PaySauce Results Presentation - For the 6 months ended 30 Sept 2025

Marina, good morning. Welcome to this results presentation for the six months ended of September 2025. Um just a reminder that um the nothing in this presentation constitutes legal, financial, tax or other advice. H and we have we have uploaded this presentation to the NZX. It is available to download uh the presentation and the interim report. We've also uploaded it onto our website for you. So today we've got Asatna, our CEO and co-founder um talking to you about the the interim highlights. I'll then have myself Jamie Monahan CFO talking to you about the financial results for the year. Um we will then have some time for questions at the end. If you do have any questions, you're very welcome to send them through in advance to make sure we get to them. You can send them through either through the chat functionality within the the portal or you can email us at investors.com. So without further ado, we will hand over to Asanth to talk to you about the interim highlights. >> Thanks Jamie. Um it's it's been it's been a pleasing half u behind us. U we've had some some good success. We continue to focus on building the technology stack. Um, and that's evidenced in the the work that we continue to do in the the second half of this year of our market entry. Um, we continue to focus on building the New Zealand base. It's about execution and scale. That's been the sort of highlights for us. So, that's allowed us to report a ARR of 9.2 million, which is up 6% yearon year. Uh and pleasing to say that we've lifted our customer lifetime value to 60.5 million which is a 20% increase. Um and the EB number continues to grow which is up 231,000 to 779 which then led to a bottom line result of 302,000 which is pretty much double the the previous half. So that's a um a pleasing financial result um that has continued to give us a platform to launch from. Um we are we are as I said we're delighted with the increase in the the the customer numbers and the value that's driving. So where does that leave us um now? So the investment that has gone in is about building the global payroll platform which we sometimes we what we call the the gen two pay per engine and that um is live now and it's up and running. So that gives us the the the strong platform both financially and from a tech point of view to to do that. So the first half of this year has been about building the scale. It's about building the capacity and it's about people and collaboration across the company. Um and at the same time understanding what the requirements are and what the size of the opportunity is in Australia. Um it's it's we've we've taken our time um to understand the problem we're solving and and build a solution that speaks to the micro business customers that we're going after. We've always said that we're not interested in just building just another payload system. We're not interested in competing on a feature basis or on price. It is about solving a real tangible problem for micro business owners who are really good. They're experts at what they do. But in terms of keeping up with the compliance piece is where we can help them be the best business owner they can be the best family member they can be the best member of society they can and it's a significant opportunity just to contrast the size of the Australian opportunity not just the fact that there are 700,000 un 700,000 underserved micro businesses in Australia but also that sector is growing between 80 and 100,000 customers a year. So there are a lot of new entrance coming and and when they come in they will be looking for a payroll solution and and our goal is to be that payroll solution that they will get to employ their first staff member. That's the the key thing. Um it's about being appealing. It's about being easy, simple, and providing a one-stop shop where a simple solution that sits on a mobile phone, they're able to keep up with the compliance. So, that is the the the goal. Um, and it's easy to say, but it's really complex to build. And, and that's been the learning that because it's complex, the approach of the micro business owner in Australia to date has been to use a series of different solutions to get to the end result that they want. What we've done is we've brought that solution into the one place. That is the significant difference that we offer. We believe with the ease of use focus that we've got and the customer care focus we've got, we can then get significant traction in getting some early adopters who will then we will use to launch from there and to get to a wider community. So that is the that's the plan. Um and and from Australia we say look everything we do in Australia is about learning entering into a new market. What's required? What do we need to build? how do we need to do that which will then serve us when we look to go to the next market beyond that. So that's the that is the plan. Um we've gone to the sector that has given us the most success and that we know really well which is the dairy sector and and the response we're getting from that is is really positive. We are back again uh in Victoria this week um working with and and talking to a whole whole number of potential customers for us and and and that's part of that learning and refining and making sure we've got this right before we push really hard into it. It's it's it's been a progressive engagement and and that's the way we've always been. It's not because we lack ambition. It is about it's really vital that we get it right before we push on from there. Um so that is the that is the u the plan for us. Um we'll continue to validate the product. We'll continue to report back um to you the shareholders as to the progress we are making. Um and and and we are tremendously excited again as a company. Um is this is this is the moment that we've been waiting for to to make use of the vast knowledge we have the experience we have in how to serve this customer base. built on a very strong technology platform that gives us a significant edge in in terms of entering the Australian market. So I'll pass it back to Jeremy to talk about the the some of the customer the financial results details of the last half. >> Thanks. Um yeah, so as you can see we're very excited about about what's to come. Um but the the results that we're generating just now are generated from New Zealand. So an important distinguishing factor here is that the annualized recurring revenue which is a key metric for us. We earn interest on the float in New Zealand that's a quirk of New Zealand rules. Um so when we go to Australia the interest income is not available to us when we move into that market and into other markets as well. So that interest income is a key component of our our revenue in New Zealand. As I said it's about 20% of the the total revenue that we get per customer at the moment. Um and as you can see that annalized recurring revenue numbers at $9.2 million um at the moment as at the end of September. Uh of that we have 7.3 million which is coming from processing fees. So when you look at the overall ARR number it's up 6% yearon year and that's despite a 20% yearon-year decline in the interest income that we've we've earned in this six months compared to the the same six months last year. And that's just off the back of those wholesale interest rates declining. the float has continued to increase um but the the interest earned on those funds has decreased. So the underlying business um generated from our customers the processing fee income has increased 15% yearonear coming through. We then look at the the you know for the for the half um we managed an increase in that that half year 4.5 million of the total recurring revenue up 5% from 4.3 million last year and that followed through into the gross margin as well. So similar margin coming through 3.5 million up very slightly on 3.3 million last year and as a percentage we're proud of the fact that we've managed to maintain that gross margin percentage despite the the interest income coming down and that's really coming through from the efficiencies that we've gained in the cost to serve those customers. So for our gross margin, we recognize the the recurring revenue less the cost to serve and our cost to serve includes our customer support team, our bank transaction costs and our hosting fees are the primary costs that go in there. So through those efficiencies, we've managed to um hold that keep that cost coming down which has managed to keep the gross margin percentage flat and that flows through then to the to the bottom line numbers. Um EBIT DA is not EBIT DA in the traditional sense because we do include that interest income and the recurring revenue. So it's earnings before tax depreciation and amortization. We've managed to increase that to $779,000 this year up $230,000 on the same time last year. And as spoke about the investment that we've been making into our our new global payment global platform, um that's where a lot of the cash has gone. the cash investment has gone through and a really important point we've managed to fund that investment and it's a significant investment into that new platform through the cash that we've generated from our existing business in New Zealand. So with that investment we've still managed to generate positive cash flow um positive free cash flow of $33,000. So down a bit on last year um but still positive in free cash flow into the business. And our closing cash position as at the end of the the period was $272,000 in cash plus we have a $350,000 facility with B&Z which is undrawn. Um and we just keep that as a as a surplus. Now moving into the customer metrics. So this is more of the the way that we think about our business. This is how we run the business in terms of what we look at when we're we're running it. So we just take you through the customer journey for this. So we have um acquisition costs of $577 per customer. So that's for every customer that we acquire, it costs us on average $577 to acquire them through our sales and marketing costs. That transfers to about six and a half months of interest of sorry of revenue. Um so it cost us about six months revenue to to bring that customer on. This customers then pay us a subscription fee um and we earn the interest on the float. So the subscription fee as I spoke about before that's up at $70 per customer per month which is um is up year on year and the interest income element that we earn in that fund is down as I said before um year. So that comes to $90 altogether per customer per month when you combine those two amounts but just down very slightly from from last year. We then have the cost to serve those customers. And as I said before, um that cost is actually through the efficiencies that we've made, we've managed to reduce that cost to serve those customers from $21 per customer per month last year to $20 this year. So we're very pleased with that outcome in terms of efficiencies coming through in the processes that we're putting in place as we as we scale up. Now, when you take those those metrics together and you say, well, how long does a customer usually stay with us? Um, so our average monthly churn is just under 1%. So what that means is, you know, we take the average over 12 months because we do have a bit of seasonality within our business. So we take a 12 month rolling average um turn rate and just under 1% and that rate has come down and that's really a reflection of a bit more stability coming in in the businesses that we serve with fewer businesses going out of business or choosing not to have staff anymore. So that number's come down quite considerably, excuse me. [clears throat] And when you reverse engineer those those values that means that customers on average stay with us for eight and a half years. Um and that has that has gone up 13% yearon year which is a good improvement for us. So when you when you multiply all those together it means that every customer is worth $7,19 um to us and that is that is a 10% yearon-year increase for each of those. And when you multiply that by all the customers that we have, um the total customer lifetime value is just over 60 million. And that's that's 20% up on last year. And that's up because of both the the number of customers and the value each of those customers is to us. And when you another common SAS metrics is the lifetime value to customer acquisition cost ratio. So we're getting 12 to1 in that ratio which is up 15% on last year which is a a reasonably solid number for us compared to to some of our peers. So I'll pass you back to now who's going to talk a little bit about the outlook. >> Thanks Jimmy. Um so one of the one of the key things in terms of outlook um is that we continue to work on growing the the revenue base out of New Zealand. um and that is about providing about acquiring new customers and being efficient about it. Um one of the the big pieces of work that is underway around the customer support side of things is the use of AI in providing an exceptional customer care but at scale without losing the intimacy that that we we have with our customers. It's it's really important that we don't lose that. um how can we continue to care for our customers in a meaningful way but do it at scale and and that's a significant opportunity for us to apply AI um and that's a big project underway um that will allow us to scale but not to have cost blowout um as we scale so it's about managing that and and you can see that reflected in the financials as well we we're servicing more customers um but we're keeping our cost to serve about the same number that that's really really important um as we look at new markets um the other place that we're looking at uh use applying uh AI is around the customer experience point of view one of the key things to understand about AI is AI is a fantastic and and and it's a gamecher for us it is how do we make use of that but keeping in mind that we have a duty to our customers around the privacy and the information that they share with us we are responsible for 75,000 employees employees and their private information. How do we manage to keep that safe and secure but still make use of this new technology in providing a better customer experience? That's the um that's the work that is underway in the business. So, um we continue to expect that we will we will grow the the field revenue side of things. Um and as Jamie has said, we we anticipate that there'll be further declines in the interest income uh which is based on the market forecast and and the commentary out there. We're expecting a further drop in the OCR that will be in this court this half. >> Yeah. >> Um and we're also looking at um we're completely reorganizing the way um we are acquiring customers. So there's some some exciting work around the growth side of the business in New Zealand. Um and we're investing in both people and in solutions and systems that will allow us to acquire customers at scale um in in the New Zealand market. Focusing then on the Australian side, uh we will take the knowledge that we're acquiring every day from our interactions with our Australian pilot customers and the conversations that we're having with the Australian potential customers as well as the providers out there. Um we've got a launch that we planned for February that we're working towards. The Australian tax year ends in June. So that provides a natural buy point of where people are considering changing payroll systems is towards the end of the financial year. There'll be some consideration to that and there's a very important complianced driven opportunity which is the introduction of payday super in Australia. That again is a significant event that will that is putting pressure on payroll systems to change and to adapt to providing them providing the ability for customers to file their superanuation payments and filing when they do a pay run as opposed to the quarterly basis that they do. Now it is a significant change that requires a lot of work to be done from all of the people providing a solution out there. We've built that capability from day one. So we are already payday super compliant and and so we know that that's something that people in market will be looking to change payroll systems because their payroll system might not be ready with it um or or they might not have done all the work for that. So again we see that as a significant opportunity for us to capitalize because businesses think long and hard before they change payroll systems. It's about finding the moment, finding the opportunity and and then capitalizing on that. And and we think that the payday super change coming middle of next year is a significant catalyst for people to change payroll systems. So our challenge is how do we scale get to a point have brand awareness when someone's looking to change or give a new payroll system that is payday super compliant they think of us and and they come to us. that is the the the next six to nine months work cover up for us in terms of a marketing positioning point of view. So we we are we're confident that we can do it. Uh we we've done this before um and we will do it in the same considered uh but ambitious way that that that we've always built this business. So we are all um eagerly awaiting the um the changes and and the the the opportunities that are coming up. um and and we're confident that we've got the people, the processes, and the thinking to capitalize on this significant opportunity. So, I think that covers the the outlook for the the next sort of six to 12 months for us. >> Thank you, Asan. Um now, we'll move on um to questions. Todd, hopefully you're on the line. Is there have there any been any questions come through from our visitors? >> Thanks, Jamie. Uh, no, we haven't seen any questions come through yet. >> All right. In that case, I will um I'll show you the glossy side. So, that's in the in the slide for those who want the to understand the three little acronyms that come through. And I'll pass back to Santa to close. >> Thank you so much. I really really appreciate the support from shareholders um who we we we got the message from shareholders that you need to hear more from us. you need to hear us articulate more about what we're doing and and we're working really hard at taking that feedback and and being more deliberate uh about sharing our vision, our plans, and what we're doing so that you can understand and and properly value our business and and that's something that we'll continue to work on. We thank you for your confidence, belief, and trust in us. It's something that we take really really seriously. Um, and we look forward to the next opportunity to talk to you in the new year. Thank you so much.