Here's the transcript for today's chat: Stakk Transcript.pdf

Stakk is fundamentally reinventing itself, pivoting entirely from a consumer-facing fintech (formerly Dough Limited) to a pure B2B operation that provides the back-end plumbing for banks, credit unions, and other financial technology companies. This is less of a turnaround and more of a 180 pivot, aiming to leverage the substantial technological infrastructure the company had already built for the original business. It's still in the very early stages, but they appear to be gaining momentum, and some of the recent customer wins seem notable.

This pivot drastically reduces the company's marketing expenses, lessens the burden of regulatory oversight, and minimizes balance sheet requirements since they no longer carry the exposure risk on lending or transactions. Crucially, they now have a far more "sticky" customer base that's difficult to dislodge once plugged in, and an improved capacity to scale through their partners' existing customer bases.

Andy seems like he's been on an interesting journey, taking the full brunt of the industry slump that followed the "easy money era" where the market cared almost exclusively about top-line growth and capital was easy to source.

The experience seems to have sharpened the focus on operational discipline, particularly the appreciation of being able to stand on the company’s own two feet and reach cash flow break even. He also seemed to be hyper-aware of what it is that Stakk does well (providing critical infrastructure) and what areas it doesn't have an advantage in, such as competing in the highly competitive card issuance and bank account space. This is probably a good thing.

The big picture seems to be that they want to provide customizable, API-first, plug-and-play infrastructure that scales with their customer's growth, and in which they participate in any growth in transaction volumes. This transactional revenue is the main source of income, representing around 60-65% of total revenue.

The company is very clearly on the hunt for acquisitions, viewing M&A as a turbocharging mechanism for growth. Andy said they are looking at a mixture of transformational deals to increase recurring revenue and distribution, as well as smaller acquisitions that bring great technology that Stakk can then rapidly deploy into its existing US distribution network. In fact, he reckons there's huge scope for consolidation in the fintech space, particularly by acquiring strong aussie fintechs that have struggled to scale overseas.

Of course, pursuing aggressive growth via M&A and market expansion is going to require capital. So, I would expect more capital raises, which could prove a good thing in aggregate so long as the acquisitions add enough strategic value and help turbocharge the annual recurring revenue, but it's something to be mindful of.

They are expecting ARR to hit $8m by the end of the current quarter, which is a big step up. Although with a market cap of over $90m it seems the market is already anticipating a lot of growth.