PropTech Group (ASX:PTG) discusses Q3 FY22 results

PropTech Group Limited (ASX:PTG) Managing Director and Group CEO Joe Hanna discusses drivers behind PropTech’s results, providing an update on the company’s growth strategies. 

Lauren Evans: Hi. This is Lauren Evans for the Finance News Network. PropTech Group (ASX:PTG) provides market-leading software to real estate agencies to streamline and automate operations. Here to talk to us today is Chief Executive Officer and Managing Director of PropTech Group Joe Hanna. Joe, welcome back to FNN. It’s nice to see you again.

Joe Hanna: Hi, Lauren. Thanks for having me again.

Lauren Evans: Firstly, your third quarter results showed growth of 69 per cent in recurring cash receipts and a 56 per cent growth in annualised recurring revenue. What were the drivers to these impressive results?

Joe Hanna: Thanks. We’ve had another great quarter in the last Q3 of this year and, as you mentioned, solid growth on all the key metrics, financial metrics. The real driver for that has been an increase in the number of unique accounts that we’ve had, so number of customers using at least one PropTech Group product, up 26 per cent year on year. And that’s had an impact as well on the ARPA, average revenue per agency, up about 30 per cent. So, today we have about 42 per cent of real estate agency offices by number of office in Australia and New Zealand using at least one PropTech Group product, paying more than they’ve ever paid before.

Lauren Evans: Your core business is in CRMs for real estate agencies. How stable is this core business and how much is it growing?

Joe Hanna: Well, it’s very stable. We’ve managed to increase the average tenure for our customers to now over eight years. I think when we listed the business back in 2020, it was about 6.5 years. So we have eight years of opportunity to continue to service our customers and upsell them and cross-sell them. And I’ve mentioned earlier that we’ve increased the number of unique accounts up 26 per cent year on year to now 42 per cent market share. So, there’s still significant growth opportunity both in the number of customers and the number of products per customer.

Lauren Evans: Now, besides your core CRM business, I see that the second part of your strategy is to market add-on solutions to your customers. You say the addressable market for add-ons is nearly six times as large as for your core. How effective has PropTech been at upselling add-ons to your customers?

Joe Hanna: Look, we’ve been really effective, and I think this is a core part of our growth. It’s important to note that in Australia and New Zealand real estate agencies spend on average about $60,000 a year on PropTech SaaS subscriptions and related services. Now, that’s typically spread over across between 10, 20, sometimes even 30 different PropTech providers. What PropTech Group aims to do is consolidate those vendors into one. And so far we’ve done a good job. When we listed the business a year ago, we were selling effectively one product per customer. We’ve now increased that by 80 per cent, selling 1.9 products per customer out of a possible four to five products that we can sell. We release a new product almost monthly, and our aim is to capture as many of those 10 to 20 as we possibly can and in doing so capture a much larger portion of that $620 million spend per annum.

Lauren Evans: Your strategy also highlights a $10 billion opportunity to integrate ancillary services like mortgages, insurance and conveyancing. Can you give us a high-level explanation of how PropTech aims to do that?

Joe Hanna: Absolutely. Look, again with this, it’s important to note that the real estate industry today is already generating over $10 billion in referral and commission revenue for ancillary products and services — namely, as you mentioned, home loans, insurances, conveyances and utilities connections. But it’s happening in a very fragmented, disjointed way, relying on the real estate agent’s memory or a disjointed non-digital process for generating those leads or that user experience. So, what PropTech Group aims to do is really inject ourselves into the process at a time that it’s most relevant. And if you think about your own experience of looking for a house to buy or to rent, you typically will go to a portal, so or a Domain to search for that house. But the moment you click on the “Inquire Now” button or “Contact Agent”, every communication, every email open, every phone call, every open for inspection, indeed if you buy the property, it’s all managed by PropTech Group’s software on behalf of the agents. During that process system, good will has been established between you, in this instance, the purchaser, and the agent. At the time that it’s most relevant — ie, the time that you sign a contract — that’s when you absolutely need a home loan, absolutely need a conveyancer, and absolutely need insurance. So, PropTech Group will start to inject ourselves in the process by making it easier for our consumers and our customers, the agents, to provide those services in a way that’s fully digital and really point-in-time. By injecting ourselves into the process where it’s most relevant, we can make the whole experience better for consumers and a lot easier for our customers, the agents.

Lauren Evans: Before we wrap up today, Joe, what can investors look forward to in the coming months?

Joe Hanna: Look, more of the same, to be honest. We’re expecting the same growth rates to continue. We’re certainly expecting to finish the year strong. And as we look beyond the next few months, we certainly will start to see the impact of some of these revenue-generating opportunities and R&D projects that we have in the pipeline. So, in summary, more of the same. We should finish the year with a solid result.

Lauren Evans: Joe Hanna, thanks for your time today, all the best, and I look forward to hearing from you again soon.

Joe Hanna: Thank you very much, Lauren. Appreciate your time.