Hypoport SE ($HYQ)

Ladies and gentlemen, welcome to Hypoport's webcast for our Fiscal Year Results 2025. We will host a Q&A session here with my CEO, Ronald and me. My name is Jan Pahl, I'm Head of Investor Relations at Hypoport, and we are happy to receive your questions. [Operator Instructions] You can ask your questions regarding our fiscal year results we came up this morning, and we will wait a few seconds or minutes for the first questions here. I can see that we have several participants here. So we're happy to wait for your first question.

Hello from my side as well. Let's start with this.

Perfect.

Yes, we had a very vital discussion here last time when we presented the Q3 numbers. So we are looking forward to another deep dive.

So I can see that someone is typing at least, so happy to moderate the first question. I want to give someone the right to speak, however. Perfect. So first question here. Ronald, can you talk about how you are thinking about balancing growth versus margin in this today environment?

Yes. Thanks for the question. So let's start there that up until the beginning of 2022, our focus was growth and showing fitting expansion of our profit or keeping our EBIT margin stable, slightly rising. And this was under the expectation that we are in a pretty stable market environment. So volatility of our core markets are slow. And we can -- with a certain level of predictability see the future and with this, keep investing in expanding the network and the business models while scaling our profitability. So with the massive change in the market environment and the sharp drop in the second half of 2022 of roughly 50%, we learned that our market is more volatile. So since then, we know that we need a higher profitability level to, let's say, stay in a safe environment for the whole group and not risk to have to restructure again because this creates a lot of waste when you build something up and have to restructure. For the last 3 years now since 2023 and up to 2025, we were focused on keeping our cost base stable, keeping the headcount stable and just scaling our revenue side. And with this focus, we start the year 2026. And from today's perspective as well, I see this for the upcoming years that we need to expand our profitability. So our -- we need to reduce our cost-to-income ratio, you can say. And we already shared with you our target to the end of this century, we want to double our current EBITDA margin from 12% to 24% so to scale profitability and show that our business models are still early stage and have a lot of potential when you look on profit and free cash flow generation.

Perfect. We've received a couple of questions in the meantime. However, because it was a pretty long question, actually, you answered a little bit of the next one. But we can -- it's a good follow-up. So the next question is that we guided double -- to double our margin until 2030, and can you explain how -- what are the key assumptions at least of this guidance? And as usual, are we -- is this including price increasement for Europace or not?

Okay. As you can imagine, we do a lot of planning short-term and long-term perspective. And our margin expansion and profitability growth is based on, let's say, complex bottom-up planning process where we -- for every business unit and all 3 segments, predict our current expectation for the future. What is included is a healthy market environment, significant market share gains in the level which we saw in the last years, release of and monetization of new products which are already developed or in development. So no innovations, no inventions, no new events are included. There are price developments included if they are visible for us. So if we -- our prices are indexed or if we have agreed with our partners some kind of dynamic prices. What is not included is future decisions to change price structure, like innovations. So coming back to your question, core of discussion, so this is what we see in a normal environment what's going to happen to our profitability. So this is not based on unknown territory that we have to still conquer or, how to say, invent.

Right. Thanks for the answers. Hopefully, this answers the question. If not, don't hesitate to come back. So we once again received a couple of questions. I try to group this a little bit to order this. Maybe the next one is a little bit on the guidance 2026. So can you explain and help us to understand how EBIT will turn into cash flow?

Okay. Yes. So EBIT to cash flow is, let's say, in general, when there is, let's say, interest burden on the group, which rise a little bit from the spread of short-term to long-term interest rate, but we talk about low single-digit million euro amount, so something around EUR 1 million or EUR 2 million, depending a little bit how much liquidity we short-term invest versus our long-term loan agreements. So not a big change from this perspective. Our average tax is something slightly below 30%. This year, still a lot of, let's say, tax credits to be used. But let's say, taking this out, it's fair to say that roughly 30% goes to tax. You are aware of this that we have some changes in working capital ongoing. So especially to the end of the year, we increase working capital. In the beginning of the year, it decreases. This is linked to our business model. I would say this is a minor for the question of how our free cash flow generation is changing. So taking this all into consideration, so cash flow generation this year should be something between EUR 30 million and EUR 40 million. So for the expected EBIT of EUR 40 million to EUR 55 million.

Right. So next question is not specifically on the guidance, but a little bit on the near future. So let's talk a little bit about products. Can you talk about what couple of new products monetization opportunities you're most excited about?

Yes. Let's say, this -- most excited about, okay, let's start with real estate and mortgage business. I'm excited about rollouts of products integration in the savings bank industry and in the corporate banking sector. So savings banks, it's a joint offering for the savings banks together with our joint venture partner, Finanz Informatik for the consumer front end, where we integrate the properties into the consumer front end of all 30 million savings bank customers. And the ones who have a property already financed by the savings banks will see it there and we'll get accurate valuation every time they open the account. And from there can start different processes around their property. If they have a mortgage with the saving bank, for instance, refinance it. If they have a mortgage with someone else, refinance it as well with the saving bank and other services. So second project is a rollout for the savings banks to opt in as a whole bank for the independent approach on the product for advice in their branches so that not the saving bank has to decide on a, let's say, on a workplace basis. If they are using architecture powered by Europace, they in the future can decide for the whole bank. It's going to roll out during this year. And on the corporate banking side, it's our new product where we integrate the automated value model of Value AG and the workflow of the cooperative banks. And with this, let's say, first time, a full integration of mortgage process and valuation process in a digital-optimized streamlined workflow, where we saw already a lot of signing up in 2025. So we are getting close to 200 banks, which are signed up already. But to get them all productive, the usage up for the integrated model is something which excites me for 2026. Yes. And with this, I would say, let's say, number three is Value AG's digital product offensive in this valuation space where we offer more and more product and product range for automated valuations as well outside of the cooperative banking sector, as you can imagine. Yes, number four is WOWIPORT and the constant additional integration of features from within the group and outside of the group in the system and the increased speed of underwriting signatures from cooperative banks there -- cooperative housing associations there for the ecosystems which we expand right now.

Great. Thanks for this. So we've talked a little bit about the products right now. Maybe AI is a good next one. And the question is here about just a second. Can you talk about how you and your team are thinking about AI as an opportunity or risk? So what period of technological change in Hypoport's history does this reminds you of, if any?

Yes. Actually, let's start at the end of the question. It reminds me at the beginning of Hypoport's development. So when the Internet was there to connect consumers and businesses and enable workflows across business without complex interfaces just by bringing different businesses in the value chain together on one solution. So this massive change, which we saw in the industry in the beginning of this century, where for the mortgage business, we can say we designed it and we brought it to life for the whole market. This is something which reminds me on the current change and the abilities AI adds for the whole industry in additional automation in the end and massive improve in quality of service to consumers and all other parties along the value chain of mortgages. So we see it as a huge opportunity. We facilitate this opportunity already now for a couple of years because it just enables us to deliver better solutions. And with better solutions comes in the end, let's say, more attractiveness of our platform for everyone involved. I switched to a slide where you see some examples for Europace, what is already in Europace based on AI and the current massive development around generative AI is, let's say, expanding this space what is possible and accelerating the development of this. Let's say, based on our data and based on our services that are there already, our openness to the surrounding and the way how we designed Europace to make everything what is within Europace available via APIs, we see us as a perfect hub for any generative AI out there or specialized models, which have some touch point to the mortgage process to interconnect with us and create with this a perfect integration and access to the offerings of the whole German banking sector, with just one interface. And this enable a lot of business models in an early-stage process of creating new homeownership or a new mortgage this way. So a huge opportunity for us. Is it a threat? Let's say, we try to find the threats multiple times now. With the current stage of what AI is able to provide, we don't see a threat for us because, let's say, replacing us or certain business models would be quite a difficult job with or without AI. And seeing how everyone who wants to invest in AI and wants to create something consumers or business partners profit from, we are an enabler to create value there. And to try to compete with us would be a quite challenging experience seeing how integrated we are in a technological way with our partners.

Perfect. So we've got 2 more questions, which are not linked to AI, not to the products, a little bit hard cut. But however, can you talk about what are the -- try to figure out, I'm not sure if this is about mortgages or about personal loan. Can the private credit crisis have a direct or indirect impact on Hypoport business? I assume it's personal loan, not sure what product.

Yes, it sounds like, I would say. So this is -- in general, the one who's questioning this is referring to the personal loan volume in the German market and the rising level of default. So what we see already in the last 3 years now that banks adjust their risk profile to this recessive environment in Germany. Consumers on the other side are as well not too keen to expand their borrowing. So we see overall a shrinking market, especially in the riskier part of the market decline of offerings by the banks. And this we saw already, yes, this is past for us. What recently happened is that banks got confirmation for their hesitation in the last 2, 3 years because defaults trickled up. So certain banks which were actually pretty active in the, let's say, this subprime segments feel the pain and see some losses going up in their portfolios. Is it something that affects us, let's say, not directly. We see that the banks in the end did a good job to reduce their lending lately. It changes the industry a little bit, and we try to profit from this that a lot of banks get more risk averse and this comes the challenge that they can't fulfill all their consumer needs. And with our platforms where we offer a ventile for banks with a change in credit policies, we give them a solution to keep their client relation and to monetize on their client relation, but not fund the lending products by themselves anymore. We saw this already during the financial crisis in the mortgage business 15 years ago. And so in such an environment, open architecture shows how strong it is that you as a bank are able to on a daily basis or quarterly basis, just change your credit appetite without threatening your client relation and your sales organization just by switching where the products come from. And right now, it's again the time to show banks in personal finance, here in the person loan business that the flexibility Europace offers for their sales is something beneficial in the turbulent market environment, something you can't do with traditional IT, which is only focused on providing exactly one loan, and this is out of your balance sheet.

Perfect. So the next question is regarding -- maybe for the next question, we would love to see the slide with a bridge to EBIT. So this one. So can you help us bridge the cost savings in 2026 and as you aim to double margins midterm?

The cost savings. So what we try to describe here is how the profitability bridge looks like and we separate the loss-making businesses, namely 3 of them from the already profitable businesses and market impact. In general, costs for the group level will go up. We have an inflation and this comes as well increasing salaries. We have a stable headcount in Hypoport over the last years and expect this for this year as well. So there is a cost -- incremental cost increase overall over the whole group, which is already compensated with additional revenues that we expected. And this is what we show here, so the loss reduction or the profit gains are net effects after the cost effects. If you want to calculate the cost effects, I would say it's fair to use a 4%, 5% increase in costs on a group level.

Hope this answers the questions. If not, don't hesitate to come back and chat on this. The next one, at least, I think it's last one for now is on share buyback. So we saw the EUR 10 million share buyback program last year. This year, how eager are you to increase this given the strong expected cash generation?

Let's say, I see share buybacks as an opportunity to gather our shares for our employee benefits programs as well as a potential instrument to acquire additional business model in the far future. And for now, it's -- I would say it's a good time to acquire our own shares because we see them, especially historically pretty low price. So I would say I'm eager to acquire more shares. And if we are able to, it depends always from, let's say, legal perspective, if we are allowed in the moment to buy and then we are allowed to buy what is the share price in this moment and how many shares we will get.

Right. So the next one is regarding market share, assuming it's Europace mostly. So what gives us confidence we will gain market share given the data from last year?

Yes. Let's switch to this here for a second. So we -- let's say, we -- all banks in Germany, other mortgage brokers for a long time just looked on the Bundesbank reportings for their interest statistics and believe that this is a good representation of our market to compare with. Lately, we see a mismatch between these numbers and what we see as our targetable market. And we learned in the last, you can say, 3 quarters when we analyze this and try to understand why we can't align anymore with the dynamic this interest statistic of Bundesbank is reporting. So we learned that there are major differences between this -- what they report about and this is what we target. So they report about, let's say, all kinds of mortgages provided by German banks within the EU to consumers or nonprofit organizations they report about every contractual change. To be fair, they separate these contractual changes, but the certainty of banks classifying it correctly is limited. And they report as well about so-called [ Bausparvertrag ], which are saving products for a long time and then they create a loan out of this and the payment out of this loan as well as -- as new mortgage volume. So there are a lot of areas where the market, Bundesbank, is describing for their interest statistic. And our market of consumers taking a mortgage to buy, build, renovate or refinance a home is different. For now, we can't -- there is no -- and you ask for certain, there is no better statistic available. Bundesbank is since 2023 gathering as well information just about mortgage finance for consumers here in Germany, but they still don't publish this data, which they now collect for 3 years. So as soon as this data gets available, we all will learn how the last 3 years in reality looked like. As long as they stay disclosed, we can just look on our platform. We know that we represent roughly 1/3 of the total market. We see how the different business models of brokers and banks with branches perform to each other, and we can make a rough guess who's really winning and who is losing market share right now and what may be a fair representation of the market. And then I look on this, then I would say we are by certain below 15% market growth, closer to 10% than to anything above 15%. And this is, let's say, based on 1/3 of the German mortgage market. We don't see 2/3 of the market, but we have difficulties to expect that there is a higher dynamic in any area.

Right. Perfect. So there are some follow-up questions on this topic. But because the answer was pretty long, I hope that it seems that they've already answered. Just one more, how is January, the number -- Bundesbank number January performing? We've seen the numbers show a slowdown. They assume our numbers are also down, but at least we don't communicate on monthly numbers, right? But this is the last, honestly, on this year.

Yes, what we can say is that there are other publicly available indicators how the market is. Schufa's reporting on the information how many Schufa requests they were, so there's credit scoring requests and shows a small decline year-on-year for the first weeks of this year. So this data is well available and gives some indication of how the market looks like right now.

Right. So the next one is what we expect on Europace One to contribute. So how many customers are signed up? What EBIT maybe we are expecting, just rough estimation. What are our feelings on Europace One?

Yes. So I didn't mention. Europace One is one of the most exciting products. It's actually not fair, to be fair. So Europace One is in monetization since summer last year. And it's the first time that we create another model on Europace where users sign up for exclusive services and pay roughly EUR 1,000 per year for this bundle of exclusive services. So we are still in the learning process how to advertise for this bundle on the system. We still have to learn to bring the sales organizations with our typical contractual partners in the past and the needs and the requests of consumers together. So for now, I would say it wasn't the best start possible, but we see that we have now 3-digit number of advisers signed up. We are in talks with a lot of large organizations to enable the use of the bundle within their organization. Often, this is linked as well to, let's say, the certain features are competing with internal solutions or needs integration to really work for the users. So we are in a way to integrate the different perspectives and needs in this and expect to develop this number of signed up users dynamic during this year. So the long-term goal is, and this is -- so it's not a 2027 number that we get to a 4-digit number of signed up clients and then scale this. This means more than EUR 1 million revenue yearly, up to EUR 10 million in revenue when we get in the direction of 5 digits. So where this will be exactly end is a question, I would say, for the next 2, 3 years to widen the user base for this first bundle that we offer with the exclusive products, as I said.

Great. So the next one is different topics here. I'm not sure how to structure, but maybe this one. So how much did our gross profit in 2025 get affected by lower average mortgage terms?

Mortgage, let's say, lower average mortgage...

The duration of mortgage...

Yes. So the fixed -- for everyone who is listening, so we talk about the fixed interest rate period, which is major, especially for the Europe transaction fee because we get 1 basis point upfront for each year of fixed interest rate period. The average of fixed interest rate period during 2025 declined from close to 11 years to close to 10 years, so roughly by 8%. So this is for the transaction fee model. For margin models of the poolers or our franchise network, it's not that important, but for the transaction fee, it is relevant. So telling this we talked about a significant 7-digit amount, which our transaction fee revenue was decreased because of the shorter duration. So it had an impact in 2025. We don't expect this impact to happen again from the current base in 2026 because we have difficulties to imagine a German mortgage market with an average below 10, and we are right now at 10.1 years exactly.

Great. So the next one is on the market as well, mortgage market. Actually, a little bit wider on the broker industry. So there is consolidation by fact. So do we consider to be the best owner, for example, for the Dr. Klein franchise network as well as the broker and poolers within the insurance segment?

This these are 2 quite different questions. For the Dr. Klein franchise network, for now, there's the largest German mortgage broker, Interhyp, belonging to ING Group. And Dr. Klein is the second -- let's say, the second one, the second known brand in the end, which takes market share over the last years and gets closer to the Interhyp brand. I have difficulties to imagine some other owner structure for this Dr. Klein brand right now because for the Europace platform, it's vital to have as well strong broker brands and not just be focused on small intermediaries. In a world where as well the largest broker would use Europace, so the whole German broker business would go through Europace, then we would not need the ownership of the franchise network anymore. But this is still difficult to imagine that something like this is happening. So as long as we see this, let's say, competition, this duopoly between these 2, gathering market share, we see that it's essential. And often, Dr. Klein is as well a great pilot partner for innovation of the platform. So it's driving the innovation together with Europace forward. In the insurance segment, we see that there is a strong consolidation process of pooling in the pooling businesses in insurance. And we are committed to provide the underlying technical infrastructure. So in case that we are able to gather more volume on our platforms, we are willing to disinvest on the side of the broker pools. So to bring the technology forward, we would be willing to find strategic options. And we don't see, let's say, in this area, actually, there are a lot of pools and sales organizations out there. We see this as a certain level of challenge as well for certain competitors of our activities to join the platform if we would state that we are not willing to, let's say, share the ownership there.

Okay. Great. So this was regarding the market, the mortgage market as well as insurance and consolidation. What's next? Maybe this one. It's again regarding the guidance. So price-wise, are we willing to still stay with this [ 1.1 ] basis points with Europace? And what is our view on the mortgage volume growth in 2026 and the current mortgage interest rates?

So what is the best slide for this? Let's go here. So we had a very strong first quarter in 2025, influenced at this time by a good start in the year and then a spike in interest rate because of the announcement of the new -- at this time, potentially new government that they would borrow another EUR 1,000 billion to ramp up German spending for defense and infrastructure. This 50 basis point spike in interest rate which we saw brought a lot of people to close their mortgage applications fast and gave us a very strong first quarter. And we all know already that the following 3 quarters were slightly weaker. So when we look on this year, we would expect a more positive dynamic during the year because of a general positive change in German macroeconomic figures. So for now, the expectation is still that we are getting close to 1% growth in our economy and with this and the positive change of potential buyers and borrowers and a positive dynamic during the year. So right now, we have an Iran crisis, which is massively increasing the uncertainty, not directly for German consumers, but you can feel that energy prices are going up when you're still driving combustion engine. And if this war stays longer, energy prices going up may lead to higher inflation. There are some warnings already that we may see inflation of up to 3.5% if this war stays longer. And with higher inflation comes as well higher interest rates, and we saw a sharp increase in interest rate in the last days, you can say, in the last 2 weeks since this war started. It's difficult to with this level of uncertainty right now to give a certain prediction of how the year will go forward. This depends a lot on how long this crazy crisis in the Middle East lasts. So I hope, I need to say, that all parties involved come to a fast conclusion that it doesn't work out as planned and that face-saving rollback is the best option. And we continue as we would have expected the year would go just a couple of weeks ago. And then I stay -- we stay with our expectation that we have an incremental growth during the year so that the quarters gets better over the year because of the underlying dynamic that housing is something needed by millions of households in Germany right now, which are waiting for years now to act and we see that there is a lot of supply there. Prices are pretty stable, not going up fast, not trickling down and interest rates stay on healthy level for this price level we are at. And so every other -- to model every other, how to say, scenario so whether this Iranian conflict is escalating or just keeps going without any decisive decision is tricky to model it right now because of the high level of uncertainty in it.

Indeed. So next question that's a hard cut but why not. So the next one is regarding CapEx. Is CapEx in line with cost growth? Or is it higher? Is it lower? What do you expect?

Yes. It's in line with cost growth. This is, yes, major part is our investment in our platforms. We don't expect -- we don't plan, we don't expect changes in our investment strategy there. It's a pretty decentralized decision process. But overall, in the group, it should be perfectly in line with the cost development, yes.

Okay. The next one -- I shall jump to the next question. I think we mentioned it before, but maybe the gentleman is a little bit late to the party. Would we consider rising the commission on Europace for our transaction?

What we consider is that with Europace One, we offer additional features on Europace in a different pricing model, and we expect the volume of participants in the broker segment to rise. And during 2026, we will bring this as well to the branch network of banks in combination with a higher transaction fee. So we don't expect to increase the prices for Europace, but we expect that we offer for the branch networks a Europace system with more exclusive feature for a higher price. So this is going to be introduced this year about the success you will hear in our quarterly statements.

So the next one, it seems it's the last one actually is regarding our portfolio of business. We have our network here. Are we happy with this? Or could we think about the investment or maybe acquisitions in the near future exactly. So any near-term changes here to expect?

Let's say, we are focused on realizing the ideas, the strategic decisions and the synergies that we expected from close to 20 acquisitions we did during 2016 until 2019. And we are still in the process of fulfilling these expectations and stay focused on this and improving with this our profitability on the group level, so don't expect an expansion of the group in 2026, not in the scope, let's say. So we will not add different new units. If there is an opportunity to integrate something which has a perfect fit to our existing business models, this may always occur, but this would be not a strategic move. It would be just an opportunistic approach in a certain way. So don't expect M&A activities from us. We are not driving this forward right now. We want to stay focused on what we do. On the other side, we are open in multiple business models for strategic partnerships to scale. So DM in merchant acquisition has a higher probability than we acquire something. So to find fitting partners which are enabling us to grow things faster than we are able to do it by our own is on the table, and we are actively looking for these opportunities for business models where we don't develop the traction that we expect from the units within the network.

It seems there are no more questions. However, I counted 19 questions. So if I may miss someone, please raise your hand and came back to me or if something came to your mind to fulfill the 20 questions, why not? So we're waiting a couple of seconds here if maybe someone shows up with the next question or if someone feels that I have missed his or her questions, don't be shy, just type in. We will stay a little bit here. It seems there are no more questions. We've covered a lot. We've covered a lot of the big topics, AI, portfolio as well as some niche topics, I would say. But there's another, yes, we got the 20th. Just wondering if our market share assumption to reach our -- yes, how much market share we need to achieve the 2030 guidance, so the midterm until the end of the century? Is there a clean or a clear number we have on mind or...?

Yes. There is -- market share gains are included in this number, a trickling up of our market share. But on this short-term period, we are talking about raising from 30% to 35%. So this is not something like a 30% to 50% market share or something like this. It's an incremental gain of market share during this upcoming 4 years in the end.

And we expect a growing market, so it's not only market share. So at least a couple of factors to bring in when we look on the market, which market we need to achieve this guidance here. So it's market share gain, but also market growth as all.

Yes.

So just to give a little bit of color more on this. So I think this was a question I missed. Sorry for that, and thanks for circling back. It seems there are no more additional questions. So maybe some last words from your side, Ronald, I see you switch on our guidance, our forecast...

Slide for the end of the Q&A session. Thank you for the questions. Again, a vital dialogue. I think it's great for everyone here involved. So we will meet again in 2 months. Hopefully, all the -- long after the crisis in the Middle East finished, and we have a more clear view of how the year 2026 will look like. Up until then, stay safe. Have a good time. Thank you.

All the best. Thanks. Bye.