For my sins I own 8Common which has been somewhat of a disappointment except in it’s ability to offer tax losses. Which is mainly why I still hold and ironic in that the company’s greatest asset is $12.3m in unbooked Deferred Tax Assets, that is double it’s current market cap!

I have also held due to the conviction and commitment of the CEO and Chair, who have taken pay cuts or loaned the company money to continue operations. Brave or stupid is what I am still trying to work out. They are at least transparent on operating performance and consistent disclosure, despite it showing a lack of consistent momentum.

The 4C update on operating performance was much the same as those of the last few years, a jumble of good and bad, the difference this time is some New Customer news, which may offer a slither of hope for profitability and cash generation. 

Customer Update

New customer contract signings including The Aged Care Quality and Safety Commission (TCV $1m inc GST over 2 years) and The National Environmental Protection Agency (TCV $200k inc GST over 1.5 years), which is moving out of an existing shared service to become its own instance.

The fact they had to include GST is telling, but these are none the less significant deals for this company and with contract extensions for Treasury and the Audit Office of NSW it may lead to the step up in revenue needed.

Operating results were:

·        Good: SaaS & Transaction revenue +7.1% pcp, Gross Margin % up 3.0% pcp, expenses down 12.3% pcp, users +4.8% pcp and ARPU +4.4% pcp.

·        Bad: Total Revenue -3.0% pcp, NPAT loss of -$260k

·        Cash: the company continues to dwindle on the edge with $110k cash, but YTD has reduce debt by $148k to $300k ($1.2m available draw down & loan extended to 1 May 2027), this quarter only generated $8k from operations and paid $7k off the debt. 

If I get to the end of the financial year and need to offset significant capital gains, 8Common will be on a short list, failing that I will continue to hold. I don’t see it as failing any time soon, it is too zombie like to lie down, just continuing to shamble along. Also, it’s now such a small position it’s hardly worth redeploying the capital and the loss sitting on my portfolio is a good check for hubris I may feel on my successful positions.

That’s enough cathartic portfolio introspection for the day, time to look at brighter opportunities.

Disc: I own RL