Spenda Limited (SPX) Earnings Call Transcript & Summary

Good morning, guys and welcome to the final investor webinar for 2025. Today, I'm just going to run through a short presentation and then really just talk to the many questions that have been asked by shareholders. So obviously, look, we ended the year really strongly. We closed with cash receipts, little bit above 11.5%, growth more than 114%, which was fantastic given we drove down operating costs by just shy of 40%. We set another cash receipts record, which is fantastic. We were more than 100% up on this time last year. Our payments volumes continue to climb and our cash and cash equivalents closed at $3.7 million. Obviously, the significant highlight of the quarter and probably the back half of the financial year was the implementation of the APG platform. So we went live as planned on the 1st of July. It was a major initiative to replace all of the tech that had previously been operated by AirPlus and then commenced that migration of customers over to APG. We're really pleased with how everything has been achieved. I think APG is equally pleased. And it's really exciting to see we've already processed more than $10 million, which is a fantastic result. Just looking forward to, I guess, the key metrics. Obviously, payment volumes more than doubled. Cash receipts well and truly more than doubled. And we did that in an environment where this last quarter was the first quarter without any revenue from our lending facility after we sold the book to Grapple. And equally, we had very flat growth in our AirPlus revenues as we were in the process of transitioning and not boarding new customers. So all in all, it was a fantastic result and that resulted in an annual growth rate of more than 100%. But really, the exciting thing for us is, we've almost averaged that over the last 3 years. Now looking at the graph, obviously, it's not that long ago, we were processing hundreds of thousands -- and it won't be too far away and we will have processed more than $1 billion [indiscernible] through the platform. That's just around the corner. And that's a massive milestone on its own but something that we would expect to be almost a forgotten milestone in the not-too-distant future. If we look at cash, again, we've more than increased our cash receipts by a factor of 3, almost 4. It's a great result for any organization and we've done that over the past 2 years. So a fantastic result for all concerned. And we continue to expect that's how our business will operate into the future.

So on to the questions. We've bundled the questions up into logical groups. And the first group of questions are about Carpet Court and the SOE program. There we go. What's the revenue potential of SOE? Look, in a reasonable time frame, look, it's a $5 million a year program on the top line. We would probably expect us to complete that program by the end of next year. We're certainly working to do it faster but there's a significant amount of business transformation involved. And we -- as we are talking consumer all the way through to manufacturer across that network. So a really fantastic example of what we do as an organization. How has the feedback been and how will we... Look, the feedback has been great. And the 2.3 release is actually far more about being able to diversify through other industries whilst deliver a fit-for-the-glove solution for Carpet Court. So realistically speaking, a lot of the things we're working on now are about speed of delivery. Our vision is to provide this SOE product to market as a complete operational stack in the same way that Xero provides a financial product. So that's the benchmark we set for ourselves. That means supply side features, they're not sexy, they're about how can less people deliver more customers or how can the customer self-fulfill. So they are really the keys for us. Are we expecting better, Swift? Probably not the right question but I understand it. I think shareholders should be aware and maybe it's been lost in, in all the noise that SwiftStatement is Pay-Statement-By-Link. So we have 100% today and we would expect as we roll out a new version to continue to retain 100%. The 35,000 businesses is actually new business, not existing. We've got roughly about 3,900 or thereabouts customers operating on the Spenda platform. So we're talking about, if you like, a 100-fold increase in addressable market through those existing networks. Let's move on to DSD. JB Hi-Fi, now where the [indiscernible] The short answer is possibly. Our focus was to deliver the Capricorn DSD service to JB Hi-Fi and that's what we've done. And it is the cornerstone of a lot of their marketing -- of Capricorn's marketing now to this e-commerce world to enable better utilization of the Capricorn account via online platform. So that's the focus for us. It wasn't really about trying to push other agendas at this point. That's not really how relationships get built on a sustainable basis. Now on to long-term vision, okay. What does Spenda look like in 10 years, including expected scale? Look, 10 years is a long way out. But as I've said, for us, we have always believed that unlike lots of companies that come from Australia, our focus has been to change the way people trade. So we're on the right path now to be a household name as a B2B platform, providing all of the capabilities that an organization would need to be able to create, share an integrated transaction, whether that transaction is between a consumer and a small business, a small business and if you like, a wholesaler or a buying group, some sort of aggregator, we really are set on the right path to achieve that and we don't back down from that vision. So that's where we're going. We're certainly ticking all the boxes that we need to tick on the way. Look, if we keep doing what we're doing, I think the numbers probably speak for themselves. But if you just look at the current projects that we're working on, if we were to just scale out what we're doing now on the same combination of revenue, it's pretty easy to see how we'll be doing, far in excess of $100 million in revenue. And obviously, once you hit that threshold, you can keep going from there. So yes, I think that revenue potential is a function of how far out you want to look and obviously, how the world changes around you. But we're really confident in the things that we're doing. And obviously, I think that what we've been able to achieve speaks for itself. We are clearly doing far more with less resource and we would expect that to be the case and get genuine intellectual property returns over the coming years. Well, the strategy, again, hasn't changed. So our strategy is to solve the first problem for a network of customers, whatever that problem may be and then set a vision with that customer network of how they can digitize and transform themselves. Because at the end of the day, you have to deliver a significant benefit to create change. And that's what we believe we will do. We believe that the product that really opens doors for us is the SwiftStatement product, coupled with AP and obviously, the -- we have a massive advantage when we look at how we can bundle that with APG's credit solutions. So it is a real enabler for us. And that -- the sorts of constraints that we've had in the past aren't there with the APG credit product. So it's a really exciting landscape for us. SwiftStatement adoption. What incentives have been offered to members? Well, we haven't really tried to incentivize them at all. We presented value that related to, I guess, the first cohort of features. Now what we're focused on is exactly that sort of stuff, moving into referral mechanisms between members, extended free trials, annual plans. There's a variety of things that we're bringing in now. But the key for us was never about what we released earlier in the year. The key for us was to get our implementation or the supply side features right. And those capabilities are yet to be implemented. But when they are, we believe that we will accelerate very rapidly through the network and maybe reset people's expectations of how quickly one can deploy software when it's built for supply as opposed to built purely for... What does it do, what's the main barriers to adoption? Look, I think that the key thing is to recognize, first of all, we launched with an initial product. We got some feedback on what the features were that were being used across that network that were maybe a little bit opaque at the start of the process. So the key change in strategy for us, again, aside from improving supply side is bundling. So how do we bundle a broader AP product? How do we improve the overall invoice automation within a Capricorn member business, whether that be how they receive an invoice, approve an invoice or schedule a payment. All of those elements come together to stand us in really uncharted territories. It's important to remember that most of these payment products are built purely on loyalty rewards. So just the arbitrage between the -- if you like, if you spend $100,000 a month, you'll get 5,000 frequent flyer miles or 5 million frequent flyer miles, I should say. So that's their value proposition. We're not about that. We're about how can we give you a lower total cost of operations and address a number of critical issues within small business that negatively impact profit. So that's been the focus. It continues to be the focus. And I think we will demonstrate that we've built a product that can stand on its own and differentiate itself significantly from other in-market offerings. What are the core features of SwiftStatement that make it valuable? Well, SwiftStatement is a sell-side product. So it's for the seller. So if you think about it from a seller's point of view, its key value proposition is being able to create an ability for a large organization to implement self-service for critical information that cuts down call center traffic without needing to connect the ERP to the Internet. So that is, I need a copy of my invoice. You haven't fixed my credit dispute. Why does my statement say, I owe you $50,000 when I think I only owe you $40,000. So it's all about enabling the buyer to have access to the seller systems as and when they need it without the need for additional call center resources and sending e-mails and all those sorts of things. So yes, that's absolutely the focus of it. It's a sell-side benefit. Obviously, the benefit to the buyer is that they are able to self-serve. They are able to take that data up and they are able to reconcile more rapidly. They are able to eliminate the need for a dispute with their supplier or their buying group or their franchisor. So it's got value to both sides. But ultimately, what it's all about is just making people more efficient. Look, the short answer to that question is no, but for good reason. As I said, we had a significant change in demand and the supply side implementation we had intended to release has not been released yet. We will release it in time. And we would expect by increasing the supply side engagement and embedding our SwiftStatement product more effectively into the current Capricorn member processes and then enhancing that with, if you like, a smoother upgrade to AP and an ability to do far more, like ingest invoices, do statement comparisons, use the ingestion product, not just for Capricorn but more broadly across the business will all stand us apart and rapidly change the way in which adoption occurs without the need for lots of human beings. Now we've already put lots of those features in. It's important to remember, we've already announced we've built capacity to run at that sort of 7,000 customers a month, which is significant. So it's not that the goal was being avoided. It was more that the goal needed to be adjusted based on our own circumstances and where our resources were being deployed. We should also note that SwiftStatement is the same technology being rolled out at Carpet Court. It's the same technology that's being rolled out for APG and we intend to use it for any other network as a mechanism for how they achieve that objective to distribute transactions without connecting their ERP to the Internet to their buyers or to their customers. Financial performance and cash flow. Is the current quarter expected to be cash flow negative? And how were you able to predict this in advance? Are you on track to achieve sustainable cash flow -- positive cash flow by year-end? Look, we're continually working to maintain positive cash flow. That's obviously a goal and you balance that against growth because for us to grow rapidly, you've got to invest money. Now if we just keep doing what we're doing, clearly, we're doing all the right things to create cash flow positivity, driving down cost, growing revenue. There's a number of initiatives that we're working on at the moment to reduce cost, including cost of goods sold. And obviously, the rollout of current programs will continue to drive revenue. So yes, I think we're doing all the right things to maintain cash flow positive framework into the future. But again, it's a full year effort. It's not something that -- if you have a bad month, it doesn't mean we all fall down and there's some sort of major problem. You just look at what the issues were and get better. What caused the $4 million shortfall, invoices not being paid by 30 June? Our priorities and our customers' priorities don't always align. And there's sometimes payments are made on 30 June, they come in at the start of the first week of July. It's hardly like we would get into a dispute with our customer over a few days here or there because they're not operating -- well, if you think about it the other way around, some customers will want to hold as much cash as they can for 30 June. They've already accrued the expense. So it's just a balancing act. Ultimately, there's -- we're providing technology that helps to improve cash flow. And really the funny thing is we are -- we were a victim of the problem that we're solving. So some of the invoices just weren't paid. It's as simple as that. Where did we create operating cost savings? There's a variety of things that have driven that. So the first one is the efficiencies of the -- from the amalgamation of -- if you like, the Limepay acquisition. There was efficiencies gained through the sale of the lending book to Grapple. We've also made some significant gains and expect to really drive home the broader adoption of AI and for that to have a substantial impact on our ability to keep doing more with less. So all in all, it's a combination of things. But probably the key thing, it was part of a very deliberate plan. How do we balance aggressive growth targets, with normalized cost of [ $1 million ]? Well, probably, as I said before, we keep doing what we're doing. We look at where there's opportunities to save money in our core operations and continue to adapt our structure. We look to how we can use better tools and retool our teams and train them so that they can do more with less. We focus product on quality and faster release. We utilize our other assets, some of those soft assets, like the APG agreement is a significant asset, not that it's going to sit on the balance sheet but it is a significant asset that will help us to grow and improve and without any substantial impact on our cost base. So again, we would expect our operating cost to be flat through this year. So there'll be some shuffling around but ultimately, that's what we would expect. Are you planning to raise more capital? Look, we are always looking at how we maximize return on capital. We definitely would love to be sitting in the U.S. where we would get a valuation many multiples of where we are now, 14-odd times revenue would be fantastic. But that's not the reality. We're here. So obviously, it took -- to be great, takes time. And some people forget that all of the mega caps took 10-plus years before they had that profitability curve and -- if not longer. So it's never been a question of whether or not we're going to be insolvent. It's really just a question of how we maximize return on capital and turn capital into revenue and more importantly, GP. The 4.6 [indiscernible] shares [indiscernible] in the market [ 27.7 ]. Look, no one worries about dilution more than me. But the reality of it is that by driving down operational efficiency and growing revenue, at the same time, our share price has halved, we can't control the market or share price. That defies logic. Our multiple defies logic but it is what it is. All we can do is just focus on building strong numbers so that at some point in time, analysts will reflect on what we've done, model out what that looks like into the future and fair value will come. There's nothing more than that, that we can do. Ultimately, we at the company believe it's up to our shareholders to look at the numbers and make their own decision. Do you think we're doing the right things? There are some shareholders that actively post negative comments and just trade in the arbitrage. It's great to be able to make 14%, 15% every week. That's counterproductive to a variety of shareholders that want to be strong. And we obviously see the register, we can see who's doing that. So it would be fantastic to have the average shareholder who rode that negative sentiment and turned it around because ultimately, we're doing all the right things in the business to be a great organization but we cannot focus on the things we can't control. So I can't control the stock market any more than anybody else. And it's not about news flow and this and that. It's really about a group of people delivering results on a sustainable basis and getting the attention of people that recognize value and see the opportunity to invest in us and go on the next chapter of our journey. Moving on to APG Pay. I'm not sure where any of those rumors about [ Domain ] real estate came from. That's just not true. The -- yes, we're confident in achieving the $140,000 per month as we wouldn't have said it if we weren't confident. And as far as APG to the automotive industry, yes, we absolutely see that as a enormous opportunity. But yes, it's just part of what we're doing. And that's probably important to remember. Is additional funding beyond the initial $50 million from APG required to support Phase 2? Absolutely. Of course, it is. Additional funding is sitting there on the sidelines ready to go. APG have got more than enough capital. They've got far more significant growth ambitions than $50 million rolling around every month. And obviously, we want to attack not just corporate travel but what other services we could supply to those corporate travel customers. Remember, they are large organizations, the majority of them. We also want to look at other markets, whether it be automotive or trade services or real estate. So all of those things, APG is sitting there ready, want to support and we're actively involved in continuous business planning with them. What percentage is recurring revenue? 100% of it is recurring revenue. That is exactly what we're building together, a recurring revenue pool. At the moment, we are recontracting -- they are recontracting, I should say. And jointly, we are rolling out the AirPlus customer base and moving them across to APG Pay. And that in and of itself is well over $50 million a month. So we're well -- it's really on track just to get this done. It is moving forward at the right pace. We're not doing things radically quickly and we're not doing things slowly. But obviously, you've got to get it right as you're growing and there's always problems when you roll out new systems and it's important we just keep rolling, as I say, it's exciting times. That's probably not a question I can really answer. That's an APG question. It's not our responsibility to retain those customers, it's APG's. But I think they're doing a fantastic job. So what's our contingency plan should APG underdeliver or exit the partnership? [indiscernible] Look, things always change, but no, I don't think we're [indiscernible]. Look, the 10% agreement is contractually binding. It's fully funded by a global PE fund and a bank. There's ample operational runway. It's highly unlikely APG will shift focus or stop funding as the product strategy is profitable for all of us. And the early indications have, I think reinforced that as a critical pillar, I'd say for us, it's -- it obviously had an impact on the transition from AirPlus to APG in the -- if you like, in the last 6 months. But we expect the medium-term result of that change to be substantially better than if AirPlus had remained our partner. So we couldn't be happier. How much of the [indiscernible] recurring gross profit [indiscernible]? We're really confident that APG can execute at scale. They are recontracting. They're probably at halfway, I think, is my understanding. And I believe that they expect to continue to scale and grow and recontract all of those legacy customers over the coming months. So yes, we're really not too concerned with that. Online accounting marketplaces, which online accounting marketplaces will Spenda target? Xero, Sage, QBO, MYOB during the 2026 calendar year and the remainder of this year. They're our focus. The 4 big ones that dominate different developed markets. Revenue and valuation. What revenue multiple is reasonable? Well, that's a question you probably want to put to an analyst. But if you look at what's happening in other markets and in the private sector, players that are far further from profitability are getting valuations of 15x ARR. Our ARR is $7 million, $8 million. So on that basis, our market cap would be $100 million plus. We've currently got a $27 million value. So if you're using a payment volume-based methodology, you'll get roughly a similar result, if you look at recent transactions again that have occurred on that basis. So I think it's reasonable to state that analysts are able to determine the value opportunity that Spenda presents. What's Spenda's current revenue mix? Well, as we said previously, we're getting asked the same question. It's about 50-50 across the payments and then the SaaS revenue or licensing revenue and the implementation fees that go with that. We're expecting all of those revenue lines to continue to grow in 2026 with the payments revenue and SaaS really driving revenue as we move forward. Obviously, for us, we will be booking APG as payments revenue. It's GP on payments volume flow as we're not the lender anymore. What's realistically addressable? Well, firstly, I guess, the market is continuing to grow. We're not so much focused on what's everybody else doing but what's actually in our own ecosystem. So what are in those channels we're already working with. And we expect that trend to continue to -- we've grown $500 million. We expect to keep growing. And we expect APG on its own will be doing more than $50 million a month. And it's not unrealistic that they want to get $1 billion through their own platform. So that's where they're heading. Yes, so we certainly feel we've got the right partner combination to achieve really exciting results. How much of current revenue is reliable and repeatable versus one-off? About 75%. What is the significance of being [indiscernible]? Well, we're moving lots of money. So this was really about us being able to operate with continuity. So our [ FSL ] was a big step. It was a costly step. But it's all about us being able to process payments in a variety of different ways and therefore, market financial products and solutions to customers at the point of activity or if you like, through the software. So it's a major part of our go-forward strategy. Partnerships and relationships. And Lessn -- yes, Lessn continues to grow. I think they're going to do somewhere around $9 million this month. So I think they're doing a great job. They're certainly a valued partner. Are you attracting interest from institutional investors? We started our engagement program there with institutional investors and they are definitely interested in the company. And I don't think they've like -- interest maybe for the last, I'd say, since September of last year but they obviously go through the process of tracking what we're doing and making sure that we're hitting critical milestones that they analyze and see value in. Can you clarify [indiscernible] partnership? We have a transaction process with Worldpay. I don't really understand why we would break that down any further, [indiscernible] that's probably not a question I can answer. It's much of the same. We probably wouldn't -- I mean, at the end of the day, we have relationships with the card teams. And under APG, we're issuing Mastercard. But the transaction volumes, all those sort of specific things are commercially sensitive but like Worldpay, they're transaction processing agreements. How do the AI capabilities from Fresh Supply enhance Spenda's differentiation? Okay. So we're working with Fresh Supply on AI tech that improves the way that we process data so we can make better products for customers. It isn't just in invoice processing. We're using their products internally to improve our -- or those products internally to improve our operations and perfect onboarding before we bring it to market. So the differentiation for us is really about bundling those capabilities that would otherwise be bought by a customer through a series of products at a far higher cost, or in fact, wouldn't be bought by a customer because those series of products cost too much and don't provide a compelling ROI. So we definitely are differentiating ourselves, as I say, through the bundle. Given Spenda's expense [indiscernible] how are you managing technical debt? That's a great question. The short answer is that our data model and the foundation tenant structure is really very good. It makes it easy for us to retire old code patents and improve quality, speed and remove technical debt with a combination of some new AI initiatives we've been running with and a significant increase in planning. And a big part of that has come from having the Spenda Worldpay, so the [ SWA ] platform and the payments platform, the [ STP ] platform that we've acquired and enhanced for a long time. So we're shifting our focus of about 30-odd percent, 30% to 32% planning on all development initiatives. And a big part of that is sort of about ensuring that what we build and the code that we release now can be rationed for longer so that the technical debt in and of itself is both repaid but has a low cost over a far longer period of time. So that's a great question. I've never had a shareholder asking that before. So thank you for that. I think we're coming to the end of our question set. Market and growth, which total [indiscernible] So payments volume is seasonal and variable and it's obviously growing. But the great thing about SaaS is, it's maintainable. It's consistent. It's cornerstone underpinning revenue. So it's not so much about converting it. SaaS is SaaS and we're underpinning our product bundles with a SaaS offering that then is partnered with other products which are charged on, if you like, on the volume of the payment flow, whether they be APG's lending products or BYO card service or any other payment for that matter. Even in the exchange of data, we're charging transaction fees on, so. How does AP and accounting market forces influence customer acquisition? Look, we've been focused on online acquisition for a while now, so you can meet the demand head on. So we expect it to positively impact growth. We expect it to decrease our acquisition cost and shift us from being a sales-driven organization to a marketing-driven organization. So yes, it's a really exciting change for us and one we're really happy with. There are over 35,000 business endpoints across Capricorn and Carpet Court, how many are transacting and generating revenue? And why? Okay. So the first thing is, the 35,000 are about customers we want to transact with, not yet transacting with. I think that it's really important that sort of reinforce that supply side feature point. So I think some people have misunderstood that Swift is not for Capricorn. It is the same tech that Carpet Court run and it is exactly the same as what APG are running. So we have obviously limited resources. And I would imagine that most people would be able to imagine just how significant the APG transition was for us on a tight time line. So obviously, that change was not expected. It wasn't something we could control or foresee. So we had to move quickly. We had to roll with the change. And obviously, that had to come at some cost of existing programs. So we based our earlier projections on an online acquisition model with SwiftStatement, where we were embedding our tech. That model has yet to be deployed and that was largely due to the above changes. A lot of change happened just before Christmas but we do intend to address that, focus on the supply side features and in the near term, get back to what our original intent was in terms of our rollout strategy. Limepay acquisition. What was the measurable outcome? Okay. Well, I guess if you just look at the Limepay business in isolation, the revenue has grown by about 50%. But probably more specifically, we could not have done the APG project at all without the Lime technology. That speaks volumes. That -- it is a remarkable achievement to be able to replace 10 or 12 years of development of a product in a few months. It speaks to the quality of the product. So that's probably the most measurable outcome of all and I think it will pay dividends significantly into the future. And what are the upcoming milestones related to the acquisition that could materially impact Spenda's financial position? Probably the biggest thing to be aware of is that we think that the Tranche 3 milestone will be achieved in the not-too-distant future. So there'll be 2.4 million shares issued at $0.0175. So that's probably the big thing to look out for as this quarter unfolds. Well, I think that brings me to the end of the questions. Thanks for your time. I know it's been a long one today. I hope you all have a great weekend and stay tuned.