Do you often wish that payday would come faster so you could finally hit checkout on your figurative cart? We get it. And although that might be difficult to achieve, payday loans provide some relief. Lending fintech company Beforepay (ASX: B4P) gives Aussies access to their wages before the end of the month but with a hint of accountability.
And it looks like the model is working, as the Company reported a positive EBITDA of $0.57 million in Q4 FY23. This is the first positive EBITDA for the Company in its six quarters as a public company.
CEO Jamie Twiss said, “It’s fantastic to have delivered positive EBITDA this early in our journey. It shows the power of steady, focused execution of our strategy, and sets us up for sustained profitability going forward.”
Beforepay was launched in 2019, just before the pandemic hit and recession followed. The Company aimed to make it easier for Aussies to access part of their income before payday for a fee. It calculates your work hours and income, and gives you access to how much you would have earned when you request a payday loan. Moreover, the app is built to help people budget and track their spending. The user is required to have a decent cash return history for Beforepay to keep providing loans.
Beforepay credited its favourable performance to its capacity for effectively managing operating costs during rapid growth and its robust data-based risk management strategy. The latest report reveals a remarkable 49% year-on-year surge in quarterly operating revenue, coupled with a noteworthy 27% reduction in operating expenses over the corresponding period.
While there’s no certainty that the Company will always make a profit because credit results and other factors can change, these results show that Beforepay’s business model is here to stay, for now at least.
Twiss added, “We’ve driven the cost agenda hard throughout the business, keeping our overheads flat while becoming significantly more efficient at performance marketing. In Q4 FY23, this enabled us to write an average of more than 35,000 pay advances every week with a full-time staff of 30 people in Australia plus some offshore contractors.”
Twiss mentioned that in the past two years, the number of employees has decreased by 3%, but the revenue has increased by over 500%, demonstrating the business’s operational efficiency. Effective risk management has played a crucial role in achieving these financial results. Additionally, the Company revealed that its database for 2023 contains 1.3 billion transactions stored in a modern, cloud-based environment.
Every day, the Company’s data asset is updated with information from over 400,000 linked accounts. This valuable resource empowers a team of data scientists to constantly improve and update Beforepay’s machine-learning models. These models are utilised to evaluate potential customers’ risk profiles and determine the appropriate advance limits for them.
In Q4 FY23, pay advances were $162.2 million, 51% higher than the same time last year (YoY), as users demanded an average pay advance of $341. Plus, the Company reduced lending limits for riskier users, improving underlying economics.
He shared, “While we’re very pleased to have delivered such a strong financial outcome, we’re also always focused on fulfilling our mission of supporting working Australians. Our average revenue per advance during the quarter was $17, with no late fees, compounding interest, penalty fees, or anything to pay aside from the fully transparent up-front fee.”
Beforepay is currently in talks with lenders to extend and expand its third-party debt facility. In Q4 FY23, its total equity stood at $26.7 million, just slightly lower than the $26.8 million in Q3 FY23.
Alinda is a Business Reporter for The Sentiment
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