ASX-listed buy-now-pay-later (BNPL) platform MoneyMe (ASX: MME) could see its share price rise on strong returns driven by scale effects and the leveraging of automation technologies.

MME executives have also hailed improvements to the quality of its credit assets after driving growth in its balance sheet to a significant scale.

FY23 revenue up 60%

MME’s Q4 FY23 update indicates that its gross revenues for FY23 exceeded $230 million, ahead of guidance of $220 million and marking an increase of 60% compared to a figure of $143 million for FY22.

The company said these returns reflected the ‘scale benefits from the $1.3 billion loan book achieved in FY22.’

MME also highlighted improvements to the quality of the assets on its loan book, achieved by moderating growth in its balance sheet after first achieving scale.

According to its update, gross customer receivables fell to $1.1 billion from $1.3 billion in FY22, as part of a ‘strategy to moderate growth and build a strong credit portfolio.’

This strategy coincided with an improvement in its average Equifax credit score, rising from 704 for FY22 to 724 for FY23. 83% of MME’s loans had a closing Equifax score of more than 600 for FY23, as compared to 79% in FY22 and 63% in FY21.

Quarterly net losses extended declines to 5.6% in the final quarter of FY23, as compared to 5.9% in the third quarter of the financial year.

Clayton Howes, MME Managing Director and CEO, hailed his team’s ability to ‘[shift] the business from two years of high growth to consolidate the benefits from scale.’

‘[The team] transitioned the business to a higher credit quality portfolio, increased its automation capabilities, and recalibrated its capital base to deliver returns in a less favourable credit environment.

‘It is pleasing to see the downward trajectory of net losses continue as the higher credit quality of the portfolio is coming into effect.’

Automation aids the bottom line

MME also pointed to the positive effect of its drive to cut costs, including efforts to further automate operations.

The Group says it’s achieved $20 million in annual cost synergy savings following the acquisition of SocietyOne in March of last year. It also says it’s achieved a fully automated approval process for Autopay, helping to further cut costs.

These efforts have reduced MME’s office operating cost-to-income ratio to under 25%, as compared to 40% in FY22 and 46% in FY21

MME expects automation to continue to play a role in improvements to its operations.

‘MONEYME will continue to leverage its technology advantage, with product innovation, increasing automation, and expanded AI capabilities,’ MME said in its latest update.

‘The Group will continue to build a high credit quality portfolio, expand its ratio of secured assets, and build on its existing scale and cost efficiencies to drive profitable and sustainable growth.’

Debt from SocietyOne acquisition paid off

MME is seeking to optimise its capital structure in order to set the stage for more sustainable growth in future.

In May 2023, the company repaid part of its corporate debt facility used for the acquisition of SocietyOne, by means of funds from a $37 million institutional placement settled in the same month.

The repayment trims its corporate facility principal to its original size, helping to reduce interest costs by around $6 million per annum.

MME also successfully completed a $4.3 million Share Purchase Plan in June, helping to expand its unrestricted cash to $16 million from $14 million in the third quarter.

MME expects its cash position to further improve in FY24, on the back of reductions to corporate debt that have lightened the burden of interest cost payments.

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