Shareholders back Cellpoint with investment in sales and product development despite growing losses

Cellpoint Digital, which claims to have invented payment orchestration, reported widening losses in 2022 as the London HQ’d business stepped up investment in sales and product development.

Originally founded in Copenhagen in 2007 by Kristian Gjerding, who is still the CEO, Cellpoint’s first customer was Danish Railways and the business still specialises in the global travel sector. Unsurprisingly, turnover was badly hit by Covid but people are flying again and activity is recovering. According to documents posted at UK Companies House, sales grew 14% in 2022 to $2.63m on the back of a 48% increase in the number of transactions processed. There has been a particularly marked rebound in the Americas which now accounts for two thirds of sales. 

Cellpoint boasts a blue-chip, customer list including airlines such as Southwest, Emirates, Virgin Atlantic and Iceland Air but also Radisson Hotels and Specsavers, the opticians. The common thread is the need for merchants to deploy a single, global payment acceptance and routing platform which gives them access to local card processors and alternative payments. The prize is lower acceptance costs, higher conversion rates and reduced fraud.

Continuing the positive 2022, management reports that 2023 has started well. New client wins include two airlines – GOL and Beond – as well as  Akwaaba, an online grocery retailer. Sensibly for a small business which needs global reach, Cellpoint is turning its attention to partnerships as a route to market. New relationships include Mikroe, a mass transit ticketing vendor, BillingPlatform, Kount, Sabre and Riskified. 

Cellpoint claims its customers can choose from a very impressive 221 acquirer and PSP connections globally. Of course, maintaining and growing this network of connections and partners does not come cheap. Administrative expenses rose 29% to $22m. Higher spend was driven primarily by a threefold increase in employee costs to $12.9m as Cellpoint grew headcount in sales and product development. Staff numbers stood at 168 at year end at an average cost of $77K. 

Cellpoint also stepped up spend on R&D, which rose from $2.8m to $8.9m as management implemented “a comprehensive overhaul of existing technologies in order to pave the way for new, ore cutting-edge and performant capabilities.”

Operating losses widened to $19.4m and the business was also hit by a $3.69 negative currency translation leading to a total net loss of $22m. Accumulated losses now stand at $69.9m.

Despite receiving $18.6m net new investment during 2022 from Toscafund., Cellpoint closed 2022 with just $1.8m cash in the bank. Fortunately, existing shareholders contributed a further £10.2m after year end and management has “received written assurances of continued financial support.”

Cellpoint has one of the most robust and battle-hardened orchestration propositions in the market. But overheads are considerable, and management will need to work hard to generate transaction volumes sufficient to deliver cash profits. Continued strong shareholder support will be essential for it to continue as an independent business. If not, the core technology and customer relationships could be a prized asset for an ambitious global processor.