The QuickFee Ltd (ASX: QFE) share price tumbled today after ASX fintech posted results for the half-year (HY21). Why isn’t Mr Market showing much love for QuickFee?
QuickFee generates revenue from its QuickFee payment platform and lending solution, enabling clients of professional services firms to pay invoices up-front or over time. The pay later solution allows professional firms like accounting and law practices to be paid immediately in full, while clients can pay flexibly by instalment.
It’s similar to buy-now-pay-later (BNPL) companies like Afterpay (ASX: APT) and Zip Co Ltd (ASX: Z1P) but a bit different.
QuickFee commenced operations in Australia in 2009 and expanded across to the United States in 2016.
Positive results in the US
QuickFee posted a bumper increase of 93% in US revenue over the prior corresponding period, HY20 (PCP). This contributed to a corresponding jump of 101% in gross profit for the US business to $1.7 million.
QuickFee highlights the significant traction in US revenue is being driven by the structural shifts in the US banking and payments industry towards digital banking and online payments. This has also been brought forward by COVID-19.
How does QuickFee earn revenue? Well, it’s different from your typical BNPL in that QuickFee actually lends money to the professional firms.
QuickFee earns interest and fee income from lending. So, the loan volume is the key driver. It’s no surprise that US lending surged by 41% for the PCP. However, not the same can be said for Australia, as lending fell by 45% over the PCP (off a larger base).
Alongside its lending solution, QuickFee also provides a traditional payment gateway. So instead of spreading out payments in instalments, clients of professional service firms can choose to pay up-front in full. Here, QuickFee earns revenue from monthly hosting fees and transaction income.
QuickFee’s bottom line
Growth in the US is encouraging but it appears to be coming at a price. Is it short-term pain for long-term gain?
Product development, customer acquisition, and general and administrative expenses all went up significantly compared to the PCP. The massive bump in product development expenses is understandable as it released a major new product, QuickFee Instalments, in both the US and Australia.
QuickFee Instalments leverages technology from Splitit Ltd (ASX: SPT) to provide a low credit risk payment solution to customers using pre-authorised client credit. The company notes the early progress has been promising, with a total of 277 firms already signed up.
This will likely bring in further revenue but investors should be mindful that net loss after tax expanded by 58% over the PCP.
Management is upbeat
The founder of QuickFee, Bruce Coombes is excited about what lies ahead, as he said, “The first half was a pivotal period of investment in the QuickFee business. We have broadened our product suite and addressable market, we have strengthened our team, and we are seeing encouraging signs for the remainder of the year, with growth in our lending pipeline activity.”
To learn more about the business, check out this interview with Bruce:
Is QuickFee a smart play?
Let’s not forget that QuickFee not only assists with lending but acts as a platform for professional firms to use digital tools to manage their finances. And it earns merchant fees on transactions processed and hosting fees from using the QuickFee platform. So, it will likely continue to benefit from the structural shift towards digital invoices in the US.
I prefer businesses with optionality, and the new QuickFee Instalments product provides just that.
There are encouraging signs of QuickFee gaining market share in the US but investors should pay close attention to operating expenses as it focuses on expansion.
It will also be interesting to see how QuickFee fares once other competitors abate its first-mover advantage.
If you are interested in other ASX growth share ideas, I suggest getting a Rask account and accessing our full stock reports. Click this link to join for free!