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.

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

14 Oct 2022: The ASX only sent out one free broker report today, and it's from CCZ Equities on Felix Group Holdings (FLX):

https://mcusercontent.com/fb916e952b091f8460a87fd27/files/6e91cf5c-5305-dc00-93ab-49992130a334/221013_FLX.01.pdf

That link will give you the report, which is an "initiation of coverage" report from CCZ. They provide a variety of DCF valuations on page 27 of the report - ranging from 18 cents (FY23 Bear Scenario) to $1.90/share (FY23 Bull Scenario). Their FY27 DCF valuations for FLX range from $0.33 to $2.89/share (Bear/Bull Scenarios again). They also provide Base Scenario valuations, and their Base Case DCF for FLX is $0.58/share in FY23 and $0.91/share in FY27.

FLX closed today at 12 cents, down 2 cents (-14.29%) from yesterday's 14c/share close.

Source: About Us | Felix

Plain Text Link: https://www.felix.net/about

Disclosure: I do not hold FLX shares.

I got sent a list of creditors for fallen construction company Condev. And notice Felix on the list, see below. Its not a super high amount, but could be something for holders to keep an eye on. I predict more and more builders will collapse moving forward. Unsure if Felix provide a list of contractors and vendors they service?

Felix have announced a capital raise of up to approximately A$7.4m, most (A$6.4m) coming from a placement, and another A$1M via a SPP for the plebs amongst us.

The placement is at 36c, or about 10c higher than the current share price. There is some math about deciding the issue price, being a 2% discount in the volume weighted average price of shares traded during the five days up to issue.

The raise is to be used for sales and marketing and to boost contractor conversion opps, as well as dev works. Run of mill stuff and not unexpected.

An accompanying slide deck shows the company continues to make progress, albeit probbaly not as fast as I'd like to see.

This is a small holding for me and I will contibute simply to avoid dilution.

Appendix 4D – Half Year Report

Felix recently released their Half-Year Report ending Dec 2021.

Principal Activities & Review of Operations

Felix provides a SaaS solution to its Contractor and Vendor customer base enabling ease of finding, managing and engaging with each other. The platform automates and streamlines a range of critical, procurement-focused business processes.

Contractors are contracted by asset owners to build or maintain capital works projects in the commercial construction and related industries.

Vendors comprise the Contractors suppliers and include subcontractors, equipment providers and service and materials providers.

Throughout H1 FY22 Felix continued to increase the number of Contractors and Vendors on the platform and expanded into new sectors, such as resources and utilities.

The number of contractors on the platform grew 18% from 31 to 38 during the half. Each new contractor embeds Felix into their organisation and mandates usage across their entire third-party supply chain of Vendors on to the platform, effectively building the Vendor Marketplace at no direct cost to Felix.

Average Contractor ARR Retention rate for the Half of 98.8%

Contractor ARR contribution increased from 45 – 56% with total Group Contracted ARR of $4.2M

Average Contractor ARR ~$63,000

Number of Vendors in the Vendor Marketplace grew by 15,138, an increase of 35% on pcp. The footprint of the Vendor Marketplace spans over 50 countries.

Average Vendor ARR ~ $2,800

Felix introduced Procurement Schedule module, connecting critical project planning, scheduling and tracking data with key sourcing processes. The company reports strong demand “with a number of Contractors taking up the new module”.

Felix continue to work on their Essentials module, a ‘lite’ version of their existing module tailored for individual Contractor projects. They expect the sales cycle to be significantly reduced as it will be sold directly to project managers as opposed to enterprise wide.

Engagement Metrics

•Number of active projects up 554% pcp

•Total active Vendor Compliance Documents up 327%

•Requests for Quotations sent by Contractors up 158% pcp

•Total Contractor user accounts up 61% pcp

Financials

•Total revenue down 21%; however, excluding Other income (Job Keeper etc) sales revenue was flat

•Contractor revenue up 28%

•Operating expenses down 32% predominately due to IPO costs in the pcp

•Marketing & advertising expense increased 32% to $136,533

•Loss of $3.7M down from $7.5M pcp

•Cash and cash equivalents of $6M

•Net assets of $4.1M

•Cash outflow from operating activities of $2.5M

Felix has 38 Enterprise Contractor Customers with an average ARR of $63,000 versus 59,000 Vendors on the platform with an average ARR of $2,800. I suspect the latter refers to paying Vendors only as the company offers a Freemium model.

What to Monitor

The company’s success relies on their ability to grow Contractor Customers. Contractor Customers mandate their Vendors adopt the Felix platform, essentially building Felix’s marketplace at no cost to the company. Consider realestate.com.au, no one is going to use the website when looking to buy a property if there are no houses listed. Similarly, with few Contractors (house listings) on the Felix platform (realestate.com.au) no Vendors (house buyers) will be attracted to the offering and Contractors will see no value.

With cash of $6M and an operating outflow of $2.5M there's a strong possibility of a capital raise in the next 6-12 months.

FLX has been on a tear recently

First they announced a new cornerstone customer in the Real estate sector

they signed a 3 year contract with GPT (managing $25.3 billion of assets)

This will add an additional $300k in ARR, (ie $900k over the 3 years) which isn't huge but could well be a springboard to much bigger contracts with new construction projects (there are currently $4.8 billion underway or planned)

then they announced an international agreement with InEight

And these guys are no minnows:

"400,000 users and their software has been deployed on $US400 billion worth of construction projects"

I have read the announcement about 6 times and it is very light on details other than the promise of collaboration, integration and working together to pursue joint bids.There is no indication of what Felix stands to get out of this, so is impossible to quantify the potential range of dollar values.

The SP has appreciated from a low of $0.28 on 25/01 to $0.365 today.

So, lots of potential but still losing money hand over fist and costs increasing faster than revenues.

Will need to see some traction in revenue before increasing my tiny holding!

Felix (FLX) secures key customer in real estate sector

FLX is pleased to announce that it has secured a 3-year contract with GPT Group (ASX GPT) for its enterprise procurement management platform.

The contract will generate $300k of ARR, equivalent to approximately 7% of total contracted ARR, with a total contract of 900k over three years.

Key points

• First cornerstone customer in real estate sector, representing expansion into new verticals.
• Another significant company (9b market cap) to acquire FLX’s services, which provides continued endorsement for FLX’s product.
• GPT is one of Australia’s largest diversified property groups with a portfolio of 25b across 79 Australian office, logistics and retail assets. GPT has significant pipeline of developments with over 4.8b currently underway or planned, provided FLX with further organic growth opportunities.

A solid win for FLX before the release of their upcoming Q2 report.

DISC: hold a small position 

Insider Alexander Waislitz (Thorney Technologies) purchased 360k worth of shares at .22c per share on 21 October. This upped their stake in Felix from 7m to 12m shares (voting power now 9%).

The company also recently presented at the Hidden Gems Webinar on 22 October, alongside TNG, FME and CBL.

Bullish signs following a promising quarterly update in Q1.

DISC: Held

Q1 FY22

@Chagsy, nice summary mate. As I indicated recently, I was going to strongly consider selling if this quarterly was a poor one. Like you, I have been pleasantly surprised reading the update. Key metrics are solid, but you hit the nail on the head - contractor growth is fundamental for the platform to attract vendors (and subsequently enable network effect to slowly do its thing). While a record six contractors were onboarded in Q1, I was perhaps most impressed at the size of some of those players, as you allude to. It is one thing to onboard a small business, but another to onboard a business worth around 2b.

Vendors in the marketplace continue to gradually increase too, albeit just under 7% in Q1 which is nothing to write home about - but my thesis was also based on gradual increases. The report mentions that the six new contractors are expected to onboard their vendors once implementation is completed in Q2, resulting in an additional 7000 vendors to marketplace. This bodes well for Q2 reporting.

Cash burn a little concerning, but with >7m in the bank they should have enough cash to sustain growth/operations for at least a few more quarters. 

DISC: Held - I think there is enough in these figures to justify me continuing to hold my small position, noting I am paying close attention to the industry in which FLX has a number of competitors.

Proptech startup ProcurePro raises $2.6 million seed round

Article is here. ProcurePro launched in Brisbane in 2020, and are targeting the same sort of market as Felix. Bear in mind, there is strong competition in this field, with iseekplant.com.au (Australia's largest online construction marketplace) and VendorPanel, to name a few. 

I bought a small parcel of Felix's shares a number of months ago. I wouldn't call their performance in that time outstanding, but they appear to be slowly ticking along. There are real and valid concerns about Felix successfully monetising their platform. I initially provided them with a bit of leeway here, given they are recording impressive growth to their suite of products/offerings - the idea is that they will eventually start to monopolise this when the network effect starts hopefully starts to do its thing. This is OK if they are market leaders with leading disruptive technology; the risk here is the market is slowly becoming more congested, which might create some real problems for Felix down the track. A reluctance to pay for a product will only become more extreme if there are other avenues for a particular business to seek that service. 

With competition growing, the risk/reward ratio is starting to become a little murky. As per my thesis, I want to see gradual growth to both contractors and vendors - the idea being that this will create value for both as it continues to scale. That said, I want to see some ARR growth in Q1 FY22 due to less-than-ideal figures posted in Q4 FY21. I will be keeping a close eye on this in the coming weeks. 

If there isn't any meaningful change/improvement to Q1 FY22 figures, I will consider selling and sitting on the sidelines with this one while Felix continues to develop and mature as a company. 

EDIT: Spelling 

I currently have the tiniest of holdings in FLX. It is a way of forcing me to keep up with companies I want to follow. Currently, there is not enough evidence of FLX being able to monetize their platform; in the form of accelerating ARR, for me to put any real money in.

It is a company very much on my watchlist as I think it has a lot of really good things going for it. It could be that ARR merely lags all the other metrics ie they are lead indicators of future revenue. But for now I am concerned that the headline increase in vendors, for example, is meaningless as this does not reflect a similar increas in revenue.

As always, would be very much like to be challenged on any assumptions or receive any feedback on teh subject

C

This is a very early stage company. Cash balance is 9 mill. Revenues are meagre "Felix added $0.2m of new Enterprise SaaS Contracted ARR, increasing 25% on the prior corresponding period". Which isnt a whole lot, in anyone's book.

Ongoing costs are likely to be signficant in terms of R&D building out the necessary modules and the passport/wallet functionality. Cash burn was ~1mill for the quarter, so unless revenues pick up .....

There is a very large chance of significant dilution from further capital raises.

The thesis relies on converting a singificant minority of major enterprise customers and perhaps more importantly, government bodies, to make this the platform of necessity for the industry. The most recent metrics reported:

• Total Enterprise User Accounts: +44% previous corresponding period (PCP)

• Requests for Quotations (RFQ) sent by Enterprise customers: +294% PCP

• Number of Active Projects: +777% PCP

• Total Vendor Approvals: +138% PCP

• Total active Vendor Compliance Documents: +469% PCP

• Vendor Evaluation: +47% PCP

Show lots of activity, but no monetisation is being reflected in the ARR. Perhaps this will be updated in the report.

I wasnt able to find much in the way of useful information about competitors in this space, my search showed up a bunch of very vanilla descriptions or assessments. So I dont know what is out there.

Key Highlights

• Expansion of enterprise platform with new Procurement Schedule module undergoing final testing and validation with cornerstone customer
• Early discussions across customer base indicates strong demand for the new module that drives operational efficiencies and greater transparency
• 52,234 Vendors in Marketplace increasing 53% pcp, significantly increasing the scale and value of future monetisation opportunities of the Marketplace
• Enterprise SaaS Contracted ARR¹of $1.9m as at 30 June 2021, up 25% pcp with a number of new contract discussions well progressed
• Three new Enterprise SaaS contracts won and one contract expansion across target sectors, highlighting the broad applicability of Felix’s enterprise platform
• Strong cash position of A$9.0m, as at 30 June 2021, providing funding flexibility to execute strategic initiatives and execute platform expansion

Thesis check / thoughts

• Contracted ARR graphic (figure 2) shows an increase of $1.9 million from $1.8 million. This is a little misleading for my liking – with the quarterly increase reported at 0.2million. Receipts from customers recorded a minor increase of almost 2% ($742,000 to $755,000).
  • This is disappointing to be honest. I am hoping to see improvement to this metric in Q1 and Q2 FY22.    
• In better news, the onboarding of 3 new SaaS contractors (and a contract extension) is encouraging. The customers are:
  • Macmahon Holdings Limited (ASX: MAH) – this looks to be the most impressive customer added. MAH has an annual revenue of around $1.3 billion. It is also encouraging to see FLX onboarding a mining-related contractor.
  • a joint venture between two major contractors, responsible for road maintenance and construction in Sydney
  • a leading provider of civil engineering
• Retention rate was 100%, which is great to see.
• The number of vendors in marketplace increased to 52,234, up from 49,402 in the previous quarter.
  • This is in line with my thesis – gradual growth of vendors in marketplace as more contractors/customers are onboarded. The latter makes Felix a more attractive proposition for vendors and should result in increased vendor subscriptions (also increasing the network effect over time).
• Cash burn rate steadied (due to the reduction in one-off IPO costs), with just over $1 million spent (in contrast to 3Q, where over $2 million was burnt). Cash position is strong at $9 million.
• Good to see ongoing improvement/investment to the Felix (platform), with the new offering of a Procurement Schedule.

All in all, I am bullish on the quarter, noting that ARR didn't increase as much I would have hoped. Even still, the onboarding of 3 new contractors, 100% retention rate and steady increase in marketplace vendors are all encouraging. 

DISC: HELD 

Overview

Felix Group Holdings Ltd (FLX) develops and operates a cloud-based enterprise SaaS and marketplace platform for the commercial construction and related industries in Australia and internationally. Its platform connects contractors and third-party vendors, automating and streamlining a range of critical procurement-related business processes in the sector. FLX monetises both contractors and vendors through SaaS subscriptions.

Vendor Marketplace

The company launched its online Vendor Marketplace in 2013, which has grown to become a leading marketplace for the Australian commercial construction sector. It is used by contractors to source vendors, and vendors to source new business leads.

Felix (platform)

In 2015, the company developed its enterprise solution, Felix – a solution used by asset owners, builders and managers to connect organisations and their supply chains. It centralises and streamlines vendor management and ‘source to contract’ processes.

For those interested in gaining a basic understanding of Felix’s procurement platform, I strongly suggest watching this video.

Thesis

• Founded-led, with a healthy 28% of the company owned by insiders.
• Sticky customers and a ‘trap door moat’ – once Felix is adopted, the platform typically becomes a core part of the business’s operations, making it difficult to replace. This results in high retention rates and low churn.
• ‘Network effect’ – as Felix grows, it will create increasing value for both contractors and vendors as it continues to scale. Contractor growth is important for this to occur as this will naturally attract vendors.
  • My partner’s friend works in the construction industry as a project manager. I took the opportunity to ask him about Felix – had he heard of it, used it etc. In short, he had. He uses Felix in his day job and encourages others in the industry to do the same. A lame point, I know, but real-world application is encouraging.  
• Growth – contractor (ARR) revenue is growing, albeit off a low base. It had a total of 8 customers at the end of FY 2018, H1 FY21 reporting suggests this figure is now at 21 (there are some sizeable companies among the mix, eg. CIMIC and Veolia). Vendor growth is also impressive, with over 40 thousand ‘vendors in marketplace’ spanning across 42 countries (up from 24,832 in HY20). Much of this growth has happened organically through contractors using Felix on international projects.
• Global total addressable market estimated to be worth $7.2 billion.

Monitor

• Contracted ARR – continued expansion confirms ongoing value in the Felix product. Ideally, I want to see this metric grow at a rate of 20% and over (YoY). Of note, contracted ARR did not increase from H1 to Q3 FY21. Keep an eye on this (slow quarters are expected, particularly in this current climate, this is why I will judge this metric YoY).
• Customer churn – continued adoption of Felix with high rates of retention and low customer churn for the thesis to remain intact. FLX reported no churn in H1 FY21, with one customer churning in 4C Q3 FY21. This was reportedly a ‘change in business circumstance’ and not financially material).
• Ability to monetise vendors – to date, FLX has not succeeded in growing revenue from vendors. In H1 FY21, FLX reported 43,865 vendors were using the marketplace, but only 1359 had subscribed. More vendors will begin to subscribe as more contractors adopt the platform – increasing the prospects of the vendor finding work. This will in turn increase vendor revenue and strengthen the network effect. This is expected to occur over several years, not instantly, making FLX a long-term hold for me. I want to see gradual increase in ‘vendors in marketplace’, but also the % of those venders that subscribe. I won’t put a % goal on this yet and will revisit in 6-12 months.
• FLX is debt free, with a reported cash balance of $10.1 million (as of 31 March 2021). As a newly listed company, it is difficult to judge the company’s track record and their ability to effectively use capital to grow. Keep an eye on this and their cash burn rate.

DISC: Recently added to RL portfolio ($0.26) and Strawman portfolio. 

•Talented, aligned BOD with relevant experience, strong track record in construction & software & 22% ownership

                -In addition, previous director David Williams (Oct 2020) owns 14.5%

-Robert Phillpot co-founded Aconex, acquired by Oracle for $1.6 billion in 2017

•2x Founder led with 6.5% ownership

                -33% total insider ownership

•First movers with potential for strong network effects*

•Possess strong economies of scale with low/zero customer acquisition cost

•Posted first positive operating cashflow for the half of $194,799**

•Strong balance sheet with $10M cash & no debt

                -Strong probability they can self-fund growth from here

•Possibly misunderstood/unknown

                -Recently listed Jan 2021

                -Financials before H1 FY21 report were not pretty (~$7M loss & -$7M FCF)

•Strong growth trajectory

•Large addressable market

•Disruptive construction technology platform

•Moderate tailwinds

                -Shift from paper to digital

                -Aus gov $110 billion Federal land transport infrastructure program over next 10 years

•Valuation: currently on a reasonable 9x price to sales

•Provides portfolio exposure to infrastructure through a higher gross margin tech play

Minor Concerns & Why I Would Sell

Construction & mining & resources industries are cyclical. This could be offset by expansion into other non-cyclical markets, including government, utilities & facilities management. Monthly recurring revenue from vendor subscription could mitigate this risk as well as the value of the platform to Enterprise customers (e.g. $75,000 cost for multiple 10 – 100’s of million dollar projects)

•Inability to onboard more meaningful Enterprise customers

•Inability to convert existing & new marketplace vendors from freemium model to paid subscription

•Inability to improve free cash flow

•Expenses outpacing revenue growth

•Founders selling a significant stake while not executing on growth strategy

To Monitor

•Ensure performance based LTI plan to be implemented July 2021 is reasonable. Provides for 25% cash bonus on base salary, made up of 50% for EBITDA target & 50% role specific performance measures. Applicable to CEO, CFO, CTO, COO.

* Continued innovation of new modules as well as conversion of vendors (currently 2.5%) to a paying subscription will be key

** Since writing this, the most recent quarterly saw an operating cash outflow of ~$1M excluding IPO related costs. Refer to my App 4C straw.

Thanks to Bear77 for his excellent write-up on Felix. https://strawman.com/reports/FLX/Bear77

I’ve included my notes to test my understanding of the company, rather than just relying on the work of others.

Company Overview

Felix was founded in 2012 by CEO Mike Davis and non-executive director Michael Trusler.

A construction technology company, Felix offers an online SaaS marketplace for contractors to source vendors and vendors to source new business leads. This enables both contractors and vendors to find, manage and engage with each other more effortlessly.

Contractors, such as Monadelphous or CIMIC, are contracted by asset owners (e.g. government bodies, property developers) to build or maintain capital works projects. Contractors adopting the Felix platform typically mandate it’s use by their vendors. This network effect drives down or even eliminates customer acquisition costs.

Vendors consist of the contractors’ suppliers, including subcontractors, equipment providers and service and materials providers. An increase in vendors should drive more contractors to the platform, strengthening network effects.

In addition to facilitating contact between contractors and vendors, Felix’s platform streamlines the procurement process.

Felix has seen it’s vendor customer base grow from 10,036 to 49,400 in 3.5 years. As a result of vendors using Felix on international projects, 800 of these vendors are spread across 42 countries with zero marketing spend in these geographies.

What problem does it solve?

For Contractors

Typically the process of contractors engaging vendors has been managed with paper-based forms and everyone working in spreadsheets. This is a labour intensive, manual process lacking transparency.

As a result, Felix was alerted by tier 1 contractors of the need for an enterprise solution to improve vendor management & procurement.

A digitised vendor management solution was created enabling contractors to engage their 3rd party supply chain (e.g. subcontractors, suppliers, consultants). This specific module enables contractors to manage their vendors from prequalification through to performance evaluation and ongoing compliance.

Felix’s sourcing module enables project teams to manage sourcing activities while storing all documentation in a central location. It also customises and enables numerous rapid purchasing and end-to-end request for quote processes.

Felix’s contracts module stores all contracts and contract summaries in a secure centrally searchable repository.

Vendor marketplace enables contractors to discover new vendors outside of their existing supply chain, ensuring competitive pricing from bidding vendors.

For Vendors

Pre-qualification to contractors is burdensome. For each bid vendors need to answer up to 300 questions, upload, send and scan 20 documents. The Felix marketplace allows them to pre-qualify to an internationally recognised standard.

Imagine a $1Bn project with 1,000 packages of work and the friction the Felix platform removes through centrally located, transparent documentation, ease of sourcing, ease of quote requests, efficient compliance and contract management as well as all the paperwork removed.

Revenue Model

The company’s recurring revenue accounts for 62% of all revenue, up from 37% in the previous corresponding period.

Felix monetises both contractors and vendors.

Enterprise customer (i.e. Contractor) ARR has grown from $36,000 in 2018 to $75,000 as of Nov 2020. Felix expects continued growth as they release more modules solving additional enterprise customer problems. Average contract length is 2-3 years.

Average Vendor ARR, through marketplace subscriptions, is $2,100. This is offered through a freemium model on annual or monthly contracts. Felix expects growth of vendor revenue to accelerate as Marketplace scales, providing a significant monetisation opportunity.

Highlights

Continued strong growth with

•Enterprise SaaS ARR up 37% YoY to $1.8M

•Enterprise user accounts up 56% pcp

•Requests for Quotations (RFQ) sent by Enterprise customers up 123% pcp

•Number of active projects up 890% pcp

•Vendor approvals up 164%

•Total active vendor compliance documents up 345% pcp

•Vendor evaluations up 70% pcp

•Vendors in Marketplace up 66% YoY to 49,400

This puts them on pace to comfortably outpace Vendor growth from the previous half.

•One customer churn but contract was not financially material. Previous half had zero churn.

While this level of growth is high it’s important to consider much of it is off a low-moderate base. Compliance documents growth could indicate vendors looking for more work. Could this lead to a higher number of paying vendors down the track? Most are currently on a freemium model. Growth in active projects suggests customers are finding value in Felix’s offering.

The market reacted with a minor selldown. My guess would be the operating cash outflow of $2.2M scared some investors. $1.2M of this was from the IPO, a one-off, and in addition due to “timing profile of recurring Enterprise licence fees”. My understanding is Enterprise fees are paid for the year upfront.

In the previous half, operating cashflow was +$194,799. Even if FLX continues to burn $1M Q, with $10M cash, this leaves them with over 2 years of cash runway.

I’m still new to the Felix story so it’s possible I’ve missed or misunderstood something.