Release Date: February 27, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- PEXA Group Ltd (ASX:PXA, Financial) reported a 12% revenue growth on a pro forma basis, with operating margins increasing by 5.2 percentage points.
- The company successfully reduced its capital expenditures, leading to a significant increase in free cash flow and enabling the repayment of $55 million in debt.
- PEXA Group Ltd (ASX:PXA) is engaged with all major UK banks, expanding its lender pipeline and preparing for the launch of its sale and purchase product in the UK.
- The company announced an on-market buyback of up to $50 million, reflecting its strong cash generation and improved balance sheet.
- PEXA Group Ltd (ASX:PXA) achieved a 20% revenue growth in its international business, driven by Optima Legal's market share recovery and increased volumes from Smooth.
Negative Points
- Statutory results were negatively impacted by non-operating, non-cash items related to taxation and investment impairments.
- The UK engagement with banks is progressing slower than desired due to stringent decision-making and risk management processes.
- The Bank of England's real-time growth settlement system upgrade has delayed testing slots, impacting the timeline for UK operations.
- PEXA Group Ltd (ASX:PXA) had to de-recognize a $19 million deferred tax asset due to failing the same business test after a divestiture.
- The company faces challenges in fully utilizing data across its various insight offerings due to pending regulatory approvals.
Q & A Highlights
Q: Can you provide context on the operating expenses for the exchange business and any major projects or platform refreshes planned?
A: Scott Butterworth, Chief Financial and Growth Officer, stated that there are no plans for a refresh of the exchange, but ongoing investments will ensure the product remains current and cyber resilient. He mentioned that productivity improvements are expected, and margins should not decline in the second half, with potential growth depending on volume outcomes.
Q: Regarding the UK market, how are discussions with major banks progressing, and are sale and purchase conversations being combined with remortgage discussions?
A: Scott Butterworth explained that discussions vary by bank, with some combining sale and purchase with remortgage conversations. The aim is to encourage banks to view them as a joint proposition, as the real benefit lies in both areas.
Q: Can you update us on the Bank of England test slots and the test transaction progress?
A: Scott Butterworth noted that the delay in test slots is due to the Bank of England's real-time growth settlement program. They are confident in the revised timetable, but unforeseen delays are possible. Regarding the test transaction, they are working with Hinkley and Rugby to find the right transaction, with internal testing indicating the platform is functioning as expected.
Q: How has the engagement with UK lenders progressed recently, and what is the current status of Optima and Smooth?
A: Scott Butterworth reported that conversations with lenders have improved, particularly after NatWest's announcement. Optima has regained market share and improved productivity, while Smooth has benefited from increased sale and purchase volumes, cost synergies, and improved attachment rates.
Q: What would be a satisfactory outcome for lender engagement by the end of the financial year?
A: Scott Butterworth expressed a desire to reach the commitment stage with as many lenders as possible, acknowledging the challenges of dealing with large organizations with their own processes.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
