PEXA Group Limited

Thank you for standing by and welcome to the PECSA fiscal year 2022 results conference call. All participants will be in a listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Mr. Glenn King, Group Managing Director and Chief Executive Officer. Please go ahead, sir.

Good morning everyone and I'm pleased to welcome you all to TEQSA's results for the 12 months ended 30th of June 2022. I'm Glen King, I'm the TEQSA's Group Managing Director and CEO and joining me this morning is our Group CFO, my colleague Richard Moore. Today we'll cover TEQSA's FY22 business highlights and our financial performance and provide some perspectives on the companies trading in today and outlook. Now we go to slide five, we'll touch on some of the highlights. PECSER is a values-led organisation. Our commitment to our core values, our people, our customers and our role in the community is what underpins the company's performance in FY22. Our team of around 500 PECSERians are highly engaged, as can be seen in our employee engagement score of 80%. that ranks Spectre in the top 25th percentile of all global tech companies. And I must say that these solar foundations, alongside our robust property market, has underpinned our record extra exchange volumes, which is up 22% year-on-year to just over 4 million property transactions in FY22, with a property settlement value of more than $900 billion. To put this in context, PEXA's exchange transaction volumes grew from approximately 10,000 transactions per month in December 2015 to more than 360,000 transactions per month in June 2022. We're essentially essential infrastructure to the property sector in Australia. In addition to growing the PEXA exchange tech platform in Australia, we've also made meaningful progress across multiple attractive growth paths for our business. We are progressing our international market plans, with the UK being a priority growth market for PEXA, and it represents a total addressable market opportunity of approximately $700 million. And we'll talk more about this progress shortly. In addition, PEXA continues to build its reputation as a trusted leader and resource for robust real-time property data. appropriately extending our offering to enhance the property experience, so we can also meet the best needs of Australians in the property sector through that Darjeeling Insights. And over the past 12 months, Vector Insights has launched new products and made several investments. And I can also say that PeerCleanters, another one of our growth businesses, has continued to build on Vector's digital and industry experience. and also developing new products and services as we expect to grow in this area. All of this has transformed into another good operational and financial performance in FY22, with two positive metrics in our portfolio of products and services and set in our sub for sustained growth. If I go to slide six, slide six actually shows the growth in residual earnings in FY22. And what I can say that we're now outside our prospective forecast period, and we've shown how the FY22 results compared not only to FY21, but also to our prospective forecast. On all measures, we grew compared to FY21. And we also exceeded our prospective forecast. A couple of call-outs. At Rupert Avenue, it was up 27% year-on-year to $280 million. Exit St. David Barrett was up 38% to $153 million. with our EBITDA margin up 5 percentage points to 55%. Our free cash flow before capex financing and tax was up 7% to 121 million. Our MPAC pay was up 123% to 77 million. And gearing, as measured by net debt to PECWIS training data, was down 35% to 1.47 times. Good results. Now, to give you a bit more colour in terms of our business and the overview of performance, I will now turn to slide eight. Our strategy, the Pector Group strategy, is a very simple strategy. We look to enhance the core exchange service in Australia for our customers so we can continue to grow. We're looking to expand in new Torrens Title jurisdictions, starting off with the USA. We plan to extend, extend to provide innovative data insights and building deeper customer relationships across a broader group of stakeholders through additional services. And importantly, we'll continually evolve our business, both in terms of platform and continually build and strengthen with our people and our brand. These strategic pillars of enhance, expand, extend and evolve are all in support of fulfilling our purpose, connecting people to price, and are delivered in accordance with our core values, where we always look to innovate and innovate for good reasons, ensure we're better together with our people, customers and our owners, and we're very clear about execution, making it happen and making it count. Now, for that is slide 9. Having established a leading and highly trusted tech platform, the PECS has changed. We are now leveraging our knowledge, experience expertise and relationships with industry stakeholders and partners to pursue a number of growth opportunities and areas across three key focus areas, including continually building our core effects of exchange and deepening our customer relationships. The four growth areas, in addition, affect the international, which is around replicating the success of the effects of exchange in Australia. to develop digital property settlement solutions in new offshore markets, with the first priority being in the UK. Textual Insights, which is about delivering new generation data solutions that empower businesses, governments and consumers to appropriately make more informed property-related decisions, including demand for land, use of land, transaction efficiency and housing affordability. And Care Spentures, which builds on Texas digital and industry experience, the innovative and entrepreneurial culture and our established relationships to develop new business opportunities with partners for consumers, businesses and governments across the property ecosystem. In summary, we're executing on all those areas as we enhance, expand, extend and evolve our business. Now a little bit more colour on all four areas. Turn in the slide, please. The picture is showing now that St Phil takes the majority of land transactions in all of Australia. And we know as a business that buying the property is one of the most important purchases many people will make in their lifetime. And it's something that we certainly take seriously. It's a role that we know that we need to make sure it's efficient, safe, secure and reliable as possible, increasing certainty to industry participants such as our bank customers and also the home buyers and sellers alike. Momentum for digital transactions continues to accelerate. And while I've already mentioned the volume and wave value of transactions settled on the PEXA Exchange in the 5.2 years growing, what's even more impressive is the Exchange has now processed more than 12 million property transactions since our inception, equating to more than 2.4 trillion in property gain. PEXA is a tech platform business for the property sector, and we are an essential service. In FY22, market conditions were positive, with 12% growth in total market volumes from FY21. 4.7 million transactions in FY22. And we grew with that, but we also grew above it, to where we're now just over 4 million transactions at 22% growth. We also grew with the refinancing. noting that we do refinancing and sale and transfer, and it was particularly strong in the refinance area, with the total market up 31% year-on-year. We continually serve now over 9,500 lawyers, practitioners and contractors, 160 financial institutions, and we serve over 1.1 million consumers in FY22. We also successfully launched in the ACT, reaching 59% transfer and market penetrations. at the 30th of June 2022, and incredible results within 12 months. And we also saw continued growth in Queensland, where we doubled our performance over the past 12 months, increasing our market share now to about 77% at the end of the financial year. On slide 11, just thought we'd add a couple of other highlights around the picture of change. We continue to enhance our Vector Exchange and Service by adding new services and job fees such as ADC, but also spending our services such as Vector Tracker for financial institutions. We've also maintained our ongoing engagement with regulators in relation to industry reform and our customer performance is continually strong with a net promote score of plus 74. Vector has also maintained and 99.9% platform availability across the FY22 and reaffirmed its position as the number one trusted provider across the industry. And whilst we've been very strong in FY22, we can have a continued presence in FY23 on the Exchange. That includes continued investment in infrastructure resilience and cyber security. We're going to continue to roll out our APIs and integration in banks panel firms and further removing customer friction points. We're going to continually enhance certainty around settlement on behalf of the industry and home buyers nationally. And we'll also continue our roadmap to become a truly national platform with productive dialogue in Tasmania and Northern Territory as we expand across the entire country. In addition to that, we'll keep our constructive involvement with regulatory reform, But we'll also ensure that we maintain a focus on a secure system for citizens, customers, government and the community at large. Importantly, our key essence is to ensure we provide great service for our customers. And talking about great service, if I go to slide 12, we're now expanding internationally and we're on target as we deliver in the UK. The UK does represent a broker airport, Petra. and our initial focus has been on the remortgage process in England and Wales, and we're making good progress. In April 22, we announced the successful deployment of a brand-new payment scheme, PectorPay. The seventh net settlement payment scheme with the Bank of England, and we're acting as a settlement agent. We're pleased with that progress. The platform and payment scheme has been successfully tested with seven mortgage lenders, and the Bank of England has agreed to another cohort of lenders to test in October this year. And as we also committed, we plan to go live with our first lenders using the PECSA platform for their remortgages, and we're scheduled to go live with our first lender in September 2022, with subsequent waves of lenders expected to join over 2023. We also work closely with conveyances, regulators and government stakeholders as we will further develop TEQSA's UK proposition and build out our services across the country. We aim to have four lenders transacting on the TEQSA UK platform in 2023 and continually grow from that position. will explore and identify potential opportunities in the UK to deliver on our strategic interests. And as part of our intent, we're already working on our sale and purchase check concepts. Now, building on the international progress which we're pleased with, we've also now extended into Darwin Insights. And for data class 13, Australia's 10 trillion housing market is continually The creation of significant volumes of property data is generating significant opportunities to enhance decision-making in the market as economic, environmental and social factors continue to change. And Texas is at the centre of this evolution. Now, we said before we estimate that the data market for land information could grow from approximately $520 million annually today to about one billion annually over the next five years. And with businesses and governments rapidly digitalising their services, data sharing is going to be a key opportunity for the Australian economy. And we believe that open data flows have the potential to reduce friction points for consumers and businesses, while also driving competition that stimulates innovation and economic growth. We are excited about this opportunity and we're going to essentially advocate for more open and ethical regulatory regimes for the use of data for the benefit of Australian citizens. Now, as on slide 13, we're building our HOPI data ecosystem and service to answer four key questions for Australians. Where is the demand for RAM now and into the future? How can the use of RAM be optimised to increase valuation? How do we increase the supply of housing to ease housing affordability challenges? And how do businesses in property value chains improve their business efficiency and in turn to deliver value to consumers? PECSA has made a number of investments and acquisitions across all that area, all those core questions, to ensure that we can deliver and add value and our aim is to grow If you turn to slide 14, you can see in 12 months it's been a very busy year for Pectoral Insights. We've built now a team of over 60 data specialists within Pectoral Insights, focused on building a property data bureau and developing solutions that appropriately leverage our unique access to new real-time and accurate national property data. We've implemented partnerships with universities such as Deegan and the Melbourne Business School and we've released our first product aimed at helping financial institutions improve efficiency with our quarterly property and mortgage insight reports. This provides a first taste of the power of our data. And with new product concepts under development and others in beta, we have charted a path towards several new product launches in FY23. In addition, though, we completed several strategic investments in FY22 and two shortly after the financial year ends. As announced this morning, Texas Insights undertook its first 100% acquisition of the leading Australian loan demographic-based company, DotID. DotID in its own right is a land information business The Business Trust has provided demographic and economic data and forecasts at the microgeographic level to more than 300 local councils across Australia and New Zealand. Separately, we also announced the acquisition of a 70% interest in Slate Analytics, a progressive property analytics and tech solution co-developed by the University of New South Wales, Sydney, and Funky SI. Both represent the third and fourth strategic investments undertaken as part of our PEDSA in-size growth strategy. Across the FY22 sector in-size, PEDSA's data analytic in-size and service business also announced the acquisition of a 38% stake in the data box tech, Langecker, and a 25% stake in the AI software leader, Alula. All four are cash investments. Now, what I would specifically then go on to is is how we're also spinning through PX Ventures, which is about to deliver new digital property products and services. Now, PX Ventures was launched in 2021 with the goal of building on our tech and property industry expertise and entrepreneurial culture with like-minded innovators, and we're making good progress. PX Ventures offers funding, bespoke services and mentoring support to enable continued innovation and enhancement of new and existing products and tools for Australian consumers in the prop sector. Through our innovative PEERS Launch Track, we've now targeted a number of startups to offer products and services that could significantly transform the property journey for Australian consumers, businesses and the government sector. In fact, our PEERS Launch Track has received more than 100 IDs from several up-and-coming Australian businesses interested in starting and commercialising their offering in the prop sector. And we've already launched, or progressed, with external partners through PN Centre in FY22, including Business Advantage, Honey Insurance and Smaila. And today I'm pleased to announce our strategic partnership with Sorted Services, a local Melbourne prop tech. Sorted is, in fact, Australia's first digital home services tech platform designed to help homeowners, organise their entire household in minutes, including things like electricity, gas and internet connections. A very exciting and practical resource that further will be in our services to our customers. Now, you can only do this in the slide 16 in terms of the growth that we've developed and built out in S142 through engaged people. And given the critical role played by Pector in the economy, it's important for us as Pector that we continually, as a group, have engaged Pectorians, building and maintaining a culture of trust in the community and with our customers. And we truly believe that having an engaged team translates to highly satisfied customers and a great business performance. And we do this by our values of innovating the good, better together, making it happen and making it count. that our workforce has an 80% in Vagina score, which translates to a positive experience for our customers on a whole. And in FY22, we set a new watermark for Grand Clubs, where we received a score of 8.9 out of 10, which is number one in the market, and a member or customer satisfaction score of 97%. And further than that, we're really pleased to say that we're in the top three in 2021 for the Best Place to Work award within Australia. Our engaged sectarian schools are engaged with the community and we're working from home to home, a not-for-profit organisation focused on creating sustainable and affordable housing for our most vulnerable communities in Australia. We also work on diversity and inclusion and environmental sustainable elements within Homes for Homes. In fact, we picture we're a proud member of the global ESG benchmark for real estate assets, having achieved a five-star GFB rating in FY22, which is a score of 92 out of 100, up from 84 in FY21. And we're not only continuing to work on ESG initiatives from our inaugural environmental statement, but we outline a commitment to achieve carbon net zero by 2025. In addition, we're now working with Indigenous consultants to establish an Indigenous engagement strategy as we are committed to supporting the First Nations of Australia. All in all, FY22 has been a strong, good result for our business and those results are translating into strong financials and I'll now hand over to Richard who will take you through the FY22 financial summary.

Thank you Glenn and it is great to be here today to talk through such a strong set of financial results for PACTA and FY22. Before I start, I should say that all the figures in this session reflect a pro forma P&L, showing the operating costs of PEXA as a listed company. And what that means is we remove the one-off costs as a result of the listing on the 1st of July and we add in $6.5 million of public company costs into the prior period to make it comparable to the current cost base of the company as a listed entity. The pro forma results are reconciled back to statutory on slide 33 of the PAC. And additionally, any reference to forecast in this section is the FY22 forecast from the perspective that we launched before we listed in July last year. So going to slide 18, you can see PECSA delivered a very strong financial performance in FY22. Our revenue was up 27% to $280 million. Our combined COGS and operating costs were up 15% year-on-year, and what that meant was an increase in PEXA exchange EBITDA of 38% to $153 million. EBITDA after investing in our growth initiative and one-off was up 28% to $131 million, and our net profit after tax of $38 million was up $43 million from a small loss last year. NPAC-A, which is net profit after tax excluding the non-cash amortization of acquired and tangible assets, which is our best measure of after-tax cash profit, also grew by $43 million to $77 million. All of these measures were ahead of prospective forecasts. And what that means is our financial metrics are also very strong, with our gross margin growing by just under 1 percentage point to 87.7%. and the exchange EBITDA margin of 54.6, being up 4.6 percentage points from FY21. So overall, it's a great result in FY22 from a financial standpoint, and I'll now use the following slides to explain the key drivers of the financial result in the PECSA exchange. Our revenue is a function of market size, market share, and price, and slide 19 explains the first two of those. As Glenn said, the market grew strongly in FY22, up 12% to 4.7 million transactions, or billable events, as we call them in PEXA. And you can see slide 31 in the appendix for more details on the market growth. On top of that, the PEXA exchange penetration, or market share, grew 7 percentage points to 86%. And on the left-hand chart on slide 19, you can see that by transaction type. We saw our transfer penetration grow from 80 to 85%, driven by growth in Queensland and the launch in ACC. We saw refinance penetration being stable at 99%, and other transactions growing 16 percentage points to 73%. Combined, that delivered a 7 percentage point increase in total penetration to 86%. Adding that to the 12% growth in the market means a 22% increase in PEXA transactions to 4.05 million, as seen in the right-hand chart. PEXA transactions were also up 16% compared to the prospective forecast, driven by a 14% higher market and 2% higher market penetration. On slide 20, we then explain how volume and price determine revenue. The top left-hand chart shows PEXA volumes from the prior slide, up 22% year-on-year. We also saw an average price increase of 4% to $68, driven by the annual CPI increase during the year and the end of the discounting campaign in Queensland in the prior financial year. That ended on the 30th of June 2021. That resulted in an average price for transfers increasing by 6%, obviously ahead of CPI for that reason. This was slightly offset by a mixed shift towards the lower priced refinances and that resulted in the total average price increasing by $2.50 or 4%. So, adding the 4% price onto the 22% volume previously discussed delivered a 26% increase in PEX exchange revenue from $218.6 million in FY21 to $276.6 in FY22. Pector Exchange 1 was also up 13% on prospective forecasts, driven by the 16% increase in volume noted earlier, offset by a 3% reduction in price due to the higher proportion of lower price refinancing transactions compared to forecast. On slide 21, we then look at gross margin and cost of sales. Another reminder, our main cost of sales are lodgement support service fees, which are incurred when a workplace is set up. It reaches out to the Land Registry to get bundled property information. That starts on every workspace, whether it's a multi-party transfer, a two-party refi, or a single-party discharge or other transaction. So this means if we do more transfers, the cost per transaction drops. And you can see that on the top right-hand chart on slide 21. The higher mix of transfers also improved the average revenue per transaction, which you can see in the top left chart, and that combination means that our gross margin has improved by just under one percentage point to 87.7%, and our gross profit has gone by 28% to $245 million. Gross profit was also 14% ahead of the prospective forecast. Slide 22 shows our operating expenses within the exchange. We group our expenses into three categories, general and admin, sales and marketing, and product design and development. Our general and admin costs, which cover our shared corporate teams, our board and executive remuneration, as well as professional fees and occupancy, increased by 24% in FY22. And this was driven by the corporate functions and advisory fees growing to support our continued expansion. Also, we saw higher insurance premiums and the cost of our new long-term incentive plan. It is worth noting that FY21 was understated due to COVID-19, and the FY22 spend is up 26% from two years ago, so that's a 12% annualised growth rate. Our sales and marketing spend held relatively flat in FY22, due to both this year and prior being somewhat impacted by COVID-19. And early in the financial year, we were unable to host our regular practitioner events, and we also reduced our overall marketing spend due to COVID. Finally, our product design and development expense has increased by 12% in FY22 due to the higher hosting costs driven by higher exchange volumes, together with investment in architecture, cloud, cybersecurity, and API development, as Glenn mentioned earlier. You'll also see from the bottom chart that we capitalised a similar amount of product development expended in the exchange, so the total cash spent on product design and development was $51 million, or 18.3% of exchange revenue. Operating expenses were 14% ahead of prospective forecast, and total product development costs in the exchange were broadly in line with the prospective forecast. Slide 23 then shows the benefits of scale flowing through the exchange. The chart on the left shows total costs, including cost of goods sold, and also shows cost per transaction. The growth in volume combined with prudent cost control has resulted in a reduced cost per transaction, down from $33 last year to $31 in FY22. This has also resulted in good growth in Texas exchange EBITDA, as shown on the chart on the right of slide 23, growing by 38% to $152.7 million. We've also seen growth in our PEXA exchange EBITDA margin, which is going from 50% to 54.6% in FY22. It was, however, lower in the second half of FY22 due to the reduction in PEXA exchange volumes compared to the first half. We are expecting to operate the exchange in the 50% to 55% EBITDA margin range going forward. So, in summary, from a P&L perspective, a year of very strong revenue and EBITDA growth And we are happy to have achieved all of the forecasts that we set in the prospectus just over 12 months ago. The final slide on financial, slide 24, shows our FY22 cash flow in two ways. The chart on the left shows the movement in our cash balance over the year and the key drivers. We started FY22 with $61 million of cash. We generated $153 million of exchange EBITDA, spent $25 on capitalized product development within the exchange, and had $14 million of other exchange-related cash outflows. So before investment in our growth initiatives and IPO costs, we would have had approximately $165 million of cash in the business at the end of the financial year. We invested $44 million in our international insight and ventures businesses and $30 million in the investments in Landchecker and Aluma. As part of the IPO process we also had net offer costs in cash terms of $15 million and this resulted in an actual cash balance of $75 million on the 30th of June 2022. The table on the right-hand side, slide 24, shows our pro forma cash flow, and you can see a strong free cash flow conversion before financing tax of $69 million, which equates to a 53% free cash flow conversion. And that's after the OPEX and CAPEX investment in the exchange and in all of our growth initiatives. And before I close, I should add that there are more details on the financials in the appendix, should you need to see them. So now I'll hand back to Glenn to run through our outlook and to close.

Thanks Richard and I just will now turn to slide 26 and I think that if you just go through the robust financials that Richard just shared, that performance delivered through FY22 has really placed us well for FY23. So whilst the monitoring and inspectorate volume slowed in the second half as shown on slide 26, it still ended up 9% above the same period last year. Overall, the FY22 volumes were up 22% year-on-year against FY21. While the property market is slowing, it is still not supported by strong economic fundamentals, including high household savings rates, low levels of unemployment, increasing inward migration and knowing that demand for housing is greater than housing supply. we're also seeing that refinancing volumes are also remaining elevated. And this is basically due to a number of changes in the market just generally. This means effective exchange volumes are holding up well, and with more than 3,000 transactions in July, and quarter one is now tracking to be above 900,000 transactions. And noting the mix, we believe we've still got a very robust performance with the best exchange platform. And in terms of FY23 outlook, we expect the exchange EBITDA margins to still stay in the 50% to 55% range. And that's also due to the fact that we're going to invest approximately 20% of our revenue in the exchange technology. As with brand, we need to invest in the exchange technology to ensure we succeed with resilience, cyber and improving our customer experience. We will also invest approximately $45 million in our international expansion and approximately $15 million in sector insights before any M&A activities. We will invest to grow. In the UK, we aimed at four lenders transacting on our VEXA UK platform by the end of FY23. And we also confirmed there will be no existing pay for FY22 as we continue to pursue programmatic M&A and continue to invest to grow. On slide 27 and in closing, Overall, on behalf of the TEQSA team, it's been another strong and successful year for TEQSA. We continue to build and grow with our people, with our capital and with our capabilities. And by any measure, we have a highly engaged TEQSA team working in a TEQSA Flex First environment. Our brain trust and our constant NPS are at good levels. And what you also heard is we have a strong TEQSA engagement score of 80%. You heard today we're delivering a clear strategy of enhancing our service, extending our service, expanding our service and evolving our business. And we continue to execute. Both operationally and financially, we've delivered on strong outcomes across the group in FY22. The TEQSA Exchange platform delivers strong year-on-year volume and revenue growth. We've exceeded all our FY22 financial metrics in the prospective forecast and our focus on efficiency and exchange continues, achieving a 55 to 10 EBITDA margin in FY22. Lastly, we continue to inject new sources of future growth and values of respect with our underpinned shareholder value growth over a longer term. We believe there's good economic fundamentals that would continue to support volume growth through the exchange. The launch of PECTA in the UK is tracking the schedule, with our first remortgage transactions in this. We're building a meaningful PECTA Insights business, both organically and through inorganic activities. And lastly, PX Ventures is extending our reach into the broader property ecosystem. This concludes our presentation, and both Richard and I are now happy to answer any questions from the participants. Thank you.

Thank you. If you wish to ask a question, please press star then 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star then 2. If you're on a speakerphone, please pick up your handset to ask your question. And our first question will come from Josh Kornorakis,

Hi Glenn and Richard, thanks for taking my call. First question, just with regard to the margin commentary of you did 55%, could you give us a little bit more colour around just, I guess, the bookends of volumes that would allow that and maybe just talk through what costs you guys have within your control to manage to that margin?

Yeah, I can take that one, Josh. So if you assume the middle of that range, you get about an 8% plus or minus in volume to get to 50 or 55%, assuming you keep your costs unchanged. So it gives us about an 8% wiggle room, plus or minus, compared to what our baseline forecast for FY23 would be, which obviously we're not saying, but it's dependent on the information we have at this point and our estimates for the future. In terms of cost management, probably two-thirds of our cost base are people-related and we, as Glenn said, are very keen to continue to invest both in the core and in the growth aspects of the business. We also have a degree of discretion we spend around our sales and marketing, which there may be some flexibility in. but we also have some fixed costs predominantly around, you know, technology and support. So we do believe that that range gives us sufficient wiggle room to work within what may happen in terms of business volume, but we also do have a few levers that we can pull if required.

OK, got it. So, I mean, obviously, you're not going to talk through your expectations the next year, but can we assume that even if it's a decent, you know, some bearish forecast with 20-plus per cent of... volume declines as some people are calling out who are more negative on the stream, is that you can still hold a 50% margin at that point?

That's certainly our target, Josh. You're absolutely right. There are some commentators that are quite bearish on the market. As Glenn said, we're seeing a reasonably good market in the first quarter. We do see those fundamental economic factors still at play in terms of high saving rates and low unemployment. We have made quite a statement around our volumes for the first quarter. And if these are over 900,000 as we're expecting them to, we'd be looking at a year-on-year drop, circa 10%, something like that, which would be, I think, better than many of the market forecasters are predicting. So we're relatively bullish about those numbers as we step forward.

The only other thing I'd like to add is We've also got the refire transactions and transfers, so therefore that gives us a degree of diversity and we've also got growth opportunity markets such as WHF, Queensland and ACT, which also gives us diversity as well. And then further to that, the platform is not dependent on the housing price. It's purely based on the number of transaction times.

100%. Thanks for that, Carla. Just following on from that, Glenn, next question was just around those other markets where you've still got some room to move in terms of market share gains. How should we think about that in terms of 23 and maybe just to talk through the unlocks and volumes and your initiatives to try and get more market share across this company?

Yeah, a couple of things there. As we were saying, firstly in ACC at the end of the financial year, 59% share. So we see that continually growing. Whilst it's a small market, it's an important market because it's part of the national footprint that we're committed to. Secondly, Queensland. We've still got some services there to grow that market and so we expect to see some growth in that market, knowing that we said we're around about 77% at the end of the financial year. In Western Australia, which we're sitting closer to 80% market share. There's some particular transaction times that haven't yet been digitalised and we're working with the relevant public service and agencies in Western Australia looking to get those digitalised in FY23 so expect growth in that one as well. The other element that I would add, but that's just purely on the exchange aspect, we haven't factored in any areas such as potential government policy reforms and some of those other dimensions, which, as many will know, could be upside as well, but they're not factored into in our thinking.

The final one, just for Richard, on the investment guidance, Richard, could you give the breakdown of how you're thinking about the UK and insights just in terms of the OPEX sort of CapEx mix?

Yeah, I can do, Josh. So, as you said, in the outlook, $45 million in total cash outflow in international and $15 in insights. To give you an indication of what that was this year, in international was $31 million. I think we referenced that in the PAC. That was $12 million of OPEX and $19 of CAPEX. Next, I think it's fair to apply something like that into FY23. Insights, we invested $11 million in FY22. That was about 50-50 OPEX capex. So again, you can probably assume something similar for FY23 on the $15 million.

cautiously pleased with the progress we're making with our UK platform build, actually. And so we do believe that we'll be able to execute exactly as what we're saying. So it's an encouraging sign.

Thanks for taking my questions, Guy.

Thanks, Josh.

The next question will come from Ed Henning with CLSA. Please go ahead.

Hi, thanks for taking my questions. First one, just on the UK, what confidence or line of sight do you have achieving that 20% target of lenders in the UK by year end? And with that, what percentage of those lenders are the seven you've already got, or you've already tested with, and the four that you've got lined up for October as the first one?

I think there's a couple of points in there. So we've already had seven tests with the extra pay scheme and that was an important part of the mandate and the commitment from the Bank of England, so that's tested well. Of those seven, we're now working through the transition of those seven onto the platform in the FY23 and also the calendar year 23 period. And when we say the transition period, we can't put a more on at the same time. So that's why we say there's four to go on in the next 12 months. In saying that, that 7 will certainly give us a percent of that 10, not 1%, but certainly a reasonable percent of that 20%. We've got a number of other organisations of the Finance Massachusetts that we're talking to. Again, we don't want to be overly hubristic in terms of our confidence on all those, but yet we do have confidence that we will start to convert some of those and they'll be testing partners of the next four cohort. That's a reason why we've made the statement that we aspire and aim to at least get a size volume signed up, not necessarily on the platform during volume by the end of the year 2023, but certainly coming on in the FY24 period and beyond. So I'm reasonably confident. That's why we put it in there. We wouldn't put it in there if we weren't that confident.

Yep. No, no, I appreciate that. Thank you for the colour there. And then just sort of the prior question, you look at your project and your expansion cost, which you've given us some insight into. Just going forward, can you just talk about the trajectory and maybe it's more near term on the insights business, where you see the cost peaking in that line or the loss peaking in that line and where you start to see it start trending down and then you start to see some growth come through in the PML?

So Insights is a good case study, Ed, because it will be a combination of the core business itself and the acquisitions that we're making. And you'll see this morning we announced an investment and a 400% acquisition of a couple more businesses within Insights. Now, one of those you'd have seen in the ASX release has generated $11 million of revenue last year. So we will start to see recently material levels of revenue coming through Insight. We are continuing to look at programmatic M&A. So I think that business will undoubtedly not be profitable in FY23, but we would certainly hope it will be in the short term thereafter. So there's certainly an opportunity within Insight. In terms of international, we're launching the Remo solution in the next few months. wouldn't expect any revenue this financial year, but we would expect a few wee more revenue in FY24. In terms of sale and purchase, you know, releasing an initial product in calendar 24, financial 25, and probably revenue in FY26. So that's certainly how we're looking at it from an internal standpoint.

Can we just add to Richard's point? On the data insights business, as you can see, we're knitting together an organic and as well as an investment acquisition business. The DOT ID business is a very interesting business as well at Richard Strange and while we're attracted to it, there is 11 million revenue in there. But what is also very good is the way they're utilising publicly available data, putting that data into products and services that add value to 300 local councils that are not currently customers of the VEXA Group. And we believe that that provides us numerous opportunities, including the way that's been done in terms of providing those types of services and capability to our existing customer groups, but also in terms of standing to new customer groups just generally. So we see some broad growth areas that we can start to deepen relationships in Australia on that area. We also believe some of the things we're learning and the data insights area can also potentially look in other markets such as the UK as well, coming back to Richard's point. And we're encouraged with the progress we're making both in terms of building the UK but some of the dynamics in that UK market as well.

And just to clarify, the revenue that's coming through from the insights and then eventually from the UK, at this stage, Is it just going to be all netted off in that project and expansionary line if you look at slide 33?

It is at the moment, Ed, but obviously in the future we will just have a segment view of PECSA. So if you actually look in our annual report, you'll see we have pulled out a full segment note in terms of the exchange international insights in three separate columns. So that's how we'll report the business going forward. We deliberately left it unchanged for this set of results because that's how it was captured in the prospectus and we didn't want to

Yeah, no, I understand. And just one last one while I've got you. On the Australian business and basically the price mechanism going forward, do you think you'll be able to achieve continued CPI increases or do you think given how sharply CPI is increasing, I'll be potentially below that?

Well, we did increase on the 1st of July by the CPI figure for the end of March, which was 5.1%, Ed. My assumption is that by next March, the CPI will be coming back down again. I think it will peak probably at the end of this calendar year. So at this point, there's nothing to suggest that we won't be increasing by CPI. But obviously, no promises can be made depending on where it trends.

No, that's great. Thank you for your time. Thank you.

The next question will come from Elizabeth Miletus with Jordan. Please go ahead.

Good morning, and thank you for taking my questions. The first one is just a follow-up on the UK expansion and the run, the profile of the expansion there. So you said that you've got two that will be transacting by the end of the year. On our estimates, they're both pretty small lenders in terms of market share. The four that you're mentioning in FY23, how much market share do they represent? And then just a follow-on with the 20% of market share that you'll hopefully have signed on by FY23, approximately how many lenders do you think will be in that cohort? Just sort of getting an understanding of each sort of bucket.

Yeah, no problems at all. And I think there's a couple of points. Let me just break it down firstly for the first two. What we've purposely done is we wanted to go with a couple of small ones because we wanted to build the platform, test the platform, get a couple of transactions to ensure it's working well and we're continuing to tailor it to meet the customer needs. And both the first two, which is Simply and Rugby, which we announced, and it's your book, had that fast-moving digital approach that was allowing us to move quite rapidly, which is good. That's the first point. And then with those two, then we'll start to scale more volume on the platform, which is supported by those organisations. By those organisations, while small, you're quite right there, they're also quite influential as well in terms of the dynamics in that particular marketplace. That's the first point. The second point then coming back in terms of other organisations going on the platform in 2023 is that they do obviously have more potential market share. I'm not going to say what size market share it is. This alludes to which ones they may be because we're under obligation to those organisations but we're not going to announce them until they're ready and we're ready to announce that they're going to go live during their first transactions as well. But it's fair to say that our intent is that we'll keep building the platform and keep building organisations that represent both small, medium and large and that's one of the reasons why we're aiming to get the 20% type of organisations in total signed up in terms of using the platform. 20% does not necessarily mean that they'll put 20% volume on straight away. That's a growth path. What we expect though is that that will happen if you look on the learnings in the Australian market as well. Why is that? Well, a couple of things. It's more efficient and effective for the customer. Secondly, there's a lot of fragmentation and broken processes in the UK. at least a bit of experience not only for the banks but the government and the consumers just generally. All the indications so far today is the work that we're doing would suggest that that hypothesis will be true and that's why we're again putting some of these benchmarks in terms of our plan. 22 and also put in the perspective to be delivered on and executed as well. So we expect that that will continue on as well. So as I said, we're also working to get meaningful volume in terms of revenue which is going to ring for some of that as well. And then we're also already developing some of that work on the silent purchase, which we expect to start having the market from next to the 24-25 with meaningful revenue in around the 26-27 period.

Okay, thank you. And just to clarify, what kind of lag is there from actually the signing the lenders through to actually transacting? It seems like it might be potentially one to two years for just wanting to get some colour on that?

No, not necessarily on that. And it's one of these things you learn as you build out. So just a couple of things in there. You've got to get in such as the bank agreements and you've got to do the relevant testing, you've got to get contracts and participation agreements in place. Both organisations have to ensure you've got the relevant cyber and security dimensions in place as well. We've been learning that as we've been developing as have our potential customers. That's why the first two have been quite helpful for us in terms of that process. But what I can also say on that If you take the platform build that we've been doing with our international touch UK, you know, pretty much within a 12-month period, we've actually been doing it, testing it, achieving new services. I want to end with all the secondary evidence around microservices. It allows us to move very, very fast, actually, and... And we're very encouraged by what was actually built to this starting partnership with South Fort Worth. And again, one of the other elements of the platform, and this is part of our strategy, should be able to be exported into other markets. And obviously, we're evaluating some of those other markets as well.

Okay, thank you. And if I can ask a second question then, just on interoperability. You know, we're just drawing closer to the end of the year. and ahead of the New South Wales election next year, particularly with Dominello retiring a week ago or so, is there increasing risk that that gets delayed again? Or how are you seeing that at the minute?

Well, look, what I can say, which has been consistent on this throughout, we certainly support competition in the regions that the right form of competition that actually helps consumers and businesses is always appropriately, if done well, is a good thing. And we've been active participants in that area. But in saying that, what we need to ensure that we don't go around doing something that is difficult and does not have benefits. And I think interoperability, I think we've all realised, is quite complex. And if you remember, it's really taking a number of years to work it through, both from a policy perspective, a technology perspective, a regulatory perspective. And in PEXA, in Australia, it took 10 years, really, to get up and running to build it out. So it's not easy. It's taken us a lot of time to work this through, and I can't predict what the future will look like. It's just... You know, we'll certainly keep working with the law enforcement, with the regulators on the benefits, all the benefits, the customers, citizens, shareholders and the community at large.

Thank you for taking my questions.

Thank you.

The next question will come from Brendan Pierce with Macquarie. Please go ahead.

Good morning, everyone. Just two follow-ups. Most have been covered in pretty good detail for now. But just on the WA and Queensland penetration, Queensland does look like it's sort of tapering off a little bit. So is there anything specifically that you think you need to do to get that trending higher again? Or do you think that without it being mandated in Queensland that you're kind of reaching a bit of a ceiling in near attempts?

No, firstly, just on Queensland, you know, we're still encouraged about where we're going on the Queensland market and as many things, it's getting people to utilise the platform. You know, when you reach the 77% that you don't want as an indication, you can get a sense that more and more people are using it as a company, the way of doing business. So I expect that to progress the right way. It's probably the best answer I can give you on that. In terms of Western Australia is slightly different because it does require certain, because it's already mandated, it does require certain transaction types to be digitalised. And those ones require not just us to do the work, but also requires the relevant government agencies and WA to work with us on that. And what I can say is is all partners are working together to achieve their outcomes. So I'm generally encouraged that we should see some progress there as well. It's all been done with the right spirit and intent.

Okay. And then my second question, which partly follows on from the WA answer. So on the Australian business, the investment of 20%, so I call it $45-50 million, and give or take next year, how much is maintenance versus investment in projects? And so as an example, investment in growth, would the WA product expansion or transaction increases be part of that investment in the core business?

We can't really give you exact numbers on that one, but I mean it's fair to say if you look at the mix today, which is sort of 50-50 off Ex Capish, you can see that it is a good blend of both growth and maintenance, and we will continue to do that. We have quite a strong trajectory of spend that we are spending on at the moment in terms of, as Glenn said, cloud and cyber, API and the broad resilience in the platform. So it is a good combination of both but we're certainly, as we move into a more competitive environment, continuing to invest not just to maintain but also enhance the platform.

Brilliant. That is this one actually. allude to some of it being maintained, it's also important for growth. You can't grow if you don't have a real robust cyber platform, as an example, and you've got to be up and running 100% of the time, basically. And that's another reason why we're doing all the APIs and removing friction points as well. So it's really a blended model. Yeah.

Yeah, no, that's fine. I might just leave it there. That was all I really needed to know. So thanks very much.

Thanks, Brandon. I think we've probably got time for one more. We're right on time.

The last question will come from Scott Russell with UBS. Please go ahead.

Morning, everyone. Yeah, two quick questions, if I can, please, Glenn and Richard. So the ACCC is obviously looking at vertical integration of LNOs and software providers. If they took a dim view there, which seems to be their preliminary opinion, how would that impact your business?

Well, in reality, it's... It doesn't affect our business because we're not a practice management software provider, which is the ACI group is. And we're agnostic to any practice management software provider for a start. So it doesn't have a... from our view on our business and what I can also say is that we're proactively providing appropriate information to the ACCC as they look at things such as DynDurham and other aspects in terms of the market from a vertical integration perspective. So I don't see personally that that's necessarily an adverse in terms of vertical integration. That's the first point. So it's important to ensure that there's clarity for all participants, not just from an HRC, but also from an R&S perspective, and we'll make sure we're active and constructive with our participants in that process. So that's probably my thing that I'm going to answer, Scott.

Would it be fair to say it would be more disruptive to your major competitor?

Look, I wouldn't necessarily want to... comment on competitors in terms of their business. I think that's up to other people to make the comments. What I can say, though, is that us, the techs, are always looking about how we can continue to approach our business across multi-market, multi-services, within all the spirit of delivering to our customers and all our stakeholders.

Okay, fair enough. Hey, just one other thing on what you're seeing in terms of volumes at the moment and the ones you're tracking towards over 900k. Just interested in how you framed that expectation. It looks like it's just three times what you saw in July. But if I look at listings, the July volumes obviously reflect listings from 8 to 10 weeks prior, which were very weak prior to the federal election and the property market jitters. But listings have come back in the last, call it six weeks, which would be a good lead indicator for your volumes going into August, September. To what extent have you reflected that in the OneView message?

So we do, obviously, with the nature of our platform, see workspaces set up before settlement. We've got a pretty good line of sight out by sort of six weeks. So you can imagine at this point in time, we're fairly confident in our first quarter numbers. We've said greater than 900. We've set that as a floor. We're certainly very confident that our numbers will be greater than 900. I can't really go any further than that, but we've got high confidence in the guidance that we've put out there. We certainly haven't just lost high July by three. It's actually based on what we're seeing flowing into the exchange.

Okay. No worries. Thanks very much.

All right. Thank you.

There are no further questions at this time. I would now like to hand the call back to Mr. King for closing remarks. Please go ahead.

Thank you. Just quickly, I just want to say thank you to everyone who's participated on the call and asked the questions. We greatly appreciate it. We also greatly appreciate the interest in the Vector Group. We've had a strong FY22. We believe we're in a good position for FY23. And we look forward to supporting our customer shareholders and all our board's stakeholders, and I want to say thank you to the FICSA team. Thank you. Thank you.

This concludes our conference call for today. Thank you for your participation. You may now disconnect.