Marketing tech company Rewardle (ASX: RXH) is quickly building up a unique portfolio of small businesses where the company is backing themselves to lift their customers’ business so much that they have again secured equity options in lieu of their service fees. This time, it’s with medtech company Cardiac Rhythm Diagnostics.
Both Rewardle and Cardiac Rhythm Diagnostics (CRD) are very well known to each other with the latter being a long-time client of Rewardle’s marketing services but with this update to their arrangement, Rewardle has been granted Options to convert their fees into shares in CRD.
CRD is currently valued at $5 million, with annual marketing fees payable to Rewardle at $360k per annum. If those fees are fully converted at the end of 12 months under the current valuation, Rewardle would own 7.2% of CRD. Fee conversion however, would have to be mutually agreed upon by both Rewardle and CRD which could potentially cause strain around Christmas given Rewardle’s Executive Chairman, Ruwan Weerasooriya is in fact the brother of CRD founder, Professor Rukshen Weerasooriya.
“Having achieved consistent cash flow positive operations over recent months our focus is shifting to developing opportunities that leverage our operations, resources and capabilities to drive growth,” said Rewardle’s Ruwan.
“A key component of our growth strategy is to leverage our operational capabilities, expertise and IP to create VC style growth exposure by building a portfolio of transactional, licensing and equity positions in partner businesses.
“We’re looking forward to leaning further into supporting Cardiac Rhythm Diagnostics and accelerating its growth. Converting our fees into shares will give us direct exposure to the upside we are helping to create from the application of our platform in a fast growing digital health business.
“The flexible nature of the arrangement allows us to balance our cash flow requirements while building an equity position over time.”
Cardiac Rhythm Diagnostics is a fast-growing medtech business that is developing a disruptive, technology enabled cardiac diagnostics service for local GPs. CRD joins other companies in the Rewardle portfolio which includes equity stakes or Options for equity in Beanhunter (Coffee community), Pepper Leaf (Meal Kit delivery) and SplitPay (BNPL).
These equity positions have become part of Rewardle’s turnaround strategy where the Company provides marketing services such as websites, marketing software, loyalty programs and affiliate programs that leverage their IP with the goal of mutual success. Particularly, it is extremely rare for marketing companies to offer the same payment options as Rewardle which are designed to reduce cash flow strain on the clients while Rewardle backs their marketing services to drive revenue.
For Rewardle, it seems to be working, with the Company reporting $693k in revenue for the half year ended 31 December 2021 which represented a 193% increase on the previous year. More importantly, Rewardle is profitabile by logging a $57k net profit over the same period.