From a start-up in 2013 to a $935-million valuation in 2021, Lendi has come a long way from the call centre on Pitt Street where it started its mortgage journey.
In most people’s minds, 2020 and 2021 will be remembered as pandemic years. But they were also the years where tech companies, from small fintechs to major players, were able to command stratospheric valuations.
Afterpay became the poster child of fintech success when it was acquired for $39 billion in August 2021 – all before ever making a profit.
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In May 2021, Lendi announced that it had completed its merger with Aussie Home Loans to form Lendi Group.
The deal valued Lendi at approximately $515 million on an $8 billion book, annual revenue of $53 million and no profit. Aussie Home Loans was valued at around $420 million based on a $70 billion book and after-tax profits of approximately $50 million.
Early days and Click Loans
Founded in 2013, Australian Credit and Finance (as Lendi was then known) had big plans.
When it first emerged on the third-party scene, founder David Hyman was eager to use his experience running call centres for groups like Living Social and TSA to transform the mortgage market through a telephone-based brokerage.
From the outset, Australian Credit and Finance operated differently to other broking businesses. Connective was its aggregator, and the business employed telephone-based brokers to write home loans.
The first sign that it was looking to set itself apart from its peers when it announced its first capital raise in 2015. The broker was able to raise $6 million from Sportsbet founder Matt Tripp and BetEasy founder Tom Carroll, along with JumpOnIt founders Colin Fabig and James Gilbert.
From the beginning, it was clear this was no ordinary broking business.
“We went out to a whole network of high-net-worth individuals, as well as family offices and funds, and talked about the business that we’ve built and our views on the future of the industry,” Lendi Group CEO David Hyman told The Adviser at the time.
“That really resonated with a lot of investors, and they really supported what we had built and what we were planning on doing in the future.”
By the time venture capitalists Bailador took an equity stake in 2016, the company had launched online brokerage Click Loans and was moving beyond broking further into the world of fintech.
Graham Mirabito, CEO of CoreLogic at the time, was an early supporter and would later take a seat on Lendi’s board.
“The key here is that digital enablement has to back it up with fulfilment. It is no good doing a mortgage application online and then filling in a bunch of forms afterwards,” Mr Mirabito said at the time.
“I think Click Loans is probably one of the best examples we’ve got here in Australia; just as good if not better than Quicken in the US in terms of their speed and the way they go about their business. That is the new norm,” he said.
At that time, Quicken (now Rocket Mortgage) was the second-largest mortgage lender in the United States.
“Consumers have become used to platforms such as Uber and Airbnb which have changed the delivery of products and services to them,” Mr Hyman told The Adviser at the time.
“We really saw an opportunity with Click Loans to communicate with people about their loan application in a way that they’re used to by bringing a great online experience in a very simple and easy fashion.”
Lendi emerges and swallows Aussie
But by 2019, Click Loans and Australian Credit and Finance were gone. Lendi was the name of the new business.
With fresh backing from Macquarie and $40 million from ANZ, the operation was ready to list on the ASX.
The Australian Financial Review was now calling the group a non-bank lender. In an article published on 8 September 2020, well into the COVID-19 pandemic, the Financial Review reported that Lendi had raised $50 million for a near-$500 million valuation in a funding round overseen by Macquarie and UBS.
“ANZ was among investors to top up its stake in the raising, having cut a $40 million cheque earlier in 2019,” the article said.
“It’s not surprising to hear Lendi's advisers are readying the company for a potential listing. There’s plenty of demand for fintechs and fintech IPOs, with about half a dozen smaller fintechs also in the float pipeline.”
But the IPO never materialised. Two months after the Financial Review story was published, CBA-owned Aussie Home Loans, which was to be spun off along with the bank’s wealth and financial advice businesses, was given a new dance partner: Lendi.
It was the first M&A deal booked by the newly-established investment bank Barrenjoey. The combined business was valued at around $900 million, with the lion’s share (55 per cent) going to Lendi’s shareholders. Aussie was settling over $2 billion in loans a month while Lendi was only pulling in $400 million.
At 30 June 2021, CBA’s 42 per cent of Lendi Group was worth $393 million, giving the company a total valuation of $935 million. In FY22 Lendi’s losses ballooned to $2.5 million as revenue rose to $198 million – but these figures mean nothing without context.
ASX-listed AFG has a valuation of around $420 million on $871 million of revenue and $38 million in net profit.
Yellow Brick Road is worth $27 million on $66 million in revenue and $916,000 in losses.
While established ASX-listed players are worth far less than Lendi, their valuations are based on market capitalisation. If they were private companies, they would be valued on a profit multiple and on the size of their book.
Lendi, on the other hand, has never been valued as a mortgage brokerage. It has been valued as a fintech, using an enterprise value-to-revenue (EV/Revenue) multiple.
According to fintech valuation experts SEG, fintech valuations peaked in 2021 at an EV/Revenue multiple of 19X. They have since fallen to 5.4X.
The halcyon days of wild valuations are behind us now. The tech boom of 2020 become the tech wreck of 2023. The big winners from the pandemic are now seeing their valuations plummet, and mass layoffs are happening in tech companies across the globe.
Lendi has lost two of its original co-founders and a handful of senior Aussie staff. There have also been reports of up to 100 redundancies in recent days, which have not been confirmed by CEO David Hyman.
For now, Lendi has its sights set firmly on ambitious growth. It plans to be as big as AFG in the coming years and be originating 1 in 10 residential mortgages.
[Related: Lendi restructures again, farewells CEO of lending]
