Movers and Shakers in Q2🧂

My comments on 10 companies that moved this quarter

Well, we did it folks, the second quarter of the calendar year is behind us.

The quarter was eventful in the world of large companies, and much less so in the smaller end of town. Other notable news included:

• Retailers announced difficult times. Whilst painful for them, this is likely good news for inflation in the near term.

• In Q1 SVB went down. In Q2 the Titan went down. RIP.

• Speculation about the direction of interest rates continued (no change to Q1).

• Howard Marks said that this time was actually different (podcast link).

• Ian and Tobias shared their thoughts on today's current market (worth a listen).

Here we are today. 

Some companies did very well in Q2, others suffered. Let’s discuss some of these. 

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Winners 📈

As per usual in this quarterly update, I’ve looked at companies that I follow from either close or afar who’s stock moved ~50% or upwards. Here are 9 such companies:

1. Oneview Healthcare (ONE.ASX) +160%

A big winner this quarter, Oneview had initially hinted in it’s quarterly report that:

“The aggressive sales and marketing program undertaken after the launch of our Cloud product is showing results. Three net new logos were added, two in the United States and one in Australia.”

Investors had responded positively to the news, with a rally in the share price following. Subsequently, It feels as if further good news had leaked before it was announced to the market given the ASX pause trading. They responded saying opportunities were now at contracting stages, and a big reseller deal (later announced as Baxter), was impending signature.

Well done to the leadership team at Oneview for the nice progress this quarter. I personally am keen to see the numbers before I get excited.

2. Fineos (FCL.ASX) +66%

4 months ago, I commented on Fineos’ half-year results wondering if their efforts in the US would soon show signs of rewards.

The company announced cost reductions at the beginning of the quarter, a strong quarterly cashflow result, and a nice new US contract with Guardian Life. It’s great to see them execute on goals.

The share price’s recent rally makes the company’s valuation feel not particularly cheap, but there remains room for upside if they can continue to deliver in the US. Let’s see if they can.

3. Impedimed (IPD.ASX) +44%

Up 200% from its price 1 year ago, Impedimed seems to be unable to stop winning.

The recently announced cap raise of $20M was concluded nearly before it was announced. The CEO Richard Valencia appears incredibly bullish on the opportunity ahead, commenting:

“Following the inclusion of our technology on the NCCN Guidelines ®in March, the speed at which providers are reacting to the news continues to accelerate. The funds raised will be used to accelerate the Private Payor opportunity and enable the scaled roll-out of SOZO systems in the U.S. With the impending publication of nearly all Private Payor policies in the coming quarters and no direct competition at present, the opportunity is ours to win or lose.”

It could be argued that there’s now a lot of execution built into the price, but if the CEO is actually right in claiming zero competitors, well, the opportunity in front of them may be yet bigger than we imagine.

Epilogue: Goodbye to Tesserent Ltd (TNT.ASX), Eroad (ERD.ASX), and Limeade Inc (LME.ASX)

3 months ago in The Low Multiples Crew, I made the argument that 15 companies with ARR models looked particularly cheap, pending they could show cash sustainability and some continued growth.

Eroad and Limeade were 2 of the companies that appeared in that article. Alongside Tesserent, this quarter saw the 3 of them receive offers by buyers who thought these were good opportunities.

These companies had own challenges to work through:

• Eroad claimed in their strategic review that they didn't expect to be cash flow positive until FY26

• Limeade’s growth had completely stalled

• neke86
  summarised the Tesserent finale perfectly: “The story of Tesserent then, if it is to be viewed as a success, is not one of triumphant business acumen but rather of repeated and cynical exploitation - of debt and dilution - leaving behind thousands of losers and staff sold short” (link)

Despite challenges and imperfections, buyers are out there looking for, and buying these businesses.

This may be a sign that there are a lot of opportunities in the world of small caps.

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Losers 📉

Here’s the flipside of the coin:

1. Rma Global Ltd (RMY.ASX) -42%

I shared some thoughts and background on Rate my Agent 5 months ago (here).

The business made a little bit of noise this quarter, showing up in the AFR with the CEO Michael Davey quoted saying ″The US is a very noisy market, it’s hard to get cut through but we’ve found a way”.

The USA business does appear to be growing, albeit at a slower pace given the changing housing market conditions. The hampered state of AU makes the overall progress seem a little slow. Other good news was provided by the outspoken chairman which claimed “We have experienced a number of cash flow positive months and are on track to becoming cash flow positive on a consistent basis.”

Well, let’s see if that’s true in the upcoming quarterly, and if so, perhaps momentum can change.

2. Frontier Digital Ventures Ltd (FDV.ASX) -43%

2 years ago, Nathan Bell wrote about the potential of Frontier in the next 2 years. With the share price down 80%, let’s just say things didn’t do according to plan.

I don’t blame Nathan for this (I think he offers insightful and interesting views in general); he couldn’t possibly have forecasted all the crazy shit we were about to experience, and the ripple effects of these.

The Pakistani credit crisis, inflation, and political dramas continued throughout the quarter, likely stressing investors out about Zameen, and causing many to exit after the tumultuous ride of the last 2 years.

Whilst the levels of uncertainty remain high, if one were to take a completely objective view, a case for the company having been oversold isn’t hard to make on historical growth rates. Hence, this becomes a more interesting company to watch in the future in my opinion.

3. Livehire Ltd (LVH.ASX) -60%

Livehire was one of the countless companies that announced a strategic review in the last 6 months.

The review’s goal being to offer “An optimised go to market that further aligns with the top partners and opportunities provided by them, with a goal to minimise the duration and roadmap to achieve cashflow break-even”

Afterwards, the quarterly showed some worrying signs, namely that churn had grown and that ARR hadn’t moved for the year.

Whilst it was good to read that directors have opted in to lower their compensation, it feels like more will need to change for true impact to happen in the next few quarters.

4. Xpon Technologies Group Ltd (XPN.ASX) -64%

Rough one for Xpon, the stock is now down 80% from its listing price.

Investors were likely starting to worry when ARR updates came in flat for the whole year after impressive growth last year.

The pill became harder to swallow when the business restructure update (released on the 26th) mentioned that app modernisation revenue would no longer be included in ARR metric reporting. This contributed to approximately $9m of ARR.

That’s ARR effectively cut in half. This serves a painful, but useful lesson. In a next article, I will share more insight into ARR, and why not all ARR is created equal.

5. Livetiles Ltd (LVT.ASX) -66%

4 years ago, Livetiles was a company with a market cap of more than $300M, it closed out the quarter with a market cap of ~$10M.

New CEO David Vander has got quite the job in front of him to turn investor sentiment around here. The focus on product expansion and improvement is arguably the right thing to do, but it will undoubtedly take time for results to show.

Let’s tune in later next year to see what happens there.

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Conclusion 

Same as the story went in Q1, there was more movement to the downside than the upside in Q2. 

At the time I had written: “I remain hopeful that the later end of this calendar year could be positive, but a lot of uncertainty remains” Seems like once again, I could have been too optimistic, but the later half of the year remains to come.

As always folks, feel free to challenge my opinion on these companies, share something I’ve missed, spotlight another big mover, and share the newsletter with a community.

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Previous Quarterly Reviews

• Movers and Shakers in Q1 - Link here

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