Release Date: August 28, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Frontier Digital Ventures Ltd (ASX:FDV, Financial) reported a significant increase in revenue, reaching almost AUD42 million for the first half of 2024.
- The company achieved a healthy improvement in EBITDA, demonstrating strong financial performance.
- FDV has maintained consistent revenue growth, even in challenging macroeconomic conditions such as high interest rates and inflation.
- The company has successfully launched new products and platforms, contributing to revenue growth and market expansion.
- FDV's core businesses are operating cash flow positive, and the company continues to have cash reserves, indicating financial stability.
Negative Points
- Some regions, particularly in Asia and parts of LatAm, experienced below-expectation performance, impacting overall results.
- The company faced technical debt issues with platforms like Yapo, requiring significant investment to rebuild and improve.
- Certain businesses in the portfolio, such as those in Morocco, underperformed and require strategic decisions to improve or divest.
- FDV's share price is not reflective of the company's performance, indicating potential undervaluation in the market.
- The company needs to balance continued investment in new products and platforms with maintaining profitability, which can be challenging.
Q & A Highlights
Q: How should we think about the margin trajectory for Infocasas going forward?
A: Infocasas is part of our 360 LatAm group and serves as a test bed for new product releases, which initially have lower margins but improve over time. While Infocasas is profitable, it is not as profitable as we would like due to the early-stage nature of many new products. We aim for Infocasas to achieve strong double-digit EBITDA margins over time.
Q: How should we think about CapEx spend from here, particularly in light of the 360 LatAm medium-term strategy?
A: CapEx is a delicate balance. We aim to grow profitably while remaining cash flow positive. Continued investment in product development is necessary, but we manage CapEx carefully to ensure it is sustainable. Recent significant CapEx has been directed towards new platforms and product improvements in LatAm.
Q: Yapo has seemed to have declined in revenue on PCP. Is this driven by the re-platforming? And is there confidence that the revenue growth will be restored once the new platform is bedded down and launched?
A: Yes, the decline in Yapo's revenue is due to re-platforming. The old platform accumulated technical debt, making it slow and cumbersome. The new platform is expected to improve performance and scalability, restoring revenue growth.
Q: Could you provide an update on the sale of Zameen by the major shareholder?
A: The ambition to sell Zameen remains, but the focus is currently on business recovery. Zameen is now growing year-on-year and generating cash. The potential sale will be revisited as the business continues to improve.
Q: Could you elaborate on the quarter-on-quarter improvement mentioned for Zameen in the first half of 2024?
A: Zameen experienced year-on-year growth in Q2 for the first time in a while. The business is recovering, and we are seeing positive trends in key financial metrics. Detailed numbers are available in the quarterly release from July.
Q: How much did prices rise for Fincaraiz during the first half of 2024, and did they get the full benefit during the half?
A: The price rise for Fincaraiz was around 15%, but the full benefit is not immediate due to the subscription-based model. The price increase will flow through over time.
Q: What are the other receivables items on the balance sheet that grew by roughly $4 million?
A: The increase in other receivables is due to internal loans that have not yet converted to equity. This is a technical accounting treatment requested by our auditors and will be resolved in the second half.
Q: What does the contribution to margin from Centrify and Iris look like at the moment for 360 LatAm?
A: Both Centrify and Iris contribute positively to the margin, although not significantly at the moment. These products are in the early stages of scaling and are expected to build margin over time.
Q: At the statutory level, revenue grew by 14%, while operating expenses increased 11%. Do you feel that the current cost base is sufficient to drive ongoing growth, or will further investment be required?
A: We aim to grow revenue faster than costs while maintaining a balance between investment in product development and cost management. The focus is on responsible growth and generating EBITDA.
Q: Do you feel that FDV is sufficiently capitalized to drive growth over the next 12 months?
A: We have enough cash in the bank to drive growth. While more capital could potentially accelerate growth, we are focused on responsible scaling and delivering strong results for investors.
Q: How should investors be thinking about the second half of 2024 in terms of growth and profitability for FDV?
A: We do not provide forward guidance but focus on revenue and margin growth. Our track record shows consistent improvement, and we aim to continue this trajectory in the second half of the year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
