Thank you for standing by and welcome to the PropertyGuru Group's Second Quarter 2023 Earnings Conference Call. Currently, all participants are in a listen-only mode. As a reminder, today's program will be recorded. If anyone objects, please disconnect now.

After the prepared remarks, we'll conduct a question-and-answer session using the raise hand function in Zoom. Please ensure that Zoom shows your name and firm. In the Q&A session, we will only take questions from those participants who are named. Now let me introduce Nat Otis, VP of Investor Relations. Mr. Otis, please go ahead..

Good morning and good evening. Welcome to PropertyGuru Group's second quarter 2023 earnings conference call. On the call today are Hari Krishnan, CEO and Managing Director; and Joe Dische, CFO. Before we get started, a few reminders. Firstly, all results are available in the earnings release that can be found in the Investors section of our website.

Secondly, today's webcast is being recorded. A replay along with the transcript will also be available in the Investors section of our website. Thirdly, we will be making forward-looking statements, including, but not limited to, statements regarding our future results and expectations for the business.

These results are neither promises nor guarantees and involve risks and uncertainties that may cause actual results to vary materially. Please refer to our earnings release and SEC filings for more information regarding risk factors.

Forward-looking statements are based on current expectations, and the company is not obligated to update them except as required by law. Fourthly, this call will also contain non-IFRS financial measures. For a reconciliation of non-IFRS financial measures to the most directly comparable you see our earnings press release.

Lastly, all dollar references are in Singapore dollars, unless otherwise stated. With that, let me turn the call over to Hari..

Thank you for joining us today for our second quarter 2023 earnings conference call. PropertyGuru delivered another good quarter of growth with expanding operational profitability. This was the result of focused investments and good execution despite ongoing macro challenges in Vietnam.

We've posted double-digit revenue growth and double-digit adjusted EBITDA margin standing from in the Southeast Asian economy wrestling with inflation and uncertainty. We're making good progress in delivering solutions that empower all our customers to make confident property decisions. Let me walk you through some of the highlights from this quarter.

In Singapore, property growth is thriving in a bustling property market with strong sales and rental activity. Asking prices remain resilient despite rising interest rates and persistent efforts by the government to rein in the strong market.

While some decrease in demand was expected, the level of durability is notable given that our PropertyGuru sales demand index was down only 4% from the first quarter.

For the fifth quarter in a row, construction-related GDP growth exceeded 6%, while private supply completions more than doubled in the first half of 2023 compared to 2022, both of which bode well for new supply entering the market going forward.

In Malaysia, the gap between buyers and sellers increased in the quarter as rising prices and interest rates pushed homebuyers to delay their transactions. Our price index was up 2.1% from the first quarter, while the demand index dropped 10.2%.

Overall, while Malaysia's GDP is projected to have slowed down in the second quarter, we are seeing positive signs as we move into the back half of the year. Recent state elections should help government stability and consumer confidence, inflation reached a year-long low point in June, and the central bank chose not to increase rates in July.

In addition, the Malaysian Prime Minister recently announced a targeted plan to increase the country's growth over the next decade, which included over $1 billion in financial support for first-time homeowners on homes below MYR 300,000.

Lastly, I would also point out that the real estate housing developers of Malaysia reported that sales of both residential and commercial units were up 120% in the first half of 2023 versus the second half of 2022, despite the number of unsold units remaining elevated. In Vietnam, conditions remain challenging.

Governmental interventions initially aimed at regulating the property market have impacted consumer sentiment and transaction activities so far in 2023.

However, recent monetary easing and a positive longer-term economic outlook should help point the direction to a recovery as we continue to actively invest in products and infrastructure in anticipation of a return to healthier growth rates.

Vietnam remains one of the most vibrant economies in Southeast Asia with increasing middle class expansion and organization. The need for good quality housing in the townships being built in Ho Chi Minh City, Hanoi and beyond will be there for years to come.

On the technological front, utilizing generative AI and machine learning, we continue to bolster our market-leading products while also helping to make our operations more efficient. In June, we launched GuruPicks, a personalized feed of property listings based on machine learning algorithms.

We are very excited about the opportunity this product offers to match a person's budget, property type and location to show personalized and recent listings.

We introduced lead management for property agents in Singapore, which will help subscribers manage their leads by using a single inbox for all e-mail, phone, SMS and WhatsApp contacts while also adding a heat index and insights on lead preferences.

In both Singapore and Malaysia this quarter, we launched a revamp of our New Homes Discovery page, increasing the coverage of new properties and better organizing the customer experience to make it easier to find ones under development.

Generative AI continues to help us operate more efficiently and effectively in product development and code quality. We have been experimenting with the auto creation of listing descriptions that benefit agent efficiency as well as AI image moderation to continue to improve listing quality.

As of June end, our mortgage business had brokered over $5 billion worth of home loans, a great indication of the continued growth in trust and confidence that customers have placed in Property Group for securing home financing.

We have also made good progress in digitizing the traditionally manual loan application progress or process rather, making it convenient and mobile-friendly with round-the-clock access for home loan applicants. Our solution is being piloted with customers of one of the major banks in Singapore and the feedback has been positive.

This quarter, our data and software solutions team released a progressive ESG framework that gives valuable insights into building climate smart real estate. The actionable strategies for property developers and investors embrace sustainability without compromising financial viability.

For example, in markets like Malaysia, where recent flooding caused more than $1 billion in losses, we analyze flood risk data and the correlation with property prices. This report is part of broader market activities educating developers and planners on data-driven insights to drive responsible property development in our region.

The quarter saw good adoption of our flagship Insights dashboard data sets by new governmental agencies in Singapore and Malaysia. REITs and industry bodies such as the real estate and Housing Developers Association. I now wanted to touch upon some strategic decisions that we announced this week.

As mentioned in our letter, we will phase out our Indonesia marketplace business, Rooma.com and sunset one of our SaaS products, Fast key.

These decisions reflect our relentless efforts to make focused investments that maximize the value we create for all our stakeholders with the objective of driving sustainable growth and doubling down on businesses with strong unit economics.

Though these decisions are tough, they are necessary for us to focus and deliver our next phase of growth and will allow us to prioritize our resources accordingly. We have some good people leaving PropertyGuru, and I wish them success in their future endeavors.

Overall, this was a quarter in which we made inroads in some businesses, sharpened our focus further by clarifying our priorities for investment and deliver increasing operating leverage and revenue growth. Outside of Vietnam, we are delighted with this quarter's performance and remain optimistic about the future.

We believe in the fundamental opportunities in our core markets and are committed to future growth and profitability anchored around our vision to power communities to live, work and thrive in tomorrow's cities. I will now hand it over to Joe to walk you through our financials..

Thanks, Hari. PropertyGuru had another good quarter with revenues of $37 million, up 12% in second quarter of 2022. Revenue growth outside of Vietnam, where we're undergoing some temporary government-induced challenges was particularly positive, up 22% from the second quarter of last year with every segment delivering double-digit growth.

This shows how despite challenging macroeconomic conditions, our businesses can flourish. What also marked this quarter out was our strong control of costs as we demonstrated continued operating leverage improvements.

Our adjusted EBITDA grew to $5 million from just over breakeven in the prior year quarter as 113% of incremental year-on-year revenue was converted into EBITDA, an excellent result.

In marketplaces, revenue was $35 million in the second quarter, up 11% year-over-year with an adjusted EBITDA margin of 59%, up from 41% in the second quarter of 2022, excluding Vietnam, marketplaces revenue was up 21% year-on-year, and adjusted EBITDA margin was 66%.

In Singapore, I'm happy to report we now have over 16,000 agents as our agent pool grew again this quarter. Our customer renewal rate was up slightly to 82% and our quarterly average revenue per agent or ARPA, was up 25% from the prior year period. This is a fantastic reflection on the success of our product and pricing developments.

ARPA has been the primary driver of overall revenue growth in Singapore, which was up 25% to $22 million from the first quarter of 2022. The added ARPA and good cost control also helped to bolster the adjusted EBITDA, which was $17 million in the quarter for a 77% margin growing more than 10 percentage points year-over-year.

In Malaysia, revenues were $7 million, up 12% from the previous year quarter, and our adjusted EBITDA increased almost $3 million to $4 million. Malaysia is a great example of our operating leverage expansion and improved yield as revenue increased $700,000 year-over-year, and our adjusted EBITDA increased $2.7 million.

As a result, our adjusted EBITDA grew to 60% this quarter from 21% in the second quarter of 2022. I'm pleased to see our Malaysia business start to show similar operating leverage to that which we have delivered in Singapore for many years now.

In Vietnam, revenue was down 27% from the second quarter of 2022 as a 36% increase in our average revenue per listing, or ARPL helped to offset a 46% drop in listings. Of note, the minimum period of listing validity moved from 7 to 10 days this quarter, which increased the ARPL and subsequently decreased the number of listings in the quarter.

The challenging property market conditions led to some agents holding back from posting listings while those more established agents who remained active continue to use our premium services to maximize lead yield. Adjusted EBITDA in Vietnam was just under $1 million for a 17% margin.

Finally, FinTech and Data Services combined revenue was up 47% year-over-year, and adjusted EBITDA was a loss of $3 million. Hari has spoken about the progress we are making in these areas, both are long-term strategic opportunities for us as we continue to invest and build out the business.

On the balance sheet, we ended the quarter with $302 million in cash. While we're maintaining our full year 2023 outlook ranges between $160 million and $170 million in revenues and $11 million to $15 million in adjusted EBITDA, we now project revenue will be at the bottom end of the range.

The most significant factor at play is Vietnam, where we are assuming early signs of market improvement will be seen in late 2023. Longer term, we remain positive advantage of both the macro outperformance of our core Southeast Asian marketplaces and positive demographic trends related to property ownership.

In summary, it has been a good quarter of a Property Group. I'm particularly pleased with how well the market has reacted to current market conditions as we utilize technology, internal automation and prudent cost management to improve adjusted EBITDA, this bodes well for future margin expansion and profitability.

Let me finish by underscoring [indiscernible] Hari said. As any successful company, we regularly review our progress as a business and make sure where necessary to ensure that we are optimizing resources and remaining on track and achieving our goals. The Indonesia and FastKey decisions were made with that clear business focus in mind.

These decisions are not expected to have a material impact on our 2023 outlook. However, it allows our business to focus both monetary resources and executive attention on achieving the long-term goals of the company.

I would like to thank all our gurus for their hard work and commitment to Property Group and thank our customers for their continued support. I will now turn the call over for questions. Operator, we're ready for our first question..

Thanks, Joe. We will now take your questions. [Operator Instructions] Our first question is going to come from Nick Jones with JMP Securities.

Nick?.

Could you touch on, I guess, the decision to exit Indonesia and kind of sunset the FastKey product. I mean do we kind of triangulate that this is maybe around a $5 million impact on the full year numbers. And then as we think about kind of the longer-term opportunity, Indonesia had a pretty large population.

I mean, is this market you'd consider revisiting in the future? Are there other geographic expansionary opportunities? Just any color on how you're thinking about your geographic footprint today amid some of the macro challenges..

Maybe I'll touch upon some of the strategic rationale and then regarding the numbers itself, I'll ask Joe to add on. But essentially, for us, this is something we have done progressively over the years. We look at our data when you look at emerging markets, you need to give it sufficient time for the data to settle.

And we're looking for unit economics, and we're looking for drivers over there. We have sufficient experience in our markets. And as Joe pointed out, we now know to do the results we delivered in Singapore and Vietnam, we're now beginning to show them in Malaysia as well. I think with Indonesia, we've been there over 10 years.

We've run the FastKey business for almost 8 years. We've seen enough to give us a sense of the monetization opportunity, but also the unit economics and how it's going to grow. We felt it's better to focus executive attention and resources on the other projects. So I think for us, it is very much not a cost control measure or anything.

It is much more of strategic attention and resource focus measure that we have implemented. With regards to geographic expansion, we are very focused on the 4 businesses, the 4 countries we're in right now and adjacent business models, both Fintech and Data Solutions, both look good.

We will continue to invest hard into them as well as into our core businesses in Singapore, Malaysia and Vietnam. We're not looking to expand into other geographies or anything for now. But as always, we will use data to inform these decisions and if we need to relook at something in the future, we'll look at it.

Specific to Indonesia, I think the way to think about this, yes, it's a large country with a large population. But with regards to the real estate market, it's really localized extensively around the Greater Jakarta region. And if you size the population there, that's 30 million to 40 million people.

For a sense of scale, Vietnam is about 95 million to 100 million people, and you're actually able to monetize and do business throughout that country. I think in Indonesia, why we've tried a number of different business models, we have not seen them actually work out well for us.

And frankly, we're not seeing good unit economics from any other proptech player in that market either. So we felt it's the right time for us to refocus on our attention elsewhere. Specific to the numbers for the year, maybe I'll ask Joe to sort of augment that..

Yes, sure. So I mean in terms of our outlook, which is obviously revenue and adjusted EBITDA, this change is not going to have a material impact on this year. These businesses are pretty small. And obviously, the action we're taking is towards the back end of the year. So it's not going to have a material impact on the numbers for our outlook.

We obviously have booked about $8 million of impairments and restructuring costs in relation to Indonesia and FastKey. And obviously, these fall below our adjusted EBITDA line..

Great. And maybe just a quick follow-up on Gorupex. How -- with the launch of this in June, how is the engagement changing from users? Are you seeing kind of an uptake in pages per visit or any kind of early times that these kind of machine learning AI powered interfaces are kind of driving more engagement..

I'm really excited about GuruPicks.

I think the concept of personalizing the experience, having a personalized speed, something we're used to in other context when it comes to entertainment or media, so in the real estate space to be able to actually look at your preferences, look at your browsing behavior, the kinds of properties you're looking at, but also, frankly, the properties are hiding.

You have the ability to actually hide listings that perhaps you're not interested in. And all of that activity is factored into the machine learning and how it rates over time.

Really, the goal here more than anything else is to personalize that experience to drive greater engagement there and share some of those insights with the other side of the marketplace as well with the lead management tool we mentioned for agents.

Over time, we'll get more and more personalization and more and more information to share with our agent, therefore, doing a better job of matching supply with demand. So I think right now to be candid, it's early days, and we're still experimenting.

We're pleased with the adoption to date, but nothing that's given how large our Singapore business is, for instance, you're not going to see massive movements on that in such a short time period..

Our next question is going to come from Nelson Cheung with Citi. Nelson go ahead..

So my first question is regarding the Singapore market. So wondering, management, if you can share your observation of [Indiscernible] demand in July and August from primary secondary markets in Singapore recently under tightening residential policy? That would be great..

Yes. Like I mentioned, I think when you look at the first half, I'll get your question. But if you look at the first half, we saw -- when you look at private new homes, the volume of supply was double that was released in the first half of 2022. So that's really good. A lot more supply coming online.

When it comes to transaction volumes that is difficult. I think we've had two rounds of cooling measures that we implemented in 2022. I think there was a little bit of correction that was warranted given prices had really taken off, as you might recall, when demand was far ahead of supply.

That sort of demand cooling off a little bit does not necessarily bode badly for the market. There's a lot of supply that it continues to come online.

Even in the recent -- we've just passed National Day here in Singapore, you saw the PM come out and talk a lot about the HDB and how they're going to launch more projects and how they're going to invest in estates, so I think there's a lot of focus on continued development and new supply coming online.

Construction, as I mentioned, its GDP growth was north of 6% again. So there are a lot of good indicators. Transaction volumes are off a little bit. But as Joe also mentioned, more and more agents continue to join the marketplace.

So clearly, both from our perspective but also from the agents and agencies, it continues to be a healthy market and perhaps more sustainable with the prices cooling off a little bit..

Then my second question is regarding the markets. Wetter market. And while we start to see some like silver lining, given the monetary easing, management expect earlier recovery versus the timing that we discussed in last quarter's earnings call, which I believe is to be late 2023 and early 2024..

So listen, I think when it comes to Vietnam, as we mentioned, there's a lot of measures the government put in. I think the result, as I stated, has been that it's impacted consumer sentiment. That's just the truth of the matter. We continue to forecast that recovery will happen at the earliest in late 2023. So that hasn't changed.

Obviously, if it happens sooner, we'd love to see that. But we are not seeing any indications as of now that it will happen sooner than that. But the government continues to message the right kind of messages, rate cuts earlier, et cetera.

So I think there's a lot of policy, but there's always going to be a little bit of a lag there when it comes to consumer demand and for them to actually see that the government has essentially said that all their corrective measures are complete. So we forecast still late 2023 for a start-up recovery in that market..

Then my last question is regarding the investment.

Given that we have phased out in the Indonesian market and also the FastKey business, I'm wondering what would be the top priority of investment for the company going forward? And do we still consider any potential M&A opportunity or investment this year?.

Maybe I'll talk to the investment, and then I'll hand it to Joe to talk about M&A. I think with regards to investment, I talked about some of the areas we're really excited about generative AI and machine learning, we're investing a lot of tech into even our core businesses in Singapore, Malaysia and Vietnam, I talked about some examples.

Really excited by the progress that both the FinTech business as well as the DataSense product are making. So to see that kind of progress happening with Fintech, over $5 billion of home loans brokered some of the partnerships with the banks driving a lot more automation under the hood, these are encouraging.

So we will continue to invest hard into those spaces. We're pleased with the progress we're seeing there. And when it comes to DataSense, the adoption that we're beginning to see from REITs from urban plans, from governments, both in Malaysia as well as in Singapore, industry bodies like REHDA in Malaysia.

This is really, really encouraging signs that this product could have legs. So I think those investments will continue at pace as well as in newer markets like Thailand, where we continue to be in an investment mode. So I think those will be the primary focus for investment right now. Maybe that many, I'll hand over to Joe to comment more..

Yes. And I think as previously stated, our major focus areas are data with Fintech. We already have presence but looking to other markets and other types of products. We also look towards developer operating systems and also to Home Services where we obviously already made an investment in Singapore in [Saint Helpa] the back end of last year.

So those are our priorities. And I think one of the challenges we've had, we've got a great co-dev team that's working away looking through opportunities. It's just really size and scale, which is hard to find in our core markets. So we definitely are looking broadly across our region to see if there's any other really attractive opportunities.

So we're casting the net is fairly wide. We're early days still in that respect, but there's nothing new specifically to report, but we're still having a very good look on a wide range of opportunities..

If we have any other questions, please use the raise hand function. We'll wait a second to see if there's any more. Okay, it doesn't look like we have any more questions. So that will conclude the Q&A. Let me turn the conference call back to Hari for any closing remarks..

We look forward to sharing our continued progress with you next quarter. Until then, thank you all for joining us today. Goodbye..