5 Performers 💪

From Q3’s cashflow report

Doesn’t it feel like yesterday that the previous reporting season just finished? Well yeah, it kinda did. 

That’s why I love this time of year; half-year reports are closely followed by cash flow reports. Feels like the playoffs of investing. 

Sticking with the metaphor, if this were a fantastic league, below are 5 players I would have liked to have in the team. Small companies, so nothing’s perfect as always, but these 5 all had strong performances. 

Here they are:

1. Dropsuite (DSE.ASX) (link here)

2. Camplify (CHL.ASX) - (link here)

3. Playside Studios Ltd (PLY.ASX) - (link here)

4. Task Group Holdings Ltd (TSK.ASX) - (link here)

5. Volpara Health Technologies Ltd (VHT.ASX) - (link here)

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Dropsuite (DSE.ASX)

Cloud backup provider Dropsuited had yet another mic drop moment when they released their results. 

They often lead with the AUD figures, but I prefer the USD ones to remove the FX movement. 

On that basis, top line results were:

• ARR in USD at $18.82. (ARR in AUD at $28.2M which will be on chart)

• Strong revenue growth at 50%.  

• 4th consecutive positive quarter of positive cashflow, with cash margins at 4.5%. This is down QoQ, with seasonality mentioned as the reasoning. We can see from 2 previous years this being the case. 

• New direct partners onboarded: 33

• Cash pile remains healthy at $22.69M

As I had mentioned in my coverage of them in the previous quarter (link here), growth is declining. That’s because they remain consistent in how much ARR they’re adding per quarter, while their baseline continues to expand, you can see what I mean here:

Should one be worried about growth heading south? 

Certainly, it needs to be monitored. I consider these 4 points moving forward: 

1. Growth north of 50% is incredible to begin with, and can hardly be maintained for years without some fluctuations about where and how this growth comes about. 

2. They’ve recently geared up at the leadership level in preparation for the next phase of growth (SVP for Marketing + Sales last quarter, CPO this quarter) 

3. Recent added spend in marketing is likely still in pipeline and not showing in the numbers (December quarterly showcases marketing spend up 80% QoQ)

4. New Quickbooks product is fresh off the shelves, and its impact will only be visible in the next few quarters. 

That being said, they operate in a busy space. There are a lot of ways to solve your backup problems, so everything is possible here. 

This is my opinion alone, and I’m keen to see what new milestones they can accomplish this year. 

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Camplify (CHL.ASX)

It’s always nice to see a percentage growth with 3 digits that begins with a 2. 

The ‘AirBnB of campervans’, Camplify started its announcement with such a figure:  “Combined global revenue of $12.5m (unaudited) representing a pcp growth rate of 204%”.

To grow the size and power of its network effect, Camplify has been acquisitive in the last few years. In the last 12 months it acquired:

1. Mighway (NZ)

2. SHAREaCAMPER (NZ)

3. PaulCamper (Germany)

So to get to organic growth one would have to remove all the above. They mention: “PaulCamper markets represented a Revenue of $3.6m”, but don’t clearly divide revenue from prior acquisitions considering they’ve now been truly integrated. 

Removing PaulCamper alone then, (organic-ish) growth comes in at 116%, which remains very strong, and might be a good showcase of Camplify actually growing its network effect. 

Other quick observations:

• Another positive was Camplify recording a small, but still positive cashflow for the quarter. If you tweak it to remove transaction cost and the government grant, they are up ~$2M.

• They also mentioned the UK region is back to growth, although with no details provided. 

• More details on this branded fleet project will be interesting (“As previously reported, CHL is focussing on branded built fleets for customers and a shift to higher margin products.”)

All in all, I consider this a very strong quarter, with Camplify showing that sustainability in cash management can still lead to strong growth. 

It will be interesting to see if they can make the next quarter their 3rd consecutive quarter of cashflow positivity. If they do, they may be close to applying for relief from quarterly reporting. 

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Playside (PLY.ASX)

After a rough ride in the last 3 months, I thought results from the video game developer were positive. 

Strong cash receipts led to one of the companies’ first cashflow positive quarters. This was mostly fortunate timing though, but still good to see. Here are high level numbers they gave:

• Revenue of $9.3m (DecQ: $10.0m, pcp: $5.4m*, +73%) 

• Record Original IP revenue of $5.0m (DecQ: $3.1m, pcp: $2.6m*, +95%) 

• Work for Hire revenue of $4.3m (DecQ: $6.9m, pcp: $2.8m, +53%) 

• Cash receipts of $11.5m 

• Net operating cash inflow of $1.7m 

• Net cash increased to $31.2m (DecQ: $29.8m) FY23 

• revenue guidance $35m+

They removed last year’s $8.4m NFT revenue from the compares so as not to blur the picture. Doing this is a risky trick, because casual observers won’t see figures of 70% growth when they load up the 4E full year results, but growth in the 20%-30% range. Still, I would consider this a good achievement considering the slight pivot in strategy. 

The commendable thing with Playside is that they seem to keep finding ways to get lucky, and because it keeps happening, it can’t be labeled as luck anymore, there’s got to be something about the war of art behind this, and good leadership too. This quarter's story was Dumb Ways to Die’s surprising viral resurgence on TikTok. What started off as a fun video became more than half the quarter’s revenue. 

Work for Hire continues to power ahead, with leadership stating “To confirm, despite the quarterly revenue decline there has been no change in the number of projects or scope of projects we worked on during the period, and the overall trajectory for this division remains positive.”

They seem to have plenty of irons in the fire, with the latest on this a new VR co-development partnership with Skydance, announced this week. 

Playside is one to watch in my opinion, they’ve always got a card up their sleeves. I wonder what surprise they will have for us between now and the end of the financial year. 

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Task Group (TSK.ASX) 

The transaction management and customer experience platform had a good quarter, with $7M in positive cashflow. This grew the cash pile to $28M. 

They report on a NZ calendar, so this end of year for them meant they could confirm they had exceeded both revenue and EBITDA guidance (revenue of $65 million vs. guidance of $59.0 – 62.0 million and adjusted EBITDA of $12 million vs. guidance of $8.5 – 9.5 million).

For those interested in this one, it will be good to get the annual report to understand what’s happening under the hood. Few details are given about where growth is coming from. The contract restructure and renewal with McDonald’s in August saw the business get re-rated significantly, but it feels like customer concentration risk remains for me. 

I’d also like to understand more about the “significant progress in feature development and performance enhancement across all elements of our platforms”. 

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Volpara Health Technologies Ltd (VHT.ASX) 

Whilst I wouldn’t necessarily say that breast imaging analytics software provider Volpara knocked it out the park, seeing a second consecutive quarter of positive cashflow (even if slim) was a very pleasant surprise.

My quick, back of the napkin math leads me to 17% annualised growth in Contracted Annual Recurring Revenue. This is the primary growth metric I use for them given it’s the lead indicator of ARR to come in the future. ARR growth was at ~25% annualised, showing me they implemented faster than they closed.

The strategy of targeting bigger accounts for larger deals seems to be slowly paying off, and the new CEO seems to be wining hearts and minds with her quirky leadership style. 

Also one to watch in the future, let’s see full year report when it comes out in a few weeks. 

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Conclusion 

It was good to see these companies release strong results in a more challenging economic environment. It wasn’t the case for everyone, and a majority of companies I follow remain impacted by slower decision making. 

There are other companies too who brought in the dough this quarter, two more are that I wrote about in the past are Fineos (FCL.ASX) and DUG Technology (DUG.ASX). Raymond Jang wrote about them here.  

I’ll comment on some of these next week. 

In the meantime, what were some of your top performers? 

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