Butn co-CEO Rael Ross
Factoring champion and SME credit disruptor Butn is skipping along, profiting more than anything from a cosy introducer partnership with small business accounting powerhouse MYOB.
Listed on the ASX since July 2021, Butn was able to brag yesterday about metrics showing accelerating progress across its invoice discounting business, while keeping headcount growth minimal.
Fortuitously for the company, the scheduling of its quarterly trading update came hot on the heels of ANZ’s confirmation (on Wednesday) that the bank was in negotiations with KKR, the owner of MYOB, around a potential acquisition.
MYOB own a 19.9 per cent stake in Butn, and its introducer relationship with the SME financier is at its infancy.
The firm said it recorded quarterly originations of A$85.4 million over the June quarter, up 46 per cent on the previous corresponding period, “with consecutive record months in April, May and June”.
It said quarterly revenues of $1.7 million were up 57 per cent on the prior period.
At a headline level these numbers look immaterial. The company was founded in 2015, and Butn has ramped up recently, aided by the capital injection from the IPO.
Butn was vague about the import of the MYOB partnership to recent business flows, aware of the sensitivities to its partner (and key shareholder) given the talks between ANZ and KKR.
“The strategic partnership with MYOB is delivering ahead of internal expectations, and expected to be significantly expanded in FY2023,” it said in canned quotes for the ASX release.
Rael Ross, Butn’s co-founder and co-CEO, amped up the significance of the company’s attacks, so far, on the staid and somewhat marginal domain of invoice financing.
“This quarter Butn reached a major business milestone, exceeding $1 billion of cumulative originations,” Ross said.
“Importantly this growth has been achieved whilst maintaining industry-low non-recoverable write-offs of approximately 0.1 per cent of originations,” he said. This number is steady with the write-offs ratio reported in Butn’s prospectus.
The $1 billion funding number looks inconsequential in comparison to Butn’s assessment of a target market running into the hundreds of billions, but this company might be one fintech with ballast in its keel.
Once (say, 30 years ago) any business factoring its invoices was prone to being written off as destined to go broke.
“I think it’s a misconception,” Ross said in an interview with Banking Day.
“Butn has bought it (factoring) to the forefront, made it affordable, made it accessible.
“This is a first to market opportunity.
“We brought a product to market in six months. Reckon and Quickbooks have not achieved what we are delivering with MYOB.”
Onboarding new SME clients, Ross said, is a matter of ten minutes or so (for those using MYOB software) and in turn fostering access within seconds to credit for a business willing to refer invoices to the Butn platform.
“It would take a big bank days or weeks, with AML and KYC.”
Butn also provided an update on its use of the $20 million in capital raised through last year’s IPO.
It has spent a shade more than forecast on platform and product development, underspent on marketing, and it still has $2.2 million in reserve to apply to receivables book growth.
Butn made its ASX debut at a time of more buoyant equity markets (when runaway inflation was suspected by only a wise few).
Listed at 50 cents per share in the first week of July 2021, the company’s share price has been on a steady slide ever since, trading as low as 10 cents one day early this month.
With ANZ and MYOB helpfully throwing a new spotlight on the company, trading volumes in the tightly held stock were unusually robust yesterday, and the trading update helped lift the share price by 2 cents to 14 cents.
When does the board believe the company will make a profit? we asked Ross.
“Officially, we don’t make forecasts,” the CEO said.
But he implied it would be soon, “with the revenue up and originations up, and with new partnerships such as with Freightlancer.”