Fintel Plc (FNTL) Earnings Call Transcript & Summary

Hi. Good morning, everyone, and welcome to the Fintel 2026 Half Year Results. I'm CEO of Fintel, Matt Timmins, and I'm delighted today to be joined by David Thompson, CFO of Fintel. In terms of the results for the first half of the year, we've had a really strong start to 2026. We've delivered revenue growth of 5.3%, up to GBP 38.6 million. We've delivered strong earnings growth with adjusted EBITDA up nearly 17% to GBP 12.4 million. That's come through an increase in margins, so 320 basis points increase in margin up to 32.1%, up from half year 2025 of 28.9%. We have delivered strong growth in our SaaS and subscriptions, 8% growth up to GBP 26.1 million from SaaS and subscriptions. When we ran the Capital Markets event earlier on this year, we committed to a 40% growth in earnings per share over the course of the next 3 years, and we're delighted in the first half of this year to have delivered a 15.1% increase in adjusted earnings per share. So earnings per share increased from 5.1p to 5.9p. And we've also recommended a dividend of 1.35p for the half year. So a really strong start to the first half of 2026. For those of you who are less familiar with Fintel, we operate across the world of retail financial services. And we are split into 2 key divisions. We have a Software & Data division and a Professional Services division. Both of those divisions serve customers from across retail financial services, including product manfacturer -- product manufacturers, sorry, financial intermediaries, consolidators and aggregators. And both of those 2 divisions operate on strong levels of recurring income. So as you would expect in our Software and Data division, the majority of revenue comes through from the sale of Software-as-a-Service applications and also Data-as-a-Service applications. Within our Professional Services division, we provide compliance and business support to over 3,000 businesses and those businesses pay a monthly subscription for access to compliance and regulation services. So high-quality revenues from high-quality businesses all across U.K. retail financial services. And when we think about the core competencies of our business and those elements of the business that sits at the core of what we do, we have 6 key products -- 6 key data sets. So first of all, we have proprietary data when it comes to product data. We research and rate 43,000 different products across U.K. retail financial services from general insurance products to banking to asset management and pensions and wealth as well. So a huge product database that we built up over the course of the last 20 years, and that really is unique in our market. It's proprietary. It sits within that Defaqto business, and it is what powers our data products and also our research and ratings products. We also, thanks to the acquisition of Pearson Ham earlier on this year, have pricing data now. So Pearson Ham have over 15 billion data points when it comes to pricing of general insurance products. And that's been built up over the course of the last 7 years, and it complements and augments the product data that we have particularly well. And we're using that pricing data now within our flagship data products, which is called Matrix 360. We have buyer behavior data. So over GBP 60 billion worth of advice transactions flow through our Defaqto Engage products. So that's financial advisers giving advice to their clients using our software application. And as they give advice to clients, they go through a system of understanding client needs of creating asset allocation models and then going on to fund selection. So we know the funds that were recommended to the clients and why they were recommended and funds that didn't make the cut, we know why that they fell out of the process. So really important buyer behavior data on over GBP 60 billion worth of advice transactions. We have market trend data. So sitting within our services business, we understand what platforms advisers are using, what pension products financial advisers are using and what providers they're using as well. So we have visibility on over GBP 240 billion worth of AUM across a multitude of different financial wealth platforms. We have over 20,000 users of our software applications. So that's workflow and productivity tools. That's the tools that advisers use day in, day out to give advice to their clients. And we have over 23 years' worth of knowledge when it comes to regulation and compliance. So we take those core components within the business, those proprietary data systems, and we phase them off in sort of 3 main ways. First of all, we build software applications, and we generate revenue from Software-as-a-Service products. Secondly, we build data products in terms of a data application and also we pipe in data in a headless way to a number of different product manufacturers. And then we also build knowledge-based products in terms of our compliance and regulatory support business. So 6 sort of key core components of the business when it comes to data, and they are faced off in 3 main ways: software, data services and knowledge services. We serve the entirety of retail financial services, and we have a very high-quality customer base. We support over 20,000 intermediaries across our membership services and our software products. We work with over 500 of the largest banks, building societies and pension providers. And we work with over 30 aggregators, MoneySuperMarkets of this world and various other price comparison websites. So a long list of very high-quality and loyal clients supporting the growth of the business in the future. Just taking the opportunity here to focus in on one of those particular businesses. So if you take Aviva, for example, who are prevalent all across U.K. retail financial services, lots of different products within their stable, and we provide support to Aviva throughout -- sorry, across both of the divisions within Fintel. So in terms of our services division, Aviva have worked with us for over 20 years in distribution. So that means that we take Aviva's products and solutions and help them promote them out to the adviser marketplace, Aviva help train intermediaries on their products, and they are also included in our protection panel and integrated into our advice technology when it comes to their the wealth products. So we worked with Aviva for a long period of time across the distribution business. And then when it comes to the software business, Aviva also used our Matrix 360 product, which is the leading product that we have in product comparisons. And they license our star ratings. So if you go on to the Aviva website, you'll see that the first point that they reference on their home page is that their insurance is 5-star rated by Defaqto and then they license our research and ratings as well. So a client that buys multiple services from Fintel across both divisions and who proudly displays the Defaqto rating on their home page of their website. So hopefully, that's given you a good overview of the first half results from Fintel. I'll now hand over to David Thompson, who will take you through the finances in a bit more detail. So over to you, David.

Thanks, Matt. Good morning, everyone. Good to see you again. So as you can see, the first half of the year has been about consolidating the changes that we made last year, moving to the 2 divisions and consolidating the growth. So we continue to drive growth and operational efficiency, and that's going to be shown in the first half. So and then hopefully, you can see the business is really well positioned for organic growth going forward towards those 2028 targets that we've announced at the Capital Markets Day. So again, although the focus for the next few minutes will be on key revenue and profitability drivers, it is important to highlight the key acquisition we did in January to add pricing data to the Defaqto insurance product suite. So we've got product set features and pricing now, which is a great step forward for us. And also the strategic disposal of 2 of the lowest margin noncore parts of the business being the Surveying business and the [indiscernible] business, and we'll see the improvements that those 3 transactions have made to the group going forward. So this first slide here is just a precursor of the disposal. So we're required to present the financials on what's called the continuing basis. And what this does, just to introduce the concept [indiscernible] initial period comparatives. So both the 2 businesses were sold partway through the year, we've got under the accounting rules exclude the financial results entirely from the 1st of January, and you can see that presented for revenue here. We do include pro forma for FY '25, so you can form an expectation of the current full year alongside it. So it's half year '25, full year '25, these results, and that will help you with full year '26 in terms of consensus. So on the next slide, group revenues up, as Matt said, 5% to GBP 38.6 million. And there's a couple of revenue bridge slides shortly that show the contribution to growth from organic businesses and the acquisition we made and the makeup of the operating segments. And again, thanks to the efforts in the prior year to restructure the group to continue to deliver profitability, adjusted EBITDA up 17% to GBP 12.4 million. And you can see EBITDA margin up 320 basis points to 32.1%, again, thanks to the strategic disposals as well. So on the next slide, you can see the constituent parts of how the revenue has grown over the period. So we saw organic growth of GBP 0.7 million or circa 2% plus growth from the acquisition we made of GBP 1.2 million in the period. And to give that organic growth some context, so FY '25 as a whole had full year net organic growth of GBP 0.6 million. Again, I'll reiterate during that year of reorganizing the business and integrating acquisitions. So it's good to see that the first half of '26 has marginally exceeded that whole year growth last year already, and we've got the rest of the year clearly still to play for and that just gives us more confidence as to the. And in terms of the revenue growth by operating segment, you can see Software and Data has been a key driver of growth at just under 10% and Services growing just over 1%. And the growth in Services is mixed. We've got good growth in the distribution side, so events, mortgages and protection, but we're seeing membership attrition still continue, albeit at a slowing rate, and you'll see that in the next slide, which is the SaaS and Subscription side. So the key performance measures of the quality of the revenue generated by the business. What we do is we aggregate the revenues from the SaaS products and the subscriptions that we charge and express those as a percentage of total turnover. And what you can see at the half year is 68% of Group revenues came from SaaS subscriptions. That's an important way point on the way of the 70% to 80% commitment that we gave at the Capital Markets Day. And period-on-period, the SaaS and subs revenue grew 8% to GBP 26.1 million. And you can see there the membership attrition of 0.2. That's 0.9% for the full year last year. So we can see that, that trend is turning around. And then on the next slide, as we tie it all together with the P&L and get the segmental income statements for both the divisions. So we again, disaggregate revenue into organic and inorganic just so you can see the different makeup and track the performance of the segment on a like-for-like basis organically. And that really just draw out to the EBITDA margin improvement across both. Software and Data is up 480 basis points, driven by the acquisition of Pearson Ham that's come in at just under 50% margin EBITDA and ongoing synergy realization. Services is up 260 basis points, again, largely due to the disposal of APS, Gateway Surveying, those were traditionally high single-digit margin businesses. So again, once you bring all the PLC central costs in generates a 320 basis point improvement to 32.1%. Again, our long-term goal is to get to between 35% and 40%. So again, sort of on the range. So on the next slide, beyond the income statement, you see EPS grew 15%, and that just reflects the flow-through of that growth in underlying profitability. Now another hallmark of the business, as you are aware of is the strong cash conversion and that benefited in the period from just inherent growth, a more efficient software development team. So you'll see on our coming slide that net debt has come down slightly despite the same levels of activity and a particularly strong performance in H1 working capital, and that's seen the operating cash conversion increase to 144%. So remember, there is a typical skew for the first half of the year as we do receive payments in advance from certain customers, particularly Defaqto ratings customers. But it's improvements across most of the drivers of cash conversion have all compounded to contribute to that strong H1 performance. And H2 will be, again, around about 100% on a full year basis. Again, you can see the net debt position, we continue to invest in the business, product development, further acquisitions. We ended up at GBP 38.2 million of net debt, and that's a ratio of 1.4x. But again, importantly, we've only got one remaining tranche left of contingent consideration of GBP 2.6 million, at which point all the M&A will have been fully funded. So by the end of this year, we'll have completely paid out everything on all the acquisitions that we've made over the last couple of years, and that helps us give confidence to the deleveraging profile. And on the next slide, you'll see a track record of managing leverage in the business. So we've got a disciplined approach to investment. We've got to invest to grow, that's for sure, but always trying to maintain a comfortable leverage position. And we're at 1.4x after that significant investment phase with only just under GBP 3 million left to spend on the contingent. So well within the Board's appetite and looking to repeat that cycle. So 16, I always include this slide, just a different representation of the cash flow. So you can see starting on the left with GBP 17.3 million of opening cash. We generated GBP 17.5 million from operations. And again, importantly, we didn't utilize the facility at all in the first half of the year, and that gave us gross cash resources of GBP 35 million. We then invested the majority of that back into the business, acquisitions, investments, software development, GBP 2.8 million return to shareholders and a progressive dividend and GBP 7.1 million in tax leasing costs and debt service costs, and we closed the period with GBP 7.3 million of cash in the bank. And then on the next slide, we've got cash conversion. So you can see the 144% and the key driver was improved working capital and the slight reduction in [indiscernible] expenditure to GBP 1.8 million. You can see that in the bottom right-hand corner of the screen. And then again, I reiterate normalized cash conversion and operating level sits between 90 and 100 on a full year basis, and we're on track to deliver that. So final slide for me. So again, just in summary, I think we entered the second half of the year with a more streamlined operating structure, a clear strategic focus and enhanced software and service platform to drive organic growth further into the year. And we've continued that growth in the dividend policy by increasing it to 1.35p per share. And with that, I'll hand back to Matt for a summary and outlook.

Perfect. Thank you, David. Turning our attention, first of all, to the -- to our Software and Data division. We've had an incredibly strong start to the year, growing license revenues by over 7%. More importantly, within that business, we have taken the businesses that we've acquired over the last 18 months, which are predominantly sat within the Software and Data division, and we've integrated those businesses well. So we've centralized the sales teams. We brought in a single finance solution across all of those businesses. We've integrated HR, we've integrated CRM. So -- and also unified the way that the businesses develop and engineer products going forward. So a unified technology foundation, including cloud infrastructure across all of the acquired businesses. So we've completed a lot of the hard work over 2025 in getting those businesses match fit to work together from an operational perspective and also not forgetting the sort of cultural alignment of those businesses as well. When you acquire a number of organizations in a relatively short period of time, obviously, that comes with complexities and difficulties in terms of integration of the products and solutions. But often overlooked is the sort of cultural aspects of integration. And we're really lucky that the businesses we acquired, we've worked with for a number of years prior to acquisition. So we knew the management teams well. We knew the founders well and the cultural alignment of those businesses into Defaqto and the Software and Data division has been really, really positive for the business. So we move forward in 2026 with a really well-aligned division in terms of the way it operates and also in terms of the way it thinks about its customers. So we've scaled the software and data services well. We are driving growth in Matrix 360, which was a proposition we've been under development for the last few years. So 27 new clients in Matrix 360. We've expanded into banking and asset management. So only a couple of clients in those markets. That's happened over the course of the last couple of months. So we see potential material growth in terms of banking and asset management clients for Matrix 360. And then when you add in the database from Pearson, that makes that an incredibly compelling proposition. We've grown the proprietary data that we have across ratings and software. What that essentially means is we're now able to rate financial products, not just on the underlying componentry of the product, but also on the price of the product as well. So we can start to build in value-based ratings and family product-based ratings as well. So solid growth in terms of product development. We focus on our AI capabilities within the business. We have a group-wide AI strategy, and we've integrated AI now into our compliance hub. We've got Release 1 in test, which will be released within the next sort of few weeks and into the intermediary market, which will enable intermediaries to use a layer of compliance and regulatory support through the technology solutions that we have. So it's bringing together the support services business with the technology business to make sure that clients of both have access to the right tech and the right compliance. Into our Professional Services division, as I said, we're building out AI-enabled compliance oversight. I think that's really important for our clients. The intermediary businesses want to take advantage of the efficiencies that AI will drive. But as we operate in an incredibly highly regulated market, there is always a concern about outsourcing regulatory obligations to AI. So our view is that we should build AI into the services that we operate rather than that being a stand-alone solution for intermediaries. So we built it into our compliance platform, and we'll be rolling out AI-enabled file checking later on this year as well. Encouragingly, within this part of the business, we are now working with 34 of the top 50 consolidators. So we are selling professional services and compliance services to those larger clients. We've disposed, as David said, of 2 noncore businesses in Surveying and APS will-writing service, which has increased our margin by -- or helped increase our margin by 260 basis points. We focused on sort of key growth markets. So mortgages has been a real growth area for us. Our mortgage completions are up 18% and the revenue that we generate from our mortgage business is up 9% in the period as well. So just to put some color on that, our purchase and remortgages are up 11% and our product transfers up 29%, which leads to an overall growth of 18% across our mortgage business. Mortgages have always been important to Fintel. We have over 1,800 mortgage brokers as part of our Services division. And as you can see there at the half year, our lending is now touching GBP 15 billion, so expect it to be somewhere between GBP 27 billion and GBP 30 billion for the full year. On top of that, we've developed a really good partnership with Mortgage Brain. We have a 6% shareholding within the Mortgage Brain business. And we've taken their sourcing and their CRM and we have deployed those to over 550 sourcing licenses across the membership and over 250 CRM licenses. So a real focus on mortgages in the first half of the year, delivering solid outcomes when it comes to total volume of lending and also the deployment of software products across the sector. In terms of AI itself, as I mentioned before, we work in a heavily regulated market. So you can't just create AI products and sort of throw them over the bank and hope they work well. You have to make sure that everything we develop with AI has compliance and regulation at the heart of it. And at this moment in time, AI can help develop efficiencies. It can help with things like triaging. It can help with next best decisions and actions like that. But ultimately, we still use our compliance professionals at the end of the checking service to make sure that the advice is suitable. So we are building AI already into our file checking service. We have our software engineers using AI to improve speed, improve code quality and improve security with a controlled adoption of agents supporting the software that we retail out to intermediaries. We have AI-assisted tools helping our frontline teams respond to queries quicker. And we have also embedded AI capabilities into VouchedFor, Matrix 360 and Trust. So we're using it within the products that we have. Our developers and engineers are using it to code, and we are using it for frontline support. So it is starting to become a real tailwind for the business. As I said, there's always that caution that we operate in a heavily regulated market. So the pace of AI development within our market is perhaps slower than the sort of other markets around the world, but it's starting to really generate efficiencies for the business, and we see a real tailwind in the development of AI. As we look forward into the second half of 2026, the focus for the business across our Software and Data division is to grow our client base for Matrix 360. We currently have 27 clients using Matrix 360, and we expect to increase that to over 30 by the end of the year. We want to launch our industry-first AI-enabled compliance platform. That's in test and development at the moment, and we expect Release 1 to come out before the end of the year. In with that, we will also have a single sign-on for the Defaqto, VouchedFor and our Compliance platform. And that means as a client of one of those applications, you can sign into that application and then seamlessly move to the other applications that we have without having the need for repeating, re-signing in. And then the final stage of that will be to deliver the workflow and connected data across those 3 applications as well by the end of 2026. So software development and the growth of Matrix 360 in our Software and Data division. When it comes to Services, we want to further increase the penetration of technology services across the customer base. So continue to roll out CRM to our mortgage advisers, continue to roll out sourcing to our mortgage advisers, continue to promote and deploy the investment that we have in Plannr across the membership base and to also broaden the proposition that we have for those 34 consolidators that we provide regulatory support to. We want to grow our proven mortgage club. So we have entered the whole of market mortgage arena in the first half of this year, providing protection services and mortgage solutions to non-Fintel clients for the first time. We are -- we've grown our mortgage lending by around GBP 1 billion when it comes to non-Fintel clients, and we see further growth in that this year. And we also aim to launch a wealth platform partnership across the membership base later on in 2026. In terms of the investment case going forward, we are a high-margin data-led business that's built on recurring revenues. You've seen from the presentation how operational gearing really works in this business, the quality of data that we have and also the quality of recurring revenues that we have across both divisions. We are targeting a Rule of 40 performance with over 5% organic growth delivered at a margin of over 35%. We believe AI is a huge tailwind for our business that will accelerate growth and value in a measured way in a really regulated business. We have a solid core moat in the propositions and data sets that we have within the business and the long-standing trust that we have with our clients. We've targeted to grow EPS by 40% over the next 3 years, and we started off well in that journey with growth of 15.1% in the first half of this year. As we stand today, we're confident about the rest of the year, and we're currently trading in line with market expectations. So a really solid first half of 2026, and we look forward to continuing to grow the business even more as we reach the end of the year. Thank you very much for your time.