PropTech Group (ASX:PTG) Presentation, FNN Online Investor Event, September 2021

Company Presentations

PropTech Group Limited (ASX:PTG) CEO and Managing Director Joe Hana introduces the company's portfolio of products and investments to streamline, optimise and automate residential and commercial sales and rentals as well as its recently announced payments JV ProPay.

Thank you Clive and thank you all for joining. Let me run you through what the PropTech group does. And as Clive mentioned, our mission is to become a leading investor in and an operator of PropTech companies that really aim to streamline, optimise, and wherever possible, automate the way that residential commercial sales and rental real estate agencies run their back office operations. We do this in Australia, New Zealand, and increasingly in the UK. And in doing so, we're looking to really embrace agency. We're not looking to displace or replace or disrupt the agencies. And we do this through a series of SaaS products that our agencies run their back offices more effectively. And in doing so and being at primarily B2B business, we're essentially helping consumers B2B to C, by making it easier for them to buy, sell, rent properties in Australia, New Zealand and the UK.

In terms of our core capability, really at the centre of our capability is owning the agency's desktop. Now we call these core agencies, software pieces. These are the mission critical software tools at agencies in need to use to operate their back offices. At their core they're made up of primarily two systems, which historically are two separate systems. So a CRM or typically a sales CRM is referred to in the PropTech world, allows real estate agents to manage the sales process of their sales arm of their business. So that's everything from prospecting, listings management, advertising management, trust accounting through to sales management, settlement management.

But most real estate agencies, as some of you may know, will typically have a rental division and a sales division. Typically, the property management software solutions that agencies run are more often than not separate solutions to the CRM. Where we differ is we have a single solution to do both property management and sales CRM built from the ground up for both residential and commercial sales. We have by far the largest market share in Australia and New Zealand. And increasingly as we own that agency desktop, what we are able to do is increase our capability by adding third party products, both ones that we own and ones that we integrate with to service along the value chain. Now they include marketing. So this includes getting your ads up on social, or pushing your properties up to the portals, domain, getting vendor paid advertising solutions in, things like marketing and agency for prospecting, as well as marketing of an individual agent.

We then have efficiency add-on tools. So typically a real estate agency will spend up to $60,000 a year on PropTechs, and that spans over 20 or 30 different tools. So by adding these efficiency, deep integration with our open API, we're able to remove the need for agencies to have to log out of our system, which is a system they use all day every day and log into another system. By that deep integration, we're able to tightly couple those two systems. Be it systems that we own or systems that we partner with, so that they have an end to end experience on running their back office.

Clearly data and insights is an important part given our market share to be able to show the performance of a given agent compared to other agents in an office, in a suburb, in a region, in a state and in the nation. So we can compare agencies performance at a top level, both franchisees, franchisors, and principles alike against performance and other like agencies across the nation.

And increasingly as we go down the value chain, we're doing a lot more in the finance and transactional space. So think of all the things that are associated and ancillary products, and these are obviously areas that and domain are getting into that a consumer or an agent gets involved with when buying and selling or renting a property. Financing being home loans, things like vendor paid advertising, conveyancing, insurances, utility connections, and the like. Given where PropTech group exists in the workflow, we're best positioned to capitalise on those relationships and capitalise on making those introductions at an appropriate point in time.

So what does our portfolio actually look like? Again, in our core software, which is our primary driver of revenue, the history being, that it's important for me to note that PropTech group was only re-listed in November of 2020. Part of that, we ran a SaaS business, servicing the B2C space and actually acquired, MyDesktop as you see in number one here from the domain group and joined it with real estate with VaultRe rather, which were the founders of MyDesktop back in 1997s, new next generation, all in one property management and rental solution CRM based in one.

Eagle Software was a recent acquisition that we finalised in July. And we also acquired H1 from Harcourts in order to gain market share there. So typically what you see here is VaultRe is our primary flagship product really focused on the enterprise end of town. We have customers like every single Ray White office, globally, Raine & Horne office, Harcourts' offices, and increasingly a larger number of the smaller franchise groups. Eagle Software servicing our smaller end of town, independent small multi-office boutique offices. Bring those two together and we have an over 40% market share of the CRM space in Australia and New Zealand. Coupled with that is our marketing solutions, including Designly, which is our automational marketing campaign management tool becoming our marketing automation tool and websites, Websiteblue, which is our website solutions for real estate agencies in order to promote both themselves and the agents that work within those agencies.

Efficiency add-on tools, as I mentioned, right now, we have over 700 add-ons or integrations if you like with our PTG CRMs. Now this means that we can effectively reduce the total spend from an agency by consolidating a vendor and not then needing them to subscribe to multiple PropTechs in order to get their back office operations as streamlined as possible, and in doing so more profitable. Rentfind Inspector is an example of a tool that we own and operate and built from the ground up to add efficiencies in the way that retail inspections are being managed. Data and insights we've released in the recent months, our franchise management system. And figure that like a data like enabling agencies to have deep insights into the operation performance of their group or their agents within their network. Most recently, as recently as two or three weeks ago, we announced a JV for PropPay. Essentially this bridges, the gap between FinTech and PropTech. And I'll come to that at the end of these slides.

In terms of the key highlights for last year, given we've been so close to last year's performance is we've spoken about in previous presentations and announcements about our growth strategy, which are underpinned by four key pillars, the first being to grow our market share. And we've done that over the last 12 months of really the last seven or eight months since listing by acquiring Website Blue and Designly acquiring H1 and Eagle Software. We've also added new products, the launch of our property management module, launch our commercial CRM module, which then increased a number of customers that use our products. We've launched a new business and/or a new business team, which is interestingly enough, we didn't have prior to listing. And now that's accelerated the growth of our market share. And we've managed to secure some major clients for extended contracts, including Ray White and Harcourt.

Now we've got a large market share, as I mentioned, over 40% we then now increase the number of products that we sell to them in order to increase our APA. So the acquisition of Website Blue, the launch of Property Management and increasing the number of third party integrations, which are now over 700. Most recently, we've added the PropPay integration through the JV, which I'll talk about in just a moment.

Clearly, as we've grown our market share, grown our product range what this does is it increase our average revenue per agency. Now, this is a core metric along with market share or number of agencies that use our product. The way we do that is by upselling, bundling, and cross-selling both to PropTech group products and increasingly third party products that we have a strategic relationship with. Now, that's the build, buy, or partner model that we're adopting. So we won't always acquire businesses. We'll often build products. And in some instances we will partner with best in breed, third party products. Those deep integrations with our product, again, remove the need from agencies to have to remove themselves from our software system and log into another system by doing it all in the one place. We've also rolled out a price increase, which shows that about 50% of our growth has come from organic as well as inorganic initiatives. Clearly, as we continue to grow, growing into new markets is a core part of that. The UK being our first strategic market with about 1% market share over there, and we've reorganised our UK operations to grow that market share over the coming years.

A little bit of our top line numbers for last year. And we'll give you an update on this year's performance to date. $11.6 million in top line revenue, which is a 29% increase from the second half versus the first half. $1.9 million in underlying EBITDA. $2.3 million in underlying cashflow. Now it's important to note that we are high growth revenue business. So moving forward, we'll look at reinvesting the spare cash in top line growth. Taking our annualised monthly recurring revenue as at July or June rather, of this year when it's sitting at $12.4 million and that's obviously increased, which I'll come to in a moment. As at the end of the financial year, $6.6 million in cash and $28.9 million in net assets.

As I mentioned, we had a very good, strong or very strong finish to the year with the second half being a 29% increase on the first. It's important to know when you look at our business in a statutory basis, it was a reverse takeover. So there are some nuances in the way that these numbers being released. So I'll talk to a proper look through of our performance. 89% of our revenue has come from SaaS, monthly recurring revenue. And increasingly as we get into the transaction space, that revenue will shift a little bit down to roughly around 80%, 20% of our revenue coming from SaaS.

If you take July's performance, going back 13 months of June 20', we've increased our annualised recurring revenue by 65%. Can we expect that growth rate to continue well into this year and beyond? Not including the 12 months, not including the 13 months but taking the 12 months and beyond.

So just how big are we and how important are we to the industry? Well, 41% market share, which is vastly bigger than our newest competitor. As of June 30, our as July, 2021 rather, our APA average revenue per agency has increased at $230 up from $210. Average tenure is eight years. And we've accounted for almost $200 billion in property transactions through our CRMs equating to $4.6 billion in agency commissions across over 266,000 properties sold over the last 12 months through our platforms. So it's an important metric to see how big and important we are to the industry, particularly in Australia and New Zealand.

When you look at our evolution of unique offices, we've grown from about 26% market share in November to now over 41% market share to a strong and steady increase in a number of users. We've also been able to increase our prices and acquire new products that has had an impact on the average revenue per agency, which is now up to $230 per month.

Again, when we take a step back and look at our growth trajectory and how we execute on that growth, clearly we want to increase our market share as I mentioned, and that's really focused on the center. As we increase our market share, we're able to increase our revenues and get step change opportunities in those revenues, by adding third party products and our own products that enable us to walk along and down the value chain. Starting with marketing, moving into agency and efficiency add on tools into data and insights. And then more importantly and increasingly is finance and transaction.

So I'm going to pause now and talk you through our latest deal around PropPay. PropPay essentially is the intersection between PropTech and FinTech. And by that, I mean, what we try to do is find solutions, both payment and online buy now pay later solutions to help real estate agencies, both internally manage their cash flow and their customers manage the way that they pay real estate agency.

Clearly, this is a JV bringing best and breed third parties into a JV where PropTech group starts with a 20% stake and increases that stake and equity earning through the distribution of our network.

So why are we doing this? Well, it's important to know that vendor paid advertising, where the vendor pays for the advertising and their property to be sold, is an important part of any vendor paid marketing solution. Now, if you think about the average value of vendor paid advertising, that's anywhere from three to seven plus $10,000. The average is about $3500. Now for a vendor selling a small property, having to fork out $3500 up front in order to get the best coverage off, domain, social media, and your own website may be a bit of an expense that they can't really incur.

Now with our buy now pay later solution, the vendor can choose to pay with their credit card upfront or pay in installments or pay once the property settles. Coupled with that, we can also release early release of the agency commissions in order for them to help manage their cash flow. Release of vendor deposits, where a property settles, but you don't get the deposit until the property settles, early release of that, as well as trades release of vendor, sorry, real estate landlord solution to enable them to manage their cash flows.

So with the PropPay solution, we're able to provide deeply integrated and automated integration into our CRM, which is why we think we're very well positioned to take advantage of this play. Buy now pay later, you'd be surprised to know that only 20% of real estate agencies have an online payment platform solution. Deep two way integration with the CRMs leaders, fully automated and automatically reconciled, next day settlement an early release of payment means that we can help agencies and therefore help their vendors get the best possible solution for their marketing and get the best value for their property when they're selling the property.

All of this, as I mentioned, is fully integrated and works alongside our CRMs, which are market leading.

Our board is best in breed, very high profile Simon Baker, as you may or may not know ex-REA. You've got Sam Plowman and Scott Wulff. Scott was one of the founders of VaultRe and MyDesktop and George Chmiel many of you would know.

So with that, and with any other questions, I'd urge you to reach out to me personally, or email our investors at PropTech group. Certainly thank you for paying attention and all the best with the next sessions. Thank you Clive.


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