Hypoport Ag

Welcome to our Q&A session regarding our Q1 results. My name is Jan Peller. I'm head of IRR with Hypoport and together here I'm with Ralf Hocken, our CEO. We are happy to work on your questions, receive your questions and answer them. Today you have the opportunity to type in your questions via the chat function. So you're free just to write some bullet points. So You do not have to tie in a lot, just a few bullet points, and I'm absolutely sure that I can understand what you mean, what you want to ask, and I will highlight and read this out to Ronald. If you have, however, any technical issues in typing in and using the chat function, you're also free to send an email, and I can also, via this way, speak and transfer all these questions to Ronald. So this Q&A session will be recorded and I will start the record in a few seconds. I see that the first one is typing, so Right now, in the meantime, we'll hand over to you, maybe, to run for short introductions, and we'll start the record in a few seconds, and then we'll record it now.

So, please. Welcome from my side as well to the session here regarding the Q1 financial results of HyperPort. We had a very vital discussion here two months ago when we released the final numbers for 2025, so Looking forward for your area of interest and to deep dive in our numbers.

Great. Just as a reminder, you can use the chat function and if you have any problems with this, don't hesitate to forward your questions via email to me and I actually see that someone is typing, so we will wait a few seconds for the first question. As a reminder, bullet points are absolutely fine. You do not have to type in a lot. We got the first question from the investor side. What percentage of your volume was tied to a large bank who is not longer offering mortgages or reducing their mortgages? I'm sure everyone who is knowing us on the call is aware which bank that is. So what percentage of our volume is tied to that large bank?

It's not longer or is reducing their mortgage offering. Let's say we can't comment on the performance of individual partners with us. It's simply not possible to disclose this information. What we can share is that The market share of private banks in Germany over the period of here in this comparison 10 years went from 20% roughly to 10% and so they changed in the attractiveness of mortgages for private banks and their allocation of equity. changed massively over this period and especially over the time 2023 until now. So it's a massive reduction in transaction volume for private banks in total here.

Great. I hope this answers the question. We've got another one in the same topic, but a little bit more specific. So because of the downturn on Starpool, at least, the key question is, at what point does it make sense to restructure or exit the joint venture rather than continuing to the strength? Is there a scenario that, for example, Starbook can become loss-making in 2026?

Let's say the entity is a pooling business where a number of people is assisting specialized advisors, so mortgage brokers tied to Deutsche Bank as an entity, tied agents, tied mortgage advisors, or they are free but have a preferred relationship with Deutsche Bank, and because of this, use Starpool. In general, there's a change in the volume, as well the necessary support functions in star pools are growing or have to be reduced, and we are in the constant process of adjusting this to the necessary volume of support. So this adjustment is regularly done, so there's no mid-term risk that this entity will be loss-making. In the end, it contributes to the overall transaction volume and enables us to address these markets. And actually, when you think about the tight issues, as well to exclusively address these markets. And because of this, it doesn't make sense to let's say shut down or question the existence of this joint venture as long as our partner is doing mortgage business at all and I have difficulties to imagine a German retail bank of this size and of this value sheet to exiting the mortgage business fully. This is difficult to understand how such a retail bank would work long term.

Right, so thanks for this and I hope this also answers the question. However, if not, feel free to reschedule this and bring this up to the top once again. We have another question. It's a little bit more to the overall market. So about interest rates in Germany here. and how the mortgage volume is progressing in April to being in May of, so at least how, in a little bit more plain words, how is Q2 performing here on mortgage business?

In general what you can say is that Q1 was volatile because of the interest environment, so during the short period of, I can zoom in a little bit, The short period of January, February with declining interest rates, people hesitate to finalize the application and close the mortgage contract because it gets cheaper while they wait. And in the moment when interest rates were starting to rise, and this was linked to the Iran conflict, then lots of applications are closed fast. So that's a volatile environment with a very strong much So Q2, it's pretty normal that after a period of sharp rising interest rates and fast decisions from the consumer side, then you have a time of, let's say, less active business, a week or two, and then everything returns to normal. I would say from this what we see for now, yeah, it slowed down as expected after launch. And actually it's visible on, for instance, super numbers that this happened. But we are more or less back to normal already again. So with this volatility on the overall macroeconomic environment and interest rates, this is nothing unusual anymore from a market environment. So from my perspective right now, I would say we see a pretty normal set quarter for this year.

Okay, great. So I hope this answers the questions, all these questions. And we've got another one which is more a little bit... Okay, there's the follow-up. So Q2 2025 was weaker, so weaker as Q1 2025. So do you expect a slight decline in volume from Q1 to Q2? And the next question is, might Q2 versus Q2 last year be down as well?

So as I say, the first question is, I would say, easy. We have a seasonal activity in the market, which one is very typically a very strong quarter. So a lot of people over the Christmas season decide to start to look into the idea of homeownership and then execute during the period of February, March. So this is pretty normal. Plus in the second quarter we have eastern, we have holiday seasons, we have a lot of single days which are holidays. So the number of working days is lower in the second quarter than in the first quarter. So all combined it creates usually a slightly weaker second quarter than the first quarter was. of the last 20 years, you can say. So I would expect a Q2 which is below Q1 numbers. So the comparison with last year, it's more difficult. This is not decided by now how it will perform compared to last year. Last year had the same effect that we had a strong March because of sharp rising interest rates and then weaker start in the next quarter. This is well documented already. For now, I don't see that it's – we know already that we are possibly to predict if it will be similar or not. So it will close above or below last Q2. What is certain? It's not a dramatic change compared to last year in both directions.

Great, Jack. So I hope this answers the question. I tried to group it a little bit. It seems we do not have on this high level of macroeconomic and interest rates or so many questions, but there are two others which are a little bit more deep dive, so we are now diving into the appraisal service, so it's about Value AG. So congrats on reaching the breakeven at Value. Is the plan to continue running this business at breakeven?

No, the plan is to more and more automate all processes which are necessary in the valuation process and this generates a lot of automation and value and margin in this business. But this is not something you do in a regulated environment on a monthly or quarterly basis, so there needs to be done work. We expect ValueAD to be next year profitable, full year. How profitable we will see when we went through the process of automating the processes during this year, so to which level of productivity we come up after then. And let's say long-term, it's a platform business. There is no human labor needed. Besides this, what the regulator forces us to, and there's a lot of potential to bring down the costs of all products which are necessary during the variation process for mortgage or as well as home ownership and buying process in total.

right very clear thanks no other questions on appraisal service on mortgages so we hope maybe there's another one this is more on a group level let's jump with a deep dive more into insurance because this is the next one so a little bit specific question on the volume it is validated so maybe it's the next slide yes exactly so the validated volume which is now applied at 29 percent growing to 2.5 billion into one like we can see here so this means that so global advising is more likely to use can you give us a sense of the revenue model once this policy is validated? And what does the economic look like per billion of validated volume versus migrated volume? So where's the difference? So the migrated volume is 5.7 here. So what are the economics behind these two different numbers?

Yeah, okay. This is, let's say, what's the difference between these numbers? let's say, via acquisitions, via winning clients, we have roughly 9 billion of premiums within our systems, which were previously provided often as a license-based software solution, so locally installed, on-premise, and therefore now close to 10 years we migrate this to the cloud. So this migration to the cloud to our centralized SaaS infrastructure creates the first KPI. The 5.7 billion is in premium volume, which is from the side of the sales organization. block to our platform. With growing numbers of insurance companies, we have interfaces and are able to validate the information provided by the sales side about, let's say, certain contracts. So if we are able to match the information, the sales information, so contractual number and certain IDs to the insurer side. Then we create validated volume because then we are able to sync the information of both worlds, so the sales side world and the insurer back end side world and we can be certain that all information about the contract is just true and valid and we can highly recommend to use this information to optimize processes up to the advice process for the consumer if this is a fitting insurance policy. So the 3.2 billion which are not validated, these are just one-sided information where neither an interface to the insurance company is using or the specific contract could not be matched to an identifiable contract in the system of the insurance company. let's say the pricing model which we use is volume-based, and depending of the intensity of the usage of the platform, so how many modules you use around your contractual volume, and especially in the area of the validated volume, the core value are created We charge a percentage of the premium volume annually, or let's actually be charged on a monthly basis, but we agree on an annual transaction fee. And the average is for now 10 basis points. So actually pretty similar to the mortgage rate. This is still low because of the low level of usage of modules. in the platform, which we have to as well sell to the clients. And the more validated volume is there, the more attractiveness, the more the modules around attractiveness, because especially on the validated information, you can automate more and gain more efficiency while on a not-validated data set you risk to get liabilities acting on them. Okay.

So another follow-up at least on this validated volume. So when does it generate a meaningfully different margin profile? bit fuzzy what this means but when it's when it's when it's kick off a little bit more yeah okay yeah that you see the dynamic so for now

we can, on all levels of this KPI, work on it. We can migrate more volume from the sales side. There are still roughly 3 billion left on non-SaaS solutions out there, so license-based. And we can win new partners to migrate to the platform. So changing the top line on the sales side, we are able to because of the higher volume within the platform, attract more and more insurance companies to provide interfaces to validate. There is a particularly painful process if this validation fails on certain contracts, so sales side and insurer have to manually search what happened to this contract. It should be there, but wasn't found. But as well, this is ongoing and improves the quality of the data and increases the volume of the verified contract. And let's say when something changes in the insurance volume value of a contract, this is automatically adjusted. 2.5 goes up as well. It's a payment for consumer devices, which usually happens more or less on an inflation level. Yeah, and we are in a constant process of offering our modules to this and increasing with this the incremental margin that we have. And let's say the goal is significant higher than this 10 basis points which we have received right now. This is on all levels we are working and what is meaningful from the dynamic of the last years we see that it takes too long without massive changes on both sides so the sales side and the Azure side to support the platform more to enforce the usage of the platform and the intensity of the usage and for this we are in strategic talks with parties to set smart insurance as the standard in this industry, to bring this to this point. For now, we were not successful to bring this platform to this unquestioned position within the market. Will this happen? Yes, in some moment. In this year, with the track record which we have by now, I'm not certain for now.

It's very clear, thanks. So, we're leaving the segment insurance platform. No more group levels. So, deep dive into expenses. So, our operating expenses were flat versus Q1 last year. So, operating expenses like personal, own capitalized and so on. Is this due to seasonality is the question or are there other reasons?

In general, we are very focused on keeping our costs under control. We are right now not in a strategic expansion mode, you can say. We don't add additional platforms. We don't explore new areas outside of our pretty wide portfolio of platforms that serve this industry already. And there's still a lot of work that needs to be done to bring all of them in a proximity level that meets our expectations. And because of this, costs are under control. And I would say there's no There are no special events in Q1 last year or Q1 this year which mislead that we are keeping this control on our cost base.

Correct. So another one on the group level is that this target to doubling our EBITDA gross profit margin until 2029. So do you include any price increases for Europace to achieve this target, meaning increasing from 1.1 base points a day to, let's say, 1.4 or so? And if yes, what about this magnitude should we expect?

Yeah, so I would say the core drivers of this rising productivity are execution of business models where we for now heavily invest or in an early stage still of the rollout and don't receive at the full scale of our expectation the return for our investments which we made in the last year. So this is the main part of this. So actually just finishing the work which was prepared already and getting to the point that we see our effort in our P&A. Yes, we expect for a lot of additional functionality integration that we deliver to get a return for the additional value we create for our partners. I would not call this price increase. It's linked for now to raising the value that we offer them. We just in a couple of, two weeks ago, so it's still in April, we released a product which you know already as your base one as a bundle for mortgage brokers as well as in the target group of bank branches. So bank branches, banks are able to book the Europace One bundle now as well for their advisors in the branches. And this is linked to a 25% higher transaction fee for this bank fund, for this volume. So we don't see this as a price increase. We see this as additional value that we developed and provide. and to get a fair share from our partners for this. From a purely financial perspective, P&L perspective, yes, it means more revenue with the same session volume, and yes, this is part of our strategy, and we just talked about value. It's a great example for this to improve and expand the features of our platforms and with this receive a higher revenue percentage.

All right. I hope this answers the question. If not, please feel free to come back. They are group level, but are a little bit more into deep dive into cash flow statement. So on the cash flow statement Q1, the non-cash income expenses line is at 5.6 million plus, which is minus 0.2 million in Q1 25. So it's a pretty big swing, at least of nearly 6 million. uh and i think at the bottom um is so what is about this item has also been largely volatile for the full year um can you explain a little bit what actually is in this line and why it's so large in q1 yeah okay now this is uh yeah these are commission payments they actually often pass through commissions as well to a certain extent

where we, after a full year is over, receive, let's call it bonus commissions from banks. And if it's for our own sales organization, so Dr. Fein's Pensions Network, most of this is based on us. part of this goes to the franchisees. If it's for corporate partners of Hypoport and our pulling businesses there, most of it goes to our partners. And depending on when a bank transfers this payment to us and then we forward this payment to the subcontractor, the subbroker, it creates some volatility in our cash flow statement.

Right, so a follow-up, not from the same investor, but on a topic that is a follow-up. Do we expect working capital to be a drag on cash flow in Q2 to Q4 this year, like it was asked?

Let's say in general we don't expect any drag of working capital beside that when we grow by 10% top line that we usually grow as well by 10% on the working capital because of these flows of commissions and the time that we've been receiving and forwarding commissions. So on a quarterly basis, this may vary. And then you just mentioned last year, please look on full years. This is pretty helpful, not on certain quarters, because as soon as the payment was done in a different quarter, it creates their volatile information. In general, no drag from the working capital side. This is really short-term transfers, probably.

Yes. So thanks for this. Next two questions are on Europay's back again. So can you give us a little bit more examples on how we can increase our revenue for transactions? beyond this former known named price increase and also the next one which we can maybe a little bit combine is could you clarify a little bit more what is EuroPace One you just mentioned so okay let's start at the end and then maybe get to the wider perspective so EuroPace One is a bundle of features in the EuroPace system

It starts at the consumer content within the consumer app. There are certain features enabled when you choose Europe as one. For instance, the chat function to communicate automatically with the consumers. There is a feature that enables you to offer your consumer a monitoring of properties that comes to the market fitting to his needs and his financial abilities so that he is fast informed about something that meets his criteria and is able to act faster than other consumers. But as well features within the systems like AI, which is recognizing what type of documents are provided by the consumer YDF or the advisor via user interface, and automatically checks if it was still open with the bank and sets the necessary processes to automatically bring this to the product provider if necessary. So, automate the flow of documents, just as an example. So it's a bunch of such a feature. The whole bundle is described online on the website of Europlace as well. And it's something where we charge advisors a fee of roughly 1,000 euro per year to use this bundle. And as I said already, bank branches it's bookable for a higher transaction fee. One feature is actually Value-AG, automated value model of Value-AG, so to get during the whole process and each information and accrue up a valuation for this, automated valuation for this property in the application. Okay, so what is your case one? And it's a good example for how we for now expect to go forward with additional features in the platform and additional use for providing them. So there will be a in some moment, and there will be additional bundles, and we will optimize these bundles in the interest of users and us benefiting from it. So we expect to continue this strategy so that every feature that we add, every automation that we provide, every integration that we provide along the value chain to put a small price tag to it or to combine multiple of these features through a bundle and enabling this way to book them all together for discounting, as you can see, compared to a single usage.

Great. Okay, so the price increase you were mentioning with Europace One is really charging the advisor, not the banks. So do you have any additional offering to the bank so that you could lead a better monetization of Europace?

Yes, a variety of features already, nothing that we bundled by now. So, for instance, automated property valuation is a very typical additional feature. which you offer already right now and which you can book. So let's say there is, you can say, a growing list of additional functionality or services even that you are able to book as a bank as well to enhance your experience and your speed and improve the certainty of your decisions during the process on the platform.

Right, thanks for this. No more questions on Europace or price increase, but there's someone typing. Maybe we can wait another second. Yeah, on Europace, any updates on the market channel on Europace? So do we expect to outperform the market this year?

Yeah, let's say we expect to outperform the real home ownership market in Germany here. We see that we are I will switch to the next slide to give you some visualization. So we expect brokers to take market share and even improve, increase our market share within the broker segment because of, let's say, a net positive migration of structures to our platform. We see as well that in the savings bank industry and in the corporation bank industry, we just have a migration path in a positive way. So we are not losing any partners in both of these groups, and we are not losing any brokers as well. So the only significant change was the decline of the market share of the private commercial banks. here in Germany, especially one big partner of us, where we still serve the whole volume in the standardised private mortgage business. But this was shrinking over the period of the last few years now, you can say. So we expect to take market share because of the ongoing dynamic in all three sectors. And to be honest, we expect as well a growing market share of private banks again in Germany and that we expand our market share there.

Very clear. Thanks. However, if there are any follow-up on this, feel free. Any updates on Interhype? Do you see them operating that platform to all brokers in the future?

I want to mention one thing here in this call as well. It was in the German Q&A. It feels strange to not share this well in English Q&A, even when the German one was recorded, but it will be difficult for you to... It seems we have lost Ronald or anyone in his connection.

I'll try to bring him back.

I see you're more of a person, so... I want to make a comment, just, he was the opinion to change my devices He did it last two months ago. He did it once. So today he did it once. I just said that we had a question calling Tago Bank. And it was leaked that they are right now going, starting their long and long mortgage deal. initiatives together with their acquired subsidiary OLB, the Oldenburger Landesbank. And the question in the German was what impact it may have on and I could just say we can't comment with single partners but yeah it's well known in the market that OLD is using Europace to run their business and it's well known in the industry here that Tago Bank for now two years prepared to enter the mortgage market here and this was what was leaked now is the cooperation of these two entities belonging to the same french banking group as an initial start for for taco to enter the mortgage business and with this state i expect a positive outcome for us and it's great for the market when another large foreign bank joins the German mortgage market and provides a mortgage business, especially when you see how private banks, originally German private banks, declined their volume. So there is a need as well and there is a space for more games providing mortgages in an efficient way, in an automated way, with the right technical infrastructure behind this. So I think this should be shared here even when nobody is able to ask the question. So the next question was InterHype. InterHype just a couple of days ago didn't announce, it was as well a leak that they reduce the workforce that they are, let's say, I would say, struggling to meet the profit expectations of ING Group and need to restructure. They want to reduce their workforce by more than 10% right now, as you may be aware, while we operate They have hired advisors in branches which they typically rented, so they have a different type of cost base, and they right now adjust or restructure their business. Part of the question was, do we see that they are more aggressively entering The platform market, no, we don't see this. Actually, we don't see Interhyp for a couple of years now as a competitor on the platform level. They are still in some old corporations there where they do a similar business, but these corporations are I would say roughly 10 years old and are still continued. But they didn't attract new clients on this level and I don't see them even trying to do this.

Absolutely. This was a little bit more linked to the bank side. What is about the brokers, the independent brokers, because this was also part of the question. So do we see or do we expect DAI to offer their platform to all of these brokers?

In general, they do this as a pooling offering with the ProHyp entity. So the ProHyp entity is actually our poolers, StarPool, QualityPool, and the last BautiNext, they're an answer to this offering of InterHype. And you can say today that StarPool and BautiNext and ProHyp are similar big pudding organization in the German small intermediary broker market. So our incremental gain in market share in the broker segment here over the last 10 years from 50 to 60 percent is linked to the fact that our pudding organizations or pudding organizations using Europace, they are pretty successful in taking over volume from pool. But I don't see any shift in the market. The pool that's running on Europace has a very competitive offering for small intermediaries. Great, thanks for this.

I hope this clarifies the question. Just as a reminder, if you have a question, you can type this into the chat or send this via email. To me, it seems that no one has any issues in using the chat function because I don't receive any questions here. This last one, which is more on capital allocation, maybe this is a good one to handle now. It's great to see that we set up this share buyback program in Q4 and Q1. How much do we still have authorized and are we still active at the moment?

So we have an authorization to buy back 10% of our shares. With the last authorization, we bought just... One percent. Yeah. Fracture is roughly 9% outstanding. And on the agenda for this year's annual meeting is again to get approval to buy back 10%. So to renew this, to have a fresh 10% potential to buy back shares. And yes, the current share price is attractive for share buybacks. Yeah, right.

So we are asking for the next one, for another one. Are we still active? Well, the current or the last chair-by-back program is closed. So this is it, 10 million. So are we active? Obviously, we have some intention on this and ask the AGM for this. So I hope this clarifies the question. And as a reminder... You can type your question into the chat. We have still a good audience here. So it seems our Q&A is pretty interesting.

Maybe just on the program, explicit ask, up until today, inside regulation, we are conflicted to start a new share buyback program. And if there are any information within the company who locks us as an insider, as a company, we can't stay and start a new one. So that makes it a little bit tricky to... find a window of opportunity to start buyback programs in a pretty dynamic environment, let's say.

Yeah.

Thanks for this background information.

Very important. I'm just going to follow up on this. Ronald, do you know if your shares are available through your custodians for short sellers? So it seems that your shares It's in Microsoft Shares, yeah. Yeah. No, Microsoft are not available for short term. Yeah. Okay. Thanks for clearing this. Ah, there's another one. What is the theoretical firepower to continue share buybacks? It's a good question, right?

Dare you say. It's... As you can imagine, there are multiple layers of how to finance a share buyback. So it's the ongoing operational cash flow. It's opportunities to finance things or to wire loans or wire selling as well, non-core businesses. So there's a wide variety. significant, I would say, and the question is what we are able to materialize and let's say keep this balance with balance especially when it comes to long-term loads.

Correct.

Okay.

So any follow-up questions here on share buyback, debt allocation or operating business, feel free to type it into the chat. All right, since from now there are no more questions, I don't see anyone typing, so... I would like to hand over to you, Ramon, for maybe some last words to close this Q&A.

I would say thank you for the activity. We had again a vital exchange, and this is great. This is a positive development, I would say, especially in the English Q&A. Happy to continue this in two months when we release our half-year numbers and be certain we will stay focused on keep growing this company and keep costs under control and bring all what we had in mind to life and monetize it. So thanks for your attention and see you here in two months. Thank you. Take care. Bye.