HUB24 Limited

Good day and welcome to the HUB24 first half FY24 results briefing. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press the star one again. For operator assistance throughout the call, please press star zero. And finally, I would like to advise all participants that this call is being recorded. Thank you. I'd now like to welcome Andrew Alcock, Managing Director, to begin the conference. Andrew, over to you.

Good morning everyone and thank you very much for tuning in for our first half results for FY24. Welcome, it's a great half for us, very pleasing to present on behalf of HUB24 as I say regularly and in summary we've had some great flows. We've got a very strong outlook moving forward, a very strong pipeline and some great awards to talk about and we'll continue to invest in our strategy to lead our industry moving forward. I quite often talk about empowering better financial futures and how we as an industry participant work with advisors, fund managers and other providers to help customers get a better outcome. I'm very pleased to say that our focus on working with advisors and accountants and supporting them to deliver efficient businesses, to help them with their own scale, to lower the cost of advice or provide access to further customers. is resonating with some of the awards and recognitions we've got and some of the numbers that we'll go through in the pack this morning. And nicely wanted to also say that we are in market with a More Power To You campaign which actually helps explain to advisors or helps advocate for how we do actually help them empower better financial futures together with their clients and we're doing that in Trade Press and so forth to sing the song about Hub24's leading differentiators that will help advisors achieve their goals and hopefully help us together build a better industry and better outcomes for consumers. If we look at what's been a great half, particularly in the last week, we've had a good time as well. We won five awards from Investment Trends last Tuesday, very pleasingly, which is testament to our market leadership and how we are focused on delivering to advisors and their clients. And these surveys are based on the important factors that advisors weight as in provide weighting tools, important factors for their business and for their business growth to meet their customer needs. So we won Best Overall Platform for the second year running for Hub24 and that's a scientific scored survey. Very pleased with that. We also reclaimed our Best Manager Counts functionality having lost last year but been the winner for about six or seven years. Very pleased with that as well because that's part of the core of our heritage. and part of the core of our differentiators as well. Pleasingly, also in that survey last week, we won three other awards, Best in Reporting, Best in Online Business Management and Best Mobile Platform. Later on in the pack, I'll outline 23 different areas where we've either won an award or been ranked first place. Before I hand over to Katrina Shanahan, who's with me today, Katrina will be outlining our financials shortly. Now, onto the numbers. In terms of the business, if you look at the total FUA at the bottom left of the slide here, we're at 91.2 billion. Our platform FUA was 72.4 billion. as at 31 December and as we stand at 15 February 74.8. I'll let Katrina unpack that. There's obviously good strong inflows and market movement in there as well. Interestingly our net inflows for the first half are $7.2 billion which is a record and that's partly driven by great organic flows but also the one-off large migration of $1.8 billion from an insignia incumbent provider to Hub24. As you'd know, we're working on transition or a large transition opportunity for equity trustees, which could be up to $3.5, $4 billion this half. So when you add that to our organic profile, it looks like for this year, we could be heading to $15, $16 billion of net flows. HUB24 and FY24 should that EQT transition deliver and our organic flows continue. That's an amazing outlook to be looking at. We're very focused on that as a business and of course we're investing to deliver that with people and so forth and to make sure we can actually deliver that robustly and deliver great service. If you look at the numbers from a PCP perspective, revenue across the group, platform and tech solutions, all up, group revenue 157 million, platform 120 million. A great result when you consider that part of our result had a lower, the PCP period, had a lower cash spread as previously advised and Katrina will unpack the impact of that on our margins later. So great results given that headwind there. Our underlying EBITDA also up 55 mil for total group and 48 for platform and tech solutions just slightly down. There's an investment there in data infrastructure to support the integration of MyProsperity and our future strategies we talk about and Katrina will chat about that as well. But these are great EBITDA results or underlying EBITDA results when you consider the investment in MyProsperity and the investment in our staff and our people for the growth that's coming as I said with that 16 bill expected this year in terms of net flows which would be absolutely a record for us and something that our industry has not seen for a very, very long time. In terms of our stat MPAT up 39% at 21.5%, underlying MPAT up 14% at 30.4%, interim dividend up 32% on PCP at 18.5%, very pleased with that, and our underlying EPS is also up as well. So Katrina will take a deeper dive into these results, but as a headline, fantastic results for first half 24 in a period where we've been investing for growth, we've got the impact of MyProsperity and the impact of that cash lower spread that's coming through this half and should be stable from then on. Having said that, we like to do this with a track record. We have a consistent track record in terms of delivery and the slide we've got here is articulating our four-year CAGR FUA at 54%. Group Revenue KGAR at 31% and Group Handling EBITDA at 48%. So we do aim to run the business with ongoing growth and expanding margins. We balance the accelerator and the brake in terms of investing and or delivering margins. We're not shy to invest because we believe there's a great opportunity for our business moving ahead but the story here is it's been consistent growth and reliable growth for us and we'll talk about some of those patterns of advisor flows on later slides. On the right hand side you can see the tech solutions revenue there from 1H23 including class and of course the drop off of the licensee revenue from 1H21 there as well in the trends but absolutely great results and consistent and we aim to continue to live that way. If we turn to some of the business highlights for the half, Interestingly, on the right-hand side of this slide, of course, we're number one for net inflows to September 23 and quarterly inflows according to Strategic Insights Plan for Life research. That being said, we're also number one for superannuation inflows in platforms. Great result for HUB24. So ranked number one as best platform and having the best flows on a 12-month basis in the platform and particularly across superannuation. Really interestingly, the third step there on the slide across all superannuation funds. Now I'm talking about not just platforms or retail funds, I'm talking about industry funds and corporate funds. Across all superannuation funds in the nation, we have the second highest level of switching or choice into our fund out of other funds, an outstanding result. I think it's behind AussieSuper only. It demonstrates the power of advice which we believe in. It demonstrates the industry that we're in and that those who are seeking advice from advisors are choosing Hub24 and we're switching into our products and many, many others. And we're number four overall for net inflows across all super funds, again including industry funds. A great result for our business. Turning to some of the anecdotes or matters to mention for the hub, we've talked about the strong PUA growth. At our AGM we also talked about having launched Hub24 Discover, a cost-effective streamlined managed account portfolio platform. It's had a strong uptake. To date there's close to 200 accounts in Discover at the moment and that's a great result and it's actually in our target space that we aimed it for. The average balance is lower than the rest of the platform's average balance so it seems to be a well positioned product but early days having been launched probably six weeks ago and having Christmas in the middle. Equity Trustees Migration, as I mentioned earlier, is on track. In the next few weeks we should see the first results of that all going well. And also in our class business, delighted to have market leading NPS and receiving some industry awards there and seeing the growth in class and now Infinity and others there as well. You would be aware if you followed the AGM, we also launched new product features in the high net wealth space. I'll take a deep dive into that a little bit later on. And our MyProsperity business is going really well with increase in households on board and some enterprise licensing model launch which are really exciting. Of course, as always, we're investing in tomorrow building a market-leading data infrastructure which really leverages the group's capabilities to help us deliver on our strategy. And we're getting to the final stages of the Explore integration which is very pleasing as well. With respect to market share, in terms of the market share gains, Hub24 has grown our market share from roughly 1% five years ago to 7% today which is a great result. When you consider the flow patterns we've got in terms of net inflows being the largest in the industry and the rankings we've got at 6% market share, there's a lot of runway to grow at increase in size quite substantially. On the right hand side if you look at the, we're ranked number one for organic market share gains over one and three years and the slides there indicating the three platforms in growth stage and where we're at. If you actually add back the inorganic flows for years three and year five there, we're ahead of the pack as well. So really doing well in terms of organic market growth and acquisition market growth. And these are great results across our business, across the main platform business as well. With a strong and growing customer base which gives rise to these results, we have a look at that growing customer base that drives that outcome on the next slide. In terms of advisors, today 28% of the advisor market is using Hub24 in some way, up from 5% in first half FY19. and so great result there. There's a CAGR in advisors using the HUB, five-year compound annual growth rate of 24% and the average balance we have from advisors is also growing which I'll detail in the next slide a little bit further. So the average balance there you can see on the slide, that's the blue bar chart up to about $17 million up from hovering around 5, 6, 7 from 19 and 20 up to that result. So demonstrating that we're actually getting more share of wallet if you like of our customers at the same time as growing the customer base. We're ranked number one for organic net inflows to September 23, the 12-month period there at Tenville and we're in the top three over one, three and five years as well. So let's unpack the advisor base and the flow trends and outline the significant runway for organic growth in the future on the next slide. On the left-hand side you can see the breakdown of flows from different cohorts of advisors, being new advisor relationships or new licensee relationships, Existing licensees where new advisors have chosen to use us in that financial period and existing advisor relationships. We have ongoing reliable flows year on year from existing relationships. We're also opening up the door with new advisors inside a licensee that we work with and also new advisors as well, which means we've got reliable ongoing flows from our business that compound over time. The first half 24 is there on the right hand side of that chart and that's the $7.2 billion we talked about. I'd imagine the 11% there from existing licensees with new advisors will tick up as the year progresses because we're only through the first half. Having said that, if you look at the overall industry there's 15,500 advisors. in the marketplace, we have access to about 7,500 of them with licensee agreements with AFSL holders in the country and that's about 48% of the market. Of that 7,500 that we have access to with existing agreements, And we do sign new agreements all the time. I think we signed quite a number up in the first half. I think it was about 70, if I'm incorrect, someone will correct me, in the first half. Of that 7,500 that we have access to, 4,300 are actively or have actively used HUB today. So a long-run way that we could get to moving ahead, a latent opportunity if you like there. Mature platforms may have a higher share of balance or share of book of each advisor and our business is growing. We're actually seeing that average increase from $8 million per advisor in FY20 up to $17 million so doubling our share of wallet and that's because of the newness of our book, the type of advisors we've got, we're in a growth mode. Some others with higher balances per customer are actually shrinking or suffering market outflows. and that demonstrates where we can get to and the opportunity ahead of us. Our calcs are, the industry average is 62 mil per advisor. As I said, our average is at 17 mil, a long way to go if you get half or three quarters of an advisor's book. Interestingly, to show the ability for us to get greater penetration, nine percent, I think it's up from seven or eight percent last time we reported, nine percent of advisors using the platform have more than 50 million on Hub24 looking after their clients. And as I said, the advisor relationships deliver flows typically up to about six years before you get to a steady state of flow from advisors. So a significant growth opportunity in our business remaining from existing and new advisors and you can see that the stats are changing half on half in terms of that level of shareable penetration. Really excited that we reclaimed our managed portfolio leadership position. with best managed accounts, the number one for overall satisfaction. In terms of advisor demand for managed portfolios, that's at 56% up from 30% in 2018. And we have $32.7 billion and 18% market share in that market. It's a key differentiator for us. We've won the award about six or seven times. It is playing to the sweet spot of advisor growth and some of the things that set us apart on the left-hand side, our leading tax optimisation, we do in-house trades, efficient portfolio implementation for managers. and most recently having launched Discover which is a streamlined, simple, cost-effective, simple fee-structured product for those starting out or simpler needs, being able to take that managed portfolio capability to a part of the market where there's an opportunity where we haven't grown as much as we'd like for those who are starting out and working well, as I said, with about 200 accounts in that product already to date. If we have a look at some of our other businesses quickly beyond the platform, My Prosperity has done really well. We're up about 20% or 12,000 households since we bought the business in April 23 and there's about 20 new wealth practices using the business up to about 460. Great market leading secure client portal technology playing to great collaboration between advisors, accountants and their clients. A safe place to store your data, your financial plans, almost a vault that's cyber secure rather than sending emails around the industry. It really is resonating in terms of the current offer with licensees and advisors and accountants. We've actually got great engagement underway with large groups who are looking at the cyber and the secure and the security and the efficient way of doing business. and have asked us for enterprise software licensing models. We've got that underway. There's one group already rolling that out to customers. Great result for us and I think that as we move forward, as we integrate MyProsperity better with our group's other products, it will be a driver of flows but a driver of change in the industry, creating efficiency and lowering the cost of advice. We're also prototyping a new class client portal, leveraging MyProsperity as well right now as we speak. So fantastic, we're heading with the investment there with the growth coming through and a great result. Turning to class and now Infinity, once again consistent growth in those businesses, class market share at 34.4%, more than 200,000 accounts now. and 650,000 companies on corporate messenger. So Class providing great diversified customer base, a footprint for expansion for the group, leading in its own space and winning its own awards as well but also helping us with our platform of the future strategy. In fact we're starting to leverage Class portfolio data capabilities to support our whole world view and integration of solutions for different customer segments. and the continued focus on customer service excellence as I said earlier has led to CLAS getting great customer engagement and market leading net promoter scores. So good results there, reliable results there and also feeding into our strategy. I've got one more slide before I hand over to Katrina Shanahan and I won't spend much time on it but as I said earlier our overall industry recognition The current awards or first place rankings there on the slide, in addition to the investment trends pieces I mentioned earlier, in their advisor technology need reports, we've got some other rankings there, primary advocacy, MPS, taps and so forth. Clean sweep and advisor ratings for the platform, also for Wealth Insights and awards for our platform being the SMSF Advice Platform or Advisor Choice Platform. And class as well, being SMSF Software Provider of the Year and having the highest Net Promoter Score. both Class and now Infinity. It really is a delight to work with a fantastic team, great customers and great industry participants to lead and get great recognition for what we're doing which is really about changing the way wealth works in the country, leading transformation and empowering better futures for our clients. Katrina, over to you for financials.

Excellent, thank you Andrew. So just moving to the first financial slide. Here we have a group snapshot, writing out the group, the platform, and the tech solutions segment for revenue, underlying EBITDA, and the customer base. So as Andrew called out, you can see that the group's revenue was $156.7 million for the half, with underlying EBITDA of $55 million for the half. Platform is driving 77% of the revenue, and tech solutions is driving 22%. with the corporate and other interests as 1%. In the platform segment, we have just under 4,300 active advisors using the platform. We've grown revenue to $120 million, and we've also grown the underlying EBITDA to $47.9 million. The custody platform is clearly the largest part of that segment, with 96% of the revenue coming from the custody part of the business, and included within the other segment of 4%, we have the non-custody solutions and the microsperity included this time for the first half. Tech solutions, we have revenue of $34.8 million for the half, and underlying EBITDA of $10.1 million. And there are just over 6,000 financial professionals who are using the Class and the Hub Connect solutions. So then moving on to the next slide to go into a bit more detail on the group, the platform, and the tech solution segment. The next slide we have the group financials. So here you can see that we've increased the operating revenue up 14% to the $156.7 million. We've also increased operating expenses 16% to just under $102 million. I'll talk more about operating expenses when we get later in the pack. And we've also grown the underlying EBITDA to $55 million, which is up 10% on first half 23. Underlying EBITDA margin is 35.1% for this half, which is down 1.1% on first half 23. This is largely driven by the investment in our people and higher FTE. FTE has been growing to just under 900. We've also got lower vacancy rates in the first half 24, which is more of an industry and block production area phenomenon. As I mentioned earlier, I'll talk more about the expenses a bit later. The group's revenue growing to 156.7. Platform, on the right-hand side, you can see platforms delivered 17 million of growth in the revenue, and tech solutions has delivered 1.4 million growth in revenue. And then when you look at the underlying EBITDA, platform has delivered $6.5 million growth in underlying EBITDA. The tech solutions segment is down $0.4 million in underlying EBITDA. Included in that is a million dollars worth of investment in our data strategy, which is using the HubConnect data tech and the data solutions, which I'll talk about when we get to the tech solution slide. On the bottom left-hand side of the slide, you can see again the Swiss franc interim dividend of 18.5 cents, which is up 32% on first half 23, and the underlying earnings per share up 12% to 36.2 cents per share. Moving to the next slide, here we've got more details on the financial results, and you can see the strong growth in the platform FUR, which is up 30% to $72.4 billion, and the non-custody PAS FUR is up 9% to $18.8 billion, which brings the total FUR to just under $91 billion, up 25% on first half of 2023. This also includes the industry-leading net inflows of $7.2 billion, which includes the $1.8 billion for the large migration. We've also got an underlying EBITDA margin for the platform of just under 40%, 39.9%, which is broadly flat to first half of 2023, which was just over 40% of 40.3% in the first half of 2023. On the right-hand side, you can actually see the breakdown from the movement in the FUA for both the custody and the non-custody, with the platform market also adding $2.5 billion from the growth in the market, in addition to the $7.2 billion of net flow for this half. Moving to the next slide, we have the trend. So we have a trend here for the financial platform. We have the underlying EBITDA margin and the underlying EBITDA. So first half 22, underlying EBITDA margin was 38.8%. It's remained relatively steady over the last five halves. up to 39.9% in the first half 24. Underlying EBITDA has grown from 30 million back in first half 22 to 47.9% in first half 24. When you compare the first half 24 to the first half 23, there was a change in the ADI deposit spreads. So the HUB24 ADI contract changed back in December 22. which meant that the first half 23, the PCP that we're comparing to, had five months of higher ADI deposit spreads compared to both the second half 23 and the first half 24. In addition to the lower deposit spreads, we've also got lower employee vacancy rates within the platform segment, and we've also included the My Prosperity for the first half. So when we look at the performance of the underlying EBITDA margins remaining broadly flat, and then the underlying EBITDA growing from 30 mil back in the first half of 2022 to 47.9% in the first half of 2024, we're really pleased with the benefits in the scale and the automation and the fact that that's offset the investment in the growth and the change in the deposit spread across the industry. Then if we move on to the next slide, we've got a bit more detail on the platform custody revenue and the revenue margin. On the right-hand side, you can see the six-year trend for the platform custody and the revenue margin with the revenue continuing to scale in line with the custody firm. Over the last 12 months, we had 7.2 billion in the first half 24 of net flows and 4 billion in second half 24, which is $11.2 billion over the last 12 months leading into 31st of December 23. And you can see that in the graph on the right-hand side, that growth in the FUA coming from those net flows. On the bottom right-hand side, we've also got a walk from first half 23 to second half 23 and then to first half 24 for the custody revenue margin. So the margin has held flat from second half 23 to first half 24 with half a bit of normal tiering and capping coming through for the admin fees. And then that's been offset by an increase in cash and trading with higher trading volumes being the main driver of that half a bit in the cash and other. The drop from first half 23, 37 bits down to 35 bits in second half 23 and first half 24 is largely to do with the change in the AVI deposit contract that I was talking about. Then moving on to the next slide, we'll just finish off on the platform segment. So here we've got the composition of the platform for and the platform revenue. On the right-hand side, you can see in the donuts that for first half 24, The retail portfolio was 85% of the custody for and the institutional portfolio was 15%. The institutional part of the portfolio includes the $1.8 billion of large migration that we had in this half. The fact that it's held flat, 15%, first half 23 to first half 24, implies that the retail net flows remain strong and are driving a large part of those net flows, which has kept the portfolio mix consistent year on year. And on the bottom right-hand side, you can see the custody revenue margin over the last three halves split between the retail and the institutional. This correlates to the... previous slide where we were talking about the overall custody margin of 35 bits in second half 23 and first half 24, with both retail holding flat at 38 and institutional broadly flat 14 in second half 23 and 13 bits in first half 24. And again, first half 23, the reason for the drop between 37 and 35 is to do with the change in the ADI deposit thread. Just another call out here is that MyCosperity, there was an underlying EBITDA loss of half a million in the first half 24 and over the full year 24 we're expecting an underlying EBITDA loss of one to one and a half million dollars given the startup nature of that part of the business. But as Andrew mentioned, we're really very pleased to have that part of the business all post the acquisition. Then moving on to the tech solutions slide, you can see that the class accounts have grown 3% to just under 204,000. We're currently at 203,860 accounts, which includes the SMSF portfolio, the trust, and portfolio subscriptions. The document part of the class business has grown 2% to just over 182,000 clients. And companies using corporate messenger have grown 12% to just under 700,000 customers using that part of the permit. Revenue for tech solutions, which includes both Class and HubConnect, is just under 35 mil, that's 34.8 mil, up 4% year on year. Operating expenses are up 8%, which includes the inflation for salaries and the lower vacancy rates that we've called out. And then the underlying EBITDA margin is $10.1 million, On the right-hand side, you can see the strategic investment that we've called out there for $1 million, which includes machine learning capability, which is driving efficiency and risk indicators for advisor reporting. It's also included in account-level dashboards for KRIs, which drive insights for advisors and licensees. There's also alerts and escalation reporting engine that we've developed for about $1 million. which is driving efficiency and advocacy onto the Hub24 platform. So again, we're pleased with that part of the portfolio, and with the performance of that investment, we're really pleased with the uptake of that, and that's also supporting the momentum that we can see in the platform out of the business. So then moving on to the next slide, we've got the group expenses and margins. So group expenses are up 17% for notable items. Notable items you can see on the right-hand side of the graph is $12.6 million. That includes acquisition amortization for the Explore, the Augment and the Class acquisitions. It also includes between $4 and $5 million for part of the Explore integration and for the Class migrations, one that we've completed this half, but also for various others. that is due to come in over the second half of 24 and complete in the third half of 25. Additionally, in the expenses, the four notable items you'll see, it's 98.7 million, growing 17% to 115.5 million. The employee-related cost is the largest increase of just over $10 million. That includes salary increases and uptick in FTE. FTE is now 883. It was 736 FTE back in first half, 23. And it was also 838 in second half, 23. So the FTE increase includes both growth for this half, the 7.2% net inflows we brought in in this half, And we're also investing for the huge net flows that we're expecting in the second half and the pipeline that we're seeing come through. And then, again, also in some of our corporate areas, strengthening our risk and compliance and our HR functions. So, again, you can see in the bottom graph, the underlying EBITDA margin, it's gone from 36.4% in the first half of 2022, 36.2% in the first half of 2023, and then down to 35.1%. In that graph, we've highlighted in a separate color in the blue, had it not been for the change in the deposit spread, we actually would have grown the underlying . So that blue box we're really trying to highlight, actually if we'd excluded that change, what would the growth outlook have looked like? So then moving on to the next slide, here we've got a walk of the different profitability measures. So we've got underlying EBITDA of 55 mil, which was up 10% on first half 23. We've then got 5.8 million of share-based payments, 6.9 million of normal depreciation and amortization, which excludes the acquisition amortization. We've then got interest expenses of 1.1 on the company's borrowings and then tax of $10.8 million, which takes us to underlying NPAT of $30.4 million, which is up 14% on first half 23. And then we've got $4.6 million for the Explore integration and the large migrations, 8 mil for the acquisition amortization and tax deducted on those expenses, taking us to statutory MPAT of 21.5%, which is up 39% year on year. Then if we move to the final slide, We have a reminder of the strong capital management with $61 million of cash on the balance sheet, given us flexibility for future growth and other initiatives that we're looking at or could be looking at. We announced a share buyback back in August. We've completed 10 million to date. We've got $40 million that we're intending to complete before September 24, which is within 12 months of announcing the buyback. We've also got on the right-hand side, you can see the underlying earnings per share growth over the last four years, a CAGR of 43% and a dividend four-year CAGR of 52%. So very pleased with the capital management and the strong performance that we're delivering. So with that, I will hand back to Andrew to finalise on the strategy and outlook.

Thank you, Katrina. And folks, I'm going to do this fairly quickly, conscious that we want to leave time for questions and some of the content you've seen before. But starting with some of the trends we have in the marketplace, there's an absolute significant demand for professional advice. We hear about it in the newspapers, we have the government talking about it, both sides of government talking about it. We've got QAR opening that up in terms of creating advice opportunities for super funds and banks and others. And absolutely, we see that as a good incubator for our business because we're absolutely committed to advice and accounting, helping customers with their needs. So in the marketplace, you've got the rise of new advice models. We've been through the disruption of the shifts through vertical integrated businesses in this country moving to self-licensed and other licensing models. You've got really the rise of boutiques and large aggregation groups either backed by PE or others starting to rise in the marketplace. Great opportunity for us. We work very closely with those groups with our key accounts functions but there is an emergence of advice networks which is creating an opportunity for us to distribute our products but also to help with those businesses with efficiency and compliance and in some cases they're building multi-disciplinary businesses which combine financial advice and accounting dealing with the needs of customers. Interestingly, we have relationships on the slide on the left-hand side with about 6,000 accountants through our class business and just over 15,000 advisors in Australia with 76% of the market relationships there as well. That demand for advice in Australia is 29% of unadvised Australians seeking advice. and 2.5 million retirees expected to transition retirement in the next 10 years which absolutely given the social imperative of our country and self-funded retirement is going to need help and assistance given complexity and the opportunities to preserve and maintain and grow wealth even There's also an intergenerational wealth transfer I'll show you on the next slide into some of the phases. So we're really dealing with our business investing on how we can help advisors become more efficient, service more clients, more than 120 on average they see now, and there are staff shortages in the industry. So data, products, and efficiency are key to helping our industry, and we're absolutely focused on that with our investment profile, and there's great demand and opportunities for us, as I said, the demand is there. for more and more people to seek advice. Turning to the life cycle stage slide, which we showed also last time I spoke to you at our AGM, the population shifts are continuing. If you like, there's the millennials rising up who are going from starting out to accumulating wealth. There's certainly an ageing population where people are looking for certainty and looking to manage longevity and the risk of sequencing or the risk of running out of money in retirement and there's also the government agenda in terms of changing the regs and the caps and so forth. And the intergenerational transfer of people as they pass on their wealth to their beneficiaries, inheritance and tax planning and so forth and downsizing. So that's the trend in the marketplace. The demographics are shifting and of course there's simple and complex customer needs represented with the access there and you can see some of the stats about the population. We're absolutely planning our business and thinking about that and how we broaden out our residents or services and products across those groups but also helping with that transition and providing hopefully an end-to-end solution that allows people to transition through life stages. If we go to the next slide, so how do we approach this and what are the strategies and offerings for investment we've got? Well, at the start of it, our approach is to lead today with our current platform offers and we certainly have been with the awards. It's about delivering customer value and growth with our current product range but it's also about creating tomorrow. We're thinking about those demographic shifts, what the market's going to require, how we can help transform the market and build solutions that deal to those demand gaps and efficiency gaps and really leverage technology, I quite often say, we're not done yet. There's more to do to create efficiency and better outcomes for customers and why not? If technology can create better outcomes for consumers, we're absolutely going to do that. And we're also, as part of our third leg of that strategy, wanting to work across the industry to shape the future of the wealth industry as those shifts occur. At the heart of that, if you look at the graphic in the middle, Hub has four market-leading business areas or product ranges, being the platform in the bottom right, our data and infrastructure capabilities, software and applications being Class, now Infinity, and also MyProsperity being a client experience portal. Those components together, working with the outside of that ring being external third parties or others in the industry or other processers, is allowing us to play to how do we build better solutions, more integrated for client experience, leveraging data and so forth to get the outcomes on the right hand side. Single view of wealth, one way of doing business, efficiency, flexibility and great insights. That's the heart of our strategy and our approach is to continue to lead today to leverage the great assets we've got and to build solutions for the future. But turning the page you can see an overlay of some of the product solutions we've got in our platform business across those different demographics and we've been gradually extending our reach to meet different client needs across their life stages. with Hub24 Discover, they're helping those starting out or helping those winding down with simpler needs. Correction to earlier, the stat I had earlier was about 170 accounts. I've just got a stat from this morning, there's 260 Hub24 Discover accounts which is a great result for us given the short period of time it's been launched. And moving up the scale there, you've also got other products like SMSF Access which deals to more complex needs up to wholesale discretionary accounts. So we really are trying to provide solutions leveraging our manufacturing capability across different life stages, different balances and needs for complexity and different client or market segments if you like. We did talk about Discover a bit at the AGM today. We'd like to talk a bit more about our high net worth capability and where we are with that. We did launch a white paper in the market recently about that and we are ranked second overall in the market in the latest investment trends survey about our capabilities for the high net worth market. Demand is increasing there, advisors are more and more focusing on higher balanced customers and you've also got reg change occurring in that space as well. But we absolutely do empower advisors with great solutions for the high net worth clients. We've got a broad range of investment options including bonds, TDs, direct FS, ESG investments, Our market leading managed portfolios are exceptional with delivering alpha in that space or what we call execution alpha or platform alpha. We do have whole of wealth view and enhanced client reporting for assets both on and off platform and some innovative solutions that are helping with that intergenerational wealth transfer, behind it wealth back to the children and the family through SMSF access and Discover and so forth. Of course you'd be aware of our PaaS business which is non-custody or portfolio admin reporting service. We run for large brokers and wealth groups and we're actually in terms of moving forward coming to market with a slightly different offer which is adding non-custody admin to our platform moving forward. Around about March we'll be having a phased rollout with some select WealthIn firms where we integrate custody, our great custody admin solution, not just with non-custody reporting as we do today where you can do that and get a hold of WealthView, but with non-custody administration services as well, which will further enable the whole of WealthView, give comprehensive admin off-platform assets and efficient corporate action management for transactions online platform. So watch this space heading in that direction to supplement the great capabilities we've got already in what is a growing market demand where we've got some great runs on the board. My final slide before we open to questions, sort of say in summary we've got great market leadership, we've got great investment in our platform in terms of the future, we're thinking about where we have to go to continue to disrupt the industry and we are gaining market share as you can see from the stats but with a long runway and a great latent opportunity to continue to excel and increase our market share moving forward. Having said that our full gardens target that we launched in August remains the same, $92 billion to $100 billion by FY25 largely comprising a net flow organic range of 10 to 12 bil. And this is a custody for a target guidance statement. We've got the opportunities for large migrations having done the insignia one and EQT on track and there's a range of market growth assumptions there. So very confident that we'll hit in that range for FY25 and moving forward we anticipate strong profitable growth and maintaining market leadership by capitalising on our great capabilities I mentioned in the strategy slide. We've got a strong balance sheet supporting our investment profile, dividends and share buyback, highly scalable, diverse customer base, reliable revenue, both new and existing customers expected to keep driving that pipeline and that growth and we'll continue to invest in leadership for tomorrow and leverage the tech and data that we've got to great customer and industry outcomes. So all in all, a bright outlook for Hub24. Thank you very much for listening to us talk about that. We'd love to open up for questions now, and I'll hand back to our facilitator.

Thank you, Andrew and Katrina, for the presentation. And as Andrew mentioned, we are now opening the floor for questions. If you would like to ask a question, press star followed by the number one on your telephone keypad to raise your hand and enter the queue. When you are selected, if you are using a loudspeaker, kindly switch to your handset to ensure your question is heard clearly. To accommodate as many participants as possible, we request that you limit yourself to one question and one follow-up, and if you do have any additional questions, please re-enter the queue and we will address them as time permits. Again, that's star one to enter the queue, and your first question comes from the line of Nick McGarrigle. From Baron Joey, your line is open.

Hi, Tim. Maybe just a question on how the year has started by the look of the market. It seems that you did kind of half the movement increase over the first 6.6 weeks was from close and half was from market. But I just want to confirm that and what you're seeing in terms of trends around RFPs and further transitions getting you towards that 15 to 16. And then I've got another question after that.

In terms of the 2015-16, we're very comfortable that the pipeline, the organic normal net flows are on track, Nick, and if you add to that the insignia number we had in the first half. We expect the EQT transitions to start in the next few weeks. There are three parties involved in that. We're well and truly ready. right to go and I was chatting with the CEO of equity trustees the other day. So we think we're fairly comfortable with that. We'll let you know if that changes and it's well advised. Kit, you might talk about the market movement and trend but good inflows for the first six weeks of the year.

Yeah, absolutely. So as Andrew mentioned in the PAC, 74.8 bill at 15th of February, so Thursday last week and yeah, you're spot on Nick. Roughly half of it is net flows and half of it is the market growth.

Cool. And then just another question for me around CapEx. It was relatively high in the first half at 10.8 million. Just how we should think about that going forward. Were there any one-off projects in the CapEx number in the first half?

Yeah, so there isn't anything in there that's a one-off. The themes that are in the CapEx were, obviously, you've got the platform CapEx, which was just under 7, which was 6.9 mil, and then the tech solutions broadly being the class piece, which is 4 million. On the platform side, you've got scalability and performance. You can see the flows continuing to grow, so we're continuing to build for the scale that we're seeing. We've got cyber that we're increasing, constantly increasing the capability to cyber. We've also got straight through processing and automation in the operations world which is driving productivity. So there isn't a one-off necessarily in there but I would say there is always a bit of phasing between first half and second half. and it's not always a consistent year-on-year. But I would say that for full year 24, yes, it will be up on 23, and it could be in the range of anywhere 10 to 13 mil, depending on how it goes in the second half.

Sorry, 10 to 13 in the second half alone?

No, sorry, 10 to 13 for the year.

Sorry, so you did 10.8 in the first half?

Sorry, just for the platform segment. Sorry, I was just talking about the platform one there. So if you go from 6.9 in the first half, it'll be somewhere between the 10 to 13 for the year, just in the platform segment. The class will be consistent, half on half and year on year.

Got it. Thanks. Your next question comes from the line of Nick Burgess from Ordmanet. Your line is open.

Yeah, morning guys. Just a couple of questions first off, just on tech solutions. So overall growth in terms of revenue growth and super account growth is pretty modest. So two-part questions for this business overall. What's the key in terms of accelerating that growth? There's obviously product development going on in the background. Is there more product development needed? Do we need to be patient on the investment that's been made so far? First part of the question. Second part of the question, how should we think about the operating margin over the next couple of years, given the current growth run rate of that business?

I might kick off. Absolutely, there is an investment there. We bought MyProsperity. We've got Class. We're absolutely investing in, and we've talked about it before, in really robust infrastructure, cyber secure data sharing capabilities, the Class portfolio data. is a very rich asset to us that we can help customers with, and so we are building that out. There was a decline in revenue from the HubConnect brokerage clients, which we've said will happen over time, but we've been investing in that data infrastructure. It is supporting an adjacency, Nick, so in and of itself, The business is there to get some growth but it is actually supporting the overall strategy and capability and supporting some of the platform of the future pieces and some of the awards we're winning, that's actually driven some of the investment in that business. So yes we've got more to do, we've actually got plans to leverage that even further. We don't expect class to grow phenomenally, we expect class to grow in a consistent and stable way but we expect to grow the overall pie by building better solutions and create competitive advantage with that. So a bit more time but we have deliberately invested some, we've moved some of the expense base to invest in strategy and we had a revenue decline. Is that fair Katrina?

I think that's fair and I think as Andrew said I wouldn't expect in the short term material changes in the underlying EBITDA margin that you see come through that part of the business because we will continue to invest in the HubConnect data and technology stack that is driving advocacy on the platform and productivity for advisors and the cost of advice and then on the class side Absolutely, we are looking at the investment in class and we're looking at delivering the strategy that was driving the acquisition of that platform.

So some of the cross-sell there, as I said earlier, we're building the prototype for a class portal, which is really, you know, the portal we have today is not fit for what we think you could deliver on an SMSF software business, so that's with my prosperity. So we're building that out, which will help make class easier. a better product in the marketplace and create integration. We're starting to look at the class portfolio data capability, which we talked about on acquisition, whereas to date we've been about stabilising the business, getting it back to relying on its customers and building SMSF access. So there are some strategies in place that will come out, Nick, over time as well about how do we leverage that class portfolio capability, which if you like could be seen as a tax engine that competes with other non-custodial services in the marketplace like RS IPS and premium. We're now turning our attention to those strategic capabilities, which all in all will help the group.

Okay, thank you. That's helpful. And just a follow-up question. I'm not sure if it's related to your last couple of comments there, but the non-custody administration service that you're launching in March, is that just an investment in people to do the administration, or is that a new take on either new or existing technology to support that service as well?

It's both and it will evolve over time and we do have non-custody admin services in market as you know. This is attached to the platform so it's an additional feature in the platform. It's not a new service so if you have the platform you can have some other assets. We currently allow you to report on them but we'll do some admin for you. We've got a staged launch if you like with select firms from March. We are going to market obviously building some tech and integration and people, but over time that tech will evolve as well. So there'll be ongoing development there as part of our platform build ongoing. Thanks very much.

Thanks, Nick. Your next question comes from the line of Simon Fitzgerald from Jefferies. Your line is open.

Hi there, Andrew. Just my first question is just in regards to the new relationships. both at the advisor level and new advisor practices. I was interested to know what you may be seeing in terms of custody that's currently off platform that's forming part of those new relationships.

Custodial assets off platform?

Yeah, correct.

Okay, so we clearly when we talk with those relationships we understand what they tell us in terms of what they've got in the group. It's not publicly available information so it's about the opportunities we chase. There is, you know, if you take the way number two with superannuation switching, a lot of those relationships were picking up clients in different life states who were typically industry fund clients. Hence that's a part of the market that we tap into with that. But I don't have visibility of large pools of money mapped to each group depending on what they've told us. So there's always large transition opportunities. If you look at, hey, if our average balance per advisor is $17 million, others in the industry have far higher balances. and we're talking to groups, there's a latent opportunity there. Having the data is only if it's disclosed to us. I'm sorry, I wish I could tell you more, but we obviously look for the right opportunities with the right assets off our platform in other places.

Okay, that's fair. And then just the follow-up question, in terms of the impact on revenue margins, obviously the EQT coming through as a large institutional set that will form part of the second half flows. Just wondering how we should be thinking about overall revenue margins.

Kit do you want to take that one? So look, from a tiering and capping and an admin fee perspective, I've often said it could be anywhere between half a BIP to one and a half BIP a year. So this year, yes, I'd probably expect it to be somewhere between that one to one and a half BIPs on the admin fee compression for tiering. That also includes the PDS role that we did in November and people moving to that new disclosed rate card. Obviously, it was a small impact on our portfolio and that's included in the one to one and a half bits in admin fee. Then you've obviously got the cash balances and towards the end of the year the large migration coming in from EQT. Now EQT won't have a significant impact over the half because broadly it will be coming in towards the end of the year and it will all go through the institutional part of the revenue margin. So just when you're doing your modeling, it goes in that institutional piece. But then the cash, you would have seen, you know, looking across the industry, that cash balances as a percentage of SPUR. have been low and they've been low for a little bit longer than they normally would be. So it will all depend on where they land for the second half. I'm not sort of putting any stakes in the ground as to where that might land but that's just something that there'll be a range of assumptions that you'll need to use for where that cash balance sits for the second half.

Is the EQT margin kit equivalent to the current institutional margin levels?

It is, yes it is, at a total portfolio of institutional, yes.

Yeah, so it'll keep institutional on track, it's just a mix of institutional, retail, they shift.

Yeah, and that's the total revenue margin.

Sorry, was that helpful?

Yes, thank you. Yes, thank you. Your next question comes from the line of Brendan Carrick from Macquarie. Your line is open.

Good afternoon. Just maybe a follow up on the margins. There's a slide that sort of shows the dollar value for admin fees up 4.8 and then cash and other up 9.1. Are you able to disaggregate that 9.1 a bit more specifically with the potential contribution from the trading or the transaction revenue, given that? I mean, it looks like it might have all been, the uplift might have all been from trading given that admin fees were down half a bit and obviously trading was up. So I just wanted to maybe a bit more colour on the contribution from trading.

We tend to, we don't break out the trading and the cash. And so we wouldn't, like we wouldn't be able to, I won't be able to break it out for you so that you'll know more where that comes from. But the one thing that I would call out is that we obviously do also include MyProsperity in the platform segment. And that's in the other, I'm included in the non-custody in the other piece as well. So the platform operating revenue, the graph that you're referring to in the analyst and investor pack, that's just the custody piece. So it wouldn't include the non-custody and the my prosperity bit. So that 9.1 in that graph, I wouldn't break it out between trading and cash, but the trading has been high this six months is a way to think about it.

Okay. And then maybe just to follow up from that, I think MyProsperity, you've told us the EBITDA contribution. What was the revenue contribution from MyProsperity in the half?

I haven't given it out, but if you use the front in the section where it talks about the group, the platform and the tech solutions, you can see that the other part is 4% of the 120 mil. So just to tell you how to find it, if you go and have a look at the analyst pack and you look for the non-custody piece, clearly the difference is going to be my prosperity. So roughly half of that 4% is my prosperity and half is not.

I thought you said you weren't telling people.

Pretty easy to work it out from there.

Yeah. Okay. And then last one, just on, oh, sorry, maybe two quick ones. Just on the strategic investment, $1 million, is that embedded into the cost base now that that's for the strategic investment in the tech solutions business? Or is that more of a one-off type cost?

It wouldn't be a one-off, so yes, it would be embedded in the cost. I mean, we obviously, we will look for operating leverage and scalability to be able to offset it, but no, that cost is embedded in there.

And sorry, one more if I might. Just on the buyback, the way that I read it in the slide, it sounds like you intend to complete the remaining, call it $40 million of that buyback. Is that correct? Or if the share price keeps going where it is and it's more advantageous to pay down debt or leave the money in cash, would that be an alternate option as well?

It's clearly an alternate option, but at the moment we are committed to completing the share buyback. Part of the rationale for it was we obviously, when we do acquisitions, and we did the My Prosperity acquisition in May last year, we issue shares and we're aware that that dilutes for long-term shareholders. So part of the rationale... was to sort of help assist with some of that dilution and people can participate in buying shares as we're buying them back on the market, participate in that or not. But you're spot on that, Luke, as we work through the second half, if we thought that there was a better way to use the capital management, we're absolutely open to that.

Okay, thank you.

Your next question comes from the line of Olivier Coulon from E&P Financial Group. Your line is open.

Hi, Katrina. I know it's been asked a different way, but you did seem to flag that you thought cash balances across the industry were a bit lower. So is that to say the closing cash balance or current cash balance in the pooled funds is lower than the average through the first half?

Absolutely. So we normally say that the cash balances can be anywhere between, you know, let's call it 8 and 10. We have historically said it could be anywhere between 8 and 12, but it's been quite a while since it's been above the 12. So anywhere between 8 and 10%. It's been over the last, let's call it three months or so, it has been below that 8%.

Apologies for the interruption. We will place you on a slight music hold and rejoin the speaker line momentarily. Please stand by as we rejoin the speaker line. Thank you. Thank you for standing by. We now have our speaker line rejoined.

Sorry, there was some sort of technical difficulty. I hope there are some people still there. Do we have any further questions, Pauline?

We do. We have a further question from Siraj Ahmed from Citigroup. Your line is open.

Siraj, welcome. All good, thanks. It's two questions. This first one, Andrew, on your comment with $15 to $16 billion of flows, That seems a bit low, right? If you're assuming, I think you mentioned three and up to four billion from equity trustees. You had one billion from Insignia. I'm happy for you to say it's a bit low.

Absolutely. You know me, I don't want to overpromise and have to correct that. Obviously, aspirationally, we'd like to do better than that. It's possible we do better than that. But if you do the maths, if you take the first half organic flows and double it and add EQT and Insignia, you'll get well up into that number range. And if we do better in the second half organically, we could do better. You're quite correct. So my point is not about dampening it. It's about saying it's about not overpromising.

Okay, got it. No reason why June quarter seasonality should not hold this year. Because I think Katrina previously mentioned March quarter decides everything and seems like you've had a pretty good start. That's why I was a bit surprised.

It's just a theory, Siraj, that the third quarter will dictate what happens this year based on previous years. So if we do, and that goes to the seasonality that we've had in Q4. The last two years, clearly the seasonality has been unusual and that could be, you know, a number of things, economic factors, fees for consent. So I think obviously the second half and depending how that seasonality goes will will sort of dictate whether or not the second half organic net inflows that Andrew was talking about has a higher run rate than we saw in the first half.

And we're yet to see how much incremental flow we get from Discover. Most of it appears to be clients we wouldn't have got previously as opposed to taking clients away from existing offers but it's early days, Siraj, and we don't know what's happening at a macro level but yes, we're fairly bullish and the statement could be low.

Super helpful. Thanks. Secondly, just on Katrina, just on costs, I mean, at the 2Q update, you did say second half sequential costs should be lower. I just want to confirm that and how we should think about cost growth in second half and phasing.

So we tend not to give guidance on what the cost growth will be, but FTE is the clearest driver as to where the cost growth could grow. And so obviously we're at 883 FTE about 31st of December. The average FTE in the second half was higher than the spot growth because we did a lot of the hiring in the first quarter and then in the last quarter of last year. And so what I would say is that you'll see a much lower growth in FTE in second half.

It could be, you know, ideally it'll be half the growth that you saw in the first half is the way to think about it.

Okay, and just one more question if there's time. Andrew, if that's okay.

That's fine. And we will wrap up after this, folks. I have some media to go to, but Suraj, off you go.

Yeah, sure. Andrew, just in terms of this investment you're making in tech solutions, the million dollars for data and that kind of that, how do we think about this contributing in terms of the core custody or for the whole business, right? Clearly making strategic investments. How does this translate in terms of revenue?

Thanks.

Look, I think it translates into further market share gains market leadership. and us actually, it's an adjacency which will drive flow and advocacy for the platform. We're winning awards because of these things. Some of the investment trends awards are the interoperability and the integration we've got. So they're underpinning and or supporting further growth. So our goal is to still generate more revenue from software and data businesses. Class is quite stable, it will grow incrementally. We are expecting to deliver more through HubConnect licensee and others over time. But these investments are driven also to support the platform business. So can I isolate the revenue from the platform business as a result of the investments? Not easily. But as you can see, we've leapt ahead of others in terms of net flows. It's sensible. We're playing to demand. Give us some time and we'll play out a bit further. But we do aim to get the revenue and the profitability of that segment up over time.

Okay. Thank you.

That concludes the Q&A session. I'll now hand back to Andrew for closing remarks.

Thank you very much everyone. Apologies for the technical glitch there. Hopefully you can see it's been a great result. We've invested in the future and the numbers reflect that. Having said that though, the position that Hub24 is in with the outlook, the pipeline, the awards and that investment and the flow pattern we've had so far holds us in good stead moving ahead. So thank you for your support as shareholders or researchers. and we look forward to speaking to you again shortly.

This concludes today's conference call. Enjoy the rest of your day. You may now disconnect.