Earnings Call Transcript - MNY Q2 2024

Operator, Operator

Good day, ladies and gentlemen. Thank you for standing by. Welcome to MoneyHero Group's Second Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. Please note that today's conference is being recorded. I will now hand the conference over to your host, Chadwick Dorai, Strategic Finance Lead. Please go ahead.

Chadwick Dorai, Strategic Finance Lead

Thank you, Livio. Hello, everyone. Very good morning, good evening, depending on where you are. My name is Chadwick Dorai, and I am the Strategic Finance Lead for MoneyHero Group, overseeing our Investor Relations activities. We're excited to have you join us for MoneyHero Group's second quarter 2024 earnings conference call. Today, we have with us Rohith Murthy, our CEO, and Hao Qian, our CFO. Let's start with a few friendly reminders. First off, you can find detailed results in our earnings release located in the Investor Relations section of our website. Also, we are recording today's webcast. So don't worry if you miss anything, a replay and a transcript will be posted on our website under the investor relations section. A heads up, during this call, we'll discuss some future projections and expectations for our business. Keep in mind, these forward-looking statements are based on what we currently expect and are subject to risks and uncertainties that could cause our actual results to differ. We also encourage you to look at our earnings release and SEC filings for a detailed discussion of these risk factors. Remember, these forward-looking statements reflect our views as of today, and we are not obligated to update them unless required by law. Also, we'll talk about some non-IFRS financial measures today. For a reconciliation of non-IFRS financial measures to the most directly comparable IFRS metric, please see our earnings press release. And one last thing, all monetary references will be in United States dollars unless we state otherwise. Shortly Rohith and Hao will be discussing our Q2 performance and business strategy. With that, let me pass on the time to Rohith Murthy, CEO of MoneyHero Group. Over to you, Rohith.

Rohith Murthy, CEO

Thank you, Chad. Hi everyone. Today, we share our performance update for the second quarter that ended June 30, 2024. As we also near the end of the third quarter, I'd like to provide some early guidance on our performance leading up to September 30th, 2024. Our core business online financial comparison grew by 26% year-on-year, and Creatory, our B2B business, grew by 13% year-on-year. In our core markets, Singapore posted an impressive 68% year-on-year growth to $9 million, while Hong Kong grew 19% year-on-year to $7.3 million. While we faced some temporary setbacks in the Philippines and Taiwan, due to provider constraints, we have swiftly addressed these issues, and we are confident we'll be back on track in the upcoming quarters. Revenue from our insurance products increased by 89% year-on-year to $2.2 million. Insurance now contributes 11% of our group revenue compared to 7% in the prior year. I think it's important to take a step back and look at the bigger picture. Focusing solely on quarterly results can sometimes mask the full scope of our performance and growth potential, which is much clearer when you view it from a long-term perspective. Here's what I mean by that. First, consider our first half 2024 results. We processed 970,000 banking and insurance applications through our platform. That's an impressive 100% year-on-year growth and nearly three times the volume of 2021. And yet, our insurance engine is just getting started. I don't believe any other aggregator in the region has experienced growth at this scale. In anticipation of this, we built additional capacity and made strategic investments that enable us to outpace industry growth rates. Second, our industry is still in the very early stages of growth. We represent a small portion of the overall industry, and there is substantial room for expansion and diversification ahead of us. Third, our strategy remains focused on growth, prioritizing long-term value over short-term profit optimization. While we could optimize for short-term profits in any given quarter, our priority remains focused on investing for future growth. Finally, efficiency gains are driving operational leverage, something I spoke about in the last two earnings calls. This will be even more impactful as we continue to scale. We're already seeing improvements across key areas of our business, from marketing to operations. Now, talking about our strategic pillars, we've made significant progress across each of them. Consumer pull, conversion expertise, insurance brokerage, partner relationships, and operating leverage. This quarter, we hosted Singapore's largest personal finance festival, drawing a record 5,000 attendees. We partnered with over 35 banking and insurance providers, and the event featured more than 70 prominent speakers from the financial industry and government. This marks our seventh consecutive year hosting this festival, and it was our largest and most successful event to date. I'm also pleased to share that we were recently named Personal Finance Tech of the Year at the Asia FinTech Awards 2024. MoneyHero was selected from six finalists, which is a testament to our strong user connection, consumer pull, and technological superiority. This recognition underscores our market leadership across greater Southeast Asia and highlights the strong consumer demand and loyalty that continue to drive our sustained growth and success. An important thing to note is we are now pivoting from simply driving traffic growth to focusing on monetizable engagement metrics. This includes monthly unique visits to our transaction pages, conversions to applications, and registered members. This shift has resulted in a 50% increase in approved applications, with our membership base now growing to 6.5 million as of June 30, 2024. We are now focused on driving strong repeat behavior supported by our cross-sell and up-sell initiatives. In the coming quarters, we are also rolling out new capabilities to enhance engagement of our member base. These would include a mobile app, a new car insurance vertical, one-click insurance purchasing, and an improved site and content architecture. In the first half of 2024, we generated approximately $4 million in revenue from insurance products, representing 65% year-on-year growth. This is nearly four times our revenue from the same period in 2021, making this our fastest-growing vertical. As a licensed insurance broker in three of our four markets, we will continue to invest in this business. While insurance verticals typically have lower margins in the first year, simply due to the cost of acquiring users, these margins grow significantly through renewals. This is a high-margin segment for us, and we will continue to make strategic investments focused on growth with profitability as a long-term outcome. Creatory, our B2B business, still relatively young, but has already demonstrated impressive growth. We are increasingly confident about our ability to scale this business across all our markets. The creator market holds significant potential, and we are investing in building a strong brand with the aim of becoming a market leader. We are also highly focused on building operating leverage for this business with several actions and initiatives in place to control our operating expenses and drive efficiency gains. We streamlined our headcount and operations, and we're investing in AI to further enhance efficiencies. As you may recall, we previously announced the addition of a head of AI, and since then, we've identified efficiency opportunities across various business functions. A couple of examples I could cite include enhancing content production and creative production, exploring a chatbot to automate our customer service capabilities, and looking at AI to help us drive conversion rates on our transaction pages. Coupled with a disciplined approach to managing expenses, these efforts will keep our operating costs relatively fixed as we grow, allowing more of our top-line growth to flow directly to the bottom line. As a result of this, we expect significantly lower EBITDA losses next quarter, reflecting the progress in building our operating leverage. We are aiming for profitability in the last quarter. As part of our broad growth strategy, we continue to explore strategic M&A opportunities with a focus on market consolidation. Rather than competing head-on, we prioritize collaboration and investment. A recent example is our transaction in Malaysia, where we transitioned from being an operator to an investor in our competitor, demonstrating our ability to adapt and consolidate the market. Our acquisition of Seedly in Singapore also exemplifies this approach with the brand thriving post-acquisition. We remain open to opportunities that provide synergies across data, technology, revenue expansion, and operational efficiency. We are more confident in our strategy and trajectory than we were three months ago, and I look forward to answering your questions shortly after I hand over the call to our CFO Hao. Thank you all once again for your trust and support. With that, I would like to now turn the call over to Hao Qian, our CFO.

Hao Qian, CFO

Thank you, Rohith. Good day, everyone. In Q2 2024, MoneyHero's strategic expansion resulted in solid growth in approved applications with 24% year-over-year revenue growth to over $20.7 million. We have made strong market share gains, particularly in our core markets, as we continue to expand across Greater Southeast Asia. However, investment into strategically expanding our customer acquisition, brand building, technology re-platform, and the data infrastructure led to an adjusted EBITDA loss of negative $9.3 million for the quarter. Now let's turn to our second quarter 2024 financial performance. In the second quarter of 2024, MoneyHero delivered a 24% year-over-year revenue growth to $20.7 million. We realized significant growth year-over-year in Singapore, up 68%, and Hong Kong, up 19%, where we have increased our customer acquisition and strengthened our already dominant market share. This top-line growth was driven by maintaining a strong provider relationship and by investment in traffic and conversions. Our Philippine business decreased 16% year-over-year, largely due to reduced volume with a key client as it completes the system and the database migration post-acquisition. We are working closely with the client to ramp up our commercial engagement, positioning us for recovery in the coming quarters. Our Taiwan business decreased marginally by 4% year-over-year to $1.4 million in the second quarter due to paused product offering from several key clients. For Taiwan and the Philippines, we will focus on building long-term sustainable profitability and the focus on building new verticals to replace the loss of revenue from our key clients' strategic decisions to exit the market. Our B2B business, Creatory, also continues to show growth, with second quarter revenue increasing 13% year-over-year to $2.9 million, which represents 14% of group revenue. We will continue to leverage the Creatory platform as a competitive advantage to drive traffic and gradually decrease reliance on performance marketing. Insurance remains our fastest-growing product vertical, with second quarter revenue increasing 89% year-over-year to $2.2 million. We will continue to explore new opportunities to offer more new product lines to further fuel top-line and bottom-line growth. In addition to our core business growth, we aim to use insurance as a differentiator to increase both frequency and share of the wallet. For the second quarter 2024, our adjusted EBITDA loss increased to a loss of negative $9.3 million from a loss of negative $6.4 million in Q1 2024. The primary drivers for the increased loss for the second quarter are, one, strategic investment. We prioritize growth through increased investment in branding, customer acquisition, data, and technology aimed at capturing new customers and building infrastructure for future profitability. Second, provider constraints. During Q2, multiple providers in Taiwan and the Philippines underwent significant platform migrations, temporarily pausing new card acquisitions. These transitions impact our short-term financial performance. We anticipate acquisition volumes will return to normal levels in Q3 as these migrations approach completion. Furthermore, one key provider’s exit from several key markets also had a major impact on our revenue and profitability. To mitigate this revenue loss, we have invested in other providers' products and expanded into other verticals. We anticipate that the revenue and profitability loss from this provider's exit will be addressed in Q3 and Q4 and will only have a minor impact from Q4 onwards. Three, increased operating costs. Total operating costs rose year-over-year largely due to additional expenses associated with being a public company, including audit fees, D&O insurance, and IR/PR-related fees. Looking ahead, we anticipate a narrowing of our adjusted EBITDA loss in the second half of 2024, with margins beginning to recover in Q3 and continuing to improve throughout the year. We have initiated a comprehensive review of our organizational structure, which began with our recent reorganization announcement. We expect it to be completed by the end of Q3. This will create a more streamlined and cost-efficient operation. We expect to reach adjusted EBITDA profitability on a monthly basis by year-end, as we have been focused on efficiency and optimizing the return on our growth investments. Looking forward, we will continue to use our strong cash position to expand our footprint. We see this in two distinct paths. First, through organic efforts such as our insurance business, personal loans, Creatory, and streamlining costs with efficiency gains using AI. Second, as Rohith mentioned earlier, and I would like to reiterate, we are actively pursuing a growth strategy by exploring strategic acquisition and investment opportunities to consolidate the industry, as we believe the timing is right for industry consolidation in Greater Southeast Asia. We believe there is ample opportunity for consolidation in our emerging industry, and we aim to lead the way. These two strategies will aid us in scaling both our market share, top-line growth, and bottom-line for years to come. With that, I thank you for your attention today and I turn it over to the Operator to take any questions.

Operator, Operator

Thank you. We have our first question coming from Milo Bussell with Edison. Your line is open.

Milo Bussell, Analyst

Hi guys, it's Milo Bussell from Edison. Congratulations on the results and thanks for the presentation. Three questions from me. The figures reported today indicate that the full year results should be H2 weighted. So I just want to understand what are some of the levers you can pull to achieve the $100 million revenue target and what is underpinning your confidence in achieving that target. Second question is, what was the rationale for the MoneySmart acquisition? And more broadly, how should we think about inorganic growth strategy going forward? And finally, just want to understand how you're leveraging AI, the ShopHero app, and the Creatory platform to continue the improvement in the approved application conversion rate. And if there are any KPIs we should look to measure success against this. Thanks very much.

Rohith Murthy, CEO

Thank you for the questions. I'll start with your first question around our revenue drivers and revenue line. Now as we look quarter-on-quarter, there are a few key revenue drivers we focus on. The first is wherever we see an opportunity for what we would like to call organic growth. A classic example is typically in the last quarter of this year we have what we call a tax loan season in a couple of our markets. Here, we see organic growth in demand for personal loans. That's a real good opportunity for us to attract demand and convert that demand, as and when people do come to our platform looking for this product. The second thing is we typically see in the last couple of quarters, especially around our banking acquisitions, a beautiful sort of scale-up of the budget from many of our providers. As you'll appreciate, this is also close to the annual targets. The majority of that budget allocation typically comes to us. We are, for many of the providers, one of the largest digital partners. So we do get the first port of call to use that budget. That's where we have a lot of marketing campaigns, especially in the last couple of quarters. Insurance, now we've been really thoughtfully building the insurance vertical. If you take a look at travel insurance, for example, today you can buy travel insurance on our platform in Singapore and Hong Kong. We've been really optimizing our UX and UI, and that really sets it up beautifully as we head towards the last quarter of the year, where again, there's a seasonality spike of travel, especially in the markets we operate. These sorts of investments we've made in our capabilities allow us to attract and convert demand. Creatory again is a very new business for us. We don't really try and set targets for Creatory because it's such a really interesting space we are operating in, and we are really learning how to capture more of the space across all our markets. There are some interesting plans and things we're going to also invest in to try and expand that B2B brand. It's very unique and innovative. It doesn't exist in our industry that we operate in. So the beauty of our business is we are multi-market. We are multi-vertical, and we have different core businesses that we can scale. A lot of this will also start to demonstrate returns on the investments we've made, especially in the first two quarters this year. Those were deliberate investments we made in acquisition. Today, we have about 6.5 million registered members as of June 30th. This now allows us to also cross-sell and up-sell to our user base. We've made investments in data and technology infrastructure, and now we're going to be launching a mobile app. We believe we have the drivers now to expand our revenue, and we'll be very focused on execution against these. Now, I'll go on to your second question, which was around the recent announcement of an acquisition, and what synergies we were expecting. Firstly, it's important to note that we are the largest aggregator platform in the region, and we have an unmatched footprint across four key markets. No other aggregator operates at our scale within these markets. Since 2015, we've seen numerous aggregators enter and exit the region. We are the only one from that early batch to have successfully gone public. We strongly believe the market is ripe for consolidation, as Hao mentioned, and we see ourselves as a key player in helping drive that process rather than merely engaging in direct competition. Having said that, we are well-capitalized and ready to compete, but we prioritize partnerships and collaboration first over competition. The recent transaction in Malaysia is a prime example of that, where we transitioned from being an operator to an investor in a competitor to facilitate market consolidation. A third thing to note is we had a highly successful IPO backed by top investors, and we've raised substantial capital as a result. While we are happy to see this capital generate returns, we've received numerous inbound inquiries regarding our M&A strategy. Consequently, as a management team and a board, we are now actively exploring acquisition opportunities. We have a proven history of M&A. I mentioned in 2020, we acquired Seedly, a leading personal finance platform. Many considered Seedly to be our biggest competitor in Singapore. Post-acquisition, Seedly has continued to thrive as a brand, a testament to how we approach M&A with a focus on fostering growth, not just absorbing competition. There are several similar, smaller FinTech platforms that could be of interest to us for potential mergers. Our approach has centered around a buy-over-build strategy, evident in how we scale key areas of our business, especially in insurance and Creatory. As for synergies, any acquisition target will ideally provide value across multiple dimensions: data integration, technology enhancements, revenue expansion, and operational efficiencies through consolidation. This is the strategic framework we use, allowing us to fully leverage the benefits of any acquisition and generate significant growth. Regarding your final question about how we are leveraging AI and the app and the Creatory platform, AI is an exciting space for us. We have already started leveraging AI and automation to drive efficiencies across every aspect of our business, from content generation to customer service. This approach is helping us achieve operational leverage by reducing costs while at the same time scaling our operations. AI is a crucial tool for us, allowing for more personalized customer journeys, automating our workflows, and optimizing our decision-making processes. All of this contributes to a higher conversion rate for approved applications. Regarding the app, the ShopHero app, after our initial soft launch, we are now transitioning into a fully functional mobile app with an integrated marketplace. We expect to roll this out in the next quarter. This will be our primary mobile app play, enhancing the end-to-end user journey with an improved UX and UI. We are very focused on traffic utilization, and this will allow us to drive that while also focusing on monetizable metrics, such as conversion rates and completed applications. Through this, we aim to significantly improve our performance and engagement. Coming to Creatory, as I mentioned, it's still in the early stages. We're steadily adding content creators and strategic partners. The addressable market is vast, and we see several exciting opportunities for growth. Creatory offers a unique platform that combines a content play, a distribution play, a traffic play, and a conversion play. We are really confident in its potential and excited about the possibilities as we continue to scale this B2B brand. In terms of KPIs to watch, as I mentioned, we're now pivoting and focusing on application conversion rates, traffic engagement and utilization, and user retention metrics across our platforms. These metrics would be the key indicators of how well we drive operational efficiency and improve our monetization. Thank you again for the question.

Operator, Operator

Thank you. And our next question coming from the line of Nirgunan Tiruchelvam with Aletheia Capital. Your line is open.

Nirgunan Tiruchelvam, Analyst

Thank you for giving me this opportunity to pose a question at this forum. First of all, I would like to congratulate the management on a phenomenal set of results and the eloquent manner in which the CEO has presented them is very encouraging. In terms of the questions, what would your guidance be for the FCF burn in FY 2024?

Hao Qian, CFO

Okay, let me address this question, please. So we are not giving specific guidance for free cash burn in FY 2024. However, we expect the EBITDA loss to be reduced to between $5 million to $6 million next quarter, driven by key actions to optimize market investment, streamline operations, and focus on efficiency optimization. We expect to reach adjusted EBITDA profitability on a monthly basis by year-end, as we have been very focused on efficiency and optimizing the return on our growth investments.

Nirgunan Tiruchelvam, Analyst

I see. My next question is about the markets that would drive the revenue growth in the next two years. Can you identify them, please?

Rohith Murthy, CEO

Sure, let me take that. We anticipate sustained growth from our core markets, with Singapore and Hong Kong remaining our largest revenue drivers. In these markets, insurance will be our fastest-growing vertical. As we roll out several key initiatives, I mentioned the revamped mobile app, an enhanced membership feature, a new car insurance vertical, a refreshed site architecture, and an improved UX and UI. All these upgrades will elevate the customer experience and drive deeper engagement. Beyond Singapore and Hong Kong, we are seeing strong growth in the Philippines, where the market is again expanding beautifully. We have also strategic plans in place for Taiwan, positioning us for future growth in the region. I mentioned Creatory, our B2B business, which is relatively young but has already demonstrated impressive growth and unique brand with incredible growth potential that I would like to believe is ahead of its time. Meanwhile, our insurance engine is just getting started. We are constantly enhancing our platform and user journeys. All of this, we believe, will solidify our position in the market but also fuel long-term growth across all our business sectors.

Nirgunan Tiruchelvam, Analyst

Thank you.

Operator, Operator

Thank you. And I see no further questions in the Q&A queue at this time. I will now turn the call back over to Mr. Rohith Murthy for any closing remarks.

Rohith Murthy, CEO

Thank you again all for your time, and I look forward to sharing our next set of results. For those back in Asia, again wishing you all a very happy Mid-Autumn Festival.