CCR has managed a beautiful turn-around. Looking at the quarterly results, CCR has gone from burning millions to showing a positive free cash flow. My preferred measure takes the operating CF number and adds in PPE and IP costs. On this basis, last quarter was a stand-out, showing $956k positive free cash flow.

Caution: this is a one-off result and there are reasons to think that it may not be accurate. First is that the reported revenue from FY24 Q1 to Q2 was flat, at about $10M but Q2 had record receipts from customers of $11,767k. With receipts from customers more than revenue, there's probably a timing difference in the cash flow. In FY23 revenue was above receipts, indicating a growing accounts receivable or similar. So, the current boost in cash flow may not be sustainable.

Nevertheless, revenue is up and costs have stabilised, largely due to the earn-out completing.

Next step is an actual PAT profit but there is a good chance we will see that in the near future.

While hard to value, recent results justify the optimism in the share price,

CCR is in trading halt, raising capital at 23c - $8.5M in a placement from professional and sophisticated investors.

I have traded CCR before no longer hold and looking at recent results, I'm glad.

Free cash flow, after PPE and IP has been negative every recent quarter except 1. In the most recent 4C they burnt a shocking $4M, hence the cash raise. To be fair, $3M was an earn out payment for ARMA. But even adding that back, their free cash flow was about 1 million in the red.

Their preferred metric - "digital collections" is growing, but we must assume that they are cannibalizing their non-digital revenue because total revenue has been range-bound in the $8.5-$9M range since buying ARMA. Their YoY figures have looked good due to that acquisition but it's not a fair comparison.

There are some big names on the books, but it still remains to be seen if they can be profitable.

23c values the company's shares at about $86M. Still seems expensive for the revenue.

Quarterly Report 4C for FY23 Q1 - Sept out today

Operating cash flow has had a massive turnaround from negative $2M in prior quarters to +$0.5M this qtr. There is even a small positive free cash flow of about $100k after deducting PPE and IP expenses.

The activities report "Annualised revenue run rate of $35.6m based on Q1FY22 revenue" which is good and growing.

Now I know that cash flow is not the same as profit and cash flow can vary a lot based on timing. Even if this quarter's c/f is sustainable, it only represents 6% margin on $8.9M revenue.

While this is heading in the right direction, it's still far from what's needed to justify the current MC of ~ $150M.

Their innovative technology in an old industry will give them the edge but it's not beyond replication. If they can grow to $60M revenue at 15% net margin by end of FY24 and get rated at 20xPE, the current price (50c) would be justified. Not impossible.

On balance, I think that PPE and IP expenditure will be ongoing and a high FCF margin will be difficult to achieve.

I'll be watching the next reports carefully.