CF1 quarterly April 2023.pdf

Complii FinTech Solutions Ltd (ASX: CF1) (Complii, Group or the Company) – a leading end-to-end SaaS (Software as a Service)

based technology solution for Australian Financial Services License (AFSL) company’s (Stockbrokers and Financial Planners) and

their licensed user centric workflows for compliance, capital raising and operational needs, as well as a global Trading Platform

for securities of unlisted companies & funds and Registry Services for listed and unlisted companies & funds.

Hi team, I would appreciate people's views on this one. Seem like a reasonably strong balance sheet and not likely to need to raise capital any time soon (unless for acquisition purposes). Not quite cash flow positive but close. Their Registry Direct acquisition to help companies raise capital in a cost efficient way seems very interesting in the current environment.

@Strawman would appreciate if we could get a deep dive from maybe Craig Mason or Alison Sarich to help further understand the business and how well they can scale this thing.

Reasonable podcast here https://smallcaps.com.au/podcast/ with Craig Mason, scroll down to Nov 21 last year

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! 

Team, here is the latest quarterly for Complii. Seems another impressive set of numbers. Cash at bank has almost doubled, customer receipts seem to be improving strongly, some from their acquisition as @JPPicard pointed out previously (newest acquisition only has a month included). I also agree it is a tricky business to really understand well and perhaps @Strawman could aim to have them on for a meeting to help us understand.

The capital raising deal flow sounds an interesting platform as does the expansion of unicorn offerings from their US partner. Further information required!

Nessy

CF1 Oct quarterly activities report.pdf

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. 

Annual Report

Good little company that’s ticking boxes with very little love on here.

Highlights for me:

• Shift to profitability in FY22.
• Organic revenue growth of 34%
• Primary Markets acquisition revenue grew 260% and trading value > 500%
• AFSL subscribers up 21 % with consistent growth
• Debt free
• $5.7 mil cash in the bank
• Kicking goals
• trading at price to FY22 revenue multiple of 3.5

Full report:

https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02554925-6A1105052?access_token=83ff96335c2d45a094df02a206a39ff4

A few notes from a mate. The Nth American comment is interesting.

 revenue $2,557,000 in Q4 FY22, a 336% increase from the previous period (pcp) (Q4 FY21: $759,000)

 Annual Group revenue receipts from customers of $9,057,000 for FY22, a 403% increase from the pcp (FY21: $2,246,000). Very close to my predicted $10m. Looks like $18m for FY23

 Cash at Bank $5,744,000, an increase of 48% from the pcp (Q4 FY21: $3,998,000)

 Complii subsidiary PrimaryMarkets signed a non-USA Partnership Agreement with Forge Securities Inc (a subsidiary of NYSE listed Forge Global) which will enable Australian sophisticated investors to invest in a large variety of US Unicorn companies

 $3.24B of new funds raised across 667 unique offerings by numerous AFSL client firms using the proprietary Complii Capital Raising System (Adviser Bid)

 Signed 8 new companies as new clients bringing the current total to 121 firms representing over 3,600 current registered users of the Complii platform and 24 % of AFSLs

 Sourced our first North American based stockbroking firm as a SaaS client. Watch this space! Deal logic is $60,000 a year! Complii a fraction of that. 

 Development roll-out underway for integration of Complii’s Corporate Highway project to permit the sharing of services across AFSL client firms with new capital raisings 

Corporate Highway estimated to bring in $10m FY23

Potential revenue FY23 $28m

Market cap $33m 

10 times revenue would be $280m 

Looks to be undervalued by 8 times.

Pitt Street Research analysis

Valuation $0.13 - $0.28

Minimum Holding Share Buyback

• Complii Fintech is pleased to announce that it intends to undertake a minimum holding share buyback of ordinary shares for shareholders of less than a marketable parcel of shares in the company... any shareholding valued at less than $500 based on the closing price on the ASX, which for the purpose of the buy back is $0.085 as at January 24th 2022.

https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02479078-6A1073830?access_token=83ff96335c2d45a094df02a206a39ff4

Executive chairman Craig Mason has steadily acculumated ~2.5mil shares at the 5-6c mark (worth around half his salary) since June of this year. Managing Director Alison Sarich also a similar amount with ~7% ownership.