Spenda Limited - Strong Lending and Revenue Growth in Q1
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 Australia 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 on Spenda in May 2021. The company has launched a range of non-bank lending offers funded via the $50m debt warehouse established August 2022. SPX provides a platform that simplifies end-to-end transactions for businesses and provides transparency to allow secure lending offers to expand. In Q1 FY23 Spenda recorded income from lending of $0.36m while transitioning from equity funding to the debt warehouse. The company’s focus in FY23 is on commercialising the Spenda product suite and accelerating the uptake of the lending offer via customer acquisition and expansion of activity in target industry segments.
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. Visa’s BPSP (Business Payments Solutions Provider) and Mastercard’s BPA (Business Payment Aggregator) agreements enable a secure payments process.
Q1 FY22 progress as targeted
Spenda’s Q1 showed continued growth in lending and revenue. The debt warehouse was established, and the company is transitioning customers from equity funded loans to securitised funding. Average lending yield was 21.23% – a 16% rise on the previous quarter. The lending portfolio was drawn to $10.4m on 30 September vs $12.1m on 30 June with customer limits at $18.4m. SPX has drawn $7.5m from the warehouse at 30 September. The company emphasised a new focus on maximising cash and returns by increasing portfolio yield and focusing on larger, integrated, channels for invoice financing offers. Payment platform transaction flows rose 120% with a 55% increase in payment volumes as new customer rollouts started to impact. Both B2B and B2C products saw increased transaction volumes. Spenda’s revenue is now 95% annually recurring vs one-off sales. A R&D rebate of $1.6m was also received post-quarter end.
Valuation is at an early stage with upside from results
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). Share price volatility remains high. Quarterly results are demonstrating progress towards the goal of delivering a robust payments and lending platform at scale.
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