I'm unashamedly positive on CV1, and they have grown to be my largest holding, albeit I'm not big enough to crack the top 20.
I think the macro environment for credential/history checking is increasingly growing. It used to be rare to have a need for these sort of services, but now they seem to be required more and more.
In my day job I am seeing government and large corporates insist that staff be background checked periodically if you want to be a supplier.
At the basic level, there is plenty of competition for police checks. It is a public API that half a dozen competitors have set up services to query. Do a search on Google for police check to see them for around $40.
This is the consumer market, targeting people who need a police check to get a job, and competition is fierce. Whoever pays the most to Google gets top billing.
CV Check started out in this business, and soared to 60c+ valuation on the revenue growth they showed capturing these small sales.
The downside is that you need to buy that Google advert again and again, as people only require a police check once in a blue moon.
CV1 evolved its business to retarget business customers. These are predominantly employers that require background checks when they hire staff members. These checks are typically police checks, but routinely include other background checks too, such as credit checking or credential checking, and form part of a package of checks to make sure the applicant is the real deal.
This has two advantages. Getting the HR staff to buy the service means they perform many more checks, a much higher volume. And the package of checks offers considerably higher profit margin than the competitive police check only market.
CV1 has been a first mover in this space. They have a corporate sales force targeting HR departments to use CV Check services, and when they get a new customer, they set up their IT systems to link directly to the CV check databases, so buying a new check is a click away.
So every new customer the sign up brings a stream of repeat business that continues.
An important competitive advantage is that once set up, it will be very hard for a competitor to poach business. Because the costs of the service are pretty low, there is little financial reason to go through the hassle of swapping suppliers, so it has a moat against competitors.
This annuity style revenue stream, largely untapped market, and growing need for the service means a very lucrative business with great growth ahead for the long term.
I think the largest competitive threat is from an adjacent business - SEEK or similar employment firms could offer the service as an adjunct to their recruitment services. SEEK did look to launch a service like this, but I don't think it went anywhere. More likely that such businesses could be potential acquirers of CV1, instead of reinventing the wheel.
I expect consistent growth that mirrors the job market for the foreseeable future. If a post COVID recovery leads to increased hiring, it will be very positive for CV1. The company is debt free, has a pretty low market cap, and is yet to be discovered by institutional shareholders.
In short, I don't think there are many opportunities that combine the low risk of a cashflow positive, debt free business with the growth in a largely untapped market with market leading systems and offerings.
Good luck!
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