MoneyMe Limited (MME) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the MoneyMe 1H '26 Results Conference Call. [Operator Instructions] I would now like to turn the conference over to Mr. Clayton Howes, Managing Director and Chief Executive Officer. Please proceed, sir.

Good morning, and thank you for joining us. I would like to begin by acknowledging the traditional custodians of the lands across Australia and their connection to land, sea and community. We pay our respects to the elders, past and present and extend that respect to all Aboriginal and Torres Strait Islander peoples. Welcome to the presentation of MoneyMe Limited's interim results for the first half of financial year '26, covering the 6 months ended 31 December 2025. My name is Clayton Howes. I'm the Managing Director and Chief Executive Officer, and I'm joined today by David Wright, our Chief Financial Officer. We're pleased to be presenting to you and look forward to addressing any questions you may have at the end of the session. Before I get into the numbers, let me briefly remind you of who we are. Since 2013, MoneyMe has been reshaping the way Australians access and experience credit. We service the customer segment we call Generation Now. These are digitally native Australians who value speed, simplicity and transparency and who are increasingly frustrated by the complexity and slow decision-making that still exists among the traditional banks. We're also proud to be a Certified B Corporation, which reflects our commitment to operating with strong governance, accountability and high standards of social and environmental performance. We beat the banks on rates, service and speed. Our rates are competitive across personal and auto lending. Our customers can move quickly online and through our app, and when they need support, they get it. And we move fast, providing near real-time credit decisioning with funds often settled within minutes rather than days. That combination of value, service and speed is what underpins our continued customer growth and strong satisfaction metrics. Our journey from a start-up to a scaled listed nonbank lender has seen us expand from a single product personal loan provider to a multiproduct platform, spanning secured vehicle finance, personal loans, credit cards and financial management tools. Along the way, we've launched Autopay, Integrated SocietyOne, achieved Mastercard principal issuer status, executed multiple ABS transactions and built a diversified funding platform. We've now surpassed over 0.5 million customers. Our loan book stands at $1.75 billion. We have generated over $5.2 billion in cumulative originations. Just briefly on the environment because there are parts that are increasingly playing to our strengths. We're operating in a period of rate volatility. With a predominantly variable rate portfolio, we can reprice dynamically and protect margins. At the same time, funding markets remain supportive of our asset classes, particularly with strong offshore investors. We're also seeing a clear shift in the banks, more focused on capital efficiency and regulation, which is creating real opportunity in personal lending and auto. And importantly, this is structural, not cyclical. The third piece is technology. Our proprietary platform and increasing use of AI are enabling near real-time decisioning, more consistent customer outcomes and the ability to scale without adding complexity. It's also allowing us to move faster on product innovation, including our soon-to-launch new credit card. So when you bring that together, the macro, the bank dynamics and our technology, it's a supportive backdrop for our growth. Let me take you through the key results for the first half. This has been a period of strong growth, improved credit performance and continued progress toward profitability. The strategy we have been executing over recent years has focused on higher credit quality, a greater mix of secured lending, a technology-led operating model and the funding platform built for scale. This strategy is now translating clearly into results. Our loan book reached $1.75 billion. That's up 26% compared to the prior period. Gross revenue grew 17% to $117 million, reflecting the larger and higher-quality portfolio. This growth was driven by strong originations of $536 million in the half, an increase of 18%. Net credit losses decreased to 2.9%. That's from 3.7% in the prior period. While we remain in a loss position with normalized NPAT of $4.6 million, these results improved materially year-on-year. We have been deliberate in prioritizing investment in growth and infrastructure. That phase is already translating into improved financial outcomes. Operating cash profit was a strong highlight at $9.9 million for the half, which is nearly double the underlying operating cash profit of $5.3 million without the one-off in the prior comparable period. This shows the business is in a strong cash generation position. Our operating cost-to-income ratio was 28%. While we've continued investing in marketing and new product capabilities, we're seeing the operating leverage emerge as the loan book scales ahead of the cost base. Secured assets made up 61% of the loan book, reinforcing our strategy of shifting toward more resilient, lower loss lending. Revenue yield was 14.9%. This reflects our deliberate strategy to prioritize higher credit quality customers and secured lending. Cost of funds improved to 6.6%, driven by continued optimization of funding structures and execution of our securitization program. Net interest margin was 6.8%, and our risk-adjusted net interest margin improved to 2.1%, reflecting the compounding benefit of stronger credit performance and declining net losses. The drivers are clear with higher revenue, improved funding efficiency, credit losses dropping and operating leverage taking effect, our focus is unchanged, and we're returning to profitability with scale. Aligned to our high-growth period, we recorded a statutory net loss after tax of $21.9 million, which is a 44% improvement on the prior period. This shift was driven by the strong loan book performance I've mentioned and the nonrecurrence of a $14.3 million one-off adjustment in the financial year '25. Our normalized net profit is progressing toward profitability. We've made great progress across our 5 strategic pillars. On technology, we embedded AI agents across credit, servicing and collections. We integrated Episode Six into arising to support real-time card processing and fraud controls. Enabled by tech, operating cost to loan book is trending toward our medium-term target. On credit quality, secured assets remain at 61% and our average Equifax score increased to 799 and losses once again reduced. On funding, capacity increased to $2.9 billion. We executed a $455 million Autopay ABS and established a $300 million credit card warehouse. Cost of funds reduced to 6.6% and continue to trend lower. On product, Autopay expanded into private sales. Our new credit card offering remains on track for March '26 and the Luxury Escapes credit card partnership we announced as part of our expanded credit card strategy. And we're achieving our desired product mix. On ESG, ISO 27001 was achieved. We continue to achieve a strong Promoter Score with our customers and climate reporting readiness has progressed. I'll now walk through the operating highlights for the half in just more detail. Technology remains our core competitive advantage. During the half, we continue to invest in our proprietary Horizon platform and our artificial intelligence capabilities. It's improving speed, accuracy and consistency across the entire customer life cycle. We deployed artificial intelligence to enhance operating efficiency and decision-making. Our AI solutions are transforming customer engagement with automated communications delivering up to 30% higher customer satisfaction scores and reduced response times. Our operating cost as a proportion of the loan book stands at 3.8% and is moving toward our target range of 2 -- 2.5% and 3.5%, driven by these technology investments. During the half, we continued to strengthen our customer value proposition by sharpening our brand positioning, expanding our direct distribution capability and continuing to improve the end-to-end customer experience. As the business scales, brand becomes increasingly important. In addition to the performance marketing, we've increased investment in above-the-line advertising to build broader awareness and product consideration across the mass market. This is a long-term strategy. Stronger brand recognition improves conversion in our direct channels, supports more consistent customer acquisition and ultimately lowers acquisition costs just with time. Importantly, it also positions MoneyMe to compete more effectively as we expand into the credit cards and deepen customer relationships across multiple products, supporting sustainable growth over this medium term. As we've scaled, customer satisfaction has remained strong with a 4.7 out of 5 average rating across more than 4,700 reviews. We're building trust with our customers, and the feedback is consistent, competitive rates, fast approvals and a simple borrowing experience. Speed remains a competitive advantage, and our products are designed to save our customers and partners the most valuable resource, time. The ease and speed of using MoneyMe is helping to drive loyalty among our customers and our channel partners. We offer an intuitive digital application process, near real-time approvals and settlement capabilities within minutes, seven days a week. We offer customers fast support across calls, live chat and e-mail. Account management is simple through the use of our MoneyMe app. When you compare us to the banks, we are industry-leading in customer experiences, and this is primarily driven by our technology. Just turning to our products. Autopay, our secured vehicle finance product continues to be a standout performer. The Autopay loan book reached $1 billion, up from $912 million at financial year-end '25 and now represents 59% of our total portfolio. This has been achieved in less than five years. The average Equifax credit score for Autopay borrowers is 838, reflecting the high quality of this book. We're increasing scale with more than 5,000 dealers and brokers on board. A major milestone during the half was the expansion of Autopay into private car sales market. Early adoption has been strong. Feedback on the new technology and user experience has been very positive. We will soon expand our Autopay to consumers directly, empowering them to shop at dealerships and private sales with preapproved finance. Common use cases of our personal loans include home renovations, travel and debt consolidation. The personal loan book grew to $632 million from $522 million at financial year-end '25 and now represents 36% of the total portfolio. The average credit score for personal loan borrowers increased to 760. That's up from 750 and a large proportion of our customers are homeowners. We now have approximately 4,000 personal loan brokers onboarded and expanding, up from around 3,200. We also increased the maximum personal loan amounts to $50,000 from $50,000 to $70,000 to meet demand from higher-quality borrowers. Credit cards are MoneyMe's next growth lever. The current credit card book stands at $91 million. In recent years, we deliberately pivoted to a target market with stronger credit profiles, which reduced the existing book but positions us well for what comes next. We established a new $300 million credit card warehouse funding facility with significantly improved terms. We also entered a strategic partnership with Luxury Escapes, under which MoneyMe will be the exclusive issuer of co-branded credit cards to its significant Australian customer base. This is our first white label credit card partnership, and there are more in the pipeline. Pilot testing of our new credit card product, which I mentioned, is well progressed and on track to the launch in March '26. This represents a significant growth and yield opportunity for our business. Environmental, social and governance principles remain embedded -- in the way we operate. As a Certified B Corporation, we continue to meet high standards of social and environmental performance. Our Certified B impact assessment score is 91.2, well above the 80-point threshold required for certification and significantly above the median score of 50.9 for ordinary businesses. During the half, we made meaningful progress across several areas. On social impact, we sponsored 140 children via our World Vision partnership. And more than 140,000 customers have now used our free credit score tool. On governance and data protection, we achieved the ISO certification for information security management and achieved PCI compliance. We enhanced customer data protection through added security layers and advanced threat detection. On the environmental front, our Scope 1 and Scope 2 greenhouse gas emissions remained low. We continue to manage financial emissions intensity across the Autopay portfolio in line with targets, and we are progressing our preparation to meet the reporting standards for climate-related financial disclosures. I'd like to hand over to Dave now, who will take you through the financial highlights in more detail.

Thanks, Clay. Jumping to the first slide. Total originations for the half year reached $536 million, representing an 18% increase on the prior corresponding period, while the closing loan book expanded to 26% to $1.75 billion. Both of these positive results were driven primarily by the expansion of the broker and dealer network as well as significantly higher direct-to-consumer originations. Direct-to-consumer originations increased materially, supported by targeted investment in brand awareness spanning out-of-home media, in-stadium advertising and digital channels. This initiative is strategic priority as direct originations offer enhanced economic benefits and enable access to a demographic that prefers engaging directly. Operating costs as a percentage of the loan book is at 3.8% and although tracking up on the prior half due to an increase in noncash long-term incentive expense and front-loading of targeted materials marketing spend are moving towards our target of 2.5% to 3.5%. The cost-to-income ratio of 28% reflects the front-loaded investment just mentioned, and we expect this to trend down as the loan book continues to scale ahead of cost base. Moving to the next slide. The key takeaway here is that we are building a higher quality, longer duration loan book that is generating sustainable committed revenue and increasingly attractive risk-adjusted returns. Gross revenue grew 17% to $117 million. Revenue yield came in at 14.9% of average loan book, which is on target with our 14% to 15% medium-term range. The decline from 16.2% in the prior corresponding period reflects the deliberate portfolio mix shift towards secured lending, which carries lower yields but better credit performance and funding economics. The net interest margin was 6.8%, down from -- 7.8% in the prior corresponding period, and that decline is largely a function of mix shift towards lower-yielding, higher-quality secured assets. But the really important metric here is the risk-adjusted net interest margin, which factors in credit losses. Our NIM strengthened to 2.1% compared to 1.9% in the prior corresponding period and 1.5% in the second half of '25. This reflects the combined benefit of improving credit performance and cost of funds. With front book originations now generating our NIM of -- above 3.5%, we see a clear pathway to continued margin expansion as the portfolio matures. On to the next slide. The key highlight here is the sustained downward trend in credit losses, which speaks to the quality of the book we are building. Net credit losses reduced to 2.9% from 3.7% in the first half and 3.4% in the second half of financial year '25. This is a direct result of the deliberate shift towards secured high-quality originations that we have been executing over the last couple of years. The benefits are increasingly visible in both the loss rate and the arrears data. 30-day plus arrears declined to 2.3%, down from 2.7% in FY '25 and 90-day plus arrears fell to 1%, down from 1.1% in FY '25. These are both continuing a sustained downward trend over recent years. Our in-house collections capability continued to strengthen. Enhancements to internal processes are delivering measurable results, reducing our reliance on external agencies and improving recovery rates. The expected credit loss provision reduced to 3.8% of the loan book, down from 4.3% in the first half and 4.1% in the second half of financial year '25. This reflects genuine improvement in underlying asset quality. And importantly, we continue to maintain a conservative overlay. Now to funding. Funding execution was a standout during the half. We expanded our total funding capacity to $2.9 billion, up 33% through 11 funding structures supported by major Australian and global banks, investment funds and mezzanine financiers. Key transactions included the $455 million auto loan asset-backed securitization, the establishment of the $300 million credit card warehouse facility and an agreed 75 bps rate reduction on our corporate facility with our partners. Our cost of funds fell to 6.6% from 7.4% in the first half and 7.1% in the second half of FY '25, reflecting improved credit quality, improved warehouse terms and asset-backed securitizations. Further, we have $1.1 billion in undrawn facilities, providing substantial headroom. Our funding mix is now 56% asset-backed securitizations, 40% warehouse facilities and 4% corporate facility. The diversification and depth of our funding platform is a competitive strength that positions us well for continued growth. Moving to the next slide. This slide highlights an important point. The platform is generating sustainable cash and is structurally self-funding. Available cash nearly doubled to $33 million in December, driving a strong trust -- driven by strong trust distributions and improving funding efficiency, which together delivered $9.9 million of operating cash profit for the half. We also released $21 million of cash from term securitizations and warehouse optimization, supporting a solid closing liquidity position. Looking ahead, liquidity is expected to continue to strengthen as the loan book scales, funding costs reduce and operating leverage expands, underpinned by $50 million of undrawn corporate capacity and $1.1 billion of committed warehouse headroom to support growth. I would now like to hand over to Clay again, who will take you through the strategy and outlook for the rest of FY '26 and beyond.

Thank you, Dave. Our strategy remains centered on the 5 key pillars you can see on the slide. When you're looking ahead, the second half of financial year '26, we expect continued momentum. Key growth drivers include further loan book growth, supported by expanding distribution network, the launch of our new credit card product and the Luxury Escapes white label partnership, continued strong credit performance as the benefit of higher credit quality originations compound within the book, improving funding economics as the asset-backed securitization program matures and continued product execution, including the expansion of Autopay into private car sales and growing our direct-to-consumer channels. Against our medium-term targets, we are tracking well. Secured assets at 61% are within range of our optimal mix. Our average loan book of approximately $1.6 billion is on track towards the $2 billion to $2.5 billion loan book size and profit-making range. Revenue yield at 14.9% is on target. Cost of funds at 6.6% is within the target range. Our risk-adjusted net interest margin of 2.1% is progressing towards the 3% to 3.5% target as the loan book scales and credit losses continue to decline. And operating cost at 3.8% of the average loan book is moving towards the 2.5% to 3.5% target, driven by operating leverage and further automation. Stronger recent performance positions the group at the top end of its normalized net profit after tax trajectory range and on track to achieve scale and profit in the short term. The drivers are clear: expanding revenue, risk-adjusted net interest margin, continued loan book growth, operating leverage and where technology efficiencies are now reducing costs relative to revenue growth. Looking at our first half normalized net profit after tax loss of $4.6 million compared to the full year financial year '25, loss of $16 million. We're progressing toward profitability. To summarize, the first half of financial year '26 represents another important milestone in MoneyMe's evolution. We delivered strong loan book growth of 26%, revenue growth of 17% and materially improved credit performance. Our statutory loss improved by 44%. Our normalized loss improved by 20% and our underlying operating cash profit nearly doubled. Our funding platform expanded significantly. Our technology continued to advance, and we made meaningful progress on our environmental, social and governance commitments. MoneyMe is emerging as a larger, stronger and more resilient challenger. We are scaling the business and the quality of the business is improving as we do it. The foundations are in place. The trajectory is clear, and we are confident in our path ahead. I'd like to thank our team for their focus and execution and our customers, channel partners and shareholders for joining this call and your continued support. We'll now open the lines where Dave and I will be happy to take your questions.

[Operator Instructions] And today's first question comes from Max Andrews with United Capital Partners.

Congrats Clay and Dave, on the strong result. Just on the -- ask a question on the cost base. It's taken a little -- like a little step up there. Could you sort of like unpack how much of this is sort of related to investment in the new products such as credit cards and the Autopay direct product, which isn't really -- like which you'll probably start to see benefits in the second half?

Yes. Thanks, Max. It's a really good question. We deliberately spent more on marketing spend, particularly to support our direct-to-consumer side of the business. And you're right that the investment in that will yield some more dividends as we go on. But we've definitely seen a significant uplift in our direct-to-consumer business and originations, and that's really helped above the line. And so pleasingly, when we look at things overall, above the line has improved significantly over what we thought previously expected, obviously, alongside with the increase in the spend, but the bottom line overall is actually better than where we expected. So it is yielding dividends already. And if we think about the comparison, yes, more marketing spend, but we're also not spending that on broker costs, et cetera. So it's sort of either above the line or below the line, but the overall net benefit is definitely there. And we're seeing that obviously compound into the future as well.

Excellent. And just one more, just on how you're sort of seeing credit demand sort of since January to now just given the sort of macro movements we've seen?

It's an absolutely interesting background. The macro climate is really interesting for us. And when you've got a technology edge, not only can we move with interest rate volatility that's happening, but our competitive edge is about speed. And we're not seeing the market play catch-up. The banks are focused on capital efficiency. We can see their mortgage focuses and regulation. So when we've seen this first half momentum, it's not -- it's not dissipating into the second half. Instead, it's continuing and it's continuing with stronger input. Now we haven't kept still. We've launched a few products. We've got a few more in the making. And we've got, like Dave called out, a strong media presence that's resonating, and it's building strong growth channels that we -- without a doubt, are excited to represent in our third quarter results. So the answer is the momentum is not slowing down for us.

There are no further questions at this time, and that does conclude our conference for today. Thank you for participating, and you may now disconnect your lines.