Thank you for standing by, and welcome to the High Pages Group Holdings Limited Fiscal Year 2021 Investor Briefing. All participants are in a listen only mode. There will be a presentation followed by a question and answer I would now like to hand the call over to Mr. Robbie Sharon Zipser, Co Founder and CEO. Please go ahead, sir.
Good morning, everyone. Thank you for taking the time to listen to the High Pages FY 'twenty one results. High Pages is Australia's largest online tradie marketplace and SaaS provider, creating effortless solutions that help tradies streamline and grow their businesses and delight their customers. We effectively connect users with up to 3 trusted vetted trades at speed. For tradies, we provide them with the type of work when and where they want it.
Additionally, we provide tradies with tools to help manage and run their businesses. For our agenda today, we have a lot to cover. We will first provide an overview of our results. We will then share more data on the industry and the size of the opportunity. Moving then to our strategy, where we have something very special for you to see.
Melissa will provide a financial and operational update, closing with an outlook statement and time for Q and A. Let's start with the overview and opportunity. Beginning with the FY 'twenty one highlights. We had a really strong performance in all our key metrics. Proudly, we were awarded Australia's best place to work ranked 2.
We continued to roll out our product enhancements and move further to subscription only, increased jobs from repeat consumers and unpaid channels, successfully launched Tradicore in June, our field service software. We were well positioned to benefit from the buoyant home improvement market and we are actively pursuing job channel expansion and ancillary revenue opportunities. Now let's take a look at the FY 'twenty one financial metrics overview. We delivered $5,200,000 MRR, up 27%, $52,700,000 of recurring revenue up 25 percent and $55,800,000 total revenue up 19%. We are generating 85% gross margin.
We beat our prospectus and reforecast guidance and delivered $11,700,000 EBITDA, up 91% and achieved $1,200,000 NPAT. Our key drivers are all improving. Subscription tradies of 31,000 up 12% and ARPU significantly up landing on $15.36 up 29% and finally job volumes of $1,530,000 up 12%. High Pages is Australia's largest tradie platform. It is a huge addressable market, which we will explore more deeply in the coming slides.
The platform is evolving and providing SaaS solutions for tradies, which will enable it to offer additional ancillary services to the category. We are subscription only with 94% of our revenue now recurring. We have strong brand awareness sitting on 55% and over 3,500,000 users have posted a job on High Pages. Let's look at our addressable market. We have recently expanded our research coverage into the tradie economy and can confirm that the total addressable market in Australia is $110,000,000,000 of which High Pages' GMV is calculated to be $2,600,000,000 So whilst we are the largest in Australia, our percentage of the TAM is 2.4%.
Further, we know that the advertising spend of the category is circa 1,000,000,000 and we have over 5% share of the wallet. And with our 34,500 tradie customers, we have 13% share of the 257,000 trade businesses in Australia. This tells us we have some massive opportunities and growth ahead of us. Now let's take a look at the strategy for High Pages. But I wanted to spend a bit of time talking about purpose and vision before I go too deep into strategy.
I want to communicate clearly how we are going to win the trade economy and it's important to understand High Pages' purpose and vision. For our purpose, High Pages is transforming the trade industry, building better lives for everyone. Our vision, to be the most trusted partner in the trade industry. Let's look at the strategic opportunity. As I said earlier, we have expanded on our work to continually define the on demand trading economy, And we are pleased to show a revised what we call the ecosystem slide where we have identified that the addressable market is over $110,000,000,000 We now are including commercial trading work into the sector and we've also seen an increase in demand in the category, which is reflected by the additional growth in the TAM.
We've also quantified the cost structure of the tradie category and we can clearly see that tradies spend a lot of money on recurring running their business. It's a huge $97,000,000,000 Again, as we can see, there are so many meaningful opportunities in the category. And in the market, we are just beginning to explore and enter those opportunities. On Slide 12, the value of the TAM is explained. As I said, we've expanded our knowledge of what the market is spending in different channels.
We can clearly see what is spent in the market on all of the segments. We also can see the tradie business spend. We've gone deeper to understand what the tradie economy is spending on the inputs needed to run their businesses. We know there is a lot of opportunity for us to participate in these ancillary products and services. The key for our strategy will be on how we can seamlessly integrate in the customer journey that will allow us to fulfill our purpose and vision.
I'd now like to talk about the strategy execution. I wanted to share with you on how we plan on executing the plan. But first, it's good to reflect on what we've achieved over the past 2 years. As you can see in FY 2020 2021, we invested heavily in our marketing, improving our brand awareness. We rolled out in November of 2019 our subscription only product and we focused on achieving profitability and worked on our cost structure and unit economics of the business.
Additionally, we were able to launch Tradicore, our field service software technology in June of this year. We have executed on the plan really well, and I'm super proud of the results we are presenting to you today. FY 2022 to 2023 is about continuing what we have already executed and we are doing so much more. We are enhancing our product experience for both the tradie and the consumer with our planned rollout of payment solutions and expanding our customer targeting for medium to larger businesses that support the industry. Further, we are building all the data capabilities that our investments are generating to further enhance and create new products that we believe will be enjoyed by our customers.
It's important to note that we will invest in technology or inorganic opportunities that allow us to accelerate the strategic plan. To make this come to life, we have put something together very special for you today. It's our product vision. We will take you on 2 journeys, one for the consumer and then one for the tradie. I hope you enjoy what we think the future will look like and how High Pages will be integrated as part of our lives, transforming the trade industry, building better lives for everyone.
Some days can be challenging.
Every now and then, we all need a helping hand.
Hey. Hi, Pages. Find someone to fix a hot water problem.
And with no surprises, it's easy to say yes because trust and communication go hand in hand.
When it comes to peace of mind, it should come effortlessly.
And when inspiration knocks, consider, stream, explore, and feel free to follow through smoothly and with confidence
because all we want is a happy
home. Hi, Pages.
Some might, you can always count on. But it's good to count on jobs too. And if the flow lag, we'll help you keep the momentum
and look after you. Because all we want
Thank you. I will now hand over to Melissa for the financial and operational update. Thanks, Robbie. Before I go through our FY 2021 results, I would first like to recap on the transformation of our financial profile. Hypages is a technology business delivering strong revenue growth, sustainable profit and positive operating cash flow.
Our financial profile clearly illustrates our proven unit economics and operational leverage. On slide 18, I will cover some of our key financial highlights. Strong MRR growth of 27%, driving our reoccurring revenue growth of 25%. Total tradie ARPU growth of 29% as we attract higher value subscribers. Total revenue growth of 19% being driven by the business model transformation.
Remember by the end of the financial year, migration of the remaining portion of our transactional customers will be complete. We now have 90% of customers on our subscription product. Strong operational leverage with gross margin of 85% with marketing efficiencies driving our operational leverage. Proven unit economics with strong operating cash flow and an LTV versus CAC ratio for FY 2021 of 9.4 times. Positive profitability metrics with EBITDA of $11,700,000 and with EBITDA margin expanding to 21%.
Strong EBITDA to operating cash flow conversion at 109% and positive NPAT of $1,200,000 ahead of upgrade. We have a strong balance sheet with cash of just under $33,000,000 no debt and the capital structure to support growth opportunities. In FY 2021, we delivered strong performance across all our key metrics. We achieved upgraded revenue, EBITDA and NPAT, MRR growth of 27% as mentioned, total revenue growth of 19% with exit growth of 20% in Q4. 94% of revenue is now reoccurring.
Our strong growth has been driven by subscription trade is up 12% and total trade ARPU up 29%. Gross margin of 85 percent and EBITDA of $11,700,000 up from $6,100,000 in prior year and a healthy margin of 21% after investing in growth. If you remember from our upgrade announcement, we made the decision to reinvest our cost savings in H1 in particular into brand, marketing and technology in H2 to further drive growth. We believe we can continue to deliver strong revenue growth and profitability. Over the next few slides, I would like to run through our key drivers, which is really important so you can see how the changes we have made in our business model and strategic focus is delivering strong growth across all our key revenue and profitability metrics.
We have delivered strong MRR growth of 27% as more tradies subscribe, join our platform at higher starting price points and our existing subscribers ascend to higher price points. We can clearly see the benefits of the flywheel effect of the double sided marketplace, which I'll expand upon in a few slides' time. Our MRR for June was slightly behind the upgrade forecast by 1%. There was a soft impact of COVID in Q4. However, as we have seen through prior lockdowns, our subscription model has been very resilient with a strong rebound once we come out of COVID.
And Robbie will talk through this a bit later. Moving on to ARPU, I would like to spend a bit of time on this slide that is really important to explain a lot of what we have been doing and why. Our move to a subscription only product has driven the ARPU growth of 29%. By this I mean in November of 2019 we moved to a subscription only product offering and no longer sell a transactional product which had a less engaged customer base, a much lower ARPU and a high variable and transactional component to its revenue stream. Under our subscription product, tradies sign up for either 12 or 6 months and pay monthly and they get a certain amount of lead credit that allows them to claim job leads that are priced by our algorithm based on the size, type and region of the job.
It is a much better product for our tradies and leads to substantially better economics for high pages. When we move to the subscription only product offering, we conducted customer research and introduced new and improved features that our tradies requested such as the ability to pause their contracts and the ability to roll forward unutilized lead credits for up to 3 months including on renewal. This provides more flexibility for our customer and has also been a really key contributor to helping us support tradies throughout COVID. As you can see from our package offerings, we offer packages for all size businesses and it is really important when a trader comes onto our platform that we put them on the right package to start with. Our sales team does a needs basis analysis to determine how many jobs they need from our platform per month and what revenue they need to make to determine which package they should be on so they get the right experience from the start.
As you can see, we have packages starting as low as $69 a month up to premium plus at $5.99 and above. This is a catch all package and we do have premium account holders paying as much as $4,000 a month. At our last update, we talked about our strategy of targeting more medium to larger sized customers. This is going really well and under what we call our Hunter program over Q4 these subscribers are joining our platform at yields of $600 a month. All of these changes being the move to subscription only, the improved subscription product features and our focus on high yielding customers with better retention metrics have all contributed to the strong ARPU growth we have delivered.
The following chart shows that strong ARPU growth. On to slide 23, here you can see the nice growth in our subscription tradie base with our brand awareness also driving increased subscriptions. In Q4 we launched a successful brand campaign by radio and digital channels targeting tradies specifically. This is really the first time we did a tradie targeted campaign. It was really successful and resulted in an increase in registrations and brand awareness and we will be in market again soon.
The improvements that we have made to our product offering and the efficiencies we have delivered in our cost base is really evident in our improved unit economics where our lifetime value versus CAC ratio has increased from 3.8 times in FY 2019 to 9.4 times in FY 2021. This has been driven by an increase in our ARPU of 60% and a 40% reduction on CAC. As you can see here on slide 25, strong growth in subscription tradies now representing 90% of total tradies combined with strong growth in users which grew to $3,500,000 in FY 2021. It's the flywheel effect you get from a healthy and balanced marketplace. This flywheel effect is what we want to see as it means our platform is functioning optimally.
On the next slide, we have a subscription bridge and I would like to talk through retention. As you can see from the subscription bridge, our revenue growth has been driven by the strong demand for new subscribers coming onto our platform and net extensions as tradies move up the higher price tier packages. In terms of retention, our counter churn at 3.5% per month was in line with upgrade forecast and better than prospectus forecast at 3.8%. Please also remember that our reported churn is inflated as 10% to 15% of new tradies are returning customers. Over FY 2021, we have been successfully targeting higher value tradies with inherently lower churn.
Our average price point for all subscription tradies is now $161 per month and our medium to larger sized customers are joining the platform at yields of $600 per month. Through moving up the price curve and launching Tradicore solutions, we expect to drive further improvements in retention and customer stickiness. You may recall that Tradicore's on price packages of above $1.29 per month have monthly churn of 2.6 percent and tradies on packages of above $2.99 a month have monthly churn of 2.2%. In terms of our industry, there are 257,000 tradies and each year approximately there are 10% to 15% new entrants being around 25,000 to 30,000 per year and approximately 10% being 25,000 leave the industry. New exits are lower than new entrants sorry, exits are lower than entrants.
Whilst we don't think it would be realistic to be able to get down to 10%, we believe that with all the initiatives and our strategic focus, we will be able to continue to make meaningful improvements in retention. Moving on to operational leverage on slide 27. As you can see the operational leverage really is coming through as a result of efficiencies across sales, service and marketing following automation and efficiencies implemented in FY 2020 through our efficiencies for growth program. Marketing efficiencies have made a significant as a result of reduced reliance on stem spend due to the shift from pay to unpaid channel and increase in customer and consumer brand awareness. We have invested in our technology team to drive growth and in FY 2021, 76% of technology development costs were capitalized and amortized over 3 years.
In terms of brand awareness, consumer brand awareness remains strong at 55% and our brand research confirmed we were market leader for top of mind awareness at 20% versus our nearest competitor at 12%. As I mentioned before, we launched a successful brand campaign across radio and digital which increased trading customer brand awareness from 35% to 49%. And we are currently live on the block as a lead sponsor. Jobs from paid channels now only represent 23% of total jobs, driving the marketing efficiencies I talked through. The customer trust that we have built and increased brand awareness is really evident in growth from jobs in repeat customers up 22% and jobs from unpaid channels up 25%.
Jobs from repeat consumers are now 64% and 77% of jobs are now from organic channels. Bringing this together in our FY 2021 pro form a financial summary, I would just like to reiterate our strong growth in FY 2021 with reoccurring revenue growth of 25% and 94% of our revenue now reoccurring. Gross margins of 85%, up from 79% last year and total operating expenses 9% lower than PCP due to sales and marketing efficiencies net of reinvestment in growth. EBITDA of $11,700,000 up from $6,100,000 in FY 2020 and EBITDA margin of 21%, up from 13% and a positive NPAT of 1,200,000 dollars versus a loss in prior year of $4,200,000 Just quickly on our cash flow, strong pro form a operating cash flow of $12,700,000 being an EBITDA to operating cash flow conversion of 109%. And on the next slide with regard to our balance sheet, a strong equity position of $36,000,000 with an increase of $36,000,000 driven by an increase of cash of $22,000,000 and a reduction in total liabilities of $14,000,000 due to the repayment of borrowings and IPO leaving High Pages with no debt.
We have a strong cash balance of $30,000,000 providing us the financial flexibility to execute the strategic plan for growth both organically and inorganically. On slide 33, we have provided a reconciliation from statutory EBITDA and NPAT to pro form a which is really just adjusting for one off IPO costs and removing non recurring interest on debt retired on IPO. I will now hand back to Robbie and he will talk through the initiatives we have in place during COVID and provide an outlook for the business.
Thank you,
Mel. I will like to talk about our COVID response and actions. So we are seeing some near term volatility. However, we know that there is significant medium to long term upside opportunities. We are doing our best to support our trading customers with short term subscription discounts, discount to our lead pricing and temporary pausing of contracts.
We're introducing a COVID safe badge for our fully vaccinated tradies for the safety of our users. We see a moderate impact on our revenue growth rate expected for the duration of lockdown. Q4 was marginal. Our subscription model has demonstrated to be a highly resilient business model. And in previous lockdowns, we have seen a significant bounce back through after the lockdowns.
The Australian home improvement market remains very buoyant. Long term opportunities are as attractive as ever. We are seeing a number of factors driving this, including increased house prices with low inventory in the market and low interest rates, means people are improving their homes more. Structural changes in the way we work and live means we are spending more and more time in our homes and so we are improving our homes even more. And lastly, online adoption has seen an acceleration particularly in the last year and a half and we expect that to continue.
We expect a strong rebound when lockdown eases as we have experienced before. If I look at our outlook, we will continue to successfully navigate the impacts of COVID-nineteen and support our tradie customers. We will migrate the remainder of transactional tradies onto subscription products by the end of FY 'twenty two, evolve to a SaaS model continuing to expand our tradie core functionality, expand into new job channels and open ancillary revenue opportunities and pursue growth opportunities to strengthen our market leadership and win the tradie economy. I'll now open it up to Q and A.
Thank And the first question will come from Sophie Karin with Goldman Sachs. Please go ahead.
Hi, Robbie and Melissa. Thanks for taking my questions. Just a couple from me. Maybe first, just on the current lockdown conditions. Can you provide
a bit more color on the proportion
of the tradie base that you're seeing impacted by the lockdown? And then also maybe what you're seeing in terms of job listings?
Yes, sure. Thanks, Sophie. I'll start with the job data. There's definitely some suppression in terms of job volume. We're seeing around the 19% to 20% reduction in the job volumes that are coming through across Australia at the moment.
But that's bounced back really, really aggressively once lockdown restrictions are based. We know that from our experience in the past, particularly in sort of the key states of New South Wales and Victoria, where that's where the restrictions are fluctuating and obviously different LGAs have different restrictions. In terms of the tradies that are impacted, the LGIs that are restricted do have a few 1,000 trade businesses restricted for trade there right now. But again, we're doing a lot of stuff to support them as we talked about in the presentation to ease some of their pain. And as I said before, once the restrictions start to ease and we assume when the vaccination rates reach a certain level that the traders get really active and people feel more comfortable and the volumes return.
It's also sorry, Sophie, it's also just important to remember we're not a transactional model. So job volume doesn't directly impact our revenue. And in terms of the business, we were seeing continued momentum and growth like we've talked about with our Q4 results and we just expect this to have a moderate impact whilst lockdown is occurring. But once we come out of lockdown, we've seen really strong rebounds and we expect that to continue to happen in this lockdown.
Great. And then maybe just following on from that, just in terms of new tradies sort of engaging with you, are you sort of building a pipeline of tradies at the moment? Or do you think there will also be an impact on new tradie growth coming through?
So with regards to the tradie registration volumes, we're certainly still receiving trade e registrations because different states have different restrictions. New South Wales particularly was impacted when there was a trade e restriction for a 2 week period. So volumes are not 100% where we want them to be. However, as we saw again in the past, as soon as the restrictions are eased, trading registration volumes go back to in line with expectations. We also will move some of our trading marketing and targeted work that we did late last year in the last quarter where we saw a big jump in trading brand awareness to drive more trading registrations when restrictions ease.
We're doing a lot of communication with our customer base as well just around helping them get their pipeline ready for when COVID restrictions are eased and we'll be also in market from a marketing perspective as well.
Excellent. And then just on the churn, I mean it's good to see that that's coming down. Can you talk about your expectations into FY 2022? Do you think that's still going to be a bit elevated as you complete the shift to subscription? And then maybe post that shift where you see churn coming down to?
Yes. So we don't see churn being elevated as we move and continue the transition to subscription. We've been doing that for a couple of years now and we haven't seen our subscription churn go up as a result of that. With COVID, we're seeing a slight increase in our churn levels. We also have a number of initiatives in place to help our customers through this process that keeps them on the platform.
And I mentioned that before like with the new features that we introduced giving tradies the ability to pause their contract That's been really helpful in helping tradies through this time. And we're also offering them things like 50% of current month invoice. So that's just a current initiative that only impacts the current month revenue. It doesn't impact our reoccurring revenue. So we're continuing with those initiatives to help our customer base throughout the period and we'll do that throughout the lockdown period.
But then when we come out of that, we expect the metrics to go back to normalized levels of metrics. And with regard to churn in particular, as I mentioned, as we're focusing on the higher value customers that have better retention metrics, we still believe over time that we'll continue to improve our retention and our churn levels once that flows through. The benefits of Tradicore as well are really evident where we provide Tradies the tool to manage their whole entire business more effectively and create the stickiness to our platform as well.
And then just one more from me. Just looking at that roadmap in terms of moving into adjacencies, can you talk a little bit more about the strategy to move into payments and financial services? I mean, what's this offering going to look like? And what level of investment is involved? And then maybe if you're sort of looking at doing this organically or through M and A?
Great. Yes, I'll take that. So in regards to the adjacencies, our priorities for FY 2022 is to roll out a comprehensive payment solution. The payment solution will be made available in the High Pages platform and also Tradicore platform. The solution will be a little bit different in that it doesn't just allow for a payment for the work that's generated by High Pages.
The intention for both products is to allow for payment for all work that the trades do. So it's a proper payment full blown payment solution. The solution is funded internally. We have our dedicated technology cross functional teams that are working on executing and delivering on that solution. So that's fully funded within our forecast and budgets.
We aren't looking for that particular aspect of our solution. We probably will partner with providers in the market, but we wouldn't be looking at an inorganic opportunity for that particular integration. But for other adjacencies in the future, we would definitely explore those things depending on shareholder value creation and whether the synergies work.
Great. That's all for me. Thank you.
Our next question will come from Johnny Quinn with EMP. Please go ahead.
Hey guys, thanks for taking my questions. Just 3 for me. The first one is, we will be seeing a step up in ARPU next year. So I think in the presentation you mentioned the average ARPU of $161 a month. So that translates to roughly $1900.
Is that how we should think about ARPU next year?
So we're not giving exact guidance on ARPU, but we would expect ongoing growth in our ARPU for the reasons that I've mentioned like the continued migration to the subscription product, the improved features that we've made on the subscription product and the fact that we're bringing on tradies at a higher price point to start with. So we do see we have an expected ongoing level of growth on the subscription product.
Okay, great. Thanks. And then the second one, can you talk a little bit more about the commercial opportunity? Are you doing much work here already? And would this be in the form of partnerships as well?
Yes. So we would be looking at partnerships in the commercial opportunity and any potential inorganic opportunities that allow us to tap into that. So we're always looking at things in that space. And as things develop, we'll obviously communicate them to the market.
Okay. Thanks. And then the last one was just on Tradicore and the user uptake versus your expectations so far and any feedback as well?
So we're still not fully commercializing Tradicore. We are really pushing hard to get adoption of users of the product. And everything so far is running to plan. And what I can say is we have been warming up the Hypages database for many months now about Tradicore. And we anticipate that we will start to put on some significant volumes onto Tradicore and using and adopting the solution over the coming months.
Okay. Thank you very much. Very helpful.