PensionBee Group plc (PBEE) Earnings Call Transcript & Summary

Good afternoon, and welcome to the PensionBee Group plc Q3 Results Presentation. [Operator Instructions] Before we begin, we'd like to submit the following poll. I'd now like to hand you over to the team of PensionBee plc. Good afternoon.

Good afternoon, and welcome to PensionBee's Q3 2026 Results Announcement covering trading for the period ending 30 September 2026. I'm Romi Savova, the CEO of PensionBee Group. For those of you who are new to the PensionBee story, we are creating a global leader in the consumer retirement market. We exist to help our customers prepare for and enjoy a happy retirement. We enable them to combine their old retirement accounts into a new online plan. We enable them to make contributions to invest in line with their objectives with money managed by the world's largest asset managers and ultimately, to withdraw and spend their retirement savings. Our aspiration is to build a lifetime relationship with our customers, generating predictable and scalable revenue for our company and for our investors. Over the third quarter of 2026, we continued to record strong year-on-year growth in assets under administration, revenue and profitability as we executed on our long-term strategy. Turning now to our individual country segments. In the United Kingdom, we closed the quarter with assets under administration of GBP 9 billion, representing 29% year-on-year growth and annual run rate revenue approaching GBP 60 million, representing 26% year-on-year growth. Over the third quarter, we onboarded approximately 10,000 net new invested customers through our effective advertising approach, bringing the total for the year-to-date to 32,000. New customer growth reflected a healthy balance of brands and organic activity, paid channels and partnerships, including our Born to retire campaign and our Channel 4 weather sponsorship. Over the quarter, we continued to grow the average account size with the average customer now holding GBP 26,700 with PensionBee, above our guided range of GBP 20,000 to GBP 25,000. Alongside customer and asset growth, we continue to invest in productivity. BeeBot is now resolving over 60% of its live chat volume, up from 50% at the end of the second quarter, and we launched our refreshed app on iOS. Overall, we generated a productivity improvement of 16% year-on-year with each staff member supporting close to 18,000 invested customers. The U.K. business was profitable for the quarter and delivered a 14% adjusted EBITDA margin on a last 12-month basis. Turning to the United States. Over the third quarter of 2026, we have been broadening and deepening the foundations for long-term growth. In line with our State Street partnership, we continue to build brand awareness and drive customer acquisition in the large U.S. retirement savings market. We expanded our out-of-home advertising campaign from New York and Chicago to 7 U.S. markets with our GBP 1.1 million U.S. marketing investment substantially reimbursed by State Street. We closed the quarter with over 500 U.S. invested customers and assets under administration of $6 million with early customer cohorts contributing at a rate of 21%, in line with the U.K. Over the quarter, we continued to advance our business offering, which we offer to employers usually through adviser intermediaries and third-party administrators. It is competitively priced with a high-quality investment portfolio and personalized service for participants. We are building our distribution across this ecosystem. Our recordkeeper integration with T. Rowe Price went live in August, and we continue to advance our intermediary relationships. Last quarter, we confirmed that over the medium term, we are targeting 100 intermediary relationships with each expected to deliver approximately $10 million in recurring annual inflows once fully onboarded. This quarter, we report that we are in the process of onboarding 18 intermediaries and the majority have already referred their first clients to us. This quarter, we also began onboarding our first Fortune 500 employer client. This week, we launched our online onboarding portal to support a growing volume of plans selecting PensionBee services, and our progress is compounding as relationships established in 2025 generate further client referrals and recurring inflows. At scale, our business line alone is expected to support $1 billion of recurring annual inflows. Looking ahead, PensionBee remains focused on converting brand awareness into customer growth across both channels. The company will continue to be disciplined with spend whilst continuing to invest in product-led growth, enhancing the customer experience through new features and capabilities that drive organic customer acquisition and retention. I would now like to hand over to Christoph Martin, PensionBee Group's CFO, who will cover the financial update.

Thank you very much, Romi. Hello, and a warm welcome from myself to everyone. I'm pleased to cover the financial section of the Q3 2026 trading update. In Q3, PensionBee had strong financial performance, showcasing the resilience of our business model. In the U.K., we delivered 29% year-on-year growth in our rate base to circa GBP 9 billion and 26% year-on-year growth in ARR to approximately GBP 60 million. U.K. adjusted EBITDA profitability on the last 12-month basis was GBP 7.8 million at 14% margin in comparison to 10% in Q3 2025. At the group level, top line growth, coupled with continuous cost discipline led to group revenue of GBP 14.8 million for Q3 plus 31% year-on-year growth and a positive adjusted EBITDA of GBP 2.4 million at 5% margin on a last 12 months basis. Those continuous achievements are further testament of our consistent and reliable execution against our public market guidance and is ultimately derived from the business core value driver, which are: First, predictable and recurring revenue; and second, business scalability. The first value driver is PensionBee's predictable and recurring revenue, which is generated from a durable base of assets under administration and is derived from the assets of existing and new customers. In Q3, we have seen a 29% year-on-year AUA growth to circa GBP 9 billion. The vast majority of our AUA base is derived from existing customers, customers who remain with PensionBee for a long period of time and continue to build up their pension savings with us, resulting in value generation for decades to come. This is because our average customer is around 42 years old, and they're building up their pension saving with PensionBee, which means that cohorts on an underlying value basis, i.e., before any impact of capital markets are resilient over time. In Q3 2026, we recorded strong underlying KPIs on retention rates and flows with an invested customer retention rate of above 95% and value retention rate of circa 100%. Next, AUA is also derived from new customer acquired through our proven approach to cost discipline new customer acquisition. Over Q3 2026, we added close to 10,000 new invested customers onto our technology platform and 32,000 year-to-date. Joining customers had higher average incoming balances in Q3 this year compared to Q3 last year. For the remainder of the year, we expect the total number of new invested customers to continue growing. In Q3 this year, gross inflows was GBP 426 million, a 21% year-on-year growth and net flows of GBP 220 million, a plus 9% year-on-year growth, underscoring PensionBee's strength, resilience and predictability. As it is customary in the industry, pension assets are invested in capital markets and PensionBee benefited from supporting -- some supportive capital markets in Q3. The compounding AUA base is subsequently converted into our revenue base owing to our resilient gross revenue margin. In Q3 2026, we have seen a revenue margin of 68 basis points, which enabled us to convert the 29% of year-on-year AUA growth into the last 12 months group revenue growth of 36% to GBP 53.6 million. In conclusion, owing to the compounding AUA base and resilient revenue margin, we are deriving predictable and recurring revenue, which is PensionBee's first value driver. The second value driver is PensionBee's business scalability, owing to the controllability of our cost base, which is thereby continuing to decline as a proportion of revenue. For the United Kingdom, the scalability dynamics of predictable and recurring top line growth, coupled with cost discipline led to an improvement in adjusted EBITDA margin to 14% on the last 12 months basis for Q3 2026 compared to 10% in Q3 2025, an improvement by GBP 3.7 million in adjusted EBITDA, while simultaneously investing into our growth and increasing the marketing budget by 36% year-on-year on a year-to-date basis. With respect to our guidance framework for PensionBee as a group, we have outlined the short, medium and long-term targets. In the short to medium term, by year-end 2029, we expect the group to generate revenue of above GBP 100 million and an adjusted EBITDA margin of circa 20% by year-end 2029, with the U.K. considerably contributing to those targets. In the long term, by year-end 2024, we expect the group to generate about GBP 0.25 billion in revenue and an adjusted EBITDA margin of circa 50% by year-end 2034. Our circa GBP 31 million cash balance puts PensionBee in a strong position to further scale the U.K. business as well as invest into the tremendous U.S. market opportunity to continue executing our long-term strategy and delivering on our public market guidance. I would now like to hand back to Romi for concluding remarks.

Thank you very much, Christoph. We are pleased to close out another successful quarter, and we look forward to hearing the community's questions.

Thank you very much indeed for your update and presentation. [Operator Instructions] I'd like to remind you the recording of the presentation along with a copy of the slides and the published Q&A can be accessed by your investor dashboard. As you can see, we've had a number of questions throughout today. So thank you very much indeed for those investors. We'll start with Jude of RBC. We've got 3 parts to it, guys. So let's start with the first one. On new customers, gross flows per new customer looks higher sequentially and year-on-year. I know Q2, you said you were targeting high-value customers. Has that continued into Q3? And should we expect similar pot sizes to be onboarded in 2027?

Well, we are certainly targeting customers with slightly larger account sizes. And part of the reason for this is that we, of course, target payback on our marketing investment. Part of it is also strategic and organic from the fact that our brand in the United Kingdom, in particular, has really grown up and is attracting a wide variety of customers. We believe that we can serve well at the lower end of the scale, whether that's someone with a GBP 5,000 account all the way up to the GBP 1 million account, and we do certainly see some very large accounts transferring in there. So yes, that remains deliberate. We do want to serve across the board, and you should expect to continue seeing us grow the average account size per customer.

Second part to Jude's questions here. Having risen for several quarters, your LTM revenue margin is now stable versus Q2 at 0.68%. Should we expect it to be maintained at this level going forward?

Yes. I think that's a very good observation. As you can see, the last few quarters, actually, it was stable at that kind of level at 67 basis points in Q1, 68 in Q2 and 68% in Q3. So we would expect those margins to continue at that level. As I said, this is due to a planned effect, the mix effect of the AA as they are allocated differently across the funds into funds that are a little bit more actively managed. They come to us with a slightly higher price point. So when you look at that net revenue margin, that actually as a proportion of the AUA base that actually has remained quite consistent. So yes, in short, we would expect that margin to be around that level.

The third part we've got here is we're now nearing the connection deadline for the pensions dashboard program. Are you able to offer an update on how you think the program is progressing and any preparations you're making when it finally goes live?

Yes, we do see the program progressing. We believe that the vast majority of pensions and pension providers are now connected to the system. We certainly are. And ongoing testing with consumers is progressing. We believe that it will still take some time for the program to go live. So for those who aren't familiar with the ins and outs of the pension dashboard program, the government has committed to giving a 6-month notice window. And that will trigger the kind of readiness point for pension providers to expect the dashboard to be available through the .gov website. And so we have not yet had that starting gun launching. And so we can most definitively say that it will be at least another 6 months. And we do believe that the launch point will be made very public because the government will want consumers to be aware that this is a service that is now being offered and importantly, for pension providers to prepare themselves for that service being offered. I would say that relative to other pension providers, we are in the fortunate position of our data being very clean and very available. And therefore, we do expect to see kind of good matching rates on the dashboard. At the same time, we are very much looking forward to many of our customers and potential customers seeing pensions that they know they have but have lost track of or pensions they don't know they have at all and using that as a springboard for consolidation.

Great. Another question we've got here. With the U.S. opportunity being substantial, how do you look to bridge that gap from the $6 million AUA to the $1 billion target?

This is an excellent question, and I can certainly comment on the progression of the U.S. build-out, the $1 billion target is a kind of very important milestone for any business like ours. And we also see the potential to build $1 billion of recurring net inflows. And if I just focus on our business-to-business channel, which we've spoken quite a lot about over the last couple of quarters, the plan there is really to keep onboarding intermediaries. Our business offering to employers essentially enables employers to move old accounts from former participants out of their 401(k) plan and into PensionBee IRAs. The smaller accounts under $7,000, those are kind of automatic rollovers. So that is done automatically and the employer simply give notice. Employers are also using us for accounts that are worth over $7,000 where we market to their former employees. And then finally, when an employer makes an acquisition or is themselves acquired, that entire 401(k) plan can terminate and the entire 401(k) plan can move into IRAs. And so that is a very substantial opportunity. We've quantified that the small balance rollovers, those kind of generate around $4 billion worth of annual inflows across the market. The terminations are probably closer to $55 billion. And then voluntary rollovers is probably $1 trillion annual rollover market in and of itself. So clearly, the market opportunity is very substantial, as you've mentioned. And our work with employers is predominantly generated by intermediaries. These intermediaries would be an adviser. In some cases, they are a third-party administrator. In other cases, they are a record keeper with a panel offering. And so this quarter, we disclosed some progress on our target of reaching 100 intermediaries, noting that we're currently onboarding 18 of those. Each intermediary, we think, has around 50 401(k) plans that they service, potentially more. And as we are onboarding those intermediaries, we are being added as the small balance rollover provider for each one of their clients. So we can absolutely see each intermediary onboarding us for one employer and then the second, third, fourth and so on. And of course, every single year, those employers will conduct a force-out exercise, meaning they remove the accounts of employees who have left. Again, the under $7,000 are automatically rolled over, the over $7,000, there is a marketing exercise that goes on. But either way, this becomes annual recurring business as each one of the employers onboards. And so the route for getting from where we are today to the $1 billion of total AUA, but also $1 billion of net recurring inflows really relies on onboarding those 100 intermediaries who we believe through their entire client book can generate $10 million worth of annual net inflows with that $10 million consisting of small balance rollovers, voluntary rollovers and also plan terminations. So I hope that gives you a bit more context on our B2B line. On our B2C line, we continue to advertise very successfully at the top end of the funnel, and we continue to work on the automations and the conversion activities for actually moving the funds from record keepers here in the United States and building out those connections in the same way that we built them out over a long period of time in the U.K. And I'll stop there.

Fantastic. A question from William. Of these 18 intermediaries, what is the average pot size of each employer's IRA pot they're working with?