MoneyMe Limited (MME) Earnings Call Transcript & Summary

Good morning, everybody, and welcome to the Extraordinary General Meeting of the Shareholders of MoneyMe Limited. I'm Peter Coad, Chair 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 who are here today. I also acknowledge the Traditional Custodians of the lands from which people are joining our meeting virtually today, and their connections to 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 virtual meeting today. It's 11 a.m. Sydney time, the nominated time for the meeting, and I've been advised by the company secretary that a quorum is present, so 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 17th of April 2023. I propose to take that 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 vote, how to ask questions, and vote at this meeting through the Online Platform. I will remind shareholders of the arrangements for questions and voting when we get to the formal business of the meeting. Shareholders were also provided with a voting form and details on how to access our virtual meeting online guide, which gives instructions on how to vote, 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 business of the meeting. If you're attending the meeting today via the online platform and you lose your connection to the meeting, you can log back in by returning to the log-in page and following the prompts. You will then receive an automated e-mail. Click on the link contained in that e-mail to reconnect to the meeting. Alternatively, you can call our shareholder registry provider, Link Market Services, on 1 (800) 990-363 for assistance. Joining me here today are Clayton Howes, our Managing Director and Chief Executive Officer; Rachel Gatehouse, non-Executive Director and Chair of our Audit and Risk Management Committee; Scott Emery, Non-Executive Director; Dave Taylor, Non-Executive Director; Jonathan Swain, our Company Secretary. Susan Wynne, Non-Executive Director and Chair of the Remuneration Committee and Nomination Committee, is on the line. The agenda for today's meeting is set out in the notice of the meeting, and I'll now provide some background on the company's $37 million placement announced on the ASX on the 30th of March 2023, which is the reason the meeting has been called. Securing $37 million of investment in an extremely tight capital market environment is an important achievement. Investors' participation in a very difficult macro environment is testament to their confidence in the future success of the business and the value that has been created. We greatly appreciate the support for MoneyMe, especially during such a challenging time to the market. As described in the notice of the meeting, the bulk of the proceeds of the $37 million placement will be used to partially repay our corporate debt facility. The paydown will deleverage the business, strengthen the balance sheet, mitigate associated risks, and reduce our exposure to interest rate volatility. It will also achieve a substantial reduction in interest costs amounting to approximately $7 million in annualized cost savings. The repayment will remove the uncertainty related to meeting the required time frame for the payment that was highlighted in our 2023 half-year results. I would also like to address the timing of this capital markets raise and shed some light on why an equity raise was chosen out of the options available to us under our strategic capital initiative. We are open to and explored various strategic capital solutions. However, the uncertain and all-time market environment negatively impacted the ability of other options to meet our required time line. A rights issue was considered. However, given the size of the capital raise, the execution time lines and the heightened market risk, a fully underwritten placement provided certainty and was deemed to be the best option. As we have previously announced, we are planning a $5 million share purchase plan to allow retail and smaller investors to participate in this capital raise. The share purchase plan will be open to shareholders who held shares on the record date of the 29th of March '23. I can confirm that the completion of the capital raise will conclude our strategic capital initiative. We firmly believe by raising these funds, we are fortifying our financial foundations, creating a solid platform of sustained growth and increase shareholder value. While we cannot predict the future, I can assure you we're fully committed to our current strategic plan. We are not considering a sale of the company, nor planning to raise additional equity capital in the foreseeable future. Before we proceed with the formal resolutions, Clayton Howes, our Managing Director and CEO, will speak about the company's latest quarterly performance, which was released to the ASX on the 3rd of May 2023, as well as outline some more detail on the benefits of paying down the corporate debt facility. Clay, over to you.

Hi, everyone. Thanks, Peter. I'm pleased to share a brief overview of our third quarter results, which reflect MoneyMe's continued momentum and increasing profitability, building on our strong returns in the first half of this year. During the third quarter, MoneyMe delivered $61 million in gross revenue, an impressive 75% increase from the same period last year. Our focus on margin protection resulted in a net interest margin of 13% for the quarter. It's an increase on last year and contributing to our robust profit growth. March was another profitable month, adding to the profits already announced for January and February. And we are on track for a healthy profit result for this full year. We took measured steps to slow growth in the near term, in line with our focus on preserving our cash balances, maintaining our book balance above $1 billion, and managing credit risk whilst macroeconomic uncertainty still exists. This approach has enabled us to continue to enhance our credit risk management and improve the credit profile of our loan book. Net losses reduced as anticipated, with the significantly higher credit quality of our book starting to now take effect. Our unrestricted cash balance remained broadly in line with the previous quarter, whilst our undrawn funding capacity provides sufficient headroom for sustainable growth into the new financial year. With that, I'll briefly outline our key focus areas for the remainder of FY '23. Our half year and third quarter results indicate a solid trajectory for key metrics, including profit and revenue, and I'm pleased to report that we are ahead of our target of over $220 million in gross revenue for the full year '23, with $182 million already delivered at the end of this third quarter. In the coming months, we will maintain our focus on strengthening our balance sheet through profit generation and a controlled approach to growth in this near term. Preparing our funding structure for sustainable growth in FY '24 is another key area of our focus. The equity raise and the planned paydown of our corporate debt facility will contribute to cost savings and increased profitability. Additionally, we're working on an initiative to enhance our capital efficiency, including the recently launched term securitization deal for our SocietyOne loan book. During the third quarter, we successfully launched our app-based credit score product, which has already attracted over 60,000 customers and expanded our Autoscan trial to additional car dealerships. Innovation continues to be in a strategic focus for this company and the next few months will see us launch new product features that are in incubation. We also continue to focus on leading the industry on environmental, social and governance, recognizing the sustainable business practices that lead to better business outcomes. We have recently achieved significant milestones in our ESG program, including launching our Reflect Reconciliation Action Plan, completing our inaugural gender pay gap analysis and achieving 100% renewable energy in our Sydney HQ. Before I proceed to outline the specific benefits of our corporate debt paydown, I'd like to address an issue that has been a source of disappointment for many of our shareholders, and it's our share price. The market environment we know has undergone substantial changes over the past year, which has resulted in significant downward pressure on valuations of fintechs and nonbank consumer lenders, in particular. In addition to the adverse market environment, the concerns associated with the repayment of our short-term component of our corporate debt facility, it's been a significant contributor to the pressure on our share price. We understand this has caused frustration, and I want to assure you that we are actively working to enhance our shareholders' value. We expect the planned corporate debt pay down and closure of the strategic capital raise to relieve uncertainty impacting our share price. Our focus on strengthening the balance sheet, optimizing our funding structures, and driving profitability will contribute to a stronger foundation for our future growth. And we're confident that this will ultimately translate to increased shareholder value over time. Now covering the specific benefits of the partial repayment of our corporate debt facility, which is the primary purpose of this capital raising. Approximately $32 million of the placement proceeds will be used to pay down our corporate debt facility. The paydown will deliver improved terms on the facility, reducing the interest rate by 200 basis points per annum and delivering annualized cost savings of $6 million to $8 million. The significant reduction in MoneyMe's interest costs will support our profitability in FY '24 and beyond. It will create significantly more headroom against financial covenants and allow for our loan book to grow. There is also an incentive to reduce interest rate cost by up to a further 300 basis points tied to performance against our financial covenants. In conclusion, the paydown will deleverage the business and stabilize our capital structure for future growth, support our increasing profitability and reduce associated risks, including our exposure to interest rate volatility. Before moving on to the next part of the meeting, I want to express my gratitude for your continued support as shareholders. We are encouraged by the progress we have made and remain steadfast in our commitment to delivering long-term value for you. As we move forward, we will stay agile, adapt to market dynamics, and seize opportunities that align with our strategic objectives. I'll hand you back to Peter now for the formal part of the meeting. Thank you.

Thanks, Clay. We'll now move on 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 raise questions at this meeting from the floor of the meeting here in Sydney via the online platform or via 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 visitor attendance cards are not permitted to speak at the meeting. If you wish to raise a question from the floor, could you please hold up your yellow or blue card? And when I call on you to ask a question, could you please identify yourself, and if you're a proxy or representative of another shareholder, the name of that shareholder, and then please ask your question. If you are registered on the online platform as a shareholder or a proxy holder, you can submit questions by selecting the Ask A Question tab at the bottom of your screen. Shareholders wishing to ask questions via 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 via the online platform 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 and that will be dealt with at the appropriate time. If you have a question already prepared, I would 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 moderator for the meeting. Jonathan will identify each person who asked a question, read out the question, and he'll then either respond to the question or pass to the most appropriate person to answer. Questions that were received online before this meeting will be addressed in the same way as questions received on the online platform during the meeting. To ask questions via telephone, you will need to dial into the meeting using the numbers displayed on the screen. Shareholders wishing to access the meeting will need to use the unique PIN provided to them by Link Market Services in accordance with the instructions sent out in the notice of the meeting. If you don't have a phone PIN and would like to ask a question via the phone, please contact Link on 1-800-990-363 to get your PIN. When you dial into the meeting, you'll be asked to mute your online sound and listen to the meeting by phone. [Operator Instructions]. For each item of business, we'll take questions from the floor first, then the telephone questions and then the questions raised via the online platform. I 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 that all shareholders have a reasonable opportunity to comment and ask questions. We also ask that shareholders do not ask more than 2 questions at a time. 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 questions that have already been answered. Otherwise, we'll endeavor to answer all questions that we can. As the Chair of the meeting, I have determined that the voting on each of the resolutions to be considered at this meeting be conducted by a poll. Shareholders were given the opportunity to exercise a direct vote before the start of the meeting by lodging the voting form that accompanied the notice of meeting. Shareholders were also given the opportunity to appoint a proxy to vote on their behalf at this meeting by lodging the voting form that accompanied the notice of meeting. As set out in the notice of the meeting, as Chair, I will vote all directed proxies in accordance with the directions provided by the shareholders and will vote all undirected proxies in favor of the resolutions. Shareholders and proxy holders who are attending the meeting in person today and have not exercised a direct vote before the 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 representative of Link Market Services, who are located at the registration desk just outside the door here. Shareholders and proxy holders holding yellow voting cards will be invited to cast their votes on all resolutions by completing their 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 vote during the meeting using the electronic voting card given to them on registration via 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 meeting online guide. This can be accessed from the download section at the bottom right-hand side of your screen. I note that shareholders attending by phone are not able to vote on phone today. Shareholders are asked to consider 2 resolutions set out in the notice of the meeting dated the 17th of April 2023. For each resolution, I'll introduce the resolution, and there will be an opportunity for shareholders to ask questions on the resolution in line with the process I've just described. Once there are no further questions on that resolution, I'll then call for shareholders to vote on the resolution, display slide showing the total direct and proxy votes received on the resolution prior to the meeting. As I previously explained, 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 close of the meeting. We now move to Resolution 1, which is to seek approval for the issue of 412,500,000 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 exceptions to ASX Listing Rule 7.1 contained in ASX Listing Rule 7.2 and exceeds the 15% limit in ASX Listing Rule 7.1. This 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 shares under the conditional placement on or about Monday, the 22nd of May. Further details of these shares that we issued under the conditional placement and the application of the Listing Rule 7.1 to the issue are set out in the notice of the meeting. I draw shareholders' attention to the fact, as was set out in the notice of the meeting, that Resolution 1 and Resolution 2 are inter-conditional, such that the conditional placement that Resolution 1 relates to will not proceed even if approved by shareholders, unless Resolution 2 relating to the issue of shares to a director of the company is also approved. I now move, for the purposes of ASX Listing Rule 7.1 and for all other purposes, shareholders approve the issue by the company, the 412,500,000 shares under the conditional placement on the terms and conditions set out and expanded from Memorandum accompanying the notice of the meeting. I'll now address any questions related to this resolution. Are there any questions from the floor today? We now move to telephone questions. Operator, are there any telephone questions for this resolution?

Chair, I confirm there are no questions on the phone.

Thank you, operator. I will now move to the online platform questions. Jon, do we have any questions through the online platform?

Yes, Peter, we have a number of questions through the online platform, including some questions which were lodged ahead of the meeting via the online facility. And I'll start with those questions.

The first question is from Cameron and Tania Mitchell. And the question is, is the company currently entertaining any approaches for MoneyMe to be taken over?

Thanks, Jon. Thank you for the question. No, the company is not currently entertaining any propositions for the company to be taken over. As is usual for an ASX-listed company, the company will respond to or engage to questions or opportunities you may see that we think might be of benefit to shareholders. But at this stage, there's no proposition and there's no likelihood that, that will happen.

The second question received before the meeting is as follows, it's relatively lengthy. How will the interests of ordinary shareholders, i.e., those not participating in the equity raising, be protected in the SPP? Will we be guaranteed our allocation? There has been a precipitous decline in the value of the shares over the past 6 months, and to say the price has risen since the equity raising misses the point. Ordinary shareholders need to be able to purchase the full allocation to recoup some, but certainly not all of the lost value. And that is from shareholder, David Compton.

Okay. As we said in the notice of the meeting, the share purchase plan is targeted at -- set to $5 million. And all shareholders that qualify to subscribe under that plan will have the opportunity to subscribe to up to $30,000 in shares. And we believe this was an important opportunity to provide to make sure that the smaller shareholders had an equal opportunity to participate at the same price and in the same conditions as their largest shareholders. So the conditions around that will be issued shortly. And that's what happened with the share purchase plan. In terms of the share price, as Clay touched on earlier, we're very disappointed with the current share price, and we continue to believe that it fails to recognize the value and the opportunity that has been created in the company over the past many years. It's not a surprise to anyone at the moment with the current market environment that shares and companies in our sector are under a great deal of pressure. We've gone through an almost unprecedented period where we've had an extremely rapid rise in inflation, which has driven an extremely rapid rise from our monetary authorities, not just in Australia, but right around the world in terms of increasing interest rates to try and drive down inflation. That's caused concerns about credit worthiness, particularly in the consumer and mortgage markets, and that then has come through in terms of investor appetite in terms of our companies in our sector in particular. So MoneyMe is not immune to that. And like others in the sector, both domestically and internationally, our share price has been pretty heavily impacted by it. We've also been impacted by the fact that we've had -- as we've disclosed previously, we needed to undertake capital management transaction in order to repay some short-term debt, which we used to finance the acquisition of SocietyOne. And we think that the questions around that sort of refinancing capability there have also weighed on the share price as well. So we believe that raising these shares should make it clear that we are now repaying that short-term exposure, and we'll set the company on a strong footing going forward, which we believe is the best outcome for all shareholders.

Thanks, Peter. There are a couple of questions which have been submitted this morning through the online platform. In fact, I think 1 of them has multiple parts, so it's probably 4 or 5 questions. These are all from Bernard Remond, shareholder. First question is, what is the year-to-date customer receivable impairment expense to compare with 2022 accounts of 91.018 and 2021 28.751. I might just park that question and read out the other questions. The second question is, are all directors participating in the SPP to the $30,000 extent? The third question is, please name the underwriters for the 2 placements, and at what cost? And the final question is, assuming everything is approved, when will the company again be needing to raise more funds?

Okay. So Jon, if you can just keep track to make sure that I do answer those questions as they came in. So the directors of the company, like other shareholders, will have the opportunity and capacity to invest in the share purchase program should they choose to do so. My personal perspective on it is that I would like to participate. But if there are other shareholders who -- if we were constrained at all, then I would stand back and allow the shareholders to take my allocation, because I already have a shareholding in the company. So yes, the directors can. I don't know what each of the individual directors' decisions will be. That will be up to them. Second question, again, Jon?

The next question was the underwriters for the 2 placements and at what cost?

So the underwriters are Morgans, who are represented with us here in the room today, and the costs around that are commercially sensitive and in confidence.