Pinned straw:
I am catching up on some of the results that came in last week and one of the ones that surprised me was 8CO, as @Rocket6 wrote about a few months back this one has been a long disappointing investment that has failed to convert revenue into profit.
What jumped out to me was this table and the significant improvement in costs in the 2H. They have reduced corporate and staff costs from around $2.3M/qr to $1.7-9/qr and I think they are going to maintain this rate. So they need to bring in 7-8m revenue to cover this cost base. As always with these guys its their ability to convert the government ERP program into active users, which is still slow, but the pipeline is moving. If they can maintain this costbase and maintain the onboarding rate this should be approaching the transition into profitability.
There is still a lot of potential here, with the captive govERP users that can be converted and with card hero contributing 466K in Fy25 and plenty of future upside if they can win a few tenders. This is the first result for 12 months or so that I can see the way forward for them. I also like that this one has gone from being a relatively highly commented stock on strawman to now being mostly ignored and pretty much all of the recent action has been sells.
@Slideup I am naturally cautious. Once upon a time (after their Strawman interview well over a year ago) management insisted that they would expect to achieve free cash flow consistently/regularly going forward most quarters -- a forecast which turned out to be badly wrong. It is not that I don't take them for their word, but once bitten....
I do agree though. There appears to have been a clear attempt to decrease costs. If they have achieved that (Q1 and Q2 will provide some insight), the only catch is if it comes at the expense of growth/expansion. Obviously this is critical -- the business needs to continue growing. I think management were forced into this for for two reasons: they had a disappointing year (revenue wise) in FY25; but also they probably clued on that the business model wouldn't survive -- simply wasn't sustainable to keep tracking along how they were.
In FY25, admin expenses, employee and contractor costs, direct software costs and marketing costs all decreased YoY. If we see stability for these costs into FY26 like you mention, the result will be a business that is profitable, or very close to -- provided they don't lose any significant contracts and continue to make small wins. SaaS revenue in excess of 5m for FY25, with standard revenue dropping 11% to 7.3m. If we see 10-15% growth to the latter in FY26, we should see revenue hit more than 8m and a profitable business (a long time coming).
I will update my valuation shortly, but for both a slower growth model, and a realistic bull case, the share price is cheap at these levels. Particularly when you consider you are getting in return a business that has a strong foothold at the fed gov level.