icetana (ASX:ICE) CEO and Managing Director Matt Macfarlane discusses revenue growth, the company's strategic placement to Macnica, changes to the share registry and the outlook ahead.Tim McGowen: We're talking with icetana
(ASX:ICE) today, who is a global SaaS company – "Software as a Service", of course -- and they provide video analytic technology designed to identify abnormal events and unexpected behaviour in real time for large-scale surveillance networks. They have market cap of around $6.5m. ASX code "ICE". We have with us Matt Macfarlane, who's both the CEO and Managing Director. Matt, thanks for your time.
Matt Macfarlane: Great to see you, Tim.
Tim McGowen: Now, Matt, for investors who don't know icetana, can you talk through your business model and talk through what the company actually does?
Matt Macfarlane: Sure. So, we build AI software technology for the surveillance industry. Principally, we focus on large surveillance networks. And what our technology does is it connects to existing surveillance cameras, learns movement patterns, understands what's happening in front of them, and then starts sending alerts in real time to control rooms. So, the security surveillance operators start to see stuff in real time rather than just having a giant recording network, which is what most security surveillance networks are used for, just recording.
Tim McGowen: And is that a subscription model you operate on?
Matt Macfarlane: Yes. So, yeah, our business model is oriented around a price per camera per month, so it's a very much a SaaS offering. We've been transitioning the business from historically enterprise based pricing. So, there's a big transition's been going on over the last few years towards that.
Tim McGowen: And, last year, your revenue was around $1.7 million with 15 per cent growth. Could you provide some context on that growth rate?
Matt Macfarlane: Yeah. Naturally, I was a bit disappointed with that. For a software company, I was expecting us to do a little better. However, we have been somewhat constrained by delays in the launch of our updated product, which is finally in market now, and looking really promising. However, we should also keep in context that there's a big transition going on in the SaaS side of things. So, our annualised recurring revenue, which is our preferred metric, which is the recurring revenue subscriptions, grew to be about 83 per cent of last year's turnover as opposed to 63 per cent in the year before. So, when you go through a transition like that, you're shifting from large upfront payments into more recurring payments, you often suffer on your top-line growth.
Tim McGowen: And what is that target growth rate ideally?
Matt Macfarlane: So, I'd rather see our growth more around the 25 to 40 per cent per annum at least, and hopefully more over time, of course.
Tim McGowen: And, of course, this week you've announced a strategic placement to Macnica, a Japanese tech company that probably most Australians have never heard about. Can you tell us a bit more about them and the placement?
Matt Macfarlane: Sure. So, Macnica is actually a $1.8 billion market cap company. It's based out of Tokyo. It's been around for a long time, and they specialise in very technical capabilities for solutions for large corporate customers. They've got a lot of PhD-style technical people within their organisation. They distribute products like NVIDIA's graphics cards and they build bespoke solutions for a large number of customers around the world. They've got actually global distribution capability, which really excites us. So, a very substantial presence outside of their home market in Japan within South Korea, Taiwan, Brazil and increasingly in Europe. We've already worked with their subsidiaries in Brazil on a number of opportunities, and we've sold through their main business in Japan, which is a really interesting market for the surveillance industry since a lot of money is spent on guards in Japan. Even though it feels like very safe country to be in, there's an increasing demand for new guards, and those guards are now being replaced by cameras because it's very hard to get staff to take on those types of jobs.
Tim McGowen: And is that a trend you're seeing globally -- outside of Japan, for example?
Matt Macfarlane: Oh, absolutely. Yeah. An increasing move to using technology in a smarter way where you could start to use cameras to see more of what's going on in real time, reduce the number of guards that you have out in field, use the guards that you have assigned, the security guards out in the field, more directly to where they're needed. And we're finding most of our clients are finding savings on that side of the equation to fund the software licensing costs for icetana.
Tim McGowen: Matt, you announced a number of other shareholding changes to your register recently, including the addition of the family office of VGW founder Laurence Escalante as a major shareholder. Can you tell us more about these changes?
Matt Macfarlane: Sure, absolutely. In the last four months, it's been quite a dramatic change to our shareholders. We've had two venture capital funds as our largest shareholders back in June of this year. Both of those funds were nearing the ends of their life, so represented potential overhang in terms of shareholdings and quite substantial shareholdings. Also, both of those funds had reached a cap in terms of ability to continue to invest in the business with growth. So, I felt quite constrained in relation to our share structure at that point.
The first change was that Go Capital, which was our largest shareholder, did a distribution in specie at the end of June, so on 30 June, and distributed shareholdings to about 38 new shareholders into icetana who were investors in that venture capital fund. The second major change was Yuuwa Capital, which was actually a venture capital fund I co-founded some 13 odd years ago, but I have since moved on from there. They are winding up this month, in fact, and they sold 50 per cent of their holdings to the family office of Laurence Escalante.
Now, Laurence is the founder of Virtual Gaming Worlds, which is a very successful gaming industry business based here in Perth. Extremely profitable organization. And he's quite a fan of icetana having had direct relationships with… Actually, my Chief Operating Officer, Kevin Brown, used to work at VGW as the Chief Operating Officer there. So, there's a bit of sort of old collegiate connection there.
So, Laurence has taken a roughly 8 per cent stake in the company through that acquisition with Yuuwa, and the balance of Yuuwa's holdings were distributed to another family office of a gentleman named Peter Meurs, who already had a stake in icetana as well.
So, combining those two together with the new placement to Macnica, we've had a really big… sort of tectonic, really, shift in our larger shareholders, and I'm pretty excited about it, because now I've got family officers or corporate investors representing some 40 plus percent of the business. People who are interested to invest more in the company as we grow are no longer constrained by being at the end of their fund. And I've gotten rid of that substantial overhang that was, I think, actually affecting our stock price.
Tim McGowen: Makes sense, of course, Matt. And shareholders and potential investors are always looking forward. What's next for the company?
Matt Macfarlane: Look, we've got our new product now in market. We are very focused in the next three months to get a lot of clients trialling that product and getting to paying us as quickly as possible. So, we'll be growing our client numbers quite dramatically. Each of those opportunities represents the thin edge of the wedge in terms of total numbers of cameras for those clients. So, there's a big focus on revenue growth, getting the new product out in the market.
The team's really humming at the moment. It's a challenging hiring market. And yet icetana, we've held onto our key people really, really nicely -- even in Perth, where prices are going nuts for this type of capability from the lovely mining companies who are always trying to poach from me.
So, look, I'm super excited about the next nine months. It's wonderful to have our product development process complete to a point where we're starting to ship to customers. It's great to have these types of partners, people like Macnica helping us reach out around the world. So, yeah, it's all about revenue growth from here on.
Tim McGowen: Matt Macfarlane, thanks for your time.
Matt Macfarlane: Thanks Tim. Really appreciate it.
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