Firstly, before the attacks start, I am back in to CR8 as I participated in the placement. I had always maintained that I loved the story/tech & the only reason I exited originally was due to the imminent CR given the cash flow position released at the end-January.
Now that the elephant has been addressed... we can move on.
The CR8 story has now been reset given the $5.5m in additional funding (taking cash to c. $7m) on hand and it is now well positioned to capitalise on the countless approaches they are receiving (on an unsolicited basis) daily.
I had the absolute pleasure of spending an hour with the wonderful Catriona at last weeks Melbourne TechKnow conference and our chat has excited me about the enormous potential CR8 has at its fingertips.
Commercialisation
The commercialisation journey has only just commenced and the following customers are already on board:
> Nationwide
> Another F-100 Company
> AMP
> Metlife
> Direct Money
Now most investors in Australia don't understand the size, scale & scope that a Fortune-100 company involves. These are some of the largest companies in the US & for a junior AI company to not only be talking to them, but for them to be approaching CR8 directly speaks volumes for what CR8 will achieve in the marketplace.
There was much fanfare about the Nationwide deal being delayed from Feb to Q2. However, my understanding is that the delay was primarily due to Nationwide wanting to expand the scope of the implementation & also placing additional security requirements around the technology. IMO this "delay" is great as it was for the right reasons...
The CR funds will be applied to fast-track the commercialisation of their product as they currently don't have the staff on hand to physically meet the inward demand that the technology is creating. Again - this is an absolutely amazing position to find ourselves in.
Monetisation
There is a lot of confusion about the monetisation of the technology & perhaps some of the terminology being used in the company communications doesn't do the sales process justice.
"Proof of Concept / Trial" - this phase is as it suggests & can take up to 3 months to come to conclusion. These trials are all paid and the revenue side of them is in the $250,000 range. Note that this usually involves the large insurer contacting CR8 directly & asking for the technology to be trialled!
"Monthly Subscription" - this is the vague part...
- Once a company (say Nationwide as an example) likes what they see in the POC/Trial phase, they progress to IMPLEMENTATION of the platform in to their internal systems / sales systems. Those that are Tech Savvy, will understand that API's & the like need to be build so everything talks to each other.
Note that CR8 charges about $150,000 for an implementation - so this is revenue outside the 'Monthly Subscription' which is also usually (depending on scale / scope) about $30,000 per month. This stage of the pipeline usually had a 6-month duration
"Revenue Share" - CR8 will want to "flick the switch" to a revenue share model after about 6 months after the start of the 'monthly subscription' phase. This is the final & obviously most lucrative part of the revenue cycle. CR8 is looking to charge approx. 3-5% of the insurance premium in fees as part of this model.
Note that most insurance providers use brokers to source business for them (insurance brokers) and these brokers usually charge between 20-50% of the premium as commission.
So not only is CR8's solution going to drive operational efficiencies for the Insurance companies given they will (eventually) no longer require a sales call centre, they will also enhance their profitability as their 'commission' for the look of a better word is market leading (the lowest) by a country mile.
Capital Raising
Again, addressing the elephant in the room, the timing was horrid... i.e. when the SP was near its lows. However, life is a learning process and this is exactly what the entrepreneurs at CR8 are currently going through. Their bread & butter is developing & growing arguably the hottest AI Tech in the world.
However, they are constantly trying to improve & I think the structure of this CR goes a long way in doing this.
They could have easily gone down the rout of the traditional CR to sophs only & got the funds. This was painfully clear given the high level of scale backs in the CR. Instead, they wanted to reward the current shareholders also by way of the 'entitlement issue' which also receives the 1-for-2 6c options.
By the way, the fact that the Entitlement Issue timetable is due for release on 31-March tells me that the earliest that the stock can trade EX-Entitlement is on Friday...
So anyone who buys up to that day, will still be offered the entitlement issue. This is also a great point.
Bright Future
Summing it all up, the future is very bright for CR8 for the following reasons:
- Well capitalised to expedite growth
- Market leading AI solution
- Capitalise on the AI wave
- They're receiving more unsolicited approaches from major businesses then they know what to do with
- Additional F-100 companies (apart from Nationwide) are on the books but names are withheld due to confidentiality.
I am very much looking forward to what CR8 will deliver in the short term and I have little doubt that in the long term this little Aussie company will change the world.
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