By Lisa Thompson
READ THE FULL CLPMF RESEARCH REPORT
Revenue is ramping even faster than we expected, as shown by the Q3 earnings report. Revenue for Q3 2024 was $521,000 compared to $149,000 in Q3 of 2023, representing 250% growth. In the quarter, the number of new deposit users grew by 101%, and revenue per user increased by 67%. In addition to signing new customers, old customers are adding more products, increasing revenue per customer. Many are signing up for Clip Change to avoid additional trips to the bank for cash. By adding this product, monthly revenues from that customer can go from an average of $120 to $140 with almost no incremental cost to Clip Money. Clip Money (OTC:CLPMF) announced that two of its largest existing customers are adding Clip Change. With expanding margins and increased revenue, we expect that Clip Money should reach cash flow breakeven by the beginning of 2026, if not sooner.
Clip Money is now in the biggest retail quarter of the year, and revenues will increase with an increase in the number of deposits as well as the size of those deposits, although not proportionally. Some deposits will not reach the threshold to meet a higher fee. With all the new customers, new stores, and new deposit locations, Q4 could be up 100% sequentially. While we expect a drop off sequentially in Q1, it should not be as great as the drop off in sales of its customers due to minimums.
In its earnings press release, the company also announced it has signed Genesco as a new customer. Genesco owns 1,200 stores comprised of Journeys, Journeys Kidz, Little Burgundy, and Johnston & Murphy. It began a Clip Drop deposit rollout in Q3 2024, adding 30 stores in Q3 and expects to have 500 installed by the end of the year. While not all of its 1,200 stores are in locations that can use a Clip box, it should be able to add at least 700 easily. We expect that this large customer will end up in the top three customers for Clip Money imminently and reduce the company’s customer concentration, which has been dependent on Lids, Hot Topic, and SunPac for the majority of revenues.
Most of the revenues (89%) in the quarter came from Dropbox deposits, with the other 11% coming from new products–Change Orders and ATMs. The company expects these new revenue streams to continue to grow as a percentage of total revenue over the next several quarters. At the end of the quarter, the company had 409 Clip Drop Boxes installed, up from 363 at the end of Q3 2023, or 13% more.
The cost of revenue for Q3 2024 was $837,000 compared to $640,000 for Q3 2023. The cost of revenue is primarily rent and site maintenance for ClipDrop locations, transaction processing and related services, wages to maintain the platform, and other costs. Processing costs were the main driver of cost increases. While revenue increased 250%, the cost of revenue only grew 17%, getting the company closer to positive gross margins.
Operating expenses were up slightly in Q3 2024 compared to Q3 2023. This increase came from lower professional fees offset by increased salaries, driven by new hires and bonus accrual reversal in Q3’23. Professional fees were lower by $100,000 in Q3 2024, while salaries and benefits were up $352,000.
The operating loss in Q3 2024 was $1.9 million versus $1.8 million a year ago.
Net finance expenses increased by $35,000 in Q3 of 2024 to $497,000. This was caused by the added interest, accretion, and related expenses for new convertible notes and government loans.
The net loss for Q3 2024 was $2.4 million compared to $2.6 million a year ago before the currency exchange. The GAAP loss per share was $0.02 versus $0.03 on a 41% increase in shares outstanding.
Clip Money’s revenues grew 436% year over year for the first nine months of 2024. It is currently at a $2.1 million revenue run rate and has been ramping revenues and decreasing losses as it adds customers and expands its network. The company trades at a $13 million market cap and $19 million enterprise value. We expect revenues in 2025 to reach or exceed $5.2 million based on current growth. At a growth rate of 150%, we believe the company is worth 6.0 times 2025 revenues or $0.25 per share.
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