PEXA Group Limited (PXA) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the PEXA's Fiscal Year 2022 Results Conference Call. [Operator Instructions] I would now like to hand the conference over to Mr. Glenn King, Group Managing Director and Chief Executive Officer. Please go ahead, sir.

Good morning, everyone, and I'm pleased to welcome you all to PEXA's results for the 12 months ended 30th of June 2022. I'm Glenn King. I'm the PEXA's Group Managing Director and CEO. And joining me this morning is our Group CFO, my colleague, Richard Moore. Today, we'll cover PEXA's FY '22 business highlights and our financial performance and provide some perspectives on the company's trading year-to-date and outlook. Now if we go to Slide 5, I'll touch on some of the highlights. PEXA is a values-led organization. Our commitment to our core values, our people, our customers and our role in the community is what underpinned the company's performance in FY '22. Our team of around 500 PEXArians are highly engaged, as can be seen in our employee engagement score of 80%. That ranks PEXA in the top 25th percentile of all global tech companies. Now I must say that these solid foundations, alongside our robust property market has underpinned our record PEXA Exchange volumes, which is up 22% year-on-year to just over 4 million property transactions in FY '22 with a property settlement value of more than $900 billion. To put this in context, PEXA's Exchange transaction volumes grew from approximately 10,000 transactions per month in December 2015 to more than 360,000 transactions per month in June '22. We're essentially essential infrastructure to the property sector in Australia. In addition to growing the PEXA Exchange tech platform in Australia, we've also made meaningful progress across multiple attractive growth parts for our business. We are progressing in our international market plans with the U.K. being a priority growth market for PEXA, and it represents a total addressable market opportunity of approximately AUD 700 million. And we'll talk more about this progress shortly. In addition, PEXA continues to build its reputation as a trusted leader and resource for robust real-time property data, appropriately extending our offering to enhance the property experience, so we can also meet the best needs of Australians in the property sector through that data-driven insights. And over the past 12 months, PEXA Insights has launched new products and made several investments. And I can also say that PX Ventures, another one of our growth businesses has continued to build on PEXA's digital industry experience and also developing new products and services as we expect to grow in this area. All of this has translated into another good operational and financial performance in FY '22, with key positive metrics in our portfolio of products and services and setting that up for sustained growth. As I go to Slide 6. Slide 6 actually shows the growth in revenue and earnings in FY '22. And what I can say that we are now outside our Prospectus forecast period. And we are showing how the FY '22 results compared not only to FY '21, but also to our Prospectus forecast. On all measures, we grew compared to FY '21. And we also exceeded our Prospectus forecast. A couple of callouts. Our group revenue was up 27% year-on-year to $280 million. PEXA Exchange EBITDA was up 38% to $153 million, with our EBITDA margin up 5 percentage points to 55%. Our free cash flow before CapEx, financing and tax was up 7% to $121 million. Our NPATA was up 123% to $77 million. And gearing, as measured by net debt to PEXA Exchange EBITDA, was down 35% to 1.47x. Good results. Now to give you a bit more color in terms of our business and the overview performance, I'll now turn to Slide 8. Our strategy, the PEXA Group strategy is a very simple strategy. We look to enhance the core Exchange service in Australia for our customers so we can continue to grow. We're looking to expand in new Torrens title jurisdictions starting off with the U.K. We plan to extend, extend to provide innovative data insights and building deeper customer relationships across a broader group of stakeholders through additional services. And importantly, we'll continually evolve our business both in terms of platform and continually build and strengthen with our people and our brand. These strategic goals of enhance, expand, extend and evolve are all in support of fulfilling our purpose, connecting people to place and are delivered in accordance with our core values, where we always look to innovate and innovate for good reasons, ensure we're better together with our people, customers and our owners. And we're very clear about execution, making it happen and making it count. Now we'll go to Slide 9. Having established a leading and highly trusted tech platform, the PEXA Exchange, we are now leveraging our knowledge, experience, expertise and relationships with industry stakeholders and partners to pursue a number of growth opportunities and areas across 3 key focus areas, including continually building out our core PEXA Exchange and deepening our customer relationships. The 3 growth areas in addition, the PEXA International, which is around replicating the success of the PEXA Exchange in Australia to develop digital property settlement solutions in new offshore markets with the first priority being the U.K. PEXA Insights, which is about delivering new generation data solutions that empower businesses, governments and consumers to appropriately make more informed property-related decisions, including demand for lands, use of lands, transaction efficiency and housing affordability. And PX Ventures, which builds on PEXA's digital and industry experience, the innovative and entrepreneurial culture and our established relationships to develop new business opportunities with partners for consumers, businesses and governments across of property ecosystem. In summary, we're executing on all those areas as we enhance, expand, extend and evolve our business. Now a little bit more color on all 4 areas. Turning to Slide 10. The PEXA Exchange now facilitates the majority of land transactions in all Australia. And we know as a business that buying a property is one of the most important purchases many people will make in their lifetime. And it's something that we certainly take seriously. It's a role that we know that we need to make sure it's efficient, safe, secure and reliable as possible, increasing certainty to industry participants such as our bank customers and also the homebuyers and sellers alike. Momentum for digital transactions continues to accelerate. And while I've already mentioned the volume wave, value of transactions settling on the PEXA Exchange in FY '22 is growing. What's even more impressive is the Exchange has now processed more than 12 million property transactions since our inception, equating to more than $2.4 trillion in property value. PEXA is a tech platform business for the property sector and really are an essential service. In FY '22, market conditions were positive, with 12% growth in total market volumes from FY '21, 4.7 million transactions in FY '22. And we grew with that, but we also grew above it to where we're now just over 4 million transactions to 22% growth. We also grew with the refinancing, now again that we do refinancing and sale and transfer. And it was particularly strong in the refinance area, with the total market up 31% year-on-year. We continually serve now over 9,500 lawyers, practitioners and compliances, 160 financial institutions and we served over 1.1 million consumers in FY '22. We also successfully launched in the ACT, reaching 59% transfer market penetration at the 30th of June '22, an incredible result within 12 months. And we also saw continued growth in Queensland, where we doubled our performance over the past 12 months, increasing our market share now to about 77% at the end of the financial year. On Slide 11, just talking about a couple of other highlights around the PEXA Exchange. We continue to enhance our PEXA Exchange service by adding new services in geographies such as ACT, but also expanding our services such as PEXA Tracker for financial institutions. We've also maintained our ongoing engagement with regulators in relation to industry reform. And our customer performance is continually strong with a net promoter score of plus 74. PEXA has also maintained a 99.9% platform availability across FY '22 and reaffirmed its position as the #1 trusted provider across the industry. And whilst we've been very strong in FY '22, we have a continued focus in FY '23 on the Exchange. That includes continued investment in infrastructure resilience and cybersecurity. We're going to continue to roll out our APIs and integration in banks, panel firms and further removing customer friction points. We're going to continually enhance certainly around settlement on behalf of the industry and homebuyers nationally. And we'll also continue our road map to become a truly national platform with productive dialogue in Tasmania and Northern Territory as we expand across the entire country. In addition to that, we'll keep our constructive involvement in regulatory reform. But we'll also ensure that we maintain a focus on the secured system for system, citizens, customers, government and the community at large. Importantly, our key essence is to ensure we provide great service for our customers. And talking about great service, if I go to Slide 12, we're now expanding internationally. Now we're on target as we deliver in the U.K. U.K. does represent a growth area for PEXA. And our initial focus has been on the remortgage process in England and Wales, and we're making good progress. In April '22, we announced the successful deployment of a brand-new payment scheme, PEXA Pay, the 7th net settlement payment scheme with the Bank of England and we're acting as a settlement agent. We're pleased with that progress. The platform and payment scheme has been successfully tested with 7 mortgage lenders. And the Bank of England has agreed to another cohort of lenders to test in October this year. And as we also committed, we plan to go live with our first lenders using the PEXA platform for the remortgages. And we're scheduled to go live with our first lender in September '22, with subsequent wave of lenders expected to join over 2023. We also work closely with compliances, regulators and government stakeholders as we will further develop PEXA's U.K. proposition and build out our services across the country. We aim to have 4 lenders transacting on the PEXA U.K. platform in 2023 and continually grow from that position. And as we grow, we will explore and identify potential opportunities in the U.K. to deliver on our strategic intent. And as part of our intent, we're already working on our sale and purchase tech concept. Now building on the international progress, which we're pleased with, we've also now extending into data-driven insights. If I go to Slide 13, Australia's entry in housing market is continually rapidly being transformed by digital tech innovations after the PEXA Exchange. The creation of significant volumes of property data is generating significant opportunities to enhance decision-making into the market as economic, environmental and social factors can generally change. And PEXA is at the center of this evolution. Now we said before, we estimate the data market for land information could grow from approximately $520 million per annum annually today to about $1 billion annually over the next 5 years. And with businesses and governments rapidly digitalizing their services, data sharing is going to be a key opportunity for the Australian economy. And we believe the open data flows, has a potential to reduce friction points for consumers and businesses, while also driving competition that stimulates innovation and economic growth. We are excited about this opportunity and we're going to continually advocate for more open and ethical regulatory regimes for the use of data for the benefit of Australian citizens. Now as on Slide 13, we're building our property data ecosystem and service to answer 4 key questions for Australians. Where is the demand for land now and into the future? How can the use of land be optimized to increase valuations? How do we increase the supply of housing to ease housing affordability challenges? And how do businesses in property value chains improve the business efficiency and in turn to deliver value to consumers? PEXA has made a number of investments and acquisitions across all that area, all those 4 questions to ensure that we can deliver and add value. And our aim is to grow and deepen our customer base through PEXA Insights. And if you turn to Slide 14, you can see in 12 months, it's been a very busy year for PEXA Insights. We've built now a team of over 60 data specialists within the PEXA Insights, focused on building the property data bureau and developing solutions that appropriately leverage our unique access to near real-time and accurate national property data. We've implemented partnerships with universities such as Deakin and the Melbourne Business School. And we've released our first products, aimed at helping financial institutions, improve efficiency with our quarterly property and mortgage insight reports. This provides a first phase of the power of our data. And with new product concepts under development and others in data, we are charting a path towards several new product launches in FY '23. In addition, though, we completed several strategic investments in FY '22 and too shortly after the financial year-end. As announced this morning, PEXA's Insights concluded its first 100% acquisition of the leading Australian growing demographic-based company .id. .id in its own right is a land information business that is a trusted provider of demographic and economic data and forecast of the market geographic level to more than 300 local council's across Australia and New Zealand. Separately, we also announced the acquisition of a 70% interest in Slate Analytics, a progressive property analytics and tech solution co-developed by the University of New South Wales, Sydney and FrontierSI. Both represent the third and fourth strategic investments undertaken as part of our PEXA Insights growth strategy. Across FY '22 PEXA Insights, PEXA's data analytic insights and service business also announced the acquisition of a 38% stake in the data PropTech, Landchecker, and a 25% stake in the AI software leader, Elula, all 4 cash investments. Now what I'll just quickly then go onto is how we're also expanding through PX Ventures, which is about delivering new digital property products and services. Now PX Ventures was launched in 2021 with the goal of building on our tech and property industry expertise and our entrepreneurial culture with like-minded innovators and we're making good progress. PX Ventures offers funding to support services and mentoring support to enable continued innovation and enhancement of new and existing products and tools for Australian consumers in the prop sector. Through our innovative PX Launchpad, we're now targeting a number of starts to offer products and services that could significantly transform the property journey for Australian consumers, businesses and the government sector. In fact, our PX Launchpad has received more than 100 IDs from several up-and-coming Australian businesses, interested in scaling and commercializing their offering in the prop sector. And we've already launched or progressed with external partners through PX Ventures in FY '22, including Business Advantage, Honey Insurance and Smaver. And today, I'm pleased to announce our strategic partnership with Sorted Services, a local Melbourne property. Sorted is in fact the Australia's first digital home services tech platform, designed to help homeowners organize their entire household in minutes, including things like the electricity, gas and Internet connections, a very exciting and practical resource that further will deepen our services to our customers. And if you can only do this, turning to Slide 16, in terms of the growth that we've developed and built out in FY '22 through engaged people. And given there were pretty good role played by PEXA economy, it's important for us at PEXA that we continually as a group have engaged PEXA earnings, building and maintaining a culture of trust in the community and with our customers. And we truly believe that having an engaged team translates to highly satisfied customers and a great business performance. And we do these by our values of innovate for good, better together, make it happen and make it count. And we're privileged to say that our workforce has an 80% engagement score, which translates to a positive experience for our customers on a whole. And in FY '22, we set a new watermark for brand trust, where we received a score of 8.9 out of 10, which is #1 in the market and a member or customer satisfaction score of 97%. And further to that, we're really pleased to say that we're in the top 3 in 2021 for the Best Place to Work awards within Australia. Our engaged PEXArians for which I'm deeply proud of, were engaged with the community. And we're working with Homes for Homes, a not-for-profit organization focused on creating sustainable and affordable housing for our most vulnerable communities in Australia. We also work on diversity inclusion and environmental sustainable elements within Homes for Homes. In fact, we, at PEXA, we're proud member of the global ESG benchmark for real estate assets, having achieved our 5-star GRESB rating in FY '22, which is a score of 92 out of 100, up from 84 in FY '21. And we're not only continuously work on ESG initiatives from our renewable environmental statement, where we outline our commitment to achieve carbon net zero by 2025. In addition, we are now working with indigenous consultants to establish an indigenous engagement strategy as we are committed to supporting the first nations of Australia. All in all, FY '22 has been a strong, good result for our business. And those results are translating into strong financials. And I'll now hand over to Richard who will take you through the FY '22 financial summary.

Thank you, Glenn. And it is great to be here today to talk through such a strong set of financial results for PEXA in FY '22. Before I start, I should say that all the figures in this section reflect a pro forma P&L, showing the operating cost of PEXA as a listed company. And what that means is we removed the one-off costs as a result of de-listing on the 1st of July and we add in $6.5 million of public company costs into the prior period to make it comparable to the current cost base of the company as a listed entity. The pro forma results are reconciled back to statutory on Slide 33 of the pack. And additionally, any reference to forecast in this section is the FY '22 forecast from the Prospectus that we launched before we listed in July last year. So going to Slide 18, you can see PEXA delivered a very strong financial performance in FY '22. Our revenue was up 27% to $280 million. Our combined costs and operating costs were up 15% year-on-year. And what that meant was an increase in PEXA Exchange EBITDA of 38% to $153 million. EBITDA after investing in our growth initiatives and one-offs was up 28% to $131 million. And our net profit after tax of $38 million was up $43 million from a small loss last year. NPATA, which is net profit after tax, excluding the noncash amortization of acquired intangible assets, which is our best measure of after-tax cash profit, also grew by $43 million to $77 million. All of these measures were ahead of Prospectus forecast. And what that means is our financial metrics are also very strong with our gross margin growing by just under 1 percentage point to 87.7% and the Exchange EBITDA margin of 54.6% being up 4.6 percentage points from FY '21. So overall, it's a great result in FY '22 from a financial standpoint. And I'll now use the following slides to explain the key drivers of the financial result in the PEXA Exchange. Our revenue is a function of market size, market share and price. And Slide 19 explains the first 2 of those. As Glenn said, the market grew strongly in FY '22, up 12% to 4.7 million transactions or billable events as we call them in PEXA. And you can see Slide 31 for -- in the appendix for more details on the market growth. On top of that, the PEXA Exchange penetration, our market share grew 7 percentage points to 86%. And on the left-hand chart, on Slide 19, you can see that by transaction type. We saw our transfer penetration grew from 80% to 85%, driven by growth in Queensland and the launch in ACT. We saw refinanced penetration being stable at 99% and other transactions growing 16 percentage points to 72%. Combined, that delivered a 7 percentage point increase in total penetration to 86%. Adding that to the 12% growth in the market means a 22% increase in PEXA transactions to 4.05 million as seen in the right-hand chart. PEXA transactions were also up 16% compared to the Prospectus forecast driven by 14% higher market and 2% higher market penetration. On Slide 20, we then explain how volume and price determined revenue. The top left-hand chart shows PEXA volumes from the prior slide, up 22% year-on-year. We also saw an average price increase of 4% to $68, driven by the annual CPI increase during the year and the end of the discounting campaign in Queensland in the prior financial year, that ended on the 30th of June 2021. That resulted in an average price for transfers increasing by 6%, obviously ahead of CPI for that reason. This was slightly offset by a mix shift towards the lower-priced refinances and that resulted in the total average price increasing by $2.50 or 4%. So adding the 4% price on to the 22% volume previously discussed, delivered a 26% increase in PEXA Exchange revenue from $218.6 million in FY '21 to $276.6 million in FY '22. PEXA Exchange volume was also up 13% on Prospectus forecast, driven by the 16% increase in volume noted earlier, offset by a 3% reduction in price due to the higher proportion of lower-priced refinance and transactions compared to forecast. On Slide 21, we then look at gross margin and cost of sales. And as a reminder, our main cost of sales are lodgement support services fees, which are incurred when a workplace is set up. It reaches out to the land registry to get bundled property information. They're charged on every workspace, whether it's a multiparty transfer, a 2-party refi, or a single-party discharge or other transaction. So this means if we do more transfers, the cost per transaction drops. And you can see that on the top right-hand chart on Slide 21. The higher mix of transfers also improves the average revenue per transaction, which you can see in the top left chart. And that combination means that our gross margin has improved by just under a 1 percentage point to 87.7% and our gross profit has grown by 28% to $245 million. Gross profit was also 14% ahead of the Prospectus forecast. Slide 22 shows our operating expenses within the Exchange. We group our expenses into 3 categories: general and admin, sales and marketing, and product design and development. Our general and admin costs which cover our shared corporate teams, our Board and executive remuneration as well as professional fees and occupancy increased by 24% in FY '22 and this was driven by the corporate functions and advisory fees growing to support our continued expansion. Also we saw higher insurance premiums and the cost of our new long-term incentive plan. It is worth noting that FY '21 was understated due to COVID-19. And the FY '22 spend is up 26% from 2 years ago. So that's a 12% annualized growth rate. Our sales and marketing spend held relatively flat in FY '22 due to both this year and prior being somewhat impacted by COVID-19. And early in the financial year, we were unable to host our regular practitioner events and we also reduced our overall marketing spend due to COVID. Finally, our product design and development expense has increased by 12% in FY '22 due to the higher hosting costs driven by higher Exchange volumes, together with investment in architecture, cloud, cybersecurity and API development, as Glenn mentioned earlier. You'll also see from the bottom chart that we covered like a similar amount of product development expanded in the Exchange, so the total cash spend on product design and development was $51 million or 18.3% of Exchange revenue. Operating expenses were 14% ahead of Prospectus forecast and total product development costs in the Exchange were broadly in line with the Prospectus forecast. Slide 23 then shows the benefits of scale flowing through the Exchange. The chart on the left shows total costs, including cost of goods sold and also shows cost per transaction. The growth in volume combined with prudent cost control has resulted in a reduced cost per transaction down from $33 last year to $31 in FY '22. This has also resulted in good growth in PEXA Exchange EBITDA as shown on the chart on the right of Slide 23, growing by 38% to $152.7 million. We've also seen growth in our PEXA Exchange EBITDA margin, which has grown from 50% to 54.6% in FY '22. It was however lower in the second half of FY '22 due to the reduction in PEXA Exchange volumes compared to the first half. We are expecting to operate the Exchange in the 50% to 55% EBITDA margin range going forward. So in summary from a P&L perspective, a year of very strong revenue and EBITDA growth and we are happy to have achieved all of the forecasts that we set in the Prospectus just over 12 months ago. The final slide on financials, Slide 24 shows our FY '22 cash flow in 2 ways. The chart on the left shows the movement in our cash balance over the year and the key drivers. We started FY '22 with $51 million of cash, we generated $153 million of Exchange EBITDA, spent $25 million on capitalized product development within the Exchange and a $14 million of other Exchange-related cash outflows. So before investment in our growth initiatives and IPO costs, we would have had approximately $165 million of cash in the business at the end of the financial year. We invested $44 million in our International Insights and Ventures businesses and $30 million in the investments in Landchecker and Elula. As part of the IPO process, we also had net offer costs in cash terms of $15 million. And this resulted in an actual cash balance of $75 million on the 30th of June 2022. The table on the right-hand side, Slide 24 shows our pro forma cash flow. And you can see a strong free cash flow conversion before financing tax of $69 million, which equates to a 53% free cash flow conversion. And that's after the OpEx and CapEx investment in the Exchange and in all of our growth initiatives. And before I close, I should add that there are more details on the financials in the appendix, should you need to see them. So now I'll hand back to Glenn to run through our outlook and to close.

Thanks, Richard. And I just will now turn to our Slide 26. And I think that if you just go through the robust financials that Richard just shared, that performance delivered through FY '22 has really placed us well for FY '23. So whilst the momentum in PEXA volumes slowed in the second half as shown on Slide 26, it still ended up 9% above the same period last year. And overall, the FY '22 volumes were up 22% year-on-year against FY '21. While the property market is slowing, it is still one supported by strong economic fundamentals, including high household savings ranges, lower levels of unemployment, increasing inward migration and knowing that demand for housing is greater than housing supply. Further to that, we're also seeing that refinancing volumes are also remaining elevated. And this is basically due to a number of changes in the market just generally. This means that PEXA Exchange volumes are holding up well and with more than 300,000 transactions in July and Q1 is now tracking to be above 900,000 transactions. And noting the mix, we believe we've still got a very robust performance with the PEXA Exchange platform. And in terms of FY '23 outlook, we expect to exchange EBITDA margins to still stay in the 50% to 55% range. And that's also due to that we're going to invest approximately 20% of our revenue in the Exchange technology. As we planned, we need to invest in Exchange technology to ensure we keep with resilience, cyber and improving our customer experience. We will also invest approximately $45 million in our international expansion and approximately $15 million in PEXA Insights before any M&A activities. We will invest to grow. In the U.K., we aimed at 4 lenders transacting on our PEXA U.K. platform by the end of FY '23. And we'll also confirm there will be no dividend pay for FY '22 as we continue to pursue programmatic M&A and continually invest to grow. On Slide 27 and in closing, overall, on behalf of the PEXA team, has been another strong and successful year for PEXA. We continue to build and grow with our people, with our capital and with our capabilities. And by any measure, we have a highly engaged PEXA team working in a PEXA Flex First environment. Our brand trust and our cost of NPS are at good levels. And what you also heard is we have a strong PEXA engagement score of 80%. You heard today, we're delivering on a clear strategy of enhancing our service, extending our service, expanding our service and evolving our business and we continue to execute. Both operationally and financially, we've delivered on strong outcomes across the group in FY '22. The PEXA Exchange platform delivered strong year-on-year volume and revenue growth. We've exceeded all our FY '22 financial metrics in the Prospectus forecast. And our focus on efficiency in the Exchange continues, achieving a 55% EBITDA margin in FY '22. Lastly, we continue to invest in new sources of future growth and value that we expected to underpin shareholder value growth over the longer term. We believe there's good economic fundamentals that will continue to support volume growth through the exchange. The launch of PEXA in the U.K. is tracking the schedule. Our first remortgage transactions in that. We're building a meaningful PEXA Insights business, both organically and through inorganic activities. And lastly, PX Ventures is extending our reach into the broader property ecosystem. This concludes our presentation and both Richard and I are now happy to answer any questions from the participants. Thank you.

[Operator Instructions] And our first question will come from Josh Kannourakis with Barrenjoey.

First question, just with regard to the margin commentary of 50% to 55%. Could you give us a little bit more color around just I guess the bookings of volumes that would allow that? And maybe just what -- talk through what costs you guys have within your control to sort of manage to that margin?

Yes, I can take that one, Josh. So if you assume the middle of that range, you get about an 8% plus or minus in volume to get to 50% or 55%, assuming you keep your costs unchanged. So it gives us about an 8% legal room plus or minus compared to what our sort of baseline forecast for FY '23 would be, which obviously we're not seeing. But we're dependent on the information we have at this point on our estimates for the future. In terms of cost management, probably 2/3 of our cost base, are people related. And we, as Glenn said, are very keen to continue to invest both in the core and in the growth aspects of the business. We also have a degree of discretionary spend around our sales and marketing, which there may be some flexibility in. But we also have some fixed costs predominantly around technology and support. So we do believe that that range gives us sufficient legal room to work within what may happen in terms of business volumes. But we also do have a few levers that we can pull if required.

Okay. Got it. So I mean, obviously, you're not going to talk through your expectations for next year. But can we assume that even if it's -- there's some bearish forecast of 20-plus percent sort of volume declines that some people are calling out who are more negative on the street. You can still hold a 50% margin at that point?

That's certainly our target, Josh. I mean you're absolutely right. There are some commentators that are quite bearish on the market. As Glenn said, we're seeing a reasonably good market in the first quarter. We do see those fundamental economic factors still at play in terms of high saving rates and low unemployment. And we have made quite a statement around our volumes for the first quarter and to track over 900,000 as we're expecting them to, we'd be looking at a year-on-year drop circa 10%, something like that, which would be, I think, better than many of the market forecasters are predicting. So we're relatively bullish about those numbers that we've put forward.

The other thing, Josh, just to add is we've also got the refi transactions and there's transfers. So therefore, that gives us a degree of diversity. And we've also sort of growth opportunities in markets such as WA, South Queensland and ACT, which also gives us diversity as well. And then further to that, the platform is not dependent on the housing price. It's purely based on a number of transaction types.

100%. Thanks for that color. Just following on from that, Glenn, next question was just around those other markets where you've still got some room to move in terms of market share gains. How should we think about that in terms of '23? And just maybe just to talk through the unlocks in volumes and your initiatives to try and get more market share across this coming year?

Yes. A couple of things there as we planned. Firstly, in ACT, at the end of the financial year, we were sitting round about 59% share. So we see that continually growing. Whilst a small market, it's an important market because it's part of a national footprint that we're committed to. Secondly, Queensland, we still got some services there to grow that market. And so we expect to see some growth in that market, now that we said, we're on about 77% at the end of the financial year. In Western Australia, which we're sitting closer to 80% market share, there's some particular transaction types that haven't yet been digitized. And we're working with the relevant public service and agencies in Western Australia, looking to get those digitalized in FY '23. So we expect growth in that one as well. I would suggest the other element that I would add is it's just purely on the Exchange aspect. We haven't factored in any areas such as our potential government policy reforms and some of those other dimensions, which as many will know, could be upside as well, but they're not factored into any of our thinking.

Yes. And final one just for Richard. On the investment guidance, Richard, could you give the breakdown of how you're thinking about the U.K. and Insights just in terms of the OpEx sort of CapEx mix?

Yes, I can do, Josh. So as we said in the outlook, $45 million in total cash outflow in International and $16 million in Insights. To give you an indication of what that was this year in international was $31 million. I think we referenced that in the pack. That was $12 million of OpEx and $19 million of CapEx, so sort of 40% of OpEx, 60% CapEx mix. I think it's fair to apply something like that into FY '23. Insights, we invested $11 million in FY '22. That was about 50-50 OpEx/CapEx. So again, you can probably assume something similar for FY '23 on the $15 million.

Josh, just on that, we are cautiously pleased with the progress we're making with our U.K. platform build actually. And so we do believe that we'll be able to execute exactly as what we're saying. So it's encouraging signs.

Your next question will come from Ed Henning with CLSA.

First one, just on the U.K. What confidence or line of sight do you have achieving that 20% target of lenders in the U.K. by year-end? And with that, what percentage of those lenders out of the 7 you've already got, you've already tested within the 4 that you've got lined up for October, that's the first one.

Yes. Look, I think there's a couple of points in there. So we've already had 7 tests with the PEXA Pay scheme and that was an important part of the mandate and commitments from the Bank of England. So that tested well. Of those 7, we're now working through the transition of those 7 onto the platform in the FY '23 and also the calendar year '23 period. And when we say the transition period, we can't put them all on at the same time. So that's why we've had the 4 to go on in the next 12 months. And saying that, that 7 will certainly give us a percent of that [ 10%, not 1%] but certainly a reasonable percent of that 20%. We've got another -- a number of other organizations of the financial institutions that we're talking to. Again, we don't want to be overly hubristic in terms of our confidence on all of those. But yet we do have confidence that we will start to convert some of those and they'll be testing banners of the next 4 cohort. That's a reason why we've made the statement that we aspire and aim to at least get a size representing 20% of the remortgage volume signed up, not necessarily on the platform doing volume by the end of 2023, but certainly coming on in the FY '24 period and beyond. So I am reasonably confident. That's why we've put it in there. We wouldn't put it in there if we weren't that confident.

Yes. No, no, I appreciate that. And then just further the prior question, you look at your project and your expansion costs, which you've given us some insight into. Just going forward, can you just talk about the trajectory and maybe it's more near term on the Insights business, where you see the costs peaking in that line or the loss peaking in that line and where you start to see it start trending down and then you start to see some growth come through in the P&L?

So Insights is a good case study, Ed, because it will be a combination of the core business itself and the acquisitions that we're making. And you'll see this morning we announced an investment and a full 100% acquisition of a couple of more businesses within Insights. Now one of those you'd have seen in the ASX release has generated $11 million of revenue last year. So we will start to see a reasonably material levels of revenue coming through Insights. We are continuing to look at programmatic M&A. So I think that business will undoubtedly not be profitable in FY '23. But we would certainly hope it will be in the short term thereafter. So there's certainly an opportunity within Insights. In terms of international, we're launching the remor solution in the next few months. I wouldn't expect any revenue this financial year, but we would expect to see remor revenue in FY '24. In terms of sale and purchase, releasing an initial product in calendar '24, financial '25 and probably revenue in FY '26. So that's certainly how we're looking at it from an internal standpoint.

Could we just add -- just also add to Richard's point, on the data-driven Insights business, as you can see, we're knitting together an organic and as well as an investment acquisition business. The .id business is a very interesting business. That's what Richard flagged and why we're attracted to it. There is $11 million revenue in there. But what is also very good is the way we're utilizing publicly available data, putting that down in the products and services. It adds value to 300 local councils that are not currently customers of the PEXA Group. Now we believe that that provides us numerous opportunities, including the way that's been done in terms of providing those types of services and capability to our existing customer groups, but also it's time to expanding to new customer groups just generally. So we see some broad growth areas that we can start to deepen relationships in Australia on that area. But we also believe some of the things we're learning here in the data-driven insights area can also potentially look in other markets, such as U.K. as well, coming back to Richard's point. And we're encouraged with the progress we're making both in terms of the build in the U.K. with some of the dynamics in the U.K. market as well.

And just to clarify, the revenue that's coming through from the Insights and then eventually from the U.K. at this stage, is it just going to be all netted off in that project and expansionary line, if you look at Slide 33?

It is at the moment, Ed. But obviously, in the future, we will just have a segment view of PEXA. So if you actually look at our annual report, you'll see we have pulled out a full segment note in terms of the Exchange international Insights in 3 separate columns. So that's how we'll report the business going forward. We deliberately left it unchanged for this set of results because that's how it was captured in the Prospectus and we didn't want to confuse in the first year.

And they'll start to become meaningful businesses, to add to Richard's point.

Yes. Yes. No, I understand. And just one last one while I've got you. On the Australian business and the -- basically the price mechanism going forward, do you think you'll be able to achieve continued CPI increases? Or do you think given how sharply CPI is increasing, are we potentially below that?