⚠ Cash Conversion Is a Growth ArtefactModerate threat

Text (TXT) — threat to the moat

Prepayments flatter cash while the base expands and stop flattering it the moment it does not.

The mechanism that makes Text's cash flow exceed its profit works only in one direction of travel.

Contribution of short-term liabilities to cash (zl m)+1,3FY2025-4,6FY2026Prepayments add cash while the base grows and stop adding it when the base does not
The mechanism that flatters cash flow works in exactly one direction of travel.

When a subscription base is growing, the stock of prepaid revenue grows with it, and that increase is a cash inflow every period. When the base is flat, the stock is merely replaced and the inflow disappears. When the base shrinks, it reverses. Text's own accounts show the sensitivity: the change in short-term liabilities contributed a positive 1,3 million złoty to cash in 2025 and a negative 4,6 million in 20261.

The base is currently not growing. Monthly recurring revenue ended the year at 6,93 million dollars, down 2,7%2, and payments received for the year were 87,9 million dollars, down 0,7%3.

What held cash up regardless was the mix. A high share of annual payments produced the record 77,2 million złoty deferred balance in the June quarter4, meaning customers moved further toward paying up front even as there were slightly fewer of them. That is a favourable substitution and it is finite: a customer can only be converted from monthly to annual billing once.

None of this threatens solvency. Text has no debt5 and 62,8 million złoty of cash6. It threatens the quality of the reported cash figure as evidence about the business, at a moment when the reported cash figure is one of the healthier-looking numbers Text publishes.

The measure that strips the artefact out is net profit, and it fell 29,1% last year7 and a further 6,2% in the June quarter8.

References
  1. ReportedText's own accounts show the sensitivity: the change in short-term liabilities contributed a positive 1,3 million złoty to cash in 2025 and a negative 4,6 million in 2026.
    Text Group Management Board report for 2025/26, margins, costs and cash (gross profit margin on sales of 67,6%, operating margin 38,6% and net margin 35,4%; cloud infrastructure costs rising, the migration completing in July 2025 after more than a year of duplicated cost, and completion not translating into cost reductions because of price increases regardless of provider and a deliberately expanded scope of purchased services; increased consulting, legal and public relations costs; fourth-quarter costs falling on cloud optimisation; a warning that more intensive use of artificial intelligence may cause further cost increases and that rising AI costs should press hardest on competitors offering free or freemium products; operating cash flow of PLN 161,6m and PLN 62,8m of cash; and a dividend policy of allocating the highest possible part of profit to shareholders) — FY2025/26 · publ. June 2026 · source ↗
  2. ReportedMonthly recurring revenue ended the year at 6,93 million dollars, down 2,7%, and payments received for the year were 87,9 million dollars, down 0,7%.
    Text Group Management Board report for 2025/26, key performance indicators (monthly recurring revenue of USD 6,93m at 31 March 2026, down 2,7% year on year and 0,7% on December, giving annual recurring revenue of USD 83,12m; revenue in US dollars of 88,2m against 88,6m, down 0,5%; payments received of USD 87,9m, down 0,7%; Q4 dollar revenue of 22,56m, the highest since Q2 2024/25; a LiveChat customer churn rate of 4% on a monthly basis with net MRR churn described as significantly lower; LiveChat at 83,7% of group revenue with ChatBot 8,7% and HelpDesk with KnowledgeBase 7,5%; and an average USD/PLN translation rate 8,0% lower than the prior period) — FY2025/26 · publ. June 2026 · source ↗
  3. ReportedMonthly recurring revenue ended the year at 6,93 million dollars, down 2,7%, and payments received for the year were 87,9 million dollars, down 0,7%.
    Text Group Management Board report for 2025/26, key performance indicators (monthly recurring revenue of USD 6,93m at 31 March 2026, down 2,7% year on year and 0,7% on December, giving annual recurring revenue of USD 83,12m; revenue in US dollars of 88,2m against 88,6m, down 0,5%; payments received of USD 87,9m, down 0,7%; Q4 dollar revenue of 22,56m, the highest since Q2 2024/25; a LiveChat customer churn rate of 4% on a monthly basis with net MRR churn described as significantly lower; LiveChat at 83,7% of group revenue with ChatBot 8,7% and HelpDesk with KnowledgeBase 7,5%; and an average USD/PLN translation rate 8,0% lower than the prior period) — FY2025/26 · publ. June 2026 · source ↗
  4. ReportedA high share of annual payments produced the record 77,2 million złoty deferred balance in the June quarter, meaning customers moved further toward paying up front even as there were slightly fewer of them.
    Text Group results for the first quarter of the 2026/27 financial year, published 28 August 2026 (revenue of PLN 83,20m, down 1,9% year on year and up 4,1% on the previous quarter; net profit PLN 29,11m down 6,2%; operating profit PLN 31,36m down 11,0%; EBITDA PLN 38,56m down 7,4%; revenue in US dollars of 22,61m up 2,1%; MRR of USD 7,46m at 30 June 2026, up 4,0% year on year and 7,6% on the previous quarter, giving ARR of USD 89,52m against the USD 100m goal, with the chief executive attributing the growth largely to the completion of price grandfathering for LiveChat customers; a record PLN 77,2m of deferred revenue and net operating cash flow up 22,2% to PLN 41,5m on a high share of annual payments; margins of 69,6% gross, 37,7% operating, 46,4% EBITDA and 35,0% net; SOC 2 Type 2 attestation in May 2026; the new visual identity and Go-To-Market start in May 2026; purchase of the livechat.ai domain and a seventh US patent in June 2026; a Klaviyo integration and Google Cloud Marketplace listing in July; a MarTech Breakthrough award and an official ChatGPT marketplace listing in August; and the annual general meeting of 6 August 2026 allocating PLN 109,7m to dividends, PLN 4,26 per share) — Q1 2026/27 · publ. 28 August 2026 · source ↗
  5. ReportedText has no debt and 62,8 million złoty of cash.
    Text Group consolidated financial statements for the year ended 31 March 2026 (revenue of PLN 329 073 thousand against 354 178; operating profit 126 931 against 177 367; profit before tax 126 680; net profit 116 608 against 164 418; earnings per share 4,53; 25 750 thousand shares; operating cash flow 161 552 against 179 489; revenue by product line of LiveChat 275,495, ChatBot 28,694, HelpDesk 23 466 and KnowledgeBase 1 418; revenue in US dollars of 88 162 thousand against 88 595; approximately 95% of consolidated revenue generated through the group's subsidiary in the United States and Polish sales of 4 837; costs by type including depreciation 26,396, third-party services 159 821 against 140,300, employee benefits 6 458 and total operating costs 201 291 against 176,876, split as cost of goods sold 106 753 against 85,588, selling expenses 68 457 and administrative expenses 26 081; total assets 195 923 against 226 705; equity 109 965 against 136 418; cash 62 780 against 77 704; current contract liabilities 65 502 and non-current 1 539; trade payables 10 284; no credits or loans; and income tax at 19% on other income and 5% on qualifying intellectual property rights under the IP Box regime, with the deferred portion computed at 6,87% against 7,43%) — FY2025/26 · publ. June 2026 · source ↗
  6. ReportedText has no debt and 62,8 million złoty of cash.
    Text Group consolidated financial statements for the year ended 31 March 2026 (revenue of PLN 329 073 thousand against 354 178; operating profit 126 931 against 177 367; profit before tax 126 680; net profit 116 608 against 164 418; earnings per share 4,53; 25 750 thousand shares; operating cash flow 161 552 against 179 489; revenue by product line of LiveChat 275,495, ChatBot 28,694, HelpDesk 23 466 and KnowledgeBase 1 418; revenue in US dollars of 88 162 thousand against 88 595; approximately 95% of consolidated revenue generated through the group's subsidiary in the United States and Polish sales of 4 837; costs by type including depreciation 26,396, third-party services 159 821 against 140,300, employee benefits 6 458 and total operating costs 201 291 against 176,876, split as cost of goods sold 106 753 against 85,588, selling expenses 68 457 and administrative expenses 26 081; total assets 195 923 against 226 705; equity 109 965 against 136 418; cash 62 780 against 77 704; current contract liabilities 65 502 and non-current 1 539; trade payables 10 284; no credits or loans; and income tax at 19% on other income and 5% on qualifying intellectual property rights under the IP Box regime, with the deferred portion computed at 6,87% against 7,43%) — FY2025/26 · publ. June 2026 · source ↗
  7. ReportedThe measure that strips the artefact out is net profit, and it fell 29,1% last year and a further 6,2% in the June quarter.
    Text Group results for the first quarter of the 2026/27 financial year, published 28 August 2026 (revenue of PLN 83,20m, down 1,9% year on year and up 4,1% on the previous quarter; net profit PLN 29,11m down 6,2%; operating profit PLN 31,36m down 11,0%; EBITDA PLN 38,56m down 7,4%; revenue in US dollars of 22,61m up 2,1%; MRR of USD 7,46m at 30 June 2026, up 4,0% year on year and 7,6% on the previous quarter, giving ARR of USD 89,52m against the USD 100m goal, with the chief executive attributing the growth largely to the completion of price grandfathering for LiveChat customers; a record PLN 77,2m of deferred revenue and net operating cash flow up 22,2% to PLN 41,5m on a high share of annual payments; margins of 69,6% gross, 37,7% operating, 46,4% EBITDA and 35,0% net; SOC 2 Type 2 attestation in May 2026; the new visual identity and Go-To-Market start in May 2026; purchase of the livechat.ai domain and a seventh US patent in June 2026; a Klaviyo integration and Google Cloud Marketplace listing in July; a MarTech Breakthrough award and an official ChatGPT marketplace listing in August; and the annual general meeting of 6 August 2026 allocating PLN 109,7m to dividends, PLN 4,26 per share) — Q1 2026/27 · publ. 28 August 2026 · source ↗
  8. ReportedThe measure that strips the artefact out is net profit, and it fell 29,1% last year and a further 6,2% in the June quarter.
    Text Group results for the first quarter of the 2026/27 financial year, published 28 August 2026 (revenue of PLN 83,20m, down 1,9% year on year and up 4,1% on the previous quarter; net profit PLN 29,11m down 6,2%; operating profit PLN 31,36m down 11,0%; EBITDA PLN 38,56m down 7,4%; revenue in US dollars of 22,61m up 2,1%; MRR of USD 7,46m at 30 June 2026, up 4,0% year on year and 7,6% on the previous quarter, giving ARR of USD 89,52m against the USD 100m goal, with the chief executive attributing the growth largely to the completion of price grandfathering for LiveChat customers; a record PLN 77,2m of deferred revenue and net operating cash flow up 22,2% to PLN 41,5m on a high share of annual payments; margins of 69,6% gross, 37,7% operating, 46,4% EBITDA and 35,0% net; SOC 2 Type 2 attestation in May 2026; the new visual identity and Go-To-Market start in May 2026; purchase of the livechat.ai domain and a seventh US patent in June 2026; a Klaviyo integration and Google Cloud Marketplace listing in July; a MarTech Breakthrough award and an official ChatGPT marketplace listing in August; and the annual general meeting of 6 August 2026 allocating PLN 109,7m to dividends, PLN 4,26 per share) — Q1 2026/27 · publ. 28 August 2026 · source ↗
Sources
Generated September 24, 2026