Wisr Limited (WZR) Earnings Call Transcript & Summary

Okay. Let's kick it off. Good morning, everyone. Thank you for joining us for Wisr's results presentation for Q4 FY '26. My name is Andrew Goodwin, I'm CEO of Wisr. I'm joined by Matt Lewis, the CFO. This webinar will be recorded. And just as a reminder, we will post on the Wisr website later today. And if you would like to ask a question, please feel free to post it in the online Q&A function, and we'll get to the ones that we can. So Q4 FY '26, indeed FY '26 has been an absolute breakout year for Wisr. We spoke at the beginning of the financial year that the year was going to be about scale and profitability, and that has fundamentally been achieved. The loan book reached $1.1 billion as at June '26, we've achieved our first full year of cash NPAT profitability of $1 million. To put that number into context, the number for FY '25 was negative $5.3 million that was a $6.3 million turnaround in the space of 12 months, which is nothing short of exceptional. We've grown loan originations by 65% to close out the full year at $695 million of loan originations. We provided guidance at the beginning of FY '26 and actually upgraded some of that guidance during the year. And so what we've provided here is obviously the latest version of the guidance, but also what we've achieved. And the highlight really is that we have comfortably exceeded all guidance metrics that were set. So firstly, we cash NPAT profitability. The guidance was expected, cash NPAT profitability in H2 FY '26 with $1.7 million. Loan origination growth guidance was 50% plus. We delivered 65%, as I said, to close out at $695 million. Revenue growth was very strong at 19% and $109 million, beating guidance of 15% plus. The cost-to-income ratio, and we do talk about the operational leverage evident within the business as we scale. It was a pleasing result with 28%, FY '25 was 31%. So a really significant improvement there. And again, beating guidance of less than 29%. So on to our FY '27 guidance. And I'd just like to start by saying, I have great confidence in this guidance and the business more broadly. And I think we've really proven certainly in the last 12 months, but over the last 2 years, our ability to execute. An inflection point has clearly been achieved. And I think that's very evident in the graph here showing that half-on-half profitability from negative $0.7 million to $1.7 million in H2. Obviously, the guidance we're providing for FY '27 is cash NPAT of at least $5 million. We have also given some indication of FY '28 cash NPAT, and we do expect that to again grow substantially on FY '27. Again, this is a qualitative statement relative to the quantitative statement in FY '27 and but we thought it appropriate just to give the market a sense on, again, we have confidence and expectation and where we believe that this business is going. And just to touch on that FY '27 guidance number, that will be driven by continued growth in both loan originations and loan book the operating leverage that I spoke about and continued disciplined cost management. And really, what we're seeing, the investments that we've made in the last year or 2, particularly in automation, AI and the efficiency that that's generating gives us a lot of confidence in these numbers. And just to give a bit of a sense or a data point, in these guidance numbers, we're not expecting any additional head count in FY '27, which again, I think speaks to the confidence that we have in the numbers that we're providing and the expectation is certainly I and the team have in the business. So obviously, the loan book, as I said, $1.084 billion, 32% up on record on PCP, record quarterly loan originations and a record month to close out quarter in June, and $198.1 million for the quarter was 41% up on PCP, very strong average credit score. We remain a prime lender 807. All of our metrics around yield, NIM are all moving and very much stable and where we want them to be really to scale the business. Revenue was up 26% to $30 million. A really pleasing, I think, stat or outcome from the year and certainly the quarter, it has been the 90-plus in the net loss performance. So you can see the 90-plus number, down 39 basis points to 1.01%, net loss is down 36 basis points to 1.3%. It speaks to the quality of our underwriting and how we're operating our business and again, very encouraging as we enter FY '27. The business is well capitalized, but obviously, we did our sixth ABS transaction in Q4, that was a $354 million transaction. It was our first major offshore deal. So we started attracting basically, particularly U.K. and European investment into our funding platform, which again sets us up really well as we continue to scale and grow accessing those capital markets to drive that loan book. Just on the customer, and I have spoken about the automation, but the technology and the AI tools we've invested in are really driving simpler underwriting, settlement servicing and collection. What that really drives is speed and predictability for our customers, and that's really flowing through in our Net Promoter Score, which is at 82, which is nothing short of exceptional. One of our values as a business is hard for the customer, it sound a bit cliche that we fundamentally live by that value. And everything that we do is focus on how does it look for the end customer and really the service that we're looking to provide. I think the growth that we're achieving is evidence of that. We also won a really great award. And look, this award is both independently by basically the broker network. So we won advisers #1 Nonbank Lender for personal loans, which again was just a great accolade to get and testament to the good work that I believe that we're doing. So Wisr at a glance, a lot of these numbers I've sort of touched on. So obviously, the $1.1 billion book. We're currently 61% PL 39% auto, average loan size of 35,000, approximately average credit score of about 807. Really, the key story here is our automation journey, both in credit decision and verification. And you can see the trajectory that we're on, closing out FY '26 on 30 June at 82% and 48%, respectively. We've originated about $3 billion through the platform, had a very well advanced and sophisticated funding platform in terms of how we fund our loan book. And obviously, I spoke to that large ABS deal that we got done 13,500 brokers on our panel, there is huge untapped potential in our distribution channel there and the NPS I've touched on. I have spoken about this a number of times for those who have joined historically. But really what we're seeing for the nonbank sector and certainly, we're a part of that and the beneficiary of it is structural tailwinds within the products that we operate within. So personal lending, secured vehicle lending are essentially deemed noncore by the major bank incumbents. And we can see that by this RBA data showing the share of personal lending held by those banks. So it's down to about 58%, down from 73% about 5 years ago. A trajectory, we expect to continue and creates a lot of opportunity to build large loan books as I think we and a number of the sector are proving. Obviously, mortgage at the top there, you can see very much moving in the other direction. I think that's very well documented. And it's not a product that we currently offer or are looking to offer. In terms of ABS, obviously, how do nonbank lenders fund their books and I've spoken about this, and it's through the ABS markets. These are strong and buoyant, you can see they're basically 5x in the last 5 years. These assets are shifting from bank's balance sheets to ABS and private credit funders that includes superannuation funds, major banks, both domestic and international and actually creates a great asset class for essentially the pension market, given it is a yielding product very predictable cash flow. And you can see really the strength of that ABS market. The TAM and size of the markets we're playing in are huge. We've taken fraction, when I say fractional. 3.5%. It's nothing to sort of smirk at, but it's not bad. But the personal loan market is obviously growing in that secured vehicle market, which is a much bigger market and a lot of the growth that we do expect to start coming through, although will be strong in personal loans, there's a huge untapped opportunity in that secured vehicle market that we expect to benefit from. I've obviously spoken to the loan book. You see that 32% growth, closing of $1.1 billion. Obviously, great growth in both of our products, as I touched on. And again, this is a thematic that we expect to continue as we scale. Obviously, that loan book is driven by loan originations. We've set a record in Q4 actually in Q3 for that matter. But yes, $198 million for Q4, 41% growth on PCP. And again, I believe, very well placed as we head into FY '27 and good growth across both of our products. I'll now pass to Matt Lewis.

Thanks, Andy. So just diving into margins in a little bit detail. So portfolio yield for the quarter was 11%, effectively flat compared to Q3 and down from 11.2% in Q4 last year. In the current quarter, the benefit of the front book pricing increases we implemented in Q3 has effectively been offset by the continuing shift we're seeing towards secured vehicle loans those loans do carry a lower yield, but they also carry lower funding costs and lower credit losses. NIM for the quarter was 5.11%. That's down 12 basis points in Q3, that reflects higher funding spreads during the quarter as we did have a higher proportion of warehouse utilization versus ABS utilization for the first 2 months of that quarter. And that, combined with the change in portfolio mix towards secured vehicle lending contributed to that portfolio NIM movement. What I'd really like everyone to focus though is the chart on the right-hand side of the page, which is our portfolio risk-adjusted NIM. So risk-adjusted NIM is essentially our NIM less our net loan losses for the period. And it remained stable. So that's 3.81% for the quarter compared to 3.79% prior quarter and 3.8% in the quarter 1 year ago. So the continued improvements we're seeing in net losses, which I'll discuss in a few slides time, has offset that NIM compression leaving the post loss margin and unit economics of the business unchanged despite that shift that we've seen to lower-yielding secured vehicle loans. Okay. For those newer to the story, this slide just really explains how we manage interest rate exposure and preserve the margin that we write on each individual loan. Every loan that we write is written at a fixed rate to the customer. So the interest income is locked in for the life of the loan, which is typically on average about 4 years. On the funding side, our warehouses are priced against the floating BBSW and we then convert that to a fixed cost using interest rate swaps on a monthly basis. So both sides of the equation. So what we earn and what we pay out to fund those loans are fixed at the moment we originate. So the practical effect of that is that the NIM on each loan is set at day 1. The BBSW rises, we'll receive swap income to offset that rise. And vice versa, if it falls, we'll have expense which will offset the benefit. So either way, the margin is preserved. Why does that matter? There has been some rate volatility of late. What we're saying here is that doesn't touch the margins on the loans that are already on our book. It only affects pricing of new loans, which is the lever we adjusted last quarter when we increased in pricing. Moving on to credit performance, a genuine highlight for the quarter. and 90-plus arrears we finished June at 1.01%. That's down 13 basis points from March and 39 basis points lower than a year ago, and it's the strongest arrears position we've shown on this chart. Net losses tells the same story, 1.3% for the quarter, 14 basis points better than Q3 and 36 basis points better than PCP. Importantly, the seasonal step-up we saw in the March quarter has unwound just as we flagged at the quarterly update. I think what's important to note here is that this improvement is structural. It's not cyclical. The average credit score of our book is strong at 807, so we're writing high-quality loans and high-quality customers. We've also got a growing share of the book as secured vehicle lending, which translates to lower losses. Also I've spoken before about the investments we've made in early intervention and collections automation. The benefits of that is continuing to feed through. So if we put it simply, we're growing the book quickly, and we're improving its credit quality at the same time. And as discussed on the earlier slide, that's enabled us to maintain those strong risk-adjusted margins despite the mix shift to lower-yielding secured vehicle loans. So if we turn to funding, as Andy mentioned, in late May, we priced our sixth and largest ABS transaction. The $354 million Momentum Trust. We upsized that from $300 million due to strong demand. It was a milestone deal for us on 2 fronts. It was the first ABS transaction that we've done that was combined both personal loans and secured vehicle loans. And as Andy mentioned, it was the first transaction that we structured to meet EU and U.K. regulations, which broadens our pool of offshore investors and increases the number of investors we can reach for each of our ABS transactions going forward. If we look at the warehouses, 3 facilities currently drawn to $887 million, $364 million undrawn, terming out that we did in late May increased the headroom and gives us plenty of runway for originating. If we look at the corporate facility, no change, drawn $27.5 million from the $50 million facility in total. That leaves us $22.5 million left to fund future growth. This slide puts together our liquidity picture. If you look at unrestricted cash, that $16.6 million. If we add to that our undrawn corporate facility of $22.5 million, that leaves us with $39.1 million of available funding to support growth. That's comfortably ahead of what we need to execute our growth plans. You can also see on the slide, we've got the equity contributions to our funding vehicles of $38.5 million. That essentially underpins a funding program aligns us with our capital partners. But the key point to make with this page is that we're well capitalized to support our growth plans and that we don't need to raise further equity capital. I'll hand back to you, Andy.

Thanks, Matt. So if we look at FY '27 and the outlook. Our strategy is clear, deliberate and the team are extremely focused on executing on it. And in many ways, it is a continuation of what we already live in FY '26, but better. And so really, the way that I think about the FY '27 strategic priorities is that they're very much mutually reinforcing. They're not conflicting with each other. They're all moving in the same direction. And really, to summarize it quite simplistically, investment in AI that I've spoken to is driving automation. This is driving growth through our distribution channels, which then drives further investment into AI, further automation and growth for our distribution channels. And so really, the strategy is consistent, repeatable and scalable. I spoke about no additional headcount in FY '27. And I think this slide really highlights that in the sense that clearly, given the guidance we've provided and the growth that will drive that guidance, this is really what's going to deliver on that outcome. And so hopefully, the market can get a little bit of a sense on how we're thinking about the business and the outlook. And I think it's very exciting in terms of just how much we can scale under this structure that we've just presented. So just to look at the horizons. And again, I provided this slide at the beginning of the financial year. Horizon 1 has been delivered, scale our core and deliver profitability, very much done. We're now in horizon 2. And again, I referenced this on the previous slide. The focus on automation efficiency and speed. This is going to drive our growth. Our customers that I spoke to want this, and we're going to deliver it, and that will drive further growth. They'll keep coming back to us, they'll do more business with us. We also want to broaden our reach, to expand our proprietary and partner distribution, engineer customer segments and verticals and really that focus on embedded finance. Finance is embedded in the economy now. And you need to be within certain work streams of that economy, and that's very much what we're focused on in terms of making sure our product gets delivered in the broadest possible sense. Horizon 3, really, the message that I want to leave you with here is diversification of our revenue streams. We'll talk more about this in due course, but really, we believe that the platform that we have built has the capability to provide network effects. And again, part of that will be diversification of the revenue stream that we have beyond lending. And again, very much horizon 3, there will be no distraction from what we're executing on today or indeed the guidance we provided from FY 2017 and FY '28, that will very much be accretive and they'll build upon each other. So just in summary, FY '26 guidance has been exceeded. The outlook for FY '27 indeed FY '28 is extremely strong. Loan book growth and record originations been achieved, revenue momentum and credit quality is clear, and you can see the operational leverage coming through that we have spoken about through the cost-to-income ratio. The business is well capitalized. The automation thematic is very clear and the efficiency, we believe that we will get from that, again, is reflected in the guidance that we provided to the market. We'll now open it up to questions.

So we now invite research analysts to ask questions. [Operator Instructions] This one is probably for you, Andy. You've guided to at least $5 million of FY '27 cash NPAT after achieving $1 million in FY '26. What gives you confidence in the step-up?

Yes. I think the first thing that I'd point out that one of the beauties of lending businesses is it's not a standing start every year. You don't roll the ledger over and start. Again, we enter FY '27 with a $1.1 billion loan book, the runoff of that book is around 3 to 4 years. And so there's a genuine annuity style of income and revenue that we start the year with. Clearly, the automation that I spoke about and the efficiency that we expect to deliver that will then drive further growth has given us the confidence in obviously put in that $5 million FY '27 guidance out there. I will note that we have said at least $5 million and so clearly, that would imply that we want to beat it. But again, the trajectory that we're on, if you look at just half-on-half negative $0.7 million in H1 to $1.7 million in H2, yes, again, I think it's very clear.

Thanks, Andy. It looks like there's kind of a follow-up to that one here. So you say cash NPAT will grow substantially in FY '28, what does substantially mean and why not provide it now?

Yes, good question. And guidance is always a very hot topic. You're damned if you do and you're damned if you don't, like clearly, we take a long term and I take a long-term view of this business and what I believe it can achieve. We obviously put hard numbers out in FY '27. I will point out, we've only started providing guidance as a business 2 years ago. So FY '25 and FY '26. And we've absolutely exceeded all of the guidance that we've provided to date. And so really, we want to bring investors on that journey of trust and understanding of the business. And so '27 we thought appropriate, I think, to put a cash NPAT number out there for '28 from a quantitative perspective. It's just too early. Like clearly, we want it to be as big as it can possibly be. We do expect it to be significantly larger than it is today and indeed FY '27, but it just wouldn't be appropriate to put a number on it at this stage other than to say that we are extremely confident in the ability to deliver at that big cash NPAT number in FY '28.

I might give you a break, Andy. I'll answer this next one. Cost-to-income ratio improved to 28%. Is that sustainable? Or will investments in AI distribution and new products push it back up? I'd say the 28% outcome reflects both revenue growth and disciplined cost management. FY '25, we're at 31%. We guided to less than 29% we achieved 28%. We do intend to keep investing where there's a clear return, particularly in automation, but this will not be done at the detriment of profitability. Andy has already talked about how that we don't have no intentions for further headcount growth in FY '27. So our objective is for revenue and loan book growth to be growing much faster than the underlying cost base. And so we do expect to be or to see further improvements to that cost-to-income ratio in FY '27. I think I'll take this one as well. Secured vehicle loans are now 39% of the book and growing faster. Do you have a target mix and how far can NIM fall as the mix increases? I think I'd say, look, we don't operate to a fixed product mix target. Secured vehicle lending is a larger market. Our share remains low. It does bring lower yield, but also the funding costs are lower and the net losses are lower. So I'd say personal loans, still a strong focus for us, and it's still growing strongly. What we do is we assess not just SVL versus personal loans on their own merits. But even within those individual portfolios, we're pricing along the risk curve. And we make sure that we're achieving strong risk-adjusted economics whilst also looking at the capital of those loans used rather than focusing on a headline yield alone. So I'd say we probably do expect that mix to shift with customer demand towards secured vehicle loans, but our focus is really on making sure we're achieving that or preserving that post loss margin and growing cash NPAT rather than defending, kind of, in particular NIM margin at any one point in time. Okay. NIM fell 12 basis points to 5.11% in the quarter. You talked to a risk-adjusted margin. Why should you focus on -- why should we investors focus on this? NIM is important, but it doesn't capture the full economics, particularly when the loan book is starting to shift and change. So as I mentioned a few times now, the secured vehicle loans, they do have a lower yield, which does result in a lower NIM, but they also carry lower losses. So in Q4, and we've seen the loss side of the equation, the net losses improved 14 basis points in the quarter, 36 basis points prior year, and that did offset that NIM compression. So it left that risk-adjusted margin essentially stable at 3.81%. So risk-adjusted margin is really kind of a better view of the unit economics. It's not the whole profit measure. Obviously, below that, we've got OpEx and corporate funding, but it explains why NIM is not -- lower NIMs not automatically a driver of lower profit. I might pass this one to you, Andy. A customer NPS of plus 82 and an adviser awards sound good, but how do they translate into shareholder value?