Kelly Partners Group Holdings | FY2025 Full Year Results Presentation

1. Key Themes

Capital-Efficient Growth Through Proven Partnership Model

Kelly Partners has demonstrated exceptional capital efficiency, raising only $18.3 million in total equity (pre and post-IPO) while building a business with a $150 million revenue run rate and $26.8 million EBITDA. The company has doubled six times in 19 years, on average every 3.2 years.

Brett Kelly explained: "We've raised equity pre-IPO of 11.6, we raised equity post-IPO of 6.7 million including the raise of 4.2 million for total of 18.3... we have a current run rate EBITDA of 52.5 million and after KPG share of that run rate EBITDA it's about 26 million so for 29.6 million we believe that we'll pull together about 26.8 million of EBITDA which is great" [00:15:08]. He contrasted this with their achievement: "since June 2020 we've grown the revenue from say 50 million to 150 million... in tripling that revenue we've done that in a particularly capital efficient manner on a per share basis across every metric... we haven't until the recent partner offer issued a single share and we still have less shares on issue than we had at IPO" [00:06:53].

Insurgent Mentality vs. Default Path to Bureaucracy

The company is deliberately choosing the difficult path of maintaining founder's mentality while scaling, rather than succumbing to incumbent behavior. This is a conscious strategic choice that requires continuous effort.

Kelly referenced the book "Founder's Mentality": "growing companies face a choice as they scale to follow the default path or commit to the journey north. And the default path you'll see really leads you down a path of struggling bureaucracy and the behavior of incumbents or we maintain our insurgent mission and try to scale that mission northward. That's not easy but it's worth the challenge and we're in a serious pursuit of that challenge as we speak" [00:01:57]. He emphasized the importance of hiring: "what goes wrong when a business grows but doesn't maintain that insurgent mentality around the talent that it brings in and in particular lateral hires from large companies that can push you towards being an incumbent" [00:03:29].

Strategic Capital Structure Review Without Premature Equity Raise

The company is thoughtfully considering its capital structure, prioritizing debt over equity dilution at current valuations. They're willing to wait for the right terms rather than destroy shareholder value through poorly priced capital raises.

Kelly was emphatic: "we just won't raise equity at any time where we believe the gap between intrinsic value and the equity that we can raise the valuation of that equity are as close as possible to each other... we won't move in haste and we won't do things that dilute your interest in mind and every other shareholder such that we set ourselves up to have to work for the next five years to create no real value because we raised equity at the wrong price" [00:27:55]. He explained their current position: "we are deep in the development and we are confident that we will close a large bond raise if we can agree the right structure with our existing bank Westpac... we're trying to put in place next generation debt capital to allow us to accelerate the opportunity to deploy our model" [00:29:47].

2. Contrarian Perspectives

Geographic Arbitrage Makes Deal Discipline Easier

Most people would expect rapid geographic expansion to create pressure to do deals. Kelly argues the opposite - that being in LA creates MORE discipline because they now have abundant deal flow across multiple geographies.

Kelly explained: "by being here in LA we've really opened up geographic arbitrage for the group on where we can partner with a firm and so that is meaning that we don't need to rush into any particular deal or pay over the odds accept terms it doesn't make sense because there is more than we could keep up with today and really no matter how big we get... I suspect that they'll be more than that we could catch up with" [00:54:20].

Taking Two Years to Build What Took Eleven in Australia is Good, Not Reckless

Conventional wisdom would suggest building a US business to the size of their IPO in 2.5 years (versus 11 years in Australia) indicates excessive spending or unsustainable growth. Kelly argues this demonstrates system scalability and validated model portability.

He stated: "our development of the business is such that the US business is now as large as Australian business was at IPO took 11 years to get to that position in Australia took us two and a half years to do that in the US that has meant that we've used a little more capital to do that than we did in Australia and we spent less time on profitability because of their confidence in ultimately being able to do that over time and the importance of getting to scale to justify frankly existing in this market" [00:10:56].

Lower Profitability in International Markets is Strategic, Not Problematic

While most would view 28.3% group margins (pulled down by US and Ireland) as concerning compared to 30.8% Australian margins, Kelly sees this as deliberate investment for scale advantages.

Kelly noted: "the US and Ireland are running it essentially average profitability for their market the challenge will be for us to deliver the results there and turn their profitability around in the way that we do in the Australian market over time" [00:10:34]. This suggests he's prioritizing market position over immediate profitability.

Being Personally Expensive to Deploy is Feature, Not Bug

Most CEOs would avoid mentioning personal costs. Kelly openly discusses it as proof that building the US business is being done right - with the founder deeply embedded.

He acknowledged: "the larger challenges are really the cost of getting the founding in this market personally very heavy on me and the family and just a massive massive undertaking" [00:41:43], but immediately followed with: "the unexpected successes are that we've built a business now from scratch the size of the business that we listed in Australia after 11 years and so there's much more commonality in people's values than people might suspect" [00:41:53].

Refusing to Increase 9% Central Services Fee Despite Investment Needs

Most rollup businesses increase central fees to fund growth. Kelly has committed to never increasing this fee, viewing constraint as competitive advantage.

When asked about increasing fees due to additional investments, Kelly responded: "we made a commitment to never increase that fee we have if anything I aspire to lower not increase it it makes the amount we deliver for that fee again within some duplicatable so we're not uncomfortable with the return that we get on the capital that we're deploying" [00:37:32].

3. Companies Identified

Constellation Software

Description: Software company known for exceptional capital allocation and decentralized operations, holding conferences for serial acquirers.

Quotes: "Lawrence introduced us to the senior team at Constellation software and allowed Ken and I to attend a conference in Toronto last October which was unbelievable in terms of a life experience... I participated in an interview with Mark Leonard and it was well received and that's given us a lot of confidence that we're on the right track you know when someone like Mark looks at the business and thinks it's okay that's that's at a personal level very helpful" [00:43:22]

The Only US-Listed Accounting Group (Name Not Specified)

Description: A US-listed accounting firm that grew from $350 million to $3.5 billion market cap over 10 years by acquiring larger businesses.

Quotes: "we look to see the US listed accounting group the only US listed accounting group and they've taken their market capital last 10 years from 350 million to you know also 3.5 billion so 10x their market cap and by way of much larger businesses it makes pretty clear what the opportunity is we think we can follow a similar trajectory" [00:29:13]

QDOS Network

Description: International network of 60 accounting firms across 48 countries that Kelly Partners acquired access to, with first partnership closed in Ireland.

Quotes: "we bought into the QDOS network it has 60 firms in 48 countries and it doesn't take it greatly to imagine that we might get many of those firms to join us the first one has joined us on a 51 to 49 basis in Ireland and that we will get out to their McDonald's business in each of those markets as well" [00:47:16]

Rackspace

Description: Technology company whose story (in "The Rack We Built") serves as a cautionary tale about maintaining culture during growth.

Quotes: "A Rack We Built by our friends at Rackspace... tells the story about what goes wrong when a business grows but doesn't maintain that insurgent mentality around the talent that it brings in and in particular lateral hires from large companies that can push you towards being an incumbent" [00:02:43]

BlackRock

Description: Asset management giant mentioned as evidence of large-scale M&A activity in professional services.

Quotes: "I think BlackRock recently paid two billion US dollars for a firm the markets are enormous and I'd be more confident than ever that we could deploy very significant capital at the right rate of return to justify the exercise" [00:44:46]

4. Operating Insights

The "Forever Dollar" Capital Allocation Framework

Kelly uses a clear formula for thinking about capital structure: one dollar of equity plus two dollars of debt to drive ROIC. This creates a simple mental model for evaluating capital decisions.

He explained: "the way we think about that capital structure is the forever dollar equity we may raise either externally or internally if we add two dollars of debt then... we expect to continue to be able to drive a very strong return on invested capital" [00:16:03]. He later elaborated: "if you raise 70 US to a hundred Aussie call it a hundred Aussie put 200 debt against that's 300, buy 600 of partnerships at 30% EBITDA, that's 200 EBITDA for the group" [00:49:15].

Relentless Relationship Building Over Years

Success in acquisitions comes from systematic, persistent outreach over multi-year periods, not opportunistic deal-making. Kelly called a California firm weekly for nearly two years before getting a response.

He shared: "I called the principal of that firm one week after landing in the US in January 2023 and I didn't get a text message back until the 22nd of December that year and I just relentlessly continued to contact that firm until we got a little bit of engagement" [00:53:10]. He added: "we have been sending emails to accounting firms in Australia for more than 17 years the good people in that market know we exist" [00:53:46].

Hire for Motive, Not Just Skills

The company explicitly focuses on why people want leadership positions, not just whether they can do the job. This prevents the infiltration of bureaucratic thinking.

Kelly referenced Patrick Lencioni's work: "The Motive... talks about making sure that the people that move through the business into leadership positions are there for the right reasons that they have the right motives and in our terms that's to make other people better off, to be people for others who keep their promises and work as part of a team our three core values" [00:03:12].

Build Systems for 3x Your Current Size

Kelly deliberately builds operational infrastructure for a business three times larger than current state, creating capacity that enables rather than constrains growth.

He explained his progression: "when we started the business I had this ambitious goal to get to 50 million of revenue we built all the systems to handle 50 million of revenue and then when we could see that that target was within range... I turned around to the team and said hey we need to run this business as if it's already a hundred million dollar business and then very quickly after that said let's make that a hundred and fifty million dollar business" [01:01:44].

5. Overlooked Insights

The McDonald's Franchise Moat is Extraordinary

Buried in the presentation is the revelation that Kelly Partners serves nearly 9% of ALL dollars in franchised restaurants in the US through McDonald's owner-operators. This creates a national presence and network effects that would be nearly impossible to replicate.

Kelly mentioned almost casually: "with the joining of our recent California business together with the North Carolina and Florida businesses we have nearly 9% of all the dollars franchised restaurants as clients through their owner operators in the US that gives us virtually a national presence Texas and everywhere else" [00:39:04]. This is a massive competitive moat hidden in plain sight - having accounting relationships with this percentage of a single system creates unprecedented referral networks and specialized expertise.

PCAOB Audit Investment Signals Major US Listing Intentions

The company spent heavily on Public Company Accounting Oversight Board audits for the prior two years. Most people would miss that this is an expensive, time-consuming process that only makes sense if planning a US listing.

When asked about US listing timing, Kelly responded: "can't really talk about it Tristan but we have done the PCAOB audits and invested a lot of time and money in that and that probably tells you something" [00:45:12]. He earlier noted: "one of the great achievements and large costs of this year was getting agreements up to scratch to operate in the UK and also in Ireland... there was also heavy cost trying to take the PCAOB audit looking back two years to make us compliant for the United States" [00:25:53]. This is a massive signal of intent that casual listeners would miss.