Announcement PDF FY24 Annual Report Spenda Limited ABN 67 099 084 143 This page was intentionally left blank. Contents Shareholder letter from the Managing Director 04 Executive leadership team 12 Corporate directory 14 Corporate governance statement 15 Directors’ report 16 Remuneration report (Audited) 28 Auditor’s independence declaration 43 Consolidated statement of profit or loss and other comprehensive income Spenda Limited • 2024 Annual Report 44 Consolidated statement of financial position 45 Consolidated statement of changes in equity 46 Consolidated statement of cash flows 47 Notes to the consolidated financial statements 48 Consolidated entity disclosure statement 80 Directors’ declaration 81 Independent auditor's report 82 Additional stock exchange information 87 01 “Enabling businesses Sell better. to transact fast, Get paidwith faster. error-free digital Spenda is is an integrated business platform that enables businesses across the supply chain to sell better and get paid faster. efficiency and boost cash flow across the We serve as both a software solutions provider and a payment processor and deliver the essential entire chain.” infrastructuresupply to streamline business processes before, during and after the payment event. Streamline your business processes Work smarter, not harder. All our apps are designed to work seamlessly together to create better efficiency in how businesses trade and get paid. Power growth through payments Streamline your payments process, offer more flexible payment options, access unsecured third-party finance for yourself or your business networks, and strengthen cash flow across your supply chain. One connected solution that improves the way businesses trade and get paid. 02 Spenda Limited • 2024 Annual Report Solutions designed to grow with your business. Spenda Limited • 2024 Annual Report 03 Shareholder letter From the Managing Director To my fellow shareholders, It is a pleasure to provide you with an update on Spenda’s performance over the last financial year and our strategic focus for the year ahead. Firstly, I would like to thank you all for your continued support of the Company as we move towards realising our ambition of enabling supply chains and trading networks to sell better and get paid faster. We commenced FY24 with a clear focus to roll out the Spenda Platform to the Carpet Court network and secure our relationship with Capricorn Society. Adrian Floate Managing Director 04 Spenda Limited • 2024 Annual Report I am pleased to report that the Company has successfully: Progressed the Digital Service Delivery (DSD) initiative with Capricorn to promote utilisation of the Capricorn Account via the Capricorn Preferred Suppliers’ rapidly growing ecommerce channels. Re-signed a 10-year Master Services Agreement (MSA) with Capricorn to transform its digital payments infrastructure for the next decade and beyond. Received a cornerstone investment of $7.2m from Capricorn to ensure both parties continue to work together on the foundation infrastructure to build long-term sustainable revenues. Successfully rolled out Spenda’s PayStatement-By-Link (PSBL) payments infrastructure to 205 Carpet Court stores and have secured a five-year exclusive agreement to offer lending services to the store network. Partnered with eBev to offer integrated payment solutions across eBev’s hospitality supply chain network. Completed the development, certification and launch of the Company’s payment facilitator (PayFac) merchant payment service. Signed a payment processing agreement with international corporate payment specialist AirPlus International to jointly offer a virtual card product. Delivered a healthy 73% growth in revenue, from $3.1m in FY23 to $5.37m in FY24, which demonstrates the hard work of our committed and dedicated team. 30,000,000 25,000,000 24.6m 24.0m 20,000,000 22.4m 22.3m 21.4m 19.9m 20.5m 18.5m 18.0m 17.8m 15.5m 14.8m 15,000,000 16.0m 12.4m 11.0m 10,000,000 5.2m 3.1m 3.4m Aug-22 5,000,000 Jul-22 PAYMENTS VOLUME (A$) 26.5m 4.3m 5.7m 7.4m 6.5m 4.0m Jun-24 May-24 Apr-24 Mar-24 Feb-24 Jan-24 Dec-23 Nov-23 Oct-23 Sep-23 Aug-23 Jul-23 Jun-23 May-23 Apr-23 Mar-23 Feb-23 Jan-23 Dec-22 Nov-22 Oct-22 Sep-22 - MONTH Figure 1: Payments Volumes on Spenda platform over the past two years Spenda Limited • 2024 Annual Report 05 Reflecting on the year that’s been, it’s pleasing to see that we achieved these outcomes, further validating our software and business strategy going forward. In what was an extremely difficult decision for the Company, the demand for resourcing to satisfy the commercial objectives of Capricorn and the continued product development for Carpet Court resulted in us having to put on hold Phase One of the AgriChain early settlement program. While our primary objectives to become cash flow positive and establish the foundations for sustainable long-term growth remain unchanged, I acknowledge that we have yet to meet the former but are well advanced on the latter. To elaborate, the process to re-sign the MSA with Capricorn was an intense exercise. It involved being audited by a third-party technology consultancy firm and undergoing a global selection process to find the best possible technology vendor that could meet Capricorn’s commercial needs and growth aspirations for the next 10+ years. It was an extremely proud moment for the team to have undergone a rigorous due diligence process and be validated by the outcome. I am proud of their dedication, perseverance and commitment to delivering such high-quality technology. As shareholders, we should take away a sense of achievement and belief in our future journey together. We are fully focussed on rolling out products and services to enable Capricorn’s digital transformation. The programs of work for Capricorn continue to evolve and grow in scale and scope. The project teams are continuously generating new ideas around products and services that can further enhance the transactional layer for the Members (predominantly mechanical workshops) and Suppliers, improving the speed at which transactions are formed, invoices are processed, and payments are made or received. The process took over 12 months to complete which resulted in Spenda being selected as Capricorn’s technology partner and securing a $7.2 million cornerstone investment. 06 Spenda Limited • 2024 Annual Report Our focus with Capricorn enables the incorporation of multiple projects and revenue streams over the long-term and is currently centred around: Progressing the Capricorn DSD project, which is moving into production in September ‘24 and is on-time and on-budget. Developing innovative solutions to deliver PSBL to the Member network, to improve eInvoice delivery and reconciliation outcomes. Continued identification of new projects to further digitise and improve the Capricorn network engagement, wallet share and Member satisfaction. Each step in the development and commercialisation of Spenda’s product suite required careful consideration, problem solving and innovation. Although this took extra time and refinement, Spenda’s investment in the DSD project and the 10-year MSLA with Capricorn will benefit the Company and shareholders in the future. Growing Capability Spenda continues to add technology enabled payment service options that match its customers’ needs, embedded directly in the Spenda Platform. Last year I alluded to the fact, that in order to achieve our commercial objectives on the road to revenue generation and cash flow break-even, we must rely on the execution of strategic decisions that ultimately create solutions that are truly unique. Spenda’s goal is to change how people do business with a single product ecosystem. We’ve shown this through our acquisition of Limepay and our agreement with AirPlus International. Spenda Limited • 2024 Annual Report 07 Limepay Through the successful acquisition of Limepay on 20 September 2024, Spenda bolted on key technology that will further enable the Company’s payment service offering. Limepay’s scalable cloud-based platform of software tools enable corporates and financial institutions to provide white-labeled embedded finance solutions to their customers. These include a suite of leading payment technologies that encompass payment acceptance, instalment options, lending, working capital, marketplace solutions and SaaS offerings. Developed in-house and managed by a team of eight experienced fintech developers with extensive experience in banking and payments technology, the team provides a valuable upskilled resource pool that complements Spenda’s team. Limepay’s mature payments Intellectual Property has delivered immediate benefits for Spenda’s customers, enabling them to readily deploy endto-end payment solutions and services with immediate deployment and revenue generating opportunities. The enlarged business’ software suite will further enhance the Company’s capabilities with a much more robust product suite. 08 Spenda Limited • 2024 Annual Report AirPlus In November 2023, the Company signed a payment processing agreement with AirPlus to jointly offer a virtual card product. The AirPlus facility enables Spenda’s clients to access working capital funds with extended trade terms of up to 90 days. This will increase payments volumes on Spenda’s platform over time. The Airplus product can be bundled with the Pay Statement by Link or Accounts Payable product offering to replace traditional supply side credit. Virtual cards provide a new tightened level of security for Spenda users as they only exist for a moment in time to facilitate a specific transaction, therefore, can not be lost, stolen or skimmed. Earlier this year, Spenda began rolling out the new AirPlus card facilities to current customer channels that include eBev and Carpet Court, and we expect significant growth as it continues to rollout amongst new and existing customers. Virtual cards can be generated on demand by AirPlus within the Spenda system for a set limit. Spenda Limited • 2024 Annual Report 12 09 Spenda Limited • 2024 Annual Report Product Innovation Spenda is a software solutions provider and a payments processor delivering the essential infrastructure to streamline processes before, during and after the payment event. During FY24 the Company continued to enhance this product offering and introduced new capabilities to its services to meet the evolving needs of our customer networks. In FY25 the Company’s continued focus will be on delivering the following program of works for Carpet Court and Capricorn. 01 02 03 Carpet Court Store Solutions – B2C engagement Carpet Court Supplier Solutions – Manufacturer engagement Capricorn • Delivering the Standard • Spenda has commenced • Progressing the Capricorn DSD Operating Environment (‘SOE’) to the Carpet Court store network that enables them to manage their quote-to-install payment flow. This software will roll out across the network during H1 FY25 and has a broad application to many verticals. • Roll out of consumer payment services to the end-consumer, including digital payment options and POS terminals instore. These services enable Spenda to capture an additional $20m in annual payment flows from the end-consumer through the Spenda network. 10 working with Carpet Court and its suppliers to digitise procurement and introduce early payment options to the suppliers. • This initiative will integrate into the SOE and enable suppliers to publish their catalogues to the store network, receive digital orders, send digital invoices, and receive payment via the Spenda network. • This project is likely to run over the next 18 months. project, as it moves into production in H1 FY25, on time and on budget. • Developing new solutions to deliver PSBL into the Member network and improve eInvoice delivery and reconciliation outcomes. • Planning new initiatives and projects to further digitise and improve the Capricorn network engagement, wallet share and Member satisfaction. Spenda Limited • 2024 Annual Report Customer Satisfaction Over the past 12 months, the Company has remained dedicated to its customers’ success. We’ve built a strong relationship with Capricorn, highlighted by their significant investment in our Company. We are also the top payments vendor for the Carpet Court store network. Earlier this year Spenda and Carpet Court presented together at the Melbourne Finance Transformation Summit. This event allowed Carpet Court to share their experiences, and by using Spenda, the Carpet Court network has managed to reduce time spent on allocation processes by 90% and increase team productivity by 40%. These impressive results are a testament to our technology’s effectiveness and a significant achievement for us all. Focus for FY25 and beyond We operate in a constantly evolving landscape, driven by shifting market dynamics, advancements in security and technological requirements, and changing societal expectations. For Spenda to remain competitive and relevant we must continue to adapt and innovate, a challenge I am now more than ever, confident our team is capable of meeting. FY24 has been a year of great successes and as we look ahead, we remain committed to delivering value to our current and future shareholders while pursuing innovation and continuing to demonstrate sustainable growth. For FY25 we expect to continue to build upon the positive momentum achieved in FY24 with Carpet Court and Capricorn and plan to scale payments volume with the addition of Limepay’s customer base. We will continue to roll out Spenda as a transactional service, combined with Limepay’s payment services and AirPlus facilities. Spenda Limited • 2024 Annual Report As we continue to build new relationships to support our network growth model, the acquisition of Limepay will help us capture more opportunities to acquire new customer networks. With the technology building blocks in place, we expect our year-on-year growth in revenue to continue at higher rates as more customers are boarded in shorter timeframes and with the deployment of whole of business solutions. We are excited to see that revenue trajectory accelerate to the benefit of all shareholders. Thank you for your trust and continued support, Adrian Floate 11 Executive Leadership Team Adrian Floate Managing Director Adrian Floate has founded, built and sold technology businesses and worked in Asia, Australia, the UK and US over the past 20 years. He is the founder of the Cirralto business originally acquired by Motopia in 2016. Richard Jarvis Chief Financial Officer Richard Jarvis is a qualified Chartered Certified Accountant and has over 20 years experience in professional accountancy and financial leadership roles with both private and publicly listed companies. Andy Hilton Chief Commercial Officer Andy Hilton has spent nearly 30 years in traditional lending and established three lending businesses. He has a background in accounting and engineering and managed the 20x growth of an IT distribution business. Prior to joining the executive team at Spenda, Andy was the cofounder and Managing Director of Australian fintech, Invigo. Spenda acquired Invigo in 2021. 12 Spenda Limited • 2024 Annual Report David Wood Chief Product Officer David Wood has over 20 years of experience in Software and Systems Design, Dave is the driving force behind bringing Spenda’s vision to life and works closely with his team to deliver a seamless experience for Spenda's customers. Corrie Hassan Chief Operations Officer With over two decades of international business finance experience, Corrie provides vital risk and operational management insights. She founded an Australian SME lending business and co-founded Invigo, acquired by Spenda in 2021. As a crucial member of Spenda's Executive Leadership Team, Corrie influences strategy, oversees operations and project management, and manages lending portfolio risk. Olivia Johnson Chief Revenue Officer Bringing more than ten years of marketing, communications and sales experience in roles across public and private sectors in Australia, India, South Korea, and Myanmar, Olivia plays a key role in the Executive Team. She oversees Spenda's shareholder communications and leads the company's sales and marketing initiatives to achieve strategic growth objectives. Raghav Jain Chief Executive Officer Spenda India As an entrepreneur and global business leader, Raghav holds over 20 years of experience in technology services and digital transformation solutions. Prior to joining Spenda, he co-founded MintWorx, a tech startup in India which eventually led to setting up Spenda India in 2021. As a member of the Executive Team, Raghav spearheads Spenda’s Asian entry and plays a key role in driving the overall company's strategic direction. Spenda Limited • 2024 Annual Report 13 Corporate directory Directors Peter Richards (Non-Executive Chairman) Adrian Floate (Managing Director and Chief Executive Officer) Howard Digby (Non-Executive Director) Stephen Dale (Non-Executive Director) David Laird (Non-Executive Director) Andrew Kearnan (Non-Executive Director) Company secretary Justyn Stedwell Registered office Suite 605, 275 Alfred Street North Sydney, New South Wales 2060 Principal place of business Building B, The Garden Park 355 Scarborough Beach Road Osborne Park, Perth, Western Australia 6017 Share registry Automic Registry Services Level 5, 126 Philip Street Sydney, New South Wales 2000 Phone (local): 1300 288 664 Phone (international): +61 (2) 9698 5414 www.automic.com.au www.automic.com.au Auditor Lawyers Bankers Stock exchange listing Website 14 HLB Mann Judd Level 4, 130 Stirling Street, Perth, Western Australia 6000 Murcia Pestell Hillard Pty Ltd Suite 183, Level 6 580 Hay Street Perth, Western Australia 6000 Australia & New Zealand Banking Group Limited 833 Collins Street, Melbourne, Victora 3000 Spenda Limited’s shares are listed on the Australian Securities Exchange (ASX code: SPX) www.spenda.co Spenda Limited • 2024 Annual Report Corporate governance statement In recognising the need for the highest standards of corporate behaviour and accountability, the Directors support the principles of Corporate Governance. Where deemed appropriate, the Company follows the best practice recommendations as set out by the ASX Corporate Governance Council. Where the Company has not followed best practice for any recommendation, an explanation is given in the Corporate Governance Statement. The Company’s Corporate Governance Statement is available on the Company’s website at www.spenda.co Spenda Limited • 2024 Annual Report 15 Directors’ report The Directors present their report together with the financial report of the consolidated entity (referred to hereafter as the ‘Group’) consisting of Spenda Limited (‘Spenda’ or ‘the Company’) and the entities it controlled at the end of, or during, the year ended 30 June 2024. Directors The following persons were directors of the Company during the whole financial year and up to the date of this report, unless stated otherwise: • Peter Richards • Adrian Floate • Howard Digby • Stephen Dale • David Laird – appointed 27 September 2023 • Andrew Kearnan – appointed 29 May 2024 Principal activities The Group offers an integrated platform that enables businesses across the supply chain to sell better and get paid faster. Spenda is both a software solutions provider and a payment processor, delivering the essential infrastructure to streamline processes before and after the payment event. The payments solution has three components – Software, Payments and Lending – and enables end to end einvoicing integration, rapid ordering, digital trust and automated reconciliation. Spenda creates an industry standard operating environment (‘SoE’) that enables the effective and seamless transfer of data from multiple, disparate software systems in one standardised technology solution. Spenda provides the services of five vendors into one solution with end-to-end software and supply integration as well as ledger-to-ledger integration to improve operational efficiency for all trading parties in the supply chain. Spenda captures transactions and payments through the value chain, generating layered revenue streams from SaaS, both B2B and B2C payments and B2B supply chain finance. Spenda’s ability to analyse and understand payment flows throughout these networks enables the Company to offer customised financing solutions to clients, to improve their working capital efficiency and cash utilisation throughout their operations. Dividends The Company did not pay any dividends during the 2024 financial year (2023: $nil). The Directors do not recommend the payment of a dividend in respect to the 2024 financial year. 16 Spenda Limited • 2024 Annual Report Directors report (continued) Review of results and operations Results summary The below table details key financial information for the year ended 30 June 2024 (FY24), with FY23 comparative: 30 June 2024 30 June 2023 Movement $ $ $ Revenue - including SaaS and Payments 2,842,535 938,790 1,903,745 Revenue - loan interest 2,532,475 2,172,723 359,752 Other income 163,702 250,643 (86,941) Total income 5,538,712 3,362,156 2,176,556 Cost of services rendered (2,246,013) (1,417,929) (828,084) Employee and directors’ benefits expense (5,545,952) (5,254,173) (291,779) Other expenses (2,919,176) (2,331,633) (587,543) Share-based payment expense (1,823,051) (1,498,960) (324,091) Fair value adjustment on non-current asset (1,725,000) - (1,725,000) Depreciation and amortisation expense (3,662,728) (3,854,967) 192,239 Borrowing costs (773,652) - (773,652) Income tax benefit (48,159) (7,408) (40,751) (13,205,019) (11,002,914) (2,202,105) Less: non-cash expenses/benefits Statutory net loss after income tax Revenue for FY24 was $5.4m compared to FY23 revenue of $3.1m, representing an increase of $2.3m or 73%. This increase was predominantly driven by the expansion of services provided to key strategic customers and new revenue streams generated through blending Software, Payments and Lending. The statutory net loss after income tax expense for FY24 was $13.2m (FY23: loss of $11m). The FY24 results included the following non-cash items: • $1.8m share-based payments expense; • $1.7m fair value adjustment through profit or loss; • $3.7m depreciation and amortisation expense; and • $0.8m borrowing costs. Operating costs have increased from the prior year, which is mainly attributable to the growth in employee headcount to meet the business objectives. During the year the Company has increased its total headcount to 78 personnel as at 30 June 2024 (FY23: 71). The Group had a closing cash and cash equivalents position of $9.8m (restricted $5.4m), as of 30 June 2024 and a client loan portfolio of $10.8m, representing loan capital deployed to multiple customers. Spenda Limited • 2024 Annual Report 17 Directors report (continued) The Group’s net cash position of $6.6m as at 30 June 2024 is represented in the below table: Net cash position Cash and cash equivalents (A) Gross client loan book $ 9,837,055 $’m 10,754,227 Less: Debt Warehouse facility (14,000,000) Net client loan book (B) (3,245,773) Net cash position (A + B) 6,591,282 Operations summary In FY24, Spenda continued to lay the foundations for long-term, sustainable revenue and earnings. In the past year, Spenda signed multiple strategic partnerships, continued to scale all product lines and increased payments volumes across the platform. $ Key highlights include: • • • Signed strategic partnerships with the following: • Carpet Court Australia Limited (“Carpet Court”): Entered into a five-year exclusive agreement to offer lending services to the Carpet Court Store network, following roll out of payments solutions between the store network and head office • Capricorn Society Ltd (“Capricorn”): Signed a 10-year Master Services and License Agreement (“MSLA”) with Capricorn for the provision of software and ecommerce payments infrastructure and cornerstone investment by Capricorn, raising $7.2m • AirPlus International GmbH (“AirPlus”): Entered into a partnership with AirPlus to jointly offer a virtual credit card product • eBev.com Pty Ltd (“eBev”): Signed binding Memorandum of Understanding (“MOU”) with eBev to provide integrated payments solutions across the eBev marketplace Continued to scale all product lines: • All product lines, including Spenda Accounts Receivable (“SpendaAR”), Spenda Accounts Payable (“SpendaAP”), Payment Widget with corresponding SaaS software licensing fees, increased in FY24 • Launch of Payment Facilitator (“PayFac”) merchant payment services • Ongoing work on the Spenda retail Standard Operating Environment (“SOE”) Total payment volumes on the Spenda platform up 160% on pcp to $250m Key Strategic Partnerships Carpet Court Carpet Court is the largest retail floor covering specialist in Australia, with a growing network of 205 franchised stores, with a presence in every State and Territory. Spenda and Carpet Court commenced working together in late 2022 to transform the network’s payments infrastructure, from end-consumer right through to suppliers, by digitizing the store invoice-to-payment processes and improving data integration and analysis throughout the network. 18 Spenda Limited • 2024 Annual Report Directors report (continued) Spenda’s Pay-Statement-By-Link (“Spenda PSBL”) payments infrastructure is now used across the Carpet Court franchise network, where 100% of the payments flow from the 205 stores to Carpet Court’s National Support Centre (“NCS”) is processed through the Spenda platform. Spenda’s two core products, SpendaAR and Spenda PSBL solutions now deliver e-Invoicing, dispute management and B2B payments to the Carpet Court network. In July 2023, Spenda announced a five-year exclusive agreement with Carpet Court to offer lending services to the store network. By the end of FY24, Spenda was processing stable B2B volumes of approximately $20m per month on its platform, from the roll out of SpendaAR to Carpet Court Head Office. The continued rollout of B2C payments, including digital payment options and Spenda Point of Sale (“POS”) terminals in-store, is expected in FY25 together with the planned roll out of the SOE to Carpet Court stores, which will enable them to manage their quote-to-install payment flows. Capricorn Capricorn is a member-based organisation established in 1974 to primarily support businesses in the automotive industry. Its current network consists of over 28,000 members and more than 2,000 preferred Suppliers in every State and Territory in Australia and New Zealand. Capricorn’s members purchase ~$270 million per month in parts from the approved Supplier network. In December 2023, Spenda signed a 10-year MSLA with Capricorn for the provision of software and ecommerce payments infrastructure, following the successful completion of the Foundation Stage of the Digital Services Delivery (“DSD”) initiative. The DSD initiative is a significant and strategic project that upgrades the payments infrastructure to Capricorn’s Member and preferred Supplier network to increase productivity and create efficiencies for Members, preferred Suppliers and Capricorn. The new payments solutions will enable all Capricorn Members to access eCommerce payment solutions, that are powered by Spenda. In 2H FY24, Spenda worked closely with Capricorn to customise its payments infrastructure for use by Capricorn’s Members and preferred Supplier network, with the onboarding of the network expected in 1H FY25. The parties have also agreed to a 5+5 year option, which if exercised, would extend the agreement to a 20-year term. The MSLA lays a foundation for both parties to build further joint initiatives that can improve the digitisation of the automotive industry over a decades long horizon. In January 2024, Capricorn became a cornerstone investor in Spenda, raising $7.2m via a private placement, reflecting Capricorn’s confidence in Spenda’s unique payments software and the Company’s earnings potential over time. In Q4 FY24, Spenda completed the 2nd milestone in the Capricorn DSD project, with the commercial launch of the new payment infrastructure on track for 1H FY25. Over half of the $1.3m development fees have now been received, with the remaining expected by the end of 2024. AirPlus AirPlus International is a leading international provider of solutions in the corporate payment segment. In November 2023, Spenda signed a payment processing agreement with AirPlus to jointly offer a virtual credit card product, which enables the generation of credit card numbers for specific purposes or durations. This virtual credit card product enables Spenda’s clients to access funds for purchases, utlising Spenda’s AP and Payment Widget software. The addition of this capability is expected to enable scaling of client payment volumes by providing access to working capital from portable and flexible credit solutions. Spenda Limited • 2024 Annual Report 19 Directors report (continued) This agreement significantly expands Spenda’s addressable market and both parties are working together to develop a pipeline of opportunities to grow the virtual credit card product. In 2H FY24, there was strong growth in the roll out of new AirPlus facilities for both new and existing clients, with total approved limits of $6.5m as at 30 June 2024, generating over $200k in revenue in Q4 FY24, up from $35k in Q3 FY24. Continuing growth in SpendaAP adoption and AirPlus facilities is expected in FY25. eBev eBev is a software provider with a platform that e