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.

31/01/23 4c

full report here

There were definite signs of progress on latest 4c in 3 areas

1) significant decreased cash burn

2) modest increase in contractor MRR and ARR

3) an update on collaboration with Ineight and indication of potential future income potential

starting with 1) decreased cash burn. The majority of the savings seem to be on staff and admin and they have reduced significantly:

In conjunction with a higher revenue cash outflow for the quarter was 654k - a huge improvement. However, this only leaves 4 Qs of cash in the kitty.........gotta be a raise coming soon.

2) FLX have been successful in signing a further 3 new contractors and expanding 6 existing contracts. So even though MRR increase is modest, this would support he land and expand SaaS strategy has traction and that NRR is healthy (even though these metrics are not reported). There were also a couple of big signs ups (New Hope Coal, and the companies delivering Victoria's North East link = $15bn project). One hopes the contracts will grow significantly over time.

3) FLX report that they have made succeeded in integrating the document systems that InEight uses with their procurement module and this opens up the possibilities for contract wins (of a much larger size) with InEight's customer base. InEight has a large international client base.

So in summary - good progress but still a long way to go and no cash with which to do it with. Surely have to have cap raise soon which will be ugly.

It would be great to see something magical happen in the next 6 months, but .....

----------------------------------------------------------------------------------------Latest update below.

The good bits:

• there was good improvement with the Contractor MRR (IMHO - this is the pathway to success - see previous straws)
• they are getting traction with a couple heavyweights (CIMIC, GPT) re-signing for larger contracts and with expanded modules. These can then be used a references/proof concept, for other large clients. This substantially improves the sales process by, in the eyes of new clients, de-risking a new process.
• they signed BG&E Resources for a couple of modules

The bad bits:

• Group ARR is flat. Again
• not much progress with the loudly trumpeted deal with InEight -see previous announcements
• staff costs 2.2 mil for the quarter and cash outflows of 2.3 mill. with 2.4 mill in cash and financing for 4 mill = guess wants coming soon!

Summary

• still a long way to go and not much cash to do it with. Likely another very dilutive Cap raise at a depressed market price which will be painful existing holders.
• The only reason I continue to follow FLX, is this company has the possibility to become a global leader in this field. If it can get traction before it runs out of the capacity to raise funds.
• I would love for that to happen, but am getting increasingly pessimistic about its chances

https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02587350-2A1408326?access_token=83ff96335c2d45a094df02a206a39ff4

I hold about a hundred bucks IRL and confidently predict it will be worth <$50 in 6 months!

After using Felix on our latest project and watching the interview with Mike Davis. I thought I would share my thoughts with the Strawman community. 

Mike’s background in the industry and plant miner demonstrates his understanding of the friction points with procurement processes and the issues that procurement and purchasing teams face repeatedly.

So is Felix the system I’ve been dreaming up every time I go back to writing scopes of work? Deep down it wants to be. On the surface beneath it’s terrible landing page, it ticks a lot of the boxes but dig a bit deeper and I feel they still have some work to do to be a solution that will be welcomed with arms wide open by contractors industry wide. Some examples below:

A key selling point Mike mentioned was the ability to pre qualify subcontractors to your company. Excellent check. 

However in practice due to the vendor user management being extremely clunky meaning that typically I have experienced issues with ~ 50% of vendors either onboarding to register for our company or having the company registered but issues sending RFQs to the vendor because of the the contacts assigned to the company.

Creating RFQs manages the documentation well and integration with ineight for wider project doc control is great. The biggest issue is the platform is based around its plant hire roots so when an RFQ needs to be assigned to a service to determine which vendors are appropriate most of the options are not suitable outside of civil works or onsite trades. This means that a lot of the automatically selected vendors are not appropriate for the package and negates the selling point of vendor discovery / database and you find yourself still reaching for the little black book of contacts.

There are also plenty of small bugs that cause enough headaches that make it to hard to sell the benefits of a platform vs business as usual for many members of the team.

Most of these issues come from the basis of not customising the platform to suit the clients needs as Mike was saying is their current approach. How successful Felix is in the wider market is dependent on how flexible the management team are in this area.

On some of the metrics, I’d like to know if the reported vendor count is based on unique ABN. When I have been trying to register new vendors I have encountered some that are already on the system multiple times (sometimes over 5 times).

I don’t see the transition to vendors paying a subscription to use the platform coming easily. The fee although only small in comparison to an awarded contract will be a barrier for many of the smaller suppliers and operators. There is still a long way to go before business as usual won’t be a barrier in this area.

Anyway that’s a few thoughts down. Happy to try provide any specific feedback if anyone wanted it.