Novatti looks to be simplified as focus on gross margins gains traction

ASX-listed digital payments leader Novatti have released their results and report for the June FY23 quarter.

There were plenty of highlights across the June quarter, including $1.19 billion Novatti set a new quarterly record for Gross Transaction Value (GTV) in Q4 FY23 with $1.19 billion processed throughout Novatti’s digital payments ecosystem. This took Novatti’s GTV for the 12 months ended 30 June 2023 to $4.21 billion, a 46% increase on the previous year.

Sales revenue of $10.3m for the Group was generated in Q4 FY23. This return to growth aligns with previous commentary about the business adjusting to lower revenue and margins from one international client, with the impact of this now fully realised.

Commenting on the results, newly appointed Novatti CEO, Mark Healy (pictured), said, “Novatti continues to capitalise on the global megatrend towards digital commerce and digital transformation which is being reflected in Novatti’s payment processing volumes. These volumes were up 15% Quarter-on-Quarter to $1.19 billion in Q4 FY23.”

“Consistent with commentary from previous quarters, Novatti’s revenue also returned to positive growth in Q4 at $10.3m, up from $8.9m in previous quarter, with the business now having adjusted to lower margins from one international client.”

“Having developed and commercialised a portfolio of payments technology that serves all sides of the digital payments landscape, Novatti is now shifting its focus to optimising its product suite and business with a core focus on lifting gross margins.”

“During the June quarter, Novatti began to streamline the business with a focus on profitable revenue where enhancing gross margin is a key focus. By realigning the commercial team around this goal, we have started seeing an uplift of gross margins. For example, gross margin percentage across the

business increased to 51% in Q4 FY23, up from 35% in Q4 FY22. We remain focused on driving revenue growth and further increases in margin while maintaining an investment in continual product innovation, with a target of achieving positive operating cash flow by the end of FY24.”

“As we continue to streamline the business, we expect cost optimisation measures to continue through FY24, alongside initial steps to align marketing and sales teams with an integrated go to market approach. Once embedded, this will drive cross selling of multiple products and services from Novatti and unlock greater benefits for clients.”

“FY23 has been a breakout year for Acquiring which has benefited from major technology upgrades enabling all new merchants to be on-boarded onto our new in-house platform. This has contributed to 198% YoY growth in revenue by the division. The upgrades give Novatti greater flexibility to deliver payment solutions and more importantly, a better customer experience.”

“Some of the larger customer wins across FY23 in Acquiring include a national gym software business which collects payments from members across Australia, a major hotel operator, a student accommodation provider and various telecommunications providers that acquire their customer payments via Novatti.”

“In the coming quarters we will increasingly move towards simplifying our business, with a focus on continued and sustainable increase in margins.”