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

Good morning, everyone, and welcome to our investor presentation for August 2026. What I'd like to do is step you through the presentation that we recently lodged with the ASX and then have some time for Q&A at the end. [Operator Instructions] FY '26 was a transformational year for Rent.com.au. That phrase is often used by CEOs and directors to kind of describe their companies. But in the case of Rent.com.au, it has never been truer. We've reset and repositioned the business by bringing in-house our RentBond product, which has been a catalyst for record revenues, operating cash flow and putting us on the path to near-term breakeven. We strengthened the business by moving away from inconsistent transactional revenue streams towards solutions that not only creates an enduring benefit for our customers, but also recurring revenue streams for Rent.com.au, allowing us to grow. It has also allowed us to make some key decisions for the future of the company and open up a clear strategy for realizing our purpose. And that purpose is to turn renting into a rewarding experience. We've not wavered from this over time, but we've, I guess, crystallized exactly how we believe we can do that. And that's through empowering renters financially, helping them take control of their financial finances to turn renting into a rewarding step towards independence. As many of you would recognize from previous presentations we've done, renting is fast growing, and it's a very high-value segment. At the last census, about almost 1 in 3 Australians were renters. But we know from the U.S.A., U.K., Canada, et cetera, that the potential is much greater. And in fact, today, in Sydney, more than 50% of people rent. Most renters are young professionals living in the inner city, prioritizing career, et cetera, over a mortgage out in the fix. They are -- so 60% of renters are under 35. They are tech savvy, they're financially savvy, but they are time poor. $90 billion a year is paid in rent and every month, $220 million of bonds or loans with various bond authorities. Renters are a huge segment of the population, and they want something better. Most renters are happy renting and they're renting for longer. But increasingly, they are under financial pressure. Over the last 5 years, the average rent has increased by 42%. So our opportunity is providing them with smart tailored solutions to deal with the financial pressures of a tight rental market. That helps us build engagement. And over time, it builds a long customer lifetime and large customer lifetime value for us. Sorry, I realize that the presentation is not actually displayed. So I will just jump to Slide 7. Hopefully, you can all see that. So today, we have 3 distinct product verticals. They're closely related, but they have very different revenue models. Our original listings portal attracts more than 400,000 unique visitors per month, seeking properties and advice, but all the revenue we earn from that is all transactional. Once they move is where RentBond applies, it's key to helping them not only secure their home, but also fund all the related moving costs. I'll cover this product in a little bit more detail shortly. Finally, RentPays when they've moved in. It provides them choice and flexibility, choice of payment methods. They can pay anything from direct debit, PayID, Pay through to Alipay, WeChat Pay, et cetera. And by flexibility, we mean timing. So you don't have to pay the rent every fortnight if you want to, you can pay monthly, weekly, et cetera. Pay when it suits you and we pay the agent when they need it. Both RentPay and RentBond revenues are primarily recurring in nature. So these 3 products, while separate work well together, but they can be so much better when combined, a better customer proposition and a more efficient operation for us. RentBond has been the catalyst for our growth over the last year. So I'd like to explain this product a little bit better. Essentially, what it does is it solves the bond gap. So when a renter moves -- needs to secure a property, they apply. once they're approved, they need to put down 4 weeks rent for the bond and at least 2 weeks rent in advance just to secure that property. but they don't move for another 2 or 3 weeks at least. So this gives them a gap where the old bond is still tied into the property they're renting, but they've really had to put a big outlay. On top of that, there's a whole bunch of moving costs, cleaning, end of lease cleaning, et cetera. So what RentBond does is we've kind of tailored essentially what is a pretty vanilla personal loan product. We provide them the opportunity to repay within 21 days when they get the old bond back. And if they do so, 0 fees, 0 charges. So great product for tenants, great product for real estate agents because we don't disrupt their property management process at all. We don't take any security over this, so we don't complicate things. Customers love it. Since we've brought it in-house, it is predominantly 5-star reviews that we've had through Trustpilot, et cetera. And we have a lifetime average of about 4.8 stars, indicating that customers really appreciate the timing of the product. They appreciate how quickly we can actually help them into a home. What you can see from the distribution of RentBond loans is that it's pretty tightly concentrated around that 4 to 6 weeks of rent and around about sort of 12- to 15-month period, which again aligns with most people's lease terms. Importantly, there are not a lot of lenders that operate in this segment. You have payday loans right at the bottom end, lending up to $500 for up to 62 days, but frankly, most of it is much shorter. And then you have the nonbank lenders that won't lend you less than $5,000 and won't lend for less than 24 months. So there's a real gap in the market that RentBond is filling, and that's why we've been able to ramp it up so quickly and so successfully. a big catalyst, so we've had this product in market for a long time, but we've always just referred it to third parties to provide the loans. A big reason for us bringing it in-house is not only that we have the capability via our RentPay platform and what the management expertise that we have. But from our modeling, we indicated that there would be a 6x revenue uplift and a 3x profit uplift from bringing RentBond in-house. Our actual results are bearing this out. And so that's why we're kind of seeing that there's a steady march towards greater revenues and steady march towards EBITDA breakeven. Now -- there is an anomaly in the accounting model in that we recognize most of the costs upfront, but we recognize the revenue over the life of the loan, irrespective of the fact that we get some of that revenue in cash when the loan is settled. This creates a gap and it means that under the new model, it takes about 7 months for a loan to become more profitable than just a referred lead. But over the life of that loan, the average of just over 12 months, we get more than 3x the profit. This focus on recurring revenue, as I've mentioned, is delivering results. So as of the June quarter, Q4 FY '26, about 75% of revenue was recurring revenue, and we've grown from about $0.9 million, so [ $900,000, high $800,000 ] a year ago to $1.35 million, just under $1.4 million in the June quarter. $1 million of that was from recurring revenue. Importantly, for us, the EBITDA gap keeps closing. So down to the Q4 FY '26, we were at just under $0.5 million EBITDA loss, and that's improving by over $200,000 each month. So putting us in good stead and giving us great confidence that we can achieve our 2026 December targets of $1.8 million of quarterly revenue and EBITDA breakeven. The next phase for us is bringing these different parts together to create a stronger business through one connected platform. We really know that our individual products work well. but making -- customers don't take more than one product very often. So for us, presenting it in one unique experience, they can actually move seamlessly from searching for a property through getting their RentBond and then into rent pay, creating a greater lifetime value, creating greater value for us, but also just making it really easy for customers to actually make use of our different products and for us to tailor a better experience for them for each stage of their renting. On top of that, it also provides us the platform to introduce savings products, expand the range of loan products that we have, expand the range of payments beyond rent to other bills and also introduce insurance, et cetera. This is just a concept that the team have mocked up in terms of what this could look like, but it is all real and all doable. Importantly, for us, we're not rebuilding anything. We actually already have the core parts there. All we're doing is putting a user experience layer over the top of our existing infrastructure. This then gives us the catalyst to then add the savings, allow build splitting roundups, et cetera, and really create that financial hub that's going to power both the renter experience and profitability for Rent.com.au. This will happen over a period of time. So FY '26 was all about strengthening and repositioning the business, bringing Rent on in-house, removing the barriers that customers have to using RentPay. So we have a premium model in place now and that we've seen -- there's been strong organic growth from customers through that. More than 70% of our group revenue is now recurring. We're seeing great revenue growth year-over-year, and we're driving profitable cash flow. This next half is all about bringing that single platform together. So one renter experience that builds loyalty and expands the cross-sell opportunities for us. So we're still targeting $1.8 million revenue for the December quarter and EBITDA positivity, and we'll do that through strengthening positive operating cash flow and recurring revenue percentages. As we move into the second half of FY '27, we want to deepen that value in terms of the platform. We will remain consistently EBITDA positive. We will accelerate revenue growth and gross margin growth beyond where we are now, and we will maintain positive operating cash flow and recurring revenue above 70% as we do that. This monetization will include more engagement tools for renters, but increased revenue through savings products, introducing a rewards program and other AI-enabled tools that renters want. As we move beyond FY '27, we'll continue to enrich the platform. We'll continue to grow customer loyalty and compound growth. We expect within 4 years that we'll be able to achieve a 4x revenue growth. We will be able to grow our EBITDA margin to above 40%. We'll be profitable at a net profit after tax level, and we will continue maintaining that recurring revenue percentage and positive operating cash flow as we continue. So just in summary, we've got really strong momentum from FY '26. We've carried that into FY '27. July was the first ever month with more than $500,000 of revenue. Our EBITDA continues to improve month-on-month, quarter-on-quarter, putting us on track for that positive EBITDA for the December quarter. As I said before, we have an existing proven platform. So bringing together into a single platform does not mean a whole rebuild of everything we've done. We've already got that. We're just layering the user experience over the top of that to make it easier for renters to find our different products. We're starting to see repeat RentBond usage coming through. So people that started taking loans in August, September last year are coming back looking for additional loans for alternative purposes, and we've amended our process to be able to easily do that. That a great quality of customer because we've got known repayment history through them, but it also allows us to build that ongoing loyalty over time. As I mentioned as well, we've seen organic RentPay customer growth since we introduced the premium model, and that really demonstrates the ability for us to build a strong and loyal customer base. We've got $6.6 million in cash and $6.25 million in undrawn debt, which is more than enough to see us through and executing the strategy. I'll now open up for questions.

[Operator Instructions] I've also had a number of questions sent through ahead of time, and I'll start with those. So the first one is a question from Andrew. Ahead of the December EBITDA target, what's the time line for merging the platforms and rolling out savings and insurance? And then a follow-up question to that is, what are the near-term catalysts shareholders should look out for? So just in terms of answering that, look, as I said, it doesn't need a whole rebuild. So we are working through the user experience layer and putting that together, while at the same time introducing some of those alternate products. So our target is to have that single user experience and single sign-on across the different aspects of the platform in place as we move into the January renting peak in January 2027. But we're not waiting before we start launching other products. So we expect to have our first savings product out by the end of the September quarter creating an opportunity for renters to earn a far greater than cash rate of return. But we are continuing to build up the savings products in the background behind that. Insurance is probably a further well away. We believe there are other opportunities that can accelerate our profitability before that. And we do want the insurance products to be -- to follow the model that we've done with RentBond, for example, which is really tailored to renters' needs and not just be generic referral of insurance, we actually want a really good product. So I would say insurance is probably more of an FY '28 thing. So in terms of the catalyst that shareholders should look for in the run-up to the December quarter, look, we'll continue to put out trading updates, advising shareholders of how we're tracking against those targets. But you will also see product releases coming through, including in the September quarter, our first savings product. There's a question from Conor. What are the actual losses from RentBond? So that's a good question, and it's always, I guess, a bit of an unknown when you launch a product, although we did have a lot of experience with our previous funding partner, Fair Go, where we referred loans to them. So based on that experience, we modeled or budgeted a 7.5% loss rate. Currently, we're tracking below that in terms of our provisioning, but we've actually added a layer on top of that just to be conservative. So we're budgeting -- sorry, we provided for more than that, but we're actually seeing that our performance is trending below, but it's much better to be able to release a provision than to have a drop. There's no doubt the broader economy is kind of playing a part in this with renters being squeezed, but we are very diligent in terms of not lending to people that we feel are under pressure and cannot afford the loans. And so that's why our performance is better than we're expecting. It's always a balancing act between sort of helping somebody into a home or lending them a loan that they will struggle to repay, and we don't want to do the latter. There's a question from Philip. You've impaired RentPay. Does that mean it was a mistake? Look, I absolutely say it wasn't a mistake. We're very confident in terms of the future of RentPay. As I said before, it's a $90 billion a year addressable market for us. We're not binning it. What we're doing is we are we're just, I guess, providing a different overlay for customers so they can access RentPay and the other products in a much more efficient manner. So the impairment is more a, I guess, working through with the auditors and looking at things on a stand-alone basis rather than as a single platform basis. In fact, we've actually bought back the last -- the 2.5% outside ownership of RentPay because we believe in that product, and we believe in the future of it. I don't see any additional questions. I'd maybe like to just give it a last chance if there are any open questions, please use the Q&A function to ask them. Outside of that, we're always welcome to take questions either by phoning the company or e-mailing us at investors@rent.com.au. If there are no further questions, I'd like to thank you for your participation today. As I said, we're always happy to contact -- or to be contacted by shareholders. Please feel free to do so at any time. Thank you very much.