Iress first-half FY24 Earnings Call Highlights

Iress (ASX: IRE) shares briefly opened 4.5% higher as the market opened on Monday but quickly reversed into negative territory. This is despite reporting a stronger-than-expected 1H24 result and an upgraded full-year outlook.

1H24 Results Summary

• Revenue down 1% to $309m or 0.6% below Macquarie estimates (22-Jul)

• Operating costs down 10% to $242m

• Adjusted EBITDA up 52% to $67m or 2.7% ahead of Mac ests

• Adjusted EBITDA margin up 760 bps to 21.7%

• NPATA up 282% to $17.2m

• FY adjusted EBITDA guidance upgraded to $126-132m vs. Mac $123.4m or 4.5% beat

• A full-year dividend will be reinstated from March 2025

Earnings Call Highlights

The below topics have all been answered by CEO Marcus Price and Deputy CFO Julia Wong.

FY24 performance: "On July 22, we announced an expectation of our adjusted EBITDA for the year in the range of $65 million to $67 million. I'm delighted to report that the earnings for the half came in at $67 million, the top end of the range, 52% uplift ... As a result of the strong performance, we will be upgrading our guidance."

Cost management: "Cost of sales and wage OpEx were down 2% in a high inflationary environment ... The bulk of the operating expense reductions came from a decline in FTE arising from the restructuring activity taken through 2023."

UK performance: "The UK has been a good news story for Iress in this half with a significant turnaround under some strengthened leadership ... Adjusted EBITDA $13.1 million, up 90%. Our margin up 770 basis points to 18.5% ... We've re-signed three marquee clients with £43 million of revenue, £84 million over the next five years."

Superannuation business: "Superannuation is performing below our expectations. Revenue is down 7% ... adjusted EBITDA is negative at -$3.6 million ... Transformation is hard at work in this business."

Transformation program: "The transformation program, which we've been undertaking for the last two years, continues to deliver good results. Pro forma results show a margin increase from 15.5% to 21.7%."

Dividend reinstatement: "Leverage post mortgage sales landed at 1.2 times ... This, in combination with improved cash flows, will enable the final dividend for 2024 to be reinstated."

Exploring new growth opportunities: "We are also exploring growth vectors ... We're looking for new growth vectors for this business, and we now have the opportunity to do so. Strategic reviews are underway to drive product development and look for new revenue growth throughout the group."

Analyst Q&A Highlights

On cost transformation outlook: “I don't think we're all done on cost. I think there is more to be gained.”

On initiatives: "Transformation is ... a three-legged beast, where we had work on the cost side, work on the revenue side for existing franchises and looking at new growth opportunities."

Exposure to digital advice: "We do. And indeed, it's live with one of our super funds. And it's actually done extremely well in a very short time."

APAC revenue growth: “We have very, very high recurring revenue, so around 98%...We saw sort of the traditional level of churn.”

This article was generated with the support of AI and reviewed by an editor.