Q1 2023 PropertyGuru Limited Earnings Call

Speaker 1: 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 reconciliation of non-IFRS financial measures to the most directly compatible.

Speaker 2: We are pleased to share that Property Guru has started the year off on a strong note by delivering overall revenue growth of 16% and positive adjusted EBITDA, both of which are in line with our internal expectations even with challenging conditions in Vietnam.

Speaker 2: As a result, we are maintaining the full year 2023 revenue and adjusted EBITDA outlook that we introduced last quarter.

Speaker 2: Our success can be directly attributed to our dedicated team of Gurus as we expand our product portfolio, witness growing acceptance of our existing offerings and enhanced operational efficiency.

Speaker 2: Despite the cautious approach of some Southeast Asian policy makers towards current market conditions, we remain confident in the underlying strength of our offerings and the opportunities in the Southeast Asian property markets.

Speaker 2: In Singapore, Property Guru continues to benefit from a robust property market despite the introduction of additional market cooling measures by the government, such as property tax and stamp duty increases, as a mechanism for prioritizing affordable home ownership for Singaporeans.

Speaker 2: While overall GDP only grew by one tenth of one percent in the first quarter of 2023, GDP tied to construction experienced a significant increase of 8.5%. This robust construction sector growth bodes well for increased supply in the coming quarters.

Speaker 2: Our property market report brings positive news, as sales demand shows improvement from the previous quarter and both sales and rental pricing remain strong, albeit with transactions below first quarter 2022 levels.

Speaker 2: We continue to thrive with resilient pricing, high customer engagement, and successful new products in Singapore.

Speaker 2: We introduced MRT Featured Agents, a premium product that allows consumers to find specialist agents and available properties based on their proximity to specific train stations.

Speaker 2: We also launched promoted listings for developers in both Singapore and Malaysia, increasing awareness and leads for their properties as the volume of new projects launched continues to increase.

Speaker 2: In Malaysia, we are encouraged as our revenue growth has been supported by improved pricing and operational leverage from both our brands. Our strengthening presence in Malaysia is crucial for our future success, and we believe that the uncertainties surrounding the national elections are subsiding.

Speaker 2: Additionally, we introduced Know Your Customer in Malaysia, which strengthens lead quality for our agents and provides customized recommendations to consumers.

Speaker 2: Vietnam presents some challenges in the near term, as the government continues to restrict credit for the property market.

Speaker 2: The number of our listings declined and many property-related firms halted business in the quarter. But we continue to invest in the product as we revamped the primary search experience, offering simplified ad choices, longer default durations, and improved listing quality.

Speaker 2: On a macro level, there are positive developments, such as the government's decision to lower interest rates in March, aiming to stimulate growth. Looking ahead, the Vietnamese economy's longer-term outlook remains positive, with the possibility of an inflection point for the property market in the second half of 2023.

Speaker 2: In our data services business, following our expansion of DataSense across all our markets in the first quarter, we undertook a technical upgrade of our interactive maps to further enhance the customer experience, once again reinforcing our commitment to stay at the forefront of technological advancements and deliver the best possible solutions.

Speaker 2: to our customers.

Speaker 2: On that note, I would also add that we have been exploring the application of generative AI for over a year now, with internal phasing initiatives on software development productivity, code quality, and customer verification. In addition, we are also experimenting with external phasing features...

Speaker 2: to improve our content and consumer experience.

Speaker 2: In FinTech, as of the end of March, our mortgage business had brokered over $4 billion Singapore dollars worth of home loans, demonstrating the trust and confidence that customers have placed in Property Guru as their preferred platform for securing home financing.

Speaker 2: Lastly, we have made several top-notch additions to our leadership team.

Speaker 2: Disha Goenka Das has joined us as Chief Marketing Officer.

Speaker 2: Helen Snowball has joined us as Chief People Officer, and Manav Kamboj, our Chief Technology Officer, has expanded his remit to also serve as our Managing Director of FinTech.

Speaker 2: A strong and stable leadership team and board have been central to our success over the last several years. We are confident that these new additions to the team will only strengthen our capabilities in the years ahead. On a broader note, we are focused on the management of our cost base given current market conditions, and as a result, we are committed to the success of our team.

Speaker 2: Just to wrap things up before passing the call over to Joe.

Speaker 2: The business continues to perform well as we leverage our value-aditative solutions and strong customer acceptance to deliver solid growth in a challenging environment.

Speaker 2: We remain bullish on our growth prospects, improving profitability, and the fundamental opportunity that exists in our core markets.

Speaker 2: Let me now turn the call over to Joe to review our financial performance.

Speaker 3: Thanks Harry. Property Guru started off 2023 well with revenues in the first quarter of $33 million, up 16% from the first quarter of 2022.

Speaker 3: We are especially pleased with the fact that all of our segments experienced over 25% growth in the quarter, other than Vietnam, which continues to face challenges from governmental policies limiting available credit.

Speaker 3: Adjusted EBID on the quarter was 0.2 million roughly in line with the same period in 2022. It is worth noting that our first quarter 2023 results include approximately $2.5 million in costs relating to being a listed entity.

Speaker 3: Obviously, this is significantly more than in the prior year quarter as the company did not go public until late in March of 2022.

Speaker 3: Marketplace revenues were $31 million in the first quarter, up 15% year-over-year, and are adjusted EBITDA-approved to 52% from 50% in the first quarter of 2022, as we continue to develop and deploy products and technology for use by our growing customer base.

Speaker 3: In Singapore, our pool of agent partners grew again this quarter. Our customer renewal rate was flat at 79% and our average revenue per agent, or ARPA, was up 19% from the prior year period.

Speaker 3: As a result of both the growing ARPA and the continued increase in the number of agents, Singapore revenues were up 26% to $19 million from the first quarter of 2022, and adjusted Iberda was $14 million for a 74% margin.

Speaker 3: In Malaysia, revenues were 7 million, up 26% from the prior year quarter, and our adjusted EBITDA increased over $1 million to a positive 3.5 million, or a 51% margin, up from 44% in the first quarter of 2022.

Speaker 3: I would note this equates to a drop through of over 80% for every new dollar of revenue to adjusted EBITDA. This underscores the leverage we are now seeing in Malaysia as we reap the benefits of the iProperty and Property Guru Malaysia.

Speaker 3: Vietnam's revenues, however, were down 34% from the first quarter of 2022, as governmental actions to limit the availability of credit led to a 32% drop in the number of listings from the prior year quarter. We have strong conviction in Vietnam's property market long term.

Speaker 3: Although our business continues to be challenged by near term, impacted by near term challenges, we see enhanced product and search capabilities as that in greater value and laying the groundwork for growth once the credit environment improves.

Speaker 3: In the quarter, the average revenue-policing or ARPL in Vietnam was roughly flat with a first quarter of 2022, and the adjusted EBID on margin was negative 28%.

Speaker 3: Finally, fintech and data services combined revenue was up 40% year over year and adjusted EBITDA was a loss of $2 million as we build out these longer term opportunities.

Speaker 3: Moving to the balance sheet, we ended the quarter with $294 million in cash.

Speaker 3: We are encouraged by the types of M&A opportunities we are seeing as we look to deploy further available capital in adjacent data, fintech, home services and developer operating system businesses.

Speaker 3: As Harry mentioned earlier, we are reaffirming our full year 2023 outlook of between $160 and $170 million in revenues and $11 to $15 million in adjusted EBITDA.

Speaker 3: While we acknowledge the headwinds faced in Vietnam, we remain comfortable with our assessment of the near-term impact of governmental actions to limit credit and have a proven plan in place to deliver longer-term growth while safeguarding profitability.

Speaker 3: Once past this period of uncertainty, we remain poised to take advantage of both the macro outperformance of our core Southeast Asian marketplaces and positive demographic trends related to property ownership.

Speaker 3: I would like to point out, though, I'm particularly pleased with how well the businesses reacted to current market conditions, as we utilize technology, interlital automation, and prudent cross management to improve adjusted EBITDA. While we recently held our one year anniversary of being a publicly traded company,

Speaker 3: Probably Guru has a 15 year legacy of technological innovation that has enabled us to become Southeast Asia's prop tech leader.

Speaker 3: Let me finish by thanking our customers for their steadfast support. Without you, we cannot have become the industry leader we are today. I will now turn the call over for questions. Operator, we're ready for our first question.

Speaker 3: Great, we'll take your questions now. So please use the raise hand function to signal if you have a question and then we'll call your name and unmute you. Also you can type in questions in the question box. If we get any that are typed in we'll address those as well.

Speaker 3: So our first question is going to come from Nick Jones of JMP.

Speaker 3: from Nick Jones of JMP. Nick, go ahead.

Speaker 4: Sorry, there we go.

Speaker 4: Hello? Can you hear me?

Speaker 5: Yeah. Oh, great. Sorry about that, guys. So I guess just on some of the headwinds in Vietnam and as we think about the rest of the year, I guess what can you maybe speak to what gives you confidence as you maintain kind of the prior guidance that you can achieve that or there's not potentially kind of increased in your life that you don't intend to achieve? Yeah. Yes.

Speaker 2: pressure as we progress through 2023? I mean, first off, thank you for that question, Nick. It's, I guess from our perspective, there's a couple of things. I think what we have tried to do is make sure that in this interim period, we are not, we're continuing to invest in the business. We've launched, like I mentioned in my remarks, an improved search experience.

Speaker 2: We've seen good adoption, you know, considering the constraints of some of the premium products that we have shipped for agents. It's significantly improved the experience for consumers as well, property seekers in Vietnam. And I think at a macro level, which is obviously the challenge, we've started to see some positive noises coming from the government.

Speaker 2: given some positive indications. And that gives us sufficient confidence to believe that at some point in the second half, we should see a bit of an inflection point in return. And I don't know, obviously, the product has been significantly upgraded in the meantime, which should allow us to serve that rising wave when it does arrive. Great. And in each corner, ye ye ye ye.

Speaker 5: You provide this kind of great engagement market share by region. And the press release and I noticed Vietnam kind of jumped.

Speaker 5: You know, about 8% from 4-Q to 1-Q. Can you speak to that? Is that, are you kind of taking this pullback as an opportunity to try to invest in and share in the region? I guess did you speak to kind of what the jump was between 4-Q and 1-Q?

Speaker 2: gains in that sense. You've seen a lot of our competitors in the general space obviously use this as an opportunity to cool off their marketing spends as they you know simply the demand is lower because of the macro headwinds and I think what tends to happen in those kind of conditions is the organic market leader tends to gain market share so I believe that's what

Speaker 2: and I think we remain focused more on that.

Speaker 5: Great, and one last question, if I can, I have a revenue per agent in Singapore continues to kind of improve your year, I think it accelerated to coincidentally, can you kind of talk to what's driving that number higher and how we could think about the growth?

Speaker 2: Any other revenue per agent number in Singapore? Thanks. Yeah, I think it's a great question, Nick. And I think it's been heartening because we've also seen the total number of agents grow. So I think that's been interesting, because normally with the denominator growing, that obviously reduces your ability to grow ARPA. I think what we've seen is with a really strong property market here in Singapore, agency to compete. And a number of premium products

Speaker 2: cooling measures from the government as we have noted on previous calls. What they tend to do is it actually means that a listing will probably stay on the platform a little longer, which means the agent needs to compete a little longer. And therefore, at least in the short term that actually paradoxically almost helps the platform monetize the agent a little bit better.

Speaker 2: And so I think it's just been really strong product adoption that's driven our growth.

Speaker 3: Great, thanks, everybody. Thanks, Joe. Okay, our next question is going to come from Nelson, Chong with City Group. Nelson, go ahead.

Speaker 6: Hi, Harry. Joe met the thanks for taking my questions and the congratulatory agents on the solid quarter and the first of the year of being a public listed company. So my first question is regarding the Singapore market. Yeah, we just discussed about the reason probably cooling measures such as raising STEM data and other TAF measures.

Speaker 6: Can management elaborate more specifically on how with that impact the transition activities on our platform into the second quarter and perhaps into the rest of the year? Thank you.

Speaker 2: Thank you for the question, Nelson. I think clearly the temper of the government here is to make sure that this very strong property market that we've enjoyed in the second half of 2022 and into the first half of 2023 is balanced by making sure that affordability for the average in the podium is not compromised.

Speaker 2: You've seen a lot more foreign buyers come into our market as the world continues to open up post-COVID and more investment dollars have come into the property sector from outside these markets. But the flip side of that coin is that we are seeing a large number of tens of thousands of units per the Singapore government published an article a few weeks ago.

Speaker 2: somewhere between 60 and 100,000 new units are going to be launched in Singapore through this calendar year. So supply is going to increase significantly. And so what you're going to see is, and I also mentioned, there's a GDP growth in the construction sector being really strong, not to 8%. That gives us confidence that supply coming online, along with a little bit of cooling

Speaker 2: of demand as a result of these cooling measures will make sure that price doesn't get get out of control and that will allow participation in the marketplace to remain robust. The demand set is going to be there because people are not going to get priced out of the market as a result of increased supply as well as the cooling measures. And yet demand remains very strong from foreign buyers as well.

Speaker 2: So I think we remain bullish about the Singapore property market for the rest of the year.

Speaker 6: Thanks, Deft, for helpful. And then my second question is related to the Malaysia market. Just wondering with the strong leadership in the Malaysia market, how do you manage the position of the two brands in the Malaysia market in the future? And how do we see any synergy of potential contendualization of these two brands in the market? Thank you.

Speaker 2: Now, thank you for the question. I think we remain very excited by the performance of both our brands, Property Guru and iProperty Malaysia. And what we've seen so far is strong adoption from both agents and property seekers in Malaysia of both brands. People have their own preferences. They takeans Three years of experience in there.

Speaker 2: The products are slightly different. There is some amount of overlap of course, but there are customers who are loyalist to one band or the other. At least for now, as we've stayed in the past, we continue to have this strategy of two brands, one team. We're beginning to see a lot of leverage. We're beginning to see the financial performance come through as Joe noted in his remarks as well.

Speaker 2: So I think for now at least the goal is to maintain both brands in that country. Continue to consult with the market to make sure that's what the Malaysian consumer and agents and developers would like. And I think it is allowing us to solve for the market rather than having to focus on a specific competitor and just fighting amongst ourselves.

Speaker 6: I see. Thank you. And then my last question is regarding the macro involvement under the current rate cycle and inflation environment.

Speaker 2: can management comment whether these micro-faceted still wait on the property market in the transaction level in the rest of 2023. Thank you. So I think, you know, obviously, I think the real estate sector is dependent on industry cycles in particular. Both are the construction side for real estate developers to see the viability of their projects.

as well as obviously for the consumers when it comes to home financing. What we are seeing is in Singapore, as I've already mentioned, even though the interest rates have absolutely have increased through last year, we continue to see very strong demand. Malaysia has seen strong demand. And then in Vietnam, as I noted, interest rates have actually been taken down by the government to try and stimulate demand later in the year.

So at least for now, while we remain cautious about what could happen here, it is definitely, it is a headwind, I wouldn't suggest it isn't, but at least in the short term, we continuously demand, and some of those macro tailwinds that we've often spoken about, urbanization, emergence of the middle class, and digitization, those three macro tailwinds.

At least for now overcoming these these headwinds that are global. Thank you. That's very helpful. Go back to Q. Thanks.

Okay, just a reminder, if you have a question, use the raise hand function or type it into the question box. The next question is gonna be from Fawn, Zhang with benchmark, Fawn, go ahead.

Here you go. Yep, thanks Gary. Hi, Harry, hey, Jill. Thanks for taking my questions. To on my side, first, wanted to take a little deeper on your call structure. Notice that the calls of your headquarters into

went up a quarter and you're just wondering what's the driver behind it. And I think how we mentioned that you guys, in terms of the head cop, you guys actually see reduction just wonder, you know, what's the, I think the plan, the budget for 2023.

I'll pause back to Harry on headcount. The increase in our corporate cost is solely driven by ongoing listed costs. So obviously this time last year, we were not a listed company. We only listed March of 17th of the prior year. So we had a very...

small amount of ongoing listed costs. So these are the sort of incremental costs that are being listed, so things around DNO insurance, listings, fees and compliance, etc. But obviously in this year we had a full, you know, full quarters worth of costs. So that was the really the sole driver really of that increase in cost. So that hopefully addresses that.

question, stabilahari. Yeah, on the head count question, I think, you know, we are still a high growth business, we continue to grow well. And so we need to be smart about knowing where to make investments. And so as I mentioned, we have added a few new executives to our leadership team, very excited by their experience and what leverage they're going to add to our

yet, now for us. And therefore, as I noted in Q1, we have seen, you know, through this active management of the business, we have seen a reduction in our headcount numbers within the group. And you know, that continues to be our mode of operations for the rest of the year. We are continuing to focus on leverage.

try to increase efficiencies within the business assess, you know, areas which are growing well and there we will invest hard But other areas where we think perhaps, you know, it's not the right time or perhaps the product market fit is imperfect We will maybe pause and but I think this is not unique to this year to be honest But I think what you are beginning to see is on the head count side of things You will see those numbers decline a bit through the year

I think more broadly on costs we are seeing some good drop through from revenue through to EBITDA. We mentioned earlier Malaysia where over 80% of every incremental dollars thrown through to the bottom line. If you adjust or add back for those ongoing listed costs we've actually had a very good drop through during the period of around 49%.

So I think the business is, despite some challenging conditions in some of the markets, really showing some good overall leverage.

And still, that's clear. Thanks. My next one, actually, regarding the generative AI, are you mentioned that in the company seems to be excited, seem to invest in areas. Just wonder, what are the key benefits you foresee this technology will? You can leverage technology.

to push our business to the next level, whether it's on the potential implication of driving top line or even on the cost optimization, any color, I think that would be helpful. Yeah, and I think, thank you for that question. Like every other technology company in the world, generative AI excites us. We are cautious about, you know, what are some of the risks associated with it.

Southeast Asia to leverage it on a back end function. So what we did is we used it for image recognition, image moderation, and significantly improved to consumer experience on our platform as a result of using machine learning on the back end of our platform. And this is many years prior to us going public. So we've always been at the bleeding edge of adopting some of these technologies. And so as I mentioned in my remarks,

A generative AI, we're using it both at the back end to improve, you know, to help our engineering team look at code quality, significantly look at, you know, for our CTO and engineering team to look at, you know, productivity within the development org, as Jules mentioned a few times. We are focused on leverage within the business and so making sure while we will invest in engineers, we can look at these technologies to improve productivity.

I will be able to share even more.

Got it. Thank you. I'll go back to Q. Hey, once again, raise use the raise hand function. If you have a question, while we're waiting there, we'll take one that was typed in in the question box.

was related to M&A. Are there, the M&A strategy, are there any, is there potential to do non technology related acquisitions? An example might be acquiring another portal in Southeast Asia. So just elaboration a little bit on the M&A strategy.

I think on M&A, I'll focus areas which move out line really are on the adjacencies. There really isn't much in the core classified area to actually to buy. We have very very strong positions there. We don't need to really do any further consolidation in our core markets.

In terms of the other adjacencies, we look where we operate at the moment, so around FinTech. Obviously, there aren't mortgage brokers really present in our markets, and that's a huge opportunity and something that's obviously very well used in other markets. Data as well is another area of focus for us. We're obviously building a data business, but there may be acquisitions.

developers are on the start of a digital journey in Southeast Asia. So there's things around property management is one example. And there's plenty of other things like rent collection, et cetera, and digitizing that. So lots of opportunities in those adjacencies, and that's really where the focus for us lies.

And geography based, we are experts in Asian, and that's where we've been very successful. So for now, our focus remains within those markets. But we are excited by the opportunities that we're seeing. There's nothing to specific to report back on at this stage. But we've built a corporate dev team internally.

which obviously gives us great leverage to go out there and really look at a range of opportunities and we'll make sure we come back and update as things progress.

Okay, we have a follow-up question from Fawn with Benchmark. Fawn, go ahead.

Just a quick follow up here on your FinTech business. It seems like it has been growing very healthily. I just wonder how should we look at the FinTech segment for the rest of the year given the current market condition. In addition, any consideration of a potential roll out.

in other markets, whether this year or basically down the road.

I think when it comes to our fintech business, we are pleased. From a standing start in 2020 to now have brokered over four billion Singapore dollars with the home loans. It's a clear indication that the market is happy to see the value we're adding. We're partnering very closely with banks. There's a lot of innovation we are producing in terms of the experience.

And actually even property agents have been partnering very closely with us to make sure that their clients are correctly advised on the best way to manage their finances. In a changing interest rate environment even more so, people are looking at their household cash flows and all of that.

Having said that, we continue, Manav, who is our CTO, who has expanded his remit to become MD of that business, is looking along with his team at ways in which we can accelerate growth within Singapore on that space. And then to your other point, absolutely. We are looking within our other five markets to see, is there an opportunity to take either this business model or another version of our FinTech business into our other markets. From the beginning, that has also been a big part

Okay, then a reminder, the race and function, and meanwhile, we'll take another question from the typed inbox. Can you elaborate on why building a data business is important for a property guru? Are you modeling the opportunity that CoreLogic has in the US? What is that? One of your main goals.

This is a multi-billion dollar industry in Southeast Asia. And the reality of the fact is if you compare with North America as you pointed out or Australia or Western Europe or Japan, there are large standalone property data businesses that inform...

Valuars, REITs, real estate developers, urban planners, consumers, agents, banks, values, they depend on these feeds to have a single source of truth. They're able to make decisions on their portfolios, investment decisions on land, and so on, basis this information. Our markets, including here in Singapore.

we do not have a solution of that nature. Now, over the last 15 years, we have over time essentially become a de facto source of that, but our consumer marketplaces haven't historically tried to solve for that, to be honest. We will focus on the home seeker and the property agents, real estate developers in that sense. But now with the introduction of our property group for business portfolios and primarily data sense, which is our core.

data business product, we are very much focused on monetizing and sort of creating value in that space. And so there's going to be a lot of good first party data or proprietary information coming off our marketplaces, but already we are getting other kinds of information whether it be flood risk data, mobility data, etc. which we are monetizing which you can see on our available.

inspiration from companies like Core Logics, CoStar, etc. to see how they have monetized some of these other markets. But our markets frankly remain a greenfield for us to go out and create value. Okay, great. Any other questions? Do the raise hand function? Move away in a moment and see if we have any other last chance.

Okay, looks like we're done on the Q&A. So that concludes the Q&A session. So I'm going to turn the conference back to Hari for any closing remarks.

Thank you. We look forward to sharing our continued progress with you next quarter. As Southeast Asia's property sector continues to grow to house its emerging middle class. Until then, thank you all for joining us today. Goodbye.

So this concludes the conference call. You can all now disconnect.

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