Novatti Group (ASX:NOV) quarterly update, September 2020


by Anna Napoli

Novatti Group Limited (ASX:NOV) CEO, Peter Cook, provides the September 2020 Quarterly Update on the company, discussing integration of its Emersion acquisition, Visa payment card issuing business and strategic partnerships.

Anna Napoli: Hello. Anna Napoli for the Finance News Network. Joining me from Novatti Group (ASX:NOV) is CEO Peter Cook. Peter, welcome back.

Peter Cook: Thanks very much for having me Anna.

Anna Napoli: Novatti group is a digital and banking and payments company. Which segments do you operate in?

Peter Cook: Novatti is a leading digital banking and payments company that can do everything from issue Visa payment cards, to cross border payments, to automated businesses subscription billing. Fundamentally we enable every person to make fast, simple and secure payments from any device, anywhere. We have an established business that's achieved revenue growth of approximately 50% per annum for the last three years, but we believe we're just getting started. We're seeing a seismic shift towards the demand for cashless payments and digital payments, particularly following COVID-19, all of which Novatti delivers.

Anna Napoli: Thanks Peter. Now to your September quarter update, can you tell us how is the company performing, starting with some highlights?

Peter Cook: Yeah, perhaps the greatest highlight coming from this update is that it shows Novatti continues to perform strongly and deliver consistent high growth over a sustained period. We've achieved actually a new record for our quarterly revenue, $3.5 million, which is up 46% year on year. And it's about half a million dollars higher than our previous quarter record of 3 million. Our payment processing business delivered its sixth consecutive quarter of record revenue with an 81% increase year on year. And importantly, a strong focus on costs saw actually our maiden normalised EBITDA being positive of a hundred thousand dollars. So very strong quarter's performance.

Anna Napoli: Some great numbers there, and how about your operations?

Peter Cook: Yes, operationally we're leveraging three key important factors, the strong macro level demand for digital services following COVID-19, our own platforms we're leveraging to deliver these services supported by tier one international partners, such as Visa. And with more than $11 million in cash, we can really drive for higher growth rates. So combining these factors, sound platforms, major partners and a strong balance sheet, we can really accelerate our growth.

Anna Napoli: And so what is your outlook for Novatti?

Peter Cook: We believe the outlook is very, very bright. We're well placed to meet the demand for new digital banking and payment services. We're focused on ongoing revenue growth, consolidation of our EBITDA and improved quarterly cashflow. While some of our payment processing businesses was limitedly impacted by COVID-19, for instance, a drop in the Chinese inbound tourists, this has been more than offset by growth in new markets and the continuing growth in our payment lines of business. So even with a couple of short-term disruptions from COVID-19, overall, we see much stronger growth for our services as we shift to a cash-less economy.

Anna Napoli: Thanks, Peter. And the banking and payments industry is undergoing dramatic change, and even before COVID-19. How is Novatti pivoting its strategy? You just mentioned some new markets and just how big are the opportunities?

Peter Cook: Yes, we really believe that this is a once in a century shift is taking place in the world as we move to digital and cashless payments. And COVID-19 has essentially accelerated that. What might have happened in five or eight years, has been brought down to a six or 12 month window. So obviously one point of interest for the past few months is the rise of buy now pay later, which we have some exposure to both in a client in the US, in Australia and the business we previously announced in the UK, which is great, but we think the disruption to the payment sector is much broader than just buy now pay later. So we are really exposed to growth in a range of payments areas.

So as society shifts to cash-less, and that shift is accelerating, so our growth is accelerating. We've already seen in Australia, that card payments is overtaking cash payments. So for Novatti, we've done a lot of the hard work to be at the right place and to capture some of this growth. Our platforms are delivering a lot of these services now, and we will continue to drive efficiencies and scale in them. So right now we're leveraging our strengths and trying to capture this growth.

Anna Napoli: Sounds like you're in the right place at the right time. Turning to your finances and your share price, can you provide us with an update on funding?

Peter Cook: Yeah, so in early July we completed a capital raising of $10.2 million. We still have about $11 million on the balance sheet or in cash at the end of the September quarter, but we're really using that cash on the balance sheet to drive growth. We've strengthened our in-house team and our business process automation platform Emersion. And in fact, we've announced that we're taking Emersion to the US in Q1 of next calendar year or Q3 of our financial year.

In terms of share price, we have a very faithful base of shareholders that are increasingly understanding the story, but they continue to believe in our vision and our plan to deliver long-term sustainable returns for our shareholders. We've also seen a large number of new retail investors join the company. We've now got over 2000 shareholders, and there is just much broader interest in our company, right at the moment.

Anna Napoli: Peter Cook, nice to see you again. Thank you so much for the update.

Peter Cook: Anna, thank you.