PensionBee Group plc

Good afternoon, ladies and gentlemen, and good morning to those joining from the US and welcome to the PensionBee Q3 results update. Throughout this recorded update, investors will be in listen-only mode. Questions are encouraged. They can be submitted at any time just using the Q&A tab. It's situated on the right-hand corner of your screen. Just simply type in your questions at any time and press send. The company may not be in a position to answer every question received in the meeting itself. However, the company can review all questions submitted today, and we'll publish those responses where it's appropriate to do so. Before we begin, we'd like to submit the following poll, and I'm sure the company would be most grateful for your participation. I'd now like to hand over to CEO Romi Sivora. Good afternoon.

Good afternoon, and welcome to PensionBee's Q3 2024 results announcement. covering trading for the period ending 30 September, 2024. I'm Romy Savova, the CEO of PensionBee Group. For those of you who are new to the PensionBee story, we are creating a global leader in the consumer retirement market. We exist to help our customers prepare for and enjoy a happy retirement. We enable our customers to combine their old retirement accounts into a new online plan We enable them to make contributions, to invest in line with their objectives, with money managed by the world's largest asset managers and ultimately to withdraw and spend their retirement savings. Our aspiration is to build a lifetime relationship with our customers, generating predictable and scalable revenue for our company and for our investors. Over the third quarter of 2024, we continued to record strong growth in assets under administration, revenue, and invested customers. As a result of our revenue growth, effective cost control, and increasing productivity, we achieved positive adjusted EBITDA for PensionBee Group in Q3 2024, the second consecutive quarter of adjusted EBITDA profitability reaffirming our expectation of achieving group breakeven on the same basis for the full year 2024. In the United Kingdom, we were pleased to deliver significant growth with assets under administration of 5.5 billion pounds representing 41% year-on-year growth, annual run rate revenue of 34 million pounds representing 41% year-on-year growth and 260,000 invested customers representing 16% year-on-year growth. To continue capturing the market opportunity, we believe it is important to own our customer relationships so that we can fully understand the evolving needs of the consumer base, and ultimately serve them more effectively. To that end, we have invested 63 million pounds in the PensionBee brand cumulatively, and our prompted brand awareness now stands at an all-time high of 58%. Our data-led advertising approach, combined with our household brand name, has continued to deliver marketing efficiency. Each pound of marketing expenditure generated 85 pounds over the first nine months of 2024, an increase of 10% year on year in net inflow AUA generated per pound of marketing spend. At the same time, we continue to maintain a stable cost per invested customer of £244. Over the third quarter, we entered the US market, the world's largest defined contribution pension market, with $24 trillion in assets in partnership with State Street Global Advisors, a longstanding asset management partner of ours in the United Kingdom. State Street will provide meaningful marketing support over the next five to seven years, enabling PensionBee to deploy its diversified multi-channel marketing approach while reducing risk. Our U.S. expansion will enable PensionBee to become a global leader in the consumer retirement market. We are currently in the initial period of live testing, and over this quarter, we were pleased to see a positive consumer response to our marketing approach and to have developed local features to facilitate easier rollovers. I would now like to hand over to Christoph Martin, PensionBee Group's CFO, who will cover the financial update.

Thank you very much, Romy. Hello and a warm welcome to everyone. I'm pleased to cover the financial section of the Q3 trading update. PensionBee has performed strongly in the last quarter, owing to our two powerful value drivers of first, predictable and recurring revenue, and second, business scalability. The first weather driver is PensionBee's predictable and recurring revenue, which is generated from a durable base of assets under administration and is derived from the assets of existing and new customers. In Q3, we have seen a 41% year-on-year AOA growth to circa 5.5 billion pounds. The vast majority of our AOA base is derived from existing customers. So customers who remain with PensionBee for a long period of time and continue to build up their pension savings with us, resulting in value generation for decades to come. This is because our average customer is around 40 and they build up their pension savings with PensionBee, which means that cohorts on an underlying value basis are growing over time. In fact, PensionBee is a net retention business, meaning that our net retention is greater than 100%, which means that looking at the underlying cash movements of any particular cohorts, taking into account consolidation, contribution, withdrawals and attrition, but excluding any positive impact from market growth, that number is positive. Net retention of greater than 100% demonstrates the inherent growth on a cash basis that we see in cohorts acquired in previous years, year after year after year. That means cohorts for which we spend marketing budget acquiring customers in the past keep on delivering revenue year after year. As a result, on a year-to-date basis, we have seen positive growth of all our existing customer cohorts, even the ones acquired very early on in our corporate journey, a trend we consistently observe across cohorts and time. Next, AOA is also derived from new customers acquired through our proven acquisition approach. Strong brand assets and acquisition capabilities allow for new cohorts to come onto the technology platform with increasingly attractive economics. As a result, the compounding AOA base is subsequently converted into our revenue base owing to our resilient revenue margin. In Q3 2024, we have seen a revenue margin of 64 basis points, which enables us to convert the 41% of year-on-year asset growth into ARR growth of 41% and last 12 months, revenue growth of 40%. In conclusion, owing to our compounding AOA-based and resilient revenue margin, we have driven highly predictable and recurring revenue. The second value driver is PensionBee's business scalability owing to the controllability of our core space, which is thereby declining as a proportion of revenue. that consistent margin improvement is generated across all cost categories. As a result, we derive margin improvements over time, achieving our second consecutive quarter of profitability in Q3. With respect to our 2025 guidance framework for PensionBee as a group, outlining our short, medium and long-term targets. In 2024, we expect the group to generate revenue of above 30 million pounds. We further target the group to be at a given profitability point. In the short to medium term, spending around three to five years, we targets the group to generate revenue of above a hundred million pounds and group adjusted EBITDA margin of circa 20% by the year five, whereby the UK is considerably contributing to group profitability. In the long term, spanning five to 10 years, we expect the group to generate above a quarter of a billion pounds in revenue and target group adjusted EBITDA margin of circa 50%. I would now like to hand back to Romy for concluding remarks.

Thank you very much, Christoph. As you can see, it has been another excellent quarter for PensionBee. as we continue on our well-established and developed strategy in the UK, and as we continue to prioritize growth opportunities in the US. We will be taking questions, and for this particular platform, only written questions are enabled. So please do submit your questions on the right-hand side, and I would be happy to take them.

That's great, Romy. Thank you very much indeed. And just to remind investors, it's on the right-hand side. Q&A, type your question at the bottom, press send, and they will appear directly in front of both Romy and Christoph. Romy, as you can see, you've had a number of questions throughout the update that you've just provided us. Thank you very much indeed to everybody for your engagement. If I may just hand back to you, Romy, just to read out those questions, and I'll pick up from you at the end.

Thank you. Great. Let's begin with our first question. Pension B has set ambitious revenue targets aiming for 100 million pounds in the medium term and 250 million pounds in the longer term. Could you outline the key milestones and challenges you anticipate in achieving these targets? So Christophe, this is a question about group guidance and I'll hand over to you to discuss the considerations behind the group guidance on the revenue part in particular.

Yes, very happy to take this one. So the best way to really think about the guidance of how we get from where we are today to our medium and long-term guidance is in the following way. I think it's a very good perspective to look at the business from a segment perspective and thereby you can look at the UK and the US separately. So as you can see in the various data that we report on, the UK business is delivering like clockwork quarter after quarter. And so thereby we would expect that trajectory to continue given all the data that we have seen so far. So what does it mean specifically? As you have seen, the UK has now turned into a profitable business and the UK will be run as a profitable business going forward and it will become increasingly cash flow generative. So there's a huge opportunity to now redeploy that excess cash back into the business to really capitalize on our position in the $1.2 trillion So that's on the UK side, which is again delivering like clockwork. So the US on the other side is at the earlier stage of the compounding growth journey, as you know, and therefore has a different risk profile, but tremendous upside and return potential. And there we continue scaling the US business to become a more meaningful contributor over the medium to long term. I hope that answers the question, but happy to take any follow ups.

Thank you very much. I'll move on to the next question, which is a question around increasing marketing spend. in order to drive faster invested customer growth. And as Christoph just alluded to, we will indeed be increasing our marketing budget for PensionBee in the UK next year. We see tremendous opportunities to keep growing our invested customer base. At our recent Capital Markets Day that we hosted on the 1st of October, we outlined our plan of getting to 1 million invested customers. In order to get there over the next couple of years and over the medium to long term, as we've outlined, we would simply need to keep doing what we have been doing now. plus increasing our marketing budget, benefiting from our brand and prioritizing in some segments that we have currently left untouched because our marketing budget has been somewhat muted compared to historical standards. But yes, from 2025 onwards, you can expect our marketing budget to increase in pound terms. That being said, our revenue will also be growing healthily over the same period and will indeed be funding that marketing expenditure as we keep the UK business profitable. I hope that answers your question. I'll move on to the next question, which is, does the recent announcement that the government will prioritize Money Helper over commercial dashboards affect PensionBee's outlook? So our expectation around pension dashboards is that they will absolutely be a good thing for consumers to find their lost pensions, which we believe is an opportunity that we and others have sized at somewhere between 25 to 50 billion pounds of the 1.4 trillion pound UK market. So certainly not an insignificant opportunity to find lost accounts. And of course, the dashboard will help reunite individuals with those lost accounts. We at PensionBee, when the dashboard does become available, hopefully by the end of this decade, would expect to be a beneficiary of those lost pensions finding a new home. More recently to the question, the government has announced that the government's own dashboard, the money helper dashboard, will be coming to market first. And our intention was always to leverage the public dashboard in any case in order to prompt consumers to have a look, to prompt our customers to have a look and make sure that they haven't left behind any of their old accounts that they can then bring over to PensionBee. I hope that answers your question. The next question is around the US. Could you provide more details on the early consumer response from your US expansion? How do you see this market contributing to PensionBee's overall revenue growth over the next few years? As alluded to in this presentation and as covered in a bit more detail during our Capital Markets Day just a few weeks ago, The US is in the early stages of live testing. We have deployed a number of our marketing channels, including paid search, paid social, PR, organic search, and so on. You are very welcome to follow us on some of our social channels where we are increasingly ramping up and releasing fresh content. And what we can see in terms of the consumer appetite and consumer demand is that there is substantial appetite and substantial demand for an easy way for people here in the US to manage their retirement savings. And so we have been very pleased with the initial results of the marketing tests that we have conducted. We continue to make very good pace on the technology side as well. The platform is live and operational and we are able to onboard new customers. At the moment, we are investing in making the rollover journey or the transfer journey as simple as possible for our customers because we know that they want to have a smooth experience. If there's one thing we've learned from the UK, it's that customers always want to do kind of the easiest possible thing when it comes to finding a good home for their savings. And so the focus will be on that in the next couple of months. In terms of the trajectory over the next couple of years, I would refer you back to the group guidance. and the expectations that we have set forward there. We, of course, do anticipate the UK to be a substantial and major contributor to the group guidance, and that the US will start making an impact on those numbers as soon as it possibly can. But of course, the UK has 10 years under its belt, and therefore we expect the UK to be a primary driver of the group numbers over the next couple of years. I will take the next question, which is how does PensionBee view its position relative to competitors, particularly metrics like brand awareness and market presence, both in the UK and internationally? Well, certainly in the UK, which is where we have had the past 10 years of operation, you know, we believe that we have been very successful in terms of brand building. Certainly on a prompted brand awareness, we now stand at around 60% prompted brand awareness, which really puts us at the household level name. It's always incredibly motivating to hear that more than one in two people have heard of PensionBee before. That being said, we believe that really high brand awareness is possibly in the 80s to 90% zone, particularly in the UK and where we have looked at some of the household brands that are perhaps a bit more prevalent in the banking sector. And so our ambition is actually to keep growing our brand awareness in the UK because we want to be very much top of mind for any UK consumer who is minded to consolidate their pensions. And we know that those moments can happen in different times, whether that's job switch or having a baby or moving house. And so we always want to be top of mind for when it is the right time for a consumer to take action. With regards to our brand awareness internationally, we are establishing brand awareness in the US right now. I think certainly on the fintech scene, we are well known. We haven't measured brand awareness yet here. But as we continue to expand on the marketing efforts, you can be sure that we will be looking at that and looking to grow that and looking to prioritize awareness of our service and of our product here in the U.S. The next question is with PensionBee's SEC registration and partnership with State Street Global Advisors, what are the main regulatory challenges you foresee in the U.S. market and how do you plan to navigate them? So great question around regulation. I would start by saying that in the US, the service and the product that we offer is very similar to the service and the product that we offer within the UK. Specifically, it enables consumers to consolidate old accounts with us. And therefore, there are, as you would expect, some substantial similarities within the regulatory frameworks of each country, whether those are frameworks around marketing, around product, around communication. There is definitely a fair amount of overlap. So we, you know, from the past 10 years, we are well, you know, I think well educated and well versed in some of the factors that regulators prioritize. Of course, we are treating each market as a local market because there are differences. There are differences in marketing, there are differences in language, and there are definitely differences in regulation. And therefore, we are taking our broad experience of what regulators care about in consumer markets related to retirement savings, but of course, localizing them for each market through a dedicated local resource on that front. I hope that answers your question. I'll move to the next question. Can you share more about the specific technological advancements made on the platform and how they contribute to long-term scalability? This is an excellent question around the technology and how we continue to evolve the technology. The technology is, of course, designed to be one that is incredibly scalable from the get-go because we have chosen cloud-native platforms that are designed to scale to millions and millions of users. From inception, we already have scalability built into the technology. A lot of the current scalability initiatives and efforts that we focus on as a product and technology team really relate to making it easier for our customers to do transactions and to self-serve without needing to get in touch. As much as we love speaking to our customers on the phone, we know that our customers just prefer to get things done as easily as possible. and therefore our focus is on giving them the information they need before they think to ask and before they think to ask us about it. That includes some of the features that we have released around investment transparency and making it easier for our customers to view and monitor their investments and predict some of the outcomes they may have from those investments. It also includes critically investments in some of the pension transfer technology in the UK, where with the wealth of experience that we have working with various providers, we have been able to and we continue to automate significant aspects of the transfer journey such that no human needs to touch a pension, which is, of course, our goal. And then third, around the technology, as you will have seen at our Capital Markets Day, we demonstrated some of the ways that we are leveraging AI to analyze our customer conversations, to continue informing and developing features that will enable customers to serve themselves before they think they need help from us. So I hope that answers your question.

Yeah, maybe just one point to add on the business scalability. So with regards to the technology platform and the scalability, we did provide a very rich data sets just very recently at the Capital Markets Day. And what you will see there in that reporting and is that we actually doubled the number of customer per FTE that we can serve on our technology platform. And so that means it makes us much, much more productive, actually. And the financial implication of that you can further see in the long term time series, because when you look at the costs as a proportion of revenue that has consistently come down as we scaled the business and as we have executed on very strict cost control, what that basically means is that on a profitability or adjusted EBITDA margin that has improved alongside as we have reduced the cost as proportion of revenue. Hope that makes sense.

Thank you very much, Christoph. And I see two questions on the side. For those who are keenly following our NES announcements, you will have seen that we have announced the commencement of a placing For obvious reasons, I cannot comment on the placing, but all of the information that you need to know around that is available in the RNS in and of itself. And, of course, we will be providing more information in due course around that, the primary purpose of which is to accelerate the U.S. growth trajectory, which I do understand is absolutely a top topic of discussion amongst investors and a strong desire amongst investors following our Capital Markets Day.

That's great. And I don't see any other questions. No, you've taken all the questions. So thank you once again to everybody for their engagement this afternoon. Romy, Christophe, thank you very much indeed for addressing all of the questions that are coming from investors. Romy, I know investor feedback is particularly important to you and to Christophe and to the company. And I'll shortly redirect those on the call to give you their thoughts and expectations. But perhaps before doing so, Romy, I could just ask you for a couple of closing comments, after which I'll redirect investors to give you their feedback.

Well, thank you very much. Thank you very much for joining us today. We are always pleased to have the opportunity to interact and engage with the capital markets community. And we look forward to having further conversations over the coming days.

That's great. Thank you again. Perfect. Romy, Christoph, thank you once again for updating attendees. Can I please ask attendees not to close this session as we're now automatically redirecting you for the opportunity to provide your feedback in order that the management team can better understand your views and expectations. This may take a few moments to complete, but I'm sure it will be greatly valued by the company. On behalf of the management team of PensionBee Group PLC, we'd like to thank you for attending today's presentation and good afternoon and good morning to you all.