8CO - Isnowthetime?

Forum Topics 8CO 8CO Isnowthetime?

Pinned straw:

Added 5 months ago

8Common is well covered by some of our awesome tribe here, so no need for a deep dive. Thought I would put my 2 cents on the table quickly though, because; why not?

With the stock down 55% this year, and down nearly 90% from all time highs, I’m not surprised to see many sell down this one in the wash of tax loss selling season. But is now the time to sell?

There’s one big question in my mind for 8Common at the moment can outweighs the others: Can they get to cashflow breakeven without raising again?

The chances are slim. Very slim.

In the last 4C a few months ago, they had 130K only left in the bank. But we all know of course that the 4th quarter tends to be a strong one, as evidenced by the last 2 years. So, there is a chance this 4th quarter is cashflow positive, and the bank balance gets further in the black. Where to? Not sure. Maybe they can bring in as much as $300K, maybe more, maybe less. In any case, we also know they incur upfront costs to onboard users onto the expense management platform before billing them. So, there’s a fat chance a positive bank balance starts to deteriorate in the quarters of next year, and they start digging into the director’s $1.5M loan.

In the last 4 quarters, they’ve burned FCF of $1.6M. So, If they do indeed build the cash cushion this quarter, and we take the $1.5M director loan, we’ve got 1 year of runway. Which could be enough. Unlikely, but could be. A CEO’s first job is to never run out of cash. So you wouldn’t want to be chancing it with a bank balance of $500K. Which means there’s a risk of dilution with this one.

All this said, my opinion at the moment is that current valuation, coupled with near-term growth that’s nearly secured, makes the opportunity appealing for a small position for me.

Hackofalltrades

Added 4 months ago

April release.

Onboarding seems to be taking a long time for some of these users... The number of live Government users does seem to keep increasing though.

This really does seem to be a bit of a can they avoid cap raising or not question. I have the feeling this may be a triple in value or go to nearly zero stock...

Wini

Added 5 months ago

Great post @JPPicard. It's been a tough slog for 8CO and shareholders, I've heard others remark that Governments are the best customers you can have when you are entrenched, but it can be very difficult to reach that point and that has certainly been the experience for 8CO. The tough part for investors is the medium/longer term thesis hasn't really changed a lot. 8CO has a clear path to $10m+ recurring/transaction revenue from their Government clients which should produce $2-3m profit/cashflow with potential to grow further into enterprise with Expense8 and NDIS with CardHero.

Can they achieve that without dilution? I think you are fair to be sceptical given the history of cash burn, but there are reasons to be optimistic they may be able to get through with the Director loan and not having to draw it too deeply. The latest quarterly commented that the costs associated with achieving the IRAP "Protected" status is behind them and the steady growth in recurring/transaction revenue will continue to offset the lumpiness of cash going in and out with implementations. The upcoming quarterly will shed plenty of light, so fingers crossed we see progress on the above.

Ultimately I agree with your final point. The market has been understandably savage given the elevated cash burn over the last two years, however the pessimism is overlooking the growth that is secured and the blue sky potential that remains with CardHero (especially given the recent headlines on NDIS spending).

Wini

Added 5 months ago

Just noticed this healthy contract on AusTender:

A few more of them will go a long way!

JPPicard

Added 5 months ago

No better way for the company to give us a wink @Wini : I think you nailed it

Rocket6

Added 5 months ago

@Wini @JPPicard great discussion. I remain a holder, in fact I am looking to buy more at these levels when I free up some cash. 7m market cap? As per @Wini's snooping, they have just won a 500k contract with one of their many government partners. I think that speaks to the opportunity and the risk/reward. Do I think they go bust in the meantime? No. Too well supported across government -- state and federal, but mainly the latter. As alluded to by both of you, government partners can be the best kind (when onboarded) -- sticky, cashed up and don't like to change when onboarding is complete.

Similar to you @Wini, my investment thesis remains the same. It hasn't been smooth sailing though. I didn't think the Protected implementation would be so expensive and dragged out, nor did I account for the exxy implementing costs. The former in particular was necessary and holds them in good stead across the suite of federal government agencies though, particularly defence who remain the blue sky opportunity. I don't think I am the only one caught off guard though, when their CEO was interviewed on Strawman, he suggested they would be cash flow positive in most of their future reporting periods. He was miles off. Similarly, they suggested they wouldn't need to use the chairman's loan offer on the table, and I will hazard a guess and say they will. Definitely not perfect execution by any means, but such investment and implementation - particularly for such a small company - was never going to be seamless.

Where I remain sceptical is CardHero. As it stands, I see this as a waste of time and money, and an unnecessary distraction during a key point in their history ie expansion of their main product within the federal government. This is also another one they haven't got right, with no real significant wins/traction after many months (and then some).

To recap though, I think the investment case is as strong as it has been for the last few years.