QuickFee Limited (QFE) Earnings Call Transcript & Summary

[Audio Gap] to the Annual General Meeting of QuickFee. I'm Bruce Coombes, the Managing Director and the CEO of QuickFee. And I'd like to introduce Barry Lewin, who's our Nonexecutive Chairman; and my other Co-Director, Dale Smorgon, who's also a Nonexecutive Director who's been involved in the business for a very long period of time. They're joining us from Melbourne via [ video ] links under the current circumstances. Our Company Secretary, Jennifer James, is also present. I'd also like to introduce Simon Yeandle, who's the CFO of QuickFee, he joined us recently in October. And I'd like to acknowledge he's paying our order [indiscernible] from [indiscernible] joins us via a video link to answer any questions in relation to the annual report. I'm advised that the general meeting is now with a quorum, members present and therefore, I call the meeting to order. We'll conduct this meeting in 3 parts. The first part will be an address by Barry Lewin, our Nonexecutive Chairman, who'll talk through the 2020 financial year. We'll then -- I'll do the presentation on 2020. Simon will share some of the presentation with me. And I'll also talk a bit about how financial '21 will start and some of the things that we're working on right now. We'll then move to the formal business of the meeting, which includes the 5 resolutions to be considered by shareholders today, which afterwards will be sent out to me. And all the chance will be given to shareholders to ask questions about or make comments on the items of business in the agenda of today's meeting. I therefore now hand over to Barry and let him provide an address to the meeting. Thanks, Barry.

Thanks very much, Bruce. Good morning, everyone. I'm delighted to present to you today as Chairman of QuickFee. I'm sure we'll all look back on the 2020 financial year as a unique, strange and challenging period. But in the case of QuickFee, this has also provided opportunity. And we were able to benefit and accelerate our growth from the shift to online payments. With a well-established and profitable business in Australia, the major focus for financial year '20 was to capitalize on our first-mover advantage in the U.S. where the professional services market represents a huge opportunity for the group. I'm very pleased to report that we made significant progress on this goal, growing strongly against all key metrics. U.S. professional services market is still largely using paper invoicing. And we were seeing the early stages of a shift to electronic invoicing, which was accelerated by the pandemic, with many clients unable to pay via check and firms unable to process paper-based invoicing due to working-from-home restrictions. This resulted in a big increase in new firm sign-ups. Transaction volumes on the QuickFee platform more than doubled in the first 6 weeks of the COVID-19 lockdown in March and April and have continued to grow well. We finished the financial year '20 with 26 of the top 100 accounting firms signed on to the platform, and we are seeing this translate to record growth in lending and transaction volumes. We completed a strongly supported capital raising of $7.5 million in May, which provided additional capital to support our growing loan book and for technology investment. And post balance date, with demonstrable further appetite from investors, we undertook another successful capital raise of $17.5 million and the launch of the QuickFee Installments in partnership with Splitit Payments. This new offering provides us with a further differentiated products set, which significantly increases our addressable market, and it's something we're very excited by. We have a keen ambition to be a market leader in what we have termed the advice now, pay later market. I would like to take this opportunity to sincerely thank Bruce and all the staff for their dedication and commitment over the 2020 financial year. It certainly hasn't been an easy year. I'd also like to extend my appreciation to my Co-Director, Dale. Dale's commercial acumen, energy and tireless support has been invaluable as we have been scaling the business. And finally and most importantly, I would like to thank all shareholders for your ongoing support. Whilst there's still much work to be done, I'm pleased to note that QuickFee is really well positioned to execute on our ambitious growth plans. I'll now hand back to Bruce for a more detailed presentation and the formal business of the meeting. Over to you, Bruce.

Thanks, Barry. Thanks, Barry. Great opportunity here to firstly say thank you. I really want to say this, thank you to the shareholders. Without anyone at the company, we wouldn't have the opportunities that the company has. So thank you very much. So firstly, QuickFee started very much as a financier of professional fees owed primarily to accounting enrollments. We have at our core always served those in the service industry, specifically, typically, accountants and lawyers. We then evolved to provide a payment gateway, bring online payments to the business. And now we provide a much broader service offering to any business which chooses to be in the service sector. For our professional service firms that we've sort of described as enterprise grade, we extend a risk in our lending with the firm through a recourse arrangement. With our new QuickFee Installments products, we can now service any service industry, any type of service, any type of clients, irrespective of size of clients or size of firm. So we very much evolved our business to provide certain professional service firms with something to businesses that provides payment plans and payment gateway solutions for any type of service business. I'm going to hand over to Simon, our CFO, to share with you around the financials of financial '20.

Thank you, Bruce, and good morning, everyone. Looking back at the 2020 financial year, despite the difficulties that arose during the pandemic, QuickFee achieved a number of significant milestones. We saw record growth in our lending book both the U.S. and Australia, which is underpinned by record lending to clients or professional firms and significant growth in new firm signings. COVID forced businesses and consumers to embrace online payments, further accelerating the shift that was already underway. QuickFee was well positioned to take advantage of this accelerated shift in online payments with transaction volumes growing 137%. The combination of the record lending and transactional volumes, by far, QuickFee was able to grow its revenue by 47% to a record of $8.5 million. In order to fund our continued growth, we completed a strongly supported share placement to raise $7.5 million of post balance date to a further $17.5 million raised to support the launch of our QuickFee Installments for us in partnership with Splitit Payments. With a strong balance sheet and having added a number of exceptional senior technology leaders to our team to accelerate our tech build, we are very well positioned looking ahead. These are just some key metrics from the FY '20 financial year. As you can see, the progress achieved is showing in the figures. Across every metric, we experienced double-digit growth. In particular, with nearly exceptional growth figures in the U.S. with a 52% increase in the value of our U.S. loan book and a 63% increase in additional firms and this points to a further value down the track as we continue to expand our operations across the U.S. market. Next slide is another snapshot of the growth achieved across the key metrics of the last financial year and, again, highlights the 47% revenue growth and again, the 137% growth in U.S. transactions up to USD 305 million. And with that, I'll pass it back to Bruce.

Thanks, Simon. So it's been great to see how hard the team has worked, achieved growth on every single metric, as Simon shared with you. So a big thank you to the QuickFee team in Australia and the United States for their hard work and dedication during the course, an amazing year. Many of these things I tell you on, our IT, working from home since around March and -- it's a credit to them, what has been achieved; and credit to our Australian team, what's been done throughout financial '20. I said earlier that QuickFee is a low credit risk solution. Right from our start and right through now, that has been an important part of our business impulse. In our traditional business, should a client fails to meet the terms of their payment plans, the firm must share the risk to QuickFee through a recourse arrangement where they make to pay to all in relation to any other pay principle. Now with our new QuickFee installment solution, we continue to be a very low credit risk provider providing interest-free installment plans, using some very special technology that we've licensed from Splitit. Now let me share this slide with you. Splitit is an Australian Stock Exchange, right, that's partnered with QuickFee, and they have got superior technology, which effectively allows us to preauthorize the balance of a payment plan that a client of a service has taken up with QuickFee. What this means is that there is no credit risk to QuickFee should the client fails to meet their payment plan. This has opened up the market for QuickFee solutions enormously. And the key bullets on this slide really are that the target market for QuickFee in Australia and the United States is now much larger as a result of this new solution that we brought to market. This doesn't take away from our core and reasonable message, which was to serve professional services business. QuickFee much to be all things payments and all things receivables for professional services' service. If you've been a QuickFee shareholder for a while, you would have seen this data a few times. What this data tells us is that the digitization of the professions in the United States is well behind where it is in Australia. The black lines are Australia; the blue lines, the United States. Using the last line of the chart as an example, the question asked to gather this data was, what percentage of your invoices do you send electronically? The blue line for Australia shows that 56% of firms are sending electronically. The 19% black line for the United States tells us that less than 1/5 of those are sending their invoices on paper. And the other 2 black lines at the top, and as a beginner, you can see the 34%, 35% of firms in the United States are sending virtually none. This inhibits the adoption of electronic payments in the offering of their payment plans. So we are building a solution which will enable firms to seamlessly generate and deliver their invoices not by using U.S. Postal System, but by using a technology being developed by QuickFee, an e-invoicing, an accounts receivable management tool. Why are we standing into areas away from our original place of accounting and law? A lot of the legal services in the very large legal market are consumer related. So they're things like consumables, things as -- even something similar to traffic matter is still a consumable. So we have made now a solution available for a much broader range of legal services and a much lower range of services generally. Our traditional product range requires a B2B relationship, which was only made alone in a commercial setting. I.e., we couldn't do consumer lending. With our new solution, which is not consumer lending, we are able to now offer interest-free payment plans for the firm that pays QuickFee fee for providing it or any type of service. So this slide was to summarize the things we've done. So the first 3 solutions, I think they're in the market today. QuickFee Finance is our traditional solution for professional services firms above $1 million range. QuickFee Installments is our new products in partnership with Splitit where we're using their technology. QuickFee PayNow is our payment gateway, all that service is available to the market today. Between now and 30 June 2021, we'll complete the build of ConnectAR, our new receivables management and e-invoicing tool. We'll also expand the QuickFee Installments gateway to allow clients to pay in full as well as pay in 4 easy interest-free installments. Firms are moving to being more online, more digital in the United States. In fact, at the start of COVID, the QuickFee payment gateway transaction values doubled in a 6-week period. People are seeing how convenient it is to pay online. With ConnectAR, we will drive increased adoption of our payment gateway and our payment plans. We now have a complete tech team, made CLA, supplemented by additional people, which we outsourced to offshore. We are building out the technology, which will take our solutions and help the firms digitize faster. So how are we going into '21? So, right, we might see that financial '21 of course as -- I want to share a little bit of information there. As you can see on this slide, lending is up compared to the same corresponding period in financial '20. Transaction values are up enormously compared to the same period of time in financial '20. In Australia where JobKeeper hasn't been back or JobKeeper and some government incentives have actually put more money into the economy than COVID took out and lending declined, we've seen a decline in our lending initiatives in some of our earlier quarterly updates on the ASX side. Between October and November, as the JobKeeper stimulus started to be unwound, we saw interest. November lending was 39% higher than October, we believe, reflecting less cash from JobKeeper stimulus similar packages in the economy. This is what QuickFee Installments story looks like. This is a live site of law firm that uses our solutions. We took the product live in Australia first and it will be live in the United States in December. We've allowed some U.S. firms to join as early adopters. In the United States, 34 firms will join; 99 in Australia, and we are seeing live transactions go through. And importantly, we have seen clients of the same service business use the solution over and over. So we're not just seeing adoption by firms who signed, we are seeing multiples of their clients using our branded solution. So looking forward, we have an enormous opportunity in United States. We're poised to have this opportunity. COVID helped people see the power of online payments. We have a long way to go in capturing more and more payments and services businesses in the United States. We now have a product for any type of service business, but we also have our QuickFee Advice, which is used by enormous components of the top 400 accounting firms in the United States. We've got a tech team. We're building tech. We are helping firms [ more or less ]. So as a final point, this is where your company is now. We have PayNow for online payments; QuickFee Installments for any service business; QuickFee Financing, our traditional products; and soon, QuickFee ConnectAR, enabling firms to enjoy automated receivables management along with payables. So that sort of concludes my presentation. So I'll now -- I'll move now on to the formal part of today's meeting. What happens with a quorum like this is that move -- put all the votes on each resolution and all shareholders have an opportunity to submit voting instructions via proxy. Before each resolution is put to a vote, I'll display the proxy voting instructions on the screen for your information. The proxy instruction forms received are held by the Company Secretary and available for inspection. Note that each resolution today's meeting will be conducted by way of poll immediately prior to the conclusion of meeting. For those who are physically present, you'll be able to submit your voting card, which will be collected by a representative of the company. Shareholders viewing the meeting via webcast are not able to vote in real time. There will be an opportunity to shareholders who are physically present to ask questions or make comments in relation to resolutions. If you wish to do so, you have to identify yourself by name and whether you're a shareholder, a proxy holder or a corporate representative and how many shares you own or represent. We'll present now and we'll be talking on year-end report of the company and provide the financial statements to directly report the independent audit for the company for financial year ended June 30, 2020. The annual general report was released online on the 20th of August 2020, with the slides on the company's website. There's no requirement for a resolution at the annual report be adopted. Well, at this point, I invite any questions from the shareholders that might have arose from the annual report. Speaking to it, I'll leave our director for the [ laws ], [ Nicholas Binbaur ], company's auditor. Members may ask [ Chris ] in view or in relation to conduct of the audit or the audit report itself. It seems there are no questions in that regard. I now move on to the next item, which is the adoption of remuneration report. The first item of business in this report for the year ended 30th June 2020, is set out on Pages 21 to 32 of the 2020 annual report. Shareholders should note that this resolution is advisory only and does not bind the directors or of the company. However, if more than 25% of the votes cast on this resolution are no votes and should the company receive 25% or more no votes on the remuneration report at next year's Annual General Meeting, the company would then be required by the Corporations Act for a further resolution of members of that meeting to convene a subsequent meeting of members in which all directors of the company will be required to stand for reelection. In accordance with the ASX Listing Rules and the Corporations Act, the company will disregard any votes cast on this resolution by or on behalf of any member of the key management personnel of the company. These details include the remuneration report or a closely related parties by key management personnel subject to the exceptions set out on Page 3 of the notice of meeting. I invite any questions in relation to the remuneration report. There are no questions on that regard. So I'll now move on to the total number of votes cast by proxy. So you can see the votes on the screen there. Exact wording on resolution 1 is set out in the notice of meeting, I now put that resolution for meeting. And for the final resolution, we're going to have a poll immediately prior to the conclusion of this meeting. I'll now move on to resolution 2, which is the reelection of Barry Lewin as a director. In accordance with clause 49.2 of the constitution, the company must hold an election for this in every annual general meeting. The constitution, though, it says to reward it by Board or it provides that the director must not hold office without an election after third annual general meeting following the director's appointment or 3 years, whichever is longer. This rule does not apply to the Managing Director. Resolution 2 provides the reelection of Barry Lewin as a director of the company in accordance with the constitution made since [indiscernible]. Barry Lewin retires after the conclusion of the meeting and will be eligible obviously for reelection as a director of the company. The shareholders does not approve the reelection of Barry Lewin and Barry Lewin ceased to be a director at the conclusion of the meeting. A biographical background information about Barry Lewin is set out on the notice of the meeting. I invite any questions in relation to Barry Lewin's reelection as a director of the company. The total number of valid proxies which have been received and recorded and are excisable for this resolution are now shown on the screen. The exact wording of resolution 2 is set out in the notice of meeting, and I'll now put that resolution to the meeting. Voting on this will be conducted by way of poll immediately prior to the conclusion of the meeting. I'll now move to resolution 3, which is the ratification of our placement. As announced in the meeting September 2020, the company successfully completed placement service achieved from perpetual investors of 25,862,068 shares at $0.58 per share to raise $15 million. The funds raised under the placement have been added to the company's existing cash and are available to be deployed and increase the company's loan book, scale up to change customer acquisitions and to fund new technology development initiatives. ASX Listing Rule 7.1 imposes a 15% cap on the number of shares to be issued by the company in any 12-month period without the approval of shareholders. Under ASX Listing Rule 7.4, shareholders can ratify the issue of securities after the event. This has the effect of refreshing the company's ability to issue shares within the 15% limit without requiring shareholder approval at the time of any future issue. The purpose of resolution 3 is for shareholders to ratify the issue of 25,862 068 fully paid ordinary shares in the company to restore the company's ability to issue further shares within the next 12 months. In accordance with the ASX Listing Rules, the company will disregard any votes cast on this resolution by or on behalf of any person who participated in the placement, any associate of those persons subject to exceptions set out in Page 4 of the notice of meeting. I invite any questions in relation to the issue of shares under the placement, specifically in relation to resolution 3. The total number of valid proxies which have been received and recorded and are excisable for this resolution are shown on the screen. The exact wording of resolution 3 is set out in the notice of meeting. I now put the resolution to the meeting. The vote on this resolution will be conducted by way of poll immediately prior to the conclusion of the meeting. Moving to resolution 4, which is in relation to Barry Lewin's participation in the placement. As explained earlier, in resolution 3, the company undertook a placement of 25,862,068 shares. Resolution 4 concerns the proposed participation in the placement of Barry Lewin, a director of the company. The resolution seeks approval for the issue of 75,000 shares of Barry Lewin at an issue price of [indiscernible] on the same terms as all other placement participants. ASX Listing Rule 10.11 requires a listed company to obtain shareholder approval prior to the issue of securities to a related party of the company. A related party includes a director. In accordance with the ASX Listing Rules, the company will disregard any votes cast on this resolution by or on behalf of Barry Lewin, any other person who will obtain a material benefit as a result of the issue of securities to Barry Lewin, any associate of those persons subject to exceptions set out on Page 5 on the notice of meeting. I invite any questions in relation to the issue of securities to the director under the placement. Before I put the motion to a vote, I advise that the total number of valid proxies which have been received and recorded and are exercisable for this resolution are shown on the screen. The exact wording of resolution 4 is set out in the notice of meeting, I now put that resolution to the meeting. The vote on this resolution will be conducted by way of poll immediately prior to the conclusion of the meeting. This allows the resolution to be part of resolution 5, which is approval to refresh the company's 10% placement capacity. ASX Listing Rule 7.1A enables other entities to seek shareholder approval by special resolution to issue equity securities equivalent to an additional 10% of the number of voters' securities on issue over a 12-month period after the date of the release. This is in addition to 16%, 15% placement capacity permitted by ASX Listing Rule 7.1. The company did not include any and does not include the [ ASX 300 ] as a market capitalization investment of $3 million. If resolution 5 is approved, the company will have the benefit of the additional 10% placement capacity even with subsequent downturn in the economy in the coming 12 months. According to resolution 5, seeking approval to shareholders by a special resolution to the issuance up to the number of equity securities calculated under the formula in ASX Listing Rule 7.1A.2 at issue price submitted by ASX Listing Rule 7.1A3 to such person as the Board may return on the term that is set out in the notice of meeting. The effect of resolution 5 [indiscernible] every security number in 7.1A during the 12 months after this meeting without anything [indiscernible] of the company under ASX Listing Rule 7.1 and by the question which relates to approve additional shares between [indiscernible], which [indiscernible]. Before I put the motion to a vote, I advise that the total number of valid proxies which have been received and recorded and are exercisable for this resolution are shown on the screen. The exact wording on resolution 5 is set out on the notice of the meeting, and I put that resolution to the meeting. The vote on this resolution will be conducted by way of poll immediately prior to the conclusion of the meeting. This resolution being set for the commission requires 75% more votes cast and then signed up for the resolution to pass.

I'll now move to questions. Shareholders who are not in attendance had an opportunity to submit questions to the company ahead of the meeting. We have 2 such questions, and I'll now move to the last to answer those. The first question -- I'll just read the question now and end the vote later. Biden is saying he's quickly aiming to change legal services as well as accounting services. I'm wondering if with this business model, we can get more information, clarification [ over time ]. Number one, how is QuickFee's concepts different from companies such as LawPay and Stripe? Two, does QuickFee consider these companies as competitors? If not, could you please explain? In the United States market, there is a company which is part of the billing payment of the company known as LawPay. LawPay provides credit card services and recently expand to also provide [ 88 ] so-called Australia services. Stripe, of course, is known as a credit card processing company. In terms of a law firm taking credit cards, they are -- absolutely, they considered QuickFee in terms of credit cards. In terms of the full payment gateway offering credit cards, EFTs and self-service payment plans, these companies are not direct competitors. For a firm, for it only to offer pay-in-full services by credit card or EFT, these companies will be competitors. I'll now move to the second question, which is similar. Could the senate provide update on progress acquiring legal clients? Based on the table below, it seems that TruePay has yet to acquire a [ progress ]. The table you're referring to is a table which shows the number of firms falling into this stratified levels of revenue in a previous ASX release. That table shows the penetration of QuickFee in the CBA, the accounting vertical. We didn't include the number of firms we have in the right-hand corner of the table, which was a list of law firms stratified by revenue. Now we do have more than [ those] solutions in the United States, but that will be a few percent of the total customer base of QuickFee. We have found it easier to onboard CBA firms and have found them having a much higher transactional sort of volume, much more repay funds, of course, than law firms, and therefore, they've been easier for us to acquire as customers to the business. With QuickFee Installments now being released and making available, something which could address consumable as well as a much wider range of smaller law firms, we expect the take out rate of law firms, the achievement for that product to be high. Selling through independent reps a product like QuickFee Finance, our traditional solution, requires a fairly consultative level of selling. With our new solution, we believe the independent reps that work within the QuickFee system will be able to sell that solutions easier in the legal space. The second part of that question is, what is the current competitive landscape in the U.S., including similar products such as LawPay, which is essentially the same question and the first question asked, which I build in now. So now here is the poll. There have been no votes cast at the meeting by any person in attendance. There was one -- sorry, one group of shareholders that provided their proxy in Simon and myself, have all of their votes in favor of the resolutions. So in addition to those you saw on the earlier slides, the ones in -- where I held the proxy, have now been voted in favor of each resolution. Accordingly, each resolution has been passed. Well, that concludes the formal part of our meeting. And I'd like to thank everybody for their attendance. I think if there's nothing else, I can safely declare the meeting closed. All right. Thank you, everybody, for your attendance. The meeting is now closed.

Goodbye.