Praemium Limited (PPS) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. My name is Matthew Quinn, and I'm the Chairman of Praemium Limited. Welcome to the 2026 Annual General Meeting. It's now the scheduled start time for the meeting, and I am advised that we have a quorum, so I declare the 2026 Annual General Meeting open. I would like to start by explaining the procedure for the meeting, including the protocol for asking questions and voting. We are conducting the meeting with the virtual components provided by our share registry, MUFG. This hybrid format allows shareholders, proxies, attorneys or representatives to attend virtually. All shareholders and their proxies, attorneys or representatives have the ability to ask questions and vote today. The MUFG online platform is now open for shareholders' questions, which I encourage you to submit as early as possible. To ask a written question, please follow the instructions as displayed on the screen. You can submit questions at any time during the meeting, and they will be addressed at the appropriate time. For those shareholders who wish to ask a question verbally, an audio question facility is available during the meeting. To use this service, please mute the broadcast on the MUFG online platform and dial in via the button labeled Go To Web phone. You'll be granted access where you will listen to the meeting until you are introduced to ask your question. For those shareholders in person today, if you have any questions on a particular item of business, please state your name and the organization you represent before asking your question. Voting today will be conducted by way of a poll on all items of business. Instructions on how to vote through the MUFG online platform are displayed on the screen. I will now formally open the poll on all resolutions and will give you a warning before I move to close the voting. For those voting shareholders, including by proxy, attorney or corporate representative, physically in the room with you today, you will have received a yellow voting card upon registration. Please complete the front of the voting card. Should you require assistance to do this, we have MUFG staff available to assist you. If you are attending online and are eligible to vote, you will need to register to vote through the MUFG online platform. Once you have registered, your voting card will appear with all the resolutions to be voted on by shareholders at the meeting. You do have the ability to change your vote up until the time that voting is closed. Please note that if you cast a live vote at today's meeting, any vote by proxy previously submitted will be overwritten. I would now like to introduce you to my fellow non-executive directors who are present at the meeting: Stuart Robertson, Katrina Efthim and Justin Lipton; and our acting CEO, Denis Orrock. Also with us today are representatives of the company's auditor, Grant Thornton, representative of the company's share registry, MUFG, and representatives of the company's Secretary, Acclime. I will conduct the meeting in 3 parts. I will first present a brief Chairman's address. Our acting CEO, Denis, will then present his report. We will then move to the formal business of the meeting where we have a number of resolutions to put to shareholders. Questions from shareholders will be taken relevant to each item of business. I will now say a few words before handing over to Denis. It is an honor to have been appointed Chairman of Praemium, and thank you for your support in electing me as a Director today. There have been a number of changes to Praemium's Board and management over the last 6 months, and I'd like to stress that this does not reflect in any way any fundamental issues within the company that should concern shareholders. Quite the contrary, the company is performing well and in line with expectations, and the previous Board and CEO made the right decision to rebuild the company's core technology platform. However, the new Board and acting CEO will make changes aimed at improving performance through increased revenue and cost control, and we will bring an enhanced focus to the design, delivery and risk management of the technology project. Importantly, this is not just a rebuild of the technology. We are creating a new platform with modern architecture and coding that will progressively replace the existing platform, adding new utilities and functionality that will improve the productivity of our wealth management customers. It will enhance their ability to provide outstanding service to their clients with fast, accurate and reliable advice aimed to give them a competitive edge in the wealth management sector. Praemium will be a dynamic company with a sole focus on generating revenue from market-leading products at high cash margins and with improved shareholder returns. The Board thanks our previous CEO, Anthony Wamsteker, for his service and looks forward to working closely with the management team led by our acting CEO, Denis Orrock, over the next couple of months. The Board will undertake a formal process for recruitment of the new CEO. Both internal and external candidates will be considered by the Board, and Denis has already flagged his interest in the permanent role. Haven't you, Denis?

Yes. Thank you.

We know from experience in working with him that Denis shares the Board's vision for Praemium to be a leading platform provider focused on delivering outstanding products to our customers. I'll now ask Denis to present his report to the meeting.

Thank you, Matthew. Good morning, everyone, and thank you for joining us. It is a privilege to lead Praemium. I've worked closely within the business, our clients and our technology program for more than 3 years. And I know both the strength of the opportunity ahead and where we need to sharpen our focus. Praemium enters FY '27 with positive momentum and an experienced executive team. The focus now is straightforward: grow revenue, keep a close eye on costs, simplify the business where we can and make sure the work underway translates into stronger earnings and better returns for shareholders. I will cover our progress in FY '26, the market opportunity in front of us and where we are focused in FY '27. FY '26 showed solid progress across the business. Platform FUA increased 10.8% to $34 billion. Net flows more than doubled to $1.93 billion, and Spectrum continued to scale strongly. Revenue increased 5.7% to $110.5 million, while underlying EBITDA grew 14.5% to $32.1 million. Revenue also grew at more than twice the rate of underlying operating expenses. That shows the operating leverage in the business. Whilst underlying EBITDA increased, this did not translate to NPAT and cash flow due to amortization and a high amount of non-operating costs. We don't expect this high level of non-operating costs to recur and we'll be focused on delivering clean results with higher cash conversion. To demonstrate this focus, our future reporting will be based on cash EBITDA. That is EBITDA less capitalized development expenditure, and this change will apply from first half '27 results. The Board has also taken a step of changing management incentive hurdles from EBITDA to cash EBITDA, which management wholly supports. This discipline gives us a stronger base from which to pursue a clear and substantial market opportunity. Our latest research estimates there are now 1.33 million high net worth households in Australia, holding $4.6 trillion in investable assets. This segment grew by 10% last year compared with Australia's population growth of 1.4%. These clients typically have more complex needs across custodial and non-custodial assets, direct investments, tax structures and intergenerational wealth challenges. That creates strong tailwinds for our business strategy over the next 5 to 10 years. Advisers servicing this segment need better administration, better reporting and a clearer whole-of-wealth view. Praemium is the market-leading platform built for high net worth complexity with the capability and experience to help advisers manage sophisticated portfolios at scale and capture the growth of Australia's high net worth market. FY '26 also put important foundations in place. We completed the OneVue transition. We brought Technotia capability into Praemium and progressed major client implementations. Those were significant pieces of work, and they give us a stronger base for FY '27. The focus now is to convert committed assets into revenue, remove unnecessary complexity from the business, improve the client experience and keep progressing the platform transformation that supports future growth. Our current platform has served Praemium well for 25 years, but the architecture needs to be modernized so we can move faster, reduce manual processing and give clients better functionality. This is not simply a technology refresh. It is a significant leap forward to a more modern, more flexible platform, which internally we call P2. It is being built to improve the user experience, increase adviser productivity, strengthen open integration and give advice firms a stronger platform for managing complex client portfolios. The first release went live last month on schedule. Much of the early work sits below the surface in the architecture and the operating model. So clients will not see every change straight away. They should start to see more meaningful improvements in functionality and the user interface from early calendar 2027, with the transition to P2 substantially complete by the end of calendar year 2027. P2 also gives us more room to improve the platform over time. We will use automation, AI and machine learning where they make a real difference, taking manual work out, speeding up processing, improving accuracy and giving advisers more time back. For clients, the aim is not just a new platform. It is a platform that helps them run their business more efficiently, serve their clients better and compete more strongly. The technology changes also support our efficiency program. We expect around $9 million in annualized savings from the benefits of the Technotia acquisition, including greater control over development capability and lower technology staff costs as legacy systems and duplicated works are removed. These savings are an important part of improving Praemium's cost base and supporting stronger earnings over time. So FY '27 is not about changing direction. It is about executing against the strategy already underway, growing in the market where we have a real advantage, simplifying the business, delivering the next stages of P2 and making sure that progress is reflected in stronger earnings and better shareholder returns. I'd like to say thank you to our clients, employees and our shareholders for your continued support. I look forward to updating you to our progress. Thank you, Matthew.

Thank you, Denis. Now we'll now move to general questions. And these general questions don't relate to any of the specific resolutions or the financial statements. They will be dealt with at that time. If you have questions relating to those, please hold them for now. So are there any general questions regarding the operations or business of the company or in relation to the addresses that Denis and I have just given? Thank you. If you could please take the microphone and introduce yourself and the company that you represent. Is your microphone working? I don't think it is.

Okay. Right, it works now. [ Peter Keller ] is my name. I'm a shareholder. I've got a couple of questions. One is about First Guardian, but I'll be very careful with the way I ask the question, knowing that there's legal issues afoot. Now the question on First Guardian is, what lessons have we learned from this [indiscernible]? And how do we make sure that a similar product does not make it onto our platforms in future?

It's a very good question and one that there's been a lot of scrutiny about over the last couple of years. And I think the whole principles of investment governance and looking at what products are on our systems and are on our platforms is a key issue for the whole industry. This goes well beyond Praemium. This is a whole of industry issue. And it also really highlights the significant role of the trustee in basically allowing and approving what goes on to a platform because whilst Praemium has a role to play with this, and in this case, as you'd be aware, a lot of this was inherited through the OneVue platform, which we acquired. So we actually acquired this business with these investors already on the platform. So it didn't go through our investment governance process at the time we inherited it. But it really shows the very important role that the trustee has in being the ultimate arbiter of what goes on a platform and what people can invest in. And you can see that some trustees have already acknowledged that responsibility in the settlement that they've met with ASIC and have provided funds back to the original investors. And it's why that ASIC is taking legal action against the trustee that was involved in our business. But I should stress that Praemium does not have any direct legal exposure for this because we are not the trustee. The trustee has lodged a cross claim against us, which we are fighting, but that is -- there is no direct action by anybody, including us -- against us. Does that answer your question?

I just go all the way back to Estate Mortgage. So I've seen quite a few of these over the years. Okay. Now, the next one, I'm not sure whether this is the right time to ask it or later on with the election of the various directors. I'll ask it. And if it's the wrong time, we can possibly answer it later. Okay. Something like this. Losing a senior executive is unfortunate. Losing 2 senior executives in a short period of time can be seen as careless. Now, we have not only lost 2 senior executives in a short period of time. We've got a new Chair, and we've got several new directors in a very short period of time. It looks like -- from a shareholders' point of view, it looks like there's a bit of upheaval there. Now I know you said in your address, this does not reflect fundamental issues with the company that should concern shareholders, but it's not a good look. How are we shareholders confident that not just that all this is behind us, but that there won't be repercussions as a result of all this upheaval?

It's a good question. I'd just like to clarify, there has only been one executive, which was the CEO. If you're talking about the other executive, which was Daniel Lipshut, who is the CEO of Technotia, he had only been in that role for a very short period of time. So there was not really any loss of institutional knowledge because he had previously been a Non-Executive Director. But the only executive that we've lost of significance is the CEO.

What about the Chief Financial Officer?

That was 18 months ago. So that's...

Within the last 2 years.

Yes, it is, but those changes are fairly normal for companies to change CFOs every few years. Changes of CEOs are quite normal as well. The difference this time around -- and we're very fortunate to have Denis, who's been with the company for several years now, who has massive industry experience who can step in on an acting basis and, as we said, put his foot forward for the role as well. But there is a lot of institutional knowledge and experience within the rest of the executive team. And even with the change of CFO, our CFO has been with us for 18 months, which is quite some time. The issue this time around is not just the change of executives that you're referring to because that is quite normal. It's the change of Board at the same time. And yes, it is a lot of change. And you said it's not a good look, but I would argue that having several directors have all been there for 10 years with no change is probably a worse look because that's not healthy for any organization to have directors who are there for such a long time without change and renewal as well. And the corporate governance guidelines actually don't dictate, but they highly recommend that directors don't serve any more than 3 terms, 9 years. And in our case, several directors have been there for 10. Now that means that of the 4 non-executive directors who are here now, Stuart has been on the Board for close to 10 years, or will be next year. The rest of us are fairly new on Board in the last 6 months. But we bring really good relevant experience to this company. And I'm very confident having spent some time with those fellow Board members, that we have the right balance and capability within the business and the appropriate level of corporate knowledge within the management team as well.

It's not change I'm concerned with. It's just that it's happened all at once rather than on a gradual basis.

Yes.

So if it was on a gradual basis, say, 1 every 3 years or something, it would still give you that change, but without what looks like a bit of upheaval.