PropertyGuru Group Ltd (PGRU) 2022 Q2 法說會逐字稿

Thank you for standing by and welcome to the PropertyGuru Group Second Quarter 2022 Earnings Call. Currently, all participants are in listen-only mode. As a reminder, today's program will be recorded. (Operator Instructions) Now let me introduce Nat Otis, VP, Investor Relations. Mr. Otis, please go ahead.

Good morning and good evening. Welcome to PropertyGuru Group Ltd. Second Quarter 2022 Results Conference Call. My name is Nat Otis. I recently joined PropertyGuru as its VP of Investor Relations and look forward to speaking with everyone in the very near future.

On the call today are Hari Krishnan, CEO and Managing Director; and Joe Dische, CFO. Before we get started, a few reminders. Firstly, our results and additional management commentary are available in the earnings release that can be found on the Investors section of our website. Secondly, today's webcast is being recorded. A replay of today's conference call along with a transcript will also be available later in the Investors section of our website. Thirdly, we will be making forward-looking statements within the meaning of U.S. securities laws, including, but not limited to, statements regarding our future financial results and management's expectations and plans for the business. Statements are neither promises nor guarantees and involve risks and uncertainties that may cause actual results to vary materially from those presented here.

Please refer to our earnings release and SEC filings for more information regarding the risks and factors that may affect our results. Any forward-looking statements made in this conference call are based on current expectations and PropertyGuru is not obliged to update or revise them, except as required this call will contain non-IFRS financial measures. For a reconciliation of each of these non-IFRS financial measures to the most directly comparable IFRS metric, please see our earnings release, earnings press release. Lastly, all dollar references are to Singapore dollars unless otherwise stated. With that, let me turn the call over to Hari.

Thank you, everyone, for joining us today for our second quarter 2022 earnings conference call. Last quarter was our inaugural earnings call as a publicly traded company following our listing on the New York Stock Exchange, an event we have been working towards for several years and something we, as a company, are very proud of. Now that we have fully passed the listing process, my focus on this and future calls, will be to update everyone on the steps we are taking to execute on PropertyGuru's long-term strategic vision as well as providing color on product development and deployment, property market dynamics and growing customer acceptance.

This quarter, we were busy adding high-quality talent as we move on -- move to expand our customer-centric products in our core markets while also looking to enhance innovation in areas like fintech and data. For all those new Gurus well known. We are very excited for you to join us. We have much to accomplish together.

We have entered the year with strong employee engagement and adding new capabilities to the team is only going to further improve our ability to serve our customers. We pride ourselves on being purpose-led and our gurus are very focused on working consistently with a set of principles we call our vision to values. This is the backdrop on which the business has been able to uniquely be successful in the region. We are keenly aware that every day, our job is to reaffirm to our customers the value we bring to them, whether through our current offerings or the promise of future product rollouts. When times of most companies add value to enhance the customer experience, but the great companies separate themselves from the pack through innovation and greater customer penetration during uncertain times. That is exactly what we are currently doing.

As our customers manage rising inflation and possible fiscal intervention, we are providing them with the partnership and solutions they need to succeed. In the second quarter, we launched several new product initiatives in Singapore, Malaysia, Thailand and Indonesia, we revamped our content management system, giving us a greater ability to tailor relevant content for individual property seekers with enhanced information security.

In Singapore, we launched a feature that facilitates the delivery of better quality leads for agents. In Vietnam, we launched a consumer experience quote to better understand if we were effectively serving customer needs in that dynamic market. Finally, we launched renewal self-service for our agent partners in Singapore as a way to help drive a better customer experience and improve our sales team efficiency.

Our innovation is not just on the customer-facing side. We are constantly looking at ways to better monetize our differentiated products. For instance, in Malaysia, we launched premium services for both PropertyGuru and iProperty, providing enhanced financial benefits that we hope will be the foundations for growth and profitability going forward.

Late in the quarter, in Vietnam, we launched a new pricing engine that will facilitate a variable pricing structure, helping us move to a more dynamic pricing process going forward. As would be expected, our product launches lay the groundwork for future growth. Just like our investments over the last 2 years provided the foundation for the results we are discussing today.

Joe will go through the financial details in a minute, but I wanted to take a little time and say how pleased I am with everything we accomplished in the second quarter. Group revenue was up 44% versus last year. But more importantly, we grew in every market in which we operate. At a time when many global real estate markets are facing extremely challenging times, such as in the U.S., where rising interest rates and decreased affordability is weighing on demand, our core markets have been able to sustain their relative momentum to date.

In the Singapore market, real estate prices remained strong in both the sale and rental markets assisted by inflows of new workers and continued demand from younger people looking for housing. In addition, there are signs that supply issues resulting from construction delays may also be improving. As our results show, in Singapore, we continue to benefit from greater customer penetration of our products and any headwind created from the government's increased stamp duties and tightened loan limits late last year appeared to have only temporarily impacted the first quarter.

In Vietnam, we are seeing improving property trends as prices rise across all segments and consumer interest returns to pre-COVID levels. Markets are reopening, our supply chains are moving again, helping to revitalize the economy and strengthen GDP. Population organization continues to be a very important demographic trend in Vietnam and one we hope to capitalize on. Of note, given rising global inflationary concerns, the Vietnamese government continues to closely monitor real estate activity to try and proactively ensure longer-term sustainability.

In Malaysia, the overall market remains strong as pricing and supply continue to grow. Encouragingly, demand increased this quarter for the first time since the end of 2020. We are pleased with the results from our acquisition of iProperty last year as we believe it to be a complementary brand to PropertyGuru, while also allowing us to leverage back-office functions and a consolidated sales team.

In Fintech, we continue to see opportunity in leveraging our core market expertise to not only improve the financing process for homebuyers but also add value for our agent customer base. In data services, our proprietary market data, combined with market intelligence as a driver for value-added software solutions is a natural next step in an industry where technology is expected to transform the future real estate transaction process. While our business has performed well this quarter, and we remain positive on our longer-term outlook, I wanted to point out that I'm also excited with the opportunities we are seeing to acquire additional assets that could further strengthen and differentiate the PropertyGuru value proposition. Clearly, we will always be diligent in the assessment of value, but I'm encouraged with the variety and merit of many of these prospects.

With all the positives we saw in the quarter, we are affirming our full year 2022 outlook of approximately 44% revenue growth and a return to positive adjusted EBITDA. That said, it is important that we remain vigilant in monitoring individual market conditions as consumers manage through the impact of inflation, rising interest rates and fiscal intervention on housing affordability.

Let me now turn the call over to Joe to review our financial performance.

Thanks, Hari. Before I move to the specific financials in the quarter, I'd like to take a moment to briefly reflect on where we are in our journey and what lies ahead of us. I'm proud of the way that the company has been executing, our strong focus on serving our customers and our innovation has enabled us to drive revenue growth across our markets. This makes it possible for us to maximize the value we can generate from the strong tailwinds we have in our markets, urbanization, middle class expansion and digitalization. At the same time, we also focus on profitability through automation and efficiencies to increase our operating leverage. For example, at the front end, we enable our customers to self-serve our products. And in the back end, we invest in our internal systems to drive both productivity and accuracy. We've also invested in our M&A and integration capabilities, we have demonstrated an ability to effectively integrate acquisitions and deliver on synergies, which will be valuable as we execute further M&A.

These improvements in operating leverage are evident through our improvements in adjusted EBITDA year-on-year. And we are also focused on our governance and compliance in the listed environment as we strive for best practice. These are exciting times for PropertyGuru with more to come.

Now turn to the financials. Just a note, where our quote percentages, these are all versus the same period in the prior year. On the top line, Q2 2022 was another solid quarter for PropertyGuru with revenues up 44% to $33 million. Breaking that down, our Marketplaces segment grew 43% year-on-year. And to look by country, in Singapore, our largest market, we grew the number of agents to 1,523 and which is a little over 1,000 above our forecast. In a buoyant market of late, we've effectively demonstrated the value we bring and attracted new agents to our brand while retaining our existing customers as shown by a high 82% renewal rate.

Despite the age and volume increasing, we've also managed to grow yields and increased our average revenue per agent or ARPA by 29% direct increased activity on our platform. At the bottom line, Singapore adjusted EBITDA was $11 million in the quarter, representing a 65% margin.

Moving now to Vietnam, revenues increased 19% as the market continues to recover from the COVID period, and we execute in our growth plans, a number of listings grew 17% to almost 2.4 million. Meanwhile, the average revenue per listing grew 7% with growing adoption of premium services. The appetite for properties and asset class continues to grow, and we are excited by the opportunities that exist in this market. Vietnam adjusted EBITDA of $1.7 million in the quarter represented a 24% margin.

In Malaysia, revenues were $6 million as we consolidated our 2 brand strategy after the acquisition of iProperty last year. Our adjusted EBITDA turned positive in the quarter and over $1 million for a margin of 21%. This validates the progress we have made in the integration of iProperty and a strong commercial rationale for the transaction.

Finally, Fintech and data services combined revenue increased 53% to $1 million. While the statement is still in its early stages of development, we have seen encouraging results and immense growth potential. Going forward, we will continue to invest in this segment, which we believe will become integral parts of our business expansion in the future.

Overall, we reported a net income of almost $4 million in the quarter, which included a positive change in the fair value of preferred shares warrant liability and embedded derivatives of $12 million. Our adjusted EBITDA was just over $3 million this quarter. This is the second quarter in a row of positive adjusted EBITDA as our operating leverage continues to grow.

Moving to our balance sheet. We ended the quarter with $369 million in cash, up from $70 million at the end of December 2021, primarily reflecting the proceeds of the listing. As Hari mentioned, we are reiterating our full year 2022 outlook of approximately 44% revenue growth and a positive adjusted EBITDA.

I would like to finish by thanking our customers for their support and the growing ranks of our staff, our gurus, for their commitment in achieving these solid financial results. Now I'll turn the call over for questions. Operator, we're ready for our first question.

Thank you, Joe. (Operator Instructions) Our first question will come from Nick Jones.

It's Nick Jones from JMP Securities. Could you maybe touch on what kind of economic challenges you're seeing in your markets? It sounds like demand is remaining relatively resilient, but there's -- I think there's kind of for investors is this overhang of just broader kind of global macro conditions impacting particularly the housing market. Could you speak to that and what you're seeing in the market?

Sure, Nick, thanks for your question. And so obviously, this varies by market, as we've mentioned on previous calls, but I'll start -- I'll sort of go market by market. When you start in Singapore, I think fundamentally, demand, as I mentioned in my opening remarks, remain very strong -- remains very strong. We saw, if you recall, over the last couple of years, the construction sector largely being shut. And as a result, demand far outstripping supply. That does continue to be the case. Post COVID, you've seen more influx of new foreign workers moving in, you've seen young Singaporeans looking to rent more. So you're seeing both price -- demand for both rental as well as sales continue to increase.

As a result of which you have seen prices continue to increase by some amount. There is obviously this aspect of rising interest rates. But I think when you step out of Singapore side, okay, in Malaysia and Vietnam, the situation varies between those markets. I think in Malaysia, we've had a supply overhang historically. And the government has been working through that situation over the last several years. We're seeing demand, as I mentioned, for the first time, pickup since the end of 2020, we saw that in Q2. And so I think some of the macro tailwinds that Joe touched on organization, emerging middle class, you are definitely seeing these sort of long-term macro tailwinds running up against the headwinds you mentioned, interest rate rises and then also fiscal intervention potentially. Some of these markets, we want to make sure the citizens don't overextend themselves, don't get to indebted, et cetera. So we are watching those keenly, but in Q2, we continue to see healthy market conditions.

Great. And you mentioned on the call, potential additional acquisitions in the future. I guess, one, how do you think about the pipeline in front of you? And then how should we think about what kind of acquisitions you'd be looking for that really kind of to go more broad and just acquire more agents and users? Or is it more technological to kind of fill some check that, a little bit of both? How should we think about the kind of acquisitions you're looking to accomplish?

Yes. No, thanks for that question. As you might recall, but just for the broader audience, we are organized by 3 different business units. We refocus on marketplaces which serve customers -- consumers, our property seekers and agents broadly, we also have data and software services that essentially serve the B2B players in the real estate sector, and then we have Fintech just for right now only available in Singapore.

When we talk about M&A, we do have a healthy pipeline, as I mentioned, we are very much focused on staying in the 5 markets in which we operate for now. So geographic expansion is not our immediate focus. We are looking at those adjacencies. So primarily looking at things such as home services, fintech, data and software solutions. We're looking in those areas to expand into the space. There are some very dynamic companies out there, which are innovating, and we feel with our support, and we can sort of double some of the performance of some of these products. So I think we're very much looking that rather than acquiring audience and looking at the consumer products. That's not our immediate attention.

Great. And one more if I can, and this is maybe for you, Joe. As we think about the back half of the year, how should we think about kind of the seasonality in 3Q, 4Q? You reaffirmed kind of top line growth numbers and then a return to profitability, how does that compare to the numbers kind of we saw on the profit line in the earlier presentation early in the year of around $11 million of EBITDA. Is that still intact? Or it's kind of just profitability there? And does that mean maybe costs are going to be a little elevated than from where we expected?

Yes. Thanks, Nick. In terms of our outlook, we are still lined up with the numbers that were in our forecast. So the revenue numbers on the top $145.1 million and the adjusted EBITDA number that you referred to. So we're still very much in line with that. In terms of seasonality, there's similarities to other markets in the Western world, and there's differences. So traditionally, this start to the year is relatively quiet as we discussed in our Q1 results. Just in terms of a lot of the festivals and holidays that happen, things do sort of pick up into Q2. And then Q3 and Q4 are generally pretty strong. In many markets, we do see a slight sort of tail off in our agent business towards the back end of the year towards a sort of holidays, et cetera, at the end. But we also have our awards business, which really picks up in the second half, which then sort of fills in revenue there. So we're looking forward to a pretty strong back half of the year. And in terms of profitability from where we are now, we're pretty much lined up with our -- the full year numbers that we just talked about.

We will now move to our next attendee who's going to ask a question is Fawne Jiang.

First of all, congrats on a very strong quarter. I think my first question is it seems like different markets going through different dynamics, partially from the global, I think, inflation perspective, partially also, as Hari mentioned earlier, is a long-tail macro tailwind. So based on my observation, it seems like Singapore market, in particular, was actually has been very strong. On the other side, Vietnam seems to be somewhat a slower start of the year. I don't know whether that's a fair assumption. In particular, Vietnam market, do you see a substantial pickup in the second half? Any drivers for accelerated growth ahead? Any color will be helpful.

Yes. No, thank you for that. As I mentioned, the macro tailwinds particularly organization and emergent to middle class that demand for real estate remains strong. I think having said that, you've seen that Vietnam has been a huge beneficiary of supply chain movements out of other markets. And commensurate to that, you're seeing job creation and as a result of housing and real estate actually take off in a big way. Obviously, the government in Vietnam pays a very close attention to that. And they have been looking very carefully to assess whether their policies and fiscal -- any fiscal intervention is necessary. As of Q2, the market continues to trend really well. But I think as we look into the second half of the year, we are sort of cautiously watching what the government does in terms of policy changes of fiscal intervention.

Understood. Second question regarding your -- I think, the bottom line, again, very impressive, I think, improvement on the EBITDA. Just wonder whether you see any cost pressure as a result of inflationary environment. I also noticed your employee compensation actually has come down in the quarter. Just wondering what's the driver behind it?

Yes. So I think in terms of the cost pressures that we face, seem to many companies, inflation is certainly an impact. We do feel that in terms of labor market. So most of these factors are all built into our forecast and plans for the year, and we certainly mitigate around them. But obviously, Singapore particularly has a talent shortage, and there are very talented people that we're hiring into our business can sort of commanded salaries. So yes, those kind of pressures in the war for talent is definitely a challenge for us. But look, we mitigate within our cost base, and we also do things like we have been outsourcing in India in order to sort of manage our costs and into other markets as well. So we're not fully reliant on the labor market here. But overall, we're managing within the envelope we have, and we feel pretty confident in achieving those EBITDA targets for the full year.

Understood. My last question is actually regarding your Fintech and database business. Just wondering, can you remind us of your target with a strategic or on the financial side for the full year? And where you are in terms of against your target for your target. In any potential strategic move in this area, that will be helpful.

Yes. So just to talk to -- I think your question was around DSS and our strategy there and whether there are acquisition targets. Is that right?

Well, actually a question regarding the progress of your Fintech business and data. So at the beginning of the year, I understand the company has a strategic target as well financial target. Just wonder where you are against this target and also any potential moves for the second half, probably more on the strategic side product upgrades.

Fintech side, where we operate a broking business in Singapore. That business has been growing very well. In terms of the back half, we continue to leverage new technology solutions that we're bringing in, in order to make the customer journey better. We've also been fostering a lot of partnerships as well with agents and other channels in order to drive sort of further leads. Another big sort of win for us really has been productivity. We've seen really strong improvements in efficiency and productivity from our loan advisers. So we're really sort of delivering sort of industry-leading levels of conversion and therefore, revenue. So I think those are some of the highlights on the Fintech side.

On the longer term, we always look for opportunities in other markets. We operate in a very exciting space. And certainly, I think Malaysia and Vietnam are 2 focus areas. We're always looking to potential acquisitions or other activity in that space.

In terms of data, as Hari has mentioned, we've got quite a strong sort of product delivery schedule in the back end of the year, particularly in Malaysia, and that's certainly going to sort of drive sort of strong revenues in the back half as we bring on new customers for our products. And in the longer term, as we always said that we would roll out those data services across the region. We already do that in Singapore to a certain extent, and we're always looking to do that. And it weren't necessary if there's any acquisitions right for hires, we'll definitely be considering those along the way. But all in, this is a very exciting space for us, a very dynamic area. And as we said before, will increase in the years to come from a large part of our revenues.

Okay. That was our final question. So this concludes our question-and-answer session. I would like to turn the conference back over to Hari Krishnan for closing remarks.

Thank you all for joining today. We look forward to speaking to all of you again next quarter.