PaySauce Limited (PYS) Earnings Call Transcript & Summary

[Foreign Language] My name is Shelley Ruha. I'm the Chair of PaySauce, and it's a pleasure to welcome all of you here in person and also online to our Annual Shareholders Meeting for 2026. We will run through our presentation today, which we have released to the NZX and made available on the PaySauce website. Please read the full disclosure slide and note that nothing in this presentation constitutes legal, financial tax or other advice. You will be able to vote and ask questions online and in person, and I will provide you with instructions as we progress through the meeting. If you have any issues, please refer to the online annual meeting portal guide or feel free to call MUFG on (09)-3755-998 ensuring you have your CSN holder number for verification purposes. Let me begin by introducing my fellow directors. In the room, we have Asantha Wijeyeratne, Chief Executive Officer and Co-Founder of PaySauce; Gavin Thompson, Director; Jim Sybertsma, Independent Director and Chair of our Audit and Risk Committee, and joining us online, we have Mark Samlal, Independent Director. I'd like to take the opportunity to acknowledge Mark Samlal, who is retiring as a Director of PaySauce at the conclusion of this annual meeting. Mark has brought deep payroll industry experience, sound commercial judgment and an invested shareholders' perspective to our boardroom table over the years on the board. On behalf of the Board, I want to thank Mark sincerely for his insights and contribution, and we wish him every success. Turning next to our executive team. In addition to Asantha as our CEO, our executive team includes Jaime Monahan, Chief Financial Officer; Jess McLean, Chief Operating Officer; Jacques Labuschagne, Chief Technology Officer; Kelly Harvey, Chief Marketing Officer; Aaron Dustin, Chief Design Officer; Chris Regan, Chief People Experience Officer; and Chris Rudd, Executive Director of PaySauce Australia. I would also like to welcome to the meeting Braden Smith, our audit partner from Grant Thornton; and Jack Douglas, our lawyer from Duncan Cotterill. Before we get officially underway, I would like to advise that proxies have been appointed for the purposes of this meeting in place of approximately 32 million shares, representing over 40% of the total number of shares. My fellow Directors and I plan to vote all discretionary proxies we have received in favor of the resolution in the Notice of Meeting and that I can confirm the Notice of Meeting has been given to all shareholders and that we have a quorum at this meeting. Finally, I want to thank you, our fellow shareholders, for attending this ASM today. I'm now pleased to declare PaySauce's 2026 Annual Shareholders Meeting open. Today's ASM will include comments from myself as your Chair, Asantha, our CEO; and Jamie, our CFO. We will then vote on the resolution under consideration and then address any general business matters or questions that shareholders want to raise. Upon completion, I will close the meeting. Moving to the chair's address. Financial year '26 was a defining year for PaySauce. After 2 years of focused investment, we deployed our global payroll platform into Australia, what we will believe will be the world-leading payroll product for small businesses. This significant milestone has been made possible by the strength of our New Zealand business, the commitment of our people and the continued support of our customers, our partners and especially you, our shareholders. Customer numbers grew to approximately 8,600, up 5% on FY '25. The strategic decision to cease offering our lowest value product to direct customers delivered increased processing fee revenue, which is the key driver of value creation in the business. This grew 13% to $7.2 million from $6.3 million in FY '25. Operating revenue for the year was approximately $9.2 million compared with $9 million in FY '25. In January '26, we completed a $5 million capital raise, which was 25% oversubscribed. That raise, together with strong operating cash flow of $2 million generated by our New Zealand business, enabled the investment in sales, marketing, customer support and product development required for our market entry into Australia. We ended the year with net cash excluding funds held on behalf of customers of $4.5 million. I want to take a moment to recognize Asantha's leadership. Asantha's vision for what PaySauce can become and his commitment to seeing that vision through have been evident in every stage of our Australian expansion, including his decision to relocate to Melbourne during this market entry phase to embed the PaySauce culture into our new team from the ground up. That is a significant personal commitment. And on behalf of the Board and our shareholders, I want to thank Asantha for the leadership he continues to bring to this business. I also want to thank you, our shareholders for your trust and continued support. I'll now hand over to Asantha to give his CEO's address.

Thank you, Shelley. Thank you for the kind words. At the start of financial year '26, our priorities were clear: continue to grow and strengthen the New Zealand business, complete the key milestones required to bring our next generation cloud -- global payroll platform to Australia and prepare the company for its next stage of growth. And I'm proud to say that we've achieved those priorities. For Australia, 694,000 micro businesses, we are building a payroll platform that is unmatched in the market, delivering an intuitive, easy-to-use mobile interface that also offers the peace of mind that comes with compliance. We are focused on turning the opportunity that we've given ourselves into accelerated customer acquisition. The pilot of our Australian product launched in September 2025 validated the platform in a live environment. And then in February, we began onboarding our first commercial customers confident that our product could handle real payroll complexity and deliver peace-of-mind compliance. New payroll rules came into effect on the first of July, requiring Australian businesses to make superannuation payments at the same time as they run their pays. We expect this to act as a catalyst for growth over the next 12 to 18 months as businesses reassess legacy solutions that do not deliver that functionality. For financial year '27, the focus remains on disciplined execution, building momentum, learning quickly and investing carefully as we scale. Two priorities still will remain to shape the remainder of the '27 financial year. First, sustaining the New Zealand business as we introduced a global payroll platform to our domestic market; second, executing on the Australian opportunity. We remain realistic about the piece -- about the pace of customer acquisition growth, having tested marketing channels in Australia, management and the Board's focus will remain on disciplined execution, careful allocation of capital and maintaining the balance between growth and profitability, though we acknowledge the impact of upfront costs required to enter a new market ahead of revenue in the short term. I want to recognize the commitment collaboration shown by the Australian team this year. PaySauce continues to strengthen the team with experts in their field and it is their dedication that has turned platform readiness into our initial cohort of paying customers as we continue to build out the sales engine for future success. I also want to acknowledge the hard work put in by our New Zealand team in both supporting the Australian team in delivering outcomes for our new Australian customers as well as continuing to grow and support our existing New Zealand businesses customer base. My sincere thanks also goes to my fellow Directors for their guidance and support and to you, our shareholders, for your continued trust and investment in our vision. I look forward to sharing our progress over the coming months. Now I'll hand over to Jaime, our CFO, to provide more detail on the numbers.

Thank you, Asantha. The result for the financial year to 31st of March 2026, reflected the continued investment for long-term growth. Operating revenue increased $0.2 million to $9.2 million, and 2 factors contributed to a modest increase: a 13% year-on-year increase in processing fee revenue to $7.2 million. This was partially offset by a $0.5 million decline in interest income to $1.8 million as interest rates continued to decline over the financial year. The strong underlying business enabled an increase in investment for the Australian product launch following the successful trial, whilst maintaining a pretax profit of $0.17 million for the year. From a cash perspective, the capital raise completed in January this year lifted the overall cash balance to $4.5 million at the end of the financial year. This slide shows the breakdown of the recurring revenue over the last 4 financial years. The growth in processing fee revenue in FY '26 is consistent with prior years, but there's a marked decline in the interest income component, which softens the overall recovering revenue in FY '26. Processing fees make up 80% of the recurring revenue in FY '26 on par with FY '23 and higher than the FY '24 and FY '25 years at 71% and 73%, respectively. Overall, operating expenses increased 5% to $8 million in FY '26. Incremental investment was channeled into customer acquisition costs and costs to serve our increased customer base. Investment into customer acquisition increased 31% to $1.3 million, and this includes early investment into creating some brand awareness for the Australian market. Cost to serve rose 2% to $2 million, lower than the 5% increase in customer numbers. Efficiencies were gained via the AI agent delivering a resolution for nearly 80% of the queries that come through that channel. Overall, R&D expenditure increased by $0.5 million or 16% to $3.3 million, of which $2.1 million was capitalized onto the balance sheet as internally generated assets. The remaining R&D operating expense of $1.2 million was in line with FY '25 as were General and Administration costs. Looking at the key SaaS measures. Customer numbers increased 5% to 8,600 at the end of FY '26. The monthly average revenue per user increased to $87 from $86 in FY '25 with overall a $6 increase in processing fee revenue per user, offsetting the $5 decline in interest income per user. With the cost to serve these customers holding flat at $19, there was a small increase in the margin. Acquisition costs, including the early investment in the brand awareness in Australia as we brought on the experts to attend trade stances and industry events. The lifetime value per customer declined very slightly as a result of a marginal increase in churn rates, but increased customer numbers offset that to increased total customer lifetime value by 3%. The LTV to CAC ratio declined to 7.1 multiplier as the initial sales and marketing basement is required for the go-to market in Australia. The underlying business generated $2 million of operating cash in FY '26, and this was predominantly reinvested into product development. The balance sheet was strengthened by the $4.56 million net capital raised in January 2026. Having funded the development of the global payroll platform from operating cash flows over the previous 2 years, the increased capital positions PaySauce well to execute on the Australian market entry and $4.5 million of that cash remained on the balance sheet at the end of the financial year. As published in our first quarter market update, momentum has continued into the new financial year. Quarterly processing fee revenue grew 11% year-on-year to $1.9 million off the back of a 4% increase in active customers to 8,756. ARR grew 8% year-on-year to $9.5 million, and quarterly recurring revenue grew 5% year-on-year to $2.3 million. Interest income declined 17% year-on-year to $0.4 million, reflecting lower wholesale interest rates on the customer float. I'll now pass you back to Shelley, who will move on to the resolution to be voted on.

Thanks, Jaime. That now brings us to the formal part of the meeting, the matter requiring resolution, which is outlined in the Notice of Meeting. Shareholders may ask questions on the matter being resolved. For the sake of good order, shareholders questions at this point should relate directly to the matter being considered. Shareholders joining online will be able to cast their vote using the electronic voting card received when online registration was validated. You are presented with a Get a Voting Card icon within online meeting platform. You will be asked to enter your shareholder or proxy number to validate. Please then mark your voting card in the way you wish to vote by clicking for, against or abstain on the voting card. Once you have made your selection, please click pass vote on the bottom of the card to lodge your vote. Please refer to the virtual meeting online portal guide or use the help line specified if you require assistance. The voting card remains editable until the voting is closed at the conclusion of the Annual Shareholders Meeting. Once voting has been closed, all voting cards submitted and unsubmitted will automatically be submitted and cannot be changed. Results of the vote will also be announced via NZX after the meeting. The resolution set out in the Notice of Meeting is to be considered as an ordinary resolution and, as such, must be approved by a simple majority of votes cast by shareholders entitled to vote and voting on the resolution. Resolution A is to authorize the Directors to fix the auditor's remuneration for the current year. Under the Companies Act, Grant Thornton are automatically reappointed as auditors of PaySauce. Details of the statutory audit fees paid to Grant Thornton for the financial year ended 31 March 2026 are set out in the 2026 Annual Report. I'll ask the shareholders in the room for any questions first, then move to questions from our shareholders online. So are there any questions for the Board in the room? No. Any questions online?

No questions online, Shelley.

Thank you. As there are no outstanding questions, please now mark either for, against or abstain for Resolution A on your voting cards. [Voting]

That concludes the formal part of the meeting. For online shareholders, please remember to submit any general business questions you may have by clicking on the Ask a Question box either at the top or bottom of the web page. When you are ready to submit your question, click the blue Submit Question button, this will send the question to the panel. Note that not all questions are guaranteed to be answered during the Annual Shareholders Meeting, but we will do our best to address your concerns. Once you have asked a question, a View Questions box will appear. At any point, you can click on View Questions and see all the questions you have submitted. Only you can see the questions you have asked. We will allow 15 minutes for questions. If we run short of time and are unable to answer your questions online today, we will endeavor to respond to you after the meeting. I would now like to give shareholders the opportunity to ask questions, whether related to the presentations, the financial statements or the management of the company. I'll open it up to our shareholders in the room first.

Thank you, Shelley. And look, I do appreciate this is a hybrid meeting, which is something that we've been seeking for some time. So just thank you for the effort the company is put into that. Just in terms of your Australian expansion, and you talked about investment and brand awareness that you made during the year. So what are the other levers that you have -- or what do you think you have in terms of actually trying to increase and sustain the rate of expansion that you have in Australia? And how is that balance against the resources that you've got available in terms of people and cash?

So one of the key things is, as we take the products to our target market in Australia, there is a lot of learning that we gather from that, which is why we've decided to take this at a pace where we can convert that information back into what is it that the customers are looking for? And that's been part of our DNA from day 1. So we're not depending on a big brand push or billboards or anything like that to build a brand. It is -- we are building a brand with the customers and the type of customers who our product appeals to and the effort we are putting into that is very deliberate, and that's what seeded us in New Zealand. So a lot of the learnings from New Zealand were around, if you can find a customer group, satisfy their requirements and delight them, they will become raving fans for us. And so that is the biggest push in terms of what we're doing and that is where the majority of our investment has gone into. It is building that kind of framework and the people around it, but also the infrastructure that supports it from developing all of the customer relationship management, the website work. And this is an evolving process, and there are things that we are learning that impact us that we've got to change very, very quickly as to what's not working and stop doing what's not working and then double down on what is. Does that answer your question?

I'd assume that the smooth pay customers would be converted to PaySauce, that might be a thing. But I haven't heard anything about that. Are they just being maintained on the site or are they going to be converted at some point?

The first group of customers that we brought on board were the Smooth Pay customers. So essentially, in Australia, we've migrated those Smooth Pay customers that the PaySauce solution was appropriate to. And so any new customer is not going on to the smoother product, they're going on to the new Australian product in market for PaySauce.

So does that mean there are no more Smooth Pay customers?

Correct, in Australia.

Okay, great [indiscernible].

Yes. Correct.

[indiscernible]

So in that conversion process, there were some customers where our solution was not the ideal solution. And those customers have found an alternate solution, which is a lesson we learned in New Zealand is we -- if we try to be everything to everybody, we just can't deliver on that. So we had to make the brave call that this is not our ICP, we walk away from that.

Question -- there was a comment I think you made Asantha a while ago about why PaySauce would thrive with AI rather than basically die by AI. Can somebody explain or give a reason why PaySauce is going to thrive and not going to get killed by AI?

Right, there's a range of things. So at the front end, in terms of the customer support, the transformation that we've seen that we are able to answer questions at any time, day or night. And that takes away the requirement for us to man that, which is why we're already seeing that in the reduction in the customer support time. So that's an easy win for us. In terms of the development, we find our development team embracing technology to iterate quickly, to write code faster and all of those solutions. And lastly is at the other end, where traditionally payroll has had this wealth of information about employees and how they behave and the outcomes of that. And that knowledge is very seldom being tapped particularly in the small business market. And what we're working on is how do we make that accessible so that I can ask a question like who's most likely to take leave in December and get an intelligent answer or ask a question like I'm paying Robert, it knows what I'm paying Robert, right? And am I paying Robert fairly, and is it a reasonable amount of money I'm paying him. Takes the information from what am I paying Robert, what's Robert specification, compares that to the universe out there and gives me as a small business owner running an ice cream shop an intelligent answer. That's where the value is. And that's where AI allows us to then provide the same kind of information that a large enterprise with access to all the data analytics can provide them. That's where I think where the proprietary moat that we have in terms of the customer information with the use of AI tools allows us to give insights for business owners to take day-to-day business decisions effectively that they can't do today.

Yes, you mentioned the Australian market. I know in the New Zealand market, you targeted a number of things like the dairy sector. I was wondering if you can give us some insights on what verticals you're looking at in the Australian market?

We started off in the dairy sector because that's a sector that we know well and that we've got credibility in, and that was our start-off point, but we are signing up. So today, we've signed up a funeral parlor. We've signed up a nail technician. We've signed up a hairdresser. So we're getting a much broader cross-section of businesses signing up for the solution in Australia than just narrow farmers. Again, that's a deliberate addition that we've taken to be wider in terms of the award coverage that we've got for not just in farming, but for the wider business population in Australia.

It might be for Jaime. How many customers in Australia do we need before we breakeven? You've got quite a high power team, a great team. And from LinkedIn, they are really energized, but it looks like an expensive team. So how long and how many?

We haven't published any forward guidance on our expenses, so -- or on our revenues at this stage. So we've not published that information, so I can't share that with you, Rob, I'm sorry.

That's disappointing.

I think it's fair to say that as we get more clarity, we're very, very early days of Australia. And so it would be misleading at this point in time to provide that kind of information. But as we get deeper into the Australian expansion, and we get more clarity and more certainty, that's sort of information that we'll be more willing to share.