hipages Group Holdings Limited (HPG) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. Welcome to the 2023 AGM for Hipages Group Holdings Limited. My name is Inese Kingsmill, and I'll be chairing today's meeting. It's now 10:00 a.m. and there being a quorum present, I declare the meeting open to business. I confirm that the meeting has been properly constituted. The business for today's meeting will begin with an address by me, followed by our CEO, Roby Sharon-Zipser. We'll then conduct the formal business of the meeting with a live online vote by poll. There will be an opportunity to ask questions after each item as well as general Q&A before voting closes. I'd now like to introduce my fellow directors who are in attendance with me today: Roby Sharon-Zipser, CEO; Nicholas Gray; Kate Mills; Dr. Adir Shiffman; and Kate Hill. I also introduce our CFO and COO, Jaco Jonker; and our General Counsel and Company Secretary, Kylie Quinlivan. Mark Valerio, representing our auditor PwC, is also available today to answer any questions on the auditor's report later in the meeting. Before I begin the formal business of the meeting, I'd like to ask Kylie to outline today's procedures and post calls. Kylie?

Thanks, Inese. The virtual meeting is being held by our share registry Link's online meeting platform. This platform enables shareholders and proxy holders to participate in this live webcast of the meeting as well as ask questions and submit votes. To enable you to ask questions and submit votes, you will need your HIN or SRN and postcode. You can click the get a voting card button at the top any time to obtain to your voting card. Questions can be submitted at any time. To ask a question, click on the ask a question button at the top of the screen. You can choose the specific resolution of general business that your question relates to by using the drop-down box. Those shareholders joining us by telephone today are required to provide a PIN to ask a question on the telephone. For those of you who do not have the PIN, please contact Link Market Services on 1800-990-2863. Please note that while you can submit questions from now on, the Chair will not address your question until the relevant time in the meeting. That may include the agenda item number to with your question relates. Please also note that your questions may be moderated or if we receive multiple questions on one topic, amalgamated together. Due to time constraints, we may run out of time to answer all of your questions. All questions should be addressed to the Chair. The Chair will either deal with a question personally or if someone will be better placed to respond. We will do our best to answer any relevant question raised. I ask that you keep your questions short and to the point so that as many shareholders as possible have a chance to ask a question. When we reach the formal business at the meeting, voting on all resolutions will be conducted by poll. For the purposes of the poll, the company appoints Aaron Calder of Link Market Services, the company's share registry, who have examined the prepared summaries of the proxy forms received to act as returning officer and to conduct the poll. Shareholders in attendance virtually that have already submitted a vote by proxy should know that you votes will already be counted towards the poll. You do not need to lodge another vote unless you wish to change your proxy instruction. Shareholders in attendance virtually that have not submitted a vote by proxy and wish to vote on the resolutions being put to the meeting today can do so by registering your shareholding with Link. Instructions on how to register your holdings were provided in the notice of meeting and can also be seen on screen. If you have any problem registering your shareholding with Link, please call the phone number shown on the screen. To allow shareholders time to log in, the poll is now declared open. Online voting is now open and will remain open until the Chair declares it closed at the end of the formal business. Your votes must have been submitted prior to the portal being closed [indiscernible]. And I'll now hand back to the Hipages team.

Thanks, Kylie. Good morning, everyone, and thank you for joining us today. I'm pleased to report that FY '23 was another year of strong execution for Hipages Group with the team progressing the marketplace platform strategy while adapting to changing economic and trading conditions. While half 1 was still impacted by the post-COVID overhang of unprecedented consumer demand and constrained trade supply, the team did well to deliver continued revenue growth while executing key strategic milestones and tightly managing costs and cash. In half 2, the economic environment softened and competition for jobs among tradies heated up with the business carrying strong momentum into FY '24. For the full year, the group delivered total revenue of $60 million -- $67 million, I'm sorry, up 8% on the prior year. While the group reported a pro forma net loss after tax of $2.3 million for the full year, we reached an important milestone in delivering positive free cash flow in half 2, with the benefit of the operating leverage beginning to emerge and our cost base having stabilized. We've announced and reaffirmed our target of being free cash flow positive in FY '24. Incorporating the subsequent $8.4 million proceeds from the recently announced divestment of our stake in PropTech Labs, which is expected to complete in December, the group is well funded. On behalf of the Board, I would like to thank our CEO, Roby Sharon-Zipser and the Hipages Group team for their focus and execution this year. As a Board, we have a high conviction in the strategy and its ability to generate long-term sustainable value for our customers, team members and shareholders. At Hipages, our vision is to be the most trusted partner in the trades industry. Trust is key to our trading ecosystem, and we recognize that environmental and social responsibility is a part of building that trust. Our ESG commitments are a demonstration of our culture and value and play an important role retaining our people and attracting new talent. Our unique award-winning culture is an important part of this and is reflected in our strong team engagement with 87% of team members saying that Hipages is a great place to work, and Hipages having been ranked in the top 3 at the Best Places to Work awards for the third year in a row. Last year, we presented our first ESG snapshot, which was an important step in reporting on environmental and social impact. This year, we undertook a benchmarking and gap analysis process, which included a review of our governance practices, policies, procedures, social initiatives and environmental considerations. We've outlined our future ambitions and look forward to reporting against and annually moving forward as we continue to expand our ESG efforts. Board renewal and diversity remains a high priority for the group, and our Board has continued its growth and evolution this year, with the appointment of 3 new independent nonexecutive directors in Kate Mills, Adir Shiffman and Kate Hill. Bringing significant and diverse experience across corporate finance role, accounting, technology and entrepreneurship, Kate, Adir and Kate add significant capability to our Board as the group enters its next phase of growth. I'd also like to acknowledge 2 of our departing directors, Chris Knoblanche and Stacey Brown, who retired from the Board of our FY '23 results. Chris led the Board as Chair through our journey from a private to a listed company, and we have benefited greatly from his experience, insight and leadership. Stacey has been a valued Director and Chair of our Audit and Risk Committee since 2020 and a role that is now held by Kate Hill. Stacey has taken up a new executive role requiring her full time commitment, and we wish her well in that new role, and thank her for her contribution. To my fellow Board members, thank you for your valued counsel and your support in my first full year as Chair. And finally, thank you to you for your continued support as valued shareholders of Hipages Group. We're strong believers in the potential of the company and certainly believe that as we execute the strategy and deliver on our commitments, we'll create significant long-term value for shareholders. I'll now hand over to Roby to talk more about the group's performance and strategic evolution in FY '23 and also to provide some color around current trading and the outlook for FY '24. Roby?

Thank you, Inese. Good morning all, and thank you for your continued support of Hipages Group. Today, I'd like to begin by acknowledging the efforts of the incredible Hipages Group team who are the key drivers of our success. The team did a great job this year to remain focused on delivering the strategy while continuing to provide exceptional service to our customers. Our unique culture and diverse workforce are very important to us and something we have worked very hard to build and maintain. And we're delighted to have maintained a high employment engagement this year as well as being ranked in the top 3 Best Places to Work in Australia for the third straight year. Our well-being and financial benefits also won us to Smart50 Best Salary and Benefits award for 2023, which reflects our commitment to attracting and retaining top-tier talent. Earlier this year, we were very excited to announce our inaugural Tradie Advisory Board, the first of its kind in Australia, comprised of 8 tradies from across Australia, representing a wide range of trades. The Advisory Board has a direct line into our management team and Board and provides them a valuable opportunity to listen, learn and collaborate directly with the people who use our products and services. We've already gained some valuable insights from the group, and we'll continue to leverage perspectives to drive innovation and deliver an even greater value for our customers. Turning to our financial performance for FY '23, I am pleased to report that Hipages Group ended the year on significant momentum, with our key metrics and other lead indicators clearly showing that as the economic activity cools, weaker consumer demand is driving greater competition among tradings, which is directly benefiting us. A slower H1 did impact revenue growth. However, MRR growth accelerated strongly in H2, up 15% versus PCP, ended the year at $6.3 million. Total revenue for FY '23 was up 8% to $67 million. Demand for our services from new and returning customers remained at record levels, with subscription tradings growing to 35,700 and strong ARPU growth continuing as tradies continued to join at record yields and ascend to higher-priced subscription packages. Job volumes continued to normalize, but total connections between tradies and consumers were up 8% in H2 on the PCP, which is a more meaningful reflection of marketplace activity and lead indicator of future revenue growth. EBITDA before significant items increased by 14% to $12.7 million with focused expense management and enhanced operating leverage driving the EBITDA margin up 1 percentage point to 18%. As Inese said earlier, we reached a key milestone in delivering positive free cash flow in H2 and we are targeting positive free cash flow for FY '24. Hipages Group is going to become the #1 online trading marketplace in Australia and New Zealand with 35,700 subscription tradings and 1.4 million jobs posted annually. The scale and brand recognition we have developed as a result of significant long-term investments with tradies increasingly recognizing that our platforms offer some of the highest ROI solutions for lead generation. While the countercyclically of the Hipages Group business model is favorable in the near term, we are evolving from a marketplace business to a single trading platform to reduce the exposure to the economic cycles and open new opportunities for growth. This slide shows the 3 pillars of our strategic transformation over the next 3 years and beyond. The first pillar is optimizing our core marketplace business with lead price optimization, increased uptake of existing services and enhanced Tradiecore functionality to drive higher ARPUs and revenue growth. The second pillar is our trading platform evolution where we are developing Tradiecore into an end-to-end SaaS platform for tradies to run better businesses. This will provide opportunities for us to develop and sell expanded ranges of products and services for tradies as well as driving additional growth through new platform pricing and strategy. The third pillar is our consumer platform evolution, with consumer products and services enabling us to increase our take rate over time, while using the huge amounts of data we capture through our platforms to create bespoke products and services to drive further growth. We believe the growth opportunity for this evolution is huge with enhanced customer retention and a range of future expansion in revenue opportunities delivering increased customer lifetime value. At our full year results, we showed a short video that shows what the future looks like as we combine Hipages and Tradiecore into a single application. I'd like to show you that video again today to bring our strategy to life. As a reminder, the first minute shows the current state with the workflow separated across the Hipages application and the Tradiecore application. The middle section shows what it will look like when the full workflow is available in the Tradiecore, providing a seamless experience for tradies. Then the final section shows a range of potential future services that are unlocked by Tradiecore. [Presentation]

I hope you enjoyed the video. We are certainly very excited to see this come together. Turning to our year-to-date trading performance and the outlook for FY '24. The business has continued its strong momentum into the first quarter, with group MRR up 17% on the PCP to $6.5 million and subscription tradies up 5% on the PCP to 36,000. While job volumes have continued to normalize, connection between tradies and consumers are up 5% on the PCB as tradies continue to compete for jobs. We are on track to deliver our FY '24 targets outlined at our full year results, driven by the execution of our first strategic pillar, with the other 2 pillars giving us additional confidence in our growth prospects over the medium to long term. We have a highly efficient and scalable operating model, which has the potential to deliver enhanced operating leverage and margin expansion. And with the benefit of the $8.4 million proceeds from the divestment of our stake in PropTech Labs expected to complete in December, the group has additional financial flexibility to execute our strategy while retaining a healthy capital buffer. Before I hand back to Inese for the formal business of the meeting, I want to reiterate my excitement about the future of Hipages Group. There is a lot of work to do. We are confident we have the strategy and team to take advantage of this huge opportunity. I look forward to reporting back on our progress throughout the year. Thanks again to the Hipages Group team for their hard work and passion and to the Board for their guidance. Thanks also to you, our fellow shareholders, for your continued support.

Thanks, Roby. We now move to the formal business as set out in the notice of Annual General Meeting. The meeting will consider the items of business outlined in the notice of meeting disclosed to the market on the 9th of October this year. Shareholders received the notice of meeting by mail or by accessing it online, depending on their election. The notice of meeting is to be taken as read. Proxies have been inspected and all those ballots we launched have been accepted. Proxies have been received representing 91,506,381 shares or about 69% of the issued capital of the company. All undirected proxies or open votes that have nominated the Chair as their proxy will be cast in favor of each resolution in the Notice of Meeting. We'll now proceed to the resolutions set out in the notice of meeting. The first item of business is to receive the company's annual financial report for the year ended 30th of June 2023. The financial report and the report to the directors and the auditors are now laid before the meeting. There will be no vote on this item, and this is a discussion item only. The company's auditor for the 2023 financial year, Mark Valerio of PricewaterhouseCoopers, is present to take questions relevant to the conduct of the audit and the preparation and content of the independent auditor's report. Are there any questions or comments on the financial reports or the report to the directors and auditors?

No questions.

Are there any questions or comments from the management of the company?

No, we received no questions.

Are there any questions relevant to the conduct of the audit and the preparation and content of the auditor's report to be put to the auditor?

No questions.

Thanks, Kylie. We'll now proceed to the resolutions set out in the notice of meeting. Item 2 is as follows: To consider, and if thought fit, to pass with or without amendment resolution 2, adoption of the remuneration report as an ordinary resolution. If you wish to discuss this resolution, please submit your questions via the Q&A.

We haven't received any questions on this topic.

Okay. The proxies received in relation to this resolution are on the screen. I now put the motion. Shareholders can vote via the online portal, please click for, against or abstain on your voting card. [Voting]

Item of business 3 is the election of Ms. Kate Mills as Director. Kate joined the Board on the 1st of December 2022. She's an independent Nonexecutive Director, Chair of the Remuneration and Nominations Committee and member of the Audit and Risk Committee. Kate brings a depth of experience in commercial transactions, capital markets and governance. Kate is a commercial lawyer with more than 25 years' experience. Resolution 3 is as follows: To consider, and if thought fit, to pass with or without amendment Resolution 3, the election of Ms. Kate Mills as Director as an ordinary resolution. If you wish to discuss this resolution, please submit your questions via the Q&A.

Inese, we haven't received any questions on this resolution.

The proxies received in relation to this resolution are on screen. I now put the motion. Shareholders can vote via the online portal, please click for, against or abstain on your voting card. [Voting]

Item of business 4, election of Dr. Adir Shiffman, as Director. Adir joined the Board on the 7th of July 2023. He is an independent Nonexecutive Director and member of the Remuneration and Nominations Committee. Adir brings a strong track record in entrepreneurial success and a deep knowledge of technology and Internet business. He's an accomplished technology sector founder, investor and the Executive Chairman of ASX-listed global athlete analytics business, Catapult Sports. Resolution 4 is as follows: to consider, and if thought fit, to pass with or without amendment resolution for the election of Dr. Adir Shiffman as a Director as an ordinary resolution.

We haven't received any questions on this resolution.

The proxies received in relation to this resolution is out on the screen. I now put the motion. Shareholders can vote via the online portal. Please click for, against or abstain on your voting card. [Voting]

Item of business 5, the election of Ms. Kate Hill as a Director. Kate joined the Board on August 25, 2023, and is an independent Nonexecutive Director and Chair of the Audit and Risk Committee. Kate brings to the Board extensive financial management and public company director experience. She is an accountant with over 30 years experience, working with listed and private companies, including over 20 years as an audit partner with Deloitte Australia. Resolution 5 is as follows: To consider, and if thought fit, to pass with or without amendment resolution 5, the election of Ms. Kate Hill as a director as an ordinary resolution. If you wish to discuss the resolution, please submit your questions via the Q&A.

Inese, we have not received any questions on this resolution.

Thank you. The proxies received in relation to this resolution are on the screen. I now put the motion. Shareholders can vote via the online portal. Please click for, against or abstain on your voting card. [Voting]

Now the next resolution relates to myself, and as such, I will hand the chair to Kate Mills.

Thank you, Inese. The sixth item of business is the reelection of Inese Kingsmill as a Director. And Resolution 6 is as follows: Inese Kingsmill, being eligible, be reelected as a Director of Hipages Group Holdings Limited in accordance with rule 3.6 of the Hipages constitution. If you wish to discuss this resolution, please submit your questions via the Q&A.

Kate, we have no questions on this resolution.

Thank you, Kylie. On that I presume I will put the -- I'm sorry, firstly, I'll indicate the resolution -- the proxies for the resolution are now on the screen. And I now put the motion. Shareholders can vote via the online portal. Please click for, against or abstain on your voting card. [Voting]

And I now hand the chair back to Inese.

Thanks, Kate. The next item of the business is the reelection of Mr. Nicholas Gray as a Director. Resolution 7 is as follows: To consider, and if thought fit, to pass with or without amendment resolution 7, the election of Mr. Nicholas Gray as Director, as an ordinary Director. If you wish to discuss this resolution, please submit your questions via the Q&A.

No questions, Inese.

The proxy received in relation to this resolution are on the screen. I now put the motion. Shareholders can vote via the online portal. Please click for, against or abstain on your voting card. [Voting]

The next item of business is the approval of 2023 equity incentives to Chief Executive Officer, Roby Sharon-Zipser. Resolution 8 is as follows: To consider, and if thought fit, to pass with or without amendments resolution 8, approval of grant of deferred equity component of the FY 2023 short-term incentive to Chief Executive Officer Roby Sharon-Zipser, as an ordinary resolution. If you wish to discuss this resolution, please submit your questions via the Q&A.

We haven't received any questions on this resolution, Inese.

Thanks, Kylie. The proxies received in relation to this resolution are now on the screen, and I now put the motion. Shareholders can vote via the online portal. So please click for, against or abstain on your voting card. [Voting]

The next resolution is the approval of 2024 equity incentive award to Chief Executive Officer Roby Sharon-Zipser. Resolution 9 is as follows: To consider, and if thought fit, to pass with or without amendment resolution 9, the grant of FY 2024 long-term incentive to Chief Executive Officer Roby Sharon-Zipser, as an ordinary resolution. If you wish to discuss the resolution, please submit your questions via the Q&A.

No questions, Inese.

The proxies received in relation to this resolution are on the screen, and I now put the motion. Shareholders can vote via the online portal. Please click for, against or abstain on the voting card. [Voting]

The next resolution is the approval of the grant of director equity entitlements to Director Kate Mills. Resolution 10 is as follows: To consider, and if thought fit, to pass with or without amendments resolution 5(a), approval of the grant of director equity entitlements to the Director Kate Mills as an ordinary resolution. If you wish to discuss this resolution, please submit your questions via the Q&A. The proxies received in relation to this resolution are on the screen. I now put the motion. Shareholders can vote online via the online portal. Please click for, against or abstain on your voting cards. [Voting]

The next resolution is the approval of grant of equity -- of director equity entitlement to the Director Adir Shiffman. Resolution 11 is as follows: To consider, and if thought fit, to pass with or without amendments resolution 11, approval of the grant of director equity entitlements to the Director Adir Shiffman as an ordinary resolution. If you wish to discuss the resolution, please submit your questions via the Q&A. The proxies received in relation to this resolution are on the screen. I now put the motion. Shareholders can vote via the online portal. Please click for, against or abstain on your voting card. [Voting]

The next resolution is the approval of grant of director equity entitlement to the Director Kate Hill. Resolution 12 is as follows: To consider, and if thought fit, to pass with or without amendment resolution 12, approval of grant of director equity entitlement to the Director Kate Hill as an ordinary resolution. If you wish to discuss this resolution, please submit your questions via the Q&A.

There are no questions, Inese.

The proxies received in relation to this resolution are on the screen. I now put the motion. Shareholders can vote via the online portal. Please click for, against or abstain on your voting card. [Voting]

The next item is the approval of the Hipages' management equity plan. Resolution 13 is as flows: To consider, and if thought fit, pass with or without amendment resolution 13, Hipages' management equity plan, as a ordinary resolution. If you wish to discuss this resolution, please submit your questions via the Q&A.

There are no questions, Inese.

The proxies received in relation to this resolution are on the screen. I now put the motion. Shareholders can vote via the online portal. Please click for, against or abstain on your voting card. [Voting]

The final resolution is the approval of the Hipages' employee equity plan. Resolution 14 is as follows: To consider and if thought fit, to pass with or without amendment, Resolution 14 Hipages' employee equity plan as an ordinary resolution. If you wish to discuss this resolution, please submit your questions via the Q&A.

There are no questions, Inese.

The proxies received in relation to this resolution are on the screen. I now put the motion. Shareholders can vote via the online portal. Please click for, against or abstain on your voting card. [Voting]

As we now open the meeting for any general questions, if you have any additional questions, please send them through the Q&A function and we'll just pause for a moment to give them an opportunity to come through.

Thank you. That concludes the resolutions to be voted on today. As noted, we are conducting a poll on all resolutions, and I note that the poll is already open. To all shareholders voting online, please now ensure that they have submitted their votes. I'll now allow another minute before the poll is closed, and if you have any questions in relation with submission of online vote, please send them through the ask a question function now. [Voting]

There being no further questions, I declare the poll closed. The staff at Link will now process the poll, and the results will be announced to the ASX once they are available. That concludes the formal part of the business. As described earlier, the results of the poll will be announced to the ASX as they are available. I'd like to thank all shareholders for their attendance today and declare the meeting closed.