L1 Group (ASX:L1G) (FY 2026) Earnings Call Highlights: Revenue Surges 49%, EBITDA Doubles to $287.4M

Q & A Highlights

Q: Can you provide more color on how you're thinking about the capacity or fundraising for the PXE funds or the small cap funds currently in development? A: Julian Russell (CEO and Managing Director): On PXE, it's very early days, but we are positive on the fund's performance. Fundraising takes time, especially with a three-year track record, so we wouldn't promise immediate growth. For small caps, we are excited about Andrew joining at the end of October, with the fund hopefully launching before year-end. We don't expect a material amount from either strategy until FY28 or FY29.

Q: Can you help us understand how the economics work for L1 in the PXE strategy? Is it 50% of profits, and are there any intricacies with performance fees? A: Andrew Stannard (CFO): The best way to think about it is similar to the Catalyst setup, except it's 50-50. We'll bring it in at 100% with a non-controlling interest (NCI) at the bottom. Performance fees will come in at 100%, and then there will be an NCI at the bottom, consistent with how Catalyst is structured.

Q: Are the costs associated with the PXE transition and the small caps fund launch included in the FY27 cost guidance? A: Andrew Stannard (CFO): Yes, they are. Anything announced up until today, including small caps and PXE, has no incremental costs that we see. The waterfall chart on synergies includes added-back business investments, and those fall under that category.

Q: On management fees, you mentioned first half '27 will dip below 100 basis points. Will that be flat half on half, and can you provide context on the compression in Platinum management fees? A: Andrew Stannard (CFO): We had 97 basis points average for the second half, and all other things being equal, we expect a similar result for the first half of next financial year, barring any unusual changes in business mix. For Platinum, the compression is a mix shift, with a few basis points related to the part-period of the sub-advisory fee, as the first quarter of FY26 was without it and the second quarter was with it.

Q: The JV partnerships in New York and opportunities in the US don't exactly fit into the strategy slide. Can you elaborate on what partnerships means and what you may look at? A: Julian Russell (CEO and Managing Director): The strategy is team lift-outs. We look for investment professionals or teams, like David Feldman in 2015, and provide back office, middle office, legal, and distribution support. We aim to replicate this by finding hedge funds in the US, particularly equities funds, and either establishing them in a new fund or taking out costs from a subscale fund struggling to raise money. Andrew Stannard (CFO) added that there are two heavy hitters in the US: one building sales for the L1 product range and another looking for new partnership opportunities.

Q: With the US and Australian small cap fund, should we expect 100% ownership by L1, or will they be equity percentage stakes? A: Julian Russell (CEO and Managing Director): For the small caps fund, Andrew will join as an L1 employee, so we will own 100% with a structure to incentivize him. For the US market, because we're not established and international M&A is risky, we prefer a 50-50 joint venture model. We do all the middle and back office and distribution, while the partner focuses on stock picking. This model works well as they are autonomous but fully aligned with us.

Q: Is Australia a hunting ground for expansion, or is the US via joint ventures the top priority? A: Julian Russell (CEO and Managing Director): We'd never rule out M&A in Australia and assess every opportunity. We'd still look at joint ventures in Australia for products where we don't have in-house skills. However, the overseas market is trickier for 100% ownership, so joint ventures are the safest way for quasi-inorganic growth into offshore markets.

Q: There was strong performance in Platinum health science and technology, but brands was a weak spot. What happened there, and how can you catapult the strong strategies? A: Julian Russell (CEO and Managing Director): Health sciences has been a steady performer, and last year's performance is peaking client interest. The Japan fund has also gained traction. Brands is a consumer long-short strategy, and its performance over the last 12 months has been disappointing, but we expect a turnaround. Performance leads flows, so strategies like health sciences and Asia are getting good traction, and we need to spend more time in front of clients to generate more inflows.

Q: On seed capital, there have been many moving pieces. Is that what we should expect, or was there a cleanup from the business combination? A: Julian Russell (CEO and Managing Director): We look at seed capital flexibly and are constantly looking at where we can generate the best return on capital. The movements, particularly GWK and Ireland Trust, were part of the restructure, and PAI was a recycling opportunity. We allocate shareholder capital in the most appropriate manner to generate the highest possible return, not just within Platinum strategies but across the board, including L1.

Q: Regarding the $380 million Catalyst FUM returned to an industry superfund, when does that come off, and what is the expectation on incremental margin for that money? A: Julian Russell (CEO and Managing Director): That's coming off this quarter. The Catalyst Fund has been performing very strongly, ranking top 1 of 92 large-cap long-only Australian equities funds. The superfund wanted to lift its allocation, but the fund is nearing capacity, so we decided to return the funds to create capacity for a higher-margin client base. We expect the margin to be more than double from current levels, and the give-up is less than $1 million in annualized revenue.

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