Change Financial Limited

I'm Tony Sheehan and I'm joined by Tom Russell, Executive Director. So similar to our webinar format Tom and I will run through a presentation.

And then take Q&A at the end. As a reminder, if you have any questions, please submit them through the chat function on the webinar.

So what do we do at Change Financial? Many of you who have been on our webinars before will have seen this slide, so we will keep it pretty brief.

But for those of you who are new to our webinars or new investors, I'll go through it pretty quickly here. So what do we do?

We provide innovative and scalable payment solutions for over 150 clients across more than 40 countries. We are a B2B business with 2 core products.

The first 1 is Vertexon, which is our payments as a service or PaaS offering, which provides card issuing, card management and transaction processing. Vertexon supports prepaid debit and credit card issuing and there are 2 main models under Vertexon.

The first 1 is processing only under this model Change provides the technology, which is a card management system to clients to run their card programs, so the clients hold the necessary scheme, typically Visa or all Mastercard and regulatory licenses to issue cards. Processing only is available globally and supports all the major schemes and we have clients using Vertexon in Southeast Data and Latin America, including 2 of the largest banks in the Philippines running over 45 million cards on the platform.

The second model is processing and issuing. So this is only available in Australia and New Zealand.

And under this model, clients utilize Vertexon for processing capabilities and also leverage Change's regulatory. So we have an AFSL in Australia, and we are a financial service provider in New Zealand and scheme licenses.

So we're a MasterCard principal issuer, and they leverage our issuing capabilities for the card. So under this model changed the card issuer of record, and we provide treasury, fraud and compliance services.

Vertexon has generated 85% of the group's revenue year-to-date. Our other core product is PaySim, which is software, which enables end-to-end testing of payment platforms processes and scheme rule compliance.

The PaySim software is based on global messaging standards and can be sold globally. You do not need any licenses to sell PaySim.

So PaySim is the default testing standard for FPOS in Australia and has a blue chip client base, including 5 of the top 10 global digital payments companies globally. PaySim contributed 15% of the group's revenue year-to-date.

Importantly, both Vertexon and PaySim are proprietary payments technology platform. So they are owned and developed in-house by Change.

So it's really important from a value and control perspective for the company that we own our technology. In terms of key highlights for Q2.

So another really strong financial performance in the quarter. So with Q2 delivered record quarterly revenue result of USD 4.7 million.

That's up 34% on prior year. Year-to-date revenue is up 29% on prior year with 70% of revenue derived from recurring sources.

That provides a really solid base of revenue to grow from. Our one-off revenue being licenses and professional services are still really important drivers of overall financial performance, and they have been key contributors to the strong financial performance during the half.

Our rolling 3-year revenue CAGR of 31 December is now 25%, and we are on track to have doubled the size of changes in revenue over the last 3 years by the end of FY '26. Underlying EBITDA for the quarter was $900,000, so taking total underlying EBITDA for H1 to USD 1.8 million.

So as a reminder, and for context in FY '25, we delivered our maiden positive underlying EBITDA result for the whole year, which was $200,000. So you can see the operating leverage pull through that we've been talking about, and that's the combination of revenue growth and a stable fixed cost base driving materially improved bottom line performance.

The cost out from the U.S. exit are also making a material difference.

So as a business, and we've talked about this before, we are scaling, we're not at scale. So we want to continue to drive operating leverage moving forward to generate that bottom line margin expansion.

PaaS is a key driver of our growth, and we have seen strong growth in the PaaS metrics across the board, which I'll talk more about on the following slide here. So on our PaaS metrics, we now have more than 110,000 cards active in Australia and New Zealand.

So the increase in cards was driven by the Sharesies debit card program in New Zealand, which launched in October. And also significant growth in 1 of our existing fintech clients in the prepaid card space.

It's just worth noting prepaid cards as a portion of our active cards has increased from 20% at June 2025 to 41% at December 2025. And why is that important?

It's well, generally, debit cards drive higher transaction activity, enhance revenue as they are often used for everyday purchases. So there is a different sort of profile, revenue profile, usage profile between prepaid cards and debit cards.

We will continue to drive revenue growth through new clients already signed. We're currently onboarding 2 clients and further client wins.

As a business, we are laser-focused on growing the PaaS platform to drive scale benefits. So we have the product and team in place to add significantly more clients and volume without having to increase our fixed cost base.

I won't go through the PaaS revenue source in detail. We have covered this 1 previously, but happy to take any questions if there are any at the end.

On our PaaS time line, so looking at the time line, you can see that steady cadence of new client wins and a significant shortening of time frames between signing clients and launching programs we've been signing clients. Before we had the platform fully live and operational, and we continue to sign clients.

You can see on the top right of the slide, Sharesies launch in early Q2, which has started to contribute monthly revenue during the quarter. We also have those 2 more PaaS clients that are currently onboarding and they will contribute monthly revenue once the program's launch.

As I mentioned on the previous slide, a key focus for the business is new client wins and particularly in Australia, given the size of the market. So we want to increase the number of new client wins, onboard them quickly and get them transacting to drive volumes and revenue across the business.

Thanks, Tom. I'll hand over to you.

Thanks, Tony. So again, we've had another great revenue quarter, which Tony touched on USD 4.7 million or USD 7 million for the quarter, which is up 34% on Q2, FY '25.

PaaS revenues from our Australian and New Zealand clients are up 19% on a quarter 12 months ago, so that's good to see. We've had Sharesies going live, which we're getting a lot of questions about as we come to those at the end, and we can answer them specifically.

But these programs when they go live, they can take a little while to build to a meaningful revenue and transaction volume. So Sharesies without giving out too much specific information about the client.

They had about 40,000 people on their wait list. I believe that was public information.

They've sent cards now to the people. They've fully released that wait list.

They only did that a couple of weeks before Christmas. And they've sent physical cards out to the people of that wait list that wanted them.

They've got a little bit over sort of 10,000 active cards now. A lot of those have gone active very recently or very late in the quarter.

So it takes time for those cards to actually get into people's hands and then for them to start transacting. So that's why there's a bit of this -- the lead indicator is the active cards, but the transactional revenue is transactional volumes, sorry, and therefore, the revenue is not literally aligned to the active cards.

The other part, which Tony also mentioned was the prepaid card amount has increased, and it's a different revenue model, if we can talk about all at the end. We're also currently ongoing 2 additional already contracted PaaS clients.

One of which will go live in the next month or so and has an existing program. So that's the embedded finance client, and we'll talk more about that maybe in the next quarter once they've gone live.

We also continue to see the benefits of our recurring revenue base, which we've been building, our PaaS and support and maintenance revenue -- for the quarter, our recurring revenues totaled USD 3.3 million, which is approximately 70% of our revenue. In terms of the nonrecurring revenue, we continue to generate from professional services and licenses.

During the quarter, we delivered $1.4 million in one-off revenue -- over the last couple of quarters, we've flagged, we've had a very strong focus on this revenue and a significantly -- a significant growing pipeline of those opportunities. And again, we've seen those efforts from the sales team where those deals are dropping through our teams delivering them and then we're also refilling the pipeline.

So we've had our best half in the history of the business in H1, which we'll talk about in a second as well in terms of one-off revenue, and we still maintain a strong pipeline into H2, but we do need to unlock that revenue as we go into timing and that can be a little bit difficult. That does help us build confidence in our guidance we've provided by the way.

In terms of EBITDA, very pleasingly after delivering a main positive result last year of a $200,000. We've now delivered 2 consecutive quarters of USD 900,000.

So $1.8 million for the first half. So we're at a key inflection point as we've been flagging for EBITDA and profitability in the business.

Cash receipts for the quarter are up -- up 4% to $3.9 million versus the prior corresponding period. That cash payments operating activities were broadly in line with Q2 last year, up only 5%, which was driven by an increase in COGS from increased transactional activity and revenue and payment of bonuses attributable to FY '25 performance.

As we say every update, we have the key roles and staff in place to add significant revenue without a lot of new hires. CapEx has also remained steady as expected, and capitalized software development is tracking in line with FY '25.

We have a healthy cash position of $2.6 million and hold an additional $1.4 million in cash -- in cash back security deposits. We also have a very healthy accounts receivable look at the end of the quarter, so USD 3 million, which is about $900,000 higher than it was the same time last year.

And that's due to a number of client payments that were collected like the days before Christmas and New Year 12 months ago have fallen into January this year around the festive season. This half is the first time in the history of the company that we've been cash flow neutral in H1.

And as we see in previous years, H2 from a cash flow perspective, given the billing cycle of some of our larger on-premise Vertexon clients and PaySim clients. Cash flow is typically significantly improved in H2, let alone any other growth, and we expect that to be the case in FY '26 as well.

Back to you, Tony.

Thanks, Tom. So just looking at our outlook.

So on the back of the strong H1, we have upgraded our guidance for FY '26 earlier this week. So revenue now expected to come in between $17.5 million and USD 18.5 million.

So the increased quantum of recurring revenue provides a very solid base for the business. We talked around that the 70% of our revenue coming from recurring sources.

We want to continue to increase that. But as we've mentioned, we also had a very strong one-off revenue half as well.

So that's also important to continue to drive our revenue. Underlying EBITDA now expected to come in between USD 3.1 million to $3.8 million.

So that's a 15% increase at the midpoint compared to our previous guidance. Tom mentioned before, we've maintained around our cash.

We've maintained our guidance of being cash flow positive for the year. Historically, that sort of stronger cash flow in the second half of the year, we expect that to be the case in FY '26 as well.

Overall, a really great start to FY '26. We're really pleased as a team as to where the business is.

Our focus which I'll reiterate, which is what we've been really drilling in across the business here is on growing the business and executing on our operating plan to deliver on our targets for the year. Tom, I think that's the end of our sort of formal presentation.

There are some questions that have come in, so we might open that up now for Q&A.

Yes, I'll start reading those out, Tony. So as I said before, we -- and I'll touch on it just again because we've had a few questions here around the difference in active cards and volumes and why aren't transactions scaling with new cards -- can you explain the large difference between the card growth and transaction volumes?

Is this related to Sharesies and when they were delivered, how many Sharesies cards went out. So yes, it is.

So again, prepaid cards, just to reiterate, less transactional activity, a slightly different revenue model and usage case to our debit cards. Sharesies is a debit card.

They're trying to drive their customer base to not use whatever bank they might be using and come over and use their Sharesies cards their everyday card -- that will take time. Again, a lot of those cards went out late in the quarter.

They were physical cards because Sharesies rolling out the digital pays, Apple and Google Pay as well this quarter, I believe, is their plan. So those sort of things will help give access to that particularly millennial and sort of more tech-driven client base as well.

So that's probably answers that, I think. And next question here.

Customer receipts of $3.9 million, up 4% versus revenue up 34%, any issue of collecting those receivables? No, no issues collecting it.

It's just a lot of those payments. So November and December are very, very large invoicing months for us relative -- and you can see that throughout the history of the business.

What happened last year, there's a few clients actually paid earlier than they usually paid. So it made last year's quarter 2, sort of a high cash collection quarter than usual, and you can see that in the trend.

Have you seen slowing of growth from existing card issuers? No, we haven't.

Our financial institutions are -- they're a lower growth profile. They've got a very sort of stable base of cardholders that use their cards religiously every day.

But Credit Unions and sort of building societies, as you would know, are not fast-growing organizations, the fintechs, such as Sharesies and the embedded finance company that will be going live in the next couple of weeks, they're fast-growing fintechs that can really add volume and we can scale with them. Does the new fintech client have an existing card program?

Yes, it does, and we'll relate some more details on that when we can.

And Tom, just on that as well, those -- that those existing card programs are across Australia and New Zealand as well.

They are. Yes, good point.

So there's a lot of questions here in 1 go. The company also entered into an additional BIN sponsorship, strategic partnership with the global processor payment.

Can you provide a little more detail and explain a little further what this means. Tony I'll throw that 1 to you.

I'll take that. Thanks, Tom.

So we provide in sponsorship services as part of our offering. So we can be the processor and issuers.

So we provide the technology. We provide the card issuing capabilities.

There are some instances where you've got clients that are based overseas entering into Australia, they might use a processor that is a global processor from overseas that needs card issuing capability. So what we decided to do was to offer the BIN sponsorship capabilities where we are the card issuer of record, but they are using another process technology.

So for us, it's actually broadening or expanding the pie of opportunities that we can actually provide card issuing capability. So we always talk around that scale game in payment.

So it's more volume for us. Our preference where we really generally target as a business is to be a processor and issuer, but we are also more than happy to provide BIN sponsorship capabilities to clients entering the market as well.

So those partnerships are important to us to sort of expand our reach in market.

Thanks, Tony. There's another question from this person around transaction volumes in cards.

I think we've answered that one, so I'll leave that. Can you please describe the client regions of the license and professional services contribution.

Tony, do you want to take that 1 as well?

Yes. So most of that, I would say, and Tom keep me -- correct me, if you've got a different view on that, I would say that probably 75% of that would come from -- would have come from Southeast Asia during the quarter.

We picked up some licenses and professional services from Latin America as well and a little bit in the Oceania region, but the vast majority of that has come from clients in Southeast Asia. A lot of that is on the Vertexon side.

And then we've got some PaySim clients as well.

Which can be global, but not a material as the Vitexon thing, obviously. Thank you.

I'll hook first 1 to you as well. Can you expand on what the pipeline looks like in each of Australia and New Zealand for PaaS?

Yes. So look, we often get a lot of questions around the sales pipeline.

I'll tie that in with another question that has -- that I've seen that's come in around when can you expect to -- I think it was when can you expect to sign another large client to move the share price. So I think as a business, we've demonstrated over the last few years that we continue to sign PaaS clients.

I think we've signed probably 12-plus PaaS clients, since launching the platform and going live. We've got a pipeline of opportunities there.

Do we want to accelerate the sort of velocity of how many clients we're in? Absolutely.

That's a key focus. I mentioned that in the presentation there is to sign more clients and get more volume onto the platform.

What we are seeing is in terms of our sales pipeline, the Australian pipeline is continuing to build given our focus with our new BDMs in that region. So there's some really good deals that are progressing through that pipeline and moving down to the bottom of the funnel.

They're still going to go through to get finalized, obviously, which is so still a way to go before they sign. But the top of the pipeline has continued to expand.

That is progressing through the pipeline. We're very pleased with where that is at the moment.

New Zealand is going well as well. We've seen that with the launch of Sharesies, which is a great program, late last year in October.

And we also have that fintech client that has their existing programs. that are moving over to us in Australia and New Zealand as well.

So some really good clients and some great volumes coming across to us. In terms of that pipeline, we're comfortable, we're very happy with where it is.

We just want to be signing more of those clients. There is some lead time as a B2B business.

There is sort of quite a lengthy sales cycle as well. So with those changes that we've made in the sales team as well, we're seeing those deals progress through the funnel.

And it is a bit of a snowball just to add to that. You've seen it in New Zealand where we signed those first clients and then we sign in other Credit Union, another Credit Union and then we signed a large a fintech, large Sharesies.

People are starting to come to us in New Zealand as the top of mind option for card issuing. We're probably not quite there yet in Australia, but we've signed a couple of deals now, the client that's going live this quarter, when we're able to say who that is they're a meaningful client from a brand perspective with big growth aspirations.

And I think that, that reputation that settling every day, that goes a long way to just building the momentum. And as Tony said, B2B sales are lumpy, and this business has the ability now and always has to sign big clients like we signed Credit Union a couple of years ago now, but that was a big deal for a small business and the business can sign those kind of deals at any point.

We just can't -- we're not going to sit here and tell you they're coming next week or whatever else that take time to come through. Another question, Tony.

What about potential customers switching from Visa to MasterCard. Does it take longer to onboard them?

Yes. So good question.

Generally, the market is -- it doesn't really matter whether you're a Visa or a Mastercard. And I think most of the people on this webinar kind of probably got a Visa and Mastercard card in their wallet.

I think in terms of switching where we've switched 1 of our major Credit Union clients in New Zealand over to Mastercard a couple of years ago. So that sort of -- they were on a different scheme moved over to Mastercard.

That went smoothly. There's generally that people fairly open in terms of the different schemes.

We have it down, we have the process down pat pretty well. We'll have another client that we can swap them over quite easily between the different schemes.

I think part of the sales cycle in terms of talking to financial institutions as well as they are with the alternate scheme being Visa, and we want to try and swap them to Mastercard. There's obviously more conversations because they're more familiar with that certain scheme as opposed to Mastercard, even though a lot of the functionality is very similar between the 2.

So -- it doesn't really take any longer to onboard them. Sometimes, particularly in the financial institution space, there's probably more conversation that needs to be had, if there is a scheme switch involved.

Okay. I have -- I'm not -- the end of the question that I've seen here, Tony.

That's right. I'm just checking another screen time.

I've not seen any other -- I think we've answered most of those. I think we've answered them all actually that have come through.

Perfect. All right.

Well, thank you, everyone, for joining again. We really appreciate you taking your time to jump on the results webinar for the quarter, and we will have our half year out as well at the end of February.

So we hope to see you all again when we do the webinar for the half year.

Thanks, everyone. Thanks for taking the time.