PropertyGuru : First Quarter 2024 Transcript

PROPERTYGURU GROUP LIMITED

Q1 2024 FINANCIAL RESULTS CALL TRANSCRIPT

EVENT DATE/TIME: May 21, 2024, 07:30 AM ET

PropertyGuru Group Limited

Q1 2024 Financial Results Call Transcript

CORPORATE PARTICIPANTS

Gary Dvorchak - Managing Director - The Blueshirt Group Nat Otis - VP Investor Relations - PropertyGuru Group Limited

Jeremy Williams - Managing Director, Marketplaces - PropertyGuru Group Limited Joe Dische - CFO - PropertyGuru Group Limited

CALL PARTICIPANTS

Nick Jones JMP Securities LLC, Research Division - Director & Equity Research Analyst Fawne Jiang The Benchmark Company, Equity Research - Analyst

Nelson Cheung Citi, Research Division - Analyst

PRESENTATION

Gary Dvorchak - Managing Director - The Blueshirt Group

Thank you for standing by and welcome to the PropertyGuru 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, VP Investor Relations. Mr. Otis, please go ahead.

Nat Otis - VP Investor Relations - PropertyGuru Group Limited

Good morning and good evening. Welcome to PropertyGuru Group's First Quarter 2024 Earnings Conference Call. On the call today are Jeremy Williams, Managing Director of our flagship business, Marketplaces, and Joe Dische, CFO.

Before we get started, a few reminders. Firstly, our results are available in the earnings release that can be found in the Investors section of our website. Secondly, today's webcast is being recorded. A replay and a transcript will be available in the Investors section of our website. Thirdly, we will 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

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Q1 2024 Financial Results Call Transcript

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.

Jeremy Williams - Managing Director, Marketplaces - PropertyGuru Group Limited

Thank you for joining us for our first quarter 2024 earnings conference call. I have been the Managing Director of PropertyGuru's Marketplaces business for the past six years and it's great to be part of today's call. PropertyGuru recently marked 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's strength and 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.

Marketplace Conditions and Macroeconomic Factors

I will now zoom in on the key updates and property trends from our markets this quarter.

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In Singapore, the government continues to project growth in the 1 to 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 a 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 bigger impediments to a property market recovery, we do see some signs of improving buyer interest.

According to our recent Malaysian Consumer Sentiment Survey, 1 in 3 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.

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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 Batdongsan 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 digitization and high growth potential. Infrastructure investments are facilitating greater urbanization and contributing to positive trends in the housing sector, reinforcing our confidence in the market.

Product Launches & Adoption, Tech and Innovation

Let me now provide an update on the recent product progress within the Group.

PropertyGuru kicked off 2024 with the introduction of new solutions for our customers, coupled with the 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.

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Marketplaces Product Launches & Adoption

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 engaged with the AI video feature chose to incorporate it into their listing gallery.

In Vietnam, as part of our effort to assist the industry in 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.

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 showed a 25% increase in satisfaction levels for agent's 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

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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 have made good progress with our digital application for in-principal 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 70% of overall submissions.

These digital experiences are especially appreciated by consumers, with over 80% of users having consumer satisfaction ratings of either 4 or 5-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 am 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.

Joe Dische - CFO - PropertyGuru Group Limited

Thanks Jeremy. PropertyGuru started off 2024 with another solid quarter of double-digit revenue growth and a 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 lead to a 12% increase in our Adjusted EBITDA margin, up from less than 1% in the first quarter of 2023.

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Q1 2024 Financial Results Call Transcript

The ongoing strength in Singapore was especially helpful, as was the success of our active cost management, with PropertyGuru 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 Marketplaces 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, increasing 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, for 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 optimizing 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 1.0 million.

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Q1 2024 Financial Results Call Transcript

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 trend 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 it 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 are 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.

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QUESTIONS AND ANSWERS

Gary Dvorchak - Managing Director - The Blueshirt Group

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 will come from Nick Jones with JMP Securities, Nick.

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Nick Jones - Director & Equity Research Analyst - JMP Securities LLC, Research Division

Hi, Jeremy. Hi, Joe. Nick Jones, Citizens JMP, my first question, can you talk about just your relative kind of share gains or the share dynamic of the PropertyGuru business in your key markets versus kind of what's happening in the underlying markets? Top line growth has been decent. Vietnam seems to be turning the corner. When we think about Singapore and Malaysia, maybe just a 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 PropertyGuru performance versus kind of underlying market dynamics?

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Jeremy Williams - Managing Director, Marketplaces - PropertyGuru Group Limited

Thanks for the question, Nick. Look, we feel really confident where, you know, where we are 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, we've seen the ebbs and flows in the market before, and two things typically happen during these sort of periods. 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 are definitely 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 to our agent customers through greater reach and greater leads, we see more and more agents using our depth products.

So I think, you know, 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.

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Nick Jones - Director & Equity Research Analyst - JMP Securities LLC, Research Division

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