Novatti slashes expenses, identifies a clear path to positive cash flow

Novatti slashes expenses, identifies a clear path to positive cash flow

ASX-listed fintech pioneer Novatti have today released its December quarter report, with revenue remaining flat while Group expenses reduced by 10% Quarter on Quarter (QoQ).

Some highlights across the December quarter included:

  • Targeting operating cash flow positive by middle of CY 2024
  • 10% decrease in quarterly expenses QoQ
  • Debt reduced by $7 million following divestment of Reckon Limited stake
  • $10.7 million quarterly sales revenue – not being impacted by cost reduction
  • Approximately $4 million cost reduction program to be implemented in Q3 FY24
  • External funding for AUDD and International Bank of Australia

Commenting on the results, Novatti CEO, Mark Healy, said, “We are now deep into the simplification of Novatti’s business. In Q1 of FY24, our focus was on simplifying Novatti’s business portfolio, completing an internal organisational restructure, streamlining the sales process, and ultimately establishing a three year, 70%+ margin target that will underpin business evaluation going forward.

“In Q2 FY24, we continued this simplification process and increasingly focused on delivering optimised financing for key initiatives. To this end, we divested Novatti’s stake in Reckon Limited. Exiting the bond also created more flexibility for Novatti to execute its strategic review, including for the potential divestment of further interests or businesses that could have otherwise been restricted by the bond’s conditions. Importantly, the commercial partnership with Reckon remains in place with more than 300 customers now onboarded, while Novatti has now also secured an API integration to enable access to Reckon’s larger customers.

“We identified external funding opportunities for key growth initiatives, including working to finalise a Series A round for International Bank of Australia, while a pre-seed funding round for the AUDD Stablecoin was increased to $600,000 to meet investor demand. With AUDD now self funding, this removes another operational cost from Novatti, while we retain an 80% interest in AUDD, providing continued exposure to any upside growth.

“We remain committed to our positive cashflow target in mid 2024 and continued progress towards this target in Q2, including normalised quarterly cash use (excluding Reckon dividend) decreasing more than 6% QoQ while we also delivered a 10% QoQ decrease in quarterly expenses. Importantly, these cost reductions are not having negative impacts on Novatti’s revenue, with quarterly revenue marginally down to $10.7 million due to cyclical, not operational, factors.

“However, we want to increasingly align these expense reductions with the timing for our positive cashflow positive target and therefore, we will now using Q3 to implement a substantial cost reduction program, with approximately $4 million in annual savings already identified.

“This focus in Q3 will be coupled with a capital raising of up to $5.5 million, continuing Novatti’s work on optimising financing of key initiatives. The capital raising is strongly supported by the Novatti Board and I, through personal contributions of $750,000.

“More broadly, Novatti’s strategic review continues across the business, with a view to identifying any non-core activities that do not align to Novatti’s long term strategic, financial and margin goals. We expect this review will identify further opportunities for optimisation and divestment across Novatti’s business and to ultimately result in the strengthening of Novatti’s financial results across 2024.”

Disclosure: At the time of writing, Australian FinTech Pty Ltd is a shareholder of Novatti Group Limited.