QuickFee Limited (QFE) Earnings Call Transcript & Summary

Okay. Good morning, everyone, and welcome to QuickFee's First Half FY '26 Financial Results Webinar. On our call today, we have Bruce Coombes, Founder and CEO; and Simon Yeandle, CFO. And my name is Katie Mackenzie, Investor Relations for QuickFee. The presentation today will run for about 20 minutes, and then we'll open up for Q&A. [Operator Instructions]. And now I would like to hand over to Bruce. Over to you, Bruce.

Fantastic. Thanks, Katie. Thanks everybody for coming along. For those of you who don't know, I'm the CEO at QuickFee, Bruce Coombes. On the next slide is just a very simple explanation of what QuickFee is. We lend B2B. We do not do any consumer lending. We lend money to the clients of accounting and law firms so they can pay their accountant or lawyer on time. And we also provide a funding solution in Australia to personal injury and estate planning firms. On the next slide, we've got a bit more of the information around some detail on this. At the end of the day, we reduce accounts receivable what we might call debtors in Australia for law and accounting firms without impacting their client relationships. We give their clients up to 12 months to repay QuickFee. We do not charge the firm anything for our finance solution, instead earning an attractive interest yield for the money that we lend to their clients. At the bottom of the middle column is the product that I referenced earlier, which is a funding solution where we provide funding to law firms, which specialize in personal injury and disputed estate matters in Australia. One way we drive usage of our finance solution in Australia is by embedding it into a full payment gateway catering for EFT, credit card and our fee funding solution. Our core business, however, is lending money to the clients of accounting and law firms. On the next slide, we have a summary of why we do this, why we specialize in accountants and lawyers. Myself and many of the team come from this background. So we have a deep understanding of accounting and law firms, how they operate, how they like to manage their cash flow, how their receivables and billing to cash cycle works. Virtually every SME in Australia and the United States needs to engage an accountant at least once a year for their taxes, in many cases, much more often. In an annual engagement, it will be an annual fee. And just like an insurance premium that comes once a year if it can be spread out over 12 months, it's easier for the client, the SME to afford. That's what we do when it comes to accounting and legal fees. The second most commonly used service by SMEs in Australia and the United States after accounting is a law firm. We specialize in these 2 verticals, which are essential suppliers to SMEs in the markets where we operate. For the personal injury firms, carrying the cost of reports, getting expert evidence doctors, economic loss reports, accounting reports forensic reports, et cetera, et cetera, becomes a large burden, particularly in the no win, no pay space. We provide a working capital solution again on a B2B basis for those firms. Accountants and lawyers are highly regulated industries, defaulting in their obligations to QuickFee or somebody else can expose them to significant reputational damage and in extreme cases, loss of their license to trade. As a result, our bad debt experience in the accounting and legal verticals is almost 0. We are a low-risk business-to-business lender. And on the next slide, I'll take you through what that means financially. So for the last 6 months, so the 6 months from 1 July through 31 December 2025, a lot happened at QuickFee. In our Australian business, our revenue grew by 10%. In our U.S. business, revenue declined. It declined because we sold 2 of the 3 service lines that we operate in the United States. In the U.S. previously, we had a Pay Now business, which was a significant solution for EFT, what's called ACH in the States, payments in that market. We also had a vision to build out an electronic invoicing system and achieved that vision and ultimately saw that business sold for AUD 40 million in aggregate. With the sale of that business in September, of course, revenue declined between the 6 months ending 31 December 25 and the 6 months ending 31 December '24. So the underlying revenue line, the fourth numeric line shows that on a like-for-like basis for the retained business, revenue grew 4%. Importantly, we were able to sell the U.S. business, as said, and book a profit of AUD 35.6 million on that transaction. We returned capital to shareholders from that transaction. And I'm very pleased to announce a maiden dividend for QuickFee for the first half of the year of $0.005 per share. On the next slide, we show you our net interest margin. So this is the interest we earn less the interest we pay on borrowed funds. And as you can see, this has shown steady increases over an extended period of time. This now represents the core of the entire QuickFee business in Australia and the U.S. Low-risk B2B lending and a solid net interest margin. So let's just summarize the highlights of the last 6 months on the next slide. Revenue up 4%. Positive EBTDA of $2 million and a positive profit after tax of $800,000 before the profit from the sale of the 2 U.S. service lines sold to Aiwyn. Aiwyn was our major competitor in the United States with a similar pay in full solution and a similar e-invoicing and receivables management solution. Following the transaction where we sold our business to Aiwyn, they are now a reseller of QuickFee Finance, looking to embed our solution into their entire payment gateway, reflecting a similar strategy as that used in Australia. We completed a capital return of $0.075 per share to shareholders back in December. And we're very pleased to announce our first dividend of $0.005 per share. We are looking to maintain a $0.01 per share dividend rate, which at the current share price is a 14% dividend yield. We believe we can maintain this, and we'll show you why on the next slide. You can see we have moved significantly from where we were in financial '24 through to where we are announcing our results for the 6 months to 31 December today. You are shareholders in a profitable business with a stable level of revenue and a competent team. This gives us confidence in our ability to pay dividends into the foreseeable future. So I'll spend a little bit of time now on the Australian business. 10% revenue growth in a relatively mature market, certainly in the accounting profession, less so in the legal is a credit to the Australian team. It's a small team, it enables our business to scale significantly without significant changes in operating costs, and this is a credit to the hard work of the Australian team. Gross margin of 54% and EBTDA of $1.9 million for the Australian business. Maintenance of the same volumes and a number of firms throughout Australia particularly recognizing the effort that was put into the sale of the U.S. business. So let's move to what our U.S. business now looks like. A singular focus on lending. No distraction, no CapEx, no product development associated with building our software. We had a vision to build the software that was ultimately achieved, and it's a recognition of the hard work by a number of individuals in the U.S. that got us to a product that our major competitor saw worthy of acquisition. Now we are running a finance business, B2B low risk. Positive underlying EBTDA of $1.3 million before the profit from the sale of the U.S. business. So I'll now hand over to Simon, who will go through and add a bit more color to some of these financial results.

Thank you, Bruce. Hello, everyone. We're conscious that the significant disposal of the U.S. business means that the results for the half don't really represent the business going forward. So I'll run through the reported numbers here and then move on to a more in-depth analysis of our cost base and what the underlying business looks like going forward. So as Bruce mentioned, interest revenue was broadly flat at $7.2 million and that's due to the drop in U.S. finance revenue. Gross profit of $6.2 million was down 18% versus the entire business, just shown here for H1 FY '25. And as Bruce noted, OpEx was down significantly across all categories as we included just over 2 months of the full U.S. operations, and this led to our underlying EBTDA of $2 million versus $0.3 million in H1 FY '25. And as a reminder, the EBTDA is after the interest expense on our loan book debt facility. As a lending business, the cost of funding loans and the interest on that is an operational expense and sits in our cost of sales line. NPAT before the profit on sale was $0.8 million, up $2 million from a loss of negative $1.2 million in H1 FY '25. We did not record any tax expense in the half as we have tax losses across the group to absorb the full $35 million profit on sale of the U.S. Pay Now business. Net bad debt write-offs in the period were $12,000, which is 0.02% of total lending. That was the same as the previous half last year. The provision for expected credit losses at 31 December was about 0.2% of total loan receivables. The group's depreciation and amortization charge decreased to $0.6 million from $1.3 million in H1 FY '25. This is due to the previous period having an unusually high amortization figure. And that was because we accelerated the amortization of our capitalized costs from the establishment of the previous borrowing facilities, Northleaf and Wingate through to 30 June 2025 when they were refinanced to Viola Credit. We now have 19 staff, including 3 in the U.S., 14 in Australia, including head office and finance staff and 2 nonexecutive directors. So on the next slide, we look at the operating expenses by category and in the top right-hand corner, you can see on that chart the third column, which is H1 FY '26 shows in green, the underlying OpEx for the period, which represents our ongoing cost base of $3.1 million for the half. and $1.3 million of costs from the sold businesses that will not reoccur in blue above that. So the last column is simply removing at $1.3 million and showing the normalized ongoing OpEx of $3.1 million as if we had operated the QuickFee Finance business as it is today, only for the current period. All categories of OpEx reduced, the largest reduction coming in the product development space and that will continue at approximately $100,000 a year, and that comprises minor enhancements to our third-party loan management systems. They're not in-house built. They're off the shelves, but we do customize them slightly. And the general and administrative expenses -- excuse me, that includes all finance and operations staff who process loans and payments and receipts and installments as well as all board C-suite corporate costs and the cost of being listed. So with this structural reduction in our cost base, we expect OpEx to remain broadly at this underlying level moving forward. So on the next slide, we look at what does the profitability of the business look like now we've returned to our core finance operations. The P&L for the half year on the right shows the reported revenue and gross profit just from the finance products, so excluding the sold product in the U.S., and that is 100% of the business now. Finance business at a group level, delivered a gross margin of 64% after interest. Below gross profit, they are the OpEx categories at the underlying run rates we saw on the previous slide. and the half year depreciation and finance costs of $0.6 million each are expected to remain at that level through the rest of FY '26. So this shows what the half year would have delivered based on today's business, i.e. if the U.S. Pay Now sale had occurred on 1 July 2025 and we didn't have it at all in the 6 months. But it's important to remember that our business has traditionally stronger loan origination volumes and revenue in the second half of every fiscal year, i.e. from January to June, rather than from July to December. And this is the fact both in Australia and the U.S. And if you followed the QuickFee story for a while, you might be familiar with some of these key seasonalities. In Q1, which is July, August, September, it's the Northern Hemisphere summer. So a lot of people are away in the U.S., and it's just after the 4th July holiday, so it's slightly slower. In Australia, it started the financial year post 30 June. And again, it's a slightly slower period. Q2, which is October to December, it's a lead up to the tax season in the U.S., which starts on 1 January. So a lot of work is being done, a lot of billing happens before a lot of tax work begins. And in Australia, it's a lead up to Christmas and the long summer break. So again, a lot of people trying to get invoicing and work done before Christmas. Q3, which is January to March. The U.S. tax season that runs to 15th of April. So firms are very, very busy and doing all that and they come out of tax season in April. And in Australia, January is pretty much shut down. So you get a long summer break. So Q3 is slow in both markets. In Q4, April to June, the U.S. comes out of tax season, there's a high backlog of billing, so very busy April, May and June. And in Australia, it's the lead up to the end of the financial year. So you get a lot of billing coming in as firms trying to maximize not only billing, but also the cash receipts by 30 June. So for different reasons, both markets sort of follow similar seasonality, but it does paint a very clear picture that Q3 and Q4 are stronger than the aggregate of Q1 and Q2. So hopefully, this presents a clearer picture of the QuickFee business as it is today for the half year's performance just gone. And obviously, with a stronger second half to follow. On the next slide, the balance sheet. Just a couple of comments on here. The net assets increased by $8 million to $13.5 million at 31 December 2025. Reported cash of $14.8 million is made up of 2 components. There's available unrestricted cash in the business of $4.7 million and a cash in transit number of $10.1 million. And that cash in transit number has been there for the last couple of years and arises from our U.S. Pay Now processing business. Now we sold that business. However, Aiwyn are still using our bank accounts for a number of months under a transitional agreement until they can transition their processing to their new bank accounts. So that $10.1 million represents that cash in transit. That has now been moved off post 31 December in the month of February. So you won't see that cash in transit anymore. But this balance sheet at 31 December, that $10 million is sitting in cash and is also sitting in firm settlements outstanding in current liabilities. So that will go moving forward. There's a $2 million amount in escrow cash that I'll talk about shortly on the next slide. Here, our total loan book has grown 4% to $60.9 million from $58.6 million at 30 June. And notably, all capitalized software which is the Connect product in the U.S. was disposed of. So there's no more capitalized software on our balance sheet. So on the next slide, we're showing a breakdown of total cash balances and other liquid assets arising from the sale. So the $16.8 million on the first line is the $14.8 million cash from the balance sheet on the previous slide, plus $2 million of funds held in escrow and they are proceeds from the sale paid by Aiwyn, and they're held in an escrow account at our lawyers and they will be released to us in September this year, providing we don't breach any of the reps or warranties made to Aiwyn as part of the sale agreement, and they're generally reasonably benign, and we're confident we will receive that full $2 million in full in September 2026. The middle section of here, other current liquid assets shows a deposit of $1.8 million. We paid that to our U.S. credit card processor. As part of the sale to Aiwyn, and it's due to be repaid to us at the rate of AUD 75,000 per month starting in September 2026 through to August 2028. So 3 years. This is held by the card processor as a security guarantee in the event that any of the merchants that we used to deal with terminated their contracts in those 3 years following the sale under some long solicited provisions in the agreement. So we have a maximum potential liability of $1.5 million that we may need to pay them. It's only payable in certain circumstances, however, we provided for it totally and that's sitting in our liabilities. So to summarize how that might work best case is, we will receive the full $1.8 million back over 3 years and pay nothing at all. And the $1.5 million in liabilities get credited to the P&L. Worst case, the deposit is used to pay back that $1.5 million in payments, but the most likely outcome is somewhere in between those amounts, but we've taken a conservative view and provided for it in full. The last item on this slide just highlights that we have additional headroom on our loan book debt facility. Our lenders Viola Credit will advance up to 95% of our net loan receivables balance for us to draw on. And based on the loan book balances at 31 December, there was $4.9 million that we haven't drawn up to that 95% limit that we could draw. So there's an additional $4.9 million of liquidity that's available for us to use for general corporate purposes, should we need to. We don't draw it because, obviously, you pay interest on what you've drawn so we keep our cash balances to a minimum, but that is available to us at any time. On the next slide, I just wanted to go through a little bit more about how our cash balances have changed with all the moving parts of the sale, and it is -- has been slightly complex. So we have the sale of the capital returns and deposits held, et cetera. So here, we just wanted to paint a clearer picture of what's happened and what we expect to happen over the rest of FY '26. So the top half of this slide, so the movement in the half year, we're reporting on from the July to December has gone. From the proceeds of the sale after costs and amounts withheld and the capital return to shareholders, which is the top 4 lines of the movement there. There was -- the net of those is $5.1 million in surplus and that was used to pay down debt and fund loan book growth, which is the bottom 2 lines. So the net of those was down about $2 million. Such reconciles back to the $4.7 million at 31 December. And then the second half of this is showing just some -- the big rocks in terms of nonoperational cash that will happen in the rest of the calendar year. So we started this $4.7 million at 31 December. We're paying roughly $2 million in dividends as an interim dividend. We expect to receive the $2 million in September from the escrowed sale proceeds from Aiwyn, an additional $300,000 from U.S. card processor deposits as they start from September. And if we pay a final dividend of another $0.005 per share for the second half of FY '26, as we have said we will intend to do, then that would give us $3 million in free cash -- the important thing to note here is that is before any EBTDA contribution from running the business. So we've given EBTDA guidance. This $3.3 million here is before any cash generation from running the business and so which would get added to that number, plus there's an additional $4.9 million of facility headroom that we can use. So the message here is very clear that the business has sufficient cash to continue to pay dividends at the rate we have just announced, both from existing cash reserves, but also from generating profits moving forward. On that, I'll pass back to Bruce to talk more about our dividend policy and outlook for the business -- sorry one more slide. Just wanted to cover off cash flow. On the left-hand side is a summary cash flow statement. In the usual sort of statutory format. On the right is the reconciliation from loss for the period to operating cash flow. The main call-outs here are that we delivered operating -- positive operating cash flow for the very first time and the washup of the U.S. sale and the capital return netted a positive $1.6 million cash improvement by December. There's a summary of our credit facilities in the appendix to this presentation that's been lodged, I won't go through those in detail because they haven't changed, but they are in the appendix, but I will hand back to Bruce now to talk about our future capital management and outlook for the business.

Fantastic. Thank you, Simon, and thank you for getting your head around so much detail there, particularly around our cash at the end of the day, we're not going to be able to pay dividends unless we've got adequate operating cash flow and adequate cash reserves. What Simon has just shared is that we do. So what we're announcing today is $0.005 per share dividend, partially franked. The timetable is on this slide. We expect to pay a further $0.005 per share dividend in the second half of calendar '26. Based on the receipt of the escrow funds and the other items that Simon mentioned, we expect to pay a further special dividend of approximately $0.01 per share in the last quarter of 2026, and I hope that our presentation has shown our capacity to make those payments from our cash generation our current resources, our undrawn credit facilities and the amounts returning to us from the sale and other events. I would like to thank everybody for your attention, and we're more than happy to open it up to any questions. Sorry, before I do, I will do that just tiny summary. Sorry, Katie. That tiny summary then. We are focused on one thing, growing our finance business in a low-risk business-to-business manner in both Australia and the United States, maintaining dividends and looking at other potential inorganic opportunities. We expect our earnings to be $3.75 million to $4.25 million on an EBTDA basis, excluding the profit on sale. Now more than happy to take any questions. Thanks, Katie.

That's great. Well, thank you so much, Bruce and Simon for that very comprehensive overview of the first half results. [Operator Instructions]. So we do have a few questions here. So the first one, this could be one for you, Bruce. So in the ASX release, we didn't sort of talk about it a huge amount in the presentation, but you've talked about the growth potential. It's a question we get a lot from investors about the growth potential of the U.S. business. And you've talked about how that might play out in FY -- sorry, calendar year 2026. Can you be a little bit more specific on how you're actually working with Aiwyn and what specific activities you'll be working on in the next 3 to 6 months?

Yes. No, that's a good question, and more happy to elaborate on that. Aiwyn following the acquisition of QuickFee, has a relationship with 300 of the top 500 CPA firms in the United States. To put that in context, the fifth largest accounting firm in the United States has revenue exceeding the sum of the entire big 4 in Australia. There are brands which are in the top 10 that it would be hard for Australians to understand these are $2 billion businesses. So having 300 of the top 500 is an enormous footprint. Our role here is to support Aiwyn in 2 things: Firstly, building QuickFee Finance, into the Aiwyn's payment stack in the same way the QuickFee Finance was built with the QuickFee Pay Now payment stack. And secondly, engaging with the Aiwyn's sales force to help them sell our solution and then have our own team of finance experts who are based in the U.S. on board coach and grow the revenue from those firms.

Okay. That is helpful. We got some more detailed questions on that. On the U.S. I think you've covered off on a lot of those. There's quite a few subquestions there. To the person who asked that question, if we didn't cover -- Bruce didn't cover off all of that, we can certainly come back to you. I think he did. A question, this might be one for Simon on the view on when the U.S. bad debt might be resolved. We haven't spoken about it a lot in these results, but we have previously. Simon, are you able to give an update on that?

We're still pursuing all legal avenues with attorneys, both for the borrowers who are the SMEs as well as the firm itself. And the legal justice system in the U.S., takes probably even longer than it does in Australia, getting through court dates and things take months and months and months and months to move sort of each step forward, but we have not given up. We are still pursuing all avenues both through legal and also discussing with our insurance broker and insurers as to the likelihood of any claims there. So at this point, I can't really give you any updates or any indication of when that might be resolved. But we are certainly not given up.

Okay. Great. Thank you for that, Simon. We've got a few questions here on dividends. So in this presentation, you've given lots of new information on your capital management strategy. The interim dividend was franked at 27%. What's your expectations on the future franking on dividends?

At this point, until we start sort of paying more tax. There won't be any franking credits. But as we become profitable for FY '26 and beyond. There will be franking credits there. Again, the level of those will be more commensurate with the level of EBTDA that we're showing. So if you're paying out a large chunk of your profits, then generally speaking, you get quite a high franking level. But at this point, it's probably too early to actually sort of in that franking level down.

Okay. And so we've got a specific question here, given that the focus on dividends in this set of results. Should we think about QuickFee as a lower growth of cash-generating business? Or how do you think about it in terms of that the growth versus the cash? Bruce, do you want to answer that one?

I think that's a good observation. I think in the Australian market, particularly if we break Australia into accounting and legal, the accounting market is relatively mature, right, in Australia for this solution. There is significant upside in the legal market, particularly commercial law firms in Australia. In the United States, we have not got anywhere near the level of penetration that we should have. So we are really going all in with a singular focus on our finance solution for accountants and lawyers in that market and an important part of achieving significant upside in this business, particularly in the U.S., is getting that right. Working with Aiwyn on a true embedded finance solution will assist us grow rapidly. Absent that, growing our product through our own efforts is what is necessary to see growth in that market. A footprint in 300 of the top 500 is our opportunity.

Thank you, Bruce, for that. We've got some more question. We've got quite a few questions on Aiwyn and the opportunity and signs. I think, Bruce, you've covered off on some of that. Is there any further color you can add just to the early signs and the early traction with Aiwyn in terms of sales in...

Yes, we did. We got a very good referral from Aiwyn, not long before Christmas, and that resulted in an instant activation of that firm. It was a top 100 firm in fact. Independent of that, we signed a $100 million accounting firm ourselves out of some work we did in an accountants conference. The Aiwyn agreement contains some provisions, which requires Aiwyn to grow their originations to maintain exclusivity. So they have a significant incentive to keep growing what they refer to QuickFee to maintain their exclusive position.

Okay. And we've got actually a specific question if there is any exclusivity agreement with Aiwyn in the U.S. market? And if there is, when is that agreement up for renewal?

Well, the exclusivity is in the CPA vertical, and it automatically renews provided Aiwyn grows originations by 25% year-on-year.

Yes, I think -- and is that one. We've got quite a few questions here, but I think we covered off on most of those. [Operator Instructions]. And If we haven't got to all of them today, we can certainly get back to you afterwards and cover off anything more specific. I think that sort of wraps it up for now. Bruce, I'll just hand back over to you for some closing comments.

Look, I thank shareholders for their investment. I thank you for your patience. It's been quite a journey with QuickFee. Our singular focus brings us back to where we started back in 2009, with a product in a market we totally understand. It is absolute pleasure to be able to say that we are paying dividends. And I thank all shareholders for their support. Thank you very much.

Great. Thanks, Bruce. Thanks, everyone.

Thank you.