QuickFee Limited (QFE) Earnings Call Transcript & Summary

Greetings, and welcome to the QuickFee webinar. It is now my pleasure to introduce your host, Bruce Coombes, CEO. Thank you, Mr. Coombes. You may begin.

Thanks very much, everybody. I'll try to make sure that this accent isn't too bad and you can sort of understand, hopefully, what I've got to share with you. It's a delight to be here, sharing a bit about the QuickFee journey in the United States. We're, of course, an ASX-listed company. We actually started our business in Australia 11 years ago and have now been in the United States 4 years. So we're well and truly an ASX-listed company with a very significant U.S. presence. We have more staff in the United States than we have in Australia and it's a delight to be bringing our solution into the United States. So what is QuickFee? Let me share a little bit about what QuickFee actually is. If you think of the buy now, pay later space, so anybody in the United States is familiar with a firm or familiar with Afterpay, we are similar, not the same but similar to that model in as much as we are lending money to clients of professional services firms, so that those clients can pay their accountant or their attorney. The accountant or the attorney thinks QuickFee is great because they get paid faster. The client thinks QuickFee is great because they get payment terms of up to 12 months. Unlike Affirm or Afterpay or Klarna, the cost of the funding is borne by the client. So in this graphic, the accountant or the attorney is paid in full at absolutely no cost to them. For example, if a client owes their accountant or attorney -- say, their accountant $10,000, they will repay $10,895, so 8.95% of the value of the invoice that we paid, will be added to that invoice and the client will make monthly installments, which if you go to mental arithmetic, you'll work out as round about $900 a month on a $10,000 payment plan. The accountant or attorney has been paid in full. The client gets time to pay, so very similar to what a lot of the buy now, pay later solutions do, except the cost is falling on the client. What causes the credit quality of what QuickFee does to be so high is that should the client not pay, the accountant or attorney has to make QuickFee whole on the balance of any unpaid principal. So let's take our $10,000 example. The client's borrowed $10,000, they're going to pay back $10,895 in installments of round about $900 each month. And let's say they get partway through the contract and has $4,000 of principal remaining, then the client goes bankrupt or decides they don't want to pay, they're dissatisfied with the services, whatever the reason there might be, the accountant then has to repay to QuickFee the remaining $4,000 of principal. That happens pretty rarely, less than 1% of the time. So for QuickFee to actually suffer a bad debt, we need the client to not pay and the accountant or the attorney to not pay. So there's kind of a low chance of that, provided we pick quality professional services firms. We've been doing this in Australia 11 years. I'm the CEO and founder. I started this business 11 years ago. And our biggest client in Australia is KPMG. So you get a sense of the type of credit quality that can exist in our portfolio of loans. Now we deal with firms from that sort of size, right down to sort of the 2-partner, sort of regional firms that you'd be familiar with in the United States. In our U.S. business, the vast majority of our clients are CPA firms. In our Australian business, we got 75% accountants and 25% attorneys. The Australian loans are primarily covered -- nearly all the loans are covered by a trade credit insurance policy. We don't have that policy in the United States at this time. So why do clients like our product? So clients need advice. Often, that advice is a one-off or an unexpected cost to an SME. Clients like to use our solution, so they can access that advice in a more cash flow friendly way, and they're happy to pay interest for that convenience. And this slide summarizes some comments from a survey we took of our borrowers, asking them why they chose to use QuickFee to pay their accountant or their attorney. So 12 months ago, QuickFee listed. And we listed on the ASX, of course. We combined our Australian business, which is a much longer-running business that had profits of about AUD 1 million pretax last year with our newer U.S. business which represents the growth opportunity for QuickFee. So we did our IPO just over a year ago in July 2019 at $0.20 a share. So the shares are, of course, a lot higher than that right now. And we've seen our Australian lending continue to grow during the last 12 months to the point where we did just under $50 million. We did $49.3 million in lending in Australia last year and USD 13 million in lending in the United States. So towards the end of last year, we were lending USD 1.5 million a month in the U.S. business. That's an annualized rate of $18 million. We have over 25% of the top 400 accounting firms in the United States signed up to QuickFee, and about 3 weeks ago, we signed our first top 10 U.S. CPA firm. The U.S. business is our growth opportunity. The Australian business is a great business, run by a great team. And of course, the U.S. economy is the largest consumer of professional services in the world. In the United States, we actually provide not just our lending solution, but we also provide a full payment gateway for the benefit of clients and firms providing professional services. So unlike our Australian business, where the vast majority of income in Australia comes from our lending business, our U.S. business enjoys income from 2 primary sources: transaction income, the third line on this slide; and also the interest and fee income from the loans. When a client goes to pay an invoice issued by a professional services firm, that's a customer of QuickFee, they can do so online. They can go to the firm's website, or if the invoice has been delivered electronically, they can actually click a link and go direct to the invoice to that website. When they land at that website, there are the invoice number, the amount and some other basic information. When they land on the next page of the QuickFee secure payments website, they're presented with 3 payment options, as you can see on the screen. From the bottom up, the first option on the bottom right row is to pay by credit card. QuickFee passes on a merchant fee of 3% to the client. As you probably know, in the vast majority of states in the United States, surcharging your credit cards by passing on the merchant fee is now legal. So we pass that on, saving the firms the cost of card acceptance. On the next row above that, firms offer their clients the ability to pay by ACH. So we take the money out of the client's bank account, and we deposit into the firms'. That option is available at no cost to the client. And then the third unique option is take a QuickFee payment plan. And you can see here, this is similar to the example I referred to earlier, where a $10,000 transaction will be $907.92 per month, $10,000 plus 8.95% divided by 12, $907.92. Now whichever option the client chooses, QuickFee earns money. So on the bottom row, the credit card option, we get a little bit of a revenue share out of surcharging the credit card. On the ACH row, in the middle of the slide, QuickFee earns on average 0.35%, 35 basis points. So on a $10,000 transaction, QuickFee earns about $35. On the top row, on a $10,000 loan, QuickFee earns $895. Now we don't do this -- we provide the same gateway in Australia, but we don't earn the same revenue. In the United States, our business is fortunate enough to be providing electronics payment services, so that we earn revenue on all 3 rows. Let's have a look at how that revenue has been growing. In Australia, in the top left corner, you will see that our business grew 17% in lending from our financial year of 30 June, '19, through to our financial year 30 June, 2020. In the United States, we grew 63% from USD 8 million in lending to USD 13 million in lending. Looking at the transaction values and volumes on the bottom half of this slide, you can see that our transaction business grew 154% from 30 June, '19, to 30 June, '20, and the number of transactions grew 134% as well. So our transaction business is growing and so is our lending business in the United States, growing at run rate of $500 million of transactions. And to put that in context, the total revenue of accounting and legal firms in the United States is $450 billion. So there's a very large market to be addressed to provide not just our transaction services but also our lending services to professional services firms and their clients in the United States. Now this growth comes not just from new firm acquisition, we have almost 450 firms signed up in the United States. It comes from not just the new firms but also increased adoption of QuickFee services by the existing firms. So we put this data together during April 2020 and looked at where did our growth come from in the month of April -- the 4 months ending April. And you can see from this slide deck that almost half of our growth comes from new clients and a bit over half of that growth comes from increased usage of our existing firms. So the 450 firms we have signed up, they represent a bit over $5 billion of revenue out of the $450 billion market available to QuickFee. So there is an enormous growth opportunity within the existing clients. So what has driven this? Existing new -- the existing clients using us more, their clients getting more used to us and new firms joining. Of course, we're sitting here in the middle of the pandemic. So what has that done to our business? In the 6 weeks from the 9th of March through the 20th of April, so the early part of the U.S. lockdown, our business doubled. So as you'd expect, with checks being such a major method of payment in the United States, during lockdown, people were less inclined to want to use checks as a payment method. They've moved online. The digitization of the U.S. economy is reflected in significant increases in transactions to QuickFee. And the more people that go online to make a payment, of course, the more that also see that they can take a payment plan to spread that payment over time. So the more people that go to a firm's website to pay, the greater the exposure to our payment plans as well. So this slide is just our ACH transactions. So what does the future look like? There's significant opportunity to continue this rate of growth through additional firms, greater adoption and just the general acceptance that using checks is less efficient than using ACH or electronic payment means. One of the things that QuickFee is working on right now is helping professional firms move from sending their invoices by paper to sending them electronically. We surveyed our users in Australia and also our users in the United States. So it's a survey of professional firms that use QuickFee in Australia versus those that use QuickFee in the United States. The left-hand side of this chart shows the percentage of firms, which are using paper versus e-mail or other electronic means to deliver their invoices. The left side is the responses in the United States. If you add together the top 2 rows, you'll see that 29% on the top row plus 16% on the second row, total of 45% of invoices -- sorry, 45% of firms are saying they're sending less than 1/4 of their invoices electronically. If you compare that to our Australian user base, you'll see that in the bottom right corner, 55%, plus 30%, that's 85% of respondents said they're sending 3/4 or more. QuickFee is developing the software to enable the firms to deliver their invoices electronically. In addition to that, QuickFee is developing inside that software automated reminders. What that means is that we will be able to control the message to the client whenever an invoice is overdue and say, if you need time to pay, take a QuickFee payment plan. Otherwise, you can pay here by credit card or ACH. By delivering the invoices as e-invoices, we will see a significant increase in the number of payments through our payment gateway. So 3 things will accelerate our growth. Firstly, development of this software to get more invoices out electronically to encourage electronic payment as a response. Secondly, increased usage and acceptance of e-payments by our existing customer base. And thirdly, the continued acquisition of additional firms. So I want to share with you a little bit about who is behind everything that we have got going on in the United States. So this slide shows our management team, our directors and our C-suite, the most senior people. The top row there is our directors. Barry Lewin who's the Chairman of a couple of other ASX-listed companies, named Praemium and Elmo. On my right on this slide is Dale Smorgon who has been a shareholder in QuickFee for 8 years, joined 2 or 3 years after I started the QuickFee journey, and it's been absolutely fantastic in getting us to where we are today. The 5 people in the bottom of this slide are our C-suite. So James Drummond, our Chief Operating Officer; Francesco Fabbrocino who's our CTO, he's leading out our team of L.A.-based software leaders in addition to some offshore developers in building out all the technology stack that we're going to use to accelerate our growth; Richard Formoe in the middle there is our Chief Revenue Officer, and he's been instrumental in driving and building an amazing sales team; Andreas looks after our marketing; and Corey is our financial controller. James, Francesco, Richard and Andreas are all based in L.A. Corey is based in Sydney, Australia. The vast majority of our staff are all based in L.A. We have about 22 people in the United States and 11 people in Australia, reflecting the growth opportunity the United States reflects. Really happy to take any questions. Very happy to hear from anybody around a question.

We've got a question here regarding how can we explain the growth from existing firms. Part of what it is, to a large extent, a professional services firm, in many cases, deals with their client once a year. A small, medium business might go and see their CPA once a year for their taxes. So it takes a while for a client to actually even be exposed to e-payments. So a firm that's signed today that issued invoice yesterday that a client paid by check yesterday won't see that they can e-pay that invoice for another 12 months. The largest clients of the largest firms would not typically use our solution. They may well have an AP system, which requires dual signatures or double authorizations on their bank account. That's a different -- a very large sort of client that won't want to pay using our solution. But the vast majority of SMEs will welcome the opportunity to use e-payments to pay their CPA or their attorney. We've got a question here, who is our closest competitor? In the United States, there is nobody that does what we do, the way we do it. So there are plenty of companies which offer credit cards. For example, there's a business in the United States called LawPay which offers credit cards to law firms. Clearly, that solution is only a value to a client that's got a relatively modest bill that fits within the limit of their credit card and they want to pay by credit card. When you get a larger invoice, paying it with a QuickFee payment plan becomes far more attractive. It's a large amount, so spread it over time. There's nobody else in the United States that provides what we provide. We are the only company, which provides payment plans, ACH and credit cards, all in one spot for professional services firms at virtually no cost to them. I think that's probably very close to time. So I'm more than happy to wrap it up at that point if there aren't any other questions. I'll just put my details up on the screen. So if you do want to contact me or whatever, you've got my U.S. number and my e-mail there, if you do want to contact me. I really appreciate everybody taking the time to dial-in.

This does conclude today's webcast. You may disconnect at this time. Thank you for your participation.