PropertyGuru Group Limited

All right, we're going to wait a second for all the attendees to get in and then we'll get started. It looks like almost everyone is here, so we'll get started. Thank you for standing by and welcome to the Property Guru Group first quarter 2024 earnings conference call. Currently, all participants are in a listen-only mode. As a reminder, today's program will be recorded. If anyone objects, please disconnect now. Now, let me introduce Nat Otis, Vice President of Investor Relations. Mr. Otis, please go ahead.

Good morning and good evening. Welcome to Property Guru Group's first quarter 2024 earnings conference call. On the call today are Jeremy Williams, managing director of our flagship business marketplaces, and Joe Disch, CFO. Before we get started, a few reminders. Firstly, our results are available in the earnings release that can be found in the investor section of our website. Secondly, today's webcast is being recorded. A replay and transcript will be available in the investor section of our website. Thirdly, we'll be making forward-looking statements including, but not limited to, statements regarding our future results and expectations for the business. These statements are neither promises nor guarantees and involve risks and uncertainties that may cause actual results to vary materially. Please refer to our earnings release and SEC filings for more information regarding risk factors. Forward-looking statements are based on current expectations, and the company is not obligated to update them except as required by law. Fourthly, this call contains non-IFRS financial measures. For a reconciliation of non-IFRS financial measures to the most directly comparable IFRS metric, please see our earnings press release. Lastly, all dollar references are in Singapore dollars unless otherwise stated. With that, let me turn the call over to Jeremy.

Thanks very much, Nat. Thank you for joining us for our first quarter 2020 for earnings conference call. I've been the managing director of Property Guru's Marketplaces business for the past six years, and it's great to be part of today's call. Property Guru recently marks its two-year anniversary of being a publicly listed company, and we thought this would be a good opportunity for me to update everyone on our continued progress. Now to the quarter. We started 2024 with another solid quarter of double digit revenue growth and double digit adjusted EBITDA margin, demonstrating our business model strength and operating leverage. Amongst highlights, our Singapore performance illustrated the value proposition we deliver to our customers, even during a period of slower market activity. We also saw some early signs of property market recovery in Vietnam and Malaysia. The first quarter witnessed governments across our region introducing robust policies that will help accelerate growth in the short to medium term and uplift property market sentiments. I will now zoom in on the key updates and property trends from our markets this quarter. In Singapore, the government continues to project growth in the 1-3% range for 2024, with first quarter GDP coming in at the high end of the range. Of note, construction-related GDP continues to outperform overall levels and was up over 4% in the first quarter, which bodes well for future housing supply. No near-term changes in interest rates are expected as the Singapore Central Bank maintains its current monetary policy while continuing to monitor inflation. The Singapore property market has had a tempered start to the year as higher housing prices, elevated interest rates and overall market uncertainty have weighed on consumer demand. On the sales side, our property sale demand index was down 17% in the quarter, while both prices and supply were up 1% compared to the prior year's quarter. On the rental side, our rental demand index was 38% lower than in the first quarter of 2023. As a result of both the reduced demand and the 66% increase in supply, rental prices were down 7% from a year ago. Whether it's sales or rental, the cautious buyer sentiment in Singapore drives greater agent competition, highlighting our sweet spot in providing vital value-add solutions for agents when transaction volumes slow down. As a result, our top line continues to grow despite softer market conditions, underscoring the optimism we have in our Singapore business going forward. In Malaysia, housing affordability continues to be the primary issue in 2024. Malaysian GDP grew over 4% in the first quarter, in line with central bank expectations for 4% to 5% growth for the full year. The Malaysia Central Bank chose to maintain interest rates at their current level in March, as inflation remains in check. While the limited availability of affordable mid-range housing and the price gap between buyers and sellers in Malaysia remain two of the biggest impediments to a property market recovery, we do see some signs of improving buyer interest. According to our recent Malaysian Consumer Sentiment Survey, one in three Malaysians intend to buy a property in the next two years, even if prices continue to rise. This bodes well for the prospects of a market recovery in the medium term. In Vietnam, while 2023 was a challenging year, we have begun to see green shoots of recovery in 2024. On March 24th, sales listings hit a 12-month high on our Ba Dong San platform and our market demand index was up 15% from the first quarter of 2023. In addition, the Government of Vietnam is working hard to support the property market with additional catalysts. One important way it is addressing this is by trying to bring forward the effective date for three newly amended real estate laws from 2025 to July 1st, 2024. These laws would provide for more consistent and realistic land appraisals, tighten developer requirements across a project's lifecycle, relax rules on foreign ownership, and better organize the agent community. As the leading marketplace in Vietnam, we believe these new laws provide a great opportunity to further improve the structure of the country's property market, especially the component that will require all agents to be affiliated with an agency. According to our recent survey, 65% of consumers view these new laws as positive actions, which should clearly help sentiment. With respect to credit, bank lending rates have decreased in Vietnam since the Prime Minister called for banks to publish average bank lending rates in March. We remain bullish on Vietnam's long-term prospects, which are supported by its population demographics, growing digitisation and high growth potential. Infrastructure investments are facilitating greater urbanisation and contributing to positive trends in the housing sector, reinforcing our confidence in the market. Let me now provide an update on the recent product progress within the group. Property Guru kicked off 2024 with the introduction of new solutions for our customers, coupled with a sustained uptake of previously launched offerings. Central to our DNA, we continue to craft pioneering technology aimed at helping customers make confident property decisions. Our strategic integration of machine learning and generative AI into product development and business operations continues to accelerate our innovation. A prime example of this is our AI video feature, which was rolled out in Singapore. This feature facilitates the auto-creation of a video based on listing images and text descriptions uploaded by our agent partners, helping to deliver a better consumer experience while also being more time efficient for agents. 60% of agents who engage with the AI video feature chose to incorporate it into their listing gallery. In Vietnam, as part of our effort to assist the industry improving property market transparency, this quarter we rolled out professional agent verification. This solution uses several different forms of information to help the company independently verify agent authenticity, enabling further trust and transparency on our marketplace. The response has been very encouraging, with more than 500 agents verified in the first week alone. Lead management, which we launched last year, supports agents with powerful lead-related insights that help them close deals faster. It has garnered increasing approval among agents, as evidenced by a recent survey that shows a 25% increase in satisfaction levels for agents who use the solution. Moving on to our data and software solutions business. DataSense, our proprietary data and analytics tool, brings valuable insights to our customers, helping them confidently make critical strategic investment decisions. February saw the introduction of DataSense Self-Serve for Malaysian agents, facilitating their seamless access to our DataSense modules. They can now leverage our comprehensive data resources to research, negotiate, and advise using timely and relevant insights. In March, we rolled out Demand Analytics Pro in Thailand and now provide coverage in all four markets. Demand Analytics Pro utilizes proprietary data to analyze supply and demand dynamics at all market levels, from as large as countrywide to as small as township or project level. For our developer and government customers, the comprehensive nature of this solution is exactly what they are looking for as they make critical investment decisions. In FinTech, we've made good progress with our digital application for in-principle approval and home loans, which we announced last year. Over half of our applications are now being completed through the guided digital application journey. A select number of our bank partners benefit from an advanced experience that includes features like digital signing, and as a result, their digital application adoption rate is up to 72% of overall submissions. These digital experiences are especially appreciated by consumers, with over 80% of users having consumer satisfaction ratings of either four or five stars in ongoing surveys. Looking ahead, we remain committed to harnessing innovative technology, expanding generative AI applications, and strategically investing in initiatives tailored to navigate the dynamic Southeast Asia property landscape, both in the present and the future. As a final update, I'm proud to share that we have recently released our first sustainability report supported by the recently launched Gurus for Good, our sustainability mandate. I will now hand the call over to Joe to walk you through our financials.

Thanks, Jeremy. Property Gurus started off 2024 with another solid quarter of double-digit revenue growth and double-digit adjusted EBITDA margin. Revenue was up 12% to $37 million in the first quarter as we navigated a phased recovery in Vietnam and Malaysia. What is remarkable is that we delivered this increase in revenue while costs within adjusted EBITDA remained flat year over year, which led to a 12% increase in our adjusted EBITDA margin, up from less than 1% in the first quarter of 2023. The ongoing strength in Singapore was especially helpful, as was the success of our active cost management, with Property Guru continuing to improve profitability and this quarter delivering margin expansion in all of our marketplaces, regardless of top-line performance. We continue to set ourselves up to benefit from our technology investments and prudent cost management as our property markets rebound and Southeast Asia returns to its position as a world leader in economic transformation and growth. Now for more details on our marketplace businesses. In Singapore, revenue was $24 million in the first quarter, up 25% from the prior year quarter, and our adjusted EBITDA increased to $19 million for a 79% margin. Once again, increased adoption of our market-leading products and active cost management helped us deliver another quarter of strong results. Our Singapore agent base grew again this quarter. We now have over 16,400 agents. Our renewal rate was 77% for the first quarter and the quarterly average revenue per agent or ARPA was up 22%. In Malaysia, revenue was $7 million and adjusted EBITDA was $4 million, both flat with the first quarter of 2023 with an adjusted EBITDA margin of 52%. On a local currency basis, revenue was up 5% in the quarter. We believe lower interest rates and easing in inflation concerns will help improve conditions as we move through 2024. In the meantime, though, we will continue to focus on product development and optimising our customer value proposition. In Vietnam, revenue was $3 million in the quarter, flat with the first quarter of 2023 and adjusted EBITDA was break-even. Of note, on a local currency basis, revenue was up 3%. I would also add that following four quarters of double digit decreases in revenue, our top line has begun to improve. The average revenue per listing in Vietnam was up 13% in the quarter, but this growth was offset by a 13% drop in listings to a million. As Jeremy noted, despite the overall drop in listings in the quarter, we are encouraged by the 12 month high point that was reached in late March. We believe the government's actions to improve consumer sentiment and facilitate a recovery in the property market should help as we move through the year. More importantly, it appears as if consumer sentiment is turning positive again. Turning to the balance sheet, we ended the quarter with $300 million in cash. In summary, our results this quarter were a solid start to 2024. Following double-digit revenue growth and double-digit adjusted EBITDA margin in 2023, we continued this trajectory in the first quarter, which is traditionally a quiet seasonal quarter given multiple national holidays. Profitable growth is more than a phrase for us. It represents the intersection of active cost management, targeted investment, transformational technology and hard work, and is how we are future-proofing our core business every day. With respect to our published outlook, full year 2024 revenue remains between $165 and $180 million and adjusted EBITDA remains between $22 and $26 million. We're excited about our opportunities for the rest of the year as we continue to deliver profitable growth while the markets we operate in bounce back and Southeast Asia gathers further momentum. I would like to thank all our gurus for their hard work and our customers for their continued support. I will now turn the call over for questions. Operator, we're ready for our first question.

Thank you, Joe. We will now take your questions. Please use the raise hand function if you want to ask a question. To facilitate the Q&A session, I will invite you to ask the question and unmute you. Please state your name and firm before asking the question. Our first question is going to come from Nick Jones.

Hi, Jeremy. Hi, Joe. Nick Jones, Citizens J&P. My first question, can you talk about just your relative kind of share gains or the share dynamic of the property group business and your key markets versus kind of what's happening now? In the underlying markets, you know, top line growth has been decent. You know, Vietnam seems to be turning the corner. But when we think about Singapore and Malaysia, maybe just the broader business, are there kind of clear share gains in the marketplace business or just broadly? Or can you maybe add just a little context as to Property Guru's performance versus kind of underlying market dynamics?

Yeah, yeah. Thanks for the question, Nick. Look, we feel really confident where we're positioned in all of our markets, Singapore, Malaysia, Vietnam and Thailand. I think obviously, you know, we spoke a little bit during the call. You know, the Q1 was a little bit of a quieter quarter here in Singapore in particular. I think, you know, we've seen, you know, the ebb and flows in the market before. And two things typically happen during these sort of periods periodically. First of all, is that agents definitely bias their spend to channels where they get the greatest ROI. And in all of our markets, we have very strong positions. So we definitely are a beneficiary in that respect. Secondly, we also see that in a market like Singapore at the moment, agents are having to work harder to get leads for their listings. So given the depth products that we offer globally, to our agent customers through greater reach and greater leads, we see more and more agents using our depth products. So I think given the strong market positions we have across all four of our markets, really sort of happy with the quarter and confident in the value that we're delivering. And we think we're sort of well poised specifically in markets like Malaysia and Vietnam as they begin to recover into the year.

And maybe just a finer point, I think in the press release, it was one in three Malaysians is going to buy property in the next two years. You know, piggybacking off my last question, you know, how should we be thinking about that kind of flow through into Property Guru's model? I mean, can you capture the vast majority of that? Will that just help drive incremental share gains, specifically in the Malaysian market?

Yeah, so we enjoy a very strong position in a Malaysia market. And you're right. I mean, it's great to see the underlying consumer demand is strong with one in three Malaysians intending to buy a property in the next two years. There are some encouraging signs in the Malaysia market. Q1 GDP was at 4%, which was encouraging the inventory overhang. reduced at the end of 2023. And also, it's good to see sort of the political situation stable after a couple of years of uncertainty. So again, you know, I think, you know, we are very well positioned given the share that we have in the Malaysia market and given some of these green shoots of recovery that we're starting to see, it gives us confidence about the year ahead.

Great. And last question, just on, you know, I think it was 60% of agents using AI video features after the first trial. How is AI showing up in the business? Is this kind of value added, increasing revenue or ARPA? And how impactful can AI be in kind of your product roadmap going forward?

Yeah, so AI is a big part of our product roadmap going forward. Obviously, we referenced the AI video feature that we launched in Singapore, and this is really focused in two ways. The first is a better experience for our consumers, our property seekers. They clearly want more of an immersive content experience, and AI helps leverage that. You know, that's one element, right? Guru picks, which he spoke about last quarter is another element where it really does increase the consumer immersive content and increase consumer engagement. So that's on the first side. On the second side, you know, it's really a lot of efficiency gains for our agent customers as well. So now instead of having to take a video of a listing, we can help them stitch together a video based on those listing images. So on the one hand, obviously, it's a great experience for our consumers and our property seekers. On the other hand, it drives real-time and efficiency gains for our agent customers. So I think that's where we're focused today. At the moment, you know, over time, we'll sort of see, you know, how we incorporate this into various subscription packages, you know, to potentially drive ARPA. But at the moment, really focused on driving a better consumer experience and more efficiency for our agent customers.

Great. Thanks, Jeremy. Thanks, Joe.

Thanks. Okay. Excuse me. Our next question is going to come from Bon Jiang of Benchmark. Go ahead.

Just want to follow up on your commentary around the turnaround of your Vietnam and Malaysia. I think we see some early signs of market recovery. Just want to... get a better sense of the pace and magnitude on the recovery side. The last cycle, especially Vietnam, we actually saw a V-shaped recovery. Just wondering, you know, how should we think about recovery, I guess, pace for this round? Any pros and cons that may or may not be differentiating from the last cycle?

Yeah, thank you. Thank you for the question. Look, you know, it is really encouraging to see some of the green shoots that we are seeing in Vietnam. So, you know, the government is taking a very proactive approach to help sort of bolster the real estate sector. You know, obviously, there was the recently announced land laws, which the government is looking to accelerate from 2025 to earlier this year. So that is really encouraging. You know, we think, you know, one of those land laws in particular around agent professionalisation is, is going to be ties in very well with one of our themes around bringing sort of more trust and transparency to the market. So when you think about the professional agent verification that we launched in Q1, that's really closely tied with what the government's trying to do around organising And, you know, we think as a market leader, you know, we're very well positioned to just capture, you know, those benefits as the market does improve. I think underlying consumer demand is strong, was up significantly in Q1 2024 over 2023. So I think that is encouraging. So in terms of whether it's going to be sort of a V-shaped recovery or sort of take longer, I think it's a little bit early to tell there. I think where we take a lot of confidence is obviously some of the external things that are happening in the market. And we're also using this time internally to become more efficient. So in Q1, we also launched a business transformation initiative internally. which is really sort of going to redesign our commercial organization and our go-to-market strategy. So that's going to really make us more efficient and drive growth when the market recovers. I think finally, we've got a great team in Vietnam as well who's executing very well. So I think these things that are happening externally and internally give us a lot of confidence that when the market does recover, we're going to be in a very, very strong position.

Understood. Thanks, Jeremy. Second question, I want to switch gears on your FinTech business. It seems like a slow start of the year. Just, you know, wonder what's the driver behind it and how should we think about the rest of the year on the FinTech outlook?

Sure. Thanks for the question. Yeah, I mean, in our results, we sort of put together in one line by fintech and data business and also said help up. So they're kind of merged in there. I think there's a couple of factors. You know, we did our fast key business was was closed down at the end of last year. So that's in the results last year, not in this year. So that's partially reflected. I think also, you know, it's proved a little challenging on the fintech mortgages side. The transaction volumes have been down a little bit in Singapore of late, and that's put a little bit of pressure on us. But I think, you know, more generally, we have a strong sense of belief and conviction in what we're doing. We believe Sendhelper is a cracking business going forward and it's got a fantastic niche in Singapore. And that data is a huge opportunity. You know, I think... You know, there's peers that make $150 million of revenue in Australia alone in a market with great data. So, you know, imagine the future, what we should be able to do in a market where there's limited data and we have a lot of that on a proprietary basis. So we're very excited about it, but we are market making rather than market taking. I think in all honesty, it's taking us a little longer to gain market traction, but we continue to invest and we expect this year to see continued improvement as we deliver what we hope will be a sizable business in the future.

Thanks, Joe. My last question is actually on your cost expenses. I mean, you confirmed your full year EBITDA margin, but you had a really solid start. So your Singapore EBITDA margin actually hit the record high. So I just wonder, how should we think about puts and takes on your, again, margin trend for the rest of the year? In addition, what might surprise us on upside versus downside in terms of profitability for the year?

Yeah, thanks. Look, I think we stand by our predictions for this year, as we sort of reiterated. There is a range there. I think we're very positive at the start of the year and very positive for the results for Q1. i think both on the revenue and the cost side on the cost side we are a very disciplined organization we we certainly are very careful where we invest and we do we are constantly gaining more efficiencies and and better leverage however on the cost side this is seasonally i guess sort of a lower cost period generally due to all the sort of the national holidays marketing spends tends to sort of sort of drop And I think that's partially reflected in our results. But look, we are focused on cost management, focused on delivering improvements and operating leverage, but we are also a growth business and you will see some greater investment during the year as the markets move out of the holiday season. We intend to keep growing the business and part of that will be investing in things like marketing and people, et cetera, in order to maximise that yield.

There. Thank you both. Congrats on good quarter.

Thanks, Rachel.

Okay, thanks, Juan. Our next question, and by the way, anyone else who wants to ask a question, use that raise hand function. Nelson Chung with Citi. Go ahead.

Hi, Jeremy and Joe. Thanks for taking my questions and congrats on a solid quarter. So my first question is regarding the APA growth in Singapore, as we see a very strong double-digit growth for APA growth in Singapore in first quarter. And just wonder what is the major driver driving the APA growth? Is it because of the upselling opportunity, technology or product transition, et cetera? And do we expect similar trend going to be last in the rest of the quarters in 2024? Do we have a target on the ARPA growth in Singapore this year? Thank you.

So maybe I'll take, thank you for the question, Nelson. I'll take the first couple of pieces of that question. Look, the ARPA growth, it's a combination of a number of factors. It's the price revision we put through in the business in Q4 last year. It's greater penetration of some of our depth products. as well dynamic pricing, which we use to drive yield. So it's a combination of sort of factors. In terms of where we see the business, I think we've got a very exciting roadmap of more value that we wanted to deliver to our agent customers over the next nine months. So I think that's something that's very exciting. We really do focus on delivering more and more value to our customers. So I think we feel confident where the Singapore business is today and obviously about its future. I would point out that we are still, relative to the value that we deliver, we are still a small piece of the overall commission pool. So I think when we think about growing the business, we think about the exciting product roadmap that we have ahead. We feel confident the business is in a good spot and we can continue to drive that ARPA growth.

Yeah, and just to add, we don't obviously give specific guidance on those kind of numbers, but I think if you look back at the trend in history, we're generally delivering a 20 plus percent average revenue per agent growth over the last period. And I think the fundamentals are there for a similar sort of growth profile heading out into the future. So I think that's very encouraging. And I think it's just, you know, a combination of, you know, a real sweet spot in the market for us, you know, great products. And also, I'd say, you know, great execution by the team as well as produce that strong result.

Okay. And then my second question is just want to follow up on the wetland market. And we just mentioned that the listing in wetland has hit a higher point in March. And just want to see what does management observe in the next few months, like April and May? Do we see the trend continue in second quarter? And yeah.

I think, like we said on the call, we feel very confident where our Vietnam business is at the moment. The government's obviously taking a lot of measures to stimulate demand in the market, which is encouraging. I think if you look at interest rates, They're at multi-year lows. Clearly, consumer demand has come back strongly post the Lunar New Year holiday period. So look, the market is positioned well. We're also taking this time to also focus internally. I mentioned the business transformation that we announced in Q1. So that's going to really strengthen our go-to-market, allow us to serve our customers better, to have a much more streamlined go-to-market. So that when the market does improve, we're going to be very well positioned to take advantage of the growth opportunities that a market like Vietnam really does. So again, we feel as though the business is in a good position. We're seeing some positive signals and we're really encouraged about the year ahead.

Thanks. And then my last question is regarding the corporate cost. Since we have seen some sequential increase in the corporate cost and wondering what would be the change within our corporate cost structure and what would be the trend going forward in order to achieve our adjusted EBITDA margin target? Thank you.

Yeah, look, I think we're very well positioned from Q1 to achieve the EBITDA numbers that we've got on our forecast. I think corporate costs are very much under control. There is a sequential increase quarter on quarter. There's a number of sort of more, I suppose, specific factors for that. But I think the trend really is the corporate cost as a percentage of revenue just keeps dropping. You notice that year on year. So I think that's a... That's a real positive. And that's a reflection really of the leverage we're making. We've unashamedly invested in good technology, great people in order to make the company a success and set us up for continued high levels of revenue growth in the years to come. But we're definitely getting really good leverage out of that. And I would expect to see that corporate cost as a percentage of revenue continue to drop this year and into subsequent years as we gain that leverage and deliver more EBITDA.

Okay, that's very helpful. Thank you.

Okay, as a reminder, if there's any other questions, please use the raised hand function. We'll wait a couple seconds to see if there's anyone else that wants to ask a question. Okay, seeing no more questions, that's going to conclude the Q&A session. I'll turn the conference back over to Jeremy for closing remarks.

Thank you. We believe 2024 is a year of tremendous potential and opportunity. This will be a year where our solutions, insights and expertise play a bigger role in empowering our customers as we power communities to live, work and thrive in tomorrow's cities. We look forward to sharing our continued progress with you next quarter. Thank you all very much for joining us today. Goodbye.

All right, this concludes the conference call. Thank you for attending the presentation. You may now disconnect.