REA Group Limited (REA) Earnings Call Transcript & Summary

Welcome to REA Group Limited Half Year Results 2024 Conference Call. [Operator Instructions] Please be advised that today's conference call is being recorded. I would now like to hand the conference over to your first speaker today, Alice Bennett, Head of Investor Relations. Please go ahead.

Good morning, and welcome everyone. My name is Alice Bennett, Head of Investor Relations and I'd like to thank you for joining REI Group's 2024 half year results presentation. Before we commence, I'd like to acknowledge the traditional owners of country throughout Australia and recognize their continuing connections to lands, waters, and communities. We pay our respects to aboriginal and Torres Strait Islander cultures and to elders, past and present. Today, you'll hear from REA's CEO, Owen Wilson; and Janelle Hopkins, REA's CFO. Owen will talk to our overarching financial performance and strategic highlights for the half. He will then hand over to Janelle to talk to our financial results in more depth. And following this, we'll be happy to take your questions. With that, I will pass to Owen to get us started.

Thanks, Alice. I'd like to welcome everyone this morning and also acknowledge the traditional owners of country throughout Australia and pay my respects to elders, past and present. REA has delivered an outstanding result for the half, driven by strong yield growth and the benefit of more normalized conditions in the property market. Interest rates stabilized and in the healthy listings environment, customers continue to prioritize our premium products to leverage our highly engaged audience. REA India's momentum also continued with price, new depth products, and customer growth driving a strong revenue increase. Looking at our results from core operations for the half. Revenue was $726 million, an increase of 18%. EBITDA, excluding associates, was $439 million, an increase of 22% and NPAT was $250 million, also an increase of 22%. Reported NPAT declined 37% to $127 million due to a reduction in the book value of our investment in PropertyGuru Group. Janelle will provide further detail on this later in the presentation. We've announced a fully franked interim dividend of $0.87 per share, a 16% increase over the prior corresponding period. Before we move into operational highlights, I'd like to spend a moment on market conditions. The Australian property market normalized during the half with the stronger markets of Melbourne and Sydney leading the way. Nationally, new listings were down just 1% on the 6-year average in the second quarter. Continuing the trend from Q1, the 2 largest markets experienced significant year-on-year increases, offset by weaker conditions in Brisbane, Adelaide, and Perth. Contributing to the health of the market and vendor confidence, interest rates stabilized during the half and each of the major capital cities experienced house price growth. As property prices and sales volumes lifted, so too did lending. In December, the value of new mortgage lending was 11.7% higher year-on-year. This slide shows 2 views of Australia's strong demand for property. The chart on the left highlights national buyer inquiries over the last 5 years. The extraordinary level of demand during the peak of the pandemic is clear, particularly in FY '22. In this half, inquiries returned to growth and a 15% increase on the prior year. On the right, you can see the reduction in median days on site over time. Demonstrating the strength of the market, properties consistently sold faster in the half compared to the prior corresponding period. Median days on site were consistently below the 6-year average. We achieved a number of significant highlights, as you can see on this slide. Our app first consumer strategy saw Australians deeply engaged with our personalized member experiences and continually return to our platforms. Premiere+ depth **penetration reached record levels with customers preferencing our premium products in the strengthening market. Our Mortgage Choice Freedom product suite powered by Athena continues to outperform and now represents 6% of total submissions. In India, Housing.com continued its market leadership, and the platform achieved record app traffic. The integration of CampaignAgent is complete, and we're seeing the benefits of the collaboration between the REA and CampaignAgent sales teams with pleasing levels of new client acquisition. Our strategic priorities are consistent and clear, and our purpose is to change the way the world experiences property. To deliver on this, we're focused on engaging Australia's largest consumer audience, providing our customers with superior value, and delivering a unique data and insights as we extend our core and build next-generation marketplaces. I'll provide highlights for the half from each of our key strategic areas in the remainder of the presentation. Starting with audience. Realestate.com.au is Australia's #1 address in property in every state. As I indicated at the Q1 results announcement, we have transitioned the reporting of our audience metrics to Ipsos iris in line with the Australian digital industry. Differences in the Ipsos methodology mean the audience volumes we report today cannot be compared to older metrics, which were based on Nielsen. I'm pleased to say, however, that the most recent official Ipsos data for December shows realestate.com.au had 4.3x the number of visits for the month compared to our nearest competitor. Our audience is not only the largest, but our consumers continually return to our platforms and spend more time deeply engaged with their experiences. Demonstrating the strength of this engagement, the total time consumers spend on our platforms in the half was more than 5x that of our nearest competitor. As Australia's #1 property app, we also hold a strong 2.8x lead in app audience. Moving to membership experiences. Our engaging consumer experiences helps deliver the highest quality leads to our customers while also providing deep insights. Our active membership base continues to grow, increasing 17% year-on-year and around 70% of all visits to our app are logged in users. This provides us with greater insight into consumer behavior and feeds our machine-learning models to continually enhance our personalized experiences. Inspections are a fundamental step in the property journey. And in November, we launched a new inspection registration tool. For our consumers, this saves time and helps streamline the inspection process. While for our customers, it enables a better understanding of demand, helping them maximize their campaigns. More than 10,000 customers have already used the new tool in the 2 months since launch. The Property Owner dashboard is key to connecting consumers with customers. This half, our marketing-leading property valuation real estimate helped drive a 62% year-on-year increase in visits in the dashboard. We now have more than 30% of properties in Australia being tracked by their owners. Customers continue to be highly engaged with our premium products with record Premiere+ depth penetration, underpinning residential revenue. Our social extension product, Audience Maximiser also achieved record penetration. The strong performance of our advertising products also extended to the commercial segment with record penetration in our premium commercial products. We achieved strong growth in our customer self-service platform Ignite with a 20% year-on-year increase in monthly active users and a pleasing 32% growth in customers on the platform. We continue to enhance value with Ignite and I'll share some more detail about the platform shortly. I've previously spoken about our new PRO subscription, which officially launched in October. For $599 per month, PRO enhances the value we deliver across our agency marketplace and agency services. It enables agents to win more listings and set their agency apart with premium seller-lead products and enhanced agency profiles. Leveraging the most comprehensive supply and demand data, PRO provides customers with deeper insights into a seller's readiness to sell and it helps agents with recommending the right price point, helping build vendor confidence. Uptake remains in line with our expectations, and we're looking forward to sharing more about our progress in the second half. Ignite first launched at the end of 2019. With the addition of many valuable features in the last 4 years, more than 60,000 customers have used the platform. It's a key differentiator in our customer offering, enabling agents to easily do business via centralized platform. This slide highlights the value Ignite provides customers. Lead generation, branding, and listings can be managed into one place alongside access to powerful insights and workflow efficiencies. Agents recognize the unique value in Ignite and utilizing it as a powerful tool across the full scope of their work. Turning to next-generation marketplaces. Our data business, PropTrack, delivered double-digit year-on-year revenue growth for the half. PropTrack's data and solutions also power many of the group's products and experiences. Our propensity to list score was added to Ignite. Exclusive to PRO customers, this provides greater accuracy in a consumer's likelihood of listing their property for sale, enabling agents to better prioritize leads. In this half, PropTrack launched its observable market assessment solution, which enables the digital validation of contracts of sale and helps drive significant efficiencies for our banking customers. Our Financial Services business is well-positioned to capitalize on the market recovery. After subdued lending conditions early in the half, consumer sentiment improved and submission volumes finished up 1%. Mortgage Choice Freedom, our higher-margin product powered by Athena Home Loans continues to perform extremely well and now represents 6% of total submissions. Pleasingly, greater indication with the realestate.com.au app combined with our ongoing investment in the Mortgage Choice brand, saw overall lead volumes increase 27% year-on-year. Moving to our international businesses. REA India delivered 21% year-on-year revenue growth with price rises, an increase in depth penetration, and continued customer growth driving core Housing.com revenue. Our focus on SEO and targeted marketing supported the flagship sites' audience leadership position. Average monthly Housing.com visits finished the year at 1.4x the closest competitor. We continue to invest in the app experience to grow this audience. We've seen strong growth in downloads and traffic with Housing.com achieving a 46% share of app downloads for the half. Turning to our investment in PropertyGuru. The group delivered a 13% year-on-year revenue increase in Q3 with growth in Singapore and Malaysia, helping offset challenges in Vietnam. Singapore continues to perform strongly, whereas consumer sentiment and transaction volumes remain low in Vietnam, where government policy intervention continues to impact the market. The outlook for Malaysia has been affected by rising interest rates and a weakening economy. From a product perspective, Property Guru continues to drive customer value, using machine learning to power a new listings description generator. In North America, Move revenues remained under pressure with a 15% decline in the first half. After more than 20 years of generally declining interest rates, inflationary pressures in the U.S. pushed the 30-year mortgage fixed rate to around 8% in late 2023. As a consequence, as you can see on the top chart, existing home sales have dropped to historically low levels, reaching the low point of the GFC. Pleasingly, interest rates have started to decline from the peak and transaction volumes should rebound as interest rates come down. We've recorded several highlights in the half as we work towards our environment, social and governance goals. The group achieved its highest -- equal highest employee engagement score of 88%, demonstrating the impact of our high-performing culture and our highly engaged workforce. In December, REA was included in the Australia and Asia Pacific Dow Jones Sustainability Indices for the second consecutive year, placing us among global sustainability leaders. To ensure we stay ahead of consumer expectations and emerging legislation, we've established new programs of work to uplift and expand REA's privacy and security practices and address the proposed new sustainability reporting standards. Against the backdrop of the strengthening market, REA is well positioned for continued growth as we invest in our core and expand our next-generation marketplaces. This strong position offers exciting opportunities for the second half and beyond. Finally, a comment on the outlook for the property market. The 2024 calendar year is likely to be quite stable from an interest rate perspective. Following the latest inflation numbers, we're increasingly confident we've reached the peak of the interest rate cycle and potentially we'll see a rate cut in the second half of the year. In these conditions and with the continuation of strong demand drivers, we expect a healthy property market for the remainder of the calendar year with a good supply and demand balance. For listings, we expect the current trend to continue for calendar 2024, which is at or around the 6-year average. This is an excellent environment for REA to continue to grow. I'll now hand over to Janelle to take us through the financials in more detail.

Thanks, Owen, and good morning, everyone. REA has delivered an excellent result for the half, driven by strong yield growth in a healthy market. From our core operations, revenue increased 18% to $726 million. Operating expenses increased 11% to $287 million. EBITDA, excluding the results from our associates was $439 million, up 22%, and the group delivered NPAT from core operations of $250 million, up 22%. The group results from core operations differ from reported statutory results with a number of one-off items excluded. On Slide 36, we provide a summary of the reconciliation between the core and statutory results. The biggest driver of the variance reflects the PropertyGuru impairment, which I'll touch on in later slides. Turning to our Australian residential business and trends in the market. Residential revenues increased by 19%, with double-digit yield growth and stronger listings, partly offset by deferred revenue. National new Buy listings increased by 4%, with outperformance of the Sydney and Melbourne market continuing throughout the half. Sydney and Melbourne new listings saw a growth of 19% and 18%, respectively. However, all of the other major metro markets are down year-on-year. Brisbane, our third highest yielding market was down 6% and Perth declined 11%. Whilst Q2 listings growth rates were particularly strong, it's important to remember that the prior year Q2 was close to record low volumes. We achieved an impressive 19% year-on-year uplift in buy yield driven by the 13% average national price rise, year-on-year growth and overall depth and Premier+ penetration and a 3% positive geographical mix impact with Melbourne and Sydney listings outpacing national growth. This excellent revenue outcome was negatively impacted by 3% due to revenue deferral. The strong Q1 listing volumes saw a 7% deferral benefit into Q2. However, the strong Q2 November, in particular, saw most of this deferred out into Q3. As we've highlighted previously, while deferrals can at times add volatility to our residential revenues, deferral simply reflects the timing of when listings revenues are recognized and will typically even out across the full year. Rent listings remained subdued, down 2%. However, this was more than offset by an 8% price rise and increased depth penetration, resulting in growth in rent revenue for the half. The following slide shows both the penetration and mix of depth listings in the residential business and the success of our premium listings products. The first half saw record Premier+ penetration after another strong FY '24 recontracting period with growth in all markets. We not only saw increased total depth penetration, but also continued improvement in product mix with customers migrating up the depth ladder from feature, highlights and Premier to Premier+. Turning to Commercial and Developer. Revenue for the year increased 11% with strong growth in Commercial, tempered by lower growth for Developer revenues. Commercial revenues benefited from strong yield growth driven by an 11% price rise and continued growth in depth penetration. Volumes were high across both sale and lease, and we saw listings growth in all major states of apart from Western Australia. The Developer business has remained challenged with well-documented issues such as increased input costs and labor shortages, resulting in project launches being down 23% in the half. Despite this, we saw modest growth for Developer revenues, benefiting from the prior year price rise and increased duration with project profiles staying on the slide for longer. Media, Data and Other revenue was up 21% to $60 million, assisted by the consolidation of CampaignAgent from July '23. Excluding CampaignAgent, revenues were flat. PropTrack delivered double-digit revenue growth. However, this was offset by lower Programmatic Media and Developer display. Turning to Financial Services. Revenue increased 4% to $36 million, a 4% reduction in settlement was more than offset by growth in our white label products driven by mortgage choice Freedom products and early signs of stabilization of runoff rates. We were pleased to see quarter-on-quarter improvement in both submissions and settlements. Submissions improved from a 5% decline in Q1, 7% growth in Q2. And settlements while still in negative territory, improved from minus 7% to minus 2%. REA India has delivered a strong performance during the half with revenue growth of 21% to $44 million. As the chart on the left-hand side shows, revenue was driven by growth in REA India's property advertising businesses. Housing.com benefited from price rises, increased depth penetration and continued customer growth. And target growth was assisted by strong market conditions. Growth for adjacency revenues on housing edge was flat year-on-year with some user attrition following increased convenience fees. Adjacencies made up 28% of total India revenue in half 1, down from 34% in the prior year. India operating cost growth of 7% in half 1 was driven by higher employee and marketing spend. I would note that cost growth is expected to be higher in the second half, reflecting both phasing of spend across the year and increased marketing spend. Core EBITDA loss has improved 16% to $19 million for the half. Moving to our strategic investments. Total losses from equity accounted investments was $13 million in the first half. Move equity accounted contribution declined from a loss of $7 million to $11 million. Move's revenue was 16% lower with the continued market downturn, resulting in a 9% decline in leads and lower transaction volumes. This was partly offset by employee cost savings. For more information on Move, please refer to the News Corp results release. PropertyGuru's contribution was breakeven, an improvement on the $2 million loss in the prior period. While this performance is pleasing, we have reassessed our PG valuation in light of the continuing property market challenges in Vietnam, macroeconomic impacts on the Malaysian business and uncertainty over the timing of recovery. Taking this into account, we have reduced the carrying value of our investment by $120 million to $166 million. Despite this write-down, we remain positive on the medium- to longer-term outlook for Property Guru given its strong leadership position and exposure to long-term growth in its core markets. During the half, we also made 2 small investments for approximately $10 million, including a 36% share in Arialytics, a provider of commercial real estate information and technology in Australia and a 21% share in Easiloan, a technology platform for end-to-end digital processing of home loans in India. These businesses are early stage and investing for future growth, and we would anticipate them to have a small negative impact on the associates line in the near term. On the next slide is our core operating jaws. As you can see, Australia jaws for the half were open. Excluding the impact of CampaignAgent acquisitions, core Australia's operating costs increased by 9%, reflecting a number of key factors. The largest driver was employee costs driven by wage inflation, increased payroll tax in Victoria and incentives, which has increased in line with strong performance. Higher technology costs impacted by double-digit price rises from a number of suppliers and increased data usage and increased COGS associated to products such as Audience Maximizer. Including CampaignAgent, Australian operating expenses increased by 12%. As we have highlighted earlier, the group continued to invest to support ongoing growth with investments focused on a number of new products and experiences across multiple lines of business. Some areas of spend included enhancing consumer experience, including investment into AI, new product delivery and importantly, continued to enhance existing products. An example of this would be Premier+, where we invested to launch the product with further investment in the second year for new features such as listing optimizer. And we're in the early stages of additional investments that will be required ahead of changes in privacy legislation with continued spend likely over the next 18 months. CapEx to revenue was 8% in the half. However, we would anticipate a rate towards the top end of that 7% to 9% range in '24 and '25. As a result of the continued investments, total depreciation and amortization is expected to be in the range of $110 million to $114 million in FY '24. Turning to our cash position. We ended the half with a strong closing cash balance of $314 million. The group delivered operating cash flows of $272 million, which is the addition of the first 4 blue bars on the graph. As you can see, the strong operating cash flow allowed us to continue to invest in the business organically and through M&A and also deliver strong shareholder returns in the form of increased dividends. At 31 December, the group's total drawn debt was $398 million, of which post balance date, we have subsequently repaid $124 million. Finally, on current trading. January national residential new buy listings were up 12% year-on-year, with Sydney and Melbourne listings, both increasing by 28%. The December and January listings are notoriously volatile, given smaller months of listings and a number of public holidays. The combined listing for December and January were in line with the 6-year average. If this trend continues for the remainder of the financial year, we would anticipate FY '24 year-on-year listings growth of between 3% and 5%. Residential buyer growth is anticipated to be lower for the second half as the first half outperformance of Melbourne and Sydney listings is unlikely to continue for the entire period. We continue to target positive operating jaws and have lifted our expectations for FY '24 group operating cost growth from low to mid-teens to mid- to high teens. Excluding M&A, operating cost growth for both Australia and India is expected to increase low to mid-teens. Growth in Australia will reflect increased employee costs due to accelerated strategic investments, higher technology and marketing costs and an increase in revenue-related variable costs, while India will be driven by higher marketing spend and continued growth in employee costs. EBITDA losses in India are anticipated to be lower in FY '24 compared to FY '23. The group expects losses from combined contributions from associates in FY '24 to be between $25 million to $30 million, reflecting continued tough market conditions in the U.S. and investment for future growth by early-stage new investments. On a final note, we're excited about the opportunities ahead and remain focused on investing prudently across our Australian and Indian businesses to drive growth for both FY '24 and beyond. I will stop here. Operator, can we please now open the line for questions.

[Operator Instructions] Our first question comes from Lucy Huang of UBS.

I've got 3 questions. I might just ask them altogether. Just firstly, with January volumes, I think up 12% you mentioned then quite volatile due to holidays. But just wondering, if I can given the strong start, what should we be expecting in terms of comp system in March given your held for now that kind of listing growth guidance of 3% to 5%? And then just as my second question, any color you can shed on how you're seeing [indiscernible] interest volumes coming into January, just to get a gauge on, I guess, how geo mix is going whether geo mix is starting to unwind in this quarter? And then just my third question on Premier+ penetration is very strong again this half. Just wondering if you can just talk about how much this contributed to, I guess, just growth in the quarter? And I guess how much more scope do you think Premier+ in terms of -- how much more penetration can actually see moving forward?

Thanks, Lucy. I'll take questions 1 and 2 and Janelle will take 3. In terms of listings, they were very pleasing in January, and it is a very low listings month. So it doesn't take much volume to get some high percentage movements. We're now a week into February. That trend is continuing into February. The market remains up at sort of similar levels. And Melbourne and Sydney are still kind of leading the way in terms of that growth. And the outlook in sort of the next few weeks just speaking to customers, they are very, very busy. So it does look like that momentum is going to continue into February and possibly into March. If it does, we're likely to be closer to the top end of that 3% to 5% range we've given, but we still think within it. In terms of your geo mix question, Brisbane is recovering. Brisbane listings were down in the first half as we move into the new year, they've turned positive. So it does feel like that momentum we have in the market where sort of Melbourne and Sydney led us into the clients and then they led us out. It feels like the others might be starting to catch up, which should diminish that really positive geo mix a little bit in the second half, which is what we flagged.

And on overall depth penetration and mix. Look, we're really pleased with the recontracting period we had last year. And you can see that on the chart where Prem Plus continued to grow as a percentage overall. When you think about that 19% yield growth kind of flagged at 13% price, we did have a healthy contribution more from mix than depth overall, but still contributions from both. We've got the 3% from geo mix. But we did get that overall year growth slightly tempered by lower subscription and add-on revenue growth. So it was a healthy number for the half. And I would continue to say we're not done. I think there's still a lot of opportunity we have to continue to increase further up the overall depth over the coming years.

Our next question comes from Eric Choi of Barrenjoey.

Good result, I think, just going to double check if it is for the question. So just quickly. First one, on your jaws.

Definitely you Eric, definitely you.

Well, well, the first one is on like you guys have kind of upped your cost, but it feels like that's on the back of better revenue. So just thinking for the logic, I think your revenue growth needs to be potentially around 20% for the full year for that cost guidance and kind of below single-digit historic jaws to work. And so if that's the case, it kind of implies the second half revenue growth needs to accelerate versus the 18% you did in the first half. And I wonder if I start with that logic up to Janelle and if that's right, can you just confirm it's like the revenue deferral normalization and then you're comping that finance write-down. So those are the kind of the key reasons why revenue should accelerate in the second half? And then second one, just -- I guess a follow-on on the market mix but more from FY '25 because you guys are very helpful and you tell us the national listings are tracking in line with the 6-year average. But if I look at CoreLogic data, it looks like Sydney and Melbourne might be about 10% above. I don't know if that's right. But if it is, does that mean there's a potential market mix headwind into FY '25? And then thirdly, I know Owen is not going to comment explicitly on price increases, but just thinking about how you guys think about it, which is in 3-year blocks and on total yields, just logically, it feels like '25 could be a bit higher to offset any market mix and if there's no new product drop. But then as we go into FY '26, would we be thinking, could it be a bit lower if you decide you're not going to do a new product [Technical Difficulty] and there's no sort of market mix headwinds?

Okay. I'll start, Eric. Obviously, second half revenue, we are line aside of part of the yield, but will really impact -- the impact is depending on what happens around things like geo mix and overall listing. But you're right, some of the drivers that have dragged in the first half around revenue deferral is likely to unwind in the second half. I need to put that -- that depending on what happens around May and June listings we could potentially impact that number. But overall, you would expect deferral to normalize into the second half. And you're right. We haven't done -- we will do another review of the loan book in the second half. But assuming that's not there, we would anticipate that to reverse and have no impact in the second half. So that will be -- that's the benefit. And then thinking about cost, a couple of points on that. We did flag in Q1 that we partly -- one, we're phasing our costs into the second half, and that was already planned in our expectations for the budget, and we did also say in Q1, we wanted to see line of sight over how the market was performing and our expectations on revenue before making any decisions around looking at our cost base. And based on what we know today, we have made a decision to uplift our overall cost to accelerate some of our strategic investments in line with what we can see from a revenue perspective. So we're on balance, very comfortable with the cost guidance we've given in our expectations for the full year.

Look, I'll take the mix and price questions, Eric. You're right. Melbourne and Sydney are currently trending above the 6-year average. And then the other geographies are obviously, therefore, trending below the 6-year average, which is why the national numbers are kind of at. As I said in the remarks, I think we're going to have hopefully one of the most stable interest rate environments we've had for some time this year at were to make it one rise, but I don't think so. And we probably won't get a rate cut towards the end of the year. So it could be a very benign interest rate environment. There's still incredibly strong demand. We've still got very healthy levels of immigration despite the government efforts to dial that back. And so when demand is strong, when the lenders are out there lending, it's a great market to say your property. And prices are therefore going to, I think, hold across the course of the year. So in that market, we'll have good supply and good demand. As we go into '25, obviously, we will cycle over some pretty strong Sydney and Melbourne comps. But I think they'll be offset by better performance in the other markets. Now the impact on geo mix will possibly be slightly negative. It really -- it is hard to call out. Total listings are what I focus on. I think at this rate, if we stay at this number, you're probably looking at flattish listings going into '25, which a reminder, flat listings is great. I mean we do very well in a flat listings environment. In terms of price, a couple of assumptions for us in your thinking there, Eric. I mean, the comments on no product drops. I wouldn't assume that. I can't think of a year where we haven't improved features or launched new products. So that's probably not a valid assumption for '25 and '26. In terms of our pricing, it's the same construct that we always have. We price according to the value that we think we're delivering and that we can justify with that value. We're very confident we're continuing to deliver value. We've got more value coming. I can't tell you what it is. And who knows, we may have more products. I can't tell you that in advance. What I can tell you is we've signed off on our price increase this week with our Board, and we'll be taking it to market towards the end of March.

Can I follow up on Janelle's comment. Just putting together Janelle's comment on more cost marketing and more value. Like just looking at your depth data, your depth is going up, but I greatly suggest that your depth is going up in some of the geographies where domain depth is falling, such as BC and WA. So I'm just wondering, is some of that costs as you do with -- I don’t know how to put it, but I guess, putting the foot down and building the lead versus the #2.

No. Look, no. In short, I think what you're seeing is customers voting with their feet in those geographies according to value and audience and leads. We're not spending money to try and drive particular geographic penetration. That's not worth going. We've got a lot of things we want to build to deliver future revenue growth. And the rate at which we build them depends on the rate of our revenue growth. And so we've always tried to manage to those positive jaws, and we wanted to get a greater line of sight on this revenue recovery before we decided to take those actions to start investing for FY '26 revenue growth and '27 growth. And that's what we're doing. We've also got things like privacy we've got to invest in, which don't have a direct revenue correlation, but it is something consumers will value increasingly. So we're all going to have to do that. But no, it was us taking deliberate, I think, cautious decisions in the first half and now that we're more confident on the size of our revenue this year, we can make more strategic investments.

Our next question comes from Tom Beadle from Jarden.

Just my first question is just a clarification on the cost guidance. You've obviously got better visibility on your revenue, which has obviously given you the confidence there to invest. What I'm trying to understand is how much of this increase is a pull forward versus an incremental step up into FY '25? I know you're not going to give FY '25 cost guidance, but it would be great to just understand, I guess, the nature of this step up a bit better. And just on Commercial and Developer, I thought it was nice to see the solid performance in that business. But a couple of questions there. Just in Developer, Janelle, you mentioned that it benefited from higher duration with project profile. I guess, how much of that duration benefit could potentially unwind if conditions here normalize? And just generally speaking, how should we be thinking about where each of those Commercial and Developer businesses currently sit versus mid-cycle?

So Tom, your first question on cost is more the phasing first half into second half and the step-up? Is that where...

And then pull forward.

And then pull forward.

Yes, just understanding if there's a pull forward into -- from '25 or if that sort of annualizes and the base we should be thinking about a higher base in '25?

It's not really a pull forward. It's more of the fact when we think about our overall slate of things we want to do, we have a waterline, and we think about what are the must things we have to do and what are the things that we can flex up and down depending on what's going on from a market perspective. And as we flagged in Q1, we were cautious going into this year, not knowing what our expectations were around what was going to happen from a market perspective. We had a line of sight on part of yield, but not on listings. As we now look forward, we've got more confidence and therefore, that waterline can expand to include more things that support either revenue growth, consumer experience, investment in AI, those type of things. So it's not necessarily a pull forward, but just more the balance of how much we think we can afford. And then your question on Developer. Yes, look, we're getting enough benefit from duration, which is leading in the current market and offsetting some of that softness in overall project launches. Over time, assuming the market returns and project launches come and if the demand is there, duration may start to come in a bit, but we would expect that to be offset by those higher project launches and benefit from that. So I think it's a nice balance at the moment for supporting that. And look, we're really pleased with our commercial business as well. We've benefited from increased price and increased depth there, and that listings market is pulling up relatively well, and we don't see that changing in the short term.

Yes. It's a very healthy commercial market. If you compare it to the cycle -- to the mid-cycle, I think it's probably bang in the middle. It's whereas the developer is at the bottom of the cycle. And we're -- I think we're entering our fifth year of productions in new projects that will turn. And the benefit of new projects will far outweigh the minor contractions in duration.

Our next question comes from Kane Hannan of Goldman.

Just a couple from me as well, please. Just Commercial and Developer again, trying to understand the sort of quarterly phasing in that business. I think back at the 1Q, you're saying Development was flat, Commercial was similarly, yet you punched that 11% growth for the half. Did Developer have a really strong 2Q? Is it deferral or something I should be thinking about that might help the Commercial side of things? Or just trying to understand what's happening there, please.

Commercial was better in Q2 versus Q1, but we did continue to see the benefit of increased depth penetration and listings in Commercial. And same with Developer actually, we saw the benefit also in display and the benefit in duration also continue to benefit into Q2 versus Q1. That duration has been continuing to go up each quarter. We did have a stronger Q2 than Q1.

Yes. And then just also pulling out the cost guidance as you've been discussing. I think back at the 1Q again, you were saying that some of the benefits of [indiscernible] the cost guidance would flow through or could flow through into FY '25. But Owen, I think in comments before you were saying for '26, '27 pricing story. Am I just taking comments out of context from back of the quarterly? Or have -- is there a change in thinking around the '25 benefits from the step-up in costs?

A lot of the investment we make is building features and products that will drive future revenues. So you're kind of incurring costs now, but you won't get the revenue into obviously, you launch that product or you're bringing that feature to market to underpin a price increase. I don't know if that answers your question. I mean we're kind of spending before you get the benefit, if that's what you're asking.

Yes, I think that makes sense. Sorry, I think you were just saying back at the 1Q, it could benefit your FY '25 numbers. So that's fine. And then just lastly, probably…

I think in Q1, we were talking about -- we actually -- we were already working on feature sets for the FY '25 price increase back then. And I think that's what we're talking about.

Yes. And then PropertyGuru [indiscernible] in the half. Is that a bit still core for you guys? And so you have a lot of optionality with the cash on the balance sheet from a broader perspective. But just interested how you're thinking about PropertyGuru where we are.

Yes, you see what you're seeing in that change in the valuation is near-term reductions in growth rate assumptions for Malaysia and Vietnam. For the reasons we articulated it, it's kind of government intervention in Vietnam and it's the economy with an election later this year in Malaysia. So those assumed growth rates were reduced which affected the valuation, but they are still growth rates. So these are still growth businesses. We've got a 95% market share in Malaysia and a 70% market share in Vietnam. They're very good markets with very strong market positions. And yes, while the near-term assumptions have softened, we think that they're very exciting markets to be in.

Our next question comes from [ Andre Rakowski from E&P. ]

My first question is hopefully a very straightforward one. Are you able to confirm whether the depth benefit to resi revenues was circa 3% in the first half. I mean, it seems like a pretty simple calc, given itself and the 19% yield growth less the 13% price and 3% geo mix. But if there's any other factors in there that we need to take into account would be sort of good to know. And given that, should we expect a similar sort of benefit into the second half given the contracted visibility?

Yes. Look that was a bit more than the 3%. We're not giving out the exact number, but the overall 19% was partly softened by some of our add-ons, which will also have healthy growth but at a lower percentage. So it's depth and mix was a healthy contribution to that first half result. And then the impact on the second half will really have the biggest impact is likely to be what happens from geo mix, and that might play into the overall outcome, which is before it was inflating the expectation that will -- the geo mix benefit for the full of the second half.

And I mean given the success of Premier+, it's now very close to the entire Premier customer base. How do you think about the scope to introduce for the depth years? Does that…

Yes. Look, I'll say what I always say and this is, we have a multiyear strategy in terms of product and feature drops. I'm not going to flag what that looks like. You'll find out about it when our competitor finds out about it.

And then maybe a last one. Just looking at the reaction of the market, this is talking about the property market. Following your 13% price increase in July last year and the big benefit, which you've seen, have you seen other elements of the marketing budget or marketing schedule having to be taken away in order to accommodate that increase. I mean just interested in whether like what you're hearing from agents? Are you getting pushback? And perhaps how does that play into your thinking around the price increases when it comes to July this year. I appreciate you've taken it to the board, but I suspect you've considered…

So no, we haven’t one, we haven't seen any pushback. At the time, we kind of put that price into the market, it -- we're generally well accepted. We could point to the value. It was very easy to demonstrate what we were delivering to our customers and to their vendors. And so we've had no pushback on that. And I think our penetration numbers would absolutely back that up. In terms of the schedules, we're not seeing -- we're definitely not seeing any contraction in schedules and CampaignAgent gets a reasonable view on sort of size of marketing schedules, and so they're not contracting. Whether other smaller things are being taken off, there are a lot of small sites out there that charge $50 or $100 to get on schedule, I haven't seen any evidence of those coming off either. So we feel pretty confident that the price we're planning to take into FY '25 will also have a similar level of acceptance.

I'm sorry for multiple questions, but are you seeing the schedules expanding in order to accommodate the price increase?

It's hard to get a like-for-like view on that. It's not like the same house is being sold multiple times, different houses justify different schedules. Agents are great at selling marketing to vendors. And long may that continue. And so I don't have a definitive answer that for you sorry.

Our next question comes from Darren Leung of Macquarie.

I just had 2, please. One was just on the geo mix piece. And so we're obviously looking at pretty record levels of listings in Sydney and Melbourne for the half. But given the sort of record levels in these 2 sets, can you give us a bit of an indication as to why the geo mix wasn't as strong as expected. Just given what's happened in prior periods, I would have thought the geo mix benefit would have been a bit higher, please? And then maybe the second question was just around the PRO subscription that was launched in October. Any quantification around take-up so far would be of interest. But in particular, I was keen to understand a bit about agents more likely to take this product up in a stronger market as we expect this coming in the next 12 months or a softer listings market, please?

The geo mix at 3% was actually a really strong uplift from Melbourne and Sydney and fairly consistent with what we also saw in Q1. The drag to that is Brisbane, which is our third highest yielding at phase was actually down 6%. So that just started to moderate a bit compared to the rest of the national average. But from a dollar perspective geo mix was strong contributor to the overall revenue result.

PRO going very well. It's rolling out in line with our expectations. We've always said this would be a slow burn product because it's not like an advertising product. This is a change in the way our customers operate, moving towards our [indiscernible] of their operating system for the way they win new business. And so it's a longer sale and it's a bigger decision. And some customers have to wait to roll off existing contracts and have indicated they'll take our product up when they do. The feedback from customers has been incredibly positive. Our comparative market analysis tool within PRO, we think is clearly the best in the market. It's got our market-leading demand data in it and no one else can provide that. Whether it sells more in a good market versus -- I don't know an agent who doesn't want to win more business. And what I can tell you in a very short period of time that PRO customers are getting about twice as many seller leads off the site from the PRO product and non-PRO customer. So it's a pretty good proof point. Agents also a love of the branding that you get from it. So the feedback has been quite positive. But I said this will be a slow burn because of the nature of the product. But so far, so good.

Our next question comes from Siraj Ahmed of Citigroup.

I have 3 questions and I will ask them one by one, if that's okay. Owen terms of '25, I know you don't want to talk about price increases, but just regarding mix of price and yield, '24 is more price and '23, '22 is more even. Should we think -- given you're talking about new products and everything that '25 is more of an even contribution? Or is it really going to be price-led as well?

Look, again, I'm not going to flag what's going to happen in '25 until we've announced our price. I mean, price will be a fair driver in '25 for sure. But alongside that price is value. And we'd like so much of our yield growth this year is customers choosing to buy more premium products. And we always want to be able to do that to them. So again, I'm not going to flag what we're going to release in terms of product and features. But it will be a combination, I would think, of further choice in premium products together with roll price, will drive our revenue growth into next year.

Second, Owen, just on the PRO subscriptions, right? Where are customers rolling off from? Like what are they giving up to roll into PRO, I guess, right?

Look, there's a number of competitors who are providing slivers of the product. So for example, CoreLogic has a CMA product. But as I said, they don't have demand data. So ours, we think, is superior. So some have bought these services individually. Others, we're not taking it from anywhere. They are actually branding and getting, that's just additional value. The seller leads, agents have been paying other providers of seller leads. We think we've got better seller leads. They convert at about 30% to 33%, so they are very good quality. So some of the stuff we're offering the competitors and others -- other parts are.

Janelle, just on OpEx, just 2 parts. Can I confirm that you're expecting post jaws in the second half as well? I know you've given full year guidance, just confirming that we're expecting in the second half as well?

Yes, we are anticipating jaws to be up in the second half. But that always depends on what happens from the listing -- that's a [indiscernible].

And just into '25 as well. I know historically, you said 1% to 3% would expect no change to that, right, in the similar length?

It's very early to talk about '25. We've always said historically, our jaws have been 1% -- 3%, but it just does depend more broadly on what's happening from a market and a revenue perspective, particularly with listings, and that's what's the big change around that could be. But 1% to 3% is always a good rule of thumb to start with.

Our next question comes from Sriharsh Singh of Bank of America.

Three questions from my side. One, it looks to me that the Property Owner tracks at $3.2 million is growing very substantially at 41% Y-o-Y. So what's the plan for that? And how do you plan to utilize that data? Does that also help you improve your seller leads product? The second question is on another depth tier. Do you think you're under monetizing premium properties, properties that are listed for more than $10 million and maybe there's scope to introduce another depth tier for them. And lastly, on your India revenues, the core revenue growth seems to be growing very strongly at [ 22% ], much higher than adjacencies, which is pretty positive in my view. What's been the driver of that? Is that new home sale or more property agents in India listing, the secondary sale listings pose?

Thanks. We'll make this the last set of questions. In terms of owner tracks, it is a powerful generator of seller leads. So I think the number is something of 39% of seller leads are coming from properties where the owner has tracked. So it does help drive our consumers towards our customers from a seller lead perspective. It's also a great source of finance leads for mortgage choice. If we know who the consumer is, where they live, how much they pay for the property, and what it's currently valued, in terms of being able to put the relevant mortgage products in front of them, it's a great driver of those leads as well. So we're delighted we've gone through 30% of properties being tracked by the owner. Next stop is 1/3, and then -- and we're going to be on that. So very, very pleased, and it's being driven by our market-leading valuation product in real estimate. In terms of premium products or really expensive properties. Look, it is a conversation our customers have with his agents can get a lot of marketing dollars for those types of properties and always looking for innovative ways to spend it. But again, I'm not going to flag a product road map, but it definitely is an opportunity.

And our India growth really is in our core [indiscernible] is a combination of factors. It's higher customer numbers overall, increased prices we got through in July plus also increasing of the depth penetration tiers. So it's a combination of things.

Well, we're at time, everyone. Look, thank you so much for joining us today, a very extensive call with lots of questions, so I really thank you for that. Janelle and I and Alice are looking forward to seeing many of you in the coming days. Thanks, everyone.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect. Have a great day, everyone.