Humm Group Limited (HUM) Earnings Call Transcript & Summary

My name is Rebecca James, Chief Executive Officer of hummgroup. Today's presentation is going to run for approximately 90 minutes. And following the presentation, we've left plenty of time for questions. If you'd like to ask a question today, please e-mail [email protected], and you can find his e-mail address at the bottom of the front cover of today's presentation. We have a packed agenda today. But before diving in, I thought I'd highlight 2 new announcements that we're pleased to provide our shareholders. First off, the Board has confirmed a return to dividend payments from the first half '22. We're also exploring a possible divestment of the New Zealand Commercial leasing business. We'll expand on these announcements in their respective sections, but I wanted to provide some context on our discussion today and our decision to hold today's session. It was born out of our desire to address a number of recurring themes ranked with discussions with existing and potential shareholders. Firstly, the need for us to explain our business and strategy in more detail, not just what it is today, but also what it will be over the longer term. Secondly, to clearly articulate the benefits of our diversified business model, which delivers high-margin profitable growth by focusing on big ticket finance. Thirdly, the reason for our more capital-intensive model, when compared to small-ticket BNPLs and competitors. And finally, the recent lack of dividend, which we're addressing today. Before we start, I'd like to make clear that we are totally committed to restoring shareholder value. And it is our objective to be able to return cash to shareholders while still growing, and going forward, we will provide quantitative metrics to assess our progress against our growth objectives. Most importantly, we will carefully manage shareholder capital committed to our growth plans. These are our commitments to you. While there's no doubt that you'll hear humm mentioned alongside Afterpay, Zip, Klarna and others. The truth is that we're not competing in the crowded space of small ticket purchases with these guys on a day-to-day business basis. Our business is much broader. What we're known for and what we have a history of is finance for bigger ticket items. There's no one else in the local market and indeed globally that can offer virtually instant credit provisioning up to $30,000 for installment payment products. We provide a differentiated offering that delivers value to merchants, driving increased footfall and an increase in average transaction value by more than 50% in key verticals, along with a winning customer experience for consumers by providing them a budget-friendly and steady way to pay the bigger purchases without having to pay interest. With a strong history in consumer and SME finance, strong credit funding and securitization disciplines and a decision platform that serves us across our suite of products, we are able to run a profitable business and self-fund our growth. This is who we are. This is our moat. Here are some things you may not know about us. We're the market leader in Buy Now Pay Later transactions over $500 in value based on research from RFi. We're the #2 nonbank commercial asset finance lender in Australia. We're the leading nonbank issuer of new credit cards in New Zealand, last quarter alone, representing 33% of new cards issued in that market. We're the #1 BNPL financier in residential solar and home improvement in Australia. In fact, we've financed approximately 10% of residential solar panels in Australia since 2012. We're the #1 BNPL financier in key health verticals, private audiology equipment and dental. We estimate our Buy Now Pay Later product covers over 30% of dental chairs in Australia. And with the B2B platform of choice for blue chip partners to offer customers the latest trends in installment payments. Today, we want to talk to you about our plans to leverage our unique competitive advantages to drive continued growth in large BNPL transactions and win share in asset finance and cards, as those markets to continue to consolidate. We believed we're very well placed to do this, and we ask you to judge us on our track record. We've come a long way in 3 years since we announced our new strategy focused on simplifying and growing the business. hummgroup has a proven ability to scale. In the last 3 years, we've strongly grown the BNPL business, hitting over $1 billion in volume in FY '21 for the first time. We've strongly grown the commercial business, which is now on a pathway to over $1 billion in volume. We've almost doubled total customers to 2.7 million and more than doubled our BNPL merchants to just under 21,000. We've also proven our ability to deliver technology transformation. Three years ago, FlexiGroup was a business operating on antiquated processes, fast-forward today, and we have the swiftest credit decision in market. It takes only 3 minutes to apply for up to $30,000. We've fully digitized the customer experience with a 4.8 app rating. We've replatformed our BNPL stack for the U.K. and Canada, and we're going to be shipping this back to Australia shortly. We've continually rolled out new features to drive engagement and transaction frequency to 19 times a year across our consumer-facing products in Australia. We've also demonstrated continued efficiency gains, making us leaner and more agile as we grow. We remain committed to a sub-40% cost-to-income ratio. We've reduced full-time employees by over 30% since December 2018. And in 2 years, our operating expenses, excluding marketing and depreciation, have reduced from $151 million to $134 million, and we've advanced on decommissioning legacy products and technology. Finally, and most importantly, we have a 15-year proven track record in capital markets putting hummgroup in a stronger and fitter position to capitalize on the growth opportunities in front of us. We have securitized over $5 billion in receivables. We've decisioned and financed almost $20 billion in purchases since we listed. We've improved capital efficiency from 16% to 13.9% over the last 3 years, and we've reduced corporate gearing from 36% in June 2018 to nil in June 2021. I'd now like to share with you how I view this business. I touched briefly on the advantage of having a streamlined, but diversified business. But I think it's fair to say that we've suffered from the perception we're complex, and therefore, difficult to value. We see hummgroup as 2 distinct highly attractive businesses that compliment one another. Our established businesses are made up of what some would consider more traditional finance products, including our credit cards businesses and flexicommercial, our SME financing business. This business, in particular, has been a standout performer, having nearly double growth, halve losses, and significantly improved capital efficiency in the last 12 months. These are stable, high-margin businesses with established market positions experiencing strong growth. These products are disrupting over $70 billion in traditional banking revenue. Our cards business is also set to benefit from the return of international travel, a $350 million opportunity annually based on the travel we financed in the 2020 calendar year before the pandemic. The popularity of these businesses is driven by distrust for banks and the long-term convergence that we see between cards and Buy Now Pay Later. Speed to yes is a critical factor for all customers, particularly in commercial, where we can decision alone in 24 hours compared to weeks for traditional banks, who are themselves retreating from the SME market. Our strategic objectives in our established businesses is to grow volumes and grow share, as these markets to continue to experience disruption and consolidation. On the other hand, our rapid growth businesses made up of Buy Now Pay Later products, bundll and hummpro, are high-growth, highly disruptive and loved by our customers. In particular, the consumer-facing products act as a funnel to a $500 billion market opportunity in big things. Crucially, these products give hummgroup prominent and long-term relevance. These are the products not just for now, but also of the future. And that's why we also see huge opportunities in partnerships as traditional finance providers look to capitalize on our expertise. The competitive dynamics in this market absolutely played to our strengths. While we've seen a rush of new players entering the low value end, there is limited competition in big things, given the requirement for sophisticated credit funding and securitization at this end of the market. It is also where we provide immense value to our merchants, providing high transaction values of over $4,000 with an approval rate above 80%, making us indispensable in key verticals looking to drive sales conversion. BNPL has delivered strong customer loyalty, giving it unique power at the nexus of customer, merchant payments and loyalty. The strategic objective of our growth businesses is to rapidly acquire customers into the humm ecosystem, strengthening our direct relationships with customers and continually evolving our platform with new data and insights. At the end of last week, hummgroup's market capitalization is $451 million with unrestricted cash on balance sheet of $65 million. When looking at our peers across our established businesses, they are trading at an average of just under 9x, FY '21 earnings. With our established businesses delivering cash NPAT of $67 million, we are trading well below where we would be if it were a stand-alone business. These are just the simple facts. This is a business that includes the second largest commercial nonbank lender in Australia and the leading issuer of new credit cards in New Zealand. The same is true of our growth businesses. Again, we're the market leader for Buy Now Pay Later transactions over $500, which is the profitable end of the market. We're the leading BNPL financier for residential solar and home improvement in the country. We're the leading Buy Now Pay Later financier in health. And overall, we still remain the third largest Buy Now Pay Later player in Australia with approximately 18% market share. The local retail market is estimated to be worth $349 billion, and we are well placed for international expansion with retail spend in the markets we operate in worth just under $2 trillion currently. With revenue of $121 million in FY '21, a differentiated product proposition, the ability to partner and a profitable business model, our growth businesses deserve a much closer look too. Under my leadership, we have never presented you with an investment checklist before, but it's something we use to guide our decision-making. And so I'm providing it to you today so you can use it to review our performance and hold us accountable. We aim to deliver to shareholders strong and sustainable unit economics. We're a profitable business that can self-fund growth, and we plan to keep it that way. A diversified business model that acknowledges technology and consumer preferences are going to continue to evolve. Our objective is to manage a tight portfolio of our products that represent current consumer preferences and innovate for the future. Our ability to partner with blue chip companies is a key differentiator against peers, and we will speak to this in greater detail later in the presentation. The expertise of a proven management team with a track record of executing on strategy and leading industry change across finance, payments and marketing. A focus on reducing capital intensity with access to capital markets and competitive funding in place and a focus on shareholder value with regular cash returns, combined with earnings growth. Every decision we make as a business references back to this investment checklist. So why you should think about buying hummgroup shares? We're the only profitable Buy Now Pay Later player in Australia, and it's because of our differentiated offering at the higher end of the market. We have a portfolio of strategic and successful businesses each in their own right, benefiting from strong market positions in their own categories. With the reopening of borders and international travel, our cards business is ready to fire on all cylinders as well as the return of in-store bigger-ticket purchases following extended periods of lockdown across key markets in Sydney, Melbourne and Auckland. We benefit from being a global niche, financing bigger-ticket items. We're not dependent on future equity raises to fund cash losses from growth. And finally, hummgroup is attractive compared with other equity market valuations. As a team, we have proven our ability to deliver a complete turnaround of an antiquated business. And so we ask for your support as we consolidate our position, protect our moat and extend and grow our business in the years ahead. This is what today is about. We welcome your engagement and your questions. I'm conscious that we have requested precious time from busy people. And so I wanted to speak plainly right upfront in order to frame a productive discussion with you today. I'm joined by many of my colleagues today, 4 of whom will be presenting directly to you. Allow me to introduce them. Chris Lamers, hummgroup Deputy Group CEO and Chief Customer Growth Officer; Adrian Fisk, hummgroup CFO; Rob Wright, Head of our Commercial Business; and Tim Moulton, Country Head of Canada, who is spearheading our international expansion. Together, we would like to take you through our vision for hummgroup, an overview of our installment products, business and strategy; our partnership strategy designed to drive volumes and improve our unit economics; an update on international expansion and incredibly big opportunity, particularly in Buy Now Pay Later; our reinvented commercial business and a detailed look at our financials. Our vision is to be the favored way to pay for bigger purchases. It's as simple as that. It's a vision that speaks to both our future and our heritage, spans our entire suite of products and capitalizes on our strengths in funding and securitization. To deliver on this vision, our strategic priority is to deliver shareholder value fall into 2 key areas. We want to grow NPAT through continued leadership in our established businesses, cards and SME finance. That means taking share from major banks and disrupting the $28 billion consumer finance and $48 billion SME finance markets. We also want to grow our scale and our revenue with a focus on targeted growth in customer numbers, merchants and volumes. We intend to be the #1 Buy Now Pay Later for bigger ticket purchases by humm in the markets that we operate. We want to continue to drive value for merchants via increased footfall, higher average transaction values and increased sales conversion; be the B2B payment and technology solution of choice for our partners; to offer customers access to the latest trends in installment payments and expand Buy Now Pay Later into the SME segment via hummpro. And both of these initiatives will benefit from us delivering increased platform efficiencies, including instant credit decisioning that continues to improve with scale and data; increased use of data analytics to grow the business, add value to merchants and minimize losses; leadership in funding and securitization to gain competitive advantage and improve capital efficiency and continued business simplification. In thinking through our strategic priorities, we're very mindful of the market context in which we're operating, particularly when it comes to the attention on Buy Now Pay Later. We see the evolution of the market in 3 distinct phases. The first phase saw the introduction of Buy Now Pay Later as a product with low competition and high merchant fees. Following the growing success of Buy Now Pay Later and as consumer adoption skyrocketed, the market saw a large number of competitors enter the space and list on the exchange. This period saw increased competition, and therefore, the beginning of pricing pressure on merchant services fees, which led us to create the world's first open loop product that you can use anywhere, bundll. As we said, we're already experiencing Buy Now Pay Later 3.0. Adoption has become ubiquitous, and competition is fierce. Buy Now Pay Later is no longer just a product, but also a feature with traditional finance and technology companies now looking to capitalize on the success of Buy Now Pay Later. That's why we partnered with Mastercard to take bundll global and continue to partner with blue-chip companies now wanting to offer Buy Now Pay Later to attract new and retain current customers. In this context, I would like to draw your attention to 1 key trend that differentiates hummgroup and gives us confidence in our strategy. Since Zip listed on the ASX in 2015, we've seen the introduction of over 10 competitors in the sub-$2000 category and growing. In the same period of time, very few players have begun contesting the over-$2,000 category. And this trend isn't unique just for Australia. In both Canada and the United Kingdom, we see similar amounts of green space for us to maintain and grow our market leadership position. It's not surprising that we haven't seen large amounts of entrants into this bigger-ticket space as barriers to entry are high. Unlike small-ticket items, larger tickets funded over longer periods of time requires sophisticated credit decisioning frameworks and funding and securitization capability. So in this new world of Buy Now Pay Later 3.0, how is humm positioned? We pride ourselves on our differentiated proposition. As you've seen on the previous slide, the lower-value ticket market is crowded with low barriers to entry. We've recently conducted focus groups with our customers and merchants to hear directly from them what they think of humm. Their feedback was unanimous. For customers, we're Buy Now Pay Later for grownups, we're so much better than a personal loan, and we're an ally for life's expenses. For merchants, probably about 60% of our business is done through humm on average. If it wasn't for that ability, 60% of our business would disappear. Our average sale price is around $3,500. The fact that you guys are not only offering something that is interest free, but it's not the longest term, so people don't freak out and are more willing to buy. With our previous finance provider, the interest was 22.98% on the contract. You can imagine how many deals I would lose when the interest came to the table. The platform you have is bang on the money, so smooth. And this is important because unlike traditional small-ticket monoline players, we're disrupting a much bigger industry. We give our customers choice with low-value short-term plans to keep them in our ecosystem. But we offer so much more. Because we can offer up to $30,000, we're competing with outdated and unloved products such as personal loans and traditional card credit that charge upwards of 20% interest. We're targeting a different customer, the more mature customer, making a more considered purchase. The product construct is also different, allowing for longer periods of repayment, and as a result, more manageable installment amounts for our customers and higher income per dollar financed in Buy Now Pay Later. That's in part because a lot of our competitors' business models aren't designed to fund this product construct. Margins are higher for us, and competition is lower. We believe for our consumer products, there are 2 distinct addressable markets that partially overlap. In the markets we operate in, there is a $1.9 trillion retail spend that represents an attractive price. In addition, across the key verticals in line with our vision to be the favored way to pay for bigger purchases, we've identified an addressable market of over $500 billion to disrupt. Another way we're dramatically expanding our addressable market is through partnerships. In the world of Buy Now Pay Later 3.0, we're one of the few Buy Now Pay Later providers who can become the Buy Now Pay Later and credit partner of choice for blue-chip companies. It's because we're reliable. We have a proven track record of delivering on our promises, over 25 years of operation. We're innovative and don't have that fintech arrogance that many partners have encountered. And finally, and most importantly, we're trusted. With a strong balance sheet and track record, blue chips are attracted to our inherently strong and profitable business model. With the differentiated and profitable proposition and a strong track record of executing on our strategy, today, we are announcing our medium-term targets for the business. In the medium term, which we're defining as a 3- to 4-year time horizon, we plan to more than double our FY '21 volume. This will translate to approximately doubling of gross income and average net receivables and delivering over $100 million in cash NPAT annually. The initial uplift in income will take time to translate to a profit at a commensurate rate, which is largely driven by accounting provisions. And Adrian is going to go into more detail on this in our financial section. We'll speak to these targets in greater detail throughout our presentation. But as you can see, we believe the outlook for this company has never been stronger. hummgroup has 4 areas of focus that will support this growth. The significant work over the prior years has positioned us to put our firepower behind these growth initiatives and expand our customer numbers, merchant numbers and addressable market, both locally and abroad to reach our medium-term targets. We'll expand the reach of our installment payment pool by attracting new merchants and platforms in our current markets, drive customer engagement and transaction frequency, building our products that are loved and used every day, find new audiences through partnerships for our innovative products and expand into new markets internationally through a considered and differentiated strategy that will appeal to a broader range of retailers and customers than traditional Buy Now Pay Later players. I'd now like to hand over to Chris to do a deep dive on our installment payments strategy.

Thanks, Beck, and good morning, everyone. My name is Chris, and I'm the Deputy CEO and Chief Customer Growth Officer at hummgroup. And I worked in the business for almost 5 years now and lead an amazing team that's accountable for the growth of the consumer-facing products. And given how rapidly the market is evolving, it's a really exciting time to be at the forefront of the changing way people pay. As you can see from this high-level segmentation, at hummgroup, we've invested in a single-product platform, serving everybody from Gen Z and millennial spenders through young families and SMEs. humm finance is everything from life's little luxuries through to the significant purchases, meaning we're more relevant to people and more moments of their lives for longer. And this really matters. It means we build deeper, and therefore, more valuable relationships with our customers than monolined companies can. Our products work together to create a single ecosystem that allows us to meet more customer needs. Customers typically first join our low-cost-to-acquire products such as humm and Bundll. And then they start to use products such as humm Big Things and humm90. This means our cost to acquire is lower than market averages. Our products start with humm, the original Buy Now Pay Later product that allows young families to afford bigger purchases and repay them back in budget-friendly installments. The strength of this brand is demonstrated by a strong performance and is a product that will be available in all of our geographies. Importantly, with a mix of customer and merchant revenue streams, this adapts really well to change in regulatory and business environments. Maybe why bundll targets the millennials to Gen Z, as we call them the balances and uses the MasterCard network. bundll customers can shop wherever they like, online, in-store, interest free with no minimum spend. And we know customers find traditional Buy Now Pay Later just doesn't work well on everyday purchases such as your coffee or your lunch, and instead typically use their debit card purchases -- debit card for these purchases. And with $450 billion of debit card transactions every year across Australia and New Zealand, there is a large addressable market to win for bundll. It's also resistant to the downward decline in merchant service fees that impacted many of our competitors. Then we have humm90, our rebranded installment-driven credit business. humm90 enables 90 days of interest-free shopping on every purchase, and a massive 60 months interest-free shopping at partner retailers. In New Zealand, we now issue more than 1/3 of new credit cards, and we see significant upside in the Australian business in taking our card offer direct to customers. These consumer-facing products combined generated $2.1 billion in volume in FY '21. And we've only just begun to make inroads into an almost $2 trillion addressable market. And finally, we have our new product, hummpro. It's a Buy Now Pay Later product designed to meet the needs of small to medium business owners and replace the traditional business credit card estimated to be worth $30 billion. We know this is an underserved market and is the lifeblood of our economy, and we want to close this gap for our small businesses. We now have simple, market-leading products harnessed by the 1 recognizable brand, and we're turning this into our strategic advantage. At the FY '21 results, we outlined for the first time our cross-sell strategy. This is our secret sauce and another part of the moat that Beck mentioned. Over the last few years, we've streamlined our acquisition processes. And through a lot of hard work, we've made sure that our cross -- we can cross-sell our products and have a single-customer view. And while the cross-sell percentages at FY '21 are encouraging, we believe there's a significant opportunity across the portfolio both to increase the number of products that customers use as well as the overall growth in customers. The ability to do this is unique to humm when compared with the most Buy Now Pay Later companies. For example, we expect over the medium term to increase the number of customers that have interacted across both big and little things to be more than 30%. What's more, we're seeing bundll customers evolve into humm and humm90 customers, in particular, because bundll is disrupting the debit card market and creating new ways for consumers to manage their credit needs. And these needs change over time. As people need higher installment limits, offered by these other products, they start using these different products. Finally, we expect there to be at least a 20% overlap between humm90 and humm. We've just started to roll out humm90 in that targeting for cross-promotion of the humm with promising early results. We're confident this strategy will continue to benefit customers, as we meet more of their needs, and merchants, as we're able to send more customers their way. And of course, ultimately, this will flow through to our bottom line. I'd now like to share a short video that demonstrates how this all comes together to create 1 finance ecosystem. [Presentation]

As you can see on this high-level product on the next slide, we're developing our products in 3 core areas; firstly, building a leading shopping ecosystem. We all know a wide range of places to shop is critical for customers. We've taken it 1 step further by building an online marketplace offer that is product-led, not merchant-led. This means customers can shop across merchants to see the product they want, then they can buy this with 1 click to pay with their hummgroup product. What's more is this does not require any technical integration that traditional Buy Now Pay Laters' rely on. Our experience with our product-led marketplace already shows how powerful this still can be with 62% growth month-on-month and our e-com conversion rate improving 88% this year alone. Secondly, our customer loyalty platform. This is core to growing the customer lifetime value that we get from each and every customer. We know loyalty points matter to a lot of customers, and we're partnering with the largest loyalty schemes to give choice. That instant gratification around cash backs and data-driven hyper-personalized offers will create new shopping behavior. Our office platform allows us to serve customers unique, timely, and most importantly, compelling offers that they can't get elsewhere. And lastly, leveraging partners to grow features, effectively a product ecosystem. As customer needs evolve, and apps that bring together a wide range of financial services from different providers become a reality in these markets, we will meet this need through our partnerships with a variety of fintechs. This way we'll be able to offer features such as store balance, which is effectively a deposit account without becoming a bank. Watch this space for continued developments. Now we're going to do a deep dive into our core installment products. First up, humm in Australia. As the biggest contributor to the Buy Now Pay Later segment, we wanted to provide a better understanding of the economics of this product. Our aspiration is to become the leading single-installment provider for merchants wishing to offer only 1 finance solution to customers, big things and little things, in verticals such as health, solar, automotive and big box retail. And as Beck mentioned in the intro, we've already achieved #1 status in some of these verticals. The challenge we're looking to do is replicate that in other vehicles. humm Little Things is a key product to support and drive growth for humm Big Things. It represents a true companion to the Big Things wallet targeting the $349 billion retail market. Our strategy to achieve growth in this product will be by doing 3 things. We're going to increase the places to shop by humm marketplace and drive transaction frequency to more than 10x in the medium time -- in the medium term. We're going to provide value to merchants by driving humm customers to transact at higher transaction value and on a repeat basis. And we're going to shift revenue to include greater interchange and customer fees. humm Big Things offers a simple and financially savvy way of buying those bigger goods or services customers want or need in their life. We believe there's a $100 billion market opportunity across higher-value transaction verticals in health, in automotive, and home and in home improvement. This is our hero product and disrupts the personal loan market. We're targeting 1 million customers with an open big things wallet across Australia and New Zealand. This is a strong growth from where we are today, which will well and truly make us the leading bigger Buy Now Pay Later player in Australia and New Zealand. Our strategy to achieve this will be by positioning humm as a bigger Buy Now Pay Later and a savvy alternative to personal loans. We're going to target practice management software and point-of-sale integrations in key verticals. We're already well progressed on this. We'll demonstrate value to merchants by driving conversions and higher transaction values from humm customers. As you saw in the quote that Beck went through, some merchants already report 60% of their customers use humm Big Things, making it an essential part of their customer offer. And we got to protect yield to an ever-increasing blended revenue model of merchant service fees, interchange and customer fees. From a product growth perspective, we expect little things to grow rapidly over the medium term, or big things growth will be slower as it's a more seasoned product and also coming off a higher base. The overall product yield on little things is significantly higher than big things. But this is more a function of the term rather than a measure of pure profitability, and the overall contribution to the bottom line from Big Things remained strong. While there has definitely been competition in the market, and we've seen yields reduce, we're also confident that we'll be able to achieve strong yield and big things over the medium term, and we expect to reach approximately 17% yield for deals written in 3 to 4 years' time. Next up, bundll and hummpro, both what we call open-loop products utilizing the Mastercard network, and therefore, not requiring management of a merchant network. Bundll customers can shop anywhere, any time online and in-store interest-free with no minimum spend. The reality is this super powers the traditional debit card. This product has customer engagement rate of close to 90%, unheard of in financial services. And it solves the problem many Buy Now Pay Later users have of managing multiple installment plans by allowing them to group these into a bundll. Our goal is to be the B2B payment and technology solution of choice for partners to offer customer access to the latest trends in installment payments. You'll see we have lofty medium-term targets founded on the strong demand we are seeing from our customers acquired directly as well as through enterprises globally. We'll achieve this by running a dual acquisition strategy of direct to customer and partnership distribution for low-cost customer acquisition. We'll cover partnerships in more detail just in a little while. We'll be leveraging Velocity points in cash back rewards to drive transaction frequency, and we'll be introducing new features like stored balances, split bills and broader personal financial management tools. This translates financially over the medium term where we expect volume to increase at least sixfold and also increasing the income relative to volume as higher customer engagements translate into monetizing bundll through both customer fees and affiliate revenues. While the credit performance was higher than expected, this reflects the performance from earlier in the product's life. And we're conscious that new products do take time to find the right operating rhythm. We're seeing really encouraging credit performance for year-to-date FY '22, which gives us that confidence we can achieve a sub-2% net loss to volume over the medium term. This will also be assisted, of course, by the increase in repeat transaction, which provides us with more and more data points to make more accurate assessments across our current and our future customers. hummpro, as I mentioned, is the only Buy Now Pay Later design for businesses, meeting the flexible cash flow needs -- meeting the flexible cash flow needs of small-to-medium businesses across both Australia and New Zealand. It's just under 3 million SMEs across Australia and New Zealand, which represents a large addressable market. And we believe hummpro is one of the best low-cost working capital solutions in the market, and our aspiration is to become an indispensable cash flow tool for small business. While the product is still in its infancy, we believe the medium-term prospects and the profitability of this product will ensure the success of this product. Specifically, we believe the income to volume against the credit performance will lead to hummpro being able to generate sustainable unit economics with less scale than other products, and we remain focused on growth, which will be achieved through continued investment in marketing. This will be both through digital performance and traditional channels. Partnerships with key SME providers, and we've already announced some, but there are more on the way. We'll be leveraging our expertise in network in the flexicommercial broker and mortgage broker channels with a focus on those small business owners and ongoing Xero and MYOB integrations as well as expanding payment features through invoice payments, for example. humm90, it's a new breed of installment-based credit cards. It provides longer interest-free periods, up to 60 months interest-free at selected retailers and the ability to convert any purchase over $250 to an interest-free installment payment plan. While there is much hype around declines in the credit market, it's still a huge, huge market. Currently 13.7 million Australians are spending almost $25 billion a month on credit cards. We're targeting market share growth from customers dissatisfied with their current card offer. Our goal is to drive customer usage to 12 times a month, delivering volume of 2.5x FY '21 over the medium term with 60% of balances becoming interest bearing. Again, you'll see our medium-term targets for this product on the slide, and we'll achieve this by diversifying acquisition from a pure-play retail distribution model to include direct-to-customer acquisition. And we know we can win here. We've got our proven experience in New Zealand to rely on. I'm bidding long-term interest-free options into e-commerce checkouts and leveraging loyalty programs and offers to drive transaction frequency to make humm90 the front of digital wallet card. And of course, as we've talked about, cross-selling initiatives from existing products, including humm and bundll, to ensure we had the lowest cost to acquire in the market. The New Zealand Cards portfolio is an established and seasoned business, consistently generating strong profits, and today issuing 1 in every 3 cards in the New Zealand market in the fourth quarter of FY '21. Our brands span the well-known Q Mastercard, the Farmers Mastercard and the Flight Centre Mastercard. And we have some really exciting partnership announcements coming up soon. While smaller than the Australian market, the opportunity here is still huge. This 2.8 million New Zealanders is spending $3.5 billion a month on credit cards. And we have a market share based on receivables of around 12%. You'll see our medium-term targets on the slide. Our goal is to grow everyday spending volume to more than $700 million in the midterm with over 60% of balances being interest-bearing. And we'll do this by maintaining a healthy product yield and a modest net loss to ANR rate. Our strategy to achieve these targets include engaging and encouraging limit utilization of existing customers with the introduction of new features such as installment plans and balance transfers. Leveraging brands such as Farmers and Flight Centres to achieve growth in segments we may not otherwise reach. And we'll continue to expand our partnerships in this product. And we're going to embed long-term interest-free options into e-commerce checkouts as well as cross-sell initiatives from existing products, including humm and bundll, which will both operate in New Zealand. Turning now to our partnership strategy. In the introduction to today's session, we outlined humm's view that Buy Now Pay Later 3.0 is seeing a real structural shift from legacy Buy Now Pay Later companies. Buy Now Pay Later is now a feature, not a product, and retailers, banks and loyalty programs all want to enter the space and are looking to be -- to a proven Buy Now Pay Later provider to drive customer engagement and retention. Our platform gives us a unique advantage in the space. And as Beck said at the start, this is another part of our moat. Because of the global shift, it's not surprising to see payment providers like Apple, PayPal and Square entering the space. Because Buy Now Pay Later companies are close to the customer, we bridge the relationship between shopping, financing and transacting on the lifestyle they want, and so there's an incentive for merchants for payment platforms for finance companies, banks and loyalty programs to all try and get closer to the customer via this channel. It's how companies will stay relevant. It's how they will maintain their customer data depth and how they'll grow their customer base. And what's more is they realize they need to partner, not build. It's why Square built Afterpay rather than try to build a solution themselves. It's why Westpac, it's why Mastercard, it's why Mitre10 had partnered with us. And it's why we spent the last couple of years building a direct relationship with the customer. Legacy Buy Now Pay Later providers are looking for the pathway to profitability. And for smaller players without scale that is becoming increasingly hard. We know success will come through specializing in a stand-alone offering in key verticals, focused on bigger-ticket items, not touched by the likes of Afterpay, by PayPal or by Apple. And becoming a feature in the digital wallet, which has led us to with Westpac and Velocity with more to come, to provide their customers with fixed term installments. And partnership is in our blood. We know how to do this better than others. The proof is our long-term partnerships with companies like Flight Centre, like Farmers. Focusing on partnerships make sense to us for 3 reasons. The first is that they can be delivered with minimal upfront capital investment, which is great for return on investment. Customer acquisition comes at a low cost and is fast scaling. In addition, we have access to high-quality customers, who are prequalified. The demand for our platform means that we have been frequently approached by global banks, by retailers and loyalty programs. In the past 12 months alone, we've had dozens of unsolicited inquiries of this nature, demonstrating that we are well known for our ability to deliver effective partnership models. It is also important to note we only progress the partnerships that add value to hummgroup. We walk away from more opportunities than we pursue. In the last financial year, we're focused on finding new audience through these partnerships for our innovative products. And as you know, we've entered into a number of strategic partnerships with the major banks, Westpac New Zealand, for example; loyalty programs such as Velocity Frequent Flyer; retailers, Mitre10/Home Hardware, and of course, issuers through our global strategic partnership with Mastercard. All of these to grow hummgroup's customer base and distribution range. Banks look to us to help attract millennials and Gen Z customers and help reengage existing customers. Loyalty programs partner with us to drive engagement in part to offset the decline in credit cards they are experiencing. And retailers look to us to help them drive sales and leverage our expertise in acquiring new customers through digital channels. And schemes partnering with us to help them navigate the changing payments landscape and to be at the forefront of the changing world of how people buy through new product innovation. Excitingly, discussions are well progressed with a number of banks, loyalty programs and retailers, both locally and globally. You can see our partnerships currently spend 4 distinct models, showing the flexibility of our product and the ability to tailor solutions based on our partners' existing lines. At one end of the spectrum, we have our distribution only model, where our partners help hummgroup acquire customers at very low cost. Currently, we're having this model. We have companies such as Mitre10/Home Hardware and Velocity Frequent Flyer. We then had the joint venture models. While these joint venture arrangements can all be structured differently from our arrangement with Westpac, our arrangement with Westpac will lead to distribution of bundll to Westpac customers that are pre-vetted. We also are extremely excited about the potential equity investment by Westpac subsidiary, Red Bird. And finally, we have licensing arrangements, where we offer our products in markets where we've a limited knowledge compared to established players and in a fee per transaction or a fee as a percentage of volume. Excitingly, we are currently in discussions with banks across 18 different markets to license bundll. In Australia and New Zealand, we are now working with some of the best blue chip companies to build meaningful partnerships. Investors can look forward to a series of announcements this financial year. Thank you.

Thanks, Chris. Good morning. I'm Tim Moulton, Country Head for Canada, and here to walk you through hummgroup's international expansion plans. I have over 20 years of experience across financial services, travel, loyalty, emerging payments and POS finance. And I noticed these sectors were starting to blend into one another, which is why I jumped at the chance to join hummgroup and leverage my experience. I also can see the disruption that's occurred in Australia and the real opportunity here in Canada. Together, I know, we will challenge and change the existence of retail point-of-sale finance market in Canada. I'm going to start with our plan, why we believe. Our plan to expand into new markets internationally is underpinned by 6 key differentiators. First, we're big-ticket experts. Our existing scalable platform combined with our credit and funding expertise enables us to finance higher value transactions. This is a real differentiator for us. Two, we will leverage pre-existing ANZ and Irish merchant relationships pulling merchants from those markets spanning retail, health, travel verticals, creating strong momentum. Third, we have the ability to leverage 1 connection into key global management systems across health and automotive. That provides access to thousands of health professionals and mechanics globally. Fourth, we also have a focus on untapped verticals, largely ignored by e-commerce pure plays. Five, a fair and transparent approach to customers is our key differentiator. Competitors can see APRs of 30% in Canada and very high late fees. And finally, we plan on delivering a swift path to profitability over the medium term. Let's discuss the market opportunity itself. We see a huge market opportunity for hummgroup as the need for financing to fixed term installment products grows across the world. Globally, $680 billion will be spent by consumers using Buy Now Pay Later over e-commerce channels in 2025. This represents a 92% increase over 2019. Of the $680 billion, $50 billion represents the opportunity in Canada. Canada saw a 30% growth rate over the last year alone. In the U.K., there's over GBP 240 billion in outstanding credit debt as at 2020. That's a massive market for us to disrupt. So how do our products work in both markets? Well, we enable seamless approvals for purchases, big and small, empowering consumers to choose how they wish to pay with flexible terms from 5-fortnight payments through 72 months. In Canada, that means 6-fortnight payments for little things. There's no monthly setup or late payment fees and a soft credit check. For big things in Canada, we offer 6 to 60 months repayment terms with a monthly fee of $1 to $5 and a setup fee from $0 to $200 really depending on the retailer or on the plan that we've negotiated. As with little things, there will be no late payment fee, but we will conduct hard credit checks for purchase over $17,500 in Canada. In U.K., we offer 5-fortnight payments for little things with no monthly or setup fee. Late payments will incur a GBP 7 fee. For big things in the U.K., we will offer 6 months to 72 months repayment terms with a monthly fee of around GBP 1 to GBP 3.5 and a setup fee of between GBP 10 to GBP 45 depending on the retailer and the plan. As with little things, there will be a GBP 7 late payment fee, and we'll conduct hard credit checks there for sure. Turning to the next slide, you will see our product offering differs from the competitors in Canada. We are the only provider to offer no minimum purchase amount; little things and big things; flexible payment plans; no-fee products; high limits, even over CAD 20,000. In the big-ticket space, we have a few Buy Now Pay Later competitors like PayBright by Affirm and a few traditional lenders like Flexiti. These traditional lenders offer long-term financing with interest-free finance periods, which then convert to revolving credits with APRs of 30%, and I've seen much higher than that. I know humm will bring a one-stop partner and give control back to the customers and merchant partners in Canada, which is completely unique in our market. On the next slide, you will see our product offering is unique compared to our competitors in the U.K. U.K. expansion is led by Patrick Byrne, who is the CEO of humm U.K. and Ireland. Ross Gould heads up credit and risk. Mr. Byrne, also known as PJ, has led the humm Ireland business for a number of years now, delivering continued growth in volumes and customers. From the outset, when exploring our expansion into the U.K., we built our offering around customer-centric product design, which is one of the reasons I joined as well. That means that it has been already configured to increased regulation, including serviceability checks. We are the only provider to offer no minimum purchase amount, little things and big things, flexible payment plans, no-fee products and high limits to GBP 30,000. Again, competitors in large-ticket space sit within the revolving credit card-based category. They're often white labeled with specific retailer brands with high APRs and antiquated customer journeys. To summarize, as mentioned, Buy Now Pay Later adoption in both the U.K. and Canada is still in its infancy with a clear opportunity to displace outdated traditional point-of-sale finance. Our little things product will be available for smaller ticket items and big things for more significant purchases with longer terms. humm Big Things offer our simple financial savvy way of buying those bigger goods or services and help customers who want them or need them. This is a game-changer in Canada. We are well placed to capture the shift from revolving credit to paying overtime in fixed installments. We will focus on higher-value purchases in health, automotive, home improvement and luxury. We also have a deep vertical strategy targeting practice-managed software and POS integration across health, automotive and trade services. With a market opportunity of $400 billion across these sections and as the only player with this type of offering, we will challenge traditional point-of-sale finance in the U.K. And we'll grow merchant distribution with a unique construct that blends merchant and customer fees and revenue. We are reaffirming our outlook today with volumes across the U.K. and Canada of $150 million and a cash NPAT drag of $12 million to $14 million for full-year 2022. As the product ramps up, we are confident in achieving a strong yield for 2022. We are also conscious that ramping up in the new markets can be difficult. And we expect during the full year of 2022, the net loss volume will be slightly elevated before we achieve a more normalized credit performance of 3% in the full-year 2024. We are also assuming the cost of funding increase over the medium term is in with forecasted for global markets. Ultimately, we believe this product construct gets to profitability over the medium term. I'll now handover to my pal, Rob, to go through commericial and leasing. Thank you for your time.

Thank you, Tim, and good morning, everybody, and thank you for joining us. My name is Rob May, and I currently lead the commercial business here at humm Group. First of all, I would like to start with the new pre this morning that we are currently exploring a potential divestment in our New Zealand commercial business. We've seen some significant interest in this particular line of business, and we are currently exploring those options to see whether the sale is appropriate. I must stress though that this divestment is subject to any proposed sale meeting, both the Board and management's valuation expectations. Currently, our New Zealand portfolio consists of small tea equipment, largely laptops, telecommunications and office equipment with an average transaction value of about $9,000. Any transaction that we do in the New Zealand business will not impact on our Australian business. If we now turn to our customer value proposition, FlexiCommercial is really quite focused on delivering commercial asset finance a $41 billion equipment finance market in Australia. Our top 3 assets currently that we finance transport, construction and light commercial vehicles. Over the past 12 months, we served over 4,000 clients with an average deal size of about $75,000. This currently makes us the second largest nonbank financial institution commercial asset finance lender in Australia. Our market-leading service is how we go out. We only originate our transactions through the third-party finance broker market. And we have underpinned this by exceptional service with ongoing investment in technology, which allows us to drive efficient and speedy decision-making, which differentiates us from some of the bigger players quite dramatically. 45% of our bills are decision on the same day that we received. And 35% of our proved deals are automated. This has made us much quicker or agile and nimbler in some of the large traditional lenders. All our applications are approved by our flexicommercial crediting, and our customer service for our brokers and their commercial customers remains very much in the schedule of what we do. I'd now like to share with you a recent testimonial from one of our brokers, and I'll give you a moment just to brief it. I have you to read quickly. Look, there's a couple of key points here. I think this particular testimonial has really quite specifically articulating our value proposition and why we've been so successful over the last couple of years. We are a broker-only distribution model, which means we have no channel conflicts. Progress deal with us with considerable amount of confidence because they know we aren't going to target their customers for our own benefit. Our product is very well designed, and we have a credit team that is dependable, predictable and repeatable. So there's a lot of consistency of what we do and what we do to our clients. And we have a very experienced business development team who have a strong understanding of our credit appetite and are able to communicate it clearly and effectively to our broker network. This gives you a bit of a snapshot on our performance from a volume perspective over the last number of years. And as you can see, we have seen significant growth, particularly over the last 2 years. And we've done that by changing our business model. We have invested in new business development managers to be invested in our technology, and we've developed a number of very strong relationships with the major aggregators in this market and over 500 brokers. What we're really proud of is not only have we been able to grow this business very, very quickly, but we've not sacrificed our core quality, and we haven't chased growth for. Our credit quality has more than double in value over the period. And while it had an extensive career in banking, it's very rare that I've ever seen portfolio to grow at this rapid rate while substantially improving our credit rating. Indeed, our Equifax corporate credit score has increased since July '18, where it was 530 points to 611 at June 2021, which is a significant growth. Since our reorientation of the business, as you can see, our volumes have grown steadily each quarter from $38 million back in first quarter '20 to over $188 million in the first quarter of '22, so a significant change. Over the next little while, we will continue to play with our origination mix and portfolio. As you can see back in '19, we had a strong mix of commercial lending, commercial leasing and managed services. And over the last little while is now primarily 100% commercial lending, and we have a very strong emphasis on primary assets. We think in the medium term, there is going to be some opportunity for us to expand into doing more secondary and tertiary equipment, which should improve our overall yield, but also provides us with access to a number of underserved markets throughout the country. Looking ahead, we plan to continue to be the best in market for facilities. We will continue to support our brokers and we will continue to invest in our technology to see greater automation in their processes. Our target is up to 60% of our business will be straight through processing. We also know that there are specific subregions that are underserviced and underrepresented, and we go to target those while also optimizing our portfolio across primary assets, secondary assets and tertiary assets. We also continue our journey towards reducing our cost of funding and increasing our return on equity. And ultimately, we expect to achieve more than $1 billion in run term volume. Ambitious targets, but as a market leader in this segment, we are -- we believe these are completely achievable, and we are delighted with the progress we've made to date. And on that note, I'm going to hand over to the world's greatest CFO of Adrian.

Thank you, Rob, very much. So I've been with humm Group now for just over 3 months, and I continue to be excited by the opportunities ahead of us, particularly in our big things, global niche and the commercial business that Rob just talked about. I consider the diversity of our business gives us financial strength as we execute our strategy over the medium term. Over these 3 months, I've been very grateful for the conversations I had with our investors and I thank you for your generosity. I hope that we have demonstrated in this presentation at this Investor Day that we listen, that we take on your feedback and you have my commitment that will provide consistent financial information to assist you in understanding our performance as well as the opportunities ahead of us. You'll remember this slide from Beck's presentation. It summarizes how we think about our business, a number of established businesses and then rapid growth businesses. Our established businesses enjoyed leading market positions, predictable earnings strong margins plus growth. In this group, we see lots of opportunities, including the FlexiCommercial business, which is stepping into the gap left by the Australia's major banks in the SME market. Any analysis of the SME market in Australia confirms the opportunity of our leading asset finance business, and we will continue to invest to deliver scale in this business. Our rapid growth businesses have significant addressable markets, scalable platforms and a clear path to profitability. Our niche in big things is a real opportunity to challenge finance in key verticals as well as the personal loan market, and our leading capabilities in credit and long history and securitization give us this unique opportunity. humm Pro when considering the light of the SME opportunity discussed in the flexicommercial section represents a significant opportunity. Bundle, which is our open loop product, having grown successfully over the last 12 months gives us a foundation to build our own financial service ecosystem. I respect that the valuation is ultimately something that you, as our investors determine. But when I reflect on the value of the business, I think about a sum of the parts valuation. And so we've shared with you our cash NPAT and our revenue for 2021, along with multiples and averages from observable periods. With respect to the revenue multiples, I want to note that we have deliberately not included certain large, well-known peers in the little think space as we pursuing our niche in big things. I joined humm Group because I consider the business has significant potential, and my experience today has not changed this view. The finance team and I have worked very hard over the last 3 months to deeply understand our financial drivers for key products from the bottom up. I wanted to be confident in the numbers and the growth targets that we provide to you and to be clear on the information that we will use to measure our performance. As we set out here in our FY '21 actuals against our medium-term objectives. We think about our business over the short term, which is the next 12 months, the medium term, which is the 3- to 4-year period and the longer term, which is greater than 5 years. In addition, for each of our products, we have built steady-state financial models to assess the long-term prospect of these products and help me ensure that the end in terms of shareholder returns justifies the means in terms of investment. We anticipate volumes increasing more than 2x over the medium term, driven by customer numbers, average transaction values and frequency across our core growth portfolio. I will cover off on gross income on the following slide, but it is worth recognizing that in recent years, we have been transitioning our revenue loan from legacy products to new products. This has meant that our volume growth has not directly translated into revenue growth, and I'll give you more clarity on this on the following page. With this volume growth, we'll see a commensurate increase in average net receivables each year. We have reviewed in detail how we will fund these receivables, and I'll cover that off in our section on funding. We reiterate our commitment to a sub-40% cost-to-income ratio over the medium term. We highlighted the last results that we see this trending up over the short term as we continue to invest in growth. But we have a clear path to 40% CTI, and I'll cover that in a couple of slides. We've also set out our expectation around cash NPAT, noting that we see a path to above $100 million cash NPAT in the medium term, with ambitions significantly beyond this over the longer term. Now for those astute investors, we appreciate that the initial uplift in gross income has not translated into the same commensurate uplift in profit. And the reason for this is twofold. As with any growing finance company, the strong growth also corresponds with an increase in accounting provisions, which ultimately ends perhaps profit but not necessarily cash profitability. This impact is even greater when you consider the strong write-back of provisions in FY '21. Also, year-on-year versus average volume growth impacts revenue and therefore, cash NPAT at the year-end balances are larger than the average growth for the year, which we recognize income. Therefore, on a normalized basis, cash NPAT should be higher in the medium term. Turning to gross income, you've requested more insight into the revenue line as it's been clear that our revenue growth has not matched our volume growth due to reductions in the legacy book that have been in runoff. As we mentioned in the Q1 update, due to COVID, our volumes and revenue in humm Big Things and humm and Cards were lower than anticipated in the quarter due to lack of in-store spending. We are looking forward to volumes bouncing back as lockdowns lift across these major cities. Over the medium term, we expect our BNPL products to increase their revenue contribution significantly and ultimately make up 35% of our income across the group. I've reviewed the value drivers of key products and know that there are many factors that go into our revenue numbers from merchant fees, to annual and monthly fees, late fees, affiliate fees and other customer fees. I am confident that we have the diversity in our revenue sources and the financial levers to enable us to manage our returns in the face of competition, particularly with merchant service fees. We expect that our offshore businesses in the U.K. and Canada will form an increasing proportion of the gross income for BNPL at about 30% over the medium term. We also believe in the quality of our cards portfolio, and we're still expecting strong double-digit growth over the medium term, resulting from the return from travel and increased card spending. We anticipate that commercial will double its gross revenue over the medium term. And it will be a function of strong volume, slightly lower yield, but increased fees. On this slide, we've also shared information about our discontinued products and how they will run off. In relation to OpEx, we set out on this page, our plans to reduce our CTI sustainably below 40%, which is our commitment to you back in FY '19. As I mentioned in our previous cost base is a transition between legacy products and systems and new products and systems. At this time, we are carrying more costs than we require over the medium term. Significant work has already commenced, reducing employees from 1,100 in December '18 to 700 in June '21, and we've made great progress in decommissioning legacy products. We plan to reduce costs further by decommissioning legacy products and switching off the associated technologies. This predominantly relates to the Once and Lombard credit card portfolios our past leasing business and discontinued products in commercial. Our U.K. and Canadian BNPL platform is almost complete, and we'll be repatriating it to Australia to replace the existing Certegy systems with work commencing in FY '22. Our customer service capabilities will continue to be enhanced through increasing self-service capabilities, which will reduce the overall cost of serve across all of our portfolios. We consider that our marketing costs will increase over the medium term as we scale our customers locally and globally and they'll return to averages. Each of the individual product slides have set out what we consider to be the long-term trends for credit losses. We will continue to drive losses lower through improvements in credit assessment fraud detection and credit recovery processes. As we mentioned, it is important to recognize that as we go through this growth period, we'll be adversely affected by rising accounting provisions, which are required to be booked at the year-end balance based upon a 1-year probability of default. This results in us recognizing income based upon the average receivables but provisions in full on the year-end balance, therefore, overinflating credit costs as we grow. To ensure you have the information you require, we'll be separating our accounting provisions for growing assets. From our results so that we can show the impact on cash NPAT. In respect of capital efficiency, we continue to look for ways to improve capital efficiency of our funding activities. And as you can see, our treasury team has delivered real improvements since 2018 through improving our focus on credit quality, focusing and tightening our lending limiting our balance sheet funding and introducing mezzanine warehouses. In any particular period, these ratios can vary depending on the timing of factors such as receivables being carried on balance sheet, then being passed in the warehouses and then ultimately been securitized. We will continue to improve the capital efficiency on all our segments through a number of activities. In relation to funding, we continue to prudently manage our balance sheet to ensure that we have the capacity to fund our growth plans set out in our medium and long-term strategies. We have the capacity to grow our business without raising capital, and we consider it to be a clear differentiator to many of our competitors. We will fund our growth through existing cash reserves, profits and returns of capital by more efficiently managing our capital across our securitization structures. We will use our syndicated debt facility sparingly to provide short-term liquidity and growth as we execute our plan. We are very proud of our 15-year history and securitization in renting and securitizing receivables. It is a clear differentiator against our new competitors in this market and gives us a funding advantage. We have an excellent treasury team, and we are also grateful for the support of our bankers to help us execute these programs. It is worth noting that our recent commercial ABS deal was priced tighter than what we had achieved in March '21, in fact, record pricing, and it required initial capital of only 6%. While we will continue to work hard at managing our capital efficiency, we are also cognizant that if we look into the future, we will see interest rates rising over the medium term, and we have factored this into our forecast. Finally, we're very pleased to announce that we're recommencing paying dividend from this year. humm Group has a long history of paying dividends. And pause briefly in FY '20 in response to the beginning of the COVID pandemic and growth in our products. We consider that we have the financial capacity to continue to grow our business locally and offshore while continuing to make a profit and paying dividends to shareholders. And I am confident that this makes us unique in our sector. You can expect that we'll pay dividends at a 30% to 40% dividend payout ratio consistent with our prior history. And with that, I'll pass back to Beck to wrap up our Investor Day.

Thanks, Adrian. Before we turn over to Q&A, I'd just like to finish on why we think you should consider buying humm Group shares. We're the only profitable buy now pay later player in Australia, and it's because of our differentiated offering at the higher end of the market. We've got a portfolio of strategic and successful businesses, each in their own rights, benefiting from strong market positions in their own categories. With the reopening of borders and international travel and cards businesses ready to fire on all cylinders as well as the return of in-store bigger-ticket purchases. We benefit from being a global niche financing bigger-ticket items. We're not dependent on future equity issues to fund cash losses from growth. And finally, humm Group is very attractive compared with other equity market valuations. I've already touched on each of these strengths, but I'd like to add my thoughts on why I think humm Group is well positioned for success. For me, our strength comes from the depth of our defensive moat. Our focus on specialty and bigger ticket items is incredibly difficult and time-consuming for competitors to replicate. To finance the ticket items, you need advanced credit decisioning and funding, which can only be built over a substantial time in the market. While other monoline players in the small ticket space get squeezed over merchant services fees, our blended revenue model gives us flexibility in how we can monetize our buy now pay later products over the long term. Our ability to partner is also unique and will allow us to rapidly add customers into the humm ecosystem, giving humm Group more opportunities to cross-sell our suite of products. I'd like to thank you all for taking time out of your morning to listen to our presentation today. I'm sure there'll be lots of questions. So I'd now like to open up to Q&A. Again, if you'd like to ask a question today, please e-mail [email protected]. You can also see his e-mail on the cover of today's presentation. Suk Hee can we have our first question, please?

Yes. Beck, probably one for you and maybe Adrian as well after. But what gives you confidence in delivering your midterm and medium-term targets?

Thanks, Suk Hee. I think the key driver of success for us in the medium term is obviously growth in volume. And we're already well underway with strength in volume growth. This quarter -- last quarter alone, we delivered 40% increase in volume on PCP across the entire group with obviously buy now pay later and commercial performing more strongly. We've successfully transitioned the business into products and services, which are highly attractive to consumers and means and we want to leverage that into key markets where we feel that we have a distinct competitive advantage. And so we're very confident based on those 3 things that will absolutely be able to hit that volume growth in the medium term.

One for you, Chris, potentially. Can you give a bit more detail on those global banks or the 18 markets, et cetera, that you're in partnership discussions with? And what format would those potentially take?

I'd like to give a lot more detail. But obviously, we can't share all the details right now. What I can say is that it's a range of partnership options from a licensing arrangement. And we use licensing arrangements, in particular where we may not have all the expertise in the local market. and/or it's a joint venture where we could be entering the market together. So we're progressing those rapidly. And as I mentioned, we're expecting to be able to make announcements over the coming months and the rest of this financial year as we progress more and more partnerships.

Perfect. Maybe one for you, Adrian, in terms of the New Zealand commercial division that's up the divestment. Can you give more color on the book and kind of volumes around that division?

Yes, sure. So I can let you know that the normalized NPAT is about $10.9 million. So that business is largely operating leases and finance leases books. So it's different to what we have here in Australia across a number of verticals, education, government, enterprise, retail and SMEs. We have about 15,000 customers. That's probably enough, I think.

Great. And another one has just come through. Is there a minimum level of cash NPAT, Adrian, that you don't want to drop below and kind of acceptable loss levels, I suppose, from that perspective for the group?

Yes. So from a cash NPAT perspective, we are very focused on managing our cash as we grow, and we've done quite detailed work around growth in volumes and how that plays in through our growth, and we plan to fund that through cash NPAT through our cash balances as well as more efficiency capital. I don't think there's a sort of a minimum cash NPAT number we're targeting. But as I said, we're trying to deliver dividends to our investors we're delivering cash NPAT and also managing our risk as we go through this growth phase. So we'll keep all of those things in balance.

Perfect. And one for you, Beck. How is humm Group placed with the reopening of the economy? Have you seen any upside from the reopening of retail?

Yes, we have. I'm really pleased particularly with the growth that we've been able to achieve in the first quarter of over 42%, particularly in buy now pay later retail with our key markets of Sydney, Auckland and Melbourne being in locked down effectively. While we've had a surge in e-commerce volume, which is fantastic to see, without our focus on bigger ticket items and that average transaction value of around $4,000 the majority of those purchases are made in an in-store environment. And we've really been pleased with the traction that we've seen since Sydney's opened over the last couple of weeks. And so just the first couple of days in Melbourne as well. So absolutely significant upside for us as not only retail in-store retail opens, but also travel.

Perfect. And just another one for you Beck. What's the benefit of migrating the Australian BNPL stack to the U.K. and Canada stack? And also kind of just lessons learned in terms of the offshore markets and the difference compared with Australia?

Yes. The first benefit that we have is actually in the product offering itself. And so one of the things that we're really conscious of right now is being able to have a blended revenue model for our buy now pay later offering. And so the ability to have merchant services fees, consumer fees, affiliate fees, the more that we can have many, many lines of income coming in across that product and not weathered to purely merchant services fee will really help us grow profitably. And that new tech stack enables us to have a much more consumer and merchant blend. Domestically, right now, it's effectively 70% merchant-funded and 30% consumer funded. Internationally when we launch and given the different product constructs and the ability for us to enter some verticals where we can charge a lower interest rate to the customer from an interest-bearing perspective, we see that shift going to 60-40 and potentially 50-50 as we grow. So it gives us much stronger product optionality. It will enable us through that product to service a broader breadth of retailers with different margin profiles, given the flexibility that, that system will have. The other key benefit is cost efficiency. This new system is all based in the cloud. It's the one tech platform that we will now have across all of our buy now pay later our humm offering across all of those markets. And so the cost efficiency for us the reductions in tech spend, our ability to bring new features on our products to market at a faster rate and simultaneously across all markets in which we operate is another real key advantage.

Perfect. Adrian, one for you. What's our budget profit for FY '22? And any update on kind of trading for the first 4 months based on that question?

So we don't provide our budget for '22. What I can say, though, is as we released in the Q1 update, there has been a bit of a deterioration from a volume perspective, mainly on big things because it's an in-store product and on cards, Australia and New Zealand. We're optimistic that things will bounce back significantly in the -- from now that the lockdown has been released. And we'll continue to update the market as things progress.

Perfect. And all the work that's been done on those medium-term targets. Just a question from one of the investors is around the bundle licensing partnership, et cetera. Is that all built into the medium-term targets for...

There's actually upside in the partnerships. We haven't put all of our partnership activity into those volumes. So we've -- so there is upside in these partnerships.

Perfect. And on those cross-sells, Beck, what gives you the confidence that you'll be able to age those targets?

It's only and if I think about it, December of last year where we rebranded humm to humm90. And so we've had less than a year of all of our products operating under one brand that is known by the customer. And already the cross-sell rates that we were able to achieve, which we announced at the full year back in August of only 6 months of cross-sell activity have been fantastic. Also, from a technology perspective, we know that us being able to achieve those cross-sell rates is largely driven by the ease in the customer experience of our customers being able to take out additional options for us. We have 1 customer view now across all of our products. We have the ability to think of credit decisioning in a shadow limit way. So again, across all of those products. And we have the take-up rates and the ease of which people can migrate and get a big things account from little things and ultimately because our humm90 product really speaks to those interest-free installment payments that we know buy now pay later customers gravitate towards. And so really confident based on the success that we've achieved to date. And as we reduce more and more and we remove more and more friction from our application processes as part of that cross-sell we're seeing those rates continue to increase. So really confident.

Perfect. And just on the topic of kind of that cross-sell and also little things. Just a question on strategy. So obviously, it looks like Little is growing faster than big things, but the main prices around big things just reconciling those 2 strategies in the numbers that were presented today?

Yes. Look, I think, unfortunately, as we've highlighted, particularly in moments of lockdown, big things has been impacted by those lockdowns. It's also a far more particularly domestically established portfolio. So we have been riding significant volume in bigger ticket items for over 15 years now. And so it's a very established business. I would say, in Q4 of last year, we achieved 26% growth in big things on PCP. So we're really confident that once we were back retail spending is starting to accelerate that we're going to have a really strong Q2 and have accelerated growth in those bigger ticket items.

And just on a bit of regulatory change, the RBA announcement last week and just your thoughts on the surcharging announcement?

Yes. My answer to that question is multi prong, so bear with me. The first is, as you've seen by some of the quotes from merchants, we are an integral part of the retail infrastructure across many key verticals. And so merchants, particularly when we can see that we're financing 50%, 60% of the volume that's going through their business were integral, and we demonstrate immense value to those retailers. The second thing is over 50% of humm customers only have humm as a buy now pay later product they had no other buy now pay later product in their digital wallet. And so we continue to demonstrate, again, the value that we drive to merchants, through customers and footfall. So we're very confident that the value that we're providing those merchants equates to the value that they're paying in a merchant services fee. So that's the first thing. The second thing is, we actually have one of the benefits of being and having multiple product offerings is that from a retailer perspective, we can offer humm or humm90, which is flexible and is preferable depending on the margin. that the retailer has to work with. And as you can see in terms of the products that we're launching internationally, again, we have the ability to blend consumer and merchant fees. And so we're very, very well placed to be able to respond strategically to any form of regulatory change. The third thing that I would finish on is that currently, the recommendations that have been made by the RBA are actually conflicted with the regulation from ASIC and also from the ACCC. ASIC actually surcharging is prohibited by the National Consumer Credit Protection Act. And so we look forward actually to consensus amongst the regulators. But we do feel that because of that complex any change is likely to be at least 6 to 12 months away and will require, I think, some more considerate consultation with us and our peers.

Perfect. And in terms of just for the future, would you look to accelerate growth plans through nonorganic opportunities?

Yes. I think I've been on the record before to say that we do feel that there is consolidation in the sector ahead of us. We have a very strong balance sheet as well as the ability as we've really demonstrated today the improvements that we've made in capital efficiency and the ability to securitize. We see our access to funding is a real key competitive advantage of ours. And so we certainly would rule out if opportunities arise to look to those opportunities if it makes sense for us and from an investment perspective for our shareholders.

Perfect. Adrian, one for you with the New Zealand divestment or potential divestment announcement. Do you have use of proceeds for any potential transaction that might occur?

No, we haven't set aside those dollars for any particular transactions at this time.

Perfect. And while I've got you there, just in terms of the 30% to 40% payout ratio, is that something that you will look to sustain for the future?

Yes. I mean that ratio has been consistent with what we've done historically, which is why we thought that was the right approach.

Perfect. And one of you Beck, it's just a question on 1 of our products. With humm//TAPP any update on the utilization and how that's going.

Yes. exceptionally well. We've had really strong take-up of that from a customer perspective. So we're well into kind of 30%, 40% of the customer base that have now downloaded humm//TAPP into the digital wallet, which is fantastic for us to see. And also from a merchant perspective, it's enabled us to launch marketplace. It gives us the ability actually to white list merchants at the back end, which we may not have merchant services agreements with, but we do have the ability to earn affiliate revenue. And for some context, as we all know how competitive the merchant services fee market can be with some of these retailers, which we're white-listed in the back end, where customers can use their humm//TAPP card, the affiliate revenue was actually 6% which, in some cases, is more than double what we would be earning from a merchant services fee perspective. And so we're very pleased, not just obviously for the ease and the improved customer experience that humm/TAPP is provided. But more importantly, it's a great strategic lever for us to continue to grow revenue is despite reductions in merchant services fees and pressure on merchant services fees, particularly in retail.

Question for you, Adrian, and Tim, if you want to jump in as well. It's just around the Canadian market and just in terms of the product yield and in the deck, it says about 12% and comparing that to little thing. So just kind of comparing the 2 different product constructs and why those yield numbers are different?

Yes. So the Canadian market, just because we haven't really sort of -- we haven't really entered that market, we're sort of moving into it. Those sort of yields are untested. So we're sort of working through those processes. And I'll let Tim speak on just sort of the work we've done to sort of validate those numbers. So in terms of little things, it is -- we're dealing with a little things product by itself in Australia, whereas what you're comparing to in Canada is a blend between the big things and the things. So there will be a difference there because the numbers we've got for the offshore market is a blend of bigger level.

I think that captures it.

Perfect. And how should we be thinking about the cost line and the current scalability of the respective divisions in achieving the cost-to-income ratio targets, Adrian?

Yes. So we've done work on this, and there's certainly more work to do. We're sort of -- we're looking at the current -- or the future state of what our business looks like and the component parts we're going to need to build up to actually sort of deliver on that cost-to-income ratio. But I have -- the work we've done today in terms of just sort of setting ourselves up for that really demonstrates to me that we should be under that sub 40% level. I think that's the appropriate place to be. I'd like to get it lower than that if we can. But it's really about sort of looking at where our SaaS revenues will be off the top of our global platforms, what the FTE levels will be relative to more digitized processes that we'll be running through. And so there's a bit of work still to be done on all that, but I feel very confident we'll get to sub-40.

And Rob, one for you perhaps, just in terms of the strong momentum in commercial. How much of a challenge will it be to keep that growth going in FY '23? And what's been driving the growth so far?

Yes. Look, we've already seen in the first quarter of this year that our growth is substantial and continuing to outperform on prior comparative periods. Our service and our response time is key to our volume growth. We are very clearly the quickest in market. We are the most consistent end market. And we're focused very much on 1 channel being the broker channel, and we think that provides us with a real comparative man. So I'm very comfortable in our fundings going forward.

Perfect. Thanks, Rob. Beck one for you. Are there other countries or markets under consideration as you continue to improve the profitability of the U.K. and Canada?

Yes. We're very focused on delivering and demonstrating our capability in international markets on those 2 markets that we've chosen. So certainly nothing in the short term. We really want to deliver and make sure that we're executing well. unless the only caveat that I would have to that if there's a global licensing opportunity through bundle, where we share I guess, the execution. We're providing the technology and the customer experience. but that partner is delivering and executing on that particular market. So apart from that, particularly in the short-term U.K. and Canada, it is.

Perfect. And just in the presentation on the product slides, there was a reference to a shift to revenue to greater interchange customer fees. Does that refer to a change in the revenue models for some of the different products?

Yes. Look, what we're seeing and we -- our partnership is run by Mastercard. And you would have actually seen a series of announcements across all of the card issuers with regard to interchange. And for those who may not have as much experience from a cards perspective, you earn different interchange for debit products to credit cards, platinum credit cards and even commercial credit cards. And so what we're seeing and in our discussions with different issuers, there will be a binary later specific interchange rate that is introduced. And we believe that, that is going to be slightly higher than debit card interchange, which is what a lot of those open loop products are currently based upon and the discussions that we've had is that it's highly attractive and has the potential to give particularly those open loop products a real boost.

Perfect. One for you, Adrian, in terms of just interested to understand overall capital management, so between growth, dividends and buybacks?

Yes. So the plan we have no plans for buybacks, but we obviously want to balance that triumph of profitability, generating our profits managing our risk and our funding of these activities. So we need to really manage closely this growth phase as we go through these receivables and then return it to shareholders. So we'll continue to adjust that out, but we have no plans for our exit strategy.

Perfect. And in terms of -- from a bundle perspective and partnerships, maybe one for you, Chris. What's the composition of the bundle growth that you're expecting in the medium term in terms of that 6x volume target? And then second to that is kind of on the unit economic differences between the partnership channel versus the direct channel?

The growth we're looking at from bundle is there's a set a mix of both direct and partnership. Without going into individual synergies, the only growth that we've built into as Adrian said, of the future of bundle of 6x growth. Our partnerships, we either have in place now or we're very close to cementing. We haven't built in a whole lot of futuristic potential partnerships to that. So at the moment, it does lean on partnerships, but a big, big chunk of that is our direct offering in both Australia and New Zealand. In terms of the economics, once we go into a partnership mode, one of the dynamics we've seen already with Velocity, for example, is the ability to pre vet and approve the best customers and target the best customers. It means it actually improves your economics because you're getting a better quality customer, a customer you might not otherwise be able to reach at a cheaper cost to acquire. So while in a partnership model, you may be sharing some revenue, you're actually taking a lot of the cost and a lot of the risk out of the equation and is actually seeing a better financial outcome. So we're really confident that the partnerships will not only give us greater scale that will give us a better financial return as well.

Perfect. And while I have you, Chris, can you expand on the future product releases and the humm ecosystem?

We've actually moved from a cycle where we were doing releases maybe once every 6 months to fortnight new releases now. And so we have a continuous team that's dropping releases like any software company. And those are a range of things from enhancements we are relentlessly focused on making it the easiest product to join and the easiest product to use. And we've seen the evidence of that when you look at independent RFI studies, which put us at the top of the pack in terms of customer experience in Australia and New Zealand. So that's a big part of it is making sure that not only are we getting the basics right, but we're continuing to evolve and improve those basis. In terms of new features, you would have seen that when Beck was talking about humm/TAPP, humm/TAPP actually opens a whole new way for us to take this product to market and to engage with customers. So you can imagine that from there, we're looking at how we use that to bring new features. In the short term, we're really focused on the open loop approach on the marketplace and creating great really relevant offers for customers. And then as I covered briefly in the presentation, then we start to look at the wider ecosystem play. So I don't want to go into all the details. But it's focusing on those things first in the medium term, getting that right, making sure that the portfolio performs really well before we move into some of the bigger changes that we'll see at open banking and partnerships allow us to do.

Perfect. And probably on the whole partnership side of things, just the questions come through in terms of -- and this probably one for you Beck, but if anyone else wants to chime in. Overnight, it saw that Stripe and Klarna partnered. And just any thoughts on the announcement overnight?

Yes. We have a lot of relationships with existing payment gateways. And you will notice that particularly in part of our expansion plans for both domestic humm big things growth, but also international expansion includes integration into payment gateways. But most importantly for us, and what makes the difference for us in the bigger ticket space, particularly in verticals like automotive and health and the various different health verticals that sit within that is actually integration with practice management software. And there is specific practice management software for automotive in the dental market, in the audiology market, in the veterinary market. The real growth that we've experienced in health, for example, domestically over the last 2 years have come from veterinary integrations and dental market post software integrations. A lot of those practice management software relationships are global relationships. And so part of our strength and the reason why we've chosen the United Kingdom and Canada is because we have the ability through those software and that practice management software to have 1 integration. And that opens up the opportunity that 1 integration could have us being offered in 30,000 dental practices across the United Kingdom, Australia, New Zealand, Ireland and Canada. The same with automotive. So from a U.K. perspective, we've just done an integration in that market, which we can ship back to Australia and gives us access to over 3,000 mechanics. And so each competitor our play, particularly in the bigger ticket space, and the verticals that we're focused on is very much in that practice management software and that point-of-sale system software integration. But we also don't discount payment at ways, but the practice management and particularly the focus software and being embedded into the ecosystem across those verticals is where very much we see our differentiated strategy and our success.

And kind of on the partnership note, just an update on Douugh?

Yes. So we continue to support Douugh with its expansion into the U.S. as a strategic investment for us. Prior to launching any product integration from humm into the Douugh ecosystem will come when Douugh hits a critical mass of customers in either the U.S. or in Australia. So we're waiting for that to hit that critical mass, and that it will be worthy of our resource from an integration perspective.

Perfect. Changing tune a little bit one for you, Adrian. I appreciate that you've only been around for a few months. But just on the cash impact from 2018 being around the $85 million $88 million mark and also with the capital raise and other retained earnings going through the company. What do you think just as an outsider looking in what's kind of been the problem in terms of the reduction in terms of return on capital? And what do you think you can do in terms of changing that around?

It's a really good question, actually. And my reflection is this transition of the business in terms of its legacy products and legacy technologies into its new products and new technologies. And at the product level, what we've seen is the revenue curve why revenue has come off on some of the legacy and now is starting to kick in, in terms of growth. And from a cost base, you're also carrying the legacy cost base and the new cost base. So I think this is a natural part of the transition as we modernize through this next phase of consumer and SME Finance. I feel very confident in the numbers that I've seen in terms of what we're going to be able to achieve and quite excited about it to be with you. But I recognize this transition period has been complex.

And in terms of the commercial and leasing side of things, the margins look like they've come down to around a [ 90% ] mark over the medium term. Just a bit more color on that?

Yes. Look, we recognize that there will be more competition in the marketplace. You can see it already. And so we've just made some assumptions around some yield reductions, but we'll also see like in the BNPL space and the diversification of our revenue sources. There are opportunities for fees in the articular sector as well. And as Rob talked about, just the blend of risky assets, and how do we sort of manage the risk profile of assets in terms of tertiary and secondary also well mix. So we've really reflected a bit of competition, but we have a lot of flexibility to be able to drive that top line number.

Perfect. And Beck one for you in terms of just the customer experience and customer satisfaction score. So I read this because it's quite a long question, but I'd just like to hear a bit more on the customer experience that you're delivering within your apps, particularly in the context of wanting to do more with each account and perhaps touching on the frequency and spend patterns that you're seeing when customers cross over between little and big things?

Yes. Great. So the feedback and if I think about the journey that we've been on from a customer experience perspective, noting that the app has been in market for just over 2 years now for humm. The first phase that we went through was really a focus on frictionless origination. And we've achieved that, that 3-minute sign up and the ability to spend up to $30,000 is true, and we received a lot of compliments from both merchants and customers with the swiftness of origination. We've absolutely now shifted that focus. As Chris has kind of outlined to an enhancement of figures -- features within the app to get people to continue to use us. and for us to be the main kind of buy now pay later digital wallet. And so you would have seen in the medium term in our trajectories of what we're after. Currently, with little things, we had 5 transactions a year, or that's what it was per customer in FY '21. And we have ambitions to grow that to 10 and 15 from a frequency perspective. And that's if we keep that product in a closed-loop product construct. The way that we're going to drive that from a customer experience frequency, and we've already seen the uplift of the provision of things like discards, which you can now but on humm our integration with BP has been incredibly well received by customers and is driving a lot of transaction frequency within that space. And then of course, with humm/TAPP giving us the ability to make it easier and to have humm offered it at a greater number of retailers, including and also gives us the ability to offer things like cash back directly at the time of being able to do that transaction. And so we're very focused. All of our new features are about making humm the core BNPL product in wallet. And as Chris said, we're releasing our release rate of new features from a customer experience perspective is rapid. And we're already seeing in this period heading into the key retails of Black Friday and Cyber Monday, a suite of cash back offers that we're currently offering customers. Some of these are merchant funded, some of these are funded from affiliate revenue. So all positive from a revenue generation perspective as well.

Perfect. And kind of continuing that theme just in terms of the customer cohort and having been around for a long time, have you seen kind of change in behavior of the humm consumer as they age?

I think in terms of the -- probably some of the stretch of verticals that we offer. I think there's a misnomer that by now, pay later is just from millennials. But we are the #1 financer in audiology and our average age of customer in that is above 60. And so I think in terms of what we're seeing is that there is just this huge drive in preference regardless of whether you're 20 years of age or 65 years of age towards paying for things in fixed term installments, where you know that there is a start and that there is an end date that it's going to fit within your budgeting cycle. One of the other growth areas that we've had, not just from a health perspective, is probably more in home improvement and retail with the introduction of retailers like Temple and Webster. For example, MCM House, we're doing a lot more in furniture, which we're able to finance. So the average transaction value there is probably $3,000 and it brings down, we probably finance that over 12 months. And so broadening in our and offering different verticals and different terms is also -- is one of the things that is going to help us with the product yield over time as well.

I Don't think there's any more questions that have come through Beck. So I'll hand it back to you to close.

Yes. Thank you. It's -- thank you so much for spending a couple of hours with us this morning. I hope you can see we are very confident in achieving those midterm targets as a business. particularly with the reopening of the economy. And thank you for your continued support and look forward to seeing many of you again at the AGM. Thank you.