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Going to California with Caltrans on my mind

1Spatial 11 May 2022 Flash note
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1Spatial

Going to California with Caltrans on my mind

Contract win

Software and comp services

11 May 2022

Price

40.3p

Market cap

£46m

Net cash (£m) at end January 2022

3.2

Shares in issue (January 2022)

110.5m

Free float

79%

Code

SPA

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

Business description

1Spatial’s core technology validates, rectifies and enhances customers’ geospatial data. The combination of its software and advisory services reduces the need for costly manual checking and correcting of data.

Analysts

Ken Mestemacher, CFA

+44 (0)20 3077 5700

Dan Ridsdale

+44 (0)20 3077 5729

1Spatial is a research client of Edison Investment Research Limited

1Spatial continues its US expansion with the announcement of a contract win to support replacing the Transportation System Network (TSN) for the California Department of Transportation (Caltrans). The contract is worth c $1.4m over four years, including US$0.7m in software licence revenue, and was won in partnership with Rizing, a global SAP partner. The US market is a key growth engine for 1Spatial and the Caltrans win shows its strategic plan continues to bear fruit. This contract follows other recent wins and extensions in the US market, including with the states of Montana, Georgia, Minnesota and Arizona, and with Google. We are encouraged by its progress and maintain our forecast of significant growth in the US; we have not adjusted our estimates.

Year end

Revenue (£m)

EBITDA*
(
£m)

EBIT*
(
£m)

EPS*
(p)

EV/sales
(x)

EV/EBIT
(x)

P/E
(x)

01/20

24.6

3.6

0.4

0.2

1.9

11.7

232.3

01/21

27.0

4.2

1.3

0.8

1.7

10.2

52.1

01/22e

29.0

4.9

2.0

1.2

1.6

8.7

33.4

01/23e

31.2

5.7

2.7

2.3

1.5

7.5

17.6

Note: *EBITDA, EBIT and EPS exclude amortisation of acquired intangibles, exceptional items and share-based payments.

Caltrans manages California’s highway and freeway lanes, provides intercity rail services and permits the state’s public-use airports and heliports. As part of its ‘Toward Zero Death’ strategy, Caltrans is upgrading its TSN to meet recent transportation legislation, which emphasises the importance of more advanced data systems for all public roads. For Caltrans, 1Spatial’s 1Integrate Rules Engine and 1Data Gateway Portal will be used to validate, clean and synchronise all the existing data within the safety data system to create a modern TSN that meets the legislative requirements.

This contract win exemplifies two key pillars of 1Spatial’s growth strategy in the United States. First, SPA targets scalable growth via its Land and Expand strategy, where the company wins an initial contract and, once the client sees the benefits of 1Spatial’s solutions, it expands into related services. The State of California is an existing client with 1Spatial’s Next Generation 911 solution and has extended 1Spatial’s solutions into transportation. Second, 1Spatial collaborates with major technology partners in bidding on large contracts, where its role is to be the data integrity provider, providing what management views as ‘best in breed’ solutions for handling geospatial data. In this case, it secured the contract in partnership with Rizing, a global SAP partner.

As we noted previously, the US market provides a significant scalable growth opportunity, with 50 states and 23k counties and cities, each with potentially their own 911 emergency services, departments of transportation and asset management teams, each of which relies on GIS information and would need solutions like SPA’s 1Integrate to check, validate and cleanse their data.

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