Plenti Group Limited (PLT) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to Plenti Group Limited's Half Year '25 Results Presentation. [Operator Instructions] Today's presenters are Adam Bennett, Chief Executive Officer; and Miles Drury, Chief Financial Officer. The presentation will be followed by a question and answer session. [Operator Instructions] I will now hand over to Adam Bennett, Chief Executive Officer of Plenti. Please go ahead.

Thanks, Tom, and good morning. And let me start by saying I'm very pleased to be meeting you all for my first half year results as the CEO of Plenti for the period ended 30 September 2024. And having joined Plenti just 4 months ago, I'm delighted to be sharing such a great set of results. And I know they are the result of all of the hard work of many people across Plenti who've been very, very hard working and productive to deliver them. And I'm very, very impressed by the caliber and energy of the workforce here that's -- and their collective ambition for our company. So Miles Drury, CFO, and I will now walk you through our investor presentation. So I know that many of you will be familiar with us, but for those who are not, Plenti is Australia's largest fintech consumer lender. Our cash NPAT is growing strongly as we leverage our proprietary technology to deliver a market-leading customer experience in 3 verticals across automotive, renewables and personal lending. We lend to prime borrowers only and have an exceptional 10-year credit track record enabled by deep and diversified funding from our warehouses and asset-backed securities arrangements. We're unashamedly ambitious to build Australia's best lender. One of the many reasons I joined Plenti as CEO was this distinctive competitive strengths I believe our company brings to market. Number one is our great team. We have an engaged and highly productive team that's committed to building Australia's best lender. Number two is our proprietary end-to-end technology stack. And this enables our fast, simple and easy customer journeys, which are continually improved by our fast, flexible and efficient continuous release cycles. I'm also excited about our 2 platform capabilities across GreenConnect on the renewable side and our Plenti retail lending platform that continue to deliver significant network effects and differentiation within our markets. And number three is our partnership capabilities. Our modern technology architecture enables deep and seamless partner integrations with go-to-market partners such as NAB, Tesla and most recently, Cadillac in the auto space and AGL and Amber Energy in the renewable space. After over 13 years in financial services, I have certainly noticed that technology stacks can be like children. Everyone thinks that theirs are the best. It's therefore nice to hear when other less biased people think your technology stack is great, too. And at Plenti, we have a 10-year track record of delivering award-winning business outcomes and industry firsts across the personal lending, renewables and auto space. We've won over 45 awards, many several times from a range of different organizations, such as FinTech Investment Innovator of the Year, Canstar Outstanding Personal Loan, WeMoney Non-Bank Lender of the Year and the Deloitte Technology Fast 50. And most recently, we've created deep system integrations that enable us to deliver compelling customer propositions for go-to-market partners such as NAB, Tesla and Cadillac. Our technology provides us with a distinctive advantage to deliver great outcomes for our customers and to underwrite and fulfill these loans efficiently and effectively with a leading cost-to-income ratio. So across the following pages, Miles and I will now walk you through our highlights, our operational performance, the NAB strategic partnership, financial results and our outlook. Look, this is a balanced set of results with an improvement against every single measure and demonstrates that we're making very good progress on our goal to build Australia's best lender based on speed, service, reliability and value. It's great to see that we've grown our H1 cash NPAT by 260% on prior period to deliver a $5.5 million result for the half. And this really demonstrates that when we have everything working well together, including our origination, fulfillment efficiency, technology and credit performance, we will deliver great outcomes for our shareholders. This NPAT was the result of disciplined and profitable growth in our originations, and we wrote over $627 million in loans throughout the half. This takes our loan book to $2.28 billion, which was an increase of 14% half-on-half. I'd also like to acknowledge that the Plenti team hit a great milestone during the quarter. We've now originated over $5 billion of loans to customers since we formed. And again, that's a direct result of the vision and hard work of our founders, Dan, Ben and Glenn and the entire Plenti team and the fast, easy and well-priced loan products we have in market. We also launched the NAB powered by Plenti car and EV loan, which I'll speak more about in a moment. And overall, we delivered strong credit outcomes with a 1.1% realized loss rate and a material reduction in arrears rates through the half. These are a great set of graphs that show our ongoing story. We continued our long track record for driving strong loan portfolio and revenue growth with a 35% 3-year CAGR for the loan portfolio and a 49% 3-year CAGR for revenue. This loan book and revenue growth, combined with careful management of costs and thoughtful management of credit helped us deliver the 260% increase in NPAT to $5.5 million. This is also after we expensed $7 million of technology investment. So we're extremely pleased with the result, and we look forward to driving the business for profitable growth in the second half for a more balanced result. Let me now walk you through our operational performance. And across -- I'll do that across our lending verticals and selected technology and operating leverage and credit outcomes. So let me start with automotive. So there was strong performance of $321 million of originations in a very competitive market with our loan book growing 15% on PCP. We remain focused on customer segments, including consumer and commercial borrowers, new and used vehicles, cars, caravans and motorbikes. And we'll continue to leverage our distinctive competitive advantages in our technology, enabling compelling customer journeys and deep integration with go-to-market partners as evidenced by landing the Tesla subvention deal, which delivered some great volumes and launching the NAB auto loan powered by Plenti a week before end of the half. The Tesla subvention program was notable in the period, offering a compelling 1.99% interest rate on Model 3, which helped step up our originations volumes for EVs. We've been very happy with the Tesla partnership so far, and it demonstrates the speed at which we can integrate with and support new business partners to create good commercial outcomes for both Plenti and Tesla. This program will continue into the coming half and will now include the Model Y, which is Tesla's most popular vehicle. We negotiated an agreement with Cadillac as the new exclusive finance provider for EVs, in particular, the LYRIQ, and we also launched the NAB powered by Plenti auto loan. Looking ahead, we're confident of being able to grow our share of what is a significant market comprising $35 billion in annual lending. If I turn to renewables, we delivered record origination volumes in renewables of $88 million, up 15% PCP, translating to loan book growth of 28%. And this was our 18th record half in a row in this channel. We built on our great relationship with the Clean Energy Finance Corporation to secure $60 million of discounted funding, and we continued the growth of GreenConnect as a platform business. This enabled us to grow affiliated applications on GreenConnect by 47%. We're extremely proud to be leveraging our technology stack to help support the renewable electrification of society, and we funded 8,077 solar systems during the half, of which nearly 1/3 had a battery as part of the installation. So looking ahead, we're also confident of being able to grow our share in this significant and critical market. Let me now turn to personal lending. We continue to grow significant volume in the personal channel with a high-quality borrower base. The overall competitor set in the PL space has now settled down, but over the half, we did see lots of moves from competitors on pricing and players using price matching to try and drive volume. Our key partners are now reporting higher lead quality and strong conversion trends. And we've seen improved funnel efficiency through the period as we've been building our business development team to drive greater growth. Our loan book grew 8% on prior year with $218 million in originations, and we've now exceeded $1 billion in personal lending via the broker channel. We've invested in our credit engine to drive greater automated credit decisioning rates and improved borrower conversion metrics. In this vertical, we remain focused on unsecured auto, home improvements, debt consolidation and significant life events and purchases, and we're confident that we can grow our share in this $12 billion market. As I mentioned in my opening remarks, I'm extremely pleased with Plenti's proprietary technology stack. Our technology investments are focused squarely on delivering great customer outcomes, supporting our strategic partnerships and continually driving operational efficiencies. As mentioned, I'll talk to NAB in more detail in just a moment. I've already highlighted that our deep partner integrations are driving profitable growth. However, what I didn't mention is the speed with which we can respond and deliver to meet their needs. We recently delivered the tailored subvention offer to Tesla and had it up and running in less than a month. We've also commenced some experiments using artificial intelligence in content marketing and document processing. For content marketing, we're experimenting with generative AI tools that create content for our web pages that responds well to online search terms and makes our digital marketing more effective and cheaper to manage. We've also successfully piloted optical character recognition and AI machine learning models to extract data from auto dealer invoices, interpret it and prefill information for our settlements team. This is moving us closer to our goal of one-touch settlements, increased straight-through processing and an even lower cost to income. Lastly, we continue to invest in our core platform ledger to deliver additional customer benefits, increase processing efficiency and underpin our ability to scale our loan book. I'm extremely happy that we continue to demonstrate the benefits of our scale and technology-led efficiency. As you can see from these graphs, we continue to improve our cost-to-income ratio, and our average loan portfolio per FTE has increased significantly over time. We remain very confident that we'll grow our loan book at a much faster rate than our costs. At Plenti, we take great pride in our credit decisioning capability and its deep integration with our proprietary technology. We continue to demonstrate differentiated credit performance. We're focused on lending to prime borrowers with strong credit characteristics and a typical Equifax score of 840. Our annualized net loss rate is declining over the last half, and Miles will provide some more detail about our credit outcomes shortly. Let me talk about our relationship with NAB. So we remain very excited about the launch of the NAB auto loan powered by Plenti product on the 23rd of September, obviously, only a week before the end of the half. Marketing is underway via targeted emails. It's available in the NAB Internet banking app, and it will be available on the NAB desktop Internet banking shortly. While we're expecting only moderate volumes over the next few months, we then anticipate growing volumes as we proceed through calendar 2025. We're also pleased to be working with NAB on a renewables offering, which will also launch sometime in 2025. NAB really has the potential to be a significant accelerator of our growth, and we'll continue to work with them closely to identify mutually beneficial opportunities. So let me share a little bit more detail on the NAB auto product. As you can see, we launched the staff pilot in June, followed by the launch to existing NAB customers at the end of September. We expect to offer the product to NAB's new-to-bank customers in calendar year 2025. Plenti and NAB's product and technology teams are continuing to work together closely on enhancing the customer experience and streamlining operational efficiency aspects of the product. As you can see from the graph, we've seen some moderate growth since customer launch, which was exactly our expectation. Once we've completed the experience and efficiency work due to finish by March 2025, we'll then accelerate our efforts, and we'll see more substantial volumes in calendar 2025. And what you can see on this slide is just some of the screenshots of how we're rolling out and what that -- how that renders to a customer. So it's a very easy-to-use compelling customer proposition that we've put together with NAB. So I'm now going to pass to Miles, who's going to talk us through our financial results.

Thanks very much, Adam. Look, I know I don't have a very large social media following, but for those who might have seen my LinkedIn post regarding the 2Q '25 result, I used the #HappyCFO. And I think it would be fair to say that this applies across these numbers also. I was very pleased with the financial results that the business delivered in the half with basically every line going in the right direction. This page summarizes some of the key highlights, which I will step through in more detail on the following pages. The key point I want to make about this result is that it demonstrates what the earnings capacity of this business is when you grow the loan book, manage margins and losses effectively and achieve cost operating leverage. From the first half of '24 to the first half of '25, that set of drivers delivered the increase of 260% in cash NPAT to $5.5 million, which was a very strong result. On Slide 22, we have some of the detail, which talks to the average loan book, which is the starting point for driving economic value in the business. You can see that we grew average loan book by 17% year-on-year and 6% on the prior half. Driving that through the increased yield on the loan book, you get to an interest revenue number for the half of $121.9 million, up 27% on the prior year. Originations were up solidly on the second half of '24, but only slightly on the first half of '24. And it will be fair to say that accelerating originations is a primary focus of ours to maintain loan book growth. I also note that amortization did step up slightly in the period. It's hard to draw exact conclusions as to the drivers. But given the effect is broadly seen across the portfolio, it is consistent with consumers having some more discretionary cash and being conservative in using that to repay debt rather than to spend. This is also consistent with the improved credit loss metrics that we have seen in the business. Slide 23 is our usual margin slide, which shows a slight uptick in NIM on the prior 2 halves. As noted on the slide, there are a number of factors supporting NIM in the period. We continued our ongoing focus on writing profitable loans, and our treasury team executed very effectively into strong capital markets to deliver favorable pricing outcomes on ABS deals and warehouse extensions. We also had the slight change to some accounting assumptions that we'd flagged at the full year. Originations into the second half of '25 are sitting at around 5.6% NIM, which, as I've explained before, is about consistent with a stable portfolio NIM, given that we need to originate a bit above book average given high-yielding loans in the portfolio amortize faster. On Slide 24, I've noted a few times that credit was a highlight of the half and particularly the trend of improvement in the second quarter. We had gone into the half expecting an uptick in losses on the prior half. And actually, the final result was below the 2H '24 number. We did benefit from a debt sale in 1H '25, but it was still a very strong result. I've also flagged that in addition to losses performing well, we were pleased by the improvement in arrears across all aging categories. While we would expect arrears to reduce in this part of the year, given the usual seasonal trend in the Australian market, the size of the improvement exceeded our expectations. You can see this improvement reflected in the ECL value, which is heavily influenced by the size and distribution of arrears. It reduced 10% year-on-year as a proportion of total loan book from the 31st of March to the 31st of -- to the 30th of September. We've also provided some visibility of how the current half has started. And while we should expect arrears and losses to tick up through the remainder of the year, the second half has clearly started well. Slide 25 talks to operating efficiency in the business as we've grown the loan portfolio. To a fair extent, this slide explains the improving business profitability journey that Plenti has been on over the last few years, with dollar margin growing at twice the rate of costs. This all comes down to our effective use of technology across the business. So we've seen the right trend in terms of the profitability jaws of the business. And Adam and I are both very focused on continuing to drive this further through ongoing improvements to our processes and technology. Slide 26 brings this all together in the P&L. I won't step through the details as the profile here is really explained by the drivers I've walked through on the last few pages. As always, it's worth noting that we expense all product and technology costs rather than capitalizing and amortizing them. This is great for spend discipline from a CFO point of view and also ensures a cleaner relationship between cash NPAT and cash flow. One technical point to note is that we do still see fluctuations in the tax line due to the interplay of movements in the value of our hedging positions and available tax losses. The key point here is that these are noncash accounting numbers and will net to close to 0 over time and therefore, should be ignored in assessing business performance. Perhaps a little lost on this page is that had it not been for the noncash hedge-related income volatility, statutory NPAT for the period would actually have been north of $5 million. Finally, on Slide 27 regarding funding. It's been another really strong half from a treasury point of view in terms of effective execution of the team. We clearly now have a very well-established institutional funding platform that has grown significantly with the business over the last 5 years. Our total securitized book is over $2 billion. And with close to $800 million of ABS deals issued thus far in FY '25, we've now executed close to $3 billion of total public debt markets funding. It will be fair to say that generally, the deals get easier, the more established your program is and the more investors understand your product. We've just completed a $330 million appeal and Green ABS in the last few weeks and demand for the product was excellent across the stack. Debt market conditions have been very robust this year, and you can see that in the tightening weighted average note margins on recent deals. We're also likely to seek to take one further deal to market before the end of the financial year to take advantage of strong financial conditions. As always, with further financial detail in the appendix, including a bridge of corporate cash flow and balance sheet details. And with that, I'll pass back to Adam to discuss our objectives and outlook for the full FY '25 year.

Thanks, Miles. So looking ahead, our priorities for the second half remain growth, profitability and efficiency. And I'm already happy to note that our origination volumes for October are strong, up 28% on PCP. Having just delivered a 260% uplift in first half NPAT, a more balanced profile is expected in the second half compared to prior years. We remain on target to deliver scale efficiencies as we push toward a $3 billion loan book. Let me close my remarks by saying that I'm extremely pleased with the set of results and the hard work of everyone in the Plenti team. And having now been in the CEO role for 4 months, I'm very excited about the opportunities to leverage our distinctive advantage in technology and deep partner integration. So looking ahead, we'll continue our focus and disciplined execution in our 3 existing lending verticals of auto, renewables and personal lending. We'll leverage the NAB relationship to drive moderate auto growth and exploring new renewables opportunities, and then we'll go hard next year. We'll continue to leverage our advanced technology platform to deliver a fast, simple and reliable customer experience, and we'll continue to drive our cost-to-income ratio down through greater automation and continuous improvement. Let me pause now and open it up for questions.

[Operator Instructions] Our first question comes from James Bisinella.

Can you hear me?

We can.

Excellent. Congratulations on the result. Just one from me, just in terms of the October originations number that you've given, sort of up 26% on PCP, obviously, a good result. I think you were up 11% in September. So it looks like the run rate's accelerating there. Can you give us a bit of an idea in terms of, I guess, the verticals that sat across and whether you think you can continue to comp that pretty strong number?

Yes. Look, what we're doing, James, is really focusing on profitable growth across all 3 of those verticals. And that's really rejuvenating all of our efforts across the company and making sure we've got really good alignment from top to bottom. And as Miles outlined, when everything is going well, when our sales force is really delivering good interactions with our brokers, our direct team is going well, the renewables guys are all firing on all cylinders, when we've got all our fulfillment capacity going well, when all of those things are in alignment, we will see our volumes increase. And that's pretty much what we're now focused on really profitable growth, making sure everyone's aligned and pulling in the same direction.

And actually, James, from a channel point of view, September was actually kind of all channels, PL, renewable and auto. Actually, all 3 of them had good periods, and there were a number of channels that actually hit all-time records. So it was a good month to see across, so focused on that, yes.

Our next question comes from Liam Hegarty-Cremer.

Can you hear me?

Liam, yes.

Well done with the result, guys. Also, Miles, I wouldn't sell myself short in the social media following. You've got a couple of devout followers on this end. I just had a -- actually had a few questions around the NAB partnership. I note the 5-year term Ford sort of agreement or deal. I'm just wondering if that comes to the end of the term and for whatever reason, it doesn't go any further, can you talk about how that goes in terms of the loan being on NAB's balance sheet, I believe, and how that would go about? And also, I understand that NAB sort of is in charge of the marketing spend. If you can talk to how your impact on that has been and if you're happy with how they've gone about that side of things.

Yes, absolutely. I might take that. Just in terms of -- look, I mean, the first point is if at 5 years, our objective is going to be making sure that, that partnership is operating really effectively. So both NAB and us have a strong incentive to be able to continue with, and that's certainly the expectation and there are definitely provisions in there with the base case that it continues to roll forward. I mean if for any reason, it was to terminate, we do effectively continue to receive the loans we continue to manage through the life of that loan portfolio, so it would amortize down, but we'd continue to get paid our servicing fees on the amortization of the loan portfolio as it runs off. So there's no cliff that's involved in that in the hopefully unlikely case that it doesn't continue. Look, in terms of marketing, I mean, it's obviously fairly early days. There's been both on our side and NAB's side. We're not -- we're seeking more to [ bed ] the product in, make sure things are working really well, continue to refine it and also do further work on their side and on our side in the back end of some of the technology platforms. So most of the marketing to date has been direct mail. We've been very comfortable with the level of investment they've made. That's actually been stepped up. I think last week, it was stepped up to another level, and we've seen that flow through, "coming through top of funnel." But I think we've been pretty clear that for the first sort of 3 to 6 months, we're not expecting big investment. Once that's all -- the back end is all working really well, then going into the sort of the next, next financial year is kind of when we want to put our foot down on the gas and be working with them to make sure that's marketed as effectively as possible.

Thank you, Miles and Adam. As there are no further questions, we'll now conclude the webinar. Thank you all for joining Plenti Group Limited's Half Year '25 Results Presentation. Good morning.