Novatti’s turnaround strategy continues as revenue increases and expenses decrease
ASX-listed Novatti Group Limited, a leading fintech enabling businesses to pay and be paid, have released its December 2024 quarter (Q2 FY25) Activities Report.
The implementation of Novatti’s turnaround strategy continued throughout Q2 FY25. Notably, this included the successful third stage of Novatti’s cost reduction program, which has ultimately seen $9.8 million in annualised costs removed from the business overall.
Novatti maintained its high quarterly revenue of $12.9 million (up 30% YoY) while expenses were reduced a further 7% on the previous quarter and 28% YoY to $5.1 million. Importantly, this figure does not reflect the full impact of the third stage of Novatti’s cost reduction program, which will be shown from Q3 FY25.
Commenting on the company’s Q2 FY25 performance, Novatti CEO, Mark Healy, said, “Novatti’s Q2 FY25 results highlight how the business is closing in on a significant turning point, following the implementation of our turnaround strategy since the beginning of FY24.
“First, in Q2 FY25 we continued to maintain our high quarterly revenue of $12.9 million, up 30% YoY.
“Second, quarterly expenses were reduced by a further 7% on the prior quarter and 28% YoY to $5.1 million. With quarterly expenses sitting at $8.9 million prior to the introduction of Novatti’s turnaround strategy, the impact of Novatti’s cost out and efficiency programs is now clearly visible, and will increase further, with the full impact of the cost reduction program to be seen from Q3 FY25.
“At the same time, we are starting to see a real impact on improved margins in the core Payments AU/NZ business. This follows the ongoing review and exit of low profitability services, solutions, and customers. Gross margin within this core business increased to 49% in Q2 FY25, representing a 15% increase year on year, with further gains expected across CY25. We are increasingly implementing new measures to grow sales and ultimately deliver higher margins with our three year, 70%+ gross margin target remaining firmly in place.
“In February we will launch our brand refresh which follows our team seeking customer feedback to deepen our market positioning. We are also implementing initiatives to streamline and automate customer onboarding, while enriching our payments capabilities and reducing costs by switching to more innovative service providers. These initiatives are contributing to our market led, customer focused approach, which was endorsed in Q2 FY25 with a tier one Australian telecommunications company renewing a multi-year service agreement, while we have also now onboarded nearly 40% of the 500 merchant pipeline identified at the beginning of FY25.
“Moving forward, we will also continue to streamline and optimise Novatti’s business, with the strategic review of all business units and subsidiaries ongoing. This includes active communication with parties interested in acquiring non-core assets.
“Following these achievements, we expect to come within $30,000 of positive monthly operating cashflow in January while we remain on track to achieve positive operating cashflow for the half-year ending June 2025. To highlight the extent of the progress under new leadership, net cash outflow has now fallen from $2.5 million in Q1 FY24 to $0.4 million in Q2 FY258, including an improvement of $1 million on the prior quarter and an improvement of $2 million or 85% on Q2 FY24.
“Achieving positive operating cashflow will represent a significant milestone in the delivery of Novatti’s turnaround strategy and will be a key step in our commitment to improving Novatti’s financial performance moving forward,” Healy ended.
Disclosure: At the time of writing, Australian FinTech Pty Ltd is a shareholder of Novatti Group Limited.
