Earnings call transcript: Beforepay Q4 2025 sees profit surge amid strong user growth

Beforepay Group Ltd reported a significant increase in net profit for the fourth quarter of 2025, driven by strong user growth and product innovation. The company’s stock price saw a slight decline of 1.48%, closing at $2.03, following the earnings announcement. According to InvestingPro data, the company boasts a perfect Piotroski Score of 9 and maintains an overall financial health rating of "GREAT," indicating robust operational efficiency and financial stability.

Key Takeaways

• Beforepay achieved a record net profit before tax of $2.4 million, up 76% year-on-year.
• The company expanded its active user base by 12% to 270,000.
• Carrington Labs secured two new U.S. clients, enhancing its competitive position.
• Operating expenses stood at $5 million, with a net transaction margin increase of 48% year-on-year.
• The company maintains a strong cash position of $19.2 million.

Company Performance

Beforepay showcased robust performance in Q4 2025, with a net profit before tax reaching $2.4 million, marking a 76% increase from the previous year and more than doubling from the prior quarter. The company’s strategic focus on expanding its user base and enhancing its product offerings has contributed to this growth, reflected in its impressive 13.95% revenue growth and strong returns with ROE at 19%. The fintech firm continues to leverage its unique value proposition through Carrington Labs, which has attracted new clients in the U.S. market.

Financial Highlights

• Revenue: Not specified
• Net profit before tax: $2.4 million, up 76% year-on-year
• Net transaction margin: $7.7 million, up 48% year-on-year
• Operating expenses: $5 million
• Equity position: $40.3 million
• Cash position: $19.2 million

Outlook & Guidance

Beforepay is optimistic about its future, projecting FY 2026 and FY 2027 as transformative years. The company plans to continue scaling its personal loan product and expanding the client base for Carrington Labs. Revenue forecasts for FY 2026 and FY 2027 are $29.47 million and $31.52 million, respectively, with EPS projections of $0.14 and $0.15. InvestingPro analysis reveals the company is currently trading near its Fair Value, with 8 additional exclusive ProTips available to subscribers.

Executive Commentary

CEO Jamie Twiss highlighted the company’s strong quarterly performance, stating, "We’ve had a succession of very strong quarters." Twiss also emphasized the significant total addressable market (TAM) potential, noting, "The TAM is very significant." He expressed confidence in the company’s unit economics, saying, "We do expect the underlying unit economics to be very attractive."

Risks and Challenges

• Market Saturation: As Beforepay expands, maintaining growth in a competitive fintech landscape could be challenging.
• Economic Conditions: Potential macroeconomic pressures could impact consumer borrowing and spending habits.
• Regulatory Changes: Changes in financial regulations could affect Beforepay’s operations and growth strategies.
• Technological Advancements: The need to continually innovate and integrate new technologies poses ongoing challenges.

Beforepay’s strategic focus on innovation and market expansion positions it well for future growth, despite the challenges ahead. The company’s ability to sustain its momentum will be crucial in navigating the evolving fintech landscape. With a current ratio of 14.41 and P/E ratio of 15.54, the company demonstrates strong financial fundamentals. For deeper insights into Beforepay’s valuation and growth potential, access the comprehensive Pro Research Report available exclusively on InvestingPro.

Full transcript - Beforepay Group Ltd (B4P) Q4 2025:

Danny Eunice, Investor Relations, Beforepay: Okay, good morning and welcome to the Beforepay Fourth Quarter twenty twenty five Investor Webinar. My name is Danny Eunice and I handle Investor Relations for Beforepay. With me this morning, we have the CEO of Beforepay, Jamie Twiss and the Interim CFO, Shreya Prakash. Before I hand over to Jamie, just to note that we will be having a Q and A session at the end. If you have any questions, please type them into the Q and A box at the bottom of your screen.

I would now like to hand the webinar over to Jamie. Please go ahead.

Jamie Twiss, CEO, 4FAK Group/Beforepay: Thank you, Danny, and good morning, everybody. Thank you all for joining us. As Danny said, I’m Jamie Twist. I’m the CEO of 4FAK Group. Shreya Akash is our Interim CFO.

We as many of you know, we have a permanent CFO joining us in mid August. And Shreya has been looking after the function in the interim. As Danny said, I’ll start off with a few highlights. Shreya will take us through some of the numbers, and then we’ll go to Q and A. And as Danny said, you can put in your questions at any time.

We’ll go through as many as we have time for. So first of all, I think we’ve had a succession of very strong quarters in a row as most of you would be aware. And I think this was a very remarkable extension of that strong momentum. And as again, those of you who have seen the result, the ASX announcement that came out will know that it was a very, very strong quarter. We two particular highlights, we delivered a record profit, record by a wide margin in the quarter, profit before tax of $2,400,000 That’s a remarkable number and so many different things contributed to it, really remarkable credit outcomes as a result of the work in the IP that we continue to do around our risk modeling and how we think about credit and how think we about lending more broadly.

But at the same time also good cost control, good top line growth. So very, very pleased with that profit outcome. If you’d asked me two years ago, if we would be at $2,400,000 profit before tax in one quarter, would have said that, that is well beyond the realm of possibility. So a very, very strong quarter in terms of profit. And I think it’s worth noting, not because of any particular outlier or surprise, just strong performance across all areas of the business.

I think the program of work that’s been underway for the last several years, just over the last several quarters, we’ve seen all of the benefits of that falling into place. And I think this quarter just really shows how powerful our model is from all of those things together. So very strong profit outcome. And then the other real standout of the quarter for us was the tremendous progress on Carrington Labs. And I’ll talk a bit more about that at the end in terms of our growth initiatives and where we’re at and where to from here.

But without stealing too much of Shreya’s thunder about the strength of these results, Shreya, please.

Shreya Prakash, Interim CFO, Beforepay: Thanks, Jamie. Firstly, I’d just like to echo what you said in that we are extremely pleased to be presenting these results today. It’s been one of our strongest quarters to date and definitely a great way to end the year. Some of the key highlights from quarter four FY ’25 were firstly, as Jamie mentioned, our record net profit before tax of 2,400,000.0. Now that’s up 76% from the comparable period last year and over a 100% from previous quarter.

Now this really is a reflection of strong top line growth as well as strong and continued profit and margin discipline. Operationally, we saw strong fundamentals across the board. We had quarterly advances of 210,000,000, and this was a function of a number of different things, including optimized performance marketing campaigns, and we’ve seen good traction off the back of it. So we had a 12% year on year increase in our active user numbers, just shy of two seventy thousand, a 13% increase in our number of advances to 539,000 compared to 516,000 in the previous quarter, as well as a 4% increase in our average advance size to $390. The key metric that stood out, however, was on net defaults of 0.56%.

Now that’s improved quite significantly from last year where we had 1.24 net defaults and 1.26 in the prior quarter. Now while this definitely reflects continued improvements and enhancements to the credit risk model as well as better limit management and good recoveries, we do note that this is an exceptionally low number, and we expect that to revert back to normal levels in the coming periods. Strong volumes and good credit performance has given us a net transaction margin of 7,700,000.0 or 3.68%, and that reflects a 48% increase year on year. On the cost front, our operating expenses came in at 5,000,000 compared to 4,400,000.0 in the previous quarter. And this reflects continued operating leverage as well as targeted investments in our growth and strategic initiatives.

Our business continues to rest on a very strong balance sheet. We had an equity position of $40,300,000 and a cash position of $19,200,000 And as we’ve mentioned previously as well, our total cash really reflects cash at bank of $14,000,000 and cash in our third party settlement accounts of 5,200,000.0. Now you will see a slight decrease in our cash balance, and that really is the setup of our 7,500,000.0 revolver facility within our existing 55,000,000 debt facility. Now what this really offers us is more flexibility with our funding and enables us to deploy excess cash when that becomes available to us. It also means that we’re working our cash harder, not just to fund the EU expenses, but also to grow the loan book.

So as of today, our drawn balance on the debt facility is about 31,000,000, and the undrawn portion is 24,000,000. And that reflects good availability of funding in order to continue our growth momentum. To sum up before I pass it back to Jamie, I think we’ve had an excellent quarter, it’s been a great way to cap off what’s been a transformative year for the business. And we continue to file on those. Back to you, Jackie.

Jamie Twiss, CEO, 4FAK Group/Beforepay: Thanks, Ray. So as Ray said, it has FY 2025 was a transformative year for our business. And we expect FY 2026 and FY 2027 to also be transformative years. The business continues to develop and grow and improve at a rapid rate. If I think about where we are now with our strategic growth initiatives that we’ve been talking about, of course, the last several quarters.

On the personal loan side, so we continue to issue those larger, longer duration loans. I think we’re pleased with how that’s going. We continue to work on the operational elements of how that goes. We continue to think about the credit very carefully. And at the right time, we’ll start to scale that up further.

We have increased the eligibility within our existing user base. We have increased the volumes of originations. It’s not yet material to the overall group, but we’re very pleased with the progress direction of travel there. And then as I mentioned at the beginning, Carrington Labs, I think, has really kind of burst out the other end of that sales pipeline that I’ve been talking about for the last few quarters. As many of you will recall, we’ve been saying for several months now that we feel very good about the pipeline and we would make announcements when we have things announced and that time is now.

So in the quarter, we announced a new paying client and which is a U. S. Bank. So fantastic to have an announced banking client based in The U. S.

And then a few days after the end of the quarter, we also announced an additional paying client, a specialty lender also out of The U. S. We also announced a number of partnerships with decisioning platforms and origination platforms. So I think what we’ve seen is a lot of the work that we’ve done over the last several months, we’re seeing those start to sign and announce at this point. As you can imagine, we’re in the process of getting those clients up and running and live, getting those partnerships embedded and those integrations done and at the same time, continuing to be very active in terms of moving other prospects to the pipeline and indeed generating new opportunities.

So very pleased with where Labs sat from a commercial momentum standpoint. Also very pleased with the work we continue to do on the product side. Carrington Labs, as many of you know, the product is based on that same IP and capability and credit risk management and skill that we have coming out of that core core pay business. And that continues to go from strength to strength, and we are always working on that and pushing the boundaries to do more and to do better there. In addition, obviously, we continue to build out the product side of the Carrington Labs product in terms of how we make that available to clients, standing up capabilities in The U.

S. With The U. S. Clients there, getting our APIs up and running properly. So the product development side of that has also been very promising.

Looking forward, I think in the core Pay Advanced business, as we note in the announcements, trading that today has been this quarter has been in line with expectations. As those of you who’ve been on the journey with us for a few years would know, Q1 of each financial year does tend to be slightly subdued demand off the back of people getting their tax refunds and just kind of the seasonal shape of the economy. But we don’t see anything that gives us any particular pause or concern in terms of that core trading to date. I think personal loans, we’ll continue to move forward with that as we have been doing. And then Carrington Labs, the nature of the business needs that’s a bit unpredictable as to when we will have something to announce given that some the timing and the pace at which prospects move through the funnel can be a bit unpredictable.

But we continue to feel very, very confident about the prospects of that business. And as those of you who have been watching the business business for a while would have heard me say, we wouldn’t be talking about it nearly this much if we didn’t feel that it was a very, very promising opportunity and that we were well set up for success. So I think we’ve had a fantastic year. We’re looking forward to a great FY 2026. I do want to say before we close and move to questions, I do want to thank Shreya for stepping into the interim CFO role.

She’s done fantastic job at a busy time of year for the finance function. And so I’m grateful for that. And more broadly, of course, the team continues to work very, very hard. It is a small team. We are writing an average of about 40,000 events every week with a team of about 50 people.

So the efforts and the hard work that go to keeping everything moving forward and delivering the kind of successes that we’ve seen in recent quarters and particularly this quarter, I’m very grateful for all of that as well. And with that, let’s very happy to take some questions.

Danny Eunice, Investor Relations, Beforepay: Thank you, Jamie and Shreya. So as Jamie said, that we will now move to the Q and A session. So once again, if you have any questions, please type them into the box in the bottom of your screen. We do have a few questions coming through, and I’ll try to pull them where they overlap. But the first two questions are from Larry Gandler at Shore and Partners.

The first question is around the full year free cash flow number. Okay. So there’s a few numbers here that I’m going to give you. So on Larry’s numbers before pay income around 40,000,000, less payments of suppliers at 17 and a half million, less funding 4 and a half, less losses of 8 and a half, less CapEx of 3 and a half, comes up with a free cash flow number of about 6,000,000. Can you please reconcile here?

Jamie Twiss, CEO, 4FAK Group/Beforepay: So I’m not sure what the you mean the reconciliation back to the profit number?

Danny Eunice, Investor Relations, Beforepay: No, in terms of what that free cash flow number is, is 6,000,000 around the right number? So

Shreya Prakash, Interim CFO, Beforepay: Yes. Sure. Yes. That would be about right. So Larry is exactly right in saying that if we take our cash position from sort of end of last year, we deduct all those little things that does get us to a $6,000,000 movement in our free cash flow.

Danny Eunice, Investor Relations, Beforepay: Great. Fantastic. Thank you.

Jamie Twiss, CEO, 4FAK Group/Beforepay: Factors can be a bit difficult to work out. One of them is just the accounting treatment of some of the share based, staff incentives, which are noncash. And those can move around a little bit, and it’s just accounting issues. The other thing that depending on what measure you’re looking at, at what time, the timing of when cash moves between the settlement accounts, what we call our lockbox accounts and the bank account and which cash measure you’re looking at. So those can swing those around.

But I think that yes, Larry, I think the core of how you’re thinking about it Yes.

Danny Eunice, Investor Relations, Beforepay: Okay. The next question from Larry is around net losses. And as expected, there’s a couple of questions about this. Are the net losses in fourth quarter an anomaly? Or is this low level of losses within expectations of the risk model for a June?

Jamie Twiss, CEO, 4FAK Group/Beforepay: So then thinking about how to answer that. I think if the question is, do we think that 56 basis points of net defaults is going be the go forward number, I think, as Shreya said. I don’t think so. And there are a couple of reasons for that. There wasn’t any particular anomaly.

It wasn’t as if we had some big lumpy thing that came through or changed provisioning or big write back or anything like that. It was simply the result of, I think, really sort of like tight, high quality credit assessments with some recoveries as well, these are net figures as well. So there’s no kind of like surprise or kind of one off flavor to it. It is strong for a Q4 result. Q4 is often kind of the most normal quarter, we find for various reasons.

So I do think in that respect, it’s probably I don’t want say a one off because that implies that something unusual happened that wouldn’t be repeated. I will say that everything kind of went very, very well this quarter. So I think we’re combining what continue to be, I think, a pretty fundamentally distinctive credit analytics capability that flows through into the broader model and lending system. So you’re combining that, I think, very significant strength, which continues to improve and then just kind of things that went well this quarter as well. The other thing I would say on that front is, as many of you would have heard me say, the way we think about we don’t target specific default rates.

We think about as each customer comes before us or in advance, what is subject to obviously eligibility, regulation, values that we do, what’s helpful to customers subject to those various constraints, we will make an offer or not and set a limit based on how we calculate the value maximizing decision in that moment of time. And so what I mean in practice is we will think about the propensity for that customer to default and to accept or not accept the loan at different potential limits we could put in front of them, and we will balance that revenue, that limit, that ability to kind of put money in a responsibly enhanced consumers in a way that generates value for us with the default risk and its elasticity with respect to that limit change. That will unfold however it folds based on our elasticity modeling on a case by case basis, and the net default rate will be largely an output of that process. When the default rate falls down to 50 as low as it’s fallen this quarter, that probably means the model has improved faster than we anticipated, and it’s time for us to go back and look at that limit balance, that limit setting process and reassess.

So in some ways, I know this sounds odd, it’s almost too low a number, and it means that we should have actually managed our limit matrices a bit differently.

Danny Eunice, Investor Relations, Beforepay: Yes. Thanks, Jamie. There is a follow-up question from another investor in regards to the default rate, but I think you’ve actually answered it. But I’ll just I’ll take a bit out of it just in case, Jamie, you wanted to add anything else. Why do you say it will likely revert back to normal levels?

Jamie Twiss, CEO, 4FAK Group/Beforepay: Yes. And Danny, as you should know, nothing pleases me more than talking about data and credit analytics. So the more questions we can get on that, the better. Would be great. I’ve enjoyed a great deal.

So I think there are two elements. One is just, again, the core capability is strong now and continue to be strong and get stronger over time. So that doesn’t revert to that kind of the skills and the systems and the software and the data that we have that continues to strengthen. Again, things just did break right for us on in all sorts of ways this quarter. And I think we can’t always expect that each one of those things will go as well as it did.

Then the perhaps slightly bigger point is at that level, I almost look at that and think, jeez, we probably should have done the limit review a bit differently and should probably expedite the next one or something like that. So we do everything judiciously. We won’t do anything half baked, but we will go back and look at that limit setting process in light of that number and think about whether we want to make any adjustments there.

Danny Eunice, Investor Relations, Beforepay: Okay. The next question is around net profit before tax. Thanks for another great quarter. Am I right to say all of the NPBT of GBP 2,400,000.0 for this quarter comes from the PayAdvance product only?

Jamie Twiss, CEO, 4FAK Group/Beforepay: It’s not 100%, but the very significant majority, yes.

Danny Eunice, Investor Relations, Beforepay: Okay. Now we’ve got several questions around Carrington Labs. So I’ll do them separately. So the first one is congratulations on the progress. Can you comment on the Carrington Labs pipeline and the nature of the prospective customers in the future?

Jamie Twiss, CEO, 4FAK Group/Beforepay: Yes. I think so I’d say the pipeline it’s plentiful. Sorry, it is full, plenty, comma, full. If I think about where if I think about how the pipeline works, let me start there. The marginal effort for us in starting a conversation, having the first meeting, having the second meeting, that’s not too difficult.

It then when it progresses, then that’s when we start moving towards proof of concept with the clients, different clients do different ways, but assume there’s going be some sort of pilot or proof of concept. And that becomes more effort intensive on our part, not so much because of the model training. And as we said, the Carrington Labs model training pipeline is very heavily automated. But partially because of the data ingestion, you’ve got to work out, well, hang on, how does are these dates month, day, year or day, month, year in the American style? You’ve got to do that sort of stuff.

You’ve to actually physically move the data from them to us. And actually, probably the most time consuming part is just papering it up, right? So working out the NDA and kind of like making sure from their policy standpoint, they can transfer the anonymized data to us and so on. So the top of the pipeline, I think, is, I mean, if anything, overfull. We have quite a lot of conversations there.

And then basically, for any given client, they may proceed faster or slower or not at all to that pipeline. But for us, what we’re always thinking about is the capacity to do that heavier lifting in that sort of middle and bottom of funnel. So right now at the top, I’d say, is very full, if anything twofold. In the middle, I think we’re doing about as much work as we can and figure out how can we expand that capacity and get kind of the right people and more people on board to help us move clients further through that. So there’s lots in there.

In terms of who’s in there, let me start by saying, again, you never know for any individual client, will it progress, will it progress from the top, middle, middle, bottom, will it actually get signed, Things fall over for all sorts of reasons. Some folks move very, very quickly, some folks move very slowly. So it’s hard to kind of say with too much confidence like, oh, the next three to come out will be like this or like that. If I think about who’s in the pipeline right now that is closer to the potentially coming out the other end, I think there are a number, again, mostly U. S, not entirely U.

S. Clients, mostly. Again, that continues to be the priority market. I’d say it’s a mixture of some, what I call, specialty lenders, a fair number of fintechs. There certainly are banks in there.

There are professional service firms at various stripes. So it’s a pretty diverse pipeline. I think it’s more a question of who can actually the biggest obstacle actually is that sort of their internal decision making process, kind of like getting the deal negotiated, the lawyers kind of ticking and tying on the agreements and so on. So again, I don’t know what the next three deals will look like, but it’s a pretty broadly diversified line in terms of who’s in there right now.

Danny Eunice, Investor Relations, Beforepay: Thanks, Jamie. That was very comprehensive. And on the similar light, there’s a question that sort of probes a little bit deeper. So congratulations on a fantastic result. Carrington Labs clearly gaining momentum, seems one of the most exciting parts of the business.

Can you outline how it’s going to play out in terms of the opportunity, I. E, addressable market size, execution milestones and what a high conviction versus more conservative outcome might look like for this facet of the business?

Jamie Twiss, CEO, 4FAK Group/Beforepay: Yes. So let me there are probably parts of that, that I can kind of give a fuller answer to than others. So in terms of addressable markets, I think, really, we can provide a pretty fundamental core capability to almost any lender. There’s a minimum efficient scale where it just doesn’t make much sense. There are some lenders who various reasons not the right thing for them.

And then obviously, kind of it’s a big world, we have to get out there. But there are thousands of banks in The U. S. And thousands more globally and then thousands of non bank lenders. And I think the opportunity if we ever got anywhere near the point where the opportunity was constrained by the size of the markets, then we that would be an unbelievable success.

I mean, if you think about kind of like the number of clients that would imply, it would be just an amazing, amazing outcome if we ever had to really worry about the TAMs. The TAM is very significant. If I think about kind of last bit of your question in terms of like how big does it get and what way? So I’d start by saying we don’t put out forecasts. And I think particularly in the case of Carrington Labs, it is quite difficult to say some of the things we’re looking at might sign soon or might sign much, much, much later or might never sign.

And it’s very difficult to be too definitive about that. I guess, I think given the traction that we’ve got, I think the comments that we’ve made repeatedly about our level of confidence in the expected value of the current pipeline, we do think it will be pretty material and meaningful with the group in due course over the talk to medium term. Danny, did I miss the question had a few different parts of it, if I

Danny Eunice, Investor Relations, Beforepay: Yes. And I think you actually sort of covered it. It was about the high what a high level view looks like versus conservative view in terms of the potential or the opportunity.

Jamie Twiss, CEO, 4FAK Group/Beforepay: Yes. I think it’s a bit difficult to say, both in terms of it’s not giving you forecast, but also in terms of we genuinely don’t know kind of this is what the next quarter will look like and which ones will pop when and so on. Over the very long term, it sort of successful on anywhere near the scale where TAM becomes relevant, then I think any back of the envelope math you would do making any reasonable assumptions would show tremendous upside. So use whatever total lender number you like, use whatever kind of penetration share, like any assumptions you make will show that as an enormous success.

Danny Eunice, Investor Relations, Beforepay: Thank you. Okay. I’m pooling the next three questions because they’re all around as expected, revenue contribution and profitability of Carrington Labs. So in general, the question, Jamie, is can you maybe provide a high level view of the expected revenue from Carrington Labs as well as the business profitability in the near term?

Jamie Twiss, CEO, 4FAK Group/Beforepay: So the near term part so starting with the second part of the question. The near term bit makes it a bit tricky because, again, will we have something big kind of like kicking off soon that we haven’t talked about yet? I genuinely don’t know. I don’t know how long some of these conversations will take and then the process event kind of onboarding the client getting revenue flowing. I think in terms of profitability from a margin standpoint, I think I can say that it’s a fairly high margin business.

So it is a it’s a SaaS product, it’s volume based is the way we tend to price it. And the marginal cost, it’s not the sort of thing where you have a big operational team supporting the process day to day. I mean it’s a software business. So we do expect that it will be fairly high margin. The incremental OpEx really is more about getting more people to help with the sales process and sales funnel.

And you can always do more work on the product as a whole. But the variable costs associated with the incremental client are not all that high. So we do expect it to be reasonable. We do expect the underlying unit economics to be very attractive. I don’t think I really have a comment in terms of the size of the revenue.

I think if it gets you’ve got to if and when it gets to the point where it’s material enough to the overall group that we think it is necessary to break that out, then of course we would do so. As you can imagine, we’ve had a handful of announcements so far and on reasonable assumptions, you’d probably assume that’s not yet material to the group. So we do think that it’s got a very bright future over a period of time, but we don’t have any particular comment on revenue right now. Okay.

Danny Eunice, Investor Relations, Beforepay: And the flip side to revenue is around costs. So there’s a couple of questions here. So I’ll just ask it in one question. So is Carrington Labs generating enough cash flow to fund its own growth? And how do you plan on funding its future growth?

Jamie Twiss, CEO, 4FAK Group/Beforepay: Yes. So the nice thing about Carrington Labs is that unlike the lending side of the business, it’s not capital intensive. So we do so let’s assume the Carrington Labs fees go very well, and let’s say we continue to add clients and get momentum and so on. We would be adding another data scientist here, maybe kind of a client relationship person there, maybe sort of a sales engineer there. But it’s not the case if you need to kind of be going back to the wells, raise enormous sums of money in order to be able to fund additional disbursements or anything like that.

So obviously, as we always do, we will make decisions off the back of the results we’re seeing at the time. I don’t think there’s an enormous cost constraint right now. Right now the constraint is really kind of like the number of people who can do this work well is very, very limited, I mean really anywhere in the world. And so the constraint is kind of finding those people who can help us move even faster on the products and then just sort of the natural sales cycle and folks getting stuff documented. But I don’t anticipate Carrington Labs growth will be hugely capped by sort of a funding challenge.

Danny Eunice, Investor Relations, Beforepay: We’re down to the last two questions. So just a reminder, here’s your last chance. If you want to ask a question, please type them into the Q and A box at the bottom of the screen. Okay. So the second last question at the moment is around the financing of the business, noting there has been a $7,500,000 debt pay down.

What will be the funding mix look like going forward? And how much capital do you expect the personal loan product will need?

Jamie Twiss, CEO, 4FAK Group/Beforepay: Why don’t I start with that and then, Sherif, feel free to jump in. So I think if we’re thinking specifically about the funding of the balance sheet and figure of the loan book, I think the question is spot on that makes sense to think about the Pay Advance business and the personal loan business separately. On the Pay Advance side, I think it’s a short duration product. And obviously, the average advances are relatively small. So the book is not terribly large.

And I think with an existing facility with ample capacity, I think if and when we fill that out, that would be a good problem to have. And I think we’d be able to find more funding existing facility. Currently draw it up 31, I think you said. We’ve got capacity at 55. And I think if we needed to add another lender or potentially extend that or expand it, I think we’d be able to do so.

On the personal loan side, I think that can be significantly more capital intensive. On the debt side, I think at some point, you would expect the personal loan products to potentially quite significantly outstrip that $55,000,000 facility. And of course, we would have to then arrange something else, whether that’s expansion or addition or a different way of thinking about it. Of course, we would need the funding to be able to provide that. I think it goes without saying that as highly data driven and analytic people, we will make sure that any changes to funding mix are consistent with creating value through unit economics of the product.

So I don’t think it will be something that should be a source of concern. We wouldn’t put in place funding that was costly past the point where the product was value accretive to us. It’s very likely that any additional debt funding will have an equity element to it. I think the business is currently profitable at a rate where we’ve actually, if anything, that’s shown by the 7.5 pay down, have been able to overfund those equity slices pretty significantly. If that changed over time, then we would make the kind of value creating decision when we got there based on the cost of capital and the returns in front of us.

But as Shreya said, we are quite focused on working the existing capital base pretty hard. We’re very cognizant of shareholder value. And I think we feel very comfortable that we would make a shareholder value maximizing decision at the time based on the different sources of funds, cost of those funds and the economics of the opportunity from us.

Danny Eunice, Investor Relations, Beforepay: Okay. And the last question, it’s actually two, but they’re both on AI. So it’ll be one question. So are advances in AI allowing you to further automate business processes and reduce OpEx? How do you think this will pan out in the future?

And are you seeing new competitors coming into Carrington Labs space?

Jamie Twiss, CEO, 4FAK Group/Beforepay: Yes. Both interesting questions. So let me take them each in turn. So I think with AI, and this might be a slightly broader question than the answer to the question. So our general approach is we use quite a bit of AI in different areas.

I think I wouldn’t advise any financial services business to have AI be the primary tool for automation. The reason being that our core lending processes in particular are completely fault intolerance. So we don’t want something that’s 99% or 99.9% correct, but to be a bit unpredictable. So we have a very heavily automated lending process. So we average about 6,000 loans a day.

Most of those vast majority of those have no human interaction whatsoever. But we do that through more traditional deterministic statistical approaches on the risk assessment side, and then we do that through deterministic code on the automation side. Now AI helps build those systems much more quickly, both on the risk modeling side and in terms of writing code and price of a range of other benefits as well. So we are significant users of it, as you’ve mentioned, but we do so in a very kind of risk aware way to avoid creating uncertainty or a lack of guardrails or additional risk in the business. In terms of competitors in the Carrington Labs space, it’s so it goes with the space that we’re in goes by different names in different markets.

Often in The U. S, we talk about alternative data, credit risk models, talk about cash flow underwriting. There are a number of companies that are kind of sort of in a similar space. So I wouldn’t view any of I don’t think we view any of them as sort of direct competitors of what we do. If you think about the core of Carrington Labs, it’s the ability to take a wide range of disparate data sets, build a tailored machine learning driven model specific to a client’s own lending experience, product unit economics and so on and flow that through to a loan configuration and pricing recommendations.

There is still nobody else that we’re aware of doing that work. There are perhaps consulting firms that could do it on a custom basis, but it’s a very, very different proposition. It’s very different economics. There are other folks doing little pieces of that. Are the credit bureaus do have kind of transaction based scores.

I think there are, in some cases, that will be a fine solution for a client. There are other folks doing kind of this piece or that piece. I think what we find the biggest constraints to growth from the client side, the biggest constraint is probably that operational capacity. But from the client side, the biggest constraint is not that they’re looking at a competitor. In fact, I don’t think we’ve ever been in a kind of competitive situation in any of these conversations.

The biggest obstacle is them sort of getting their head around this different and better way of doing things, but kind of getting their head around the change management and then their own internal decision making processes. So we’re never complacent about competitions, but we have not yet seen it as a factor that’s had a meaningful impact on our ability to grow the business.

Danny Eunice, Investor Relations, Beforepay: Okay. There are no further questions. So that concludes the Q and A section. So I’ll hand over back to Jamie for any closing remarks.

Jamie Twiss, CEO, 4FAK Group/Beforepay: Well, I’ll just finish where I started, which is to say thank you all for joining us today, and thank you in particular. I know many of you have been on this journey with us for quite some time. And obviously, the company is right around six years old. We’ve been public for about three point five years. And for many of you who have been investors for quite a while, it is enormously gratifying to be able to be consistently delivering these kind of results for you.

So we’re grateful to all of you, whether you joined us on the journey when the market opened nine minutes ago or going back to the various earliest funding rounds. Thank you for your support. We’re really pleased with how the business is performing for you, and we are grateful that you’re on this journey with us. We look forward to seeing you all at the full year results in about a month.

Danny Eunice, Investor Relations, Beforepay: Thank you very much. You may all now disconnect. Thanks.

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