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Research: TMT
1Spatial’s AGM statement provides further support for our view that the company is establishing a good platform for scalable recurring revenue growth. 1Spatial has secured its first customer for its Next Generation 911 (NG 911) solution in the US and three customers for its SaaS 1Streetworks product (including an additional one since 19 June). The opportunity for both products is significant, in our view. Sales cycles continue to be somewhat protracted within the current macro-economic environment. However, with a strong order book, pipeline and feedback for new products, management remains confident it can deliver FY24e results in line with expectations. Our estimates are unchanged but further progress with the SaaS products would potentially make the recurring revenue growth and margin expansion opportunity more apparent.
1Spatial |
SaaS progress and pipeline support prospects |
AGM Update |
TMT |
7 July 2023 |
Share price performance
Business description
Analysts
1Spatial is a research client of Edison Investment Research Limited |
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1Spatial’s AGM statement provides further support for our view that the company is establishing a good platform for scalable recurring revenue growth. 1Spatial has secured its first customer for its NextGeneration 911 (NG 911) solution in the US and three customers for its SaaS 1Streetworks product (including an additional one since 19 June). The opportunity for both products is significant, in our view. Sales cycles continue to be somewhat protracted within the current macro-economic environment. However, with a strong order book, pipeline and feedback for new products, management remains confident it can deliver FY24e results in line with expectations. Our estimates are unchanged but further progress with the SaaS products would potentially make the recurring revenue growth and margin expansion opportunity more apparent.
Year |
Revenue |
EBITDA (£m) |
EBIT* (£m) |
EPS* |
EV/EBITDA (x) |
P/E (x) |
01/22 |
27.0 |
4.2 |
1.3 |
0.8 |
12.7 |
63.0 |
01/23 |
30.0 |
5.0 |
2.0 |
1.2 |
10.6 |
41.1 |
01/24e |
31.4 |
5.2 |
2.2 |
1.4 |
10.2 |
36.6 |
01/25e |
33.6 |
6.2 |
3.3 |
2.1 |
8.5 |
24.2 |
Note: *EBIT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and sharebased payments.
The AGM statement indicates that 1Spatial’s investment into product and business development teams are now translating to a strong and growing pipeline, as well as positive feedback for the company’s new products. 1Spatial has made notable progress in two key strategic growth pillars: SaaS sales and US expansion and strategic partnerships.
The company has now secured an additional customer for 1Streetworks, 1Spatial’s SaaS automated traffic plan solution, adding one more since announcing its first two wins on 19 June. As a reminder, management estimates the total addressable market for this product on the UK’s low speeds alone equates to around £250m. The first customer for the SaaS version of the NG 911 product has also been secured with a county in the US.
In the US, 1Spatial has obtained its first contract, worth $0.4m (£0.3m) initially (for 1Integrate and 1DataGateway), with the state of Oregon. This brings the total number of US state customers to 18, leaving plenty of scope to add more and to expand the revenue footprint within the established customer base.
In Europe, a four-year contract worth €3m (£2.6m) has been won for the company’s 1Water application, with the Walloon Water Company in Belgium.
Our estimates are unchanged but 1Spatial’s prospects of delivering an inflection in scalable, recurring revenue growth continue to strengthen. We do not believe that the company’s rating of 1.6x FY25 sales (a significant discount to peers) and 24.2x FY25 earnings (a small discount to peers) reflects this potential for transformation.
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