Endowus’ 2023 loss widens, revenue doubles

Sometimes, you have to dig beyond the headlines to get a better idea of how a company is performing. Endowus’ latest audited financial results are a good example of this.

Gregory Van, the co-founder and CEO of the Singapore-based wealthtech firm, told Tech in Asia last year that it had a “clear path to profitability” by 2025.

On its face, the results suggest that the firm has its work cut out for it to hit this milestone.

Endowus co-founders Samuel Rhee (left) and Gregory Van / Photo credit: Endowus

In 2023, Endowus’ total losses before tax widened to S$30.6 million (US$23.7 million) – a 14% jump from last year. This came even as its revenue grew by more than 2x to US$15.4 million.

Yet, a closer look at the results reveals that Endowus might be closer to its profitability target than it seems. It also shows that revenue growth would have been slower were it not for an acquisition the company made in 2022.

The retrocession riddle

Endowus’ total revenue in 2023 grew by 140% from the previous year.

Breaking down revenue into its component parts shows that the fastest growth was from retrocession fees, which grew by 449% year on year. This was also the biggest contributor to revenue in absolute terms, accounting for about half of the increase in revenue between 2022 and 2023.

According to the financial statements, retrocession fees are incurred when Endowus’ customers execute trades through the platform’s partner financial institutions. These are “based on agreed-upon percentages of the commission earned” by the financial institutions.

These carry a similar definition to a commission called “trailer fee,” which Endowus lists on its website. The company has, since its founding, been adamant about refunding 100% of trailer fees to its clients as cashback.

So why is this a line item in its financial statements?

In a written response to Tech in Asia, an Endowus spokesperson says that “the specific growth in retrocession fees is due to full-year consolidation of Carret’s business, which we had acquired in October 2022.”

Carret is a Hong Kong-based wealth management and investment solutions company.

He notes that the uptick in retrocession fees was because Endowus only earned – through Carret – three months of these fees in 2022, in contrast to a full year’s worth in 2023.

Share-based compensation triples