Felix Group (ASX: FLX) provides software to help asset-heavy businesses like mining, construction and property, manage the the process of sourcing and purchasing material, equipment and services they need to operate. It also provides a vendor marketplace, connecting contractors with large mining, construction, port, and property businesses.
While Felix Group is not yet profitable, it is growing revenue. At the suggestion of a supporter of A Rich Life, I (Chris Coe here) ran the ruler over Felix Group (ASX: FLX).
The share price is currently depressed, as Felix Group has been caught up in the overall downturn in software company share prices, due to fears of AI disruption. Investors may also be losing patience as Felix remains unprofitable.
Also, Co-founder and CEO Mike Davis announced in November 2025 that he was stepping down, and a new CEO is expected to be named in the March 2026 quarter, creating leadership uncertainty.
Felix Group (ASX: FLX) Q2 FY26 results show continued plateauing organic growth
Felix shares dropped 7% after Q2 FY26 results were released. This was possibly due to investors fretting about slower organic Annual Recurring Revenue (ARR) growth. There was also some churn as a local council discontinued using the software, impacting ARR by $35,000. Despite this, the Enterprise Net Revenue Retention (NRR) is still an acceptable 101% at the end of the quarter.
From the below chart, you can see Q2 FY2026 ARR is $12.2 million, up 47% on the prior corresponding period. This includes the Nexvia contribution of $3.4 million. Without this contribution, the organic ARR is $8.8 million in Q2FY2026, unchanged on the previous quarter, and up only 6% on the prior corresponding period. ARR has plateaued from Q3 FY2025.
Source: Felix Group Q2 FY2026 Report
On December 31, 2025, Felix held total cash of $7.2 million and no debt. Felix lost $4.73 million in the FY2025 year, and while Nexvia is expected to contribute $3.4 million in ARR, integration and staff costs will likely see FY2026 operating costs higher than FY2025.
Felix Group (ASX: FLX) Acquires Nexvia
In October 2025 Felix completed the acquisition of Brisbane based construction project management software Nexvia, which focuses on small and medium construction businesses. Construction in Queensland will get a boost from the 2032 Brisbane Games, which Nexvia may benefit from.
Nexvia has grown Annual Recurring Revenue (ARR) since 2022 at a Compounded Annual Growth Rate (CAGR) of 25%. Felix paid $12 million, at 3.8 times FY25 Enterprise Value/Annual Recurring Revenue. This appears good value with Nexvia ARR up 13% on the prior corresponding period to $3.4 million in Q2FY2026, and cross-selling opportunities could increase ARR further. Felix raised $0.5 million via a share purchase plan, issuing 2,333,319 shares at $0.21, and $16 million by issuing 48,181,818 shares at $0.22 via a placement.
Procurement is part of the project management process and Felix will look to integrate its procurement software with Nexvia. Felix can also cross sell the Nexvia software to the subcontractors and vendors using existing Felix services, but it is uncertain how many vendors they will convert. Nexvia appears to be a decent addition to Felix Group, covering the whole project management process, offering new capabilities, and cross-selling opportunities.
Risks facing Felix Group (ASX: FLX)
The below chart shows Net Operating Cashflow per quarter, which takes net income including interest payments/expenses minus operating expenses and tax. The last two quarters saw operating cashflow down significantly on increased staffing costs and higher integration and acquisition financing costs from the Nexvia acquisition.
Investors may turn increasingly bearish if cross-selling opportunities between existing entities in the Felix Group platform and Nexvia do not eventuate as expected. This, coupled with a still unprofitable business, may see investors lose patience with Felix Group.
Advances in AI technology means it may be easier in future for a company to build its own procurement software. Despite uncertainty around AI’s future potential, I think procurement software may be at the easier end of the scale of software to replicate, but Felix’s vendor marketplace may not be so easy for a single company to replicate. The idea of a marketplace is that everyone is in the one place, putting vendors in front of a wide variety of customers, so large companies can find a wide variety of quotes easily.
Does Felix Group (ASX: FLX) offer value after the recent price decline?
Felix has some well-known large company clients including SRG Global, Bellevue Gold, Regis Resources, Downer, and Fulton Hogan. This would help attract other big name clients and more vendors, thus creating the network effect written about here.
If Felix can successfully extract more revenue out of vendors via cross selling the Nexvia platform to them, we could see higher organic growth in future. The share price would likely follow.
However, neither the Felix Group margins of ~76%, nor the organic annualised recurring revenue growth of just 6% in FY25 are impressive, by industry standards. I, (Chris Coe) would be hesitant to buy Felix until there is evidence of a successful integration of Nexvia, a clearer path to profitability, and a clearer indication as to whether AI will disrupt this software business.
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Disclosure: The author Chris Coe does not own shares in FLX and will not trade FLX shares for at least 2 business days after the publication of this article. The editor of this article Claude Walker does not own shares in FLX and also will not trade the stock for at least 2 business days after the publication of this article. This article is not intended to form the basis of an investment decision and is not a recommendation. Any statements that are advice under the law are general advice only. The author has not considered your investment objectives or personal situation. Any advice is authorised by Claude Walker (AR 1297632), Authorised Representative of Equity Story Pty Ltd (ABN 94 127 714 998) (AFSL 343937).
The information contained in this report is not intended as and shall not be understood or construed as personal financial product advice. You should consider whether the advice is suitable for you and your personal circumstances. Before you make any decision about whether to acquire a certain product, you should obtain and read the relevant product disclosure statement. Nothing in this report should be understood as a solicitation or recommendation to buy or sell any financial products. A Rich Life does not warrant or represent that the information, opinions or conclusions contained in this report are accurate, reliable, complete or current. Future results may materially vary from such opinions, forecasts, projections or forward looking statements. You should be aware that any references to past performance does not indicate or guarantee future performance.