Beforepay Group (ASX:B4P) used its half-year earnings webinar to highlight a sharp lift in profitability, pointing to higher advance volumes, a larger average advance size, and improved net transaction margin as key drivers. Management also discussed continued investment in the company’s newer Personal Loan product and its Carrington Labs software and analytics business, while providing additional detail on funding strategy, credit performance, and the use of AI in risk models.
Business overview and segment focus
Management reiterated that the group operates two core areas. The Beforepay lending business in Australia includes:
- Pay Advance, described as the flagship short-duration, small-dollar lending product
- Personal Loan, a newer product with larger loan amounts and longer duration that is “starting to scale”
Half-year profit and operating performance
The standout headline from the discussion was NPAT of AUD 4.2 million for the half, which management said was up 50% from the prior corresponding period. Profit before income tax was described as AUD 3.7 million, and the company recognized AUD 0.5 million of additional unutilized tax losses as an income tax benefit, which contributed to the NPAT result.
On operating metrics, management reported that advances increased to AUD 467 million in H1 FY26 from AUD 397 million in H1 FY25, representing 18% growth. The company attributed the rise primarily to a higher average advance size, which increased from AUD 393 to AUD 458 (up 17%). Executives said the increase reflected a focus on “higher value customers,” supported by performance marketing and credit risk analytics.
Loan defaults increased modestly to 1.3% from 1.1%. Management emphasized it does not target a specific default percentage, instead focusing on overall profitability and what it described as the trade-off between limit management and default rates to maximize marginal contribution (net transaction margin). One executive added that in prior quarters they had been “worried about the low default rate” as a sign the business may not have been optimizing limits, and said they were comfortable with the 1.3% outcome.
Direct service costs rose slightly from AUD 0.77 per advance to AUD 0.80 per advance, which management linked to the additional deductions needed to collect on larger advance amounts. However, the company said service costs improved on a relative basis, declining from 0.2% of advances to 0.17%.
Management reported that net transaction margin increased to AUD 14.3 million from AUD 11.8 million, a 21% increase. Operating expenses increased from AUD 8.8 million to AUD 9.7 million, which management said reflected investment in personnel supporting both Personal Loans and Carrington Labs.
Balance sheet, funding, and cash flow
Beforepay ended the half with AUD 9.1 million in cash. Drawn facilities were described as flat at AUD 30.9 million, with AUD 24.1 million of undrawn facilities available. Equity was reported at AUD 44.4 million, which management said had increased due to profitability.
Management noted that cash declined by roughly AUD 5 million over the half, which it attributed to the loan book growing by about the same amount. Executives explained the company’s debt facilities allow it to fund up to 80% of loan growth through third-party financing, but it chose to fund that growth from cash given excess cash on the balance sheet. Management said the company retains the ability to draw on the facility if desired and described the decision as an effort to “sweat the assets a little bit more.”
On the cash flow statement, management highlighted receipts from repayment of customer advances rising from AUD 388.3 million to AUD 452.2 million, alongside the higher advance volumes.
Strategy: Pay Advance optimization, Personal Loan scaling, and Carrington Labs investment
Looking ahead, management described its strategy as consistent and methodical rather than involving “radical shifts.” In the core Pay Advance business, the company said it will continue optimizing limits, attracting new customers, and prioritizing higher-value customers while remaining disciplined on cost. Executives also emphasized the automation and efficiency of the Pay Advance operation, stating the business processes “tens of thousands” of transactions each week with a small team.
For Personal Loans, management reiterated that “2026 will be the year of Personal Loan,” stating origination volumes have begun to increase meaningfully. However, executives said the rollout remains cautious, with a focus on credit outcomes, data collection, and ongoing experimentation, and they noted the importance of operational and technology readiness as the product scales. Management also said it is evaluating how to extend and expand debt facilities to support growth as Personal Loans feature higher balances and longer durations.
In Carrington Labs, executives said they continue to invest, including increasing the size of the U.S. team and improving both the analytics “core” and the supporting technology stack used to deliver solutions to clients. When asked about the sales pipeline and timing for meaningful revenue generation, management cautioned that sales cycles—particularly with larger institutions such as major banks—can be significant, and it declined to provide a specific timeline while saying it would not invest incremental resources without believing progress justified the spending.
Q&A highlights: facility refinancing, funding costs, AI, and Pay Advance pricing
During Q&A, management said the company has a AUD 55 million debt facility expiring in October and has begun discussions on a new facility. Executives said they expect a larger facility will be needed as Personal Loans grow and indicated they aim to secure reduced interest rates, though they said potential savings would not “dramatically shift the economics” of products. Management noted funding costs in the half were about 50 basis points (0.5%) of the amount advanced.
Asked how funding loans with facilities rather than cash would affect net transaction margin, management said drawing on the facility would add interest expense. Executives provided additional detail on facility costs, including ranges for the facility’s cash basis and amortized costs, and said the cost of funding an advance through the debt facility would be about 87 basis points based on average duration, compared with essentially zero when funding through cash (aside from minor opportunity cost).
Management also discussed how it uses AI, distinguishing between machine learning and “big data” techniques versus generative AI. Executives emphasized explainability and compliance, describing a “control point” where humans approve logic before models are used in production, with deterministic and reproducible techniques applied downstream of that point. They also said AI can accelerate model development and feature generation.
Finally, management confirmed that the group has begun charging interest on a small subset of Pay Advances in addition to the 5% origination fee, though it said the impact was not material at this stage. Executives noted the Pay Advance product is issued under the short-term credit exemption, which permits up to a 5% flat fee and up to a 24% APR, and said the company’s average duration is just under a month.
About Beforepay Group (ASX:B4P)
Beforepay is an ethical-lending fintech that was founded in 2019 to support working Australians who
have not been well-served by the traditional financial services industry. Beforepay’s flagship pay
advance product is a safe and affordable way for custo
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