In a bid to save money, Dexit Inc. on Thursday announced it has slashed its workforce by roughly half.
Dexit, which is based in Toronto, said it would reduce its staff from 55 to under 30 employees. The company, which provides a service that allows customers to pay for low-cost items using a RFID tag instead of cash, also said it will scale back the number of retail locations in downtown Toronto and the surrounding area that provide the service. Dexit says it currently has 450 merchant locations and 50,000 customers — up from 225 merchants and 25,000 customers in April 2004.
“The focus right now is managing the cost, getting the company focused and executing on a strategic partner, at which point we’ll start to get more visibility on profitability,” said David Campbell, chief financial officer at Dexit.
While Dexit’s total revenue was up in Q1 2006 from $552,627 for the same period in 2005 to $833,922 for three months ended March 31, 2006, it’s overall expenses have risen from $2.8 million to $3.1 million. Dexit reported a net loss of $1.8 million in its Q1 2006 report compared to a net loss of $2.3 million for the same period last year.
Dexit also announced it has formed a “Special Committee of the Board,” which is comprised of three board members, including chairman of the board John McBride and two other board members. The committee has also hired a U.S. financial advisor, Kirchner and Company.
The release of Dexit’s Q1 report coincided with the two-year anniversary of a partnership it struck with Bell Canada in April 2004 that gives Bell exclusive marketing rights to implement Dexit across the country and Dexit the right to use Bell’s IP network. The Merchant Licence Agreement or MLA, which was supposed to be for five years, is currently being renegotiated between the two parties. Under the terms of the agreement, Bell has the right after two years to terminate the contract.
“Those discussions have been ongoing for quite a while,” said Campbell. “We haven’t completed negotiations but we’re talking constantly trying to come up with an agreement that makes sense for both of us.”
The deadline for the renegotiations was originally extended to the end of last month but Campbell said the two parties likely won’t reach an agreement before the end of the summer.
Neither Dexit nor Bell would get into the specifics of the negotiation but a Bell spokesperson said it continues to see Dexit as a “value partner.”
“Overall, Bell Canada’s pretty excited about the trend towards electronic payment options, whether it’s implementing a cashless vending machine at the Ambassador Hotel in Kingston or using your cell phone,” said Mohammed Nakhooda, a Bell Canada spokesperson.
Campbell said Dexit in the meantime is looking to focus its efforts on white-label solutions such as the Starbucks card, which allow customers to put a cash value on a card that’s used exclusively at that retail location. He added that this type of solution has a shorter sales cycle and shorter implementation cycle than the Dexit method.
“They’re self contained,” he said. “You don’t have that chicken and egg issue.”
Since Dexit’s launch in September 2003, it has been somewhat limited by the small number of merchants that feature the service, making it less convenient for customers to use. Retail analyst Rena Granofsky of RIT Experts in Toronto said the best solution would be one card that handles all types of transactions.
“The solution that’s going to win is going to be the one that provides the most convenient.”