MoneyMe Limited (MME) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to the 2023 Annual General Meeting of MONEYME. I'm Peter Coad, the Chair of MONEYME. I'd like to begin by acknowledging the traditional custodians of the land on which we meet today, the Awabakal and Worimi peoples, and the traditional custodians of the other lands from which people are joining the meeting virtually today and their connections to land, sea and community. I pay my respects to their elders, past and present, and extend that respect to all Aboriginal and Torres Strait Islander people joining the meeting today. It's 11 a.m. in Newcastle, which is the nominated time for the meeting. I've been advised by the company secretary that a quorum is present, and so I'm pleased to declare the meeting open. Joining me here today are Clayton Howes, our Managing Director and Chief Executive Officer; Rachel Gatehouse, Nonexecutive Director and Chair of the Audit and Risk Management Committee; Mark Stretton, our audit partner from our auditor, Deloitte; Neal Hawkins, our Chief Financial Officer; and Jonathan Swain, our Company Secretary. Joining by telephone are Susan Wynne, Nonexecutive Director and Chair of the Remuneration and Nomination Committee; Dave Taylor, Nonexecutive Director and incoming Chair of the Remuneration and Nomination Committee; and Scott Emery, Nonexecutive Director. The agenda for today's meeting is set out in the notice of meeting. The notice of meeting was made available to shareholders and lodged with the ASX on the 27th of October, and I propose to take it as read. This year's AGM has been convened as a physical meeting, and we are also providing an audio webcast of the meeting for shareholders who prefer to listen to the proceedings of the meeting remotely. Before we proceed to the formal part of the meeting, I'll give a short address, and then you'll hear from Clayton Howes, our Managing Director and CEO. I'll now make some brief comments about our journey and positioning, our results in the 2023 financial year and our ESG progress before handing over to Clayton, who will take you through the group's performance in more detail and our strategy and outlook for the year ahead. MONEYME is a founder-led digital lender and certified B Corporation. We deliver digital-first financial products to customers who, in an increasingly digital world, want fast, flexible and seamless access to finance. Our products include car loans, personal loans and credit cards, and our main point of difference is our proprietary technology platform. It allows us to quickly roll out new innovation, adapt to rapidly changing external environment and to deliver customer experiences that meet the ever-evolving needs of modern consumers. We also hold ourselves accountable to high sustainability and governance standards. And I'm proud to say that our long-standing focus on ESG has earned us a B Corp certification earlier this year. I'll cover that in more detail shortly. MONEYME has come a long way since its inception in 2013, and our continuous innovation has allowed us to stay ahead in a competitive landscape. Our forward-thinking approach is not only reflected in multiple awards we've accumulated along the way, but also the strong demand for our products by customers and partners. We've made tremendous progress in recent years, growing our loan book from over -- to over $1 billion and reaching over $3 billion in cumulative originations as a group. And we've demonstrated our ability to service high demand and scale the business through both organic and inorganic growth, including the acquisition of SocietyOne in March '22. In financial year '23, in recognition of an increasingly challenging macroeconomic environment and rapidly evolving investor expectations, we successfully transitioned from our high-growth strategy to profit delivery and demonstrated the capability of the business to quickly recalibrate its operations accordingly. MONEYME was extremely pleased to report a record statutory profit of $12 million in financial year '23, reflecting a compound annual growth rate of 148% from financial year '19, and a record cash profit of $24 million, reflecting a compound annual growth rate of 46% from full -- from financial year '19 and up 19% on the previous financial year. The result was achieved through a deliberate decision to slow growth in financial year '23 to focus on enhanced credit risk management, cash conservation and optimizing our operations for further cost efficiencies. The $12 million statutory NPAT reflects an additional management provision overlay of circa $6 million, reflecting prudent consideration of ongoing macroeconomic uncertainty. This increased our financial year '23 provisioning rate from 6.1% to 6.6%, with the aim to safeguard against any unexpected impacts that might not have already been reflected in the group's base and macroeconomic models. It's important to note that our successful shift from high growth to profit in financial year '23 was achieved against a backdrop of rising interest rates, heightened inflation, geopolitical uncertainties and reduced access to capital markets. This has arguably been the hardest year to navigate since MONEYME's inception with large external market shocks and macroeconomic uncertainties. The RBA lifted rates 10 times during financial year '23, with the cash rate increasing from 0.85% at the beginning of the financial year to 4.1% at year-end. The market sentiment for the nonbank sector was severely impacted, and at times, capital markets were effectively closed as policymakers' public concerns regarding fighting inflation and the future trajectory of interest rates negatively impacted market sentiment. In response to these headwinds, we adopted the strategy to update our customer pricing in line with the RBA rate rises. Around 70% of our loan book is variable rate and our fixed rate book is hedged, which has enabled us to successfully manage margins. After significant customer and loan book expansion in financial year '21 and '22, we made the shift to moderate growth and focus on cost optimization to bring forward the timing of statutory returns. A key focus was the post-acquisition integration of SocietyOne into the business, delivering annual cost synergy savings of greater than $20 million per annum. In conjunction with the scale benefits stemming from a significantly larger book, these cost synergies have amplified MONEYME's operating leverage, which not only facilitated strong results in financial year '23, but will also support continued profitability in financial year '24 and beyond. Our ongoing focus on credit quality and the further diversification of our customer base has continued to shift the composition of our loan book. The improved credit profile of our book has supported the business through the rising interest rate environment by offsetting external factors impacting credit risk and loss rates. We expect the higher credit quality book will continue to protect the business against interest rate pressures and the projected increase in unemployment rates. MONEYME further diversified its funding structures in financial year '23 to support strong returns despite higher interest rate environment and the challenging securitization and capital markets conditions. $21 million of new equity capital, net of transaction costs, was raised in the first half of '23, followed by $40 million in the second half of the year to support the group's funding and liquidity position. The equity raise completed in May was used to retire the corporate debt incurred from SocietyOne acquisition. As a result, the corporate debt facility principal was reduced to $50 million, alongside delivery of improved terms for the facility. In May '23, MONEYME completed a $150 million term securitization for SocietyOne personal loan assets, marking the third term transaction for the group. The 2 senior tranches of the deal were rated AAA by Moody's, demonstrating the credit quality of our loan book. At the end of the financial year, the group had 8 funding structures in place and $1.5 billion of total funding capacity. The closing funding mix includes around 69% of warehouse funding, around 26% of term funding and 5% corporate debt. We expect the elevated credit quality of our portfolio will continue to deliver opportunities for more favorable warehouse funding and securitization when the market risk appetite begins to improve. Financial year '23 saw us progress our environmental, social and governance agenda by strengthening our governance structures and identifying ESG-related risks and opportunities to enhance our positive impact. The commitment to ESG best practices is reflected in the recent achievement of B Corp certification in August this year. The B Corp framework allows us to measure and improve our impact in a way that is understandable, verifiable and recognizable. It is pleasing to give our stakeholders confidence in the positive outcomes of our ESG initiatives through independent assessment and an internationally recognized framework. As part of our year-end reporting, we published our most comprehensive sustainability report to date, which is aligned to leading sustainability disclosure standards. The report is available on MONEYME's investor website, and I strongly encourage all shareholders to review it. I'd like to take this opportunity to recognize and thank my fellow Board members for their commitment and the expertise they provided to the business in the past year. This week, we announced to the market that Susan Wynne, Nonexecutive Director and Chair of the Remuneration and Nomination Committee, has decided to retire as a director to focus on her other career commitments. I would like to take this opportunity to thank Susan for her contributions to the Board in stewardship of the company during her 4 years as a Director. To replace Susan, the Board has appointed Susan Hansen as a Nonexecutive Director effective from the 1st of December '23. Susan Hansen brings a wealth of experience in finance, risk assessment and governance. She has served as a nonexecutive director at listed and nonlisted companies in Australia and abroad for over 20 years and currently chairs the Audit Committee for several Boards, including Resimac. Susan is a chartered accountant and holds an MBA from the University of Cape Town. She's an accomplished author and speaker as well as a course facilitator for the Institute of Directors in New Zealand. On behalf of the Board of Directors, I would also like to thank Team MONEYME for their unwavering commitment to creating long-term value for shareholders during what has been a very challenging year for the industry. In closing, I extend our gratitude to our business and community partners, customers and shareholders for your trust and your ongoing support. With that, I'll now hand over to Clay for his presentation.

Thank you, Pete. Good morning. To our shareholders and staff, I would like to thank you for your support and strong conviction for what we are creating at MONEYME. I'm pleased to present our recent performance and our strategy and outlook. Financial year '23 was undoubtedly a challenging year for our industry and business. In a difficult operating environment with rising funding costs, reduced access to capital and elevated credit risk, we once again demonstrated our ability to adapt to rapidly changing circumstances. We achieved this while continuing to challenge the status quo and deliver new technology advancements. Financial year '23 was a standout year for innovation. We launched a fully automated approval and settlement process for secured vehicle loans, a new credit score product and further improvements to our digital customer experiences. I am very pleased with MONEYME's performance in financial year '23 driven by strong fundamentals. The strong profit result was driven by a record $239 million in gross revenue from a higher value loan book. MONEYME also accelerated its operating leverage through scale and technology benefits, reducing the office operating cost-to-income ratio from 40% to 22%. In addition to advancing MONEYME's business model, we successfully integrated SocietyOne. We replatformed SocietyOne originations onto our highly automated tech platform, reducing application approval times for customers from hours down to minutes. By leveraging our low-cost operating model and realizing scale benefits, including warehouse consolidation, we delivered significant cost synergies. We continued our focus on higher credit quality customers and secured assets to boost our resilience and reduce risk in a tougher climate, resulting in a further increase of our average Equifax credit score to 727, while secured assets made up 44% of our book by year-end. It is pleasing to see the benefits of this strategy take effect, with credit loss rates reducing in the first quarter of financial year '24. I'll now cover the highlights for the first quarter, reflecting great progress on our financial year '24 strategy. Revenue continued to be strong driven by a stable loan book. We maintained a healthy net interest rate margin of 11% for the quarter. As mentioned earlier, credit losses reduced in the first quarter in line with our focus on elevating the credit profile of our book. Net credit losses reduced to 4.9% -- less than 4.9%, down from 5.6% in the previous quarter. We maintained our strong book profile with an average Equifax credit score of 733 and 46% secured assets at the end of the first quarter. We also intensified efforts to refine our technology platform. Technology updates launched in the first quarter include increased automation, improved application journeys and enhanced data security. Lastly, MONEYME achieved B Corp certification this quarter, marking a significant milestone in our commitment to environmental, social and governance values. We also continue our commitment to the transparent and regular shareholder updates beyond our half year and full year reporting, including through evolving quarterly trading updates, and that's taking into account shareholder feedback. MONEYME currently has roughly 1% to 2% of the personal loan and credit card market and less than 1% of the vehicle finance market. There is an opportunity for MONEYME to gain market share from incumbents with their focus on mortgages and limitations caused by outdated processes and clunky legacy platforms that slow down the rollout of new innovation. Banks have also been exiting the vehicle finance sector, which poses a great opportunity to leverage the unrivaled speed and customer experience of our Autopay product. The outlook. MONEYME expects to deliver positive statutory and cash NPAT results for the first and full year financial year '24. Our strategy includes 5 key focus areas. The first one is to extend our technology advantage. MONEYME has created a superior, tech-driven value proposition that is hard to replicate. Our proprietary technology platform is our competitive edge, enabling us to be incredibly cost efficient, but also innovate, change and roll out new products at speed. We made significant tech advancements in financial year '23, and we're going to continue to invest in our technology in financial year '24. MONEYME is actively pursuing the integration of generative artificial intelligence in our products and operations. Generative AI offers substantial opportunities in terms of operational efficiency and enhanced customer experiences. With our advanced technology and in-house platform, we are well positioned to harness new AI capabilities and address the inherent risks associated with them. Increasing the ratio of secured asset finance and targeting higher credit quality borrowers will continue to be a strategic focus to help safeguard the loan book for tougher macro conditions. We will leverage our competitive edge with Autopay and expand our secured asset funding programs to increase the proportion of secured assets in our loan book. Continuing from the significant progress made in financial year '23, we will capitalize on our low-cost operating model and scale advantages to grow our operating leverage over time. This focus includes further refining our technology platform and operations, simplifying our business by removing noncore products, leveraging automation to deliver human capital cost efficiencies, insourcing previously outsourced operations processes and reducing distribution costs. We will continue to optimize the business for growth, including refining our warehouse programs for capital and cost efficiencies, evolving our channel distribution and sharpening the design of our core products. I believe we are uniquely positioned to seize the market opportunity quickly when conditions start to change. MONEYME takes customer protect data protection very seriously. Building on from our ISO 27001 certification, we will continue to further strengthen our information security systems and processes. And I would like to thank Team MONEYME for the relentless execution and dedication to our mission, our Board for their expert guidance, our customers for giving us the opportunity to service their needs and our shareholders for your support today and in the future. I look forward to answering any questions you may have, and I'll hand you back to Peter for the formal part of this meeting.

Thank you, 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, shareholders can raise questions at this meeting from the floor here in Newcastle. Shareholders are also able to lodge questions on the notice in advance of today's meeting via the Link Market Services' investment center -- investor center. For those shareholders and proxyholders who are present at the venue today, I will invite questions from the floor in the usual way. Only shareholders and proxyholders holding yellow voting cards or blue nonvoting cards will be entitled to speak and ask questions from the floor. Visitors holding red visitor cards are not entitled to speak at this meeting. If you wish to raise a question from the floor, could you please hold up your yellow card or blue card. And when I ask -- when I call on you to ask your question, our roving microphone will be brought to you. Could you please identify yourself, and if you're a proxy or representative of another shareholder, the name of that shareholder. You may then ask your question. For questions lodged via the investor center prior to the meeting, our company Secretary, Jonathan Swain, will identify each person who has asked a question and read out the question. For each item of business, we'll then take questions from the floor first then questions lodged via the investor center. I ask all shareholders asking questions from the floor to 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 will also not answer questions that are either the same or substantially similar to questions that have already been answered. Otherwise, we'll endeavor to answer as many questions as we can. As Chair of the Board, I have determined that the voting on each of the resolutions to be considered at this meeting will be conducted via 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 shareholders, and I will vote all undirected proxies in favor of all resolutions. Shareholders and proxyholders 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 representatives from Link Market Services, who are located just outside the room. Shareholders and proxyholders holding yellow voting cards will be invited to cast their votes on all resolutions by completing the voting cards and placing them into voting boxes. Representatives of Link Market Services will circulate the voting boxes after all resolutions have been discussed and before the poll closes. Shareholders who have joined our audio webcast this morning will not be able to vote through the webcast. The first formal item of business is to receive and consider the company's financial statements and reports for the financial year ended the 30th of June '23 as set out in the full -- financial year '23 annual report. This item of business does not require shareholders to vote on a resolution or to adopt the reports. Shareholders or their proxies may comment on or ask questions about the financial statements and reports or about the management of the company. Shareholders may also ask questions of the company's auditor, Deloitte, in relation to the conduct of the audit, the preparation and content of the audit report, the accounting policies adopted by the company and the independence of the auditor in carrying out the audit.

I'll now address any questions relating to this item of business or any general business questions. Are there any questions from the floor? As there are no questions from the floor, I will address any item -- any questions on this item of business that were lodged via the investor center prior to the meeting. Jon, are there any questions?

Thanks, Chair. Yes, there is one question from shareholder, Mr. [ Edward Youts ]. The question is I want to understand why the quarterly reporting has been reduced so much with no explanation of cash flow, unrestricted cash, et cetera. We actually got less information than in the 3Q '23 report. Your competitors provide much more information. It gives the feeling that you are covering something up. Please explain this. Thank you. That's the question.

Thank you, Jon, and thanks for the question. We appreciate -- we really do appreciate our shareholders contacting us and helping us understand what they would like to know more about. MONEYME's first quarter 2024 trading update was consistent with the first quarter update we provided in previous years. Our quarterly trading updates supplement our comprehensive audited half year and full year reporting, unless any further detail is warranted due to specific circumstances in that quarter. The depth of the quarterly reports tends to build up during the course of the year. In regard to our peers mentioned, they may have specific reporting requirements that need to be met that do not apply to MONEYME. That said, as Clayton mentioned earlier, we take all shareholder feedback on board, and we will look to evolve our quarterly reporting -- quarterly updates going forward. So once again, thank you for the question. I hope that resolves the question you've asked. If there are no further questions, from shareholders on this item, we'll move on. We will now move on...

Sorry, Peter, just before we move on, I should confirm that there are no further questions from shareholders.

Oh, I'm sorry, Jon.

In fact, that was the only question received through the investor center for the entire meeting. So there are no further questions from the investor center.

Okay. Thank you, Jon. That's great. Thanks for the update. Thank you. We'll now move on to consideration of the resolutions for which shareholder approval is sought at this meeting. Shareholders are asked to consider 4 resolutions set out in the notice of the meeting dated the 27th of October '23. For each proposed resolution, I will introduce the resolution. There will be an opportunity for shareholders present at the meeting to ask questions on the resolution. We'll also address any questions from shareholders that were lodged via the investor center prior to the meeting. Once there are no further questions, I'll call for shareholders to vote on the resolution and display a slide showing the total direct and proxy votes received on that resolution prior to the meeting. As I previously explained, voting on each resolution is 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 consider Resolution 1, which is the nonbinding and advisory vote on the company's remuneration report for the year ended 30th of June '23. The remuneration report is set out on Pages 24 to 35 of the annual report. I now move that the company's remuneration report for the financial year ended the 30th of June '23 be adopted. We'll now address any questions relating to this resolution. Are there any questions from the floor? As there are no questions from the floor and no further questions from the investor center prior to the meeting, I'll now put the resolution to the meeting. The direct and proxy votes received for the resolution prior to the meeting are shown on this slide. We'll now move on to consider Resolution 2. Resolution 2 is for the reelection of Scott Emery as a Director. Scott is required to retire at this meeting in accordance with the company's constitution and being eligible, offers himself for reelection. Information relevant to Scott's proposed reelection is set out in the explanatory notes that accompany the notice of meeting. And I note that each of the other directors supports his reelection. I'll now invite Scott to address the meeting.

Thank you, Peter. Ladies and gentlemen, I'm very pleased to be standing today for the reelection of MONEYME Board. I'm a Cofounder of MONEYME and have been a Director, Nonexecutive Director of the company from its inception. I've been a member of the Board's Remuneration and Nomination Committee since 2019. With over 30 years' experience building businesses, including establishing and running property development companies, commercial building companies and hotels, my long association with MONEYME means I have an excellent understanding of the business and how it's evolved over the past 10 years. My broad skills in property finance, raising equity bring diversity to the Board, which I believe makes a valuable contribution to the company in my role as a Director and Board committee member. I very much enjoy my role working with Clay, my fellow Board members and executive team, and I would welcome the opportunity to continue my position as a Director of the company. Thanks, Peter.

Thank you, Scott. I now have the pleasure in moving that Mr. Scott Emery, who retires in accordance with Rule 7.1 of the company's constitution and being eligible, offers himself for reelection, is reelected as a Director of the company. I'll now address any questions relating to this resolution. Are there any questions from the floor? As there are no questions from the floor and there are no questions from the investor center prior to the meeting, I'll now put the resolution to the meeting. The direct and proxy votes received for this resolution prior to the meeting are shown on the slide. We now move to Resolution 3, which is for the reelection of Rachel Gatehouse as a Director. Rachel was appointed as a director by the Board in December '22. Rachel is required to retire at this meeting in accordance with the company's constitution and being eligible, offers herself for reelection. Information relevant to Rachel's proposed reelection is set out in the explanatory notes that accompany the notice of the meeting. I'll note that each of the other directors supports Rachel's reelection. I now invite Rachel to address the meeting.

Thanks, Peter. I'm delighted to be given the opportunity to continue as a Director on the MONEYME Board. I joined the MONEYME Board just under 1 year ago and during this time, have chaired the Audit and Risk Committee. I have more than 30 years' experience in banking and financial services with expertise in finance, accounting and governance. Most recently, I held the role of CFO and COO at fintech disruptor Brighte and previously held CFO and senior leadership roles at HBOS A and ANZ Bank. I have expertise in governance and held the position of CFO and acting CEO at the Australian Institute of Company Directors. My previous directorships include Capital Finance Australia Limited, a high-growth finance company specializing in asset finance; and Landcare Australia. I believe my experience in financial services with a particular focus on finance and governance enables me to make a valuable contribution to the Board and the Audit Committee. It has been a privilege to work with Clay, the management team and my colleagues on the Board. I look forward to continuing this work in service of the company and its shareholders. Thanks, Peter.

Thanks, Rachel. I have pleasure in moving that Ms. Rachel Gatehouse, who retires in accordance with Rule 7.1 of the company's constitution, and being eligible, offers herself for reelection, is reelected as a Director of the company. We'll now address any questions relating to this resolution. Are there any questions from the floor? 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 are shown on this slide. We'll now move to our final resolution, Resolution 4, which is for the approval to issue 11,875,000 performance rights to Clayton Howes, the company's Managing Director and CEO, under the company's Employee Equity Incentive Plan. The details of Mr. Howes' current remuneration package as Managing Director and CEO is set out in the notice of meeting. The directors consider that the proposed issue of performance rights is an integral part of effectively rewarding and incentivizing executive management in a manner that aligns the interest of management with those of shareholders and is a key component of an appropriately structured remuneration package for Mr. Howes. Further details about this resolution are contained in the explanatory notes to the notice of meeting. I now move, for the purposes of ASX Listing Rule 10.14 and for all other purposes, shareholders approve the issue of 11,875,000 performance rights to Mr. Clayton Howes under the MONEYME Employee Equity Incentive Plan and otherwise on the terms set out in the explanatory notes, which form part of the notice of meeting. We'll now address any questions relating to this resolution. Are there any questions from the floor? 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 are shown on this slide. That ends the formal part of our 2023 Annual General Meeting, and I now declare the meeting closed. Would all shareholders and proxyholders who are present here at the venue and wish to vote on the resolutions proposed today please complete your yellow voting cards and place them in the voting boxes being circulated by representatives of Link Market Services? The results of the meeting will be announced on the ASX company web announcements platform and will be available on the company's website as soon as possible after the close of the meeting. Thank you for participating in our Annual General Meeting today. We look forward to your continued support in the coming year. Thank you.