Yes it took me a while to wrap my head around those cash receipt figures as they did not clearly break it down for us. If we look at the research report below Novatti earns their revenue from several sources:
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Transaction and remittance processing are generally done through third party partnerships so are net of TTV (Total Transaction Value). So the proportion of cash receipt from those are likely to be low but growing significantly - as noted in the latest update:
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It is important to note that any amount from those will go straight to the bottom line due to the recurring nature and fixed cost base. And if it continues at this trajectory the figure will become quite significant in 12 months time. If we go back to the FY2017 Report we can see the rough revenue break down:
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I would assume non recurring revenues to be those up front platform implementation for clients and much of the other recurring revenue to be SaaS based and Licensing payments (orange).
With regards to the ballooning cash receipts I have tracked it down to Flexepin. Since Flexepin is owned by Novatti any money from those sales will directly flow to Novatti. We should not confuse cash receipts as revenue and positive cash flow amounts as profit. The clippings from Flexepin are between 0.5%-6% with an average of 2% as noted in the research report. So the reason we have high cash margins would have to be the lag time between customers who bought Flexepin to the time they spend it entirely. This is an advantage to Novatti as it provides us with valuable cashflow.
If we look at the transaction value for Flexepin we can see that the percentage growth is similar to our ballooning cash receipts:
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At an average margin of 2% of TTV Flexepin alone could become very significant for Novatti if it keeps growing at this rate. We only need to look at what AfterPay does for APT in their TTV growth below:
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APT is capped at $1.2bil+ and largely reliant on their AfterPay product which operates only in Australia. It is more of a consumer finance product and after accounting for bank debts interests etc their margins on TTV are almost the same as Flexepin:
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So if Flexepin keeps going the way it is it will be very big for Novatti. APT due to their buy now pay later business model have big cashflow problems which needed to be serviced by bank loans. It is a fine juggling act compared to Flexepin.
Another similar FinTech to APT is Z1P. Capped at nearly $380 mil with slower growth in TTF and massively negative EBITDA for FY2017 which has just turned cashflow neutral and yet to turn a profit.
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So what is NOV doing sitting at a fully diluted mc of $62 mil? With fingers in so many pies and already have a global presence if we can show growth in the next quarter or two the market will catch on much quickly. Just look at the China Payment unit alone; WeChat Wallet and AliPay alone control 90% of the Chinese market and we have agreements for both to be used by Chinese visitors and also the entire Chinese population to buy Australian goods online. The 3 agreements with RoyalPay, ePay, and LatiPay covers the entire China-Australia commerce gateway and is virtually an untapped market. We can see that in the growth by RoyalPay distributing WeChat Wallet within Australia. Within 6 months they are already doing an annualised TTV of $150 mil growing at 20%/month, so revenues from those will become significant going forward.
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