Hello, I'm Romi Savova, the CEO of PensionBee. Welcome to our third quarter trading update for 2022. For those of you who are new to the PensionBee story, we are a leading online pension provider in the U.K. We exist to make pensions simple so that everyone can look forward to a happy retirement. We enable our customers to combine their pensions into one new online plan, with money managed by the world's largest asset managers. We aspire to build a lifetime relationship with our customers, thereby generating predictable and scalable revenue streams for our company and for our investors. Reflecting on the year to date, markets have, as is widely understood, exhibited unusual volatility owing to Vladimir Putin's war in Ukraine, inflation, and the consequent global interest rate rises. Yet, we can all acknowledge that the need for retirement planning and pension ownership remains paramount.
Despite the challenging macroeconomic backdrop, we are pleased to see excellent growth momentum in invested customers, having added 56,000 new invested customers in the first three quarters of this year. We are further pleased to have delivered this growth in combination with a declining cost per invested customer in the third quarter. Not only did we deliver resoundingly high customer growth, we also maintained excellent customer satisfaction throughout this period. We recorded a customer retention rate of 97% and ongoing strong net flows from our existing customer base, despite a very challenging cost of living crisis that has impacted everyone across the country. As a result of the strong new customer growth and ongoing net flows from our existing customer base, our AUA remained resilient and supportive of our objective to achieve profitability by the end of 2023.
Turning to our financial and operational highlights for the first three quarters, I am pleased to report GBP 2.8 billion in assets under administration, reflecting a compound annual growth rate of 77% since 2018. We are also pleased to have attracted 265,000 active customers and to have 174,000 invested customers. We are particularly pleased to have achieved this level of stability despite the S&P 500, our main invested index, being down approximately 25% for the year to date, and the FTSE 250 being down approximately 30%. Thanks to our predictable revenue model and high retention rate of 97%, the growth in assets has translated into similar growth in revenue. Our annual run rate revenue is GBP 18 million, also reflecting an annual growth rate of about 76% since 2018.
Taking a closer look at the year to date, I am pleased to report that we have added more than 56,000 invested customers, reflecting a year-on-year growth rate of 68%. We are pleased to see the asset and revenue base increasing by 24% and 27% respectively over the past year. As always, our results are a testament to our strategy and proposition, which continue to resonate in the enormous market of pension savers. Over the last quarter, we continued to acquire customers at pace. The summer months are known to be seasonally quieter, but at the end of September, we launched our Believe in the Bee TV campaign on The Great British Bake Off. This campaign ad will increase our visibility further, enabling us to take advantage of growing national awareness of pensions.
At PensionBee, we believe everyone deserves a happy retirement. That's why we've helped thousands of people to bring their old pensions together into one simple online plan. We have responsible pension options, like our Fossil Fuel Free Plan. For the over 55s, we've made withdrawals hassle-free. Because everything's online, you can check on your pension progress anytime you like. We're building a pension company you can believe in. PensionBee, be pension confident.
We also continued to optimize our digital channels, led by our data model, reducing our cost per invested customer to GBP 253, in line with our expectations, and positioning us for further efficiency improvements for the rest of the year. Our product initiatives continued, with Easy Bank Transfer now being available for one-off and regular contributions within the app and the web estate. Easy Bank Transfer makes it possible to contribute to your pension in 60 seconds, as often as you like.
To complement the ease of contributions, we are producing an easy-to-use tax relief calculator to help current and prospective customers make the most of their tax allowances in the impending run-up to the 2022-2023 tax year end. Our regular withdrawals feature for over 55s is now in the final testing phases, and we look forward to continuing to help our customers manage their retirement savings effectively online. To support our ambitions, we have continued to invest in the ongoing performance of our industry-leading technology platform. We delivered further transfer efficiency improvements, internal automations, and information security enhancements to support growth, productivity, and information security. This is evident in our increasing efficiency with invested customers and revenue per FTE demonstrating strong annual improvements in line with increasing operational leverage.
Many of these improvements were designed to support our customer service team, enabling us to continue delivering a high quality of service. We are pleased to have maintained our excellent ratings across Trustpilot and the app stores throughout this period of customer growth. With regards to our investment offering, as previously communicated, we have completed our selection of a new impact-oriented plan and look forward to introducing this to the market in the near term. Now I'd like to hand over to our CFO, Christoph Martin, who will take you through the financial outcome for the year to date.
Thank you very much, Romi. Hello and a warm welcome from me to everyone. I'm pleased to cover the financial section of the Q3 trading update. The first nine months have demonstrated the strong resilience of our AUA. We generated close to GBP 700 million of net inflows over the period. While this would have resulted in an AUA base of close to GBP 3.3 billion and around GBP 21 million of annual run rate for September at stable markets, similar to other companies in the sector, poor markets have reduced AUA by approximately 17%. Nevertheless, our AUA has increased relative to the end of last year, and I would like to highlight the asset contributors in more detail. First of all, we have driven growth through new customer acquisition.
Our agile marketing approach enabled us to onboard more than 56,000 invested customer, representing the majority of asset growth over the period at GBP 534 million. Second, we have driven asset growth through existing customers who have continued to accumulate pension savings with PensionBee. Growth from existing customers over the period represented GBP 153 million of AUA. Net flows from existing and new customers contributed GBP 688 million of asset growth over the period. We will comment on the quality of lifetime value generation on the back of our strong retention rate and continuous net flows from existing customer base, more specifically on the next pages. Lastly, as previously mentioned, we have been impacted by market volatility.
As it is customary, pension assets are invested in global capital markets, which have been impacted by a number of macroeconomic factors, including increasing inflation, rising interest rates, and geopolitical tensions. Global markets volatility reduced AUA by approximately 17%. In summary, our AUA demonstrated resilience against the backdrop of market decline and exceptional market volatility, thanks to strong net flows from new and existing customers. As a long-term business, the lifetime value of our customers is of great importance. Lifetime value is predominantly driven by high retention rates and recurring and compounding asset growth from existing customers. First, as you can see on the chart on the left-hand side of the page, we are pleased to report a continuous improvement of our customer retention rate, which is in excess of 97% for 2022.
Secondly, on the right-hand side of the slide, we demonstrate cumulative net flows excluding market growth by customer cohorts. All customer cohorts delivered positive net inflows in 2022, even the very early cohorts acquired in 2016 to 2018. This serves as a good reminder of our long duration compounding nature of the underlying business. With an average age in the late 30s, our customers demonstrate a long-term commitment to savings with PensionBee, growing their assets with us every single year. In summary, generating lifetime value on the recurring and compounding asset growth from existing customer cohorts is evident in both a high customer retention rate and continuous net inflows across all cohorts. We have turned our asset growth into a recurring and predictable revenue stream, thanks to our resilient contractual gross revenue margin.
By way of reminder, the contractual gross revenue margin is the annual fee charged to customers before applying any discount for pension pots over GBP 100,000, which again remained resilient over the year to date at 69 basis points. As already communicated, we executed on our plan to accelerate marketing expenditure in the beginning of the year, priming us for a lower cost marketing spend for the last quarter. On a trailing twelve months basis, we have seen an improvement in adjusted EBITDA margin. The underlying scalability of the platform was highlighted earlier in the presentation, showing an IC per FTE and revenue per FTE growth of 39% and 26% respectively. Looking at profitability, we reconfirm our expectation of adjusted EBITDA profitability, being profitability before marketing expenditure by the end of 2022 and adjusted EBITDA profitability by the end of 2023.
To conclude, we have converted asset growth into revenue growth thanks to the resilient contractual gross revenue margin, and we have continued to scale the business operations. We routinely evaluate the attractiveness of marketing expenditure within the unit economics return framework, which includes a cost and return component. On the cost side, we measure cost per invested customer, which represents the unit cost of our marketing investment. I will cover the cost side on this slide while the return or lifetime value component will be covered on the next. As guided, we accelerated marketing deployment in Q1, which saw a temporary increase in CPIC to GBP 268. As guided, we brought that CPIC down to GBP 260 in Q2 and around the GBP 250 pound mark in Q3.
Having deployed the majority of our budget, we expect CPIC to continue to reduce in the fourth quarter as we focus on conversion. In summary, we continue to focus on reducing the cost of customer acquisition with more moderate marketing spending levels and an increase in lower cost marketing activities and to capitalize on our growing brand awareness.
It is very important to view the cost of acquisition together with the expected return on that investment in order to evaluate the return potential of the marketing investment, as shown in the illustrative unit economics example. The unit economics framework includes a cost and return component, and the multiple of the return over cost guides to the attractiveness of that marketing investment. With regards to the cost component, we pay a one-time cost to acquire a given customer to come to our platform, which I covered on the previous slide.
With regards to the return component, once on the platform, a customer builds their pension saving with the company over a long time, evidenced in the high retention rate. This translates into recurring and predictable revenue stream over many years. We then pay a fee to our money manager partners and bear the cost to serve customers on our scalable technology platform. The remaining profit accrues to PensionBee and generates lifetime value. The illustrative unit economics of the return over cost calculation with simplified assumptions indicates that PensionBee deploys marketing capital with attractive returns of mid to high single-digit multiples. I will now hand back to Romy to cover guidance, investment highlights and further updates.
Thank you very much, Christoph. Given the performance to date, we are pleased to reconfirm our core guidance and objectives. We continue to experience high double-digit revenue growth and consistent revenue margins. We are pleased that our revenue remains resilient despite the macroeconomic backdrop with an expectation of GBP 17 million-GBP 18 million under a range of different market scenarios. We will continue to manage our marketing budget flexibly and with the return-oriented mindset, making that expenditure work even harder to acquire new customers.
Our priority continues to be the achievement of near-term adjusted EBITDA profitability by the end of 2022 and overall adjusted EBITDA profitability by the end of 2023. As you can see, PensionBee continues to take advantage of the vast and growing U.K. defined contribution market. Our differentiated customer proposition and scalable technology platform have been designed to serve an enormous customer base.
Our successful brand building and customer acquisition activities have enabled us to grow with a clear path to profitability. I and the rest of the executive team are committed to continuing on this path to serve our customers. We wish everyone a prosperous final quarter and look forward to engaging with investors. Thank you for your time today.
If you would like to ask a question, please signal by pressing star one on your telephone keypad. Participants can also ask a question using the Ask a question button on the webcasting page. We'll pause for a moment to assemble the queue. We will take our first question from Greg Paterson from KBW. Greg, please go ahead.
Morning, everybody. Can you hear me?
Good morning, Greg. We can hear you well.
Yeah. Three questions. One is just a concern that people, investors raise. If the market dropped further and correspondingly the revenue dropped, how much capacity do you have to reduce your marketing budget until it starts materially hurting customer growth numbers? I wonder if you could just talk around that theme. Two other sort of questions in terms of numbers. I see the underlying cohort growth rate is 4%. If I'm not mistaken, was it not 5% consistently for the last two years? If I'm correct, why has it dropped, in your opinion? If you could just tell us what the average age on the book is now versus what it was at the half year. Thank you very much.
Of course. Very happy to. Thanks. Thanks for the questions. I'll start off first by considering the market environment and the impact that it has on all variables within business performance generally. As you know, markets have been exceptionally volatile. I think 2022 has really been marked by a lot of anxiety around market volatility, around cost of living, around the war in Ukraine. All of that undoubtedly has an impact on sentiment and on markets. Nevertheless, what we've continued to see is ongoing interest in finances and people becoming much more engaged with where their money is, how they can optimize their finances, and generally good financial hygiene. We think it's important to lay that backdrop as we think about marketing.
Now, as you said, the market does have an impact on revenue, because it has an impact on AUA. Within our projections, we remain fairly conservative in terms of our market expectations. We actually think that markets will remain subdued for the remainder of the year and quite likely into next year. That is already quite well factored within our planning and within our internal preparations. I think what we have to acknowledge on the marketing side is that we are in a very, very different place as PensionBee than we were over the past few years. We've already invested substantially in our brand. Our brand is resonating well within the broader consumer market.
As you know, our brand awareness at the start of this year was around 25%, and we think it's continued to increase over the course of the year. We have a wealth of data within our data platform, and so we've continued to optimize our performance channels such as paid search or ad campaigns. As a result of that, you can see a very clear decline in the cost per invested customer. Our expectation is that the trends and the foundations that we've already laid will continue to bear fruit. That gives us great comfort in reaffirming that PensionBee remains very much in growth mode, and we will continue to deliver on the high rates of growth that we've become accustomed to. I hope that gives you some background and some comfort around the first question.
On your second question with regards to underlying cohort growth, that figure is indeed 4%, as at the last measurement point. As you can see, customer retention remains exceptionally high. Contributions remain robust as well. We believe Easy Bank Transfer is helping customers to contribute into their pensions, and we can see that as well. Withdrawals remain subdued. People are cutting back on expenditure generally. Therefore the explaining variable is really around consolidation of additional pensions, that would have factored into this variable and that do factor into that variable.
We think that a lot of people are staying put at the moment, so not necessarily changing jobs. We know that some people are delaying retirement. Old pensions or rather pensions from our older cohorts that may have come through in the past, I think may take a small bit longer. Overall, we expect that underlying cohort growth figure to remain robust because we can see that contributions are remaining robust as well. I think, Christoph, if you want to cover point three around the average age.
Yeah. That's a quick answer. The average age is again in the late thirties, around 38.
I'm just trying to figure out how it's changed in the last quarter, the average age.
We don't see material change over the last quarter.
Thank you. Cheers.
Next question is coming from Paul Bryant from Equity Development. Paul, please go ahead.
Hi, Romi, Christoph, thanks for the presentation. Question more on staffing. We're seeing invested customers per staff member sort of ratchet up quite sharply now. First point on that, is there a sort of maximum or a level where you see that might taper off? To the same point, could you give us an update on hiring plans over the next year or two in terms of absolute numbers and the types of roles you're planning to recruit for? Thanks.
Sure. Very happy to talk about scalability generally, and customer service more broadly. As you know, customer service is a core strategic priority of ours. It's one of our five strategic pillars. Therefore we hold ourselves to very high standards when it comes to picking up phones, replying to emails, answering live chats, and doing what our customers expect us to do when it comes to serving them. We see that reflected in our Trustpilot ratings and also in our app store scores. Maintaining that level of service is an absolute priority and is one of the core drivers of our hiring plans.
Now, at the same time as you've pointed out, we have seen, you know, a great increase in the IC per FTE metric, and a lot of that comes down to being more efficient, automations and product features that enable our customers to self-serve. So we continue to roll out simplifications within the customer servicing technology on the back end that make it easier for our beekeepers to serve our customers, and we continue to roll out product features within the product, whether that's related to making contributions easier, as we've already covered in terms of some of our launches, or whether that's related to bringing more transparency around the product so that customers have fewer questions that they wanna call in about.
We see a lot of continued opportunity for us to continue bringing through those efficiency improvements and automations as well as customer features over the course of the next year. It's going to be a big focus for us to continue investing in the product and to continue making it self-servable, so helping our customers to find what they're looking for in the app, which ultimately we believe also enhances their customer experience. In terms of hiring plans, we have continued hiring. We have actually been hiring into our customer success team. We expect a large amount of volume of new customers coming into the new year, and so we are actively preparing for that already. We've also been hiring into our developer team, because of the product investments that we intend to make, as I just mentioned. That plan, that hiring plan continues, fairly on track for us. Don't know, Christoph, if you'd like to add anything more.
Yeah. Maybe just on the second point, Paul, because this is a really good question around the hiring plan within the context of inflation, which is a very typical point that the people tend to raise. I think within there, we gave guidance around the number of FTEs to be hired this year, which was between 10%-20% over the course of 2022. Obviously what has changed is an increase in inflation. Why we still got comfortable on the overall cost base to reconfirm the guidance on our profitability target is that we embraced a working from home kind of approach, and that allows us to actually also recruit talent across the U.K, which gives us also flexibility to really acquire talent, so to speak, at a reasonable price and therefore lifting a little bit that inflation pressure on the people cost side. That gives us then again the comfort on the profitability target that we today reconfirmed.
Super. Thank you. That's very helpful. The next question is coming from James Allen from Liberum. James, please go ahead.
Hi, Romi. Hi, Christoph. I've only got one question. From what I can see from the presentation of GBP 534 million of inflows from 56,000 new investor customers in the period. That implies an average pension pot of circa GBP 9.5K versus your average pension pot on the platform of, I think it's just over 16K. Is that lower pension pot value from new customers purely down to the fact they may not have consolidated all of their pensions onto your platform yet? Or is there an element of a mix change where you are just starting to see smaller pots coming onto the platform and maybe therefore you need to see more customers coming onto the platform in order to maintain the growth you've currently got?
Very happy to chat on that one. Usually when new customers do come onto the technology platform, they consolidate their first pension and then they consolidate their second pension. We do expect that to impact the perceived pot size of a new customer in the very early months.
Maybe, James, just to add an additional point on that one. We did mention particularly around the average age on page seven, so that we acquired this year a little bit a younger demographic, so to speak, because of the broader market environment and our marketing approach to still deliver on that growth objective, the high double-digit guidance that we gave. I think the point to just note is that from the nature of the business and being a long duration business, it is those customers really come onto the platform with very attractive unit economics.
They tend to be younger, but that also means given the high retention rate of 97.4%, they stay with us over the long term and building up their pension wealth, which we also highlighted on page 11 that we see across time and across cohorts very consistently. That means that even while they're bringing the first pot onto the platform, the GBP 9.5K, that is just the initial pot. But then they obviously stay on the platform and building up the pension wealth and therefore benefiting PensionBee as a company by generating that lifetime value, which is really the core and the attractiveness of the underlying business.
Thank you very much.
The next question is coming from Alexander Bowers from Berenberg. Alexander, please go ahead.
Hi, everyone. Just one question from me today. I guess one potential scenario looking forward is sort of as your customers get older and hopefully wealthier, they might start looking at other options of some providers with broader, more complex wealth offerings. I was wondering if you could give us a bit of a flavor as to sort of additional functionality or products you are thinking about in order to keep your customers on the platform and over the longer term. Thanks.
Oh, good morning, Alex. I'll make two points there. I think first of all, that's not a trend that we currently observe. When we look at our customer retention rate and when we look at our AUA retention rate, which is of course informative because older customers often have larger pension pots, we actually see fairly similar performance. We don't, you know, we don't believe that our older customer base will suddenly decide that they want a more complex or more expensive offering than what it is that we offer. You're right. It's also important to keep investing in the product and making sure that the product is excellent for that customer base. Of course, our regular withdrawals feature is something that we are very excited about.
We've surveyed the market, and what we have found is that other providers, other pension providers on the market, by and large, have incredibly antiquated drawdown products. Typically, a customer needs to fill in a form or actually call on the phone in order to effect a drawdown from their pension. We believe that offering best-in-class withdrawal functionality for our customers over 50, 60, and 70 will really help them to plan for retirement, to execute on their retirement plans, and ultimately to stay with PensionBee and to join PensionBee, which is of course, you know, good for us.
Thank you.
Thank you. Just to remind you, if you would like to ask a question, please signal by pressing star one on your telephone keypad. We'll now address the questions submitted via the webcast page. Our first question is coming from Mark James from Investec. The question is: Can you put some numbers to your CAC/LTV analysis, please, to help demonstrate that you are acquiring customers in an economic manner?
Yeah. Good morning. Maybe just quickly on the lifetime value workings. I think if you take an average pot, let's say on normalized, so to speak, market levels, and let's use rounded number for the purpose of simplicity of GBP 20,000. We generate a realized revenue margin of 64 basis points. We keep 80%-85% of that on our P&L. That's roughly, you know, let's call it 50 basis points again, to use round numbers. If you multiply the 20,000 average pot with a 50 basis points of net revenue, gets you to roughly GBP 100 per year per customer. We quantify roughly GBP 20 per year within the technology platform and other costs that are variable in nature and to capture them within the unit economics framework, gets you to roughly GBP 80 of cash contribution per customer per year. That is one specific year, so to speak.
We hold the customer again for a very long period of time, and that is evident with the high customer retention rate of 97.4%. If you assume a retention rate of 95, again, to keep it simple, invert that, gets you to an implicit churn of 5%. You know, if you invert then the 5%, that basically implies a holding period of 20 years. Obviously, the retention rate is higher. That means the holding period is mathematically longer, but again, using 20 years as a simple assumption. If you multiply the 20 years with the GBP 80 of cash contribution per year gets you to roughly GBP 1,600 of lifetime value. If you take that lifetime value and then divide it by the acquisition costs, by the CAC, which we in our reporting we call CPIC, that gets you to the mid- to high-single-digit multiple that we refer to in the presentation.
I hope that clarifies and quantifies that part a bit better.
Thank you. The next question is coming from Andrew Watson from Singer Capital Markets. Andrew, please go ahead.
Morning. Just one of your answers to Greg's question earlier, you were talking about how the marketing backdrop had changed quite a lot in current conditions. Can you just talk a little bit to the efficacy and the changing efficacy of your different marketing channels and how that might impact the conversion experience of newer cohorts of registered customers to invested customers, please?
Sure. We continue to employ a diversified multi-channel marketing approach. We believe it's important to continue investing in our brand. You will have seen the launch of the Believe in the Bee campaign, which we demonstrated on this call. That has certainly resonated well in the broader market of consumers. At the same time, we've continued to gather data within our data model, which enables us to optimize our expenditure on our digital channels as well, thereby bringing down the cost per invested customer, simply through more efficient deployment of the marketing capital.
I think what you can expect to see from us is a strong continuation in the conversion rates that we see from registered to invested customer. As we've guided to before, the optimal time at which to compare those ratios are at the December points, because that tends to take into account any seasonality in our marketing expenditure. What we've seen over the past few years is a roughly one percentage point increase in the RC to IC conversion rate, which we expect to continue over the course of this year, even having increased our marketing spend substantially relative to last year. Hope that.
Okay. Yeah. That's helpful. I suppose I'm just thinking kind of more challenging market conditions. Is the data model telling you to favor lower cost marketing channels, like SEO, as opposed to the kind of advertising campaigns that we've seen out in public on the basis that it's really only people who are looking for your product at the minute that are likely to have a kind of positive conversion experience instead of somebody walking along the street seeing the brand, maybe the sentiment isn't there to force that conversion in current markets?
Well, I think that's actually a much more nuanced picture because if anything, interest in money right now is exceptionally heightened. So we can see that through the reintroduction of, you know, thicker money pages in various newspapers. We can see that through the reintroduction of money management shows. You know, I think for the time being the, you know, the topics of discussion will tend to lean into mortgages and into energy costs. But generally speaking, good money management, good financial hygiene, I think is very much on the top of people's minds.
And so there definitely is interest in consolidation. A couple of research houses have looked into the space. One of the stats that I'd recently heard is that around 20% of consumers are considering consolidation in the next year. I would definitely think that pension consolidation is top of people's minds and that reinforces our desire to continue investing in our brand and to continue acquiring customers at a very rapid rate.
Okay. Thank you very much.
The next question is coming from Greg Patterson from KBW. Greg, please go ahead.
Yes. Just finally, just a stat. Full-time employees at the end of the nine-month period and the full-time employees average over the nine-month period, if you could give us that. Thank you.
Yeah, that's a very specific stat. I can get back to you on that one after the call. That's no problem.
Thanks.
Thank you. There are no further questions submitted via the webcast page. I will now hand back over to Romi Savova for closing remarks.
Thank you very much. Thanks for taking the time to join us today. I hope it's clear that we continue to do what we said we would do, and very much progress with our plans to continue acquiring market share, to growing our customer base, and to achieving our profitability objectives. Thanks very much for joining this morning.