Release Date: August 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Netwealth Group Ltd (ASX:NWL, Financial) achieved a record $22 billion in gross inflows and $11.2 billion in net inflows, ending the financial year with $88 billion in funds under administration.
- The company reported a total income of $255.2 million, reflecting an 18.9% growth, and an EBITDA growth of 23.8%, resulting in an NPAT of $83.4 million, a 24.1% increase.
- Netwealth Group Ltd (ASX:NWL) received several awards, including the number one platform for Best Advised Product by Chant West and Best Product Offering and Best Transaction Tools in the Investment Trends Report.
- The company expanded its financial literacy program, reaching approximately 125,000 children since its inception.
- Netwealth Group Ltd (ASX:NWL) successfully acquired Xeppo, enhancing its data capabilities and positioning itself for an AI-driven future.
Negative Points
- Operating expenses increased by 14.5%, driven primarily by employee benefits expenses, which rose by $13 million due to the addition of 60 new roles.
- Revenue margins experienced compression due to lower average cash balances and positive market movements, which have an inverse effect on basis points.
- The company anticipates a small percentage increase in the rate of expense growth in FY25 compared to FY24, which may impact EBITDA margins.
- Despite strong revenue growth, reductions in cash balances and lower overall admin margins somewhat offset the gains.
- The integration and consolidation of Xeppo, while strategically beneficial, will initially be break-even, potentially impacting short-term profitability.
Q & A Highlights
Q: Can you confirm if July is seasonally a quiet month and if the strong performance is due to seasonal factors? Also, how do you see the impact of AMP's recent changes on your flows?
A: July is typically a softer month, but it has been a strong start to the year. Regarding AMP, it's early days, but we have good relationships with their new licensee, and we expect positive opportunities from these changes. (Grant Boyle, CFO; Matthew Heine, CEO)
Q: What is the strategic reason for moving into advice management and practice management? Is this a new revenue stream?
A: Our focus is on advice enablement to improve efficiency for advisors. The Xeppo acquisition is part of this strategy, allowing us to offer broader solutions without deviating from our core business. While it may not significantly move the revenue dial, it is crucial for differentiation in the market. (Matthew Heine, CEO)
Q: Can you provide insights into the advisor groups contributing to the $1.2 billion in flows and any changes in their composition?
A: The $1.2 billion is diversified across our key market segments. There are no one-off institutional accounts, and the flows reflect a broad spread across Super Retail, Investment Retail, and Wholesale. (Matthew Heine, CEO)
Q: Can you elaborate on the expected OpEx growth and the types of hires contributing to this?
A: We added 60 roles last year and expect a small percentage increase in headcount this year. The roles will be spread across technology and service areas to support our growth. (Grant Boyle, CFO)
Q: How should we think about revenue margin compression moving forward, given the composition of new flows?
A: Account sizes are getting larger, which may lead to some revenue margin compression. The impact will depend on the mix of new flows, with high net worth groups potentially accelerating this trend. (Grant Boyle, CFO)
Q: Should we expect EBITDA margins to pull back with the step-up in cost growth next year?
A: We are not providing specific guidance on EBITDA margins. The expenses will see a small percentage increase, and the revenue will drive the overall margin. (Grant Boyle, CFO)
Q: Are newer advisors contributing more to net inflows this year compared to last year?
A: Yes, newer advisors contributed more this year due to the backlog of opportunities and business transitions from the previous year. (Matthew Heine, CEO; Grant Boyle, CFO)
Q: How should we measure the success of your tech investments?
A: The success will be reflected in continued sustainable growth. Our tech investments are fundamental to our business proposition. (Matthew Heine, CEO)
Q: What is the size of the Xeppo business, and is its cost included in the cost growth guidance?
A: Xeppo's revenue is approximately $3 million, and it is currently break-even. The cost growth guidance does not specifically include Xeppo. (Grant Boyle, CFO)
Q: Will you continue to invest in-house development of key platform features?
A: Yes, we will continue to build in-house capabilities to ensure complete control and flexibility over our products, which also helps diversify risk. (Matthew Heine, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
