Accounting and business management software company Xero has declined to clarify what the future of its lending subsidiary Waddle will be after it completes its “exit” from the business.
In March, Xero announced a “streamlining program” that included cutting headcount by 700 or 800 and exiting Waddle.
A spokesperson was not able to say at the time how the exit from the business would be executed – whether by closure, sale of the business, sale of the receivables or return to the founders.
Banking Day made inquiries again yesterday, following the release of the company’s 2022/23 financial report, and received this response: “We continue to consult closely with our customers as we work towards exiting the business. We know one of the biggest challenges for small businesses is managing cash flow and accessing capital. Xero remains committed to our broader small business platform strategy in order to support small businesses across their many needs.”
Xero’s financial report for the year to March provided one clue to Waddle’s future in a disclosure that it cancelled debt facilities related to the Waddle business.
It cancelled an undrawn NZ$150 million facility and replaced a A$30 million facility supporting the portfolio with a A$10 million facility “to provide short-term liquidity”. The $10 million facility has since been cancelled.
Xero also reported that it booked a bigger write-off than previously indicated from its “exit” – a $48.5 million impairment and other costs related to Waddle.
In March, Xero said it would write off $30 to $40 million as a result of the Waddle decision.
The company had already taken a hit on the investment. In its financial report for the six months to September last year, it included a $25.9 million impairment “due to changed operational and market conditions for the Waddle business”.
The latest impairment, along with other impairments and restructuring charges, tipped the company into a loss of $113.5 million for the year.
Waddle is a cloud-based lending platform offering invoice financing. It was launched in 2014 and acquired by Xero in 2020 for $31 million upfront and earnout payments that had the potential to take the total consideration to $80 million.