Here's the transcript from today's interview:

Felix Transcript.pdf

Thanks for all the great questions @Slomo. I'll be keen to get your thoughts on how he answered them.

My initial impression is that Mike is a pretty straight shooter, and although the share price hasnt gone well since the heady days of 2021 when it listed, the business does genuinely seem to be making progress. But as I said in the interview, the concern here is that they never grow into their cost base and realise any decent operating leverage. It's just a very familiar story for small cap ASX stocks. But Mike's response seemed reasonable -- you need to have a certain capability to play at the level they want. And it was encouraging to see consistent ARR growth and the transition to positive operating cash flow.

Much depends on the Nexvia acquisition, but the strategic rationale made sense to me.

Shares are roughly 4x pro-forma ARR, which hardly makes them cheap, but such multiples are rather limited. Could still be very good value if revenue growth remains strong and the operating leverage kicks in.

Anyway, here's chatGPT's summary:

1. Business Overview

Felix provides a cloud-based enterprise SaaS platform designed for large, capital-intensive sectors — construction, mining, infrastructure, energy, and property.

• Core capability:
• Manages subcontractors, suppliers, and third-party vendors by streamlining procurement, compliance, prequalification, RFQs, tenders, and contract awards.
• Marketplace effect:
• As enterprise customers onboard thousands of subcontractors, Felix builds a two-sided vendor marketplace with over 100,000 vendors.
• Revenue model:
• Primarily subscription-based SaaS, integrating tightly with existing enterprise systems. Vendors join free when invited by contractors.

2. Recent Results & Metrics

• Revenue growth: Up 22% YoY.
• Net revenue retention: 106%, indicating account expansion from existing customers.
• Positive operating cash flow: Achieved, marking a key inflection point.
• Marketplace scale: Vendors doubled since IPO — from ~52,000 (2021) to 100,000+ today.

3. Strategic Positioning

Integration, Not Replacement

• Felix complements rather than replaces ERP systems like SAP, Oracle, JD Edwards, and Workday.
• Felix integrates deeply with ERP and related systems, becoming the “source of truth” for vendor data — including compliance, banking, and relationships.

Network Effects

• Contractors require vendors to join Felix, onboarding them at zero cost to Felix.
• This accelerates vendor marketplace growth and creates a defensible moat similar to car-sales platforms — "buyers and sellers go where everyone already is."

4. Operating Leverage & Inflection Point

Mike highlights Felix’s 12-year journey:

• Pivoted midway from vendor monetization (“PlantMiner”) to enterprise SaaS.
• Required heavy upfront investment in platform robustness, security, and scalability to compete with global players like SAP and Coupa.
• After several cost-base resets, FY25 marked a shift to positive cash flow.
• Now positioned to unlock operating leverage — scaling revenues faster than costs.

5. Nexvia Acquisition

Rationale

• Acquisition cost: ~$12M (~3.8x FY24 pro forma ARR).
• Structure: 12-month earn-out based on ARR growth; earn-out shares priced at a premium (25c vs 22c transaction price).
• Location synergy: Nexvia is based five minutes from Felix HQ in Brisbane.

Strategic Fit

• Nexvia provides project and business management SaaS tools targeted at SMBs in construction — a large subset of Felix’s existing vendors.
• Unlocks a cross-sell opportunity to ~43,000 subcontractors on Felix’s platform:
• Nexvia’s average ARR per customer ≈ $13k/year.
• Estimated TAM: >$500M ARR within Felix’s ecosystem.

Integration Approach

1. Culture first: Both teams move into a shared office to ensure cohesion.
2. Technology: Both platforms built on similar stacks → easier integration.
3. Go-to-market: Immediate cross-pollination of sales funnels; goal to upsell Nexvia to vendors already within Felix.

6. Partnerships & Growth Channels

• Pronto ERP partnership:
• Pronto has ~1,800 customers and ~$250M revenue.
• Even a 5–10% conversion rate could double Felix’s enterprise base (~75 today).
• Shift toward integrations & partnerships:
• Historically sales-led; now aiming to accelerate growth via channel partners.

7. AI Strategy

Two-phase roadmap:

• Phase 1 — Efficiency gains:
• Apply AI to automate manual workflows:
• Vendor prequalification reviews.
• Tender evaluations.
• Risk assessments.
• Phase 2 — Data advantage:
• Leverage Felix’s proprietary vendor and project data to deliver forward-looking insights:
• Predictive analytics for procurement risks.
• Strategic vendor management recommendations.

8. International Expansion

• Rationale: At ~$100k ARR per enterprise client, reaching $100M ARR would require ~1,000 customers → necessitates expansion beyond Australia/NZ.
• Approach:
• Follow existing multinational clients into new regions.
• Examples: DRA Global (South Africa) and PCL (Canada).
• Preference for organic pull over risky “big bang” launches.

9. Key Risks & Challenges

• Integration execution: Merging cultures, systems, and processes effectively.
• Scalability: Ensuring onboarding, customer success, and support keep pace with growth.
• Timing of monetization: Avoiding premature vendor monetization to protect network effects.
• Competition: Competing with global ERP ecosystems and niche SaaS players.

10. Outlook & Takeaways

• Felix is at an inflection point:
• From cash burn → cash flow positive.
• From pure SaaS → platform + marketplace + SMB upsells.
• Nexvia integration + Pronto partnership are near-term catalysts.
• Large untapped opportunity:
• Over 100,000 vendors.
• $500M+ ARR potential just within the existing ecosystem.
• Management positioning Felix as a future global player in vendor management SaaS.

Bottom Line

Felix is transitioning from a vertical enterprise SaaS provider into a broader ecosystem play:

• Enterprise contractors → core recurring revenue.
• Vendors → monetization upside via Nexvia.
• Data + AI → potential competitive advantage.

Execution on integration, partnerships, and international expansion will determine whether Felix achieves its ambition to become a dominant global player.

Here's the transcript from today's meeting with Felix founder and CEO Mike Davis:

Felix_Transcript_Final.pdf

Some points i'd emphasise:

Felix is not an ERP competitor. Rather than replacing platforms like SAP, Oracle, or Workday, Felix integrates directly into them. It acts as a fit-for-purpose front-end bolt-on tailored specifically for complex supply chain management in capital-intensive sectors. This allows Felix to complement, not compete with, existing systems, which helps enterprise adoption.

Felix is deeply embedded and hard to dislodge. Once integrated, Felix becomes mission-critical for managing vendor engagement, compliance, risk, and tender workflows across large project teams. This deep integration increases switching costs, contributing to strong customer retention and long-term stickiness. Good to see >100% revenue retention.

Network effects are becoming more visible. Mike noted that each new enterprise client brings thousands of vendors onto the platform, accelerating vendor-side adoption at minimal cost. Contractors benefit from a growing base of prequalified vendors, while vendors benefit from exposure to more projects — reinforcing Felix’s dual-sided marketplace dynamics.

Vendor monetisation remains underdeveloped. While vendor revenue has been flat, the growing base of enterprise clients (contractors) is building a rich, engaged vendor ecosystem. The monetisation of this side is still in the early innings but (in theory at least) there's latent potential.

International expansion has been slower than expected. Compared to early expectations, global growth has taken longer to materialise. That said, Mike reaffirmed it remains a key strategic priority, with some “green shoots” emerging via cornerstone overseas clients.

Disciplined capital management is front of mind. Felix is focused on standing on its own feet — they’ve reached operating and free cash flow breakeven, which is commendable in the current environment. Importantly, this is being achieved while continuing to invest in product maturity and future growth opportunities.

Thanks @Trancer for some great questions.

I have to rush off, but just some high level thoughts after today's meeting with Mike.

I'll admit it, I'm somewhat seduced by the business model -- at least in principle. I mean, it's a capital light software business that has the potential for the super strong network effects that often accompany marketplace businesses. Also, I often love companies that are well placed to benefit from a structural shift within an industry (in this case, towards a Cloud based procurement and contractor management) and that enjoy an early lead over competitors.

At the same time, they don't always hit the necessary critical mass and can bleed cash for a long time before any real scale is achieved. And I think it almost certain that Felix will raise again soon.

I think the partnership model is the way to go for offshore expansion, and the fact Mike reckons offshore revenue will be 90%-plus of the group total within 5 years is very interesting.

It seems that the story here is (potentially) -- good tech, and good base of banner clients that they have fought hard for, but to date the earlier expectations for revenue growth haven't been as strong as perhaps the market was expecting (maybe due to some overzealous guidance provided at the time of listing) and shares have bled off when coupled with the expectation for further dilution. BUT, the market potential is exciting, as is the industry tailwind. And there does seem some decent traction with contractors. These things -- especially at the enterprise level -- always takes much longer than most people expect.

Shares are roughly 3.8x revenue.

Adding them to a watchlist for now