Paymentsense debt mountain grows despite phenomenal sales performance by Dojo

Dojo, the SMB card payment brand created by Paymentsense, has taken the UK market by storm but with its parent company racking up £498m debt, a tricky re-financing is looming in 2025.

Based by the canal in Paddington, in a swish office building shared with the English Premier League, Paymentsense is the brainchild of two low-profile serial entrepreneurs – Juan Farrarons and George Karibian. The team also founded Judopay, a mobile payment gateway recently sold to Fabrik, and Capital on Tap which issues credit cards to SMEs.  

Paymentsense says that “investors continue to prioritise growth over short-term profit and are investing heavily in both technology and customer acquisition.“ Their confidence has been rewarded by payment volume trebling in just two years, reaching £33bn in the year to March 2023. I can’t think of another European POS-focused payment brand growing as quickly.

Dojo added a net 26,000 customer locations and now serves 146,000 premises. The customer base is moving upmarket which is a positive trend. Average volume per location rose 26% to £227,000 and larger merchants now include restaurant chains Cote and Pizza Pilgrims. 

Paymentsense has been migrating more merchants to its in-house acquiring service. This helped turnover grow 66% to £298m with the take rate ticking up 7 bps to 0.9%. 

Management explains that Dojo was only possible once the company built its own processing platform and stopped being reliant on Fiserv/First Data. As Nick Fryer, CTO explained in this interview with Fintech Magazine:

“It was frustrating that we couldn’t change the product, which was very similar to everyone else’s, and our key sales tools; our salesforce [were] awesome, but we knew we could do even better by our customers. So we looked at ways of taking control of the product, trying to make it better and more customer-focused.”

Paymentsense cleverly built the Dojo brand around the PAX A920. Other providers can re-sell PAX devices but only Paymentsense sells Dojo. In just a few years, the eye-catching white terminals have become ubiquitous on Britain’s high streets. The original Dojo has now been joined by the smaller Dojo Pocket. This includes ePOS integration so that restaurant staff can generate bills and take payment at table.  A counter-top terminal is promised soon.

Walkup, a restaurant booking app purchased for £20m in 2022 and now renamed Dojo.app adds to the hospitality proposition. However, Walkup seems to have made little impact so far. It recorded an operating loss of £847K on sales of just £473K.

Dojo’s investment in a large field sales force backed with aggressive digital marketing is one key reason for its success. Dojo also appeals to SMBs by only insisting on a minimum six-month contract and being willing to pay up to £3,000 to buy customers out of multi-year contracts with other providers. This advantage has been eroded by the regulator’s drive to cap contracts at 18 months. Another early differentiator was Dojo’s commitment to next day settlement, although this has now also been replicated by competitors.

Almost all merchants are in the UK. The small Irish operation – which processes through Valitor Rapyd – accounted for just £8m sales but Paymentsense has big plans. It has secured an e-money licence in Ireland which gives the ability to operate across Europe.

For the Paymentsense group as a whole, administrative expenses rose 31% to reach £244m. More than half the extra cost was accounted for by a 76% increase in employee expenses which rose to £71m driven by both higher staff numbers (almost 1,000) but also sharply higher salaries. Total spend per staff member was 49% higher at £73,000. The staff need somewhere to work. Paymentsense is taking a new 55,000 sq ft office in Bristol.

While management is pleased that adjusted EBITDA, the company’s preferred measure of profitability, more than doubled to £69m, the bottom line doesn’t look so pretty.

After deducting £122m of depreciation and amortisation and a further £62m of net interest payments, Paymentsense lost £141m before tax, roughly the same as the previous year. Accumulated group losses recorded by Typhoon Noteco, the ultimate UK holding company, now stand at an eye-watering £582m according to documents deposited at Companies House.

The group’s outstanding debt rose £86m to £498m giving a debt to EBITDA ratio of 7.2x. A £320m bond at 8% is due in 2025 and a long-term loan of £180m at 16.25% is due in 2026. Refinancing this debt mountain could be a challenge in today’s market conditions.

Paymentsense has built an impressive sales and marketing machine but competitors have begun to react to the Dojo phenomenon. The business will need to continue to innovate if it is to avoid a crunch in 2025.