LM PAY S.A. (Y00) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. Welcome to LM PAY's earnings call for the final fiscal year 2025 in the first quarter of 2026. I I'm very happy to have with me today the CEO, Jakub Czarzasty and also the Head of IR Gregor [indiscernible]. The presentation will last probably around 20 minutes. After that, we can dive into Q&A. [Operator Instructions]. We will record this event and post it on ResearchHub once the event has concluded. And with this, [indiscernible] Jakub, the floor is all yours. Please enlighten us.

Thank you very much, [ Kai ]. Thank you very much for or next opportunity to come here and see you. So I would like to tell you only that I'm going to make this presentation in maximum 15 minutes, and I hope today will be a lot of questions in the Q&A session. So we are still doing the same and almost nothing changed, but I hope that I can present you today our great revenue increase. So very shortly about company. Of course, as the last time, we've got the strongest in our niche market, I mean about the medical treatments. And as you know that 1 year ago, we started our new project in insurance car market, and it's higher and higher. But it's interesting, and I hope that will be interested for you in the next slides. Light business model, we got still more than 30%, even 2% returning clients, we've got more today than 15,000 medical clinics at hospitals we are working with us this business still stay in a very scalability [ one ] and our technological project just go this correct and the great line. As you remember, we've got -- we are kind of a bridge between our clinics and the patients. And because we started our insurance [ Radossay ] that not only patients by customers and the brokers and insurance company. So on this slide, you can see our first [indiscernible] for 2025. So value of the loan we've got increased almost 30%. But it's not the most important here. The most important is that our value of ticket and the margin will rise out. So it's important if we are talking about a rise of revenue. Why I tell you about it because the rise -- the numbers of the loans, I mean, about numbers of the customers, it's a little bit it's up PLN 53,000, down PLN 48,000 compared to 2024. So it's much less than an 29% when I'm talking about the value of the loans because it's a bit more than 10%, but the merchant and the size of the ticket is much, much higher. Of course, we take care about default rates and still we've got our default rates today less than 3%. And unfortunately, nothing changed, personally for our company, but unfortunately, for our system and the patients in Poland, we've got still a lot of the lines to the specialists to the surgeons, et cetera, because we need to wait average for 4 months to come to specialists for rehabilitations today or ablations, it today, 6, 7 months. And if you want to mend knee or some implant search really need to wait minimum half a year. Absolutely now the slide because quite old one. This slide only shows us that -- we are in a correct place in Poland for next year because the private health cat market is going to rise and rise every year in the next in the next years. We changed this slide a little bit because we decided to add this small picture of SecurePay near MediPay product. As you know, we started 1 year ago, our new business line. That's why we decided to show a little bit about it on this slide. And as you can see, the average loan today is almost EUR 500. I'm talking about it because this is the most important product in our portfolio because it's more than 75% of our business so it's important. MediRaty's rather -- it's not different. There is no difference than recently because it's a little bit more than EUR 1,400 and the cash loan, it's important because it's not so big ticket. It's almost EUR 1,400. And MediRaty is today less than 15%. Our sales, but we've got to hope that our media and secure pay in the next year will be minimum 90%. It's a small ticket, so small ticket always means the same. It's really, really safe. In the last quarter of 2025, we changed our risk manager employee again [ Malartic ] great specialist and modern specialists in credit policy. We did a exchange, we did not a revolution in our scoring system, we've got almost the same, but everything started to be more clear able for our financial partner. I mean about [ UniCredit ], who is our main delivered partner of the money. our embedded finance in our insurance car market rising over the last 2, even 3 quarters. As you know, we've got an agreement with one of the biggest broker in Poland, [indiscernible] China, and we just integrated -- we have just integrated with another three big players in Poland. So our -- my expectations rise in revenue, which is connected with these products, we can see in the third and fourth quarters of 2026. But this slide shows us one very important thing because I went to a little bit compared to medical treatments. Medical treatment, it's -- we got a lot of recurring patients. especially in beauty. But we are doing our business in dentistry too. But dentistry and many other treatments characterized that we are doing that not very reputable in our life. So this market worth -- I mean, about the medical treatments in private health care, it's worth something about PLN 9 billion, PLN 10 billion, and it's not so reputable. So that's why I try to explain you why we decided to go some other way in our business, our lending business. because this market, I mean about insurance market, this is very, very reputable because everybody, every driver has got a car need to buy a car insurance every year. So that's why we decided to choose this way. And on the other side, it's worth almost PLN 40 billion. So it's almost 4x more than medical treatments market. Okay. So Slide #10. We got almost 5,000 more customers in 2025 if we compare to 2024. It's only 12%, but our margin was higher. That's first of all, and our ticket was higher, too. That's why our revenue is rising almost 50% increase and it's nice, I guess. But you can see on this slide a blue line and this blue line is directly connected with our very big steps, what we decided to do in the beginning of this year because first time in our history, we decided to get our own accounting system inside, no outside. So we switched our accounting system, like I said, from outsourced to in-house. And I hope it will be very useful, especially for financial and reported scheme. And when we changed the accounting system, we decided to change a little bit to show our revenue. I mean about -- it called subtracting when somebody -- when our customer pay earlier his or her agreement. So before we need to reducing of revenue then. So today, we decided no reducing the revenue at [ Astor ], but we decided to show this cost in other operating expenses. So that's why I want to compare you here on this slide, 24 to 25. And if I would like to be objective, I need to show you like that. So we reported before 22.8% revenue last year. But when we add the reducing revenue, so if I wouldn't reduce this revenue, it would 25.4%. So the same situation in 2025. So it was 31.9%. But when I add the other operating expenses about the reducing about the spreading, then we've got a 37.8%. So if you want to compare, you can compare the green line or you can compare green line plus blue line. Recurring customers, it's very positive. It's always positive that in 2024 average recurring customers, we've got 30%. In 2025, we've got 32%. So it means it's our product are better and better, I guess. And EBIT, we've got 54% more. Of course, we've got a great -- a quite huge one-offs in 2025 in the last quarter because we switched our financial partner, as you know, from Fortress before for our [ UniCredit Next ], which is much cheaper, but it costs a lot to pay for Fortress to exchange the financial partner, and we need to pay some money to make the IT system in [ UniCredit ]. First quarter looks like that we've got a little bit more than 1,000 new customers for the first 3 months. Our revenue is rather stable in the 3 months of our revenue. Unfortunately, but it was a little bit quiet first quarter, but I think that today, I don't want to give you more details. Recurring customers, we've got first quarter in 2025 was at 35% and really high. And this year, we've got almost the same because it's at 34%. Our EBIT unfortunately decreased about 25% because our -- we've got a much more operating costs and we continue many, many integrations with our new partners in insurance business. Our equity, it's almost PLN 35 million, 8 million. Our total assets is almost -- it's a little bit more than EUR 37 million. Long-term liabilities, it's almost EUR 20 million. Yes. And here, I promise you that I show our guidance for 2026. So I can tell you only that it will be announced by end of July because, as you know, because our guidance for 2025, I think that we made it -- so if I would make the 2026, I need to wait for some decisions of our big partners in insurance market and probably in maximum 3 weeks, I will -- so I decided not to show you this data today because I would prefer to make our guidance 2026 in real, and I don't want to change it in the next -- in the nearest future. So 9 minutes. So it's quite speedy. I hope it's okay for you. If you've got any question, I'm so open to answer now.

We do have a few questions already lined up. So I will go straight into Q&A, Job. Starting out with your switch in financing partner. As you mentioned during your presentation, you are now working with [ UniCredit ]. Can you give us a better understanding as to how much impact that had on your refinancing situation? You did say that on the one hand, you had one-off costs with your old partner that you had to service. On the other hand, you have costs related or you had costs related to IT changes and the like. Can you give us an idea of what -- and it's probably not as precise, but still how much impact you had on the cost side, special impact? And how much on the other hand, do you expect a positive impact on profitability due to the [ UniCredit ] versus the old agreement that you had?

Yes. Of course, with pleasure, I can tell you that because it's a quite big one-off, so I know it very well. So this transaction has switched the financial partner costs altogether for [ UniCredit ] PLN 3 million. So it's like [ EUR 700 ]. Yes, it's exactly PLN 3 million. So it's a lot, but it will have a great impact for the future because if you compare our financial from 2024 and 2025, especially when we show the first quarter -- first half year of 2026, I think very soon, you can see that our debt come higher, but the cost of the debt are the same or a little smaller even. So I think that we need to wait 1 or 2 quarter more when I show you the financial that we've got a great expectation. We've got a quite a big expectation of better figures, especially in the cost of the debt in the future. That's why I would like to show you our guidance because it's impactable for our scale to -- so it's a much cheaper finance. But on the other hand, you need to know that we to our financial partner the receivables. So the receivables are out of our balance sheet, right? So in the balance sheet, you can see that our income, but you cannot see our -- we are thinking with our report, maybe we should show how it looked like everything which is -- which are outside of our balance sheet. And we think that we will show it in the nearest future.

Great. Come back to [ UniCredit ] and you already mentioned the negative impact on EBIT due to the switch in financing partner. Can you -- once again, that's a tricky question. I'm aware of this, but can you give us an insight as to what terms currently securing in financing with a new partner, i.e., what the spread was old versus new and the improvement?

Unfortunately, I cannot tell you about these figures because it's fully confidential how much of that, but I think that everybody can -- I'm pretty sure. But I can't tell you.

The overall relationship with [ UniCredit ] is prospering and developing well because the question one investor had, how would you describe your relationship with [ UniCredit ] presently?

Now our relationship is so great, and I can tell you why. This is the first bank, first financial institutions who very often ask me, Jakub, how can we help you that you can write your business? It's really adapted for me, and it's very nice. This is -- we feel like it's our team inside is [ UniCredit ] team. So it's a great relationship. For example, when we wanted to get the money for a new business where we get an old partner, we need to wait for the decision about 9, 12 months. Here, we made it, if we are talking about the SecurePay, we made it in 5, 6 weeks. So it's a quite different story, quite different relationship.

Understood. One question, and probably this means a lot to you. The onetime costs related to the [ CUK ] implementation in fiscal year '25, [ CUK ] implement. Can you give us a little guidance as to what the onetime costs related to that were?

It's a little bit confidential because we but we started in June last year. I can tell you only that our -- maybe not revenue, but our sales today is 10x more than we did in the last quarter of 2025. And we've got a quite a big expectation of higher revenue because decided 1 month ago to working with us as only one partner. So they say another partner, they want to quit it. And because up till now, we've got a BNPL, Buy Now Pay Later, in this market in West China. And in the next month, we started to sell our regular product, not only Buy Now Pay Later, but at the beginning in the agent office there will be of our installments plan for car insurances. And we just finished with three quite big partners in this market. So our expectation of revenue in the third and the fourth quarters is quite high.

On a dynamic 2025. One question, however, is related to the first quarter, which lost a lot of dynamic that we've seen in the overall '25 year. And the numbers, if I recall them correctly, EBIT was down around 25%, while revenues grew about 4%. Can you give us a little bit insight as to what drove that, i.e., is that margin decline only driven by costs that you incurred due to the expansion that you're currently doing? Or were there some structural as well at work just to help people better understand.

We get three reasons of that situation. So as I said, that about two things about the higher margin was first, a bigger ticket was the second. But the third is that one of our quite big partner just wanted to switch for another business partner. I mean about one bank, my bank. So let's say that somebody stall us some part of revenue in the first quarter. But in May, it changed. We've got that story before. So it was our expectation because it's not so hard to go to some big partner and say that I will lend almost for free the money for your customers. So we've got that expectation in the first quarter that we've got a little bit -- we don't have -- as you said, that we didn't have so much pricing in our revenue, but it's a little bit changed in the second one. So it happens sometimes, especially if we're talking about a quite high partner, especially in the beauty. So they switched for another partner for a moment, and they're just coming back today. It's -- of course, it's quite clarified for you.

If we look at the [ Insurtech ] business that you are going into, what do you expect in terms of development costs related to product offering? The insurance sector...

Unfortunately, the sky is the limit. But of course, we need to check everything. We need to see how it looks like because the figures is very important. The market in Poland looks like that. We've got 20 really, really big partners, big brokers. After these 20 big brokers, where especially with them, we wanted to have a directly implementation in their systems and it must costs. Today, we talked with seven of them. We just -- we finished 1 year ago with two, and now we are almost finishing with another. We are going to make an implementation with 13 next because we've got today that very comfortable situation that almost everybody wants to get our product set. But after these 20 big guys, let's say, we've got 120, let's say, the similar business partners. And something about 50, 60, half of them, we want to make an implementation direct implementation to, but it won't be -- probably it won't be so expensive. We get because it's a smaller implementation, let's say. So I don't have exactly guidance of this because it's really hard to make it -- and I think that I can do that in the next quarter maybe because when we -- today, these implementations, we took, for example, this example, costs EUR 100,000. So another business partner costs EUR 25,000. And in another time, it costs EUR 75,000. So it's a quite different story because when we've got an implementation, this is a first step, let's say. Then we need to make a second step. So we need to implement it in ahead of the agents in a secure pay market. So it costs us 1/3 this product costs a lot. But this is some kind of CapEx. So -- but I understand that you get some expectation that we can make some guidance of these figures. So now I write down this one, and maybe that's a good idea to show the next time our expectations of the cost of this, let's say, one-offs in implementation in a business partner in insurance.

You were trying to expand beyond Poland. And I think one of the markets that you were looking at was Romania. And from what I gather, you stopped that expansion into Romania. Can you give us insights as to what the specific reason for that was and what that means for your overall international expansion story? Is there still a story? Are there any other attractive markets that you're presently looking at? Can you give us an understanding of what potential growth opportunities are outside of Poland that you're pursuing?

Yes. Yes, of course, with pleasure because it's for me privately, it's a little bit wet because today, that's true. We need to suspend the processing our company in Romania. And it's hard to understand for me, especially because we passed absolutely all the most difficult requirements why registered company -- loan company in Romania. But at the end of the process, National Bank of Romania and today, we are going to announce it in the market, National Bank of Romania wanted from every LM shareholders, even that shareholder who has got one share, criminal records and IPs. So it's not possible to make it. And as I said that today, we will post relevant announcement. No, I'm just wondering why the Romanian regulator decided to add an impossible conditions to make. I don't know why. The true is that for the last 2 years, National Bank of Romania didn't get any license for all companies in Romania. So I stop to think, I stop to talk with them because it doesn't make sense. If somebody asked me about how about your criminal records from the courts. So it's a little bit sick, I guess. So -- and we got it in an official letter from the [ MD ]. So that's why I'm going to announce it everybody.

Do you have other markets that you're looking at that you can talk about? Or is it...

Yes, yes, of course, we've got another market, but thanks to SecurePay, we're just thinking about the SecurePay in market because we don't see such that product in European countries, but a little bit on the left than Poland. I mean about the France, about Benelux countries. So if we are talking about the secure pay and the left on the Poland is correct way. About medical treatments, we will see. We need to think a little bit about because we've got a lot of work now in Poland, and we are going to focus on it. And we will see. We will see. But I think that the sea will be much easier to implement in another West countries than, let's say, south countries so at least in Europe.

I saw one comment from one of the participants that wasn't actually wrapped in a question, but I still want to make sure that we clarified and there is no misconception on the end of the audience. Looking at the split between the different ticket areas and ticket types, you said 75% of your tickets were small tickets, 14% were larger hospital tickets. And then the rest, roughly 11% and the participant wrote that they were already car insurance, but I think they were just bigger cash loans, right?

Yes, that's today, we connected MediPay and SecurePay because it's still SecurePay is, let's say, 10% of our revenue.

No, I'm sorry, I was -- I guess I wasn't clear with my questions. Apologies. I mean you have roughly 75% of your sales are in smaller tickets, MediPay, SecurePay, then you have 14% in the larger health care tickets, so 14%. And then the 11%, the participant road were already car insurance, but they're not car insurance. They're really just big ticket loans that you give up, right?

No, no, no. It's car insurance and not secure together. So this is a small ticket...

No, you have cash loans to clients, right? That's 11% of sales, correct? So that's the 11%, that's the residual. And he thought it was car insurance, but it's not, right? And the split last year, there was hardly any insurance business.