Discl: Not Held

SUMMARY

Financial position is very impressive

TAKEAWAYS

The key questions for me now are (1) how is this growth going to be sustained to justify the current PE multiple (2) how long will the current growth run for before it plateaus

The current 124x PE feels very expensive against the backdrop of (1) not a clear monopoly/semi-monopoly (2) uncertain longer-term growth opportunities (3) sterling growth in the last 3 years

REVENUE

Revenue is growing

The legacy transactional Criminal History check is flatlining, Other Checks are in decline

Exponential Growth has come from the Workforce Compliance SAAS products since the BPT acquisition and its subsequent enhancement/re-branding - the market is clearly rewarding KYP for this

Growth is exclusively in Australia - NZ has been completely flat in the last 5 years, despite the workforce compliance products

PROFITABILITY

Nice inflection to profitability, EBITDA, NPAT and EPS

BALANCE SHEET AND CASH

• Balance sheet is clean - $10.2m cash, no debt
• Increasingly positive cashflow from operations - $5.3m in FY25
• Overall cash flow also rose to $0.4m in FY25 from $0.13m in FY24

Discl: Not Held IRL and in SM

Part 3 - Competitors, Domestically and Globally

In summary, at this point, my thinking on KYP:

• Not an obvious monopoly/semi-monopoly in the workforce compliance space - it looks like it has direct competitors. Its acknowledgement that their “Serviceable Obtainable Market” of 60-70% of TAM might be explicit admission of this. 
• Has clear and largish global competitors with their own international reach
• Appears small, size-wise, vs its global peers
• Not seeing an immediately obvious path to international expansion - is KYP merely an ANZ play, despite the noises it is making on “international expansion”.
• The $10m cash on hand does not seem like much to work with at all, given the on-paper scale of the global players - I would expect a capital raise to accompany any M&A

Need to peel the KYP announcements to confirm or debunk this continued scepticism.

Would appreciate any input/feedback from anyone who has followed KYP more closey and for longer as I am unsure if I am off course with my thinking thus far ...

DOMESTIC COMPETITORS

Kinatico sits in the workforce-compliance / compliance-management / RegTech niche. competitors fall into three groups: specialist workforce/credentialing platforms; broader compliance/GRC vendors; and general workforce/HR platforms with compliance modules. Representative competitors (examples with sources):

• Rapid Global — safety & compliance / contractor management solutions
• SafetyCulture (iAuditor) — operations & compliance inspections widely used across industries (competes on operational compliance)
• Donesafe / SAI360 / Donesafe-like GRC vendors — broader compliance and risk platforms used by enterprises. 
• CredEntry / other credentialing vendors — focused on credential verification / visitor & contractor credentialing (very direct overlap). 
• Large HRIS / HCM vendors (Workday, SAP SuccessFactors, ADP, Oracle) — not direct substitutes for deep compliance workflows but important competitors/partners because many customers rely on HRIS vendors’ modules or integrations. Kinatico lists many of them as integration partners.

(Industry listings and competitor aggregates also show Kinatico compared to Rapid Global, Nakisa, Redzone and others in third-party directories.) 

COMPETITOR FEATURE MATRIX (TOP 6)

Takeaway from Matrix

• Kinatico’s strengths: integrated screening history (CVCheck heritage), mobile worker UX and explicit HRIS integrations — good fit for regulated industries in ANZ
• Kinatico competes most directly with specialised ANZ credentialing/worker-compliance vendors (CredEntry, Cited within Kinatico group, Rapid Global, Donesafe) 
• SafetyCulture and SAI360 compete on adjacent functionality (inspections, enterprise compliance) and may win customers via broader operational or GRC footprints

CLOSE OVERSEAS COMPETITORS

Below is a focused list of non-Australia / New Zealand companies that offer products comparable to Kinatico (workforce compliance, contractor pre-qualification, credential verification, ID/KYC, background screening, mobilisation/logistics). For each I give the primary country (HQ) and a one-line note on the comparable product area. 

Key Notes

• Region matters: Avetta / ISN / Veriforce / Alcumus / Achilles already operate in many countries and have strong relationships with large corporates and asset-owners — they’re the firms a global miner/utility will ask about first.
• Partnership vs direct competition: Some identity and screening providers (Onfido, Jumio, Sterling, Trulioo) often partner with contractor management platforms rather than compete directly on full workforce-compliance stacks. Kinatico could integrate with (or white-label) these providers when entering new markets. 
• Regulatory & data localisation: entering EU/UK/North American markets typically requires local data-handling, chain-of-custody and compliance with local background-check laws — existing local players have operational advantage
• Africa & Middle East - higher barrier to entry due to local rules - must partner locally or buy licences; direct entry without local partnerships is high friction
• India - large TAM, but regulatory and fragmentation challenges

COMPETITOR MAP BY VERTICAL

Go-to-market competitor map by vertical and who dominates which vertical.

Vertical Competitor Map Takeaways

• Large asset-owners in mining, energy and infrastructure typically contract with Avetta/ISN/Veriforce/Achilles/Alcumus — these players are entrenched because they operate buyer-led networks or are aligned with procurement standards
• Background screening for hires and contractors is dominated by specialist screening firms (Sterling / HireRight / Checkr / Certn) that focus on speed, global data sources and API integrations. They are complementary to (and sometimes partners of) contractor-management platforms
• Identity/KYC providers (Onfido, Trulioo, Jumio, IDnow) dominate the document + biometric verification layer — often integrated into contractor platforms rather than replaced by them. 

CHAT’s “ADVICE” ON WHERE KYP CAN REALISTICALLY WIN INTERNATIONALLY

Adding this for completeness - not placing any reliance on these “suggestions”

• Target mid-market and regional subsidiaries of global firms first. Large miners/utilities typically use Avetta/ISN — but their regional operations and subcontractors can be won with faster onboarding, lower cost and better local integrations. (e.g., KYP’s ANZ vertical templates are a selling point)
• Partner rather than compete on screening / identity in new markets. Integrate with global screening (Sterling/HireRight/Certn) and KYC (Onfido/Trulioo/Jumio) instead of building local screening networks from scratch — this substantially lowers time-to-market and regulatory burden
• Focus on niche verticals where buyers value local/regulatory fit. Aged care, healthcare and regulated education environments prize local compliance fit (national police checks, healthcare registers) — win these by pre-baking local checks and workflows. 
• Use a two-track approach: (A) land-and-expand with mid-market clients via fast deployments and modern UX, (B) pursue 1–2 strategic global anchor customers (regional units of multinationals) to build credibility and integrations.

MY TAKEAWAYS

Domestically

• Appears KYP has direct competition, with various companies dealing with some or all aspects of the workforce compliance management space - need to peel what KYP’s market share is and KYP’s differentiator from its competitors 
• KYP’s own Serviceable Obtainable Market of ~60-70% of TAM also suggests that KYP’s is not quite in a monopolistic/semi-monopolistic situation

International

• There are big international players in KYP’s space in the US, UK, Europe and Canada with seemingly huge valuations in the US$b, and “relatively entrenched” positions, most of which sound like they have a global offering - prima facie, these look completely out of KYP’s reach to acquire given KYP’s market cap of ~A$164m. If anything, it raises the risk of KYP being acquired for the globals to geographically expand to ANZ - with those valuations, acquiring KYP would appear to be well within reach
• The smaller non-English speaking countries could be white space for KYP’s international expansion but these will come with its significant operational challenges - language, lack of standardisation, need for deep local knowledge etc
• I can’t quite see an immediately obvious and viable pathway to KYP’s international expansion - this was my very first risks when looking at KYP for the very first time. The evidence in this superficial dive seems to confirm this thinking rather than debunk it

QUESTIONS TO ASK

Q6. What is KYP’s thinking and plans around international expansion? In what space, region?

Part 2 on TAM. Trickier to assess!

PRACTICAL TAM (1st PASS OF CHAT)

Estimates vary by how you define the market (pure workforce-credentialing vs. compliance software vs. whole RegTech market). authoritative market research firms provide different figures; below I list a clean, sourced range and how to interpret it:

1) Workforce / workforce-compliance software (narrow segment) — one specialist estimate puts the global Workforce Compliance Management Software market at ~US$2.4–2.5 billion (2024) with double-digit growth (CAGR ~12%+). This is the most directly comparable segment to Kinatico’s product. Dataintelo

2) Compliance management software (wider category) — multiple sources show a broader Compliance Software market in the tens of billions (USD) range: e.g. Mordor / Verified Market Research / The Business Research Company report values spanning ~US$33–60 billion depending on the exact scope and year. These figures cover GRC, regulatory reporting, policy management and other enterprise compliance functions — larger than Kinatico’s immediate niche but addressable over time if the company expands features.

3) RegTech (largest umbrella) — RegTech market estimates commonly range from ~US$17B (2023) up to >US$70B by 2030 depending on the research house and definitions (RegTech includes identity, KYC/AML, regulatory reporting, compliance automation). If Kinatico expands into adjacent RegTech services (identity verification, screening, automated regulatory checks), it could target a slice of that broader RegTech TAM. 

Bottom line (practical TAM for Kinatico right now):

• If you map Kinatico to the workforce compliance / credentialing sub-segment, a defensible global TAM today is in the low single-digit billions USD (~US$2–4B) and growing at double-digit CAGR.
• Kinatico is a SaaS RegTech / workforce-compliance vendor with measurable scale in ANZ (claimed ~1M people, 30k organisations). That makes its immediate market the workforce compliance niche (smaller TAM but faster path to revenue). 
• The company faces competition from both specialist credentialing vendors (CredEntry, Cited-style platforms, Rapid Global) and broader compliance/GRC or HRIS vendors. Competitive differentiation will come from domain expertise, integrations, scale, verification capabilities and vertical focus (healthcare, mining, aged care, construction etc.)

If you stretch to all compliance software / RegTech opportunities (adjacent services, vertical expansion), the addressable market expands to tens of billions USD over the next 5–10 years. (Use the larger RegTech / compliance software reports for strategic upside.) 

CHAT’S GDP-BASED METHOLODLOGY TO CALCULATE KYP’s ANZ TAM (2nd PASS)

Including this for completeness and a data point - can’t say I am bought into it as I expect TAM’s to be a bit more specific, generally

Data Points

Global workforce compliance management software market (narrow segment): US$2.47 billion (2024), projected high double-digit growth (DataIntelo market estimate). Dataintelo

Australia GDP (2023) ≈ US$1.728 trillion. Macrotrends

New Zealand GDP (2024) ≈ US$260.2 billion. Trading Economics

World GDP (2023) ~ US$100 trillion (used to compute country share). Macrotrends

Baseline Approach (Proportional to GDP)

A simple, commonly used, way to estimate a country/region slice of a global software market is to allocate by economic size (GDP), adjusted for adoption intensity. Using that:

Australia + NZ combined GDP ≈ 1.728T + 0.260T = ~US$1.99 trillion. Macrotrends+1

Share of world GDP ≈ 1.99T / 100T ≈ 1.99%. Macrotrends

Apply that share to the global workforce compliance market (US$2.47B):

ANZ TAM ≈ US$2.47B × 1.99% ≈ US$49.1 million.

Result (baseline): ~US$49M for the specific workforce-compliance / credentialing software market in Australia + New Zealand today.

Adjusted Baseline

Higher per-capita digital adoption in ANZ: Australia and NZ are mature, high-tech adopters with strong regulatory compliance needs in mining/healthcare/construction, so per-GDP spend on RegTech could be above global average. Adjusting up (×1.5–2.5) gives an upper practical TAM of roughly US$75–125M. (This captures higher software penetration, industry concentration and local demand for workforce credentialing.)

Lower bound: if you instead use the broader compliance software market (tens of billions), and then narrow by the fraction that is workforce credentialing, the ANZ slice of that could be larger — but that drifts away from Kinatico’s immediate product set into adjacent markets. See VerifiedMarketResearch / Mordor for larger compliance market context. 

Final GDP-Based TAM

Conservative / baseline (GDP share): ~US$49M (approx). 

Practical / adoption-adjusted upper bound: ~US$75–125M (to reflect higher per-capita software spend and industry concentration in ANZ). 

KYP’S VIEW ON TAM FROM FEB 25 RESULTS PRESENTATION

• KYP’s $2.7b TAM aligns more closely with the Global Workforce/Workforce Compliance Software, but is a a fraction of the global RegTech TAM of US70b by 2030
• The Estimated Serviceable Market of $200-$300m within 10 years is on the higher side of the GDP-based TAM from Chat of US75m-US$125m
• Boils down to what the agreed definition of “RegTech” is, as may not be comparing like-for-like at all
• Agree with the SME’s positioning, which is taking on a more XRO-like focus

Customers / scale: Kinatico states it serves ~1 million individuals and >30,000 businesses across Australia & New Zealand (public investor content)

TAKEAWAYS

• Am not clear what makes up the KYP TAM as “RegTech Solutions” is very broad - KYP’s $2.7b TAM is more aligned to the narrower “Workforce compliance software” TAM (US24-25b) above vs Global RegTech (up to US$70b by 2030)
• Also unclear if the KYP TAM is global, semi-global (in the countries KYP is targeting only) or pure ANZ

QUESTIONS

Q5: What does the KYP TAM comprise off? Reg Tech (broader) or Workforce Compliance (narrower). Is that a global or ANZ only TAM, and the Serviceable Obtainable Market of ~60-70% of TAM is thus against the ANZ market only?

Started a deep dive on KYP ahead of next week's meeting. I found doing this deep dive ahead of a SM meeting extremely helpful with RTH. Pre-meeting, I was clear what I needed to see/hear before I decisively entered (as was the case with RTH) or I pull the pin and move on. I also found doing this deep dive in logical chunks, over a few days, very helpful, to gradually build understanding of the story which in turns builds (or kills) conviction.

I used inputs from my buddy, Chat, but have asked the questions in multiple ways to see if I get the same answers. I then synthesised and summarised the inputs. Questions that I had, I have/will add to the KYP Slido.

Further context is that in my past life, I had to work out how to deal with the issue of managing Reg Tech compliance within a SAP SuccessFactors/SAP HR back end, so I do have some appreciation of the technical integration challenges of bolting on something like KYP to an existing ERP. This is key to point out as most of my doubts/commentary centre around the robustness of the KYP product and how ready/capable/scalable it truly is, outside of ANZ.

With that context, here is Part 1: KYP's Products.

1. KINATICO COMPLIANCE (SaaS)

This is the core SaaS workforce-compliance / credential-management platform. Key features:

• Real-time dashboard of workforce compliance status and visibility across people, roles and tasks
• End-to-end lifecycle: hiring → onboarding → ongoing compliance tracking → off-boarding
• Mobile app access for workers: upload documents/photos, complete forms, receive alerts
• HRIS / HCM / ATS integrations: supports a wide list of systems (Workday, SAP SuccessFactors, BambooHR etc) for sync of user/role data
• Verifications & checks included as part of plans (and add-ons available): e.g., working rights, police checks, driver’s licence, qualification verification, AML screening, etc
• Configurability: organisations can create custom workflows, digital forms, assign activities by role/location, set up alerts/renewals
• Data security / compliance credentials: e.g., ISO 27001 certification, accreditation for national police checks, document verification service
• Tiered pricing: Starter (free up to 5 users), Core (~US$15/user/month), Premium (~US$24/user/month) with more features/verification inclusions

So in short: a platform to manage workforce credentialing, compliance, verification, ongoing monitoring, with dashboards, mobile app and integrations.

2. COMPLIANCEX

Although less fully detailed, this is described as the “new platform” version / upgraded workflow engine for Kinatico. Key notes:

• Launched during 2025
• Designed to simplify people-management workflows by synchronising disparate screening, validation, compliance and procedural systems into one real-time, secure, self-serve solution
• Positioned as an evolution of their compliance platform — likely the next-gen version/underlying tech of Kinatico Compliance.
• According to a broker note: “the company’s new compliance SaaS solution … underlying real-time workforce compliance management”

Here’s a timeline-style table summarising what Kinatico Ltd (ASX: KYP) has publicly disclosed about the development and rollout of their “ComplianceX” platform — what features they plan, when they said they’ll deliver them, and how that maps to what we know so far. Some dates are exact, others are inferred from announcements.

• Development for ComplianceX appears to have been ongoing through 2023 and into 2024, with roadmap features clearly defined by Sept 2024.
• Various news articles in April 2025 describe the “launch” of the ComplianceX workflow platform. For example, one: “the latest version of Kinatico’s platform … ComplianceX … synchronises disparate screening, validation, compliance and procedural systems.” 
• In their FY25 full year results announcement they said they “invested in excess of $3.5m of operating cash flow into new compliance technology” while focusing on building their new solution
• The formal launch of the platform was scheduled for 6 March 2025.
• The product is already in market (Q3 FY25 ended March 2025) with revenue impact. Q3 FY25 (quarter ended March 2025) results show SaaS revenue of US $4 m (or AU$4 m) for that quarter, up 60% YoY, with mention that “while simultaneously focusing on the launch of its new platform
• They stated that the platform was built with international markets in mind: one source notes “Compliance X was developed with international markets in mind. The company aims to achieve international revenue within the next calendar year, potentially through partnerships or acquisitions in other jurisdictions
• The roadmap features (self-service config, predictive tasks, geolocation triggers) are still being delivered — implying a phased feature rollout over 2025 and beyond.
• The company also mentions international rollout ambitions as part of the ComplianceX strategy.

Deployment Plans

• 2025 (Calendar Year): Full commercial availability of core ComplianceX platform in ANZ; customer onboarding; feature enhancements and module rollouts (predictive tasks, geo-triggers, dynamic dashboards).
• 2026 and beyond: Expansion into international markets using ComplianceX as the core platform, possibly via partnerships/acquisitions, localised integrations and new modules for global compliance. (Inferred from roadmap & strategy commentary)

3. CVCHECK SCREENING & Verification Services

This is the legacy / foundational business of Kinatico. Highlights:

• Pre-employment screening, background checks, verification of credentials, references, police checks, etc
• Understood to serve many thousands of clients in Australia & NZ across enterprise and SMB
• It remains part of the group and provides the “screening & verification” layer which complements the compliance/credential-management SaaS.
• The re-branding from CVCheck Ltd to Kinatico took effect October 2022, reflecting an expanded product offering including broader RegTech / compliance workflows.

4. Additional modules / vertical-specific offerings

• While less fully detailed in public documentation, some other product/solution names and modules are indicated:
• Cited – referenced as part of their suite (pre-existing product under the group) which provides compliance management
• OnCite – mentioned in context of mobile application enabling workers to manage daily compliance and credentials
• Industry/vertical-specific modules: though not always branded with unique names, Kinatico notes they serve sectors like aged care, mining, healthcare, government, education and have configurable workflows for regulated industries. (From “Who We Serve” pages)

Notes/Caveats

• While the “Kinatico Compliance” and “ComplianceX” names are quite prominent, the exact modular breakdown (e.g., “contractor-management”, “visitor-credentialing”, “asset-based compliance”) is not always separately itemised in the public site.
• Some older products (e.g., Cited, OnCite) seem to be being folded into the broader “Kinatico Compliance / ComplianceX” stack — so there may be overlap or rebranding underway.
• Pricing and feature-inclusion vary by plan; some verification checks are add-ons
• The company is in a transition phase (from more transactional screening business to recurring SaaS) which means product road-map and packaging may evolve rapidly

TARGET INDUSTRIES

As mentioned above, Kinatico clearly targets multiple industry verticals and offers tailored compliance workflows for them. Based on “Who We Serve” on their website:

• Aged Care – organisations dealing with mounting regulation and credential verification burdens
• Education – staff vetting, credentialing of teaching/support roles, cyber-incident tracking etc
• Financial Services – high trust/credential regimes, data security, regulatory compliance
• Disability Care – compliance paperwork, verification, streamlined workflows
• Energy & Resources – contractor management, site compliance, credential tracking across locations
• Critical Infrastructure – regulatory obligations (e.g., SOCI Act), credential oversight across roles and supply chain.
• Utilities – workforce of contractors, internal employees, supply chain – manage credentials and compliance across roles/locations.
• Healthcare – staff credentialing, audits, compliance-heavy environment.

USE CASES

• Mining & Resources / Mobile Workforces: Validate + Logistics modules are explicitly designed for asset-owners, multiple sites, mobile workforce, travel/accommodation management
• Regulated Sectors (Health, Aged Care, Education, Financial Services): Modules tailor workflows for credential/licence tracking, working-with-children, AML, cyber policy acknowledgement etc. (via core Compliance product)
• Small/Mid-Sized Organisations: Starter plan for up to 5 users; self-service model emphasised to capture smaller organisations. Kinatico+1

KEY TAKEAWAYS

1. Think KYP has evolved from the old CVCheck company which existed years ago
2. Kinatico Compliance appears to have morphed into “ComplianceX”, positioned as the “next generation” of Kinatico Compliance - this will likely encompass “everything” into a single, seamless platform
3. ComplianceX was launched on 6 March 2025, and as at Q3FY25, appears to be revenue generating
4. There are intentions on international rollout as part of the ComplianceX strategy - 2026 and beyond: Expansion into international markets using ComplianceX as the core platform, possibly via partnerships/acquisitions, localised integrations and new modules for global compliance. (Inferred from roadmap & strategy commentary)

AREAS TO FOCUS ON/QUESTIONS AT THIS POINT

Q1. International expansion - what is KYP’s capability to achieve this and plans thereof? Ambition is one thing, capability is quite another, especially when there are existing RegTech providers overseas (subject of next deep dive part).

The commentary says ComplianceX was built with international expansion in mind - this may be nothing more than ensuring that there is country code field to enable the adding of diferent countries to either a module or an industry vertical sub-module, or both. I think of how XRO has struggled to gain significant traction outside of ANZ.

Q2. What edge does KYP bring that other RegTech in foreign jurisdictions not have for customers to switchover to KYP such that KYP can "rule the RegTech" world? I ask this thinking about my other holdings: RTH in horse racing data, SDR in small hotels/revenue management AIM in enterprise captioning/translating, C79 in PhotonAssay, EOS in kinetic anti-drone - these are all companies with a product that is global. I do not include XRO in this list because, like KYP, XRO needs very specific tailoring of its product for each jurisdiction that it enters.

Q3. Does KYP have the financial ability to undertake foreign M&A, balance sheet-wise? Have not looked at the financials yet, but there was commentary about $10m cash, no debt - that does not feel like much of a war chest for any M&A without an associated capital raising, which given how far the price has come, looks like a distinct possibility. Given RegTech complexities, rather than focused on the revenue opportunity an M&A presents, I would be more focused on investment requirements, why and how customers will transition over to a KYP bolt-on.

Q4. Spend of $3.5m to develop ComplianceX (number needs to be validated), feels very, very light for a "strategic asset" - raises questions on the extent of this product - was it a platform rebuild (ala CAT, which revamped its platform for scale) or was it a quick cosmetic integration/makeover of the hodge podge of solutions, to make it look seamless. Goes back to the "what is the moat" question as well.

Have opened a position in Kinatico (KYP) - IRL and here. Another company converting from traditional software to SaaS. They do compliance software for workplaces - think certification checking when onboarding staff and ongoing monitoring. Eg mining drivers, aged care, etc. “RegTech” is a growing area with compliance requirements only getting more complex - their product integrates with most HR systems and handles this complexity for clients. Some nice enterprise clients and adding more as time goes by.

My theory is that they are at an inflection point and with moderate growth and a lower R&D / development bill in FY26 and ongoing they could start a much more profitable trajectory as the operating leverage starts to kick in.

Balance sheet is solid with $10m cash, positive cash flow and no debt. About $120m market cap and at current numbers a very high PE (just over $1m profit this year) but expecting that PE to drop to the 20s on FY26 results and more beyond.

I’ve not met management but the 3 key execs have good pedigree and skin in the game. I really like the chief revenue officer - seems to know his product very well (and gets more airtime than the CEO at briefings!)

In summary my thesis is:

• growing SaaS revenue into a market that is growing - they say TAM is $2.8b and growing
• pricing is ok if you look forward (and squint back :-)
• solid balance sheet
• Should get lots of leverage from growth and capex bill has peaked (at least CEO thinks so) - just turning NPAT profitable in FY25
• product is sticky and gaining in acceptance / child care is a interesting opportunity off the back of the inquiry also
• shares on issue have stabilised and even a little buyback last year - there’s no major dilutive options or like out there
• management have good pedigree and are well aligned

Downsides/question marks/risks:

• that money burns a hole in their pocket and they do something stupid like M&A
• management take increases - it’s been big as a %age of profits but my theory is it’s front ended and will fall as a percentage of earnings
• The big ERP players figure out reg tech and start doing it for themselves
• it’s scalable here but limited / costly if you go overseas
• liquidity of the stock isn’t ideal

Thats about it - would be interested in other straw folks views…@Strawman - would be great to get them on for a meeting too…

Rich

Looks like a positive update from Kinatico - cashflow positive, reduced costs, revenue increasing, cash in the bank and no debt.

http://www.aspecthuntley.com.au/docserver/02623789.pdf?fileid=02623789&datedir=20230125&edt=MjAyMy0wMS0yNSswOTo0NzoxNCs0ODArOTM4NzE2K2FuZHJld3dlc3QrcmVkaXJlY3QraHR0cDovL3d3dy5hc3BlY3RodW50bGV5LmNvbS5hdS9pbWFnZXNpZ25hbC9lcnJvcnBhZ2VzL3BkZnRpbWVvdXQuaHRtbCtodHRwOi8vd3d3LmFzcGVjdGh1bnRsZXkuY29tLmF1L2ltYWdlc2lnbmFsL2Vycm9ycGFnZXMvcGRmZGVsYXllZC5qc3A=

Held IRL & SM

3Q 2022 quarterly cash receipts was $7.3m, up 102% on pcp but lower than the $8.3m in 2Q. Operating cash flow was 855k. Free cash flow was 21k. Cash increased slightly to $12.3m with no debt.

With cash receipts of over $21m in the 9months to date, CV1 is trading at less than 2x the EV to cash receipts which seems cheap to me.

CV check reported revenues of $6.9m in the March 22 quarter up 64% pcp. Year‐to‐date revenue to $19.7m, up 77% on pcp.

CV1 has been cash flow positive on an operational level since 1Q 21 and free cash flow positive 4Q21 and 2Q22.

Cash is a health 12.2m and the market cap is only $48m.

Not sure why company is trading at close to 52 week lows when the financial results seem to be improving.

CV Check – Q4FY21 quarterly activities report

Overall a good update to the market. Growth across key metrics. Management state that the acquisition of BPT and integration of products/services has been good. They are currently in phase 2 of a 3 phase integration plan which will look to optimise operations across services provided.  

Highlights

• Strong sales performance $6.4m group unaudited revenue in Q4FY21 which is 262% up on PCP.
  • Although this was off a low base
• Operating cash flow positive across Q4FY21 $0.6m and full year FY21 $1.5m
• Strong balance sheet, cash at bank $12.9m as at end June and no external financing
• Annual recurring revenue (“ARR”) was 13.3m to 30 June 2021, compared to $11.1m to 31 March 2021, 19.8% growth and a record for 12-month booked annual recurring revenue (“ARR”).

CVCheck platform record performance:

• Record revenue of $5.0m (104% up on Q4FY20), including ~$0.7m revenue from B2B integrations (420% up on PCP)
• ARR for 12 months to June of $13.3m (20% growth from March 2021)
• Bright People Technologies (“BPT”) platforms (acquired at the start of Q4) revenue of $1.4m, including $0.6m (43%) SaaS-based revenue
• Significant progress on integration of CVCheck and BPT businesses.

Notable new customers

• Rheinmetall Defence Australia
• Think Childcare
• WaterNSW
• Whitehaven Coal
• Winning Appliances Group 

CV1 to acquire Bright People Technologies and completes $10.5 million placement to institutional and sophisticated investors

Highlights

~ CV1 to acquire Bright People Technologies (“Bright”), a cloud-based workforce credentials and compliance software company, operating under a Software as a Service (“SaaS”) business model

~ Acquisition Enterprise Value of $15.3m1 , with $12.0m in scrip issued at completion and to be held in voluntary escrow until 31 December 2022

~ The combination of CV1 and Bright will create a credentials-based workforce management capability built on Bright’s workforce compliance strength and the CVCheck platform’s highly automated verification workflows and HRIS integrations

~ In FY202 , Bright generated revenues of $4.9m, 85% gross margin and EBITDA of $1.7m

~ Bright’s clients include BHP, Roy Hill, Woodside, Atlas Iron, WaterCorp and the NT Government

~ Bright’s Chairman and largest shareholder, Mr Jon Birman, will be appointed to the CV1 board as a Non-Executive Director and Bright Executives, Petra Nelson and Declan Hoare, will join the CV1 Executive Management Team

~ The transaction is conditional on CV1 shareholder approval, certain conditions precedent and customary closing conditions

~ CV1’s largest shareholder, the Carolan Family (~16%3 ), have given a statement that they currently intend to vote in favour of the acquisition

~ $10.5m (before costs) raised through a strongly supported share placement to institutional and sophisticated investors (“Placement”)

DISC: I hold

CVCHECK – Q2 FLASH FINANCIALS - REVENUE RECORDS, CASH POSITIVE

? A record $3.5m revenue booked in Q2FY21 (12% up on PCP), $2.7m from B2B and $0.8m B2C

? A record $7.0m revenue booked for H1FY21

? A record of over $10.2m booked ARR for the 12 months ended 31 December 2020

? Cash positive Q2, strong balance sheet with cash at bank $5.2m as at end December, no debt

DISC: I have small holding

Participated for small amount in the raise. They should have the cash required to push hard on B2B now. Let’s see what they can do with it.

Want to see B2B revenue growth push well above 20%, the higher the better.

They are now talking about acquisitions and with the capital just raised they’ll have the cash ready to do so, which shouldn’t require going back to market.

I think the biggest potential catalyst is an offshore push. Hopefully we see that in the next 12 months.

Livewire- A cheap growing tech stock

https://www.livewiremarkets.com/wires/a-cheap-growing-hr-tech-stock

FY 19 annualised recurring revenue now $9m driven by new large enterprise wins and rising avg revenue per account.

3 yr CAGR of 32%, and cash flow positive. 

Operating leverage from will excelerate, GMs pushing toward 60% and i've been told minimal additional OPEC

Debut post on Strawman. I can’t promise Anthill or Wini type returns but I’ll give it a crack.

I posted something similar on another unnamed forum but was suggested I would get better engagement and feedback here. And the quality of contributors here is clearly much higher.

So CV Check is a HR tech business.

If you think about a client like Optus, every time they hire an employee they will run a bunch of checks - criminal history, references, validate qualifications, other groups might do a credit check, working with children, and so on.

CV Check provide these products. In the case of Optus, exclusively. And they provide it online over their own platform or increasingly through large HR platforms - WorkDay, SAP, etc.

They have an impressive client base, something like 1000 of the top 5000 largest businesses in Australia. There are >7000 regularly active clients ranging from big government departments down to small businesses.

Their strategy has been to lead with criminal history checks (c.50% margin). Now that they are cash flow positive (two consecutive quarters) they are moving to:

1) roll out new products like automated reference checks, financial checks, ID verifications, etc to their existing client base. These are all >70% margin which is why gross margin is increasing. This is where most of their growth is coming from at this stage. It is high ROIC, low CAC (existing clients) and provides plenty of opportunity for growth.

I actually think they could grow c.30% a year just from this bundling strategy to existing clients, and given gross margin would rise it would see gross profit increase at more like c.40%.

2) The free cash generated from the above strategy will be increasingly reinvested into sales growth/acquiring new customers - particularly large SME and enterprise. They announced some new big name clients on the call last week. If growth accelerates the stock will re-rate. This strategy should kick in over the coming weeks and months so I’d expect it to be reflected in growth over the next couple of quarters. Expect them to run at cash flow neutral while they grow.

3) Offshore expansion. They discussed this on the recent conference call. Sounds like it will be by partnerships or through a small acquisition. I’m guessing the former is more likely at this stage. Would be a very nice catalyst.

They have two divisions B2B ($8-$10m revenue) and B2C ($4m revenue).

The new CEO has focused purely on the higher quality B2B segment - >90% recurring revenue, large enterprise clients, low concentration risk (largest client <2% of revenue), growing c.30%.

This is high quality. It deserves a revenue multiple of significantly more than the current valuation of 2x.

Expect B2B to be where all the growth comes from. I think they can grow at c.30% pa for a couple of years if they get this strategy right. I’d love to see growth accelerate further to c.40%, and it is possible, but lets see how they execute. B2C probably just grows in line with inflation as it isn’t a focus.

Headline revenue has been flat last year because the CEO cut ad spend for the B2C division and revenue dropped for that segment but profitability increased as the pay per click revenue wasn’t profitable. I think the flat headline revenue figure might be partly why the stock is cheap but if B2B keeps growing at its current pace it will be self-correcting.

They are run-rating $13-$14m revenue. That puts it on ~2x EV/Revenue. 

I think that is too cheap. If you can find another tech stock with this type of quality revenue on 2x then let me know as I will probably buy that too.

XF1 is on ~10x with a similar revenue base in B2B. It is growing quicker, but 1) that might explain why CV1 should be on 5x and XF1 on 10x, but doesn’t explain why CV1 only deserves its current 2x. The gap is too big, in my opinion. And 2) CV1’s growth could potentially accelerate in the next 12 months if they get things right. If they get to XF1’s rate of growth they should command the same multiple.

XF1 also has offshore growth which gives it more blue sky. But it sounds like CV1 will soon have that opportunity too. I think the market will like this.

One thing XF1 do really well is tell their story and communicate the metrics the market requires to value it on 10x revenue. CV1 have the opportunity to do this too.

The fixed cost base won’t expand much from here. The tech is built. It’s ready to go offshore too as they already provide thousands of checks both in Australia and internationally.

There will be an increase in variable costs as they increase the investment in sales, but mostly on an incentive basis (pay sales staff when they perform) and if it results in sales accelerating the market will like it.

Catalysts include:

 - Ongoing sales growth. The market will wake up if sales growth continues or accelerates.

 - Announcing big name clients. They announced a couple (eg Medibank) in the call.

 - Offshore expansion.

 - Improving liquidity.

I think CV1 can quite reasonably trade at 25c.

Lets see.

Have recently annouced sucessful completion of a platform integration connector for SAP SuccessFactors. which has over 13,000 corporate clients and has already boarded 2 out of that. Has addionally CapGemini has been engaged as well for a major work. Looks like as per annoucment on 17 Apr on ASX is primed for growth and considering it has $3mil and cash and cash flow positive with some mor contract wins this can easily go up. XEF which is in similar to CV1 has Mcap of $100mil compare to $CV1 can potentialy go to 18c to 20c on back of contract wins.