QuickFee Limited (QFE) Earnings Call Transcript & Summary

Welcome to the QuickFee FY '25 Q1 Business Update. I'm Jennifer Warawa, President for QuickFee North America, and I'm joined today by our CFO, Simon Yeandle. We're really glad that you could join us today as we share an overview of the progress that we've made in the QuickFee business in both the U.S. and Australia in Q1 of our FY '25 fiscal year. Everything that we're going to share with you today is based on a relatively simple focus for QuickFee. We help professional service firms automate and accelerate accounts receivable, while at the same time, supporting them as they grow their firms. To post any questions and feedback, please register on our investor hub, details of which will be shared at the end of this presentation. While we're confident that we have the right strategy to support our business ambitions, the proof of strategy is working is all in the results. And in Q1, we continue to deliver strong results, underpinned by great people and a laser focus on relentless execution. As you can see on this slide, in Q1, group revenue was up 33% and Finance is a key contributor to that, with Finance revenue in Australia up 57% and in the U.S., up 17%. I also want to emphasize that we're on track with the earnings guidance we set for the FY '25 year, expecting FY '25 to be EBITDA positive in the range of $1.5 million to $2.5 million weighted to the second half. Overall, I'm pleased with the progress we've made and the results we delivered in Q1, but there's much more to be done and a significant opportunity ahead of us. In addition to our quarterly revenue being up 33%, we had a number of additional highlights in Q1 that I want to call out. First, we launched our fourth Connect integration this time with Thomson Reuters Practice CS, which is the most widely used practice management solution by our customers today. New customer acquisition remains a priority, and we brought on 23 new firms in Q1 in the U.S. and now have 69 firms signed up for Connect. Our pipeline continues to strengthen. And in Q1, we saw a healthy increase of Connect demos and are finalizing the implementation of Connect for a number of large firms and key customers. Our strategic partnerships with Knuula and IRIS continue to progress. On the Knuula side, our engagement to cash workflow automation has generated strong interest from both customers and prospects, which has led us to partnering with Knuula on 31 opportunities, which have played a key role in customer retention. On the IRIS side, we saw a significant uptick in loan volume with 14 payment plans for IRIS software taken out in the quarter with the largest being for USD 39,000. Now it's important to remember that there's seasonality to our business, and our revenue is stronger in Q2 and Q4 due to Pay Now seasonal volumes and Q4 is traditionally stronger than Q2. I've shared on this slide some of the reasons for the seasonality. Now I want to pivot and recap a little bit on our current strategy and share some of our progress. As you know by now, Connect is a key focus area, and there are a few callouts worth noting here. First, we have introduced a new subscription model to the market and have started with an implementation fee of USD 1,995, that's $1,995 and monthly subscriptions of $499 a month. We'll soon be introducing additional functionality, which will be available for higher-level tiers, which, of course, are at a higher level price point. With that, Connect is incredibly important for three reasons. First, it has a subscription model with monthly recurring revenue streams. Second, it increases transaction volume for all of our solutions. And third, it introduces a very competitive offering that's ideal for firms that want to build their own tech stack, which is becoming increasingly important to firms of our all sizes. On the new customer acquisition side, we had strong growth in the active firm numbers, which were up 13%, and we had 16 new firms sign up to Connect in the quarter. In addition to launching our Connect integration with Thomson Reuters Practice CS, we're also nearing the completion of our fifth Connect integration, which we plan to launch this quarter. Additionally, this quarter, we'll be launching a new payment portal, which will allow clients of firms to store their payment information, see historical invoices, set up recurring payment plans and pay multiple invoices at one time. The U.S. also saw increasing transaction volume across all products with the Finance transaction volume up 14%. QuickFee's Q1 coincides with the busy tax extension season in the U.S. with key deadlines falling on September 15 and October 15. As a result, Q1 is seasonably weaker as many firms in the pipeline are focused on client deadlines rather than making buying decisions during this period. In addition, economic uncertainty related to the upcoming U.S. election also had an adverse impact on new firm acquisition as companies postponed purchasing decisions. In Q1 FY '25, U.S. Finance revenue was adversely impacted by cancellation of approximately USD 40,000 of interest revenue due to clients defaulting on their payment plans and firms paying out the loans. Two of these payment plans were in excess of USD 100,000. While firm guarantee repayments are relatively common, importantly, QuickFee did not incur any credit losses due to the guarantees by firms on all loans. However, these canceled loans adversely impacted the total loan book balance and the future interest on the remainder of the loans is foregone. Our Pay Now transaction volume continues to increase, and Connect has certainly played a role in driving volume. In September 2024, Connect delivered 4,500 invoices to firm's clients and it was the highest volume month since Connect's launch outside of April 2024, which is a seasonal high due to the April 15, end of tax season billing. U.S. Pay Now total transaction volume was up 15% on PCP, revenue up 9% to USD 1 million. Q1 of FY '24 was $0.9 million on slightly lower revenue yields. And it's important to note that we had no credit losses in the quarter. Now let's take a look at how Australia did in Q1. Australia had a very strong Q1 with TTV for Finance up 42% to AUD 15.6 million. And Pay Now TTV up 22% to AUD 22 million. Additionally, BNPL TTV was up 100% to AUD 1.2 million. On the new customer acquisition side, active firm numbers were up 8% to 437, the second highest quarter on record after Q4 FY '24. There's been a heavy focus on reactivating firms who have not processed payment plans in the last 12 months. Our business in Australia, led by our founder, Bruce Coombes, has shown consistent growth over the last 12 quarters since COVID with Q1 delivering record lending, a culmination of all the hard work the team have put in over the quarter. Economic conditions continue to work in our favor as interest rates remain high and inflation has not let up. The success of the QuickFee brand in the Australian market is built on a reputation for excellent customer service and ongoing vigorous relationship management activities, which positions the business extremely well to continue its growth. I'm now going to hand it over to our QuickFee CFO, Simon Yeandle, to provide a liquidity and funding update.

Thank you, Jennifer. As a funding update, here, we've summarized our credit facilities, cash and facility growth capacity. At 30 September 2024, the company had AUD 4.6 million unrestricted cash on hand, with borrowing growth capacity of a further AUD 16.5 million from existing facilities available to fund the future loan book growth. We previously updated the market that the existing receivables-backed debt facility with Northleaf matures in November 2025 and the repayments are due until that date. While there is undrawn headroom available from this facility, increases in drawn amounts were to become unavailable from 30 September 2024. We have now extended the expiry date of this draw period with further funds available to be drawn until 31 March 2025. In addition, we are in advanced discussions with various potential lenders to secure financing to replace the Northleaf facility in full prior to 31 March 2025, and we will update the market in due course with any further developments on this. We do not expect any material ongoing financial or operational impact from any potential changes in lenders, although amortization of previously capitalized borrowing costs will accelerate to end of March 2025, and any new facility will incur advisory and legal fees and establishment costs, which will be capitalized and amortized over the life of any new facility. QuickFee has a strengthened balance sheet with the $4.4 million capital raise completed earlier this year and FY '25 EBITDA expected to be positive, while we are well placed to achieve sustainable profitability within our existing cash and borrowing facilities. I'll now hand back to Jennifer to wrap up.

Thank you, Simon. As we look ahead to the remainder of FY '25, we'll continue to have a focus on sustained profitability, supported by acceleration of total transaction volume and revenue from QuickFee Finance and QuickFee Connect and, of course, very careful management of our cost base. Our Connect integrations will continue driving increasing demand and opportunity, allowing us to win more new customers and drive Pay Now and Pay Over Time transaction volume as well as revenue through our new subscription model. Most importantly, we expect FY '25 EBITDA in the range of AUD 1.5 million to AUD 2.5 million weighted to the second half. Our outlook for FY '25 is positive, and it's strongly supported by our momentum. To wrap up, I have no doubt that we're in the right place at the right time, and we're well positioned to take advantage of the market opportunity while delivering unparalleled solutions to the accounting market segment. Our top-tier management team are leading their areas of business with owner mentality, high accountability and a sharp focus on outcomes, the same outcomes that you, as an investor, are seeking. We have a proven track record of delivering strong year-over-year revenue growth. Just one of our verticals, accounting has a serviceable addressable market of $84 billion in the U.S. alone. The market opportunity is tremendous. Given we have just 14% of our existing firm's revenue flowing through QuickFee, we have the opportunity to 8x our transaction volume without even getting one new customer. Our proposition is different. The combination of our unique Finance product, Connect's ability to modernize our firm's existing tech stack and our unique pricing set us apart from anyone else in the market. Finally, we have a customer base of over 1,500 professional services firms, and that continues to grow. We are very appreciative for your time today, and we hope that you can feel the energy around the results, our strategy, our momentum and our plans to execute. It's an exciting time to be at QuickFee, and I believe our best days lie ahead. To post any questions or feedback on this presentation, we encourage investors to sign up to the QuickFee investor hub and details are shown here. Thank you for listening in today.