Wrkr Ltd (WRK) Earnings Call Transcript

Well, I'll be from banned from this. And hopefully, if you do -- if you can see it now, just let me know. There they are. Well, look at that. My skills are questionable, but they're there. So just so everyone is aware that last slide, we were talking about is just the size of funds. And you can see it pretty clearly. We've concentrated ourselves up at the top end, and we really think that pays dividends for us long term. So a lot of people have asked questions around the implementation plan of a fund, and we just want to give you an idea of how that works. And then I'll kind of show you, where each of the funds are that we're in discussion with where they sit. And in reality, what that means in terms of bringing revenue. So we -- it is a 6- to 9-month implementation. It's a faster implementation without employer rollout, obviously, if we're just doing a back end in payroll. They -- it's really just a live switching across. But really, 6 to 9 months is the time frame we proposed with the super funds accepting that they need -- I need someone who can drive Zoom. I just saw that statement. Thanks very much, Ian. So that important element is it's a complex time period, but it is really less about platform readiness and far more around fund readiness to do their transformation. So pre-go live, this is around developing comm strategy. This is around developing your employer transition content. You're planning and staging that and testing how that content and how your branding is working across our platform. So as you can imagine, at this point, we're really dealing with very much starting with a live platform. So there is opportunity to expedite this process, but we're being conservative. We still give guidance of 6 to 9 months to the funds, but there's increasing pressure to bring this forward. And then it's an execution phase with Hypercare, which then moves directly into the funds benefits. So let me just explain how that rolls out in what we have right now. So we have REST. And I've just put their member numbers because it is difficult to highlight exactly who has what accumulation, and I want to keep those numbers sensitive for the funds. But REST, obviously, they have gone live. We have now concluded putting their new brand on, and they are really finalizing their transition and comms plans. But we expect them by the end of Q2. So by December, we would expect them from October through to December to have achieved go-live, subject to hitting that main retail time frame, which may push 1 or 2 of their key clients potentially into the start of Q3. Wrkr has our own ClickSuper transition that we're migrating across to. Obviously, it's an uplift. and we will decommission our ClickSuper platform. That's the current time frame. There has been work done and a considerable amount of work done by Karen to go back historically all the way through and ensure all the reconciliations, ensure that we are in a position to archive and close that core platform. AustralianSuper announced a couple of weeks ago, and they have fairly aggressive time frames. Q3 is a go-live, but we expect to be doing platform testing with live customers hopefully around the end of Q2. So they will be more aggressive, and they have a fairly large internal workforce. We have extra features to build, which will be across the whole platform, [ BI ] and actually a funded data migration program for them as well, which adds a fair amount of additional work for us, but we believe that helps expedite the implementation. We get transactions earlier. The second element is then we have a large payroll in our pipeline, and we have proposed that swap, which would have them live at the latest by mid-Q4, which puts them on track for PayDay Super. In addition, our team are working on the additional features for Wrkr's Small Business Clearing House. We don't know what share we will get of that market. However, we know that we are very competitively priced, and our solution is well and truly fit for that market. The two things that we do need to still conclude on an investment is the accountant uplift. So that 240,000 employers. It's actually predominantly input, about 80% by accountants, and then a digital go-to-market, which we've not had to do prior. We need an increase in. The [ SEH ] funds are slotted. There is a little pressure to bring them back earlier. We will deliver them as one group package, but there is still commercial considerations for each of them. So we'll work through that with MUFG. And MUFG have indicated 2 more large fund slots, which you'll see below. And in between those, we have a further set of managed payrolls that we've been in conversation with to increase it. We already serve them today. They'll come across in the ClickSuper transition, but actually, there's some features that may increase our total coverage of that market. So all bodes well. This does not include funds coming directly to us that are outside of MUFG. And interestingly, since the announcement of AustralianSuper, we've seen a couple of funds show immediate interest. So that time line, and the most obvious thing that you'll see is not everybody is going to make Payday Super. And that is actually in part probably one of the biggest challenges that we are foreseeing we will be put under a little bit of pressure to be able to deal with multiple programs simultaneously. And to be honest, a lot of this is possibly driven by uncertainty from the government on when PayDay Super will be rolled out. In all meetings wherein, the indication is it is an expectation that certainly the funds and the gateways will be ready on time by July -- start of July '26. So at the end of Q4. So that's the background on timing. So we want to just be clear with everyone. The good news is we're seeing a lot of success. The challenge is that success we're going to have more work to do. And as I've explained earlier, this work is not always cash flow positive. We tend to have to make a level of investment as you do as a SaaS platform to then reap the rewards on the longer life beyond with the transactions. So that's the key background. I thought we'd jump into financial performance, and then I'll come back and rip through the questions.

Thanks, Trent. Okay. So cash flow results are up there. I just want to talk through the key points from the year and the quarter. As Trent has spoken through, you can see that, it's been a busy year. We've been talking about a lot of things we've been doing, but it's really culminated in Q4 with the Australian Super win and the go-live of REST and Hong Kong as well as lots of conversations also on the pipeline and continual development in our feature set for PayDay readiness. And that's around making sure that we have the APIs for our payrolls, integration that was built for Aspire. So yes, I guess what the screen is showing is that we have a lot of investment. If you look at the investing activities, we have a lot of investment into the platform, and that's really setting us up for PayDay Super and when we can get the funds onboarded and going because that's where our commercials become profitable. Just to break it down a little bit more, we had net cash -- positive cash from our operating activities. Now within that, we had $2.2 million in cash from our MUFG contracts around that development and implementation of the digital platform, Wrkr's digital platform. We had an increase in the float income through the clearing house. Part of that is because of the yearly increase that we've seen in the superannuation guarantee rate. So there was another 0.5% last year. There was another 0.5% this year. That's then up to 12%, at which point it will stabilize. So just that means more superannuation contributions, more float going through the clearing house. We had our Platform as a Service revenues increase. That was due to both, one, renegotiation of our Australian Retirement Trust contract that saw an increase on our support and maintenance and license fees. We saw -- and then we have renewals on our other Platform as a Service license contracts that just saw an increase in CPI. We also had our existing ClickSuper business remain fairly stable, which it has done year-on-year, and we're looking forward to the transition of that onto the Wrkr PLATFORM in the next kind of 6 months, and we hope to see traction of our other products that we can offer at that time when we bring people across. So it's not just the clearing house. There's the onboarding and stapling moments as well that -- and other compliance moments that we'll be able to roll out to them and hopefully capitalize on. In terms of the cost base, so the largest increase in cost base is around our resources, so our people, our staff costs. We had expanded the team by 20 people in the year. So quite a significant increase in our resource, and that also means in our skill and abilities across the board from product managers, business analysts, engineers, solution architects. And yes, I think that's probably the main areas that we brought those resources on. We'll continue to see that resource requirement as we move into next year, but I'll talk about that a bit when we get to the next slide. And also in our security posture. So we're continually investing in that security posture at Wrkr. And that's not something that we just stop. It happens every day, but most importantly, just around protecting the increasing fraud environment within which we work, which you've all seen in headlines in papers around Superfunds and just making sure that we're protecting ourselves as things continue to evolve in that space.

It's worth saying that many of you will have seen in the news reports, there was considerable fraud across the network for particularly focused on direct debit. There's an increasing push from funds and payrolls to step away from their liability and pass that liability on to the clearing house. Our view is that's an opportunity as much as a challenge. So we've invested considerably so we'd be in a position to take on that accountability, which we think will differentiate against our competitors. And obviously, that liability would be only taken on where participants are going through our formal verification processes.

Thanks, Trent. So yes, so lots of capital investment, lots of increasing in resources. It's all trending in the right direction in terms of looking at what we need to achieve over the next 12 months. So if I move on to the next slide of our financial outlook. We're working through the audit at the moment in the second week of audit with our net operating revenues projected to be between $10 million to $11 million. And next year, we're going to continue to balance our investment between this short-term revenue generation and long-term growth. As you could see -- because you could see at that point, the slides of Trent with the kind of funded and unfunded pipeline, we have -- there's a lot of opportunity in front of us, and we are quite bullish on that opportunity. We won't be able to do it all at the same time unless we bring on more resources and we have a look at what is strategically the best option to bring forward the revenue growth that we want and to get that member base, that 7 million target on board and then look at where those higher compliance moments going to come from as well. So there's strategic decisions to happen there. We also know that, that PayDay Super data is there. So there is mounting pressure from the payrolls, from the DSPs, from the HR systems and obviously, the remaining MUFG funds to want to do something about their current systems and positions. So with that being said, we are keeping on growing, keeping on investing. We'll see some more investment in the platform, obviously, over the next 12 months. And yes, I guess I'll pass back to Trent, but happy to answer any questions that pop up.

So given the slides are working, I thought I'd jump to this one because this is where most of the questions are based, and there's a couple of questions here I'll pick up. Just starting with funded. In reality, we can roll our teams on the implementation side and adding those extra features, we can roll from one to the other, but we think that will push us out into well into post-PayDay Super. And that's a risk we're looking to manage on how we manage it at the moment. There are 2 options. We push the opportunities and risk and finding an alternative or we look to sell a fund and be more aggressive and bring those opportunities back closer and start them sooner so that they kick off. The good news is the time frame is tight for any of those participants to make a decision. So we know where we stand pretty quickly, and there's a lot of active conversations. But we will need to be in a position to serve up those 2 options. So either we're saying no and letting it push out, or we'll seek to look for alternatives to fund them to bring them forward. But in terms of what is covered in our work today, obviously, the 2 major funds being REST and Aussie Super, which I'll be honest, it's 2 funds worth of both size and effort for us, but the team are well positioned to deliver those as well as our own transition. And of course, we have -- although started and technologically, the platform -- the API work has started, which positions us well for a large fund, we'll still -- there's still a fair amount of onboarding for a significant cloud-based fund -- payroll, sorry. And the Small Business Clearing House will require a level of digital go-to-market activity that we've not yet done. So they're not skills we have in-house. So that just gives people an understanding of where we sit, better to have a basket of opportunities and then figure out how we prioritize. So let me go through -- so Ian, yes, you picked up on that same victim of your own success. Will you need to raise funds to take all these to market? Don't let the competitors in. I share your view. I think we do need to think about there are different methods available to us for funding, but we definitely -- it is my view and the Board's view at this point as well as Karen's. Karen has got to figure out how, but we don't let competitors in. I think this is -- I'm frustrated because the funds have had a lot of time, but that sort of sat back a little feeling they had more time, and they've taken lengthy periods looking. Now the time is here and now we're running out of time. So there's a little frustration, but the reality is this is a once in a generation for the Super industry. Whoever wins the lion's share now will hold that share, we think, over the next 9 to 10 years. So that's important to us to make sure we win. So I agree with you there. I think, John, that picks up your question on the same. There was a question back on can -- apologies my eyes are failing me. Could you speak to the international scale ability and what Hong Kong development gives? So Hong Kong for now gives HSBC serve about 300,000 users and now they're in the corporate area, they'll continue to expand into rolling them out. There are though another couple of -- there is a large fund manager or pension manager there of the same size as HSBC that there are discussions with. And then there is the -- what's called eMPF, which is the basic Super in that market. So we think longer term, Hong Kong represents a great opportunity. Again, it was one -- we had to be there at the time. Otherwise, the risk was we would have introduced another payments provider or another solution provider to work with MUFG. So us being able to sort of shoulder up as a true partner was important. I don't think Hong Kong itself will be the biggest opportunity, but the pension modules we've built are definitely the same that the U.K. market requires. And I think they have -- that U.K. market needs a lot of work. They are, I believe, a long way behind Australia. There's still a check -- checking system market in some respects, but they are starting to transform. So we're not pushing it because we don't have the manpower. But once we finish the Australian expansion, that will be the next logical market for us with MUFG. So just picking up, did AustralianSuper provide any specific reason for their feedback for why, why you beat the competitor challenges? Were those competitors the same as what you have covered before? Yes, so the main competitors, Westpac, Superchoice and others. But the main reason, I think, is Wrkr's, the one-stop shop vision actually, a cornerstone of what they were looking to do is they're trying to help their employers and that means putting software in front of them that may also bring -- they may buy other services directly with us, but they really felt that not being Super centric and just solving for the Super payment, but actually bringing more broader value and introducing value was a key competitive strength of ours. So that was some of the feedback. So far, we're also -- we have very much a shared vision on we care about customers and we're not -- it's not money first and contract first. It's what can we do and partner together. So that's the sense. I think the feedback we're getting across the board is we're culturally a good business to partner with. Michael, that answers your question. There's one here, which is a great question. I'll just read it out. Westpac announced rolling out real-time Super payments to all its QuickSuper employers in September, and Cbus was one of the clients who've done a pilot. If Cbus does not take up the Wrkr PLATFORM, how does that fit? So we're confident that we will still be successful across that slot, but we have alternatives. We'll turn that energy to -- there are a couple of other funds that we would work a little bit more diligently towards that are outside of the MUFG space actually is our plan if we need to make up numbers. We still think we're well on target because REST and Aussie are such a meaningful contribution. What I would say is our platform is already set for real-time payments. It's just another payment method. So we already do the real-time clearance. I think the challenge is there's a lot of enthusiasm from the major banks to say that they have a solution for doing real-time payments now, so everyone should pay in real time their Super. I have 3 answers to that. One, real-time payment of Super coming into an employer, no problem. That makes sense. But that's a one-off payment to cover if you're Woolies, 150,000 employees. Woolies is not going to make 150,000 onetime payments and then try and manage that. It needs to be reconciled and managed in line with your other requirements for Super. You can't just pay -- if you want to pay out real time, you will get real-time fraud, particularly where people are paying out into self-managed Super. So what you get is paying into self-managed Super that doesn't meet the legal requirements or may not be active from an ATO perspective. So that's 2 of the issues. And three, the overall system is not set for real-time receipt. We don't start collecting someone's performance in real time because that's not how we allocate the funds to earn income. So actually, we want them as soon as plausible into the system that accurate, and we want them -- and we do them in batch and we do them in daily batch. So the reality is these are great initiatives, but I don't believe they're from the same traditional competitors. I believe they're more coming out of the transaction banking world who have heard PayDay Super equals 500 million pay events. We'd like to get share of that. So in some ways, there's noise in the system. We're talking to all of those funds. We have a pretty good understanding of what they feel about what's noise and what's valued. So I don't want to be arrogant, but I think we've done -- we have invested appropriately, and we understand what they're trying to achieve more so than throwing a product at them at this stage in the game. So that's our view. But we'll see. Arrogance can always be met by a loss. So let's watch those last couple of funds, but we continue to invest very closely with them. And that -- Westpac is not the only one. ANZ and others are pitching the same proposed solution. Michael, just one other thing to note, payments can't send PII-related data, and the entire SuperStream network is about sending PII data, such as your tax file number, your employer ID, employee ID, your full name, detail, date of birth. That information doesn't sit in a payments reconciliation. So there's a just to give people a bit of backdrop there.

I think the one other thing to mention there as well is the limit that the banks are currently putting on the amount of the same time payments, which is currently $25,000. And a lot of people's superannuation payments are -- a lot of employers are higher than that. So we are really working closely with our bank and working through kind of the limitations that, that poses for employers at the moment. Yes.

And Ian, working backwards, so who should bear the responsibility of the onboarding? The reality is it's a tripartite, which is what makes it lengthy. But Wrkr take a very much hands-on approach because we're the recipient of the data, we're the recipient of the processes and that talks to our longer-term cost to serve and quality. So we are -- if you like, we take a more active role in implementation than what is perhaps necessary or what we're funded for, but it's -- we just know it's necessary for our long-term growth. Nick. Could you give a competitive landscape description? Yes, Nick. So competitors now, Westpac is still present across a bunch of funds. But obviously, REST has come from -- sorry, AustralianSuper has come from there. So that really does do some damage to their total numbers. Obviously, it would be interesting to see what their strategy is in light of a host and Cbus if they were to move. Superchoice is definitely the other larger competitor. So it goes Westpac, Superchoice and then us for now. That's starting to shift. A bit of a difference in model and a difference in Westpac lowest price and least amount of features. Superchoice, comprehensive service, no onboarding, but highest price. We sit in the middle with increased features for the same dollar value and close to Westpac on transaction and price. So we're in a fairly unique position. I try to describe this as ALDI, where best value for money in the slot. Hopefully, that helps. Outside of that, it's a pretty small network of players. And there's one last one here for Karen. Karen, does your headcount include those for project work and therefore, temporary in engagement?

Yes. Thanks for that question, Ian. At the moment, we have a few contractors. The headcount that I mentioned doesn't include those. We are looking at the engineering team. It will change in its shape once we move from this really development and implementation phase into that operational phase. And we know we're looking at the shape of that and how we're going to most efficiently manage that cost and then continue to invest in additional projects and feature enhancements, more compliance moments and things like that. So we do want to create a workforce that then where there is something that's quite project-based and funded by clients, then we can bring on a team and remove a team. We just have to be careful with where that comes from and how much that costs because as an Australian digital service provider, we need to make sure the engineering capability is onshore in a lot of the areas around the clearing house. So we are looking at ways over the next kind of 12 months to make sure that we're set up for that right kind of development operational organizational chart. Yes.

And I think we're down to the last question, which was pipeline organically looks solid. So well done to the team. Has management got sites on possible acquisition for scale? And I would say, yes, we're always looking forward. We won't seek acquisition in the super funds, obviously, space just because those clients are really there to be won through best value proposition. However, the compliance moments window is creeping up for us. I use the example AustralianSuper and REST combined looking to roll out software, which will touch probably, let's say, a net 300,000 businesses will get to onboard onto our portal, see our experience, see our other services. And we think that is a really powerful opportunity for us to be able to display additional working -- from working with children's checks and upper medical checks all the way through to more detailed licenses visa status. They're much more profitable checks, but obviously not as ubiquitous to the market. So being there in front of those employees and making it easy for them to buy a handful is going to be key. So we are looking at some of those now, not for immediate acquisition, but there is definitely opportunity to accelerate that revenue in line with go-live. It would need to be available for us and this service to a greater challenge before -- as we go live for a REST and AustralianSuper, we need to be introducing subscriptions. But over time, we can introduce more depth and breadth of those subscription services. So that is a focus, but we haven't made any immediate decisions, but there is definitely a group that's forming. So I think that is all of the Q&A, and I'm sorry, we've overrun. I do apologize for my poor use of the tech today. The next one may not be on Zoom because I don't think we have a Zoom expert. We'll try another method. But again, thank you very much. We're available. We have lots of meetings with different people this week. But if you have questions, please put them on the Investor hub. I'll commit to answering them as soon as possible. So thank you very much.

Thank you.