Change Financial Limited ($CCA)

Good morning, and welcome to the Q3 FY '26 update for Change Financial. My name is Tony Sheehan, CEO of Change, and I'm joined by Tom Russell, Executive Director. Similar to our usual webinar format, Tom and I will run through a presentation and then take Q&A at the end. If you do have any questions, please submit them through the chat function on this webinar. Okay. So what do we do at Change Financial? Many of you have listened to this slide and seen this slide many times, so I'll try and go through pretty quickly. We provide innovative and scalable payments solutions for over 150 clients across more than 40 countries. We're a B2B business with 2 core products, the first being Vertexon, which is our payments as a Service offering, which provides card issuing, card management and transaction processing. Vertexon supports prepaid, debit and credit card issuing, and there are 2 main models under Vertexon. The first is processing only. So under this model, Change provides the technology, which is a card management system to clients to run their card programs. So the clients hold the necessary scheme and regulatory licenses to issue cards. Processing only is available globally and supports all major schemes. So we have clients using Vertexon in Southeast Asia and Latin America, including 2 of the largest banks in the Philippines running over 45 million cards on the platform. The second model is processing and issuing. This is only available in Australia and New Zealand. And under this model, clients utilize Vertexon for processing capabilities and leverage Change's regulatory and scheme licenses and issuing capabilities. So under this model, Change is the card issuer of record and provides treasury, fraud and compliance services as well. Vertexon has generated 83% of the group's revenue year-to-date. Our other core product is PaySim. So PaySim is software, which enables end-to-end testing of payments platforms, processes and scheme rule compliance. PaySim is based on global messaging standards and can be sold globally and is the default testing standard for EFTPOS in Australia and has a blue-chip client base, including 5 of the top 10 global digital payments companies. PaySim has contributed 17% of the group's revenue year-to-date. Importantly, both Vertexon and PaySim are proprietary payments technology platforms, which are owned and developed in-house by Change. So this is important from a value and control perspective for the company, and we do see that in terms of some of the sales that we are converting as well in terms of controlling our own destiny with ownership of the technology. Okay. So some key highlights for the quarter. So continued revenue growth in Q3 as we delivered revenue of USD 4.3 million, up 11% on prior year. Year-to-date revenue is up 23% on prior year with 72% of revenue derived from recurring sources. So this provides a very solid base of revenue to grow from. One-off revenue being our licenses and professional services revenue remain important drivers of overall financial performance. Underlying EBITDA for the quarter was USD 700,000, so taking total year-to-date underlying EBITDA to USD 2.5 million. So throughout FY '26, we have continued to demonstrate operating leverage, that combination of revenue growth and a stable fixed cost base, driving materially improved bottom line performance. We remain laser-focused on scaling the business and generating margin expansion moving forward. And PaaS is a key driver of our growth, and we signed 2 new Australian clients in Q2. So we saw solid growth in PaaS metrics during the quarter. Transaction count was up 12% and volume processed was up 18% on prior year, which is great. Looking at some other key PaaS metrics. We now have over 119,000 cards active in Australia and New Zealand. So that's up 70% over the prior year. That increase in cards has really been driven by the Sharesies debit card program in New Zealand and continued growth in one of our existing fintech clients in the prepaid space. The prepaid cards as a portion of active cards has increased from 20% at June 2025 to 40% currently. So generally, debit cards drive higher transaction activity and hence, revenue as they are often used for everyday purchases. So they're that front of wallet card that you use or the members use or cardholders use for their purchases. So we will continue to drive revenue growth through new clients signed and onboarding and further client wins. I won't go through the PaaS revenue sources in detail on this webinar, but we have it in there on the slide deck, and we have gone through that previously. In terms of the PaaS time line, so looking at our PaaS time line, you can see that steady cadence of new client wins since the launch of the PaaS platform. We have 9 clients live on the PaaS platform. Of these 9, 6 were existing card programs that we have won from competitors. In April, Hnry, one of Australasia's largest accounting services, formally launched with Change and commenced migration of its 30,000-plus debit cards in Australia and New Zealand to the Change platform. And people often ask, why the clients choose us? So Hnry selected Change on the basis of platform capability, reliability and service to support their next phase of growth. Also in the past week, Vertexon has also enabled completion of one of the first authenticated B2B agentic AI transactions in ANZ through a Change issued Hnry card. So that really demonstrates the modern and innovative capability of our technology. We are onboarding currently 4 new PaaS clients, which we are targeting to launch throughout the remainder of calendar year 2026. So these programs will contribute monthly revenue once they launch. A key focus for the business is new client wins, particularly in Australia. We've said this in the last few webinars and quarterly updates as well. So we want to increase the number of new client wins, onboard them quickly and get them transacting to drive volumes and revenue. We want to continue to increase the number of clients we're onboarding. So that gray shaded box you can see on the right-hand side there and then also continue to move those clients from onboarding to live and transacting. Just looking at the sales pipeline. So this is a new slide that we've included in our materials to provide some color as to our sales pipeline. So the sales pipeline growth has been expanding over the last 12 months, and there has been a clear shift in the pipeline quality and maturity across both products. From the Vertexon perspective, we've seen strong progression from qualification to proposal to negotiation. There's continued top-of-funnel replenishment alongside conversion as well. And you're seeing that with some of these client wins starting to come through on the PaaS platform as well. On PaySim, the pipeline is weighted towards proposal stage with a strong conversion outlook. We are also seeing increasing adoption with existing clients. So really additional module expansion, et cetera. We've also been focusing on expanding the partner ecosystem. So this is a common theme you may have noticed in the last couple of webinars as well. So growing the network of partners has been a focus, which is generating more consistent and higher quality lead flow into the pipeline. So we recently announced a partnership with Paymentology, a global processor. So under this partnership, we provide BIN sponsorship services in Australia. This partnership provides us with access to Paymentology's pipeline of opportunities, particularly global client opportunities looking to come into the Australian market. Partnerships are also supporting entry into new regions. So this is particularly so for the 3 new PaySim partnerships we entered in FY '26. You can see from the charts, we have numerous deals in late-stage negotiation with near-term onboarding potential. We expect the pipeline strength to translate into future revenue. Overall pipeline is larger, more mature and more consistent than it ever has been, which is fantastic. We need to continue to focus on closing those deals, bringing those clients on board for both Vertexon and PaySim, so that they're generating revenue and driving growth in our business. Over to you, Tom.

Thanks, Tony. So we had another strong quarter across the board with client launches new sales as well as a strong financial result, which puts us well on track to hit our upgraded guidance from January. I'll just touch on a few of the key points again. Revenue for the quarter, USD 4.3 million or in Australian dollar terms, AUD 6.1 million, up 11% on Q3 FY '25 and PaaS revenues from our Australian and New Zealand clients were also up 21% 12 months ago. Importantly, too, and we don't release margins officially at the half year and the full year is looking at margins in our PaaS business on a quarterly basis isn't really appropriate. But we're continuing to see those PaaS margins expand as we expected. So they were mid-20s in FY '25, 30% in H1, and we're seeing those push into the 30s in the first -- in Q3 FY '26. The majority of the growth in PaaS revenue is coming from our fintech clients, in particular, Sharesies who launched in Q2. So revenue is really only starting to come through in Q3. And with Hnry going live in April, we'll begin to see some revenue from them in Q4 and even more so into FY '27. Sharesies and Hnry, in particular, have some pretty exciting growth plans, and we look forward to supporting those plans beyond what their cardholders are already transacting today. Once those volumes and revenues build, they tend to continue on a monthly, quarterly and yearly basis going forward, of course, with some typical payments industry seasonality throughout the year. We're also currently ongoing an additional 4 new already contracted PaaS clients, as Tony mentioned, and we'll start to see them at PaaS revenues through FY '27. For the quarter, our recurring revenue was approximately 74% of our total revenue, which gives us a strong base to continue to grow from. In terms of that nonrecurring revenue, our licenses and professional services. During the quarter, we delivered USD 1.1 million in one-off revenue, so below those record levels in H1, but still at the upper end of historical levels from previous years. The sales team has also secured a number of opportunities in Q3, totaling over USD 1 million, which continues to build that pipeline of contracted work that will be delivered over future quarters. In terms of EBITDA, we have delivered another USD 700,000 worth of EBITDA for Q3, which takes unaudited EBITDA to date underlying to USD 2.5 million or AUD 3.5 million. Cash receipts for the quarter of USD 4.5 million, up 19% on the prior corresponding period. As Tony mentioned, it was a record for us for a quarter. Cash payments from operating activities were broadly in line with Q3 last year, up only 1% with those key roles and staff in place to add significant revenue without a lot of new hires. CapEx is also holding where we want it, with capitalized development tracking about 10% higher than last year, but well below those levels when before the platform was built. We have a healthy cash position of USD 3 million plus an additional USD 1.4 million in security-backed deposits. And very pleasingly, we're seeing that cash flow pull through as in previous years. The cash flow is typically significantly improved in H2, and we're already seeing that in Q3 and expect that to be the case for Q4 as well. Back over to you, Tony.

Thanks, Tom. So in terms of outlook, so year-to-date FY '26 revenue and underlying EBITDA are ahead of our initial targets, and they are tracking to the updated guidance we provided in January. So for the 9 months year-to-date, we have delivered a revenue of USD 13.5 million, so up 23% on prior year. And as we've said, underlying EBITDA of USD 2.5 million. We have also maintained our guidance of being cash flow positive for the year. So overall, the business has continued to perform strongly in FY '26. As I've mentioned, we are very focused on growing the business and executing on our operating plan to deliver on our targets for the year. We want to continue to scale the business and drive profitability. So that's really new clients driving that growth benefiting from that fixed cost base that we have in place to enable that scale to deliver increased profitability. That's the end of our formal presentation. Tom, I believe we have some questions that have come in, which is great. So I might hand over to you to moderate the Q&A.

Thanks, Tony. I'm going to -- there is a fair few here. So I'm going to -- I'll try not to double up, but just bear with me. So the first question we'll go through. There's a few from Laf from MST. What has the change in Sharesies revenue contribution looked like since the last quarter? Has it accelerated much? And will you continue to expect the same growth level moving forward? I might take that, Tony. So -- and jump in, please. But -- so that -- Sharesies is scaling up. They obviously had an initial waitlist of cardholders that have gone live over sort of the Christmas period and early into the new calendar year. The revenue is building sort of as we'd expect, what will drive future revenue for us from Sharesies is their rollout of cards. So they've launched Apple Pay during the quarter. I think if you ask Sharesies, they'd be quite happy with the rollout. We're certainly happy with how the rollout is going from our perspective, and we'll just keep seeing that growth. But it is dependent on the speed at which Sharesies get uptake from their cardholders. I don't know if there's anything you want to add to that, Tony?

No. Look, I think, Tom, the program launch for them has been very good in New Zealand. The next part as well that they'll be looking at is an Australian card program that they'll be assessing as well. So sort of we're working with them as part of that sort of market assessment that they're doing. So overall, very pleasing to see the results from the Sharesies launch.

Okay. I'll keep going with questions from Laf. I appreciate the extra color on the pipeline chart. Can you give us an idea on the Vertexon pipeline mix by geography? Also, is Paymentology's pipeline included in this slide? I'll give that to you, Tony.

Yes. So the Paymentology pipeline is not included in our pipeline. We don't include that there. That is their pipeline. Any of those sort of opportunities that are coming through and that we're directly engaged with will be included in our pipeline, though moving forward. That would be the same for any partners, by the way. So partners are a referral source, so they will be included in our pipeline, but not their whole client base, if that makes sense. The second part of that question, Tom.

Geography mix.

Yes. Look, we haven't broken that out at this stage, Laf. We're starting with sort of total count of numbers. What we are seeing is that increasing number of opportunities in Australia. We've really reshaped that sales team, as we've mentioned over the last sort of 12-ish months with a key focus on Australia. So there's an increasing proportion of those opportunities that are weighted to the Australian market.

Thanks, Tim. Okay. A question from Nick from PAC Partners. With the new clients onboarding, are they comparable to any of the existing customer profiles, example, prepaid credit unions, fintechs, et cetera? I'll let you take that one, Tony.

Yes. I'm just reading -- just are they comparable with the new clients onboarding. Look, it's a little difficult to compare, say, a fintech to another fintech. I think what's probably easier is comparing a credit union versus another credit union. If they're sort of similar -- they're in that similar space in terms of debit card usage. I think it's very difficult to compare a Hnry versus a Sharesies. Hnry's got those existing cards that are coming across to change financials. So you're coming across with a ramp of revenue that moves forward there. But Nick, really hard to sort of draw comparisons. They've got different value propositions. They've got different use cases as well in terms of how Sharesies uses it versus a Hnry, which is the sort of accounting services provider that does auto reconciliation for sole traders when you're spending. So hard to draw a sort of comparable conclusion there. I would say, easier on a credit union space, but too difficult, probably somewhat misleading on those sort of fintech programs.

There's another question here that says, is the decline in recurring revenues per active card primarily driven by prepaid card making up a larger share of the mix? Are there any other factors contributing to this trend that you can speak to? And I think this is sort of to the point, Tony, we release it as an average because every card is different inside one fintech's profile, they'll have some very active users, they'll have some less active users and they'll have some even less active users. I suspect that will be the same for Hnry. It will be the same for Sharesies. It's the same for the Credit Unions. So I think you do need to sort of look at averages more broadly. And also too, in terms of that declining recurring revenue from the number of cards, it's a couple of things. Part of it is the increase in prepaid cards. So they're less active than a Credit Union debit card, for example, or probably any other debit card for that matter. And there's also just a little bit of seasonality because Q3 -- our financial year Q3 is typically a slower period across the payments industry on the back of everyone sort of spending quite large in those sales periods and also the Christmas and holiday period in the quarter before. Sorry, I'm just -- there's quite a few questions. Another question here. Thanks for the new pipeline slide. Can you give some context in terms of how those figures have evolved over time, example, what would it have looked like 12 months ago? I don't know if you want to talk about generally, Tony.

Yes, I'll talk generally because I don't have those specifics there. There's been a number of changes over that period as well. I think if we look at a sales pipeline for our business 12 to 18 months ago, the business included the U.S. So there was U.S. opportunities included in our pipeline now. As you'd be aware, we have exited the U.S. So a lot of those opportunities or all those opportunities really came out of the sales pipeline. I think -- so that's one change to it. I think the other change that we -- that we would be seeing would be the number of opportunities on the Vertexon side in Australia, as I mentioned in response to Laf's question earlier. There's been a big focus on the Australian opportunities. So the weighting of Australian opportunities has increased in that pipeline over the last 12 months. The other one with PaySim is we'll see in there more opportunities, particularly coming down the bottom of the funnel for PaySim than there was 12 months ago as well.

Okay. Next question. Do you have any research on -- or view on what the size of the TAM and what is a reasonable amount you can get of it? So Tony, I'll throw to you, and I might just pull up our slide in our appendix.

Yes. So it's a fairly -- that question there, Tom, was that specific to anything in...?

Not specific, but -- No.

I might just -- I'm going to give it a very general themes around our products. So if we have a look at our Vertexon PaaS side of the business, in New Zealand, where we've had a lot of traction, we still only have a fairly small portion of the market. I think, Tom, if you go down to those further slides, I think we have about 15% of the market outside of the banks. There's similar to Australia, big banks dominate in New Zealand. So we still have scope to grow in New Zealand. I think we've seen that with Sharesies. I think we're going to see that with Hnry coming on board, bringing across their New Zealand cards and their Australian cards as well. So whilst we've got a good sort of ramp of clients and revenue in New Zealand, there's still scope to increase that. I think in Australia, we have not scratched the surface really. That's part of that big focus that we have on growing the number of clients that we have in Australia. Our volumes are very, very small. I think bringing on those Hnry cards in Australia, that helps us. As I said, we're working with Sharesies to assess a potential Australian launch for their card program. We've signed a couple of new PaaS deals during the quarter as well to really start to push into that Australian market, but we have not scratched the surface of a much bigger opportunity in Australia. From a PaySim side, we estimate that we've got, I think, Tom, it's on there less than 1% of the -- yes, less than 1% of the total addressable market globally for sort of testing tools as well. So again, big opportunity on PaySim. There's -- and we really need to continue to focus on executing that with partnerships because a lot of those opportunities are overseas as well. So the best way for us to access those opportunities really is through our partner network. We have an existing partner network. We've signed 3 new PaySim partners this year. It's really that sort of one to many through the partnerships approach, particularly in regions where we do not have a presence. So still a big opportunity there for PaySim, which we have not capitalized on yet.

Okay. Can you comment on the Cuscal acquisition of Paymark? I don't know if you want to provide a very general comment, Tony, we don't -- as it relates to us more than Cuscal.

Yes. So look, I'm sort of -- I don't really comment on other companies and what their approach is. Obviously, Cuscal being listed for sort of a period of time now that this is their second acquisition that they've made. I think it's the first -- probably their first major foray into the New Zealand market buying the domestic network over there. We are connected and integrated into Worldline and Verifone. There's 2 domestic networks in New Zealand and obviously, into the Mastercard rails over there as well. So in terms of their push into market, I'm sort of probably repeating what Cuscal has said they've got some customers that are pushing them into the market over there. This is probably a foray for them in there. They're not integrating it. They're letting it stand-alone is what they've said. There's probably not a huge amount for me to add. They are a network that we are integrated into over there being Worldline, which is now going to be owned by Cuscal. But apart from that, I don't really see anything else out of that acquisition. It stays as a stand-alone as they've publicly stated.

Okay. And then another one here. Can you add more color around Paymentology? How did that -- how did it come about? What does the shared pipeline look like? How would you rate it as an opportunity out of 10? I don't know if there's anything else you want to add to what you said before.

Yes. Look, I think there's probably not a huge amount to add there. And I think in terms of where we are in the market as a principal issuer in Australia and New Zealand. We can be the processor and issuer. We can be the issuer only under BIN sponsorship, working with processors like Paymentology. We have other partners that are similar to Paymentology that we work with as well on those global opportunities. I think given the sort of nature and scale of Paymentology as a global processor, I would expect any opportunities that would be coming through that partnership to be of that sort of significant scale. The size of those clients typically for Paymentology will be on the bigger end and if they're starting to move into the Australian market. So I think there's probably a good pipeline of opportunities. There'll be bigger opportunities. So it will be fewer but bigger opportunities would be my expectation through Paymentology, but I think it's a very good opportunity.

All right. I think that's it, Tony.

Excellent. That's great to get a lot of questions.

Yes. And thank you for all the questions. We'll wrap it up there. And if you have any other questions, please reach out to us on Investor Hub or via e-mail. We're happy to answer questions any time as well. So thanks for joining us, and we'll see you at the next webinar.

Thanks very much.