Q2 2023 PropertyGuru Group Limited Earnings Call
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Second quarter 2023 earnings conference call.
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After the prepared remarks, we'll conduct a question and answer session using uranium.
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Good morning, and good evening welcome to property Girl Group second quarter 2023 earnings Conference call.
On the call today are Hari Krishnan, CEO , and managing director and Joe Dish 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 a replay along with a transcript will also be available on the investors section of our website.
Thirdly, we will 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 our SEC filings for more information regarding risk factors for.
Looking statements are based on current expectations and the company is not obligated to update them expect except as required by law.
Fourthly. This call will also contain non <unk> financial measures for a reconciliation of non <unk> financial measures to the most directly comparable ifr's metric. 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 heart.
Thank you for joining us today for our second quarter 2023 earnings Conference call.
Property grew delivered another good quarter of growth with expanding operational profitability.
This was as a result of focused investment and good execution, despite ongoing macro challenges in Vietnam.
We have posted double digit revenue growth and double digit adjusted EBITDA margin standing film in the Southeast Asian economy wrestling with inflation and uncertainty.
We're making good progress in delivering solutions that empower all our customers to make confident property decisions.
Let me walk you through some of the highlights from this quarter.
And Singapore property growth thriving in a bustling property market with strong sales and rental activity.
Asking prices remained resilient, despite rising interest rates and persistent efforts by the government to rein in the strong market.
While some decrease in demand while as expected the level of durability is notable given that our property grew sales demand index was down only 4% from the first quarter.
For the fifth quarter in a row construction related GDP growth exceeded 6%, while private supply completions more than doubled in the first half of 2023 compared to 2022, both of which bode well for new supply entering the market going forward.
In Malaysia, the gap between buyers and sellers increased in the quarter as rising prices and interest rates pushed homebuyers to delay that transactions.
Price index was up 2.1% from the first quarter, while the demand index dropped 10.2%.
Overall, while Malaysia as GDP is projected to have slowed down in the second quarter. We are seeing positive signs as we move into the back half will be up.
Recent state election should have governments stability and consumer confidence inflation reached a yearlong low point in June and the Central Bank chose not to increase rates in July .
In addition, the Malaysian Prime Minister recently announced a targeted plan to increase the country's growth over the next decade, which included over $1 billion in financial support for first time homeowners on homes are below 300000 ringgit.
Lastly, I would also point out that the real estate housing developers off Malaysia reported net sales of both residential and commercial units were up 120% in the first half of 2023 versus the second half of 2022, despite the number of unsold units remaining elevated.
In Vietnam conditions remain challenging governmental intervention initially aimed at regulating the property market have impacted consumer sentiment and transaction activities. So far in 2023.
However, recent monetary easing and a positive longer term economic outlook should help point the direction to a recovery as of we continue to actively invest in products and infrastructure in anticipation of a return to healthier growth rates.
Vietnam remains one of the most vibrant economies in southeast Asia, with increasing middle class expansion and organization the need for good quality housing in a down chips being built in Ho Chi Minh City, annoy and beyond will be therefore yours to come.
On the technological front utilizing generative AI and machine learning, we continue to bolster our market leading products, but also helping to make our operations more efficient.
In June we launched <unk>, a personalized feed of property listings based on machine learning algorithms.
We are very excited about the opportunity. This product. This product offers to match a Boston budget property type and location to show a personalized and recent listing.
Reintroduced lead management for property agents in Singapore, which will help subscribers manage their lead by using a singling involved for all E mail phone SMS and Whatsapp contacts while also adding a heat index and insights on lead preferences.
In both Singapore, and Malaysia. This quarter, we launched a revamp of our new homes discovery page, increasing the coverage of new properties and better organizing the customer experience to make it easier to find ones that the development.
Gender debate continues to help us operate more efficiently and effectively in product development and quality.
We have been experimenting with the auto creation of listing description that benefit agent efficiency as well as AI image moderation to continued improved listing quality.
As of June and our mortgage business had brokered over $5 billion worth of home loans.
Indication of the continued growth in trust and confidence our customers have placed in property group of securing home financing.
We have also made good progress in digitizing the traditionally manual loan application progress a process, rather make it convenient and mobile friendly with round the clock access for home loan applicants.
Our solution is being piloted with customers of one of the major banks in Singapore and the feedback has been positive.
This quarter, our data and software solutions team released a progressive ESG framework that gives us valuable insight into building climate Smart real estate.
The actionable strategies for property developers and investors embrace sustainability without compromising financial viability.
For example in markets like Malaysia, where recent flooding caused more than a $1 billion in losses.
We analyzed flood risk data and the correlation with property prices.
This report is part of broader market activities educating developers and planners on data driven insights to drive responsible property development in our region.
The quarter saw good adoption of our flagship insights dashboard datacenters by new governmental agency agencies in Singapore and Malaysia.
And industry bodies, such as the real estate.
And housing developers Association.
I now wanted to touch upon some strategic decisions that we announced this week.
As mentioned in our letter, we will phase out our Indonesia market based business room at our call and fan said one of our SaaS products Husky.
These decisions reflect our relentless efforts to make focused investments that maximize the value we create for all our stakeholders with the objective of driving sustainable growth and doubling down on businesses with strong unit economics.
Though these decisions are tough they are necessary for us to focus and deliver our next phase of growth and will allow us to prioritize our resources accordingly.
We have some good people, leaving property group and I wish them success in their future endeavors.
Overall this was a quarter in which we made inroads in some businesses sharpened our focus further by clarifying our priorities by investment and delivered increasing operating leverage and revenue growth.
Outside of Vietnam, We are delighted with this quarter's performance and remain optimistic about the future.
We believe in the fundamental opportunities in our core markets and are committed to future growth and profitability anchored around our vision to power communities to live work and thrive intermodal cities.
I will now hand, it over to Joe to walk you through our financials.
Thanks Hari.
<unk> had another good quarter with revenues of $37 million up 12% from the second quarter of 2022.
Revenue growth outside of Vietnam wherever undergoing some temporary government induced challenges with particularly positive up 22% from the second quarter of last year with every segment delivering double digit growth.
This shows how despite challenging macroeconomic conditions our businesses can flourish.
What also marked this quarter out with a strong control of costs as we demonstrated continued operating leverage improvements.
Our adjusted EBITDA grew to $5 million just over breakeven in the prior year quarter at 113% with incremental year on year revenue was converted into EBITDA and excellent results.
And marketplaces revenue was $35 million in the second quarter up 11% year year over year with an adjusted EBITDA margin of 59% up from 41% in the second quarter of 2022.
Excluding Vietnam marketplaces revenue was up 21% year on year and adjusted EBITDA margin was 66%.
And Singapore I'm happy to report, we now have over 16000 agents as our agent pool grew again this quarter.
Our customer new rate was up slightly to 82% and a quarterly average revenue per agent or ARPA was up 25% from the prior year period.
This is a fantastic reflection on the success of our product and pricing developments.
Arthur as being the primary driver of overall revenue growth in Singapore, which was up 25% to $22 million for the first quarter of 2022.
Added ARPA and good cost control also helped to bolster the adjusted EBITDA, which was $17 million in the quarter for 77% margin growing more than 10 percentage points year over year.
In Malaysia revenues was $7 million up 12% from the previous year quarter, and our adjusted EBITDA increased almost 3 million to 4 million.
Malaysia is a great example of our operating leverage expansion and improved yield as revenue increased $700000 year over year and our adjusted EBITDA increased $2 7 million as a result, our adjusted EBITDA grew to 60% this quarter from 21% in the second quarter of 2022.
I am pleased to see our Malaysia business start to show similar operating leverage to that which we have delivered in Singapore for many years now.
And Vietnam revenue was down 27% from the second quarter 2022 at a 36% increase in our average revenue per listing or LPL helped to offset a 46% drop in listings.
Of note the minimum period of listing validity moved from seven to 10 days this quarter, which increased the LPL and subsequent decrease the number of listings in the quarter.
The challenging property market conditions led to some agents holding back from posting listings, while those more establish agents who remained active continue to use our premium services to maximize lead yield.
Adjusted EBITDA in Vietnam, with just under $1 million for 17% margin.
Finally, fintech and data services combined revenue was up 47% year over year and adjusted EBITDA was a loss of $3 million.
<unk> spoken about the progress we are making in these areas both our long term strategic opportunities for us as we continue to invest and build out the business.
On the balance sheet, we ended the quarter with $303 million in cash.
While we are maintaining our full year 2023 outlook ranges between $160 million and $170 million of revenues and 11% to $50 million and adjusted EBITDA. We now project revenue will be the bottom end of the range.
The most significant factor at play is Vietnam, where we are assuming early signs of market improvement will be seen in late 2023.
Longer term, 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.
In summary, it's been a good quarter for property, Gary I'm, particularly pleased with how well the market has reacted to current market conditions as we utilize technology in terms of automation and prudent cost management to improve adjusted EBITDA.
This bodes well for future margin expansion and profitability.
Let me finish by underscoring some of the hardest hit.
As any successful company, we regularly review our progress of the business make sure when necessary to ensure that we're optimizing resources and remaining on track in achieving our goals.
The Indonesia, and Foskey decisions were made that clear business focus in mind.
These decisions are not expected to have a material impact on our 2023 outlook.
However, it allows our business to focus both monetary resources and executive attention on achieving our long term goals of the company.
I would like to thank all our crews for their hard work and commitment to property group and thank our customers for their continued support.
I will now turn the call over for questions.
Operator, we're ready for our first question.
Thanks, Joe we will now take your questions. Please use the raise hand function if you'd like to ask a question.
To facilitate the Q&A session I'll invite you to ask that question and on mute yourself. Please state your name and firm before asking the question.
Our first question is going to come from Nick Jones with JMP Securities Nick.
Great. Thanks, Thanks for taking the question.
Could you just touch on I guess the decision to add.
Indonesia and.
And kind of sense that the SaaS key product I mean, do we kind of triangulate that this was maybe around AR.
$5 million impact on our full year numbers and then.
As we think about kind of the longer term opportunity, Indonesia had a pretty large population I mean does that.
Market you'd consider revisiting in the future or are there other geographic expansionary opportunities as any color on how youre thinking about your geographic footprint today amid some of the macro challenges.
Listen Thank you for your question.
I will touch upon some of the strategic rationale and then regarding the numbers, it's double ask Joe to add on but essentially for US. This is something we've done progressively over the years, we look at our data.
When you look at emerging markets, you need to give us sufficient time for the data to setup and we're looking at the unit economics and we're looking for dry goes over there we have sufficient experience in our markets and as Joe pointed out we now know how to do the results we delivered in Singapore and Vietnam were now beginning to show them in Malaysia, as well I think with Indonesia, we've been there over 10 years, we run the Fas.
E business for almost eight years, we've seen enough to give us a sense of the monetization opportunity, but also the unit economics and how it's going to grow we felt it's better to focus executive attention and resources on the other projects. So I think for US it is very much.
Got a cost control measure anything it is much more strategic attention and.
Our resource focus measure that we've implemented with regard to geographic expansion, we're very focused on our core businesses. The four countries. We're in right now and a.
Adjacent business models, both Fintech and data solutions. Both look good we will continue to invest hard into them as well as into our core businesses in Singapore, Malaysia, and Vietnam were.
We're not looking to expand into other geographies or anything for now, but as always we will use data to inform these decisions if.
If we need to re look at something in the future. We'll look at it specific to Indonesia, I think the way to think about this yes. It is a large country.
With a large population, but with regards to the real estate market is really localized extensively around the greater Jakarta region, and if you size. The population. There. That's 30 to 40 million people for a sense of scale of Vietnam's about 95 to 100 million people and youre actually able to monetize and do business throughout that.
I think in Indonesia, where we've tried a number of different business models, we have not seen them actually work out well for us and frankly, we're not seeing good unit economics from any other broader player in that market either so we felt at the right time for us to refocus our attention elsewhere.
Specific to the numbers for the year, maybe I'll ask Joe to to sort of augment that.
Yes sure Sam.
Items of all outlook, which is obviously revenue and adjusted EBITDA. This change is not going to have a material impact on the <unk> businesses.
Pretty small and obviously the action, we're taking us towards the back end of the year. So it's not going to have a.
The material on the material impact on the numbers for our outlook and we will see have booked about $8 million.
If impairments and restructuring costs in relation to Indonesia, and Foskey. Obviously these fall below our adjusted EBITDA line.
Great and maybe just a quick follow up on Guru packs.
With the launch of this in June .
As the engagement changing from users are you seeing kind of an uptick in <unk>.
Pages per visit or any kind of early time.
Yes.
He's kind of machine learning AI powered.
Interfaces are kind of driving more engagement.
Yes. Thanks for that question Im really excited by what Opex I think the concept of personalizing the experience having a personalized feed something we're used to in other context when it comes to entertainment or media. So in the real estate space to be able to actually look at your preferences nuclear browsing behavior. The kinds of properties, you're looking at but also frankly the properties are highly <unk>.
You've actually hide listings that perhaps youre not interested in and all of that activity is factored into the machine learning and how it raised over time really the goal here more than anything else is to personalize that experience drive greater engagement, there and and share some of those infected with the other side of the market basis with a lead management tool. We mentioned four agent over time, we'll get more and more.
More personalization and more and more information to share with our agent therefore doing a better job of matching supply with demand. So I think right now to be candidates early days and we're still experimenting we have we're pleased with that option today, but nothing thats given how large our Singapore business is for instance, they're not going to see massive movement on that in such a short time period.
Great. Thank you Erinn thanks, Jeff.
Thank you Kim.
Okay. Our next question is again come from Nelson Cheung with Citi.
Also go ahead.
Hi, how are you hi, Joe how are you.
Thanks for taking my question. So my first question is regarding to Singapore market. So wondering if management can share your observation.
With substantial demand in July and August for primary and secondary markets.
Singapore recently undertaken a residential policy that would be great. Thanks.
Okay.
Yes, like I mentioned I think when you look at the first of all I'll get you out of the question, but if you look at the first half we saw when you look at private.
New homes, the volume of supply was double that.
That was released in the first half of 2022. So that's really good a lot more supply coming online when it comes to transaction volumes that is debit.
We have had to measure to around the cooling measures that were implemented in 2022.
I think there's a little bit of correction that is warranted given prices had really taken off as you might recall when demand was far ahead of supply.
That sort of demand cooling off a little bit it does not necessarily bode badly for the market. There is a lot of supply that continues to come online even in the recent past National day here in Singapore, you saw the <unk> come out and talk a lot about the HDD and how they're going to launch more projects and how they're going to invest in that state. So I think theres a lot of folk.
<unk> on the continued development of new supply coming online construction as I mentioned.
Sure.
GDP growth.
6% again, so a lot of good indicators transaction volumes are off a little bit.
But as Joe also mentioned multiple agents continue to join the marketplace. So clearly both from our perspective, but also from the agents and agency. It continues to be a healthy market.
And perhaps more sustainable with the brightest cooling off a little bit.
Okay.
And then my second question is regarding the retina market.
While we started season like silver lining given the monetary easing.
Management expect earlier recovery versus the timing that we discussed in last quarter's earnings call, which I believe distributor.
Late <unk> early 2024, thank you.
So I listen I think when it comes to Vietnam.
As we mentioned there is a lot of measures the government put in I think the result, as I stated has been.
That has impacted consumer sentiment, that's just the truth of the matter.
We continue to forecast that recovery will happen at the earliest in late 2023, so that hasnt changed.
Obviously, if it happens sooner, we'd love to see that but we're not seeing any indications that that now that it will happen sooner than that.
The government continues to message the right kind of messages in a rate cut earlier et cetera. So I think there's a lot of policy, but there is always going to be a little bit of a lag that when it comes to consumer demand and for them to actually see that.
The government has essentially said that all their corrective measures are complete so we forecast till late 2023 for a start of a recovery in that market.
Yeah.
Thank you and then my last question is regarding the investment.
Given that we have state of the less in the Asia market and also with the SaaS business.
Wondering what will be the top priority of investment.
The company going forward, and we still coffee to any potential M&A opportunity or investment this year. Thank you.
Maybe I'll talk to the investment and enhanced the Georgia talk about M&A I think.
With regard to the investment I talked about some of the areas. We are really excited about generative AI and machine learning, we're investing a lot of debt into even our core businesses in Singapore, Malaysia, and Vietnam I talked about some examples really excited by the progress at both the Fintech business as well as the data center product are making so to see that kind of progress happening with fintech over.
$5 billion of home loans brokered some of the partnerships with the banks driving a lot more automation under the Hood. These are encouraging so we will continue to invest hard into those spaces.
Pleased with the progress we're seeing there and when it comes to data centers. The adoption that we're beginning to see from <unk> from urban planners from from government.
Governments, both in Malaysia, as well as in Singapore industry bodies like radar and Malaysia. These are this is really really encouraging signs that this product could have legs. So I think those investments will continue at pace as well as in newer markets like Thailand, where we continue to be in an investment mode. So I think those would be the primary focus for investment right now.
Maybe there are many I'll hand off to Jojo to comment more.
Yes, Thanks, sorry, and I think as previously stated our major focus areas, our dice with Fintech, we already we already have presence, but looking into other markets and other types of products.
We also look towards develop our operating systems and also to home services, where we obviously already made an investment in Singapore in scent health at the backend of last year. So those will be our priorities and I think one of the challenges. We've had we've got a great core Dev team that is working why looking through opportunities, it's just really size and scale.
Which is hard to find in our core markets. So we definitely are looking broadly.
Across our region to see if there's any other really.
Attractive opportunities from a cost and the net steady wide. We're early days still.
In that respect.
But theres nothing new specifically to report, but we are still having a very good luck on a wide range of opportunities.
Thanks, a lot for the color.
Very helpful. Thanks, a lot. Thank you.
Yes.
Okay. If we have any other questions. Please.
Use the raise hand function.
I can see if there's any more.
Okay.
Looks like we have any more questions. So.
That will conclude the Q&A, let me turn the conference call back to Ara for any closing remarks.
We look forward to sharing our continued progress with you next quarter until then thank you all for joining us today Goodbye.
Yeah.
The recording has stopped.
Good.