Netwealth Group Limited (NWL) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Netwealth Group Limited Half Year Results H1 2025. [Operator Instructions] I would now like to hand the conference over to Mr. Matt Heine, CEO and Managing Director. Please go ahead.

Thank you very much, and good morning, everyone. Thank you for joining this morning's call as we deliver our first half results for financial year of '25. My name is Matt Heine, I'm the CEO and Managing Director of Netwealth, and it gives me absolutely great pleasure to introduce our CFO, our new CFO, for his inaugural results, Hayden Stockdale. Hayden, as many of you know, joined us back in late November and officially took over as CFO on the 31st of January, replacing Grant Boyle. So thank you, Hayden, and welcome to the results call. Before I start, I would just like to acknowledge our country. And we acknowledge the traditional owners of the lands that we work and live on. Our office here in Melbourne is on the land of the traditional owners of the Wurundjeri people of the Kulin Nation. We celebrate the stories, culture, and traditions of the Aboriginal and Torres Strait Islander people of all nations and pay our respects to Elders past and present. If we can please turn to Page 7, I'll jump straight into it. As you can see, it's been a fantastic start to the year. I'll run through some of the key metrics in a moment. And by way of a quick update. As of the 18th of February, I'm pleased to announce that our FUA was $105.4 billion. and we've recorded a good start to the year with circa $1.5 billion received calendar year-to-date. Moving back to the actual half year, our FUA at $101.6 billion was a $23.6 billion increase compared to the prior corresponding period, a big increase of 30.2%. This reflected strong markets, but also incredibly strong net flows. In fact, the 2 quarters were both records in their own right with $8.5 billion received in the half, an 80.2% increase on the prior corresponding period. Importantly, we're able to convert that FUA flow increase income and income increased by $32 million to $155.4 million, an increase of 26%. EBITDA was up 32.8%, an increase of $19.3 million to $78 million for the half, and our EBITDA margin of 50.2% was a 5.4% increase on the prior corresponding period. From an NPAT perspective, on Slide 8, you'll see that we increased NPAT by $18.3 million to $57.6 million, an increase of 46.6%. We saw strong account growth an increase in our cash transaction account and the FUM that is the money invested into our managed account and managed investments for the 6 months grew by $5.9 billion, a 32.9% increase which really reflects the continued growth in the managed account, particularly and the focus of the industry as we grow that particular product. If we can move across to Slide 9, I think what's really important, though, is when you take all of those numbers into account, it actually comes back to the point I mentioned earlier, which is that ability to convert the growth of the business, both in our FUA and net inflows into EBITDA. So you can see over the last 2 previous halves, so first half '24, first half '23, we've seen a consistent and increase in growth in both our income numbers, but also importantly, our EBITDA margin as we continue to get that operational efficiency, leading to some very strong EBITDA growth numbers, which Hayden will work through in a bit more detail in the financial section. Moving across to Slide 11. One of the key parts of our strategy that we've talked about now on a number of occasions when we've caught up on previous results. It's just the extension into the new markets. We believe that there is significant growth still to come from our direct market, being the platform market of $1.1 trillion, but also as we look to expand into both smaller balance or emerging affluent clients and also the high net worth and institutional markets. These charts here really show that we are getting great coverage across all our key markets. So emerging affluent -- mass affluent and the high net worth with about 1/3 flowing into each of those markets. Importantly, we're seeing strong expansion of our high-value customer tiers, so a 2.1% increase in the high net worth and family office space and also really good strong and continued growth in our core product, which was relaunched around 18 months ago. So the strategy is working. We're seeing great growth in our core business, and we're being successful in those adjacent markets as well. Moving across to Slide 14. One of the interesting parts of our business is really the mix between existing clients, which continue to provide significant inflows and support for the platform in the business and how that interacts with the newer customers coming on to the platform as well. So for the calendar year just being nearly -- or $10 billion, 67% of our total flows actually came from customers that we've been working with for more than 4-plus years. So very mature customers writing good new organic business. And the clients that have come on or the financial intermediates that have come on in calendar '24, so a new sort of business and the relationship whilst they contributed $1.5 billion, the expectation is that in year 2 number will significantly increase. And you can see that the cohort analysis on the right-hand side really shows that, which is in the first year customers start to migrate and move customers onto the platform as well as that organic business. And in year 2, we really see that picking up. While it's important, it gives us a very high level of confidence over the future flows. A big part of that flow, as you can see, is coming from those existing customers, but we're getting really good new inflows that continue to build in years 2 and 3 as well from the new cohorts of financial intermediaries. On to Page 16. I touched on a few of these things. Our strategy is working. We continue to build it out and develop. We've successfully delivered on our road map for the first half of the year with a number of new features and benefits delivered not only to end customers, but also to advisers with a view to make them as efficient as possible. Through the half year, we announced a purchase, the full purchase of Xeppo and also Flux, which are key parts of our strategy when it comes to expanding into those adjacencies, which I talked about earlier. Xeppo business has been successfully integrated into the business. They're all now part of our tech stack. Teams are working really well together. And now we're working together on that future road map to make sure that we can really deliver market-leading data and data analytics and data management platform to the industry, which not only supports their business and licensees, but also underpins and supports the platform and a lot of the products that we have and are building out. The mobile technology continues to be enhanced with some exciting new developments coming out in the next 3 to 6 months, and they're currently in pilot at the moment with a number of groups and the Flux business is also integrated. And we're seeing some early wins with advice groups actually adopting their technology and content to service their next generation of young adult clients. So really pleased with how the strategy is working and particularly the fact that it's delivering so closely to our market segments and what's been discussed previously. Jumping ahead to Page 24. From a corporate sustainability perspective, it's really important that we continue to invest into our core business. The reality is that when we look at our overarching objective, which is to improve the financial futures of 1 million Australians. What we do day to day is a business through superannuation investments in helping people with financial futures is the biggest impact that we can have. Outside of that, though, we are working on a number of initiatives across our 3 core pillars that is to foster diversity and talent and improve well-being and really pleased to say through the period that our engagement scores for employees continue to increase and are generally very happy. We're also creating positive social and environmental impact, and I won't go through all of those items, but we have been very active in the community. We've got a number of philanthropic partners that we're working very closely with. And 1 of the stats that I'm very proud of is the fact that now more than 125,000 kids have gone through our financial literacy program in schools in conjunction with Banqer Primary. Also, a range of new regulatory uplifts and frameworks that have been delivered and are in process, and that really ties back to our ability and desire to be genuine and transparent in all of our dealings. So plenty to discuss. Hopefully, you've enjoyed the results. We think they're fantastic. Hayden is now going to go through them in a bit more detail. If you can hold until the end, we will take questions. But on that note, I'd like to hand over to Hayden for our financial section and for his inaugural results. Over to you, Hayden.

Thanks, Matt. It's a very warm introduction. And hopefully, this is the first of many of these results presentations we actually get to do together. So a warm welcome to everyone as well, and thanks for everyone's participation today. And let's dive straight into some, I think, what are some very exciting numbers starting on Slide 26. Now Matt hit the high notes of these earlier, but I really want to reinforce these because I think they actually truly are quite stunning. To begin with, we delivered an 80% increase in FUA net flows, driving a 30% increase in total FUA and generating a 26% rise in revenue to more than $155 million that you'll see there. Now that's an over $30 million improvement in revenue just for the half. And as we grew, we were also able to do so very efficiently, as Matt said, and we yielded a 5.4% productivity gain in EBITDA. So the combination of the strong revenue growth and the efficient scaling has actually meant we've generated a 33% increase in our EBITDA to $78 million for the half. And pleasingly, given we actually capitalize very little, our conversion of EBITDA was to over $75 million of pretax operating cash which is very, very strong, almost 100% conversion rate there. You'll also see our NPAT rose strongly by 47%, and we benefited there from a lower effective tax rate, which I'll touch on in just a bit. But lastly, on this slide, I really want to draw everyone's attention to our Rule of 40 score. Now this is a metric that's actually gaining increasing attention outside of the SaaS sector. And here, you'll see our Rule of 40, which to everyone's benefit, if you're not too sure, it's the sum of our revenue growth and our EBITDA margin. Our Rule of 40 score was 76.2, which is amazingly strong and clearly best of breed amongst our peer group. And it really underscores the sustainability of our high-growth, high-margin and highly cash-generative business model. So I think all up, a great set of numbers and something we're truly proud of and very excited to announce today. Moving on to Slide 27 quickly. This morning, you would have seen that the Board declared a $0.175 per share dividend, which is an increase of 25%. And also represents a payout ratio of about 75%. There are some call-outs on this slide in the bottom right, listing some of the nonoperational impacts on our accounts, which I think are important context in particular for our effective tax rate that I mentioned earlier. I won't go into details of those here, but I'm very happy to answer any questions on these later. Next up is Slide 28. Here, you can see the key components of our revenue and how the base of that revenue has actually been broadening over time. And the 1 thing I want to point out in this slide is the transaction fees now represent just over 14% of our platform revenue. And if you overlay this with a 24% growth that we achieved in our platform revenue in the half, you can actually do a back calculation and get to the fact that our dollar transaction revenue, so in dollar terms, grew by almost 50% in the half, which is clearly a very strong result and a very significant contributor to our growth. Moving on to the next slide, 29, and operating leverage. I think everyone knows we've been very disciplined in managing our costs, and it's been no different at all this time. Now our cost management has actually enabled us to deliver an EBITDA margin north of 50%, which I think on any measure is clearly stunning. But there's actually 1 thing in having high margins. There's actually another thing in being able to show you have a very fine level of control and understanding of them and can actually deliver efficiencies over time, while also investing for the future. And I think that's exactly what we've done here. We've shown meaningful operating leverage in very particular areas that can expand margins while we also grow. So in the half just gone, we grew revenue by 26% and yet our largest cost item being staff grew by only 15.5%. So the delta there represents a massive 10.5% headcount productivity gain, and that's flowing straight through to our EBITDA. Just going to a little bit more detail there in the half. Those efficiencies were generally across our G&A, our general and administrative function. We would expect to see efficiencies as we grow. But we also got scale efficiencies out of our staff spend on technology and pleasingly, also in our delivery functions, even though they're more variable cost in nature. But as I said, we want to be investing for the future, too. And so we're very deliberately edging up our spend on certain things to capture future growth and scale efficiencies with the main area here being the nonstaff investment in our platform and data technologies. And to me, this whole sort of efficiency and investment thematic is like super, super exciting. And whilst Matt said, I'm sort of new in the role, only 3 months in. I think this area of efficiencies together with growth are probably the 2 areas of CFO that I really want to concentrate on. Just quickly on the next slide, you'll see our headcount growth. So segueing from the previous slide, it's actually no mean feat to have gotten a 10.5% productivity gain from headcount and yet have still added 55 staff during the period -- sorry, I should say, 51 staff during the period. I think that really underlines the scale of what's possible, and that's being efficient and investing, being efficient and investing. And the last thing I think to note here, and Matt will get to this a little bit later, is that we are expecting to accelerate our headcount investment in certain areas soon. Moving now on to Slide 31 and our funds metrics. I think it's important to stress the strength of these as they really are the engine that makes everything possible within the company. And the first point to note here is, as Matt did highlight earlier is that our record half of net flows was actually made up of 2 record consecutive quarters. So that's showing that we're really running with some very strong volume momentum at the moment. And at $8.5 billion, it was a massive 80% increase on last year and has powered our -- us to a total FUA number north of $100 billion for the first time ever. Okay. On the next slide, again, just quickly, 32. This sets out 3 things across the 3 charts there. The first is the growth in our average account size, which has been a real positive trend for us over time. Secondly, in the middle, our platform earn rates actually rose slightly since the second half of last year. And whilst it's down about 1.6 basis points to 31.4 bps from 33 bps in the first half of last year. That's actually only a 5% contraction, which can be entirely accounted for by just the market movement in our FUA for the last half alone, okay? So that's not accounting for any of the fee tiering or caps or institutional flows or the like. So I think in that context, we're really, really pleased with that, too. Lastly here, our average revenue per account has risen by 10% since last year, and that builds a very consistent growth that we've had historically as well. With that, I'll move on to my final slide, which is the summary. And in short, that we're in excellent financial position. As I said, we've got high-quality recurring revenue. We're growing rapidly. We've got strong and improving operational leverage. That's all showing through in our stellar Rule of 40 score of 76.2. We're investing for the future, and yet we've actually got a clean P&L with very low CapEx. We're generating significant cash. We're raising our dividend. And quite frankly, feeling generally very, very confident in our outlook and growth opportunities. So on that note, I'll pause and I'll hand back to Matt.

Thanks, Hayden. It's going to be hard to talk about outlook from you. But as you heard from both my opening remarks and also Hayden's analysis, the business is performing really well. We remain very confident of the future prospects of the company and flows, as you saw, we've got significant support from our existing customers. We're signing up and winning good quality advice groups that are now producing and will continue to produce over the next many years and the market outlook is certainly positive. We have flagged a number of things. One of the key areas is that given the very positive outlook for the business, we want to make sure that we are capitalizing on the opportunity, and we have brought forward therefore some planned initiatives to make sure that we can deliver on them sooner rather than later. In the second half, there will be increase to headcount. And as you'll see there, inclusive of the Xeppo and Flux headcount costs and costs, sorry, we would expect costs to grow by about 5% in the second half and a small increase of $2 million in our capitalized software. Beyond that, there's a number of minor product changes. But overall, as I said, the business is performing very well, and we're fairly confident about the future. So on that, we're happy to take some questions and hand over to those on the call.

[Operator Instructions] We have the first question from the line of Bob Chen from JPMorgan.

Just a couple of questions for me. Obviously, coming off a couple of record quarters. And it looks like your third quarter has started pretty well, about $1.5 billion today, how is the balance of the year sort of shaping up on the back of that? Are you seeing the pipeline growing stronger from here? Or is it sort of broadly even with what you've seen in the first half?

Yes. Thanks for the question. Look, we obviously haven't made any sort of forecast flow that will provide any forecast flow numbers, but it has been a really good start for the year, and we're very confident about the current pipeline. The pipeline is large and importantly, it is diversified across all regions. So we're seeing fantastic opportunities across each of the states. We've made some key appointments within the sales team, which should help drive future flows and we're seeing really good diversification across our client segments. So I obviously talked about the 3 parts being the emerging and mass affluent and also high net worth. The pipeline represents all of those. And yes, feeling good about where we're at.

Okay. Great. And then just on the OpEx side of things. I mean I think your sort of second half outlook sort of implies maybe 21% OpEx growth for the year. Like do you see this year is a bit of a reinvestment year and then we could see that rate of growth slowing into the following year? Or is this sort of a new baseline?

Hayden, do you want to take that one?

I'm sorry, could you just repeat the last part of that, Bob?

Just whether or not you guys are seeing FY '25 as a bit of a larger reinvestment year before slowing down that pace of reinvestment into next year?

Yes. So look, we have as you'll see on the outlook slide, we've declared that we're going to be investing an additional $2 million in our software CapEx in the coming half. We haven't made any judgment or a decision, I should say, about what lies beyond. But one of the things that I think is really encouraging here is the fact that the top line growth when you mix up with the scale efficiencies that we can get by having an element of our cost base being fixed and then finding some efficiencies in parts of our variable cost base is that we can actually drive our EBITDA margin up. And I think we've shown that 3 half-on-half as per 1 of the slides in the pack. So what that enables us to do, Bob, is really I suppose, moderate potentially a little bit of what flows through the EBITDA and invest where we see there's good returns into the future. Now I'm not making any commitment there about what we're planning to do in FY '26 or beyond, but we certainly have the levers to be continuing to invest in CapEx whilst I think at the same time, either maintaining our EBITDA margins or potentially letting them just continue to expand as well slightly.

We have the next question from the line of Nick McGarrigle from Barrenjoey.

I just had a question around the -- some of the pricing changes. Obviously, the revenue margin was quite strong in the half. I assume part of that was the acquisitions coming through a for a more complete period. But can you just talk through the rationale around the cash rate change? And then does that have any implications for fees elsewhere across the rate cut?

Yes. Thanks, so I talked all about the total revenue mix, as you know, and we saw a great growth across a number of those revenue lines, in particular, within transactions. Having said that, we have done analysis as part of our annual review. We're probably slightly out of market when it came to the cash rate that we're paying and we wanted to make sure that, that was sort of at the median or market. It also just means that we future-proof any sort of pricing compression in the future. So we want to make sure that we can pass on attractive pricing to our customers some of the larger strategic accounts. We are seeing a little bit of pricing pressure in the market and that will obviously allow us to absorb it. But yes, it's just part of the broader pricing review and pricing metrics.

It's more in response to pricing pressure, having flexibility to be able to drop admin but keep the overall margin the same? Or are you kind of leaving some of that pricing.

Pricing is part of it, but there's also a number of areas of the business that continue to be uplifted. So clearly, regulatory environment continues to make sure that we're doing the right thing and that there's good coverage across all of the different teams. So it's just -- it was an appropriate time to do it.

Okay. And then I guess in terms of the flow outlook, you've -- I think the year obviously tends to start a bit more seasonally quite but you've commented on some transition wins. And they've been maybe in the last 3 or 4 months that you've had additional wins that give you confidence about the outlook for further flow growth?

Yes. The pipeline is very strong at the moment. We've had some good wins in the last 12 months, we had good wins in the last 6 and 3 months. So as per normal, there is that sort of seasonal element to it, but equally got some transitions starting as well as some new accounts have confirmed that they're going to be moving in the last month or 2 as well.

We have the next question from the line of Cameron Halkett from Wilsons Advisory.

I might just start, I suppose, quickly on the tax side of things. Obviously, a bit lower than usual this half. Hayden, is that best framed as a one-off just due to the nature of expenses incurred this half? Or is it something we should all be considering looking ahead?

Yes. So Cameron, there are really 2 parts to that. If you have a look on Slide 27, we've given some numbers there in the bottom right. So the largest part was $2.8 million, and that was tax credit relating to an employee share trust. Now that is effectively a timing difference. So we would have received that tax benefit at the time, any way of incurring the share-based payment expense. So it's really just moving when that tax benefit is actually recorded. And then the small component, which is the R&D tax incentive of $1.6 million. To the extent that we continue to do R&D tax claims, then you should expect that we would be receiving a benefit of some sort as to whether it's 1.6 or something different, I don't know. But the 1 thing to point out there is that tax incentive claim benefit was for a full financial year FY '23. And clearly, we're only reporting half year financials here as well.

Yes. Okay. And then 1, I suppose, around the additions to headcount seen through the half, in particular, quite a step, I suppose, on the distribution product and marketing side, usually, we've been adding around the sort of mid-single digits in terms of net new staff members. So I suppose, what's the story here? Is that spend to ramp up exposure to other areas of the market you're looking to target or Netwealth is just getting larger and just naturally needs more people.

Yes, there's certainly an aspect to that. But clearly, we're seeing really good opportunity in the market and we want to make sure that we capitalize on it. There's a few extra heads in there as well for -- in our training relationship team. So senior BDMs come on, they typically will work individually for a period. And then we add a training relationship manager to what we call a sales pod. So there's a little bit of that. But overall, it just really reflects growth in the size of the business, but also our desire to make sure that we capitalize on all the opportunities in the market at the moment, and that really is across the board in each state.

And maybe I'll just add to that, too. The heads there cover distribution, products and marketing. So distribution and marketing, clearly, sort of sales are entered sort of growth-oriented. Product is probably more akin to technology in some ways. So it's an unusual sort of grouping of those. And there was actually a little bit of movement within the groups as well between tech and product during the half. So some of that is a reflection of that as well.

Okay. And so just quickly on, I suppose, the headcount, the key focus there for second half, given you're sort of flagged, it's looking to continue to be another strong half for hiring. What should we expect given Netwealth has usually sort of added on average around about 16 heads a year.

Do you want me to take that, Matt?

Yes, sure.

Yes. So look, the outlook statement that we have provided there is that headcount growth will increase. So not necessarily headcount will increase, but headcount growth will increase. So if you have a look that we added 51 during the half, that's a base number on which to establish that outlook statement. So I think you just need to read those 2 things together, Cameron.

We have the next line of Simon Fitzgerald from Jefferies.

Just really briefly on the tax rate. What is your expectation for the tax rate for the full year.

We -- yes, that's not something that we have published. But look, it wouldn't be too hard to back calculate that, as I said. The employee share trust is effectively a timing difference. And look, we are in the process of doing FY '24 R&D tax claim, whether or not we actually manage to achieve that in the current half or not, still is open. But look, everything is very, very clean, very clear. And it's really those 2 impacts the share trust and the tax incentive that are going to the -- R&D tax incentives that we're going to move that around. There's nothing else.

Curious though why an R&D tax incentive tax credit of $1.6 million is claimed in the first half '21, which relates to FY '23?

Yes. Because we have only recently processed that claim and brought that to account.

Okay. And so was there anything done in the FY '24 year for R&D tax incentives that relate to the FY '23?

No.

Okay. That's fine. And then just a broader question for you, Matt. Obviously, superannuation is a big component in your flows and your FUA. There's probably likely a larger pot out there, which relates to non-superannuation, private assets held. And I would imagine that Netwealth would have a good exposure to that just because you do have quite a good exposure to higher net worth individuals. Have you had any thoughts about how that market looks like and how much is actually coming on to platforms. And I'm not talking about the sort of noncustody stuff. I'm just sort of for a minute thinking about the size of that part of privately held assets that are not part of superannuation.

Yes. That's obviously we see as a huge opportunity. So the actual number is quite difficult to quantify. I know some of our peers have attempted to and we hear anything from $3.5 trillion, $4 trillion to $7 trillion. So it sort of -- size up yourself, if you like. But we're certainly seeing movement. So if we look at our own books and a number of these discussions that we're having, where we've either been successful moving across or will be its institutional accounts where they've been on more traditional custody platforms, which have got limited functionality and it can be quite expensive. We're seeing family offices moving significant money across where they may have historically invested directly whether locally or internationally and run that on 0, some other system spreadsheets, et cetera. And obviously, the broker market is something that we're actively pursuing with a number of discussions where we're looking at combining individual reporting with our broader platform capability. So that broker market is something that we certainly want to participate in and we'll continue to build out throughout the course of the next couple of years.

Sounds good. And then just a final question. I'm sorry if you've mentioned this already or I missed it in 1 of the slides. I was just curious in terms of the heads that were added this time around how much are related to development versus distribution and other areas.

We haven't provided a -- yes, we haven't provided a split of the 13 in distribution, product and marketing. We haven't provided a split as to what is distribution, what is product and what is marketing. Any thoughts on the -- it's 13 across -- let me take that 1 offline.

We have the next line of Siraj Ahmed from Citi Group.

Some of these questions might be repeat because I'm just focusing on multiple results. Matt, first 1 on that 3Q of $1.5 billion. I'm not -- correct me if I'm wrong, but I think last year, you had $1.5 billion as well. Can you just let us know if that's correct? And maybe a second part on that, I know you've flagged quite a few large transitions, right, especially from 1 of the competitors consolidating platforms. Has that really kicked off -- just that would be helpful.

Yes. So the $1.5 billion, I believe, is very similar to this time last year. So there is the seasonal aspect, but it is a good start to the year, and those flows are coming from a variety of sources. So as I mentioned earlier, we're not making any flow forecasts, but we're comfortable with where we're sitting at the moment. So there's a number of transitions happening across the board from a number of competitors. I think the one that you're referring to. There's a couple of very large ones. One is well underway and the other 1 is still very much at the beginning. So they're certainly not going to drive all of our flows moving forward, but they will contribute well in addition to everything else that's coming in.

That's helpful. Second one, maybe for Hayden. I know you were not there when the initial cost guidance was given. But it is supposed to be, I think, modestly higher. It's coming at 20%, right, with, I think, last year was 15%. So it seems like some of this is tech-and-comps pressure. Just keen to understand, that is unplanned. And secondly, I think, Bob might have asked this, but I think second half is accelerating 23% growth in terms of OpEx. Does -- is that the level we should take into next year? Or do you reckon some of this tech and comp spend can come down?

The best thing for me to point you towards there, again, is what's in the outlook statement. So we are expecting our operational expenses in the current half we're in to grow from the first half run rate by about 5%. And on top of that, it's a little bit more on capitalized software. Now that 5%, you can take it that the vast majority of that will be in headcount. And then that obviously links back to the earlier comments about growing 51 heads in the half and expecting headcount growth to increase as well. So yes, that's where the majority of the additional spend is.

Just clarifying, that 51 included Xeppo and Flux, right? So are you saying second will be more than the 51% or excluding Flux and Xeppo?

We -- no, it would be Flux and Xeppo, so more than 51. There's clearly a large number of heads to add. And we -- I think in the past, we haven't necessarily been as successful in hiring people as quickly as we would have liked, but I'm not too sure what will play out, obviously, for the remainder of the half.

Got it. Last one, maybe 1 for Matt. Matt, in terms of trading revenue, that's a pretty solid outcome. I think this is partly a function of in-housing that you did last year. Is there more to go here? I know you're doing some functionality, but just keen to understand, is it cyclical or is it structural in what you have done, I guess, just in terms of us modeling it and looking ahead?

Yes. So obviously, this is the 1 part of our business that's not totally predictable or recurring in its nature, but we've seen a big uplift in the volume of it. So there's a number of things that we've done that have contributed to that increase in the volume of trades. One is, as you correctly said, we've set up and released our trading desk. So the trading desk effectively helps large clients and advise firms that are looking for more of a high-touch service to trade via us as opposed to external. So we've seen really good success in that. We've also now started to trade international for certain groups via that desk, but also -- we've uplifted our international trading capability. We've actually seen a really big uptake of international in general across the platform. So it's growing pretty significantly as people look to get overseas exposure through direct holdings as opposed to through funds. That's driving some of it. And managed account grows, a reasonable component of that is through direct equity. So the bigger managed account and more turnover, the more trading. So across the board, there's a number of initiatives been put in place truly to drive that trading revenue up and now we're starting to see the benefits of that.

We have the next question from the line of Scott Hudson from MST.

Just a couple of questions from me. Firstly, just referencing your slide on Page 35 on I guess, AI. Could you maybe give us a sense of what benefits AI have delivered already from a cost perspective?

Yes. So I probably can't give you quantifiable at this stage, although we are starting to look and tie headcount savings to the different initiatives. But there's been major upgrades made to our contact center technology and how they operate. So we are seeing a lot of time being saved on the responses that we provided to clients, and the quality of the responses that have been given to clients and also just the overall quality makes it a lot easier to assess and review at scale, but also small things such as call wrapping, so rather than agents now having to spend sort of 2 to 5 minutes typing up notes post call. All of the calls are transcribed and automatically summarized, which agents can then check and move on fairly quickly. So we're seeing really good capacity being released there. That's been -- that's resulting in more time to train, lower waiting times. And over time, we would expect that to reduce the requirement for headcount growth as well. We're also pushing ahead and further automating a lot of our documents. So we're indexing, I don't have the numbers on me, unfortunately. So in categorizing, indexing and recognizing a lot of the paperwork that comes into our business. They're working at the moment to now extract data from those forms and more importantly automatically process that data straight through into our system so that we believe we'll have some major efficiency gains. The developers, we're pushing the take-up of that so that it's making them more efficient and then we'll certainly be a big focus for next year. If you believe the hype, Microsoft suggesting that using their copilot tools you should be able to get at least 30% developer efficiency. So we want to make sure that as a target, we are absolutely working towards those numbers. Personally, I know I use it all the time, and it's freeing up probably hours, if not more, a week. And that's certainly consistent across the business. We're seeing some really interesting use cases. So we continue to implement, identify and use it wherever it makes sense and where possible. So yes, we absolutely believe that's going to have a big impact moving forward.

That's great. And then just, I guess, you've seen a very robust net inflow environment over the past 2 quarters and the start of this quarter. Could you sort of give us a sense of where you feel that what's driving that robust uplift seems across the broader market to be first, not just yourselves and maybe your closest peer, but it seems like the overall advice market is pretty buoyant. Could you maybe give us a sense of what's driving that?

It's pretty multifactor. So certainly, we're seeing good flows from incumbent platforms where advisers see benefits to moving across the Netwealth, whether that's the product range that we offer, the service, the capability, the whole range of reasons why different advisers may choose to work with Netwealth, but clearly that's a key driver of flows. The advice industry is definitely seeing a buoyant environment. Markets have been good and that definitely drives positive sentiment and new client growth, but also picking up, I think, it was on Scott's comment earlier, we are also being successful in dragging money from nontraditional platform sources into the platform, whether that's through sort of industry funds or emerging affluent channels. Also that high net worth channel as well as we're working with new clients that traditionally wouldn't have been platform clients, and that's been a really successful strategy. So yes, buoyant market, but also delivering on our strategy across all those other aspects as well.

And then I noticed in the APRA data that your sort of competitive flows from a superannuation perspective are very strong and have been very strong. Is that you are taking share from retail superannuation. Or do you feel like you're also starting to maybe eat into some of the industry funds from a superannuation perspective?

All of the above. So a couple of years ago, I think, we called out that we'd obviously spent a number of years focusing on building out our high net worth proposition. And whilst our mass affluent and superannuation growth was good. We felt there was more that we could do there. And so we've added a number of platform features to sort of drive that efficiency for the mass affluent adviser. But also the core product, which you would have seen earlier in the deck, has really hit the mark and had really great market fit. So that's helped advisers move money from industry funds, but also service that cohort of clients better. So again, it's not just lumping. It's a number of things that we've done, but certainly, really pleasing to see that superannuation part of our business firing as well as, obviously, the other parts that we've talked about historically.

We have the next question from the line of Simon Fitzgerald from Jefferies.

Sorry, guys, just a quick follow-up. I was just a little bit more curious and want to unpack a little bit more about the competitive landscape. You did mention, Matt, that you've changed your pricing structure to be ready and be a bit more flexible there. And you did say you're noticing some minor price competition. But just interested to know whether you're seeing new participants starting to turn up in a tendering process or anything like that?

So not new participants. There is obviously all the usual suspects. And inevitably, it's likely to be us in the final 2 with the incumbent. [indiscernible] is coming up occasionally, and that's where we're seeing certainly a bit of pricing pressure. But again, nothing has really changed since the last quarter.

There are no further questions at this time. I now hand the conference back over to Mr. Heine for closing remarks.

Thanks, everyone, and appreciate the comments at the end. We're really pleased with the result. Great to have Hayden on board and congratulation to him on his inaugural set of results. I look forward to catching up with everyone.

Thanks everyone.

Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.