PropTech Group (ASX:PTG) - expanding into ancillary real estate services

Interviews

by Lauren Evans

PropTech Group Limited (ASX:PTG) CEO and Managing Director Joe Hanna discusses quarterly results and performance drivers, the new RelloPay product for buy now, pay later real estate transactions, and future strategy with regards to ancillary real estate services.

Lauren Evans:
Hi. This is Lauren Evans for the Finance News Network. Today I'm speaking with CEO and Managing Director Joe Hanna from PropTech Group (ASX:PTG). PropTech provides market-leading software to real estate agencies to streamline and automate operations.

Joe, happy new year and it's nice to see you again.

Joe Hanna: Hello and happy new year and thanks for having me back.

Lauren Evans: You recently released some impressive results. What were the highlights here?

Joe Hanna: Yeah, certainly. We've had another good quarter in the Q2 of this financial year, with cash receipts increasing by 116 per cent compared to previous year, up to $5.8 million. Our net cash flow from operations is sitting at a million dollars in the last quarter. And, importantly, our average revenue per agency has increased by 23 per cent against previous year, up to $245. Just as importantly, we've managed to increase the number of products per agency up from one product up to 1.85 products per agency. Now, this is an important metric because, when we IPO'd the business, it was really centred around growing market share. We've grown market share by 45 per cent since November of 2020. And, as we grow to the 41 per cent market share which we sit at today, our focus shifts from obviously continuing to add new real estate agencies and franchise groups to our network, but importantly increase the number of products that each agency adopts in our suite of products. So, by moving from one to 1.85, we're managed to move up that ARPA and also increase the revenue.

Lauren Evans: So, during the quarter, you finalised an agreement to create Real Payment Holdings, aka "RelloPay". Could you give us an overview of the agreement, and what does this mean for PropTech?

Joe Hanna: Primarily, the solution that we've come up with is a payments and cash flow solution for real estate and real estate transactions. Now, that encompasses vendor-paid advertising, being able to pay for those with your credit card up front, or enabling the vendor to make a decision to pay in instalments or indeed pay on settlement. Similarly, we're enabling products that will enable vendors to get an early release of their deposit once the property's been transacted, getting access to that cash before settlement is actually occurring, and ditto for real estate agencies, getting early release of commission. They're the three products that we'll go to market with.

And, certainly, what we're trying to address here is not something new. It's an area in the real estate segment that's been under-serviced, in our view. Now, the reason it's been under-serviced is that, whilst agents have been doing this and the incumbents have been offering this product for a while, where it's fallen over is the deep integration into the tools that agencies use all day, every day. Given that PropTech Group has a 41 per cent market share by number of agency offices, we're able to deeply integrate these products and services.

What it means for the consumer is that the agent need not remember to click a button or to take some action to enable a vendor to make a decision on how they want to pay for their advertising or whether they want to get an early release of the deposit.

And in terms of what it means for PropTech Group, we start with a 20 per cent holding in the JV, and we have the ability to earn our way up additional revenue through our distribution channel. So, for this year, it's really a year of foundational growth for RelloPay. We expect to see some traction towards the back end of this year, and certainly in FY23 and beyond is where we'll start to see significant growth in that side of the business.

Lauren Evans: So, turning to the future, where do you see opportunities for revenue and market share growth?

Joe Hanna: Well, it's important to note that, in Australia alone, real estate agencies by and large spend on average $730 million a year on SaaS and proptech-related products. Now, this is typically spread across 20, sometimes even 30 different SaaS providers. Our goal is to continue to increase and release products and services that seek to address the needs of the industry, reduce the real estate agencies' need to go to multiple vendors, combine those vendors into one, or reduce the number, increase our share of wallet and reduce the total spend for real estate agencies.

So, we see significant growth opportunity just within the SaaS business in Australia and New Zealand alone. Again, a $730 million addressable market. But what we see beyond that is a significant opportunity to inject ourselves into the very large $10 billion a year ancillary price and services stream. Now, the injection that we've done with RelloPay is the first foray into ancillary products and services, and we're finding early good signs of life and early signs of adoption.

Lauren Evans: So you have touched on ancillary services, but what is the long-term vision here?

Joe Hanna: The real estate industry accounts for over $10 billion annually in ancillary products and services attached to any given real estate transaction. So, that includes mortgages, insurances, conveyancing, utilities connections, and all the other things that we typically need when we buy, sell or rent houses. But what we're finding today is that real estate agents have either a fragmented or a very loose arrangement with how they refer revenues here. And if you think about the experience from a consumer, whilst it's true that real estate.com, Domain and a lot of the other large proptechs are trying to inject themselves into home loans, insurances and finance, the reality is the point of time of where it matters most, when it's in context, is through your dealings with an agent. If you reduce the need for an agent to have to remember to do something, leverage off that relationship to provide an in-context offer to a consumer, our hypothesis is that people will be more receptive to receiving an offer, particularly if we can give them best-in-market pricing.

Lauren Evans: And the last question from me, Joe -- what can investors look forward to from PropTech in 2022?

Joe Hanna: Well, thanks, Lauren. Hopefully more of the same, to be honest. We are really focusing on accelerating growth. Whilst we have been profitable in the past, we're spending almost every spare dollar and all cash flow back into investing in R&D, continually releasing products and services. It's fair to say we have grown through acquisitions. There's nothing imminent, but certainly acquisitive growth is certainly on the horizon. But, typically for us, it's really more of the same, continuing this growth, continuing to push hard into the industry and improving the lives of all those involved in a real estate transaction.

Lauren Evans: Well, Joe Hanna, congratulations on the results, and I hope you have a great year.

Joe Hanna: Thank you, Lauren. Thanks for having me.


Ends

Are you a 708 sophisticated investor?

A sophisticated investor is defined under Section 708 of the Corporations Act (net assets of $2.5 million or annual incomes in excess of $250,000).

They are eligible to receive information regarding wholesale investment opportunities that are not available to regular or retail investors.

Please subscribe if you would like to be alerted to these types of opportunities.