In the classic investor luck fashion I published an article on my newsletter last week (https://goforgrowthco.substack.com/p/3-small-caps-ill-be-watching-this) sharing I was excited to see how Complii would perform in the reporting season. 

They released their results yesterday and I needless to say I was underwhelmed . 

You can tell things aren’t going to be great when the highlight page talks about the cash balance (after they’ve just completed a capital raise) and the RD grant.

Pleasingly, they did start to give us a little more on the reporting, stating for the first time an ARR figure. The figure is low at $0.975M. I’ll monitor this one over time, but am not expecting any incredible step changes anytime soon. 

What we saw in the weakness is the cyclicality of the business, in a similar fashion to Ansadara. We saw the reliance on the PrimaryMarkets revenue, which as they stated: 

“Whilst ARR improved across the Group including within PrimaryMarkets, we did see a decrease in PrimaryMarkets’ transactional revenue which was expected due to the poor general global financial market conditions plus seasonality of PrimaryMarkets trading”.

I somehow delusioned myself into thinking they may slow down on the acquisitions now; they would likely need time to integrate and make sense of who does what, but that might not be the case considering the statement: 

“With completion of aggregation of both the PrimaryMarkets and Registry Direct businesses which adds growth and strength to the corporate and capital raising side of the Group businesses, Complii is ready and remains committed to look for synergistic, complimentary acquisition opportunities which supplements the continued success of the Group’s organic growth strategy.”

Not a massive fan of this. 

These acquisitions are having their toll on the cost base, with staff costs increasing by 28%. I will continue to monitor them, but perhaps not quite as closely as I expected prior to these results. 

If anyone’s got a different take on things, very keen to hear it! 

A few Thoughts

I had a look at these guys a number of months ago when they released their half yearly. Top line growth is pretty incredible, so I did a little further digging into the story to try to understand it. Short summary is that there’s still much more due diligence I need to do to understand the business. I thank @nessy for some epic insider insights there, and also @bjbart for surfacing this one is worth some time looking at.

A few things I would like to see from these guys to consider a it more seriously would be: 

Organic growth. I appears the business was pretty much flat before they acquired primary markets. I have to give it to them thought that it appears they did a good job with primary markets because growth afterwards has been impressive. Now they're in the process of another acquisition with Registry Direct. It would be great for them to rip out the numbers and share the like for like growth figures. 

More on the TAM. In a recent presentation they communicated having ~25% of AFSL holders using the platform. That’s a big chunk of the pie for a company on ~$10M revenue. I did hear Greg Mason mention expanding to other countries was a possibility. It would be good to hear more about their strategy around this. 

How does the Software work? Like many other small listed Saas companies, it’s not terrible easy to understand how the platform works. They have a few videos on their Youtube channel, but I haven’t found a dead easy explanation of how everything comes together. 

Summary

Like @nessy and @bjbart pointed out, the valuation of ~3X revenue appears to be cheap as it stands for a company growing at this pace. I think this is true although the growth has been largely acquisition led and they’ll have to prove the model continuing to multiply out in the future for us to see that multiple expand. Neat business overall and certainly one to watch.