Hypoport Ag

Run Results webcast from Hypoport SE. My name is Jan Pahl. I'm Head of Investor Relations here at Hypoport. And together with my colleague, Ronald, we would like to welcome you to our webcast. I will start the record in just a few seconds, so the webcast will be recorded, just to let you know. And we will have a short presentation by our CEO, Ronald, and after this, hopefully followed by a classic two-in-one session, which I will introduce to you after. But now I may head over to Ronald and start the record. Seems Ronald, that you are already ready. Please welcome.

Yes. So hello, everyone. Yeah. Presentation of the Q1 numbers of Hyperboard 2025. You know it already. We delivered strong growth in the first quarter, double-digit growth rates. In the core, thanks to... an ongoing recovery of the German mortgage market, something which is still in the core of our major business unit, real estate and mortgages. Second good news comes from the housing environment. Our ERP system, our ERP platform for the housing sector is accelerating in subscription rate. A strong success is all there and the base of a good performance of the financing platform segment in Q1. This is the downside of Q1. You can say that everything outside of the residential mortgage market, all credit markets are still depressed, distressed, thanks to an, let's say, leaving government which didn't focus on prosperity here in Germany and a new government which was just established at the beginning of the second quarter of this year. So the environment in the first quarter was friendly, safe, open. Okay. As usual, we start with the mortgage market. as the core of the real estate mortgage segment. You are aware that housing is, even when we talk about the mortgage market usually and the underlying housing market, it's a fundamental macro development here in Germany that we have a housing crisis that people would like to find a fitting place for their families, typically for German families in the moment when they get triggered by family events like children's And this frozen renting market, this more and more, this life events more and more needs to be processed in the home ownership market. The renting market is in Germany frozen. For a couple of years, governments tries to take the issue of rising rents with additional regulation. And this led to a massive mismatch between the rents of the existing contract and new rents. You can say in metropolitan area, it's roughly one to two. So the new rents are double of the existing rents. This locks the renting market because everyone with an existing renting contract has a huge benefit to stay in his apartment. So the turnover in this market dropped sharply and families, people who got triggered, don't find any solution in the renting market anymore. And for Germans, this is a massive change. 55% of Germans live in a rented apartment and to leave such a rented apartment to a new rented apartment gets more and more impossible. On the same side, the regulation makes it less attractive for especially smaller private landlords to invest in housing. So there is draw from this market. So if the apartment gets empty, they sell or they even try to sell it with a rentee and the owner then trying to get a rent out. Something which increases the home ownership market here in Germany over the period of a couple of quarters now. So all the same about the renting market. Just the perspective of affordability is in a positive trend. We see stable interest environments for five quarters now. A massive change to 2023, you can say. We see a significant supply in units for sale, something which is a massive change compared to the period of 2022 and earlier, where there was a lack of supply side always. We still see high new construction costs, which doesn't make it easy to build something new, but doesn't affect the existing property market. And a positive thing, we see rising incomes thanks to, let's say, a labor shortage, especially with skilled labor. And this is the core target group of our project. of our business model. So home ownership is linked to people with significant income, middle class and upper class. And they usually were still renting and this is changing right now. So what didn't change in the first quarter is regulation. The leaving government didn't focus on the housing market. They were completely different motivated and areas where they were looking for So they increased and insist in density and in quality, the regulation around housing, which was negative, especially on the construction side. As well, they reduced the support programs for middle income people to buy something. So let's say, we couldn't imagine a worse regulatory environment than we saw in the last years. So this is now over, we have a new government. Voting was in the end of last year, first quarter they spent finding a new coalition. Since April, we have a new coalition. So people are waiting now for the necessary decisions to come to enable more families to acquire their home. So this influenced the first quarter market. You can say that people were waiting, but still number of transactions are up. So this in, let's say, in charts and numbers, what does it mean? Stable interest environment, first quarter, a little bit more volatile than the last year, but in a similar range, number of properties for sale publicly on record high level, number of units for rent on record low level, and slowly trickling up real estate prices, but still a massive gap between new construction and existing homes. So there's still a 15% discount compared to the situation of three years ago. So in this market or in this environment, the mortgage market kept recovering. Here is seen with the black line. You can say the mortgage market is already in the area of the 2018 numbers now. So soon we will see inflation adjusted in a positive direction. a little above the starting point here five years ago. So closing the gap to the pre-crisis time. Europace at the same time outperformed the market. This is not new for you. Last quarter we gained 34% in volume on the platform compared to the first quarter of 2021. Bundesbank showed even a slightly stronger growth, 37%. It's still a little bit puzzling for us where this number comes from. We see parallel that Schufa reported a 21 increase in applications in newly confirmed mortgages with an increase of the loan amount of something between 5% and 10%. This would come up to something below 30% market increase, but not 37%. So something inflates the market. Some transactions inflate the Bundesbank number this quarter. So we expect that the market is slightly below 30%, and we gained 34% in volume this quarter. We gained this across all areas. Dr. Klein, our own franchise network, which is a really good indicator of the market development, is plus 30%. We see a strong performance of the brand. Dr. Klein had the highest number of leads generated online in history, so even more than in 2021 and 2022. So, strong lead generation. And first quarter, finally again, fully loaded workforce of advisors in this franchise network. So every lead gets distributed, every lead is taken care of, but the people are busy. The advisors are busy as well. That's good. From here, we need to grow with additional advisors now and scale and keep scaling Dr. Klein back to new record high levels. So a slight outperformance of this development, which is more or less in line with market, I would say, is savings banks. Usually a strong outperformance. We have here a lot of joint IT projects with our joint venture partner, Financiinformatik, which are in rollout. So we expect an acceleration of market share gains here compared to this first quarter here in 2020. A lot of positive things are going on. A lot of new integration in this sector is rolled out during this year. So outperformance, again, cooperative banks, they keep migrating to us and they keep taking your pace super serious as well in their sector. Even without a joint venture with the centralized IT service provider, Here is a strong supporter and opens up more and more doors in the sector to gain traction. And yeah, corporate banks who are using Europace are outperforming their peers. This is proven by the sector that there is a massive positive performance of advisors using Europace compared to the traditional work environment in their IT service provider. So this ends up with a total of 34% for the whole platform. Again, we are on track with the recovery and heading to new records. So when you look on the perspective of what are the mortgages used for which we transact right now, then you'll see that especially the purchase market where existing properties are sold and financed is the base of the recovery. Here we saw the second best quarter in our history already. Just the three years, the exceptional great quarter of the beginning of 2022, where interest rate changed from below one to more than 3%, exceeds the current volume. So you see that there is an market share gain plus an underlying change in the market because without the change of conduits from being rented to being occupied by homeowners, this would not be possible. And there's a massive amount of units to be transferred between the renting market and the homeownership market. So what doesn't contribute to the a positive recovery of the market is new construction. We are still down less than 50% or more than 50% below the 2022 first quarter, so the peak, and roughly still 50% below what we saw before. There are two segments in this new construction. One is single-family houses. There, the recovery is already... We talked there about roughly a third below the pre-crisis level, but still distressed. What we are massively missing still are activities from developers and sales of newly-built conduits in multifamily houses in metropolitan areas. The reason is that this massive change in demand in 2023, the second half of 2022 and 2023 is stressed at the sole developer market, and they are still not recovered from this stress. So they are happy if they finally sell their open projects at the last, not third unit, that they finish their project. And there's still no movement in this market to really start a lot of new projects. This is well linked to the nervousness of banks. So the capital requirements are still high, just by barfing, they are changed to 1st of May slightly, but there's a high capital requirement to finance development. So they're still working out their existing portfolio before starting something new. And this new construction is missing in the market. And this keeps, let's say, rising the tension in combination with the net migration to the metropolitan areas where exactly these units are missing. Okay, then still far below traditional volumes is the refinancing market. We still are in this base where old mortgages, which were closed longer than 10 years, six intercepted, don't need to be refinanced and have a lower interest rate than you currently can get. This will change later in 2027. But for now, this part of the market stays on an extremely low level. And as well on a surprisingly low level is everything which is modernization. Decarb of the housing sector here in Germany, even when it was an ideological goal of the last government, they didn't design the subsidy programs that the rules for modernization innovated as possible. So there is a historic low level of investments there, even when Thanks to our climate goals, latest in 2045, the German or 2050 EU, we need to de-carb our housing sector and massive investments needs to be done at every quarter which passes, increases the volume that needs to be invested to get to a de-carb. Okay, from a perspective of sales channels, the growth on a little bit longer perspective, the last nine years, you can say here, we have a similar volume in the market, nominal, not inflation adjusted, but nominal value. What gained volume was brokers from roughly 20 to roughly 30%. So 50% growth within this market for brokers. And this in the core powered by Europace and we even took incremental market share here. In addition, we were able to expand our reach as well to the cooperatives and the savings banks, both getting closer to 25% share of their new generated mortgage volume comes via Europace or is transacted via Europace solutions in their branches. So this is really a very positive development that we keep growing in both of the sectors as well, strong, so that our overall coverage of the market is getting better and better. So, only slightly negative perspective on the real estate market segment is property valuation. You know, next to the massive market changes in 2022, there were massive regulatory changes and the mismatch of our strategy to enter this market with the regulatory and market environment. We needed 2023 to recover from a massive mismatch of resources. 2024, we could focus on optimizing the business model, building technical infrastructure, IT solutions for the new regulatory environment. And now we see that is step-by-step value AG is recovering from its massive losses, which it made in 2023 and still significant in 2024. And we will use this losses and slowly work us in the direction of a break even. In total, for the segment, it was a great start in the year. If you're interested, Exclude the losses from Value AG, we talk about 14 million in EBIT for the first quarter. This was the best first quarter ever. 2022 was even better, but it was one of the strongest first quarter that we had here already in recent history. And so the growth track keeps us, it's alive. And the focus for this year is, maximize the profitability out of this market share market development in the market share gains so for now we focus on realizing everything what we built already and finish the projects and bring innovation to the market to optimize our profitability still keep focused on profitability and this works out very well so our next segment financing platform first market housing, housing societies. They are pretty similar, you could say, to the home ownership market with a massive change. They are the ones who provide renting units and the massively regulated renting market is a significant problem for them. Second is, they are usually not buying existing properties they are building them and keep them forever and with the current environment of contract construction regulation in combination with the renting relation this is not feasible so they massively reduce the investment in new housing and same regulation like for the homeowners as well for the for the housing associations that you um in the decarbonization sector. So the last government wanted it to do something, but didn't provide the necessary regulatory environment. And so they can't invest in decarbonization in the way that they would need to, to meet our goals. This all leads to record low investments of this sector in housing last year, whole last year, but as well as first quarter. I can't remember a time where This sector, which has a massive impact on German GDP and has a massive impact on German housing in the metropolitan areas, was so, lacked so much attention of politics and was so reluctant to finally be able to build again or modernize again apartments. So they are waiting for the new government now to set the right or create the right environment. So we talk about deregulation and we talk about subsidies in the combination of both. The new government promised this and in other sectors in the first day, the new government was exceptional. Something happened already. Here it's still, the new ministry is in place, but no action was taken by now. We hope that in the next month we see here actions and this is necessary for the German housing market. While they can't invest in their housing stock, what they can do is invest in their technical environment and there we are right now super successful with rolling out our new ERP platform for them. Our goal is to create a perfect open IT infrastructure for them where we easily can help them finance and ensure their portfolios. They can rent their units in a very efficient and modern way in an IT environment for their customers and their employees, which is modern. Something which is new to this industry and over a period of, you see here, six years now, from piloting our system we are generating traction and getting relevant for this market, taking market share. So, a nice success story, still something we invest millions in, but this recurring revenue model, something where for now we expect even next year already a break even. Next topic, German Mittelstand, corporate finance. something that we saw a lift up in the big project volumes, but still on financing rules and subsidy rules from the old government, lots of volatility and decisions still in this transition from last to new government. So let's call it low margin project class that had to be closed by the major part of German industry is waiting for the new government to establish a new set of regulation, power this with fitting subsidies to bring Germany back on track out of the recession to back on growth track. And with this, we expect for the next quarters to have a massively change in this environment here. And there's a lot, there was a lot promised from the new government and we see in other areas, migration, international relations that they are fulfilling their promises. Let's hope that they are fast here as well in the business environment. And it's necessary for recovery of the German industry. So last area, as well the market with let's say struggling environment in the first quarter, personal loan business. We have multiple quarters of recession now here in Germany, a live recession, but it's recessive. So banks hesitate to increase their loan portfolios. Consumer hesitate to take new loans for consumption in the end. So market is down. We are slightly up by gaining new partners, migrating new partners on the platform and new safe structures of them. So we keep slightly growing, but the environment could be massively better than this, what we see right now. As a result, double-digit growth, yes, good. Massive investment, especially in the housing industry and the ERP platform there. small decline in probability for the first quarter. But what we need here is a better market environment, not a recessive market environment for all these credit markets that we provide here. Last segment, insurance industry, where we cover three areas with business models. So in the core, three platforms for personal insurance, occupational insurances, and industrial insurances. We see small growth in all three when we look on the transaction volumes on my volumes on these platforms. We see even more projects going forward in the right directions. What we still miss is progress in the monetization. So that's why a slight level of disappointment for the first quarter numbers. We expect this to improve during the year that we are back on growth track here for the full year and even getting closer to a double-digit growth in all numbers. In the end, we are still in the transition from a very heavy investment phase to an incremental gain in profitability. The first quarter was not in line with our expectations. Okay. So for the group in total, we see a strong first quarter in line with our expectation and the recovery of the mortgage market. On a longer perspective, you see that we are well ahead of last year, getting closer to the record year of 2021. Let's see how close we end up there. This is... For next year, we expect a new record year. For this year, it's closing the gap, you can say, and improving especially our probability in a systematic, stable, and recovering market. So there we are at market and recovery of the market. Inflation adjusted, we are still far below the volume of a market which we saw in the first decade of this century. Since the European integration and massive labor movement to Germany, this was a growth market. And you see that we are still far below our long time growth trend where housing demand was high in Germany. What we didn't see in the second decade of this century was the transition from renting to home ownership market. And this is a core source of additional volume for us here in this market that professional landlords or small landlords sell to homeowners, finance mortgages via our banking system and this way via EuroBase. In addition, we expect the recovery of the new construction site from the current extremely distressed and low level. We expect a recovery of the refinancing and we expect that the goal of decarbonization of our household stock needs 30 billion of investments per quarter to be financed in the end by mortgages. And with all this said, we expect the mortgage market from the current 60 billion level to uplift in the area of 75 to 100 billion. So higher level than we previously saw and you can say returning to the growth path which we were in in the last This can still take some years, but we don't see another macroeconomic perspective on the German mortgage market with this. This said, short-term outlook, we feel confident with the 2025 forecast, which we gave two months ago. First quarter is perfectly in line with our expectation. And for the upcoming years, we see double-digit growth in the token bottom line. I would hand over now to Jan to moderate the Q&A session in case there are some questions today.

Presentation rolled. Just to let you know, we now start the Q&A session. And if you have a question, you can ask this by using the rise your hand button under these three dotted points here, under the three dots. And then you have a blue button where you can just sign. uh up and uh or if you find it's too complicated or just can't find the button just in chat i have a question and i will hand over to you unmute you and then you can arise your question otherwise of course you also put on and write down your questions in the chat um and i will just read it um and ask ronald so these are the ways how we can create the q a session So we will just type it down here for the instructions in the chat. You can look up leads. So we will wait a moment and see if we have some questions.

Now we have already some in the chat. Someone posted already a number of questions. Oh, I see. I see. Okay. I can tell the way. You see as well. Okay, cool. Yeah, I see them as well. So, first, savings banks and our joint venture with Finance Informatics. There are two major rollouts right now. One is the integration of Eurocase in the work environment of mortgage advisor within the IT service platform of Finance Informatics. So we get a better integration. So it's easier. to transition from the traditional process to the Europace process. And there is an integrated version as a choice for every savings bank in the future offered by Financial Traumatic. This is a major step forward to get more savings banks accepting Europace as, or the brokerage model as an option. market approach. And the second is that we provide together with financial informatics, a so-called cockpit immobilia. So a solution end-to-end with the consumer to manage your properties and the linked mortgages to this within your environment your technical environment that you as a consumer use from your savings bank, from Finanze Informatik. So the touch point of the mortgage business, the digital touch point is now jointly proposed to the consumers. And so this again will enable savings banks or will attract more savings banks to use the EuroPace environment for the advice process, or even an automated mortgage transaction process, which we provide with 1K BALFI. So, value achieved, second question, value achieved recovery. For now, we don't expect for this year a break even. We expect a break even for next year, even with the positive attraction that we saw in the first quarter. it was still half a million in loss in the first quarter. So there's still something to work out. And even when we are a little bit ahead of our plan, there is still a certain level of uncertainty. So for now, we expect the losses to decline in this year. but no break even for this year. Let's hope that we get surprised here. So, cost inflation in the financing platform. Yeah, I talked a lot about the success of the ERP platform for the housing association. This comes with an, additional investment necessary in project management to onboard all the new clients. So we have an acceleration in our pipeline of new clients. And to migrate housing associations to our ERP platform is a massive human labor intensive project we have to do with each of these clients. And for now, all starting places, we call them, so all migration slots for this year and even next year are already sold. So the pipeline is long and we have to expand massively our resources to migrate this housing associations. Expecting an ongoing higher migration need in the near time future, so means that we even create more drag in our direction and take more market share in the upcoming years. So further investments, let's say it was a significant increase that we saw in the first quarter. There will be more increase in OPEX, you can say, for migration. if the demand keeps as high as it is right now. So with the current inflow of new clients, we really struggle to, let's say, not disappoint our industry, this extremely integrated, connected industry with a too long waiting list for migrating to Boviport. So for now, we reach a new level. We need to bring the people productive in the project. This takes some time, but for the upcoming years, we may expand even more. So a key difference between these two KPIs, which we provide for the personal loan business. So one is transaction volume on the European system in personal loans. And this transaction volume comes from usually from Europex partners, advisors, which use Europex to broker personal loans. The white label offering is a subsidiary where we offer banks the work of the advisor as well and broker the third party loans for their clients. So this is a BPO outsourcing business, you can say. where we generate additional commission income plus transaction fee for the European system. So the white label brokerage volume is part of the overall transaction volume of EuropeBase. But the business models are slightly different. One is commission based and includes the third party commission. This is what we pass through to the partner who provides the client. so banks usually, and by the others, solely a transaction fee, which is a loan base, but much smaller than the brokerage fee. Okay, is all four questions answered, I think?

Yes. I hope so, and if not, Maxime, feel free to just drop a short note, and we will follow up on this. But there's another question, which is a pretty long one, so I will try to shorten this a little bit. The question is, Ronald, you mentioned that you don't see a sharp decline of the German mortgage market, but against the background that the German Bund has increased, why is that?

Okay, I didn't dive deep there in the presentation. So, what happened in mid-March was that the German government let's say not government at this time, future government proposed and announced massive additional debts for German government. This sent the government bonds up into say 10 years, 60, 70 basis points. Mortgage rate went up between 35 and 50 basis points, parallel to this. For us, this short term, it shortened the, advice time, so people closed their open mortgage applications faster, and we saw a positive impact in March for this. After this, usually this, it's so far normal, it went, it normalized again, it went down, and we saw at the beginning of April, and these are public numbers as well, for instance, provided by By Schufa, we saw a drop to, let's say, previous year level. So from just 20% in application of 21 to more or less zero compared to last year for a couple of days surrounding Eastern. For now, we see from this recovery again, we saw trickling down interest rates since then. So all what was increased in interest rates, it trickled down later again. Now today we saw a sharp rise of 10 basis points again. So we are in a slightly more volatile market. This is nothing that impacts the housing decisions anymore. When you go back on this slide where we show the interest rate development, this is all within this what happened last year as well already. Not as fast as this year, but we are more or less moving sideways with the interest rate. So nothing that on a longer term, not talking about days or a couple of weeks, will affect the willingness of Germans to borrow their first mortgage to finally get a home for their family. In general, we expect midterm declining long interest rates in Europe because of the general macroeconomic environment where we don't see a massive growth, we expect inflation to be under control and with this ECB to lower short-term interest rates and gaining as well trust for the long-term interest rates to trickle down again. Something which we saw already multiple times now with Trump's, let's say, Putin's and Trump's international politics, we see a higher level of volatility, but nothing is going to change that Europe is not a super growing area with high interest rate environment anymore.

Okay, cool. Thanks. We have a next question, which is on ERP system, so ERP software. So this is on the housing association, on the institutional housing association. It seems that the migration of customer is the bottleneck. Are there any plans to team up with some IT service provider, some third party that we can speed up this process?

Yeah, would be great if possible. We check it out. But to migrate to our platform is a skill set which, let's say, needs to be developed. it needs to be developed if we do this by ourselves or if we train someone else. So if you hire the people or we train third party people, it's a pretty similar effort. And this is not an area where there is a high level of skills available because the migration volume in the past was limited in this market. So that's why there is no existing market for specialized smaller entities who could help us to ramp it up, unfortunately. So we see that we can still improve in efficiency in the processes and with again and again, migrating clients from the same previous solution to our platform is something where we get better and faster. But let's say, this learning curve we need to go through by ourselves.

Okay, thanks for this. It seems that we do not have any questions right now. Just a reminder, you can... Oh, there's another one. No, it's just thank you, which is also welcome. But it seems that we do not have any additional questions. Just as a reminder, once again, you can just type it in or use the rise your hand button, whatever. is more to your preference. We'll wait another second, but it seems we do not have any additional questions, so I'd like to hand over to you, Ronald, again for last words.

Yeah, let's meet again in three months for the half-year results in the beginning of August. Up until then, we will be busy optimizing our probability and using whatever the market offers us on this path. Thank you. See you then.