So I invested based on Praemium growing the new Spectrum product and showing operational leverage. While lower quality than competitors Hub and Netwealth I thought the lower valuation compensated for this. Also, downside protection from takeover potential.
The latest H1FY26 results showed some disappointing margin trends. Margin for all platform products reduced with the explanation given based on tiered pricing. They give large accounts with high balances cheaper rates.
Previously announced inflows for Spectrum and Powerwrap were solid.
The non custodial product (Scope) also saw a reduction in portfolios. Praemium was one of the first to provide such a product and shows competitors catching up.
The question here is how much is loss in market share due to competitive pressures? Is Praemium reduced to competing on price? Perhaps it deserves to trade on a much lower multiple than its higher quality peers.
The full OneVue cost out was also not completed in 2025 as planned but only completed in February (this month) which was another negative.
On the positive side the Technotia acquisition ($7m in shares + earn out) seemed to be a good one. They state $9m in salaries cost out due to technology division restructure. The CEO framed this as hiring exceptional developers rather than jumping on the AI cost saving narrative which I liked. Does make you wonder the state the tech stack before they engaged Technotia 18 months ago though.
So I originally thought the Spectrum product would help grow margins, but the Powerwrap platform has been achieving inflows and platform margin is down for all products.
Operating leverage should be helped by cost out through the Onevue in H2FY26 and the Technotia acquisition/restructure should help reduce costs in FY27.
In terms of management I think they are reasonably honest in how they present information (providing internal fund transfers and platform margin).
Overall, I hold and I'm comfortable with the valuation but I need to watch thesis creep. I will continue to monitor Spectrum growth and the operating leverage.
Overall a OK update but not as impressive as HUBs.
Spectrum net inflows were 300m and for the first time they provided a breakdown showing the internal transfers between products. After removing the effect of the OneVue exits, It shows steady growth and is in line with the thesis.
The legacy product, Powerwrap, a worse product had higher inflows (similar net levels) than Spectrum. I don't understand exactly why (perhaps client make-up, advisor habits).
OneVue transition is complete without reaching all the earn-outs - this should clear up the metrics.
Custodial FUA were only up 1.6% on the prior quarter compared with HUBs up 4.9% (less market gain for both).
Checking on the Praemium thesis.
Is their new platform (spectrum) gaining traction fast enough to allay outflows from older ones?
Overall, yes - net overall platform flows were positive 550m, a sharp reversal from last quarter.
Spectrum had 483m inflows, similar to last quarter, and there were higher outflows (184m), but net flows were still 300m for Spectrum.
The bleeding of the legacy platform, Powerwrap, actually reversed in Q1 which was surprising. One negative was the lost of 5% of total customers in non-custodial business.
There's not enough data to draw strong conclusions on product quality but encouraging signs. It's also a lot easier to grow in a bull market.
Net Quarterly Platform Inflows
HUB’s results, released today, showed inflows of $5.2bn, which is 10× greater than Praemium’s. This drove platform FUA growth of 8%, compared to Praemium’s 6.5%. The impressive thing about HUB's organic growth this quarter was that it excluded large migrations, a real indication of product quality.
Overall, encouraging progress from Praemium.