Camplify Holdings Limited (CHL) Earnings Call Transcript & Summary

Hello and welcome MarketOpen Direct Connect. I'm your host, Stuart Walters, and we're joined here today by Justin Hales, CEO of Camplify Holdings Limited, ASX code CHL. Justin joins us to provide an introduction and overview of CHL Group and discuss the latest financial results and participate in a live Q&A post presentation. [Operator Instructions]. Justin, welcome to MarketOpen Direct Connect, and over to you.

Yes. Thanks for having me, Stuart. So I'll just run through some of our results and also just give you a brief overview of exactly what Camplify and associated companies do to give you some background. And yes, as Stuart mentioned, happy to take any questions. So I might just start with a bit of a background on the companies that we operate and how we operate them. So CHL Group consists of Camplify, which runs our marketplace in Australia, New Zealand, the U.K. and Spain as well as PaulCamper, which operates in Germany, Austria and the Netherlands. We have our insurance mutual, which is MyWay, and we'll go into a little bit of that as we progress through the presentation. And then in Australia, we sell in New Zealand. We sell memberships to MyWay as an insurance mutual protection product through the brand called Camplify. And we also own the largest rental company in the Australian market as well. So we approach all these entities under the CHL Group. So our objective is to leverage technology to be the leading marketplace for connecting RV owners and people who want to go away on a holiday together through the sharing community. We want to make van life accessible to all and connect up a world where outdoor travel is simple through our process. We really make sure that our customers have the simplest execution of being able to rent out or to rent a vehicle through our platform. And really, we are the glue that holds the transaction together. We provide everything that those 2 parties need to be able to transact. So we provide everything from support, roadside assistance, contracts funds management right through to protection products and insurance products throughout the group. So we really have thought of everything that makes that friction point sticky and being able to solve that. And that's really our objective to continue to make that process easier and easier and simple as we progress through. We began in 2015 and we are now the largest RV sharing community in Australia and New Zealand and the biggest in Germany and 1 of the biggest in Europe overall as well. We have paid over $500 million to our owners through the platform, and there's over 1,000 rental businesses that operate through the Camplify platform through our locations. So getting in, I guess, to where we've seen the last 12 months and how we've evolved the business. So really, our last 12 months has been focused on profit generation. We were a business that went through periods of significant growth expansion, M&A activity. And we really have just tried to make the organization as focused on achieving the EBITDA target line as possible. We've done that through being able to make the business more efficient, focus on efficiencies and stable basis of operation. and really looked at how we can deliver that through technology improvements and through automation to deliver a rapid change to both the organization and customers through that process. We've built a product stack that enables through each 1 of our countries. And really, our objective is to deliver a 5 star user experience through that. We spent the last 12 months building our damage protection business, MyWay, which we've now had running for just 12 months, and that's really helped to transform the organization and it's something we're looking to expand a little bit more in the coming 12 months. And really, we want to build a business that is very much focused on operational improvement. So how do we do? Well, we turned around the last 12 months from a $10.4 million loss to a $300,000 EBITDA positive result. The second half, in particular, was a major uplift for us. So performance of the EBITDA result within a plus $3.5 million result in the second half, an improvement of $6.3 million pcp. So we've really focused on that bottom line result. We've made some sacrifices in terms of growing the business to really make sure that we had profitability first and foremost. And then in the next coming years, we'll get more focused on being able to achieve both of those outcomes in terms of growth and profitability. We've gone from a product cycle of 12 months backlog to a 45-day product cycle evolution that we shipped more product in the last 12 months than we had in the previous 3 years. We've built our MyWay Mutual, which has allowed us to be able to provide cover to Australia and New Zealand customers. And we've really seen an improvement in the way that we work with our customers, but also our GP margins as a result of that. We've improved our customer satisfaction scores. We've improved our customer retention rates and we've improved our higher conversion rates. So we've got a much more efficient cost basis, and we'll just really created a bit of business. So the second half for FY '26 was really where we saw that reset prove itself. We returned it back to profit. We held margins through genuine external demand shock. And as we enter '27, we've really -- that structural work is behind us, and now we're in a position to be able to capitalize on that and continue to deliver that bottom line result and then start to look at how we see some further uplifts. So as I mentioned, the second half result there. We also saw higher margins during that period of time as well. Cost of sales fell 30% as we saw the mutual come into effect in particular. So we've effectively gone from giving an external insurance company profits to bring that in-house, which has really worked. This year's defining structural improvement really has been the mutual and it has been a driver of that margin transformation in the second half. So now entering the full year. We've got that set now. We've run it for 12 months. We sort of know how to improve it further. So looking forward to being able to deliver that. Just touching on demand shock. So we certainly saw in the June quarter that significant volatility as a result of the oil crisis, which really saw a result of bookings cut by 29% as that came to be, particularly in the Australia and New Zealand market. Since that period, we've actually seen it recover a little bit, and I'll touch on that in a second with a slide particularly around that. But now moving into the summer period, bookings are accelerating at a faster rate than they were before. And we're very confident, particularly in the Australian market about having a really solid year for the Australian season. We also executed a partnership with a strategic investment from the JB Group. They've come on the board as well, and they were working with them to roll out integrated products associated with them. I'll touch with that seat just to give you some background on the JB Group, for those of you who don't know, they're the largest manufacturer in the Australian market. So they build and distribute JB Caravans, New Edge Caravans, traveler caravans, Paradise Motorhomes, Victory and Network RV. So they're a significant operator. They also own most of their own dealerships. So they own 12 of their own dealerships and they have a network of an additional 20. So they're a significant operator in the Australian market. And a great partner to have on board. And we're really looking to work with them a lot more in this market, in particular, and then replicate that into the other markets. So from a full year turnaround from a restated $16.5 million loss to a positive result in 12 months with $10 million of cash on hand and no debt. And all the structural work behind us, we're in a really fantastic position to be able to build on that for the next couple of years as we continue to grow. So really, FY '27, we will be significantly focused on profitability, how we make sure that we have that strong profitability from the bottom line. And how we really look at achieving more efficiency through our platform to enable growth through that profitability. We're focused on generating positive cash flow and further rolling out our cost reduction programs that we've implemented, particularly into our insurance business as we look to optimize that even more now that we've been able to run that for 12 months. We've really been able to scale our technology to a global marketplace. And we can see now that when we have markets that are impacted by issues, we're less exposed than what we previously were before. So while we're exposed quite significantly in the Australian market when we had the oil availability issues for May and June, we didn't see that as much in the other markets. And now we've seen the German market have some impact as a result. And I'll touch on that in a second, but we're less exposed now because we have that real global option around the world that we deliver. Just looking into some of the financial metrics. So we saw group revenue slightly down. However, most of that was deliberately executed as a result of going after more profitable bookings. So what we've seen in the marketplace is a shift from -- particularly in the German market we've stopped trying to get smaller short-term bookings and focus more on larger long-term bookings. And that means that there's more margin there for our customers. There's more margin in there for us. And so we've kind of made the decision to sacrifice some gross transaction volume and a slight bit of revenue to be able to focus more on profitability and that has worked -- so now our job is to look at how we can do both. We can start to lift that revenue as well as focus on that profitability. This slide really shows the impact that we've made. So you can see revenue has been really fairly consistent over the last couple of years. And we've seen that real bottom line improvement particularly in that second half. We've seen our staff and marketing costs decline. So marketing has declined through efficiencies, better pipeline, more efficient pipeline and better conversion metrics that we've really been focused on the platform and us being able to consolidate all of our operations into 1 global team and leverage over the last few years in particular, automation and AI has meant that we've been able to reduce our employee benefit costs as well. So we're in a great spot now where we've put all those hard work into automation over the last few years. And now being able to further leverage AI as part of that process means that we can really operate with a smaller team, but not really sacrifice anything. We've been able to improve our customer service and customer service scores as a result. So we've lent pretty hard into AI in the last 2 years. And now we'll just continue to reap benefits from us really leveraging that technology and being a first mover in how we leverage that technology internally. While we have reduced our marketing spend, we have also invested in key markets as part of that. If you jump on our YouTube channel, you can see this is 1 of our TV ads that we've just put out recently. We've been able to do that in a very efficient way with user-generated content and we're now distributing that through the networks at very effective prices. And so we're more focused on top of funnel, and that has really resulted in us being able to continue the at GTV levels that we need to be at to be able to support that profitability. So while we have reduced that marketing budget is really about being more efficient with the spend. If we have a look at the P&L here, we can see that we're now getting more and more of a mix of product into our revenue line. So not only are we primarily a marketplace that is focused on rental. We're now seeing a larger contribution from our insurance rents. And that's something that we will continue to evolve. We believe that we will be an insurance-led business in every market. And that will allow us to be able to leverage that investment to provide products and services to the marketplace customers as well as the wider customer group beyond the -- just our marketplace customers as part of that. Just a look the cash flow. So as I mentioned, positive cash flow for the year, so a significant improvement from the last couple of years. And as I mentioned, we closed the year with in cash, which was around $2 million improvement from the previous year. So we've really put ourselves into a much, much improved position. through the hard work that we've done and no debt, as I mentioned before, which you can see there on the balance sheet. So just we look into our key metrics. So you can see that our bookings roughly maintained in the key markets. We definitely saw some impact in the German market. So I just got back from the major show in Germany, the Caravan Salon Dusseldorf. The feedback from the entire market is that the every rental operator in the market has been down around 30%. So that's been consistent with what we've seen. And really, that has been around a softer market in Germany this year. So with the hard work that we've done and the work to really concentrate on consolidation of costs and automation. We're actually in a much better position than most of the other operators in those markets because we've gone through that pain and we now can reposition that as we start to move into next season and focus on those operations and be able to leverage some of that technology that we've built. We're in a much better position to be able to take advantage of potentially more of an upswing into the next market. As part of that, we're also integrating with a number of larger fleet providers to expand our fleet and also looking at how we can leverage our insurance offerings into the German market to provide a really significant improvement for our customers in those markets, which we feel will net us some excellent results in the coming years. So future bookings, as I mentioned, we saw that real drop off a cliff in the May, June period as a result of particularly Australian market as well as pressure on flights into the New Zealand market, particularly from Europe. As we've started to see things evolve from this period, we've now started to see bookings accelerate. So we're seeing people book a little bit closer to travel date than previously they were booking. But we've maintained fairly well our net margin per night as well as our actual length of booking stays as well. So overall, as we move into the summer period in Australia and New Zealand with that lower cost base operations and with the acceleration of those future bookings we're in a very comfortable position. So we're looking forward to delivering a good result for shareholders and investors and also customers through the platform. As I mentioned before, Club Camplify is our protection product we sell in the Australia, New Zealand market, which is backed by a MyWay insurance mutual. And we launched that about 12 months ago. What we've seen in the first year by bringing that in-house. So we paid about $2.7 million in claims. We've had 99% of claims approved. We've maintained a loss ratio of 68%, which is slightly below where we had budgeted to be at. Probably the 1 thing that we want to improve is our days to complete claims ratio. So sits at 85 at the moment. We're working to improve that. We've brought our assessing in-house. We're developing a nationwide repair network through that process as well. And we think that's a big area of improvement for us, which will provide better customer outcomes and really allow us to grow that product quite significantly. But overall, great success for us with healthy margins in that product in -- and now we're looking to sort of expand that and see how we can grow that a little bit more. So just touching on JV. So we're now working with them on a number of different fronts. So we're working with them to roll out many depots. We've got the first 2 of those up and running, 1 in Newcastle and in Brisbane. Feedback so far and the process has been excellent. So there are pilot projects. What we're doing essentially is taking customers' vehicles who don't want to look after them themselves, putting them into those depots, and we will run those on behalf of the customers. So that means that we're able to really leverage the depo location and create this network of more traditional rental experiences for customers. So already, we've seen some customers that have come and rent through us that previously would not have done that through that methodology. So it's been very successful so far, and we're looking to expand that now into the other locations. But also a key thing for us is we've now agreed on a deal with them to provide Club Camplify as a bundled product complementary as part of every customer purchasing a vehicle from JB. So they, as I mentioned, the largest in Australia, and that means that we now can really develop this great pipeline of customers who will be on our cloud products and hopefully, for many years for us to provide protection to that vehicle for the life of the vehicle. That's a 3-year agreement. So every year, when they sell a vehicle that comes with that membership bundled, and it's our job then to service our customer and keep the customer on the product for the long term. So we're very excited about the ability for us to be able to expand that product outside of the traditional rental marketplace, primarily through this channel. So as I mentioned, our real focuses are on profitability, cash flow positivity and really positioning us to be somewhat protected from macroeconomic issues, which we've done a good job of doing that. Looking at how we can continuously improve our operations and our efficiency, really build more and more fleet through the platform and really maintain our cost controls and an EBIT positive relationship, a result for FY '27. So leveraging those networks that we're building those relationships, we feel confident to be able to really match that out of the park and look at how we can then leverage those things that we've built in our Australian market as our key proving ground to then move those products into the other marketplaces, particularly into the European market. We also have built our new Camplify Xchange. So it is a sales platform, and it's fully integrated into our processes with the rental marketplace as well. So we've got around 12 dealers on that platform right now, selling vehicles through that. It's a key different way of providing experiences to customers who are looking to both buy and sell, primarily because we now can integrate a try before you buy experience into that process. So we know that lots of customers come to Camplify to try something before they actually decide what they're going to buy. So we're actually able to integrate that entire experience through that pipeline, work with dealers on being able to fulfill that. And then look at how we can provide Camplify to those people that are buying and introduce the marketplace through that process as well. So we'll look to expand and provide a new integrated approach with that more and more. It's a relatively new product. We've launched it just a couple of months ago. So it's really building and gaining momentum through the platform at the moment. We've got a very experienced Board of Directors for those of you are new to the story. So Andrew McEvoy, former Managing Director of Tourism Australia, chairman of CHL as well as luxury scapes and a bunch of other very broad tourism background. John Myler brings our insurance expertise, so the former CEO of Auto and General and RACQ insurance as well. Mike Rosenbaum brings the marketplace experience. So he's the Founder of Spacer and Park Hound as well as being involved with DealsDirect and a bunch of other marketplaces, including the cash sharing platform. Carolyn Trouchet was 1 of the founders of Apollo Motorhome so became the largest RV rental fleet globally and now part of the THL Group. And Sharon Xue who's the principle behind JB Caravan. So we've got that real mix of manufacturing, fleet operating, marketplace, insurance and tourism. So we've really built a very, very strong Board and also a very strong executive team with Brett, our CFO, with over 12 years ASX listed financial experience, Jeremy with a significant amount of marketplace operations experience and Soto, who has a really strong background from a tourism operations experience. So I'll pause there and open up for Q&A, and happy to talk more and answer some more questions.

Justin, thank you for a fantastic presentation. Obviously, the company is a fantastic position. We've had some great questions come in. So we'll get straight on to those now. How confident are you that H2 profitability will be sustained through financial year '27?

Yes, very confident. We actually have quite a predictable business in terms of -- we can see future bookings quite and way out. We have a lot of understanding of customer patents of behavior in terms of the way that they come on to the platform, look for rentals, engage in that rental process and then how we can work through that seasonality through the system. So with our cost base where it is at the moment, and the predictability that we have and the patents that we're seeing, we're very confident in achieving that result for the full year. there, Stuart.

Sorry, how much of the financial year '26 cost reduction is structural versus temporary?

Yes. So as I mentioned before, a lot of it has been done through automation and technology. which means that we now have built that and we're able to leverage that. So we haven't just sort of cut costs to be able to look at bringing costs back in the future. We've done it through hard work. And so now that is really something that we believe is sustainable moving forward.

What needs to happen to return the business to revenue growth without giving back the margin gains?

Yes. Look, the real focus for us is how we can self-fund that. So while we've had a good basically breakeven result for the year, we need to be able to prove that profitability uplift this year to be able to then fund that growth in the future. And we believe that we can get to a position through that methodology that we really become a real 40 company where we're growing at a significant rate and being able to still contribute a significant margin to the bottom line. So I think we're in a good position to do that. I think we've got a lot of tailwinds that we can being back off. One of the great things about building an insurance book, which is essentially what we're doing with the mutual is that it's basically recurring revenue. So we can look at to customers on that book. We can look at how we're growing that book, although book is meant to do next year, how we retain those customers. And so that gives us a great forecastability in terms of the book value. And then on top of that, we also have a very strong marketplace business. So we're able to sort of leverage those 2 things together to be able to look at how we sort of continue that growth in the next couple of years.

You talked about the key metrics, but what are some of the key metrics investors should judge more watch to judge where the financial year '27 is on track.

Yes, for us, we are a very seasonal business. So -- most of our revenue comes in the second half. So our objective for the first half is to be as close to breakeven as possible. And then our real revenue result, bottom line result comes in the second half. So that's a key thing for us is to see how we can perform in this first half of the year. And then we really see the results in the second half as part of that. The other key things for us are fleet volume. So how we can make sure that we're maintaining and growing fleet through the platform and then how we can really maintain and grow revenue. So they're really the markets that provide us with kind of the forward-looking analysis, if you like.

Justin with $10 million in cash and no debt, where is capital best deployed in financial year '27?

Yes. Really, it's about how we can leverage that to be able to invest into the right marketing turns to deliver the right result and continue to reinvest into both our technology stack and how we expand our insurance business. So expanding it here locally in Australia through networks like JB, but also how we can deliver a better product in the European market. So that Australian business has been transformed through insurance. and insurance prices in Europe are a significant cost for our customers. And so we want to be able to really create a new product for those customers in the European market and a better product for those guys, which will mean more bookings, more marketplace operations but also better GP margins for us. So that's really where we're focused on an investment to reap that improvement.

Can you explain the level of revenue growth in the current cost base support before you need to reinvest?

Yes. Look, I think we feel very confident with the systems that we've built to be able to grow our book of insurance at a very sustainable rate. We can grow our marketplace at sort of double-digit growth before we need to have any reinvestment into that. I think the thing for us is we need to work through that process of insurance and deliver more and more improvements through that process. So as we start to be more operationally efficient with the bottom line for the insurance business that we can then also, at the same time, reinvest that savings into customer service at the insurance level. So we feel very confident that we've got the ability to provide that operational efficiency, get that benefit and reinvest that into providing better products and services to customers, which will net bottom line results.

And future bookings are still below last year. What are you seeing in the booking momentum today?

Yes. Look, it's been very strong. We're very pleased with development of the coming summer period, particularly in the Australian market. New Zealand has been a little bit slower than what we had seen in previous years. But I think if you look at recent result from THL they sort of called out a similar thing with acceleration happening in New Zealand market just in the last few weeks. Peter in a marketplace like us is usually a couple of weeks behind traditional rental fleet. And we're starting to see that movement momentum as we get closer to the travel date as well. So we're quite confident about achieving the numbers that we want to achieve from a revenue perspective.

Can you talk about the strategy for Europe, while those markets remain subdued?

Yes. As I mentioned, it's been a tough market for a lot of operators in that marketplace in the last 12 months. We've seen in the last 18 months, 4 major operators going to liquidation. And there's a lot of pressure on those asset-heavy companies that have major fleets who are investing in marketing and fleet development staff and are not seeing the results. And so the great thing about our business is that we've been through that structural reset already. We've optimized already. We're kind of 2 years in front of them in terms of going through that process. We're an asset-light business. And we have a lot more levers than they do in those markets. So I think, number one, we can work with those guys to be able to provide a channel for more bookings for them. And number two, we can just be a lot more efficient than what they can. So we feel as though we will win over the long term because of those things. And our insurance business in that market gives us a real lookup as well. So being able to improve those products and services and have better rates for our customers, I think will net us the win in the end.

And when should investors expect the JB Group rollout to make a meaningful contribution?

Yes. It's really over the next 12 months. So we'll start to see that insurance bundling through the MyWay Mutual have a real effect over this 12-month period. We're really starting to ramp up those depots. It will also allow us to unlock one-way rental as well through that process. So really this 12-month period is about how we leverage that investment and then start to see those things provide a real return in the Australian market in particular. And then we'll start to just see that build over the next couple of years.