Finseta Plc (90W.F) Earnings Call Transcript & Summary

Good morning. Welcome to the Finseta plc Investor Presentation. [Operator Instructions] Before we begin, I'd like to submit the following poll. I'd now like to hand you over to James Hickman, CEO. Good morning, sir.

Good morning and thank you. Right. We'll just dive straight into it. Just as a reminder, Finseta, we have built a complete financial ecosystem to support businesses and individuals with all their payment requirements. A little bit of history on the business. We've transitioned over the last couple of years away from a one-dimensional FX business, predominantly focused on individuals to a much more specialized payments business focused on providing account-based solutions for larger corporate clients with more complex needs. We've done this through our proprietary platform, which we've built out, which ultimately enables us to provide customers exactly what they need. So we're not reliant on third parties. We've also built out a very strong banking network infrastructure and a very strong compliance and regulatory framework, which allows us to onboard customers with more complex requirements. We do this all backed by professional expert service provided by account managers. So not only do our clients get a very good technology platform and banking infrastructure, but also a personalized service, which really sets us apart from some of our competitors. On the -- go straight into sort of 2026 H1. From the strategy, you can see B2B growth very much growing from 75% -- sorry, up to 75% of the mix. A couple of years ago, just as a reminder, this was much more like 25%. So we've made significant strides in that area in the B2B focus. We are increasing our active user numbers. And you can see there that this is validating not only the system but also the strategy. And we've increased our margin slightly up to 66%, our gross margin. Part of the strategy has been very much to diversify. The Dubai office had a significant jump in revenue up 224% year-on-year. Some -- we have no doubt had some challenges in the first half of the year. Certainly, primarily the macroeconomic headwinds that ultimately have affected a lot of businesses. Sales cycles have definitely been extended. Now whilst we're onboarding customers, customers are doing less than we would like and less than expected and ultimately is suppressing demand in the short term. We did have an interruption on a particular currency corridor, which we have now resolved, and we expect to go live in the next few months or so. But again, it's sort of testament to our strength and depth in terms of our banking infrastructure that we can ultimately adapt and move very quickly to replace. I'll hand over to Andrew for the financials now.

Yes. Good morning, everyone. I'll just highlight some of the key financials for the period. In terms of revenue, we're reporting revenue of GBP 5.4 million. As James mentioned, this does incorporate and reflect our corporate customer focus with corporate customers now representing 74% of our total revenue with the remainder being high net worth individuals. And we believe corporate source revenue is higher quality and more repeatable revenue streams. In terms of our Dubai office, revenue has grown significantly over the period. And whilst group revenue overall has declined year-on-year, this growth in the Dubai office does reflect that our strategic repositioning has continued in line with plans. James just talked about our active customers, which have increased by 26% year-on-year. But overall, we do believe that revenue does reflect some of the temporary adverse impacts of general macroeconomic headwinds, and we are seeing slightly longer sales cycles than anticipated in our target markets, which we do think right-shift some of our revenue into the second half of the year. Just focusing on gross margin. We are pleasingly seeing an increase in our gross margin from 63% to 66%. We do believe this reflects our improved quality in our revenue streams. And it also does incorporate some refinements to our sales commission structure that we made during the period. And lastly, just talking about EBITDA in terms of our key headlines. We have reported an EBITDA loss of GBP 1 million for the period. This does reflect the suppressed revenue I've just referred to, but also incorporates our expense base, which is in line with expectations and does reflect the recent investment that we've made in the business. I'll briefly talk around a bit more detail of our revenue mix and what the components of our revenue. As referred to, we have grown our Dubai operation, which has grown by -- which has shown revenue growth of 224% year-on-year, which is very pleasing to see. In terms of our corporate sector, it's up by -- our corporate sector revenue is up by 19% year-on-year, now reflecting the 74% of total revenue as we've referred to, and active customers are up by 26%. So whilst we are seeing that with the growth in our active customers, but a reduction in our revenue that average revenue per customer is down, we do think that some of our newly acquired customers are still ramping up their volumes with us. And as James referred to, the revenue does reflect the fact that we did see a pause in our -- a temporary pause in the currency corridor, which we've now rectified and expect to bring revenue back on stream over the course of the second half of the year. And just lastly, I'll cover a bit more around our expense base. Our expense base reflects the fact that we have invested in the business over the course of 2025 and 2026. The biggest investment in our expense base has been in our staff. In particular, we've invested in growing out our Dubai operation, investing in our sales teams and invest in some of our back-office functions such as compliance, technical and our settlement team. Overall, we believe that this investment in our staff is central to delivering our future strategy. Okay. James, back over to you, please.

Thank you. So a little bit about the highlights -- sorry, the strategy and where we are today. So ultimately, we've made significant progress on the shift from consumer to business, which was very much highlighted specifically around repeatable revenue and much more visible revenue streams. So for example, historically, very much reliant on sort of FX transactional revenue, whereas actually now providing an account-based solution, we can actually charge monthly fees, inbound fees, outbound fees, et cetera. So not totally reliant on FX transactions, which is very, very important as the business grows. We've invested significantly in our banking and sort of banking infrastructure and technology platform. And ultimately, again, this allows us to connect very seamlessly into other banking providers, into other counterparties. Historically, API connectivity has been difficult, but we've completely revamped the platform, modern technology to allow us ultimately to streamline that. And typically, we can integrate within a period between 3 and 6 weeks, which makes a significant impact, particularly when we're seeing new revenue streams in new regions. We now have a diversified geographic portfolio of business and also a diversified portfolio vertically. Dubai, as you've seen, revenue increasing significantly. And we are extremely positive on the region despite the sort of macroeconomic environment, which continues. Longer term, we are very positive on the region in terms of potential growth. We focus very much on higher-margin business. Ultimately, payments is a competitive market. We very much invested in areas where we know we can maintain margin and particularly around the regulatory and compliance piece, that's very, very important to make sure that the business operates in a regulatory compliant fashion, both not only here and in the U.K. And one of the things in Dubai, for example, we got an extension of our permissions to allow us -- it's called Retail Endorsement to allow us to ultimately deal with all customers. So we make sure that we operate in a regulatory compliant fashion. And lastly, the Board still remains very confident in the medium term that this strategy will deliver significant value for shareholders. And with that, I will open it up for questions.

Perfect. Thank you for updating investors today. [Operator Instructions], a recording of today's presentation will be available on the Investor Meet Company platform shortly after the meeting has ended. Guys, as you can see, we have received a number of questions during today's presentation. So James, if I could just hand back to you at this point to read out the questions and give responses where appropriate to do so, and I'll pick up from you at the end.

Sure. Thank you. Yes, we've got quite a lot of questions. So I'll try and rattle through them. I appreciate we haven't got that much time. First one, does targeting more complex corporate customers require materially higher onboarding or compliance costs? And how does that affect customer acquisition payback? Very good question. Yes, the more complex customers do require more eyes on. So ultimately, we have the expertise in-house. Having said that, the more complex customers should and will deliver much higher longer-term revenue streams. So in terms of the investment in doing that, it is worth it. We have internally embedded a number of compliance sort of external compliance systems to allow us as much as possible to operate a straight-through model. Now the onboarding piece is obviously where you've got to be very careful and make sure, you're weeding out the bad actors. So that, to a degree, there is some manual intervention. But ultimately, we still onboard even complex cases between 24 and 48 hours. So we're significantly ahead of our competition there. The next one, probably one for you, Andrew. Given the revised full year '26 outlook, continued investment requirements that -- what gave the Board sufficient confidence in liquidity to repay the GBP 250,000 of short-term working capital facility on the 9th of September. And does the Board anticipate requiring additional external capital before reaching sustainable positive free cash flow?

Yes. In terms of the short-term working capital facility that we have, we have that ring-fenced separately. And so we manage that very tightly such that we know that we do have sufficient liquidity to repay that at its expiry date. So there's no concern on that particular facility. In terms of our own internal forecast, we do believe that we will be in a position to generate positive free cash flows in an appropriate period of time such that we're not overly concerned about the liquidity position of the business.

Next one, Shore forecasts approximately GBP 15 million revenue in full year '27, at which point the business approaches adjusted EBITDA breakeven. What gives the Board confidence that the existing cost base and infrastructure can support that level of revenue without a commensurate increase in operating costs. I'll answer the first bit of that. Ultimately, the business, as I said before, over the last 2 years has invested significantly in its infrastructure, in its operating base, ultimately to try and streamline as many of the processes and procedures as possible. And therefore, we can layer on additional transactional volume at no cost. So ultimately, more and more customers are now using the platform. The transactional flow is very much a straight-through process now. We've, as I say, invested very much on technology to try and ensure that ultimately, we can build transactional revenue and transactional volume without increasing the cost base. Is there anything you wanted to add, Andrew, on that one?

No, I think that's what I tried to get across in my slides earlier that we've got our expense base set up to be able to deliver our future strategy, and it's not the other way around where we will need to increase our cost to deliver that strategy. It's already in place. And therefore, we expect to be able to incorporate that revenue without significant incremental cost being incurred.