Qoria (ASX:QOR) A 25% Sell-Off Despite Ongoing Growth (What Happened?)

ARR Grew, Sentiment Fell

Qoria (ASX: QOR) delivered what we would describe as a reasonably solid quarterly result, yet the market reaction told a very different story. The share price fell around 25% on the day, which tells us expectations were clearly set higher. In this note, we want to unpack what actually happened in the quarter and why market sentiment shifted so quickly.

For subscription based businesses like Qoria, two metrics matter more than almost anything else. Annual recurring revenue, or ARR, and customer retention. These numbers give investors a clearer picture of the underlying health of the business than short term earnings alone.

Starting with ARR, Qoria added A$5.1 million of net ARR during the quarter, representing growth of 42%. Exit ARR reached A$154 million, which remains a strong outcome in absolute terms. Management also reiterated FY26 revenue guidance of A$145 million plus, alongside ARR growth of more than 20%. On the surface, these numbers point to continued expansion and solid forward momentum.

Looking at cash receipts, Qoria generated A$32 million for the quarter, taking year to date receipts to A$79 million. The company was explicit in highlighting seasonality within its contracts, particularly across the K12 division. A large portion of these contracts are typically collected between July and October, which means individual quarters can appear lumpy when viewed in isolation.

So while the headline numbers were not weak, the result appears to have fallen short of what the market was positioned for.

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Why the Market Wanted More

Turning to profitability and customer quality, the underlying metrics this quarter were actually very strong. Qoria reported gross margins of 92%, net revenue retention of 102%, and churn below 5%. These are high quality indicators for a subscription based business and suggest the product is delivering clear value to customers and retaining them effectively over time.

Where the quarter became more complex was at the cash flow and margin level. The company was impacted by foreign exchange movements of around A$4.5 million, alongside a net negative cash effect of approximately A$3 million. Free cash flow was negative A$2.3 million for the quarter, which is not ideal, but it needs to be viewed in context.

Marketing costs increased sharply, up 132% year on year, as the company invested aggressively to drive growth across the Qoria division. While this weighed on operating margins and free cash flow in the short term, it reflects a deliberate decision to prioritise growth rather than immediate margin optimisation.

In our view, the share price reaction was largely driven by expectations rather than a fundamental breakdown in the business. With the stock having traded above A$0.90 previously, the market had clearly priced in a smoother transition toward stable profitability. The combination of FX volatility, higher than expected marketing spend, and weaker free cash flow likely unsettled investors who were positioned for a cleaner quarter.

Is this the time to start looking again?

That said, after a drawdown of more than 60%, the discussion naturally shifts from momentum to valuation. At these levels, we think it is reasonable to start reassessing Qoria through a valuation lens rather than focusing solely on near term sentiment.

Following the de rating, the stock is now trading on a materially lower EV to sales multiple. On a FY26 PEG style basis, the multiple sits around 0.15. As a general rule of thumb, values below 1 are often considered undervalued from a pricing perspective, assuming growth expectations remain intact.

If Qoria can continue to deliver on its forecast ARR and revenue growth over the coming years, there is a strong case that the market reaction has been overly aggressive. In that context, the recent sell off may prove to be an over correction rather than a reflection of deteriorating fundamentals.