Airtasker Limited (ART) Earnings Call Transcript & Summary

Welcome, everyone, to the investor webinar for Airtasker Limited ASX code ART. Earlier today, the company released its full year '24 financial results with several key financial and operational milestones achieved. Shortly, I will introduce Chief Executive Officer, Tim Fung and CFO, Mahendra Tharmarajah, who will run through a presentation on the results. At the completion of the presentation, Tim and Mahindra will then participate in a live Q&A session. [Operator Instructions] And without further ado, I'd now like to introduce Tim and Mahindra, who will run you through the formal presentation.

Hello, everybody. Thanks, David, for that introduction. So I'm Tim. I'm one of the founders and the CEO here at Airtasker. And yes, really pleased to share with you our FY '24 financial results. We can skip forward 2 slides through the disclaimer and to the next slide. So at Airtasker, we're building the world's most trusted marketplace to buy and sell local services, very simple business model. We connect people who need work done with people who want to work. On the next slide, our mission is to empower people to realize the full value of their skills. One of the really powerful things about Airtasker is although we're building a really great and convenient service for our customers, we are creating jobs in the local community. And those jobs aren't just the byproduct of what we do. That's the core purpose of our business. You can see here 2 of our incredible tasks who have supported our community throughout the year. And during FY '24, really happy to say that we put more than $600 million cumulatively in the pockets of Australian tasks through our marketplace. If we move forward to the next slide, our unique value proposition at Airtasker is twofold. We are open and infinitely horizontal marketplace. So starting with the open community model, Airtasker doesn't use manual operations, set prices and tell people what to do. What we've done is we've built a system of transparency and accountability, which enables customers and taskers to be able to find a good match in a trusted but light-touch way. This is really important for the ethos of Airtasker, which is that we don't tell people what to do, but it's also really powerful from a business perspective. This white touch operating model means that we have gross margins in the range of 95% plus. The second thing that makes Airtasker very unique is our infinitely horizontal marketplace. We don't just focus on one type of task or a category of taste home services, what we allow is for customers to be able to try and solve any problem that they need done, and we empower taskers to be able to solve the customer's problem in any way that they see fit. By doing this, we unlock an incredible amount of market opportunity, which wasn't possible otherwise. For customers, this represents a really powerful value proposition. They're going to get offers superfast. They're getting the biggest range of people to be able to do their jobs and they get great value for money. For taskers, we provide instant work, industry ratification. You have to go to interview processes and line up for jobs. You're in control of your pricing and you get complete flexibility of when you work, what you do and how you earn an income. If we move forward to the next page, we've got a really simple business model, too. Our revenue model really aligned Airtasker a company with the success of our tasking. So if you look at that left-hand side chart there, the GMV or the gross marketplace volume of Airtasker is the sum of all the transactions that go through our marketplace. And one of the unique things about Airtasker is that every task is paid for through Airtasker pay our payment system. So unlike the classifieds businesses, Airtasker seats, all the transactions are right through. And we make a revenue of about 20% our monetization on that. There's a little bit of sales tax. And 78% of that GMV gets played through to our taskers for a job well done. If you take that 20% revenue, that monetization rate and break it out, which we've done on that second bar chart there, you can see why we have this 95.4% gross margin or gross profit. We have a little bit of merchant fees, so that's all of the payments and credit card costs that we pay on that whole transaction, repent about 3.7% and about 0.9% goes to public liability insurance, which helps our tasks to be able to provide that assurance to customers in the case of third-party personal injury or having forbear this property damage. So Airtasker, super win-win business model, it represents low risk for taskers. So unlike some of these sort of subscription-based products where you've got to pay first and then get our value later. Airtasker and marketplace business model is very much able to give you access to jobs instantly with no upfront fees. Also, you've got wide range by allowing taskers to be able to freely seal of the jobs and interact with customers. From a customer perspective, that means that you get the widest possible range of offers. And finally, our business model demonstrates really strong gross margin. So 95% gross margin, a lot of that revenue is dropping straight to the bottom line. So with that, I'll be back later today to talk a little bit about our growth strategy. But what you've all come for is the FY '24 financial results. So I'm going to pass it across to our CFO, Mahendra take you for being through those.

Thank you, Tim. Next slide, please, David. And one more, please. Okay. I must start by providing a quick overview of some of the highlights from FY '24. So one of the key goals we set out at the start of the fiscal year was to be cash positive and we successfully achieved free cash flow of $1.2 million over the course of the year. So we're up 115% on the prior period, and almost $9 million turnaround, which is a terrific result for the company. On our Airtasker marketplaces revenue was up just under 10% to about $38 million. And in the U.K., which is one of the new markets that we're actively investing marketing dollars in revenue is up 76% in the fourth quarter, which is the most recent quarter. And that was on the back of marketing campaign, our TV campaign with Channel 4. There was an out-of-home campaign in the last month of the fiscal and it's also peak season in the Northern Hemisphere. And we'll talk about all these cyclical factors a bit further on. We also finished the year with cash interim deposits of about $17.8 million on balance sheet. And we were fortunate enough to complete 2 partnerships with O Media and ARM media at the end of June and the beginning of July, which has provided us about $11 million of that inventory that we get to spend over the course of the next 2 years. Next slide, please, David. Unpacking some of our results. So group revenue was up just under 6%, 5.6%, $46.5 million. That's about a 25% full year compound annual growth rate. The group for those of you who don't know, comprises 2 marketplaces, we've got the Airtasker marketplace that operates in Australia, the U.K. and the U.S. principally. And we've also got the one-lane marketplace that operates predominantly or only in Australia. If we look at the Airtasker marketplaces, pure [ lease ] that's a global number. We've got $38 million contribution. So that grew just under 10% for the year and is tracking about 19% compound annual growth over the last 4 years. And as I mentioned earlier, our positive free cash flow number of $1.2 million, a $9 million turnaround on the previous year. And we also achieved positive operating cash flow of $3 million, which was a $13 million, $14 million turnaround in the prior year. We actually had 3 consecutive quarters of positive operating cash flow for the first 3 quarters of the year were all positive, which is really encouraging. The fourth quarter, obviously, as we talk about it further on, is a cyclical quarter. So we don't get as much cash receipts in the fourth quarter. Next slide, please, David. So if we look at our marketplaces. So we've got 2 slides here or 2 charts here. The left-hand side is really our Airtasker marketplace is the global marketplace that comprises Australia and the U.S., the U.K. and some small markets and then the right-hand side Australia. So Australia at the moment, still contributes to about 97% of the Airtasker marketplaces. So excluding the Oneflare business. So it is heavily weighted towards, obviously, the group is heavily weighted towards the performance of the Australian Airtasker marketplace. So I look at that specifically. So we've had some challenging, I think macroeconomic conditions over the last year. We've talked about it several times -- and we've tried to address that through a number of product and pricing initiatives that we've been focused on through the course of the year. So our top of funnel in gross marketplace volume was down about 4.5%. That was impacted by our volume and book cost that came through the platform and the average task price that we saw some softening over the course of the year. Despite that, we managed to get revenue increasing 8.5%. And on a full year basis, full year compound annual growth rate, we're about 18%. The monetization rate was up just under 14% to 20%. And this is all on the back of product investment in reliability and our sales funnel efficiency. And we introduced a revised cancellation policy and cancellation fee structure. And one of the main things, I think, that achieved was that we now monetize all transactions that goes through our betas platform, whereas previously canceled transactions weren't monetized at all. So it's a really positive change. Next slide. Turning to the U.K. and the U.S. These are our newer markets. In the U.K., GMV was up 41% for the year. And revenue was up -- sorry, revenue was up 41% and GMV was up 20%. And the full year compound growth on revenue was 71% and for GMV 47%. So as I mentioned earlier, we launched the television campaign we channeled for in late October. And we also had an out-of-home campaign, we're in the peak season. So we spent quite a bit of marketing dollars. Not cash necessarily, but certainly marketing investment in the U.K. through the media asset that we acquired from Channel 4 in June 23. In the U.S., much smaller market, still very early stage. It's in our earlier phase of growth. 73% revenue growth and GMV was up about 10%. We're still continuing to explore marketing partnerships or media partnerships and have been cautious with our marketing investment in that market until we see some success on the partnership front. Move forward one slide, please David. We wanted to try and explain, I think, our quarterly business or the cyclicality of the business. And so we've taken a view of illustrating the GMV and the revenue performance by quarter across all Airtasker marketplaces and then looking at Australia, the U.K. and the U.S. And the business is quite seasonal or cyclical. So in Australia, as I mentioned, GMV was down, average [indiscernible] prices were down. But you can see here by the chart, and we've got a 2-year view here, you can see that the second and third fiscal quarters tend to be stronger both on GMV and revenue. And what that also means then is that your first half and second half performances are generally about equal, that each have 1 strong quarter and 1 weaker quarter. As I mentioned earlier, the priority investment reliability and sales funnel efficiency drove improvements in completed task record -- completed task and improved monetization rates. You can see the green line is our monetization -- sorry, is our revenue line. Turning to the U.K. The spring summer season is upon us. So fiscal -- the fourth quarter fiscal and first quarter are the strongest in the Northern Hemisphere. Our fourth quarter revenue, as I mentioned earlier, was up 76% on the back of the TV at peak season. And in the U.S., the fourth quarter is tracking nicely up 30% in revenue, still a small market, and we're being quite disciplined in our marketing investment. Move forward one slide please, David. We wanted to highlight 2 of the, I guess, 2 of the key operational metrics that we focus on, the book task and monetization rate. In Australia, we saw book tasks were down just under 3% over the course of the year. One of the interesting things, though, in the first half of the year, book cash were down about 5%. The second half, they're actually flat, but the second half was up in the first half. So we're optimistic that we're going to pick up some positive momentum as we go into FY '25. And then the monetization rate was up just on 14% to 20% on the back of a lot of the product and pricing initiatives that we implemented. Turning to the U.K. book tasks were up 22%, all-time high at 35,000. But notice what was interesting was that most of the -- certainly, 1/3 of the full year book task came through in the fourth quarter, which is our peak season when tasks were up 32%. And the monetization rate was up 17.5% to 15%. The monetization rate in new markets tends to be a little bit lower than, say, a more established market like Australia. As the network effects build, there's a lot of book task, the conversion rate tends to be a bit lower. But over time, that improves. Looking at the U.S. book tasks were up 142%, so that's an all-time low for them as well, though it's coming up at a relatively low base. And in the fourth quarter, that was up 254%. The monetization rate was up 58% to 13%, a little bit lower than the U.K. So it's still slightly earlier stage. And as I mentioned, the monetization tends to be a bit weaker or softer than established markets like Australia. Move forward one slide, David. The other thing I think we wanted to highlight was that the seasonality of the business does affect all our different categories. So if you look at revenue and cash, we see expenditure and cash outflows, both from an accounting perspective and a cash flow perspective. So revenue and cash received tend to be stronger in the second and third quarters, and that's really due to the fact that Australia provides a higher weighting of the overall group performance. And then we see that our expenditure in market in -- our expenditure tends to be relatively flat or steady excluding the marketing piece. And marketing tends to flow with seasonality. So with the peak seasons, we tend to spend more in marketing. And then you can see how that impacts the operating cash flow. Obviously, cash flows tend to be stronger in the second and third quarters. But we also tend to have a lot of outflows in the first and fourth quarters as we have annual renewals of things like insurance and software and so on. So the fourth quarter tends to be negative generally because of obviously lower cash receipts and then we also tend to have higher outflows, and that's just the cyclicality that we have at the moment because of the contribution of Australia. Over time, as we build up our Northern Hemisphere business, hopefully, that will provide a balancing effect and we'll have quite a good countercyclical business. Next slide, please, David. So looking forward to FY '25, what are our plans? So having now achieved positive free cash flow in FY '24. That's certainly a target for ourselves in FY '25. We're also aiming to continue to deliver double-digit growth through our Australian marketplace in aggregate. And they will then generate cash and cash flow to fund -- continue to fund our U.S. and U.K. expansion in which we intend to accelerate through the course of FY '25. As I mentioned earlier, we've done with cash and term deposits of $17.8 million on balance sheet. We've obviously got the $11 million of advertising inventory to use from [indiscernible] in the Australian market. So we expect to be doing significant marketing activity in Australia after a number of years and not having spent a lot of marketing in the Australian market. And we've got just over GBP 1 million in inventory led from Channel 4 in the U.K., which we received from them last year, and we intend to invest that into the marketplace through the first half of FY '25. I'll now pass back to Tim.

Thanks, Mahendra. I think FY '21, really, really great results and really setting up the foundations for next year. We've also tried to increase the level of transparency around those quarterly results and the consistency of those metrics. Where there in challenging circumstances or when they present a really great story as well. Similarly, with seasonality, I think that is something that is quite important in Airtasker's business. It's crazy. Spring and summer really are the times where our people do a lot of jobs versus our full and winter. So hopefully, that increased transparency around seasonality in our operating metrics is useful. I'm not going to talk a little bit about our growth strategy going forward. So if we can move slide. So of course, Airtasker, we're going to continuously invest into our core product experience. We have a very, very scalable platform. We're going to be talking about that over the next few slides. But our brand and platform in Australia is going to keep investing into that. First of all, what we've worked out is that the metric that we need to move on Airtasker is really to increase our brand salience. What do we mean by salience? It's really that affected the brand that when you see something that needs to be done, the first name that pop in the head is automatically Airtasker, so we're really trying to improve our unprompted brand awareness. And so our partnerships with O Media and ARM Media who owns brands like Kit, which have [indiscernible] and stations that our feature will and Woody and things like that are really a good way for us to drive our brand [indiscernible]. And one of the great advantages that we have with our Airtasker plus One platforms in Australia is that we are really covering that entire breadth of customer demand from those one-off jobs that everyday jobs you can get done on Airtasker, all the way through to that spectrum a very, very large jobs, which one will help support. Over to Oneflare, Oneflare has been an incredible acquisition for us and a great learning experience and the value of this platform. We're going to continue to invest in the Oneflare platform throughout 2024, '25. And we're going to do that primarily by simplifying the subscription pricing and then improving how efficient we are at onboarding customers onto that platform. Thirdly, we're going to invest a lot into marketplace trust. We had a very, very hyper-focused strategy in FY '24 to increase reliability and reduce cancellations. That had a profound impact where by even as book task and GMV were down, we were able to increase sales efficiency so much that we're able to produce a strong revenue result. And the great thing about that is that increased efficiency throughout the sales funnel. As we now add more people into the top of that funnel, all of those customers are going to benefit from that increased improvements into the product experience and ultimately, to how well we can monetize each of those customers. So in FY '25, we're going to focus on marketplace trust. That's the next part of the funnel that we're going to focus on. And so you can see here, already making progress around enhancing the signals that exist on Airtasker so that customers can find and trust and have great confidence when they're booking at Airtasker. So for example, ID verification for all of our tasks across the platform, doing things like our police checks, New South Wales, licensed electrician checks, all of these verifications can help customers to be able to make sure they find the task out that's right for them. They can have that confidence, increases the rate of assignment or booking of that job ultimately result in greater sales funnel efficiency and more completed tasks. We move forward to slide. As Mahendra went through, our Australian business is still currently a very big portion of our revenue. So if you look at what Airtasker Limited is made up of right now, we've got about $17.8 million of cash in that left in so box. We've got Airtasker Australia, which is generating significant cash. And so those 2 cash flow generators can actually help us to fund our new investment in new marketplaces where we actually have to invest ahead of the curve to build up those network effects, build up that brand awareness. So moving on to the next slide, where we'll break this down a little bit. So on the right-hand side here, you can see a chart of Airtaskers growth over the 5 years in within partnership with Seven West Media. And you can also see here on the left-hand side that during FY '24, our Australian marketplaces generated about $45 million of revenue and about $31 million of cash flow. So we've used their cash flow proxy for the EBITDA. But Australian marketplace essentially generated about $31 million of cash. So how did we get this marketplace to be as profitable as that? During these 5 years out the 7 West Media, you can see in the light blue bars there that we continue to increase our marketing investment from about $2 million ARPU in FY '16, stood about $8 million in '17 and close to $10 million in FY '18. And during that period, GMV was growing at 2x to 3x a year from $12 million run rate to $36 million run rate to close to $70 million GMV run rate. Once we establish those network effects and got it to scale, we're able to actually start pulling back that marketing investment. You can see that from FY '19 to FY '20, we actually pulled our marketing investment. We're very lean. And during that time, we were able to keep scaling that GMV from a little under $70 million to well over $100 million. And in FY '24, about $190 million of GMV in Australia with a very, very lean marketing investment. So that's how we're able to build these profitable marketplaces. -- we have to invest upfront in order to build out those network effects. And now we'll come out the other side of that, we have a very, very profitable marketplace in Australia. If we move to the next slide. Our Australian marketplace, the experience that we had was in establishing that first marketplace, we not only had to be able to cover the cost of the marketing investment at the local level. We also had to cover the cost of investment into our software platform and head office the structure. So if you look here on the right-hand side chart, you can see that in FY '24, Airtasker invested about $18 million into our software platform and head office infrastructure and generated about $31 million of that platform. So we're profitable, and our Australian business is covering the costs of that head office. But the great thing here is we've now got this opportunity to leverage that software platform that we've created to cover the Australian market and we can actually use that platform to move into the U.K., the U.S. and other new markets. And when we do that, we don't have to replicate those platform costs again. So the economics of that are very powerful in our U.K. and our U.S. markets. Now if you move to the next slide there, David. So we are currently investing into our U.S. and our U.K. market. So you can see there our Australian marketplace, we're generating about $31 million of cash. But in our U.K. market, we've invested about GBP 2.5 million of cash in over the past year. And in Airsoft USA, we're continuing to invest cash into that as well. So we make these small investments into these markets. But what we're now doing is we are turbocharging those cash investments by doing media partnerships at a local level. This is really powerful for us because it means that with a small cash investment, we can actually scale those network effects and cross that chasm from marketplace investment all the way through that profitable improvement model that we have in the Australian market. We're now doing that in the U.K., and we intend to do that in the U.S. market as well. These local media partnerships don't just represent advertising inventory, though. So that is one of the massive benefits. But another really important benefit is that we establish these local experts in that marketplace. And that helps us to grow our networking opportunities and helps us to grow brand opportunities and it enables us to understand the local nuances of that market. So really a powerful model, both financially, but also from a marketing and operational excellence perspective as well. We move to the next slide. The model that we've used to be able to set up these investments in new markets is it enables huge upside for us. So if we look at the way that we treated the investment with Channel 4 in the U.K., we set up a new entity, a new company, Airtasker U.K. We had Channel 4 invest into that entity. And what we've agreed is that in 5 years' time, which is 2028 June, we're going to come back and repurchase that equity from Channel 4. And the grade that we're going to determine the valuation for Airtasker to U.K. is to take the local revenue that's being generated in the U.K. and multiplying it by Airtasker's group revenue multiple. This is really, really powerful because it aligns Channel 4 to not only want to, of course, drive local revenue in the U.K., which they are empowered to do but also to make sure that Airtasker overall is really, really successful. What it also means for us is that if things are going incredibly well for both Airtasker U.K. and Airtasker a group and our group valuation multiple, then yes, we will have a huge check to write for Channel 4, but we own the other 80% of that business. So we're going to have 80% of that revenue. And of course, we're going to be benefiting from a low cost of capital associated with that high revenue multiple. So it's a really powerful model, which aligns by parties but also helps to manage risk for Airtasker in that at the end of the partnership period, everybody is incentivized by the same things. Everyone does well together. It's also a really compelling proposition for Channel 4 and other media partners that we're exploring. First of all, they're getting access to a proven model. We have a software platform, which is creating very, very profitable marketplaces in Australia, and we've got a track record of using media partnerships to scale that model to $100 million, close to $200 million of GMV. So there's a proven investment thesis there and a proven operating model. The second thing is that each of these local marketplaces that we set up has very minimal fixed costs. Airtasker has already built a business in Australia, which is profitable enough to generate EBITDA that covers the entire cost of that software platform. So we don't have new fixed costs in each market. They're leveraging that same platform. And then the third thing is from an investment point of view, there's a guaranteed exit for each of these investors. So that is a very powerful incentive to make these just really, really work for local media partners. And the feedback that we've been getting are very encouraging and I think presents a very scalable marketing opportunity. If we move to the next slide, David. I just want to pay tribute to the incredible media partners that we've already on boarded. So in the U.K., Channel 4 ventures, I'm seeing super encouraging results. Vine, our venture partner there is having a really, really encouraged by the results we're seeing so far and has been an incredible ally for us in the London and ultimately, the U.K. market. And then back home in Australia to O Media, who we struck a $6 million partnership with in June of this year, giving us access to our outdoor media. And then across to ARM, who in the early part of this fiscal year, we stick a $5 million media partnership with giving us access to all of those names like Willam Woody, Amanda Jones and Kalanako, which can really help to get the message of Airtasker there and ultimately increase that brand salient. So really a powerful suite of media partnerships. And as mentioned, we're seeing some really encouraging progress in all of our markets around this model. So watch this space. I think there's a lot more to come. Permit to the last slide, just wrapping up, Airtasker great FY '24. We've really tried to increase the level of transparency around our core operating financial metrics and the seasonality of our business. And I think we've got an incredibly powerful and scalable and risk-managed growth strategy for international scaling. So yes, really happy to take any questions and your thoughts.