QuickFee Limited (QFE) Earnings Call Transcript & Summary

Thank you for standing by and welcome to the QuickFee Limited Fiscal Year 2020 Results Overview Investor Call. [Operator Instructions] I would now like to hand the conference over to Mr. Bruce Coombes, Chief Executive Officer. Please go ahead.

Thanks, Anita, and thanks, everybody, for taking the time to join this call. It's obviously a busy time, reporting season, et cetera. So thank you very much for your time. I'll be referencing the investor presentation, which was uploaded to the ASX site this morning, and you can certainly follow along on that deck as we work our way through the call. There will be time for some questions at the end. And again, thank you to everybody for making the time, and thank you to our shareholders for support. I thought if there was a word I wanted to use as a theme in this presentation to describe financial '20 and our outlook, that word would be accelerating. If you look at Slide 2 in the deck, I think, it's clear that QuickFee has enjoyed growth across all the significant metrics. Specifically, we've seen 63% growth in our U.S. lending, 17% growth in our Australian lending, both a record, and that's translated into a bigger asset base. We've got a larger loan book, 52% up in U.S. dollars in the United States and 15% up in Australian dollars in our Australian business. All those numbers are records. And this is translating into increased revenue. And the capital we've raised, both in our IPO and in the replacement we did back in May, is being used to build our technology, which is going to accelerate this growth. $305 million through our portal in the United States in financial '20. 412 firms signed up, and as of today, that number is just over 440. So we're continuing the acceleration in the number of firms, and that's an indicator of future growth. So if we move to Slide 3, I want to emphasize a 47% increase in our gross revenue across both lines, so $8.5 million in revenue as a result of the growth in all of the metrics referenced on Slide 2. So a summary of our financials on Slide 5. Before our investment in technology, the cost of the IPO and customer acquisition, our business continues to be profitable. We, of course, aren't here to have a small, profitable business. We are here to have a large business, enjoying our first-to-market advantage in the United States. Most of this presentation will focus on our United States business, but I will cover what our great Australian team has done in the Australian business as well. Our U.S. revenue was up 113%. We are well placed to continue to grow, and we are making technology investments to accelerate that growth. The financial results in 2020 show we're on the right track of achieving significant revenue from the customer base we're fortunate enough to serve. Moving to our balance sheet on Page 6. We've got $15 million in the bank. We have that money available for growth in our loan book in both markets, our technology spend, and to enable us to continue to acquire more and more customers, particularly in the United States. Your support means that we are well capitalized and able to enjoy everything the U.S. market presents in terms of modernization and digitization, and I'll come to that a little bit later in terms of where we will be able to accelerate in financial '21. Looking at Slide 8. What we do is important. We help small and medium enterprises get the advice they need from their accountants and their lawyers. You'll see on the right-hand slide -- sorry, right-hand side of that slide that 90% of people say that having payment plans available to pay their accounting and law firms is important, and 92% of people say QuickFee's payment plans in particular are very or extremely easy to use. We are helping small and medium businesses get the advice they need. We are equally helping accounting and law firms in particular reduce their receivables, win more clients, provide more services to their existing clients and run a more streamlined business, and we'll continue to do that and accelerate it throughout financial '21. If we look at Slide 9, we summarize why QuickFee exists, what our purpose is, and that is to be all things payments and all things receivables for professional services firms. In Australia, the vast majority of our income continues to come from the interest we earn on our lending products made available to the clients and professional services firms. In the United States, where we have brought the only payment platform offering all 3 of EFT, credit cards and payment plans as payment options for the clients of professional services firms, we earn revenue across all 3 of those payment methods. And before the end of this calendar year, we will have a solution in the market, which will represent a further income stream and further acceleration of the use of our payment plans and our pay-in-full payment gateway by the clients of professional services firms. Looking at Slide 10. You can see a 63% increase in lending and a 63% increase in the number of firms that we're fortunate to serve. Over 25% of the top 400 accounting firms in the United States are clients of QuickFee, many of whom have joined in the last 12 months as a result of the great efforts of our sales team based in L.A. and the East Coast. We are fortunate to be able to have such a high level of acceptance, and we recently signed our first top 10 accounting firm in the United States. The U.S. is an enormous market, and I'll come to the power of that market soon. There are 18 billion checks written each year in the United States. There are probably people on this call in Australia who don't even have a checkbook. This is part of our opportunity. If we look at Slide 11, it shows the significant increase in transaction values through the QuickFee payment portal in the United States in financial '20. You'll see that we've processed USD 304 million in payment transactions through our portal in financial '20. That continued to grow throughout the year, which means our run rate now exceeds $0.5 billion at $554 million. The right-hand side of this slide shows the momentum. It shows the existing opportunity within the existing firms we serve. It compares the portal transaction values between financial '20 and financial '19 based on the period of time in which the firm actually signed up for our solution. So using the third line from the bottom, the June 2018 quarter information, as an example, we processed $17 million of transaction value to firms signed during that quarter, during the 2020 financial year. For financial '19, that was $10 million from that same group of firms. So we have seen a $7 million or a 70% increase from just the firms that were signed in that quarter. The top 4 rows, of course, are firms that were signed throughout financial '20. So there is, of course, no comparative data, and they have only been with us for a period under 12 months. What this data shows you is the sheer momentum. Many clients of an accounting or law firm deal with that firm maybe once a year. So the firm signed up today, a client who was issuing an invoice yesterday might not know that they could have paid with a QuickFee payment plan until another 12 months when they get another invoice. There is enormous momentum in our existing client base, and the total revenue of the firms we currently serve exceeds USD 5 billion. On Slide 12, we've summarized the impact of COVID on the acceleration of our growth. With 18 billion checks being written and thrown into the U.S. Post each year, COVID represented an opportunity for people to change their behavior, moving to online payments, moving more to online delivery of many things. 15 April is the typical deadline by which all U.S. natural person taxpayers and most corporations are required to either lodge their tax return or pay an estimate of the tax payable. As you can imagine, with most businesses having a 31 December balance date, this is a very busy time for the accounting firms in the United States. With COVID, the government moved the deadline out to 15 July, so a group of taxpayers shuffled along and moved out when they were engaging with their account. You'll see our business exhibits an element of seasonality but continued to grow, so that even after the 15 July delayed deadline, our transaction values continue to be at a very high level. The shift to digital is happening, and I think somebody who's previously paid with a check, has enjoyed the convenience of online payments or the convenience of a QuickFee payment plan, will be unlikely to revert to an old system using the U.S. Postal Service. We now have representation of 1 or more firms in 46 states of America. Slide 13 shows you where we have firms located and where our footprint is significant. Our sales team can reference a user close to a prospect most of the time. Social proof of the acceptance of our solution lies in more in firms using us in 46 states. Things like the cloud, things like online payments, things like e-delivery of documents are happening slower in the United States than they are in Australia. As a reference point, the Xero business has 1.08 million subscribers, so a little bit over 1 million subscribers in Australia and New Zealand. In the United States with clearly a much larger market, Xero business has 195,000 users in the U.S. and Canada. This opportunity to move firms online is enormous. With a footprint in 46 states, we are starting to see significant acceleration in the adoption of QuickFee as a solution. So I now want to spend a little bit of time on our Australian business. We give credit to the great work of our team in Australia on Slide 14. June 2020 was our largest lending month ever. The financial year ending 30 June 2020 was our largest year of lending, up 17% to $49 million, and our loan book at the end of the year was the largest it's ever been at $27.5 million. We were fortunate to have the continued support of our senior lender and a further $5 million increase in our debt facility to enable us to grow in the Australian market. The volume of Australian government assistance by way of JobKeeper and JobSeeker meant that our levels of arrears is at the lowest it's been for many years. There is a lot of money in the Australian economy as a result of government support. So now I want to turn to the future, putting the tech into fintech for QuickFee. We've had a magnificent period as a lender, the support of amazing firms, but now it's time to really build out some amazing technology to capitalize on the modernization of the U.S. market. So looking at Slide 16, we summarized there what we are building to achieve our mission of being all things payments and all things receivables for professional services firms. We are building out a fresh tech stack. We have built out our technology team underneath the leadership of our Chief Technology Officer, Francesco, who was appointed back in January. We now have 4 additional senior technology leads, a database engineer, a testing engineer, a front-end engineer and a back-end engineer, supplemented by a range of contract labor to build out our technology. We have built new connectivity into the U.S. banking system. We have built our wireframes and either work around the redesign of our payment gateway, and we are building out an electronic invoicing and automated receivables management system to enable firms to move away from paper and move to e-invoicing, automated collections and, of course, build into that QuickFee's multiple ways to pay. The more people that are exposed to an online payment gateway, the more they will choose to pay online or use a QuickFee payment plan, particularly as they need advice from their accountant or their lawyer during these challenging times. On Slide 17, this is referred to as our next-level technology. Before the end of this year, we will be having firms moving away from paper invoicing to electronic invoicing using a QuickFee solution for delivery. Virtually every practice management system used by accounting and law firms around the world stops as soon as you issue the invoice. QuickFee will complete that final mile to money received easily in an automated and seamless manner. I take you to Slide 19. The sheer size of this opportunity should be clear. In Australia, there's $41 billion of revenue from the accounting and legal professions each year; in the United States, $111 billion, plus $313 billion; $424 billion of revenue from just the accounting and legal sector of $1.2 trillion across all professional services in the United States every year. What does this mean for QuickFee and its technology? On Slide 20, there's a graph. This graph presents some information that we've shared before in a slightly different way. It compares directly our experience with the firms that we serve in Australia with those we serve in the United States. The green color is the Australian experience. The question was, "In your firm, what percentage of your invoices do you send electronically?" The top row, the United States in black, says 45% of firms in the first 2 rows are printing, putting it in envelope and posting all or 75% of their invoices, i.e., less than 1/4 are going electronically. The Australian lines are both 0, i.e., no firm in Australia, responding to this survey, is sending anything less than 25% electronically. At the bottom of the chart, you can see that 56% of the Australian firms say they are sending essentially all of their invoices electronically. Our opportunity in the United States is to move professional services to copy the experience we already have in Australia, in a market exceeding $400 billion. Our e-invoicing tool would not only do that but will also automate the reminder process and the collections process for these firms. Moving to Slide 21. The market is modernizing. QuickFee is there to participate as well as accelerate this rate of change. We want to see our customers enjoying all the benefits of electronic invoicing, automated receivables follow-up, automated collection, time and cost saving that our Australian firms enjoy. What we are doing is extraordinarily scalable and will enable us to grow in the United States and ultimately North America. We have the opportunity to be not just first to market in fully fledged multiple payments, payment gateway and payment plans, but also with an electronic invoicing solution. We have the capital, we have the people and we have the vision. That's very much what our future looks like as we very much put the tech into fintech and use technology to drive our growth. I'm more than happy to take any questions.

[Operator Instructions] Our first question today comes from Wayne Sanderson with Sequoia Financial Group. The next question then will come from [ Brendan Kelly ].

Firstly, just on the Australian business. Just wanting to understand what the outlook looks like for FY '21 and whether you think you can actually grow the book there, just given that there is a bit of turbulence happening in the market with COVID.

Yes. Yes. Thanks, Brendan. Certainly, at the start of financial '21, the sheer volume of government money sloshing around the economy means that firms are being paid quite rapidly, and certainly, our arrears are the lowest they've been in many years, as I've said. In terms of growth for financial '21, we do see some upside, particularly in the legal space, where we have concentrated more of our efforts. We've got, as you probably know, 65% of the top 100 accounting firms as users of QuickFee in Australia. Our largest customer continues to be a significant user, so that's very positive. Consulting activity, M&A activity, of course, is down, but the opportunity to fund legal fees for SMEs around, particularly things like landlord disputes, credit disputes, et cetera, would be real. And I think, come October, we would expect to see some tailwinds flick in our favor, especially in the legal space.

Cool. That's great. And then just to the U.S. and Australia as well, just with the development of the invoicing solution, can you just help us understand the materiality of that potential revenue contribution over the next 12 to 18 months?

I think, firstly, that slide I showed where the -- just the momentum inside the existence, says a lot about where the business will go, devoid of that solution. In terms of the new solution, it's all about exposure. So the stuff I showed on Slide 11 says, "Look, we will just keep growing off the existing customer base." The new solution exposes more and more people to the payments. So our logic is if 18 billion people are running checks, part of that is cause they received an invoice in paper through the post, so they respond with a paper check back through the post. If we make it so easy to pay by literally clicking and being offered pay in full or take a payment plan, more SMEs will do that. In terms of a contribution to revenue, we'll have the product out, as I said, before the end of the year. We know of some firms that are basically immediate early adopters that will go with it. In terms of its true impact, I don't really want to put a number of what the SaaS is going to do, but I would say it would certainly accelerate the existing rate of growth that you see on Slide 11.

The next question comes from Wayne Sanderson with Sequoia Financial Group.

Congratulations on a stellar result and stellar outlook, by the sound of it. Could you just -- I don't know the company terribly well yet. Could you just describe how many staff you've got on the ground in Australia and also the U.S. implementing this opportunity? And how do you go-to-market? How do you sign up this vast number of accounting firms? Is it done through like the equivalent of the Australian chartered accountant association or whatever or the U.S. equivalent?

Okay. Yes. Thanks, Wayne. The -- in terms of number of people, we have 11 people in Australia and 22 in the United States, the total team of 33 across the whole business. In terms of go-to-market, at pre-COVID, we're a pretty major sponsor of largest accountants events. As you probably know, accountants and lawyers have to do their CPE, 40 hours or so of CPE in both countries each year. So they'll go to a conference to get that learning, and we'll have a trade stand and be part of the social activities, the dinner, the drinks, et cetera, et cetera, and that's a great way to meet prospects and get permission to proceed and sign them up and get them on board. During COVID, we've had to, of course, change our approach and have taken a fairly strong outbound cold call-style approach. We have run some webinars of our own. We have 1 events and 11 accountants turned up to listen to what we had to say about technology and a few other things. We recently did an event in conjunction with BDO in the United States, where we took them through sales processes for accounting firms in the time of COVID, and that had 181 people turn up. So we do outreach that way. But primarily, we're using some cold call-type techniques for the United States. To a large extent, part of the opening question is, "Hey, is the office closed? Yes, it is. Who's picking up the checks? I don't know. Why don't you move to e-payments and payment plans?" It's obviously more complicated than that, but it's a simplified example of how we're getting in front of firms and continue to sign them up.

So are you using an external like telemarketing-type outfit?

No. No, internal. We have our own people. We do have...

So your 22 are doing that.

Not all the 22 work in sales. We've got 5 people in our tech team. There's about 6 people in our admin team across both countries. But the largest single group is our salespeople and account managers. So once sold, the prospect has now become a customer, has moved over to our account management team and help them with the on-boarding process. There are 6 account managers across both countries, and there would be 8 salespeople across both countries.

Very busy by the sound of it.

7 in the states, 1 in Australia. We have a key relationship manager in Australia as well. She looks after the major accounts, the sort of the top 100 sort of accounting and law firms. And probably just off the back of that, I would want to just point out, we do have a finance team, of course, and none of this would be possible without the incredible efforts of Corey Struve, who's our Financial Controller. He's done a magnificent job of bringing together our annual report, this deck and all this financial data. So I want to call out specifically the great work that our finance team, particularly Corey has done to get us to this point.

[Operator Instructions] The next question comes from Dean Fergie with Cyan.

I was just wondering, it looks like your margins on the transactional businesses in the U.S. have sort of expanded from like 0.2 to 0.4 or something like that. I presume there's like costs in there. But I was just wondering, sort of, what you might think is a long-term kind of margin for those transactions and whether it's going to continue to expand.

Yes. The small firms pay more for the transactions than the large firms do. So as we get greater adoption in the larger firms. Yes, there is a bit of a risk that it does graduate slightly down. I sort of budget on 35 basis points across all transactions through the portal. We do have a little bit of opportunity to expand it with some new tech that we've got. So I would expect to see a little bit of growth in financial '21 in terms of margin expansion, but I think the large firms are gravitating towards what we do. And I think probably would -- it's probably safer, Dean, to stay around the 35, 40 basis points of gross transaction value.

There are no further questions at this time. I'll now turn the back over -- turn the call back over to Mr. Coombes for any closing remarks.

Thanks very much. For the avoidance of doubt, I wouldn't be able to do this -- we wouldn't be able to do this without the support of our Board. So a big thank you to Dale and Barry for everything you do to support our business and give us guidance; and to our team, who've been absolutely amazing. We've gone through the whole work-from-home thing. And I think we've done more Zoom calls in these 6 months than we've probably ever done in a lifetime. So a big thanks to all of our team and everybody and all our customers and our shareholders that have made this possible for us. Thank you.

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