Q2 2022 PropertyGuru Group Ltd Earnings Call
Joe Dish, CFO . Before we get started, a few reminders. Firstly, our results and additional management commentary are available in the earnings release. It can be found on the investor 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 investor 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 Property Guru is not obliged to update or revise them, except as required by law. Fourthly, this call will also 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 Parf.
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 are fully past the listing process, my focus on this and future calls will be to update everyone on the steps we are taking to execute on Property Guru's long-term strategic vision as well as providing colour on product development and deployment, property market dynamics and growing customer acceptance.
This quarter, we were busy adding high-quality talent as we 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, welcome!
We are very excited for you to join us. We have much to accomplish together.
We have entered a 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 bedrock 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 roll-ups.
When times are good, 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, Ireland, 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 code 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 Property Guru 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 two 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 US, 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 remain strong.
in both the sales 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 dam duties that tightened loan limits late last year appear 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 as supply chains are moving again, helping to revitalize the economy and strengthen GDP. Population organizations continue 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 Property Guru, 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 home buyers, 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 businesses perform well this quarter and we remain positive on our longer term outlook, I wanted to point out that I am also excited with the opportunities we are seeing to acquire additional assets that could further strengthen and differentiate the Property and go to the value proposition.
Clearly, we will always be diligent in the assessment of value, but I am encouraged with the variety and merit of many of these prospects.
With all of 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 insulation, rising interest rates, and fiscal intervention on housing affordability.
Let me now turn the call over to Joe to review our financial performance.
Thanks, Harry. Before I move to the specifics 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 on our markets of 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 evidence through our improvements in adjusted and EBIT.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 Property Guru with more to come.
Now, turning to the financials. Just a note, where I quote percentages, these are all versus the same period in the prior year.
On the top line Q2 2022 was another solid quarter for Property Guru with revenues up 44% to $33 million.
Breaking that down, our marketplace is segmented with 43% year on year. And to look by country, in Singapore our largest market we grew the number of agents to 15,023 which is a little over 1000 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 agent volume increasing, we've also managed to grow yields and increased our average revenue per agent or ARPA by 29% throughout increased activity on our platform.
At the bottom line, Singapore adjusted EBITDA with $11 million in the quarter, representing a 65% margin.
Moving north to Vietnam, revenues increased 19%. As the market continues to recover from the Covid period and we executed our growth plans, the 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're 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 two-brand strategy after the acquisition of our property last year. Our adjusted EBITDA turned positive in the quarter at over $1 million for a margin of 21%.
This validates the progress we have made in the integration of our property and a strong commercial rationale for the transaction.
Finally, FinSec and data services combined revenue increased 53% to $1 million. While this segment 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 and a quarter, which included a positive change in the fair value of preferred shares, warrant liability and embedded derivatives of $12 million.
Our adjusted EBITDA is 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 Harry mentioned, we are reiterating our full year 2022 outlook for approximately 44% of new growth and a positive adjusted either done.
Thanks.
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 to questions. Operator, we're ready for our first question.
Thank you Joe.
Now we will take your questions. Please use the raise hand function if you want to ask a question. To facilitate the Q&A session I will invite you to ask a question and unmute you.
Please state your name and firm before asking.
Our first question will come from Nick Jones.
Next, you're now open to speak.
Great, thank you. It's Nick Jones from J&P 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.
I think there's kind of for investors is overhang of this 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. So obviously this varies by market as we've mentioned on previous calls but you know 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 remains 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-
Post-Covid you've seen more influx of new foreign workers moving in. You've seen young Singaporeans looking to rent more. So you've seen both price demands, 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 and start looking at 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 are seeing demand, as I mentioned, for the first-time pick-up since the end of 2020. We saw that in Q2. 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 market. As you mentioned, interest rate rises. We've had a supply overhang historically and the government has been working through that situation overhang historically and the government has been working through that. We saw that in Q2. 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
and then also fiscal intervention potentially. Some of these markets, we want to make sure that citizens don't overextend themselves, don't get too indebted, etc. So we're watching those things, but we continue to see healthy market conditions.
Great. And you mentioned the call, you know, 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? Is it really kind of to go more broad and just acquire more agents and users, or is it more technological to kind of fill some tech debt, a little bit of both? How should we think about the kind of acquisitions you're looking to accomplish?
Yeah, thanks for that question. As you might recall, just for the broader audience, we are organized by three different business units. We focus on marketplaces which serve customers, consumers, property seekers and agents. We also have data software services that essentially serve the B2B players in the real estate sector. And then we have FinTech, which is 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 five 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 spaces. There are some very dynamic companies out there which are innovating and we feel with our support and we can double-move some of the...
performance of some of these products. So I think we're very much looking there 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 was maybe for you, Joe. As we think about the back half of the year, how should we think about kind of the seasonality in 3, 2, 4, 2? You reaffirmed kind of top line growth numbers and then return to profitability. How does that compare to the numbers kind of we saw on the profit line in the early presentation early in the year of around $11 million of EBITDA? Is that still intact or any depth of dabble? Is it transparent to a positively different content? I'm not saying the share-to- Both minimally and optimally Soifers here or describing and thinking about the pandemic change here. Secondly, the
It's kind of just profitability there. And does that mean maybe costs are going to be a little elevated than where we expected?
Yeah thanks Nick. In terms of our outlook we are still lined up with the numbers that were in our F4 forecast so the revenue numbers on the top 145.1 and the adjusted EBITDA number that you referred to so we're still very much in line with that. In terms of seasonality you know there's similarities to other markets.
in the Western world and there's differences. So traditionally the start of 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 the holidays etc at the end.
but we also have our rewards business which really picks up in the second half which then sort of fills in revenue there. So you know we're looking forward to pretty strong back half of the year in terms of profitability from where we are now we're pretty much lined up with our portfolio numbers that we just talked about.
Great. Thanks, Harry. Thanks, Joe.
Thanks Nick.
Thank you very much for that Nick. We will now move to our next attendee who is going to ask a question. It's Fon Yang. I'll allow you to talk.
So on you can now talk.
Hey, Joe. Thanks for asking my question. First of all, congrats on a very strong quarter. I think my first question is, it seems like different markets may go through different dynamics, partially from the global inflation perspective, partially as Harit mentioned earlier, there's a long tail macro tailwind. So based on my observation, it seems like the Singapore market in particular has been very strong.
and the emergence of middle class, that demand for real estate remains strong. I think having said that, you're seeing that Vietnam's been a huge beneficiary of the supply chain movement out of other markets. And commensurate to that, you're seeing job creation and as a result of it, housing and real estate actually take off in a big way. Obviously the government in Vietnam pays very close attention to that. And you know, they have been.
are looking very carefully to assess whether their policies and any fiscal intervention is necessary. As of Q2, the market continues to trend really well. But I think as we look at the second half of the year, we are cautiously watching what the government does in terms of policy changes or fiscal intervention.
Understood. Thanks so much. Second question regarding your, I think, 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. Also, notice your employee compensation actually has come down in the quarter. Just wonder, you know, what's the driver behind it?
Yeah, so I think in terms of the cost pressures that we face, I think to many companies inflation is certainly an impact. We do feel that in terms of labour 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 the very talented people that we're hiring into our business can certainly command good salaries.
in achieving those EBITDA targets the full year.
Thank you, Jill. My last question is actually regarding your fintech and database business. I just wonder, can you remind us of your target, whether 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 would be helpful. Thank you. Thank you.
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? I should have 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 as a financial target. Just wonder where you are against these targets and also any potential moves.
for the second half, probably more on the strategic side.
probably more on the strategic side. And you know, more product upgrades.
Sure, that's a question. You know, for our fintech side, you know, where we operate a broking business in Singapore, you know, 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 advisors. 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 Bintech 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 also Vietnam are two focus areas we're always looking into for potential acquisitions or other activity in that space. In terms of data, as Sari has mentioned, we've got quite a strong product delivery schedule in the back end of the year, particularly in Malaysia, and that's certainly going to drive strong revenues in the back half.
as we bring on new customers for our products. And in the longer term, and it was 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 won't necessarily, 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, we'll increasingly be years to come with a large part of our revenues.
I'm just going to thank Joe. I'll go back to you. Thank you. Thank you. Thank you.
I'm still thinking I'll go back to you. Thank you.
Okay, thank you, Paul.
That was our final question.
So this concludes our question and answer session. I would like to turn the conference back over to Halle Krishnan for closing remarks.
Thank you all for joining today. We look forward to speaking to all of you again next quarter.