During a recent RaaS Research Group Stock Take Webinar, Wrkr (ASX: WRK) – a rising player in the RegTech sector – was the focus of detailed analysis. Wrkr is revolutionising compliance for Australian businesses, offering digital solutions for everything from onboarding employees to managing payroll and superannuation contributions. The webinar featured an in-depth financial analysis from RaaS Senior Analyst John Burgess, and valuable insights from Wrkr’s CEO Trent Lund and CFO Karen Gilmour.
RaaS Research Group’s Perspective: Revenue Growth Potential
John Burgess began by reviewing RaaS’s initial analysis from July 2023, noting Wrkr’s promising growth trajectory. At the time, Wrkr had a revenue base of approximately $6 million, but Burgess identified three major catalysts that could drive this figure to $25 million over the next few years.
- MUFG Retirement Solutions Client Migration: One of Wrkr’s major opportunities is the migration of clients from LinkGroup (now MUFG Retirement Solutions) onto Wrkr’s platform, potentially boosting revenue by $6 million to $8 million.
- Payday Super Implementation: Scheduled to begin in FY27, this new regulatory framework could increase superannuation transactions up to fivefold, representing another $6 million to $8 million in revenue.
- QSuper Migration: Wrkr is also in line to benefit from migrating QSuper clients onto its platform, adding an estimated $2 million to $3 million.
When RaaS initially covered Wrkr, its stock was trading at just 2 cents, with a valuation target of 8 cents. Fast forward 15 months, and Wrkr has delivered an EBITDA-positive result for FY24, all while managing major client migrations, contract delays, and product expansion, including its entry into the Hong Kong market.
Financial Performance: Strong Growth and Profitability
Wrkr's financial performance in FY24 was a standout. CFO Karen Gilmour highlighted that Wrkr achieved 46% revenue growth, largely driven by its integration with MUFG Retirement Solutions, bringing in $2.5 million in revenue from that partnership alone. Wrkr’s first-ever EBITDA-positive result of $500,000 was a significant milestone for the company.
Wrkr’s SaaS revenue stream, comprising license and transaction fees, continues to generate reliable income. In addition, the company successfully raised $7.8 million in a capital raise, giving it a strong balance sheet and positioning it well for future growth.
Key Partnerships: MUFG Retirement Solutions Drives Client Base Expansion
Wrkr’s strategic partnership with MUFG Retirement Solutions is the centrepiece of its growth strategy. MUFG Retirement Solutions services some of the largest super funds in Australia, including REST, Hostplus, and Cbus, representing a potential user base of up to 7 million Australians. Wrkr’s technology integrates directly into MUFG Retirement Solutions’ administration platform, enabling seamless superannuation contribution processing, data cleansing, and compliance reporting.
CEO Trent Lund emphasised that this partnership represents a major growth opportunity. Wrkr’s platform is designed to handle complex compliance requirements and simplify them for employers. The scalability of the platform, combined with the increasing number of super fund members under MUFG Retirement Solutions, is expected to significantly boost Wrkr’s revenue as more clients migrate to the platform.
Payday Super: A Regulatory Game Changer
One of the key regulatory tailwinds for Wrkr is the upcoming Payday Super reforms, set to commence in FY27. These reforms will require employers to remit superannuation contributions in line with each payroll cycle, increasing the number of superannuation payment events from 160 million to over 500 million annually.
Lund explained that this massive growth in transaction volumes is expected to have a substantial impact on Wrkr’s business, positioning the company as a key player in processing these payments. Furthermore, the closure of the ATO’s Small Business Superannuation Clearing House will push approximately 240,000 small businesses to seek alternative platforms, presenting Wrkr with a significant market opportunity.
Product Development and Future Prospects
Wrkr’s investment in research and development (R&D) is another factor underpinning its growth strategy. Burgess highlighted that Wrkr’s R&D spending is among the highest in its peer group, relative to its revenues. This focus on innovation has allowed Wrkr to expand its service offering, including its recent entry into the Hong Kong market.
While Wrkr’s core focus is on superannuation processing, the company is also developing additional compliance solutions, such as visa checks and payroll integration. Lund noted that Wrkr’s “one-stop shop” approach to compliance makes it easier for businesses to meet their regulatory obligations, positioning Wrkr to capture further market share.
Valuation and Sensitivities
Despite Wrkr’s strong growth prospects, Burgess pointed out some risks that could affect the company’s trajectory. The timing of client migrations, particularly from MUFG Retirement Solutions, remains a critical sensitivity. Delays or setbacks in these migrations could impact Wrkr’s revenue forecasts. Additionally, fluctuations in interest rates could affect Wrkr’s float income on superannuation holdings, although this is expected to be a smaller risk.
Nonetheless, Burgess maintained a positive outlook, with a discounted cash flow (DCF) valuation of 7.8 cents per share, implying significant upside from Wrkr’s current share price of around 5.2 cents. The key to unlocking this value will be successful client migrations and benefiting from the regulatory boost offered by Payday Super.
Wrkr’s Growth Strategy: Path to Profitability
CFO Karen Gilmour reiterated that Wrkr is on track to remain EBITDA-positive in FY25, despite the challenges of managing large fund migrations and regulatory changes. The company’s strong balance sheet, bolstered by its recent capital raise, ensures it has the financial strength to continue investing in product development and scaling its operations.
Looking ahead, Lund highlighted that Wrkr is targeting several new super fund contracts over the next 12 months, which will further drive revenue growth. With the mandatory compliance requirements of Payday Super and the closure of the ATO’s Small Business Superannuation Clearing House, Wrkr is poised to capture a significant portion of the market.
Conclusion: Wrkr Positioned for Significant Upside
Wrkr is well-positioned to capitalise on regulatory changes and expand its market share in the superannuation and payroll processing sectors. With a strong pipeline of client migrations, partnerships with major players like MUFG Retirement Solutions, and the tailwind of Payday Super reforms, Wrkr’s growth prospects look promising. Investors should keep a close eye on this emerging RegTech player as it continues to execute on its strategy and unlock further value.
