QuickFee Limited (QFE) Earnings Call Transcript & Summary

Great. I think we're live. Good morning, everyone, and good evening to those joining us from the U.S. Welcome to the QuickFee Q4 FY '24 Business Update Webinar. On our call today, we have Simon Yeandle, CFO; and Jennifer Warawa, President North America to run through the presentation. And my name is Katie Mackenzie, Investor Relations for QuickFee. The presentation will run for about 20 minutes, and then we'll open up for Q&A. [Operator Instructions] If we don't have time to get through all the questions today, then we'll reach out to you directly following the webinar. Now I'd like to hand over to Jennifer Warawa.

Thank you very much, Katie, and thank you to everyone that's able to join us this morning and this evening in the U.S. We're very pleased to announce that we have continued the trend set in H1 and Q3 of this fiscal year with another strong quarter of revenue growth, with Q4 being up 42% on pcp to a record of $6.1 million. Our Finance product growth led the way with Finance revenue growth in the U.S up 39%, TTV up 9% and revenue yield up 250 basis points. In Australia, Finance TTV was up 14% and revenue up 46% on pcp and revenue yield was up 300 basis points. Our strategy to unlock transformational growth in the U.S. remains on track, and we continue to be laser focused on growth underpinned by cost-effective operations and processes that will scale over time. In the last quarter, we achieved several important operational milestones, including a significant increase in invoices sent through QuickFee Connect up 120% in Q4 over Q3 and a strategic integration with Knuula, which expands our product offering and provides a foundation for highly scalable future integrations. In June 2024, we finalized a well-supported placement and oversubscribed SPP, raising $4.4 million to fund further loan book growth in both the U.S. and Australia. Finally, we posted a positive EBITDA in Q4 as we continue to track towards sustained profitability. With that, I'll hand it over to Simon to run through the numbers in detail.

Thank you, Jennifer. Good morning, everyone. Here are the Q4 metrics, as mentioned, with growth across all products in both markets. As Jennifer mentioned, group revenue for the quarter was up 42% to AUD 6.1 million from AUD 4.3 million in Q4 FY '23, which was a record revenue quarter for the business. Revenue highlights include U.S. Finance revenue of USD 714,000, up 39% on pcp; U.S. Pay Now revenue, which is the ACH & Card, up 27% to USD 1.5 million; and Australian Finance revenue was up 46% to AUD 2.3 million. All of these are record revenue quarters for each of these products, and we delivered TTV growth across all products as shown. On this slide, we explained previously, Q4 is traditionally the strongest in each financial year, as you can see in the top left chart. The top right chart shows rolling 12-month revenue on a quarterly basis. This presents the growth trend in a more consistent way and eliminates that seasonality, as you can see on the left. This is why we report quarterly volume versus the prior corresponding quarter in terms of growth percentage rather than quarter-on-quarter growth rates, which can fluctuate, and some quarters can actually be lower than the immediately previous quarter. So showing quarter versus pcp and rolling 12 months presents a more consistent picture of the growth trend. Q4 is the strongest in the financial year in the U.S. as the tax season finishes and the backlog of billing is caught up. And in Australia, we generally see a very strong lead up to end of financial year, and we did this year as well with an all-time record month in June this year of over $7 million. Here, we present the breakdown between price and volume growth in our Finance product. And as a reminder, our Finance product delivers 25x the revenue yield of our U.S. Pay Now product from the same volume for every dollar processed. The chart on the top right of this slide shows Australia lending volume for Q4 FY '23 and Q4 FY '24 and the revenue yield percentage, which is revenue divided by that volume. And on the far right, the current quarter revenue growth over pcp split between growth from volume and growth from yield. So in that last column, you can see $0.2 million of revenue growth is from higher volume of lending and $0.5 million is from the increase in the rates we charge over and above pcp revenue of $1.6 million. The yield increase is driven by higher rates implemented over the past 2 years plus a higher share of lending derived from our legal disbursement funding book. This has a higher yield than our regular fee bundling product as interest compounds monthly on loans originated in prior months. So you don't have to actually originate loans to still earn interest on that product. Similarly, in the U.S. chart, bottom right, $1 million has come from volume growth and $0.1 million from yield growth over the prior year revenue of $0.5 million. And we continue to incur minimal bad debts through our low credit risk business model, and Q4 is no exception with very, very minimal bad debts. I'll pass back to Jennifer to discuss the business in more detail.

Thank you, Simon. Now as many of you already know, QuickFee was founded in Australia in 2009, and we entered the U.S. market in 2016. And since our inception, we really had 1 mission, to help professional service firms get paid faster. QuickFee's payment platform allows the firm's clients to pay their invoice by ACH or Card, which we refer to as Pay Now. And you can think of this as traditional digital payments. Then we also offer a lending option that's proprietary to QuickFee called QuickFee Finance. This pay-over-time option allows clients to pay over 3, 6, 9 or 12 months or the firm gets paid in full at no cost to the firm. Finally, our Connect product is a significant growth enabler in the U.S. market. Our existing customers have a combined annual revenue of around $10 billion. Right now, only $1.4 billion of that annual revenue is processed through QuickFee. The remaining $8.6 billion is primarily being received by check. This is where Connect comes in. Connect provides an integration to leading practice management solutions, helping turn a manual primarily paper-based invoicing process into an automated digital process by sending out the invoices generated within the practice management solution via e-mail. Those invoices of a payment link on them, which sends the customers directly to the QuickFee payment page. We now have 4 integrations effective this month being CCH ProSystem fx, CCH Axcess, IRIS Practice Engine and Thomson Reuters Practice CS. Now like any product in any industry, we now actually have competitors in our market, but we're also very well positioned to win against those competitors. In the Pay Now area of our business, the majority of traditional ACH and Card processors do not have an integration with practice management solutions. Additionally, many other processors do not have the option for the credit card surcharges to be passed on to the firm's clients. There are 3 main attributes that differentiate our Pay Over Time offering from other financing providers in the market. Other providers in the market tend to be consumer focused and aren't designed for firms that are serving business clients. They typically have a very low invoice maximum around $17,500, and they require a credit check for every single customer, and most customers don't want to have it on their credit score simply because they paid an invoice. QuickFee's designed for professional service firms. Our Finance solution has no invoice maximum. The clients affirms don't need to get a credit check done to pay an invoice. We integrate with leading practice management solutions, and we have a pricing model that works for small, midsize and very large firms. We are the best fit for the largest portion of the market. When we look across our customer base as to why firms work with QuickFee or when we win a new customer, it typically rolls down into 1 of 4 reasons and sometimes a combination of these. First, they want to reduce accounts receivable or AR. AR is typically the #1 item on a firm's balance sheet, and we help turn AR into cash. Second, they want to grow their business. There are many priorities competing for cash, and we can help find more of it for firms and their clients. Third, they want to automate their processes. We increase efficiency while improving the client and employee experience. And finally, as I mentioned before, they want to save on fees. Firms can save thousands and sometimes hundreds of thousands of dollars on credit card merchant fees simply by passing on credit card surcharges to their customers. Now we're very proud of the firms that we work with that have trusted us with their business. In fact, we work with 35% of the firms from the INSIDE Public Accounting or IPA Top 400 and we have 27% of the firms in the BDO Alliance as our customers. In addition to working with incredible firms, we also take great pride when they share their feedback and testimonials with us and with the market, such as you see here from Frazier & Deeter. Now I want to pivot and recap on our current strategy and share Q4 progress. Now we shared this slide at Investor Day in March and also during our Q3 business update, but given it's the foundation of our strategy and key focus areas for FY '25, I want to do a brief recap on it. If you envision a flywheel that when turning at full force compounds the efforts of every single component, that's what I'm trying to represent here today. This flywheel showcases the 5 areas that we believe will unlock transformational growth in the U.S. market. Our #1 lever on our flywheel is QuickFee Finance. As Simon mentioned earlier, QuickFee Finance has revenue yields that are approximately 25x those of our Pay Now offerings, all while delivering the solution to the market that's unmatched by any other company in the U.S. It's the reason we came to the U.S., and it's absolutely instrumental in delivering transformational growth. I think QuickFee Finance as our crown jewel of sorts. Secondly, QuickFee Connect is a key part of our growth strategy. Many firms that have adopted Connect have seen the transaction volume grow by up to 40% in the same period over last year. In addition to that, by integrating QuickFee Connect with most widely used practice management solutions in the U.S., firms are able to unlock automation capabilities that do not exist in the practice management solution itself. To maximize the transaction volume we capture from our customers, Connect is key. In addition to QuickFee Finance and Connect, we need to deliver differentiated technology, build strong partnerships with other leaders in the industry so we can rapidly grow our reach, drive increased awareness and acquire new customers at scale on a one-to-many basis. And finally, we want to leverage automation across all areas of our business. How would our key focus areas translate into results in the fourth quarter? Well, as you'll see, our Finance rolling 12-month TTV by quarter is the chart on the top left, and our Pay Now rolling TTV by quarter is on the right. U.S. Finance revenue was up 39% over the prior corresponding period. Connect invoice volume saw an uplift of 120% over Q3, and H2 saw a 10x the number of Connect invoices sent as H1. In Q4, our average firm size for new firms signed up was $19 million compared to $4.5 million in Q3. Our Connect functionality and automation capabilities are appealing to larger firms as well as smaller firms, and that's translating into more opportunity and transaction volume. Now let's take a look at how Australia did in Q4. Our business Australia led by our founder, Bruce Coombes, has shown consistent growth over the last 12 quarters since COVID with Q4 delivering record lending, a culmination of all the hard work the team have put in over the financial year. Economic conditions continue to work in our favor as interest rates remain high and inflation has not let up. As mentioned, Australia had a very strong Q4 with Finance revenue up 46% on the prior corresponding period, driven by both record lending volumes and also yields, particularly from the growing legal disbursements funding product. The disbursements funding product provides funding for disbursement costs for personal injury claims. The interest on these loans compounds as there are no installments repaid during the term of the loan. This delivers higher revenue per dollar originated than the traditional fee funding product. I'll now hand it back over to Simon to share some details around our full FY '24 performance and liquidity position.

Thank you, Jennifer. So as a recap, over the quarter, we executed a AUD 4.4 million capital, a $3.75 million placement that was very well supported and the share purchase plan that was originally set at $500,000 and was upsized to $667,000 due to demand. The capital raise, whilst we didn't need to raise capital to achieve profitability, the capital raise will be used to fund further loan growth in both the U.S. and Australia to support the momentum in the business. So we've got a strengthened balance sheet and we're well funded to our grow our lend book further. At 30 June, the company had $6.9 million available cash on hand and a borrowing capacity of a further $19.6 million from existing facilities available to fund future loan growth. And as a reminder, the company contributes 10% to 15% of loan book growth at our own cash reserves. Given current cash reserves and profitability expectations, we expect any hypothetical potential future capital requirements will be purely for the purposes of funding any future lender growth as the recent Q4 capital raise was. So the next slide. In terms of full FY '24 performance, we've talked all about Q4. Revenue from the Finance product in the U.S. and in Australia, revenues were up 52% and 51%, respectively, and the U.S. Pay Now revenue was up 18%. We achieved lending TTV of USD 26.7 million in the U.S., up 28% on pcp, and we processed Pay Now volumes of nearly USD 1.4 billion. In Australia, we hit $15 million in originations for the very first time with a 20% year-on-year growth and achieving a total of AUD 55.5 million. We recently released our full year results guidance on the next slide. And when there's a summary here, it shows group revenue up from $14.8 million in FY '23, and our guidance is between AUD 20 million to AUD 20.5 million for FY '24. And EBITDA after interest improving from a $6.6 million loss in FY '23 to between a $3 million to $4 million loss in FY '24, reflecting the revenue growth and cost reductions in the business as we track towards profitability. Importantly, our EBITDA after interest for H2 is expected to be a small loss below $1 million, and that supports our confidence in achievement of sustained profitability ahead. With that, I'll pass back to Jennifer to wrap up.

Great. Thank you, Simon. We're proud of our Q4 and full year results but also recognize there is much more work to do. We have positive momentum in key metrics and continue to manage our cost base very carefully. However, we're acutely aware of the importance of demonstrating sustained profitability, and that is, of course, our immediate priority. We remain confident that we have the right strategy, the right management team and solid momentum to continue to grow the business at an accelerated rate. As it relates to the U.S. market, I shared with you earlier and in previous investor presentations and updates, our flywheel of strategic priorities that we are confident will unlock transformational growth in the U.S. We'll remain focused and heads down on executing on the strategy we've set out for FY '25 which puts QuickFee Finance and QuickFee Connect at the heart of everything that we do. I want to thank each and every one of you for our continued support and confidence in what we're doing. And I'll now hand it back over to Katie to moderate any questions that may have come in.

Great. Thank you very much, Jennifer and Simon, for the quarterly update. [Operator Instructions] So Jennifer, just while we're waiting for some questions to come in, you have talked quite a bit in this presentation about Connect and about Connect integration. You were able to talk a little bit about what's coming up in FY '25?

Sure. Yes. We will be launching our next integration, which is Thomson Reuters Practice CS. I mentioned and we will be launching that month. So I'm aware that there are not that many days left in this month, so we'll be launching very soon. We're excited about that. That is an integration that has the largest number of our existing QuickFee customers using that practice management solution. So we're excited to get that into the market and help those firms transform how they process their accounts receivable.

Okay. Great. Thank you. We do have quite a few questions have just come through. This might be one for Simon. Are you able to talk about U.S. Finance TTV growth? The question here is that the growth rate has been a little slower in the last few quarters. What would explain that slower rate of growth in TTV?

Go ahead, Simon.

Yes. No, I don't think there's anything remarkable there. Jennifer, would you like to comment on that?

Yes. I was going to say something similar. I mean we've been through -- as you can imagine, we do significant analysis every month, every quarter on a customer-by-customer basis around -- especially around our loan book and our QuickFee Finance volume. And I would say probably there were some -- when we look back, the only thing that is worth calling out is we had some very significant kind of one-off. If we get a new firm in and they're clearing out their AR and they kind of catch up, we saw that in Q4 of FY '23, and we didn't have exactly the same situation in Q4 of FY '24. So sometimes you see those one-off clearing out of AR and you don't see them matched in the same period of the next year. That was really the only thing, but we've had good customer retention. Our key customers continue to produce loans as well as quotes for loans. So there's nothing remarkable other than that stands out.

Okay. Thank you. We've got a question here about the number of firms in the U.S. and the growth rate of that. Are you able to talk to the number of firms that you are acquiring, your number of customers?

Yes. I think when you're looking at the U.S. firms growth in Q4, the slower rate of growth can be attributed to a few things. I mean I think we were a little bit slower coming out of tax season. So we had a nice pipeline going into tax season, but coming out of tax season, firms a little bit slower to get back to business. So something that you'd see after the tax deadlines passed in April and May, we picked back up, but there was a little bit of a slower ramp to bring on new firms. I think the other part is as we are navigating political uncertainty in the U.S., as you can imagine, and I'm sure you've seen on the news, it certainly does cause -- some firms will use that. Sometimes it's well justified, and sometimes they're looking for a way to delay decision-making. But we did see some that we expected to land in the fourth quarter pushed to the first quarter of this fiscal year. So I see the other part of that question around are we losing firms to competition. I would say that we have -- there has been some firm attrition or losses to competitors in the market. I think that we're very clear on our win-loss efforts. We interview every single firm that makes a decision to leave, and we're very clear on why they left. And we have a very prescriptive road map to ensure that we minimize the number of losses.

Yes, Katie, it's not in the deck we put up, but it was in the Appendix of the results release that we grew firms over the course of the financial year, 5%, and we're just touching on about 800 active firms in the U.S. So that's again another record.

And I think it might be worth adding there as well that the firms which we did put in the release the average revenue of the firms that we're signing up are significantly larger than the ones that we were signing up previously. So the number of firms now -- 1 firm is actually a bigger firm than 1 firm a year ago.