Since undertaking a major business transformation that saw Novatti Group (ASX: NOV) reset its commercial strategy towards a market-led, customer focus, the digital payments company has reported a new record for quarterly revenue, made more impressive amid a cost-cutting program..
For the quarter ended 31 March 2024, Novatti reported $12.4 million revenue. It was the highest on record and 16% more than the December quarter. This was reflective of the commercial strategy that was first introduced by CEO Mark Healy when appointed in June 2023 when he immediately streamlined 12 fragmented and independently operated businesses into 4 core divisions with shared resources.
The restructure was designed as part of a broader strategic shift for Novatti to transition from an innovation-led fintech, to a market-led one where digital payment products are now marketed based on customer needs. Subsequently, there is much less friction for clients to engage more Novatti products, and new customers to be quickly onboarded across multiple products.
Wins from a major BNPL player and one of Australia’s largest food delivery platforms were announced earlier in the month, reflecting the change in commercial strategy to target larger customers.
Those new contracts are expected to deliver at least $1.5 million revenue, but will be captured in Novatti’s financials from Q4 onwards. They further demonstrated Novatti’s renewed commercial focus which can now take on much larger clients that process higher payment volumes, courtesy of $4.3 million raised during the quarter.
Making the 16% quarter-on-quarter revenue jump more remarkable is that Novatti has been undertaking a major cost-cutting program which is on track to remove $4 million in annualised expenses from the Company. With several of those initiatives executed in March, Healy expects the reduced expenses to kick in from April 2024 onwards with the Melbourne-based fintech recently reducing its workforce by 12% as part of their streamlining initiatives.
“Substantial progress continues to be made in Novatti’s transformation. Since this transformation began at the start of Q1 FY24, quarterly revenue is now up 21% and quarterly expenses are now down 23%,” said Healy.
Among the newer client wins is one that has engaged Novatti for their merchant services (Acquiring) where Novatti offer a range of online and card-present payment acquiring products.
“The strong potential of Novatti’s Acquiring services was highlighted again in Q3, with the integration of one new client seeing its business within Novatti rank as an overall top 3 revenue generator within the first month of operation,” added Healy.
While these recent wins reflect the progressive nature of Novatti’s streamlined structure, it may just be the start of the 1,000 existing clients identified by Healy’s overhauled team, as ones that can benefit financially and operationally by engaging more Novatti products.
Beyond merchant services like payments acquiring, Novatti also offers a suite of integrated payment products that facilitate card issuing, reward programs, cross border payments and billing automation.
Novatti ended the quarter with $9.5 million on hand with several decisions expected to be made on optimisation and divestment measures in areas that do not contribute positively to Novatti’s long-term growth strategy.
Mitch Korver is a Business Writer focused on high-growth companies listed on the ASX in the small and medium cap space.
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