Credit Clear continues to deliver solid metrics in FY22, and sees strong momentum in FY23.

Debt collection tech company (Credit Clear )ASX:CCR) has grown its revenue significantly in FY22 by 95% to $21.5 million, setting a record in the process in June with $3.1 million, increasing its annualised revenue run rate to $37.4 million.

CCR has delivered consecutive operationally profitable months in May and June, which has now continued well into Q1 FY23.

During the year, the company added 696 new clients (a 108% increase from the pcp) with 99% client retention rate. Several of these clients are expected to become top 10 clients by revenue.

CCR also received a net promoter score (NPS) of +47 from a survey of over 97,000 respondents.

The company owns a multi award-winning and highly-scalable technology, which was awarded the “Best use of AI in Fintech Awards for 2021 / 2022”.

Its AI (artificial intelligence) software has delivered a 35% uplift in collections at a 67% faster rate,  surpassing $100m in digital payments through the platform.

So far in Q1 FY23, CCR has seen $9.81m in digital payments making it a record quarter with a month still to go.

The recent ARMA acquisition has significantly increased operational scale, adding material digital volume through the platform with associated EBITDA uplift.

ARMA’s industry penetration, sales team and operational efficiencies have resulted in 215 new clients being added this year, which is accelerating significantly post  acquisition.

CCR also continues to invest in technology developments, taking its tech development spend from $1.7m in FY21 to $2.9m in FY22.

Normalised full year EBITDA pre tech development was a loss of $3.49m, down 32% from a loss of $5.16m a year earlier.

Taking into account these tech development costs, reported EBITDA loss for the year was $8.5m, up from a $5.59m loss in the prior year.

Tailwinds and pipelines

The company believes that the current socioeconomic environment is providing tailwinds for the business.

Households and individuals have  suffered material increase in volume of their debt, built up during 2020/2021 and elevated further into 2022 with cost-of-living inflation.

Digital only providers have struggled to gain traction, as clients do not  want stand-alone digital services.

As a result, debt purchasers are competing for a shrinking pool of available assets, with companies less likely to sell debt than pre-2020.

This paradigm shift from companies’ debts towards helping customers to make repayments aligns exactly with Credit Clear’s approach to collections.

Additionally, while other contingent debt collection providers have struggled with integrating technology and their own internal operational issues, CCR’s technology advantage translates into international markets.

The company has been able to expand its addressable market with an end-to-end hybrid service for clients of any size in Australia, and increasingly as a technology partner to global operators.

In South Africa, partnership agreements are progressing well with long-term commitment and deep integration deals in the pipeline.

In the UK, there is an opportunity for CCR with large multinational BPOs  and associated collection agencies on a “partnering and teaming” basis.

In Southeast Asia, Credit Clear is pursuing a licensing agreement with a large APAC debt collection provider.

CCR however says that Australian growth and expansion remains its immediate priority, and the preference now is to adopt a low capex and low risk approach by following Australian and New Zealand based clients into new international jurisdictions.

FY23 outlook

CCR  sees strong revenue growth to continue in FY23, as the revenue trajectory in FY22 has now accelerated into the first half.

In terms of new pipelines, there will be larger client opportunities in financial services such as Australian banks, alongside tier 1 Australian Insurers.

Multiple large utility opportunities are also in progress, with growing pressure on utility customers due to higher inflation.

CCR also says that its addressable market will continue to expand due to its hybrid end-to-end capabilities (digital and physical), along with strong counter cyclical economic tailwinds.

The company has a strong balance sheet with cash at bank of $10.2m as at 30 June.

The share registry has been boosted by news that directors Mark Casey, Hugh Robertson, Marcus Price and co-founder Lewis Romano  – who collectively hold ~40m shares that will be released from escrow on 22 October 2022 – have now each notified the company of their intention to retain their holdings once they are released from escrow.

This article was developed in collaboration with Credit Clear, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.

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