PensionBee Group plc

Hello, I'm Romy Savova, the CEO of PensionBee. Welcome to our trading update for the nine months to September 2021. For those of you who are new to the PensionBee story, we are a leading online pension provider in the UK. We exist to make pensions simple so that everyone can look forward to a happy retirement. We enable our customers to combine their pensions into one new online plan, with money managed by the world's largest asset managers. We aspire to build a lifetime relationship with our customers, generating predictable and scalable revenue streams for our company and for our investors. We are very pleased to deliver another quarter of resoundingly high growth, achieving our operational and financial goals across our core key performance indicators. Underlying the results we are sharing today is our value proposition, which resonates in the enormous market of pension consumers who have £1 trillion in defined contribution pensions across the UK. Today, we will take you through the key highlights, some important business updates, a detailed financial run-through and confirm our outlook for the end of the year. In sum, we expect to deliver revenue growth at the top end of our IPO guidance for 2021, combined with increasing operating leverage, thereby concluding a productive first year as a listed company. Turning to our financial and operational highlights for the third quarter, I am pleased to report that our assets under administration increased to 2.25 billion, continuing to reflect a compound annual growth rate of over 100% for the period since 2018 and underscoring the growth story of PensionBee. We were pleased to celebrate the milestone of our 100,000 invested customers and are greatly encouraged by the rapid growth of our customer pipeline, which now stands at over 600,000 registered customers. Thanks to our predictable revenue model and high retention rate, the growth in assets has translated into similar growth in revenue. Our annual run rate revenue increased to £14 million or roughly $20 million. Examining the progress that we have made over the last year to the end of the third quarter, our invested customers grew by 75% and our assets under administration grew by close to 110% year on year, with similar increases reflected in our annual run rate revenue. The growth in our AUA reflects, of course, healthy markets, but also, importantly, an increase in the average pension pot being transferred to Pension B over the past year. These results are testament to our strategy and proposition, which continued to resonate in the market. First, we continued to efficiently invest in customer acquisition and brand awareness. As in previous quarters, the majority of our marketing spend was deployed in our top three channels, TV, out of home and paid search. Out of home advertising has been particularly important for us this quarter, as consumers continued to return to the streets. If you have been out and about in any major city, you are likely to have seen our advertising. And if you watch football, you will not have missed the Brentford Bees, for which we are the official pension partner, well rooted in the top 10 clubs of the Premier League. We continue to scale our digital channels with paid search leading the way. Our data platform has helped us grow and optimize this channel while also delivering important insights on our other channels that have helped us allocate our marketing budget with the primary focus of growing AUA while keeping the cost per invested customer within our desired 200 to 250 pound range. This quarter has truly been a quarter of innovation for the PensionBee product, and I'm pleased to show you one of our latest feature launches, Easy Bank Transfer. We have been rather explicit that our main commercial ambition, given the enormous size of the UK market, is to increase our customer base, then enable them to contribute more money into their pensions, and then to expand our product offering beyond pensions. Having hit the 100,000 invested customer milestone, I am pleased to announce that we have also taken an important strategic step to enable our customers to put more money into their pensions. Specifically, we are pleased to launch our Easy Bank Transfer feature, which enables our customers to pay into their PensionBee pensions in just 60 seconds. This feature has been achieved through open banking technology and a long-term partnership with open banking platform Plaid. This feature lays the groundwork for more innovative payment features into the PensionBee pension, which, by removing friction, we expect will increase our net flows from existing customers. An additional feature of note for the quarter is the use of personalised tax codes for customers over the age of 55, enabling them to access their pensions more tax-efficiently from the get-go and avoiding the emergency tax protocol for their second taxable withdrawal and beyond. This feature is important to maintaining customer satisfaction among our more mature customers who continue to account for a larger proportion of our overall customer base, positively contributing to our net inflows. And finally, our financial metrics continue to demonstrate improvements in our efficiency and operating leverage. These improvements are owing to ongoing product developments that enable us to serve our customers with less and less human intervention. One of the key features we offer is to flag exit fees or special benefits where they are found in the transfer process. This quarter, we revamped the review and transfer process to take into account the latest data about each pension provider so as to make the transfer automatically more expedient and safer for our customers, while reducing beekeeper involvement. We continue to invest in our technology over the year. Last quarter, we updated you on our data platform, which is helping us to drive marketing efficiency, an important objective as we continue to expand our marketing budget in line with our ambitious growth objectives. This quarter saw the onboarding of a dedicated data team who sit within our technology department and are actively expanding the use cases of the platform. When we regroup in early 2022, we will be sharing more insights from the data platform as we provide an update on the 2022-2023 marketing approach. I won't say much about the rest of 2021 at this stage as we are very confident in the remaining budget deployment and consequent output for the year. As always, customer service continues to be a distinguishing marker of our offering to consumers. We are pleased to have maintained our excellent ratings, to have added 10 new awards to our shelves since we last spoke, and to have built the type of internal culture that promotes employee and in turn customer happiness. And finally, we continued our ongoing engagement with our asset management partners. Today, we announced the simplification of our product range from 9 to 7 plans as we close the match and future world plans. Our match plan will transition to our tailored plan. Both plans are managed by BlackRock. Our future world plan will transition to our fossil fuel free plan. Both plans are managed by legal in general. We expect this product simplification to improve customer decision making, a key factor underpinning conversion, but to otherwise be budget neutral. And now I'd like to hand over to our CFO, Christoph Martin, who will take you through the financial update for the first nine months of the year.

Thank you very much for me. Hello and welcome from me to everyone. I would like to cover the financial section of the Q3 trading update. We continued to execute on our growth story as reflected by the consistently strong performance over the first nine months of the year. We are pleased to record strong asset growth to 2.25 billion pounds of EOE as of September. Over the first nine months in 2021, we added close to 900 million pounds in total assets, of which the majority of roughly 720 million pounds came from underlying net flows, excluding markets. I would like to highlight the asset growth drivers being new customers, existing customers, and market growth. First of all, we have driven asset growth through new customer acquisition. Growth from new customers represented the majority of asset growth over the first nine months at 521 million pounds or 60% of total asset growth. Over the first nine months of the year, we have acquired roughly 35,000 revenue generating invested customers and A higher proportion of these were mature customers which came onto the platform with a higher pension pot size, therefore being accretive to the average pot size figure which reached £21,700 as of September compared to £19,700 at the end of last year. Second, we have driven asset growth through existing customers on our platform who have continue to accumulate their pension wealth with PensionBee. Growth from existing customers was strong over the first nine months, adding close to 200 million pounds of AOA. Therefore, existing customers together with new customers' net flows contributed more than 80% of asset growth over the first nine months. Since the inception of the company, we have seen a high customer retention rate of 95% plus meaning customers remain on the platform and build the pension savings with us. We recorded a continuation of the 95% plus customer retention rates in Q3. In addition to staying on the PensionBee platform, customers have continued to consolidate further pensions into the PensionBee POT, have contributed into their pensions, and overall we have seen low levels of withdrawals. We therefore recorded a continuation of the circa 5% annualized underlying cohort growth in Q3, which captures consolidation, contribution, transfers out with roles and the pension fee fee and does exclude any market appreciation. These dynamics of high retention coupled with underlying cohort growth have generated attractive long-term value for the company. Third, we have seen asset growth supported by healthy markets. As it is customary, pension assets are invested in capital markets, which have performed well in 2021 and therefore we benefited on the back of market appreciation. In summary, both new customer acquisition of higher pod size customers and the retention of existing customers on the platform who grew their pension wealth with PensionBee have served to drive strong asset growth for us over the year-to-date period. We have turned our asset growth into recurring and predictable revenue stream thanks to our resilient contractual gross revenue margin. By way of reminder, the contractual gross revenue margin is the all-in fee charged to our customers before applying a discount, which increased slightly to 70 basis points for September 2021. This meant that we converted the 108% of year-on-year asset growth into 107% of annual run-rate revenue growth, translating into annual run-rate revenue of £14 million for September. We demonstrated clear operating leverage over the first nine months in 2021, thanks to the scalability of the technology platform. One of our profitability measures, adjusted EBITDA, reflects profitability prior to considering any growth market investment. We have seen any improvement of that metric from negative 35% to negative 23% over the first nine months this year compared to the same period last year, underscoring the scalability of the tech platform. The second profitability metric is adjusted EBITDA, which does capture the investment in marketing growth, which I will cover separately in the next two slides. But this metric has also demonstrated a notable improvement thanks to the scalability and continued efficient spend. To conclude, we have converted asset growth into revenue growth thanks to the resilient contractual revenue margin, and we have generated operating leverage for the year-to-date period. The majority of proceeds we raised during the IPO have been earmarked on marketing spend and therefore a close monitoring of that spend is critical. We routinely evaluate the attractiveness of that marketing deployment within the unit economics return framework, which includes a cost and return component. On the cost side, we measure cost per invested customer, which represents the unit cost of our marketing investment. I will cover the cost side on this slide while the return or lifetime value component I will cover on the next. We have continued scaling up our capital deployment into marketing. September represents an important growth month and is therefore a high marketing spend month for PensionBee. which is why we concluded the quarter at the upper limit of our tolerance threshold. In summary, we utilize a methodological approach to marketing investments to ensure healthy growth, and we continued to grow in a cost-disciplined way over the first three quarters of the year. It is very important to view the cost of acquisition together with the expected return on that investment in order to evaluate the return potential of the marketing investment, as shown in the illustrative unit economics example. The unit economics framework includes a cost and return component, and the multiple of return over cost guides to the attractiveness of that marketing investment. With regards to the cost component, we pay a one-time cost to acquire a given customer to come to our platform, which I covered on the previous slide. With regards to the return component, once on the platform, a customer builds their pension wealth with the company over the long term, evidenced in the high customer retention rate. This translates into a recurring and predictable revenue stream for many years. We then pay a fee to our money manager partners and bear the cost to serve our customers on our scalable technology platform. The remaining profit accrues to PensionV and generates lifetime value. The illustrative unit economics of the return over cost calculation with simplified assumptions indicates that PensionV deploys marketing capital with attractive returns of mid to high single digit multiples. I will now hand back over to Romy to cover the objectives and guidance and the outlook for the rest of the year.

Thank you very much, Christophe. Given the excellent performance for the year to date, as you might expect, we are reconfirming our medium-term financial objectives and guidance. I'm also pleased to note that we expect our revenue growth for 2021 to be at the very top end of the IPO guidance. You will see that we have achieved our stated revenue margin objectives and we expect this to continue, as will our focus on disciplined expenditure, which leaves us very much on track for our profitability objectives. We expect to continue delivering Folsom quarterly updates and will be providing a detailed end-of-year and forward-looking review in early 2022. We will also provide a more detailed timeline of our transition to the premium segment, a move we expect will generate additional demand and liquidity for Pension B. At this stage, we can confirm we are expecting the transition to occur in the first half of 2022. Thank you for your time today. We look forward to engaging in the Q&A session and during our upcoming meetings with the investor community.