QuickFee Limited (QFE) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to the QuickFee FY '26 Results Webinar. On our call today, we have Bruce Coombes, Founder and CEO; and also Simon Yeandle, CFO. The presentation today will run for about 20 minutes, and then we'll open up for Q&A at the end. If you've got any questions, please feel free to type them into the Q&A tab. And now I would like to hand over to Bruce. Over to you, Bruce.

Fantastic. Thank you, Katie, and thank you, everybody, for one, being a shareholder, two, taking the time to listen to us today. We know it's a very busy time of the year with results presentations, et cetera. Thank you for making the time. So in a nutshell, where is QuickFee today? QuickFee is a high-margin business-to-business lender serving the clients of accounting and law firms and accounting and law firms themselves. There's a bit more detail on the next slide, which for those who are new to the story, this is what we do internationally. We do this in Australia and the United States. We serve the clients of accounting and law firms, enabling the firm to be paid faster and the client to enjoy payment over time. The bottom of the third column, disbursement funding is a product we offer in Australia, whereby we actually lend money to law firms to enable them to fund the hard costs known as disbursements in the carriage of personal injury and disputed estates matters. The rest of the business lends money to the clients of accounting and law firms, so they can pay their accountant or lawyer on time and enjoy repayments to QuickFee over a period of typically up to 12 months. We are a business-to-business lender only. So on this next slide, we explain a little bit more about why we target only accountants and lawyers. Many of our team come from the accounting and legal industries. Accountants and lawyers are generally some of the slowest paid invoice issuing businesses in Australia and the United States. So we've got a business-to-business lending solution that reduces the accounts receivable of those firms, provides additional cash flow and working capital and also allows their clients to enjoy time to pay. Ultimately, the way our business operates is the credit risk sits with firms that are providing accounting and legal services in Australia or the United States that have been assessed by our credit team, so that essentially, should a client fail to pay, we have recourse back to the accountant or lawyer. Of course, being such regulated industries, failure to pay QuickFee because this would have a significant impact upon the ability of the firm itself to continue to trade given the accreditation, et cetera, needed to operate in our targeted industries. So very low risk but high margin. Those margins are shown on the next slide. Very pleased to report our EBTDA. Now the reason there is no I in that expression, the traditional EBITDA is that, of course, being a finance company, interest is the equivalent to cost of sales for QuickFee. So EBTDA is up 58% on the previous corresponding period. We gave guidance some time ago, and that guidance was achieved. You can see here, we've achieved EBTDA of $3.8 million and profit before tax of $36.8 million, reflecting, of course, the gain on sale of 2 of the products that we offered in the United States that have now been sold. So let me take you through the highlights on the next slide. We sold off 2 of the 3 products which we operate in the United States. The 2 products we sold was a software solution, which provided electronic invoicing, automatic payment reminders and a range of other facilities to improve invoice delivery and speed of collection for accounting firms. The product was called Connect is now being sold to a company named Aiwyn, A-I-W-Y-N. We also operated a significant credit card and EFT or what's known as ACH in the United States payments business that also was sold to Aiwyn. QuickFee has retained its U.S. finance business. So what that means is following that sale, in Australia and the United States, QuickFee is back to the very core product offered from the very first day, and that is making it easier for clients to pay their accountant and lawyer. Revenue is down marginally. We now operate a profitable business in Australia and the United States. Our disbursement funding product in Australia has been very well received, and we've made some significant advances in the way that product can be accessed self-service by firms. And part of that investment is reflected in a 51% increase in our disbursement funding loan book compared to the previous corresponding period. And all of this has happened with an attractive net interest margin of 15.3%, and we're very grateful to our senior lender for an increase in our facilities to enable us to continue to grow this business. Following the sale of the U.S. 2 product lines, we were able to make a capital return to shareholders. I'm very pleased to announce that we, of course, paid our first dividend, our maiden dividend of $0.05 per share earlier this year. So let's look at the EBTDA and the profitability of our business. It is a very simple business. We don't employ enormous numbers of people, and we achieved a great NIM. You can see on the chart here the level of EBTDA and net profit after tax, our business has been able to achieve. Expenses are, of course, down given the sale of 2 of the products in the United States. So let's have a look on the next slide of the NIM. So NIM has been steadily growing, as you can see from the chart, and now sits at 15.3%, the difference between what we pay for our money and what we receive in returns on the loans that we make. All of this underpinned by the strength of the accounting and law firms with whom we deal. So let's now move to Australia and specifically the growth we've been able to see in the legal market. We have served accountants from day 1. We've served lawyers from day 1, but we've been able to see a significant increase in both the use of our traditional fee funding solution and also an increase in our disbursement funding solution inside the legal vertical. Our primary users in the legal vertical are commercial law firms, and personal injury and disputed estate firms in relation to funding product. EBTDA for the Australian business was $3.9 million. So as we move forward to the next slide, you can see here just a handful of logos of the many firms we serve around the world. Many of you may recognize these Australian logos. This is where our business has had the greatest level of growth throughout financial '26. Had a strong, consistent yield, increasing TTV, and as you can see on the third chart from the left, the number of open payment plans or matters, including disbursement funding matters, has jumped significantly, reflecting the additional growth in that solution that we provide to law firms in Australia. So let's move forward now and have a look at our United States business. Unsurprisingly, operating expenditure has dropped significantly with the disposal of 2 of the products to Aiwyn. Gross profit of 71% and again, positive underlying EBTDA of $2.2 million for our U.S. business. Australia and the United States are now both profitable, sustainable businesses able to maintain what we do with the underwriting strength of accounting and law firms in both markets. So on the next slide, we talk a little bit about where the growth might come from in the United States. The U.S. market is, of course, much larger than Australia, but our actual level of origination and our actual level of loan book is smaller. So we are working hard with our distributor, Aiwyn, to have our payment solution embedded as a finance product inside the Aiwyn...

We lost Bruce.

Yes, I think Bruce is frozen. We lost him.

Okay. Well, we can continue. This was the last slide, Bruce was going to present. Until we move to the financials. So we'll probably just skip through the financials.

I think Bruce is changing. We got you back, Bruce?

We have indeed. What happened there. So talking about our U.S. business, in particular, the growth we're able to achieve. Aiwyn has a significant footprint in the U.S. market. Aiwyn has some of the largest CPA firms in the United States as customers, and we're working with them to build our finance product into their overall payments stack, and they suggested they can have that done by 31 December 2026. All of this augurs well. Notwithstanding any of that, our U.S. business is now a profitable business and runs very leanly with the 3 very experienced staff, indicating the scalability of both Australia and the United States. So I think I'll move forward now to Simon and let him share a little bit about some of the financial results in a little bit more detail.

Thanks, Bruce, and hello, everyone. So the statutory P&L here represents the entire business in FY '26, both Australia and the U.S., all products and obviously, in FY '25. And FY '26 represents just the 2.5 months of the Pay Now products before they were sold and the remaining U.S. and Australian businesses. So unsurprisingly, revenue was down from AUD 25.2 million to AUD 18.4 million, reflecting that sale. But on a like-for-like basis, revenue from continuing products is only down 1% from $17 million to $16.8 million. Reported gross profit was down 35% to $10.6 million versus the entire period -- entire business in the corresponding period. And as Bruce noted, OpEx was down significantly across all categories as we included just over 2 months of the full U.S. operations. So the main callouts from this slide are reported EBTDA of $3.8 million, up $1.4 million on FY '25 before the nonrecurring items of the sale and prior year credit provision. And profit before tax and before the profit on sale was $1.2 million, up $2.1 million from a loss of $0.9 million in FY '25. And this year, we booked a net tax credit of AUD 2.5 million, and that comprises $0.5 million income tax payable in the U.S. on the sale and deferred tax income tax credits of $3 million, and they recognize the benefit of the remaining tax losses that we still have in both the U.S. and Australia. Now we're generating profits in both regions. We're able to use those tax losses to offset future taxable income. That $3 million represents that benefit. So the net of those 2 items are $2.5 million as a credit. And net profit after tax before the profit on sale was $3.7 million. It's shown here, but it's -- and that's up $4.6 million from a loss of $1.2 million in FY '25. On the next slide, is a summary of our operating expenses. And you can see in the top right corner chart, the fourth column, FY '26 shows the actual OpEx in FY '26 and the fifth column in green shows the underlying OpEx for the period, and that represents our ongoing cost base, so $6.1 million for the year. So all categories were down. General and admin expenses includes all the finance and operations staff who process loans and payments as well as the Board, C-suite, corporate and listing costs. We do incur a very low level of product development expenses still, but they're related to the maintenance and enhancement of our third-party loan management systems. We are not building any proprietary software ourselves anymore, that will stay at a very low level. So with this structural reduction in our cost base across all categories, we do expect OpEx to remain broadly at this underlying level moving forward. So on the next slide, we look at the FY '26 year on an underlying basis. So it's more of an ongoing snapshot of what the business would have looked like had it just had the finance product for the entire FY '26 year, which gives a good example, a good profile of the business going forward. The finance business at a group level delivered a gross margin of 64% after interest on the loan book debt facility. And below gross profit are the OpEx categories at the underlying run rate that we expect to continue broadly at that level. Depreciation and finance costs are expected to remain at that level as well. And this shows that we would have delivered in FY '26 an EBTDA of $3.6 million had we just been operating the finance business on its own for that full period. We now have 17 staff, 3 in the U.S., 14 in Australia, comprises 9 running the business, 4 in finance and Bruce and there are 2 nonexec directors as well. So that gives a pretty good profile of what to build on for FY '27 in terms of the business. On the next slide, I'll just call out a couple of items on the balance sheet. Net assets increased by $8.8 million to $14.3 million at 30 June 2026, reported cash of $8.3 million was down $5.4 million, really as a result of the sale of our U.S. payments business. The ACH product, in particular, held $6.8 million of cash at June '25, and that, of course, has been sold. So that is removed from the balance sheet. Our total loan book has grown 12% or $7.3 million to $65.9 million at June '26. That was funded by increased borrowing costs and cash generated from operations. And all capitalized software was disposed of in the sale. The fixed assets and other noncurrent assets in there of $4.4 million includes the $3 million of deferred tax assets. So on the next slide, there's a little bit of a breakdown on the right-hand side of our cash balance. $10.2 million at the top comprises $8.3 million shown on the balance sheet on the previous slide, plus $1.9 million of funds held in escrow from the sale of our U.S. business, and that is to be released to us in September this year, provided we don't breach any of the warranties or reps that were made to Aiwyn at the time of the sale. And I can say we haven't done that yet, and we're confident we won't. So we do expect to receive that amount in full in September this year. And then at the very bottom, there are some deposits held by our U.S. credit card processor that are due to be repaid to us at a rate of AUD 75,000 per month from September this year through to August 2028. And that's held by them as a security guarantee in the event of any merchants of the old merchants terminating their contracts. To date, no payments have been triggered. So we do expect most of that to come back to us. And we did announce a couple of months ago that we've increased our Australian dollar credit facility from $45 million to $60 million with Viola Credit, our main senior lender. That's really to provide further headroom as our Aussie loan book grows -- continues to grow strongly. I've set out the terms of the Viola facility there on the left. And also, we have $5 million of term debt with Fancourt and the terms of that also set out on the left. So with that, I'll hand back to Bruce to wrap up.

Fantastic. Thank you, Simon. So looking forward to financial '27. We're going to continue to do exactly what we do, low-risk lending. We're going to continue to do what we do, make profits in Australia and the United States, and we're going to continue to focus on accounting and legal. Right now, at a $0.075 share price, the company is able to continue to pay dividends of $0.01 per year, $0.05 in each half for 13% yield based on the share price of $0.075. We're pleased to be able to announce that we expect to pay a final financial '26 dividend of $0.05 per share. And as Simon alluded to, with funds coming back from the escrow in the United States, we expect to pay a special dividend of up to $0.01 per share in Q4 of calendar '26 from those proceeds. We continue to look at other ways to increase returns to shareholders, including potential inorganic opportunities. And we announced now our expected financial '27 EBTDA guidance in the range of $4.5 million to $5.5 million. And we're more than happy to take any questions, Katie, that we might have there. And I'll point out that there is an extensive appendix at the back of the deck, if you want to download it from the Investor hub on the QuickFee website with more detail on a little bit of the breakdown of some of the margins by product, et cetera.

That's terrific. Thank you, Bruce and Simon. [Operator Instructions] So Bruce, let's kick things off. We've got a few questions from different investors. So I'll do some of those different ones into one question about the outstanding debt or the recovery of the bad debt in the U.S. Are you able to give everyone on the call just a little bit of an update on that?