WT Financial Group Limited (WTL) Earnings Call Transcript & Summary

Good afternoon, everyone, and welcome to the 2026 financial year-end results presentation for WT Financial Group. My name is Tim McGowen. I'm the host for today's session. Before I introduce WTL's CEO, Mr. Keith Cullen, some quick housekeeping. The format for today is a 20-minute presentation followed by Q&A. [Operator Instructions] We've already had several questions submitted by shareholders during the week. Please note that this session is being recorded and will be available for later playback on the company website during the week. Keith, that's all the housekeeping. Over to you.

All right. Terrific, Tim. I appreciate that. We'll see if we can get through it in 20 minutes. Good afternoon, everyone. Appreciate you taking the time to join us. And for those I haven't met, I'm Keith Cullen, the Founder and Managing Director of WT Financial Group. Look, many of you know our story pretty well. So I'm not going to spend half an hour retelling it. Instead, what I'd like to do is just spend a few minutes on what the 2026 result tells us about the business that we've been building and that we have built, and then look forward at the opportunity developing across financial advice more broadly, but importantly, why we believe that WTL is particularly well positioned to capture it. So 2026 represented our sixth consecutive year of compounding growth. We've built scale. We've built infrastructure and capability, and we've built an adviser community and really demonstrated, I think, that the model can produce sustainable revenue and profit growth. So today isn't really about proving the model anymore. We think the model is proven. And the more interesting question for us and our shareholders now is really what can we do with it. So Tim, if you hop on to the next slide for us. Just looking at WTL today, 30 seconds on it, we support more than 500 financial advisers operating through around 400 privately owned practices, about $25 billion or more in assets under advice in the business. And these all operate through our Wealth Today, Sentry, Synchron and Millennium3 networks. So we've got the 4 networks there, but what we've really built behind those individual brands is a shared operating platform. And that platform provides licensing, technology, advice support, most importantly, risk management, professional development and also the sort of practice growth capability that we bring to bear for the practices in our network. And so the practices retain their own individual identities. They retain the client relationships and the entrepreneurial independence. And we provide the infrastructure and the scale around them. Scale is useful, but scale combined with entrepreneurship is much more powerful. So if we hop on to the next slide, please, Tim. The simplest way of understanding our journey of 6 consecutive years of growth is that net revenue and other income has grown from around $4 million to more than $33 million. In that time, EBITDA has moved from a loss to $8.2 million, NPBT from a loss to $6.6 million. And during that period, we acquired and integrated 4 networks. We've invested heavily in technology, in risk management, in our professional development and practice management capabilities. And we've built the national platform that we have today. The important thing isn't simply that the lines go up. It's really been the heavy lifting required to create the platform, and that's all substantially behind it. And that, I think, changes the economics of what we have coming next. So if we hop on to the next slide, please, Tim. The growth is really translating into earnings. So 2026 demonstrates that operating leverage is beginning to emerge in the business, and this is what we've been seeking to build is a platform that would enable us to really apply some operating leverage. Net revenue and other income increased 15.6%. EBITDA grew faster, it was up 19.5%. Net profit before tax increased just over 19%. The statutory NPAT increase of 6.9% or just under $5 million, really the difference between that net profit before tax and net profit after tax growth is just the tax line. Our ability to use previous carryforward losses, et cetera, is starting to wane off. And so our income expense increased from around $857,000 to nearly $1.6 million. So the operating story is very clean now. Revenue is growing and earnings are growing faster. So if you hop on to the next slide for us now, please, Tim. I think a key thing is that the balance sheet has really improved across that time as well. It strengthened materially. We finished June with $16.8 million in cash. Net current assets more than doubled to $11 million. Net assets increased to $34 million and net tangible assets moved from a negative $1.4 million to a positive $2.4 million. So really, as we enter 2027, it's not just with stronger earnings, but I think with a substantially greater financial capacity that provides flexibility. So next slide, please, for us, Tim. That's the one. Thank you. Look, you'll also notice that borrowings increased $2.5 million during the year. That was deliberate. I've had a bunch of questions on it throughout the week and since we put the numbers out. We drew additional corporate funding ahead of year-end in anticipation of investment opportunities that we thought were going to progress before the end of the year. So we drew that down. We haven't deployed it yet, but we will be deploying it. As of the 30th of June, we had $9.2 million in drawn facilities against -- and $16.8 million in cash and about $2.5 million of undrawn facilities. So this wasn't debt required to fund the operating business. It was a deliberate decision to ensure we had the liquidity and the funding capacity available to move on the next attractive opportunities. So next slide for me, please, Tim. That's the one. Just having a look at shareholder returns. At the same time, as we've been improving the balance sheet and growing the revenue and profitability, the statutory return to an average shareholders' equity was about 15%. The Board has declared a $0.0075 dividend as its final dividend for the year, bringing total dividends with respect to '26 to $0.01 cent a share, fully franked. So that's about $3.4 million being returned to shareholders in respect of the year. And so we really don't see growth and shareholder returns as mutually exclusive. We're investing in the future while we're returning capital today. So let's have a look as to why we think the investment opportunity is so attractive. If you can move on to the next slide, Tim. More demand, supply -- constrained supply. So we've talked a lot about this over the last couple of years, so we won't get bogged down on it. But structurally, the industry equation remains quite extraordinary. Australia has got well more than $4 trillion in just APRA superannuation funds without considering the extra $1 trillion in SMSFs. We've got around 250,000 people a year -- each and every year now retiring or reaching that retirement age. People are living longer, financial decisions around retirement are becoming more complex. Look, against this demand, we've only got around 15,000 advisers. And so more people need advice. There's more wealth requiring advice, and there just simply isn't enough advisers. But I'll be very clear on this. Tailwinds alone don't create shareholder value. Everyone can see the same opportunity. The real question is for investors, the same as we pose to our advisers all the time, who has the machinery and the ability to capture it. So next slide for me, please, Tim. This is this one that I say tailwinds are just not enough. We've spent 6 years building. We've built scale, more than 500 advisers. We've built alignment with those practices. When our practices grow, we participate. We've built real capability. Infrastructure in individual practices can't economically replicate. And we've been very focused on building a community. We've got hundreds of business owners sharing their experience, sharing their intellectual property. And increasingly, we have capital through our Investco and Hubco model. So if you put those together, I think WTL has become something quite unusual. We don't simply have exposure to the opportunity. We've built real machinery to capture it. But it's important to understand, I think, how all that machinery comes together and how it works. So if we flip on to the next slide, Tim. This is where we talk about a critical thing for us being alignment, not control. So WTL doesn't employ 500 advisers. These are independently owned businesses, and they're run by entrepreneurs. So when we acquired the 4 networks, we didn't acquire the businesses supporting those advisers, but -- and we also didn't acquire the trust, to be honest. Look, from an adviser's perspective, some of those transactions were a little like an arranged marriage. They woke up one morning and they had a new licensee that they hadn't chosen. So we've spent years earning their trust, demonstrating that we're financially aligned with them, that we're philosophically aligned with them and that we're not there to interfere unnecessarily in their business. And that really counts because you can't have your cake and eat it too. You can't tell people they're independent entrepreneurs, and that's where the future opportunity rests. And then at the same time, issue instructions from head office telling 500 advisers how to run their business. No question, our approach is harder. It's one adviser, one practice and one improvement at a time. But across a network of this scale, those improvements really compound. So Tim, if we hop on to the next slide, please. And if our friend, David Haintz is watching, we can give him credit for this one because David has often said of many things that should be done in the -- to capture the supply-demand opportunity in advice. They're pretty straightforward, but they're not easy. And this slide really demonstrates the potential mathematics of all of the opportunity compounding. Today, gross adviser revenue across the network is around $220 million, a little bit higher than that. If we keep working on pricing confidence and we get that generally to improve within the network, we've illustrated a pathway towards approximately $330 million. If advisers can build capacity to serve more clients, and we're really focused on working with them and helping them do that, that pathway potentially becomes considerably larger again. The $660 million figure is illustrative only. It's not a forecast. The point is the mechanism. Pricing confidence, advisers understanding the commercial value that they bring into play for advisers and being more confident around it, capacity building through the use of AI tools and automation, getting that average number of clients served per adviser, which is already higher than the market averages in our network, up from sort of 140 towards 240, even on to 300 where some of our best practices are. That capacity building, building lead flow to backfill the capacity, advisers focusing on enterprise value. None of those happens because we flick a switch. Pricing confidence, in particular, can take a long time to change with advisers. Advisers who have undercharged for a decade don't suddenly reprice because we send them an e-mail. I described it the other day as literally hand-to-hand combat. It's by adviser and by practice at a time, straightforward, but not easy. But increasingly, we're proving that it works. So Tim, if you could click on to the next slide with me. Part of our mantra really in what we're doing is what we call scale without surrender or a philosophy of scaled sovereignty. Look, great entrepreneurs don't want someone sitting in head office, telling them how to run their business, and you don't make them better entrepreneurs, better businesses with dictates from head office. Practices want to retain their identity, their leadership, their culture and their client relationships. And they also want to retain the entrepreneurial upside that comes from improvements. So what we add is the scale, the infrastructure, risk management. We add that technology and capability, and we can add in capital. And that's where our Investco and Hubco strategy is -- becomes the ultimate expression of that philosophy. Investco is deliberately structured as a long-term investment platform. So it's not your traditional private equity vehicle with a predetermined exit horizon. Its purpose is to support entrepreneurs over many years. And this sentence really captures the philosophy better than anything else that we've put on the page here. When liquidity events do occur, they're expected to be driven by the ambitions of the entrepreneurs and the shareholders involved rather than the investment structure that we've created in itself. So our investment structure is built to serve the entrepreneurs, not the investment -- not the entrepreneurs serve the investment structure. So if we hop on to Slide 13, Tim, I think that's the one, recurring revenue to enterprise value. This is where the core business and Hubco come together. So our core business of WTL and Hubco come together. We start with more than 500 advisers generating recurring revenue. We use what we call our 4 pillars of pricing confidence, capacity building, lead flow and enterprise value and succession to help them build more productive businesses. And those better businesses are creating enterprise value through corporatization, proper succession planning and M&A within our network. So WTL can then participate in that value through Investco directly, through the Hubco -- putting equity into the Hubcos and selectively making investments within our broader ecosystem. And that last piece is really important. As the profession corporatizes, it needs more capacity, technology, automation and specialist services. We've seen -- the last bit there about sort of kindred businesses and looking at those. We've seen a version of this playbook executed extremely successfully in general insurance, where businesses like Steadfast and Austbrokers, both built valuable ecosystems of services and capabilities around their underlying broker network. So look, we see similar opportunity emerging around financial advice. Critically, our model remains capital-light by default with capital available when it's attractive for us to co-invest. So let's have a look at what that looks like in practice, Tim, if we can hop on to the next slide. Income today, enterprise value tomorrow. We missed one there, I think, Tim. Just slip on to the next one for me. Oh no, you've got it right there. Sorry, you do have it right there today, Tim. It's Titan Advice Group. So Titan was our first Hubco. And really, it's providing genuine proof of concept. Investco deployed around $3.4 million into what we call TAG, Titan Advice Group. And at the same time, WTL received direct TAG equity recognizing our contribution of services of approximately $800,000, all issued at $1 a share. And when we did the last TAG transaction acquisition is the business was revalued, and revalued at $1.63 a share. So if you have a look at our statutory accounts for the year, you'll see highlighted in the accounts in the notes that, that generated around $0.5 million of direct fair value uplift in our audited result and implies a value of approximately $5.8 million on that initial $3.4 million worth of investment by Investco. So within that, there's about another $335,000 of additional economic uplift attributable to WTL through its ordinary interest in Investco that isn't separately recognized in the 2026 fair value gain. And then on June 30, WTL received another nearly $700,000 of TAG shares through the Vesta acquisition that we detailed to market and is also detailed in the accounts. So importantly, it's not just about capital appreciation, though. TAG has generated in excess of 15% return dividend flow. It's gone on to acquire Rushby Financial and Fusion Partners accounting. It's grown its enterprise value to more than $17 million net of debt. So I think we're already seeing what the model was designed to produce. That was income, acquisitions and consolidation, and also capital appreciation. And so if we hop on to the next slide, please, Tim. So this one, we've headed Different Entrepreneurs, Same sort of Alignment. Titan Advice Group isn't a one-off structure. It's the first of our Hubco model that we're rolling out. Select Advice Group demonstrates another version of the model. So Investco has deployed around $3.2 million into Select and Newleaf, bringing those foundation businesses together to create what's affectionately known as our Hubco 2 or otherwise known as Select Advice Group Australia. Select Advice Group Australia has gone on to acquire Sabre Wealth and Legacy Planning. Those transactions have settled. And so today, that leaves us with Investco holding around nearly 32%, WTL having 6.8% directly and the principals and vendors retaining a bit over 61%. And we've already had our first distributions from SAGA, and they're supporting an expected return again above that 15% per annum before considering franking and tax consequences. So great value being created there. And this is all before we've seen the real further value creation out of corporatization and the scale that comes to putting these businesses together. And already, SAGA is out looking at additional acquisitions as is Titan Advice Group. And then a third version of it is demonstrated in our Hubco 3 or Life Sumo, which is a different version. We're backing an existing entrepreneur, an entrepreneurial-led practice here. We're backing it with initial -- at an initial enterprise value of $6.6 million. Investco's initial commitment is $1.8 million with the founder retaining 68%, Investco holding around 25%, 26% and WTL having that 5.7% directly for originating this opportunity and coordinating all the due diligence and so on. So Investco has set aside additional capacity to commit to this model to support further acquisitions. So the point of all of this is there isn't a single rigid Hubco template. The model adapts as to the entrepreneur and to the opportunity. So if we hop on to the next slide, please, Tim. And this is an important one about rebuilding the profession. You've heard us talk a lot about the supply constraints in the profession. This is another significant accelerator in the business. For about 6 years now, we've been growing, and the advice profession has effectively been operating with one hand tied behind its back. The entry pathways into the profession have become unnecessarily restrictive. Advice has become increasingly difficult and expensive to provide, and adviser capacity has really been constrained. So those things are now beginning to change. The government has committed and then recommitted again, and just a week or so ago when Treasurer -- Assistant Treasurer, Dr. Daniel Mulino, spoke at the press club, he confirmed again the government's commitment to more realistic education pathways, and that means that we can get back to recruiting advisers again. Simpler advice regulation is on its way, meaning more Australians will be receiving advice. And technology and automation are really meaning more advisers per adviser -- more clients per adviser, rather. So WTL doesn't need a new strategy to benefit from any of this. We've been part of the profession's push for the reaffirmation of those education standards. We've already got the platform in place. And so the key growth in adviser numbers for us, we see, will come in this next wave of not us having to go out there and recruit more practices into the network. We absolutely don't need that, but we're really excited about those education reforms, enabling advisers to get back to recruiting within the existing practices that we've got. So we think that's another significant opportunity in the pipeline. So we'll move on to the next slide, please, Tim. We say proven today, optionality for tomorrow. And that's really how I'd like to leave shareholders thinking about WTL. Our core business is already proven. We've coalesced together these 4 disparate businesses, a couple that were really losing money and a couple that were breaking even, making a little bit of money, and we've put them in together into a cohesive operating unit, built a single platform. We've built the advisers' trust, and we're setting about growing both their revenue, which grows our revenue, and also improving our margin through leveraging that scale. So we think the core business is proven, 6 consecutive years of growth, $8.2 million worth of EBITDA, still very conservative levels of debt in the business, generating an approximately 15% statutory return on our average equity, $0.01 fully franked share -- fully franked dividend per share across 2026. And on top of that, we've got optionality. So a solid business there with real optionality. Our 4 pillars program of that pricing confidence, capacity building, helping advisers build their lead flow and build their equity value. We've got industry reform underway. We've got that Hubco model that we're deploying that early stages, it's already proving itself up. And we've got -- so we've equity emerging in the ecosystem. And we're participating in enterprise value that we're helping build. So you don't have to believe all of this happens tomorrow. It certainly won't. This isn't a light switch that we turn on. It's hundreds of people within our network making better business decisions over time. But investors aren't being asked to fund a loss-making company in the meantime while they wait and see whether our thesis works because the business already works. So -- I mean, I'd say to our shareholders, you own a profitable dividend-paying business today. And at this stage of our development, I think you're getting a very inexpensive look at what it really can become and what we're designing it to become. The last 6 years were really about building that platform and earning the right to do, including the trust with our advisers to do what comes next. So the next 5 years for us are about compounding that. So I guess rather than me taking you through the remaining accounts line by line, Tim and I thought we'd leave plenty of time to dig into details and to answer any questions you've got. So I think if we move on to the next slide, it's probably a Q&A one, Tim. I'm hoping it is, and I didn't leave anything out. Yes, there we go, it is. So really happy to take a sip of water and answer any questions that everybody has.

Thanks, Keith. You take a breather, and we've got several questions here. We had a couple of family offices reach out and wanted an explanation on the roughly $1 million uplift in IT and telephone spend. So it took actually the operating expenses to around $1.7 million in the second half. Can you explain that, please?

Yes. Well, so that's true. And it's an important point, Tim. But what I'd like to say is that our telephone -- a lot of telephone expenses at telephone and IT, it's not a case of them suddenly blowing out. It's predominantly some reclassification of technology-related costs. So we've reclassified a bunch of things that have previously been sitting up in cost of goods sold, but were really not directly related to generating revenue. So a bunch of our technology costs as we need to pay whether we've got 100 advisers or 1,000 advisers. And so we've more properly reclassified them to where they belong. We've also continued investing in infrastructure of supporting the advisers that we've got, cyber, data capability platforms. So there's some genuine investment in there, but it's not an uncontrolled cost blowout. It's deliberate expenditure on supporting scale. And I'd say despite those reclassification issues, it is predominantly, but despite some of the increases that there were within there is EBITDA still increased 19.5% for the year.

Thanks, Keith. And you're holding around almost $17 million in cash on the balance sheet against around $9 million worth of debt. Why not net these each other out with each other?

Look, I think, Tim, the answer to that is probably optionality. We're really entering a period where we see attractive opportunities across the Hubco strategy and potentially other strategic investments around adjacent services to try, and in a manner, replicate what was done so successfully in the general broking -- general insurance broking business. So we want balance sheet flexibility to move quickly when those opportunities arise. And look, clearly, we're not going to hold on to expensive debt indefinitely simply for the sake of holding cash. We'll continually assess the cost of that capital against the opportunities in front of us. But right now, it's -- I think we've got a really well-balanced balance sheet to excuse the pun. Right now, we value having liquidity, though, and funding capacity available when opportunity is there to -- and opportunities are expanding all the time there.

And advisers numbers have been flat. That's known within the industry. You grew gross revenue to 12.7% or by 12.7%. We have 500 advisers in the network. Is that coming from more advisers or more revenue per adviser?

The growth is definitely coming from more revenue per adviser. So it's more revenue being generated across the network rather than adding adviser numbers. I think we did have a net growth of some 20 advisers or something across the course of the year. But it's exactly the thesis we've discussed today, Tim. We're helping practices improve their pricing confidence, build their capacity, helping them serve more clients and become better businesses. And -- but look, it's not every adviser suddenly increasing revenue by 12.7%. I think I used the expression with you the other day that we -- that I put into this slide deck, which is really it's hand-to-hand combat. It's -- and we've got a great network of our regional managers to help us do this, right? And this is a huge part of our resource because this is one adviser at a time, one practice at a time that you help suddenly get that pricing confidence. When I say suddenly, it's after weeks, months, years of talking them through it, helping them build all of the things that they need to build to be more confident about better expressing their value propositions with their clients. And then they have that epiphany, and they start to charge properly. So some are repricing, some are adding clients. Others are adding advisers or support staff and some are just simply improving their own personal capacity. But when each of those incremental improvements compounds across 500 advisers, they really start to produce meaningful network level growth. And because our economics are aligned with our advisers, we participate in revenue share with the vast majority of our practices. We participate without adviser numbers having to grow themselves, it gives us that leverage of the base that we've got in place.

And we had some more detail today on the Hubco example, if you like, Titan. What do you think the first Hubco has proven? And do you think it's a repeatable model? There's also a question around how many times could you repeat this before management costs increase by having new management in place or additional management?

Okay. I think I'll answer the first part of the question, Tim, to start with. Look, I'd say that what the whole Titan experience has proven is that the model can generate multiple layers of economic value at the same time. And look, quite clearly, the whole Investco and Hubco model has been a difficult one to articulate to the market. The difficulty in articulating that is starting to be realized where the opportunity really sits. The difficulty is in the multilayers, but where the opportunity sits is in the multiple economic -- layers of economic value it can create. So Investco has deployed about $3.4 million into Titan. We've already seen dividend returns of well in excess of 15%. Titan's completed further acquisitions using its own balance sheet and using debt. And the latest transaction price where it raised some capital from its existing foundation shareholders was at $1.63 a share. And so WTL has benefited through its direct equity. It's benefited through its economic interest in Investco, plus, of course, through its ongoing network revenues and through its transaction activity. So we're getting income today while we're building enterprise value for tomorrow, and that's exactly what the model is designed to do. I'd say underpinning all of that, though, you've got to remember is who's benefiting the most out of that are those foundation shareholders, the practitioners in the group, the advisers in the group. The revenue of Titan overall is growing. We only grow and benefit when our practices do as well. And so that is the beauty of this great alignment that we have with them, Tim. The second part of that question was around management. And I'm thinking, Tim, the question related to our management?

Yes.

Look, I think we've got that already, and we've probably seen it -- we've seen some additional costs with outsourced. Look, I put together or shared with a practice that's just looking at a Hubco transaction with us at the moment. I shared our internal confidential document with them that they should consider when they're considering a Hubco structure. And in the back of that document, it's got a full list of the resources that we bring to bear. Now, you've got to remember, we've got 60-odd full-time staff in this business. And when I look through and look at all of the people that are contributing a bit of working on what would normally need to be a dedicated M&A team, including our external resources of our valuers and the people that do our peer reviewing for us and support the legal due diligence, there's 29 people involved in that process. So I don't think we're anytime soon having to build a dedicated M&A team. This is the whole beauty that I keep talking about in terms of we've got a successful profitable business here now, and we're increasingly looking at ways of leveraging the resources of that business, the key resource of it being its human capital and its human resources. And so we've got this fantastic team of regional managers out there that are supporting practices every day with their pricing confidence, their capacity building, and so on, regardless of whether those practices are looking at Hubco strategies. But those regional managers are really the first people that those practices talk to when they're looking at building a succession plan, where they're looking at ways of retiring debt and making acquisitions and so on. So in a normal model, that would be a deal origination team. Well, we've got a network of 9 of those, plus our Chief Operating Officer, David Newman, that looks after them. And so this is the sort of leverage that we've got. We've got our Chief Financial Officer, Michael Peters, very experienced in due diligence in M&A and so on. We've got myself working on it. So we're able to bring together a very significant number of resources without having to go out and build a very expensive team to do it. So it's really all about leverage for us there, Tim, and it's working really well.

And just on that Titan-Hubco, there was a revaluation to $1.63. How is that determined?