Under the leadership of newly appointed CEO Mark Healy, digital payments company Novatti Group (ASX: NOV) is accelerating its pathway to profitability with an immediate uplift in their gross margins. Having spent the last few years developing and monetising their digital payment ecosystem, Novatti now has the revenue base to optimise its sales strategy by targeting businesses that can improve their own margins by utilising Novatti’s fintech products.
The strategic focus to drive higher margins across Novatti has been led by Mark Healy who was appointed as CEO in June 2023 having already spent 12 months in the Company as Executive General Manager of Payments. Prior to joining Novatti, Healy held executive roles for various global payments companies over the past 20 years.
Hitting the ground running under Healy, Novatti has seen its average gross margins rise to 51% in the June FY23 quarter which is comfortably up from the 35% logged 12 months ago in the previous June quarter.
During the June quarter, the Company also set a new quarterly record for Gross Transaction Value (GTV) across all divisions, which include Acquiring, Issuing, Cross Border Payments and Alternative Payments. By processing more than $1.19 billion across the three months, GTV was up 15% in the March quarter and 46% in the previous year.
“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,” said Healy.
“By realigning the commercial team around this goal, we have started seeing an uplift of gross margins.”
Having been developed over the past few years and generating $39m in revenue for FY23 (unaudited), the Novatti digital payments ecosystem has matured to a point where Healy is comfortably being more selective in the revenue sought, rather than a secure-it-at-any-cost approach.
Healy has driven his focus to inflect Novatti into operating profit by aligning the sales and marketing operations between divisions, a move that Healy expects will substantially benefit businesses who engage Novatti for all their digital payment needs.
“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.”
Reporting $10.3m revenue across the June quarter, a 15.7% increase on the March quarter, comes in the backdrop of Novatti exiting revenue from one international client which was not aligned with Novatti’s direction to focus only on profitable revenue. Healy expects that the transition will be an incremental one but is confident that all revenue being generated at the moment is now breakeven, at worst.
Scalability of Novatti’s products is expected to play a large role in Novatti’s growth in FY24 and beyond with some clients signed over the past 12 months indicative of the direction being pursued under Healy’s leadership.
“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,” said Healy.
“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.”
Conor Murphy is the Marketing Coordinator at TradersCircle
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