Rent.com.au Limited (RNT) Earnings Call Transcript & Summary

Welcome, everyone, to today's Rent.com.au Investor Briefing Webinar. It's a pleasure to have you with us. My name is Nicola Gosatti from Investor Relations Consultancy, Corporate Storytime. Rent.com.au Limited is Australia's leading renter focused technology platform purpose-built to meet the financial and digital needs of the country's 8 million renters. If we think of REA as the go-to platform for buyers and homeowners and that carsales dominates the auto classifieds market, Rent.com.au is building the same category-defining leadership position for renters, an audience that has been largely overlooked despite its scale and importance. A key part of this story is RentBond. This product directly solves a major availability challenge for renters, and following the recent financing agreement is now positioned to scale significantly. That deal gives Rent the capital capacity to significantly expand RentBond volumes and revenues, creating a powerful annuity income stream. Alongside the growing adoption of RentPay, these developments are strengthening the platform and setting the company up for an exciting period of growth. With that context in mind, it is my pleasure to introduce Jan Ferreira, CEO of Rent.com.au. Jan will share the progress to date, the lessons learned along the way and the opportunities ahead as Rent accelerates its growth. Following Jan's presentation, we will open the floor for a Q&A session. [Operator Instructions] So without any further ado, I'm pleased to hand over to Jan.

Thanks, Nicola, and morning, everyone. Thank you for joining us. Before I go into our strategy and update, for the new people on the call, what I'll do is tell you a little bit about who we are. We've got an experienced Board of Directors, all of whom are significant shareholders as well, led by Sam McDonagh, former Country Manager for Airbnb and Regional Manager for eBay. Within the management team, we also have a lot of experience, particularly relevant experience for RentBond. And that's one of the reasons why we're so bullish about that. Most of the team are also shareholders. In fact, management and Board collectively own around about 12% of Rent's shares. Our share price has recently been hovering around about the $0.04 mark, staying just either above or below that. And that gives us a market capitalization of just over $38 million. But more importantly for us, it puts about $8 million worth of options [ at or in ] the money. The exercise of those options will allow us to significantly expand and accelerate our growth. Just stepping back a little bit in terms of why we do what we do. So Rent.com.au exists to make renting rewarding. And by that, what we mean is that we want the whole process to be a far better experience than it is today. Much of the national conversation about property tends to be about homeownership, house prices, et cetera, with renting kind of relegated to hard-luck stories and the like. We see this reflected in real estate agencies too where property managers are, I guess, sort of the second-class citizens of an agency, even though, weirdly enough, the only asset that an agency has when they sell is their rent [ growth ]. The reason we focused on the renting sector is because it is huge and it is overlooked. So the absolute number of renters in Australia has consistently grown as both the population has grown and the percentage of people renting has grown. And we see that growing towards the 40-odd percent that we see in comparable countries like Canada, the U.K., et cetera. There's $85 billion of annual rent paid in Australia and about $200 million in monthly bonds lodged. So that's $2.4 billion of bonds. Capturing just a very small share of that market would significantly multiply the valuations for Rent. We've been moving from being purely a listings business that monetizes our audience through advertising as usual, but once every 3 years transactional products, to building more consistent relationships with our renters through RentPay initially and now through RentBond. Going forward, we'll add additional ongoing annuity products like insurance, savings, investments and other things. We've seen the compounding impact that recurring revenue can have on -- like as a benefit for the business, where even modest growth in RentPay customer numbers and growing ARPU has driven step changes in the revenue that we get. With RentBond, we see a similar opportunity. But the great thing there is we already have 4,000 people applying for a loan every month. So we've got the demand there. We expect further growth to come from combining or cross-selling RentPay with RentConnect, RentBond, et cetera, and adding those new revenue streams. RentBond is a product that's been around in various iterations for about 10 years now. And the gap that it solves is not a new one. It's been around, but it's never been adequately resolved. When a renter moves, it's one of the most stressful time. I mean even when a homeowner moves, it's a very stressful time. But for renters, it's a really condensed period. They have between 4 and 6 weeks that they have to get everything together, like from finding the property to booking their move, then they've got to switch all their utilities, et cetera. And they have to lay out about 4 weeks rent in terms of the bond, 2 weeks' rent in advance, but they haven't even got their bond released from their previous properties. So it's a significant gap and a pain point for them. And this is where RentBond really shines. So not only do we bridge that gap where not a lot of other providers in the market would finance such a period, but also if they repay within 21 days, it absolutely costs them nothing. Now we see that very few people actually do repay within that time period, but the option is there for them. And that's why the product has been rated 4.8 stars by renters over a long, long period of time. In terms of the RentBond rollout, so we've previously announced, we've got the $10 million facility secured. We've already drawn down $1.6 million to cover the first few months of funding. We're getting good advice and support from the lender team. They are very experienced in this space, and that's complementing the experience within our management team. The first month's trading has gone really well. We've been progressively rolling out, and we've been quite conservative in the approach, just making sure we're refining before we sort of expand. But we're on track to grow to that $1 million a month in terms of loans within the next 2 to 3 months. In terms of the business case assumptions, so we've talked a lot about the fact that we can drive 6x revenue by bringing this product in-house. And pleasingly, the first month's trading is actually proving that out. So the average loan size is just over $3,500. The average term is just over 13 months. And importantly, the lifetime revenue that we've got from those loans that were actually written is just over 6x what we would have received under the old model. So summary is we're on track and we're really starting to see the volumes grow. In addition to that baseline growth that we get by just changing the business model of getting that 6x uplift, we've got other opportunities to scale RentBond even further. One of the things we've consistently felt and we're starting to see early benefits of is the user experience. Just keeping people on our site rather than flicking them off to third parties is seeing more people get to the point where we can actually make a decision on them. And we also have started working through gathering the data that we need to have AI supporting our credit decisioning. So for example, one of the things that we want to look at is we have rental application data. So when renters apply for a rental property, they do fill in a lot of information, which is, in many cases, similar to a loan application. We already have that information captured through the application process and our Renter Resumes. So using that to get a quicker response and also be able to make a smart response that other lenders cannot, we expect to see us grow much, much faster. Next also comes product extensions. So we're looking at landlord rent-smoothing products, so covering sort of one-off bills or vacant periods that they have to have a consistent income stream for landlords through providing a finance product. And also variations. So at the moment, RentBond is just a straight-out personal loan, but we're looking at introducing buy now, pay later and other options to cater for different customer demands. Partnership channels are also very important to us. We already have a number of significant partners that refer their customers to us to process loan applications, and we will continue expanding those. For example, through real estate agencies, RentBond is a great way for agencies to generate incremental income with minimal effort. With RentPay, the proposition is something that we're always looking at refining and improving. And currently, we balance the renter offering with what agencies want. And we have about 25% of our user base is -- joins us from, I guess, we call it off the street, so they join without any agency involvement at all. And the reason they do that is because they like the flexible payment options, either the scheduling, but most importantly, what we see is they're likely to use their credit cards to have points, et cetera. We do offer cash-backs and rewards. We've got a partnership there that provides good savings for customers. And recently, we've bought our line of credit called Scorebuilder in-house alongside the RentBond, bringing that in-house. Collectively, these provide us the opportunity to drive higher margins. So with Scorebuilder, by bringing it in-house, we're getting higher margins. We've also recently been accredited as a consumer billing service provider for credit cards. So what that means is that we're no longer classified as a merchant. So, A, it allows us to increase our margin on that by charging a platform fee. And from a risk perspective, it also moves us out of the scope of what the RBA is looking at in terms of the review of credit card surcharges by merchants. So we should escape that. In terms of agents, we provide great productivity benefits for agents. We've consistently proven the value proposition to property managers. This is proven out by not only sort of case studies that we've done on them, but the fact that we've had a number of win-backs through this. And we expect more growth through [ specific group ] partnerships across both RentBond and RentPay. What this has led to is significant growth for us. So as I called out earlier, we've had consistent growth in active customer numbers over the years, and it's been quite pretty pleasing. Over the last 3 years, 45% compounded annual growth rates. The ARPU keeps increasing as people are using those flexible payment options. But collectively, there's a multiplier effect when you combine both customer growth and revenue per customer growth. We've had 222% growth in recurring revenue across the past 2 years to where, at the moment, we get about 1/3 of revenue is coming from recurring sources through RentPay. This brings us to what our targets are. So we've been quite explicit about this because we're very confident about hitting these. So from a revenue growth perspective, we've proven up that the financial assumptions we made on RentBond are valid. So getting 6x the revenue compared to the old model. Combined with recent strong growth in RentPay, we expect that we will be doubling our group revenue within the next 12 to 18 months. From a profitability perspective, this revenue growth, without associated costs -- so costs will increase, but not nearly as fast as revenue does. So that puts us in the frame to be EBITDA positive within the next 12, 18 months as well. So we're targeting Q2 FY '27. Pleasingly, most of this revenue growth is going to cover recurring sources. So we expect that by the end of this current financial year, more than 70% of group revenue is going to come from recurring sources. Collectively, these put us in a great financial position. Of course, if the $8 million worth of options that are almost in the money are exercised, we can accelerate that pathway to profitability and get there much sooner. Thanks. Nicola, that kind of brings us to the end of the formal presentation.

Thank you so much, Jan. We'll now move on to our Q&A session. Our first question for you is, with the launch of RentBond, have the other parts of the business become less of a priority?

Absolutely not. We're building a platform for renters here. So RentBond actually bridges the gap between Rent.com.au, which is focused on helping people search for a property, apply for it and then move in, with RentPay, which covers the tenancy period. So RentBond is a great way for us to unite all the different parts of our business. We want to cover the entire renting life cycle.

Thanks, Jan. Our next question for you. You've said that the renting market is huge. How is Rent.com.au positioned to capture a larger share of this market?

It is huge, $85 billion a year in rent, $2.4 billion in bonds lodged. It gives us a massive opportunity. And we're the only ones that are really targeting renters from a renter's perspective. There are other businesses that focus on property management, but generally, they tailor their solutions to the real estate agencies that operate in that. By building up that relationship with renters that I spoke about earlier, not only does that give us the ability to generate recurring revenue, but that ongoing relationship allows us to provide more services and more products into those renters.

Thanks, Jan. Our next question for you. You're looking to double revenue in 12 to 18 months. What are the key drivers that give you confidence in achieving this?

Probably the biggest impact in terms of doubling that revenue is the change model for RentBond. Given the experience within the team, we've always been confident that we will achieve that. But the first sort of 5 weeks or so of trading has actually proven out all those assumptions. So we're right on track to do that. And that 6x -- RentBond was already a significant contributor to group revenue, but getting 6x the revenue over that time period gives us a lot of confidence that we'll do that. We're also seeing good growth in RentPay, and we're starting to see, I guess, more usage of our normal renting products as well. So everything kind of points us in that direction.

Thank you, Jan. My next question for you. You've recently spoken about Rent.com.au becoming a $1 billion business by becoming the default for renters. How do you see that positioning creating strategic value for larger players in the sector?

I guess sort of the hidden question there is, are we looking to exit and who do we think we'll buy Rent.com.au? Well, we're not building for that. We're creating a relationship with a very significant proportion of the market. 30% of people in Australia rent. And so really, the value there is not just for other companies within the real estate sector, but anybody wanting to have access to a significant channel of people, predominantly under 40, generally not -- like with a lot of disposable income, et cetera. So we see energy companies, telcos, et cetera, either looking to acquire or to partner with us to gain access to that channel.

Thanks, Jan. Beyond RentPay and RentBond, what is the longer-term vision for Rent as a platform for renters and how does that expand your revenue streams?