PropertyGuru Group Ltd (PGRU) 2022 Q4 法說會逐字稿

Looks like we have most of the attendees on. So we'll get started. So thank you, everyone, for standing by, and welcome to PropertyGuru Group Fourth Quarter 2022 Earnings Conference Call. (Operator Instructions) As a reminder, today's program will be recorded. If anyone objects, please disconnect now.

Now let me introduce Mr. Nat Otis, VP of Investor Relations. Mr. Otis, please go ahead.

Good evening. Welcome to PropertyGuru Group's Fourth Quarter 2022 Earnings Conference Call. On the call today are Hari Krishnan, CEO and Managing Director; and Joe Dische, CFO.

Before we get started, a few reminders. Firstly, all results are available in the earnings release that can be found in the Investors section of our website. Secondly, today's webcast is being recorded. Replay, along with a transcript, will also be available on the Investors section of our website.

Thirdly, we'll be making forward-looking statements, including, but not limited to, statements regarding our future results and expectations for the business. These results are neither promises nor guarantees and involve risks and uncertainties that may cause actual results to vary materially. Please refer to our earnings release and SEC filings for more information regarding risk factors. Forward-looking statements are based on current expectations, and the company is not obliged to update them except as required by law.

Fourthly, this call will also contain non-IFRS financial measures. For a reconciliation of non-IFRS financial measures to the most directly comparable IFRS metrics, please see our earnings press release. Lastly, all dollar references are in Singapore dollars, unless otherwise stated.

With that, let me turn the call over to Hari.

Thank you, everyone, for joining us today for our fourth quarter 2022 earnings conference call. 2022 is an exciting and historic year for PropertyGuru as we listed on the New York Stock Exchange in March, grew revenues by a robust 35% for the full year and were adjusted EBITDA positive. Hard work by all of our Gurus as well as an increased product adoption, improved pricing and the continued integration of the iProperty acquisition, all helped to offset challenging market conditions.

That said, macro and fiscal policy uncertainty continues to test our customers. Given this reality, PropertyGuru will be there to help them navigate the current market as well as set them up to take advantage when landscapes shift and pent-up demand begins to flow. We believe that the headwinds our core markets now face are largely temporary, and the longer-term runway and underlying prospects for economic outperformance in Southeast Asia have not changed. In the International Monetary Fund's January 2023 World Economic Outlook, Southeast Asian markets are anticipated to grow at 4.3% in 2023, even as global growth is projected to decelerate to 2.9%.

For Vietnam, the IMF has an even higher-tier outlook with 6.2% growth projected in 2023. While property market activity was uneven in the fourth quarter, PropertyGuru still delivered strong results across its Marketplaces segment, led by Singapore's outperformance, where increased adoption of premium products and market pricing strength more than offset higher borrowing costs for property seekers and government-implemented cooling measures.

In Malaysia, while higher borrowing costs and uncertainty around the national elections in November impacted sales activity, just like in Singapore, property pricing remained resilient. In addition, PropertyGuru experienced strong operating leverage from the iProperty integration.

In Vietnam, Q4 saw the continued theme of government tightening credit to manage debt levels and the resulting drop in property listings. Overall, the fourth quarter was a busy one for us as we continue to roll out solutions that make it easier for our customers to help people search, find, buy and rent properties.

In December, we launched PropertyGuru for business, giving our enterprise customers a single-trusted source for accessing the critical data and tools needed to maximize the significant opportunities presented by the Southeast Asian property markets. PropertyGuru for Business' unified offering gives customers our DataSense, ValueNet, FastKey and marketing-as-a-service offerings, allowing for a more cohesive customer experience.

Our market intelligence platform, DataSense, is now available in all of our markets. Previously, it had only been available in Malaysia. We had many exciting products that launched on our Marketplaces, which solve both for paying customers and to drive greater transparency and trust in our high demand but low trust markets.

Let me start by talking about Turbo, one of our hot new discretionary ad products. Turbo allows agents to differentiate themselves and increase the exposure of their listings on top of their basic subscription. It launched a year ago in late 2021 in Singapore and early 2022 in Malaysia, and we are pleased with agent adoption rates so far with half of all active agents in Singapore and 1/3 of all active agents in Malaysia having used it. Thanks to Turbo and other new discretionary products like Boost and Featured Agent, PropertyGuru's average revenue per agent continues to grow.

In the fourth quarter, we launched Promoted Listings in Singapore with releases in more markets expected in early 2023. Promoted Listings is a new performance-based dynamic ad product that helps agents find property seekers who are looking for similar but not exactly matching properties, a win-win technology that helps both the agent and the consumer. In Malaysia, we reached a milestone in our integration of iProperty and PropertyGuru Malaysia. Agents are now able to cross post their listings on either platform using 1 software interface. So an agent who subscribes to both platforms can now post a listing on one or both platforms seamlessly.

In Vietnam and Thailand, we launched 2 new premium products, [Verified Listings and Verified Agents.] Verified Listings help give customers greater confidence in the market and combat the general challenge of fake listings. Verified Agents is the start of us trying to help professionalize the agent market in Thailand, and to help property seekers find agent partners they can trust.

In Q4, we also inaugurated our first office space in India. India is our technology center of excellence that supports our product technology capabilities group-wide. Lastly, as we discussed on our prior earnings call, we are excited about our October acquisition of Sendhelper and its ability to connect homeowners and tenants with verified home services providers, bringing added value to the current PropertyGuru customer base. We see this acquisition as consistent with our new vision statement, which is to help our communities to live, work and thrive in tomorrow's cities.

To wrap things up, Singapore continues to be a strong performer. And in our other markets, we resiliently operated through temporary macro headwinds to deliver growth while exercising prudent expense management. In short, we are pleased with this quarter's result and with 2022 overall. We are well positioned to continue to be the go-to technology provider for Southeast Asian agents, developers and property seekers in 2023 and beyond.

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

Thanks, Hari. PropertyGuru capped off 2022 with another solid quarter results. Revenues in the fourth quarter were $40 million, up 17% from the same period of 2021. Adjusted EBITDA in the quarter of $5 million was up [$9 million] from the same period in 2021 as we combine revenue growth with appropriate cost management.

For the full year 2022, revenues were $136 million, up from $101 million in 2021, and adjusted EBITDA was $14 million, up from a loss of $10 million in the previous year. I would point out that at a margin of 11% in 2022, the incremental new revenue over 2021 had an almost 70% drop through to adjusted EBITDA, illustrating the operating leverage we have in our business.

Turning to the quarter in more detail. Marketplaces revenues were $38 million in Q4, up 15% year-on-year, and our adjusted EBITDA margin jumped to 48% and 19% in the fourth quarter of 2021. In Singapore, our pool of agents grew again this quarter with over 15,500 in the fourth quarter. Our customer renewal rate was 79%, and our average revenue per agent, or ARPA, was up 20% from last year. As a result of both ARPA and the increase in agents, Singapore revenues were up 15% to $19 million in the quarter and adjusted EBITDA was $11 million or 61% margin.

Turning to Malaysia. Revenues were $8 million, up 28% from the prior year quarter, and our adjusted EBITDA increased to a positive $3 million from a negative $2 million over that same period. This illustrates the tremendous leverage from the iProperty integration as a revenue increase in the quarter of under $2 million produced an almost $5.5 million increase in adjusted EBITDA.

Turning to Vietnam. Revenues were down 7% for the fourth quarter of 2021 as the government's efforts to limit the availability of credit and to a 20% drop in the number of listings. While our business continues to be impacted by government attempts to slow inflation, we're encouraged by increased premium product penetration and listing duration, which both helped the average revenue per listing, or ARPL, increase 22%. In addition, through improved operating leverage, our adjusted EBITDA margin expanded 190 basis points to 12.3% from 10.4% even as revenues dropped 7%.

Finally, Fintech and Data Services combined revenue was up 70% year-on-year. Adjusted EBITDA was a loss of $2 million. We are excited about the long-term opportunity in both businesses.

Moving to the balance sheet. We ended the quarter with $309 million in cash, down from the last quarter, primarily due to ForEx changes to our U.S. dollar deposits. This level of deployable capital gives us comfort and flexibility to take advantage of acquisition opportunities as they arise. As we mentioned in our press release, the result of economic uncertainty, especially related to Vietnam and Malaysia is to take a more cautious view of the market in the near term. Because of this, we're introducing a 2023 outlook with a revenue range of between $160 million and $170 million and an adjusted EBITDA range of $11 million to $15 million.

A couple of important data points with respect to adjusted EBITDA. Firstly, while we are very pleased with the long-term opportunity we see in the Sendhelper acquisition, in 2023, integration and scaling efforts will weigh on adjusted EBITDA by $3 million to $4 million. Secondly, going forward, the ongoing cost of being a listed entity will no longer be removed from our calculation of adjusted EBITDA and are anticipated to be between $11 million and $12 million in 2023.

Let me finish by underscoring our confidence in our core operations and the opportunities we see both now in challenging our uncertain conditions and in the future when markets revert to more positive growth trends. We're excited by our ability to add additional resources through strategic M&A to develop new market-defining technologies and maximize efficiency through greater internal automation and prudent cost management.

On a personal note, I want to thank our customers for their ongoing support and our Gurus for their huge effort over the past year, not just for managing through complex and changeable market conditions to deliver tremendous results, but doing so with the added level, oversight and complexity that comes with being a publicly traded company.

Now I'll turn the call over for questions. Operator, we're ready for our first question.

All right. Thank you, Joe. So we're going to take questions now. (Operator Instructions) We're going to start with Fawne Jiang.

Yes. First, congrats on a very strong quarter and also very healthy, solid, I think, 2023 outlook. You mentioned, Hari, in your, I think, opening remarks, there are some moving parts in regards to some of the regions you're covering right now. Just wondering what's the current situation you have observed. And of course, it's probably hard to predict, but how do you expect the market will most likely shaping up for the rest of the year? And also, in regard to your guidance, what are the puts and takes? You could, I think, give additional color which might surprise us on the upside or potential on the downside?

Thanks for your question, Fawne. I think let me get started, and I'll ask Joe to sort of chime in after. So answering the first part of your question, I think our markets are at different stages of openness with regards to the property sector. I think I mentioned that Singapore has done really well. Even though transaction volumes are down, we see property prices holding very well. They appreciated significantly through 2022. And even in the -- into '23, we are projecting that they will at least hold up pretty well. We are seeing more and more supply come online. So if you think about it in terms of the dynamics of demand and supply, you are seeing extremely high demand, and that's what drives that price stability, if you like. And even though supply is coming online, we're still projecting prices holding. So that gives you a sense of the size of the demand in Singapore. So I think Singapore, it still looks like a good space. We have a lot of agents in the marketplace. ARPA, average revenue per agent, grew very well. So I think that looks very healthy.

When you look at some of the other markets, in particular, Vietnam, it's definitely a policy decision from the government to make sure that the country does not have any of the challenges that other markets, like in particular, China have had. And so they've been very vocal and open about talking about the fact they want to make sure developers don't have any defaults and that even consumers don't -- even household interest levels don't get out of control. Having said all of that, we do remain optimistic that we're getting some indications that at some point in H1, they will start to open it up a little bit. And it is a material driver of their GDP. So we do believe it's more about making sure that the demand and supply are managed rather than trying to kill the sector.

And in Malaysia, we have just finished Chinese New Year. The market looks good. Our market position, obviously, is very strong. The election sort of has been put to bed in Q4. So we're looking forward to business starting up and doing really well this year.

And maybe, Joe, if you have anything to add that?

That's very helpful. Second question is actually regarding your acquisition on Sendhelper. It seems like very incremental to your Singapore business. Just wonder where the business is right now in terms of financial impact to your top line, bottom line for 2023? And where do we expect this potential synergy down the road, whether it's on the revenue side or potentially on the cost side? And do you expect any breakeven or profitability time line for the business going forward?

Just in terms of the financials, we've disclosed here some of the sort of the impact on our adjusted EBITDA for next year -- for this year, just as a point of reference. It's rolled up into our DSS and Fintech segments. So we won't be splitting out individually or giving any individual guidance. I think what I will say is it's a small startup, and we're definitely in investment phase. Hence, there are some, sort of, some losses as we start to integrate and really start to scale the business. But we're really very excited. As we mentioned before, we came across the business because they were advertising on our site. So obviously, there's some good sort of high-intent traffic that we had converted well for them. So I think one of the things we're doing is looking at how do we cross refer the audience that we have to Sendhelper. That, ultimately, will obviously lower cost of marketing and make the business more successful, but also vice versa. It's very useful once somebody has completed a purchase or a rental, they will often drift away from our site. They don't need to use it every day. They can then engage in Sendhelper, and we can refer that traffic back to us, which again also adds to the ecosystem. So there's definitely some very good sort of linkages between those 2 businesses. And we're very excited about the opportunity in the future.

Understood, Joe. Just a quick follow-up there. Any M&A, I think plans, targets you guys have in mind for 2023?

Yes. There's nothing to disclose at this moment. I think one of the good things about going through the listing process was that -- so we certainly generated a fair amount of attention for ourselves, and we've definitely been a focus of businesses in the region that are open to a transaction that have approached us. We've also been proud. We've been really investing in an M&A team and also an integration team as well, and that's now fully set up. So we've got the right bandwidth internally to be able to [affect] transactions.

I think one thing we've learned is that it can be quite draining on an organization to do this kind of M&A work and also to integrate. So now we've got these separate teams. We should be able to make the transactions, integrate them and keep the core business running well and efficiently. So I think we're well placed. We remain really interested in fintech, in data, in home services, where, obviously, we made the [center] acquisition and developer operating systems. So our interest areas remain the same, and we've definitely got a few exciting things that we're looking at, at the moment.

Understood. And congrats again.

Thank you.

Great. Thanks, Fawne. The next question is going to be Nelson Cheung.

Congrats on the very solid quarterly results. My first question is a follow-up question regarding your revenue guidance. Just wonder how would management prioritize your strategic resource, your allocation in different priority markets in 2023? And given the ongoing headwinds in Vietnam, how should we manage our investment in this market in this year?

Thank you, Nelson. Maybe I'll get started, and again, if I missed something, Joe can jump in. So I think with regard to our priority markets, it remains still very much Singapore, Malaysia, Vietnam with regards to our Marketplaces segment. As I mentioned in my remarks, Singapore is still very strong. So we're still investing. I mentioned some of the new products we've launched. Some of them are in only 1 market and not [rule out] across the board, things like Sponsored Listings, et cetera. So I think there is going to continue to be a good investment of product and technology and monetizing Singapore.

As with Malaysia as well, we see a lot of particularly PropertyGuru for Business and some of our enterprise products do very well in Malaysia, and so we're looking for that as that market opens up.

Specific to Vietnam, we are still very bullish on what are the prospects there. Our agent partners and definitely the demand on batdongsan.com.vn. remains very high. So I think there is still very much people doing research, getting ready, trying to make sure they understand this. The key thing though is, obviously, a clarity from the government on the policies around indebtedness. We don't expect that to clear in Q1, but we're optimistic -- or rather hopeful, I should say, that we'll get clarity in Q2 and get started building that out. So I think for Vietnam, it's going to be a slower H1, if I'm being honest, but I'd say Singapore is looking very strong. And our emerging businesses like Fintech and Data Services are also coming off a low base, but we continue to be bullish.

And my second question is regarding your Fintech and Data Services business. Since we saw a very solid growth in fourth quarter, can management elaborate more about the growth driver on it? And what do you think about the monetization prospect going into 2023?

Yes. So I think with Fintech and Data Services, definitely, these are younger businesses. We run a lot of experiments, both to the business model as well as when it comes to acquiring customers, trying different things. And so I wouldn't read too much into quarter-on-quarter variances. I think definitely some of the slowdowns in Q4 in -- for Data Services in particular, Malaysia slowed down significantly because they had a national elections in November. And so I mean, the entire sector, most of the economy actually wasn't really at full swing. And so that isn't entirely surprising. Data Services, a lot of the revenue comes from that country. And with regards to fintech, again, we saw, as I mentioned in the opening remarks or rather in the Q&A, the transaction volumes in Singapore dropped off a little bit -- quite a bit rather through the year as interest rates grows and such. And so as transaction volumes drop, you will see a little bit of a slowdown there. But I think, obviously, because we are gaining market share, there's still -- we still continue to grow, just perhaps not as fast as we would have liked.

But I would really stress that for those 2 markets, they are -- we don't have the entire product suite rolled out or nailed. It's not quite like marketplaces in Singapore, Malaysia and Vietnam, where product market fit is extremely good. I think these other markets -- other businesses -- sorry, these adjacencies, we're still innovating and you can expect a little bit of variance.

I see. And my last question is regarding your cost control. I just wonder, management, if you could elaborate more on your cost optimization strategy in this year? And should we -- which cost component should we expect a greater optimization or reduction in this year?

Yes. Thank you. Look, I mean, we are a growth company, and we're still focused on investing in our business. So I think it's really sort of focus is the most important thing for us. So we've definitely been through a process through our planning, sort of, cycle this year where we've really sort of optimized our spend, where we've looked at where we want to invest hardest. We definitely made some decisions of the products and the like that haven't necessarily been the right way forward. So we've really focused ourselves, and that's really the key. So no, we continue to invest in the business in new products and services. Things don't stand still in our markets, and we intend to service our customers as effectively as we possibly can with those new products and services.

I think on the marketing side, we definitely look to optimize. We have such strong search SEO positions that we don't need to spend quite as much on SEO and search, and we've been optimizing on that front. And I think more generally, on the people side, we've been very selective in terms of where we're hiring in order to sort of service our broader needs of the business.

Looking backwards to the end of last year, I'm really proud of the way the business responded to some of the sort of the revenue challenges that we had. And you can see from the really strong EBITDA results, we really sort of optimize spend really effectively and efficiently in the back end of the year, which we're all very pleased about, and we'll continue that selective process through 2023.

(Operator Instructions) Our next question is Maximilian?

Congrats for the strong quarter. Yes. I just have 1 short question as a follow-up for your PropertyGuru for Business. So just wanted to ask that, do you see any meaningful impact since you segregated the business from consumer side as well as from business side? In other words, do you see any meaningful impact from separating the services from PropertyGuru from Business from your main PropertyGuru website? Is there any further expectations for you moving forward regarding that side?

No, thank you for that question. When you look at PropertyGuru for Business, it's an overarching brand umbrella that covers a variety of solutions which I mentioned in the opening remarks. So you've got everything from DataSense and FastKey and ValueNet, which are all part of our Data Services unit, but you also have marketing as a service, which is really offered by our Marketplaces unit. The point here is more that we are able to give a coherent and a cohesive solution to our enterprise clients. So if you're a developer or a bank or an urban planner, et cetera, you're able to sort of look at all our solutions in a coherent manner, understand what's right for your problem set and solve for it.

We really see it as very powerful because if you look at some of the more developed real estate markets around the world, access to high-quality real estate data in the form of a dashboard is sort of pretty critical as well as workflow automation software is core to the efficiency of everyone from valuers to real estate developers when it comes to how they go about conducting their business. We continue to show very good demand from our customers. And I think we don't see any dissonance in the fact that we have a consumer-oriented marketplace, which is really around helping people find their home. And increasingly, even in the Marketplaces, obviously, we expanded our offerings to also through fintech, allow things like helping to finance their home.

But now increasingly, we are helping people also manage their home better with things like Sendhelper. But coming to Data Services and PropertyGuru for Business, it's really around what's our infrastructure with which our enterprise clients are interacting with the world out there and how can we impact that. Having been in the market now 15, 16 years, we're pretty confident that we have a good sense of what are the problems faced by some of these enterprise clients. And we're getting started there, but I think there's no disconnect in terms of the pursuit of division between the groups. Hopefully, that answered the question.

(Operator Instructions) Okay. We don't see any other questions, so we'll wrap up the Q&A. I'll turn the call back to Hari for any closing remarks.

Thank you all for joining us today. I would like to reiterate how pleased we are with our performance in 2022, and look forward to speaking to you again next quarter. Thanks so much.

All right. Thank you, everyone. You can all disconnect.