Wisr Limited (WZR) Earnings Call Transcript & Summary

Good morning, everyone, and thank you for joining us. My name is Andrew Goodwin, CEO of Wisr. I'm joined by Chief Operating Officer of Wisr, Joanne Edwards.

Good morning, everyone.

Thank you for joining us today for the presentation of our H1 FY '24 results, which I'm pleased to present to you today. Wisr has reimagined the consumer financial journey. This is both the current state of play and our future ambition. Our platform's holistic approach to a customer's financial life extends the relationship well beyond the transaction. The Wisr platform deliver the scalability and customer impact. Our award-winning proprietary platform now a consolidated one-stop shop encompassing our lending business, along with our financial wellness tools and products, seeking to [ step ] -- deliver on a purpose. Through the Wisr platform, we are building long-term sticky customer relationships will be on the transaction using technology. For loan customers, we currently offer personal loans and secured vehicle loans through 3 key channels, which has been built around funding, capital management, operational efficiency and scalability. In addition, we offer an array of products alongside our loan business, our loan management business, including credit scores, round ups and smart moves, which all drive the unique customer experience, innovation and organic growth. In terms of our H1 FY '24 results, the key highlights are really the 11% growth in revenue and the normalized EBITDA profitability that we delivered for H1. So we just go through the results one by one as I reference, $48.1 million of revenue, which is an 11% increase. Our net interest margin, our portfolio NIM, and our December '23 run rate NIM, all increased. I'd like to draw your attention to that run rate NIM because it's a very important point. We've spent the last 12 months recalibrating the business to grow that front book yield and that NIM that we're earning on every loan that we write [ exceeds ] very well placed in our recommence scaling in the not-too-distant future. I'll talk more about that shortly. Prudent cost management is being delivered with a 26% decrease in OpEx. And as I said, very, very pleased to present our first EBITDA profit for the half. In terms of the lending business, and as it's been well documented, we have been under moderated loan volume settings. Those settings were deliberate and very much focused on delivering profitability and maintain strength of balance sheet. So if we look at those numbers one by one, we did $103 million of loan originations, and that's $1.7 billion of originations to date. Our loan book is at $847 million, which was a slight decrease on PCP, which will, again was called out in terms of those deliberate volume settings. Pleasingly, our prime loan book in terms of credit quality has been maintained with a 781 average Equifax score on the book. And our 90-plus arrears remains well within risk appetite of 1.31%. And some of that slight increase is described by both the decrease in the loan book, which has a denominator effect and also maturing of the loan book. From a capital perspective, so in December, we pleasingly delivered our fourth ABS transaction. We have great support in the capital markets. We saw a good improvement in our cost of funds on the back of that $200 million deal. We've now delivered $875 million across 4 term transactions since inception, since 2021, I should say, which is our first term transaction. We have significant warehouse capacity, almost $300 million, which sets us very well placed to recommence scaling. The balance sheet remains strong with almost $20 million of unrestricted cash. And also in terms of the equity holding we have in our warehouses, we have about $47 million of collateral going against that loan book. In terms of customer metrics, monthly active users on the Wisr App is up 86%. We have a whole range of sort of data metrics here around the one-off repayment feature, which has now delivered $11.3 million in loan repayments, $7.7 million in round ups helping people to pay off their debt quicker, a 12% rise in our platform Wisr Platform rate estimates. And the other really key data point that we've presented here is when we look at our loan customers, for those that are on the platform, the broader financial wellness platform, and those that are 13% further ahead on their repayments than those that aren't, which is really a proof point around the quality of the platform and the benefit that it provides to our customers. A 78 Net Promoter Score is very strong. And pleasingly we recently won the Best Mobile Experience Award for 2024 from WeMoney. Turning to loan book and revenue numbers now in more detail. We obviously didn't call those out briefly. So the loan book is at $847 million. And those loan origination numbers we called out still at very strong levels, and again, impacted by the moderated loan volume settings that we've had in place, as I said deliberately, we still delivered an 11% increase in revenue, PCP. And that's really being driven by the yield story that we've been delivering. So if you look at the chart on the bottom right hand corner there, I'll draw your attention firstly to H1 '24 [ tax ]. So 10.51% portfolio yield. So that's basically the interest rate that we earn on our whole loan book. The loans that we wrote in December '23, were at 13.43%. So what that really says is we've successfully repriced our front book and allow the NIM expansion, which again, when we rescale at that run rate level, sets us very well placed. And obviously, when we do more volume, that will flow through the overall book, and we have seen some incremental uplift so going from 9.75% to 10.51% on a portfolio basis. But obviously, the more volume that we do, the quicker that flows through the book. And the other point to call out here, as I did reference, the increase in yield we have managed to achieve hasn't been as a result of taking more risk. The average credit score in our book of 781 has remained flat and stable, which is a really key point to call out. Now just a further expansion in terms of that front book yield is NIM. So again, the story here is very much we had expanded. So if you look at the portfolio numbers, first of all, we've increased the portfolio NIM from 5.23% to 5.34%. Keep in mind that this has been achieved in an unprecedented rate increase environment. So we really have to reprice that front book and recalibrate the business to achieve these numbers. And again, you really see the proven reporting in the December '23 numbers in those run rate numbers, so that NIM at 7.16%, a material increase on the 6.12% from 12 months prior. And again, just to reiterate, when we do recommence scaling this run rate levels we're achieving, so it is very well placed to [indiscernible] strong metrics for this business. I'll now pass to my colleague, Joanne Edwards, who's going to talk about credit quality, losses and expected credit loss provisioning.

Thanks, Andrew. So first of all, a bit of a deep dive into credit quality of the portfolio. So as Andrew touched on, as we've been expanding on NIM, on the front book. One way to do that easily is just to take on more risk, and that's been a purpose strategy of ours not to do that. And you can see this is reflected in the average credit scores of both the front book and the average portfolio. So in the most recent half, half 1 FY '24, the quality reflected by the average credit score of the new business is 780, which is the same as the sort of long-term trend on the portfolio and long-term trend over time. So really important for our strategy around credit quality, which is to maintain the business quality that we're writing and continue to write to that prime sector while increasing the yield through that interest rate, which we've successfully done so. When we look at our arrears, defined as 90-plus arrears rate, that's 1.31% for the half and has increased slightly over time. However, when we look into that, the actual dollar amount of arrears, it has been stable. So even though the book is maturing and we do typically see more arrears coming from business we wrote 2 years ago, actually, the dollar amount that in 90-plus is stable. And really, the reason for that increase in arrears rate is reflected in the graph in the chart below that shows that the loan book has run off. So as the loan book does run off, you do see higher rates as a percentage. But actually, when we look at the dollar amount, it's the same. The graph below, so that talks to also our net loss for the half, so that's 1.18%. That net loss after recoveries has increased, however, as I mentioned before with regards to the arrears, that's really a reflection of the decrease in the loan book and also the maturity as those cohorts of [indiscernible] loans from when we're in a high-growth phase start to mature. The next slide talks to expected credit loss. So this is really two measures here. So firstly, we've got the provision that we hold on our loan book. The ECL provision is the amount that we hold for future loss and that's 2.9% which is stable compared to the prior half. So that's the amount of money set aside to cover our future losses. And then the second measure is the ECL expense, so expected credit loss expense, which is the P&L charge for the half, which is a reflective of the change in that provision movement as well as the write-offs and the recoveries. And this is 0.94% for the half, which is a decrease compared to the prior period, really reflective of when the loan book does run off, you can release provision as long as your risks isn't changing. So really, what they say is our risk is stable, and we [ release ] lease provision because we've got a smaller book. And then the write-off of recoveries is a component of that. So that was $8.3 million for the half, which is down as a percentage of the prior period.

Thanks very much, Joanne. I'm now going to talk through that EBITDA number and the financial metrics in more detail. So again, as I called out, EBITDA profitability was delivered for the half, as you can see there. How do we do that is very much through operational leverage. So we grew revenue by 11%, and we reduced OpEx by 26%. So those are really the key metrics in terms of how we deliver that. Finance costs, obviously, we were exposed to the rising rate environment. And I think we've managed that very well and obviously grown that front-book yield and that NIM, as I spoke about, remember loss number, as Joanne spoke to, resulted in, as I said, a positive EBITDA for the half, which is very pleasing. Also the cost-to-income ratio, which is again our operational leverage point went from 41% down to 27% half-on-half, which again, is a very pleasing outcome sets the business very well placed. What we've provided on the right-hand side, and this is very much indicative and not a forecast. Firstly is an annualized view of our December run rate at $1 billion loan book. And so essentially what those numbers look like, there's the 7% NIM that we showed previously. We then extrapolated out the losses in OpEx, which shows the business we can exceptionally be delivering a $20 million EBITDA profitability number, which, again, really speaks to the fact that the December run rate settings we have in place sets very well place to build a highly profitable business. Secondly, what we've provided is basically a medium-term scenario that shows what numbers could look like and again not a forecast at a $2 billion loan book. And again, the anticipation at scale is that operational leverage does take hold even further. As you can see by that cost-to-income ratio, which does sit down a little bit. But basically, what you really see is a highly profitable business at scale based on the settings that we currently have in plus. In terms of our funding program, and our funding platform, just wait for the slide to pop up, we've got a slight delay on our screen. And hopefully, you can see it already. So on the right-hand side, we've really just shown our 4 term deals and 2 warehouses that we have in place. So as I said previously, we have almost $300 million on committed funding and are able to use within our warehouses. And that's in our SVL warehouse which is for our auto loan product, and our PL warehouses which is for our personal loan product. We then just provided further details on that sort of $875 million for ABS transactions, the most recent one, which we delivered in December, which was a great outcome. So overall, the funding platform is very much in great show. We also have a HeadCo facility there. It doesn't mature for another sort of 15 months to 18 months. We have intraday overdraft facility to help us maybe our working capital as we write loans and sell them into warehouses. And finally, work is continuing, even though we have sufficient and quite material capacity as we stand here today for a third warehouse with the new senior fund we just focused on, basically diversification of funding partners. In terms of our capital position, so cash per balance sheet is $76.7 million, and unrestricted number of around $20 million, with the restricted balance really being funds that basically sit within the warehouse trusts, have to use for basically repayments on the loan book for [indiscernible] refunding for funding future loans and so on. And importantly, and as I pointed out, at somehow [indiscernible] missed, we have $47 million of capital or collateral sitting against our loan book, and that basically shows the numbers against those 6 deals, the 2 warehouses and the 4 term deals that we have in market. So the business is very well capitalized and has extensive layering of capital throughout the business. And so just to wrap up, so H1 FY '24 key milestones that have been accomplished. Revenue growth, cost production -- cost reduction and EBITDA profitability. I want to go through the numbers one by one as I think we've been through in the call, but a very pleasing set of results there. NIM improvement while maintaining credit quality, and a run rate attractive to recommence scaling. The Wisr platform continuing to reimagine the customer's financial journey. Again, we shot a whole range of metrics that the business is working on as part of that key and, in our view, a unique and differentiated offering. And the important point to call out, and this is sort of the first time I've done this, subject to market conditions being favorable and comfortable. We do intend to recommence loan volume growth this half, which is obviously a great communication to be able to give to you all. We have gone through a period, as you know, of consolidation and recalibration that actually sees the business very well placed as we do head into that growth scenario again. And I'd just like to thank you all for joining us today. If you do have any questions, you can provide those to the investor line, [email protected]. I'd also draw your attention to the investor hub on our website. I'd just like to thank my colleague, Joanne Edwards, and thank you all for joining us today and wish you a good day. Thank you.

Thanks, Andrew.