Wisr Limited ($WZR)

All right. Great. Let's kick off. Good morning, everybody, and welcome to the Wisr results presentation for the third quarter of FY '26. With us this morning, we have Andrew Goodwin, CEO; and Matthew Lewis, CFO, who will take us through the presentation that was launched with the ASX this morning. As always, this webinar is being recorded, and we will post it on the Wisr website later today. [Operator Instructions]. And with that, I will now hand over to Andrew and Matt.

Thanks, [ Elara ] and good morning, everyone. Thank you for joining. Pleased to present our Q3 FY '26 update you today . It's been nothing short of another cracking quarter for Wisr. As you know, in Q2 FY '26, we passed the threshold of cash NPAT profitability. In Q3, we have achieved a significant milestone for the business in a $1 billion loan book. Again, I reiterate, this is a great milestone and a great point to pass, but it is very much still early days for this business, and our scale and profitability ambitions are clearly well beyond this, but it's still great to achieve that outcome. Driving that with record quarterly loan originations and actually on the back of that, we're upgrading our FY '26 guidance. Originally, we had advised loan origination guidance of 40% plus for FY '26. We're upgrading that to 50% plus for FY '26. So some of the highlights. So as you can see, the $1 billion threshold has been passed record quarterly loan originations of $186 million. So that loan book was up 29%. Loan originations were up 68%. The average credit score has increased by 8 points to 808. That's partly driven by the slightly more skewed towards SBL loans, and I'll talk more about that shortly. Our broad financials in terms of yield, NIM and losses are all tracking well and in line with expectations. Matt Lewis will talk more about our front book pricing initiatives on the back of, obviously, the inflationary pressures and interest rate pressures given the geopolitical environment that we're in. Revenue has grown 22% on the back of that loan book growth to $27.4 million. We're well capitalized and very well placed to continue scaling this business. In terms of the customer, so there's been some great progress on our basically automation and some of the AI tools we're using as part of our process. I'll talk more about that shortly. Net Promoter Score remains exceptional at 80 plus. And we have won for the third year in a row, WeMoney's Best Mobile Experience award. So just some data points on automation, and we have included, obviously, credit decisioning and verification historically. You can see that those continue to increase. We're now at 84% and 44%, respectively. Basically, what we've set the business up to do is to scale efficiently, given the automation that we've built in, and we'll continue to build into our business and into our processes. So some of the initiatives that have really progressed in Q3, automation of income verification, as you can appreciate, in underwriting a loan, verification of income is an important component of that. And so we've really developed some great processes around that. AI verified settlements just to check and balance, making sure that everything is operating as it should, also reducing errors and fraud risk. We also have developed an AI in partnership, an AI collections assistant to assist basically our collections offices when they're on calls with customers to basically enhance that process that we have in that collection platform. Structural tailwinds I've spoken about extensively. And as you can see by the results that we're delivering these just continue the shift away of our core products from the major banks to essentially the non-bank lending market and indeed from bank's balance sheets into ABS structures. And you can see that through these charts very evidently. And in terms of the market share in TAM, obviously, $1 billion loan book is a great milestone. But as you can see, the opportunity remains vast, and it is very much still early days for this business. So the customers. So again, the skew, as I mentioned earlier, slightly towards more secured vehicle loans. So if we go back about a quarter, this was more 2/3, 1/3, now 63-37, so you can see that slight shift. Both of those products are growing. Obviously, the SBL market is larger. And so this is anticipated and obviously, good to see. Average loan size remained fairly consistent. The average credit score increased to 808, that I've spoken to, well diversified across Australia and majority full-time employee loan customers. I think this slide very much speaks for itself. Obviously, the $1 billion loan book, you can see the fantastic growth we've delivered to achieve that outcome over the last 5 quarters, 29% on PCP and 8% on prior quarter. That's been driven by the record loan originations delivered $186 million, 68% up on PCP and 13% up on prior quarter. You can see that strong growth in both products, so 46% for personal loans and 111% for secured vehicle loans. So as I referenced, seen that slight skew in terms of the overall book mix given the size of market, and it's encouraging to see. I'll now pass it to Matt Lewis.

Thanks, Andy. Portfolio yield for the quarter came in at 10.99%. That's a modest decline of 9 bps on Q2 and 26 bps on PCP. It's a small movement, primarily driven by that mix shift that Andy spoke to. We're Writing higher credit quality loans and the growing proportion of our loan book secured vehicles. They both carry a slightly lower headline rate but deliver a materially lower loss outcomes in due course. The other dynamic that Andy touched on is the macro environment. So the conflict in the Middle East and the associated inflation risk has pushed swap rates higher and we have responded by pushing through a number of front book pricing initiatives on to originations to absorb that. This hasn't really impacted portfolio yield as yet. The benefit of that repricing will start to flow through the portfolio yield over time. If we move on to NIM, 5.23% for the quarter, again, a modest decline of 7 bps on Q2, 37 bps on PCP. That movement is consistent with the yield dynamics and the mix shift and the quarter-on-quarter outcome is in line with expectations. And then we look at portfolio credit score 808 for the quarter, up from 800 same time last year. This really underpins the improved performance we're seeing in losses and provides for more loss resistant margin going forward. This is a refresher slide, really, but for people having seen some of our prior decks, but given the rate environment, it's worth a quick recap. So what this slide explains is that every loan we originate is written at a fixed customer rate. And on the funding side, our warehouses are initially priced on floating BBSW but we convert that to fixed rates using swaps on a monthly basis. So the asset yield and the funding costs are essentially locked in at origination. That means that the NIM that we write on a loan does not change over its life. So if the BBSW rises, the swap will offset that rise in increased funding costs. And if the BBSW falls, the benefit on funding cost is offset by the swap. So in both scenarios, margins preserved. And that's particularly relevant in the current rate environment. So swap rates had moved over the last quarter, driven by the geopolitical environment and inflation expectations I talked to. Any future volatility does not impact the margin on our existing $1 billion loan book, which is already fixed. It does, however, affect the pricing on new originations, which is why we've adjusted front book pricing through the period to cover for that. Credit performance continues to be a standout for the business. On 90-plus, we closed at 1.14 for the quarter broadly flat on December 1.13 and 34 bps lower than PCP. On net losses, they've come in at 1.44% for the quarter, representing a 55 basis point improvement versus PCP, the 29 basis point increase on Q2 is really seasonal and fully in line with what we flagged at the half year results presentation. Q2 represents a low point in the cycle, in particular, supported by strong collections activity during that period, while Q3 reflects the post-Christmas impact on customer cash flows. So this is a pattern that we outlined in February and it's played out as expected. I think another good way to look at that to really see the improvement over time is just to look at the dollar of value. So losses were $3.4 million for the quarter. If we go back from the same period last year, they were $3.8 million, and we've achieved that $3.4 million on a loan book that's 29% larger than what it was PCP. So what is behind that is really structurally, I've talked about this previously. The work we've done over the last 12 to 18 months on early interventions, collections automation, improved collection systems is continuing to flow through. And we're starting to see that benefit also come through from higher writing higher credit score loans and the greater proportion of secured vehicle lines. If we move on to funding capacity, starting with the warehouses total commitment $767 million, unchanged from December. There's $47.5 million undrawn at the end of the quarter. There's a reduction in the undrawn since December, which reflects the record origination volumes throughout the quarter. In April, we did secure a temporary $120 million increase in our warehouse limits. This just provides us with some extra flexibility as we approach the next ABS turnout, allowing us to maintain that origination momentum while preparing for that next transaction. If we look at the corporate facility, $27.5 million drawn of a total $50 million facility. We've got a further $10 million committed and $12.5 million uncommitted on that facility. So overall funding is very well positioned to support both current forecast origination levels, and we've got sufficient flexibility to execute our next ABS transaction. Okay. Capital position, looking at liquidity, capital strength and resilience, Unrestricted cash at the end of the quarter was $14.8 million. We've got $22.5 million undrawn on the corporate facility. That leaves us with just over $37 million of available liquidity for effectively for any business purpose, which is comfortably ahead of what we need to execute our growth plans. On the chart, you can also see the equity investments we have in our funding structures, $42 million. This underpins the funding program and aligns us with the capital partners. But I think the important point to note here is that we are well capitalized to support our growth. We don't need to raise further capital and we've got the flexibility to respond as market conditions evolve. I'll hand back to Andy.

Thank you, Matt. So just to reaffirm our FY '26 guidance. So as we advised back in November, cash NPAT profitability expected in H2 FY '26. Pleasingly, we've upgraded our loan origination growth guidance from 40% plus to 50% plus on the back of that record quarter in Q3 and obviously the $1 billion loan book. Revenue growth of 15% plus in cost-to-income ratio improvement of less than 29% remain in place and are reaffirmed. So just in summary, a fantastic milestone achieved $1 billion loan book, 29% growth to get to that number. Record quarterly loan originations over $186 million, which was 68% growth in upgraded guidance, as I just referenced. That growth in loan book is driving revenue momentum. That will obviously drive enhanced profitability as we continue to scale the book continues to perform well. It's a prime loan book because we've always advised and that is pleasing to see. And as Matt just referenced, the business is well capitalized to continue scaling and grow profitability.

All right. Great. Thank you, Andrew and Matt. We now invite research analysts to ask questions. [Operator Instructions] I have had a couple come through. Matt, I think this first one is probably for you. So you've reached a $1 billion loan book and upgraded origination growth to over 50%. At what point does this growth start to put pressure on warehouse capacity or require more frequent ABS issuance?

Okay. We don't really see any pressure on warehouse capacity and we retain the flexibility with those providers to scale as we need to. And that was just demonstrated in the current month where we increased the facilities on 2 of our warehouses by $120 million to give us that runway for our next ABS transaction, which I mentioned in the presentation. As the loan book continues to grow naturally ABS issuance or cadence will increase over time and a broader proportion of the book will fall into a cheaper ABS transaction. So our last time deal was in October '25. I'd expect we'll be announcing our next transaction imminently. And at our current run rate, we're probably looking at 2 to 3 ABS transactions per annum. While the conflict in the Middle East has caused some short-term dislocation in credit markets, conditions are improving, and we've seen 3 transactions passed over the last week or so. So we're comfortable with the funding position and our issuance outlook, and we've got sufficient capacity for current and future originations.

Great. Thank you. So the next one is probably on you, Andrew. So secured vehicle loan originations grew 111% year-on-year. Can you provide some insight into what is driving that? Is this a deliberate strategic push or market share gains from some of the major banks exiting the [ PET ] market? Could you provide some insight on that?

Sure. The auto market of Australia is very large as we've advised in those TAM numbers. There's about 1 million cars a year, so in Australia. Currently, we are a very small portion of that market. So the 111% growth although extremely pleasing is off a relatively low base, which is actually very encouraging given our growth aspirations and our scale aspirations as well. So I think that's a key point. The other one is just the structural dynamic of that market where the major banks as I advise on that structural tailwind slide. Just fundamentally we aren't focused on this product anymore, they're very much focused on mortgages, deposits business planning. And so really, that creates space to grow and scale the auto loan book, and that's exactly what we see. It happened. That's what we said would happen. It's what we said we do, and we're doing it, and we expect to continue doing it. So yes.

Another one that's come through is on the average credit score, Andrew, that's one for you. So the average credit score of 808 is strong. At what point does a higher credit score start to constrain your addressable market or origination growth trajectory?

I think very little. And so if we look at the Aussie market more broadly, the major banks typically fund what you call, predominantly prime borrowers, there's some of the edges, but -- and that's very similar to what we're doing, obviously, in different products. And so we do risk-based price our portfolio. And so we obviously price for risk, and that actually captures a fairly broad spectrum of the community, even though we do see private, and that's a very deliberate strategy in the sense of we believe the scale, the size of book, the risk-adjusted return that we can make and actually the ability to navigate through economic cycles with the prime lending book. And so that is very deliberate. We don't expect it to have any impact, again, as we've sort of proven over the last 6 quarters or so on our ability to execute and grow.

Great. Matt, I think this is question for yourself. This is actually from Larry Gandler at Shaw and Partners. And he's asking when should we start seeing some of the rate increases taken start lifting portfolio yield?

I think we put through a series of rate increases in the current quarter. And so obviously, we present the portfolio yield in the numbers that we're showing. So it will slowly increase the yield that we earn on both our products over time over the next 2, 3, 4 quarters. I think what's also important to note though is that we're also seeing a mix shift to SBL. So whilst the pricing that we're seeing on both PL and SBL loans individually will start to increase over time as that pricing flows through. We may see a small moderation in portfolio yield like we've seen because we're seeing a bigger proportion of the book being written on SBL, which are lower yield, but again, achieve a much better [ loss outcome ].

And then I've got a question just come through from Laf at MST. You kind of touched on this a little bit just on the mix, but how much does the changing mix of the book impact your expectations for NIM over the medium to longer term?

If we look at -- it's the same impact that I just disclosed. But I think what we try to do is we look at, Andy mentioned it before, we look at risk-adjusted returns. So we would expect even with a slight increase in interest rates or applying to both products. If we continue to write a higher proportion of secured vehicle loans. There may be a small moderation in NIM. But what we actually look at more importantly is what is the risk-adjusted return or the risk-adjusted NIM that we achieve on the portfolio. And we see -- and we can see it when we presented our half year numbers, our risk-adjusted our NIMs are kind of at the highest levels they've ever been. And we continue to see that, that risk-adjusted NIM improving despite maybe small moderations in the kind of high level front [indiscernible].

Thank you, Matt. I have got another one from Laf. Can you please remind us on the operating leverage in the business, specifically, if you double the loan book, how much do you think you'll need to increase the headcount?

When we kind of look at overall on a cost-to-income basis where we're seeing large increases or improvements in cost to income as we scale the loan book, where we will come in under 29% for this year as we grow the loan book more and more. We expect to see numbers come down to 24% and lower. I think what I can say based on the numbers that we've achieved this year is in the second half of the year, we're assuming no increase in head count despite the increases that we've seen in originations. And we've had very minimal increase in headcount in the 6 months that have just been on the back of significant loan book growth and significant originations. So we do see quite significant scale benefits as we grow, in particular in relation to the initiatives that Andy talked to in respect of the efficiencies in pushing volumes through the book.

And I think this is maybe another one for you Matt, just on -- you mentioned sort of geopolitical environment sort of driving higher funding costs, and that's prompted the front book repricing. Could you quantify the basis point impact on your cost of funds?

Well, while we're not disclosing the specific basis point impact on cost of funds. The increase was sufficiently material to warrant a front book pricing response. So importantly, it's a market-wide dynamic. It's not something specific to Wisr. All lenders accessing wholesale funding markets and navigating same conditions. And we've seen pleasingly rational pricing behavior emerge across the sector. So we have increased pricing a number of times in the quarter, and we're continuing to see strong origination volume. So it's not having an impact on our originations. I think it's also Important to note that point I raised around the existing loan book being fully insulated. So those funding costs are locked for a swap program, meaning the $1 billion loan book that we have in place is unaffected by future swap rate movements. So the impact is, therefore, isolated to new originations, which we've covered with the pricing increases.

Thank you. There are no further questions. So I thank everybody for attending this morning. A reminder that a recording of this presentation and the Q&A will be made available on Wisrs website. Thank you.

That's, everyone.

Thank you.