Spenda Limited - Increased Revenue and Goodwill Adjustment
Spenda Limited
Increased revenue and goodwill adjustment
Spenda Limited (ASX:SPX) has a long history in business financial services software development. The Spenda platform, launched in February 2020, has developed to become an integrated applications, payments and lending platform. SPX is reporting a large pipeline of customer leads for the software and services delivered through Spenda as the world opens post-COVID lockdowns. Businesses are looking to simplify processes and payments systems, with Spenda offering a competitive platform integrated with major accounting and payments providers. SPX launched the full payment applications suite in June 2021. The company is now adding a range of funding options into the Spenda software. These were funded via the company’s own cash reserves, prior to the announcement of a debt warehouse which will now be used to fund expansion in business lending products. SPX provides a platform that simplifies end-to-end transactions for businesses and provides transparency to allow secure lending offers to expand. The company earned $1.7m in loan interest in FY22 before use of the $50m debt warehouse, as announced by the company on 1 August 2022. FY23 should see a further increase in revenue from the company’s blended revenue model, incorporating SaaS, payments and lending. Spenda acquired three synergistic businesses during the year to build the expertise and scale needed to develop and deliver a fully integrated payments and lending platform and ended the year with total headcount of 69 people. The group finished FY22 with a net cash position (including client loans) of $12.5m.
Business model
Spenda Limited operates a Software-as-a-Service (SaaS) model for licensing of the components of the Spenda platform. Businesses have several ways to take up the service with the ability to choose which modules will be turned on – point of sale, inventory management, e-commerce, procurement and service management. Payments services are then available for wholesale and retail B2B and B2C use. Utilising the ledger-to-ledger dataset provided by these transactions, SPX can securely offer on-demand lending, pay later, early settlement discounts and trade finance to its business customers to enable further revenue growth. The combination of payment and lending services allows Spenda to generate three streams of income from one customer: payments, lending and software fees.
Lending growth and debt warehouse expansion in FY23
SPX announced the establishment of a $50m debt warehouse after the end of FY22. The facility should enable SPX to accelerate take-up of the company’s debtor financing and other lending products. Operating costs increased with the growth in employees. The acquired companies - Appstablishment Software (ASG), Invigo and Greenshoots - were integrated into Spenda and now provide the payments and lending platform with additional expertise and scale. A consequence of the acquisitions and application of Accounting Standards is a $41.5m write-down of goodwill, which is discussed in detail below.
Valuation upside from results as debt warehouse utilised
The fintech sector is a diverse group with different niche focuses and stages of corporate development. Similar listed early-stage companies include Douugh (ASX:DOU), Earlypay (ASX:EPY) and Ioupay (ASX:IOU). Quarterly results continue to show the company’s progress towards the goal of delivering a robust payments and lending platform.
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