- Group Revenue: Increased by 10% on a pro forma basis.
- Operating EBITDA: Increased by 22% on a pro forma basis.
- Free Cash Flow: Increased by 175% to $38.5 million.
- Operating Margin: 36.5%, up 1.7 percentage points from the prior year.
- NPATA: $21 million, increased by 22%.
- Non-Exchange Revenue: Represents 15% of total business revenues.
- Exchange Margin: 54.5%, up almost 1 percentage point from the prior year.
- Operating Expenses: Grew by 4% on a pro forma basis.
- CapEx: Broadly flat at around $69 million.
- Specified Items: Increased by about $9 million.
- Depreciation and Amortization: Increased by about $13 million.
- Net Finance Charges: Fell by about $0.4 million.
- Income Tax Expense: Fell by about $9 million.
- Market Penetration: Increased by 1 percentage point.
- Customer Satisfaction: Remained at 90%.
- Platform Uptime: 100%.
- Digital Solutions Revenue: Grew by 8% on a pro forma basis.
- International Platform Spend: Approximately $127 million from FY '20 to FY '24.
- Cash Balance: $90.5 million after paying down about $10 million of debt.
- Net Debt to Operating EBITDA Ratio: Improved by 0.3 turns.
- Net Interest Expense: Broadly aligned to this year's experience.
- Group Revenue Guidance for FY '25: Expected increase of 13% to 19%.
- Group Margin Guidance for FY '25: Greater than 34%.
- Cash Outflow in International Operations for FY '25: Expected to fall to a range of $55 million to $58 million.
Release Date: August 21, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Group revenue, operating EBITDA, and free cash flow all made positive gains, driven by revenue growth, cost and CapEx management, and operational improvements.
- Non-exchange revenue now represents 15% of total business revenues, highlighting the growth of new revenue streams.
- Operating margin was 36.5%, exceeding guidance and showing a 1.7 percentage point improvement from the prior year.
- The exchange business demonstrated resilience with improved revenues and a margin increase to 54.5%.
- Digital Solutions achieved operating EBITDA breakeven for June, indicating progress in financial management.
Negative Points
- Digital Solutions' overall contribution was modest and below expectations, despite its strategic importance.
- U.K. market activity was challenging, with lower mortgage volumes impacting business performance.
- Specified items increased by about $9 million, driven by restructuring costs and noncash impairments.
- Income tax expense remains high due to profitable operations in Australia and losses in the U.K.
- The timing of achieving market share aspirations in the U.K. is uncertain due to external factors beyond PEXA's control.
Q & A Highlights
Q: You have reiterated your U.K. market share targets, but it sounds like there might be a potential miss due to market forces beyond your control. Can you provide more color on this?
A: (Scott Butterworth, CFO) We are working hard to achieve our milestones, but we don't completely control when large banks will sign on to contracts. We are pushing towards our targets but acknowledge some uncertainty due to factors beyond our control. (Glenn King, CEO) We have delivered on the PEXA integration into Optima Legal as expected, and interest and momentum are progressing positively. We will provide a more detailed update at the half-year results.
Q: Can you give us color on the path to profitability for smaller businesses like Smoove, Optima, and the Digital business? Should we expect profitability at an EBITDA level in FY '25 or beyond?
A: (Scott Butterworth, CFO) Digital Solutions had a good last month of the year, and we expect it to continue on a profit trajectory in '25. Smoove is ahead of expectations, and we expect profit improvement, though it may not reach full profitability this year. For Optima Legal, we need more productivity improvement to bring down the breakeven point, and we expect a good step forward in profitability during the year.
Q: Can you delve deeper into the revenue guidance and the assumptions underpinning it, excluding the annualized impact of Smoove?
A: (Scott Butterworth, CFO) We expect modest economic improvement in both Australia and the U.K. Exchange volumes are expected to grow at the long-run GDP rate for Australia. We anticipate revenue growth in Digital Solutions, with ID and Value Australia showing good growth opportunities. Optima Legal is expected to see revenue improvement driven by increased market share and remortgage activity.
Q: Should we expect Exchange margins above the 55% achieved in '24, given the pause in interoperability and recovery in transfer volumes?
A: (Glenn King, CEO) We expect strong Exchange margins but emphasize the group margin as an important metric. Operational efficiency across the group remains a focus, and we anticipate improvement in Exchange revenue. While interoperability is paused, we will continue to work with regulators on this.
Q: How are conversations with conveyancers going for the sale and purchase piece in the U.K.? What are the key incentives for them to take on this product?
A: (Glenn King, CEO) The conveyancing fraternity sees PEXA and Smoove as value-adding to their business. Smoove gives us access to around 2,000 practitioners, and our intent is to integrate PEXA tech into their services. This will improve efficiency and customer experience. (Scott Butterworth, CFO) The PEXA platform reduces coordination costs, post-completion processes, and cyber risk, which are significant benefits for practitioners.
Q: Can you clarify if the two large banks you're talking to are willing to start integration before the Bank of England testing slot becomes available?
A: (Glenn King, CEO) Some banks are willing to start the work earlier, even before the Bank of England allocation. It depends on the bank's tech and priorities. We are exploring ways to accelerate the process and do things in a different order to move faster.
Q: Are you close to seeing transactions with NatWest, or is it still a while away?
A: (Glenn King, CEO) The timeline can move, but we are doing everything within our control to make it happen earlier. We continually explore ways to accelerate the process.
Q: What percentage of the sale and purchase market can Version 0.5, 1, and 2 of your product cover?
A: (Scott Butterworth, CFO) Version 0.5 is a test product with limited features. Version 1 is a one-sided product covering about 10% of the market, mainly new homebuilders. Version 2 is a two-sided product with 40% to 50% coverage capability. By the end of the financial year, we expect to have a sizable capability in terms of sale and purchase.
Q: Can you provide more details on the integration period for large banks?
A: (Glenn King, CEO) The integration period depends on the bank's tech, priorities, and whether they use an API or user interface version. It varies case by case, but we are gaining more confidence and experience from our ongoing work with different institutions.
Q: What are the benefits for conveyancers using the PEXA platform in the U.K.?
A: (Scott Butterworth, CFO) The PEXA platform reduces coordination costs, post-completion processes, and cyber risk. It also offers a secure environment, which can potentially lower professional indemnity insurance premiums. The Smoove platform helps conveyancers get selected by mortgage brokers and customers, and we will highlight PEXA platform usage to signal a better experience.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
