Wisr Limited (WZR.AX) Earnings Call Transcript & Summary

Good morning, everybody, and welcome to the Wisr quarterly update presentation for the fourth quarter of FY '25. With us this morning, we have CEO, Andrew Goodwin; and CFO, Matthew Lewis, who will take us through the presentation that was lodged with the ASX this morning. As usual, just before we kick off, just a little bit of housekeeping, [Operator Instructions] this webinar is also being recorded, and we will post the recording on to the Wisr website later today. So with that, I will now hand it over to Andrew.

Thanks, Eleonora. And good morning, everyone. Thanks for joining. So if we go back to the start of FY '25, we said to the market in terms of loan origination guidance, we were aiming for 75%-plus growth in loan originations. We upgraded that guidance to 90% plus at the end of Q3, and I'm very pleased to announce that for the full year, on the back of accelerated growth into Q4, we've delivered 101% year-on-year growth in loan originations, which is just an exceptional result, and I really want to shout out to the whole team in achieving that. And this was our first year of being back to growth. And so it's a really good place to be. And so as I said, Q4, we saw accelerating growth -- sorry, Eleonora, just go back, across both of our loan products. That drove a third consecutive quarter in loan book growth, which ultimately drives revenue growth. And pleasingly, this quarter was our first quarter of being back to revenue growth as well, and we'll talk more about that shortly. We've continued to invest in technology and automation, which is driving efficiency and actually some great improvements in arrears, which we'll show shortly as well. The business is well capitalized. And pleasingly, back in May, we announced our third warehouse facility with Barclays. That was a $267 million facility, which gives us great headroom for ongoing growth into FY '26 and beyond. So just some of the key numbers. So for Q4, we delivered $140.3 million in loan originations. This is 154% up on PCP and 26% up on Q3. Loan book is now at $824 million, again, seeing good growth, 7% up year-on-year, and we expect to see that continue to grow as the loan originations grow as well. And pleasingly, the average credit score on the book has gone up to 804. It remains a prime book, and that hasn't changed. In terms of the broad financials, everything is moving in the right direction. Yield, revenue and NIM are all up. Our 90 arrears -- and our net losses are down. And I'll quickly call out our 90-plus and our net losses. So 90-plus is down 18 bps to 1.4%. Net losses is down 109 basis points on PCP to 1.66%. Again, just an exceptional outcome. The business is well capitalized, as I called out, and our customer focus remains. And so 79 Net Promoter Score for our customers is fantastic. Obviously, our award-winning Wisr App is a key component in driving that. So Wisr at a glance, many of you will be familiar with this, for around 7 years, we've been focusing on helping people make smarter money decisions. And making it easy to make them. So financial wellness has always been the purpose on which the business has being built. We are a tech company, first and foremost. We have a proprietary tech platform that is basically built for scale and automation, and we're really seeing that start to come through. We currently have over 72,000 loan customers in our books, three warehouses, three term deals, a called term deal. We've originated over $2.2 billion in loans since inception and 80% of our loans are now automatically credit approved by our tech platform. So just more on that automation piece. So in the last 12 months, we've seen the automation or the credit approval automation grow from 69% to 80%. Really, what this is going to drive as we continue to scale is just ongoing efficiency and operational leverage. I already spoke about the huge improvements we've seen in our arrears, both 90-plus and net losses, that's really driven by our arrears management platform that we have invested heavily in the last 18 months or so, and the fruits of that investment are now really starting to come through. And obviously, our loan ledger platform remains very strong and, again, is very well placed to scale as the book grows. We're well diversified across Australia in terms of our customer base. The majority of our prime customers are full-time employed. The majority of our loans are vehicles. Some of those are secured. Some of those are unsecured. In terms of our loan book, we're about 1/3 secured, 2/3 personal. Some of the other use cases there are debt consolidation, home improvement contents and other. There's a whole range of loan purposes that we have to support Australians on their financial journey. Average loan size is about $35,000. I've already spoken about the strong credit score. I just wanted to reiterate some of the structural tailwinds, and we've spoken about this historically. What we're seeing in the Aussie market is the incumbent major banks really move away from personal lending and auto lending to focus more on mortgages, deposits and business lending. This is creating structural tailwinds for what I call the nonbank lending sector to take market share. And really what we're seeing in that top right-hand chart there, and this is RBA data, is the -- RBA -- is the Big Four banks' share of personal lending has gone from 74% to 61% in the last 5 years. We expect that to continue. Mortgages have remained very steady at around 95%. And just to be clear, that's not a market where we're playing in. In terms of how these loans are funded, so the bottom right is ABS issuances in Australia by banks and nonbanks. And really, we're seeing autos go from being funded on bank's balance sheets to the ABS markets, which are extremely strong and benefiting from the private credit wave that is taking place more broadly. And you can see those issuance sizes just growing really dramatically in the last couple of years. And again, a thematic we expect to continue. And just finally, the market opportunity or the TAMs that we're playing in are enormous. So to put into context, of our $824 million loan book, there's around a $58 billion total TAM that we're playing in, which does get me quite excited in terms of the amount of market share that is available to take, particularly given these structural tailwinds that I've spoken about. I think this slide very much speaks for itself. Obviously, 154% growth in loan originations on PCP, 26% quarter-on-quarter. So we finished out Q4 at $140 million. We've seen great growth across both of our loan products, so personal loans and secured vehicle loans. And again, that 101% total year-on-year growth is just a great result and very much just the beginning. So obviously, that loan origination growth drives loan book growth. And so we've just delivered our third consecutive quarter of loan book growth. So we've closed out the year at $824 million. Again, the loan book size and growth is really what's going to drive our revenue growth. We're seeing growth in both of our loan books, personal loans and secured vehicle loans. And obviously, really pleasing to see this chart start to rise again after that period of moderated growth settings that we went through, we're very much accelerating out of those. I'll now pass it to CFO, Matt Lewis.

Thanks, Andy. If we now focus on yield, NIM and credit score over the last 4 quarters, all moving in the right direction. We've seen portfolio yield has increased from 10.9% in Q4 FY '24 to 11.2% in the current quarter. And NIM has improved from 5.14% to 5.47%. There's been a small reduction in the yield and NIM quarter-on-quarter, which is really just a reflection of the change in the product mix split slightly more towards secured vehicle products. Secured vehicle loans have a slightly lower yield, but they also have a much lower loss profile. So when we look at the portfolio credit score, we can see that's continuing to increase, largely as a reflection of that increased SVL mix. And it's important to note that when we look at the two products that we take to market, when we look at them on a post-loss basis, they both broadly have the same unit economics. So the overall portfolio unit economics are still stacking up equivalently. If we move on to arrears and losses, and this has always been a good news story, at least over the last 3 or 4 quarters. We've seen 90-day arrears decline from 1.58%, Q4 '24, to 1.4% in the current quarter. And losses having reduced over 100 basis points to 1.66% in the current quarter. And as previously discussed in updates, this really reflects the upgrades to our arrears management platform, which has given us the ability to segment our customers better. We've now got stronger real-time payment platforms for customers and more efficient engagement strategies across the customer base. We move on to funding program, big change in the current quarter is that we settled the new warehouse with Barclays in May and funded in June. So this is a mixed-use warehouse for $267 million. It increases our overall available funding to $302 million, that includes the HeadCo loan. Excluding that on a pure warehouse basis, it's $287 million. As a business, we've executed four ABS transactions. And now that we're now starting to see the loan book return to growth, we're looking to resume our ABS program in the current half. If we look at our capital and cash. Overall cash on balance sheet, $43.6 million. Unrestricted cash is $14.1 million. That's come down a little bit from Q3 as we had to seed the warehouse 3, warehouse with Barclays with $5 million of equity contributions in June. That will be utilized over the current quarter. Looking ahead, we're also looking at recycling other capital, we'll be -- in the current half, we'll be calling our Freedom22 deal and reentering the ABS markets, which will both refresh and increase our capital and cash position.

Yes. Thanks, Matt. So just to summarize what we've presented here today, so continued and actually accelerating loan origination growth. So 154% for Q4, 26% Q-on-Q and great growth across both of our personal loan and our secured vehicle loan products. That has then driven loan book growth, so our third consecutive quarter of loan book growth. And pleasingly, while growing that book, both our portfolio yield and NIM have increased, that's at the same time as skewing more towards secured vehicle, as Matt said, and a higher credit score in our book. The improvement in credit quality again is just exceptional, particularly that net loss number coming down 109 basis points a year -- on PCP, and the 90-plus down 18 basis points as well. The business is well capitalized, as Matt just called out. And very pleasing to close that third warehouse in Q4. And just to wrap up, obviously, for the full year, we started at 75% plus guidance, we upgraded that to 90% plus. We've delivered 101% year-on-year loan origination growth. A really pleasing outcome. I'm looking forward to providing more detail in our full year August results, where I'll give more of an outlook on FY '26 and what we're expecting to see.

Thanks, Andrew. Thanks, Matt. Look, we will now open it up for questions. [Operator Instructions] Look, we have had a couple come through as we went through the presentation. So I might kick off with those. Andrew, I think, it's one for you, which is -- the question here is, congratulations on a very strong loan origination growth in Q4. Could you give a little bit more color on the key drivers behind this strong growth? And how sustainable is this momentum going into FY '26?

Sure. So firstly, we've only been back in growth mode for about 12 months. And so really a key component of the outcome is a function of being back in market. We have very good products. So our personal loan and our secured vehicle loan are great products in their own right. They're also differentiated through that Financial Wellness Platform offering that comes alongside them. The automation thematic is key. That is driving efficiency and just making the whole process quicker, more user-friendly, et cetera. The overall system size is very large. And that's also aided by those structural tailwinds that I spoke about earlier in terms of the nonbanks picking up that share from the incumbent majors who just aren't fundamentally focused on these products that we're doing. And just to round that question out, consumer sentiment is very strong. So obviously, people would be familiar with the rate environment. Obviously, rates coming off. Unemployment remaining relatively benign. And really, that's driving people to want to make those life decisions like buying a car or put in a pool, do a home improvement, and we're there to help them on that journey.

Great. Thank you, Andrew. We just got another one. This is on the loan book. So the loan book is now sitting at $824 million. When does Wisr expected to reach the $1 billion loan book milestone? And what sort of are the key sort of factors and risks to achieving that?

Yes, sure. So I think if you look at those charts that we showed earlier in terms of our loan origination growth and the trajectory that we're on. The $1 billion book is very much a milestone as opposed to an end state. Like we want to be well beyond $1 billion book. And I think the reasons I outlined earlier on why we're growing, and actually, it's very early days, I think it's very evident that, that is very much a milestone as opposed to an end state. And as I said, in August, I'll be able to give more of an outlook on what we're expecting to see in FY '26 and beyond. But yes, it's obviously something that is very much sort of a short-term view for want of a better word.

I've just got a couple of more that have come through. So here is one, congratulations on a great update. Unusual to see rapid growth in book versus falling loss rates. Can you point to a few of the drivers of the lower loss rates?

I think there's two points to mention there. I think that the key driver of the reduction in loss rates is the arrears platform that we put in place 12 months ago and it's undergoing continual upgrades. So that, as I mentioned before, that's allowing us to do much better segmentation of the customer base. It's also allowing us to take more forms of real-time payments from customers when we call up and chase their debts. And it's also providing our FA team with more information to contact people earlier when they're likely to go into arrears. So there's been a huge uplift in that process. Also, now that the loan book is starting to scale and originations are scaling as well, we do get a minor denominator benefit when we're doing those calculations because it's the losses over an average loan book for a period.

Great. Thank you, Matt. There's another one. Also, as you ramp up your sales and the automation, is this allowing more to come through the top of the funnel?

As we ramp up our sales -- I mean in terms of -- conceptually, yes. I mean, from a top-of-funnel perspective, given the automation that we have, we're delighted to have as much as possible come through the top of funnel. And the reality is we get a lot more at the top of the funnel than ultimately what we settle. I think what I'd say is it's -- it would be attracting more customers conceptually in both our broker channel, our direct channel and through our Financial Wellness Platform. But really, I think what the automation does is it sort of optimizes the speed in sort of producing the end product and getting those loans settled and out the door. And so it can only be a positive. But also from an operational leverage perspective, obviously, automation drives less necessity for OpEx to actually get those conversions into settled loans, loan book growth and ultimately, revenue.