HUB24 Limited

Thank you for standing by and welcome to the Hub24 Limited first half FY22 presentation. All participants are in listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Mr. Andrew Alcock, Managing Director and Chief Executive Officer. Please go ahead.

Good morning and welcome everyone. It's great to be here and we're very proud today to deliver hopefully what you regard as a very good result for Hub24. The first half of FY22 has seen us set some records in terms of organic growth but also success on our acquisition strategy to create strategic opportunities for further growth and expansion for the group. So with me today we have Katrina Shanahan, our Chief Financial Officer. Katrina will give an overview of our financial results today. Later on during the presentation, of course, we will have some Q&A at the end of the presentation. Just moving on to the strong financial results slide, the first one there in the pack. Great, as I said, to be talking about fantastic organic growth. We had $6.7 billion of net flows for the first half, bringing our total FUR up to $68.3 billion $50 billion of that being of custodial FUA and $18.3 in the PAS and on custody space. So the $50 billion is our closing number at $31.12. We're pleased to be able to say whilst there's been some market volatility our flows so far in the second half have offset that. So as we stand today or as of Friday the current custodial FUA was also at $50 billion. Those flow amounts have driven great financial results which have also been supplemented by the full half year of having Explore inside the business and so with our group underlying EBITDA up at 80% on PCP, our revenue up 72% and our underlying NPAT up 103% to $14.2 million. With statutory following behind that of course because there's $8.3 million of transaction implementation cost, statutory impact of 8.4. But really great to see EPS up 27% at 11.86 cents per share and we've been able to increase our dividend up 67% at 7.5 cents for a half year fully franked dividend. So all in all fantastic statistics with the numbers in the 70s or 80s in terms of percentage improvements in the underlying financials for the business there. And it's been a great half of proactive discipline management for us to do that, to be able to pivot investment in parts of the business that support ongoing growth and in fact growth that surpassed expectations where we had to move around to support onboarding of customers and advisors and sales team, to be able to move our expense base around to focus on what we needed to do so that we could expand margins, manage expenses but also deliver what we think is amazing growth. And in fact, if you look at the statistics in historical terms in terms of platform growth in this industry, it's been a very long time since platforms, in fact, not at all, or only once in the last 15 years where platforms have achieved growth levels of $12 billion per annum. So you've got two industry peers or competitors achieving that, which is really a record for the industry. And we certainly look forward and are aiming to continue to do that moving ahead. Moving to the next slide, if we look at the four year trend for our financials, you can see that we've consistently delivered record growth in terms of funds under administration and the record being having had three consecutive quarters of record inflows in what could be challenged as a very interesting and difficult time economically on a world sense. So our funds under administration, you can see the growth there over four years. It's been reliable and consistent and certainly the revenue and underlying EBITDA growth stats there for four years as well, also being reliable and consistent. We certainly hope to deliver that trend more again in the future. So our FUA is up from about $10 billion around about first half FY19. In a custodial sense, it's at five times that, being at $50 billion four years later. And when you add the non-custody, it's at the higher levels there. And the CAGR... of revenue and Adelangi Bidab being in the 41% for revenue and 63% for Adelangi Bidab. So good reliable trends for delivery for HUB24 and as I said we do aim to continue to do that moving forward. We work very hard to do that after our customers, our staff and deliver great results for shareholders. If we move on to the next slide and a quick look at the overview of the group today which has changed remarkably certainly from this month due to the completion of the class acquisition. And on the left-hand side of the slide, our platform business, there you've got our non-custodial platform business, as I said, with a total of $68.3 billion of FUA. Breaking that down, there's about 3,400 advisors using the platform and about $22 billion of the $50 billion in FUA is in managed portfolios, which is one of the fastest-growing parts of the market and certainly an area in which we excel and lead the market. We'll talk a little bit about that further on in the PAC. The non-custody piece is there as PARs or Portfolio Admin Reporting Service that also experiencing some growth through the half, landing at $18.3 billion and over 8,000 accounts. In the middle pillar there, there's the HubConnect or the Tech Solutions business line which is supporting brokers in the Australian marketplace and licensees and there's 92 clients or institutional financial services clients there and 96 data integrations. That's important for our ongoing strategy talking about how many data integrations when we think about the strategy about bringing a whole of WealthView together. And so that business is growing as well and the class business on the right hand side. Class being certainly a market leader, an award winning business. We completed the acquisition or the implementation of the acquisition probably only four business days ago. In fact it's week one this week technically. Tomorrow we took over the keys of the business last Wednesday. They are experts in the establishment, management and administration of wealth vehicles and you can see some of the products there with being class super, SMSF administration software or accounting software, class trust for trust administration, class portfolio and you can see the commonality between some of the existing hub strategies for investment reporting and administration for assets with data feeds. Class having 220 feeds of data to support those product ranges and the Corporate Compliance and Documentation Business Now Infinity which Class runs to help establish trusts and wealth vehicles and deal with ASIC and company administration activities there to support accountants and professional advisors. There are some great complementary opportunities and products and commonalities between client bases and opportunities to grow both businesses together which we're very much looking forward to. So that's an overview of Hub24 today and great to be able to talk about that and very glad that the class acquisition has been completed. Moving on to the next slide, of course the core value driver for our business is our award-winning Hub24 platform and once again please be able to say that we are Australia's fastest growing platform provider and by that I mean in terms of our share of net flows versus our current market share. Not in dollar terms but in terms of rate of growth or how much we're delivering off our base. Yes, we've edged out to be number one again and that will move around but we're very pleased about that to be the fastest growing provider at a ratio of 10.66 i.e. our share of new business is 10.66 times our current share of overall market. So in terms of the metrics on the market share, we've grown from 2.3% of the platform market as at September 20 and that's the latest data, September 21 has us growing to 4.6% so doubling our market share in a 12 month period. We're the seventh largest platform provider from ninth place in that 12 period. We're ranked second for annual net inflows and our five year compound annual growth rate of 65% for food in the marketplace. So you can see on the left hand side that ratio of new business to existing share and on the right hand side there just the growth in FUA and we've added the yellow bars there being the non-custody or PAS FUA. A little bit later Katrina will cover off some of our financial highlights but before we do that I want to just quickly talk about some highlights for first half of FY22 in business sense, that's on the next slide and I'll also talk about our strategic pillars. So moving to the first half 22 business highlight slide, as I mentioned we've had three consecutive net flow records for the business. and ending up with $6.7 billion for the first half of FY22. A great result, particularly when you look at the history of the industry. And I was looking the other day, even if you go back five or six years, it's hard to find a platform that delivered more than $6 or $7 billion a year except for the two main players that are in the market today. We are number two for annual net flows, as I mentioned on the previous slide. On that top row there, we've once again won the Platform Managed Accounts Functionality Award from Investment Trends. The data was out last week. That's the sixth year running for us to win the managed accounts functionality. It's certainly our sweet spot and our clear differentiator and we've also won first prize for overall product offer which we're very pleased about as well. We've just been edged out again into number two position overall having edged forward last year into number one position. Both of the peers in that space, ourselves and our competitor were neck and neck in that Both have had scores over 90%, which is a new record for the scoring, I think, in recent years for investment trends. So having said that, being number two overall, but first for product offer, first for managed portfolios, we're in the top two in five out of six categories. But interestingly, below that, we've won 22 subcategories out of 48, and that's the highest amount of categories won by a platform. So having won 22 out of 48 is the best result of any platform. I'd love to say we're number one, but we are very, very close and we're constantly delighted to compete with our competitor, trying to edge each other out on that award. In terms of the platform, 3,400 advisers there. During the half, we've done some ongoing enhancements, certainly to support advisers with regulatory matters, with advice fee consent, some of the changes that came out as a result of the Hayne Commission. We're pleased to have delivered what we call bulk ROAs, or the ability for an RO being a record of advisability for an adviser to trade across their client portfolio and issue an advice document and do that as one step to all the customers affected by that really great proficiency for advisors and really amped up our online account opening to make it easier for advisors and customers to work with us. The Explore integration is progressing well. The benefit realisation is on track and 13% EPS growth for FY22 is the plan for that and lastly the acquisition of class was completed during the half. and we absolutely aim for that to accelerate our growth strategy moving ahead. Moving forward to the next slide, in terms of our strategic pillars and it is about, we quite often talk about this, our purpose or why we exist is we want to empower better financial futures together for Australian customers but working together with financial professionals, whether that be financial advisors, accountants, solicitors, tax professionals, working together with investment managers, fund managers, working together with licensees and certainly working together with customers and other tech providers to build better futures for Australians. So of course, our first pillar is about delivering customer value and growth and that's about our core platform business continuing to develop that proposition and lead the marketplace in terms of building a sustainable competitive advantage, lead innovation and continue to transform the landscape as we've done previously. We are committed to that, to delighting our customers, and we'll continue to work in that space. In the middle pillar, we talk about continuing to build the platform of the future. For us, that means an integrated experience that supports financial professionals able to implement tax, investment, and strategic advice. And breaking that down, it's about providing a single view of wealth, allowing customers to see their entire wealth with one view whether that involves data from multiple providers but bringing those pieces together, the integration or the seamless integration of being able to view assets that you might hold in custody on a platform i.e. our core economic engine, the Hub24 platform and the Explore business bringing together or looking at non-custody assets and being able to see those transparently regardless of how they're held in different legal structures, being able to get a whole view but bringing the seamless integration of those together And obviously looking at product solutions that improve retirement outcomes for all client segments. So that includes the segments we've had pre the acquisition of Explore and now with Explore having high net wealth and non-custody assets there with the Orbitnet PaaS business as well. But building out the platform of the future that creates advocacy and transformation and support for our future and the future of our customers. And the third pillar there about collaborating or once again working together to shape the future of the wealth industry and to play our role to develop this industry to build advocacy and support for advisors and make sure we've got solutions that deliver on that promise to empower better financial futures together. I'll talk a bit more about some of the initiatives we've got there and we're very pleased that we actually have those three strategies on which to consolidate and think about our further growth. I'll hand over to Katrina Shanahan, our Chief Financial Officer. Katrina, for you to give us an overview of our financial results.

Okay, cool. Thank you, Andrew. So moving to slide nine, which is the group financial results, you can see strong results coming through this half with the group underlying EBITDA at $29.7 million and which is up 76% when compared to the prior comparative period being December 2020. Underlying NPAT is up at $14.2 million, being up 103% on PCP, and stat NPAT up again to $8.4 million, being 38% on PCP. The difference between the underlying NPAT and the stat NPAT is the acquisition amortization and the implementation cost for Explore and Orphanet. Post-tax, the combination of those two things is about $5.8 million. You can see on the right-hand side on the operating revenue bar chart that we've got that the platform segment continues to be the driving force of the growth. With the tech solution slightly back on PCP, which is an old infrastructure contract that rolled off this half. And so the continuing business being the applications business is still performing well. Revenue at a group level is up 72% to $81.6 million. And the operating expenses at a group level are up 70% to $51.9 million. So that's giving a positive jaws at a group level. and has improved the underlying EBITDA margin by about 1%, which has improved to 36.4%, up on 35.5% on December 2020 results. So then just moving over to the next page, here we have on page 10, we've got the platform segment results. And again, here you can see Andrew briefly talked earlier to the growth in the total sewer balances. So total FUA is up 118% to $68.3 billion, with the platform custody FUA being $50 billion and the PAS non-custody FUA being $18.3 billion. You can see both of those. Platform FUA is up 128% and PAS is up 97%. This half, we've got the benefit of the Explore portfolio being in there with the acquisition completing in March 2021. So the Explore business wasn't in the FUA numbers for first half 2021 but is in the first half 2022. The organic growth has also contributed quite significantly. On the right-hand side, you can see the FUA walk with $6.7 billion of net flows and $3 billion worth of market movements. The market movements in the first half to December were very strong. January and February have been a bit weaker, which everybody will have seen coming through, but the first half was a real benefit. We've got the impact of the last RBA rate cut. We've given this just as an illustration. So the positive jaws that we saw at the group level, the revenue for platform is still very strong at 76% growth rate at $77.3 million. Just as an illustration, the RBA rate cut, the last one in November 2020 of 15 BIPs, based on our average FUA balance and our cash as a percentage of FUA, that had a drag on revenue of $3 million over six months just for that one rate cut. So had it not been for that, you would have seen positive growth during the platform segment as well. Moving on to slide 11, continuing the platform results. Here we've included a five-and-a-half trend for you for the revenue, expenses, and cost-to-income ratio. You can see here that this half, when you compare it to Spolier 21, even in the platform segment, the positive jaws are coming through, which is the operating leverage on the platform delivering, and we're expecting that to continue. We've also got small synergies coming through for the Explore business. with the full run rate for synergies expected to come through by the time we get to the beginning of full year 24. The platform underlying EBITDA is up at $30 million for the six months. That's a 55% five-year CAGR. And you can see that compared to a full year underlying EBITDA number of $37.9 million, $30 million for the six months is a fantastic result for us. Moving on to slide 12, which is the composition of the platform for us. So this you can see in the wheels on the right-hand side. We started including this at year end just with the acquisition of Explore. With the Diversify portfolio, we included this just to help break out the retail, institutional, and Explore super admin. So it's... Based on full year 21, when you compare first half 22, the composition has remained relatively stable, with retail representing 81% of the portfolio, explore super admin representing 16%, and institutional being 3%. When you look at the bottom of the page on the right-hand side, the revenue margin this half has actually been very strong. We're very pleased with where the revenue margin has come in. Overall, for the whole of the platform business, Platform 4 is coming at 32 BIPs, And that's slightly down on the full year 21, which is with a total of 36 bits. You'll see when we get to the next page, that's the annual runway impact of the Explore business, which is a slightly lower margin coming through. So then when we move to slide 13, this is where we talk about the platform revenue. And you can see here the growth of 76% half on half. So taking first half 22 compared to first half 21, it's grown to $77.3 million. Administration fees have contributed nearly $10 million on the second half last year and about $18 million over the first half 21. And then cash and other being trading, cash and trading, and some small other revenue streams in there has contributed $10 million in this half and about $16 million this year. over first half 21. On the bottom right-hand side, you can see the platform revenue margin. So here, when we did the year end, we did the walk down from the 44 bits in the first half 21 down to the 34 bits at 30th of June 2021. And that was to do with the cash RBA rate cuts, the trading volumes normalizing to pre-COVID levels. And then this half, you can see that the only impact on the margin is really the annualization of the Explore portfolio coming in. And a key bullet point that we've included here for you, as I've mentioned earlier, the strong performance in the group is both the organic growth and the net flows, the $6.7 billion of net flows, but also the Explore and the Ord Manette acquisitions have contributed $14 million in the first half of 2020. Moving on to slide 14 being the group expenses. You can see here that the group expenses in total when you include abnormal items and acquisition, amortization, et cetera, you've got about $69.6 billion, $70 billion worth of total expenses. Just left of that in the far right graph, you've got $61.3 million, which would be the underlying expenses, which includes $3.5 million for the special rights that were issued back in 2021. Last year, we didn't recognize any share-based expenses for that issue because the probability of investing was still unknown. Given the strong net flows that we've had in the 18 months since they were issued, we've increased the probability of those vesting and included a $3.5 million share-based expense that we flagged to the market when we did the second quarter market update. Operations, technology and sales is the driver, the driving force of the core of the business and the increases, with $17 million of that relating to employee expenses being the the core driver of the investment for this half. We've got $8.3 million of abnormal items being $3.2 million before tax for implementation costs and then the $5.1 million of the depreciation and amortization that was acquired through the Explore and Augment acquisition that we did. Just moving on to the last financial slide, we've got the NPAT and we've got a walk of the underlying EBITDA of $29.7 million to the underlying NPAT of $14.2 million and statutory NPAT of $8.4 million. You can clearly see here depreciation and amortization from the normal core business is $3.2 million, which is broadly in line with the run rate from last year. Then we've got the share-based payments up at $6 million, which includes the $3.5 million that I mentioned earlier for the recognition of the special rights that were issued in full year 2021. And then, again, you've got the implementation costs for Explore and Orbanet of $3.2 million and the acquisitions or amortization for Explore and Orbanet of $5.1 billion. So overall I would sum it up as a fantastic financial result this half which we're really very pleased with. And then back to Andrew.