OFX Group Drives B2B Growth with Digital Expansion

About OFX Group Limited

OFX Group Limited (OFX, the Group, ASX: OFX) is an international money services provider that was founded in 1998. OFX offers money transfers and foreign exchange services for Corporate, Consumer, and Enterprise clients across 50 currencies through its 24/7 global digital platform. Today the Group operates in nine countries and employs 700 staff servicing the foreign currency transaction needs of more than 1 million clients.

Business client strategy

About two years ago OFX announced the strategic growth decision to shift the Group to a Business to Business (B2B) focus and be less reliant on the Consumer segment for growth. Today more than 70 percent of revenue is sourced from B2B clients.

B2B clients deliver higher margins and increased revenues compared to Consumers because they require a broader range of complementary business-related services beyond foreign exchange transfers.

B2B clients need more than just competitive pricing and low-cost payment solutions for their international settlements and payments. They want ease of use (digital solutions) with human intervention when they need help because workflow and tasks around foreign transfer payments incur more pain and cost than the payment transfer itself.

OFX can now solve these pain points and eliminate more costs through digital Accounts Receivable and Accounts Payable global payment solutions, virtual global currency accounts, as well as global employee expense management and risk management services. This expanded range of foreign currency services to B2B clients is delivered through a transaction processing platform acquired 18 months ago, called Paytron. The platform has since been branded OFX and is integrated with the full OFX service range and provides an integrated digital expense management and foreign currency accounts payable processing capability.

The digital platform delivers superior functionality compared to other foreign currency processing platforms, and provides OFX with new non-FX revenue streams, and improved margins. The platform is highly scalable, and in addition to FX payments, enables client access to a digital wallet that can be linked to cards, integrated accounts payable workflows and ingesting of invoices.

On-market share buy-back

The current on-market share buy-back end date is scheduled for 6 June 2025. Since commencement of the buy-back in June 2023, 13.2 million shares have been bought back at an average price of $1.64. The highest price paid is $2.16 on 23 August 2024 and the lowest price paid is $1.29 on 14 November 2024. The maximum remaining number of shares to be bought back is 34,557,454

Positive long-term growth outlook

The deliberate B2B transaction focus has created diversity in global revenue streams by adding levers OFX can pull to generate returns regardless of the prevailing economic conditions. This is because foreign currency transaction needs of business entities are more resilient to prevailing economic conditions than Consumers’ needs. This explains why B2B revenue is growing at over 20 percent per annum despite subdued economic conditions globally.

B2B clients tend to grow revenue in years two onwards, compared to Consumers whose revenue contribution is stronger in the first 18 months. B2B growth generates higher Corporate transaction activity which in turn increases transaction value and results in higher earnings. This is a strong pointer to long-term sustainable, recurring revenue and earnings growth.

The future

Global roll-out of the expanded B2B transaction processing platform is initially planned for the Canadian market, followed by the UK. Both markets are expected to be live within the next 12 months. Sixty-five percent of revenue is currently generated outside of Australia and so this figure is set to increase in the year ahead.

OFX has a consistently strong cash generation business model backed up by a high-quality balance sheet that internally finances an expanding product offering for business growth.

Furthermore, at the AGM in August, management reaffirmed the medium-term outlook (1 to 3 years) of 10 percent per annum net operating income growth, and an underlying EBITDA margin of 28 – 30 percent. This compares to 28.4 percent margin in FY24.

The achievement of these performance outcomes is dependent on the migrated take-up of non-FX products and B2B services in the Canadian and UK markets in the year ahead. Management have stated their intention to update the medium-term outlook as part of their FY25 results announcement in May 2025. To the extent that management’s 10 percent net operating income growth and 28 to 30 percent underlying EBITDA margin targets can be achieved, moderate shareholder value accretion should occur over the next 2 to 3 years.