Okay, good morning and welcome to the Beforepay Third Quarter 2025 Investor webinar. My name is Danny Younis, and I help with investor relations for Beforepay. With me this morning, we have the Chief Executive Officer of Beforepay, Jamie Twiss, and the Acting CFO, Elena Chan. Before I hand over to Jamie and Elena, just to note that we will be having a Q&A session at the end. If you have any questions, please type them into the Q&A box that you see on your screen. I would now like to hand the webinar over to Jamie. Please go ahead.
Thank you, Danny. Good morning, everybody, and good afternoon or evening to those of you joining us from overseas. Thank you all for joining us here today. I'm delighted to be presenting our Q3 results. I'll briefly introduce a few highlights, and Elena will go through a few of the numbers in a bit more detail. I'll start by saying I was very, very pleased, and pleased to the point of surprise almost with the results we had this quarter. This is a very, very strong quarter for us. The third quarter, traditionally and seasonally, is probably the most difficult quarter because you have the post-holiday lull on the top line, and then you've got those holiday loans and advances coming back, and that puts a bit of pressure on the credit outcomes as well. But this quarter, we just blew through both of those. So top-line growth, very strong.
The year-on-year numbers in active users or revenue or what have you, on every metric, very strong year-on-year performance. In fact, even Q on Q looked good on active users and more or less flat on usage of top line, which is from Q2 to Q3 to whole is really remarkable. Very pleased with the top-line outcomes. Great to see those user numbers continuing to pick up steadily. Then, of course, the standout result of the quarter was the profit number, so more than tripled last year's Q3 number. I think I said two results ago that the era of triple-digit growth in metrics had come to a close and turned out I was wrong. Just amazing to put up a PBT number of AUD 1.1 million for the quarter. Really, really pleased with that.
And then the cherry on top of all of the results was being able to announce a new deal for Carrington Labs signing a partnership agreement with LendAPI. So as you guys know, we said we feel very confident about our growth initiative, that we would announce news when we had something to announce, and it was fantastic to have that announcement announced a little while ago. So really just really, really pleased and proud of the team for this quarter. It was just a very strong result for us. Elena.
Thanks, Jamie. Reiterate, the pleasing results that we're seeing is really a [reflection] of the hard work that the team have put in. It's great to see that hard work translates to the financial numbers that we're seeing this quarter. What you'll see, and Danny mentioned, good top-line growth numbers. So we saw quite a 16% increase in our total advances of AUD 226 million. And that's really pleasing and really driven by the total number of loans that we wrote, which was AUD 516,000. Also, the increase in focus of our marketing team and marketing spend, as well as what we saw was a slight increase of 2% in our overall average loan size up to AUD 288 year-on-year [audio distortion]. We also saw active user numbers increase from that AUD 258,000 to just over AUD 265,000 this quarter.
That Q on Q increase is showing us a nice steady incline in our growth, and we're very pleased with that result. Our net default numbers are also very pleasing and support the fact that we truly believe in our credit models. We have a 1.26% net default number, which is an improvement from sort of that year-on-year number, which was 1.64% in Q3 of 2024. So what we are seeing is really that contributes to the overall net transaction margin total number of AUD 5.9 million, which we're very pleased to say that's a 41% year-on-year increase from AUD 4.2 million in the prior corresponding period. Our operating expenses have increased, and Jamie and I said this in previous quarters that we've seen gentle increases, particularly with a focus on increasing our marketing focus and spend, as well as increased investment in our operating activities around the new growth initiative.
Our operating expenses landed at AUD 4.4 million relative to that AUD 3.7 million we saw last quarter. Our strong balance sheet continues to show in that AUD 36.4 million equity position. We also have a strong cash position. And what we've provided this time around is, as we've seen in the announcement, what we consider as our total cash position of AUD 28.9 million. Our cash at bank, so that total cash position comprised of our cash at bank, which has slightly decreased Q on Q to AUD 16.4 million, plus the AUD 12.5 million of money that is ours sitting in our settlement account to fund our loan growth and also our funding bank account as well. And so when we think about our total cash position, we think of it as our money is really that AUD 28.9 million.
In the past, while we disclosed that cash at bank number, in the past, we've talked about those other numbers separately and put notes, and I think we've gotten the investor feedback that it would be helpful to wrap all of that together into a single metric, and so we're certainly not trying to kind of displace that traditional cash at bank number, which has a long time series at this point, and that's still a very real and valid number, but that total cash number does reflect the total amount of cash available to you.
And you will see we recently announced a change to our existing debt facility, where we've carved out AUD 7.5 million off the total AUD 55 million debt facility for a revolving line, which gives us a lot of flexibility to adjust our funding costs as we have more cash available. And so what you'll see is, as of today, our total drawn facility is about that AUD 31 million, and so we have AUD 24 million undrawn in our facility, so plenty of room for growth. Now, it's needless to say that all of these things add up to a AUD 1.1 million net profit.
When I think about sort of where we were this time last year, at half, we announced a AUD 2.8 million profit, and then you add this quarter's profit in there, and I feel very pleased that we're already matching our AUD 3.9 mil at Q3 relative to our full year number FY2024 of the AUD 3.9 million.
Yeah, so in the first three quarters of this year, we've already matched last year's full year profit, so it's nice to get there three months early.
Yes. And so, again, reiterating that, very pleased with the results and happy to take questions or.
Yeah. Yeah, look, I think I probably need to do some [square root of this] in the tank for later use, so I won't kind of review it at the beginning. All the numbers went in the right direction, especially considering the seasonality of Q3 just, I think, exceeded our expectations in every way. I think the Carrington Labs progress is just kind of yet another great thing on this quarter on top of it. Very, very pleased and happy to take your questions.
Thank you, Jamie and Elena. We will now move to the Q&A session. As Jamie just said, once again, if you have any questions, please type them into the Q&A box at the bottom of the screen. And it's good to see we have several questions coming through already. The first question is from Larry Gandler at Shaw and Partners, and it's in regards to the additional cash flow disclosure. So Larry's asking, "Is it correct that cash received from Beforepay income was about AUD 10 million and cash movement between warehouse and cash balance about AUD 6 million? That suggests that operating cash was positive, excluding loan movements in the quarter.
That's all correct.
Yeah, I'm thinking about the AUD 6 million movement piece, but yeah, I think that's right.
I think that's kind of, I think to Larry's point, it really goes down to that extra footnote we've added into Appendix 4C, Footnote 1, which shows you the net movement of other receivables that we count into the receipts of customers. Just to put that out so that people are clear on what that looks like for us.
Yeah, I think, and Larry, it's a very sharp question, so just catching up with you. If you look at the 4C itself, we had 2.5 come in from customers, and we had AUD 200 go back out, and of course, 10% of that AUD 2.5 is revenue. So yes, I think that's right.
Thank you. The next question is around the debt facility. So does the sub-limit for the debt facility effectively act like an interest offset account? And do you intend to get the full interest saving in Q4 as you have AUD 16.4 million of cash at bank?
Sorry, could you get into the what as an effective?
Sub-limit for the debt facility.
So that's a pretty reasonable way of thinking about it. It's not literally an offset account because we're not separately putting money into an account in the same way, but because it's revolving, we can pay that down, pay that back. I think without going beyond what we've publicly disclosed, unless Elena kind of gives you the go-ahead, I think you'd say we see the world the same way that you do, which is we have ample cash available, so the opportunity of not paying interest is a very attractive one. If we were to do that, of course, you would see some of those cash numbers decrease accordingly. The best we would be paying down that debt. But as we retain the capacity to draw that, I think that would be a very healthy and sensible thing to do.
Okay. We've actually got two questions on the net default decrease, so I'll just pull it into one question, Jamie and Elena. What are the key drivers in relation to your net default decrease? I think that's the first part of the question. And it says the investor's asking, "It was unusually seasonally low. Does this reflect the improved performance from an existing customer cohort or lower-than-expected losses from new active customers or unusual collections from prior quarter losses?" So maybe just a little bit more clarification around the drivers.
So I'll start by saying that the activity in any given quarter is heavily weighted towards existing customers just because if you look at the active user base and the number of new customers in a given month, especially given that new customers tend to start on lower limits. So the significant majority of the advanced dollars put out in any given period of time are to existing customers. So any meaningful change in the default rate is going to come off the back of the performance of existing customers. I'd say there are a few different things. Some of it is also just the way that we provisioned for the quarter and then obviously had an upside surprise, and that will always we try to net that out, but when we get smarter results like this, it gives us the ability to write back some of that provision.
So there's an element there. Collections, I think, performed well. Nothing enormously out of the ordinary there. I think you wouldn't expect Q3 to be an outlier in collections. I think we have gotten more effective at it. It's not a step change. Really, what we are seeing is just normally there's a kind of a peak of defaults around the loan [distribution] right around the holidays, especially kind of the couple of weeks leading up to and then a bit after Christmas as well. And that peak has crested well below where it did last year and where we thought it would. There are a lot of things going into that. A lot of that is the way that we do our limit management.
So, anticipating that peak, we thought we always are kind of adjusting and right-sizing limits to maximize the gross contribution dollars out of any individual loan, any individual customer. We've quite rigorous analytic way of doing that. I think additional data into the model and continue to work on the model, that's always helpful. There wasn't kind of a single big bang thing that we did there. So I'd say it's a combination of many small things.
Okay. The next question is around the marketing expense. It's quite a long one, but starts off on a positive note. Hi, Jamie. Hi, Elena. Congratulations on a fantastic result from Luke Alexander. Now, with increasing marketing expenses and an improvement on the top line, it seems those funds have been well deployed. What is the company's vision and plan for the next quarter and even the next year? Is it a continuation of marketing expenses, product improvement, keeping defaults down, etc., or all of the above?
Yeah. So focusing just on the Pay Advance business, obviously on personal loans and Carrington Labs, we've laid out our vision and plans around that. Happy to recap that separately. And another question if someone would like to go deeper on either of those. But in terms of just the Pay Advance product, I'd say there are a few priorities, a number of priorities consistent with what we've been doing for the last several years. We are always looking to drive user growth in a value-aware manner. So as we've said before, our goals always have to be that marginal cost of acquisition, that last customer that we pay to bring in the door, to have that customer still be value-creating inside that marginal CAC and marginal acquisition cost below the expected lifetime value of that customer.
And as we oversimplify, as we think about our approaches to marketing and how we onboard customers, we always will put out. We'll always grow as quickly as we can consistent with that. So as long as we are still acquiring customers in a value-created way, we would always rather spend more and grow faster. I think over Q2, sorry, Q2 and Q3, last several quarters, we've been quite successful at that. Again, a million little things, just like little tweaks to how we think about Facebook advertising, kind of alternative ways of thinking about kind of passing back some signals through Google, starting to advertise on Bing and so on. If I think about how that rolls forward, I'd love to keep spending at this higher level if we're seeing the value for it.
So if we are actually getting customers, if we're getting customers in at that marginal CAC lower LTV, we will absolutely keep that going. So that will continue to be a priority. I would love to find a way to accelerate that even further, and that's something that we're always thinking about, are there kind of new things we should be trying to do? Separate to that, we will always, of course, be very focused on further improvements to the risk model. And again, we always have lots of things on the boil there, and we periodically release new versions of the model and expect to see continued improvement in our capabilities there. As discussed, we will take that benefit wherever it creates the most value for us, which can be a mixture of default rates as well as on the average limit size.
We'll always balance for each individual loan, how much do we add to advanced loans in the most value-creating way. So it's not something that we're trying to drive the default rate down, certainly not from here. It's a pretty low number. But that, as the model gets more predictive, we will balance those two things off so to drive a mixture of top-line growth and lower margins.
Thank you. The next question is around the OpEx. So quarter on quarter, the OpEx rose AUD 800,000. Does this all reflect the additional marketing spend?
It does not all. So I'd say a few things. Both Q1 and Q2 were a little bit messy, and as we disclosed in those results, a lot of that was non-cash related to incentive approvals and things like that. So I think probably a better way to think about it is a bit more of a straight line from kind of those Q3- Q4 numbers up present, and then Q1 and Q2, there's just a bit of noise off the back of that. There are a few things going on. So certainly, there is that increase in marketing spend that we spoke about and that may or may not continue. We would hope it continues because if it does, it's creating value. As we have said for a while now, we are continuing to invest in business and capabilities of business and in our growth initiatives.
So I do think kind of where we are now is more reflective of that longer-term OpEx rate of the business. I think given the success that we'd be having, we'd be remiss if we didn't pre-invest in the growth of the business. I think it's a sign of continued confidence. We think there's absolutely good return to be had putting some of that money back into something that we're.
Thanks, Jamie. Just a reminder, if you have any questions, please type them into the Q&A box at the bottom of your screen. We do have several questions coming through on Carrington Labs. I will get to those, but first, we'll just stick with the core product. Okay. So the next question I have is in regards to the debt facility. Do you plan to close another debt facility with different terms and limits for the other higher loan amount new products? If so, what are you thinking that would look like?
Yeah, I'll start, and then Elena can jump in on this. So I think we still have plenty of dry powder available to us, both from our existing cash as well as the current facility. When we look at the personal loan product and without putting you on a timing board, you would expect that would be the growth that over time will likely significantly outstretch that available capacity. So I don't know exactly when we will get to the point where we can do it, but I think it would be very disappointing if we had to constrain growth of an otherwise value-creating product for funding. So I think at the appropriate time, we will extend, expand, add to, refinance, do something to increase that available capacity available to us. In terms of what it looks like, I think obviously you would always rather pay less than more.
As you borrow more, especially in a declining rate environment, there may be opportunities to do that. I think it's probably too early to have a firm point of view on what exactly that would mean for us, but we certainly would be looking to minimize the cost of that facility in the future.
I don't think I have too much to add to that. I think that our existing funding that we are always thinking about, but that's the funding element that would constrain our ability to grow.
Okay. We'll go to personal loans. So there's two questions on personal loans. So the first one is around when do you anticipate rolling out your personal loan product or maybe give some progress on where that's at?
Yeah. So I'd say I kind of don't want to say something unhelpful about kind of when it's ready, but essentially, the work we're doing right now is I think we're in pretty good shape operationally with that product. I think because of that slightly longer duration, that three-month period. So the loans that we issued, we launched product at the very end of October. So the first loans were going out really in November. So those loans were coming back in February and then kind of the year. So we're just kind of starting to get that data in to really sort of take a look at that and see where it stands from a risk point of view. I think once we feel comfortable with the risk, we'll be in a position to start rolling that out more broadly. But I don't want to overpromise.
As you guys know, we'd always rather underpromise, not kind of pre-announce anything and then tell you when we've definitively done something. I think we'll adopt that approach here as well. When we do launch it, I also don't expect that we will immediately turn the dial to 100 and somewhere kind of where the balance sheet grows 10x overnight. I think when we do launch it kind of more fully, we will still be turning that dial and keeping a close eye on things as you guys know we take risk very, very seriously. So we'll be very interested to, as we get more data, kind of see how that's performing and making the adjustments as we go.
Yeah, and the second question sort of follows on to that, Jamie. Can you share what you have learned about customer behavior with the larger, longer loans?
Yeah. I think it's actually really interesting. I think there are a lot of similarities with the advanced product, but as many of you know, the average duration of the advanced product is a little bit under a month. The average size is a bit under AUD 400. The personal loan product is between AUD 2,000 and AUD 3,000 currently for a fixed term of three months. Now, we do expect to adjust both of those over time. I think the nature of somebody who is looking out that longer period of time without that more significant need, it's quite a different mindset with your personal loan. So we think about the risk. There's certainly strongly overlapping elements in terms of being sort of positive and negative indicators.
But I think the thing that I've been quite pleased about is somebody who has the underlying ability to manage that loan and where the risk profile is appropriate. I think the very active kind of being interested in that slightly longer duration and larger product does itself feel like a positive signal, which we didn't know whether that would be the case. In terms of behavior, I think the way people use it varies widely as you'd expect. I don't think there's sort of an obvious kind of lesson to be drawn in terms of where that money is going. The one thing I would say is there is a bit of we do sample on it, implicitly sample on the dependent variable in that we will probably not approve you for one of these loans if you are in a heavily indebted situation already.
So because that size is currently capped at $3,000, we're not seeing a lot of use of it for refinancing debt because we aren't issuing the kind of volume where somebody would actually be able to clean up their entire debt situation. We'd like to get there over time.
Okay. We'll go to Carrington Labs. As expected, there's quite a few questions on this. There's five or six, but I think some of them are covering the same ground. So I'll ask them individually. So first off from the first investor, "Hi, Jamie and Elena. C ongratulations on a terrific quarter. Can you please provide an update on the progress on Carrington Labs at present?"
So I think, as you know, the way we like to do this is not to pre-announce, "I would think we're about to do this. We're very close on that." And that's partially because it's always nicer to underpromise than overdeliver. And in part because the nature of Carrington Labs is such that these can be unpredictable sales cycles. They can move quickly at times or they can move slowly. Sometimes you get something very close and it falls over. We don't want to be in a position where we're kind of too far ahead of the game and we have to go back and say, "Actually, that didn't go the way that we thought." So we only announce things when we're in a position to do so. Obviously, the fact that we were able to announce something this quarter was very, very pleasing.
We feel really good about that LendAPI partnership. I think that's a good opportunity for us and also a great vote of confidence in the Carrington Labs offering as a whole. I think in terms of what else I can say, I would say we continue to feel very confident. First of all, the quality of the Carrington Labs offering, and then secondly, the strength of the pipeline and who is in it and how that's looking. As many of you know, I've been spending quite a bit of time overseas. I was overseas at the half year. I was overseas last week and going again next week, a week after that as well.
So that activity obviously relates to Carrington Labs, and I think hard to say for any given opportunity what the probability is or what the timing is, but I think it's clear from the focus that we're placing on it, the way that we're resourcing it internally, the amount of time that I'm personally spending on it, the amount of travel that I'm doing for it, that we continue to feel very confident about it. And again, we will announce things when they're there to announce, but I'm very hopeful that I'll continue to have good news for you on a regular basis.
That ties into the next question, which I think you've partly answered. Can you provide some more clarity around the approach to gain further traction for Carrington Labs over the next 12 months?
Yeah. I think, I'd say, there are two things. One is we do have, again, a lot of direct opportunities in the pipeline, and, again, you never know when it will close. But I think there's a lot of good opportunity in that pipeline right now, and folks are all in different stages of that. And again, as I think I said last time, one of the challenges we actually have is the top of the pipeline arguably can get over full, right? So it's just kind of the capacity to move folks through that proof of concept stage and out to the end. So I think that continues to be a good level of focus for us.
I think the thing that we're doing more and more of now is also talking to potential partners like the LendAPI deal where someone has a pre-existing pool of customers and a pre-existing technology platform, and so if we can strike that arrangement, then it becomes much easier to kind of get access to those customers at scale, and then the integration and implementation becomes much simpler at that point, so I think that's been an area of growing emphasis for us. Again, I don't want to overpromise on timing because we have to get those deals done, and then obviously they have to work out to the end customer from there.
But I think if we look forward over a longer period of time and look at how we scale this business to very considerable numbers of clients and revenue, the ability to pick up five, 10, 20, or whatever it might be through a single partner with relatively small margin effort would be very helpful. More broadly in terms of how we're approaching it, I think it's a mixture of a lot of direct interaction. Obviously, having Brian Perry leading our U.S. efforts on the ground there is tremendously helpful there. We are spending a lot of time at conferences presenting the solution, talking about what we're doing. I think it's a broad-based approach that I think we continue to kind of fine-tune where we are spending our time on that.
But I think, again, we wouldn't be investing as much time if those weren't producing the results we were looking for.
Okay. The next question is around potential customers. So maybe a little bit more clarity around the type of customers that you think will come through to Carrington Labs and the timing.
Yeah. So two-level hierarchy. First division is between direct sales and through partners. On the direct sales, divide them into three categories. First one being fintech startups, kind of newer, more digital-savvy folks. Second category being non-bank lenders. Third category being banks. I'll talk about those for a minute. On the direct side, I would say we've probably populated the top of the funnel with, speaking very roughly, roughly equal numbers across those three buckets. I think they all have strengths and weaknesses. They're all attractive to work with in different ways. What happens once they're at the top of the funnel, the fintechs move significantly faster as a general rule. They have less legacy infrastructure. They tend to be focused on pace and speed a little bit more. They often don't have an existing solution in place. So I think they tend to be moving faster.
The non-bank lenders are somewhere in the middle, and the banks can't be too slow. Now, we still want to get them to the top of the funnel because what I don't want to do is two years from now, kind of we've done a lot here, but haven't done anything on banks, and then we start the process, and then there's a lengthy process from there. So we are really disciplined about making sure we're pushing across all three of those categories. That's on the direct side. On the intermediated side, it's a bit of a blurrier taxonomy, but certainly there are providers that are kind of the software houses, again, both kind of more startup, newer houses, as well as kind of the more established legacy kind of core banking platforms, loan management systems, and so on.
The trend is to think about those because they already integrate into the clients. All we have to do is a single integration into one of them. Then I think you also have some service providers like systems integrators and others where they may or may not have existing integrations, but they have the capability to do that. For them, that's quite attractive. It's something where by bringing Carrington as part of that discussion, that can help them drive that relationship with the client, and then they end up doing the work on that integration side as well. I think we're probably more opportunistic on that intermediated side, but it's much more about where do we have an emerging relationship where they kind of see the value in what we're doing and where they're excited to take us forward.
So it's not quite as broad-based, but the LendAPI partnership came together through that side of it, and we certainly expect and hope that there'll be more over time.
Okay. We're down to the final two questions, and they're asking pretty much the same thing. So I'll make it the final question. So it's in regards to Carrington Labs' revenue. When do you anticipate reporting revenue from Carrington Labs, and when can we expect to see more detail on that?
I'd say we'll report it when it feels material to the financial shape of the overall group. I don't know when that will be. That probably depends on the next several clients signing for what and what that total number adds up to. When it feels like the total volume of revenue is actually something that someone would need to put in the model or put a multiple on to establish valuation, of course, we take our disclosure obligations very seriously, and of course, we will break it out at that point.
Okay. Let me just have one last check. Yep, that concludes the Q&A session. I'll now hand over back to Jamie and Elena for any closing remarks.
Great. Well, again, thank you all for joining us. I think just to finish where I started, I think we were really, really pleased where this quarter landed. The core business is absolutely firing on all cylinders. I couldn't be happier about that. I'm still grinding away on personal loans, and then I think really pleased to be able to kind of start the new slope from Carrington Labs that first I mentioned about LendAPI. Again, we never, especially with Carrington Labs more broadly, any quarter may always be up or down for whatever reason. But if we look at the kind of the patterns in business and kind of where we're headed over the coming 12 months, over the coming years, I think we have a really formidable capability in terms of our ability to manage risk.
We have found a great way to deploy that domestically in Australia, which has led to, I think, a growing, profitable, and very sustainable business. And I think we are excited about the ability to take that out for a spin on a much broader stage both with the personal loan product as well as Carrington Labs. So we need to be very, very optimistic about the short, medium, and long-term future of the company, and we are as always grateful to have all of you along with us as well. So thank you very much for joining us. We will see you at the next quarterly results at the end of the quarter.
Thank you. You may now disconnect. Thanks.