9Spokes poised for growth off the back of increased interest in SMB digitalisation

9Spokes International Ltd (ASX:9SP) experienced strong pipeline growth in the March quarter off the back of its regional sales focus, which incorporates direct sales teams and partners. This strategy has already resulted in a strengthened direct and partners sales pipeline with a number of opportunities at varying stages – including five qualified opportunities.  During the quarter the company announced a Framework Services Agreement with Clydesdale Bank Plc, a subsidiary of Virgin Money UK PLC, and a first Statement of Work to determine project scope for a working capital health proposition. Under the agreement, the parties explored potential participation in Virgin Money’s working capital health proposition, a progressive initiative designed to help SMBs monitor and sustain their business health through an advanced digital banking proposition. The engagement with Virgin Money will continue going forwards. “Increased focus on SMB digitalisation” 9Spokes chief executive officer Adrian Grant said the company’s increased business development capacity and partners business development efforts were resulting in a pipeline that it could not have previously achieved. He said: “Significantly, and for the first time in our history, we have core banking platform providers approaching us to investigate how we might collaborate and integrate our products with their platforms.  “We believe this is a strong validation of the increased focus on SMB digitalisation and our strategy.  “While we are seeing competitors to aspects of our proposition emerge, we view this as an extremely positive development as it gives credibility to what has been a nascent sector prior to COVID. “We expect to be in a position to announce material contracts within the current quarter.”  Regional sales outlook As part of the regional sales strategy, the company has expanded its business development team with new appointments in London and Toronto, who are tasked with focusing on direct sales and further supporting the company’s channel partners.  9Spokes is continuing to make progress in Asia with its partner Visa, and has also established a regional relationship with Oliver Wyman, an international management consultancy, as an opportunity for the company to gain deeper penetration through the firm’s Asian network.  In North America, the company is now observing the banking industry coming out of COVID hibernation and beginning to explore opportunities to improve SMB digital banking experiences.  9Spokes expects to gain significant traction in this market with a strong North America-based business development team and active partner engagement with Linear Financial Technologies (formerly Fundation) and Visa, the company is already seeing an increased level of demand feeding into its pipeline.  Key platform releases Platform performance continues to progress, influenced by the enhancements released in recent months, including: Multi-boards: Home boards which are customisable landing pages bring information and insights from across the ecosystem together to deliver a better, more cohesive experience for customers. This marks the first drop of multi-boards, which will enable SMB users to create multiple, shareable boards based on select information (for example, marketing, cash flow, inventory); and  Revenue forecasting: Powered by a business’ financial software, the revenue forecasting feature builds on the revenue tile functionality. It gives users a three-month forecast (from the current month) of their business’ anticipated revenue with a confidence band.  Quarterly operating cash receipts, expenditure and burn. Loan management potential  The company noted that the global finance sector, despite the impacts of COVID-19, has proven both adaptable and resilient.  The fintech industry has demonstrated its potential to close gaps in the delivery of financial services in an increasingly digitalised market.  9Spokes, having built a robust data infrastructure based on open banking and business data, is pursuing a number of market opportunities to leverage its platform into core banking applications to facilitate loan origination and loan management – all of which complement the company’s core SMB proposition.  Grant said: “Importantly, the work we have done to build our extensive data models for SMBs, can now be extended to additional use cases, principally towards loan origination and loan management. “Last year our focus was the launch of our V2 platform.  “The tangible benefits of the enhanced V2 platform now allow us to add capability at an increased pace.  “We will provide further information on product development as part of our market update.” Financial expenditure and outlook During the quarter, 9Spokes’ operating receipts were $1.6 million, operating expenditure was $2.7 million, resulting in net operating cash burn of $1.1 million. This is lower than the guidance of $1.9 million given last quarter and is largely due to a reviewed global accommodation footprint reducing overall cash flows relating to rent. The expected cash burn for the quarter ending June 30, 2021, is $1.7 million.  Grant said: “While we continue to maintain our focus on cost control, we have also grown our in-field business development capacity, which in turn has increased our direct and partners sales pipeline.” The company is well funded to pursue its sales pipeline going forward and the cash balance was $9.27 million as of March 31, 2021.