Connexion Mobility reported a slight revenue decline in Q2 FY26 but boosted net profit before tax by 18%, supported by expense cuts and steady subscription growth. The company’s strategic focus on expanding OEM and dealership relationships continues amid near-term sales team reductions.
- Q2 revenue down 1% to $2.9 million, breaking a 12-quarter growth streak
- Gross profit declined 12% due to labour reallocation from new features to existing ones
- Net profit before tax rose 18% to $0.8 million, driven by reduced expenses
- Marketplace subscriptions and dealership sales grew, though sales staff reduction may slow growth
- Strong balance sheet with $6.7 million net cash and no debt supports reinvestment and M&A plans
Financial Performance and Operational Highlights
Connexion Mobility Ltd (ASX – CXZ) has released its quarterly update for Q2 FY26, revealing a nuanced financial picture. While total revenue slipped slightly by 1% to $2.9 million, ending a remarkable streak of twelve consecutive quarters of growth, the company managed to increase its net profit before tax by 18% to $0.8 million. This profit improvement was largely attributed to a disciplined reduction in operating expenses.
The quarter saw a 12% decline in gross profit to $1.7 million, primarily due to an internal shift in labour allocation from developing new features to maintaining and enhancing existing ones. This strategic choice reflects Connexion’s focus on sustaining its current product offerings while continuing to invest in research and development.
Marketplace Growth and Sales Dynamics
Connexion’s SaaS platforms, OnTRAC and Connexion, continue to serve US automotive OEMs and franchised dealers, managing courtesy transportation activities. The company reported steady subscription revenue, with marketplace subscriptions and dealership sales showing positive momentum. Approximately 25 net new subscriptions or trials were added during the quarter, up from 20 in the previous period.
However, a notable operational change occurred with the reduction of dealership sales personnel from three to one, due to a termination and maternity leave. This downsizing is expected to flatten marketplace subscription growth in the near term, posing a potential headwind for sales expansion.
Strategic Initiatives and Partnerships
Connexion is actively deepening and broadening its commercial relationships with existing OEMs and dealerships while exploring new partnerships. A paid pilot of the OnTRAC software commenced with General Motors Canada, marking an expansion beyond the US market, although a commercial outcome is not guaranteed.
Integration efforts with partners such as Stripe and Modives progressed, enhancing the platform’s capabilities. The company also completed integration work with UVeye, activating all mutual dealers. These partnerships aim to enrich Connexion’s product ecosystem and improve customer stickiness.
Capital Management and Investment Strategy
Connexion maintains a robust balance sheet with $6.7 million in net cash and investments and no debt. The company continues to repurchase shares, having bought back approximately 254 million shares at an average price of A$0.02 per share, including 13.2 million shares during the quarter.
Investment earnings rose 19% quarter-on-quarter to $0.1 million, contributing 16% of net profit before tax. Connexion’s diversified investment portfolio includes a minority stake in Covertrue Group Pty Ltd, an Australian fleet branding business, which provides additional income streams and potential for future growth.
Outlook and Market Positioning
Looking ahead, Connexion remains committed to its mission of connecting fleet owners with the future of mobility, focusing initially on the niche of courtesy transportation within automotive retail. The company sees ample opportunity to grow its software’s market share among OEMs and dealer groups by enhancing proprietary features, expanding commercial partnerships, and increasing its user base.
While internal reinvestment is fully funded, Connexion is actively exploring alternative capital deployment options, including mergers and acquisitions, to accelerate growth and diversify earnings. The near-term flattening of marketplace subscription growth due to reduced sales personnel is a cautionary note, but the company’s strategic initiatives and strong financial position provide a solid foundation for future progress.
Bottom Line?
Connexion’s solid profit growth amid revenue softness and strategic recalibration sets the stage for a pivotal year ahead.
Questions in the middle?
- Will the GM Canada OnTRAC pilot convert into a significant commercial contract?
- How will the reduction in dealership sales staff impact long-term subscription growth?
- What potential M&A targets is Connexion considering to diversify and scale its earnings?