@mikebrisy, I agree I am not sure if it is a concern or not. As long as the total number of users and ARPU keeps going up then I think it will be ok. I wouldn’t be surprised if a big roll over of users go live on July 1st, but I haven’t seen dates mentioned anywhere. I was previously under the impression that it was a continuous flow pipeline but less so now given the largely static user numbers. I would be disappointed if they included the user numbers without updating or checking them.

I am just a bit wary as Cardhero has been a disappointment to date, but still has potential, and given the importance of the GovERP program to my valuation I am hoping to see good numbers in the quarterly.

I also saw that they will be presenting at coffee micro caps in early may so reading the tea leaves that either bodes well for the quarterly numbers or it’s the beginning and the can ringing.

@Slideup I dropped them an email today asking that they address it in their 4C commentary which should be out in a day or so.

I'm not concerned. I imagine the rollout would be lumpy. I base the following on implementing large scale govt systems but I stress they haven't been SAP or travel expense related so I might be off the mark. Government agencies tend to do big releases so that everyone is using the same software and process. This means that 8CO deliver the onboarding system changes, all users need to be trained and the production system updated. Sometimes there are multiple projects delivering in a production system release and a delay in one can delay them all.

@Scott @mikebrisy, what were your thoughts on the quarterly, overall I was pretty happy with it and am a bit surprised that some people are selling it off to create a new 52 week low.

Reducing the cash outflow to $259K, with $1.65m cash gives me confidence that they can avoid the need for a cap raise- they are also stating this pretty clearly now as well -"Cash balance at 31 March 2023 of $1.7 million (31 December 2022: $1.9 million) providing all the required capital for 8CO to execute on growth under the GovERP implementation and transition the Company to positive operating cash-flow"

Only negative was that total users fell from 174K to 155K but am comfortable to overlook this as it was a relatively low value state government contract (maybe $200K revenue/yr lost) and the real prize for them is executing the federal goverment work. No real information given on this but noting to suggest they are having problems either. I will try and ask on Monday when they give a presentation.

Was a bit surprised to see the Fed ARPU down to $46.96, vs $53 last quarter, but they say less travel over the holiday period, which is all believable. Still up on the pcp so no real dramas in the numbers. Do either of you know how they calculate their ARPU exactly. I had assumed it was on a trailing 12 month e.g total SaaS revenue/total users, but the quarterly variance makes me wonder if this is being calculated just on the quarter numbers and then annualised - either way not a big deal.

CardHero also added 2K to recurring rev for the quarter, now up to 33K.

@Slideup I thought it was good. Stepping back from particular numbers there was a key comment buried in the text.go

The company has also invested into cyber security and infrastructure initiatives in FY23 to provide for an increase in system usage driven by the GovERP go-lives. This investment is forecast to be complete by the end of FY23 and when coupled by the increase in new transaction revenue from the GovERP go-lives is anticipated to transition the Company towards a position of positive and sustainable cashflow

The paragraph before this also said they had $200k of higher costs with external partners with the GovERP Phase 0 rolloat.

So there are some costs to come out and revenue is due to lift which they say will provide sustainable, positive cashflow.

I am a bit disappointed with the progress of CardHero and note that there was very little in the announcement about it.

@Slideup overall I thought the result was OK - neither particularly good nor bad.

Before providing some further detail, at the time of writing, the share price movement has been due to only 26 trades for a total value of $47k. Because of this, I tend to ignore the "market" reaction. Its pretty much irrelevant when you think that the average trade is only around $2k.

I've put some of the usual trend charts in, because I only ever look at quarterly data in the context of a longer time series.

In Figure 1, I have plotted the trend line for FCF over the last 6 Q. It is looking quite good and, if they stay on trend, then it looks increasingly likely they'll make it through to positive cash generation in the coming year - which has been a consistent message. This is in spite of the additional cyber security and parnter costs pointed out by @Scott. (I guess there is nothing like the kitty running low in the current environment to focus your mind!)

In Figure 2 I've plotted the trailing 12 month (TTM) trend for cash flows. This shows more clearly the trend of FCF turning the corner over the last two years.

I guess the motivation for selling today came from the KPI charts which I plot in Figure 3 and 4. Again, I think it is helpful to look at the quarter in the context of many quarters.

Both revenues and ARPUs are lumpy from Q to Q. This implies to me that they are strictly reporting the numbers from revenues in the quarter. @Slideup it doesn't make sense to me that these numbers could be TTM figures, as the quarterly variations are just too wild. But good idea to clarify on the call on Monday. (see you there!)

Who know if their observation about Jan-Mar quarter is correct. It sure makes sense at one level from everyday experience, but it isn't a consistent story across their reported history. Eye-balling the numbers it does look like 3Q might have been part of a slowing trend, even trying to approximate a seasonal correction when looking at Q3 FY21 and Q3 FY22 in the context of their respective 2Q and 4Q results. To me, it all looks to be in the noise.

Finally, there is the reported number of users. Last time we saw them de-book a bunch of users for cards that weren't active. Now its a reduction due to non-renewal of a contract. Even though it is not a material contract, a defecting customer should always be a concern. So I hope their is some explanation of this on Monday - Why didn't the customer renew? Which product did they migrate to? Why?

Tracking users is great, but I suspect they have been the victim of this being a tricky metric to track as it ultimately depends on how many cards their customers issue to staff. Perhaps it would be better if they stuck to a more meaningful measure like number of active users, where an active user is a card that has incurred expenditure in the last 12 months. Personally, I am not overly concerned about the users KPI provided they keep adding large government departments, with ARPU and total revenue heading in the right direction. Clearly, number of users needs to trend back up and soon!

On the meagre CardHero additions, I'm also not too worried at the moment. $8CO are running on the smell of an oily rag at the moment, and with a need to control costs they are clearly focusing on the GovERP initiative. That makes senseto me.

So overall, it is a mixed bag. Not enough today to make me change my tiny holding. Having said that, 4Q might end up looking comparatively strong so before we get there I'll take a view as to how the rest of my small cap / very high risk holdings are tracking, and might up the weight opportunistically. (Need to mull this over a bit)

Disc: Held IRL and SM

Figure 1

Figure 2

Figure 3

Figure 4

@mikebrisy ,@Rocket6, it was another nice annoncement today and its good to see the pipeline keeps getting topped up. I agree that a few of those larger departments that travel a lot would be nice to target and get going. It is mandated that they will all move across, its just a matter of when.

We also got some useful information in yesterdays presentation. The pipeline is largely a stop-go setup, and they said the 27,000 users in the on-boarding category will transistion to live user in 2024, for either a 1st July or 1st Jan start. They said this is the way the departments like to run it. They also said many of the departments haven't been approached yet about when they will start the scheduling process. I had expected this pipeline to move relatively quickly (2-3yr rollout for the 161K users) but now I think it will take a year or two longer than I had previously thought. I don't think the total numbers in that pipeline are that critical beyond giving an idea of what is coming in the next 12 months for SaaS revenue. From what we know we can be pretty confident that their will be another $1m in SaaS revenue in 2024, and then a large proportion of the 36,000 users ($1.5-1.8m SaaS rev) that are currently in phase 0 will presumably go live in the following 12 months on similar dates (FY25). I am not expecting much of a tick up in the next quarterly but am expecting a step change in Q1 and 2 of next year.

They also said they lost the NSW transport contract to a competitor (SAP - concur) sounded like they lost it on price point.

Not much was mentioned that we didn't already know or suspect, but they did seem confident and happy about where they are heading to and stated clearly that they will not need a cap raise.

Thanks @Wini for clarifying. Makes sense.

Thanks Wini, that is a big opportunity and I can see why they are positioning themselves to be a prime contender when it comes back up. It sounds like the Federal government is very happy with the Expense 8 rollout.

One of the things I like about 8CO is that they clearly know what segment they are working in and appear very focused on delivering a high quality sticky solution into that area. Even though CardHero has been a slower and more expensive rollout than intended I think it has the potential to be a slow burner that will become more significant over time.

I also like that if you look on Hot copper that no one is really following or commenting on it, always makes me a bit wary if there is a lot of chatter.

I have also used Concur before and I can see why the DoD scrapped it!

Ugh, my company is about to switch over to Concur so not great to read that the DoD dropped it!

Although it can't be worse than the current system we use, Traveldoo. It's so bad it's being wound up by it's parent company!

@AUROPAL Looks like a subsidiary of Expedia. Fraedom (a subsidiary of Visa) is also winding up, interesting times in TEMS software, hopefully 8CO can grab some market share.

@Wini yes, Traveldoo is a subsidiary of Expedia. We all hate it so much and there were so many complaints that global management was looking to move away from it anyway even before it’s wind up was announced.