Novatti has reported a statutory profit and positive EBITDA for FY26 after cutting low-margin revenue and concentrating on Payments AU/NZ. The turnaround is substantial, but an auditor-flagged going-concern uncertainty, upcoming debt maturities and negative operating cash flow leave the recovery unfinished.
- $646,000 profit attributable to shareholders, versus a $6.11 million loss
- EBITDA rises to $2.8 million as gross margin reaches 54%
- Payments AU/NZ revenue and direct EBITDA improve materially
- Audited results reduce reported revenue by $1.7 million
- $12.845 million net current liability position triggers going-concern uncertainty
Profit returns after a sharp revenue reset
Novatti Group Limited (ASX:NOV) has crossed back into profit, but the more revealing feature of its FY26 annual report is how it got there: reported revenue fell 44% to $28.25 million while gross margin climbed from 30% to 54%. Profit attributable to Novatti shareholders reached $646,000, reversing a $6.11 million loss, and EBITDA improved by $7.25 million to $2.79 million.
The figures reflect a deliberate retreat from high-volume, low-margin activity rather than broad-based top-line expansion. Novatti sold Emersion Systems for $500,000, exited a low-margin overseas service and deconsolidated AUDC after losing control of the stablecoin issuer. The result is a smaller reported group, but one management says is more focused on payments infrastructure and higher-quality earnings.
Payments AU/NZ becomes the turnaround engine
Payments AU/NZ supplied the clearest operating evidence of progress. The annual report’s headline figures show revenue of $13.8 million, up 15% year on year, gross margin of $6.3 million, up 23%, and direct EBITDA of $2.3 million, a 522% increase. The audited segment note reports $14.651 million of revenue for Payments AU/NZ, indicating that the company is using different presentation measures in its operating commentary and statutory segment reporting.
Acquiring customers were migrated to an upgraded omni-channel platform and internal API, while the issuing business added a Visa debit-card partnership with Vivi Money. Novatti also said the University of New South Wales integration went live in November 2025 and had generated more than $60 million in gross transaction value and over $0.9 million in revenue by July 2026. Other disclosed wins included an airline contract extension, a tier-one telco renewal, airport retail acceptance and a distribution agreement with an Asian fintech.
Audited figures change the shape of the result
The final accounts do not simply rubber-stamp the Appendix 4E released on 31 August. Novatti reduced FY26 revenue by about $1.7 million after aligning revenue previously attributed to its Malaysian ATX subsidiary with group accounting policies. At the same time, a $864,000 gain on extinguishment of liabilities lifted reported EBITDA to $2.8 million and net profit from operations to $0.6 million. Basic earnings per share were 0.108 cents.
Novatti says the amendments do not materially affect current or future performance or its underlying financial position. That assessment is separate from the quality of the headline profit: underlying EBITDA remained negative at $2.78 million, although this was an improvement from a corrected $7.06 million loss in FY25. Operating cash flow also remained negative at $2.22 million, despite improving from a $11.31 million outflow a year earlier.
Going-concern warning keeps balance sheet in focus
William Buck gave the accounts an unmodified audit opinion but highlighted a material uncertainty related to going concern. Current liabilities exceeded current assets by $12.845 million at 30 June 2026, while cash and cash equivalents stood at $3.137 million. Novatti’s ability to continue on a going-concern basis depends on a combination of further AUDC share sales, possible capital raising, creditor support, debt extensions or conversions and improved operating cash flow.
The timing is tight. Related-party loans of about $770,000 were due to mature on 31 October 2026, while $3.118 million of convertible notes, with a repayable face value of $3.1 million, mature on 22 December 2026. A separate $1 million Morkim debt facility was renegotiated after year end, with repayment now linked to a further AUDC sale or a capital raising of at least $3 million, and otherwise due by 28 February 2027.
AUDC stake offers liquidity, but liabilities remain
Novatti completed the sale of 1.5 million AUDC shares for $1.2 million before costs in July, retaining 18.5 million shares, or a 43.5% interest. The stake is carried at $5.47 million after Novatti recognised a $1.53 million share of AUDC’s loss for FY26. It gives the group an asset it can potentially monetise, but selling more would reduce its exposure to AUDC and does not by itself resolve the recurring cash-flow question.
The balance sheet also carries a $3.2 million legacy commercial liability under negotiation for conversion into equity, plus provisions linked to deferred consideration from the ATX Malaysia acquisition. ATX vendors are pursuing approximately MYR7.38 million, or about $2.67 million, in the Kuala Lumpur High Court. Novatti is defending the claim, and the report says proceedings are not expected until the second half of FY27.
Bottom Line?
The operational turnaround is now visible in margins and EBITDA, but FY27 must show sustained positive cash generation before the balance-sheet uncertainty materially recedes.
Questions in the middle?
- Can Payments AU/NZ convert its improved margins and commercial wins into consistently positive group operating cash flow?
- Will Novatti need another equity raising or further AUDC sales to meet its debt and legacy liability obligations?
- How will the ATX Malaysia litigation and proposed liability conversions affect the group’s capital position?