MoneyMe Limited (MME) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the MoneyMe FY '26 Results Conference Call. [Operator Instructions] I would now like to hand the conference call over to Mr. Clayton Howes, Founder, Managing Director and Chief Executive Officer. Please go ahead.

Good morning, everyone, and thank you for joining us. I'd like to begin by acknowledging the traditional custodians of the lands across Australia and pay my respects to elders past and present. Welcome to MoneyMe Financial Year '26 Results Presentation. I'm Clayton Howes, Founder, Managing Director and CEO; and joining me today is David Wright, our Chief Financial Officer. I'll begin by taking you through the year, the operational progress we've made and importantly, why we believe the business is entering a fundamentally different phase of its evolution. Dave will then cover the financial results before I return to discuss strategy, outlook and where this business is heading. Every company has defining years, years where you don't just get bigger, you prove something. For MoneyMe, financial year '26 was one of those years. We demonstrated that we can grow rapidly, improve portfolio quality and begin converting that scale into earnings at the same time. That's a very different stage of business to the one investors knew just a few years ago. Today, we're an AI-powered consumer finance platform, serving ambitious Australians who expect finance to be fast, simple and digital. During FY '26, our loan book exceeded $2 billion for the first time. We delivered record originations. Credit quality improved materially, funding became cheaper and the foundations we've been investing in for several years are now beginning to translate into operating leverage. Importantly, these weren't isolated achievements. They are all connected. Each improvement reinforces the next, creating a stronger business than the one we started with just over a year ago. For those newer to the story, let me briefly explain what makes MoneyMe very different. Since 2013, we focused on improving the customer experience around credit. We compete on 3 things: value, speed and experience. We provide highly competitive pricing. Customers can speak to someone in seconds rather than waiting on hold. Applications are digital, approvals are fast. Funds can settle within minutes rather than days. That combination is why customers increasingly choose MoneyMe over traditional lenders. It's also why we've been able to continue growing share despite a highly competitive market. This slide shows how far we've come from starting the business in 2013 to listing on the ASX to now originating almost $6 billion of lending for more than 0.5 million Australians. Financial year '26 was another milestone year. We passed $2 billion in the loan book, completing our eighth securitization. We became a Mastercard principal issuer and launched our first white label credit card partnership. While each achievement is significant on its own, what matters more is that they're still the same technology platform that we began with. We're not buying a separate business to create growth. We're extending a platform we've already built. That means every new product improves the future economics of this entire business. Financial year '26 wasn't delivered in easy conditions. Interest rates remained elevated. Inflation continued to pressure customers. Competition remained intense. Yet, businesses aren't defined by favorable markets. They are defined by how they perform through all cycles. There are 3 structural trends working in our favor. The first, nonbank lenders continue gaining market share as banks focus increasingly on capital efficiency and mortgage lending. The second, technology is creating genuine competitive separation. not because AI is fashionable, but because businesses using it effectively can make better credit decisions, automate more processes and serve customers at significantly lower cost. And the third, our funding position continues improving as credit quality strengthens. Better assets create better funding economics. Better funding economics allow us to price more competitively, which attracts better customers. That flywheel is becoming increasingly powerful. Let me now walk through what we achieved during FY '26. Four numbers tell most of the story. The loan book reached over $2 billion, $2.08 billion. Revenue grew to $249 million. Originations exceeded $1.2 billion and net credit losses reduced to just 2.4%. Individually, those are strong outcomes. But together, they're much more significant. In consumer lending, it's relatively easy to grow quickly. It's also possible to improve credit quality. Doing both at the same time is much harder, but that's exactly what we've demonstrated this year. The achievement I'm most proud of isn't simply how much we've grown, it's the quality of that growth because sustainable earnings aren't created through disciplined growth, not just growth at any cost, growth at smart, disciplined operating models like the one we've demonstrated. FY '26 represents an important earning milestone. Statutory losses continued improving. Normalized earnings improved substantially. And importantly, the second half delivered positive normalized NPAT. That represents an important inflection point. It validates the direction we've been taking over the past several years. Our operating cost to income increased during the year, but that was entirely expected. We deliberately accelerated investments into direct distribution, AI capability and our credit card platform. Those costs are recognized immediately. The earnings arrive later. More importantly, the trend through the second half already demonstrates operating leverage beginning to emerge. Costs largely stabilized, while revenue continued growing. Now that's exactly what we'd have expected to see. This slide explains perhaps the most important strategic decision we made. We deliberately accepted lower headline yields in exchange for higher credit quality customers. On the surface, that reduced net interest margin, but lower credit losses and cheaper funding more than compensated. Risk-adjusted margin improved significantly. That's the key measure we actually manage this business against. Importantly, new lending is already writing well above the portfolio average. As those newer vintages become a larger proportion of the book, we expect that improvement just to continue. Against each of our 5 strategic pillars, we've made meaningful progress. technology, funding, credit quality, products and trust. What excites me most isn't each pillar individually. It's how they reinforce one another. Technology improves credit decisioning. Better credit performance lowers funding costs. Lower funding costs improve pricing. Better pricing attracts better customers. That creates stronger economics, which funds the next round of our investment. And that's how enduring finance businesses compound over time. Let me now take you through our operational progress. Horizon, it remains at the core of everything we do. People often ask us about AI. For us, AI isn't a project. It isn't a department. It isn't something we talk about because it's fashionable. It's increasingly becoming the operating system of our business. Every improvement allows us to serve customers faster make better lending decisions, reduce operating costs, improve fraud detection or automate work that previously required manual human intervention. Ultimately, AI isn't about technology. It's about economics. It's one of the biggest reasons we believe operating leverage continues improving in our business. Technology only matters if customers actually experience the benefit. Our customer metrics continue demonstrating that, whether it's our Net Promoter Score, review ratings or answering most calls within 10 seconds. Say that again, answering most calls within 10 seconds. Those outcomes aren't marketing achievements, they're operational achievements. And increasingly, they become a competitive advantage that's difficult for traditional institutions to replicate. Turning now to products, vehicle finance continues performing exceptionally well. Autopay has now become a $1.2 billion business. But what excites me most isn't where it is today. It's where the next growth comes from, private sales, direct vehicle finance, new distribution channels. They're expanding the addressable market rather than simply shifting volume between channels. That's exactly the type of growth opportunity we really like. Personal loans were our fastest-growing product in FY '26. Growth came through a stronger customer proposition, higher loan limits, longer loan terms and increasing strength in our direct channel. Importantly, we achieved that while maintaining acquisition discipline and improving funding efficiency through further securitizations for this product. For me, this is where the next chapter of MoneyMe begins. Credit cards aren't simply another lending product. They fundamentally change our relationship with customers. Instead of interacting every few years when someone needs a loan, we can now become part of their everyday financial life that creates significantly more engagement, more data, better credit decisions, higher customer lifetime value and stronger long-term economic. The investment we've made this year establishes the platform. Financial year '27 is about scaling it. FY '28 is where we expect that investment to begin contributing materially to earnings. Now this slide is really about the future of MoneyMe. Increasingly, we're no longer thinking about individual products. We're thinking about customer relationships. Today, we operate multiple products across multiple channels through a single customer platform. Every interaction teaches us something, card spend, repayment behavior, vehicle ownership, borrowing needs. That allows us to provide increasingly relevant products with time. So rather than acquiring a customer repeatedly, we're building a relationship that lasts years. That's a much more valuable business. Brand. Now this is really interesting investment that we've made in this recent year. We believe building a stronger direct business requires building a stronger brand. We've grown largely through intermediaries in the past. Now increasingly, we're investing so customers choose MoneyMe directly. That's not about replacing brokers, it's about creating a second engine for growth, one that broadens our addressable market while improving lifetime economics. Finally, trust remains fundamental, whether that's our B Corp certification, supporting communities through world vision, protecting customer data or maintaining strong governance, these aren't separate initiatives. They're all part of building a business that customers, funding partners and shareholders can trust over this long term. I'll now hand over to Dave to take you through the financial results in more detail.

Thank you, Clay, and good morning, everyone. I'll now run through financial details. Starting with the income statement. Gross revenue increased 20% to $249 million, driven by a 34% loan book growth, partly offset by lower yields from the deliberate shift to higher-quality lending. Impairment expense fell 12% despite a materially larger book, led by stronger personal loan credit performance. Operating expenses increased to $66.7 million, largely driven by investment in direct channel marketing, credit cards and white label partnerships. That investment is recognized immediately while the earnings build over future periods. Expenses stabilized through the second half, while revenue grew around 12% on that prior half. That gap is operating leverage, and it's happening now. Statutory net loss after tax improved 40% to $40.1 million as stronger revenue growth and lower credit losses more than offset that continued investment. Normalized net loss after tax improved 74% to $4.1 million, with the second half positive at $0.5 million, showing the quality of underlying earnings is improving. Operating cash profit was $11 million, down from the $23.8 million or $13.7 million, excluding the one-off benefit in the prior year. That step down is the investment, not the underlying engine. Operating cash profit plays a significant part in funding our growth alongside efficient funding and our corporate facility. Now on to distribution and cost. Originations grew 34% to $1.23 billion. The broker and dealer network deepened and direct-to-consumer became a genuine second channel rather than a supplement to the first. Operating cost to loan book improved to 3.2%. That is the measure of how efficiently we run our platform, and it improved even while we spent $15.5 million more in OpEx. Cost to income rose to 26.8% because that growth investment is front-loaded ahead of the revenue it will generate and because yield fell in line with our higher credit quality strategy. Underlying operating leverage kept improving over the same period, which is what the 3.2% shows. The exit trend matters more than the full year ratio. Operating costs were flat through the second half, while revenue grew around 12%. That is the operating leverage that the platform and the AI investment were built to deliver, and we expect it to keep coming through in FY '27. Now on to the quality of our revenue base. Revenue of $249 million is more durable than it was because of what sits behind it. Secured assets are 59% of the book, 43% of borrowers on the book are homeowners. The average contractual term is 73 months and the average Equifax score of 802 sits within the very good category. Longer term, higher-quality lending means a larger proportion of our revenue is committed rather than needing to be rewritten each year. Our net interest margin reduced to 6.5%, which was the intended consequence of the mix and pricing trade. Risk-adjusted net interest margin, which is the measure we manage our business to improved to 2.4%. FY '26 originations were written above the 3.5% risk-adjusted margin. That is a number that determines where the margin goes from here, and it sits well ahead of the current portfolio average. On credit performance, net credit losses improved for a third consecutive year, down 1% to 2.4% on higher quality originations. This is also the lowest in MoneyMe's history. It was delivered alongside a 34% book growth and in a challenging macroeconomic environment that has not been easy for consumers. The improvement was led by personal loans, where write-offs fell in absolute terms on a book that grew 52%. Higher quality originations replaced older vintages and enhanced underwriting and collections did the rest. Reported arrears reduced to multiyear lows across both measures because arrears lead losses, that indicates a continuing improvement trend into FY '27. Expected credit loss coverage reduced to 3.5% of the book. That reflects genuinely stronger credit performance and the asset mix, and it was achieved despite more conservative macroeconomic inputs into the model. On to funding, total funding capacity expanded 44% to $3 billion across 12 structures. An increased proportion of cheaper asset-backed securitizations in the funding mix is driving the ongoing improvement in funding costs. Cost of funds fell to 6.6%, which is good for earnings in its own right, but the measure of our own improvement is the margin we pay above the benchmark, and that improved year-on-year. Cost of funds fell 0.5% compared with a 0.3% average reduction in the BBSW, meaning our funding spreads improved by 0.2%. During the year, we completed 3 asset-backed securitizations totaling over $1 billion. and executed our planned warehouse extensions on improved terms, and we established a new $300 million credit card warehouse on materially better pricing than the facility it replaced and is structured to scale with the white label card programs. That reflects stronger credit performance and improved funding terms as the program has matured. These term deals and new warehouse transactions are more than just access to capital. They demonstrate the confidence sophisticated institutional investors place in our business, the quality of our assets and the consistency of our execution, which is an advantage that compounds as we scale. On cash and liquidity, unrestricted cash increased to $20 million from $17 million, and the walk in the slide show how we got there. We generated $11 million of operating cash profit, demonstrating the underlying cash generation of the business. We also released $29 million of capital through more efficient term funding and improved warehouse terms. Importantly, we then put that capital back to work, investing a further $36 million into loan equity. So we continue to grow the portfolio while also increasing unrestricted cash. On liquidity, we have $0.9 billion of undrawn facilities, providing substantial capacity to support continued loan book growth without the need for equity. At the corporate level, we have $50 million of undrawn capacity at 30 June, reducing to $40 million following a $10 million drawdown in July, which alongside ongoing cash generation and capital expected to be released through upcoming term deals, provides further capacity to fund growth. Looking forward, we expect cash generation to strengthen as the book grows, funding costs continue to improve and the operating leverage builds. In summary, we have a track record of delivering on what we said we'd do, and FY '26 is no exception. The economics of this business are strengthening across every measure that matters, and we are meeting both our profit and strategic objectives. That consistency is what gives our investors' confidence in where the business is heading. I will now hand back to Clay to take you through the strategy and outlook.

Thanks, Dave. I'll finish by talking about where we're heading. The strategy itself hasn't changed. What has changed is the scale from which we're executing it. We're entering FY '27 with stronger credit, better funding a broader product set, more distribution and a much more capable technology platform. Our objective remains simple: to become the first place Australians think of whenever they need finance, whether that's a personal loan, a vehicle, a credit card or future products we haven't yet launched. This slide explains an important capital allocation decision. We could optimize FY '27 earnings or we can invest behind an opportunity we believe creates substantially greater long-term value. We've chosen the second path. Building credit card programs require upfront investment. Customer acquisition comes first, revenue follows. By FY '28, we expect those investments to begin contributing positively. Beyond that, cards become one of the highest returning parts of our business. We're building for where the business will be in several years, not simply where it is today. This chart really brings everything together. FY '27 proved the economics. FY -- sorry, FY '26 was our proof of our economics with our second half inflection point. FY '27 is about scaling those economics. We're guiding to an average portfolio of approximately $2.2 billion and normalized NPAT that is anyway from breakeven to a positive $7 million. Importantly, that guidance already includes continued investment in cards, AI and direct distribution. We're investing today while continuing to improve profitability. That gives us considerable confidence in where the model can go beyond FY '27. To conclude, FY '26 wasn't simply another year of growth. It was the year we proved the model. We demonstrated we can grow faster, improve credit quality, strengthen funding, expand products, build new distribution and begin converting the scale into earnings. The business entering FY '27 is larger, higher quality, more diversified and more scalable than at any point in our history. Now while we're proud of what we've achieved, we believe the opportunity ahead is significantly larger than what we've accomplished so far. Now thank you to our team, our customers, our funding partners and our shareholders for all your continued support. Dave and I would now be delighted to take your questions.

[Operator Instructions] Our first question today comes from Steven Sassine from Morgans.

Well done on the result as always. A couple for me. I might just start with the first 2 at the same time, just around costs. Obviously, cost to income, 26.8%. I think the slide said there was investment in tech, AI, brand and growth initiatives. Can I just maybe get you guys to elaborate on each of those buckets for us? And the second part of that is, are you starting to see some of the spend drive any efficiencies, be it around technology or headcount that will see some of these cost benefits flow through to the bottom line in the medium term?

Yes. Steve, thanks for the question. David and I will both answer it in part. Now one of the interesting aspects is we started the financial year '26 with more headcount than where we ended. okay? That's interesting. Now partly because we've spoken about the investment in AI and automation in our processes. Now whilst we grew the business by more than 34%, we reduced our headcount. We invested in brand. If you are in Melbourne or an AFL support of any kind or you're domiciled here in Sydney, and that includes Greater Sydney, it's very obvious to notice that we have established a brand with a presence that is challenger mindset and focused on representing our product and the challenger status of being priced, experience and efficiencies that banks just can't keep up with. And that message is permeating into results. When we receive our customer reviews, which is now sitting, I think, is about 4.7 average out of 5 Google Star ratings. They're telling us that thank you, MoneyMe as a common thread. Thank you, MoneyMe. My loan was approved in the matter of minutes. The experience has been -- the experience has been excellent and your pricing has been beating the banks. Now that I'm not making out. That is a consistent thread. So we think it's permeating into growth as well as resonating with the message we're trying to represent ourselves in market. Now the cost-to-income ratio, I'll talk let [indiscernible] cover the component parts about it. But that fundamentally is a key driver for us, Steve, which is our operating costs are getting cheaper. But what we're investing in is creating a larger, scalable and a more direct business.

Steve, so to the initial part of your question, so I think outside of sort of CPI increase across the cost base, roughly 50-50 is, I guess, between marketing and then the cost of the infrastructure development of the new credit card and white label program setting that up. So that sort of answered that question. And I think just on the cost to income, definitely, it's a big point that we're making is that we're investing upfront, the revenue comes later. But importantly, when we look at it from a whole unit economics perspective, the unit economics in the long run are better through direct. Not to say that broker and dealer is not important to us, it's significantly important is the basis we've grown from, and we'll keep growing from. But really, the economics, the spend on marketing is cheaper relative to, say, for example, the commissions and other fees that we potentially have to pay as part of our economics. So it's a really important point to make and really why we're focused on it.

I might just sort of ask a third one around costs, if that's all right, before I squeeze in one more and then hop back in queue. But if you look at sort of the last couple of years of the CPI, it looks like the lowest print was in FY '24 in recent times anyway at 22.5%. And the medium-term target is sitting at 18% to 21%. Can you maybe just talk to what gets us there? I mean, obviously, there's some pretty decent operating leverage coming through. But is there enough of a flywheel -- enough of a flywheel sitting within marketing, we can wind that down a little bit in a couple of years? Like what bridges that gap? And just maybe help us bridge that to 18% to 21%, if you can?

Yes. Yes, there's definitely a few things in that. As marketing builds and the direct channel builds, it becomes stickier. We've become more well known. We have -- we can actually spend less on that. So it's definitely a factor that we see impacting into the future. The operating leverage, as we said, is real. It's happening now. Across the AI development that we've done, I mean, we're not actively looking at our cost base to -- from a people perspective to reduce it. That's not what we're doing. We're trying to do -- we are doing things smarter and better. The processes -- the underwriting, collections, everything across the board, there's been a significant improvement over the last 6 to 12 months, and that is carrying on into the future. So we are very comfortable that our cost base doesn't necessarily need to improve beyond where we've kind of structured at the moment. The sales and marketing, yes, that will -- and in direct will have to continue, but it will probably -- relative to the book growth or the origination will start to come down in time.

Yes, and [indiscernible] what is the proof of it coming down it was the second half of the year. So our revenue growth outpaced our expense growth in the second half, and we reached that inflection point of positive normalized profit. So we saw the second half, our cost-to-income ratio, what that means was significantly lower than where we've ended the year as a whole. So yes, if you're looking for guidance, Steve, the second half is a clear trend where that cost-to-income ratio has improved materially already.

Super helpful. One final one, then I'll jump back in the queue. Maybe, David, you can pick this one up for me. We saw the way the Stage 2 and Stage 3 receivables dropped pretty meaningfully. Even the provisioning is what 3.5%. So like things look to be pretty good from a credit quality perspective. And maybe can you just talk to a couple of things. First, the macro overlay increasing, the reasoning behind that? And maybe part B, I guess, on a spot basis, are you seeing any sort of change in consumer behavior recently given sort of budgetary changes and what's happening with housing?

Okay. So yes, you're right. Stage 2 and 3 has significantly improved, and that is really the product of -- and we've talked about sort of some of the earlier back book vintages rolling off and being replaced with what we've been originating at a significantly better credit quality. And so it's just the math behind that, right? So we're seeing better quality. Our losses are coming down. It will naturally improve our Stage 2 and 3 and particularly 3 outcomes. So that's kind of the math behind it. I think the consumers at the moment, yes, it's -- sorry, around the macro overlay. Look, across the industry at the moment, we are seeing some challenges, either anecdotally or some in evidence. We've been coming -- our arrears have been coming off a sort of a reasonable high relative to our competitors. So we're still seeing that benefit come through. But I think the market generally has seen that. And look, it's prudent to increase the overlay. And I believe across the industry, it's the same. And so auditors, et cetera, are requiring it, we're requiring it. It's just prudent that we're doing it. So we have increased it quite significantly, although the outcome is still we've come down. And like we sort of pointed out in the presentation, we've had a really significant improvement in our personal loan loss rates and arrears. So that's really what's driven it.

And just to add to that, like we haven't been standing still. We've been using data intelligence and our artificial intelligence credit decisioning that navigates through what we can see are serviceable, lower losses, reducing fraud and being ahead of the curve. So it's not surprising for us to see that the portfolio is increasing in quality. Now in absence of the market challenges, right? So let's take market challenges to the side. Our value proposition has been compounding. Our cheaper capital has given us better pricing whilst protecting margins, better pricing that's giving us better quality customers. These are homeowners, 800-plus Equifax profile customers that are electing to choose MoneyMe and other alternative lenders to banks. And we're getting that share of the market that we may not have been accessible to when our pricing and our cost of capital was high. So this is all compounding, and I'll repeat it, better credit decisioning using artificial intelligence, cheaper pricing, giving us access to a borrower characteristic and credit quality that we wouldn't have otherwise been able to reach some time ago. And that, again, is compounding why these results are the way they are. Now we don't expect that just to stop now, by the way. Yes, we've got to take a macro overlay because we can all see that there's challenge -- it's a challenged market. But we're expecting, like we have already seen, this is an all-time low loss rate that this business has had. We don't expect to end there. We expect that to continue to improve even further.

[Operator Instructions] Our next question comes from Andrew Johnston from MST FS.

Well done on a good result. Those trends from -- are really starting to come through that we started to see emerge a little while ago. So good to see that. So a couple of questions. First up, on the direct-to-consumer product that I think has just being released. So this is the one for buying used cars, not from a dealer, so direct-to-consumer product. Can you just confirm that that's being released and whether you're getting any -- whether it's been released long enough to see how that's tracking?

Thanks, Andrew. Really good question. It's one of the larger parts of the car market that we've never had access to. And so this is for a customer who wants to buy a car that typically -- well, has choice to buy privately, suburban private sales, buying a car through that or walk into a dealership prepared with cash or a credit facility ready to buy the car. So it services that customer's objective as opposed to one finding a car, then talking to potentially a broker and working their way through what they can afford. It's giving them the confidence of finance prior to purchasing. So that's an interesting one. Now one of our favorite parts for us that we spoke about is we are a multiproduct platform. And our customers, existing customers, which we now have over 0.5 million Australians walking into dealership environments and then going through some intermediary to get access to finance. And it's luck of the draw if it's us or if it's somebody else that they get sold to. This is changing that. And the economics are obviously favorable. We've got a large customer base. We know their creditworthiness. We value their loyalty, and we're offering them the opportunity to establish their car finance and have the power to walk into a dealership or buy through private sales and be really efficient for us and their customer. So it's that evolution of multiproducts, removing friction points and being really, really technology-led to be able to -- for that customer to buy from the dealership, drive it away, it's minutes when they decide to buy their car. So it's a pretty exciting experience. We are only literally a couple of weeks in, and the proof has been happening. Our existing customers have existing customers with products, personal loans or credit cards, have on their own accord, seen that we've got this product on offer. This marketing message is still being rolled out, and they've chosen to elect the next car purchase using MoneyMe's direct, efficient, fast, real strong economics, no intermediary broker fees or any of that stuff that goes into it. And we get this customer with more than one product at MoneyMe, sticky, really confidence for us, proof of loyalty. That's what we love. It's building the ecosystem, really efficiently servicing the existing customers and creating that one platform ecosystem for them. And so yes, it's very difficult to explain the size of it because we're only a couple of weeks in, but it's already in action and already customers are interacting and have established their first or second car purchases through that offer.

That's interesting. I can't remember the number. I think it might have been 21% or 23% of existing customers or customers that have more than one MoneyMe product. Was that the number?

That's the number, 23%.

Right. Are you -- do you expect that to increase? And how important a part of that is in your thinking about the business?