SmartCraft: Forensic overlay and STS reading

Continuing Coverage | October 2025

We’re experimenting with using AI/GPT-driven scripts to apply a forensic overlay to a stock’s financial and narrative history, scanning quarterly transcripts for tone shifts, contradictions, and subtle changes in management emphasis. The idea is to test whether a consistent machine-assisted lens can surface inflection points earlier than manual review alone. Our first company we’re testing this on is SmartCraft (SMCRT).

We’re also using this as an opportunity to pilot the Sophon Trajectory Score (STS) on SMCRT — our 100-point rubric that consolidates ten qualitative categories ranging from Market Opportunity to Financial Health. This combination of AI-driven narrative analysis and structured scoring will become a repeatable module in our research stack.

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The bullets below mark tone shifts in the quarterly earnings calls held by SMCRT’s management:

1. Churn & downgrades became the primary headwind—management’s tone pivoted from “contained” to “elevated.”
   Q4-23: management celebrated churn falling to 7.2% with improving momentum.
   Q4-24: churn pushed to ~9%, with bankruptcies cited; downgrades also weighed (≈3 pts YoY impact).
   Q1-25: churn hit 9.3% and, notably, downgrades were called out as the bigger drag (-5 to -8 pts to growth depending on lookback). That’s a sharp acknowledgement vs. prior quarters.
   Q2-25: the message softens—“churn elevated… downgrades still high,” but framed with “early risk detection” and “upsell strategy,” i.e., a proactive tone.

2. Sales conversion whipsawed—management first leaned on rising meetings, then admitted a step-function drop.
   Q4-24: conversion rate improved to 44% (from 35% in Q3), highest new customers since Q1-22—bullish tone.
   Q1-25: conversion fell to ~30% vs historical >60%, attributed to delayed decisions—not lost to competitors. That’s a big reality check vs. prior optimism.

3. Pricing tailwind → “moderate” pricing—another tonal shift.
   Q4-23: CPI-linked increases 5–8% (prior year 8–10%) were a tailwind spreading through 2024.
   Q4-24: management explicitly kept price increases “moderate” (~3–5%) to stay competitive—acknowledging less pricing power just as churn/downgrades rose.