Wisr Limited (WZR) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. And welcome to the Annual General Meeting of Wisr Limited. I thank you all for taking the time out to attend this meeting by webcast during this time which is trying for us all, and for your continued support of our business. My name is John Nantes, and I'm the Executive Chairman of the Board. It is now just past 2 p.m., the nominated time for the meeting. I've been informed that a quorum is present, and I'm pleased to declare the meeting open. There are 2 components to today's meeting. Firstly, our CEO, Anthony Nantes, will present a business update, and then we will progress to the formal business of the meeting, where the resolutions reflected in the Notice of Meeting will be put to the members. As with many things in our COVID disruptive environment, we must do things somewhat differently at this AGM. It's unfortunate that we are not able to meet in person, but we have made every effort to ensure that you're able to participate in and vote at today's meeting. Computershare is our share registry provider, and they will oversee the voting at today's meeting, which will be conducted by an online platform. Online attendees can submit questions at any time. To ask a question, select the Q&A icon located in the bottom right corner of your screen. Once the icon is selected, a pop-up box will appear to start your chat with the moderator. Please note that while you can submit questions from now on, I will not address them until a relevant time in the meeting. Please also note that your questions may be moderated or if we receive multiple questions on the 1 topic, we'll combine them. For those shareholders who wish to ask a verbal question, an audio question facility is available during this meeting. To use this service, please click the Q&A icon located in the bottom right-hand corner of your screen. Once the icon is selected a pop-up box will appear to state your chat. Please let the moderator know whether you'd like to ask an audio question or not. You will then be provided with the relevant dial in details. Finally, due to time constraints, we may run out of time to answer all your questions. If this happens, we will answer them in due course via email or posting responses on our website. Voting today will be conducted by way of a poll on all items of business. In order to provide you with enough time to vote, I will shortly open voting for all resolutions. At that time, if you're eligible to vote at this meeting, a new voting tab will appear. Selecting the table bring up a list of resolutions and present you with voting options. To cast your vote, simply speak to 1 of the options. There is no need to have a submit or enter button as the vote is automatically recorded. You do, however, have the ability to change your vote up until the time I declare voting close. I now declare voting open on all items of business. The voting tab will soon appear. Please submit your votes at any time. I will give you a warning before I move to close the voting. [Voting]

I would like to start holder by introducing you to our directors and executives who are online with us today. Mr. Craig Swanger, Non-Executive Director; Mr. Chris Whitehead, Non-Executive Director; Mr. Matthew Brown, Non-Executive Director; and Mr. Anthony Nantes, Chief Executive Officer. Also online today is Mr. Andrew Goodwin, our CFO; and Ms. Natalie Kimo, Assistant Company Secretary. We also have representatives of the company's share registrar, Computershare, who are running the Secure Online valuing system for us and Team of the group's external auditors, BDO, who are available to answer questions regarding the audit. It's been a truly outstanding year for Wisr. The company's business model has proven while continuing to rapidly respond and thrive despite the unprecedented challenges from COVID-19. We delivered significant results across all our key financial metrics. Most notably, 21 consecutive quarters of growth, a significant achievement during a 2-year pandemic. We have achieved accelerated revenue growth, improved operating leverage and expense management, delivering 280% growth in revenue for FY '21, $27.2 million, compared to 43% growth in operating expenses. This resulted in operating cash flow breakeven for the month of June 2021. The quality of Wiser's business has been demonstrated through the strongly supported $55 million equity raise in June of this year led by Goldman Sachs, the sole lead manager and underwriter, and also our recently highly successful inaugural securitized issue, the Wisr Freedom Trust, with a Moody's AAA rating for the top tranche. At year's end, the company is very well capitalized with $92.4 million of cash made up of $64.8 million unrestricted cash and $27.6 million restricted cash. The $27.6 million is restricted to the funding of loans and operations of the Wisr Warehouse and Freedom Trust. Our CEO, Anthony Nantes, has also built an extremely strong executive team under his leadership. They are dedicated to driving the company's growth, and this is being demonstrated by Wisr thriving in the new normal of working from home and throughout the unprecedented COVID-19 disruptions. In recognition of the superb leadership and unique Wisr culture, we received 2 prestigious awards as first-time entrants this year, coming in at #6 in the AFR Best Places to Work Financial Services Category and #8 in the WRK Best Places to Work over 100 Employees category. As previously announced, after a 10-year of 6 years, Non-Executive Director, Mr. Christopher Whitehead, will be retiring from the Wisr Board today. On behalf of the Wisr Board, I would like to thank Chris for his significant contribution to the success of the company. For more than 6 years, Chris has worked tirelessly to support the company across the key areas of strategy and governance as well as a unique and purpose-driven business model reinvents the consumer finance experience in Australia. In that time, the company's market capitalization has grown over tenfold. Chris has demonstrated an unwavering commitment to delivering outstanding outcomes on behalf of our stakeholders and customers and will leave Wisr in a position of great strength. We wish him further success in his nonexecutive director career. The Wisr Board is committed to growing with appropriate talent as the company grows in scale and complexity and recently appointed former Managing Director of Macquarie Capital, Mr. Matthew Brown, as Non-Executive Director. This appointment is in keeping with Wisr's commitment to maintaining strong and appropriate governance. Matthew is also the Chair of the Wisr Risk and Audit Committee, adding further depth to the company's governance and oversight. As previously announced, we are well placed to continue to expand the Board as the company continues to grow and provide the right level of diversity and experience to Wisr to make the company stronger and more prepared for the next period of growth. The Wisr Board is progressing recruitment for additional appointments, which are expected to be announced in the near term. As we enter FY '22, the company's success and financial strength in FY '21 has provided a solid foundation for growth and scale. It's an exciting time for Wisr, one which could not have been possible if not for the hard work, advice and expertise of the entire Wisr team. I would like to thank the Board, executive management and all of Wiser's staff for their continued support vision experience. Importantly, the Board and the Wisr team should thank all of our shareholders for your support and the trust you placed in us to make Wisr the successful company it is. Together, we look forward to helping more Australians to improve their financial wellness and change the way Australians experience credit.

I'd like to now hand over to Anthony Nantes, our CEO, who's going to say a few words.

Thanks, John, and good afternoon, everyone. Thanks for your support to the company and appreciate your time today. I'll just turn to the next slide. The [ starting ] point for Wisr has always been building and purpose of the company in this space with a truly unique and differentiated strategy, building out an amazing digital lending platform that is now surely starting to get to scale and size and then make meaningful contributions to the company in terms of its revenue, but at the same time doing our agile platform approach. The financial wellness platform dedicated to [indiscernible] on that purpose of financial wellness and in turn, delivering the market through leading economics and market leading to be advantage across this sector. If we turn to Slide 12, year '21 really was a whole half year for the company and John has already touched on some of these points but it's worth reiterating and the growth that we delivered that in last year, 169% loan origination growth [ 280% ] growth in revenue, touching sort of $27 million for the financial year. Our financial wellness platform, the second platform we're building, [indiscernible] 450,000 uses by the end of June, up 80% per previous cross-lending period, as well as getting our arrears in check continued to deliver strong credit. On top of these great stats, we also had some really benchmarked and hallmark milestones for the year, including the launch of our second credit card, the secure vehicle loan product which we have launched last financial year which opened up $51 billion market opportunity for us here in Australia that credit card continues to scale with early stages for us but it's gaining traction and doing material benefits for us in this coming financial year. We truly have a [indiscernible] after market with incredibly strong response and really great results for the company which total cost of funding down rounding [indiscernible]. We strengthened the balance sheet and set the company the up for the next few years of growth [indiscernible] these cash to do a company size, scale and impact. And we are recognized as being one of the best places to work in Australia, we're not 1 but 2 different publications, which is really a hallmark and a testimony to the quality of leadership and people we have worked across the business end to end. And one of the achievements that I'm most proud to be achieved in this last financial year. Turning to the next slide. We've continued this trajectory into the first quarter of this year with 113% growth in our loan origination up to $132 million into Q1, which also drove our operating revenue up 195% PCP, $12.1 million. So we're approaching an exit run rate, we're just touching up towards that $50 million annualized exit run rate coming out of Q1, which is a really great place to be seeing it is as we exit that first quarter. We passed through the 500,000 mark in terms of customer and our financial wellness platform. We also set up our first secured vehicle dedicated warehouse, which again sets the company up for significant growth in the years to come. Turning now to Slide 27, where Wisr sits today is on an incredibly strong position. And we read the market to strengthen the balance sheet earlier this year, and we said we'd do 3 key themes. We said we would deliver growth in our loan book. We said we would invest in technology, investment and feature enhancement. And we said, we would expand our TAM by delivering new product, new markets and new growth opportunities. We've done a lot of that already. We start to accelerate pace towards achieving that $1 billion book on the back of 21 consecutive quarters of growth and we now announce $475 million. By setting up our inaugural vehicle warehouse, not only reduce our cost of funds, but gives us the room to grow in this coming year ahead towards that $30 line book milestone. We [indiscernible] inaugural ABS transaction, which only reduced our cost of funds, but again, it's that room growth. And with the balance sheet behind us, as we look forward to year 2022, you should expect us to deliver our inaugural secured vehicle [ point of view ] next year. We should also be on track delivering a second personal loan tenure market as we expect and another chunk out of the warehouse into the credit market and achieve that $1 billion loan book milestone. I know we achieved that milestone, there's a use case 1 beyond that as we go through the year 2022. In terms of technology investment, we continue to deliver operational leverage. We demonstrated that in financial year '21 with revenue growth of 28%, but OpEx growth of only 43%. So last year, we started to really show you, we don't open jaws. Yes, we start to scale the company and we started to scale towards that $1 million profile rate by achieving a $500,000 profile -- 500,000 profiles on the platform by the end of Q1. As we move forward to year 2022, we were targeting that $1 million -- sorry, that 1 million customers on our price platform, the metrics and the early signs of data we're seeing the economic times that we see coming from that platform is really material. And we believe that we can further do it operational leverage as we get into next year, not just throughout the [indiscernible] but through the entire business end to end. At the same time, we've built to explore different opportunities, growth opportunities and expanding our TAM and our market opportunities. We've our first national brand campaign on Tokyo Olympics, which was incredibly successful, which really moved Wisr from a challenger brand to a household name across the course of this 2 weeks or 3 weeks around the takeover, which really sets the company up for the next 2 or 3 years of growth. We're making sure the strategic investment into Arbor, into the EU market and we have optionality as we look forward into the year 2022 to take further investment in that market. At the same time, as year 2022 comes towards us, we are calling out we'll be launching a new product to market. We're looking at ways to create new revenue streams and new market opportunities. We'll deliver on that in the year 2022 and we head towards the next year to really excite time to be in this business -- It's an exciting place to be. We have an incredibly talented team. We have a strategy, which is a winning strategy, a brand, a presence that's really well known in Australia, and a business that's now reaching a specific point of operational leverage. On the back of a maiden cash flow positive month in June, we're really demonstrating that we can open the jaws in this business. We've got a proven track record in delivering product to market, scaling those products, and there's a lot to look forward to into year 2022. I'd like to wrap up by saying a sincere thank you to the Board for their ongoing support and commitment to the company, the unwavering level of talent and the contribution they make is very material. We keep the business running at the strength that it has been made. In particular, a really significant and meaningful farewell to Chris Whitehead, who's been a pillar of strength and commitment to the company in my tenure as CEO. I'm sure we could not have achieved a lot of what we've achieved without Chris' commitment and his dedication and when he both business. So thank you very much, Chris, for your time. Good luck [indiscernible]. We're watching us very, very closely as we continue to grow the scale of the company beyond your stewardship. And as a final thank you, I'd like to thank our shareholders with their ongoing commitment and support of the company and including their feedback, which is always taken on with good grace and humbleness by us, and we aim to do it a company that is outsized returns to shareholders over the coming years, and we welcome them during the journey with us. But lastly, most of all, I think my staff to the team and management and people right across the Wisr business to come to work every single day and deliver a company that is truly high-performing and market leading in the industry. A significant thank you to them because without them, none of this would be achieved. Thank you, and I appreciate the time this afternoon.

Thanks, Anthony. As always, extremely well said, and as our shareholders know the whole Wisr community, you would note Anthony started sort of in that summary on people talking about his passion and the team's passion around people and their commitment to doing the right thing and then he concluded on the same thematic and for years now, we're seeing that commitment and the work he and his team put into that sort of focus around talent and engagement. It just pays dividends. So well said and well articulated. I would now like to open the meeting to general questions for the Board and management. You'll have opportunities to ask questions pertaining to each resolution when we get to the formal business of the meeting. A reminder that only shareholders are entitled to ask these questions. I have been informed that a notice of meeting was sent to all registered members within the notice period, and I do now table that meeting. Unless there are any objections, I will take the notice convening this meeting as read. During the meeting, I will put various resolutions to the meeting, and where appropriate, I'll provide the opportunity for discussion. There will be an opportunity for questions on each resolution. I will endeavor to give all shareholders, who wish to pose a question or make a comment, a reasonable opportunity to do so through the portal moderator. May I ask that you keep your questions related to the matter at hand and as succinct as possible to allow for easy handling. Voting will be decided on a poll, which I now declare open. This means that each Wisr Limited shareholder present in person or by proxy has 1 vote for each Wisr Limited share they hold. You may end your vote as each resolution is put to the meeting, and I'll allow some time at the end of the meeting to finalize the voting. The results will be announced the ASX shortly after the close of the meeting. If you are eligible to vote at this meeting, a new polling icon will appear. Selecting this icon will bring up a list of resolutions and present you with voting options. To cast your vote, simply select one of the options. There is no need to hit a select button or enter button as the vote is automatically recorded. You can cast and change your vote on all resolutions up until the time I declare the poll closed. Following confirmation by Computershare, final results will be announced to the ASX later today. Our share registry has advised me that all proxies received have been checked, and I declare them valid for voting at this meeting. Proxy votes received will be presented on the screen prior to the vote being taken for each item. These figures will be as at the closing time for receipt of proxies, which was 2:00 p.m. Australian Eastern Standard Time on Monday, the 22nd of November 2021. There are a number of voting exclusions on resolutions being put to shareholders in this meeting, and these are outlined in the notice of meeting. All resolutions being put to shareholders today are ordinary resolutions, meaning that to pass they require 50% of the votes cast by shareholders to be in favor of the resolution. If sufficient votes in favor of the resolutions are received, they will be approved. I know at this stage, we haven't received any questions, so I'll continue on, but if they're up, please send them through. Item 1 Wisr Limited financial statements and reports. The first item of notified business is to receive and consider the financial statements, the director's report and the auditor's report for the year ended 30 June 2021. As I'm required to ask, are there any questions or comments on the financial report or the reports of the directors and auditors? Are there any questions or comments on management of the company? Are there any questions of the order relevant to the conduct of the audit, the preparation and content of the auditor's report, the accounting policies adopted by the company in relation to preparation of financial statements or the independence of the auditor in relation to the conduct of the audit? And at this stage, item 2, I will now move on to the next item, the remuneration report. The resolution was set out in the notice meeting and is now reflected on your screen. Please note, if there's any questions or comments on item 2. Voting proxy statistics on this resolution is shown on the screen. As advised, voting on site will be via poll between now and at the end of the meeting. Please cast your vote as soon as you are ready. Reelection of Director, Mr. John Nantes. As this resolution relates to my reelection, I shall hand over to Craig Swanger to chair this part of the meeting.

Thanks, John. The realization of John Nantes is the next item of notified business. The resolution was set out in the notice of meeting and is now reflected on your screen. Are there any questions or comments on item 3? Voting proxy statistics on this resolution are shown on the screen. As advised, voting on this item will be via a poll between now and the end of the meeting. Please cast your vote as soon as you are ready. Thank you. I will now hand over to John to chair the remainder of the meeting.

Thanks, Craig. The election of Matthew Brown is the next item of notified business. The resolution was set out in the notice of meeting and is now reflected on your screen. Are there any questions or comments on item 4? Voting proxy statistics on this resolution are shown on the screen. As advised, voting on the site will be via poll between now and at the end of the meeting. Please cast your vote as soon as you are ready. The next item of business is the approval of the total aggregate annual remuneration payable to nonexecutive directors. The resolution was set out in the notice of meeting and is now reflected on your screen. Are there any questions or comments on Item 5? Voting proxy statistics on this resolution is shown on the screen. As advised, voting on this item will be via poll between now at the end of the meeting. Please cast your votes as soon as you're ready. And questions. The next item of business is the approval to grant and issue performance rights to Mr. Matthew Brown or his nominee. The resolution was set out in the notice of meeting and is now reflected on your screen. Are there any questions about or comments on item 6? Voting proxy statistics on this resolution is shown on the screen. As advised, voting on this item will be via polled between now and at the end of the meeting. Please cast your vote on as you are ready. Okay, moving forward. The next item of business is the approval and ratification of the prior issue and a lot of fully paid shares in the company. The resolution was set out in the notice of meeting and is now reflected on your screen. Are there any questions or comments on item 7? Voting proxy statistics on this resolution is shown on the screen. As advised, voting on the side will be via poll between now and at the end of the meeting, please cast your vote as soon as you already. Okay. If you have not already done so, please submit your vote on all resolutions via the online voting platform. I will now allow a further minute to allow for voting to complete. If you have any questions or having to do your voting, please submit a query to the moderator. There's a question that has come through. Could Anthony or Andrew briefly explain the reasons for the capital raise with Goldman Sachs? We have plenty of cash on hand and moving towards breakeven. So I'll hand that to, as requested, Anthony, and obviously, Andrew, please, as you see fit, please jump in as well. Thanks, Anthony.

Yes. Thanks, and I appreciate the question. Look, there's a couple of reasons for the capital raise. There's 3 primary reasons, and I talked to them in the CEO address. The first key reason is we want an [indiscernible] capital on the share price going forward. We want a very clear view that we have the balance sheet available to the company as it grows in the next couple of years that our loan origination growth wouldn't be held back by our balance sheet, that we continue to grow and scale the company over the next couple of years. There is a significant capital requirement required to support a loan book through $1 billion as we head towards a loan book hopefully pushing towards $2, 3, 4 billion in the future. There is significant capital required to do that. Yes, there is a strong revenue stream coming for it, but that is particularly comes out of our loan book over 4.5 years, and we're growing at a fast pace. So we want to make sure that first and foremost, there was a strength in our balance sheet. The market had no question around our ability to continue to grow the company at scale and at pace that we have been going it. Secondly, we want the ability to continue to invest in growth opportunities. That's why in terms of the technology platforms that we have, and I suppose that are giving us competitive advantage, we're seeing really great early data from a dual-platform approach. We want the ability, and we've done that in a very, very lean manner by heavily investing in our digital lending platform. We're seeing the power of that. We want the ability to significantly invest into our financial wellness platform alongside that. I'm really taking into a market-leading position. The early data coming off that platform is exceptionally powerful. It's showing true competitive advantage in the space, and we want to make sure we have the capital available to support further investment in that tech stack. In addition to those capital requirements, we also want to make sure we have the capital available to explore further growth opportunities. The world of [ future ] clients is changing at a rate of knots. We believe that we are as well-positioned as anyone in Australia and in this market with our brand, our tone of voice, the capability that we've created across this business. And the people that we have in this business to go and build a company offer significant size, scale and impact in this market. In order to do that, we want to make sure we're positioned for both. We're positioned to take the opportunity to grow the business and build something of real size and scale. And so those 3 reasons are the reasons why we raised the capital. The capital is being prudently managed in line with those the 3 key reasons that we asked for. We're delivering already on the results of those 3 asks. And as we get towards the calendar year 2022, as we outlined, you'll see even more of that capital being put to use and the return that we get on having that capital value.

Thanks, Anthony. Andrew, I won't go to you as well. I think that was covered by Anthony, if that's okay with you in this instance. I'll just pause again, if there's any further questions as I sort of committed to. Okay, I'll read this question and hand back to Anthony and Andrew. With the noncash provision for bad debts, it appears high compared to current bad debts. Is there a point in time that those noncash provisions get reduced and that impacted earnings. So maybe, Andy, if that's okay with you. You could lead in on this one.

Thank you, John. Yes, so the expected credit loss provision is a forward-looking provision for the expected loan losses over the life of the loan book. So obviously, with our rapidly growing loan book, we are required under the standard to put in place a forward provision and is rightly called out by the question. That is well in excess of kind of our current write-offs if that makes sense. So a sort of preliminary context. For FY '21 actual write-offs were around 90 basis points, which speaks to the high quality of the loan book that we write, whereas actual provision was quite about 2.5% on the loan book. So it's really a consequence we want of a better word, just that the loan book growing at such a rapid rate, and they're required to forward provisions. So look, as the book continues to grow, I mean, that provision will remain in place, keeping in mind met it's a noncash provision based on the numbers that have flowed through, we have been overproducing we've taken a reasonably conservative stance. We didn't see any benefit in the early aggressive at this stage, particularly coming through the COVID period that we've come through at this stage very well in terms of the performance of the book and those lines that have started performing again, close that period of dislocation. So yes, that would be the answer to that question.

Thanks, Andy, well done. There's not a bit of any further questions. But thank you for those questions coming through loan you guys to sort of explain sort of the capital positioning and also the financial sort of treatment of the -- how we sort of manage the bad debt and provision for bad debt, so I appreciate that. I will say, just before I declare the poll closed, Anthony, Andrew, the Board, we are always approachable directly, et cetera. So if further questions do come up, it's a phone call, it's an e-mail. We're happy to meet, and we do actually really enjoy it. So if you miss now, please, please reach out. As such, I'll now declare the poll closed. The results of the poll will be announced to ASX as soon as they are available. To close up the meeting, ladies and gentlemen, that does essentially conclude the formalities. I would like to take this chance to again thank my fellow directors. I believe Anthony articulated really well the great thoughts we have of Chris Whitehead, the contribution to the company. The view in the room that is always important to us, and we do wish him exceptionally well. Additionally we welcome Matt as we did, and we look forward to adding sort of further diversity and more board members as part of our pretty exciting journey. I want to thank Anthony and his team, outstanding team consistently recognized. You heard Anthony talk about key financial metrics, people, brand, milestones they're going to achieve them. And essentially, at the heart of that is a management team that continue to do the things they said they were going to do. And that allows us as a Board to really inspect well and from a very solid team as he did. Most importantly, I want to thank our shareholders for your support. It's been outstanding through the journey. Some of us have been here for a few -- for quite a few years. The company has shaped and reshaped again and -- we value your trust, your sort of faith in us, and we don't take that lightly. Anthony, again, talked about being humble on the feedback, on the commitment, and I think you said that really well. I look forward to meeting you again in person when possible when we can in the new year. And my final comment is you heard it quite a few times today that 2022, we are exceptionally excited about what we're going to do, how we're going to do it. and how we're really set up to do that in terms of loan growth, innovation, key metrics achievement through people and through the brand sort of work we've been doing will place as well. So thank you again, and I'll declare the meeting closed.