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Novatti Group (ASX: NOV) - Updated Revenue, Expenses, and Profit Forecast for FY24 and FY25

Current Share Price: As of 26 September 2024, Novatti’s share price stands at AUD 0.082

FY24 Results: Revenue: AUD 42.9 million, representing a 10% increase from FY23 (AUD 38.9 million). This growth primarily stemmed from the
Payments AU/NZ division and additional merchant acquisitions.

Operating Expenses: AUD 29.2 million, a 20% reduction from FY23, attributed to cost-saving initiatives including office reductions and operational streamlining.

Gross Margin: 44% in FY24, up from 37% in FY23. The company’s goal is to reach a gross margin of 70% within the next three years.

EBITDA: The underlying EBITDA loss improved by 20%, reducing from a loss of AUD 14.99 million in FY23 to AUD 12.0 million in FY24.

Net Loss: The net loss decreased by 22% to AUD 20.6 million compared to AUD 26.5 million in FY23.

FY25 Forecast: Revenue Projection: Revenue is forecasted to increase by 15-20%, driven by new merchant onboarding, particularly in the Payments AU/NZ division, which aims to grow by acquiring 500+ new merchants in the first half of FY25.

This would potentially bring FY25 revenue to approximately AUD 49-51 million.

Operating Expenses: Expenses are expected to continue to decrease as part of the company's ongoing cost-reduction program, with AUD 7 million in annualized savings targeted for full realization by the end of FY25.

Operating expenses could reduce to approximately AUD 26-28 million.

EBITDA: Novatti targets a positive operating cash flow run rate by H1 FY25 and aims to reach positive EBITDA by FY25. With the expected revenue growth and continued cost-cutting measures, the company projects a positive EBITDA margin.

Key Initiatives Impacting FY25:
1. Cost Reductions: The full effect of the AUD 7 million annualized cost-cutting measures will be reflected in FY25, including reductions in office space and operational expenses.

2. Revenue Drivers: Key revenue drivers include the onboarding of 500+ new merchants in the Payments AU/NZ segment and the elimination of low-margin services, such as the cessation of wholesale cross-border payments.

3. Strategic Focus: The company has divested from non-core operations, such as the sale of its stake in International Bank of Australia (IBOA), resulting in a more streamlined focus on core payments and acquiring services.

Novatti’s transition into a focused payment solutions company, combined with operational streamlining and merchant growth, positions the company to potentially achieve its 70% gross margin target by FY27 and positive cash flow in FY25.

Novatti Group (ASX: NOV) Financial Projections for FY25

Revenue Projection: For FY25, revenue is expected to grow by 15-20%based on the onboarding of 500+ new merchants and further expansion in the Payments AU/NZ division. The estimated FY25 revenue will therefore range from:

AUD 49.3 million to AUD 51.5 million.

This is an increase from FY24 revenue of AUD 42.9 million.

Operating Expenses Projection:
With a focus on cost reductions, including the annualized savings of AUD 7 million, operating expenses are projected to further decline by 10-12%. This reduction is expected to bring FY25 operating expenses to approximately:

AUD 26 million to AUD 27 million.

This is a decrease from the FY24 operating expenses of AUD 29.2 million.

EBITDA and Profit:
Novatti aims to achieve positive EBITDA by FY25, driven by increased revenue and cost efficiencies. Given the revenue growth and reduced expenses, Novatti is likely to post an EBITDA of:

AUD 1 million to AUD 3 million (positive) for FY25, transitioning from the AUD 12 million EBITDA loss in FY24.

Net Profit: While EBITDA is expected to turn positive, Novatti may still experience a net loss due to ongoing financing costs and potential restructuring charges. However, the loss is projected to be significantly lower than in FY24:

Net loss could be reduced to AUD 5-7 million, improving from the AUD 20.6 million loss in FY24.

These projections reflect Novatti’s strategic focus on high-margin business lines, cost management, and revenue growth through merchant acquisition. If the company sustains its current trajectory, it is likely to reach positive net profitability by FY26.