Great dual set of news today.
Becoming an approved vendor for the Ford & Lincoln CTP is not a guaranteed path to growing revenues and diversifying the customer base but CXZ is now in the ring. It will now come down to the
merits of the CXZ solution versus alternatives, notably the existing Ford-approved software and the ability of the CXZ team to convert.
However, given the current macro and business environment, and the changing nature of dealerships across the US and beyond, CXZ is in a favourable position in my opinion by being the
lowest-cost provider.
Those who have done their competitor checks will know that Ford Pro Telematics sells for $20/month/vehicle. ARSLoaner, an approved vendor, sells for $18/month/vehicle (equipment lease) [or $12/month/vehicle (+ equipment purchase: $56/device)]. TSD sells for $13/month/vehicle (ex-Connectivity). This is in contrast to CXZ at just $6/month/vehicle (ex-Connectivity). In a world where dealers are increasingly looking for efficiencies, following a lean 2 years of COVID-interrupted (and low-volume) operations, CXZ has a foot in the door.
I'm also confident that CXZ's solution measures up well on metrics of
quality.
CXZ's ability to price at this level (lowest relative cost position) is a function of their long history with GM, in which they were paid to customise the product directly for them and, uniquely, retain IP. It is also a function of their small and agile team which
had to operate profitably over the past 3 years to improve the balance sheet and avoid a capital raise at very low share price levels. I doubt that CXZ's ethos of running a very lean team of only “do-ers” will change even though their balance sheet is now strong (~$4m+ AUD cash in hand). This is a competitive advantage.
Secondly, I'm really pleased with the news of the on-market share buy-back. One of the biggest risks that I was concerned about was that CXZ may continue to trade at a material discount to intrinsic value to reflect i) the customer concentration risk and ii) a tangled and loose register (with most holders underwater). Today's two announcements are an excellent start to addressing these two concerns.
Let's see if this arrests the share price decline and allows the share price to start a slow and steady rise back to 2c+ levels and beyond. There will be plenty of stale holders who need to be flushed out on each step up. Today was a good start (18m+ volume) and possibly sets a base.
I continue to believe that Aaryn and the team are working hard to set up this company (and importantly its shareholders) for long term success.
Today was a meaningful day for Connexion. I've picked up a little more at 1.0c (~$8m MC, ~$4m EV).
