HUB24 Limited

I would now like to hand the conference over to Mr. Andrew Alcock, Managing Director and CEO. Please go ahead.

Andrew Alcock Good morning everyone. Welcome to the Hub 24 first half 25 results call. We certainly are working very hard in this business with our industry, our clients, customers and business partners to empower better financial futures together for Australians and now more than ever that is a growing need in this country. I'll be giving an overview of highlights and operating review of the business, followed by Katrina Shanahan, our CFO, coming through some of our financial results. I'll come back after that to talk about strategy and outlook before, of course, we'll take some questions from those on the line. So we'll jump straight in, but we're very pleased to tell you that on Valentine's Day last week, we had the pleasure of being the best platform for the third year running, by Investment Trends as part of their 2024 platform competitive analysis and benchmarking report. So we're delighted to be able to tell you that today, that we're the best platform. Again, we were, of course, last year. And we also picked up the number one for managed accounts capability, which we've won eight out of the last nine years, which is one of the strongest growing part of the wealth industry in terms of investment solutions for customers. In that survey, we picked up a number of other awards, which I'll run through very quickly. Best in product offering, which is great to have, of course, in terms of our product offering meeting the needs of different groups of Australian investors. Best in decision support tools. Best in online business management. And interestingly, most improved, which I thought was quite cute, having been awarded first place last year, which we're very grateful and humble for. To be told we improved the most arguably means that we've extended our lead significantly. against our competitors, which we're very pleased to do in conjunction with our customers and advisors, because we're very serious about making a difference in our industry and investing in the future for all the participants. Along with that, on the left-hand side of this page, a couple of other things to mention. We also won an award from Sustainability Hub for having the most impactful new enhancement, which was updates to our advisor fee consent process, which I might talk about a little bit more later on, but certainly key for advisors. That's been a pain point with regulatory change in the industry how we make that easier for advisors and their customers. For FY25 for the first half, well, sorry, at the latest data, we're number one for annual platform and retail superannuation flows. And we've been in that position for some time now. But also the first for net flows where investors or customers choosing to switch or move for their superannuation funnel, the advice of their advisor, number one in the industry for picking up the largest amount of net inflows for those who are choosing different solution with the help of their advisor so very pleased to be talking about that today as well on to some highlights in the operator view might flick straight through to the financial highlights slide please of course to be able to determine a dividend of 24 cents fully franked for the half uh and on the right hand side of the page you can see some of the stats there as well with that dividend being up 30 on the same time last year Our underlying EPS is up 51 cents, up to 51 cents per share, up 41%. That's a diluted number for prior period. MPAT up as well, 40%, and stat MPAT up 54%. So great numbers there. Breaking them down, though, on the left-hand side of the pack, our revenue for the total group has been up 25% to approaching $200 million at $195. Our platform up 29%, and tech solutions also up 9%, which we're very pleased about. And the EBITDA numbers there as well, great healthy percentages for the first half with 41% increase at a group level up to $77.6 million underlying EBITDA. Our platform FUA, as you know, was very strong in the first two quarters, in the first half of FY25. And we finished the half at $98.9 billion of custodial or platform FUA, which is up 36% on the PCP. As at 13th of February, last Thursday, it was up to $102.6 billion, representing ongoing strong inflows in January to February today, plus some market movement as well. With total fewer, including our non-custody or parts business, at just under $121 billion at 31 December. Some other highlights on the half from a business perspective. We've obviously done very well with getting record flows for ourselves. The first half of $9.5 billion, and that includes some large migrations, but a great result for the first half, which I think is testament to underlying market conditions, which are very favourable for our industry and very favourable for investors and advisors looking after customers' financial futures. We've also had an increased growth in advisors, which we'll talk about a bit later, with 361 net additions in the first half, choosing to start to use Hub24. Another large migration we announced during the period with the Successive Fund Transfer for Clearview Wealth Foundations. That's on track to complete in the next few weeks. So we're looking forward to that as well. And advocacy is building with MyProsperity with us signing up extra agreements with large national groups with MyProsperity as well. Now Infinity and Class hosting positive growth. We'll talk about that later on in the pack. On the innovation sense, we announced during the half the alliance we had with Reach Alternative Investments and hoping to access more alternatives investments on the platform. Our award-winning reporting capability, which we call presenters now, being involved, being called to engage, and it's in pilot at the moment. Very exciting results for that from advisors. We continue to enhance the platform, evidenced by those investment trends rewards, and a lot of work in class with significant product enhancements during the half on what we call compliance of the future, including registry feeds. That's Share registry feeds, property title searches, and document integrations that allow auditors of SMSFs and administrators to cite and see source documents that make it easier and faster to do the job of looking after the accounting for self-managed super funds. And of course, this week, the Self-Managed Super Fund Association Conference is in Melbourne, which we're presenting and talking more about those enhancements during the week. We've also been investing in the future with automation, for quality and service, building out our infrastructure and our people and our capability to ensure we're growing and able to support the future growth that we strongly believe in. And of course, doing a lot of work in the AI space and automation to solve challenges for our industry. A bit more about that later. We take a look back at our growth over time and we put this slide in each pack just to show the reliable and consistent delivery of growth and shareholder. value and that is the way we think about how we run and drive the business and how we approach investment and margin expansion and expense management in the business with corresponding revenue growth. Key value driver for the business being fund under administration with a four-year CAGR of 53% and group revenue with a 42% CAGR over the last four years and no longer at 47%. And that 47% CAGR is above the platform CAGR which is about 40% for the same period. indicating that we're getting results coming through from our tech solutions business, giving us diversified revenue and ongoing earnings growth for shareholders. In addition to some of the awards from investment trends I mentioned earlier, the next slide is not unfamiliar to those of you who follow Hub24. There's some other accolades there from the investment trends and other technology needs report, which is a different report, which is about number one for satisfaction, which means customers are choosing Hub24. and are advocates for us with our great Net Promoter Score and all the tools there. Also having and still maintaining best overall advice platform for advisor ratings in 2024 and Wealth Insights as well, which is a sentiment award as well. So great accolades there. It's good to be recognised that we're doing what we believe in very much and that is about making sure we put our customers in the centre of our business and build solutions that are sustainable for the future and meet their changing demographics and continue to lead in the marketplace. We're very, very pleased to play that role. If we look at how that translates into market share over the last period, over the last 12 months, we can see that Hub24 has gone from 6.6% market share to 7.9% market share. That's the largest market share gain in our industry as researched by Plan for Life. We're currently ranked at number seven in FUA at 7.9% in the top 10 platforms there. Also pleasingly, the industry has grown over the last 12 months, or the industry as measured by Plan for Life with 17% FUA growth, reflecting market growth and inflows into the business. And so whilst that's the current platform industry, our addressable market, of course, has far broadened that with the net casting further out from what is currently on platforms. as evidenced by some of our growth as well. So good gains in market share. A great result there, hopefully, from your perspective as well. Moving on to the advisor story, if you like, or the advisor lens on Hub24. Since 1H21, we had 11% advisors using the platform. It's now at 31%. So strong advisor growth, which you'll see in the next slide as an indicator for future opportunity as well. With the average usage or the average funds of an administration per advisor in that same four-year period going from $10 million per advisor up to $20 million. So we've more than doubled the number of advisors. We've more than doubled the usage per advisor in our platform business. In the same time period, market share having grown from 2.3% to 7.9%. There's a lot of potential other way to go. in this industry as a market leader to continue to grow and a great opportunity for us to keep working on as you'll see in the next slide. We break this advisor lens down to look at the opportunity for that further growth. On the left hand side for the first half of 25 you can see the outlined box there that 86% of our flows for the first half have come from existing licensees and advisor relationships, 12% from new advisors in those relationships and 2% from new relationships Given that's the first half, that number will bounce around a little bit as advisors who've started using the platform are with us for the full year. And you'll see that revert back to the normal trend there. But it's a great result with us continuing to get flows from existing clients and picking up new ones as well. Typically, advisor relationships can deliver transition flow benefits on the platform for a period of up to six years. And so when we consider that we had 361 advice. This is on the right-hand side of the slide. 361 net additions in 1H25. The average for the past three years was 277. So there's been an increase in advisors signing up to use the platform this has, which is an indicator of future flows. Should we continue to have great products and service? The field per advisor having doubled, as I mentioned earlier. Interestingly, the average field per advisor in the industry is about $75 million. Lots of room for us to continue to grow that usage. And 11% of advisors, we've actually got up to $50 million or more than $50 million on Hub24. So the slide is painting a picture about if we look at the lead indicators for advisor relationships, there's much more for us to do, much more opportunity to continue to grow and continue to exceed in the marketplace looking at those stats. And before I pass on to Katrina Shanahan, a quick snapshot about other businesses with the tech solutions business. and MyCrosperity delivering consistent growth. Class has maintained its position as second largest in market share and growing its system with about 30.4% market share, more than 210,000 accounts with Class as a software solution. Interestingly, the self-managed super fund establishment has increased and we'd expect that to flow through these numbers in the next six months as well. And now Infinity the growth and 810,000 companies using Corporate Messenger and now Infinity growing at 1.7 times the system. So great leadership there from those two businesses. And on the right-hand side, the penetration into MyProsperity is increasing. There's more to do. It's still early days. We had 18,000 new households sign up in 1H25 and 23 new practices using the solution. And you can see the activity stats there as well with logins from customers and firms a number of documents stored on the system as indicators of further usage moving forward. Katrina Shanahan, our CFO, will now take us through some of the financial results. Thanks, Kit.

Excellent. Thank you, Andrew. So, yes, I'll now run through the financial results. Here on the first slide, we have a snapshot of the group platform and tech solutions with revenue, underlying EBITDA and customer numbers. So the group revenue of $195 million and underlying EBITDA of $77.6 million, with the platform delivering 79% of the revenue, tech solutions delivering 19% of the revenue, and the corporate segment, which holds the strategic investments and also has the corporate interest income in there, being 2% of the group's revenue. Platform revenue for the half was $154.2 million, an underlying EBITDA of $66.7 million. Custody, FUA, and NetFlow still being the main driver, which is 97% of the platform revenue. The customer base, as Andrea mentioned, just under 5,000 advisors. We've got 4,886 active financial advisors using the platform. And on the technology solutions side of the business, underlying EBITDA of $13.8 million for the half and revenue of $38 million with a customer base of 6,500 accounting practices using the class solutions. Then if we move to the next slide, we have a snapshot of the group financial results with operating revenue up 25% to the $195 million. Operating expenses up 16% and half on half comparing to December 23, growing 16%. With revenue growing significantly faster than operating expenses, underlying EBITDA is up to $77.6 million, up 41% over the PCP. Underlying EBITDA margin has grown 4.7% from 35.1% to 39.8% this half. And we also have the underlying MPAT up 40% to 42.6% and stat MPAT up 54% to 33.2%. You can see on the graph on the right-hand side the contribution from the platforms, tech solutions and corporate businesses with the platform operating revenue up 34% on the PCP and tech solutions up 3.2%, underlying EBITDA platform delivering $19 million of the underlying EBITDA growth of the platform. Moving on to the next slide, we have more details on the platform segment, with the total for up 33% to just under $121 billion, $120.9 billion. Custody for the 31st of December was $98.9 billion. As Andrew mentioned, on the 13th of February, we gave an update, $102.6 billion. So we crashed through the $100 billion mark. non-custody was up 17 to 22 billion dollars and platform net inflows of nine and a half billion dollars in the six months which included eight billion of underlying net inflows and one and a half billion for eq2 large migrations that were completed in the half and the eqt opportunity being five billion in total and we've got another billion expected to come through in the second half of 2025, which will close out that last migration of five bills that were called out. Underlying EBITDA is up. The underlying EBITDA margin is up 3.3% to 43.2% in the half, and you can see the graph on the bottom right-hand side shows the walk of the FUA with net inflows of 9.5 bill and market movements of 5 bill in the custody side. and the non-custody growing $1.7 billion in the half. Okay, moving on to the next platform slide. So on this slide, we give a bit more detail on the platform revenue margin, with the revenue margin reducing one BIP in the half to 32 BIPs, which you can see on the bottom right-hand side graph. There were strong markets during the half, which meant that average balances were increasing and people were moving into slightly higher tiers. The percentage of custody FUA with fee-paying clients remained steady in the half, and you can see that in the analyst and investor pack. The average cash as a percentage of the custody FUA remained stable in the half at 7%, although we did see that dip down to when we came out at an exit run rate of the 31st of December, it was more around the 6.5% mark. Moving on to the next slide, we have the composition of the platform revenue and platform FUA. So here on the graph on the right-hand side, you can see that the composition with 86% of the custody FUA held in retail, which is up 1% on first half 24, and the institutional portion of the custody FUA is down 1% to 14%. The retail flows have been really strong over the last 12 months, which has offset the growth in the institutional FUR plus the large migrations from EQT going into institutional FUR. The graph on the bottom right-hand side shows the movements in the retail and institutional revenue, and you can see the one-bip reduction in the total custody FUR from 33 bps to 32 bps, with the one-bip reduction coming from the retail side of the portfolio, 37 bps down to 36 bps, and institutional revenue margins remaining stable at 13 bps. Okay, so then moving on to the next slide, we have the platform underlying EBITDA margins. They've grown to 43.2%, up 1.7% on the second half of 24, and up 3.3% in the 12 months to December 24. You can see that in the graph on the bottom right-hand side. All of the growth on the platform side is coming from operating leverage and growth in net flows and strong markets. We then have the graph on the right-hand side which shows the previous five half with the revenue and consistently increasing underlying EBITDA margin steadily taking up to that 43.2%. The four-year compound annual growth rate for the platform underlying EBITDA is 40%, so fantastic growth in the platform's division. Moving on to tech solutions, so it's been a really strong half with underlying EBITDA of $13.8 million, up 37% on 1st March 24, and the underlying EBITDA margin has grown 7.3% on PCP to 36.4%. You can see the growth in all of the key metrics for class, with class accounts growing 3% to just over 210,000, class accounts growing up system Class document orders up 10%, just over $200,000 in six months, and companies using the corporate messenger solution up 17%, which is significantly above system growth. Operating expenses are up 2% on first half 24. Sorry, down 2% on first half 24 and slightly up on the second half 24. The operating leverage that we're seeing come through in the core businesses has enabled reinvestment into new capabilities for the class customers. Moving on to group expenses and underlying EBITDA margin, you can see the graph on the right-hand side. Expenses are growing 16% to $149 million or up 17%. if you're excluding the amortization related to acquisitions. So employee expenses is the main driver, with $9.3 million increase half-and-half in employee-related expenses. SE has been relatively flat half-and-half, with 883 first-half 24, 882 first-half 25. This reflects very disciplined cost... cost management however we do have increases in customer facing FTE supporting the growth that we're seeing come through in the businesses so you can see in the commentary there we've got customer facing FTE increasing 20 and we've got corporate roles in areas like risking compliance and HR increasing 9 however this has been offset by the closure of the explore integration and the wind down of some of the large migration activities with the bulk of the EQT and migration being completed And then the graph on the right-hand side just shows you the contribution to the underlying EBITDA margins from the various areas platform, delivering 2.3% of the underlying EBITDA margin growth in the half. Moving on to the next slide, we have a walk of the underlying EBITDA to the underlying MPAT and statutory MPAT. Both underlying EBITDA and underlying MPAT are up 40-41%. So the underlying EBITDA is 77.6%, reduced by 6.7 million of share-based payments, 9.5 million of depreciation and amort, and then 18.8 million of interest and tax, taking us down to 42.6 million of underlying MPAT, and then the acquisition amortization on things like the class acquisition, explore acquisition, Net of tax, $9.4 million, taking us to 54% growth in statutory impact. We've also, in this slide, given you a bit of an indicator of the depreciation amortization for full year 25 will be somewhere around $19 to $21 million. And then the acquisition amortization for full year 25 is expected to be around that $26 million. There has been a bit of an uptick in the effective tax rate up to 28%, 25% first half 24, so a bit of an uptick there. That's mainly related to movements in our deferred tax balances that relates to things like the purchase of the treasury shares and the timing of using those treasury shares and R&D claims. And then moving to the final finance slide, We've got a recap here of the dividend with a 30% growth on the dividend and a dividend declared of 24 cents per share in the half. You can see that on the graph on the right-hand side, a four-year CAGR in the dividends of 52% and a 48% four-year CAGR on the underlying diluted EPS, which was 51 cents per share in the half. We've also called out here the strong operating cash flows. So we have... Operating cash flows of $67.1 million in the half, which is an 86% conversion of EBITDA to operating cash flows. And we've also given you a bit of a list here of a few things that, or what do we use the cash for? Ongoing investment expected to be around $20 million of capex in the half. We've got employee share schemes, purchasing treasury shares on market to service those employee share schemes. And we've also got the operational risk financial requirements for the HUB24 super fund with the super fund growing and the offer reserve expected to increase as well and potentially a loan there with the trustee to service the offer. So with that, I will hand back to Andrew to talk about the strategy and the outlook.