Spenda Ltd (ASX:SPX, OTC:CROTF) has completed the final phase of its Digital Services Delivery (DSD) initiative with the Capricorn Society Limited for the provision of software and ecommerce payments infrastructure.
The companies are now in advanced discussions to finalise a 10-year service agreement for commercial launch in mid-2024.
Spenda will receive A$443,000 for the successful completion of the final phase, as well as A$1.3 million in initial development fees for commercial launch in mid-2024 and a recurring revenue of A$100,000 per month in software licensing fees.
The agreement also presents Spenda with the opportunity to benefit from increased e-commerce volumes on its payments infrastructure, through Capricorn’s 26,000 members and 2,000 preferred suppliers.
Capricorn members purchase around A$270 million per month in parts from the approved supplier network.
"De-risk solution implementation"
Spenda’s CEO and managing director Adrian Floate said: “The long-term partnership with Capricorn is a transformational commercial opportunity for Spenda.
"We are thrilled to have successfully completed the Foundation Stage to de-risk the solution implementation and provide the parties with further insight on final design before the build phase commences.
"Our payments infrastructure will significantly improve the cash utilisation and reduce the working capital requirements throughout Capricorn’s network of members and preferred suppliers and the commercial potential of this partnership over the next decade and beyond is significant.”
Capricorn looks to enhance payment services
Established in 1974, Capricorn is a member-based organisation primarily serving the automotive industry.
The DSD initiative is a key strategic project for Capricorn aimed at enhancing its payment infrastructure for both members and preferred suppliers. This upgrade is designed to boost productivity and efficiency across the board.
The new payment solutions, powered by Spenda, will allow Capricorn members to utilise advanced eCommerce payment options. These include Spenda’s Pay-Statement-by-Link and Payment Widget solutions, tailored to integrate seamlessly into Capricorn's network.
The Pay-Statement-by-Link technology will enable members to view live statements, incorporate purchases into their financial systems, and facilitate credit processing by preferred suppliers.
Meanwhile, the Payment Widget is designed to allow member purchases to be charged to the Capricorn Trade Account through preferred supplier eCommerce platforms.
In May 2023, Spenda was chosen as the preferred supplier to spearhead the DSD initiative's Foundation Stage, with a 12-week work period. By August 31, 2023, Spenda announced the successful completion of the initial phase and began discussions to extend this foundational engagement.
In October 2023, Spenda entered into an 8-week contract to finalise the DSD initiative's Foundation Stage. This final phase involved creating a security and platform Proof of Concept (PoC), simulating the full production solution, including a mock supplier eCommerce site.
Advanced discussions
Spenda effectively demonstrated the PoC across multiple technical scenarios, fulfilling all acceptance criteria. With the final phase of the DSD initiative now complete and accepted by Capricorn, both companies are engaged in advanced discussions to finalise a 10-year service agreement, aimed for commercial launch in the second half of the 2024 fiscal year.
For completing the final phase, Spenda will receive $443,000, in addition to $1.3 million in initial development fees for the commercial launch.
A recurring revenue stream is anticipated, with software licensing fees of $100,000 per month. The agreement includes a 5+5 year option, potentially extending the contract term to 20 years if exercised.