Felix’s Positive Cash Flow Masks Challenges in Net Revenue Retention Amid Expansion

Sustained Cash Flow Improvement

Felix Group Holdings Ltd (ASX: FLX) has marked a notable milestone in Q2 FY25 by delivering a second consecutive quarter of positive operating cash flow, recording an inflow of $148,000. This represents a significant turnaround from the $675,000 outflow in the same quarter last year, underscoring the company’s effective cost management and strategic focus on sustainable growth.

Over the first half of FY25, Felix’s operating cash flows improved by 139% year-on-year, reaching $493,000 compared to a negative $1.25 million in H1 FY24. This financial discipline is critical as Felix balances its ambition to scale its Contractor platform while maintaining a healthy cash position.

Robust Customer Acquisition and Sector Expansion

During the quarter, Felix signed seven new customers and secured five contract expansions, collectively adding $487,000 in new Contractor Annual Recurring Revenue (ARR). Notably, three of these new customers operate within the mining and resources sector, which has emerged as Felix’s second-largest customer base. This sector traction is driven by increasing demand for enhanced ESG reporting, supply chain compliance visibility, and digitisation of procurement processes.

Key contract wins included Karara Mining, a major magnetite mining operation, which licensed Felix’s full suite of modules across its mining, processing, and logistics operations. Another significant expansion was a three-year deal with GPT Group, one of Australia’s largest diversified property groups, highlighting Felix’s platform versatility across adjacent industries.

Strong ARR Growth and Marketplace Momentum

Contractor ARR rose 29% year-on-year to $6.4 million, while total Group ARR increased 22% to $8.3 million. This growth was fueled by both new customer onboarding and expansions within existing accounts. Felix’s Net Revenue Retention (NRR) stood at 102% for the quarter, indicating solid customer retention and expansion despite a slight decline compared to the prior year.

The Vendor Marketplace also demonstrated impressive growth, expanding its network to 115,266 vendors, a 27% increase from the previous year. This growth supports Felix’s medium-term strategy to monetise the marketplace, which complements its Contractor platform focus.

Platform Enhancements and Internationalisation

Felix continued to enhance its platform capabilities, releasing multilingual functionality for the vendor portal with Spanish and Indonesian languages under client review. The launch of Post-Tender Requests (PTR) functionality completes the Pricing Schedule enhancements, enabling contractors to request quote revisions and streamline pricing comparisons during tender negotiations.

These developments position Felix well for international expansion and deeper integration into customer procurement workflows, further driving engagement metrics such as active projects, requests for quotations, and vendor compliance documents, all showing strong year-on-year growth.

Outlook and Strategic Focus

CEO Mike Davis emphasised the significance of balancing top-line ARR growth with positive cash flow, highlighting the company’s ability to scale sustainably. The increasing footprint in the mining and resources sector signals a broadening market opportunity, while ongoing platform enhancements and marketplace growth underpin Felix’s long-term value proposition.

With $2.3 million in cash reserves at quarter-end and no customer churn reported in Q2 FY25, Felix appears well-positioned to continue its growth trajectory while advancing monetisation strategies for its Vendor Marketplace.