Half Year 2025 Netwealth Group Ltd Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Bob Chen - JPMorgan - Analyst : Just a couple of questions for me. Obviously, coming off a couple of record quarters. And it looks like your third quarter has started pretty well, about $1.5 billion today, how is the balance of the year sort of shaping up on the back of that? Are you seeing the pipeline growing stronger from here or is it sort of broadly even with what you've seen in the first half?

Question: Bob Chen - JPMorgan - Analyst : Okay. Great. And then just on the OpEx side of things. I mean I think your sort of second half outlook sort of implies maybe 21% OpEx growth for the year. Like do you see this year is a bit of a reinvestment year and then we could see that rate of growth slowing into the following year or is this sort of a new baseline?

Question: Bob Chen - JPMorgan - Analyst : Just whether or not you guys are seeing FY25 as a bit of a larger reinvestment year before slowing down that pace of reinvestment into next year?

Question: Nicholas McGarrigle - Barrenjoey Capital Partners Pty Ltd - Analyst : I just had a question around the -- some of the pricing changes. Obviously, the revenue margin was quite strong in the half. I assume part of that was the acquisitions coming through a for a more complete period. But can you just talk through the rationale around the cash rate change? And then does that have any implications for fees elsewhere across the rate cut?

Question: Nicholas McGarrigle - Barrenjoey Capital Partners Pty Ltd - Analyst : It's more in response to pricing pressure, having flexibility to be able to drop admin but keep the overall margin the same or are you kind of leaving some of that pricing.

Question: Nicholas McGarrigle - Barrenjoey Capital Partners Pty Ltd - Analyst : Okay. And then I guess in terms of the flow outlook, you've -- I think the year obviously tends to start a bit more seasonally quite but you've commented on some transition wins. And they've been maybe in the last three or four months that you've had additional wins that give you confidence about the outlook for further flow growth?

Question: Cameron Halkett - Wilsons Advisory and Stockbroking Limited - Analyst : I might just start, I suppose, quickly on the tax side of things. Obviously, a bit lower than usual this half. Hayden, is that best framed as a one-off just due to the nature of expenses incurred this half? Or is it something we should all be considering looking ahead?

Question: Cameron Halkett - Wilsons Advisory and Stockbroking Limited - Analyst : Yes. Okay. And then one, I suppose, around the additions to headcount seen through the half, in particular, quite a step, I suppose, on the distribution product and marketing side, usually, we've been adding around the sort of mid-single digits in terms of net new staff members. So I suppose, what's the story here? Is that spend to ramp up exposure to other areas of the market you're looking to target or Netwealth is just getting larger and just naturally needs more people.

Question: Cameron Halkett - Wilsons Advisory and Stockbroking Limited - Analyst : Okay. And so just quickly on, I suppose, the headcount, the key focus there for second half, given you're sort of flagged, it's looking to continue to be another strong half for hiring. What should we expect given Netwealth has usually sort of added on average around about 16 heads a year.

Question: Simon Fitzgerald - Jefferies LLC - Analyst : Just really briefly on the tax rate. What is your expectation for the tax rate for the full year.

Question: Simon Fitzgerald - Jefferies LLC - Analyst : Curious though why an R&D tax incentive tax credit of $1.6 million is claimed in the first half '21, which relates to FY23?

Question: Simon Fitzgerald - Jefferies LLC - Analyst : Okay. And so was there anything done in the FY24 year for R&D tax incentives that relate to the FY23?

Question: Simon Fitzgerald - Jefferies LLC - Analyst : Okay. That's fine. And then just a broader question for you, Matt. Obviously, superannuation is a big component in your flows and your FUA. There's probably likely a larger pot out there, which relates to non-superannuation, private assets held. And I would imagine that Netwealth would have a good exposure to that just because you do have quite a good exposure to higher net worth individuals. Have you had any thoughts about how that market looks like and how much is actually coming on to platforms. And I'm not talking about the sort of noncustody stuff. I'm just sort of for a minute thinking about the size of that part of privately held assets that are not part of superannuation.

Question: Simon Fitzgerald - Jefferies LLC - Analyst : Sounds good. And then just a final question. I'm sorry if you've mentioned this already or I missed it in one of the slides. I was just curious in terms of the heads that were added this time around how much are related to development versus distribution and other areas.

Question: Siraj Ahmed - Citi - Analyst : Some of these questions might be repeat because I'm just focusing on multiple results. Matt, first one on that 3Q of $1.5 billion. I'm not -- correct me if I'm wrong, but I think last year, you had $1.5 billion as well. Can you just let us know if that's correct? And maybe a second part on that, I know you've flagged quite a few large transitions, right, especially from one of the competitors consolidating platforms. Has that really kicked off -- just that would be helpful.

Question: Siraj Ahmed - Citi - Analyst : That's helpful. Second one, maybe for Hayden. I know you were not there when the initial cost guidance was given. But it is supposed to be, I think, modestly higher. It's coming at 20%, right, with, I think, last year was 15%. So it seems like some of this is tech-and-comps pressure. Just keen to understand, that is unplanned. And secondly, I think, Bob might have asked this, but I think second half is accelerating 23% growth in terms of OpEx. Does -- is that the level we should take into next year or do you reckon some of this tech and comp spend can come down? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 19, 2025 / 10:15PM, NWL.AX - Half Year 2025 Netwealth Group Ltd Earnings Call

Question: Siraj Ahmed - Citi - Analyst : Just clarifying, that 51 included Xeppo and Flux, right? So are you saying second will be more than the 51% or excluding Flux and Xeppo?

Question: Siraj Ahmed - Citi - Analyst : Got it. Last one, maybe 1 for Matt. Matt, in terms of trading revenue, that's a pretty solid outcome. I think this is partly a function of in-housing that you did last year. Is there more to go here? I know you're doing some functionality, but just keen to understand, is it cyclical or is it structural in what you have done, I guess, just in terms of us modeling it and looking ahead?

Question: Scott Hudson - MST Marquee - Analyst : Just a couple of questions from me. Firstly, just referencing your slide on page 35 on I guess, AI. Could you maybe give us a sense of what benefits AI have delivered already from a cost perspective?

Question: Scott Hudson - MST Marquee - Analyst : That's great. And then just, I guess, you've seen a very robust net inflow environment over the past two quarters and the start of this quarter. Could you sort of give us a sense of where you feel that what's driving that robust uplift seems across the broader market to be first, not just yourselves and maybe your closest peer, but it seems like the overall advice market is pretty buoyant. Could you maybe give us a sense of what's driving that?

Question: Scott Hudson - MST Marquee - Analyst : And then I noticed in the APRA data that your sort of competitive flows from a superannuation perspective are very strong and have been very strong. Is that you are taking share from retail superannuation. Or do you feel like you're also starting to maybe eat into some of the industry funds from a superannuation perspective?

Question: Simon Fitzgerald - Jefferies LLC - Analyst : Sorry, guys, just a quick follow-up. I was just a little bit more curious and want to unpack a little bit more about the competitive landscape. You did mention, Matt, that you've changed your pricing structure to be ready and be a bit more flexible there. And you did say you're noticing some minor price competition. But just interested to know whether you're seeing new participants starting to turn up in a tendering process or anything like that?