Motio delivered a trading update last week. Big picture, there were no great surprises. I came away perhaps a tad less bullish, but I still estimate a healthy ROI.

Here's their presentation: https://announcements.asx.com.au/asxpdf/20260508/pdf/06zd1nvr98b0sv.pdf

Below I've copied the notes I took during the presentation, as well as Chat's take. I'll separately tweak my valuation on SM, down just a tad.

Pete's notes:

• Notes taken during presentation:
• “Forward revenue” (seems to refer to contracted future revenue) guidance, excl discontinued Go operations, 13% higher than same time last year, but forward for Q4 only about 5% higher.
• Still around $4m in bank.
• Revenue return on screen payback in 1 year; revenue per screen $8k, screen cost typically $5k. Currently focused on Health rollout where confident of 1-year return.
• Adonix (new Motio Drive division) just advertise via taxis, not Uber.
• Adam: Historically Q4 tends to be a good Q because cold/flu season, good period for cafes, high mid-year sports
• Revenue per screen: When we started 5 years ago, $2-3k, 18 mths ago hit $6k per location, now $8k.
• My rough estimate, revenue is tracking for perhaps $8.8m, which will be an absolute decline of 2%, and 8% increase excl Go. Tracking between my previously published bull and bear cases for FY26. 
• Pete: If maintain rev per screen and hit current guidance for rollout, revenue “run rate” will be $8.9m at end of FY26
• Said location rollout on track, but since last update, both Feb and Mar were well down, Apr met goal, and May-Jun unchanged forecast. So forecast for H2 is now around 130 compared to 175 guidance (in CEO letter; although 150-175 in presentation) given in Feb (although oddly that guidance included 10 new screens in Dec). 130 new screens for H2 would be a 13% increase, a big increase for half a year
•  “Screen” and “location” seem to be used interchangeably. 
• Good:
• They report revenue per screen as now $8159, well above costs around $5k, and up from $6k 18 mths ago and $3k 5 yrs ago
• Confident of 1-yr payback for new screens; IF that’s the case then profit should increase independently of pace of rollout
• Screen rollout is rapid, roughly 13% increase in half a year
• No debt and cash $4m
• Bad:
• Tone was overly promotional given the substance, and headline content was selective, eg “forward revenue 13% higher” but only 5% higher for Q4, “record sales for last 10 weeks” but overall growth still likely to decline for year in absolute terms and grow only single digits for the year excl Go, “screen rollout on track” but while Apr met goal both Feb and Mar were well below guidance, “strong Q3 result vs pcp” but Q3FY25 was a poor quarter
• Gave vague positive answer without details when asked about expectations for profitability after expanded leadership team
• There appears to be negligible long term contracted revenue given “forward revenue” diminishes greatly after Q1FY27
• Didn’t show in presentation but stated cash as $4m suggesting no FCF so far in H2 (was $4.0m end H1)
• Overall, revenue tracking middle of my bull and bear cases, NPAT near bull case. If I were to adjust my valuation now, it would marginally decline because I’d keep my bear case unchanged but slightly revise down rev growth assumptions in my bull case. My estimated ROI would drop from 23% pa to 19% pa. 

Chat's take:

The update is incrementally positive on screen economics and balance sheet strength, but not strong enough to offset the softer-than-hyped revenue trajectory. I’d come out in a similar place to you: not thesis-breaking, probably still investable if your prior valuation allowed enough margin, but I’d lower the bull-case growth slope slightly and put a bigger “show me” flag around FY27 revenue conversion from the rollout.

1. The headline message was stronger than the underlying numbers

The presentation is framed very confidently: “record highs”, “exceptional” activity, “materially stronger platform”, “record forward revenue”, “scalable growth”, “operational leverage”, and “future cash flow generation” are all prominent phrases. Motio says sales activity has hit record highs, closed-won activity is at record highs, forward revenue has strengthened, and Revenue Per Location is now $8,159. 

But I agree with your caution. The most useful figure is not “forward revenue +13% excluding Go” in isolation. It is the composition and timing of that forward revenue. Page 22 shows FY26 forwards of $3.181m versus FY25 forwards of $2.817m, which supports the +13% headline, but the bars also visually suggest most visibility is near-term and fades quickly into later periods. 

So my translation would be:

Forward bookings are better than last year, but this is not yet evidence of a long-duration contracted revenue base.

That matters because one way to justify a higher multiple would be if Motio had recurring / contracted / highly visible revenue. This update does not really establish that. It shows momentum, not necessarily durability.

2. I agree the tone was promotional relative to substance

I would not say the update was misleading, but it was certainly selective and salesy.

Examples:

Motio says “Q4 tracking to exceed our record quarter achieved (Q4 FY25)” and that it is “on track to meet Q4 revenue targets”, which sounds strong. But if FY26 group revenue is still tracking to an absolute decline because of the loss of Go, and only single-digit growth excluding Go, then the deck is leaning hard into the most flattering version of the story.

Likewise, the Q3 comparison is presented as a “strong Quarter 3 comparative result on PCP”, but that only tells us so much if the prior comparative was weak. Your note that Q3 FY25 was a poor quarter is important because it stops the “strong PCP” language from becoming too persuasive.

I’d classify this as a yellow flag on communication quality, not a red flag on the business. It suggests management is enthusiastic and shareholder-promotional, which is common in microcaps, but you need to keep doing exactly what you’re doing: translate every upbeat phrase back into actual revenue, EBITDA, cash and per-share value.

3. The screen economics are the genuinely interesting part

The strongest part of the update is your note on screen payback. The deck itself supports the direction of travel by disclosing Revenue Per Location of $8,159. If the company is right that a screen typically costs around $5k, and if RPL is now over $8k, then the rollout economics may be genuinely attractive.

That said, I’d be careful with the payback logic. “Revenue per screen/location exceeds screen cost” does not automatically mean one-year payback, because payback depends on gross margin, installation costs, maintenance, sales commission, venue economics, content costs, network operations and incremental overhead. In older material, Motio has emphasised high gross margins and operating leverage, but the correct question is still:

What is the incremental contribution margin of a mature new Health screen after all directly attributable costs?

If the answer is genuinely high, the Health rollout can create value even if total FY26 revenue growth looks modest. If the answer is flattered by using revenue rather than contribution profit, the one-year payback claim is less powerful.

So I’d put this in the “good, but needs proof” bucket.

4. The rollout update is positive, but your criticism is fair

The deck shows total Motio locations moving from 954 in Dec-25 to a forecast 1,057 by Jun-26, plus 38 forecast additions in Jun-26, which appears to take the June endpoint to around 1,095 total locations if the forecast additions are included. The page labels additions as actuals for Jan-Apr and forecasts for May-Jun: 11A, 10A, 5A, 17A, 25F, 38F. 

Your point is right: “on track” is technically plausible if they can hit the May/June forecast, but the cadence is uneven. February and March look well below the earlier implied pace, April improved, and the forecast relies on acceleration into May/June.

The key issue is not whether they get to exactly 130, 150, or 175 new locations in a half. It is whether revenue from those locations ramps in a predictable way. The deck says there is “early traction with new locations” and “revenue starting to flow to FY27”, which is helpful but vague. 

For valuation, I’d probably avoid giving them full FY27 credit until they show the added Health inventory converting into revenue at or near the current RPL.

5. Cash position: strong, but not yet a cash-flow proof point

Your cash observation is important. The deck repeatedly talks about the balance sheet being ready for future growth and cash-flow generation, and says the business is shifting from platform-building to operational leverage and scalable growth. 

But if cash is still about $4m, similar to H1, then it does not yet prove H2 free cash flow. There could be timing effects, working capital, rollout capex, hiring, or acquisition/network investment, but the deck does not provide enough detail to separate those.

So I’d phrase it this way:

Balance sheet risk has reduced, but cash-flow conversion remains a monitoring item.

That matters because Motio’s valuation case increasingly depends on the company demonstrating that revenue growth converts into statutory profit and free cash flow, not just “Cash EBITDA” or presentation-level operating leverage.

6. Leadership expansion is a real cost/margin question

The deck highlights the leadership team: Justin Kingston as COO, Jacqui Smith as Financial Controller, Gordon D’Mello as Product & Marketing Director, and Christian Tyson as National Sales Director. 

That is potentially positive — more senior media talent may help professionalise sales and execution. But your concern is right: an expanded leadership team raises the fixed cost base. If management gives only a vague answer on profitability after hiring, that weakens the operating leverage claim.

The central question becomes:

Has Motio stepped up fixed costs ahead of growth, or has it added cost faster than revenue?

That is probably the most important FY27 question after revenue conversion from the Health rollout.

7. I’d slightly downgrade the bull case, similar to you

Your proposed valuation reaction feels sensible:

• Bear case unchanged: because the update does not remove cyclicality, execution risk, promotional comms risk, or uncertainty around true FCF.
• Bull case trimmed: because FY26 revenue tracking appears less explosive than the tone implies, and because rollout timing/revenue conversion has not yet been fully proven.
• Margin case perhaps still okay: if RPL and screen economics are real, the business can still compound profitably from here.

A drop in your estimated ROI from 23% p.a. to 19% p.a. sounds directionally right. That still clears your 15% hurdle, but with less fat. Given your portfolio cap and your emphasis on conviction, I’d treat 19% as “worth continued work / possibly hold or small position” rather than “pound the table”.

8. My updated investment read

I’d summarise the update as:

Positive: RPL has moved materially higher; Health rollout remains the key growth engine; cash balance is strong; management appears confident; new leadership may improve execution; the business still has credible operating leverage if revenue per location holds.

Negative: revenue momentum is not as strong as the language suggests; forward revenue visibility appears short-dated; rollout is uneven; no clear H2 FCF evidence; management communication is more promotional than analytical; profitability impact from expanded leadership remains unclear.

Net: slightly positive operationally, slightly negative versus a high-growth bull case. I would not call it a thesis break. I would call it a discipline check.

The three things I’d now monitor most closely are:

1. FY26 revenue excluding Go — does it finish closer to your $8.8m estimate, or can Q4 surprise?
2. FY27 opening run-rate — do new Health locations actually lift revenue, or just screen count?
3. Cash conversion — does H2/FY26 show real free cash flow after rollout costs and added leadership costs?

My challenge back to you: I’d be careful not to let the attractive one-year payback claim do too much work in the valuation until Motio shows it at the contribution-profit level, not just revenue-per-screen level.

Watched the CEO interview and checked out the financials

My major concerns are around the dependence on advertisers and the TAM

At the moment, the screens are only around two thirds "full" of advertising. The CEO basically admits that there is little value in just adding more screens, because advertisers often have a fixed budget in mind (ie adding more screens will not necessarily bring in more revenue). So essentially the limiting factor in this business is availability of advertising dollars. I'm no expert, but I'm pretty sure that advertising is a super-competitive and highly cyclical industry.

So this is not one of those businesses that can continue to deploy capital and generate high returns. The best they can do is to optimise the quality of their locations, demonstrate the effectiveness of their advertising (so as to attract more advertising dollars), and perhaps modestly increase the number of screens over time. If they can do that, while keeping costs under control, maybe they can do ok. But the upside seems limited

I do like the business model. Partnering with the host business, displaying some of their content, in order to get your screen into their space almost for "free"

Also the price is right, at less than one times revenue. And the business has cash-flow profitability and earnings momentum.

There are some things to like. But the potential cyclicality, dependence on advertisers and capped upside will probably keep me on the sidelines

I love how you build an investment thesis @Wini -- methodical, rational and grounded. Love it!!

I'd never even heard of Motio before, but as soon as I'm done typing this I'll try and arrange a sit down with the CEO.

Also, your reaction to the global macro shenanigan's is exactly right -- ignore the noise and get on with looking for good businesses. Sure beats doom scrolling twitter (which was my initial reaction)