Thank you for standing by, and welcome to the REA Group Limited Q1 financial results conference call. All participants are in listen only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Mr. Graham Curtin, General Manager of Group Reporting. Please go ahead.
Good morning, everyone. Thanks for joining us to discuss REA Group's first quarter results ending 30 September 2021. Before we commence, I'd like to acknowledge the traditional owners of the land on which we are hosting our meeting in Melbourne, the Wurundjeri people of the Kulin Nation, and pay our respects to the elders past and present. As you know, our quarterly numbers are top line results, so we're restricted by the amount of detail we can provide. This morning, our CEO, Owen Wilson, will provide a brief business update. Then Janelle Hopkins, REA CFO, will talk to the financial results for the quarter. Following this, as always, we'll be happy to take any questions you may have. For now, I'll hand over to Owen.
Thanks, Graham, and good morning everyone. REA Group has delivered an exceptional result and made an excellent start to the new financial year. The result is particularly impressive given the long lockdowns in Sydney and Melbourne. Revenue for the three months ending 30 September was AUD 264 million, an increase of 35%, and EBITDA for corporations, including associates, was AUD 158 million, an increase of 25%. Excluding acquisitions, revenue growth was 22% and EBITDA growth was 24%. The strength of the Australian residential property market was clearly on show during the quarter, despite the lockdowns across the East Coast. After modest year-on-year declines in July, national listings increased 11% for the quarter. Sydney down 7% and Melbourne up 79%. Melbourne's growth rate reflects the impact of the lockdown in the prior period.
As we enter the new financial year, our core strategic objectives remain consistent, providing our customers with access to the largest and most engaged audience of property seekers, delivering unparalleled customer value, providing the richest content, data and insights to empower our customers and consumers, and creating the next generation of property related marketplaces. Once again, Australians demonstrated their love of property with a growing number of people visiting realestate.com.au for all their property needs. We received 129 million average monthly visits, up 16% year-over-year. This is 3.3 times more visits than our nearest competitor. Our app also performed strongly, with average monthly launches of over 58 million, a 17% year-over-year increase. We have an extremely loyal cohort of property seekers.
On average, 12.6 million people visit our site each month, with a record in July of 7.3 million people choosing to use realestate.com.au exclusively. Added to this, our audience has extremely high intent, underpinning incredible growth in buyer inquiries delivered to our customers, up 61% year-on-year. Our commitment to delivering highly personalized experiences resulted in a number of consumer highlights during the quarter. Our goal is to convert Australia's largest audience of property seekers and owners into realestate.com.au members. We do this by delivering the right experience at the right time, which in turn drives lasting relationships with our consumers. realestate.com.au's membership base experienced strong growth, increasing to over 30% year-on-year. Pleasingly, we also saw a 23% year-on-year increase in the engagement levels of our members accessing features such as our property owner dashboard.
Using the powerful combination of consumer behavior data, property supply data, and confidence calculators, our property owner dashboard is assisting owners in making decisions related to selling, renting, renovating or refinancing their property. Throughout the quarter, we averaged over 200,000 owners engaging with the property owner dashboard each month, driving a growing number of leads to our customers and our financial services business. The number of homeowners tracking properties also continued to grow during the quarter, with total owner tracks reaching a new record in September, increasing 51% year-on-year. Looking at our rent segment, realestate.com.au remains Australia's number one place to rent. Our focus on building a next generation rental marketplace is centered around seamlessly connecting property managers, tenants and property owners. We just delivered a number of innovations during the quarter. Our new centralized rental application offering delivers a faster, more efficient process.
In July, we released utility connection service for renters within the Ignite platform, and we launched a new rental inspection feature, allowing agencies to generate QR codes. This allows consumers to easily verify their attendance at a property inspection and improves the overall ease and efficiency for property managers to process applications. Turning to our customers, one of the biggest drivers of our strong results was the record penetration of our top tier advertising products in both residential and commercial, along with continued growth in our add-on products such as Audience Maximiser, eBrochure, and Property Showcase. This is a testament to the fantastic effort by our customer team in 2024 and 2021, and the exceptional value these products deliver to our customers. Our new Connect offering, which helps agents to attract, nurture, and convert seller leads, continues to resonate strongly with customers.
We saw a 200% increase in agent sign-ups to Connect on the prior quarter, demonstrating the pace at which the industry is adopting digital solutions. Our financial services business had a pleasing quarter with revenue increases due to strong settlements growth. We also continued to grow the number of brokers across the Smartline and Mortgage Choice networks. In completing the Mortgage Choice acquisition, we've made excellent progress integrating the businesses, reaching a number of key integration milestones. In October, we announced that our combined broking business will operate under the Mortgage Choice brand. This will result in the Smartline brand phasing out following a transition period. The combined business will also transition to a single broking platform in 2022. Turning to our investment in India. During the quarter, we rebranded Elara Technologies to REA India.
India continues to rebound from the severe impacts of COVID experienced earlier this year. On the back of these conditions, REA India performed strongly. Record listing volumes on our flagship site, housing.com, were achieved in September, growing 53% year-on-year. Housing.com also delivered excellent audience growth for the quarter, with visits up 65% year-on-year. Janelle will talk about the results of our international investments in more detail. Turning broadly to market conditions. With COVID restrictions now lifted in Sydney and Melbourne, and clear roadmaps out of lockdown announced, things are returning to a more COVID normal state. On the policy front, we've seen APRA introduce total loan serviceability tests, but these changes will only impact the borrowing capacity of a small number of buyers. If further changes are made to address house price inflation, this could slow listing volumes.
The conditions are right for seller to list with confidence high and buyers remaining out in force. In October, we had our highest ever visits to realestate.com.au, reaching an incredible 145.5 million. We also had record buyer inquiries, increasing 49% year-on-year. National listings also grew strongly in October, increasing 16%. These excellent market conditions are underpinned by low interest rates and healthy bank liquidity. As Australia opens up, the return of foreign students and the resumption of immigration, coupled with the supportive lending environment, should see this positive momentum continue into 2022. I'd now like to hand over to Janelle to talk through the financial results.
Thanks, Owen, and good morning, everyone. REA has delivered a strong result. We pleasingly saw revenue growth in all of our end segments. We have provided group results in the ASX release for the first quarter and also growth rates excluding REA India and Mortgage Choice acquisitions. Revenue increased 35% to AUD 264 million. Operating expenses from core operations increased 49% to AUD 107 million, and the group delivered EBITDA, including the results from our associates of AUD 158 million, up 25%. Excluding acquisitions, group revenue increased 22%, and EBITDA, including associates, increased 24%. After a soft start which saw July national listings down 3%, the Australian residential property market again demonstrated its resilience during the quarter. Despite lockdowns in Sydney, Melbourne, and Canberra, national listings ended Q1 up 11%.
Sydney listings were down 7%, which is impressive given the whole quarter was spent in lockdown, and Melbourne listings were up 79%, assisted by a weak prior year comparable due to last year's lockdown. Australian residential revenue increased for the quarter, benefiting from increased depth and premium penetration, following a very strong recontracting effort from our sales force in the June quarter, listings growth, a contracted price rise on the first of July, and continued growth in add-on products. Turning to commercial and development, we were pleased to see growth in revenues despite the impact of Sydney and Melbourne lockdowns, with commercial revenues benefiting from a 13% like-for-like price rise and increased depth penetration. Development experienced a sharp decline in project commencements, down 37% year-on-year for Q1.
However, despite this, developer revenue increased in the quarter, assisted by strong project commencements during FY 2021 and extended project duration. Media, data, and other revenues were up during the quarter, with positive momentum in PropTrack and media revenues, partly offset by lower other revenues as COVID continues to impact realestate.com.au. Both our existing financial services and the Mortgage Choice businesses had a strong quarter, with operational revenue growth driven by record settlements and continuing momentum in broker recruitment. Integration of Mortgage Choice is going well, and whilst we have recognized some immediate synergy benefits, these are being reinvested to support integration. We are aiming for full integration to be completed by Q3 FY 2023. After a challenging second half of FY 2021 impacted by COVID, the Indian market has recovered well in the first quarter.
REA India experienced strong revenue growth driven by Housing.com's core business and additional growth driven from adjacent products such as Housing Edge. Core operating costs, excluding acquisitions, increased by 13% during the quarter. This partially reflects reduced operating costs in the prior period as we reacted to COVID and revenue uncertainty. However, it also reflects higher headcounts as a part of growth initiatives and the impact of the double pay rise due to the annual July 2020 remuneration review being deferred to December 2020, and upward pressure on salaries in a tight labor market. The group's combined share of associates constituted AUD 1 million to EBITDA, down from AUD 3 million in the prior period. The year-on-year decline reflects a lower contribution from Move and losses from new investments.
Move continued to deliver strong revenue growth, up 30% year-on-year, with the traditional lead generation product benefiting from continued strong demand and improved sell-through and yield, and the referral model benefiting from higher average home values and transaction volumes. However, this growth was more than offset by planned reinvestment spending to drive long-term growth, including in areas such as marketing and employee-related costs. The reduction in contributions from associates also reflects the inclusion of equity accounted losses from PropertyGuru from the third of August, as well as losses from Simpology, Realtair and CampaignAgent. We would anticipate the contribution to Move in FY 2022 to be largely offset by continued equity accounted losses from these new associates as they invest for future growth. PropertyGuru plans to list on the New York Stock Exchange in Q2 or Q3 of FY 2022.
As a result, PropertyGuru is expected to incur a number of one-off costs, which will be reflected in the group's FY 2022 reported equity accounted results. Moving to current trading conditions. October national residential listings were up 15% year-on-year, with an increase in Melbourne of 20% and 21% in Sydney as these cities began to emerge from the lockdowns. Looking across the remainder of the year, we expect year-on-year growth rates to slow as we cycle very strong prior period listing comparatives, particularly in the second half. As Owen mentioned earlier, regulatory measures to slow house price inflation could impact listing volumes, as well as a temporary impact from a federal election expected in Q3 or Q4. The group is targeting positive operating jaws, excluding the impact of acquisitions.
Based on current market outlook and excluding the impact of REA India and Mortgage Choice, the group anticipates high single digit core operating profit growth. This reflects increased investment to deliver our strategic initiatives, combined with a tight labor market driving higher salary inflation. I'll pause there. Operator, we will now open for questions.
Your first question comes from Eric Choi with Barrenjoey. Please go ahead.
Good morning, guys, and cracking results, Owen and Janelle, since we're done. All my questions are just on digging into the strength of that underlying 22% revenue growth number. The first one, if I look at resi depth, Domain probably did 20% growth in the first quarter. Can I just confirm your resi depth growth is well north of that, like, back probably in the 25, maybe even 30 zone? And then second question, if I unpick that resi depth, price and volumes probably summed up to around 19%. So just wondering what drove the bulk of the delta. I know there was some deferral impacts in Q4, so maybe it was that, or was it depth in new products? And then just lastly, on the non-resi segments, it looked like they were really strong.
Obviously, FY 2020 and FY 2021 were sort of low points for media, commercial, and developer. I'm wondering if you can comment on how close we are back to those sort of first quarter FY 2019 levels of growth, which was sort of much stronger. Thanks.
Thanks, Eric. I'll take one and three, and Janelle can talk to the mix of growth across the price, volume and other factors. Bear in mind there are other products other than just in, you know, the core depth products in there. That's Janelle can talk to that. Look, in terms of resi depth, it's fair to say our growth is well north of that number that was reported by a competitor. We're pleased with that. We had, as I said in the speaker comments, our team did an incredible job of recontracting. We saw a huge uptick in our depth, particularly upgrading our product. In terms of non-resi segments, again, a fantastic job by the team, particularly in commercial with recontracting. That market is still pretty tough.
It hasn't recovered, so we're pleased with that. You would've seen, you know, our developer project commences being well down in the quarter. It is starting to recover as we come out of the lockdowns and the number for October is much better than that. We saw in developer the benefit of all the projects that commenced in FY 2021, and that they just keep coming on and on, and project duration keeps increasing. The other segments are performing well, I would say, in not great markets. You know, I wouldn't say we're at the high-water mark there.
Eric, to your question around resi, absolutely. You know, it's been a cracking result. If you think about, obviously, we had 11% listings growth. We obviously shared price growth of 8%, and then penetration and mix, all very positive, as well as growth in our add-on products. The offset to that for us for this quarter was deferral. Deferral was actually a negative for us this quarter, as we had the strong benefit coming in from Q4 last year. The strength in September coming in the last few weeks has actually deferred out more than deferring in. Overall, it's been a very strong result.
That's great. Can you comment at all if that new product delta has become more material than the sort of, gets the next step channel?
Are you talking about things like Connect?
Yeah.
Connect, we've barely started monetizing that. You'll see while, you know, still early days, revenues start to come in from Connect more in the second half and into 2023. But at the moment, we gave a free period, and anybody who signed up in the last quarter is getting three months free as well. We're trying to support sign-ons.
That's great. Thank you, Janelle. Thanks a lot.
Our next question comes from Lucy Huang with Bank of America. Please go ahead.
Good morning, Owen, and good morning, Janelle. I've got three questions. Firstly, just in relation to depth, just wondering how that also trended, coming into October, whether we continue to see strong depth uptake, through this one? Just secondly, in terms of cost growth, you mentioned kind of higher salaries, you know, driving a bit higher cost growth versus previously. Just wondering how confident you are in maintaining that positive jaws. With that cost growth, is most of it coming from salary increases or is there actually a lot more spend planned in sales and marketing? Just thirdly, in terms of Elara, I think last time you showed us that housing.com's web visits are now, you know, they've come in at, you know, the number two position in the market.
Just wondering how that's trended over the past quarter. Thanks.
Thanks, Lucy. I'll take one and two. Yes, we have continued to see that positive momentum in October for overall penetration. As you saw with listings continuing to be strong, which is excellent and also strength in Melbourne and Sydney. In costs, I think as we've shown over the past few years, we are capable of flexing our cost base up and down depending on how the expectations of the market and the revenue growth expectations. We do currently anticipate to retain our positive jaws. Yes, we are seeing growth in salaries. You know, clearly we had the impact of the pay rises in December and in July again this year. The tech market is extremely hot and, you know, we want to continue to grow and we will take talent from other organizations.
We can manage our cost growth. While the growth is predominantly in salaries, we are flexing up, opening up over the quarters.
I'll take the Elara question, Lucy. Look, we make great inroads in the race for lead in audience in the second half of FY 2021. It does bounce around a bit month to month. We've seen our competitors increase their spend rate on marketing significantly in Q1. I'm really pleased to say we ended the quarter pretty much in that same position that we achieved in the second half of FY 2021. The team are doing a great job in that race to become the number one in audience.
Wonderful. Thank you.
Your next question comes from Entcho Raykovski with Credit Suisse. Please go ahead.
Hi, Owen. Hi, Janelle. I've got two. The first one is around listings, and I guess I'm interested in perhaps how the listings environment over the last three months compared to your expectations back in August. I mean, I've got the sense that you were a bit uncertain as to how restrictions might impact listings, and it seems to have done pretty well. Also just as an add-on, is there a chance you actually surprise us to the upside for the rest of the year, notwithstanding those tougher comps in the second half? Secondly, obviously you're talking to some pretty good depth penetration numbers. Have you seen that improve depth penetration across all states and across all regions?
To what extent do you think that is attributed to the favorable property market, you know, the low interest rates Owen is talking about? Do you think you can hold onto all of those gains longer term and obviously continue to grow as you've been doing in the past?
Thank you. In terms of listings, I'd probably made a statement that Q1 was quieter than what we thought, at the time we spoke here. You might recall, Melbourne had no property inspections in place, and thankfully the state government realized that, you know, you could do it safely, and so they allowed inspections to recommence, you know, before we had the lockdown. I think that had a huge impact on the volumes for Melbourne. We weren't sure they were gonna do that at the time we did the full year results. That definitely exceeded our expectations. In terms of the rest of the year, you know, it's just so hard to predict as you know. We cycle over a huge Q4. You know, we had 59% growth in listings in Q4 FY 2021.
Having said that though, the market is still very strong. 145 million visits in October and massive growth in buyer inquiries. The demand is there. You know, if you're a seller, it's probably never been a better time to sell. I just don't see that changing anytime soon. You know, even if we got a rate increase, and I don't think we will, in the immediate future. The big swing factor is the election. You know, we've done a lot of analysis on the impact of listings over the past three elections. You see a drop in the election campaign, and then you typically see a subdued period after the election, depending on whether there's a certain result.
The last couple haven't been, you know, slam dunk wins and therefore, you know, contributed to the uncertainty. But it's temporary, and it comes back. The big swing, why I call it the big swing factor, if the election was to happen, say, right at the end of May, you could see May and June down because of that and recover in July and August the best year, right? It could have an impact for two years, but if you smooth it out, you know, there is no impact. It's really hard to predict. Look, the market is very healthy, but, you know, when you're talking tough comps, you know, if you ask me, now I'd say Q3, we would expect positive listings, but Q4, particularly if there's an election, you know, could be negative.
In depth, look, we saw improvement in all states. Exception was ACT, but it's a minor market. We saw depth across all states. It's got nothing to do with the market, in my view. This absolutely speaks to the value that we present to the new comps. We've seen it incredibly attractive, and that's why people, our customers, you know, chose to step up and sign. I don't think it's market related at all. In fact, you know, I've said for years, in a hot market, you know, you probably need to advertise less. You know, a slow market, you need to advertise more. I don't think it's due to market conditions.
Okay. That's great.
Your next question comes from Fraser McLeish with MST Marquee. Please go ahead.
Great. Thanks. Janelle, can you just confirm how Asia, sort of the rest of Asia, not Elara, is treated both in the way you've kind of done the revenue adjustments for the year or the impact of the changes there, plus in that cost guidance for the year? Thanks.
Yeah. On Asia, obviously reflected the cost growth excluding acquisitions. It excluded that from the adjustment that we've made. The cost guidance, obviously with the savings we've obviously got from Asia, we have reinvested a portion of those back into the business.
You've got PropertyGuru. There's been two transactions in Asia, hasn't there? There was the earlier one, with some of your smaller. Was it Singapore? Then there was the PropertyGuru one. Sorry, I'm just trying to understand. Are Asia costs still in that guidance or?
Effectively, the removal of Malaysia and Thailand obviously had an impact on removal of some of the revenue and some of the costs in relation to those businesses that have come out. PropertyGuru is a PropertyGuru transaction. That's an equity method through our associates. Those are reflected in there. When you look at the cost growth, what we've done is obviously there's reported cost growth and our cost growth excluding M&A acquisitions. That excludes effectively Mortgage Choice and Elara.
The guidance absolutely reflects the removal of the Asian business from those numbers going forward. If that answers your question.
Yeah, great. I'll maybe follow up on that after, but that's helpful.
Again, if you'd like to ask a question, please press star one on your telephone and wait for your name to be announced. Your next question comes from Paul Mason with E&P. Please go ahead.
Hey, guys. I just wanted to get a quick comment on, yeah, there's been some expectation that you might be releasing updated leads model. Also we had a bit of a comment around Connect earlier on the call, but are we still expecting any sort of new product releases around that during this year at all? Anything you can say on that?
On seller leads, look, the timing on that hasn't changed from what we talked about with the full-year results. You know, we're very pleased with the number of consumers engaging with our Find an Agent section. I think it's about 1.8 million visits to Find an Agent section per month. We're driving increased seller leads to our customers, and they're, you know, they're seeing huge value in that. In terms of monetization, the timing hasn't changed. Much of the financial year, but we are getting set up to launch beyond that.
Thanks a lot.
There are no further questions at this time. I will now hand back to Mr. Wilson for closing remarks.
Look, thanks everyone for joining the call today. We've started the year incredibly strongly, and we are very pleased with the Q1 results. I really look forward to updating you on how Q2 goes at the half year results. Thanks for your time today.