myIOU Q2 sets stage for 2022: margins up, maiden positive effective cashflow, dynamic growth

IOUpay has delivered another quarter of strength, with its flagship BNPL platform myIOU building momentum into 2022.

Fintech provider IOUpay (ASX:IOU) has continued to build a community of quality merchants and consumers throughout the December quarter, as part of its ‘best-in-class’ brand positioning in South East Asia.

The rigorous assessment of quality and value is yielding results with Net Transaction Revenue (NTR) up 23% on the previous quarter.

BNPL Total Transaction Value (TTV) for the quarter was more than $6 million delivering Net Transaction Revenue (NTR) of ~$611k.

The results reflect stronger than anticipated margins across a range of industry sectors with myIOU income margin for the quarter of 10%.

Furthermore, IOUpay achieved positive effective net operative cashflow of $1.20m (after adjusting for BNPL payments), for the first time since myIOU was launched in mid-June 2021.

The Company is laying a strong foundation running into 2022 with a number of growth initiatives being executed for sustainable value generation.

Sign up growth

Impressive growth in consumer and merchant sign ups of myIOU has underpinned the latest results including:

2,987 merchant outlets now onboarded (up 29% since 30 Sep)
1,536 merchant outlets activated and listed on myIOU (up 62% since 30 Sep)
39,422 consumer downloads of myIOU (up 132% since 30 Sep)
10,989 consumer activated accounts (up 129% since 30 Sep).

Malaysia drives growth

As the local Malaysian economy starts to open up following COVID-19 lockdowns, merchant acquisition is increasing. IOUpay business development staff, including those as part of the company’s regional development plan, can be more active in the field and engage with prospective merchants in-person.

During the December quarter, more than 200 merchant relationships operating over 500 outlets around Malaysia have been added to the myIOU platform.

New merchants have been added to almost every industry vertical category. Importantly, the company has experienced significant growth in consumer engagement, meaning more people are downloading and activating the myIOU app.

Among some of the new notable merchant relationships to come on board are the big name electrical outlets from regional Malaysia, Wah Lee Chain Store Sdn Bhd, Darson Electronics Sdn Bhd, Star Electronics Sales and Services Sdn Bhd, and Surai Jerai Electrical Sdn Bhd.

Well-known global brands Jurlique, Lego, Dell, Lenovo have also been added via their Malaysian distributors joining the growing myIOU stable of quality merchant relationships.

Consumer engagement

Importantly, as shopping choice expands consumer engagement with myIOU has improved. Consumer app downloads, onboarding and account activation metrics are all up ~130% since Q1 FY22.

The company said the consumer engagement growth trend correlates with easing of COVID-19 restrictions, ongoing digital marketing strategies and various promotional campaigns.

RMS full implementation

Following successful completion of systems integration testing IOUpay has progressed its partnership with Razer Merchant Services (RMS) announced in mid-2021. The partnership enables RMS to refer and onboard its extensive network of merchants to take advantage of IOU’s suite of BNPL payment services.

The Company has now moved to full implementation with RMS to send batches of merchants for review and acceptance by IOUpay.

IOU had completed its review of the initial batch and approved more than 140 merchants for onboarding by RMS so that those approved merchants will offer their customers the option of funding purchases using myIOU when they go to the ‘checkout’.

Onboarding of approved merchants from the initial batch is expected early February.

iPay88 Update

In other deals, IOUpay’s deal with Malaysian payment company iPay88 was expected to be finalised in the December quarter.

But due to ongoing negotiation of commercial terms and operational details, this has been delayed and is expected to be finalised by the end of the March quarter.

Once commercial terms and operational details are finalised, then systems integration and testing will be performed with expected completion during Q4 FY22.

IDSB Investment

In a busy second quarter for IOUpay, the company confirmed in December that the one remaining condition relating to its 42% acquisition of I-Destinasi had been met, paving the way for the transaction worth 126 million ringgit (~A$42.1m) to go through.

The first tranche payment of RM63 million (~A$21.1 million) was funded from existing cash holdings.

The second tranche of the investment for the remaining 50% of the Purchase Price is payable by the later of completion of the audit of IDSB’s FY21 statutory accounts or six months after settlement.

Pricing adjustments to the investment due to any variations to the profit target benchmark are accommodated under the share purchase agreement.

IOU is now working closely with IDSB management to develop inter-company reporting and operational relationships. Planning is well underway for a pilot programme marketing myIOU BNPL services into IDSB’s high credit quality, civil servant customers.

Strong outlook for H2, myIOU 2.0 imminent

Looking ahead, IOUPay plans to release myIOU 2.0 in the March quarter.

The highly anticipated platform update aims to further streamline the merchant and consumer experience and is designed to deliver additional operating efficiencies and activity levels for new and existing customers.

A comprehensive marketing and advertising campaign is planned to capitalise on the release for optimal growth and value generation.

Settlement of the IDSB investment strengthens the company’s prospects for financial growth through cross-marketing opportunities and customer acquisition for myIOU from IDSB’s high-quality customer base along with participation in potential future dividends.

Furthermore, IOUpay’s mobile banking division continues to perform and, with improved infrastructure of greater capacity, is ready to accommodate anticipated further growth in transaction volumes.

This article was developed in collaboration with IOUpay, 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.