Earnings call transcript: Praemium Ltd Q1 2025 highlights platform growth

Praemium Ltd, an Australian financial services company, held its Q1 2025 earnings call, focusing on its platform business expansion and strategic initiatives. With $30.1 billion in funds under administration (FUA) and notable net inflows, the company is positioning itself for continued growth. The stock price increased by 2.05% to close at $0.73, reflecting positive investor sentiment. According to InvestingPro data, the company maintains a "GREAT" financial health score of 3.29, with impressive year-over-year returns of nearly 59%.

Key Takeaways

• Funds under administration reached $30.1 billion.
• Net inflows amounted to $364 million.
• Spectrum platform emerged as the leading product.
• Stock price rose by 2.05% post-earnings.

Company Performance

Praemium Ltd reported a strong start to the fiscal year, bolstered by significant growth in its platform business. The company’s Spectrum platform led the way, attracting over $500 million in flows. Despite the ongoing reduction in OneView platform FUA, Praemium remains confident in maintaining a competitive edge. The firm’s strategic focus on high net worth clients and platform integration is expected to drive future growth.

Financial Highlights

• Total Platform Business FUA: $30.1 billion
• Net Inflows: $364 million
• Spectrum Platform Flows: Over $500 million
• OneView Platform FUA: $4 billion, with a planned reduction to $3 billion

Outlook & Guidance

Praemium Ltd is optimistic about the continued growth of its Spectrum platform and is targeting £3 million in synergies from the OneView integration. The company is investing in mobile applications and data integration to enhance its wealth management solutions. With a strong sales pipeline, Praemium is confident in capturing a larger market share. Based on InvestingPro’s Fair Value analysis, the stock appears slightly undervalued, while analysts maintain a strong buy consensus with potential upside.

Executive Commentary

Anthony, a senior executive, highlighted the company’s strategy, stating, "We feel we should get a much greater share than we have in the past of that migration." James Edmunds, COO, emphasized the strength of Praemium’s integrated solutions, saying, "One of the strengths of Premium is the fact that we’re now able to provide an integrated solution."

Risks and Challenges

• Market volatility may impact client inflows and asset values.
• Competition in the platform market could pressure margins.
• Successful integration of OneView platform is crucial for synergies.
• Regulatory changes in financial services could pose compliance challenges.

Praemium Ltd’s Q1 2025 earnings call underscored its strategic initiatives and market positioning, with a focus on platform growth and integration. The positive market reaction reflects investor confidence in the company’s direction.

Full transcript - Praemium Ltd (PPS) Q3 2025:

Anthony, Senior Executive (likely CEO), Premium: Welcome, everyone. Thank you for your interest in the premium quarterly update. It’s nice to see so many people registered and joining the call. I’m joined today by James Edmunds, our Chief Operating Officer. And so James will be joining me in presenting some of the information that’s already been released on the ASX and putting a bit more color on that.

James and I have finished going through the presentation, which shouldn’t take too long, as is usually the case, we have an opportunity for Q and A. I think everyone on the call is familiar with how to lodge questions into the Q and A. I know that there’s a number of questions coming through already, which is tremendous. As is usually the case, we will curate the questions somewhat because that just allows to deal with as many as possible where there’s some repetition between the questions. So if I just move on to the disclaimer of our first traditional custodians of country and pay our respects to their elders past and present, and then the usual disclaimer.

Because James has such a wide remit in Chromium, I’m going to ask him to deal with the strategy progress as often that’s what I will talk about, but I’ll leave that with James today because most of the areas of progress are in James’ remit. Then we’ll go on to the FUA and the flows and the detailed tables before handing over to you for questions. But I’ll now hand over to James to

James Edmunds, Chief Operating Officer, Premium: talk about our progress on the strategy front. Thanks, Anthony. Thanks very much. Good morning, everyone. Yes.

As Anthony sort of said, I’m going to cover off a few key areas in our strategy progress over the last three months. It’s been a really exciting quarter for us. Obviously, we’ve had a lot of focus on completing the OneView integration over that time. There’s a lot of work going on in that space for us, but really just sort of working working across. So in the product space, in line with our product strategy that we’ve developed over the last six months, we are pleased to announce that we’re actually starting to start work on the upgrade of our mobile application.

This is something that our advisers have been really requesting over a couple of years for from us to to help really their engagement with their with their clients. At the same time, the launch of Spectrum at the end of last year has resulted in a lot of excitement and a lot of interest from from potential clients. And the product team and and and and groups are really focused on developing a number of white labels, the groups that we’re actually in the process of onboarding. We’ve had a lot of good business wins. And as a result, we’re seeing a lot of change for that.

And in line with our desire and efforts to be the leading in alternative investments, we’ve done a lot of work over this quarter in the structured investment space, most notably leading with webinars that we’ve been hosting with advisers to really help with the education and training and what our capabilities are in that space. One of the key initiatives that we’ve had over the last six months has been in service excellence, and both our operations and our customer service teams have been really focused on improving the overall levels of service that we’re providing to clients. That’s come in a number of different forms. So we’ve basically gone back and reset the KPIs and the expectations that we have in terms of delivery to clients. And we’ve also done a number of initiatives to improve the service standards.

So that includes better engagement with clients, being more responsive to their calls and to their queries and also increasing the amount of quality assurance that we’re doing. We’re actually just about to launch a pilot program to use AI to drive our quality assurance and having better insights into how we can actually improve that service going forward. As part of that service excellence program, we’ve also developed and rolled out a new adviser onboarding process. So this will dramatically improve the time to market that we have for onboarding new advisers, cutting it down from weeks to days. And there’s further improvements that we’re going to be making over that over the course of this year.

In the superannuation space, we’ve been really focused on this because it is a core driver for business. We’ve made significant improvements with the current administration provider that we have, and we’ve really been proactively engaging with them to make sure that we’re delivering a better service to the end investors. We’ve been working with our trustee as they complete a review of the administration options that are out there. And we’ve also been expanding our in house administration administration capability and looking to take on more of the responsibility of delivering that service to our clients. And finally, in the inorganic space, I touched on it before, but a lot of the work and a lot of the effort that is going across all of our teams, whether it be product, operations, technology, has really been on focusing on completing the OneView integration.

We’re really committed and driven to having that done within the time frame that we’ve laid out and within the budgets that we’ve set. And a lot of the heavy lifting for that is really beginning to kick off now, and that onboarding process will take place. We’ll continue through the next couple of months. And obviously, in the inorganic space, we’re always vigilant for opportunities. But obviously, the ELT and the business as a whole is really prepared to take a disciplined approach to that.

And so with that, Anthony, I’ll pass it back for the numbers.

Anthony, Senior Executive (likely CEO), Premium: Thanks, James. We’ll come back to you with some of the questions. But if we just talk about the flows, first of all, talk about the platform side. And this quarter is really the beginning of starting to understand Premium as a platform business in entirety rather than separate platforms. Now we’re not planning to lower the level of disclosure that we give in the short term, but in the long run, I think shareholders should think about this as an overall platform business.

And by that, I mean Spectrum is now our leading product. As much as we can, we will promote Spectrum to our prospects in our sales pipeline. One of the investment options in spectrum is the managed account product. So we now when money comes into spectrum and then goes into the managed account, we disclose that as a spectrum flow. And we make sure, of course, that, that means that we avoid double counting in what we do.

Power App will still most likely continue to grow, but we don’t try to sell new advice groups into Power App. We offer spectrum for new advice groups. And the same for OneView. We don’t try to sell new advice groups into OneView. We offer spectrum as a product.

Now it’s up to each individual advice group how quickly they might transition from Power App or OneView into Spectrum, not so much with the OneView clients because that will be a forced migration. Thanks to the work that our team have done on that. We can manage that transition differently. But PowerApp, we’ve never said that the the PowerApp adviser will have to transition from PowerApp to Spectrum. That said, there is probably going to be some of that down the track, although I hasten to add that’s not a big factor in the $05,000,000,000 that flowed in or that Spectrum now has.

It’s almost negligible to Power App flows into Spectrum to date. But overall, what you need to think about the business as an overall platform business with the $30,100,000,000 and the net inflows of $364,000,000 I probably won’t cover anything else on that, but I think the only thing I do want to draw a little bit of attention to is the Power App, the departed advisers. We’ve said for a while now that we expect that that will gradually come to an end, and that is indeed starting to happen. And I think we’ll see how it goes next quarter, but it could well be that we we stopped worrying about re reporting separately the amount of money going from the departed adviser because you can see having averaged about 250,000,000 a quarter for for about a year or or a bit more, it’s it’s coming to a much lower number. Then if I move to the non custodial, and obviously with this slide, we give you a sense of the number of accounts in both scope and scope plus, but we also give you the FUA in scope plus.

Those I think everyone’s attuned to the fact that the revenue is driven by more by account numbers. But you need to understand, we look at the FUA too because what we’re doing is providing a service to our advice groups. And the the the amount of FUA is is a good reflection of the level of penetration amongst our advice groups that we’re getting. Even though the FUA doesn’t really drive the revenue, it does highlight the important contribution that noncustodial makes for our advice groups. It’s clearly, when you look at it, ScopePlus is the leading noncustodial administration service in the market.

It has a market leading position. That’s different, as as you all know, from our position in platform where we’re not number one in the market by any stretch of the imagination. Depending on how the the different groups record the information, we’re either the seventh or eighth biggest platform, but we’re number one in noncustodial administration service and, indeed, software as a service for noncustodial industry. We’re pleased of

both a noncustodial and a custodial solution to their client base because of the complexity of the portfolios that they’re advising on. And increasingly, our sales pipeline has has potential prospects where the the service needs to be across both for that adviser to be able to serve the needs of their clients. So a very important part of our business. Obviously, you know, we don’t cover the revenue in the flow information, but obviously, the impact in terms of the sales pipeline of having the market leading non custodial service is very important to us. So when we go to the more detailed tables, I put them up there.

We’re very happy with the progress that we’re making for the platform business as a whole. Obviously, as I said earlier, we’re not going to reduce the level of disclosure that we give for a while, but and so we do break it out into all of the different platform products that we have, but we would anticipate that at some future time, people will think of premium as the platform business as just a platform offering similar to what just about all of the other platforms are able to do and not go into quite a level of detail. So with that, I’ll I’ll now start to deal with Q and A because there have been a lot of questions, and we’re very grateful for the interest. As I say, if I miss a question, you’re welcome to contact me later, but I will try to cover them off. One of the questions is just around the client numbers in Spectrum and the pipeline clients, and there’s quite a bit of interest in Spectrum.

Obviously, we’re we’re pretty happy with the rate of progress in Spectrum getting up to over half a billion dollars already. The questions are around number of clients, number of advice groups, and and some questions around, you know, do you think this is the beginning of of that sort of rate of flow for the long run? And, certainly, our aspiration for the platform is that we feel having got spectrum into the market, we’re we’re confident with what we offer. We’re confident with our sales team and the way they’re working. We’ve we’ve got a high level of encouragement from our sales pipeline.

We do expect that we can win a greater share of what is an ongoing shift. And, you know, I talk about the shift in market share from the older, more legacy platforms to the challenger platforms continues at a very rapid rate, something like 2.5% to 3% market share shift as well as strong organic growth as the size of the platform market increases. So we if we get what we think of it as our fair share of that, having now a complete product suite to offer to the market and one of the top three platforms in in scoring on functionality and service and the like, we feel we should get a much greater share than we have in the past of that migration as well as the organic growth for the market as a whole. But I’m not going to forecast that we will get this much every quarter. We’ll wait and see how it comes over time, but we’re confident of where we’re going.

Around the lumpiness, it’s inevitable that at the start of the of the new product, there will be some lumpiness inflows, and we’ve observed that even within the quarter. Now I’m not gonna get to telling you monthly. You know, it’s it we we present to the market four times a year on flows. I’m not gonna go to monthly flows, but there is a level of lumpiness that people would be aware, both because it’s a new product and also because it’s a high net worth client group that we’re serving. And and sometimes you win a client that’s, you know, a hundred million dollars.

Other times, you just get a consistent flow. So there’s a bit of all of that going in, but there’s quite a few advice groups that are now migrating funds onto spectrum. We have got a question about the two products that are not really open to new business. We’ve got some questions around Power App and some questions about OneView. On the OneView side, it’s noticeable still that there’s over $4,000,000,000 in FUA, and we’re not at the half yearly results, we said we’re not provisioning for an earn out on FUA.

Now there is still an expectation that we probably don’t need a financial provision for an earn out, and so people quite rightly say, well, doesn’t that mean another billion dollars is gonna flow off one view? And that is likely. It’s not the the earn out is not a % linked to the for being $3,000,000,000. There is an element of the stated intent of the advice groups, and a stated intent that hasn’t yet migrated off is what is being reflected in the numbers today. So we do think eventually that the FUA from the OneView clients probably heads closer to $3,000,000,000 but it hasn’t yet happened.

It will that FUA will most likely occur over the next six months or so. Certainly, a lot of that starts to happen as we close the platform. And as James said, we’ve got an internal time frame target for that, and that’s progressing pretty well. So we would anticipate closing the OneView platform. Certainly, you know, everyone knows we’re we’re gonna do that before the thirtieth September, but internally,

James Edmunds, Chief Operating Officer, Premium: we would like to do

Anthony, Senior Executive (likely CEO), Premium: that a bit earlier. Then there’s a question about PowerApp, and I’ve said already, you know, we’re starting to see the tail end of some of the departed advice. There is a question about advice who went to CODA, and there has started to be some fuller shift. I’m not gonna go into the private client information of of of those advised we’ve shifted from one to another, but in in our disclosures, we don’t see that as an outflow because the the advisers are still with PowerApp. That PowerApp is a platform that is within the coder stable, and so the forward doesn’t have to roll off the platform.

So that has been different from where the platform the advice group that the adviser have gone to doesn’t use premium because of strategic decisions at shareholder level, as I understand it, within Crestone. There is a question about how we see the trade off between portfolio numbers and price rises that we’re putting through on Scope Plus. And certainly, when we took the decision around pricing, we’re obviously sensitive to market pricing. As I’ve said, we’re the market leading offer, so we feel we can command a sensible price for the offering that we make. But we certainly were conscious that, you know, you might have some portfolios roll off with the price increase.

But, overall, you should see a lift in the overall revenue, and there’s no there’s nothing to suggest any anything different as part of that. There there is a question about the SMA outflows relative to inflows, And the outflows typically are typically there’s a pattern to outflows. There’s obviously a seasonal pattern to out outflows, but there’s also just a pattern of outflows relative to the size of the FUA that they’re relatively stable, not exactly the same, but relatively stable over time, whereas the inflows can go up and down more. And the the managed account scheme, I know in the past, I’ve had some questions about, you know, it it its sales impact seem So the net flows, which is the difference between two large numbers, the gross inflows and the gross outflows, produce the net inflows.

If the outflows are, as I say, typically relatively stable over time other than a seasonal impact relative to the size of the book. You know, there’s just a certain number of clients who are taking pension payments or moving money off the platform, but the inflows are more volatile, and hence, the net flows are more volatile. Managed accounts, part of the reason we’ve built Spectrum is we were losing traction in the market because we’d gone pretty close to saturating the market for those who wanted managed accounts only. The people who said I’m gonna run all my business on managed accounts, and I don’t need a full RAP service. There’s a limited number of advisers like that.

Most advisers say, I wanna run managed accounts, but I also need the functionality of a rep, so I need both. And we didn’t have both. We only had a managed account. Now we’ve got both. But part of the reason we knew that we needed the full wrap was because we were noticing that we were reaching saturation of those advice groups who only needed managed accounts.

And so there had been a trend over time prior to the launch of Spectrum that we were losing a bit of traction in the gross inflows. That was having an impact on the net flows, and we feel we’ve addressed that with Spectrum and with the sales strategy that we’ve launched around Spectrum. The there’s a question about if OneView does land at £3,000,000,000 in the long run, do we still get £3,000,000 of synergies? The answer is yes. We we will we will still target £3,000,000 of synergies.

Indeed, the challenge we have and we, you know, internally, accept is that if the revenue declines, we should get more synergies so that we can ultimately aim for a $3,000,000 EBITDA line from the OneView clients and business that stays with us. And you might ask, well, if you can if your revenue drops by another mill, for example, how can it go from three to four mill? But the reality is what we have done with the OneView clients is we’ve been very, very deliberate in the way that we’ve gone about that, looking at that business. And and the cost of running the that’s dropping off were roughly equal to the revenue that we’re generating. So if we were generating $1,000,000 revenue that drops off, it’s more than likely there’s $1,000,000 of additional cost, not synergies, just the cost of running that business.

So we do feel that there’ll be more synergies if the revenue drops. But the other point I’d make about it, the revenue shouldn’t drop by a quarter. If the full landed at three, it’s not like the revenue should drop by a full 25% just because the FUA has dropped by 25% because some of the FUA that drops off is lower margin business, and some of the retained FUA will move to a higher overall revenue rate because just as we adjusted the revenue on the premium platform business, we have also adjusted the revenue to what we regard as the market rate on the OneView business.

James Edmunds, Chief Operating Officer, Premium: When they cover off on a couple of those questions around the development.

Anthony, Senior Executive (likely CEO), Premium: Yeah. So I’ll let you chance to take

James Edmunds, Chief Operating Officer, Premium: a break. Yeah. So there’s a couple of questions, both related around what we sort of see our r and d and the integration of our custodial and non custody solutions. So as as Anthony has sort of said that one of the strengths of premium and and real differentiator is the fact that we’re we’re now able to provide to an investor or to an adviser effectively a a a an integrated solution when it comes to both custody investments and and holding non custodial assets. And so a lot of the investment that we’re really gonna be making over the over the next coming years is really how to make that an even more integrated and more seamless solution, whether it be through additional trading options and capabilities through through the adviser platforms or our reporting solutions that allows for advisers to be able to provide really detailed insights to their to their investors across all the assets that they may hold.

I think the other area that we’re going to be making that that that investment is into the into the data integrations. One of the things that we’re looking at is how we continue to build out the data phase that we’ve already got to allow for advisers to bring in into the into the reporting packages that we have a a one stop shop, effectively a a total wealth use for for their clients. So a lot of the investment we’re gonna be making as we think about FY twenty six is going to be into, as we sort of already stated, the mobile app to allow for advisers to to provide their clients with insights and and and views. But that will be an app that brings in all of that wealth, so whether it be the custody or the non custodial holdings.

Anthony, Senior Executive (likely CEO), Premium: Great. Thanks, James. There’s a few questions around the volatility of the markets. And with in in the past, I’ve talked a little bit about some of the ups and downs, not of the market or the markets for ups and downs, of course, but the the there’s positivism and negatives of market volatility. On the positive side, market volatility typically leads to somewhat higher levels of trading, and we obviously make a margin on the trading volume.

And it sometimes leads to higher cash holdings. And both of those, at the margin, and I don’t want anyone to read too much into it or adjust spreadsheets based on it. At the margin, we have seen that in recent times, those two positives. On the downside, obviously, if markets go down, the forward drops and some of the revenue is linked to the amount of forward. Some of the revenue is more stable and just based on account numbers or capped or or the or the dollars are capped.

But some some revenue is linked to FUA, so we have that impact. And then the other negative is that, obviously, if you’re an adviser and the markets are volatile, you’re spending more time talking to your clients about their portfolio composition and and what the the lower value of their portfolio means for their ability to draw down on on the amount of money that they’ve got. So the conversations are less about shifting from one platform to another and more about reassurance. So those are the two negative. All of that is in the mix with the recent volatility.

As you all know, typically, once you have a period of volatility, except in really extreme events, it tends to go away. So we we note it, and and we we monitor what’s going on internally, but we don’t think it reflects any underlying long term shift in the way the platform market is behaving at the moment and the composition of the long term market. The the we get questions about Euros, and obviously, we some some clients we do announce, and Euros was a client that was a big enough client that we made an announcement. I’m not going to get into private information about Euros and their business, but part of the inflow into Spectrum is Euros. But, you know, is there more to come?

We based on the, you know, the relationship we’ve got with Euros, we expect that that will be part of the the flows that we might expect into Spectrum for some time to come. Once an adviser moves to a new platform, it it it depending on the size of the adviser, but you can see flows for for quite a long time, twelve to eighteen months. So it wouldn’t surprise me if if there’s a a a long term involvement in flows coming out of out of Euros and the other clients that we’re funding to spectrum. The there’s a question about Spectrum inflows and the impact on SMA. We do record the inflows that come into Spectrum.

In Spectrum, we, you know, we had to make that decision, and we’ve got to avoid double counting. So if a if if if a hundred million flows into Spectrum and then it goes to SMA, we will report that as a Spectrum flow. And it’s consistent with the desire that we’ve got, as I say, not to reduce the level transparency, but ultimately to just say this is a platform business. And, hopefully, you know, in a at some future date, maybe a year or two down the track, we just can say here are the flows into the platform and here are the noncustodial assets. There are also a question a quite good question about should we think of spectrum revenue differently to SMA.

And the truth is one of the drivers and the most important driver of the revenue margin, which we’re very transparent about and disclose that very very often in our reports the financial reports, you know, our level of disclosure around revenue margins is, think, exemplary in my view and transparent, which is what we try to do with our shareholders. The biggest driver of that margin, which has been as high as 40 points in SMA, is the average account size. So we think the revenue margin probably drives down a little bit because we think the average account size spectrum will be higher than in the SMA, and that will gradually reduce the revenue margin. But, obviously, the dollars of revenue will go up because the, you know, 30 points times 1,000,000 is more than 40 points times 300,000, for example. The other driver of it is, obviously, we get some revenue on cash holdings and some revenue on trading volumes, And that may be different based on it being a wrap account rather than a managed account, and that will emerge over time.

So you should see something there, but the biggest driver will be the average account size. I think we’re going to call it to a close. I know there’s one or two other questions that we haven’t got to. I’m sorry, but we have run out of time. But I will try to reach out to the two or three other questions individually that we didn’t get.

But very grateful for, again, your interest in our presentation and for attending the call, particularly last day before another long weekend. So thank you, everyone, for your interest. Thanks, James, for joining me on the call. I’m sure you’ll see a lot more of James in future calls, and enjoy the rest of the day. And I’ll I’ll probably touch base with those one or two questions that we didn’t get to on the call later in the day.

Thanks, everyone.

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