Release Date: August 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- wrkr Ltd (ASX:WRK, Financial) reported a 45% increase in revenues for the year, marking significant growth.
- The company achieved a positive EBITDA for the first time since listing in 2016, indicating improved financial health.
- wrkr Ltd successfully renewed its contract with Precision Administration Services with a 25% uplift, showcasing strong client relationships.
- The company entered strategic partnerships, including with Transmit Security, to enhance security and cyber posture, focusing on fraud prevention.
- wrkr Ltd's capital raise attracted institutional investors, strengthening its balance sheet and providing funds for future growth initiatives.
Negative Points
- Operating expenses increased by $0.84 million, driven by new resources and partnerships, which could impact profitability.
- The company faces challenges in reconciling trust accounts daily, although improvements are being made.
- There is uncertainty regarding the timing of achieving the targeted 2 million user onboarding, which could affect revenue projections.
- wrkr Ltd is exposed to fluctuations in income from float, which is dependent on market interest rates and outside of the company's control.
- The competitive landscape poses a threat, with potential new entrants and existing competitors possibly catching up to wrkr Ltd's offerings.
Q & A Highlights
Q: How much work is it for rest employer payroll providers to connect to the Wrkr platform? What has their reaction been?
A: The reaction has been fantastic, with the digital experience of the Wrkr platform ticking all the right boxes. The onboarding process is smooth, and there are no significant limitations on the payroll side. However, further integration to remove errors from payrolls will take time, but the onboarding process is not expected to slow down. - Trent Lund, CEO
Q: How is the $5.2 million ARR split between Wrkr Pay and Wrkr Platform? Is about half of that from the ART contract as part of the Wrkr Platform segment?
A: The ARR of $6.7 million includes $1.2 million from the ART contract, which is part of the Wrkr Platform segment. The rest of the ARR is from Wrkr Pay. Development fees for ART are not included in the ARR, only license usage, support, and maintenance. - Karen Gilmour, CFO
Q: Is the Trust account reconciled daily? Is there any material unreconciled differences?
A: Yes, the Trust account is reconciled daily, and extensive work has been done to improve automation around virtual bank accounts. The system is robust, and new rules have been implemented to manage overpayments and underpayments, reducing error rates and reconciliation issues. - Karen Gilmour, CFO
Q: When you say enough to bring on two major funds simultaneously, is that in addition to the existing Rest integration?
A: Yes, the work with Rest, Hong Kong, and ART is covered, and we have the capacity to bring on two additional large funds simultaneously. There are also six additional funds with similar architecture to Rest that will follow. - Trent Lund, CEO
Q: If you achieved the 2 million user onboarding in FY25, at previously disclosed $4.50 ARPU, are you expecting ARR incremental of $9 million as a target for FY25?
A: The transition and phasing are still uncertain, and while the target may not be fully achieved by the end of FY25, it is expected within the next 12 to 18 months. The ARPU is annualized, so timing of implementation affects the ARR. - Karen Gilmour, CFO
Q: In terms of competitors in the market, are there groups that are building out tech that competes or catches up to what Wrkr currently offer?
A: While there may be competitors, Wrkr has built a strong niche with a competitive price point and technology. The industry requires frequent regulation changes, which Wrkr is well-positioned to handle, making it challenging for new entrants to catch up. - Trent Lund, CEO
Q: What is the outlook for development and fee income in FY25 given the large jump in FY24?
A: The growth in FY24 was driven by MUFG contracts, and similar levels are achievable in FY25 with new large fund integrations. The focus is on quality revenue, with transaction and SaaS revenue being the core targets for the business. - Karen Gilmour, CFO
Q: Are you likely to remain at or around EBITDA breakeven over the short medium term as these integrations with Super Funds and HR providers continued?
A: The company aims to stick to market forecasts and budgets to achieve EBITDA breakeven. However, strategic investments may be made to capitalize on high-margin revenue opportunities, especially with the approaching payday super reforms. - Trent Lund, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
