While net profit is some way off, with more than $6 million in cash on hand, and no debt, Rewardle is well-funded to continue growing – and further monetising – its network.
When digital retail loyalty technology provider Rewardle Holdings Limited (RXH) listed on the Australian Securities Exchange (ASX) in October 2014, there was plenty of criticism from the start-up world. At the time, Rewardle only had 64 paying customers, and was generating just $30,000 in annual revenue. But the initial public offering (IPO) easily raised the $4 million it sought – in fact, it was over-subscribed, indicating that plenty of investors wanted the stock.
On its opening day, Rewardle surged to a 40% gain, closing 8 cents up on the 20-cent issue price. At 27 cents, the company is now valued at $35 million. Founder and managing director Ruwan Weerasooriya – who established the company in 2011 – holds 87.5 million shares, or 75.4% of the company.
Rewardle is effectively the digital version of the basic “get-one-free” loyalty card programs offered by merchants. The company started in the café business, replacing the punch-card-based coffee loyalty membership and free-coffee rewards programs. Any business that offered points and rewards programs could participate: Rewardle provides local businesses with a tablet on the counter, that runs the Rewardle app: the customers “check-in” on the tablet, using a free card or the Rewardle smartphone app, to record their visit, collect points and redeem rewards.
Rewardle carries the membership and activity data in the cloud, and gives the merchants access powerful analytics and marketing tools that have usually only been available to large retailers. The technology platform now represents more than one million members, and is used by about 4,000 local businesses around Australia, including sectors such as cafés, bakeries, bars, florists grocery stores, newsagencies, gyms, fast-food outlets – even tattoo studios. For Christmas 2014, Rewardle introduced to participating merchants the ability to offer customers prepaid and gift cards, and mobile ordering.
When it floated, Rewardle identified three major sources of revenue:
- monthly subscription fees that its merchant members pay;
- Brand Partnerships, where brands are charged a fee to engage with Rewardle’s merchant and member network: this is similar to how airline loyalty programs like Qantas Frequent Flyer and Virgin Velocity allow brands to purchase points for distribution to their customer base as incentives and rewards; and
- mobile payments.
Merchants using the platform more than doubled between 30 June 2014 and 31 March 2015m from 1,587 at to 3,553. Over the same period, member numbers surged by 178 per cent, from 300,000 to 834,219; customer check-ins more than tripled, from 3.4 million to 10.7 million; and both the monetary amount added to pre-paid cards, and used, were up by more than 300 per cent. Expanding from its café base, the service is now being used in the pharmacy, food service, health and fitness, convenience stores and coffee wholesale sectors.
2015 has seen solid progress on the deal front. In February, Rewardle launched a mobile order-ahead through credit-card payment solution, extending the company’s existing order-ahead and prepaid funds system, which has operated in more than 1500 merchant locations nationally since early 2014. The system is similar to how Uber users pay: Rewardle users can securely add one or more credit cards in the Rewardle smartphone app (either iOS or Android), which can be used without re-entry to order, pay and pick up items at participating Rewardle merchants.
In April, Rewardle struck a channel partnership deal with the Australian Newsagents’ Federation (ANF), which covers about half of the 4,000 individually owned and operated newsagencies in Australia, through which the ANF members can use the Rewardle platform to establish a digital relationship with their customers, and connect their business with other local merchants. With the decline of print newspaper and magazine sales, newsagents are looking for ways to engage and retain customers, and the ANF sees using, endorsing and promoting Rewardle as a means to do this. A leading national publisher introduced Rewardle to the ANF, in the same way that its 2014 introduction to the Ezymart convenience store chain was driven by a leading fast-moving consumer goods (FMCG) supplier.
But the really big announcement came in May, with the launch of a brand partnership with Malaysian-based airline AirAsia, to make flight rewards available at local businesses around Australia. This deal represents a critical step in monetising the Rewardle platform: as a partner for AirAsia’s rewards program, Rewardle will add gift vouchers for flights across the 100-destination AirAsia network to its rewards system.
Rewardle members will be able to collect AirAsia gift vouchers, which can be redeemed towards the purchase of AirAsia flights and services anywhere on the AirAsia network: effectively, any trip to your local café, butcher, grocer, or any of many thousands of local businesses that Rewardle works with, could earn a Rewardle member a free flight with AirAsia.
As a newer, “challenger” airline brand, AirAsia wanted to place its brand at the counter of Australian shops, in the faces of its young, budget-conscious target market; but the deal is also very strategic for Rewardle, for several very good reasons. Firstly, it is the company’s first commercial brand partnership, and both monetises its platform – Rewardle describes the deal as “six-figures” in terms of payment – and demonstrates the strategic value that brands see in the membership network. Second, and flowing from that, the deal greatly increases the value for merchants and members in joining the Rewardle network. And third, it inserts Rewardle firmly into the multi-billion dollar Australian points and rewards marketplace, which is dominated by the Virgin Velocity and Qantas Frequent Flyer programs – airline points have become an established loyalty currency, if not the most sought-after. It is a space that Rewardle had to crack.
The most recent deal came in June, when Rewardle announced a marketing partnership with ASX-listed TV and movie streaming company Quickflix, under which Rewardle will integrate special Quickflix offers as rewards that its members can redeem. The company says the deal will drive customer acquisition for Quickflix while adding value and increasing engagement of Rewardle’s merchants and members.
The company is well-placed financially for further growth. In April, Rewardle raised $5 million (before costs) through a share placement to institutional funds, family offices and high-net-worth individuals. The placement was heavily over-subscribed, and Rewardle says that as well as brining in capital, the new investors also brought in significant commercial networks that will assist in Rewardle’s ongoing growth and development.
While net profit is some way off, with more than $6 million in cash on hand, and no debt, Rewardle is well-funded to continue growing – and further monetising – its network. Last quarter the company consumed just over $1 million in cash, but potential investors will be mindful of the rate of “cash burn,” they will be heartened by the deal flow so far this year, and looking for more of the same.