MoneyMe Limited (MME) Earnings Call Transcript & Summary

Okay. Good morning, everyone and welcome to the Extraordinary General Meeting of MoneyMe Shareholders. I'm Peter Coad, the Chairman of MoneyMe. I'd like to begin by acknowledging the traditional custodians of the land on which we meet today, the Gadigal people of the Eora Nation. I pay my respects to their elders past and present and extend that respect to all Aboriginal and Torres Strait Islander people in the room today. We also acknowledge the traditional custodians of the other lands from which people are joining the meeting virtually today and their connections with the land, sea and community. We pay our respects to their elders past and present and extend that respect to all Aboriginal and Torres Strait Islander people joining the meeting virtually today. It's 11:00 a.m. Sydney time, the nominated time for the meeting, and I've been advised by the company secretary that we have a quorum present, and I'm pleased to declare the meeting open. The Notice of the Meeting was made available to shareholders and lodged with the ASX on the 9th of September, and I propose to take it as read. Shareholders were also provided with a voting form and details of how to access our virtual meeting online guide, which gives instructions on how to ask questions and vote at this meeting through the online platform. I'll remind shareholders of the arrangements for questions and voting when we get to the formal part of the meeting for today. If you're attending the meeting via the online platform and you lose a connection to the meeting, you can log back in by returning to the log-in page and following the prompts. You'll then receive an automated email. Click on that link, which contains the e-mail to reconnect you to the meeting. Alternatively, you can call our share registry provider, Link Market Services, on 1800 990 363 for assistance. Joining me here today in the room are Clayton Howes, our Managing Director and Chief Executive Officer; Susan Wynne, who's a Nonexecutive Director and Chair of our Remuneration and Nominations Committee; Dave Taylor, who is a Nonexecutive Director; Neal Hawkins, our CFO; and Jonathan Swain, our Company Secretary. Joining via the online platform are Jon Lechte, Nonexecutive Director and Chair of the Audit and Risk Management Committee; and Scott Emery, who is a Nonexecutive Director. The agenda for today's meeting is set out in the Notice of the Meeting. Before we proceed to the formal resolutions, Clayton Howes, our Managing Director and CEO, will provide a background on the company's capital raising announced on -- to the ASX on the 31st of August, which is the primary reason this meeting is being held today. He will also speak about the company's latest quarterly performance update, which was released to the ASX earlier today. Thanks, Clay.

Thanks, Peter. Hello, everyone. The financial year of '22 was a game changer for MoneyMe as the business delivered on its growth strategy despite a challenging macroeconomic environment and increased its loan book by more than 4x to $1.35 billion. I'm pleased to say this increase in our book was made possible through exceptionally strong demand for our innovative lending products as consumers are increasingly seeking faster solutions and better experiences in a market that is dominated by incumbents. It was also supported by the successful acquisition of SocietyOne, which allowed for a step change in scale that brought with it significant operational advantages and cost synergies as well as the low-cost acquisition opportunity in cross-selling MoneyMe, expanding product range to more than 200,000 SocietyOne customers that are now in our ecosystem. The growth of our loan book required a similar increase in our funding capacity, which grew to $1.7 billion across 5 warehouses over the financial year. This growth in our balance sheet requires an increasing -- an increase in equity capital. And on August 31, we announced a $20 million institutional placement and a $1.2 million director's placement and a retail share purchase plan for up to $1.2 million. How the capital -- how the raised capital will support the business is outlined in the Notice of Meeting. I'll now take you through how this strategy has been executed in the first quarter and the key results as announced to the market just this morning. To position the business strongly in the changing economic cycle, we've shifted our strategic focus. We're prioritizing statutory returns over high growth in FY '23. As we enter into a higher interest rate environment with slowing economic growth and continued uncertainty in the global markets, MoneyMe is focused on building further resilience by managing our cash reserves and increasing the credit quality of our loan book, and that's in the immediate term. I'm pleased to say that MoneyMe has executed on this strategic focus efficiently and effectively in quarter 1, enabled by our proprietary technology, which continues to provide a significant competitive advantage in an ever-changing and evolving market. Our tech-driven agility allows MoneyMe to rapidly adjust our credit decisioning, pricing and variable cost base to balance growth and profitability at various points in the economic cycle. Shareholders who have been on the journey for a while will have seen this ability in the past as MoneyMe achieved profitability by its fourth year in business in 2017. We posted consistent net profits through to 2022 before entering its high growth phase. Now supported by our technology, MoneyMe has promptly adjusted customer pricing to protect yields in a rising interest rate environment. MoneyMe has deployed staggered rate increases to all variable rate loans and advances across its Autopay, Personal Loan and Freestyle products. And enabled by the scalability of the Horizon platform, these consecutive pricing calibrations have been executed efficiently to risk-based pricing cohorts to over 50,000 customers. Both front book and back book pricing have been adjusted appropriately across the group's product range. Now it's worth noting that the SocietyOne loan book is not impacted by pricing. That's largely predominantly because it is a fixed rate hedged book. We'll continue to review our pricing strategy against the external environment. As part of the longer-term focus on increasing the credit profile of the loan book, MoneyMe has adjusted its acquisition strategy and credit criteria to prioritize higher credit quality loan assets. The focus on credit quality has continued to improve our average Equifax profile, now to 711 in the first quarter of '23. Compare that to 658 in the first quarter of 2022. The proportion of assets with an Equifax profile below 600 has reduced from 36% in the first quarter of last financial year to now only 19% in this quarter. Secured assets as a percentage of the loan book continues to increase, sitting now at 40% at the end of this first quarter. MoneyMe's gross customer receivables was $1.28 billion for the first quarter '23, which is slightly down from the $1.35 billion in the fourth quarter. The change in loan book size has primarily been driven by slightly higher customer prepayment rates, and that's in response to increasing interest rates, the focus on originating higher credit quality customers and the moderated growth as part of the strategy for us to deliver statutory profits in this financial year. MoneyMe delivered gross revenue of $57 million for the quarter, on target to deliver greater than $200 million in this financial year. Optimizing operational efficiencies remains a key priority as MoneyMe leverages scale advantages and our recent technology advances, including improvements to our artificial intelligence and our automation capabilities. The realization of cost synergies from the SocietyOne acquisition is progressing ahead of plan and has been accelerated to achieve an important milestone in this first quarter with SocietyOne originations using MoneyMe's Horizon technology platform. The migration of channel originations to Horizon has drastically improved processing times from what was on average about a 24-hour processing time with multiple human touch points to now under 1 hour with a more efficient automated solution, driving improved customer experiences and definitely human capital efficiencies. Core office operating expenses as a percentage of average gross customer receivables has decreased to 3.1% in the first quarter. Now that's proactive cost management and will continue to be a focus as part of the strategic objectives for the next quarter, while the recalibrated acquisition strategy will leverage the low-cost acquisition opportunity in offering MoneyMe's product range again to over 200,000 SocietyOne customers over a period of time. Credit outcomes remain within expectation of net credit losses at 5% in the first quarter, while MoneyMe continues to provision for losses at closing FY '22 provision levels. We expect the existing overlays to provide appropriate contingencies for the current macro environment. While the macroeconomic outlook continues to be challenged, MoneyMe is uniquely positioned to continue to deliver industry-leading innovation while also achieving our strategic initiative of generating those statutory returns. Our ability to calibrate quickly to a higher interest rate environment and the focus on high-quality credit will position the business strongly in the current environment, while we optimize for further tech-enabled cost efficiencies. I'll now hand you back to Peter to take you through the more formal parts of the meeting. Thank you.

Thanks, Clay. Ladies and gentlemen, I'll now move to the formal part of the meeting, and I'll start by explaining the arrangements for asking questions and voting on the formal items of business. As set out in the Notice of the Meeting, there are 3 ways that shareholders can vote today and raise questions at this meeting: from the floor here in Sydney, via the online platform and via the telephone. For those shareholders and proxy holders who are present at the venue here today, I'll invite questions from the floor in the usual way. Only shareholders and proxy holders holding yellow voting cards or blue nonvoting cards will be entitled to ask questions from the floor. Visitors holding red visitors attendance cards are not entitled to speak or ask questions at this meeting. [Operator Instructions] Shareholders wishing to ask a question on the online platform will need the SRN or HIN number, which is printed on the top of their voting form. Proxy holders wishing to ask questions online will need their proxy code. You can submit questions now or at any time before the meeting considers the item of business to which your question relates. They'll be dealt with at the appropriate time as we move through the meeting. If you have a question already prepared, I encourage you to submit it now so that as many questions as possible can be answered. All questions submitted via the online platform will go through our Company Secretary, Jonathan Swain, as the moderator for today's meeting. Jonathan will identify each person who asked a question, read out the question, and then I will either answer the question or pass it to the most appropriate person. To ask questions via the telephone, you'll need to dial in to the meeting using the numbers displayed on the screen. Shareholders wishing to access the meeting will need to use a unique PIN provided to them by Link Market Services in accordance with the instructions set out in the Notice of the Meeting and the virtual meeting online guide. If you don't have a phone PIN and would like to ask a question via the telephone, please contact Link on 1800 990 363 to get your PIN. [Operator Instructions] For each item of business, we'll take questions from the floor first, then the telephone questions and then questions raised via the online platform. I'd ask all shareholders asking questions from the floor, via the telephone or via the online platform to please keep your questions short and to the point so as many shareholders as possible have a reasonable opportunity to ask questions. We reserve the right to rule out questions that do not relate to the business of the meeting. We'll also not answer questions that are the same or substantially similar to what have already been answered. Otherwise, we'll endeavor to answer as many questions as possible. As the Chairman, I've determined that voting on each of the resolutions to be considered at this meeting will be conducted by a poll. Shareholders were given the opportunity to exercise a direct vote before the start of the meeting by lodging a voting form that accompanied the Notice of the Meeting. Shareholders were also given the opportunity to appoint a proxy to vote on their behalf at the beginning of this meeting by lodging their voting form that accompanied the Notice of Meeting. As set out in the Notice of Meeting, as Chairman, I will vote all directed proxies in accordance with the directions that are provided by shareholders, and I'll vote all undirected proxies in favor of all resolutions. Shareholders and proxy holders who are attending the meeting in person today and who have not exercised a direct vote before this meeting should have received a yellow voting card on entry to the meeting. If you did not receive a yellow voting card, please see the representatives of Link Market Services who are located outside the door. Shareholders and proxy holders holding yellow voting cards will be invited to cast their votes on all resolutions by completing the voting cards and placing them in the voting boxes. Representatives of Link Market Services will circulate the voting boxes after all resolutions have been discussed and before the poll closes. Shareholders and proxy holders who are attending via the online platform may cast a direct vote during this meeting using the electronic voting card given to them on registration on the online platform. Those persons may cast a direct vote at any time from now until 5 minutes after the close of the meeting. If you have any questions about casting your vote online, please refer to the virtual online meeting guide. This can be accessed from the Download section at the bottom right-hand corner of your screen, and I note that shareholders are not able to vote today by telephone. The shareholders are being asked to consider 6 resolutions set out in the Notice of the Meeting dated 9th of September. For each proposed resolution, I will introduce the resolution. There will be an opportunity for shareholders to ask questions on the resolution in line with the process that I've just described. Once there are no further questions on that resolution, I will then call for shareholders to vote on the resolution and display a slide that is showing the total direct and proxy votes received on that resolution prior to this meeting. As I've explained previously, voting on each resolution will be by poll. The poll for each resolution is now open and will close 5 minutes after the end of the meeting. The results of the poll will be released on the ASX company announcements platform and made available on the company's website after the meeting. We now consider resolution 1, which is to seek ratification of the issue of 35,677,083 shares previously issued under the unconditional placement described in the Notice of the Meeting. If this resolution is passed, the issue of these shares will be excluded in calculating the company's 15% limit on issuing equity securities in ASX Listing Rule 7.1. This will effectively increase the number of equity securities that the company can issue without shareholder approval over the 12-month period following the issue date of those shares. Further details of the shares that were issued under the unconditional placement and the application of Listing Rule 7.1 to that issue is set out in the Notice of the Meeting. I now move that for the purposes of ASX Listing Rule 7.4 and for all other purposes, shareholders ratify and approve the prior issue by the company of 35,677,083 shares under the unconditional placement on the 6th of September 2022 on the terms and conditions that were set out in the explanatory memorandum accompanying the Notice of this Meeting. I'll now address any questions on these resolutions from the floor. As there are no questions, we now look for questions on the phone.

There are no questions from shareholders participating by telephone.

Thank you, operator. And Jon, as there are no questions on the phone, I'll now ask you if there's any questions through the platform.

Chair, there are no questions through the online platform. Thank you.

Okay. Thank you. As there are no questions on this resolution, I'll now put the resolution to the meeting. The direct and proxy votes received for this resolution prior to the meeting is shown on the slide. If you wish to vote on this resolution online using the electronic voting card, can you please do so now. [Voting]

We now move to consider resolution 2, which is to seek approval for the issue of 4,322,917 shares under the conditional placement described in the Notice of the Meeting. The company's agreement to issue shares under the conditional placement does not fall with any of the exemptions -- exceptions, rather, to the ASX Listing Rule 7.1 contained in ASX Listing Rule 7.2, and it exceeds the 15% limit in the ASX Listing Rule 7.1. The issue of shares under the conditional placement, therefore, requires the approval of shareholders for the purpose of ASX Listing Rule 7.1. If this resolution is passed, the company expects to issue the shares under the conditional placement on or about Wednesday, the 12th of October. These shares will subsequently be excluded in calculating the company's 15% limit on issuing equity securities in ASX Listing Rule 7.1. Further details of the shares that will be issued under the conditional placement and the application of Listing Rule 7.1 to that issue are set out in the Notice of the Meeting. I now move for the purposes of ASX Listing Rule 7.1 and for all other purposes, shareholders approve the issue by the company of 4,322,917 shares under the conditional placement on the terms and conditions set out in the explanatory memorandum accompanying the Notice of the Meeting. I'll now address any questions to this resolution. Does anybody in the room have any questions? Operator, are there any questions on the telephone for this resolution?

There are no questions from shareholders participating by phone.

Okay. Jon, with no questions here on the phone, any questions on the platform?

No questions from the online platform, Chair.

Okay. Thank you. As there no questions on this resolution, I will now put the resolution to the meeting. The direct and proxy votes received for this resolution are displayed on the slide. If you wish to vote on resolution 2 using your online electronic voting card, please vote now. [Voting]

We now move on to resolution 3, which seeks approval to issue 1 million shares to Clayton Howes, the company's Managing Director and CEO, or his nominee under the director offer, which was described in the Notice of the Meeting. ASX Listing Rule 10.11 provides that, unless one of the exceptions to ASX Listing Rule 10.12 applies, a listed entity must not issue or agree to issue equity securities to certain persons identified in ASX Listing Rule 10.11, including directors and their associates. The issue of shares under the director offer, therefore, requires approval of the shareholders for the purpose of ASX Listing Rule 10.11. If this resolution is passed, the company expects to issue shares under the director offer on or about Wednesday, the 12th of October. Further details about the proposed issue under the director offer are set out in the Notice of the Meeting. I note that as disclosed in the Notice of the Meeting, the predominant purpose for the director offer as part of the placement is to support the marketing and the placement to new and existing institutional investors by demonstrating that -- the participating directors' strong belief in the future prospects of the company. I now move that for the purposes of ASX Listing Rule 10.11 and for all other purposes, approval will be given to issue 1 million shares under the director offer to Clayton Howes or his nominee on the terms and conditions set out in the explanatory memorandum accompanying the Notice of the Meeting. I'll now address any questions on this resolution from the floor. Any questions, operator, on the telephone?

There are no questions from shareholders participating by phone.

Okay. Thank you, operator. Jon, from the platform?

Yes. Peter, we do have a question from the platform. It's relatively lengthy. So bear with me as I read it out. Now the question is from [ Patrick Kearney ], and the question is as follows. "On 21st June, management denied rumors in the media that it was testing equity markets regarding a potential capital raising. The business subsequently breached covenants tested on 30 June 2022 relating to tangible net worth, loan asset-to-debt ratio and liquidity ratios requiring the capital raise we are addressing today. Were management aware of the covenant position at that time of that announcement? If not, what controls have been implemented to provide investors confidence of management's current assessment of covenants?" And that's the conclusion of the question.

Okay. Thanks. Thank you for that question. So the focus on ensuring that we operate within the agreements that we have for our funding is consistent and ongoing. And management was in regular dialogue with both the funding partners that we work with and the Board about renegotiating and managing the process of our covenants and also making sure that the covenants we had in place were consistent and appropriate for the way the business was operating and the financial environment which the business is operating at the time. So the reason for obtaining the covenants was to ensure that we didn't have any unplanned or unagreed breaches, and those covenants were in place and were well managed in terms of the relationship with both our financiers and the Board. And I can assure the person who has asked the question that we have a regular dialogue with the management team. And through all our reporting, we see information which provides us information on how we are operating within our funding agreements and where we are with any covenants. Do we have any further questions, Jon?

There are no further questions on the platform at this time, Chair.

Thank you. As there are no further questions, I'll now put the resolution to the meeting. And direct and proxy votes received via this resolution are on the slide that you can see. If you wish to vote on resolution 3 online using your electronic voting card, can you please vote now. [Voting]

We'll now move on to resolution 4, which seeks approval to issue 1 million shares to Scott Emery, a Nonexecutive Director of the company, or his nominee under the director offer described in the Notice of the Meeting. The resolution being proposed is the same as resolution 3, and I don't propose to repeat the details. As I noted earlier, further details about the proposed issue of shares under the director offer is set out in the Notice of the Meeting. I now move that for purposes of ASX Listing Rule 10.11 and for all other purposes, approval be given to issue 1 million shares under the director offer to Scott Emery or his nominee on the terms and conditions set out in the explanatory memorandum accompanying the Notice of the Meeting. I'll now address any questions relating to this resolution. Are there any questions here in the room? Operator, do we have any phone questions?