Release Date: February 28, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Frontier Digital Ventures Ltd (ASX:FDV) reported a return to revenue growth and profitability in its Asia and MENA regions by the end of 2024.
• The company made strategic investments in its operating platforms, which are expected to provide long-term value and have already resulted in a return to free cash flow positivity by the end of 2024.
• FDV's business in Pakistan, Zameen, showed a steady recovery in the second half of 2024, supported by favorable macroeconomic factors such as reduced inflation and interest rate cuts.
• The company has launched a new product, Iris, which aims to improve transaction monetization by reducing lead leakage and increasing conversion rates, offering a more scalable and sustainable business model.
• FDV's business in Colombia, Fincaraiz, demonstrated strong performance due to improved competitive positioning, leading to increased average revenue per customer.

Negative Points

• FDV faced challenging trading conditions in Q3 and Q4 of 2024, impacting overall performance and leading to a decline in EBITDA.
• The company experienced a decline in revenue from its LATAM business, particularly InfoCasas, due to strategic shifts in transaction monetization models.
• FDV's share price has been declining for four consecutive years, reaching an all-time low, which has been a significant concern for shareholders.
• The transition to the new Iris model has resulted in short-term revenue declines, particularly affecting the LATAM region's financial performance.
• FDV's strategic review process has been delayed, partly due to the timing of audited financial statements, which has slowed down efforts to unlock shareholder value.

Q & A Highlights

• Warning! GuruFocus has detected 4 Warning Signs with ASX:FDV.

Q: Can you provide commentary on what is included in the offline production costs and whether that cost line will change under Iris? A: The increase in production costs was largely driven by new product initiatives, including Centrify and Iris, and events to improve customer engagement. These events will likely decrease in 2025 as Iris gains traction, reducing the need for such promotional activities.

Q: What are your expectations for EBITDA to cash conversion in calendar year 2025? A: There was a significant gap due to CapEx investments in LATAM. However, by Q4 2024, the cash balance increased, indicating improved capital management. This trend is expected to continue into 2025, with reduced CapEx leading to better EBITDA to cash conversion.

Q: Can you provide more commentary on the strategic review and its progress? A: The strategic review, initiated in December, was paused to allow the release of full-year results. It will now gather pace, focusing on unlocking shareholder value and understanding the potential of LATAM businesses, which are believed to be undervalued relative to the market cap.

Q: How does the performance of InfoCasas impact the strategic review? A: InfoCasas is a significant part of the LATAM business, and its performance is crucial. The strategic review aims to look forward and ensure the business structure supports long-term growth, despite short-term revenue impacts from strategic changes in InfoCasas.

Q: How does Iris change the financial dynamics with 360 LATAM? A: Iris shifts the business model from lead generation to acting as an intermediary in transactions, reducing upfront investment and improving conversion rates. This model keeps transactions on the platform, enhancing control and financial outcomes.

Q: What will calendar year '25 CapEx be relative to 2024? A: While specific numbers were not provided, CapEx is expected to be less in 2025 compared to 2024, reflecting a focus on capital management and reduced investment needs following significant platform investments.

Q: Would you consider paying dividends if free cash flow exceeds AUD5 to AUD10 million? A: The company is committed to improving shareholder returns and would consider dividends if free cash flow exceeds operational needs, aligning with a focus on capital management and shareholder value.

Q: What drove Fincaraiz's strong performance relative to the rest of the region? A: Fincaraiz improved its competitive position, enhancing its market leadership and enabling better revenue per customer through price increases and innovative product uptake, demonstrating the value of market leadership in classifieds.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.