Earnings Call: H1 2023

Nov 7, 2022

Thank you, Sari, and thank you everyone for joining the call. As Sari mentioned, I'm joined by Selena Ver, our CFO and Matt Gregorowski, who leads our Investor Relations program with Citadel Magnus. Selena and I will take you through the pages and then there'll be some time for Q and A. This presentation will cover 3 things. The half year result, what it is and what drove it, our financials in more detail and the strategy for the larger OFX, including why and how we will be more valuable in the future as well as our fiscal year 2023 outlook. Let's move to Slide 5 in the pack. The first half fiscal year twenty twenty three was an excellent half with turnover of $19,900,000,000 up 32.6% versus prior year. Net operating income or NOI at $105,300,000 up 53.4 percent and underlying EBITDA at $32,300,000 up 59.4%. We are delighted to show strong growth rates across all our major metrics versus the prior period and they all grew half on half. It was especially good to see NOI grow over 34% against the second half fiscal year twenty twenty two. This was of course underpinned by the addition of Therma ex UK from May. NOI margins, excluding same currency transactions was 62 basis points, up 9 basis points on second half fiscal year twenty twenty two as we manage inflationary forces exceptionally well. The investments continue to grow with particular emphasis in people, technology and marketing as we build a strong scalable company for the medium term. In that context, it's also very encouraging to see such a healthy underlying EBITDA margin at over 30%. The results were underpinned by great execution, highlighted by the closing of the Therma transaction. More on that in a moment, but it's a great credit to the OFX and Therma teams Acutis against the difficult backdrop and then to drive the performance so well. And given the economic and political uncertainty, our attention to detail on risk management and our experience in it continues to be critical. We continue to see healthy regulatory engagement around the world And we know that these relationships and our reputation with regulators is critical for our business. So all in all, a great performance and I'm delighted to be upgrading our outlook for fiscal year 2023 to NOI of between $215,000,000 $222,000,000 and underlying EBITDA of between $62,000,000 $67,000,000 Moving to Slide 6, the addition of Therma has been a great success thus far. Full credit must go to the Therma team, who over several years put in place a strong operating model that is now beginning to deliver exceptional results. Revenue for the full year to 30 September 2022 was a record $68,200,000 up over 30%. That compares to the CAGR between fiscal year 2018 through fiscal year 2021 of 2%. They delivered this increase through a series of critical steps in prior years and benefited from the volatility of the markets also. The average transaction values grew over 14% in the year, driven by market volatility and the supply chain and inflationary pressures. Vearth's early efforts to provide an online platform have been successful with penetration of revenue from online clients nearly doubling in the last year. This ensured that transactions for active clients grew just over 11%. Finally, Verma's commercial teams provided exceptional support to their clients. I've now had 2 visits to Canada in the last 6 months. The team are very experienced, client centric and hungry to grow, a great fit for OFX. And it means they can achieve healthy NOI margins, which was 75 basis points for the 12 months to September 2022. Our integration team comprising leaders across OFX and Soma are driving an effective integration. The 3 focus areas are people, client experience and synergies. On the people front, we've had good engagement with voluntary attrition in line with firmness experience in fiscal year 2020, slightly up on fiscal year 2021, while voluntary attrition in the commercial team is actually down versus fiscal year 2021. The product data and technology teams have been working hard to get a clear and consistent plan to migrate clients. And we will start that process in Q4 of this year. The synergies are on track to deliver $5,000,000 plus by fiscal year 2025 with revenue from underlying performance exceeding our expectations in fiscal year 2023, whilst revenue and cost synergies are progressing well. We will have a better picture of potential upside once migrations take effect in fiscal year 2024. In all, very encouraging indeed. Turning to Slide 7. As mentioned, turnover of $19,900,000,000 was up nearly 33% versus the prior corresponding period, which is excellent. But it was also terrific to see first half twenty twenty three up over 9% versus second half twenty twenty two. Will unpack the drivers of turnover later. That suffices to say there is strength in all key areas, including elevated average transaction values that certainly helps. The strength 2 in transactions per active client. NOI of 105,300,000 up just over 53% was outstanding, driven by the contribution of firmer, but also by the continuing hard work we're putting in on managing our costs that arise from revenue, bank fees and commissions. Selena will touch on treasury revenue and interest income later also. Finally, the underlying EBITDA of $32,300,000 up over 59% versus last year and up over 33% versus second half twenty twenty two was also outstanding. It reflects a very healthy company with good fundamentals. In addition to being a very strong result, it's great to see on Slide 8, the strength in the portfolio and in particular, our Corporate and High Value Consumer segments, which represent over 90% of our revenue. I'll go through each segment in detail later, but here is a brief summary of the segments on one page. Firstly, our corporate segment delivered revenue growth of 98.2% versus first half twenty twenty two. Ex firmer, it was up nearly 20% on the prior corresponding period, but flat versus second half twenty twenty two. Noting that second half twenty twenty two included some unusual transactions arising from COVID that contributed to non repeating revenue as we have previously explained. Our high value consumer segment has performed exceptionally well, growing 11.3% versus first half 22 and 3.7 percent for the second half twenty twenty two. We've worked very hard to ensure we continue to deliver a best in class product and service for our high value consumer clients everywhere. Our online seller segment was slightly up versus first half twenty twenty two and slightly down on second half twenty twenty two. Ex Asia, it grew 6.9% versus first half twenty twenty two in mixed conditions. We continue to see strength in North America, opportunity in EMEA and challenges in Asia. Our Enterprise segment had a disappointing half with revenue down 1.6% versus first half twenty twenty two and down 7.4% versus second half twenty twenty two. Whilst the overall contribution of enterprise is still relatively small at just under 3%, we expected more and we'll break this down further later. Moving to Slide 9, it's wonderful to see that as a global company, all our regions are performing so well with each growing revenue double digit versus first half twenty twenty two and each growing versus second half twenty twenty two. Notwithstanding the second half twenty twenty two had some unusual revenue arising from COVID. North America was the standout, delivering 117.2% revenue growth including firmer for 17.2%, excluding Thermo. We remain incredibly encouraged and committed to the region with the firmer acquisition giving us scale and earnings, strong team and strength in Canada. Consumer and online sellers are also performing well, supported by prior investments and aided by some volatility in a strong U. S. Dollar. EMEA was also very good, growing revenue 26.9 percent in what continues to be a difficult economic environment with inflation and political uncertainty all affecting consumer and Corporate, confidence. They're in good shape to grow further in the second half twenty twenty three and our European license creates opportunity for further expansion. In APAC. It was also a good first half twenty twenty three with revenue up 15.4%. Australia and New Zealand performed well, growing over 15% in first half twenty twenty three versus first half twenty twenty two, while Asia grew over 8%. It's been challenging for our clients who are largely importers with such a low Australian dollar. However, this has been offset by the volatility driving a strong consumer performance. Moving to Slide 10, we've shared previously that our corporate segment is valuable for its strong growth, strong returns and client loyalty to OFX. We've grown our investment in this segment considerably in the last 2 to 3 years. So it's wonderful to see the progress during the half. Corporate now represents more than half of our total revenue. We grew revenue over 98% in the first half versus the prior period in every region delivered strong double digit growth with North America being the standout at 2 51% growth versus for prior period including firmer. However, it's also terrific to see EMEA growing just under 60% off the back of a very strong commercial team, sound risk management and good execution. APAC also grew over 28% despite being the most mature region and operating in a fiercely competitive market. Similarly, it is a sign of great health when both transactions and ATVs are growing well. As I mentioned earlier, the export thermal portfolio declined slightly first half twenty twenty three versus second half twenty twenty two, largely due to transactions and $1,300,000 of revenue associated with COVID, which occurred in the second half twenty twenty two that did not repeat in the first half twenty twenty three. This was also flagged in our Q1 2023 trading update And excluding that, we've seen consistent growth in the OFX portfolio with a 3 year CAGR of 12.7%. In our fiscal year 2023 outlook, we've assumed ATVs remain at first half twenty twenty three levels due to the combined effect of volatility, supply chain challenges and labor shortages not showing signs of abating. I will discuss later our competitive strength heading into a different economic cycle, but I do want to emphasize here that this portfolio is well positioned. We are represented across a diverse range of industries. We have exceptionally good service. We're global and we can manage price. There is considerable investment being directed at improving our commercial platform as well as providing better risk management capabilities for our clients. Is fair to say, we are delighted with the progress we've made and especially the trading and operational excellence we demonstrated through the pandemic. Moving to Slide 11, we're delighted to see such a healthy high value consumer segment winning that rebound that we were targeting with revenue up over 11%, with particular strength in North America growing over 20% in the first half versus the first half twenty twenty two. We're more convinced than ever that our sweet spot is consumers who value that combination of a great digital platform, great prices and great service, including human interaction when it's required. We saw ATBs maintaining high levels at nearly 21,000 as consumers manage their assets with our help and we saw the return of salary transfers and mortgage repayments as substantial use case. Our outlook assumes ATVs moderate down to between $1,200,000 in the second half, given we can't predict volatility. That is higher than the long term average, primarily due to inflation as well as our marketing programs targeting higher value use cases. Our high value consumer segment is at its best when clients need us the most, such as during crises. When the combination I spoke of earlier along with our banking support means that unlike some of our competitors, we remain open to business and able to support them. Moving to Slide 12, this is the 3rd year since we announced deliberate and targeted focus on the online sellers segment. And while it's disappointing to see revenue roughly flat, it's encouraging to note that the progress we've made in our platform and our regions excluding Asia and to see revenue margin grow 4 basis points versus the second half 22. It's well documented that e commerce and other online sales have been up and down over the period as consumers tighten spend off historic highs and retailers and service companies struggle with supply chain challenges, which impact inventory, inflation and increasing risk in currency exposures. Our response is to strengthen the call, a further investment in our platform, increased focus on risk management whilst adding more value for our clients, more currency, better pricing and faster payments. We've previously announced incremental promotional expense target of this segment in North America and this has been growing gaining traction with registrations up 29.5%, which all goes well for future performance. I visited Amazon in Seattle in the last few weeks to discuss their PSP program as well as their broader views on e commerce and technology. And I left feeling significantly more encouraged by the partnership and our direction. Turning to Slide 13, the first half was a mixed story in our enterprise segment. We saw revenue decline slightly as one of our long standing clients saw share trading activity decline. We're also seeing slower activation of our recent wins than participated. This is largely due to the challenges larger companies face in adjusting to the new economic environment and particularly in getting new technology programs up and running. What is more encouraging is the pipeline. In the last 6 months, our pipeline has grown with prospect meetings up and 71 opportunities now in the pipeline, up from 48 in the first half twenty twenty two. Our commercial team has pivoted its focus from larger prospects for smaller and midsized prospects because they see greater transaction sorry, traction and speed to activation and every region is contributing. Was great to win our 1st enterprise deal in Asia, which is already activated. We see more competition in this segment, but think it will be a very strong part for OFX over the next several years as we continue to provide clients with a strong global platform, superior risk management, exceptional service and strong account management. As we'll touch on later, it also very much plays into the strategy of being a value added specialist. Moving to Slide 14, we always share the drivers of our turnover so that investors can see what is happening in more detail. In this presentation, we've broken it down further to help explain how the portfolio operates. In the first half twenty twenty three, we saw turnover grow just over 32% on the first half twenty twenty two. But beneath that, we saw a pickup in active clients during the half, an improvement in the transactions per active client excluding the offshore share purchases we saw in first half twenty twenty two and ATBs remain elevated. When we break that down, our consumer portfolio saw active client growth, transaction growth, HEV slightly down on the first half twenty twenty two, but still elevated an improved fee and trading margin, which drove turnover of just over $5,000,000,000 in the first half. Our corporate portfolio also saw growth in active clients and transactions, but then also growth in ATVs, primarily due to the addition of Therma, driving turnover of $11,500,000,000 This breakdown between the portfolios illustrates the value of our corporate portfolio. Around a 5th of the total active clients drive around 60% of the turnover at healthy margins with high recurring revenues. Turning to Slide 15, as we continue to operate in an inflationary environment, investors are naturally concerned about the effect it may have on our growth and returns. Selena will walk you through the detail on our financial results in a moment, but I want to share a very critical lever, our ability to manage margins. The chart show you how we've managed our NOI margin over time. We have always said that at a group level, even as we grow corporate as a proportion of our total revenue, we will maintain stable NOI margins. The chart on the left shows that over the last couple of years. With the onset of inflation, higher interest rates and the addition of firmer, we're actually growing our NOI margins. The chart on the right shows how. Firstly, we've been investing in more sophisticated price programs for many years and we watch the market very closely and are always looking for opportunities to get a reasonable price for a reasonable service. As volatility increases and we remain open, stable and resilient, whilst others don't, we can get a little more price. We also see improved interest in treasury income as rates go up and volatility increases. Finally, our firmer team is very much a service led proposition. And whilst they are significantly cheaper and better than banks, they are slightly higher priced than OFX. This combination is very valuable, especially in an inflationary and rising rate environment. So in all, a very good first half. And now let me hand over to Selena to walk you through our financials in more detail. Thank you, Skanda. Moving to Slide 17, we have driven a Record financial results. We have growth across all regions and are delighted with the contribution from firmer. We closed the transaction on the 1st May for all subsidiaries with the exception of the UK, which closed on the 1st September. Fee and trading income or revenue was up 49.9%. Of the $110,900,000, Ferma contributed $27,200,000 which is an excellent performance for 5 months of trading. We saw growth in all regions and the corporate and consumer segments were up 98.2% and 11.3%, respectively. The Aussie dollar has weakened during the half, moving from $0.74 in March of 20.22 to 0 point 6 7 And strengthened against the pound moving from $0.56 to $0.59 For the first half of twenty twenty three, 41% of our revenue is from North America and and 13% from EMEA. The revenue growth rate of 49.9% when adjusted for constant currency is more like 49.2%. Net operating income was up 53.4%, which is a higher growth rate than revenue as our bank fee and commission ratios held, Walshe also had a benefit of $1,000,000 from interest and other income. Rising interest rates have allowed us to make some interest on the cash we hold. Our clients value speed through our treasury function is critical in providing liquidity and security, enabling fast and low cost payments. Interest income is a nice upside to moving money through our accounts, but we will not prioritize this over the speed of payments. Our underlying EBITDA is $32,300,000 up 59.4% on the first half of twenty twenty two and 33.2% on the second half 22, a record effect. The strong trading conditions, higher ATVs and volatility all produced with Fee and Trading Income, whilst our investments in risk management, pricing and client experience meant we delivered an EBITDA margin of 30.7%. Our tax rate for the first half of twenty twenty three is 23%. In fiscal year twenty twenty four, we will no longer benefit from the offshore banking unit tax regime. So we're expecting a tax rate in fiscal year 2024 to be approximately 29%. Our statutory net profit after tax is $14,700,000 up on both the first half of twenty twenty two and the second half of twenty twenty two. There are one off costs of $5,400,000 including the statutory net profit after tax for the transaction and integration costs of the Therma acquisition. There is a healthy $92,900,000 of Cash held up $29,800,000 in the first half of twenty twenty two and up $8,700,000 from the second half of twenty twenty two. Moving to Slide 18, our underlying operating expenses are $73,000,000 up 50.9% on the first half of twenty twenty two. You will note that we are now 712 FT feet feet feet feet feet feet feet feet feet feet feet feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet. We welcomed 174 firmware employees into OFX Group and we have continued to invest in technology, up 41 FTE and the sales and marketing resources are up 24 FTE. It's great that we're able to attract talent that remains in what remains a competitive market due to our growing reputation, track record and strong financial position. Promotional expenses for the half were $9,000,000 up 13.8% on the first half twenty twenty two. So NHL partnership started in the second half twenty twenty two. We continue to invest in marketing where we see the demand, which generally increases during gold tile periods. Technology expenses of $5,200,000 were up 36.1%, driven by a shift to software as a service Struckscher from Owned. This approach better supports risk management payments and client onboarding because we benefit from global technology firms investments at scale. This is us investing solely for a relatively smaller benefit. We are exceptionally pleased with the balance out of debt in for U. 'twenty two. So as we outlined at the time, we did not expect this trend to continue given the industry fraud levels. Most of the bad and doubtful debts in the last Tafel for North America, where we're seeing a lot of smaller transactions being pulled back from transferring banks due to insufficient funds. This marks a shift in the pattern of fraud we see away from identity takeover fraud to money mules and bad actors deliberately exploiting the U. S. And Canadian Banking loopholes. As you can see, the $1,200,000 of bad and doubtful debt for the half is still well below historical levels when you compare it to the revenue for the business, and we will continue to focus on keeping losses as low as we can. Other expenses are up $4,400,000 up 90 5.3% on the first half twenty twenty two driven by firmer and travel as normal business operations have returned. Turning to Slide 19. We continue to have a strong balance sheet. Our net cash position is $92,900,000 which is both cash held for Onus and deposits due from financial institutions. As mentioned, this is up $8,700,000 from March of 'twenty two. We hold some of this cash as collateral for our trading lines and bank guarantee. Collateral and bank guarantees were $49,000,000 up $7,400,000 from March 'twenty 2. This is due to firmer creating a higher need for collateral and the volatility meaning higher collateral calls from our trading counterparties, especially during September 2022. Net available cash is $43,900,000 Our DeRoutu financial asset of 145 $800,000 and liability of $124,200,000 are higher than prior periods. You may remember that on the 30th September, the pound was almost at parity with the U. S. Dollar. This caused our client positions to widen as we hedge these and as we hedge these with offsetting counterparty positions Wyden in the opposite direction as well. The net derivative position at 30 September was $21,600,000 higher than the $7,300,000 in March due to the addition of firmer, growth in the corporate portfolio and volatility. Cash flows from operating activities is 20,100,000 which is lower than normal cash conversion rate for OFX. This is due to 2 items. The first is changing the forward book. When our clients book a forward with us, revenue is recognized, but cash is not received until the forward matures. We may also need to call collateral from our clients and post Claro with our counterparties as rates move. These items create a timing difference between EBITDA and cash flow generation. Also, we have been growing our corporate segment very deliberately. As part of that, assisting our clients in considering simple risk management approaches such forward during these volatile times. As this volatility has materialized, clients have appreciated this and more forward has been put in place creating this larger difference. We are comfortable with this as we have established risk and credit processes and adequate lines with our counterparties to offset the forward risk. The second item relates to the one off non operating cost of $5,100,000 from the transaction and integration costs for Therma. We funded the Therma acquisition using debt. When the transaction closed on the 1st May, we drew down on our $100,000,000 5 year facility. Due to the strong second half of twenty twenty two and continued cash flow generation, we paid down $18,500,000 of the debt in the first half of twenty twenty three. The balance net of establishment cost is now $78,200,000 and we continue to target repayment of the debt Sility within 4 years, subject to no other value accretive growth opportunities emerging which require funding. As we stated when we announced for fiscal year 2020 results in May. We will use our excess cash to pay down our debt instead of paying a dividend. As such, there is no interim dividend for the first half of twenty twenty three. Moving to Slide 20, our intangible investment forecast is between $15,000,000 $17,000,000 for the year, which is slightly different than our original guidance of $12,000,000 to $16,000,000 Hiring technology staff has improved more than we expected, adding 54 FCE in the last half, many of which work on the development of our intangible assets. Our areas of investment are aligned to our strategy to become the world's leading cross border payment specialist. Some of the delivery highlights for fiscal year 2023 are with 2 additional currencies, the Japanese yen and the Polish zloty being added to our global currency account for our online seller and corporate segments. JPY is live and already being used by our clients. Faster payments and more straight through processing. Our initial focus is on automation of allocation of payments as well as our connectivity to our banks, thereby improving our ability to reconcile and move funds for times during the day. 80% of our incoming funds are straight through process allowing us to increase the speed to move money for clients. On onboarding to ensure the best onboarding experience while also maintain managing risk and compliance and client experience. We've gone live with a new and improved Client Relationship Management System, which will allow us to better serve our clients by providing improved functionality and tools for our client facing teams. Our investment historically has tracked just over 6% of revenue. Continued investment is required to ensure we remain contemporary and continue to improve our client experience, with Risk Management and Scalability. I will now hand back to Skanda to take us through the strategy and fiscal year 2023 outlook. Thank you, Selena for that excellent coverage of our financial performance. And in this section, I'll share with you our strategy as well as our outlook for fiscal year 2023. Turning to Slide 22, we've worked very hard over the last 3 years in particular to get a deep understanding of what the opportunity is for OFX, where we want to play, how we can be distinctive and if we execute against that, why will we be more valuable in the future. This slide summarizes that thinking. Firstly, our total addressable market or TAM is huge. With McKinsey's estimating the total cross border payments market at over $130,000,000,000,000 in turnover per annum. We have a small fraction of that, sporting just over $19,000,000,000 in payments in the first half. We We've targeted 4 segments of the $130,000,000,000,000 market that we see as being valuable and where we believe we can be distinctive. Corporate or SME clients who value great price, a digital plus human service and the expertise of a specialist will typically do very well in uncertain economic environments. SMEs who operate primarily through e commerce continue to be a growing part of the overall SME mix. And particularly over the medium term, we see strong growth from them through our online seller segment. Next, we see more and more value in taking the complexity, cost and risk of cross border payments out for our enterprise clients who have an embedded cross border payment in their organization. We also see global banks retreat from this segment due to the regulatory burden and the relative strength they have in lending and transactional banking for domestic firms. Consumers who value great rates on a digital plus human service delivery typically send larger transactions than consumers who value a purely digital platform or who sends smaller amounts to remittance use cases. As consumers grow their cross border asset holding or do more cross Porter, Education and Travel will be there for them. While each of these segments will grow, it's our job to win disproportionately by being distinctive and executing better than our competitors. I've mentioned that our research tells us that at the heart of what clients in these segments want is a great digital platform supported by human service to provide expertise where it's valued. To execute that well, who've laid out those elements that we believe and clients told us are most important. The winners will have a single global platform that provides a world class payment experience, both in terms of the product and the service supported by strong risk management and run by the best team. We believe that by unlocking that opportunity through these segments With our execution, we can build an even more valuable company characterized by healthy revenue growth, high recurring revenue, strong EBITDA at attractive EBITDA margins that generates good cash flow. And as we foreshadowed, we see the industry consolidating and see ourselves as well positioned to participate in that. Turning to Slide 23, I mentioned earlier that we see OFX seemed very well positioned for the new economic cycle we're now in, higher interest rates, inflation and a heightened geopolitical change. We're obviously seeing inflation in our global economy, which continues to rise. Central banks everywhere are increasing rates in order to try and get it under control. That combination, higher interest rates and inflation have not been evident in developed markets for more than a decade. It creates 2 particular effects in our industry. Firstly, being profitable is more important. Generating one's own cash is critical because borrowing is now a real cost and growing. It will also mean availability of debt will go down. So for those companies reliant on debt or who don't generate meaningful profit or EBITDA, operating has become much, much more difficult. And this is obviously reflected in their valuations, down around 70% in the last 12 months or so for those companies. But inflation is in fact somewhat of a tailwind for OFX. The ability to generate margin as I touched on earlier is critical here. We can only do that because our value proposition as a specialist is critical. We add value by being digital and human. Anyone can move money. Can you help your client reduce risk? Can you remain open to trading when they need you most? It's the strong foundations we have that come to the fore when inflation and interest rates rise. We're also experiencing a temporary disruption to supply chains, which is affecting all countries, all SMEs and all consumers. That disruption shines a light on being a resilient platform that your clients can rely on. We can operate remotely. We can operate securely. We move money quickly. That combination is very, very important, especially for SMEs when their inventory is difficult to source and sell. And then finally, as a result of higher inflation, higher interest Trait's geopolitical uncertainty and supply chain challenges, it's fair to say we've moved to a risk off world. Investors understandably look for companies that have navigated these times before, have an infrastructure built for many cycles, not just good cycles in governance and leadership, I think medium term, not just short term. Our investments in the good times and risk management become a lot more valuable in difficult times. Turning to Slide 24, this is a slide Mark Shaw, our Chief Operating Officer shared and discussed at our Investor Day back on March 16, 2022. I won't repeat what he said word for word, but I want to remind investors how intrinsic this is to our organization. Is no great financial services organization that has survived more than one economic cycle that does not have a strong risk culture. OFX has this in our DNA. We were founded by people who grew up in treasury and we have been operating in foreign exchange and payments since 19 98. Through that time, we've had missteps and there's no learning that happens without that. But today, we have a mature and rigorous program and it breaks down across 6 main areas. We have partners who we can rely on, who share our risk appetite, Tier 1 banks and enterprises we work with. We target clients and segments we understand and can add value to. We operate in geographies we can get comfortable with and particularly as it relates to their laws and regulations. We offer products that provide value to our clients that are not so complex or opaque to them that they cannot understand them. And we answer their questions quickly and fully when they have them. Our processes are a blend of digital and automated where possible and first and Humean where we don't yet have the automation or digital aspect or where it's not valued. And finally, we operate through channels that we can understand and on platforms that share our risk appetite. In the middle of all of that is our culture and effectively our people. Starting with our Board and moving down to our frontline. OFX is a risk management company dedicated to keeping our clients safe. Moving to Slide 25, as I said upfront, I am delighted to upgrade our outlook for fiscal year 2023 to NOI of between $215,000,000 $222,000,000 and underlying EBITDA of between $62,000,000 $67,000,000 this reflects our performance in the first half and trading in the 1st month of the second half as well as our forecast for the second half ATVs as outlined earlier. I've shared the drivers of this performance, but I thought it would be useful to share what we see as the main potential tailwinds and headwinds to our outlook. The main potential tailwinds are foreign exchange volatility, which typically lifts ATVs in transactions, especially in consumer. High inflation will typically lift ATVs and create margin opportunities. And finally, the low AUDUSD does create a revenue upside with our portfolio revenue is now 18% in U. S. Dollar. In terms of potential headwinds, we're seeing some signs of client stress and I'm managing it carefully. But this is a known unknown in the sense that shocks can be unexpected and we tend to see it in credit loss. In the first half, we saw losses rise and we've assumed they continue to rise in the second half. The incidence of cyber attacks is growing. We're investing more than ever, but we know that the bad actors feel very bold right now. And finally, GDP growth does slow that could affect the for health of our clients businesses, which could mean losses or just reduce transactions if they go out of business. With all of this said, We're delighted with the first half twenty twenty three results and our outlook for fiscal year twenty twenty three reflects that. We're also delighted with the performance of firmer and remain on track to deliver more than 20% in underlying EPS accretion. Thank you for your time. And now let me hand back to Sari for any questions. Thank Your first question comes from Seth Hoskin from Canaccord Genuity. Please go ahead. Thanks, operator. Hey, Selena. Hey, Scanda. Thanks Thanks for the time this morning and congrats on a good result. Just a couple from me and just starting on corporate ATV. So just firstly, a bit of confirmation. Does that AR37,000 include Wirth. And then secondly, I mean, you called out a few things around supply chain and volatility and some other factors that are giving you confidence that that's going to preserve. I mean, what level of visibility do you have on the components outside of that, that this may be more of a sort of structural change around inflation of goods being purchased? And then as far as following on from that, yes, 1 to 2 year view, you're still expecting ATV to normalize back down? So, 37,000, yes, that does include firmer in that result, which their ATVs are higher than the OFX ATVs. But even if you look at the corporate ATVs, even in Halifax, they're still relatively elevated. And then what was the second part of the question, sir? I think I'm going to normalize that. Yes, sorry. I threw a few out yet. Around, I suppose what's changed relative to 6 months ago that's sort of giving you confidence that they're going to stay at that level. I mean, you called out supply chain volatility, but is there a component of this that is just more structure around like inflation, etcetera? Yes. I think it's a combination of all that, right? We are seeing them hold. We've seen them hold through the half. We are seeing supply chain. We're also seeing a little bit of inflation. And the more that we talk to our corporate clients and understand how they're trading. We are expecting them to hold at those levels. Thank you. And then just stepping through the cash position again, sorry, just a few moving parts in there. So did you say your available cash post your collateral is $43,000,000 up to $67,000,000 So if we go through cash, I'll take you through it from the top, which is fine. So our cash held So you've got the $67,000,000 of cash held for unused and then you add $25,700,000 of that, which is Deposits due from financial institutions effectively turned deposits. The total of those is $92,900,000 which is our net cash. We then use 49 of that is used for collateral for our counterparties and we also have a bank guarantee for a lease. So the net available cash when you take the $92,900,000 less the $49,000,000 you get to $43,900,000 Thanks. That's helpful. So your net debt position is $35,000,000 that's actually available that you can use? Yes. When you look at net debt, yes. And then just following on from that in terms of cash conversion over the next 12 months, there's obviously a few moving parts around working capital. Do you expect cash conversion to improve over the next 12 months? Well, if you look at some of the cash conversion yes, so if you look at some of the items in the cash conversion, we walked it for you on Slide 19. We are expecting a refund on tax payments and some of that tax payment was also the firmer And we had cash on the transaction for that. So that tax payment should go down. The change in the forward book, some of those forward the cash to be collected, so that should also be less of a cash drain. And then the one off non operating expenses, The large majority of that was to transaction costs on Thermo, which are now done. But we do have integration costs going forward, but it will be less than that amount. So The cash conversion should be better in the second half than the first, given all those items from the operating cash conversion. Thanks, Selena. That's really helpful. And then just one for SCANDDA, hopefully. Just on the corporate business, you called out sort of GDP and how that can have an adverse effect and you're starting to see a few signs around the edges of that coming through your corporate customers. Could you just talk through sort of potentially some previous experiences and how flowing on negative GDP can flow through into your corporate book. Yes. So what we've seen in the past is that you are exposed to SMEs who are in industries that experienced severe downturns. So for example, if there was a severe downturn in manufacturing or some service industries, then obviously the performance of those particular SMEs is going to be affected and they may reduce their transactions because they're just trading less. If you have SMEs like I pointed out in the online seller space who are exposed to retail and consumer discretionary spend goes down, they can be affected in the same way. So when GDP goes obviously for those SMEs who are serving industries or consumers that are affected, that's what can affect transactions. The good news is, when you look at our distribution of industries, it's actually very broad and so is firmer. So we don't have a particular kind of overhang on a particular industry or particular geo. And that's why we feel pretty good generally. But you have to just keep a weather eye on the way that could turn out. And so that's why we've called that out. Thanks, Ganda. Thanks, Selena. Congrats on the good results. Thank you. Your next question comes from Lafittani Sotirio from MST Financial. Please go ahead. Good morning, team and thank you for my questions. I would like to kick off with firmer. Is it possible to get a rough ballpark of what the underlying EBITDA contribution for firmer was for the first half? Yes. So what we've given you is we've obviously given you the net operating income from FOMA, which is absolutely excellent at $26,700,000 It's actually really hard to split out EBITDA because the two businesses are operating together. I thought so. Yes. But ballpark ish, do you have a rough number? Because I expected some of the could there be some shared costs or integration, so it would be harder to But you have a ballpark of what it was roughly? I can give you what was released before, which was their September last year actuals, which was they had $51,900,000 of revenue and $10,900,000 of EBITDA. So you can See there what the cost structure is and that was on a 12 month basis. So half that will take 5 months of that. We've obviously had some cost synergies, so it's slightly lower than that run rate. What if I ask it in another way? So for the first half from NOI contribution, you've got $26,700,000 I know that there was 1 month that wasn't included. But there's also some of the U. K. That wasn't included for a longer period. So if we were to gross that up, what would that NOI number B for the first half? Yes. So NOI of 26.7 is effectively 5 months of trading for Fermat, While the U. K, we didn't acquire until the 1st September, there was a management fee because we were running effectively the back end of that business until that sale occurred, which came through other income, which is in the NOI line. So it's not that much different, the UK in or out coming 1st September. So I would take assume that the Thurman number is just the same number. Yes. Okay. And so but this is a huge result in term. And so I just want to better understand the dynamic because obviously when you made the acquisition, you called out a few value adds that you were going to deliver and some gaps that they had with some of the licensing that value you could bring across. But this is the uplift has already happened. So is there if you were to attribute the mix of the uplift, how much of it is The market dynamic and how much of it were there some early wins of, are you guys being on board and adding digital or other things to the mix. Maybe Laffer, I could tackle that. I asked this question when I was in Canada in October of all of the team over there in various roundtables because I kind of figured there might be some reaction or some questions around this. And this is kind of the way I would summarize it. There's a series of compounding effects that are going on here. So it starts off with volatility. And there's no question at Volatility kind of lifts all boats. And so the business is moving faster because of that external pace. But then here are the sort of multiplicative aspects. One is relative to other cross border payment company serving SMEs. Firma has a very kind of service led proposition. So when you get volatility, typically clients go to service companies before digital companies to kind of get that support that they want and they need. And so firmer relative to other companies in that space have done very well and they've has been very successful in presenting kind of risk reduction as part of the value proposition. The third thing is that they have been investing in prior years in putting in place their digital platform. And you could see in that result, a significant like 100% increase in online penetration, which has meant transactions per active client is going up at a record rate for firmer. And then the final thing is, in times like these, they're also exceptionally good at getting margin. And what they've done is if you look at their tenure, it's now up by the 7 years. And when I talk to folks in roundtables there, particularly their traders, one of the comments that was made to me was I feel a lot more confident now talking to clients and understanding price than I did 2 or 3 years ago. So it's arrived at a very, very good time that tenure. And because voluntary attrition was down in the commercial teams, kind of really did a nice job. It was also a little bit of a tailwind because one of their major competitors fell over a couple of years ago. And so they had picked up a bunch of new clients about 18 months ago. So the short answer is, what we've been doing is keeping close, supporting them. We haven't been in there kind of driving policy changes. We've obviously been getting close to their sales teams and encouraging them. We have not been turning anything off whatsoever, we're working very heavily towards the integration. But really largely the FERMA team deserve all the credit for the hard work and the progress. And they're very excited candidly by the sort of changes that are coming with respect to their ability to sell from the U. S, to sell through, to sell more through the online platform. So hopefully that unpacks it a bit for you. I got it. So why don't I move on. So just moving to some of the FTE increases over the last year and excluding firmer from this, 54 Newtek and 40 odd new sales is a meaningful increase. So can we just talk a little bit about what the expectations are of the medium for this increase in headcount. So from a technology perspective, are you anticipating better efficiencies Margins or you anticipate getting more share of the wallet from some of these corporates and for the sales and marketing that's quite Huge increase. And so should we anticipate more higher sustained growth rates over the medium term? Most of the technical ads are working on things like platform resilience. So making sure that everything that we do is very, very strong. And believe it or not, that actually has an effect on number of transactions because clients feel confident transacting with you, especially during volatile times. Things like our pricing engines, things like our risk investments that help us in managing our loss exposure. Certainly we have been investing heavily, for example, in enterprise integrations. All of those things are very much on our product roadmaps. Selena touched also on our customer management solutions that tends to show up on more transactions for active clients because it's Deloitte to remain engaged. When I look at, for example, reactivations in the first half, they were significantly up. That's really testament to our CRM programs, which are technology investments. But they show up in lots of different ways. Obviously, Selena also touched on faster payments. In the past, we've shared things like adding new currencies and partners that tends to show up on more show up as more transactions or better margins. All of those things are the way we think about intangible investments in technology. Okay. Why don't I move on to the guidance and can I just clarify, the guidance includes Average transaction values for consumer dropping a little bit, but for the corporate book being largely in line with first half? Is that correct? Guest. Okay. And so can you just remind me, is second half Traditionally, seasonally stronger half for OFX? Historically, yes. But I just would hesitate to work seasonal. Historically, you can look at second half and compare it to first half, there's no, let's call it seasonal reason for that. It's not like because in the Northern Hemisphere, they're celebrating spring or something like that. It just seems to be that over the history of OpEx, the second half has been slightly higher than the first half. But we've always Selena and I have always been quite sort of circumspect about that. We don't sort of bank it. We don't put it in as a given our sales teams and our client service teams have always maintained close contact, but there's no specific reason why we seem to trade a little bit better in the second half? It's not just trade a little bit. I mean, if you look at the last 3 years prior to this this year. I mean, we're looking at 30%, 40% higher second half versus first half on average. There's a meaningful Tyl, but you're saying there's nothing specific. But even if there isn't, right? So go on. The last quick one. You may remember, it just so happens coincidence that some of the highly volatile events in the last few years have happened in the second half. So for example, the Brexit vote that creates some huge volatility for a couple of years there. They always happen in the second half. The other one is COVID that happened in March of 2020. It just so happens by coincidence the high volatile events have happened in the second half. We don't know whether that will be or not. Pardon me. This is Sari. Operator, you could have one last question, Mr. Sotirio. Yes, okay. And so Okay. So if I'm just finishing this question, I've got one more. And so if you look at the guidance then if you largely double if there's Seasonally, that's at least not going to be weaker. And there's probably another $1,000,000 on EBITDA from the Firm component that you did normalizing that for the full 12 months. That kind of gets you to the upper end of guidance. So If there is a seasonal impact, you could push up ahead of the revised guidance, but I'll just park that. In terms of the commentary around M and A, Can we just go into what your capacity is given you're in the middle of a pretty big integration with Thermo? We can see from the balance sheet there's some capacity to do another one. Are there many opportunities you're looking at? Do you think you could do A bolt on in the next year or are you pretty tied up with firmer? Look, there's certainly opportunities. And as I've always said, it's one of those things where you don't always get to choose. Sometimes you just have to be patient and you've got lots of capacity and you just don't do any transactions because they're not well priced or they don't have a good fit. Other times, things are extremely busy, but you've got a great price and a great fit. So you have to kind of make capacity within reason, we obviously have to manage existing commitments, particularly the thermal one. So the position of the Board and the management is we'll look at every opportunity and we'll just assess it around what's the kind of medium term value that we can extract? What's the EPS accretion that seems reasonable? And we'll make a position. I mean, there's no question right now that as I said, consolidation, particularly for those companies that are not as capable to withstand the next sort of 2 or 3 years is happening. And so we have to remain alive and aware and there's been a lot of lessons coming out of firmer that we can leverage into transactions going forward if we choose to. So there is capacity. You're not going to not do a transaction because of what having Surma on your plate? Correct. All right. Thank you, guys. Congratulations on a Guruzel. Thanks. Thank you. Your next question comes from Cameron Hawke from Wilsons. Please go ahead. Thanks, operator. Hi, guys. Thanks for giving me the chance to ask a Question. I'll be really quick and just do one. So I suppose EBITDA margin post thermal was always targeted to around 30%. We've been there for the last few halves. And obviously, there's a few things driving that with elevated ATVs and things, but you've also done some really good work with Thermo. So I suppose, what's your message to investors and to the market about how you think about that EBITDA margin target of around 30% whether that's something you stick by today or that might be a bit conservative just given how well things have gone? Thanks. Now, I mean, what we've always said Cameron is that the long term should be 25 to 30. There'll be some hards and some quarters where it's better than that. But we certainly shouldn't be too much less than that at any point in the cycle. It's kind of a little bit of you've got to be a bit careful because at the moment, obviously, what we've been doing is being very thoughtful about pricing and we're getting good price. We've been very, very thoughtful about expenses, particularly on the firm side. And so the EBITDA margin is very, very healthy. Other times, we'll be investing and it won't look so good. But long term, it should definitely be in that sort of range. And especially for a company like ours, that is mature, that has enough scale, that's kind of the way Joanna and I and the Board think about it. Awesome. Thanks, Candace. Thank you. That does conclude our Q and A session. I'll now hand back to Mr. Malcolm for closing remarks. Look, I just close by saying thank you all for joining. We're obviously delighted with the result. And we're very, very focused on the firmer integration as a big priority. But in the meantime, we're seeing our kind of competitive strength rise. So we will continue to keep you updated on developments from here. But thanks very much