9SP makes its money from the banks that license the platform so they can make it available to their small business banking customers as a value added "adjacency". IT DOES NOT MAKE MUCH (IF ANY) MONEY FROM THE END USERS OF THE PLATFORM. They might start to make a bit of end user revenue from 9Spokes.com (their direct to SMB offering) now that it is relaunched as a subscription service.
From the 2021 Annual Report...
"Revenue from banking partners is currently the Group’s primary source of revenue and accounted for 82% of the Group’s revenue".
The consolidated financial statements show the revenue from each source. Amounts are all NZD. I have added the percentages so you can see the relative significance of each revenue stream.
- Implementation revenue = $977,000 = 17%
- Platform access revenue = $4,245,000 = 74%
- Development revenue = $316,000 = 6%
- Other revenue from customers = $190,000 = 3%
I will paraphrase what each of these means but I encourage you to read the detailed descriptions in the annual report.
Implementation revenue = Payment FROM THE BANK for 9SP integrating their platform into a bank's ecosystem. I imagine this would include "reskinning", i.e. cosmetic changes to match the bank's branding, integrating into the bank's identity & access management platform, customer onboarding, reporting on usage, etc.
Platform access revenue = Payment FROM THE BANK for 9SP letting the bank's customer's access the white labelled platform. I am not sure if this is a per user fee or an enterprise fee with an unlimited number of users. Keen to hear from anyone with some insight on this topic.
Development revenue = Payment FROM THE BANK for 9SP developing bespoke software specifically for them. This might include integration with a bank system, development of a "tile" to show on the 9SP dashboard, etc.
Other revenue from customers = This is not fully explained but I expect it would include any revenue from the SaaS partners (MYOB, Stripe, Shopify, etc) for referral fees. Any subscription revenue from direct customers would go here.
> If I choose a budget of say $10,000 to spend on facebook advertising through
> the 9SP platform, then 9sp gets a very small percentage of that revenue.
I have not read/heard anything about 9SP getting revenue from online advertising. But even if they did, this would be a trivial amount and would not be the focus of 9SP's attention. If this revenue did exist then I expect it would fall into that tiny 3% bucket of "other revenue".
> Then banks and partners that have applied 9SP to their services for SME's have had nothing to lose,
> no money has changed hands for the use of this platform other than what it generates
Fake news. Read the annual report.
The problem is not how 9SP makes its money. Their model of building a software platform and licensing it to enterprise users is tried and tested. The problem is 9SP does not make enough money. I suspect COVID has made it almost impossible for them to sign up new enterprise customers. Lets hope the Business Development Managers get out there and ink some new contracts before 9SP runs out of cash.
9SP Price at posting:
0.4¢ Sentiment: Hold Disclosure: Held
