Good post @PinchOfSalt. I've been following this one loosely on and off.

Credit Clear has an interesting narrative. Using transformational AI, ML and Big Data to deliver better results and disrupting the sleepy collection services industry, providing a better experience for all stakeholders. Sounds great.

Listed in Oct 2020, the company acquired Credit Solutions (traditional collection services) and Oakbridge Lawyers (legal collections) less than a year prior. The Credit Clear digital business was only a $1.1m/year revenue business. With the acquisitions, the revenue was padded out to $11.2m/year. In Dec 2021, ARMA (traditional collections) was acquired and again padded out the revenue by a further $15.5m (what ARMA did in FY21).

The rationale for the acquisitions makes sense. It's a hard grind selling the software as a SaaS product, so let's inject it into collection services companies to provide a complete offering. But I do think there's a mismatch of narrative and reality here. Is it a tech company disrupting the collections industry? Or a collections services company enabled by tech? It feels like it's in the latter camp.

A couple of other things.

1. A lot of the deals signed are not exclusives, and certainly not the major deals. They're on a panel of collectors and will be allocated work based on performance.
2. The company paid 3x revenue for ARMA (~$50m including earn-out for FY21 $15.5m revenue), and perhaps 1x for Credit Solutions. By contrast Credit Corp purchased Collection House's collection services arm at 0.25x revenue - granted the CLH business was in decline and the sell was distressed. When Credit Corp acquired Baycorp in 2019 - the collection services business was pretty much thrown in for free along with the outstanding PDLs. Both the CLH and Baycorp collection services arms would not have been profitable at the time. Collections services is a highly competitive space.