Pexa Group Limited · ASX:PXA
Pexa — H1 2024 Earnings Presentation
63 slides from Pexa's earnings presentation, Feb 23, 2024
Slide 1: 1H24 results
1H24 results 23 February 2024
Slide 2: Important notices and disclaimer
Important notices and disclaimer This presentation and the information accompanying it (Presentation) Forward statements You should note that Market Data is inherently predictive, is subject to has been prepared and provided solely by PEXA Group Limited (PEXA or No representation or warranty, expres
Slide 3: Acknowledgement of Traditional Custodians
In the spirit of reconciliation, PEXA acknowledges the Traditional Custodians of country throughout Australia and their connections to land, sea and community. We pay our respect to their Elders past and present and extend that respect to all Aboriginal and Torres Strait Islander peoples today. 2 We
Slide 4: Overview
Page 4 Page 13 Page 31 Page 35 Overview Financial results Outlook and Q&A Appendices Glenn King Group CEO and Managing Director 3
Slide 5: Group financial performance
Group financial performance Improved results +16% +12% -36% down -4.8cps +1% +15% +27% large +82% +12.0cps +6% $163.3m $58.8m $15.0m -$4.6m 8.5cps $15.3m Business revenue Operating EBITDA NPATA NPAT EPS-A Free cash flow +3.0% -1.2% +0.5% +3.5% 55.4% 36.0% Exchange Margin 1 Group Margin 1 vs 1H23 x v
Slide 6: Key messages
Key messages Focused execution of strategic priorities Business continues to perform strongly Exchange x Continued marketplace leadership with resilient platform Building revenue, strengthening relationships, delivering valued solutions Digital Growth Operating EBITDA break even on track 1 UK has wh
Slide 7: Strategic priorities
Strategic priorities Focused on execution Purpose Australia’s #1 digital property Leading digital solutions Powerful platform Trusted and influential in Position Exchange platform Unique distribution Developing ecosystem property markets Business Australian Exchange Digital Growth International Grou
Slide 8: Exchange
Exchange Business continues to perform strongly Deepen customer engagement Enhance connectivity, maintain resilience Build stakeholder relationships Chief Customer & Commercial Officer Les Vance PEXA Exchange workspace dashboard Glenn King, CEO, at the Property Council of Australia (on right) at the
Slide 9: Digital Growth
Digital Growth Building revenue and strengthening relationships Use of land -commercialise Value Improve customer efficiency Demand for land - extend ID’s reach Environmental risk - integrate Land Insight Australia PEXA Planner workflow dashboard Ivan Motley, founder of ID, launching forecast.id Mas
Slide 10: International
International UK has what it needs to scale Build our customer base Enhance the PEXA proposition Integrate into PEXA ecosystem Strengthen Advocacy Image to come PEXA information stand at Conveyancing Association PEXAGo remo workspace New Optima Legal lender client portal PEXA presenting at Conveyanc
Slide 11: UK Distribution capability enabled by acquisitions
UK Distribution capability enabled by acquisitions Access to meaningful market share; guidance reaffirmed1 UK Lenders Market Share2 Remortgage Conveyancing Transactions Market Share3 Lender 1 19% Conveyancer 1 33% Lender 2 13% ✓ Combined access to ~71% of UK Optima Legal 22% Highly Lender market sha
Slide 12: Evolve
Evolve Delivering on our purpose Investing in our people Productivity agenda Capital management framework Environmental, Social and Governance Advanced our Diversity, Equity & ~$1m of cash run savings delivered Framework established Signed United Nations Global Inclusion outcomes, with 44% of women
Slide 13: Financial results
Page 4 Page 13 Page 31 Page 35 Overview Financial results Outlook and Q&A Appendices Scott Butterworth Chief Financial and Growth Officer 12
Slide 14: Group performance
Group performance Improved revenues, higher operating expenses; EBITDA impacted by specified items Business revenue (A$m) 1 Operating expenses (A$m) 1 Operating EBITDA (A$m) 1 7% vs 1H23 5% vs 1H23 Op EBITDA 10% vs 1H23 EBITDA -5% vs 1H23 14% vs 2H23 163 8% vs 2H23 27% vs 2H23 23% vs
Slide 15: Group performance
Group performance Non-operating items primarily due to growth, M&A and restructuring Specified items (A$m)1 Amortisation (A$m)2 15.4 13.6 11.5 11.1 7.4 6.7 1H23 2H23 1H24 1H23 2H23 1H24 1H24 impacted by M&A costs (primarily Smoove acquisition), integration of Optima Increase vs 1H23 primarily new in
Slide 16: Group performance
Group performance Non-operating items expected in 2H24 Specified items 1H24 actual 2H24 outlook Comment M&A ($5.0m) Including Smoove acquisition & integration Optima/Smoove integration ($3.0m) Migration from Capita TSAs Redundancy and restructuring costs ($4.7m) ($11m) to ($14m) Cost of PEP Other it
Slide 17: Exchange
Exchange Transaction volumes recovering, better mix Monthly market transactions: 1H23, 2H23 vs 1H24 (#’000) Monthly market refi mix: 1H23, 2H23 vs 1H24 (% of transactions) 450 30% 25% 400 20% 350 15% 300 10% 250 1H24 = 2.22m transactions 1H24 = 22.1% refi mix 5% 2H23 = 2.06m transactions 2H23 = 24.3
Slide 18: Exchange
Exchange Transfer volumes in largest states have not recovered to their peaks Index of PEXA transfer volumes: NSW and ACT Index of PEXA transfer volumes: Victoria Index of PEXA transfer volumes: Queensland 120 120 140 100 100 120 80 100 80 80 60 60 60 40 40 40 20 20 20 0 0 0 1Q23 1Q22 3Q22 1Q24 3Q23
Slide 19: Exchange
Exchange Improved operating leverage, slowed capex growth Business revenue (A$m) Operating expenses (A$m) Operating EBITDA and EBITDA (A$m) 11% vs 1H23 2% vs 1H23 Op EBITDA 17% vs 1H23 17% vs 1H23 EBITDA 16% vs 1H23 17% vs 2H23 149.6 17% vs 2H23 18% vs 2H23 18% vs 2H23 19% vs 2H2
Slide 20: Digital Growth
Digital Growth Revenue driven by subscriptions, higher volumes of new business relative to 1H23 Average monthly value of ID’s active proposal pipeline (A$m)1 Average monthly proposal win rate for ID (%)1,2 2.4 24% 1.9 1.6 1.1 1.2 11% 12% 1.1 11% 8% 4% 1Q23 2Q23 3Q23 4Q23 1Q24 2Q24 1Q23 2Q23 3Q23 4Q2
Slide 21: Digital Growth
Digital Growth Economics starting to scale Business revenue (A$m)1 Operating expenses (A$m)1 Operating EBITDA and EBITDA (A$m)1 +7% vs 1H23 -10% vs 1H23 Op EBITDA +$2.3m vs 1H23 EBITDA +$0.5m vs 1H23 -9% vs 2H23 -16% vs 2H23 +$1.8m vs 2H23 +$1.8m vs 2H23 7.9 14.5 1H23 PF 2H23 PF 1H24
Slide 22: International
International UK market activity below trend Market remortgage transactions (average #’000 pm) Estimated re-mortgage market mix by product (%) Market S&P transactions (average #’000 pm)1 40 180 100 Recession Recession 35 160 90 140 30 80 70 120 25 60 100 20 50 Period average 80 Period average 15 40
Slide 23: International
International Overview of FI pipeline progress (# of institutions) Pipeline size PEXA & Optima Engagement Status PEXA Go & Pay Onboarding Status Contracting Status (# of institutions) Optima Legal customers 2 4 1 1 1 4 2 2 1 1 1 1 1 Total Pipeline Technical Negotiations for Bank of England Onboarded
Slide 24: International
International Cash burn impacted by lower revenue Business revenue (A$m)1 Operating expenses (A$m)1 Operating EBITDA and EBITDA (A$m) 1 -41% vs 1H23 +21% vs 1H23 Op EBITDA -$8.8m vs 1H23 EBITDA -$14.2m vs 1H23 -7% vs 2H23 +6% vs 2H23 -$1.9m vs 2H23 -$6.3m vs 2H23 10.9 22.7 24.0 19.9
Slide 25: Smoove losses lower due to cost savings; aim to integrate over FY25
International Smoove losses lower due to cost savings; aim to integrate over FY25 Smoove operating EBITDA bridge: 1H23 vs 1H24 (£m) 1,2 High level approach to integrating Smoove into the PEXA Group 1H23 1H24 Operating Remo Gross S&P Gross Attachments Other items Operating Transaction EBITDA Profit P
Slide 26: Cashflow
Cashflow Cashflow generation consistent with 1H23 Cash balance bridge: June 2023 to December 2023 (A$m) EBITDA to free cashflow conversion: 1H23 vs 1H241 Free cashflow: 1H24 (A$m) Free cashflow 2.9 conversion = 31.3% 3.2 2.9 34.3 34.3 48.8 48.8 2.0 15.3 Adjusted EBITDA Net working Capex Net financin
Slide 27: Group balance sheet
Group balance sheet Third party cash balances partially hedge debt exposures Maturity profile of Group banking facilities (A$m) Average gross debt and PEXA plus third-party moneys: 1H23 to 1H24 (A$m) Average gross loans and borrowings 1 335 334 298 299 Average 1H23 2H23 1H24 interest rate (% pa) c4.
Slide 28: Group balance sheet
Group balance sheet Sound settings Net Debt / Op EBITDA Times Interest Cover – Op EBITDA / Interest expense 10.7 2.7 2.9 2.3 6.5 5.5 1H23 2H23 1H24 1H23 2H23 1H24 Banking Style Times Interest Cover – Op EBITDA / Net Finance Banking Style - Net Debt / Op EBITDA + interest income Expense 17.3 17.2 2.5
Slide 29: Group performance
Group performance Productivity Enhancement Program gaining traction 1H24 PEP progress Productivity benefits reflected in 1H24 results (A$m) 2H24 run rate benefit of 1H24 productivity actions (A$m) FTE impact of 1H24 productivity actions (#) 0.9 4.2 104 0.2 0.9 80 1.8 0.3 0.3 0.3 1.3 3.3 0.7 1.1 0.2
Slide 30: Group balance sheet
Group balance sheet Capital framework being embedded in business; aim to lift targets as practicable Objective Generate sustainable returns for shareholders Principles Maintain organic Evaluate material Ensure a strong, Recycle surpluses Run the business Deliver robust and Safeguard liquidity invest
Slide 31: Outlook and Q&A
Page 4 Page 13 Page 31 Page 35 Overview Financial results Outlook and Q&A Appendices Glenn King Group CEO and Managing Director 30
Slide 32: Economic outlook
Economic outlook Mixed GDP growth (%, yoy) Central bank rate (%, average of year) Real dwelling investment growth (%, yoy) 2.5 2.0 2.2 4.0 4.4 4.0 1.5 1.8 3.5 1.4 -0.7 -2.2 Australia1 CY 23A CY 24F CY 25F CY 26F CY 23A CY 24F CY 25F CY 26F CY 23A CY 24F CY 25F CY 26F 5.2 0.5 0.5 1.0 4.2 0.8 3.4 3.2
Slide 33: Guidance
Guidance Reaffirmed FY24 guidance 1 1H24 outcome Outlook Operating EBITDA margin Exchange of 50 to 55% 55% Guidance reaffirmed Break even operating 7% revenue growth 2 Digital Growth EBITDA in June 2024 10% expense reduction 2 Guidance reaffirmed Growth businesses International operating cashflows t
Slide 34: Key messages
Key messages Focused execution of strategic priorities Business continues to perform strongly Exchange x Continued marketplace leadership with resilient platform Building revenue, strengthening relationships, delivering valued solutions Digital Growth Operating EBITDA break even on track 1 UK has wh
Slide 35: Appendices
Page 4 Page 13 Page 31 Page 35 Overview Financial results Outlook and Q&A Appendices 34
Slide 36: Detailed financial information: Group
Detailed financial information Group 35
Slide 37: Group results
Group results Detailed financials Group financial performance Commentary A$m 1H23 2H23 1H24 Business Revenue 140.9 142.5 163.3 Business revenue • Exchange up $14.5m or 10.7% – mainly CPI-linked pricing effects Cost of sales (17.5) (17.3) (19.4) • Growth businesses up $7.9m –impact of acquisitions Gr
Slide 38: Group results
Group results Pro forma revenue and expense analysis Business Revenue bridge including pro forma impacts: 1H23 vs 1H24 (A$m) 0.5 5.0 0.5 14.5 11.9 11% 7% 46% 163.3 7% 152.8 increase increase decrease increase 140.9 1H23 as published Pro forma impacts Pro forma 1H23 ex Exchange vs 1H23 Digital Growth
Slide 39: Group results
Group results Non-operating items review 2H23 Group financial performance Commentary A$m 1H23 2H23 1H24 Operating EBITDA 52.4 46.3 58.8 Specified items • $8.3m higher than in 1H23 - mainly due to M&A and restructuring Specified Items costs, offset by FX effects Optima Legal integration (0.9) (4.3) (
Slide 40: Group results
Group results Amortisation charge Group capex to amortisation1 and revenue ratios: 1H20 to 1H24 (%) Components of Group amortisation1 charge: 1H23 to 1H24 ($m) 100% Category 1H23 2H23 1H24 90% 80% Historical acquired amortisation 28.0 28.0 28.0 Capex to 70% amortisation 60% Amortisation on business
Slide 41: Specified Items Reconciliation Months ended December 23
Specified Items Reconciliation 6 Months ended 31 December 2023 Share of loss Redundancy M&A after tax 31 Dec 23 and transaction from Total 31 Dec 23 Statutory Optima Legal restructuring Unrealised FX professional investments Specified Excl Specified P&L integration related costs gain / (loss) fees O
Slide 42: Specified Items Reconciliation Months ended December 22
Specified Items Reconciliation 6 Months ended 31 December 2022 Share of loss Redundancy M&A after tax 31 Dec 22 and transaction from Total 31 Dec 22 Statutory Optima Legal restructuring Unrealised FX professional investments Specified Excl Specified P&L integration related costs gain / (loss) fees O
Slide 43: Specified Items Reconciliation Months ended June 2023
Specified Items Reconciliation 6 Months ended 30 June 2023 Share of loss Redundancy M&A after tax 30 June 23 and transaction from Total 30 June 23 Statutory Optima Legal restructuring Unrealised FX professional investments Specified Excl Specified P&L integration related costs gain / (loss) fees Oth
Slide 44: Divisional performance overview
Divisional performance overview Solid Exchange, Digital Growth operating losses lower, International operating losses slowing Exchange Digital Growth 1 International 2 Business + 11% + 6% - 40% Revenue $149.6m + 17% $7.2m - 9% $6.5m - 6% Operating + 17% + $2.4m - $8.8m EBITDA $82.9m + 18% ($5.8m) +
Slide 45: Published figures to Pro forma reconciliation
Published figures to Pro forma reconciliation FY23 comparatives Published Pre ownership Pro forma Exchange A$m 1H23 2H23 FY23 1H23 2H23 FY23 Business revenue 135.1 128.0 263.1 135.1 128.0 263.1 Operating expenses (47.9) (42.0) (89.9) (47.9) (42.0) (89.9) Digital Growth .id Land Insight A$m 1H23 2H23
Slide 46: Detailed financial information: Exchange
Detailed financial information Exchange 45
Slide 47: Exchange: Detailed financials
Exchange Detailed financials Exchange financial performance Commentary A$m 1H23 2H23 1H24 Business Revenue Business revenue 135.1 128.0 149.6 • $14.5m (11%) higher than in the PCP Cost of sales (16.3) (15.8) (17.8) • Primarily due to improved volumes and mix and repricing effects Gross margin 118.8
Slide 48: Exchange: Revenue
Exchange Revenue PEXA penetration of national market (% of total transactions) PEXA transactions (#’000 per half) 1,919 1,966 89% 1,829 89% 267 260 251 480 486 Other 494 88% Refinance 1,172 1,084 1,221 Transfer 1H23 2H23 1H24 1H23 2H23 1H24 Transaction fees (A$ per transaction) Exchange revenue brid
Slide 49: Exchange: Expenditure
Exchange Expenditure Exchange operating expenses by category: 1H23 to 1H24 (A$m) Exchange capex by category: 1H23 to 1H24 (A$m) 20.6 19.0 3.3 16.8 4.5 5.5 3.9 0.7 2.4 Other 3.7 4.8 2.0 0.1 3.9 6.7 Regulatory 3.1 Integration 2.5 4.3 48.9 8.2 47.9 6.7 Enhancement 4.1 1H23 2H23 1H24 1H23 Inflation Labo
Slide 50: Detailed financial information: Digital Growth
Detailed financial information Digital Growth 49
Slide 51: Digital Growth: Detailed financials
Digital Growth Detailed financials Digital Growth financial performance 1 Commentary A$m 1H23 2H23 1H24 Business Revenue Business Revenue 4.0 7.6 7.2 • Business revenue up $3.2m (80%) due to acquisitions, and increased Cost of sales (1.0) (1.0) (0.9) revenues from workflow and transaction support pr
Slide 52: Digital Growth: Revenue
Digital Growth Revenue Digital Growth revenue bridge: 1H23 pro forma vs 1H24 (A$m)1 0.7 0.5 0.3 0.5 0.6 0.1 34% growth 2.7 101% growth Change in revenue Net subscription 6.7 recognition principles growth = 4%2 7.2 4.0 7% growth 1H23 Pre 1H23 AASB 15 New Lost Projects Legacy product New transaction 1
Slide 53: Digital Growth: Expenditure
Digital Growth Expenditure Digital Growth operating expense bridge: 1H23 pro forma1 vs 1H24 (A$m) Digital Growth capex: 1H23 to 1H24 (A$m) 2 3.6 0.5 3.0 Acquisition 0.8 2.9 0.6 integration and 0.7 3.5 other Investment in 2.4 growth = $2m Overhead 2.0 1.8 Non-VA reduction & product leveraging develop
Slide 54: Detailed financial information: International
Detailed financial information International 53
Slide 55: International: Detailed financials
International Detailed financials International financial performance 1 Commentary A$m 1H23 2H23 1H242 Smoove Business Revenue Business Revenue 1.8 6.9 6.5 0.5 • Optima Legal revenue per transaction up 33% (11% ex interest) Cost of sales vs pro forma PCP – repricing and mix (0.2) (0.5) (0.7) (0.2) •
Slide 56: International: Performance impacted by market and Capita issue
International Performance impacted by market and Capita issue Optima Legal remortgage volumes by quarter (average #’000 pm) 1 Monthly Optima Legal rolling 3-month average market share (%) 1,2 12 30% 10 25% 8 20% 6 15% 10% 4 Instructions 5% Period average 2 Completions 0% 0 Jan-21 Mar-21 Jul-21 Jan-2
Slide 57: Smoove: Economics overview
Smoove Economics overview Volumes (#’000 per half) Revenue per transaction (£) Average cost of sales per Gross profit excluding Other (£’000 per transaction (£) half) 16.7 17.5 15.4 161 166 163 Remo 1H23 2H23 1H24 1H23 2H23 1H24 10.5 304 321 338 121 125 3,489 3,475 6.6 7.9 114 3,193 Sale and Purchas
Slide 58: International: Expenditure
International Expenditure International cost bridge: 1H23 pro forma1 vs 1H24 (A$m) International capex (A$m)2 13.1 0.5 0.5 0.6 2.5 11.7 1.4 0.0 0.6 Integration 10.9 8.0 0.2 1.3 Sale and Purchase development 23.4 24.0 12.6 19.9 Remo product 10.7 development 11.9 9.8 (including joint Optima Legal prop
Slide 59: Glossary
Glossary 58
Slide 60: Glossary
Glossary Term Type Definition API Business Application programme interface ARNECC Business Australian Registrar’s National Electronic Conveyancing Council As published Financial – non-IFRS Numbers as provided without adjustment in PEXA’s published financial reports, market briefings or investor upda
Slide 61: Glossary
Glossary Term Type Definition Free cash conversion Financial – non-IFRS Free cashflow divided by EBITDA adjusted for items not having a cash impact FTE Business Full time equivalent employees FY Business PEXA’s financial year, which covers the period from 1 July to the following 30 June Gross financ
Slide 62: Glossary
Glossary Term Type Definition Operating EBITDA margin Financial – non-IFRS Operating EBITDA divided by Business Revenue Optima Business Optima Legal Other transaction type Business Being in Australia a property transaction passing through PEXA’s Exchange which is neither a transfer nor a refi Operat
Slide 63: Investor relations and Media contacts
Investor relations Media Hany Messieh Danielle Tricarico + 61 414 446 876 + 61 403 688 980 hany.messieh@pexa.com.au danielle.tricarico@pexa.com.au