Small cap fintechs burn cash as investors search for the next Xero or Afterpay
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As we round the corner to full year reporting season, fintech companies are starting to lift the lid on how much money they’re actually making.
Large cap fintechs such as Afterpay (ASX:APT) and Xero (ASX:XRO) are trading at near record highs.
Afterpay told investors last week it was expecting EBITDA earnings of $33m to $34m from revenue of $142m for the year to June.
The ten-bagger-and-then-some is trading at $14.39 compared to its listing price of $1 little more than two years ago. It’s now valued at more than $3 billion.
Xero’s stock is up more than 4000 per cent since listing in 2007 and analysts believe there’s more upside.
The $6.2 billion company delivered its first full-year positive EBITDA earnings in May.
And as they start to reveal full-year numbers it’s clear many small cap fintechs are still burning chunks of cash.
Though the halo effect of large cap stocks like AfterPay and Xero are helping sustain investor confidence in the sector, with some share prices up by as much as 90 per cent.
For example shares in blockchain and investment app Ookami (ASX:OOK) are up more than 50 per cent over the past year — even though last week it reported $73,000 in cash receipts for the year while burning $800,000.
Flamingo AI (ASX:FGO) — which makes virtual sales assistants — is up 8 per cent for the year, despite last week revealing full-year customer receipts of $821,000 (mostly from paid trials) and operating cashburn of $6.5 million.
Flamingo is now focusing on transitioning those paid trials into ongoing sales.
Of the other fintechs that have reported so far (see table below), most stock prices movements reflect their cashburn rates.
There’s a huge variety of fintechs on the local bourse, from regtech-style platforms that help with regulatory paperwork to payment facilitators and micro-investment or lending plays.
There are a range of ways fintech companies generate cash. They can charge a subscription fee for a software package or service. They can clip the ticket on transactions run through their system, whether through investment account fees or charging business clients a commission to use their payments service.
While many of these businesses lead with total transaction volumes, funds under management or user growth as their frontline metrics, these numbers don’t always correspond to the amount of sales or revenue the business is doing quarter to quarter.
Businesses and burn rate
Digital payments platform Zip Co (ASX:Z1P) reported $3.1 million operating cashflow after bringing in record quarterly revenue of $13.2 million in the June quarter.
Hong Kong based online merchant payments provider Fintech Chain (ASX:FTC) had cashflows of RMB 7.8 million ($1.5 million) for the June quarter. However, this follows the March quarter when the business burned 4.6 million RMB after pulling in 2.8 million RMB from customers in the three months to March.
Other businesses, like micro-investor Raiz Invest (ASX:RZI) have highlighted user and revenue growth over the past quarter. Raiz reported a negative operating cash flow of $4 million for June after factoring in a range of pre-planned expenses, including costs relating to its listing on the ASX last month.
|ASX code||Company||Net operating cashflow (Jun quarter)||Net operating cashflow (YTD)||Share price||Share price change 12 mth|
|FTC||FINTECH CHAIN||$1.5m (RMB 7.8m)||$1.5m (RMB 7.8m)||11.5c||94%|
Still to give numbers:
Then there are these guys who are still to give insights during their next scheduled reporting periods:
Change Financial (ASX:CCA), Afterpay (ASX:APT), EML Payments (ASX:EML), Goldfields Money (ASX:GMY), Wisr (ASX:WZR), Pushpay Holdings (ASX:PPL), AssetOwl (ASX:AO1), 8Common (ASX:8CO), DigitalX (ASX:DCC), 9 Spokes (ASX:9SP).