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Research: TMT
1Spatial’s announcement of contract wins in the US, spanning a number of products across several states, highlights the company’s progress and opportunity in the world’s largest market for software. It also gives an early indication that management’s investment in strengthening the US business development team could yield good results. In the US 1Spatial now has contracts or framework agreements with 21 states, up from 18 at year-end, with management setting a longer-term ambition of generating $1m in annual recurring revenues from each state.
1Spatial |
Contract wins underpin US growth opportunity |
US contract wins |
Software and comp services |
2 July 2024 |
Share price performance
Business description
Analyst
1Spatial is a research client of Edison Investment Research Limited |
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1Spatial’s announcement of contract wins in the US, spanning a number of products across several states, highlights the company’s progress and opportunity in the world’s largest market for software. It also gives an early indication that management’s investment in strengthening the US business development team could yield good results. In the US 1Spatial now has contracts or framework agreements with 21 states, up from 18 at year-end, with management setting a longer-term ambition of generating $1m in annual recurring revenues from each state.
Year end |
Revenue (£m) |
EBITDA* (£m) |
EBIT* |
EPS* |
EV/EBITDA |
P/E |
01/23 |
30.0 |
5.0 |
2.0 |
1.2 |
14.9 |
55.3 |
01/24 |
32.3 |
5.5 |
2.5 |
1.4 |
13.6 |
47.7 |
01/25e |
35.8 |
5.7 |
2.4 |
1.4 |
13.0 |
48.9 |
01/26e |
38.7 |
7.6 |
3.8 |
2.6 |
9.8 |
26.4 |
Note: *EBITDA, EBIT and EPS exclude amortisation of acquired intangibles, exceptional items and share-based payments.
We have previously highlighted that evidence of growth in the US, together with further wins and scale-ups for 1Streetworks, are the key catalysts for more rapid, operationally geared growth to become priced in. Today’s announced contract wins span a number of states and products:
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Two customer wins for 1Spatial’s automated traffic conflation solution with the departments of transport in Virginia and Georgia, which will generate at least $0.5m in annual recurring revenue (ARR). This product is based on 1Integrate, 1Spatial’s geospatial rules engine, which is used to integrate and standardise traffic information from a number of different data sets.
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A five-year framework agreement with the state of Tennessee to deliver data management for highway systems. This is 1Spatial’s first engagement in Tennessee and was won with the company’s partner Rizing (also partner for the Caltrans engagement). 1Spatial/Rizing were ranked first by the customer for highway systems and data management solutions, providing good a reference for future customer wins.
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The state of Minnesota renewed its NG-9-1-1 contract with 1Spatial for two years, resulting in $0.25m in ARR. This expanded contract represents an approximately $0.1m increase in annual contract value.
1Spatial trades at a discount to peers on an EV/sales basis but at a premium on an EV/EBITDA and P/E basis, which highlights that the business has a cost base built for growth. However, the upside from successful execution in the US and with 1Streetworks could be significant. Please see our May update note, where we explore the financial and valuation implications under various scenarios.
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Research: Investment Companies
Templeton Emerging Markets Investment Trust’s (TEMIT’s) board is frustrated by the company’s persistently wide discount so it has announced a series of measures aimed at increasing demand for the trust’s shares. These are an acceleration in share repurchases, a commitment to at least maintaining the current annual dividend, a conditional 25% performance-related tender offer and a phased reduction in management fees. TEMIT’s two managers, Chetan Sehgal (lead manager) and Andrew Ness, remain positive on the outlook for emerging markets and consider that the general lack of appreciation of their prospects is providing a good opportunity for global investors. Emerging markets offer the potential for above-average growth with attractive absolute and relative valuations.