Onfolio reports 2022 EPS ($1.35) vs. (96c) last year

Reports 2022 revenue $2.2M vs. $1.8M last year. "In many respects, the fourth quarter of 2022 marked a transition from what we might consider Onfolio 1.0 to Onfolio 2.0. In our view, Onfolio 1.0 was marked by the roughly two dozen initial acquisitions that comprise our legacy web businesses and properties that are focused on content generation and media publishing," commented Onfolio CEO Dominic Wells. "While these foundational acquisitions represented the launch of Onfolio, they collectively lacked the necessary scale to get us to profitability and were too often subjected to the vagaries of online search ranking algorithms. Subsequently, using a portion of the proceeds from our August 2022 IPO, we made three pivotal acquisitions – SEOButler Ltd., Proofread Anywhere, and BWPS – in October 2022 that brought more scale and diversification to our portfolio. These are the first three acquisitions under our new Onfolio 2.0 strategy, which is defined by our increased focus on service businesses, agencies, and ecommerce opportunities, such as online courses and digital products, which aren’t as susceptible to online search ranking algorithms and have higher recurring revenue. In fact, these three acquisitions helped us generate more revenue in the fourth quarter than in the first three quarters of 2022 combined. Our revenue grew $771,000 sequentially from 3Q22 to 4Q22, and given the nature of the subscription revenue from our BWPS acquisition that we ratably recognize over the subsequent 12 month period, one could view our incremental revenue in 4Q22 as being understated. Furthermore, due to our relatively flat organizational structure and the high-margin nature of the acquired revenue, our incremental revenue generated an incremental $617,000 in gross profit, representing an incremental 82% gross margin. Our ability to identify profitable and/or cash flow positive business targets, acquire these businesses at modest prices, grow these businesses over time, and successfully manage these businesses ourselves using a modest sized team is at the very foundation of our corporate strategy. To wit, in February 2023 we closed our asset purchase agreement with Contentellect, which we expect to bring us even closer to profitability. Our goal is to build our scale and leverage our team through continuously adding profitable online businesses that can be purchased for a total price of $1M to $5M each. We believe there are thousands of such businesses and that we have the proper industry contacts to successfully act upon such a deep pipeline of potential targets. In terms of our reporting, there were a number of expenses recognized in the fourth quarter that skewed our total expenses higher but that aren’t recurring or reflective of our forward total operating expense run-rate. For instance, the three acquisitions closed in October carried approximately $300k in total acquisition costs that won’t be seen in subsequent quarters. Additionally, we believe that the acquisition costs for most future acquisitions will not be quite as high as what was seen in 4Q22 per transaction, as most additional acquisitions will not require formal audits like the three acquisitions in 4Q22 did. There were also higher legal and professional fees seen in 4Q22, some of which carried over from 3Q22, and we also recognized some severance costs in 4Q22 due to headcount reduction. Thus, the total expenses of $1.91M we recognized in 4Q22 were higher than they would have been without these factors. It is also worth considering that approximately $100,000 of incremental operating expenses in 4Q22 are amortization costs and, thus, non-cash in nature. We are encouraged by the incremental gross profit seen from the incremental revenue in 4Q22 and the added contribution we expect in 1Q23 and beyond from the acquisition of Contentellect and are optimistic about our path to profitability without having to first conduct another equity offering. Despite a cash balance of $6.7 million, which, in the absence of any future acquisitions, would be sufficient for our operations in 2023, we are exploring non-dilutive financing opportunities that could be used to further drive our Onfolio 2.0 acquisition strategy and, presumably, quicken our path to profitability. We expect that our competitive advantages and strategic direction will deliver financial growth and value creation for shareholders."