PensionBee Group plc

Hello, I'm Romy Savova, the CEO of PensionBee. Welcome to our first quarter trading update for 2022. 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 recently published our annual report and financial statements for 2021. And in our first four year results following our IPO, we were very pleased to have delivered resoundingly high growth, achieving our operational and financial goals across our core key performance indicators. The first quarter of 2022 is a continuation of that momentum. We are proud to have delivered growth in line with our guidance and full year objectives despite the ongoing market volatility that has undoubtedly affected consumer sentiment. As always, underlying the results we are sharing today is our value proposition, which resonates in the enormous market of pension consumers who have one trillion pounds in defined contribution pensions across the UK. Today we also look forward to celebrating PensionBee's admission to the premium segment of the London Stock Exchange. This important next step for the business reflects PensionBee's continued commitment to strong corporate governance and our dedication to realising our growth ambitions. The move is expected to further enhance the company's profile and brand awareness whilst broadening the opportunity to own the company's shares to a wider group of shareholders through index inclusion. Turning to our financial and operational highlights for the first quarter, I am pleased to report that our assets under administration increased to £2.75 billion, putting us well on track to the £3 billion milestone. This continues to reflect a compound annual growth rate of over 90% since 2018. We are particularly pleased to have maintained our growth momentum despite a volatile market background, with the S&P 500 delivering negative growth of about 8% year-to-date as at the time of recording. We are also pleased to have attracted over 200,000 active customers and to have approximately 140,000 invested customers. Our registered customer pipeline is now nearing the 1 million mark. Thanks to our predictable revenue model and high retention rate of over 95%, the growth in assets has translated into similar growth in revenue. Our annual run rate revenue increased to £17 million, also reflecting an annual growth rate in excess of 90% since 2018. Taking a closer look at the past three months, I am pleased to report that we have added over 20,000 invested customers in the first quarter alone, reflecting a year-on-year growth rate of 70% and year-to-date growth of 17%, higher than the guidance we delivered in our last presentation to the market. We are pleased to see the asset and revenue base each increasing by approximately 65% over the past year. This outturn continues to support our overall guidance for 2022. As always, our results are testament to our strategy and proposition, which continue to resonate in the market. We have previously communicated that, guided by our data model, we plan to deploy a substantial part of our marketing budget in the first three months of the year. I am pleased to report a deployment of 8 million pounds in advertising for the first quarter, well in line with our budget and growth ambitions. We deployed our budget across our prevailing top channels, search, TV, and out of home. Thanks to our data, we were able to respond rapidly to a changing market environment, which affected consumer sentiment among the over 50s in particular. Our more mature target audience was less likely to take financial action this quarter, and therefore we focused on a slightly younger customer base, delivering an average new customer age of 37 compared to 39 in the first quarter of last year. This was achieved through deliberate changes in our paid search strategy. We deployed a greater proportion of our budget in the app stores, where we tend to attract a younger audience. We also delivered and continue to deliver an enormous brand campaign across the country to support our acquisition activities for the rest of the year. As a result, our cost per invested customer has increased to £268 for the quarter, in line with our expectations and guidance. As we consider marketing initiatives for the rest of the year, we expect to now actively focus on delivering a strong reduction in our cost of customer acquisition. Our product activity will support this endeavor. We will be expanding some of our lowest cost channels, including referrals and email marketing, by integrating these channels closer within our product and technology. With a registered customer base nearing the 1 million mark, now is the right time to harness our enormous marketing investment. In addition, we will continue to deliver the excellent experience customers have come to expect from PensionBee through ongoing enhancements to our contribution capabilities, including the rollout of easy bank transfer in the web estate and the launch of regular income payments for withdrawing customers. To support our ambitions, we have continued to invest in the ongoing performance of our industry-leading technology platform. We delivered further transfer efficiency improvements, internal automations and information security enhancements to support growth, productivity and safety. This is evident in our increasing productivity with invested customers and revenue per full-time employee demonstrating strong annual improvements in line with operational leverage. Many of these improvements were designed to support our customer service team, enabling us to continue delivering a high quality of service despite substantial growth and exceptionally volatile markets that impacted our customers' pension balances. We are pleased to have maintained our excellent ratings across Trustpilot and the app stores. With regards to our investment offering, it is in times like these that we are proud to work with the largest money managers in the world who help PensionBee to give our customers peace of mind. As previously mentioned, we have identified substantial demand in our customer base for an impact-led investment plan. I am pleased that our search for this plan is progressing well and we expect it to conclude very soon. And now I'd like to hand over to our CFO, Christoph Martin, who will take you through the financial outcome for the quarter.

Thank you very much, Romy. Hello and a warm welcome from me to everyone. I would like to cover the financial section of the first quarter trading update. We continued to execute on our growth story as ERA reached 2.75 billion pounds at the end of the quarter, representing a 67% year-on-year growth rate. Against an enormously challenging market backdrop, we generated 237 million pounds of net flows over the period. I would now like to highlight the asset growth drivers in more detail. First of all, we have driven growth through new customer acquisition. Growth from over 20,000 new invested customers represented the majority of asset growth over the quarter at circa 153 million pounds. The average consolidated pension pot was slightly smaller than usual, owing to market volatility that impacted sentiment among more mature customers. We observed that over 50s were less likely to transfer their pensions, preferring to wait for conditions to stabilize. This led us to refocus our online acquisition activities on slightly younger customers with an average age of 37 this quarter versus 39 in Q1 last year. It is worth noting that while a 37-year-old average customer might have a smaller initial pension pot, they're expected to have a longer lifetime with us to generate attractive lifetime value for PensionBee, thanks to the high retention rate. Second, we have driven asset growth through existing customers who have continued to accumulate pension savings with PensionBee. Growth from existing customers over the quarter was 85 million pounds of AOE. Therefore, existing customers together with new customers' net flows contributed circa 237 million pounds of asset growth over the quarter. Since the inception of the company, we have seen a high customer retention rate of over 95%, meaning customers remain on the technology platform and build their pension savings with us. We recorded a continuation of the greater than 95% customer retention rate. In addition to staying on the PensionBee platform, customers have continued to consolidate further pensions, 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 gross figure in Q1, which captures consolidation, contributions, transfers out, withdrawals, and the PensionBee fee. Importantly, the 5% underlying cohort growth figure excludes market growth. These dynamics of high customer retention coupled with underlying cohort growth have generated attractive long-term value for the company. In summary, While we were negatively impacted by unavoidable market volatility, we generated asset growth over the quarter thanks to strong net flows from new and existing customers. We have turned our asset growth into a recurring and predictable revenue stream thanks to our resilient contractual gross revenue margin. By way of reminder, the contractual gross revenue margin is the annual fee charged to customers before applying any discount, which again remained resilient in Q1 at 69 basis points. This meant that we converted the 67% of year-on-year asset growth into 63% annual run-rate revenue growth, translating into annual run-rate revenue of £70 million for March 2022. As already communicated, we executed on our plan to accelerate marketing expenditure in the first quarter, priming us for low-cost marketing growth for the rest of the year. On a trailing 12-month basis, we have seen an improvement in adjusted EBITDA margin to negative 151% compared to negative 164% last year. On an adjusted EBITDA margin profitability before marketing investment, we saw an improvement from negative 36% to negative 29% LTM to March this year compared to last year. This improvement in operating leverage is due to the scalability of the technology platform as evidenced in rising invested customers and revenue per staff member as pointed out earlier in the presentation. As both margin developments are consistent with our expectation, we reconfirm the guidance around adjusted EBITDA profitability by the end of this year and adjusted EBITDA profitability by the end of next year. To conclude, we have converted asset growth into revenue growth thanks to the resilient contractual gross revenue margin and we have continued scaling the business operations. 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 marketing expenditure within the unit economics 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 will be covered on the next. As guided, we accelerated marketing deployment in Q1, which saw a temporary increase in CPIC to £268. We now expect the CPIC to decline strongly over the course of 2022, thanks to, first, a reduction in the velocity of marketing expenditure. We expect the marketing deployment over the next quarters to be significantly below the Q1 costs at around 3 to 4 million pounds per quarter compared to 8 million pounds this quarter. Second, the impact of the upfront marketing investments is that conversion into invested customers has a longer time period to roll in for the remainder of 2022, thereby reducing CPIC as we approach the end. In summary, as guided, an accelerated marketing deployment saw CPIC grow in the first quarter. The subsequent quarters will now be focused on conversion on the back of more moderate marketing spending levels and an increase in lower cost marketing activities to capitalize on our growing brand awareness. It is very important to view the costs 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 a 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 savings with the company over a long time, evidenced in the high retention rate. This translates into a recurring and predictable revenue stream over many years. We then pay a fee to our money manager partners and bear the cost to serve customers on our scalable technology platform. The remaining profit accrues to PensionBee and generates lifetime value. The illustrative unit economics of return over cost calculation with simplified assumption indicates that PensionBee deploys marketing capital with attractive returns of mid to high single digit multiples. I will now hand back to Romy to cover guidance, investment highlights and further updates.

Thank you very much, Christoph. Given the performance to date, we are pleased to reconfirm our medium term financial objectives. We expect to deliver high double-digit revenue growth in 2022 and for revenue to exceed £20 million. We expect to deliver this with consistent margins in line with historical averages. 2021 demonstrated strong improvements in operating leverage and by the end of 2022, we expect to have achieved profitability on an adjusted EBITDA basis. As confirmed earlier, we have now deployed 8 million pounds of our 17 to 20 million pound marketing budget. The resulting growth in net flows from new customers combined with net flows from existing customers will see us achieve full profitability on an adjusted EBITDA basis by the end of 2023 as always expected and consistently communicated. As you can see, PensionBee continues to take advantage of the vast and growing UK defined contribution market. Our differentiated customer proposition and scalable technology platform have been designed to serve an enormous customer base. Our successful brand building and customer acquisition activities have enabled us to grow with a clear path to profitability, and I and the rest of the executive team are committed to continuing on this path to serve our customers. We look forward to engaging with investors at our annual general meeting in May and at the first half results in July. Thank you for your time today.