Beforepay Group Limited (B4P.AX) Earnings Call Transcript & Summary

Good morning, and welcome to the Beforepay Quarter 2 2026 Investor Webinar. My name is Jackie Pfenninger, and I help with Investor Relations for Beforepay. With me this morning, we have the CEO of Beforepay, Jamie Twiss; and CFO, Laavanya Pari. Before I hand over to Jamie, just to note that we will be having a Q&A session at the end. [Operator Instructions] I would like now to hand over the webinar to Jamie. Please go ahead.

Thank you, Jackie, and thank you, everybody, for joining us this morning. I'm delighted to be presenting our second quarter results for the quarter that ended on December 31, 2025. As Jackie noted, I'm Jamie Twiss, the CEO, joined by Laavanya Pari, our CFO. We'll run through the numbers and the highlights from the quarter to start, and then we'll take questions at the end. As Jackie mentioned, you can type in questions at any time into the box, that should be available on your screen. So I'm very pleased with the quarter that we just had and with the results that we printed. Those of you that have been following our story for a few years know that the second quarter of each year is where we traditionally see an increase in defaults as a result of the holiday season spending that people do. And as a result, we do see that higher default rate compresses margins. So we see a lower profit number in Q2 very reliably every year. So it happened this quarter, it happened last year and the year before as well. Because of that, what we tend to do when we look at Q2 to decide if it was a good quarter or not is we look at 2 things. We look at top line growth in the core business, and then we look at our progress on the strategic growth initiatives that we have underway. And I was very pleased with how both of those turned out. Laavanya will go through the numbers in more detail, but we had an 18% year-on-year revenue increase, which is driven primarily by increases in the average advance size. And then we've had a number of meaningful wins and progress steps on the strategic growth initiatives, which I'll come back to at the end. So I'm pleased where we're at overall for the quarter, and I'll hand over to Laavanya to talk through the core business.

Thanks, Jamie. So as Jamie said, we've had some progress on our revenue numbers, driven by the average advance size increasing to $470 as an average number, which has grown 18% year-on-year. That has directly led to our advances increasing by 17% up to $240 million, which then has translated into our revenue numbers, which have grown by 18% up to $12 million. So as Jamie said, our net defaults have -- are seasonally higher than the previous quarter, but as we would expect at 1.85%. This has led through to our net transaction margin at $5.9 million, which is pleasingly 22% up year-on-year. So as our operating expenses, as you go through our P&L has increased to $5.2 million, and this is predominantly because of marketing expenses as well as an increase in our salary numbers, which is because of growth in our business.

And that's driven primarily by the investments in our growth initiatives, particularly around Carrington Labs and in the personal loans business as well.

And that has led to a $0.3 million net profit before tax. I'll just hand it back to Jamie.

Yes. So I think the numbers are very straightforward. It continues to be an easy business to understand. So the core business continues to perform well. If I think about where we're trading in the quarter that's currently underway, everything we're seeing is in line with the normal trends we would expect. So we do anticipate that number to come back down as the holiday season is now over. We'll see those margins normalize over time. And traditionally, Q3, we see a potentially slower growth number than Q2, but a better margin from the number. So feeling good about where we're at in terms of current quarter, which is trading in line with expectations. Now on the strategic growth initiative side, it's been a very productive quarter for us. We've had a lot of good news coming out of Carrington Labs. I'm delighted that we're able to announce other client wins with FlexCar, which is a significant car leasing business in the United States. It's nice to have an automotive client, and it's a very sharp organization. We're really enjoying working with them. We also have a new partner that we're excited about, Sea.Dev. So they work in automation and -- particularly around document automation in financial services. And so they're a great partner for us because they sit adjacent to Carrington Labs in the value chain. A lot of what they do is bringing data into a lending origination workflow. And so that obviously is a natural input point for us as well. So really pleased that we're working closely with them, and we think that's going to be very helpful for joint clients going forward. And then finally, we did previously put out a market announcement about this. We launched an MCP server, which is a way that will enable banks and other lenders who are building AI -- Agentic AI workflows to integrate Carrington Labs tooling into those workflows as well. So a very productive quarter for Carrington Labs. We continue to feel quite confident about the prospects for that business. As Laavanya noted, we -- our OpEx is up off the back of investing primarily in those growth initiatives. I think if we had known how well the Carrington Labs product was going to be working and where the demand would be, we probably would have made these investments even earlier, but we've added additional resources to our U.S.-based team, and we've upped the tempo in terms of our activity there. So feeling very confident about Carrington Labs where that's at. And then on the personal loan side, which is a little bit the quiet achiever that we're just quietly growing and scaling in the background. We continued to ramp that business. We published the origination figures in the quarter, but we continue to put out loans at increasing scale there. Those of you that compare last quarter to this quarter and do the math about the loans that we're issuing now will note that the average loan size for the personal loan has increased to about $3,200 in the previous quarter. So previously, we were capping loans at $3,000 in 3 months. We've now started testing larger durations and larger volumes as well. And I think we continue to feel quite optimistic about that where that will get to. So very happy with how the core business performed given the seasonality of Q2 and then really pleased with the progress on both personal loans and Carrington Labs as well. Going forward, I think we continue to see blue skies ahead for all 3 parts of our business. As Laavanya noted, we are continuing to invest, and you will see that coming through on the OpEx line. Again, I think if we've known how well Carrington Labs, in particular, is going to go, we probably would put more money into it earlier. We think there's a very significant opportunity for us to capture, and we are going to make sure that we invest properly to capture that as well. So to summarize, I think in Q2, the core business performed in line with or actually somewhat better than expectations, and we're very pleased with our progress elsewhere in the business. And with that, happy to take your questions.

Thank you, Jamie. Thank you, Laavanya. We will now move to the Q&A session. [Operator Instructions] I see a few questions coming through. So Jamie, could you provide the quantum of Carrington OpEx? And when will you start publishing Carrington revenue?

Yes. So on the OpEx, it's a little hard to fully disentangle it because we have a lot of people such as the two of us who work across both. I spent quite a bit of time on Carrington Labs, both representing the business in the United States and also hands-on the tools, writing code, building models and so on. If you look at the increase in OpEx over the course of the past year, most of that increase has been around building the integrated set of technology and tooling that powers Carrington Labs. It also powers personal loan business, and we're using it in the core business as well. So we are getting a lot of mileage out of using that investment and that capability across the different aspects of our business. So I can't quite say that, that entire increase is all Carrington Labs. But directionally, the reason that OpEx is up $1.6 million over the past year is because of the strategic growth initiatives and the work that we're doing around supporting them, particularly Carrington Labs. In terms of when we'll publish the revenue, this is a first world problem to have. Because the core business is going well and growing quickly, we're now approaching $50 million annual run rate in revenue across the entire group. The Carrington Labs revenue is still not particularly material to the group as a whole. I think we will -- there will be a point at which it makes sense to break that out separately. I think we would for now tell people, we've been -- we've disclosed the 4 clients that we're able to talk about at this point. I think you can safely assume that the revenue off the back of those itself is nothing really to write home about. In part, we're trying to kind of continue to get traction and get more reference clients in cases, and I think that's going very well. When it becomes material to the group, obviously, there will be a point at which we need to break that out separately. But I don't think it would be very helpful.

Okay. Next question. Can you walk through your customers at Carrington Labs and what stage of launch they're at?

Yes. So I think I'll talk about the customers that we've mentioned to this point publicly. And I'll talk broadly about where different ones are at. I don't want to go into too much detail about the business of each one and where they're up to and so on. But the customers we talked about so far is Kiva, which is a kind of micro business lender, while these are all based out of the U.S., Doc2Doc specialty medical lender, CC Bank is a more sort of just -- I say traditional bank, they're quite a forward-thinking bank, but they're a U.S.-based bank. And then most recently, we announced FlexCar, the car leasing company. I'd say they are at all different stages from very early to fully live in production. And they're at all different stages. We find that also sometimes clients will have sort of a one-off build something that they need and then they're using that. Does that feel live or launched or not? It can be a bit definitionally tricky, but we absolutely have a number of clients live production today.

And what do you now have in your pipeline? And how varied are the sizes of these potential customers and current customers?

So, quite a lot in the pipeline. As I said in the past, I think one of the things that we've struggled with is having, if anything, an overall top of pipeline in particular. And so I think some of the investments we're making are to get people who can help us move those prospects through the pipeline, particularly as you get into the middle of the plan and the proof of concept, there's more technical work required, not so much on our side in terms of model building, that's quite heavily automated, but in terms of helping the client understand the data they need to get to us and how they get it to us and kind of working with them to go through that. So there's quite a lot in the pipeline. It is quite varied. So we have some of the largest banks in the world in that pipeline. And again, I never want to overpromise or implies that what's going to land and when, large organizations of all kinds, particularly banks can be slow and have long sales cycles. But we have some very, very large banks. We have -- well, the banks, we run all the way from the very, very top down to sort of the point at which you would say actually that's -- the cutoff there is more where it just becomes too small for us to think about. Certainly, plenty of fintechs. I think fintechs and kind of sort of newer start-up lenders of various flavors are good clients for us. They have clean data stacks and kind of get why this stuff is important. We are having a number of discussions in kind of different types of specialty credit. I think one of the things that Carrington Labs is really good at is if you have a customer base or a product that is just not kind of that very middle of the road familiar product to customer, then traditional approaches, which are very generic, really are not very helpful for you. So the specialty medical lending is a good example of that. We are still focused primarily on the United States. But I think when you do work in the U.S., you also start to have conversations in Canada. And on a selective basis, we are having conversations in other markets as well. We're consciously not wanting to try ourselves too thin, but it's an opportunity-rich environment, and it's a very broad and diverse pipeline. We just need to make sure we invest properly the resources to get them through to the clients.

Good. We have another question here on Carrington Labs. So with the recent appointment of an SVP Head of Revenue, does this signal that Carrington Labs is now scaling rapidly and generating significant revenue?

So first of all, I'd like to compliment whoever asked that question for picking up that we have indeed appointed a senior sales leader in the U.S. We already had a sales resource on the ground, but we've brought in a heavier hit to lead that team, and I think feel good about that hire -- there's good progress there. I think, yes. The answer is yes. I was slightly hesitated when we say significant revenue because significant could mean different things. I don't want to overstate the actual revenue coming in the door right now. It's not nice. But as I said earlier, it's not material to the overall group. So I don't want to mislead on that front. But I think you can see that higher as both an expression of the level of activity that we're trying to kind of support and service already as well as our confidence in what that will look like going forward.

So you have another question here. Assuming all goes to plan, where do you see Carrington Labs in terms of revenue to the overall group in 12 to 24 months?

12 to 24 months. Again, it's first problem that the core business continues to grow strongly. And I think as personal loans start to kick in that will be another leg of growth as well. So it's a little bit of a moving target as the core business continues to grow as well. I think if you think about kind of the sales cycles for the large banks that will generate very meaningful contracts, they are slow. So if you're really only looking 12 to 24 months out with clients live in production, you're not going to be sort of like a very meaningful portion of the group from a revenue point at that point. If you're asking sort of longer term kind of where can Carrington Labs get to kind of be bigger than the core business, then again, without making a forecast overpromising, of course, it can. The scale of the global financial services market, the value created by a smarter approach of lending, the head start that we have on this capability is tremendous. I never want to overpromise on the time line. As I've said a number of times, these are slow sales cycles. If anything, we've been living kind of 18 months in the future at times, and we find that some folks are just now starting to understand what it is that we even do. From a competitive point of view, that head start has been tremendously helpful. I think will continue to be so. But I don't want to overpromise on time line, but the potential. Absolutely. I think where we are putting our time and resources and our focus is a very credible signal that we are very confident in the opportunity.

That's great. You have another question. So for existing Carrington Labs customers that are fully live, how does their usage of the product stack up? Example, Plenti's NAV auto loan product has taken longer than the market expected to get traction. So how should we think of uptake of these products given large companies can be slow movers?

Yes. I think they can be -- and the truth is small companies can be slow movers as well depending on the nature of what they're doing. And it is -- I mean, it's not a complicated product to use, but what Carrington Labs does is it gives you a better way, usually supplementing not replacing, but it's a better way using it is very, very core of what it means to be a lender. So we really are running a wire into the brain of the organization. And that's something that clients kind of want to get their heads around properly. So clients can be slow to get through that sort of decision-making selection process. And then depending on their tech stack, they can be slow to just actually do the integration and stand things up. It's not hard to use, have to call the API, but they may have to do data work on their side and they have their own risk checks and diligence and things to go on. So again, I -- if you ask me over the long term, kind of like will the folks that we're talking to, will we see a number of them successfully convert and get live into production at volume? I think the answer is yes. I just find any time anybody predicts how quickly a large bank is going to go from an idea to something fully live in production. The odds are you're -- it's going to take longer than you guessed. So I never want to overestimate or overpromise on the speed of some of these opportunities.

Your next question is, are you seeing new competitors to Carrington Labs with the hype around AI?