HUB24 Limited

Thank you for standing by and welcome to the Hub 24 Limited FY22 results. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session. If you have been provided with the question link and 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. Please go ahead.

Good morning and welcome everyone to our financial year 2022 results presentation. Absolutely pleased to be delivering another set of really strong results for HUB24 for the year with some headlines that have underlined year to start 92%, underlined our profit after tax up 133% and of course our dividend year-on-year up 100%. From the customer front I'd like to talk about a couple of the points we've got. One is value for money with investment trends and once again retaining our managed portfolios award. With me today is Katrina Shanahan, our Chief Financial Officer. Katrina will be presenting our results as I did through some of the earlier slides and certainly be able to answer questions as we move towards the end of the presentation. Before we jump into the results, I'd like to put some context around the role we play in the market and just move into the next slide. Our group has expanded in FY22. We've certainly added to our purpose of empowering better financial futures together with now over 300,000 customers accessing wealth-related products from HUB24 and group members. So that's the HUB24 platform, the Explore platform and the CLAS, SMSS, Portfolio and Trust products, 300,000 Australians that we're helping actively to meet their investment and retirement goals together with others in the industry. And by together, we mean with our customers, with advisors, professional advisors, accountants, financial planners, investment managers, technology providers, bringing together the best capabilities and the best choices and creating opportunities using technology for a better future for our customers. We have a large footprint now which is deliver and grow and moving forward with plenty of room to grow and lots of market share for us to hopefully capture as we move ahead. So in terms of our purpose, we've certainly delivered on that year with the acquisition of clients and delighted that we've got that footprint to move forward. Turning to the next page or moving to the next page and looking at our results highlights, we're very, very proud of such strong growth in dollar terms and centric terms for FY22 with our total group revenue up 76% to $192.5 million and underlying the direct group level up 92% to over $70.4 million. Unpacking that a little bit, the platform segment contributed $160 million of that revenue at $62.3 million of the underlying impact, a good result. Looking at the profit and earnings numbers, statutory impact up 50% and that includes $18 million of strategic transaction and project costs. So looking at an underlying level, it's up 133% at $35.9 million. A fully dividend adding the $0.125 dividend we've determined for this half comes to $0.20 per share and that's up 100% on FY21 with earnings per share also up and that's delivered at 37% to $0.195. We absolutely finished the year with a good floor balance regardless of market earnings of $65.6 billion for combined sewer at a custody or a platform at an intensity of 49.7, just shy of $50 billion. That's at the 18th of August due to good positive flows for the first couple of months here today and some market recovery back at $64.1 billion with the past sewer at $15.9 billion at 30 June. Turning to the next slide, if I could put the group into context with our operating segments, just a bit of a footprint for which we intend to grow. The HUP24 group is there with the platform segment on the left-hand side with a bit more breakdown of some of the stats I've already mentioned, the number of advisors and the non-custody PAS accounts. On the right-hand side we've got HUP Connect now joined by CLAS in our tech solutions segment, really building out that segment with a combined footprint and a far more meaningful contribution to business moving ahead both strategically and financially. noting that we've got 92 Bites of Services clients buying tech and data services and products from HubConnect. And we'll talk a bit more about that later on in the presentation. And classed with 7,000 unique clients, 200,000 accounts across the world for admin products, and 170,000 document orders across the now affinity business as well. So a much broader footprint and two operating segments alongside our corporate segment moving forward, which we'll be reporting in that way. Turn to the next slide. I look at our track record and it's absolutely continued. We continue to build on a consistent track record of funds under administration growth, revenue and underlying EBITDA growth and we'll certainly be working very hard to build on this moving forward. We aim to manage the business to deliver rival growth and as you can see we've done that from FY18 to FY22 consistently and if you go back further it's been consistent since earlier years. We do that while balancing investments for future growth trying to put in place the right building blocks and foundations to support ongoing growth but also deliver consistent and reliable returns to shareholders. On the left-hand side we've got the funds of administration graph there and at a group level that's a four-year compound annual growth rate of 68%, a really great growth statistic for our custodial and non-custodial FUA over that period of time. On the right-hand side our revenue CAGR over the four-year period is 41% and underlying EBITDA 56%. That includes on the right-hand side in the yellow the contribution for class which we acquired in February for four months of this year and also in FY22 there's a full year run rate of Explore in that expansion there of revenue and underlying EBITDA for the group. We head over to the next slide. We've wanted to look at it from a market share perspective and the same sewer chart is there on the left-hand side but you've also got the net inflow line there which is the yellow dotted line showing the net inflows into the business from a platform perspective. The CAGR there is slightly different. It's a four-year CAGR for the custodial or platform organic growth, a platform growth of 56% over the four years. Interestingly, we're still ranked number two for annual net flows. a really, really large established set of institutional competitors. Our market share has grown from 3.9% up to 5.1% in the space of 12 months. We've gone from eighth largest to seventh largest, but we are certainly the fastest growing platform provider in percentage terms, in fact, based on our current market share and the growth we achieved in the preceding 12 months. Great results for the platform part of the business. In the class business as part of Tech Solutions, Equally from June 18 to June 22, Class Super has grown its market share from 24% to 30% albeit we've owned the business for less than six months. But it did have the strongest quarter four since 2019 in FY22 with the strongest growth there and you can see the number of accounts there for Class, the total accounts and the Class Super accounts there on the slide. So doing well in terms of market share, lots of opportunity to continue to grow and great results when you look at them beside our financial results I'm not going to spend much time. We're going to move on to the next slide. I won't spend too much time on that. But if I put in summary financial year 2022 overall, we've talked about the financial results. We've had record annual platform net inflows. In fact, the net inflows for our business and for specialist platforms are at levels that this industry hasn't seen for many, many years, if at all, for institutional providers and ours being $11.7 billion. So a great result and a great level of growth. Our customer advocacy has grown substantially and I'll be showing you some awards in the next few slides in terms of what customers are saying about Hub24 and it's absolutely in our DNA to make sure we continue to deliver and delight our customers with great opportunities. We've completed the class acquisition, increased our profitability. We've continued with the integration of Explore which we acquired in FY21 and those things together all against the backdrop of a market that's been rattled with some uncertainty changes in inflation, interest rates, concerns about health, pandemics and international uncertainty. In the backdrop of that we've actually delivered on strategy, delivered great growth, delivered great outcomes financially and still working on innovating to enhance customer value. I'll talk a bit more about those three innovations there, HubPresent, HubConnect Licensee and HubConnect SMS and Access later on in the slide and of course we're playing our role of working with the industry to build foundations for strong and thriving wealth management industry in Australia. Turning on to the customer advocacy, we're moving to the next slide. In terms of the awards this year, there's six there for HUB that we've called out and two for CLAS across both our key business units. Interestingly, and the one I'd like to talk about as well, we recently have been awarded in the last couple of weeks number one value for money from investment trends. When you think about it, we talk quite often about value versus price and the levers for that. The market is shifting to a value driver. We haven't seen massive competitive pressure on price for the last couple of years. Advisors are understanding value and the sustainability of working with a great platform provider who's there for the future, who's building out for the future. Put it in the context of best interest duty for customers, value is a key driver for why a decision should be there to recommend a particular platform. So for the HUP platform, that's a great new award that speaks to us overall from the customer sentiment. Running through them, number one for managed portfolios for the six-year running. Another one for product outcomes and investment trends. And from advisor ratings we have the best advisor experience, the best platform and best investment options. Great awards to have. And looking at class, class has won the award for best SMSF software administration platform as well. The two awards there for provider as a platform. Moving forward, looking at those awards and the market share, I think we all agree we're very well-placed for more growth and more opportunity as we move ahead in FY23 and beyond. To do this, of course, and moving to the next slide, talking about our people, we have an exceptional team and we work very, very hard to build a great and talented team, build on the already high-performing culture that we have and look at how we attract, develop and retain talent in the business and creating the right environment for our people to thrive. I think that's a secret to our success is having a really capable team that are aligned and working very well together. In the group we now have 700 employees having had 200 employees join us from class and Hub24 hitting up to 500 employees over the last 12 months as well. Obviously we work very hard at that so we have a very, very strong and focused culture prioritising employee wellbeing. We're continuing support a diverse and inclusive workplace and investing in leadership. In fact, on the bottom half of the page, in terms of putting in place the foundations for future growth and operational certainty and scale, you can see we've recruited three new key executives for the business to support that growth and we're out in the market currently recruiting the chief people officer for the combined group. Employee engagement is 72% which is a great outcome but I want to talk about our values. and it really is in our DNA the advantage of what we have on the right-hand side of the slide about how we operate, about our integrity and we see these things as precious. Collaboration, acting as one team, really, really being focused on clients and easy to deal with, delivering excellent outcomes, going above and beyond. In fact, we often talk about being brave to do things and get things achieved that seem difficult in the context of how do you look after your customer and how do you progress the business. So we have passion and energy to make a difference and we certainly think big and outside the square. So a little bit more about our people there. We are continuing to invest and we're absolutely focused on maintaining the great culture we have as a foundation on which to build moving forward. Now I'm going to hand over to Katrina Shanahan to move to the next slide that will go on our final results and I'll be back a little bit later to talk more about the strategy and outlook.

Thank you Andrew, thanks for that. So if we could just move to the next slide for the finance section. Here we've got a snapshot of the combined total group, a breakdown for revenue, underlying EBITDA and customer numbers. So you can see here that business is included in the tech solution business for the consolidated group. On the right hand side however you've got the revenue contribution from CLAS for the four and a half months. of $23.9 million and an underlying EBITDA contribution of $9.5 million from CLAS and a customer base of over 7,000 customers. On the Hub24 side, where we have the Hub24 platform, the HubConnect and Agility and the Explore platform, we've got revenue of $168.6 million and underlying EBITDA of $60.9 million. and a customer base of advisors of just over 3,400, taking the total group revenue to $192.5 million and underlying EBITDA of $70.4 million. The platforms business contributes 83% of the revenue to the total group, and the tech solutions, including the class business, contributes 15% of the total revenue to the group. Corporate includes the investment that we have in Diverger and our share of profits from the Diverger investment. So just moving to the next slide, we have the group financial results. So this is the combined financial results of the whole group and you'll see the operating revenue is up 76% to $192 million and operating expenses are up 69% to $122 million. delivering positive jewels and an underlying EBITDA growth of 92% to $70.4 million. This is combined with underlying EBITDA margin and cost-to-income ratio improvements for both of those metrics of 2.9%, so delivering operating leverage across the whole group for the year. On the right-hand side, you can see the breakup and the contribution of the different segments to the operating revenue and the underlying EBITDA. So the platform segment is still the highest contributor, delivering $59 million uplift in revenue on full year 21 and $24.4 million uplift on underlying EBITDA to the group. Tech Solutions grew $22.4 million in revenue and grew $9.7 million in underlying EBITDA, both of those metrics largely being driven by the class acquisition that we did. Moving to the next slide, we've got the platform segment again delivering very strong results with a 20% growth in the custody platform growth, growing from $41.4 billion in school year 21 to $49.7 billion, just shy of $50 billion in school year 22. The non-custody past score went backwards or declined 8%, which was largely driven by the negative market impact. So it's now just under $16 billion. and total FOA growing 12% to $65.6 billion, up from $58.6 billion in full year 21. Platform net inflows have grown 32% to $11.7 billion, up to $8.9 billion in full year 21. Full year 21 also included $1.4 billion for the large transition of the clarity portfolio. So if you did a normal net inflow excluding large transitions, the platform net inflows is actually up 56% year-on-year. You can also see in the platform segment the underlying EBITDA margin improvement of 1.3%, so growing to 38.8% underlying EBITDA margin, up from 37.5% in full year 21, and underlying EBITDA itself in a dollar term growing 64% to $62.3 million. On the right-hand side, you can see the split and the growth in the funds under administration, growing to the $65.6 billion. You've got the half-on-half split in this metric. Net inflows in the first half, the strongest half, at $6.7 billion, adding the second half, $5 billion, getting you to the $11.7 billion for the year. The market movement on the custody portfolio was $1.9 billion in the first half, positive strong market movement, and then the negative market movement aligned broadly in line with the ASX 200 movement, negative market movement of $5.4 billion in the second half, netting to $3.5 billion over the whole year. And then you can see the non-custody part, the net impact of the net inflows and the market movement is the $1.2 billion over the year with a positive market movement of $1.1 billion in the first half and negative market movement of $2.3 billion in the second half. Moving to the next slide, we continue on with the platform segment results. Here we've got the five-year growth trend in revenue, expenses, underlying EBITDA and underlying EBITDA margin. So you can see each year delivering very strong growth in revenue and in underlying EBITDA with the full year 18 revenue back at $40 million growing to $160 million in full year 22 and expenses growing from $28 million to $98 million. Those metrics deliver a very strong $62.3 million platform underlying EBITDA in full year 22 with a full year CAGR growth So annual growth rate was 51% in the underlying EBITDA. The revenue margin for the platform segment remained stable over the year at 32 bits. I'll talk more about that as we get on to that if we can just move to the next slide. So on this slide we have the composition of the platform sewer and we break it out between retail, institutional and explore super admin. So there hasn't been a significant shift year on year in the spot sewer contribution from the different segments, with the retail segment contributing 81% of the platform sewer, approximately $40 billion, and the institutional, including the private labels and the private clients that we have, representing 16% of the total sewer, or approximately $8 billion. and the Explore Super Admin being a smaller portfolio contributing $1.5 billion. As we've announced in our quarterly results and the Analyst and Investor Pack, we're expecting the Explore Super Admin part of the portfolio to transition out towards the end of full year 23. So the revenue margin you can see in the graph on the bottom right-hand side. So the average for the custody revenue margin in full year 21 was 36 bits. And over full year 22, each half bit remained static at 32 bits. The reduction in the Explore Super Admin revenue margin, there was a one-off service being included in full year 21. So you can see the small drop there from 17 bits to 13 bits in full year 22. And then on the institutional revenue margin, you can see an increase from 9 bits to 14 bits. which represents a full year contribution from the private labels being Clearview and Insignia. Just moving on to the next slide. So here we have the 59% growth in the platform revenue up to $160 million with the admin fees delivering $12.4 million uplift on failure 21 and cash and trading delivering $13.5 million uplift on failure 21. So you can see in the graph on the right-hand side the split between the first half and second half of 2022, the contribution from admin fees and cash and other, which includes the trading. So the first half benefited from the net inflows, the strong $6 billion of net inflows in the first half. There was also the strong $1.9 billion of markets in the first half, and there was an extra two months of Explore. The Explore acquisition completed in March 2021. And so Moodle from second half 21 to third half 22, there's an extra two months for Explore in there. When you move from first half 22 to second half 22, there's not an uplift from Explore and it's all been accounted for in the previous periods. The second half admin fees and cash and other have been impacted by the negative market and the impact on the filler growth. So if you take the Explore extra two months in the first half and you take the impact of the negative market, that's the reason for the difference in the growth half on half. Then in the bottom right-hand side, you can see the platform revenue margin with Explore, 36 average on the custody portfolio in full year 21. and then normalising for a full year impact of the Explore portfolio which has slightly lower margins, bringing it down to 32 bits. The margin remains static half on half with the benefits from the RBA increases and the cash management fee broadly offset with the admin fee clearing in the second half, albeit that was lower than normal. It was still a small impact on the second half. Moving to the next slide, we have the group expenses. The total group expenses was $171 million which included $30.2 million for strategic transactions and acquisition amortization which I'll talk more about on the next slide. Excluding abnormal items or notable items, total operating expenses were $141.1 million. which included the class operating expenses for the four and a half months of $14.4 million, which gets you to a core business operating expenses pre the class acquisition of $126.7 million, which is up 46% on full year 21, and it included $10 million for the full annual impact of the Explore portfolio coming in. You can see in the graph on the bottom right-hand side that employee expenses is still the largest part of the expense base, being $80.3 million of the expenses incurred. FGE, as Andrew mentioned, grew to 700. with a class contributing about 211 extra FTE and the FTE growing for HUB24 up from 460 in the first half of 22 to about 490 in the second half of 22. And then just moving to the last finance slide, we have the increasing profitability across all the measures. We've got underlying EBITDA, which is up 92% on full year 21 for the continuing operations. And then after we take out the share-based payments, the normal run rate for the depreciation and amortization of $7.5 million, and then the tax, we get to our underlying NPAT of $35.9 million, which is up 133% on full year 21. The share-based payments of 10.8%, is higher than last year as it included a recognition of the special powers, special performance options and rights that were issued in full year 21. Given the strong growth in the net inflows this year, we recognised the share based payment for 18 months of that issuer of the And then moving on from the underlying MPAT of $35.9 million, we've got the notable items of $17.9 million, which includes transaction costs for the class acquisition. It includes $5 million for the Explore implementation-related costs and $1.9 million for other projects, including regulatory change, the joint FMSS products that we've been working on, and some small client transitions. And then we have the statutory MPAT of $14.7 million, which is up 50% on Tollio 21. So an excellent financial support. I'll turn back to Andrew.