OFX Group Limited (OFX) Earnings Call Transcript & Summary

Thank you, Darcy, and thank you, everyone, for joining the call. As Darcy mentioned, I'm joined by Selena Verth, our Chief Financial Officer; and Matt Gregorowski, who leads our Investor Relations program with Citadel-MAGNUS. Selena and I will take you through the pages and then there will be time for Q&A. And this year, we'll cover 4 things. The full year results, what it is and what drove it, our financials in more detail, our strategy, including our investment in Paytron and announcing a share buyback and our fiscal year '24 outlook as well as the Q&A. Let's move to Slide 4 in the pack. And fiscal year '23 was another record year with turnover of $39.1 billion, driving net operating income, or NOI, $214.1 million, and underlying EBITDA of $62.4 million. These metrics represent the biggest NOI we've ever produced, up 45.6% on prior corresponding period and the biggest underlying EBITDA we have ever produced, up 40.3% versus prior corresponding period whilst generating the strongest net available cash of $67.4 million we have ever had. This financial performance was the result of very strong execution. Clearly, the external environment was as unusual as we've ever seen with rapidly rising interest rates, inflation and considerable political and geopolitical conflicts, causing uncertainty for our clients and team. Nonetheless, we were very disciplined in driving an exceptional integration of Firma and continuing to invest and deploy new features and services in our global platform in leading our team and engaging our employees and in managing the considerable risks we faced. We saw the highest fraud and loss prevention we've ever had to manage, which is a testament to the efforts and capabilities of our team, which continues to grow. Moving to Slide 5. The performance of our 3 segments that comprise B2B has been strong and underpins both our fiscal year '23 results and our fiscal year '24 outlook. The 3 segments in B2B are Corporate, online sellers and Enterprise. Corporate is our largest of these, generating just under 90% of the total B2B fee and trading income or revenue, and in fiscal year '23 was the strongest performer, generating $124.6 million of revenue, up just under 90% versus fiscal year '22 and up 10.7% second half versus first half and more on the Corporate segment in a moment. Online sellers saw revenue declined 6.9% as it reflected the overall decline in e-commerce volumes we have seen following the COVID driven surge, it was encouraging, however, to grow active clients 5.5% and to further strengthen our product integration with Amazon and we continue to see a great opportunity in this segment in the future, notwithstanding the short-term challenges. Enterprise saw revenue growth of 2.1% in fiscal year '23 versus fiscal year '22 and the rate of growth was higher in the second half as it grew 14% versus the first half. The growth in the second half was driven by the activation of our Link program, some growth in our WiseTech program and continued strength in our Macquarie program. Importantly, as previously mentioned, we've been focusing on targeting smaller prospects that are in our strategic sweet spot that we feel would be easier and faster to activate and would use existing technical infrastructure. We saw that bear fruit, especially in the fourth quarter, where we announced and activated programs with automic and shift, for example, and grew the pipeline from 56 to 67, and these were well dispersed regionally. In all, very encouraging indeed. Moving to Slide 6. The Corporate segment is performing very well for OFX and is very much the key driver as we build a more valuable company. Firstly, our clients are very loyal, delivering recurring revenue of over 88%. And as we have shown, the revenue growth we see is very much the steady growth over time of clients using us more, complemented by adding new clients. Secondly, we target and support clients who give us substantive average transaction value. In fiscal year '23, these were 31,900, broadly stable versus fiscal year '22. Firma had targeted and serve clients who used Firma for fewer but larger transactions, which meant the group corporate ATVs rose to 36,500 over the full year. These healthy transaction sizes give us good economies of scale and reflect the trust and support we get from clients. The growth in ATV since fiscal year '20 has been due to a change in the mix of the portfolio. We see larger transactions from clients in industries such as wholesale trade, investments in public administration versus industries like retail or business services. These ATVs were stable in fiscal year '23, and we expect them to remain stable in fiscal year '24. Thirdly, we grow with our clients, evidenced by the consistent growth in transactions per active client. Excluding Firma, we've grown transactions for active clients around 19% in the last 3 years, whilst growing ATVs and fee and trading margin. Growing transactions by number and size creates terrific operating leverage as the incremental cost of a transaction is low once the client is onboarded and active. We see a terrific opportunity here with Firma, given the majority of their clients were phone-based. Their transactions per active client were lower. And as we migrate them on to our platform, we expect to see this grow at a low marginal cost. Indeed, the fastest-growing subset of the Firma portfolio were the clients on the Firma online platform, which supports our fees. Moving to Slide 7. Our B2B portfolio is complemented by a valuable consumer portfolio. In our case, we serve consumers who use us for high-value use cases such as wealth management and property purchases or sales. The nature of these use cases means we see transactions and ATVs fluctuate half-on-half. Historically, it tended to fluctuate as volatility in currency markets. Events like Brexit or COVID tended to trigger our clients and prospects to move money. In the last year, we have seen a fair bit of volatility. But for the first time in 10 years, we've seen a combination of rapidly rising interest rates and inflation, which has deflated asset prices and in turn, the higher-value use cases have softened this proportion of all activity. However, we see the consumer portfolio performed well through the cycle, generating modest growth but healthy returns. And this also, despite pivoting our marketing program to focus on the corporate segment over the past 3 years. So the number of active clients is slowly declining, although revenue grows in particular periods as the size of transactions grow or margins grow or both. Through the cycle, we see growth around 5%. Though in any given year, it will vary, such as fiscal year '23, where we saw revenue growth of 11% in the first half versus first half '22 offset by a revenue decline of 13% in the second half, generating an overall revenue of $71.6 million, which was largely flat to fiscal year '22, but up over 24% versus fiscal year '21. We remain pleased with our Consumer portfolio and the continued growth in the quality of the portfolio and intend to continue to support clients who value the trust, great value and the simplicity of the service we provide. Moving to Slide 8. As I just covered, our overall performance in fiscal year '23 was strong in the first half and a flat second half driven by a softening in the consumer confidence globally for high-value use cases. The chart on the left shows group revenue split by segment by half since first half '21. We share this to illustrate a few important points for investors. Firstly, the total portfolio is affected by swings in the consumer portfolio, but that effect will be more limited going forward as the pivot to B2B has well and truly taken hold. We do occasionally see some softness in Corporate such as first half '22, but largely, we see steady growth at a long-term CAGR of between 10% and 15%. Secondly, whilst we can have unusual half-on-half performance as we did in fiscal year '23 driven by a consumer, it is rare that, that persists over multiple periods. And finally, as we start to build synergies from Firma and as we start to build stronger growth from OLS and enterprise, we expect to see the effects of consumer fluctuations lessen on the overall result, though it will still remain valuable. All of this revenue growth can be supported by good execution across margin, OpEx and risk management levers also. Now let me hand over to Selena to share more detail on our financials, including our P&L, our balance sheet, cash and intangible investments.

Thank you, Skander. Moving to Slide 10, we have driven a record financial results. We have growth across all regions and are delighted with the contribution from Firma. Fee and trading income or revenue was up 42.4% to $225 million. Firma contributed $59.7 million to the result and a record year for their business. We saw growth in all regions with APAC up 7.4%, EMEA, up 27.2% and North America up 105.7% or 7.1% ex Firma. The revenue growth rate of 42.4% when adjusted for constant currency is more like 41.3%. Net operating income was up 45.6%, which is a higher growth rate than revenue as our bank fee and commission ratios held whilst we had a benefit of $3.9 million from interest and other income. Rising interest rates have allowed us to make some interest on the cash we hold. The benefit has increased from $800,000 in the first half of '23 to $2.6 million in the second half of '23. Our clients value speed so our treasury function is critical in providing liquidity and security, enabling fast and low-cost payments. Interest income is a nice upside to move -- to money moving through our accounts, but we will not prioritize this over speed of payments. Our underlying EBITDA was $62.4 million, up 40.3% on fiscal year '22, a record for OFX. As we had outlined, we had a very strong first half '23, with underlying EBITDA of $32.3 million. We continue to see growth in corporate in the second half of '23, but weaker conditions for Consumer resulted in the second half '23 underlying EBITDA of $30.1 million. As Skander has talked to, Consumer revenue saw a decline in high-value use cases such as property and wealth transfers as a result of rapidly rising interest rates. Consumer does fluctuate but delivers steady single-digit growth through the cycle. Over the year, we generated healthy EBITDA margins of 29.2%, which is some of the highest in the industry. Our fiscal year '23 tax rate is unusually low at 16.2%. The main items that have contributed to this, as we have guided the offshore banking unit tax regime ceases in fiscal year '23. As a result, the deferred tax position has been remeasured to 30%, creating a decrease in the fiscal year '23 income tax expense of $800,000. The ATO has also implemented an intensity measure for R&D tax benefits. Essentially because we have invested more in intangibles, we have gone over into a new threshold, which delivered a higher R&D rebate. As a result, the tax credits have increased from 8.5% to 15%, resulting in an increased benefit of $700,000 on the fiscal year '23 eligible R&D spend. Considering what this means for fiscal year '24, we previously guided that with the cessation of the OBU tax regime, the tax rate would increase to 29%. We now expect this to be more like 25% of the increase in R&D tax credits. Statutory earnings before tax is $37.5 million, up 14.8% and includes $5.9 million of interest on our debt, which we used to fund the Firma acquisition and $6.7 million of Firma transaction and integration costs. Our statutory net profit after tax is $31.4 million, up 25.6% on fiscal year '22 and a net cash hold is a healthy $93.8 million, up $9.6 million on fiscal year '22. Moving to Slide 11. Our underlying operating expenses are $151.7 million, up 47.9% on fiscal year '22. A significant portion of this increase is Firma as we completed the acquisition on the 1st of May 2022, including 193 employees. Employee expenses had the largest increase, up 58.2% or $38.6 million. $26.2 million of this increase was due to Firma and the remaining $12.4 million represents further investment in technology and sales as well as salary and inflation of approximately 5% over the period. Promotional expenses were $16.8 million, up 1.5% for the year. In the first half of '23, we spent $9 million and the second half of '23 was lower at $7.8 million. You may remember there was high volatility in the first half of '23. And as always, we continue to invest in marketing where we see the demand. Also the cost of branding campaigns and a higher wage into the -- have a higher wage into the first half of '23. We would expect a similar spend in fiscal year '24 as fiscal year '23. Technology expenses of $11.4 million were up 37.7%, largely due to Firma and a shift to Software-as-a-Service infrastructure from [indiscernible], for risk management, onboarding and payments. We are currently running 2 platforms, OFX and Firma until we complete the integration. We are excited that the first region to go live, which was Australia, has successfully completed in April. Bad and doubtful debts are in line with our expectations of $2.5 million and just over 1% of revenue. We always guided that the fiscal year '22 bad and doubtful debt of $100,000 would not continue given industry fraud levels. Like previous years, most of the bad and doubtful debts originate from fraud in North America. Only a few hundred thousand of the $2.5 million in fiscal year '23 was a credit loss on a forward contract. With the U.S. banking collapses, increasing interest rates and heightened financial stress for some corporates, we are remaining vigilant ensuring we review our credit positions and collect [indiscernible] from customers when [ positions ] Move out of the money. Despite the increase in fraud losses, as Skander mentioned, we saw the highest fraud and loss prevention we've ever had to manage, which gives us confidence that the systems and profits we have in place are effective and continuously improving. In fiscal year '23, our productivity initiatives were focused on bank fee savings, which you can see through the NOI margins and also a reduction in our office footprint. We successfully reduced our office footprint including Firma Sydney, London and Winnipeg offices and co-locating with OFX. We have also reduced our footprint in our Sydney head office by over 30% as we adopt a more hybrid working model. We expect fiscal year '24 growth in FTE and operating expenses to slow as we continue our focus on productivity and the realization of the annual $5 million Firma synergies by the end of fiscal year '24. $3 million of these are cost focused. Turning to Slide 12. You can see the continued progress we've had on margin management. You may remember the first half '23, NOI was 53 basis points and 62 basis points at same currency. As many of the margin changes occurred in the first quarter '23, we did expect the full year NOI margins to be higher than at the half. For the full year, we had an NOI margin of 55 basis points and 65 basis points ex same currency. On our annual turnover of $39.1 billion, the 11 basis points margin increase has a substantial impact. 4 basis points of the increase is due to pricing changes in the book. We watch the market closely and have an excellent pricing engine that we continue to test price elasticity, and there's more elasticity for the service that we offer, we can command a higher price. We've also seen many of our competitors increase their prices throughout the year. This is a result of costs rising due to inflation and the growing need to generate a profit for their shareholders. This may provide more opportunity for us in fiscal year '24. As mentioned before, with rising interest rates, we're able to make some interest income from the cash balances we hold with our customers. In the second half of '23, this was $2.6 million compared with $800,000 in the first half '23. We continually look at more efficient ways of offsetting our FX risk while generating a small return at the same time. Overall treasury revenue represented $14.7 million of fee and trading income or revenue in fiscal year '23. All of this while growing our corporate portfolio, which has lower margins faster than Consumer is an excellent outcome. Adding to that, as you can see, 5 basis points of the margin increase is from our Firma portfolio. As it is a service-led proposition, they are able to get a higher price, which we love. As we continue in an inflationary environment, OFX is naturally concerned about the effect it may have on our growth and returns. But what this shows is that managing margins is a critical lever which can generate excellent value when it is managed well. We will continue to monitor pricing and ensure we get the right price for the fantastic service we offer. Turning to Slide 13. We continue to have a strong balance sheet. Our net cash held position is $93.8 million, which is both the cash held for own use and deposits due from financial institutions. As mentioned, this is up $9.6 million from March of '22. We hold some of these cash as collateral for our trading lines and bank guarantees. Collateral and bank guarantees were $26.4 million, which is down $15.2 million on March '22 or $22.6 million for the first half of '23 -- September '22. You may remember September '22 was a particularly volatile period as the GBP almost at parity with the USD. As volatility has eased, the collateral position has reduced, and we have continued to negotiate better arrangements with our bank freeing up cash. Net available cash is $67.4 million. We saw our cash flows from operating activities in the second half of '23 revert to a usual high cash conversion rate. With the second half '23, statutory EBITDA was $29.1 million, converting to $28.3 million of cash, a conversion rate of more than 90%. The annual underlying cash conversion when excluding Firma items is also strong at over 90%. We funded the Firma acquisition using debt. When the transaction closed on the 1st of May, we drew down our $100 million, 5-year of the facility. We've paid down $32 million of the debt facility in fiscal year '23 and are on track to repay the debt facility within 4 years, subject to no other value-accretive growth opportunities emerging which require funding. With our high net available cash balances, our current net debt position is $18.8 million. Skander will take you through our capital management policy later, how we use this excess cash. Turning to Slide 14. As we guided at Investor Day, we've invested $17.7 million in our single global platform in fiscal year '23. We have also invested a further $1 million in the platform for the Firma integration. We are very pleased that the first region went live in April and the others will follow throughout this year. We invested $10.5 million in fiscal year '22, but you may remember the original intention was to invest more like $12.5 million. But like all companies in fiscal year '22, it was hard to find resources in this space. So we spent a little less than we intended to. Since then, we've developed a number of outsourced partnerships with technology development and hire talent outside our core office locations. This has allowed us to catch up on our fiscal year '22 delivery program. The team has had a huge year of delivery. You may remember, we spent fiscal year '22 automating incoming payment allocations. This year, we took this a step further and created [ introduced ] streaming to meet faster USD payments for our clients and reducing the payment processing time by 9 hours. Improved connections also provide flexibility and cost efficiencies with bank fees as a percentage of revenue down 16% over the past 3 years. We've rolled out an improved customer -- consumer risk management process and implemented a global customer biometric identification and verification system. The new platform allows for automation, but more importantly, we have better verification rates in North America with an improvement of 17% and 25% in EMEA. This increased fraud protection has allowed us to keep bad and doubtful debts around 1% of revenue, which is very low for our industry. Like many companies, we have also invested in cybersecurity and data protection. This included a multifactor authentication process, which helps stop credential stuffing and botnet attack. We have a global customer management system, which all our front lines are using, allowing us to better track and respond to customer queries. We have also enhanced our online seller partner integration to ensure that we continue to be included in Amazon's list of approved payment service providers. All of these elements led to a high client engagement scores, the Trustpilot score at 4.2% and NPS of 71. Skander will now take you through the fiscal year '24 outlook and our new investment in the platform we have announced today.

Thank you, Selena, for that excellent summary of our financials. And in this section, I'll cover the exciting investments we are making in Paytron, the contemporary platform for the streamlining of business payments and workflows for small and midsized enterprises as well as our announcement that we intend to buy back up to 10% of our shares as part of our capital management program. Moving to Slide 16. Investors will be familiar with our strategy on a page, describing our goal to build the world's leading cross-border payment specialists. We discussed this at our Investor Day on March 23, so I won't go over this in much detail. However, I will restate a few key points. Firstly, we are playing in a huge market that grows every year and is largely dominated by major banks who are more expensive and less well liked by their clients than the new entrants. More and more customers are taking up the specialist service in every region as evidenced by the growth rate of all the new entrants, whether they are public or private. Secondly, we choose to target 4 segments. We chose those because we feel we have the right combination of skills, knowledge, global presence, platform, risk management and service delivery for those clients and prospects. Our competitive position is strong, driven by years of investment, learning and progress, and we know that we are differentiated through feedback from clients, competitors, banks and regulators. Finally, we have a valuable business, but we can make it more valuable through good execution, better capital management, a strong team and by leveraging our credibility as an industry specialist to grow wallet share of our clients by generating revenue beyond the core spot transaction. Today's investment is a great example of this. Moving to Slide 17. Whilst any investment or technology has technical and financial dimensions, we prefer to start by asking what do they do for our clients. This page describes our investments in building a best-in-class client experience over time, and it underpins the growth in transactions. ATVs, client retention and ultimately, revenue and EBITDA that we have seen in our Corporate segment in the last 10 years and how this will be further improved by our investments in Paytron and TreasurUp. OFX started by creating a simpler, lower-cost way for clients to make payments cross-border. It was digital, complemented by humans, and have dramatically reduced the cost of these payments for our clients as well as improving the time spent by clients on this as well as the speed it took for beneficiaries to receive client payments. As we spent time serving clients and understanding their needs better, we added features and benefits. Forward contracts, for example, reduce the risk for our clients, limit orders, let them set a preferred price without having to monitor the market. Then we added the ability for a client to receive a payment, which complemented their ability to make a payment, that step was enabled by our prior investment in more sophisticated transaction monitoring that gave our banks confidence we could get comfortable with incoming payments as well as outgoing payments. As we started to serve enterprise clients who wanted the ability to do mass payments with a single instruction, we developed that feature. Larger clients wanted role-based access for their employees, so we developed that. As we entered the online seller segment, it was clear that we needed to be integrated with the major marketplaces and PSPs, so we built that. Those clients tended to transact more often and because they were also heavy users of accounts receivables, we had to ensure we had a reasonable picture of the client's funds for a prototype of a ledger. But we've known for some time that we don't get all our clients wallet because the smaller transactions tended to get paid with corporate cards. We have done a bit of work to assess the work required to build it ourselves and had a path to do that, but Paytron gives us a ledger, which is what is required when processing more transactions and real-time authorization as well as the ability to issue a card. As I previously mentioned, they have also developed deeper integrations with accounting software and invoice management to further help clients manage AP and expense workflows. Each of these features have been added over time built from the insights we gained from working with clients, understanding the cost and the risk and deciding whether that is a feature we can do well. We don't add everything we see as possible. And generally, we look to stay focused on flow features, i.e., features that enable flow as opposed to balance sheet features, which rely on us using our balance sheet or push us into risk areas we don't have experience in. We expect to generate revenue beyond spot transactions and more transactions by deploying features that add value to the client experience, and this is why we have acquired Paytron. Turning to Slide 18. Today, we generated broadly 90% of our revenue from spot transactions and the remainder from transactions that are related to forward contracts. This mix reflects our history of starting with consumer clients who largely used us to move funds at a lower price more quickly than banks as well as corporate clients who found our combination of price, service and speed compelling. Corporate clients increasingly see the value in laying off risk, especially as they navigate turbulent supply chain, payroll and other risks in their businesses. However, we also know that the same corporate clients have needs that are associated with their cross-border payments and accounts receivables that we do not serve. Firstly, they'll have generally smaller value transactions they use corporate cards to pay. For example, software costs that are billed in U.S. dollars or vendors for services provided offshore. They can use our FX for many of these, but they don't because it may seem easier to use a card. Cards are widely accepted, the reporting is excellent, and they can be controlled well. Secondly, as invoicing has become increasingly digitized and accounting package is increasingly integrated with invoice management, Corporate clients have turned to firms specializing and integrating their invoice management with their payable solutions, both domestically and globally. Those firms generally charge a subscription for that service. Paytron provides a digital solution across cards and invoicing and by OFX acquiring them, we get immediate access to the software, we were in the process of building to access these revenues from clients. The software we were building, as Selena described many times, in our intangible investments creates competitive advantage by making life simpler, safer, more reliable and more visible for our corporate clients. The acquisition of Paytron fits into our platform journey by giving us card and invoice management solutions. And over the next 3 years, we will continue to operate the 2 platforms until we're ready to merge the 2, which we expect to start within 1 year of closing. In addition to the software, we're also delighted to welcome Paytron's team to become part of our FX, led by Co-founder, Jaco Veldsman and Francois Henrion. Jaco and Francois have over 30 years of experience across multiple geographies in major banks and entrepreneurial organizations in the payments and trading space. They have assembled a very strong and experienced team to build this platform and take it to market. We've structured this investment to align the interest of shareholders, the vendors and clients. In summary, we will acquire Paytron in exchange for a consideration of $11.25 million OFX performance securities, which vest when certain revenue targets are met by Paytron over the next 3 years. OFX will fund the operating budget with OFX retaining discretion in line with their revenue performance. This structure will encourage revenue to be generated, a strong integration and a better client experience, all underpinned by our usual disciplined risk and compliance foundations. And we think this is a great way to add valuable features and services for our Corporate clients and create the most compelling proposition for corporates globally while enhancing our revenues over time. In addition to generating revenue from loyal clients, OFX has always been a strong generator and converter of cash. This gives us options with respect to the best way to generate value for shareholders. Moving to Slide 19. Today, we have announced that we intend to buy back up to 10% of our shares by our share buyback program. In simple terms, the program will run for up to 12 months and will be periodically reviewed during that time, and its purpose is to return value to shareholders whilst we believe it is to shareholders' advantage to do that. It will not be done at the expense of investing for sustainable growth or in repaying debt, as Selena outlined or at the expense of investing in M&A or other strategic investments as Paytron has highlighted. As our last buyback demonstrated, we will run a disciplined program and we'll keep investors abreast of outcomes. Moving to our outlook. We've carefully considered our business and performance in creating a range of outcomes we expect. Turning to Slide 21, to summarize what is a complicated set of possibilities we expect to grow. Firstly, we expect to grow our net operating income so that it finishes between $225 million and $243 million. That range is a little wider than normal, but reflects, in particular, the difficulty in synthesizing and forecasting the range of economic outcomes we see globally and largely how that plays out in our Consumer portfolio globally and in the U.S. region for our Corporate segment. We'll keep the market appraised. However, in the trading we have seen in April and May to date, the evidence confirms the range we are providing. Secondly, we expect that to translate to underlying EBITDA of between $63 million and $74 million. Again, that range is a little wider than normal, driven by the NOI factors I described earlier. We expect the EBITDA impact of Paytron to be approximately $4 million in fiscal year '24, offset against the $63 million to $74 million range. Thirdly, we expect intangible investments to be between $17 million and $19 million. The range here is a reflection of the availability and cost of technical resources, as Selena mentioned earlier. We have a clear program that is well understood and resourced. The Paytron investment will add in the region of $1 million in fiscal year '24 as we uplift their product to enable the future combination I mentioned earlier. And finally, we expect to generate the $5 million of synergies from the Firma integration, in line with expectations with the Australian migration complete and performing well. Against this outlook, we've summarized our main assumptions as well as the main tailwind from headwinds potentially affecting the outcomes. Our main assumptions are that our Corporate segment will perform in line with the historic CAGR underpinned by stronger trading in the second half '24 as corporate clients get more confident in interest rates and inflation. Our Enterprise segment will grow steadily as it started to do in the second half of fiscal year '23. Our Consumer and OLS segments will be in line with fiscal year '23 performance with confidence picking up in the second half in Consumer to complement steady start. The main tailwinds to this would be a stronger corporate client confidence, driven by improved economic conditions. Also, should consumer rebound sooner than the second half, fueled by stabilizing rates, better economic and political conditions, we would trend towards the higher end of the range. The main headwinds would be unforeseen losses or risks materializing in cyber or fraud and an extended hard landing in the U.S. affecting U.S. corporate confidence and activity. In closing, OFX has never been stronger, more global and more engaged. Fiscal year '24 is off to a good start, that we must execute well, drive an even better year. We're delighted by the progress of the Firma integration and excited to bring the Paytron team and platform to our clients in due course. And with that, I'll hand back to Darcy to manage a Q&A.

[Operator Instructions] Your first question today comes from Cameron Halkett from Wilsons Advisory.

Skander and Selena, just firstly, thanks for the color on the guidance ranges and things and outlining your assumptions. I think we all appreciate it's certainly not easy to just tell an adequate range. I guess just following on your comments, firstly, Skander, before you concluded just around the confidence in the outlook with perhaps what you're seeing since the update in late March. I just wonder if you could shed any more color about obviously spoiling what you guys generally say in your first quarter update.

Sure, Cam. So to give you a little bit more color, as we touched on, and as you're aware, the dip in the second half fiscal year '23 was really mostly fourth quarter, for the business. And Corporate, for example, was down 6.4% versus the third quarter in that fourth quarter. But what we started to see in very late February and which carried on into March and is continuing is if you look at Corporate, the average monthly revenue for Corporate for that quarter was $6 million, but March was $6.9 million or 15% better than the average. And we actually saw a similar effect in Consumer, so fourth quarter average monthly revenue for Consumer was $5.3 million. And I'm only talking about OFX here which is ex Firma but just so that you can get a feel for it. March was $6.3 million or 19% up. So that's what Selena and I have been working on in terms of the outlook. It gave us, I guess, if you like, to use your phrase, a bit more renewed confidence in producing that outlook.

Yes, that's great. And then just the second, following on from Selena's comments around competitors and pricing. I've seen recently a certain peer of yours met sizable increases in their margin on the euro and pound transfers. I'm just curious whether OFX has followed suit.

We're always looking at the book of what pricing is there's some elasticity there and demand will change those levers. So we're always looking at the pricing within the book, so we'll keep you updated as we go. But what we're really happy with is if you look at the NOI walk, the pricing levers that we did deploy during the year really played out really well. When we got to the end of fiscal year '23, we're happy with what we had already done. We'll always look at it, but it was quite a -- there was quite a few changes that we did throughout that year. A little bit more of that will play through into this year, but we've done quite a lot already.

Your next question comes from Lafitani Sotiriou from MST.

Congratulations on a good result. I just wanted to dive a little bit more into the Paytron acquisition. And just to understand, a bit more around the integration and the current growth rate. So can you just remind me, I think you said you're not going to integrate it for 2 years, but they've got revenue targets that you'll be monitoring over the next 2 to 3 years. And so is it a case that it's just growing organically? Or how should we think about the cross-selling to your existing business? And will it be a cross-sell globally over time? Or can you just add a bit more color, please?

Maybe I'll touch on that, and then I'll just get Selena to clarify because thanks to your note, which I saw in outlet to clarify the consideration. So Paytron are operating today out of Australia. They have an AFSL, they have clients, they're generating revenue. And as I mentioned, they're targeting the same sort of target clients as us. That will continue for the first year under the Paytron brand. What they'll be doing is in that first year, uplifting their core products so that it is equivalent to OFX in Australia for the Corporate segment. There's a couple of smaller things that they don't do today, which they had on their road map anyway, so they will uplift their product. And in that first stage left, once that is ready, then exactly, as you said, we will offer that product to OFX Australian corporate clients. And obviously, rebrand Paytron at that point, so that for any OFX or Paytron clients, they're going to get corporate client, I should say, they're going to get the best of both, so to speak. Then what will happen is, over time, we will add the OLS segment and then, of course, other regions one by one, and we're going to be doing very detailed planning over the next sort of 60, 90 days to sort of map that out with a Paytron team. And so that by the end of that 3 years, last, to your point, the main countries in region will have the availability of the Paytron product, and we will be offering that product to OFX clients and generating the revenue from that. And I'll just get Selena to clarify the consideration while we're at it.

Yes. So in the consideration and it's on Slide, I think, 18 on the presentation, the consideration is just shares, okay? So we -- the consideration is 11.25 million shares, the performance securities, the best over 2 to 3 years based on their development and revenue milestones. The $6 million that we referred to is actually cash to fund their business. So really, it's a payment over the next 12 months to fund their business to really see -- help them develop that platform and also continue to generate those revenue synergies. That $6 million because it's cash upon the business, that's why you see a drop through on the EBITDA and the intangible assets. It is not a goodwill payment that goes on to the balance sheet. So we just want to clarify that for everyone but $6 million of cash and you see it through EBITDA and intangibles.

Look, that makes sense. And so can I just follow up in terms of the revenue mix. So card and subscription revenue, so adding this back in, how should we think about -- is it -- because there's a lot of features that you talk about that Paytron has, but is it primarily the card and invoice management that is the key things that you're attracted to? Or is it the user interface and so -- and how do we think about the pricing, like what is the subscription revenue more specifically? Is it just asset and you'll see or to be able to use the invoice management or how should we think about it?

Yes. So a couple of things to unpack there, Laf. So first of all, certainly, cards are very, very well known use case and product for Corporate clients. You can have a look at some of the competitors' offerings and start to see the revenue they're generating, the penetration of clients that are taking up a card. And you can see in what we put on Slide 18 kind of an illustrative -- well, if we generate a reasonable uptick in cards, what the proportion of revenue would come from cards. Subscription is less certain because it's candidly a little new in this space. Paytron is generating nice subscription revenue. But that said, what we've seen in other use cases is the subscription revenue hasn't over time been as much as the card revenue. So that's something that we'll learn as we go, and we've certainly done a little bit of analysis so far to get confident that the value proposition is attractive that will flex around pricing and adoption as we go. But certainly, the cards piece is something that, as you know, I'm very familiar with -- in my background, there's plenty of comparables that you can go and check.

[Operator Instructions] Your next question comes from [ Julian McCalhay ] from Evanston Partners.

Just a couple of questions for me. Firstly, with the EBITDA guidance, how much is included for interest income you expect to earn on the book over the next year?

Yes. So that second half, the interest income was about $2.5 million. A rate rise on top of that will slightly increase it. So that's what I would expect through the halves as we go forward.

Right. Okay. Cool. And with the customer growth, I mean it's gone backwards in the core OFX business, but you're still spending a fair bit on promotions and advertising. When do you think you're going to get some traction for that investment?

Yes, it's an interesting one, the active clients. I mean it went up in the first half and declined in the second. It's largely a function of our Consumer active client portfolio, Julian, because of just the number. Active clients in Corporate were slightly down in the second half, broadly flat. We've been working very hard on improving our go-to-market, both in terms of promotional and commercially-led propositions. So we -- we're definitely targeting active client growth, but the overall number, like I said, went up at the half decline in the second, much more driven by consumer.

[Operator Instructions] Your next question is a follow-up question from Cameron Halkett from Wilsons Advisory.

Just wondering with -- thinking about the amount of spend you are actually getting from the average corporate customer, now that you're thinking about cards and some of the use cases you mentioned there before, Skander. I just wonder if you guys have any statistics around how much spend or flow you are getting per average corporate customer and what you obviously target to take that to?

At this stage, Cam, we are just saying we will generate incremental transactions which will generate incremental EBITDA. We will update you in due course with what that detail looks like. But we know as you've seen, for example, and that we've quoted that our average transaction -- transactions per active client in Corporate has continued to grow every half. And we know that with cards and we know from looking at competitors that, that will grow again. And that's what we tried to show in 18 was just an illustrative revenue number. Some of the comparables, obviously, you can look at firms in the public space like [indiscernible] equals Wise does -- it's a bit less clear with Wise what the penetration of cards is in their corporate base, but you can certainly get a feel for interchange revenues and that's kind of how we've developed our kind of illustrative future revenue profile.

Yes. That makes sense. And then just coming back to Paytron. The management style has always been very focused on profitability and cash flows. And I believe the $4 million impact to EBITDA this year is expected to be around a 9-month contribution. So I just wonder, as you look to embed that business within OFX, there's surely some easy wins there from the cost side. But also, I'm sure there's some expected revenue synergies and things over time as well. So just wondering if you could provide a bit of feel for us on looking further out, the profitability of the Paytron to the broader group.

Yes. So you'll also see in the outlook slide, yes, the EBITDA drag for this year for 9 months will be $4 million. We did say that we're giving them $6 million to fill the development platform and the business. The great thing with Paytron which we love is it's a platform that's working today. It's actually generating revenue. It's got $1 million of revenue coming through it and they're one just getting started. Obviously, our focus is going to be building -- make sure the products are there for us to then sell to our customers as well and migrate our customers across, so that EBITDA drag should decline over the years as that all comes to play. We obviously have not guided on that, but what we do love is it's a platform that's up and running and working and has real clients.

Okay. Yes. And look, if I can just quickly squeeze 1 further in. We've got Paytron now. They are supposedly still in the hunt for additional accretive M&A, perhaps something sort of similar to Firma. I guess just balancing all of that in addition to consuming to grow the core book, I suppose just perhaps a question being that where Firma is today is much of that largely complete with just finishing up a number of the remaining -- as soon as you target such that, I guess, things are quite hands off?

I wouldn't describe it as hands off. We're very pleased with the technical and people integrations. And as I mentioned, the Australian migration is now complete. And so we turn our sights on to the U.K. and in New Zealand and then Canada. The good thing about the technical migration is you kind of learn a lot of the sort of iron out the kinks in the first one and then the second and the third and the fourth become easier, but they still need to be executed, and they're still making sure that the Firma clients get used to the new platform. And as I said, we really believe that those synergies are going to be mostly a function of the creating opportunities to generate more revenue but also access our banking arrangements and so forth. So that's not yet complete. Generally speaking to your question around accretive M&A, Selena and I have always been of the view that we would be better at programmatic M&A. So do some things regularly rather than one thing every 5 or 10 years. And that's really what we're sort of moving into here. And obviously, we're keeping our eye open for Firma-like transactions, but we'll be disciplined about making sure we only get the ones where we can generate a good return for shareholders.

Thank you. There are no further questions at this time. I'll now hand back to Mr. Malcolm for any closing remarks.

Thank you, Darcy. Thanks, everyone, for dialing in. As I summarized it begins -- we feel very, very good about the fiscal year '23 performance overall, and we're executing well in the early part of fiscal year '24. So thanks for your support.