Wisr Limited (WZR) Earnings Call Transcript & Summary

Good morning, everyone. Thank you for joining us today. My is Andrew Goodwin. I'm the CEO of Wisr. I'm very pleased to present our FY '24 results to you today. I'm joined by Matt Lewis, CFO. I'd like to welcome him to his first results call, full year results call. And [ Matt ] join the business about 6 months ago.

Thanks, Andy. Good morning, everyone.

Our PowerPoint seems to have frozen, so just bear with us for a moment as we go to the next slide. For more into that, where we hoping to go. So Wisr is a [ personalized ] business. We've built a business platform to approach our customers like more holistically than traditional financial services companies. That means our relationship with our customers goes well beyond the transaction of when direct capital remindful and [indiscernible]. We want to add value to their financial journey and ultimately their lives. Some of our competitive advantages within the business are presented here. So firstly, our proprietary technology platform build from the ground up, which we are constantly optimizing to ultimately enhance experience for our customers and our partners. We have strongly diversified distribution channels, including a very well-established broker network and direct to customers through our Wisr app. As we had pivot to the growth, which is well documented, we're really enhancing these distribution channels as we progress through it. Customers come first. And as I mentioned, our first live year growth, we take to our customers is at the core of everything that we do. We want to be more than just a lingering support our customers and build long-term relationships with them on their financial journey. And following the Wisr app, this is really where the purpose-led portion of our business is well represented, where we have both our lending products and our non-lending products. And this is really a tool for both loan customers and non-loan customers to use on their financial journey and also acts as the funnel for non-loan customers as the first touch point for the business. So Wisr in FY '24, a significant amount is achieved against a challenging backdrop. All items serving the business after success as we head FY -- as we enter into FY '25. First, in prudent capital management. Strategic cost management decreased our OpEx by 19% versus FY '23 and our cost-to-income ratio went from 36% to 28%. Also within this context, we have moderated loan volume settings until May 2024, so the majority of the financial year. We significantly improved our capital position and bolster our balance sheet for the announcement of the $50 million core facility from Nomura, which we announced in May '24, which now really provides the platform for our incentive growth as we head into FY '25. We also completed our 4-term transaction, the 3 in '23, which lowered our funding costs. The big news story just before the end of FY '24 is our pivot back to growth after about 12-plus months of moderated volume settings. In Q4, we actually grew loan origination volumes by 7%. However, if you apply our run rate post the execution of that HeadCo facility, we actually delivered 30% growth quarter-on-quarter on a pro forma basis. Pleasingly, we've seen our momentum continue into FY '25 with growth in application flow, loan volumes and average loan sizes. The prioritization of our customers and partners has continued. Within the Wisr app, we introduced a new feature known as Debt Bustr. We also had a number of ongoing uplift and improvements to our platform in terms of the broker and broader partner experience, which will be very important, again, as we head back into that growth wise. We constantly optimize our lending process in FY '24. Again, the prioritization of our prime loan book was key. The average credit score is 782, which has remained very strong. And we also do a lot of work up within technical capabilities in terms of our collection strategies. As the book gets bigger, clearly, that collection space is a real movement point for the business in terms of optimizing, minimizing both the [ regional ] loss levels. And finally, the business wouldn't exist or function without our people and our culture. The start in FY '24 was challenging, and we had a huge amount of work post that in terms of an independent cultural review, company values to register and a full policy review across the business. And pleasingly, the results we saw on the back of that in terms of our H2 FY '24 employee engagement score went from 68% to 79%. The average -- excuse me, the average for financial service is 73%. So we're very pleased to be well north of the industry average. So now on our key results. And Matt will go through some of these in further details, I'll run through them at a relatively high level. Pleasingly [indiscernible] revenue by 2% even in the backdrop against the backdrop of those moderated by volume settings. Our portfolio yield grew strongly as did our run rate in. And the point that I make is as we pivot back to growth both in unit economics and unit levels are at very attractive levels for us to now scale the business. As I mentioned, we reduced OpEx by 19%. And again, I called out that was while increasing revenue by 2%. And we delivered basically a minimal loss of $2.3 million, which I think in the context call the environment we're operating within FY '24, strong results and certainly a good point to start from as we head FY '25. So and many, as this [indiscernible] documented, the deliberate moderate sets we had in place, we delivered $210 million of originations, $1.8 billion in total originations since inception. And as a result of loan bookings down to $770 million, which again was very much expected and manageable. Importantly, the quality of the loan book remained at 782 average credit score and arrears about 1.5%, that's the 90-plus arrears and getting through by a maturing of the loan book but also a decrease in the loan book, there is a denominator effect, but that level is very much within risk appetite. On the capital. So the $50 million Nomura facility is well documented. The quality of that counterparties i think is testament to the business that we are running. We've drawn $35 million. We have $15 million undrawn, basically there for our future growth ambition and attention and $25 million of that $35 million was used to repay our existing core facility. We have significant undrawn warehouse capacity to fund our growth into FY '25. Our cash balance is very strong, obviously, on the back of that new facility, and we have a strong equity holding within our warehouses and term deals. So customer metrics now, 57% growth in the monthly active users on the Wisr app. We've had a significant amount of roundups and additional loan repayments via new feature we have on the Wisr app, which is very pleasing, and a 78 all-time Net Promoter Score. We introduced Debt Bustr, as I said, which is a debt consolidation tool, again focusing on giving value to our customers. Had a really page out of it when we talk about it. When we look at our loan customers who are engage with the Wisr app in the broader platform, they are 12% further ahead on their repayments compared to customers that aren't engaged on the platform, which I think is a great data point. And finally, we won the WeMoney best mobile experience award for 2024 and again, a testament to the quality of the Wisr app and really both the focuses for the business and what we're looking to deliver to our customers. Okay. So the return to growth, well documented. So in May 2024, that $50 million facility, and a significant bolstering of our balance sheet, we quickly did into growth. So that was around the last 6 weeks of FY '24. If we just look at the numbers as they were, we grew the loan origination by 7%, but clearly, we [ weren't ] under gross setting for the whole quarter. If we apply those run rate settings to the quarter, on a pro forma basis, we actually grew 30% quarter-on-quarter, which I think is very exciting. That would be the equivalent of around $68 million of originations for Q4. You can see that breakdown by month on the right-hand side there. And what I would pleasingly say, we have seen this momentum continue into FY '25 as we go on our growth journey. We just wanted to show here what the new corporate facility means for us on the business in terms of what we can do with that capital, okay? So by and large, that money is going to be used to fund what we call our [indiscernible] or equity portion of each one will be right, which is around 4% of every line. So if we look at the total $50 million, $25 million, as I said, repaid our existing facility, $25 will be used of incremental loan funding growth. So if we take that $25 million, put it in our warehouse model which is existing, that will allow us to originate a new lending, $650 million. This is excluding principal repayments, which get invested -- reinvesting in new loan growth as well. Again, just to be clear as illustrated, if we apply our June '24 run rate settings to that $650 million of new lending from both the yield and a NIM basis so the 12.6% and the 6.1%, are result in $82 million of annualized revenue and $40 million of annualized NIM. I'd also make the point that the average loan tenor is around 4 years. And so clearly, that benefit -- certainly is evident for more than 1 year, but we have provided the annual figures here for simplicity. I'll now pass to Matt Lewis who is going to provide more detail.

Thanks, Andy. So talking to the EBITDA here. If we look at our chart on the left-hand side, we've got a presentation of our FY '24 P&L in summary form. So as Andy mentioned, pleasingly, we did see an improvement in revenues to $93.8 million for the year. So we had improvements to yield which offset the reduction in the loan book. We saw an improvement in the cost income ratio as the business is focused on cost management, down to 28%, which leaves the company well placed for one [indiscernible]. And overall, we delivered a minimal EBITDA loss of $2.3 million for the year, and that was despite the challenging macroeconomic conditions that were in place for most of FY '24. On the right-hand side of the page, we've presented an annualized view of our June run rate and a $1 million loan book, and noting this is very much indicative and not a forecast. What these numbers look like when you imply the 6.1% NIM numbers that Andy talked about previously as our current [indiscernible] run rate NIM. And then we extrapolate our losses and our OpEx number. We can see the business delivering $11 million EBITDA profit number, which illustrates that the June run rate settings that we have in place right now, we believe is very well placed to deliver a very profitable business. So the right of that, we've also shown a medium-term scenario and what those numbers could look like, again, not a forecast. So we can see that we further scale on operational leverage and then further improvements to the cost-to-income ratio. We see a very highly profitable business as we scale those current unit economics. If we take more of a deep dive into our loan book and our loan originations, we can see the loan book is at $770 million at 30 June. Our loan originations were $210 million for the year as has been well publicized that was impacted by the deliberate moderated loan volume settings we had in place. And as Andy mentioned earlier, if we -- when we hinted back to growth from May, if you look at that on a pro forma basis, Q4 actually grew at 30%. So despite that reduction in loan book, we do see the 2% growth in revenue to $94 million as we have higher yields in the prior period. And if we -- if I draw your attention to the chart at the bottom right-hand side of the page, we've got the FY '24 portfolio yield of 10.9% for the year. So this represents the interest rate that we achieved on the whole loan book, which is high from the prior period of 10.17%. If we look at the [indiscernible] in June '24, which is our June run rate, we achieved a front book yield of 12.62%, which illustrates that we've successfully repriced the front book, which will allow the new expansion that shown on the next page. It also puts us in a strong place to rescale growth as those increased yields will flow through into the portfolio position. And it's also worth noting that as we've increased yield, we haven't done that by sacrificing on increasing risk. Our credit scores are improving, and I'll show that to you on a subsequent page. If we focus, started on that portfolio NIM, we have seen a small reduction year-on-year to 5.33%. This relates really to the rising interest rate environment experienced during the year. However, it was well mitigated with higher yields. If we look on a front book basis, however, we can see our front book [ NIM ] and churn is at 6.14% versus the 5.23% for the overall year. So as we said, the yield is increasing and we talked about on the previous page. We've also seen some improvements in cost of funds more recently. As we recommend scaling that run rate level positions the business really strong led to growth. In terms of the credit quality, as you can see on the top chart, we've maintained our credit quality. So our average credit score is 782 and on the front book, it's 786. So as I mentioned earlier, as we've expanded [indiscernible] with NIM, we haven't done that by sacrificing credit quality. If we look at arrears, which is defined as 90 plus of the average loan book, we have seen a slight increase over time to 1.58%. The key reason for this is the maturing of the loan book and then also the reduction in the loan book from our moderated settings, which you can see in the loan book chart there of $77 million. This reduction drove what we call denominator effect, which in fact, increases percentage slightly. If we look at the net loss number, we can see that's increased to 2.43% of average loan book. Again, similar mathematics playing out. That's a function of a reduction in the loan book, which increased percentage also seeing some maturing of some of our older loan cohorts written in the earlier higher growth phase of the business. It's important to note that for both the 90-plus arrears and those losses numbers, they're both well within our risk parameter settings, and we do expect to see improvements in these metrics as the loan book starts to rescale. Okay. If we look at our expected credit loss. We've got 2 measures presented on this page. We've got the provision we hold on the loan book, the ECL provision, which is $24.4 million or 3.18% of the average loan book. This increase -- it's important to note this is very much a noncash number and is representative of an estimate of the future potential losses of the business. The increase in percentage terms compared to the prior year really again relates to the seasoning of aging of those older cohorts. If we look at the second measure, which is the ECL expense, which is at 2.1 -- 1.6%, this is the P&L charge for the year. So that's reflective of the change in the provision movement as well as the write-offs and the recoveries. So this is a lower number than the prior year, which really just represents releasing of the provision because there's been a reduction in the loan book. In terms of our funding program and platform, on the right-hand side, we've shown our 3 current term deals and through warehouse that we have in place. We've got $220 million of committed undrawn funding in our 2 warehouses, our [ SVL] and [ NPL ] warehouse. We've got some further details on the left-hand side on our ABS transactions, noting in December, we successfully delivered our fourth ABS transaction. And in March, we also successfully called our first term deal. To bear both illustrative of the funding platform and the great shape that I've seen debt market confidence in what we're doing as a business in respect to our funding platforms. Also worth noting that work continues on a third warehouse, which will be a mixed SVL/PL warehouse. Even though we have sufficient capacity in place, we are still looking at this warehouse to provide basically diversification to the platform. If we look at capital position, we have cash on balance sheet of $62.4 million unrestricted cash of 24.8 million -- $28.4 million. And certainly, that's an increase on prior year largely as a function of a new Nomura facility for having place. Our restricted balances is at $34 million. So this is fastest in the warehouse trusts that really just represent undistributed customer loan payments and unutilized funds and subscriptions. We've also shown on this page that the Wisr equity holdings and warehouses of $42.8 million. So that's capital collateral that we have sitting against our loan book. So in summary, the business is well capitalized, and we've got extensive layering throughout the business.

Thanks, Matt. So just to wrap up, everyone. Given how we finished FY '24, and I think on balance, it's a strong outcome, particularly how we finished the FY. We're very excited about FY '25. So FY '25, we're focused on growth, our pathway to profitability and getting the business to a self-sustaining capital position. We have the technology, quality assets, risk and operational frameworks in place to achieve this. In terms of our specific FY '25 objectives, given we only have just pivoted to growth, there are inherent challenges in forecasting. However, we have provided some quantitative and qualitative guidance for FY '25 and what we believe it looks like. So firstly on growth. Our intention is to grow loan originations in FY '25 versus FY '24 by 75% plus. This will lead to subsequent and -- subsequent incremental growth in our loan portfolio and [ LIBOR ]. On profitability, our focus is on growth, but importantly, an attractive unit economics, and that's, that fall piece around NIM and the recalibration of the business we've done to grow a sustainable business. We want to maintain our [ part ] credit quality and have disciplined cost control as we've shown in FY '24. Importantly, that pathway to profitability is cost one, is intended without the need for additional equity capital. On distribution channels, as I spoke about clearly drive required distribution, we intend to strengthen and grow our existing distribution channels and focus on market-leading user experiences and service excellence. This has already started at the FY '25. I'm very excited about the results we've already seen in those channels. And finally, deepening our customer relationships. We want to give all this credit in a responsible way and engage them for both loan and non-loan potential customers for our products and features on the Wisr app. I'll wrap up there. I just want to finish by thanking the whole Wisr team very much for what they've done in FY '24 and very excited for the journey to FY '25. I'd like to thank you all for watching and taking your time, and have a great day.

Thank you.