Novatti Reports $12.9M Revenue, 7% Expense Cut, Eyes Cashflow Break-even by June

Strong Revenue Growth Amidst Cost Discipline

Novatti Group Limited (ASX:NOV) has delivered a compelling performance in the December 2024 quarter, maintaining quarterly revenue at $12.9 million, a 30% increase compared to the same period last year. This growth underscores the effectiveness of the company’s turnaround strategy initiated in early FY24, which has focused on both top-line expansion and rigorous cost management.

Expenses have been trimmed significantly, falling 7% from the previous quarter and 28% year-on-year to $5.1 million. This reduction reflects the successful implementation of Novatti’s third stage cost reduction program, which has removed nearly $9.8 million in annualised costs. The full benefits of these initiatives are expected to be realised from the third quarter of FY25 onward.

Margin Expansion and Operational Enhancements

Novatti’s core Payments business in Australia and New Zealand has shown marked improvement, with gross margins rising 15% year-on-year to 49%. This margin expansion results from a strategic exit of low-profit services and customers, alongside operational efficiencies. The company remains committed to its ambitious three-year target of achieving gross margins exceeding 70%.

Looking ahead, Novatti is poised to leverage a brand refresh scheduled for February 2025, designed to sharpen its market positioning as a comprehensive payment solutions provider. Complementing this, the company is upgrading its payment gateway infrastructure by adopting a Visa-owned acquiring payment processor, aiming to enhance customer experience, reduce churn, and lower costs.

Cashflow and Balance Sheet Strengthening

Cash flow dynamics have improved significantly, with normalised net operating cash outflow narrowing to $2.16 million in Q2 FY25 from $3.55 million reported in the quarter. Novatti expects to approach positive monthly operating cashflow within $30,000 in January 2025 and remains on track to achieve positive operating cashflow for the half-year ending June 2025, a milestone that would validate the company’s turnaround efforts.

The company’s balance sheet has been bolstered through the repayment of legacy liabilities, supported by a recent capital raising that secured over $7 million. This funding is earmarked for growth initiatives, including the brand refresh and new business development, as well as further strengthening financial stability.

Strategic Portfolio and Market Position

Novatti continues to review its business units and subsidiaries, actively engaging with potential buyers for non-core assets to streamline operations. Its majority-owned AUDD Stablecoin business is progressing well, with revenue up 60% in the quarter and key technological deployments planned for 2025, including integration with Hedera and Ripple’s On-Demand Liquidity platform.

Commercial traction is evident, with a tier-one Australian telecommunications company renewing a multi-year contract and nearly 40% of a 500-merchant pipeline onboarded since the start of FY25. These developments highlight the company’s market-led, customer-focused approach, which is expected to accelerate growth in the coming quarters.

Looking Forward

Novatti’s CEO Mark Healy emphasised the significance of these results as a turning point, noting the company’s commitment to continuous cost reduction, margin improvement, and operational excellence. The upcoming brand refresh and technology upgrades are positioned to catalyse further revenue growth and margin expansion, underpinning the company’s goal of sustainable profitability.