REA Group Limited (REA) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the REA Group Limited Full Year Results 2024 Conference Call. [Operator Instructions] Please be advised, today's conference is being recorded. I would now like to hand the conference over to your 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 REA Group's 2024 Full Year Results Presentation. Before we commence, I'd like to acknowledge the traditional owners of country throughout Australia and recognize the continuing connection 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 full year. We'll 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 the land in which we are meeting and pay my respects to their elders past and present. REA Group has delivered an exceptional FY '24 result. This performance reflects our clear and consistent focus on delivering greater value at every stage of the property journey. In the strong listings environment, our customers increasingly preference our products and services to leverage our leading audience to maximize their campaigns. REA India also maintained strong momentum with excellent revenue growth. Turning to the group results from cooperations for the year revenue was $1.45 billion, an increase of 23%. EBITDA, excluding associates was $825 million, an increase of 27%. And NPAT was $461 million, an increase of 24%. The board is determined to pay a final dividend of $1.02 per share, fully franked. Together with the interim dividend, this represents a total dividend of $1.89 per share, an increase of 20%. Before we move into our operational highlights, I'd like to touch on the market conditions we're operating in this year. The Australian property market strengthened in FY '24 with interest rate stability supporting market activity. The return of vendor confidence coupled with strong buyer demand saw sales volumes increase while national house prices reached a new peak in June. Nationally, new listings were up 7% year-on-year and were 5% above the 6-year average. As you can see on the chart on the left, listings remained above FY '23 volumes throughout the year. That year-on-year growth extended in Q4 with continued strong demand driving vendor confidence while the prior year comparable was impacted by interest rate uncertainty. The country's 2 largest markets, Melbourne and Sydney, led the national uplift in listing volumes. The chart on the right shows that Canberra and Brisbane started to follow suit in Q4 with significant year-on-year increases. This slide demonstrates 2 views of Australia's demand for property. The chart on the left highlights a view of national buyer inquiries over the last 5 years. Inquiries returned to growth in FY '24, up 14% year-on-year and continued to trend higher in the second half. On the right, you can see a clear reduction in median days on site as strong buyer demand saw properties rapidly turnover. Properties consistently sold faster compared to the prior year and median days on site were well below the 6-year average. Turning to the many highlights we achieved this year. Our focus on delivering personalized member experiences extended our audience leadership with 10.8 million Australians visiting realestate.com.au on average each month. Our personalized owner experiences help drive a 37% increase in seller leads, enhancing the value delivered to our customers. We also reached the milestone of 1 in 3 properties being tracked by the owner on our platform. Our premium customer products and services led by Premier+ saw significant growth. Record depth penetration was also achieved in our top commercial depth product Elite Plus. Supporting our agency services strategy, we completed the acquisition of the remaining interest in Realtair. REA India maintained its audience leadership with a focus on creating India's leading app experience. And Mortgage Choice Freedom delivered an excellent performance, significantly exceeding our expectations. Our strategic priorities are clear and consistent. To deliver on our purpose of changing the way the world experiences property, our strategy centers on engaging the largest consumer audience, delivering superior value to our customers, and leveraging unique data and insights as we expand our core business and build next generation marketplaces. I'll now share highlights for each of the 5 key priorities outlined at the right of this slide. The scale and deep engagement of our audience sets REA apart. Our flagship site, realestate.com.au extended its unique audience lead in FY '24 reinforcing our position as Australia's #1 address in property. Our consumers are loyal and our unique experiences ensure they consistently return to our platforms. Over half of the Australians who visit our site every month use realestate.com.au exclusively. And we achieve 97.3 million more monthly visits than our nearest competitor. Almost half of all visits to our platform are via our app. Our app-first strategy delivered a strong 5.3x lead in app visits. The quality of our unrivaled audience is underpinned by our personalized member experiences. We know members are 4.8x more likely to submit an inquiry and result in high value leads to our customers. Our aim is to convert our audience into active members and we achieved a pleasing 18% increase in our active membership base. Inspections are a key moment in the property journey and we are focused on seamlessly connecting our consumers and customers through this fundamental step. On average members added around 300,000 inspections to their plans every week, a 46% year-on-year increase. Our property owner experience facilitated through our property owner dashboard is key to driving high-value seller leads to our customers. In FY '24, around 45% of all seller leads were generated through our personalized owner experiences. And business to the dashboard increased 62% year-on-year. Our continued investment in our AI-generated personalized homepage experience is encouraging consumers to take the next step in their property journey. The homepage delivers 7.5 million personalized recommendations via hundreds of different layout combinations to consumers every day. Looking at 2 of our new newer consumer experiences in a bit more detail. In April, we launched a new feature which enables consumers to place digital offers with our customers on select listings. The experience is powered by Realtair and is currently only available on listings uploaded by Realtair customers. From a customer perspective, this new capability helps uncover powerful insights into the campaign and potential buyers. In June, we added an AI room visualization feature to our property owner experience powered by Roomvo. The feature enables consumers to digitally change property images and has been used to restyle over 500,000 property images in the first few weeks since launch. Turning to customers, our goal is to be the first choice in digital property advertising. We also want to provide agents with the tools and services they need to manage their workflow and increase efficiency. Our end-to-end solution supports customers in the important early stages of generating, nurturing and converting new business leads. A pro subscription empowers our customers with elevated agency profiles, the most comprehensive supply and demand data and premium lead insights. When a listing goes to market, our superior advertising products provide connection with the largest and most engaged audience of property seekers in Australia. Customers can power up listings with add-on products such as our new premium listing product, Luxe, and our audience extension product, Audience Maximiser. At the campaign stage REA's market-leading tools enable customers to digitally manage inspections, offers and contracts. All of this customer value is underpinned by our powerful PropTrack data insights. Looking at highlights from our customer product suite. Record Premier+ penetration supported the exceptional year growth in our residential business. Audience Maximiser also reached record penetration and delivered 32% year-on-year revenue growth. Our new Luxe product officially launched to all Premier+ customers last month. This high-performance listing solution is designed to raise the profile of top properties. Exclusive features such as increased homepage visibility and prominent app push notifications ensure a property stands out. Agent Elevate enhances an agent's visibility with features such as a larger presence in search results and the ability to detail recently sold listings. With these and other valuable features added to Ignite platform, we achieved a 31% year-on-year growth in monthly active users. Realcommercial.com.au is Australia's #1 place for commercial property in every state. The platform attracted 1.5 million visitors each month in FY '24, which is 2.4x more than our nearest competitor. Our focus on personalizing their consumer experience is driving audience growth and reinforcing our leadership. We achieved record depth penetration in FY '24 as more customers migrated to the highest-yielding product, Elite Plus. Property.com.au is Australia's most comprehensive property research destination. And in FY '24, we've built on the strong foundations established since relaunching the site in 2022. The property.com.au consumer experience offers rich insights and valuable information aimed at boosting buyer and seller confidence. One in 5 buyers now turn to the platform to support their decision to purchase a property. Leveraging the strong audience growth, in recent months, we launched our first media integrations on the site and we look forward to expanding this new revenue stream with top tier media partnerships in FY '25. Our property data business, PropTrack, powers many of the group's unique customer and consumer products, services and experiences, while also driving revenue. PropTrack suite of propensity models represent a substantial opportunity for our customers. They have delivered a 77% increase in high-rated leads which supports lead prioritization and increases of value delivered to agents and brokers. In our financial services business, our higher margin white label products continue to resonate with borrowers supporting revenue growth. Mortgage Choice Freedom achieved $1.2 billion in settlements. And our newly launched Mortgage Choice Freedom digital offering achieved its first submissions. Moving to our international businesses, REA India delivered a pleasing 31% revenue increase, primarily driven by growth in the core housing.com business. REA India's focus on SEO and targeted marketing, continued to support housing.com's audience leadership position with 1.3x more monthly visits than the nearest competitor. Our app-first strategy leverages the rapid growth in mobile penetration in India. We have deliberately chosen to invest in the app as we know it's the future of the Indian property experience. While it's frustrating that there's no independent measure of the ad traffic of our competitors, we are confident we have the best app in the market. Our second half app traffic accelerated to 45% year-on-year growth. Our leading app downloads, along with our leading rating, demonstrates the value consumers place in a superior housing.com app experience. Turning to our investment in PropertyGuru, the group delivered a 12% year-on-year revenue increase in the March quarter with growth in Singapore offsetting a more gradual recovery in Malaysia and Vietnam. PropertyGuru is expected to report its first half results later this month. In North America, Move revenues remain under pressure with a 10% decline in FY '24, impacted by continued challenging macroeconomic conditions. Historically, higher fixed mortgage rates saw a sharp decline in U.S. existing home sales. However, there were early signs of stabilization in the second half. And transaction volumes should start to recover as interest rates come down. Despite the challenge market, there was strong growth in seller new homes and rent revenues. We continue to make progress towards our environmental, social and governance goals, achieving several milestones in FY '24. REA maintained its AA MSCI ESG Rating and was certified carbon neutral for FY '23 emissions by Climate Active. Additional travel required to support global investments resulted in increased emissions in FY '24. However, we remain committed to our near-term 2030 climate targets. In May, we launched our Reflect Reconciliation Action Plan following endorsement from Reconciliation Australia, laying the foundation for future initiatives. The Australian property market strengthened in FY '24. Under these healthy conditions, our business continued to invest in strategic initiatives that will enable us to capture significant growth opportunities in FY '25 and the years ahead. Our growth drivers remain consistent, and you can see them set out on this slide. The listing environment in FY '24 has been strong. And as we head into FY '25, we will be lapping a very favorable market from the prior year. Melbourne and Sydney listings were well above the 6-year average in FY '24. Staying at these levels will be challenging, and therefore listings in Melbourne and Sydney may be marginally down. This would still be a very healthy outcome. On the other hand, we're starting to see the level of new listings increase in the smaller capital cities. Where we will end up in terms of overall listings is hard to determine. However, what we do know is that the Australian property market is in good shape with strong levels of demand. This demand will be supported by higher employment levels and immigration. It was encouraging to see interest rates remain unchanged this weak and is expected they'll stay at current levels for the remainder of the calendar year. When we swing into the second half of this financial year, we could be in a market that is expecting interest rates to be on the way down. I'll now hand over to Janelle to take a deeper dive into our results and provide further insight into market conditions.

Thanks, Owen, and good morning, everyone. REA has delivered an exceptional result, driven by strong yield growth in a healthy market. From our core operations, revenue increased 23% to $1.45 billion. Operating expenses increased 18% to $628 million. EBITDA, excluding the results from our associates was $825 million, up 27%. And the group delivered NPAT from core operations of $461 million, up 24%. The group results from core operations differ from reported statutory results with a number of one-off items excluded. On Slide 26 we provide a summary of the reconciliation between core and statutory results. The biggest driver of the variance reflects the PropertyGuru impairment which we discussed at the half year results. Turning to our Australian residential business and trends in the market. Residential revenues increased by an impressive 24%, driven by double-digit buy yield growth and stronger listings. We achieved a 19% year-on-year uplift in buy yield driven by the 13% average national price rise, year-on-year growth in overall depth and Premier+ penetration, a 3% positive geographical mix impact, partly offset by lower growth for total add-ons and subscription revenues. National new buy listings increased by 7% with the outperformance of Sydney and Melbourne markets continuing throughout the year. Sydney and Melbourne new listings saw growth of 21% and 22% respectively. And while Brisbane stabilized during the year, up 1%, all other metro markets declined. As Owen mentioned earlier, while Sydney and Melbourne continued to outperform in Q4, up 26% and 32% respectively, we did see all other metro markets return to year-on-year growth. With Brisbane, our third highest yielding market up 17%; Adelaide up 10% and Perth up 6%. Rent listings remained subdued, down 1%. However, this was more than offset by an 8% price rise and increased depth penetration, resulting in double-digit rent revenue growth for the year. Total residential revenue growth of 24% was driven by the 19% yield and 7% listings growth, partly offset by a 2% revenue deferral impact due to the strong May and June listing results and slower rent revenue growth. The following slide shows both the penetration and mix of paid depth listings in the residential business and success of our premium listing products. The second half saw record Premier+ penetration with growth in all major states, and we saw record total depth penetration with both sequential and year-on-year growth. We also delivered continued improvement in product mix with customers migrating up the depth ladder letter from Feature, Highlight and Premier to Premier+. Turning to Commercial and Developer. Revenue for the year increased 12% with strong growth in commercial, tempered by lower growth for developer revenues. Commercial revenue growth was broadly consistent with our residential business, benefiting from strong yield growth, driven by an 11% price rise and continued growth in depth penetration. Volumes were higher across both sale and lease with listings growth in all major states apart from WA. The developer business has remained challenged with well-documented issues such as increased input costs and labor shortages resulting in project launches being down 13%. Pleasingly, there was some stabilization during the second half with project launches up 1% year-on-year. Despite these challenges, we delivered modest growth for developer revenues, benefiting from the prior year price rise and increased duration. Media, data and other revenue was up 25%, assisted by the consolidation of Campaign Agent from July 23. Excluding Campaign Agent, revenues were up 2%. PropTrack delivered double-digit revenue growth and Developer Display revenue also increased. However, Media Display remained under pressure with yields and volumes impacted by a soft advertising market. Campaign Agent's performance has been impressive and exceeded expectations. Revenue has more than doubled since we acquired the business, benefiting from strong customer growth, higher volumes and greater spend per customer. Turning to Financial Services. Operating revenue increased 8% to $74 million. A 1% reduction in settlements was more than offset by growth in our white label products, driven by the Mortgage Choice Freedom product and improving runoff rates driven by growth -- driving growth in trail commission revenues. We were pleased to see a return to growth in both submissions and settlements in the fourth quarter, up 7% and 5% respectively. Net revenues increased 21%, reflecting the $8 million negative trail book valuation in the prior year with no trail book adjustment in the current year. Recruitment was strong with 158 new brokers added during the year. We continued to exit less productive brokers with the network ending the year up 1%. REA India has delivered a strong performance with revenue growth of 31% to $103 million. As the chart on the left-hand side shows, REA India's property advertising businesses, including Housing.com and PropTiger delivered revenue growth of 25%. Housing.com benefited from strong customer events, increased depth penetration and improved monetization of our Tier 2 cities. We saw growth for adjacency revenues on Housing Edge in the second half driven by growth in rent pay customers. The Reserve Bank of India has recently increased focus on the use of credit cards for certain types of transactions. As a result, we have taken proactive measures which may impact the growth rate of our rent pay business. We would anticipate Housing Edge revenue to be broadly flat in FY '25. India operating cost growth was 18% above our guidance, below to mid-teens growth. Apart from the expected higher employee and marketing spend, this reflected the sharp increase in COGS in the fourth quarter. Excluding the impact of COGS, India's operating costs increased by 12%. Core EBITDA loss has improved 9% to $36 million. And with revenue growth expected to continue to outpace cost growth, EBITDA losses in India are expected to reduce further in FY '25. Moving to our strategic investments. Total losses from equity accounted investments for the year was $26 million. Move's contribution was a loss of $21 million, a decline from $6 million loss in the prior year. Move's revenue was 10% lower with continued market downturn, resulting in a 3% decline in leads and lower transaction volumes. This was partly offset by revenue growth in adjacent products such as seller, rent and new homes. Move increased investment in marketing, particularly in the second half, with this increased cost largely offset by employee cost savings. For more information on Move, please refer to the NewsCorp results release. PropertyGuru's contribution improved to a $1 million loss from $3 million loss in the prior period with strong revenue growth in Singapore helping to offset a slower recovery in Vietnam and Malaysia and continued focus on costs. In June, we acquired the remaining shares of Realtair for cash consideration of $34 million. Having been equity accounted since FY '21, Realtair will be consolidated from 30 June 2024 and the acquisition is expected to be broadly EBITDA-neutral in FY '25. On the next slide is our core operating jaws. As you can see, we delivered open jaws for Australia and the group. Excluding the impact of the Campaign Agent acquisition, core Australian operating costs increased 14%, reflecting a number of key factors. The largest driver was employee costs, impacted by incentives, which were paid out below 100% last year, but will be well above 100% this year given FY '24 strong performance. Wage inflation and head count driven by investment into strategic investments. This was followed by marketing costs, driven by increased consumer brand campaigns and customer events and technology costs were higher, impacted by double-digit price rises from a number of suppliers and increased data usage. Including Campaign Agent, Australian operating expenses increased by 18%. As we've highlighted earlier, the group continued to invest to support ongoing growth with investment 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 and personalization, new product delivery and continuing to enhance existing products, examples would include the Luxe add-on and [ AMX 2.0 ]. And as we flagged at the half year results, we're in the early stages of investing ahead of expected privacy legislation with continued spend likely over the next 12 months. CapEx to revenue was 8% in FY '24, modestly lower than expected due to the strong revenue performance. We would anticipate a rate towards the top end of our 7% to 9% range in FY '25. As a result of the continued investment, particularly over the last 3 years, total depreciation and amortization is expected to be in the range of $136 million to $144 million in FY '25. This reflects the growth in capitalized software projects since FY '22, which are typically amortized over 3 years. It also reflects the consolidation of Realtair, which is expected to increase D&A by approximately $4 million to $6 million. Turning to our cash position. We ended the year with a strong closing cash balance of $204 million. The group delivered operating cash flows of $589 million, which is the addition of the first 4 blue bars on the graph. As you can see, the strong operating cash flows allowed us to continue to invest in the business organically and through M&A, deliver strong shareholder returns in the form of increased dividends and continue to pay down debt with $200 million of our syndicated facility repaid during the year. At 30 June, the group's total drawn debt was $202 million. Finally, on current trading. July residential buyer listings were up 12% year-on-year, with Sydney increasing 12% and Melbourne listings up 15%. It's important to call out here that July benefited from 2 additional working days relative to the prior year. If we exclude this, like-for-like growth was 2%. Year-on-year growth rates for the remainder of the financial year will reflect very strong prior-period listings volumes, particularly for Melbourne and Sydney. Residential buy-yield growth in FY '25 will primarily be driven by an average 10% price rise in our highest penetrated product, Premier+. Positive operating jaws is again targeted in FY '25 with high single-digit group operating cost growth anticipated, including the acquisition of Realtair. Growth in Australia will largely reflect increased employee costs due to strategic investments and salary inflation and higher technology costs. 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 '25 compared to FY '24. The group expects FY '25 losses from combined contributions from associates to be marginally lower than the prior year, reflecting stabilizing conditions in the U.S. On a final note, FY '24 has been a massive year and we are very proud of the results that all of our talented team members have produced. Whilst we are facing more challenging comps as we head into FY '25, we remain excited about the opportunities ahead, and we'll continue delivering more value for our customers and driving yield opportunities across all of our businesses. We will, as always, remain focused on investing prudently across our Australian and Indian businesses to drive growth for FY '25 and beyond. I'll stop here. Operator, can we open the line for questions?

[Operator Instructions] And our first question is going to come from the line of Kane Hannan with Goldman Sachs.

I've got 3. Just the yield, the buyer yield outlook into next year, you're explicitly calling for a double-digit target this year. Should I read that as you think that's an unrealistic outcome, an unlikely outcome? Or just how do I interpret taking out that as a lack of a target next year?

So Kane, on yield, what we've flagged is that we think the yield growth will be primarily driven by the 10% increase in Premier+ price. Where you will land will really depend on a number of key factors. We know that geo mix has been a positive this year. We've given guidance -- well, not giving guidance. What we've seen in the past is the range of where geo mix could land. In FY '23, it was a minus 5%, in FY '24 it's positive 3%. We do expect it to be marginally negative in FY '25 just based on the strength we've seen in Melbourne and Sydney this year. And then on the upside, it will really depend on growth in additional depth and the take-up of Luxe and the mix of low-value asset usage. So at the moment, it's very early in the year, but we're just flagging that the 10% price is going to be the primary driver of yield.

Yes, that makes sense. Maybe on Luxe, I mean is there any early feedback, any sort of data points that you have in the market that supports the ROI on what is obviously a pretty significant cost that you can talk to?

Yes. Look, Kane, it's just very, very early at the moment. But the feedback so far has been very positive. And it's being bought in a very wide range of geographies, one of the misconceptions about Luxe is it's only for high-value properties. But we've obviously priced it across, at the right level for every sort of market, and it's being taken up right across the country. And it's performing exactly as we expected 4 weeks in. So we're pretty pleased. Some agents are becoming heavy adopters, heavy early adopters and others are watching and waiting.

Yes. That's helpful. And lastly, just costs, high single-digit growth next year. Just give us a sense of how we should think about India's OpEx expense. I mean, it's obviously had some amazing revenue growth in that fourth quarter. I think you got the Cyber City launch in the India market as well coming through. So just how we should think about the cost growth in India?

Yes. We've provided guidance to high single-digit cost growth for the group. So it's a little bit less in Australia and a little bit more in India, but that's the overall cost guidance. Probably another point to note is that within that cost guidance we have included the acquisition of Realtair, which is worth about 1%. So we are continuing to invest in India, but we are anticipating it to be at a lower rate than the growth we've seen in FY '24.

And our next question is going to come from the line of Eric Choi with Barrenjoey.

I'll just ask all mine one by one. Just the first one, just back on costs. You guys are obviously guiding to high single digit, but traditionally you managed to probably 1% to 3% jaws. So I'm just wondering if that's still broadly what you're thinking for FY '25. And then just on the listings outlook, last time we chatted, Owen, I think you said you were budgeting for flat. If I think about the shape, if it is flat, and if I look at your Slide 6, should we assume maybe first quarter positive second quarter even more positive, but maybe 3Q and 4Q that you're expecting those to be negative listing quarters? And then just dialing in, just kind of drilling into that resi buy-yield question a bit more from Kane. So I missed it because I fell off. But yes, I noticed you've admitted to double-digit resi buy-yeild growth than you had last year. Can you repeat that 3% depth that you did in '24? And I'm just thinking about Luxe and I'm wondering if we've got the sensitivity right because if Luxe is 90% more than Premium+, sort of if you get low single-digit penetration in Luxe, you get low single-digit resi buy-yield contribution from Luxe. Is that the right math?

Yes. Look, Luxe is obviously a super-premium product, and it does have a very high price point in each of its markets. And at this stage, we are assuming that the take-up follows, the take-up we've seen when we've introduced products like this in the past, it is quite slow. And I think what you'll see is there'll be certain geographies where the uptake surprises us because you get early adopters and therefore then you get FOMO start to kick in because it is a very high-performing product for a vendor, and we're already seeing that in terms of its performance. So that could contribute more. In terms of depth, further penetration, you can see on the chart, we're not fully penetrated. We're always going for more. We had good sign-ups in our recontracting. So we do expect some contribution from increased depth, but not at the rate you saw from '23 to '24, that was a fairly big uptick. In terms of listings, the only thing you can do sitting here today in this sort of market has assume flat. We started July well. The noise around spring is positive. So it's just those Melbourne, Sydney comps, just maintaining those would be a really, really good market. And so Melbourne, Sydney could be flat, might be slightly down, might be slightly up. I think the other capitals have lagged Melbourne, Sydney, and they're already showing signs of now coming strongly up. So it's just hard to predict. We do assume flat as we go into the year. And then as we go into that second half, the comps do get a bit harder, but the environment will probably be different. We could be sitting in here in sort of February at the half year results, looking at when we're going to get our first rate cut. And again, that will have a positive effect on the market. So we work on flat, Eric, and see what we can do at this point in time.

Yes. And Eric, to your question around jaws, when we think about jaws, one of the things that obviously factors in, we have set our cost growth, and we've provided that guidance at high single digit. And as we flagged, we assume that the listings are going to be flat, where our jaws will then land generally flexes up and down depending on the strength of what happens around residential listings. We don't target 1 to 3, but that's been the historical average in the years before we had this massive amount of volatility, but that will be a good guide to start with.

Stupic question, Janelle. Obviously if listing are better than flat, then you'd expect the jaw to be better than the 1% to 3% in '25. You'd let it flow.

And that's what you saw this year as listings improved. But we also did increase our pace of our investment in the second half. So we look at our expectations around the market. And as the year progresses, if the listings are better, and we have more certainty around higher revenue growth, then we may decide to accelerate some of our strategic investments. On the other side, we can -- if the market is tougher, obviously, as we've done before, pull back on cost.

And our next question is going to come from the line of Entcho Raykovski with E&P, your line is open.

Also I've got firstly a question on costs. So looking at that high single-digit OpEx increase guidance into FY '25, I don't know if you can answer this, but how much of that is driven by underlying inflation, say, wage inflation. Contracted cost increases you mentioned that you take costs going up in the double digits in '24. So I presume you've got good visibility into '25. So how much is driven by that underlying inflation as opposed to some discretionary additional investment?

Yes. Look, it's probably fair to say about half of it is inflation related, so obviously salary increases. And then we have the flow through and obviously technology costs associated with suppliers increasing their expectations around increases there. And then it's really then going to be the flow-through of the additional strategic investments that we're making flowing through into FY '25.

Okay. So is that -- I mean, is it easiest to think about it as half-half? Or is there more than half that's essentially contracted?

That's the best guess, yes. Half inflation. And the problem there is obviously salary increases starting 1 July. The other half is kind of discretionary investment.

Okay. Great. And then secondly, I mean if I look at FY '24, that really strong domestic operations, but then the offshore investments have generally had a -- well, have had a negative earnings impact. I think you've got some very clear views on India. But just interested on how you're viewing some of the other investments longer term? I mean, particularly Move, it's got tough conditions, there's a lot of competition. There was the PropertyGuru write-down. Are you happy with your current interest in those investments? Would you take an opportunity to reduce those interests if there was that opportunity? I'm just conscious that it is at the moment a drag on your earnings?

They're both very good markets to be in. We weren't in the U.S., but we're trying to find a way in. The U.S. market had an exceptional year on the negative. If you look at the volume of how it was back towards GFC levels because of those interest rates. It's well flagged over there well in advance, unlike here, that there's an interest rate cut coming probably in September. And they are now -- they've got the opposite, they're cycling over the weakest volume since about 2008. So as consumers become confident of interest rates coming down, I think we'll see those volumes start to come up and that business will absolutely rebound. And we've always said in every market listings are never lost, they're just deferred. So people are sitting on their hands at the moment because of interest rates as they come down. That volume that's been lost in these last 18 months is going to come back. So we're confident that will have a positive impact on our results going forward. And similarly, in Asia, PropertyGuru is the #1, clear #1 in the market it operates in. It's got a very profitable business in Singapore. It's 95% market share in Malaysia. They're in good growing markets, and we like to be there.

Okay. And final one for me. On those India revenue trends that really accelerated into the second half and the fourth quarter, I think 2H revenues were up 39% year-on-year and stronger growth than that in the last quarter. Was there any seasonal impact for that acceleration right into year-end? And Janelle, given your comment on adjacencies into '25, sounds like we should really be expecting that growth rate to slow materially in '25. Is that a fair way of looking at it?

We're expecting the Housing Edge product to slow, just be more flat into FY '25 just reflecting the fact that the expectation, we put some additional controls in place. So we just think that the growth rate will be slower, but we still expect to see strong growth in our core housing business, which is the #1 focus we have for our India business.

Okay. And sorry, in the Q4 acceleration, was there anything specific driving that?

Again, it was higher Housing Edge revenues in the second half.

And our next question is going to come from the line of Siraj Ahmed with Citigroup.

First question, can I just clarify the lack of the double-digit yield growth for next year? Because if you [indiscernible] various components, you've said 10% price increase, some depth growth. Geo mix may be offset there, but you should still be seeing growth from Audience Maximiser and the other add-ons, right? So just a bit confused as to why you mentioned that. Is that just because geo mix could be worse?

We're just saying the primary growth will be the 10% price. Where it land will depend. It's just very early in the year and where it lands will depend on things like, yes, how big a drag geo mix could be, potentially offset by increased penetration and some of our other products.

Okay. Secondly, just a question about India, right? It looks like the way it accelerated, the core business is what grew it, I think 19% something in the second half, so it sub-20% growth. So should we be thinking India is now like a sub-20% growth business in the year forward just because of Housing Edge being flat as well?

No. No, that's -- Yes. No, there are 3 businesses in India. There's Housing, there is Housing Edge and then there is PropTiger. So on Housing we're very confident on the growth profile going forward. And that is the core business. That is the hero brand, that is the hero app, and we are absolutely expecting strong growth in that business next year.

Got it. Last one, just, Owen, interesting move to make an offer through the Realtair platform, right. Just keen to think about how you -- understand how you think about monetizing this in the future? Is it just Realtair? Or is there any broader play that you're thinking from an end-to-end transaction perspective?

No, that is part of this suite of products we've got for our customers to manage their business. And it will stay that way. That's how we'll monetize it, through things like pro subscription. The customers who -- have been on Realtair for a while and have been using this feature the most since its launched. And again, it's new in market. We absolutely love it because it reveals a lot more about what's happening to that listing. They get a lot more information on buyers' intent early in the process. One customer who said, can you have it on every listing, like he just want it everywhere. So we're not trying to step into the process. It's really about giving our customers more insight into their buyers and will be monetized through our subscription product.

And our next question is going to come from the line of Lucy Huang with UBS.

I've got 3 questions as well. But just as the first question, are you able to talk through the geo mix trend, particularly in the fourth quarter and coming into July? Just wondering with kind of the other cities starting to catch up on these listings growth, whether we're starting to see geo mix moderate or even start to turn negative right now?

Yes. Look, we -- in Q4, as we did see some of the other cities, such as Brisbane, which is our third highest yielding cities start to turn positive, that geo mix benefit has started to come down. What it means for the full year will really just depend on where the rest of the city's listings perform compared to Melbourne and Sydney. Our current expectation is it's likely to be a small negative drag into FY '24 -- '25, I should say.

Yes. So but it hasn't turned negative at this point as a negative drag in the fourth quarter?

No, no, no. Not so far.

Wonderful. Just my second question. So just to kind of follow through on the seller leads and pro subscription. I mean seller lead is up 37%. Just wondering if we're starting to see a bit of an acceleration in the take-up of the subscription product and also kind of the revenue contribution? Or is it still kind of a bit too early in that journey?

It is still very early. It's a much longer sell product. I mean, you're basically selling a new way of working the operating system into the agency. And it's very hard to get them to focus on these things when they're busy, when they got a lot of work on. That said, our penetration in pro is kind of exactly where we wanted it to be and expected it to be this far into the launch. What we are seeing is that pro subscribers are getting more seller leads and nonpro subscribers. So that proof point is there. Our sales team has obviously been focused on repricing for most of the half that we've just come through. And so they'll turn their attention to pro now as we move into this -- the first half of this financial year. So we do expect that uptake to continue to increase, and particularly as these proof points start to play out.

Yes. No, that makes sense. And then just one last one on cost. Just want to confirm on that positive jaws target. We're also expecting that for the Australian business in '25.

Yes. Yes, we are.

And our next question comes from the line of Nick Basile with CLSA.

Just 2 questions from me. First one on audience. I think you've called out you're now 4.1x your closest competitor. Just interested to know how we should think about that flowing into your yield growth into FY '25 in terms of perhaps capturing that in price or in addition getting some benefit in your depth ad penetration as well? And then the second one on cost. Just interested in a bit more color on the breakdown across the different buckets. For example, tech costs, is that likely to be double digit this year as it was last year? Just sort of trying to get a sense of where you retain some flexibility on variable costs.

Thanks, Nick. We're absolutely delighted with our audience position and how it's moved over the last 12 months. It does underpin the value that we deliver to our customers and through them to their vendors. And that has underpinned the price increase that we've put through on 1 July. So it's growing. Our leader has been growing. It doesn't change our pricing during the year though, the yield. It really just is one of the things that underpins our price increase on 1 July.

Yes. And when you think about the breakdown of cost growth and where it's likely to come from, the biggest drivers of cost growth, things like employee costs, technology costs and marketing costs. We are expecting our technology cost to be up again double digits. But we absolutely have a lot of flexibility in our cost base. If you think about the pace of hiring, we can adjust that up and down should we need to, plus we've got our external offshore service provider where we can again flex our cost base up and down there as well. So we do still have quite a bit of flexibility in the cost base should we choose to adjust it.

And our next question is going to come from the line of Roger Samuel with Jefferies Australia.

I've got 3 questions. I might just pass them in one go, given the time. First one is with the additional marketing campaigns that you did in the fourth quarter, have you seen any return on investment, for example, higher market share into the areas relative to your competitor? And second question is around your guidance for cost going up by high single digit, probably a bit less for Australia. Can you [indiscernible] as to your -- probably your increased caution in your outlook for FY '25, given flat listings and probably geo mix as well. And perhaps if these things are better than expected. As you alluded to before, you could actually flex the costs pretty easily. And the third question is just a quick one. Given the strength in the listings in the fourth quarter, particularly in May and June, can we expect some revenue deferral into Q1 in FY '25?

Yes. Let me take the revenue one. So you're right, we did see a revenue deferral negative impact in Q4. So that will give us a benefit into Q1. The impact of that will really depend again on where listings land in August and September. So -- but at the moment, there is a positive deferral benefit flowing into Q1. On costs, as we flagged, high single-digit, we set out cost growth, knowing what we've have around salary inflation plus our strategic investments. And that's our best view at this point in time around what we want to invest in. And as we flagged, if the market is better or worse, we can adjust it up and down, and we normally wait until we see at least a couple of quarters of experience before we make many changes to our cost base.

And in terms of marketing, where that shows up in terms of our ROI, we'd say very strong audience numbers, that lead we've continued to maintain over our competitor. I hope you've all seen our marketing campaign at the Olympics. We're very, very pleased with that. And what that drives is not only audience, but things like people coming and claiming their property, people visiting the owner dashboard, which as we said in speaking drives seller leads to our customers. So there's a lot of value that comes from that marketing as people then engage with our site.

And our next question is going to come from the line of Darren Leung with Macquarie.

I might just do all 3 upfront as well. And just the first one is in relation to the Campaign Agent. Can you talk a little bit about the -- if there's any price differential between an ad purchase direct or upfront versus on a buy-now pay-later arrangement through Campaign Agent, please? The second one is just on…

[indiscernible].

Okay. Second one is just on the OpEx outlook. So there's been obviously a few questions on this, but is it fair for us to conclude that the sort of flat listings outlook is a key input in terms of how you're thinking about OpEx? And I kind of asked this question in the context of there's obviously a lot of excelling opportunities looking at AI investment, et cetera, et cetera. But if we are in an environment where rate cuts are called February next year, is there an option for you guys to invest more heavily?

Yes. Look, the way we -- as Janelle said, the way we manage costs, we take a view on our revenue. We assume flat listings and the revenue will come with that. And obviously, we aim for our cost growth to be below that revenue growth. And as the year unfolds, if revenue is below expectations, we will adjust accordingly. And similarly, if it's above our expectations, and we think that's going to be prolonged, it does give us options to flex up, which we did this year in such a strong environment. But we like to see that kind of sustain before we make that call.

Yes. No, that's useful. Just a final one on India. I'm sure you've seen the release, one of your key peers is talking about investing a little bit less in sort of margin improvement. And I know you've got guidance out there for EBITDA losses to be less in '25 and '24. But can you give us a feel as to how close you think you guys are towards breakeven in this market?

Yes. We're not putting out breakeven forecast in India. We've said consistently our absolute focus is getting to clear #1. And the clear #1 in audience, clear #1 in revenue, clear #1 in customers, clearly #1 in listings. I did notice our competitor saying that they can reduce the level of investment. They didn't invest pretty heavily this year in marketing. But I think that's a sign that the market is starting to mature a little bit, but look, they're not making money either. And we grew revenue much faster than them. So the frustrating thing, as I said, is we believe we've got -- if you added our web audience and our app audience and compare to our competitors, I think our lead is higher than we can report at the moment. So it's a bit frustrating that someone is not doing that yet. So we took those comments as encouraging. It means people are starting to be rational. And that will influence our level of investment somewhat.

And our next question is going to come from the line of Thomas Beadle with Jarden.

I just had a couple of questions. Just again another one on the cost just around the phasing in FY '25. Just given the high exit rate, should we expect a higher rate of cost growth in the first half, something more like a low double-digit type growth and maybe sort of I guess a low to mid-single-digit type growth in the second half as a result. And on that as well, can you just talk to anything that we might need to be aware of in terms of the timing of costs that might be different in FY '25 relative to '24, things like marketing campaigns, for example? And just secondly, just a quick one on commercial and developer. Just I'd be interested just to hear what you've done on price and product in those businesses in FY '25?

Yes. Look, I'll take the second question first. Both have got double-digit price increases into FY '25.

Yes. And Tom, on costs, we always say you shouldn't look too much at the phasing because there is things that move around, and we did flag at Q3 that Q4 costs were going to be substantially higher for things like marketing spend, which was flowing through into Q4 of last year. So I wouldn't look too much about the phase in. I think it would focus more on the full year guidance around costs.

And we'd never flag in advance what we're doing in our marketing.

And I would now like to hand the conference back to Owen Wilson for any further remarks.

Thank you. Look, thanks, everyone, for joining us today. It's always pleasing to be able to present fantastic results like these. We look forward to seeing many of you in the coming days. Thank you.

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