Joleen Whittaker: Today's session is being recorded and will be available later in our investor center on the Novatti website if you wish to look at the recorded copy. It has just turned 11:00 a.m., so I am going to start today's investor briefing now. Thank you for joining us. My name is Joleen Whittaker. I am the Marketing Manager at Novatti, and I am joined today by Mark Healy, CEO of Novatti. Mark has been leading Novatti's transformation into a market-led, customer-focused organization and delivering seamless payment solutions that help businesses across Australia and New Zealand to grow and succeed. We would love and encourage you to submit any questions, which we will address at the end of the webinar. To do that, you can simply type in your question in the Q&A box at the bottom of your screen.
Joleen Whittaker: If we do not cover a question in the Q&A that you want covered, you can email us directly at investorrelations@novatti.com, and we will make sure to respond to you directly. Over to you, Mark.
Mark Healy: Thank you, Joleen, and good morning to everybody, and thank you for joining us today. I think today, simply to start, I will just call out the headline. In the September quarter, transaction value across our Australasian payments business passed AUD 1 billion, a real milestone. That is the first time we have crossed that line since we restructured the company in 2024. GTV was up 23% on the June quarter and up 48% on 1 year ago. That number matters really by what sits behind it. 3 years ago, I reset the business at phase 1 of the turnaround. We removed costs, we sold off several assets that did not fit, we reset the strategy, and brought the forward-looking core business to profitability across FY26. Q1 of FY27 is the first quarter of phase 2 for Novatti, and phase 2 is driven by a pivot to growth.
Mark Healy: In our current circumstances, it is disciplined growth, working within the constraints that we have. The direction is clear, and the GTV shows that customers are coming with us. Today, we will take you through our September quarter, but also spend some time on what comes next. We have a clear stage roadmap that positions Novatti for where payments are heading, and we are very well-positioned to pursue that opportunity. Just a quick recap for anyone listening today that is new to the company. Novatti is a B2B-focused payments infrastructure business with 4 key pillars of capability. Payment acceptance, including card acquiring and account-to-account payments, online, in-store, direct debit, and real-time. Card issuing, including sponsorship of other fintechs for their own programs. International payments, covering cross-border payments, international bill payments, and Asian wallets. Moving forward, in regulated digital finance. The value is not in any single pillar.
Mark Healy: It's that a customer can get all of them through one relationship and one integration, and we can help them apply a solutions focus to their payments challenges. The real value here is interoperability, and growing businesses don't want 5 different providers for 5 different payment types. They want one partner that connects them all, and that's the role that we're building for. Importantly, the rise of blockchain and digital assets is shaping the future of payments with new regulated rails. On the digital side, we're connected into the emerging ecosystem, most visibly through our incubation and now shareholding in Australia's leading stablecoin, AUDD, and through a variety of customers bridging into this space. You can see a sample selection of the companies that place their trust in us at the bottom of the slide.
Mark Healy: Let me add a little more color on why we're positioned this way and how we see the industry shaping. For about 30 years now, moving money has generally meant cards, bank transfers, and wallets. Those rails aren't going anywhere, but new forms of money are arriving alongside them. Stablecoins, which are effectively regulated digital cash, and tokenized deposits, which are essentially bank money on new rails. What's evolving rapidly and now bringing certainty is the rule set. Australia's Digital Assets Framework Act passed in April this year, and payments licensing reform is underway in Australia, moving to discrete, functional-based payments licensing. The new rails are coming inside the regulatory perimeter, and that's where a licensed operator like Novatti can leverage our strength. Adoption usage is real too. Around 390 billion USD of real-world stablecoin commerce in 2025, and roughly 60% of that was B2B.
Mark Healy: Think of importers settling with suppliers on the same day, payments paying overseas workers in real time, and corporate treasurers who want to move money on a Sunday night just as easily as they can on a Tuesday morning. A new era in payments is coming, and Novatti intends to be there and ready to meet it. The question will be who businesses trust to connect the old world with the new. We believe that answer is a licensed ASX-listed operator that's moved money for 30 years with end-to-end infrastructure and expertise. Now for some numbers. Group revenue for the quarter was AUD 6.9 million, down 6% on the June quarter, and gross margin was AUD 3.5 million at 51%. Cash EBITDA was -AUD 0.1 million, a swing of AUD 0.4 million from Q4. There are 2 drivers behind that last movement, and they're quite different.
Mark Healy: The first is a headwind we flagged last quarter. Regulatory changes earlier in the year required us to temporarily cease international BPAY payments in Q1, which today run mainly through our ChinaPayments brand. It's also one of the reasons margin reduced quarter-on-quarter, along with year-end adjustments and one-off setup revenues that lifted our June quarter. The second driver was choice. We invested in growth. We expanded the commercial team, appointed a highly experienced commercial leader, we lifted our marketing spend, and we put more into product to keep momentum building in our pivot to growth. On cash, the headline 4C operating cash flow was -AUD 1 million, an improvement of AUD 0.8 million on the June quarter. However, important to note that most of that outflow went to clearing our historic liabilities from many years prior. Adjusting for this element, normalized operating cash use was -AUD 0.2 million.
Mark Healy: To the core part of our business, our payments infrastructure across Australia and New Zealand. ANZ revenue was AUD 3.8 million against AUD 4.1 million in Q4. Gross margin was AUD 1.6 million, and direct EBITDA was AUD 0.5 million. Across the 4 quarters on the chart, that base has largely held, with Q4 lifted by the one-offs I just mentioned. The foundation here is now solid following several years of streamlining this area. There are clear signs that what we are doing is working. Across the period, we have lifted conversion, improved our onboarding, and renewed our focus on key account management, and that is clearly seen in the GTV numbers. Our number 1 job now is converting a growing pipeline into recurring revenue and building our sales velocity. We will continue to incrementally lift our spend in marketing and sales in a disciplined way.
Mark Healy: As I said, in the quarter, we welcomed a new leader for the commercial team who is already having an impact. We are opening new channels that use our licenses we already hold, including wholesale distribution with partners such as Zipay. Partnerships enable our product set out to our partners' merchants, which gives us reach that direct sales alone cannot match. On the product side, we are planning our cross-border global currency account relaunch, which had not been selling for several years now during our restructuring, and kicked off a new solution design for international bill payments that was turned off this quarter. We are targeting return in early calendar year 2027 with additional features and extension to another key Asian market. As I mentioned at the kickoff, our ANZ transaction volume has grown significantly in the last year.
Mark Healy: For most of our target mid-market clients and partners, GTV takes time to build, with customers moving through the 6-stage life cycle at the bottom of this slide, from lead generation through solution design, commercial agreement, onboarding, go-live, penetration, and extension. These last 2 stages matter the most. A customer who starts with, say, account-to-account payments and then adds acquiring, cross-border, or card issuing is worth more to the business and will stay longer. Some will have noted that despite the uplift in ANZ GTV, both revenue and margin dropped from the June quarter. Both falls are driven by the regulatory headwinds impacting international bill payment services and changes in the ANZ processing mix between card issuing and card acquiring.
Mark Healy: As we return to planning for growth, our go-to-market priorities are the relaunch of the ChinaPayments BPAY product and improving the business mix towards higher-margin product lines in the Australasian business. Embedded payments is now one of the biggest shifts in our market, and we see it as a key growth opportunity for us. Most businesses now get paid inside the software that they already run. For example, their practice management system, their booking platform, or a management portal. Research from Visa this year found that 51% of Australian SMBs on software platforms already take their payments through that software, and in verticals like healthcare, it is even higher at 62%. Faster payouts follow the embedding of payments functionality, helping to improve our merchants' cash flow. Consumers are moving also.
Mark Healy: RBA data shows that around 40% of in-person card payments are now made via mobile wallet, up from 31% several years ago. About half of Australians have already used their real-time PayID in the last year. From 1 October, card surcharging ended, and interchange has come down. Basic card processing is now becoming commoditized, so value is moving into software, services, and the ability to provide broader solutions than single payment offerings. That suits Novatti, a software platform wants every way to get paid through one partnership. Cards, online and in-store, tap to phone, the PayTo methods, BPAY, Asian wallets, and in future, regulated digital assets. Novatti is a principal scheme member and acquirer with a deeper infrastructure and capital base than our local non-bank peers. A good proof point here is the University of New South Wales.
Mark Healy: Asian wallet payments embedded in the university's enterprise software late last calendar year have already passed AUD 100 million in cumulative GTV since launch. That is the playbook we are intending to replicate across education and then into healthcare, travel, B2B trade, and other verticals over time. Payments is a very dynamic industry and currently undergoing rapid change from all sides. One of those forces is regulatory, and recent changes in Australia have removed the ability of businesses to surcharge their card processing fees onto consumers. We are already seeing the disruptive effect of this change, which I expect to continue to play out for the next 12 to 18 months. Since the changes went live on 1 October, inbound inquiries to our commercial team have lifted significantly. Many merchants will find it hard to absorb any processing fee on a card payment, notwithstanding any reductions that may flow through from interchange.
Mark Healy: Merchants are already looking for alternatives, and alternative acceptance is a big part of what we sell. We are also seeing significant interest from international fintechs that want to enter Australia. They need a trusted local partner with the licenses and infrastructure already in place. Building that from scratch takes years, but we can offer this to them seamlessly and quickly. Our future product roadmap will follow the market and our strategy. As examples I mentioned earlier, we expect to deploy a digital wallet to facilitate resumption of international bill payments, additional regulated settlement rails for payouts, embedded payments, and we are already working with our first customer to support an AI agent with virtual cards for agentic payments.
Mark Healy: AI is obviously moving very rapidly, and we have deployed BroadCOVID internally, with early application into complex, generally manual compliance processes, where AI linked to other process automation tools has reduced some tasks from days to minutes to complete. Continued AI deployment into our customer-facing products will allow us to drive revenue without growing cost at the same rate. Let me finish with where we are heading. Phase one is complete. We have reset the strategy, reduced the cost base, divested IBoA and Emersion, and delivered four consecutive quarters of positive normalized operating cash flow through FY26. Entering FY27, we are reorienting to growth and starting to position for the new era in payments. With this posture, Q1 dipped slightly below Q4 performance, but that was a choice.
Mark Healy: We've invested in sales and marketing to keep that momentum building, but the discipline from phase 1 hasn't changed, and we'll spend only where we can see and expect to deliver a return. Phase 2 runs over several years to build the ANZ payments infrastructure with disciplined growth. We'll deepen our connection to the new digital rails, drive towards our 70% gross margin target, and build risk management capability as a core capability inside our teams. We'll also consider acquisitions where they prove to be accretive to the bottom line. In our current circumstances, it's growth we have to pace, working with the constraints that we have. The direction is clear, and our recent GTV shows that customers are coming with us.
Mark Healy: We can't fund every opportunity in front of us, so we're back to ones that are closest to revenue, leveraging partners and channels where needed, and treat our AUDC stake as a source of strategic flexibility. As our legacy liabilities fall away through FY27, more of every dollar that we earn will go into supporting and driving growth. Our phase 3 will be about driving leadership in this hybrid payments infrastructure, with Novatti deeply embedded in how our customers run their business. We get there by delivering phase 2 first. Just to sum up, we've crossed AUD 1 billion in quarterly ANZ volume. Our pipeline is growing, target customer needs are moving our way, and we hold a significant stake in one of Australia's leading regulated stablecoins.
Mark Healy: BPAY clearly impacted us this quarter, but international bill payments will return early next year with a stronger product set and a second major Asian market on the way. Phase 1 provided a foundation for Novatti to grow. We're confident in our strategy and our ability to continue to execute, so our return to growth will match the same discipline you've seen from us over the last 3 years. Thank you, and Jolene, I'm happy to take some questions now.
Joleen Whittaker: Thank you, Mark, for sharing that. We have some questions that we are going to address that have come through, but a reminder that you can submit any other questions that you have inside of the box on the screen, or you can email us directly. First question coming through. How confident are you in your statements around the return of international BPAY?
Mark Healy: Okay, just a little more insight here. In the last few weeks, we have actually received the initial scheme guidance on how this service could be reestablished with a compliant solution. We started the product design process already, but we do need to have this officially confirmed, which we expect in coming weeks. At this stage, we are targeting early calendar 2027 to be back in market. As I mentioned earlier, we expect to add a local payer wallet and we will add further product features to that wallet over time. We also plan to extend the service to a second major Asian market to complement the largely Chinese students that previously used the service. Another important note to add here is that the direct acceptance of Asian wallets for merchant acquiring has continued as normal throughout. This was not affected by the regulatory changes.
Joleen Whittaker: Thank you. Next question. What guidance can you give for FY27, and when do you expect the group to return to positive cash EBITDA?
Mark Healy: Well, we do not historically give guidance, but what I can give you is a shape. The momentum in payments, ANZ building for FY27, a pipeline of customers moving from implementation and onboarding into live processing, and the clear phase 2 priorities that we have laid out. In terms of EBITDA, some of the key near-term EBITDA drivers are obviously international BPAY returning, our pipeline and conversion momentum, and our merchant acquiring pricing remaining unaffected by any significant competitive pressures in this current period of disruption. I think you can see very clearly, though, the position of the business now versus 12 months ago, 24 months ago, the Q1 bottom line position is not a material number to address.
Joleen Whittaker: Can merchants pay less in processing fees by using Novatti's alternative payment options instead of credit cards?
Mark Healy: Short answer is yes. It depends on the payment method and on the merchant's business. Account-to-account payments are probably the clearest example. With real-time PayTo and PayID, money can move directly from a customer's bank account over the New Payments Platform. There is no card scheme in the middle, and so the pricing structure is usually a flat fee rather than a percentage of the transaction value. For a merchant taking larger denominated payments such as tuition, rent, larger invoices, or healthcare bills, that difference can add up very quickly. Since 1 October, obviously merchants can no longer pass on any card cost through a surcharge, so every AUD of that processing cost now effectively comes out of their margin, which is why we are seeing a lot more inbound inquiries.
Mark Healy: I still believe that cards will remain the preferred way that people will pay for some time, but our role is really to give a merchant the full product set through one integration, and the merchant can then steer customers to the right method for each sale. Some of those methods will be saving money, but others like Alipay and WeChat Pay, for example, can also help win customers for the merchant that they may not otherwise have reached.
Joleen Whittaker: Thank you, Mark Healy. How soon might we see new products launched, and will they be in the open market or only through B2B channels?
Mark Healy: Well, again, the first major one is the relaunch of international bill payments, targeting for early next calendar year, and we will deepen and extend the features around that wallet using a range of complementary products and services through the Novatti infrastructure stack. This is really our only open-end consumer-facing product, if I understand the question. Novatti is mainly focused on B2B payments infrastructure, and we will retain that core direction. Our products reach the market through 3 main routes. Firstly, direct sales to merchants, enterprises, and platforms. Secondly, via software platforms that embed our products into their own product. The third is partners and wholesale channels, such as HuePay, that distribute our payments products and processing to their own merchant bases.
Joleen Whittaker: Thank you, Mark. Can you give us some examples for the new products you are developing, and what will make them attractive to customers?
Mark Healy: Sure. A few examples would be, for example, payout platforms. PayTo and NPP payouts at a marketplace or a software platform collect money and then pay its sellers or sub-merchants in real time through the same relationship that it uses to accept payments. The second one would be a foreign exchange business is working with us to build out our first multi-currency card program, where customers would be able to hold several currencies on the one card. Thirdly, one of our issuing clients is testing agentic payments where an AI assistant inside their app could help customers manage their money over our settlement rails. All of these are built around problems that our B2B customers have told us about, and what makes them attractive is the same thing every time, one relationship, one integration, and end-to-end infrastructure from a licensed provider.
Joleen Whittaker: Is Novatti looking to sell down any more of its AUDC stake, and if so, how much?
Mark Healy: Well, just taking a step back, AUDC is performing very well in its own right. It has now passed over AUD 2 billion in cumulative on-chain volume across nine blockchain networks, and it is growing its revenue steadily month-on-month. We certainly see our holding as strategic, and it is a lot more than just a line on our balance sheet. We are integrating with AUDC's rails into our own platform so that regulated Australian and New Zealand dollar stablecoins can sit alongside cards, account-to-account payments, and wallets for our customers. We retain 18.5 million shares, which gives us options, and the board will weigh any future decision on that stake against the strategic and financial alternatives at the time.
Joleen Whittaker: How much historic liability is left to pay off, and what are the plans for that cash once it is paid?
Mark Healy: I mentioned a few times, the most important debt here is the historic liability to the ATO, which was built up some years ago. At the peak, it was over AUD 5 million with interest penalties. We have been on an approved payment plan for some time now, and the remaining balance is much lower, sitting around AUD 800K at the moment, which we expect to fully resolve by April of next calendar year, 2027. As our liabilities fall away, more of that cash in the business simply will stay in the business to drive growth in marketing and sales capacity, in our target verticals, education, healthcare, and in productivity and delivery and support of our customers. Some of it can also be used to bolster our working capital position in floats and collateral that our bigger GTV processing volumes will need with our supply chain partners.
Joleen Whittaker: Phase 2 mentions a potential targeted acquisition. How would you fund that without diluting shareholders?
Mark Healy: Yes, that is right, it does. Targeted acquisitions are an element of our plan to develop scale. Any initial acquisition would be deliberately targeted and deliberately modest. The purpose is to prove out our acquisition and integration discipline, not really to bet the company. We have not identified a transaction to announce, so any funding discussion would be premature at this stage. What I would simply point out, again, is how we behaved under my tenure with highly disciplined execution. We divested non-core assets. We exited lines of business where we lacked the ability to compete and win. We sold off a small portion of AUDC when it made sense. Any acquisition would make the same test. Really, does it create more shareholder value than any alternatives available to us at the time?
Joleen Whittaker: Thank you, Mark. We have time for one last question. What is the background to the recent board changes and Peter Cook's exit from the business?
Mark Healy: Post the end of the quarter, in fact announced on 1 October that two directors, Peter Cook and Kenneth Lai, were both stepping down from the board. Peter's move really completes a planned succession that began in 2023 when he moved out of the CEO and managing director role to an executive director role. Peter founded Novatti and took it from an early-stage business to an ASX listing in 2016. It is an orderly transition. He remains a director of several subsidiary entities for a short period as we work to complete the full transition out in coming months. Kenneth joined the board as a cornerstone investor after the IPO and contributed really a great deal to strategy and regional expansion in the early period post-listing. I would also just take this opportunity to thank them both for their service to the company.
Joleen Whittaker: Thank you, Mark. Thank you, everybody. That concludes the time we have for questions today. If you have any further questions, once again, please feel free to email us directly at investorrelations@novatti.com. Thank you for your time today, Mark, and thank you to everyone that has joined us. That concludes today's briefing.
Mark Healy: Thank you.
