Announcement

The Good

• Revenue for Q3 improved over previous quarters to $3.4m.

• Staff expenses have largely levelled out after previous spikes.

The Not So Good:

• Total Contract Value has taken a hit for the first down and is down on the previous quarter. This indicates that as K2F is delivering on projects and services, they are not replacing this with new work along with no new major contract wins announced this quarter.

• ARR is flat for the quarter but up 35% over the pcp. 

• Cash balance of $4m provides ~ 1 yr runway (including investing expenses) which given funds were raised only 12 months ago, additional capital could be hard to come by. Operating cash burn continues to improve, however cash receipts have been lumpy over previous quarters.

What To Watch:

• Product costs are significantly up on previous quarters. This along with the increase in invoices raised over the quarter of  $3.6m may indicate a rise in cash receipts for Q4. This will likely still be down on the $5.4m in Q4FY22.
• So far the land and expand strategy execution is questionable as there haven’t been many significant additions across the existing customer base.
• BHP ground disturbance & Rio Ground Disturbance have gone live. These were announced in May 22 & Nov 22 respectively. So in the future I need to factor in 6-9 months of implementation time before ARR goes live.
• The 12 month standstill agreement with Maptek expired in April. Given the current weakness in K2F’s share price, Maptek may look to continue to build a position in the company.