Pinned straw:
FLX reported their full year results last week. For those not following along, they provide software for the construction industry to organise contractors, workflow and procurement. This means if a big construction company wants to use FLX to organise their work flow and procurement for their latest big project; all the subbies and providers also have to sign up to win the contracts and provide stuff for the procurement process. A true network effect if they can get critical mass.
The good bits are that they continue to sign new contractors, and the ones they have are using the platform more. This is evidenced by two date points:
NRR is running at 114%
ARR per contractor is increasing at a CAGR of ~16%
The number of contractors joining the platform is starting accelerate:
And if they win the prize of becoming the preferred platform in this space then the TAM is huge as there are ~1700 potential companies that could use there product in Australia. Let alone internationally.
As a SaaS business it has good gross margins of 76% So far so good, top line looks promising
BUT, to take a leaf out of @Scoonie 's playbook: yeah but where's the cashflow?
SO..... the bottom line is improving a bit, some expenses have been reduced but just the salaries still account for 103% of revenue. And they burnt through $5mill last year
AND, how much have they got left in the bank? About $4mill.
Are they going to make it?
No.
They had a cap raise last year, and they will be doing another one this year.
I would really like to see this company make it. Maybe next year, we will see some real exponential operating leverage appear.
I hold a couple of hundred bucks of shares to force me to keep an eye on their progress, but have no intention of putting any more in anytime soon.
Hear hear, @Chagsy
Watching from afar also. I bought this too early (many years ago) and got out without too much damage but Felix could genuinely have a cracking business somewhere in there, they just need to continue on their current growth trajectory without too much dilution. I don't think they will have any issues tapping the market for some more cash in the next six months, but I don't want to be involved in financing their growth while they continue to mature. If they make it, we are likely sacrificing subsequent returns but I am comfortable watching from the sidelines for the time being.
I have gone down this path -- knowing that short term returns will be subpar -- for two of my core holdings (Novonix and Talga), which I have more conviction in. I am not as happy doing the same for Felix but remain very interested in what they can achieve over the next 24 months. Continue onboarding contractors (which should naturally attract vendors) and they could start to see some operating leverage come through. There is enough evidence to suggest that this business could well scale nicely -- in FY24 revenue increased nicely YoY, while core costs barely moved. Costs as a percentage of revenue is decreasing and that bodes well.
Upon writing this, shares on issue stand at just over 204m. Conservative speculation: lets suggest another cash raise at 0.12c, raising 4.8m and adding another 40m of shares to the register -- almost 1/5 of outstanding shares. Not great, but a necessary evil to get them through.
While their success still very much remains up in the air, I will start to get VERY interested as they near cash flow break even, provided they are continuing to grow organically.
