Lincoln Indicators Pty Ltd (PFG) Earnings Call Transcript & Summary

Welcome, everybody, to this afternoon's webinar, Prime Financial Group, following an acquisition of Lincoln Indicators. During the presentation, we're going to go through a formal part of the presentation, which will probably go for 10 to 15 minutes, and then we'll leave plenty of time for questions and hopefully get to all of your questions. And thank you for those that have actually already shared a bunch with me as well. But with us here today, more importantly, we have the Managing Director and Chairman, Simon Madder. So welcome, Simon. And alongside Simon is Peter Bergin, the Head of M&A and a member of the finance team as well, who no doubt some of those financial questions, Simon will be throwing to him to pass and answer those. But look, without further ado, let's get underway. There's a bunch of you that have joined us, so that's really encouraging. But over to you, Simon, to get things underway.

Great. Thanks, Adrian, and thank you, everyone, for joining today. An exciting acquisition that we have been working on now for over 12 months and looking forward to giving an update on how that fits into our business. We'll go to the first slide, if we can, please, Adrian. What I thought I'd do just to kick off is actually just touch on a little bit of detail about who we are. And then I think contextually, it will make a lot more sense why we've undertaken this transaction. So in terms of the firm Prime, we are an advice capital and asset management group. The business was founded 26 years ago, very much around this concept of connected advice experiences. That is very much the case continuing today. And our core clients are really businesses, often emerging businesses turning over $1 million to around about $100 million, often founder-led and also high-net-worth investors. And there's a real crossover in our business between those 2 core segments for us. We very much believe in untapped opportunities and today's conversation about growth and acquisition is part of, I guess, our core philosophy. Pre-transaction, we had $1.3 billion of funds under management within the business, 189 team members, a global footprint, predominantly with offices here in Melbourne, Sydney and Brisbane. Four core service lines that make up those 2 core segments. And as I said, the business has been in operation now for 26 years. Next slide, please. So in terms of the clients we look after, over the course of our journey, we've actually supported about 5,000 clients for wealth management and SMSF. Over 2,000 businesses have been assisted in their journey. We're seeking to empower them to achieve their aspirations. Over 1,000 clients have been assisted typically through R&D tax incentives to get their innovation and new product development funded. There's over 100 businesses, SMEs, that we've invested in through our alternative asset funds management division called Altor, that's in the last 5 years. Over 500 businesses that we've assisted with growth, transition and succession. And this generational intergenerational wealth transfer is going to take place in this country is a key theme that we're seeking to participate in and to support people in terms of advice. Not only does Prime deliver advice in a very connected way for our own clients, but we also support over 250 other professional advice firms, accounts, financial plans and stockbrokers to deliver services to their clients, their version of the one connected philosophy. Next slide, please. In terms of what we do, as I mentioned, there are 4 key services that we offer in those 2 core segments, being the business segment and the wealth segment. That is very much supported by a strong and now well-developed, centralized and shared services structure that supports the development of the business across finance, IT, HR, marketing and operations. We have 34 team members of our 189 team members that are in the centralized shared services structure. And it's that structure that's allowed us to continue to increase our acquisition activities. In terms of the business segment, we do deliver accounting, business advisory and corporate finance services for our clients. It's actually quite broad and quite meaningful in terms of how we can do quite a lot under the one roof. In terms of the wealth segment, and this is where we started our business 26 years ago, investment advice, financial planning, originating transactions within the alternative asset property sector as well has become a key area that we're involved and also assisting on the SMSF front around advice and administration as well. So a very comprehensive business that we believe can actually deliver a whole heap of value for our clients, as I said, under the one roof. And I'll demonstrate that on the next slide, if we can, please, Adrian. This is how we think about our business. So this is how we do it. This is what we call our one connected philosophy. So a lot of our organic and inorganic activity relates to building out what we can do for our customers, increasing the number of customers that we can serve and making sure they have an exceptional experience. Often, clients will come to us for one particular issue, and that could be any of the issues that are outlined in those 2 circles that connect in the middle. And then what we seek to do is to make sure that we can deliver more value for them through the one office or the one business. So this wagon wheel, if you like, will continue to build out. And what we've been able to add to this is a couple of new areas by virtue of the Lincoln Indicators transaction. Next slide, please. So let's touch on the transaction. I really wanted to highlight probably some of these key statements below the transaction overview for Lincoln Indicators. This is a quality business with strong recurring revenue. Almost 100% of the revenue in Lincoln Indicators is recurring in nature, a really quality earnings profile, increased capability that adds to what we can do, opening up new markets for us and the ability to cross-sell what we've already got to that client base plus what they've got into our growing client base as well. Next slide, please. So think about Lincoln Indicators as a platform for future growth. One of the things that really excited us about this opportunity in bringing these 2 businesses together is the ability to expand the solutions that we have in wealth and our distribution reach. We want to be able to do more and more for a greater and scaling audience. And one of the really appealing parts of this particular business, Lincoln Indicators, is that they have 3,300 high-net-worth investors. Currently, within Prime, we had about 320 high-net-worth investors. So what this has done is given us a 10x increase in the number of clients that we can deliver additional services and value to. Lincoln Indicators also brings to our firm, our collective business, additional tools and services that will allow us to widen the market and access more of that growing wealth market in Australia that was growing at about 9% last year. Those key tools are investment research for DIY investors and managed solutions for those same types of investors without having to go through a platform or see a full financial advice model play out or a financial planner. We also do believe that there is a significant opportunity to assist not just our own clients and that growing audience, but also the Lincoln clients with that inevitable intergenerational wealth transfer and the needing of advice to think about how that can be structured to get the best possible outcome for clients. This transaction is absolutely consistent with our strategy that we have been speaking to for the last 5 years when we set ourselves that goal to increase our revenue from $26 million in FY '22 to $50 million in FY '25 and on to $100 million by FY '28 and -- between FY '28 and '30. So this is an appealing business for lots of different reasons, including the people, the culture, how they go about servicing their clients, but it is a larger transaction in comparison to what we've done most recently. In the last 2.5 years, we have now acquired 4 key businesses, and they are typically between $2 million and $3 million in revenue. That has allowed us to build the systems, the structure, the disciplines in order to get the best possible outcomes for all stakeholders when we undertake transactions like this. Lincoln Indicators is about 4 to 5x the size of our most recent transactions, and that excites us because it does present us with a significant opportunity to step up into a more scalable business. This will translate to increased revenue and earnings for the firm. As I said, $10 million to $11 million of revenue for a full year on an annualized basis. Typically around an EBITDA margin of 15% to 20% pre-synergies, which are both cost and also revenue, but an appealing business that we believe will actually fit very nicely into what we want to do for the future. Next slide, please. So the transaction summary, and to some extent, we apologize for how complicated this looks when you actually present this. We are driven by obviously ASX disclosures and requirements, but let's simplify this transaction. We've talked to the strategy, but let's simplify it down to really how point 3 and point 2 fit together. This is a business that we've effectively paid 4x EBITDA for and it's all based around the earnings are achieved over a 3-year period of time. So if the business does continue to grow, the maximum payment could be up to $18 million, and the business would need to grow its EBITDA by about 2x what it currently is now. So if the business remains at, say, circa $2 million of EBITDA, the payment for the business would be $8 million. If it goes to $3.5 million or $4 million, it would be 4x that number. It is all dependent on the achievement of future maintainable EBITDA. It is a highly EPS-accretive transaction for our firm because we are paying 80% cash and 20% in PFG shares. So it has been intentionally structured to make sure that we get the maximum benefit for all stakeholders. It is worthwhile noting that Tim Lincoln, the founder of Lincoln Indicators, will become a shareholder in Prime down the track as well. The initial consideration for this transaction is $4 million of cash upfront with a further $1 million to be paid on the achievement of some cost synergies, of which 90% to 95% have already been achieved by the time we announced the transaction. We will fund this transaction via our cash reserves, our facility with Westpac, which doesn't -- hasn't been drawn down terribly significantly and through our good strong operating cash flow, which will improve again in H2. So a fantastic transaction that we think has been bought for the right value with a team of people that want to build and grow over time, and we want to incentivize them to do that as part of our collective group. Next slide, please. So these are the highlights. These 6 key boxes are probably the key takeaways from today's presentation. Revenue of $10 million to $11 million. This is how we believe this will drive value for our firm and for our clients. $10 million to $11 million of revenue, most of that recurring in nature, which will help with the profile of Prime's revenue into the future. Pre-transaction, 70% of our revenue is recurring in nature. With this transaction, say, 95% to 100% recurring, that enhances that profile. EBITDA margin of 15% to 20% pre-synergies, revenue and cost synergies and a significant increase in the number of high-net-worth clients we can support for the future. We've done a particularly good job of delivering high value for our existing high-net-worth clients of 320, but to be able to increase that to 3,620 is material and important. We've increased our funds under management by about 50% from what was $1.3 billion to circa $1.9 billion, subject to market fluctuations, obviously. We've got an additional team that we believe are strongly committed to the future, an additional team of 30 that will join the firm and take us to 219 team members and those 2 additional services, clearly being the investment research part and also the managed solutions. That opens up a significant large audience for us. And that excites us because it can bring a greater number of people into that wagon wheel we spoke about before with the optionality to be able to then deliver them more services, that cross-sell methodology we talked about. It's not the final and least most important point, but it is important in terms of the environment that we work in today, technology and scalability. Lincoln Indicators is a business that uses a quant approach that's built technology to allow that business to be scalable, repeatable to reduce key person risk. And there are 10 team members within the total of 30 within Lincoln Indicators that have significant experience across platform, AI and programming. That will be a fantastic asset for the whole firm and something that we'll be seeking to leverage off as we become a more tech-enabled business, people-first, but tech-enabled business for the future. Next slide, please. I've already spoken to this, so I won't spend a huge amount of time, but we are on track to increase our revenue to $50 million in FY '25. That will be a doubling from FY '22, and we will then move on to $100 million within 3 to 5 years. Clearly, a transaction of this nature, if you add $10 million to $11 million to the current $50 million starts to move us there quite rapidly. We'll continue to grow organically. So that's more services for our existing customer base. That's rolling out new services as appropriate based on need and business case, having people join us that have their own existing customer base as well that want to offer more services to their clients, but also the inorganic piece. As I said, we've now undertaken 4 transactions most recently, 3 in the last 13 months across wealth and business. So we've got good diversification across what we've been doing, but we are particularly excited about this current transaction and what it means for the business. Next slide. So importantly, we are confirming our outlook for FY '25. We did expect to generate 15% to 20% plus in revenue and underlying EBITDA for the year, confirming that guidance and that outlook. We'll continue to focus organically, accretive acquisitions. This is obviously a fantastic transaction for the business to do. But we do have an additional $50 million to $60 million of revenue that we're looking at that we would consider bringing into the business over time. We'll continue to scale and drive efficiencies, including using that technology capability I spoke about on the previous slide. And as I said, we start the year every year thinking that we can build the business by an additional 15% to 20%. We're ambitious. We believe this is an uncapped opportunity in a growing market where we can make a real difference. And there's very few firms that can surround their clients like the way that we can in that mid-market space. So we believe it's an exciting future, an important transaction for us, and we're very grateful for the Lincoln team and the founder, Tim Lincoln, to choose to work with us for the future. I think, Adrian, they are the key points I wanted to make. Clearly keen to answer any questions that anyone might have. So happy to be guided by you if you'd like to open the floor.

[Operator Instructions] Simon, not surprisingly, there's a bunch of questions that have already come through. So let me just sort of step through those. And to the extent I need to, I may have to group some of these because there's a wide range of topics. But just as a kind of a kickoff, and this is one that I received earlier today. Just can you share the split of the different businesses that are actually being acquired? So a bit more color on the Lincoln Indicators operations itself.

Yes. The best way to think about Lincoln Indicators is as a research and funds management business. Their revenue is broadly split about 50-50 between a subscription business for those self-directed investors and a funds management business around 3 core funds that they operate. Obviously, ambition to roll more funds out into the future. But essentially, the business is almost equally split between those 2 areas from a revenue perspective. Importantly, Adrian, and I think this is -- sort of goes to some of the things that we've seen in our own client base. There is a real connection between the people that decide to subscribe for research, but then also undertake to invest in the managed solutions as well. In fact, the last stat I saw is that I think 90% to 93% of the investors that subscribed for the research actually invest in the managed funds. So that's an encouraging trend and something that we want to continue to advocate for. And what we really like is we've got now a very nice funnel in terms of how we can offer, into a growing market, more solutions. We have that research piece. We have the managed solutions, and we now have what Prime already does, which is that full financial advice offering, along with what we do for wholesale investors.

Thanks, Simon. Next question from the same investor. And you already made comments on this, but just in terms of the acquisitions you've made prior to this, you mentioned 3. I know it's 4 that you've done prior to this, but he really just wanted to get a taste of how each of these are going, and he was looking to form a view as just basically a judge on how good you are at doing these, both buying them and integrating them.

Yes. I think that point or that last word is essential integrating. We don't buy or merge in any businesses that don't sit in the middle of what we do. So nothing sort of sits out to the edge. That is part of the reason why we built that centralized services structure, those 34 team members that work to make sure that we're supporting this concept of delivering connected advice experiences for all of our clients. So we're very specific around the way that we do that. Of the 3 transactions that took place before this current transaction, the first one's revenue is similar to what it was when we acquired it, if not slightly higher. The second transaction, which was the Altor transaction, actually achieved their 3-year earn-out in the first 12 months. So substantially grew under the combined ownership and the dedicated team that worked very closely to connect advice in a very connected way for our own clients, but we also support over 250 professional advice firms, accounts, financial planners, associate funds management business and remuneration consulting business. We will have had that for around about 12 months shortly. That business will have grown since we've actually acquired it. What we really like, and I think is probably key to making these transactions work, Adrian, is a respect for founders and what they're trying to achieve along with the ambition for the services to be delivered to clients. We have 20 founders in Prime that are from businesses that have integrated over the last 7, 8, 9, 10 years. And so we base a lot about what we're trying to do on the people piece. If we get that right, then integrations typically work. Clearly, we try to reduce key person risk and part of that is about scaling the overall operation. But we work very quickly in the first 90 days to integrate businesses deeply and make sure that they are supported for the future. We want people focused on what they're really good at and aiming to deliver more services to a bigger client base.

Thanks, Simon. Very detailed answer there. Next question, and it goes to this transaction. So can you put a number on the synergies, what they might be? And will the transaction have any impact on dividends going forward?

I'll answer the first part of the conversation being the dividend. So we have forecast a 3% to 5% increase in our dividends. We think that's probably the right way, although we'll have EPS growing at a faster rate than the 3% to 5%. We want to retain more cash for the future. We do have significant facilities in place. So that's advantageous for us, but we don't want to have more than 1 to 1.5x EBITDA as our debt profile. So we will manage our cash, but dividends are important, and we wanted to modestly continue to increase it. Sorry, because I speak so long, Adrian, I forgot the first part of the question. Do you mind asking that again?

So just -- so the 2 questions were just on the synergies, just the number of...

Yes. So yes, in terms of our objectives around EBITDA margins as a business, we're targeting a 25% to 30% EBITDA margin for Prime. We would expect within 12 to 18 months through revenue synergies and cost synergies, most of which have already been extracted pre-transaction to be blunt, we'll be able to have this business generating a similar EBITDA margin to what Prime targets to achieve, which is 25% to 30%. On the revenue synergy side of things, we have taken our own clients over the last 5 to 7 years on a journey to introduce them to alternative assets and also to property as well. And what we've been able to do is not only get our clients a solid and improving return from that exposure, but to generate an additional $4 million to $6 million in revenue from the existing customer base by virtue of undertaking that. The Lincoln Indicators' fantastic client base that it is doesn't currently receive anything more than the equities piece, which they do very well. So we believe there's an opportunity with a 10x size client base of what we started with to be able to offer alternatives and property investments as well from our significant team. So that's probably the main revenue opportunity we see. It will be supported by that intergenerational financial planning opportunity as assets transition through families. But that's one of the core things that we think we can do well. So we're following a proven methodology on the revenue synergy front. In terms of costs, there's the obvious ones that will come sort of post transaction. Rent, the Lincoln team are based down in Collins Street. We're in Melbourne here in Southbank, we'll co-locate, which will be an obvious benefit. And then future benefits include things like events and marketing, technology, HR and people. So you're not duplicating. That's why we have that centralized structure in place. Adrian. So yes, we're very optimistic about making sure this business generates a similar EBITDA margin to what Prime will be generating.

Yes. Thank you, Simon. Not surprised to hear you say that. So next question, just some of the detail. How many staff -- there's a couple of questions here. How many staff do Lincoln have? And is the bridge from the current earnings to post-synergy earnings only reliant on cost synergies? And what are the areas of cost synergies? I think you've already spoken to that last point. So how many staff do they have? Is the bridge reliant on cost synergies and you've spoken about the source of those as well.

Yes. So 30 wonderful team members that have been with the business for a long time, very committed to the vision. They want to grow this business. They want to take advantage of not just an Australian but a global opportunity to really create a significant business. So that excites me the tenure of the team there. They're important. They're an important part of how we're going to grow together into the future. And in terms of the synergies for the future, again, I'll go back to how we've structured the transaction, and it's important to understand this is that we do believe in untapped opportunities. So if we believe we can help this business grow from, say, $2 million of EBITDA to $4 million of EBITDA, the current owners are rewarded for doing that. So we're paying about 4x that. So are we expecting huge growth in revenue? In our own business, we target around about a 10% organic growth rate. I think you'd expect we'd do that, but we'd also be looking for revenue via that cross-sell as well. So that's typically how we would tend to approach it. So the transaction is not dependent on anything other than maintainable EBITDA from where we're starting. We obviously have to disclose what the maximum amount of money is that we would pay for the transaction if it was to grow quite significantly over the next 3 years. And the payments are made over that 3-year period of time based on what is actually achieved.

Okay. Simon. Same question. Just in terms of the split of the FUM within Lincoln between direct clients, advised clients and institutional money, just broad splits.

So no institutional money. These are all retail or wholesale managed funds. So there's 3 of those funds. They are really for individuals that are typically investing under their own stream or via a self-managed super fund. So no institutional money, no key clients that sit in there that would be at risk or loss of attrition through any transition, a well-diversified group of clients across the different funds.

Next question, quick one. How does the deal reflect the broader M&A trends occurring in the wealth management space at the moment?

Yes. So what I find interesting is that there is a lot of activity around financial planning businesses. There's obviously quite a bit of activity separate to that in accounting as well. We've intentionally chosen something here that plays to our strengths. It's not a financial planning business. This is a general advice business. So this isn't a business that's doing full financial planning. It's saying, here's some research. These are our best ideas. Would you like to subscribe to that and make your own decision? Or if you don't want to make your own decision, would you like to invest through these managed solutions here? And you pick one and then you invest by that. This is not a financial planning business. It is not a full financial advice business. Intentionally, that was what we were seeking to attract here. What was interesting for us is how we could use the technology to scale, how we could do more for that existing client base, plus also offer that capability into a broader marketplace. So this is not a financial planning business. In my view, some of the multiples that I hear being paid for financial planning businesses are not justifiable and difficult to get the appropriate return on investment from that. So we have picked something that we felt was appropriate, fits with our culture, our direction, the right valuation. And yes, it's a little bit different than what you would typically see. But as we spoke about previously, Adrian, we're not necessarily looking where everyone else is because what we're trying to do is to create one totally connected business. We are not a roll-up strategy. Everything we do needs to sit in the middle of the business and be able to do more for our clients and our customers.

That's good. It sounds like Peter has delivered on his remit -- well done, Peter. Just in terms of the -- not surprised to hear this comment, just on -- a little bit on the weeds with respect to Lincoln funds in terms of performance in recent times. And what's the group's perspective on the value of the managed solutions? And has Lincoln grown a lost FUM over the last year?

Yes. So it's been a difficult 12 months for the Lincoln team. There was some hedging that went on in a few of the underlying portfolios, which meant that they didn't participate as fully as they typically would have over the previous 10 to 15 years in the upswing in the market. So they unfortunately didn't participate as strongly in that. I think when you talk to Tim, we have a really open conversation about hedging and how that fits for the future. And that's not something that we're seeking to do. So those hedges have all been rolled out. So that was the main impact for not having probably as good a performance as they have historically had. Putting aside those -- that decision, what you actually see is a business that's had outperformance across all of their core portfolios over that period of time. So I think the advantage of -- for the Lincoln team and the Prime combination is we've got hopefully the best people around the table that can make the right decisions for the future. And that's something I know that Tim and the team are keen to explore more fully. But yes, we're aware of that. It was part of our considerations in the transaction. Nothing was a surprise there. When you take 12 to 14 months to a transaction, you get to know each other really well, which means that there's very few secrets by the time you've gone and completed a deal.

Yes, that's great. Thanks, Simon. There's a couple of -- just going down further into the weeds, a couple of questions around the Stock Doctor. So a subscriber wanted to know how do we intend to maintain and improve that service? And are they able to continue to lose that platform as they do now?

Absolutely. There's not going to be any change to service standards, to the team that's the Stock Doctor client base for so long. The way we want to help improve the service is we do have the advantage of another 189 team members that are there to offer other things if people want to access them. This is not about us putting things in front of people that they don't want or they don't need. But some of the key things that we are keen to do is to really light up those marketing and events again. The Lincoln team do a fantastic job of communicating with their clients, whether it's by phone or webinar, et cetera. But one of Prime's real strengths is our marketing and our events team. In the first half of this financial year, we ran over 50 events for our clients to connect them with experts to make different decisions and get access to information. That will be one of the first things we do is actually get in front of the clients and talk to them about the full capability of what we can do, but let clients choose what they want to access. I think that's the important part of how we think about this for the future. So hopefully, all that a Lincoln or a Stock Doctor client sees for the future is access to more people that can assist them in their journey.

That's great, Simon. So no doubt very reassuring to those people asking those questions. So this -- I know this one will go to the heart of what's really important about this transaction, and it really goes to that cross-sell initiative, which is obviously key motivating with respect to this. But the question is quite simply, how would you deal with high-net-worth clients you have acquired from Lincoln? That's almost like a Dorothy Dixer, Simon, that it's been served up from the public, so...

No, no. It's with respect and integrity, the same way that they've been dealt with for the last 20 years. Tim Lincoln, who I've got the privilege of working really closely with for the future, has got a heap of integrity and has built a really significant business along with his father Merv when they started all those years ago, a very clear philosophy about respect and integrity and how we deal with clients. I was privileged enough to start this business here, Prime, 26 years ago along with my father. So I have a good understanding as to how you need to treat people over the journey to make sure that they get value from the relationship that you've got. So again, absolute integrity and class is hopefully how we approach it.

That's great. Thank you, Simon. You've made a comment about the number of transactions you've done, which were revenues of $2 million to $3 million, and this one is obviously more like $10 million to $11 million. The question here is, is Prime looking to complete further M&A deals of this larger nature in comparison to the smaller transactions?

Yes. Larger transactions will become a hallmark of what we're doing. And to some extent, we've been a little bit of a sleeping giant over the last 2 to 3 years with respect to building out that capability in that shared service model. Unfortunately, Pete hasn't said much here, but Pete is a very well-regarded and experienced M&A operative that actually has run businesses as CFOs, et cetera. So to have Pete's capability plus the broader team available means that we've got the right data, the right information to make informed decisions and although we've been in business for the last 26 years, it's really the last 3 to 4 years where we've really started to accelerate where we believe we can go. So there's been plenty of preparation undertaken and now we're kind of getting on with the job, I guess. And it doesn't mean we won't do a transaction that's got sort of $5 million or $6 million of revenue, but we're equally talking to some that have $13 million or $14 million of revenue. But they're in our core competencies, they're where we already operate. It's where we're doing well and where we want to do more of that.

Okay. Thanks, Simon. Next question. How is the integration expected to support the scalability and broader adoption of the Lincoln managed solutions?

Yes. So the first 90 days in any transaction like this one are the most important. We've had an integration team of 8 people working on this, leading up to the announcement yesterday. And that team will continue on through the business. So that has operatives across IT, finance, people, HR, marketing, the whole lot. And so what we do is we make sure there's only so much you can do in the due diligence process, clearly, but we want to make sure that we fully appreciate and are able to respect what's there and make sure that we integrate that in the best possible way. So the first 90 days is a cadence where we've got meetings 2 to 3x a week, making sure that we're working through every single item and ensuring that we're not missing anything as we sort of move through, and using our experience to make sure that we get the right outcomes, that right balance. So it's a very diligent process. Four transactions over 2.5 years gives you an idea as to what's involved when you do this. But interestingly enough, Adrian, whether you're acquiring a business with $3 million of revenue or one with $11 million of revenue, you end up doing the same level of work. So that's something that we're conscious of through this process. But yes, it's a very diligent and structured process.

Thanks, Simon. Our next question goes to kind of more debt capacity more than anything else in terms of your -- suggesting that this takes you to the upper end of your comfort range and gearing. Do you expect to pay down some of that debt in the medium to longer term?

I think the best guidance we can give, which is the same guidance we've given really for, I guess, probably the last 2 to 3 years is that our stronger preference is to end up with about 1x EBITDA. So 1 to 1.5 depending on when transactions take place. And clearly, this is taking place at the end of the financial year. So that will obviously have the debt being slightly higher. But just probably worthwhile noting that when you do acquire a business like this, you are not acquiring it with net cash. So that is something that will offset part of that as part of the process. But really, our typical goal is to pay out around about 50% to 60% of our earnings, retaining the rest for future growth and to not end up with more than around 1 to 1.5x EBITDA as a debt profile. So you manage that, unfortunately, over the course of a 12-month period, it might move around a bit. But it's a lot of the reason why we focus on having maintainable EBITDA from our own perspective and making sure we've got stronger recurring revenue. But that's the guidance I can give on debt, which is the same it's been for the last 3 years.

Thanks, Simon. Next question is kind of more product development-wise, and it's kind of really looking ahead with glass half full. So Lincoln currently self -- serve self-directed investors around the ASX. And Lincoln had previously spoke about this desire to expand the research into the U.S. market, primarily the Dow Jones and possibly the NASDAQ. With the acquisition, is this potentially possible now enhanced and expedited potentially?

The short answer is yes. Absolutely. It's completely possible. And I think the fantastic part about having such a tech-driven business that is so enabled around AI, having programmers on staff, et cetera, really means that you can quite efficiently enter new markets. What's clearly obviously important for us is to make sure that someone that's paying for access to research like buy a Stock Doctor, that they're getting the best possible information in the most timely manner. So that quant-based approach that Tim and the team have developed over many years is highly scalable. I think I've made it clear through this conversation that Prime is a firm that is growth orientated, and we want our clients and our customers to get more and more services under the one roof. So you can absolutely expect us to invest in growth for the future.

So Simon, just stepping back to comments you've made earlier as well, a question here with respect to the pricing structure, which I think you initially called out as being -- it sounds really complex, but it's actually quite simple. Just can you sort of share the significance of that floor and ceiling on the EBITDA multiple, which look to limit the downside risk in some way?

Yes. So I'm going to give a very -- almost a layperson explanation and then Peter is going to correct me because he helped us structure the deal. But I'll restate what I said before. If the business doesn't increase its EBITDA from, say, the current, call it, $2 million for sake of this conversation of EBITDA, then the payment will be circa between $5 million and $8 million, if we're being quite straightforward about it. If the business grows to $3 million, you just simply multiply that by 4, and then you'll be paying $12 million for that particular business. If you go to $4 million, you'll be paying $16 million. That's why we've had to disclose the upper range. But it is capped, and that's what I'm going to hand over to Peter as to that $80 million to $120 million range that we talk about, that 80% to $120 million range. I might hand to you, Peter.

Thanks, Simon. So for each year, there's an on-target earnings, and there's a floor of 80% and a ceiling of 120%. So as a for instance, in the first anniversary year, the target is 2.5. If that is met, then the consideration of $3 million, $3.2 million is paid. If the floor isn't met, so the 80% floor or $2 million, then nothing further is payable. So as Simon rightly said, each milestone is essentially a 4-ish multiple.

No, that makes sense, Peter. In fact, if anything, you want it to outperform, so you -- because it obviously generates more value for the business.

Absolutely, Adrian. And I think this is important to probably highlight and I'm glad you said that. We want our founders to achieve their full earnout. If that's happening, it means the business has been deeply integrated. It means that we have been able to grow together. And that's a statement that we regularly make to anyone that decides to merge or combine with what we're trying to do for the future. So that's a good day.

Yes. Just a quick question on Tim Lincoln. Is he the sole vendor and that will retain equity in Prime in the future?

Correct.

Okay. Excellent. Just a couple of final questions. In what ways does Prime -- I think you've answered this. In what ways is Prime expected to contribute to the growth and scalability of Lincoln managed solutions? I think you spoke about some of the offshore things, but were there other initiatives that you thought about?

Yes. So look, obviously, having been an investment advisory and wealth management financial planning business for 26 years, we've got deep experience dealing with clients, various products that are available, and we've got a team with a deep level of experience. So we hope that, that is something that is additive to thinking about what clients and customers might want for the future, so we can design things that aren't run of the mill that anyone can sort of get anywhere. We want to make sure that clients have a really engaging experience with the firm. So we think broadly about what that might look like. Initially, that is looking at the alternatives and the property space where we've been able to do some really significant work. But we already ourselves advise clients across Aussie equities, fixed income, international equities, emerging markets, the whole spectrum of that asset allocation. So I think what we've got there is 2 fantastic investment teams that when you combine their capabilities, we'll be able to find the next best ideas for clients and to offer that to clients in a manner in which they want to engage, whether it's research, the managed solutions, as you rightly talk about, which we expect to grow and also that full financial advice model. So yes, optionality is the key.

Thanks, Simon. We're running right up against our time limit here. I apologize. But -- so thank you for all those questions. We won't be able to get to every one of them, but we'll do our best to come back to you. But one final one which I think actually does actually help kind of put a bit of a full stop on it. Just with respect to the strategic fit between these 2 businesses. And just you've spoken about but how it aligns with your longer-term growth strategy as a business.

Yes. So I think we're already dealing with the same type of client. I think we do things in a slightly different way. But I love any business that's been able to grow the way that Lincoln has over 20 years and dealing with high-net-worth investors. That's a space that we think that we're particularly good at serving as well. So it's highly complementary. It's not like we're doing something completely new. It's additive to the suite of things that we can do. We started life as a wealth management business. We appreciate this space. We know what the opportunity is. There's pretty material tailwinds. And I think I sort of said during the presentation, people that are classified as high-net-worth investors, that market has grown by 9% over the last 12 months from 630,000 to 690,000 people. And how wonderful that within our combined audience now, there's probably about sort of 4,000 plus that we can deliver more value to. So we do it in the right way with respect for legacy and approach. But then we also think about what do we look like for the future and how do we do this well. So it absolutely fits in the sweet spot of what we're trying to do as we build out to a $100 million-plus business that is generating those EBITDA margins of 25% to 30% where clients can get more from the one service provider.

That's great, Simon. Thank you to you, Simon and Peter, for your time. So Simon, I just might just pass back to you for any closing remarks for what's a significant audience we would have thought that might have been a few on leave today, but certainly lots were interested in hearing the story. So just some final remarks from you.

Yes, absolutely. Thanks, everyone, for being patient, and thank you to the Lincoln team for being patient in terms of how this transaction has taken us collectively 12 to 14 months to get comfortable to complete. We love this business where it fits into what we're trying to do for the future. It's an area that we have capability and skill. We think we're complementary to each other. We think we've paid a fair price. We're encouraging owners to grow the business. We're exceptionally excited for the team, 30 team members at Lincoln to join Prime. One of the things I didn't touch on is the fact that 48% of the firm is owned by the team, and we will extend that ownership offer to the Lincoln team over time. So we love the fact that we can get together. We're on the same journey, doing things in a slightly different way, and we can access a really large market that's growing. So really proud to announce this transaction. I'm very grateful to our team that worked on it. And thank you to shareholders for their support and their questions, always available to answer any of them. If you haven't worked out, we love talking about it.

That's great. Thanks, Simon. Thanks, Peter. That ends the presentation this afternoon. So thank you all for joining us.

Thanks a lot, Adrian.