Spenda Ltd (ASX:SPX) shares surged 22% higher intra-day to 1.1 cents after signing a deal with Carpet Court to deliver an optimised payment solution across all Carpet Court member stores, with target integration by April 2023.
The deal was signed after the successful completion of a pilot program, involving the integration of the Spenda Platform into the operating environment of select Carpet Court stores, using a bespoke iteration of the Spenda Platform (CC Spenda Platform).
Carpet Court will now proceed with the roll-out of CC Spenda Platform across its entire franchise network (consisting of ~205 member stores across Australia).
Node-to-Spoke execution strategy
The implementation of the agreement is in line with Spenda’s Node-to-Spoke execution strategy, through the rollout of services to Carpet Court’s National Support Centre (NSC) and its 205 connected stores.
Payments processed via the CC Spenda Platform will increase productivity and create efficiencies by automatically allocating and reconciling payments in the accounts payable ledger and accounts receivable ledger of the store and NSC, respectively.
In doing so, the platform provides a standard operating environment which will, in turn, enable Carpet Court to implement key strategic initiatives designed to drive an increase in profit.
Following the success of the pilot phase, which included the onboarding of circa 20% (40 stores) of the franchise network, the parties have now signed the agreement to facilitate the roll out of the platform to all 205 Carpet Court stores by a target date of 30 April 2023 (and in any event by no later than 30 June 2023).
The agreement contemplates that Spenda will provide the platform on an ongoing basis, with no fixed term.
Under the terms of the agreement, Spenda will be entitled to Software as a Service fees in respect of the license of the platform to Carpet Court stores, as well as fees based on transaction volume and integration fees.
Carpet Court chief financial officer Mark Hogan said: “The Spenda platform enables us to leverage best in class integration capabilities for efficient end to end payment processing, whilst offering member services such as POS and working capital management facilities to save cost and drive member growth.”
Spenda managing director Adrian Floate added: “Partnering with a national flooring retailer like Carpet Court provides the company the opportunity to showcase the maturity of its software, lending and payments stack.
“What we are solving for Carpet Court is industry agnostic.
“The desire to provide extended and flexible payment terms, e-Invoicing integration and greater cash flow visibility penetrates the whole supply chain.
“The overwhelmingly positive feedback we have had from member stores demonstrate that when businesses implement a collections and payments software solution that provides mutual benefits to both businesses in a transaction, not only is there quick uptake and immediate Return on Investment to the business implementing the solution but trading relationships are also almost instantly improved.”
Revenue expectations
Once fully deployed and assuming no change to Carpet Courts revenue and payment utilisation, Spenda expects to earn baseline fees under this agreement of A$50k to A$75k per month or 600k to 900k per annum.
Provided ongoing feedback from Carpet Court member stores continues to be positive, the parties intend to expand the provision of services to include a working capital facility to be made available to Carpet Court member stores to provide increased payment flexibility and extended credit services.
These services will generate significant uplift for the Carpet Court NSC, which will be able to better predict its cash flows.
This will be enabled through Spenda utilising funds from its recently established debt warehouse facility, i.e. drawing funds from the debt warehouse and advancing it to individual stores to pay their invoices to Carpet Court’s NSC.
READ: Spenda paves pathway to growth with $50 million debt warehouse facility
Building on these solutions, Spenda also has the opportunity to sell its retail services bundle, which includes Spenda’s Point-of-Sale solution and merchant services, into the Carpet Court franchise network.
Owing to the positive brand awareness generated through the deployment of SpendaAP services to Carpet Court member stores, Spenda expects significant uptake of the retail bundle to this engaged and motivated audience.