Explosive growth for Dojo but losses mount at Paymentsense

Paymentsense, a leading payments provider based in London, has reported spectacular growth in the year ending March 2022, with total payment volume rising 89% to £21.6bn. 

The company, founded by two low-profile entrepreneurs – Juan Farrarons and George Karibian – has long been one of the UK’s largest and most innovative independent sales organisations (ISOs). The duo also founded Judopay, a mobile payment gateway, and Capital on Tap which issues credit cards to SMEs.

Despite its impressive topline growth in 2022, the company reported significant losses. Typhoon Noteco, the ultimate UK holding company, recorded a pre-tax deficit of £141m on turnover of £179m in filings at Companies House

Paymentsense’s recent turbocharged growth has been driven by its Dojo product, a rebranded PAX A920, which has taken the UK small business market by storm. The Dojo terminals can be seen everywhere, thanks to its simple and transparent pricing, next day settlement and short contracts.

Reflecting the good sales performance, merchant locations rose 39% to 120,000, with payment volume per location growing 36% to £180,000. This indicates that Dojo is increasingly penetrating larger merchants. Management has stated that the impact of Covid in accelerating cash to card switching has boosted average merchant volume by 20-30%.

All new customers will be boarded onto Dojo and the product has been further enhanced with the addition of a virtual queue and booking management system for restaurants, stemming from the acquisition of Walkup for £20m. Six hundred customers have signed up so far at a list price of £99 per month. 

Management explains that the development of Dojo was only possible once the company built its own processing platform and stopped being reliant on First Data for product. As Nick Fryer, CTO explained in an 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.”

Total cost of sales grew 118% to £87mm, resulting in gross profit rising just 36% to £93m. Additionally, the company has been hiring aggressively, with staff numbers growing 74% to 816 and total employee costs doubling from £20m to £40m in FY 2022.

The company points to a positive underlying operating performance and an adjusted EBITDA of £33m although this is before charging £115m in depreciation and amortisation and a further £51m in net interest expense. Total pre-tax losses were £141m and total net debt stood at £411m at the end of March 2022. The debt funding includes a £320m bond and £110m of loan notes which may need renegotiation before the next repayments are due in October 2025. If Dojo continues to grow this fast, that shouldn’t be a problem.