CNGFF (CNGFF) Q4 2026 Earnings Report, Transcript and Summary

And welcome to the FY '26 Annual Results Update for Change Financial. My name is Tony Sheehan, CEO of Change, and I'm joined by Tom Russell, Executive Director. Similar to our usual webinar format, Tom and I will run through a presentation and then take Q&A at the end. If you have any questions during the webinar, please submit them through the chat function. On 21 July, we released an FY '26 trading update, which included our unaudited revenue and underlying EBITDA. The numbers we are going through today are unchanged from what we provided. We also released our June quarterly activities report and [ 4C ] on the 24th of July. So a lot of the information today has already been covered given the level of detail we provide in our updates. So we are going to go through the presentation at a fairly high level and leave plenty of time for Q&A. In terms of the overview, I will skip this slide. We've been through it numerous times over the course of our webinars, then we'll go to the key highlights. So if we have a look at key highlights for FY '26, revenue totaled USD 18.2 million. That's up 21% on FY '25 and in line with the upgraded guidance we provided to the market in January. We have more than doubled the size of the business over the past 3 years, delivering a 3-year revenue CAGR of 28%, which is a great achievement for the company. 73% of revenue is derived from recurring sources, which provides a solid base of revenue to grow from. You may recall, this has increased from just 58% 2 years ago. So a great increase there in terms of that driving that recurring revenue and that base of income for us. Underlying EBITDA for the year was USD 3.3 million, a 17-fold increase over FY '25 and in line with the upgraded guidance we provided to the market in January. The combination of revenue growth and a stable fixed cost base has been -- has driven materially improved bottom line performance over the past few years, and this is particularly evident in FY '26. We also delivered a maiden full year profit, which is a major milestone for the company. PaaS is a key driver of our growth, and we saw strong growth in PaaS metrics over the year. The PaaS platform ended the year with more than 150,000 active cards in Australia and New Zealand, up from 73,000 at the start of the financial year. That material increase in active cards was attributable to growth in the existing client base, particularly fintech clients, the launch of the Shares debit card program and the migration of Hnry debit cards in Australia and New Zealand in late FY '26. We processed more than 21 million transactions during the year, so that's up 17% on prior year with total volume of USD 630 million, up 16% on prior year. The momentum we are seeing on the PaaS platform culminated in June being a record month for active card numbers, number of transactions, gross transaction volume and revenue. We are well placed to continue to grow the PaaS business in FY '27 and beyond through new clients already signed and onboarding and further client wins. The PaaS platform is still scaling. It's not at scale, and it is driving margin improvement, which Tom will cover in more detail shortly. So we have a clear and focused operational road map to deliver shareholder value. So if we look at some of the notable achievements for FY '26. So from a commercial perspective, commenced a branding and value proposition project. So this is around the new website and sales collateral to be delivered in FY '27. So this is focused on increasing sales leads and conversions, expanded the partner ecosystem, so we signed 4 new PaaS in regional partners and a new BIN sponsor partnership with a global processor. We launched our first BIN sponsorship client in New Zealand being Sharesies, which has grown strongly throughout the year. We migrated Hnry, one of Australasia's largest accounting software debit card programs, which is Australia and New Zealand, to the PaaS platform. The migration completed in July, so they are now fully onboarded to Vertexon. Currently onboarding 4 new PaaS clients, which we expect to go live in H1. There are 4 additional clients in final contracting phase, which we are working to close out as well. We continued the transition to the highly scalable PaaS business. So there are material cost savings and efficiencies that will result from all clients being on a single cloud version of the Vertexon. Maintaining multiple versions of the Vertexon in client-hosted environments creates additional over the head given we need to develop, test, upgrade and support across all versions of the software throughout the year. So this is really a key reason as to why we have been rationalizing our legacy on-premises clients over a number of years given the efficiency gains it delivers to the business. From a product perspective, significantly enhanced the Vertexon PaaS digital capabilities. So this is important given the increasing trend towards digital payments. So we want to make sure we offer a comprehensive and leading digital solution, which is easily digestible for our clients. When I talk about easily digestible, that's really that integration and usability for our clients. Completed Phase 1 of the PaySim modernization project. So whilst PaySim is very functionally rich, we are significantly improving the look and feel of the product, which we expect will deliver future revenue growth through new sales and module upsells. Completed the sales demo platform. So this is a key sales enabler for new opportunities as the sales team performs demos for prospective clients. Embedded Agentic AI. So this has rapidly accelerated product road map development and improved efficiency. So given the widespread adoption of AI across the business, we are seeing faster release cycles, which means we can deliver more new features and functionality to the market. Agentic AI has been a critical enabler of the rapid acceleration of the PaySim modernization project. Tom, I'll hand over to you.

Thanks, Tony. So as said, we're not going to go through every slide in all details where some of the information is the same, and this is the same numbers at 30 June. But what these graphs clearly show is that the momentum we continue to build in the PaaS business in Australia and New Zealand and with record volumes in June, as we've talked about in July also was record active cards and transactions processed in dollars through the platform. Okay. So again, we met our upgraded guidance in FY '26 of $18.2 million of revenue, a record year, up 21% on the prior year. We have a diversified mix of revenue across our recurring revenue streams, PaaS and support and maintenance as well as one-off revenue streams being licenses and professional services. I'll go into a bit more detail on the following slide around this mix. You can also see the key regions globally where we're continuing to have success. Oceania and Southeast Asia, where we're really focused on continuing to grow as a portion of our revenue with 86% of revenue now coming from these regions. Another thing that we continue to build is our recurring revenue base. Even with the outsized one-off revenue year we delivered in FY '26, revenue from recurring sources was 73% compared to 58% 2 years ago in FY '26. This has been primarily driven by PaaS revenues increasing, which are up 19% [indiscernible] in FY '26 and support and maintenance has also continued to tick up in FY '26 on the back of license sales from FY '25 and FY '26. We delivered one-off revenue of $4.9 million, which is above those historical levels as we discussed. You can see as well here the makeup of currencies. So we're invoicing -- the invoicing currencies of USD dominance is still there, but it's coming down. So in FY '26, our clients, 61% paid us in USD, 27% in New Zealand dollars and 12% in Australian dollars. So that mix is starting to also shift to those New Zealand and Australian dollars as we grow this part of the business. As a reminder as well, with the wind down of the U.S. and that growth in the Australia and New Zealand business, this is the last time we intend to report in USD, and we are working over the Q1 to be reporting our first quarterly of FY '27 all in Australian dollars. Okay. So turning to the profit and loss. So again, $18.2 million of revenue in FY '26. And as we always say, you can see it there. We have the team in place to significantly scale this business. You can see that cost -- staff costs, if you exclude share-based payments for performance rights, were flat on the year. Most significantly, too, we recorded a big increase in underlying EBITDA of $3.3 million, which was up 17x on last year's maiden EBITDA result. You can see there in the bottom right-hand graph to over the last 5 years, just how far this business has come going from an EBITDA loss of $2.4 million to now a profit of more than $3 million. Looking at the PaaS margins. And again, we did release this information in our quarterly. We have significantly improved those PaaS margins by over 600 basis points from FY '25 to FY '26, and that is being driven by improving economics across the whole PaaS business as we process more transactions. Margin expansion is a key area of focus for us, and we have a medium-term target for PaaS gross margins to move towards 40% to 45%. Change is one of the smaller processes and issuers in market, and we are scaling up. We are not yet at scale. The bigger we get, the pay-to-play costs get spread out over a larger base of transactions and volumes. Moving to the balance sheet. As at 30 June, we had $3.1 million cash at bank and an additional $1.4 million cash-backed security deposits. You can see their client settlement funds sitting on our balance sheet, which relates to our PaaS business were $1.7 million at 30 June and fluctuate significantly as we've talked about, depending on the day of the week, but in general, we'll grow with our PaaS business. There is also that offsetting liability of $1.5 million for scheme settlement payables split out there now for everybody. We have a healthy balance of contract liabilities. This is already contracted and paid for support and maintenance as well as professional services work, which will be unlocked over the next 12 months. Overall, the balance sheet is in very good shape, and we continue to drive profitable growth. We will continue to strengthen the balance sheet. In terms of cash flow, the significant improvement has been driven by a significant increase in cash receipts and a stable fixed cost base. Receipts from customer timings can fluctuate, and there were some customer receipts that we expected in Q4 that we collected in July. We also had a few hundred thousand dollars of one-off restructuring costs and costs associated with liquidating the U.S. entity, admin costs around that liquidation, which is now complete. CapEx is also holding where we want it with capitalized software development tracking about 10% higher than last year, but well below those previous year's levels before the platform went live. And we -- as we've said, we expect those levels to remain around that USD 1.5 million, USD 1.6 million in the coming years. Back to you, Tony.

Okay. Thanks, Tom. So our key focus for FY '27 is accelerating growth through our 2 key sales channels. The first is the direct acquisition channel. So we've changed the sales team composition over the past 12 to 18 months to be more outbound sales focused. So that's aggressively hunting new deals. We're undertaking that significant project I mentioned earlier to refresh our sales collateral, including a new website in FY '27. I mentioned it earlier, it's designed to really increase lead generation and help the sales team close deals. As we've been doing for a while now, we've mentioned this, Tom mentioned it as well, continue to focus on our core target markets. So from a Vertexon perspective, that's new clients in Australia and New Zealand with a primary focus on penetrating the large Australian market opportunity and continue to work closely with our 2 key strategic Southeast Asia clients, that's professional services work that we do for them and also a future upgrade to Vertexon Cloud. From a PaySim perspective, that's new license sales globally. So the PaySim modernization project is key to helping drive new sales. The second channel is partner acquisition. So we want to leverage the partner ecosystem to expand the opportunity pool. So that partner channel is a one-to-many approach. For Vertexon, we have 3 global processor partners. So this provides us with access to deal flow, which otherwise we may not see, particularly for global program managers entering the ANZ market. From PaySim, we signed 4 overseas regional partners in FY '26, so we now have 14 partners in total. The key for us is to monetize these partnerships through new license sales. So given PaySim can be sold globally, the regional distribution network is key for us to gain reach and traction with potential clients in those markets. The sales focus will be supported by new product releases. So with our extensive adoption of Argenti AI, we're expecting to ship a lot of new features and functionality for both the Vertexon and PaySim throughout the year. In terms of outlook for FY '27, so we enter FY '27 with strong momentum underpinned by record PaaS revenues in June. We expect to further accelerate through FY '27, driven by the onboarding of 4 contracted clients. So they're all forecast to be live and transacting in H1. 4 new clients currently in the final contracting phase and then the new client wins from an increasingly maturing sales pipeline. We expect further PaaS gross margin expansion throughout the year as we continue to grow volumes with our medium-term target of 40% to 45% that Tom just went through. Overall, we expect to be net cash flow positive for FY '27. So on the back of a great FY '26, we enter FY '27 in a strong financial and operational position. We are focused on delivering our strategy and our operating plan with a particular emphasis on securing new sales, product delivery and driving operational efficiencies. Finally, to our shareholders, thank you for your ongoing support of the business over the past 12 months. We have achieved a huge amount, and we look forward to keeping you updated on our progress and achievements throughout FY '27. That wraps up our formal presentation. Tom, I think we have received some questions, so we might turn to Q&A now.

Thanks, Tony. So the first question here is from [ Michael ] at MST. So strong outlook, guys. On the 4 new clients currently in final contracting phase, what is the likelihood of these converting? And will they follow the typical time to live duration of 6 to 12 months, meaning upticks to be seen in H2 '27 and FY '28? So [indiscernible] yes, those 4 clients are still in contracting phase. We do expect them to convert. We -- like we often do, we start onboarding or some of the early stages of onboarding process with these guys before the contracts are even signed. The contracts can just take a while when you're dealing with moving money and all that sort of thing. So we do expect those to convert over Q1. Most of those, maybe some of them will slip into Q2, but we expect them to convert -- and we would expect them to go to live in H2. It is subject to the clients' plans as well, but sort of that 6-month time line after they get signed is pretty typical. Next question from [indiscernible] as well. With respect to the unchanged medium-term PaaS gross margin guidance, what year base is this starting from? And how are you expecting it to scale? Are you expecting relatively even incremental expectation each year? Or is it likely to be skewed to the back half as you expect to scaling benefits? So yes, if you look at the half year margin chart and then look at FY '26 overall, so we added 600 basis points of margin over FY '26. we certainly expect to make a meaningful move towards that 40%, 45% level this year, and it will be skewed towards the back half because it just keeps increasing to a certain point with scale. So no reason to expect that the margins won't improve from the sort of 35% level in H2 FY '26 in H1 FY '27. But again, probably we'll start to see more meaningful as these clients on board and the growth keeps going, H2 will be more meaningful. Will we get to 40%, 45% in -- by the end of FY '27? Look, we haven't said that, but we certainly expect to make meaningful progress towards it. And it's definitely possible that we get there this year as well. Okay. Nick from Pac Partners. NZ economy seems to be picking up. We've seen strong JB HiFi and Baby Bunting retail results in New Zealand. How are you seeing the volumes on the credit union clients? I'll take that one as well, Tony. So the credit union clients, to be honest, are fairly flat. They have been for a number of years, and that's sort of what we'd expect. They're not high-growth institutions like the fintechs that we've onboarded recently. You do see some fluctuations with the economy, I think, and also with inflation and all that sort of stuff. So they're sort of flat to growing at a very low percentage, which is what we'd expect. Another one from Nick. How are Hnry Volumes looking compared to your expectations now that it is fully onboarded? I'll take that one as well, Tony. So -- the Hnry volumes, they are all long. They finished their migration in the last days of July, so they're fully migrated across. The volumes have sort of gotten to the level where we expected and now we look forward to supporting Hnry on their growth plans, and they need to keep rolling out and doing what they're doing, and we'll look to support them with that growth. But it's gone as expected. The teams at Hnry and change are very happy with the onboarding, and it's all gone smoothly. So we look forward to providing updates as we go on that. A question from Lewis. Can you provide an update on the migration of large Southeast Asian clients from on-premise solutions to the cloud? Tony, I'll let you take that one.

Yes. Thanks, Tom. Thanks, Lewis. So in terms of that, we've mentioned before the migration, given the size of those clients up in Southeast Asia, that is going to be a multiyear journey to move them to the cloud. We have been in discussions with them for quite some time. Myself and other senior members of the team will be up in Southeast Asia next month with those clients, visiting the clients, talking through those plans as well. So we'll continue to work through that, Lewis. That will take time, though. I mean, between them, they're running more than 45 million cards on the platform. So that is a big transition to move from on-premises over to the latest version of the Vertexon. So we'll keep you posted throughout, but the dialogue continues, and we continue to do project work with those clients. We have very strong relationships with both of them.

Thanks. Another one here. In Cuscal's result, they highlighted the potential for New Zealand adoption of real-time account-to-account payments as a future growth opportunity. How do you view the New Zealand market? And to what extent does your relationship with Finzsoft position change to participate in this transition?

I'll take that. So Lewis, in terms of the New Zealand market, different -- a little bit different from Australia. We have the NPP in Australia in New Zealand. They don't have a real-time payments system in the country. What they do have is SBI 365, which is somewhat of a hybrid between our old BECS or direct entry system in Australia and NPP. What SBI 365 is in New Zealand, it means that you can direct debit accounts 7 days a week. So that's different from Australia, and that's what I'm sort of talking sort of halfway, in my view, halfway between the BECS system of being able to do it on business days and NPP doing it 24/7. So one, the capability or the platform in New Zealand is not there. They will probably move towards that. That is an investment that quite a big investment that needs to be made in New Zealand to move to real time. In terms of where I would see that moving, similar to what we're doing in Australia, NPP is on our road map in FY '27. That is underway at the moment where we will be able to offer NPP to our Australian clients. When it moves to that in New Zealand, I would imagine that we will look to include that capability in New Zealand as well for our clients, and we participate in that way. I think we've mentioned before when we talk around NPP at the end of the day, we will look to integrate a provider and sort of white label that solution into our product offering as opposed to becoming an NPP provider in our own right. That is not our wheelhouse, but we will sort of provide that capability wrapped up into our the Vertexon PaaS offering.

Thanks, Tony. That is all the questions for now. And so we'll wrap it up there. And thanks, everyone, again, as Tony said, and this recording will be on the website in half an hour or so. So you can watch it back if you'd like. Thanks very much.

Thank you.