Rightmove H2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
February 28, 2025

There are 10 speakers on the call.

Operator

All right. Good morning. Welcome to the presentation of Rightmove's results for 2024. I'm joined today by Rory Hook, our CFO and Ben Winstanley, Director of Investor Relations. I wanted to start off with a few key messages.

Operator

Our platform and network effects remain very strong. Our data leadership and ability to serve the market is actually strengthening all the time. We upload around 10,000 properties and generate two fifty million consumer data signals every day. Our business is delivering on all fronts, strategically, operationally and financially. With 14% headcount growth in 2024 and now '24 welcome, AI enabled product teams today, we have started to really materially increase our pace of innovation and delivery.

Operator

We're launching some world firsts and we're definitely launching very UK tailored products. We'll explain how the end market conditions and the strength of our platform gives us confidence, not just for 2025, but actually for quite a long way into the future. Just before we get into the 2024 results, I know you want to get to it, you've seen it, I wanted to spend a few amendments though on what we think is our investment case. So starting with that, on the left, right move, exceptionally strong foundations, Been around for twenty five years. We've established a really differentiated and leading platform at the heart of UK's largest or large and structurally growing property market.

Operator

The platform is digital. It's low cost. It's capital light, driving higher returns on capital, while the subscription based B2B model has a proven ability to deliver in all market conditions, compounding growth. If you move to the middle of the diagram, this central position benefits from powerful data and profound really profound network effects. Scale begets scale.

Operator

In the bullets, we're increasingly using these advantages to drive even more value to our partners. We continue to elevate the pretty iconic brand that we have with consumers and we deliver new products and features to everybody. In the green boxes, we are executing on an expanded growth strategy that we laid out fifteen months ago with increased investment. We're largely focused on data backed product innovation and we are delivering that with an experienced and very energized team. So we are moving on from here, entering now our twenty sixth year with confidence, confidence in delivering a larger, more diversified, yet very connected right wing platform.

Operator

This will deliver compelling financial outcomes that you can see on the right of this slide. So I just want to dig a little bit deeper on one core pillar of our strengths. We generate fantastic reach and loyalty with our consumers. We have exceptionally high brand awareness with the British public in general and even more of course with home movers. We are part of the fabric of the nation.

Operator

Importantly, the vast majority of our traffic, over 85% comes direct and organically. So that's habit formed behavior built over a long time. It manifests itself also in vendor insistence that their agent subscribes to RightNoob in order to win that vendor's mandate. We have put in place a multi layered and ever evolving marketing strategy. We are focusing on scale, depth and also modernizing our brand proposition compared to a few years ago.

Operator

You can see some of the examples at the bottom of this slide. That deep brand saliency and engagement that we have results in Rightmove's eighty percent or over 80% share of consumer time spent across portals according to Comscore. It's consistently strong and you know it has been so over many years. It's even higher on our mobile app, which last year drove over 45% of our leads generated. Consumers spend over 7 times as much time on our app as the number two in the market, Soupla.

Operator

And with over 9,000,000 consumers now in our marketing CRM, including emails and app notifications, we're increasingly able to segment and personalize. We're using our scale and of course a lot of data and B2C tools to do that. We strengthened our reach for consumers, both at the top of the funnel. For example, we grew our social media engagement last year by 39% and further down the funnel with 24% more views of our expanding home moving content. And it's interesting, people who engage with our content typically spend 86% more time on our site and they view five times as many property detail pages.

Operator

So this consumer engagement has continued to drive outcomes for our partners, as you can see top right. Across all the portals, we delivered over seven out of every 10 vendor instructions and over eight out of every 10 tenants for Letting's properties. We think that's entirely natural if you consider what our data and platform can do. For example, Opportunity Manager, which is a product within our Estate Agent OptiEdge package, has an algorithm which is in 2024 indicated 350,000 properties which could be coming to market, but before they were actually listed. That's more than 1,000,000,000 potential commission pool for agents from that product alone.

Operator

And as well as high performing products, we offer numerous inclusive services that we call Building Success Together. We talked about this last year when we launched it. And that program is one component contributing to 90% partner retention for '24, which is the second highest in a decade. So the combination of highly performing products, value add services that has been consistently monetized over time through a well honed and evolving package structure. And as you also know, we keep coming up with new packages every so often.

Operator

Just to remind you, 2024 from a property market perspective was average. It was off the back of 'twenty three, which was the worst year for housing transactions in a decade. But our teams were able to roll out Optimizer Edge, the new top end package with such success that it was actually the fastest growing top package ever for the company. And I'll explain later how an agent on our essential package, the lowest package, can expect an eight times ROI better by upgrading to optimizer edge all the way to the top. And then of course using the full suite of the various products and the data log products sitting in that one.

Operator

Now, summarizing these in financial terms, '24 was a very solid year. Revenue growth of 7% supported by Orban membership increases in the core business, as well as growing contribution from our strategic growth areas. This in a market still subject to higher for longer rates, which affected several of our segments actually. Underlying operating profit margin of 70%, again reflected our strong business and executing the communicated investment that we're doing to expand the platform and diversify our revenue streams. Underlying EPS growing by 4%, DPS by 5% and in line with our long standing policy, all surplus cash was returned to shareholders.

Operator

And finally, back to one of the real strengths, time on-site sixteen point four billion minutes last year. It was the second highest on record, only beaten by the COVID burst and flurry in 2021. So great performance by our team and another proof point of the resiliency of our platform, the products, the relationships we have with partners and in actually somewhat subdued still end market conditions. So as we start 2025 and look ahead, we see building sentiment of positivity across a number of indicators. As a main driver of all subsegments, mortgage rates remain high in historical context.

Operator

Today, the average five year fixed rate is 4.7 versus just above five compared to a year ago. And this is per Rightmove's weekly tracker, which is summarized at the top left. Now the trajectory is clearly downwards, which even though it has some uncertainty in terms of timescales and exactly when, that's of course supportive for all actors in the property markets. It's probably by far the single most important factor out there for confidence. As a result, within resale demand has been healthy and growing over the course of 2024.

Operator

Top right, if we compare to which we've done in in the past as well to the last normal year of 2019, sales agreed have been up double digits since October, while completions are now approaching those 2019 levels. And that's of course a positive for agent commissions and therefore also their business ambitions. Now the long six to seven month average from first listing to completion of a transaction and therefore that delay in commission. It really is a systemic issue and you know that we are very keen to work on that problem over time, but we hope it will also decline a little bit as the market adjusts to the higher activity levels that it's seen. Within rentals, bottom left, increased supply and reduced demand, a little bit of a change of the picture here compared to several previous years.

Operator

So that imbalance is improving at least from those extreme levels that we had before. The number of requires per available property at 14 in January, it's still though roughly double what it was pre COVID. So we think we are well positioned with both our listings advertising platform and our lead to keys product suite. In the rental space, we can serve all variations of the market, helping agents generate more leads as well as improve lead qualification and indeed increasingly also their operational efficiency. In new homes, bottom right, you can see the decline in developments coming to market to a trough in about mid-twenty four and then actually beginning a recovery, albeit pretty slow one since August.

Operator

But developments today are absolutely going up in numbers, yet they're below 2023 levels. So there you go, that's some property market context for 2024 and start at 2025. Now over to Rory for some more detail on the financial results and outlook.

Speaker 1

Thank you, Johan. Good morning, everyone. I'm delighted to present our financial results for 2024. Overall, revenue has increased by 7% on December 2023 with growth across all areas of the business. Starting with Agency row three in the table, revenues increased by 7% to million.

Speaker 1

Looking at the chart on the right hand side, the light blue bars show how this was largely ARPA led with a 1,500,000 contribution from increased agency membership numbers. Next on the table, we have new homes where revenue rose 4% to $69,200,000 Johan mentioned the headwinds in the new homes end market. You can see in the dark green on the chart how the decrease in developments impacted revenue by $2,900,000 more than offset by strong ARPA growth as developers continue to turn to our products for their marketing needs. Moving to the bottom of the table, we saw strong revenue growth in our three strategic growth areas, which increased by 27% to $23,400,000 Amongst the subdued market backdrop, commercial revenues increased by 11% to $13,500,000 dollars The revenue growth came from a 17% increase in customer numbers to over 1,000 at year end. Mortgages revenue was up over 100% to $4,700,000 The majority of revenue remains from our mortgage in principle proposition.

Speaker 1

We significantly increased leads and started to monetize broker introductions. Rental services made up of our lead to Keys products, referencing and ancillary services saw revenues up 31% with strong growth across all parts of the business unit. Referencing and ancillary revenues were up 12% and we saw over 500 lead to key sign ups in the year beating our target. And from completeness, the non SGA parts of other revenues being data services, overseas and third party advertising grew 5% year on year. Focusing on agency and new homes, overall ARPA increased by to GBP $12.24.

Speaker 1

Due to a higher proportion of lower ARPA lettings only branches, we saw dilution of 1% to total ARPA. Of course, we are happy with new members and increased revenues. Once again, discretionary spend on products remain the largest driver of growth, 57% as you can see in the yellow section of the first bar. Agency, the middle bar on the slide, added of ARPA, up 6% on 2023 to 1440. You can see from the Teal segment that 40% of agency ARPA growth came from contract renewal discussions, which all proceeded as expected.

Speaker 1

We see no change to our long standing approach in 2025. Johan will explain how we continue to provide great value to our partners through continually evolving products. The majority of agency ARPA growth, the 60% in yellow came from product, which we can split into two categories. Firstly, upgrades to the Optimizer Edge package, the quickest growth ever of a top tier package. This alone contributed around 30% of agency ARPA growth in the year and we will see some full year impact in 2025.

Speaker 1

The reason why it has been so successful is its access to our varied and extensive product suite, which as Johan will explain later has such demonstrable ROI. It also provides access to exclusive products, one of which Native Search Adverts is a key driver of the upgrades with 70% of members choosing to add that product to their marketing mix. And the second component within product, also around 30% contribution to agency ARPA was upgrades to other packages and partners choosing to purchase incremental product within their package. Moving to the right hand side, New Homes ARPA has grown by 9% to GBP $19.87. The Teal segment shows that 44% of ARPA growth came from contract renewals.

Speaker 1

Of the 56 contribution from product in yellow, roughly 40% was contributed by upgrades to the top tier advanced package and the new access package with the remainder being developers purchasing incremental products within their current package. In H2, we saw record growth of GBP27, which was the result of strong growth across both agency and new homes. We saw the changing market dynamic impact agents and developers differently. Agents have been buoyed by the green shoots in the property market, whilst new builds have seen increased competition versus resale properties. Both sets of partners turn to Rightmove for their marketing needs with increased upgrades and incremental product uptake, which sets us up well for 2025.

Speaker 1

Agency membership at the year end was 16,124, an increase of two eighty five or 1% on December 2023. This increase was mainly driven from increased lettings only branches, both from new partners and existing partners expanding. Agency retention was the second highest in a decade at 90%. Within new homes, we saw a year on year decline of 23 developments to 2,923 at December 2024. The number of developers advertising on-site remained the same, but with fewer developments being advertised as the pace of new developments coming to market remained low compared to previous years.

Speaker 1

If you look at the chart on the bottom right, you can see two things. First, the H1 decline in development numbers recovered slightly in H2 as we saw an increase of 55 developments compared to a decline of 78 in H1. Secondly, we saw growth in lower upper housing association developments in both halves, the teal segments. That partly offset the decline of new build developments in H1 in yellow. This was partly driven from the success of the access package that we launched at the start of the year as a basic entry level package for lower spending housing associations.

Speaker 1

Underlying operating costs increased $16,000,000 year on year. The majority was people costs, which increased by $10,500,000 with headcount increasing year on year by 14%. Of these new roles, around 60% were technology roles. In the year, there was $8,000,000 of internal labor capitalization, which we expect to be broadly similar in 2025. This increase is reflective of the investment stage of product development associated mainly with the strategic growth areas.

Speaker 1

Across other costs, we saw an increase of 13% in marketing spend as we continued to invest sensibly across channels and alongside an increase in marketing for the SGAs. Technology costs rose $2,000,000 including increased spend on cloud hosting as we continue to migrate over from our data centers. Margin was 70% in line with our previous guidance. We remain highly cash generative with a cash conversion ratio of 108% of operating profit compared to 104% in 2023, largely driven by improved working capital. As we continue to grow the strong cash generation of our business, this leaves us well placed to return surplus cash to shareholders.

Speaker 1

This year, a total of 182,000,000 was returned to shareholders, one hundred and seven million dollars via share buybacks and million via dividends. Cash tax was million, higher than in 2023, reflecting increased profitability and a full year impact of The UK corporation tax rate at 25%. There were one off transaction adjustments of £9,200,000 The cost is broken down into £3,000,000 relating to the investment in Cojute and £6,200,000 of fees relating to the unsolicited offer for Rightmove in September and the acquisition of HomeViews. Our approach to capital allocation remains consistent with our long standing policy. We will continue to prioritize investment in the business.

Speaker 1

We will continue to evaluate value accretive M and A opportunities, after which we will continue to return all excess cash to shareholders via progressive dividend and buyback thereafter. In terms of financial guidance, we're increasing revenue growth guidance next year to between 810%, reflecting the accelerating delivery of the business. We expect customer numbers to grow around 1%. We lifted expected ARPA growth to to which includes a similar impact from lower ARPA branch joiners in 2025. However, revenue growth is our main focus.

Speaker 1

So as in 2024, the mix of ARPA and customer numbers may flex if we are more successful at winning lower ARPA customers. At an overall level for the SGAs, we expect absolute growth to be slightly higher than the 5,100,000 we saw this year. And we continue to target an underlying margin of 70%. This includes the absorption of 1,000,000 to 2,000,000 from the National Insurance Levy and reflects our philosophy of growing the business with margin as an output, albeit an important one. That concludes the financials.

Speaker 1

I'll now hand you back to Johan.

Operator

All right. Well, as you know, a bit more than a year ago, we set out the new strategy and plans to grow Rightmove. You may recall this diagram, which sets out how we view the property market from our perspective and how we intend to broaden our reach over time across residential, commercial and data, but also how we want to deepen into the home moving transaction through what we call the find, afford, transact, move and lifecycle steps, FAT ML. We're in a great position to invest and stepwise expand our role in the ecosystem. We have reach, we have connectivity, we can both deliver value to other participants in the market and of course generate right mover revenue and profit.

Operator

So an update on our outlined current strategic growth areas, the SGAs, which are the numbers two, three and four in this graphic. First a reminder that 2024 revenues from the SGAs are around 5% of the total group revenues, But they are, as intended, growing decidedly faster than the core business. You can see in the first row of the table, we believe that we have a right to play and lead in each of these areas. They have attractive TAMs and we're in a good starting position and we are growing each of these submarkets. We started to elevate the visibility with, for example, roughly 300,000 marketing interactions in commercial.

Operator

And for mortgage keywords, we saw a 38% increase for Rightmove in top three search engine positions related to mortgage keywords. Revenue wise, second row to table, rental services was in line with our expectations, mortgages was ahead and commercial slightly behind, impacted somewhat by softer end market segments. Now operationally, all three areas hit their milestones on or ahead of targets. As a first step, we relaunched commercial. We had a great partner take up of lead to keys for the rental market and a strengthening consumer proposition in many different ways within mortgages.

Operator

You can see some current UIs on this page, if you squint a bit maybe. For 2025, the headline for the SJs is quite simple, continue executing, build on the momentum, we have great confidence. For commercial specifically, we'll reboot the user search experience by the end of the year, including having more relevant data and new search and property detail pages. We continue to build marketing and sales, of course, looking to add customers, listings and driving higher lead generation per property. In rental services, we'll continue to focus on sales of the lead to key suite to partners and developing the product further.

Operator

We indeed last year actually of the roughly 500 new accounts, a third of those were completely new accounts to the Rightmove platform. So they were not advertising before, and that's of course a very healthy additional benefit to the core business. Consumers will be able to see and handle all steps and services on our site within Lead2Keys under the My Right Move page. To them, we will also offer utilities as a new ancillary service driving further monetization opportunity. Partners will be able to run Lead to Keys modules directly now from the Right Move Plus site and not in separate software environments.

Operator

So the Digital Moving Journey Assistant is coming to life here. It's powered by our upper funnel reach with consumers that we can lead into it. Our enhanced leads or users sign in and share additional data up front to qualify better as tenants increased by over four times in 2024. And in mortgages, we continue to optimize the MIP application and we deepen connections to our lender partner and more broker partners. We're looking to enable consumers to also add a property interest to their mortgage and principal, meaning they can take our solution or we can take our solution beyond the general affordability decisioning that we have today.

Operator

That will build even higher lead quality for our partners and give consumers both higher confidence and increased visibility of mortgage payment levels, regardless really of where we are in the process at the time of applying. So in summary, we're happy, strong progress to date on the SGAs. We are in fact though here breaking some new ground. We are learning as we go and we obviously get really, really good excitement when we see how we progress and discover along that route. So finally, a reminder, SGAs, all of them, they also reinforce our core platform in different business in different ways back to the connector platform.

Operator

They strengthen utility, frequency and they accelerate of course your whole data sets. So on that topic, a little glance at data without any numbers actually on it other than indications. But this really, really is a power play for Rightmove and builds so much opportunity not only now as we do the business, but certainly if you look at the opportunities going forward. So we've been generating data and insights obviously since the beginning, February, from the largest platform and the largest account management team in the field also feeding data back. So today we have around three petabytes of data on the platform.

Operator

Every day that advantage increases. We receive unique and first party data signals from consumers and partners on property listings, content and all the different products. The diagram is simplified, but it's a pretty powerful representation. You see the bubbles representing billions, millions, or thousands of these relevant data points that we collect during the course of just one year. So you may recall I mentioned in the very beginning that we gather about two fifty million different consumer data signals.

Operator

We upload around 10,000 property listings every day. Trump and BP might say drill, baby, drill. But as a matter of fact, data is the new oil, although it's not a new expression. But that is really what we have here and it's very valuable. The large data sets inform us better than anyone else or products or features to build.

Operator

And of course, we're fully dedicated to The UK market. We can also either scale or fail experimentation increasingly fast with all this data. It drives development velocity. It drives quality on the platform. You'll see some of that on the next slide.

Operator

So starting in the table just below the chart, today we have over twice as many tech people as we had in 2020. So we're progressing well to more modern architecture with cloud transition now being well over halfway. That gives us even stronger product momentum. On the consumer side, we are progressing beyond find in that strategic model and further into the transaction. In 2025, we expect to launch new consumer features actually across all five of the Fatima lanes.

Operator

Those are the shades of turquoise you can see on the chart. We also drive a clear acceleration in products for partners, yellow and pink on the chart. For new homes, we have already in this year, twenty five, soft launched an early version of the new product. It's an appointment booking feature. We're working very closely since a while with two of our largest house builder partners.

Operator

For estate agents, we're path finding also for new product as well as of course enhancing many of the existing ones. We're continuing to upgrade Rightmove Plus, which is included in all partner subscriptions and which is making it easier for partners to self serve digitally on our platform for things like user access, insights, campaign creations and so forth. Its efficiency wins for them and its efficiency wins for us. Now, just a bit of a product case study in the afford domain, so for the consumer. This exemplifies how we build with quality and actual pipeline thinking.

Operator

We touched on this in half year last year briefly, the left slides here. But now we actually start seeing real results from building out the afford lane of the strategic model pretty quickly. We started with the MIP proposition already before and we have rapidly added several related features, online valuation, tracker property, renovation calculator, content pages on mortgages and most recently an expansion into remortgage MIPs. Many of these are actually quite unique tools and or are built on the best and biggest data and they're specific for The UK. So we give consumers reasons to visit more frequently, use new products, frankly love Rightmove even more, that drives both stickiness and it drives more monetization opportunities.

Operator

The other aspect is that we can grow new concepts faster and larger than competition due to our scale. In yellow bubbles here, last year, we generated over 1,000,000 mortgage clicks, 5x growth in our tracked properties and in only five months, we got 60,000 renovations done in our renovation calculated by consumers. For MIPS, we of course generate revenue today growing very healthily, but collectively across these products in the afford domain, still early stage, but we generated a total of 7,000,000 completely new data points that we never had before, thanks to the different products that we just developed literally in the last eighteen months. And all of them again are first party data points. It's unique.

Operator

So we have some, but certainly not all yet ideas of both the direct and indirect value of what this will bring. So what else can data be good for? Yes, AI continues to be a hot topic. On the left of this slide, just showing a little bit how we look at data and AI, we call it the house of values. So from bottom up is the important orchestration and infrastructure layers for great data and they are important.

Operator

But as mentioned, we are well over halfway to migrating to cloud and to our unified data platform and we're starting to see accelerations from that in many places. Now in the yellow boxes up top, we classify data and AI opportunities into four clear value drivers. What we want to see from literally all data and AI efforts we undertake. This is not a cost center. It's supposed to drive benefits for the company.

Operator

As one example of efficiency, all 24 product teams now enabled with GitHub Copilot and being assisted in their coding. So we're increasing posture, deployment, experimentation and excitement over AI. On the right, you can see examples of activities that we have ongoing and how they all tie back to one of the four value drivers. We're seeing and seeking results and certainly learnings across all facets of the business when it comes to AI and is led by our Chief Data Officer, who joined us just in the fall. It's a truly exciting enabling technology to a lot of what we do developing really quickly.

Operator

But I would also say that sifting the hype from real and high quality deployments is an ongoing process and I think for many. I'll give you a few examples of just live AI consumer experience that we have going at the moment. First, AI keywords. We're testing this in our Android app. So we're moving beyond lists of static filters to users instead prompting for keywords relevant to that specific user or how they choose to express themselves.

Operator

So So you can see just a screenshot example here. It's a prompt of outdoor space. That has resulted in the suggestions of land, balcony, etcetera, etcetera, which catches and also optimizes the properties that are returned back for it. It can lead to more listings views, relevant results, time on-site, ultimately of course driving leads. It also creates feedback loops to content creation, what we want to have on the content for the listings.

Operator

So AI keywords, yes, it is truly useful in itself, but more so we see it as a stepping stone towards conversational UI alternatives that we expect to come in the future. Next, AI location content, that was actually built in literally just couple of weeks in Q4 and we're trialing it in 20 towns across The UK, testing actually also different LLM engines. And while the average UK home mover only moved about six miles in 2024 on average, now we can with this easy experiment get a very efficient read on what value users might attribute to getting location information by listing. So no need to commission a load of expensive location write ups and lots of people to get that information anymore. Finally, the mortgage and principal propensity model.

Operator

So calls to action or CTAs key to generate MIP submissions. Our propensity model sifts through over 150 behavioral signals of millions of consumers, identifies high propensity cohorts among them that we can then expose to CTAs at the right time and the right place. And of course, that's directly driving revenue for the mid business. So AI is truly exciting. It does hold a lot of promise.

Operator

We are leaning in and we have a strong growing roster of differentiated products already. And again, massive data sets to leverage and that's what you need for AI. Now though, I want to return to our core estate agents of business and outline a little bit of what the products for that segment does and why we still think there is absolutely a long, long runway of revenue growth. For twenty five years, we built products for The UK market. We know what our partners want and what they need.

Operator

We now have a marketing suite of around 30 products, all also further enhanced from time to time. These products serve the full range of agents' needs. On property marketing, top left, our standard listing is our best selling product. The ability to market a property to The UK's largest and most engaged set of homeowners. Premium listing, a longer term feature for property increases exposure further, while a feature property is typically more tactically used around events like a new listing, price reductions, etcetera, and of course it increases views substantially.

Operator

Our branding products in the middle, including sold by me, native search ads and microsites, We can show agents now their share of voice on the x axis, really mathematically how it correlates with the number of new listings that that agent generates on the y axis. So in other words, Rightmove branding drives business results for agents and we can show and really talk about the ROI. And on direct response, top right, number of valuation products, leads, sorry, number of valuation products, where are we again, top right, which we deliver to agents, sorry, it was numbers in here, continues to grow irrespective of marketing dynamics. You can see that in the chart. It's just demonstrating the value of our regular enhancements of products.

Operator

Turning to the bottom of the slide, there's a number of services that we provide to all of our agent partners as part of a core membership and it's quite distinct part of Rightmove's offering. Agents have direct engagement with our data in Rightmove Plus and we share a lot of data within that. Rightmove Plus uses the whole of market view to deliver comprehensive personalized data to partners that they simply cannot get anywhere else. And of course, that data is complemented with intel and context from our account management in the field. They had over 50,000 meetings last year within the estate agency team and combined with Vipen plus our partnership model really is led by data and living through relationships.

Operator

So two examples on the bottom left of the slide, two competitor dashboards or the competitor dashboard shows how a particular branch is performing relative to its peers on metrics like instruction, stock, property, views and so forth, always of a lot of interest to any agent. How are they faring in the market? Property reports, they're digital, flexible and with the premium price guide, which is part of the Optimizer Edge package, it also gives both agents and Rightmove live data signals and indicators of how homeowners are interacting with the materials and when. Now, when we aggregate these products and services into the higher tier packages, results and ROI are boosted for that agent. Remember, Optimizer Edge also contains exclusive products, which drives upgrades.

Operator

For example, native search ads that Rory mentioned, already early on used by 70% of our OptiEdge partners. An OptiEdge package generates 12 times the brand views, 12 times the valuation leads and at the end double the number of instructions relative to an essential package. Those additional instructions generated imply roughly an eight times return on investment for an agent who chooses to do that upgrade from essential to opt the edge. So while we offer, of course, full choice in terms of package levels, these are very compelling reasons to be using more of the right wing products and to adopt even more digital modes of working from an agency perspective. Now we're also confident of a long runway in our core business given property market factors, which I think are important to remember.

Operator

And why? Well, because the average agency branch has access to already an attractive and steadily growing TAM. We estimate that the average right move branch had access to a residential transaction value of £40,000,000 in 2024, which is 10,000,000 more in 2015. Looking forward, if you hold transaction volumes constant and use consensus house price and rental projections, that implies a further increase of $6,000,000 by $28,000,000 And if you use other long term average for price growth and still no growth in transaction volumes all the way to $34,002,000 that implies over $50,000,000 per branch, I. E.

Operator

In ten years' time. So in summary, big revenue opportunity for our agent partners to capture all the way through next decade and of course beyond that too. We will meanwhile continue to deliver even better products and packages to support the agents and we will grow our revenue along with it. So that was a bit on the estate agency, why it's big, why we think it will continue to be big, but let's zoom out from that for a second and back to this sort of full potential of digitizing truly, truly much more of the property market. Our business will become more diversified over time, but it will be connected through one platform.

Operator

And we will be tapping large and growing segments over the coming years. We showed a near term addressable revenue opportunity at the CMD event. This chart shows a total potential opportunity, in aggregate totaling well over $10,000,000,000 per year. Today, we're capturing less than 3% of this opportunity. And this is data in twenty twenty four terms.

Operator

If you add in long term house price growth supported further by structural shortage, plus all the opportunities to move deeper into transaction in so many ways, we are confident the right move will deliver well above GDP growth for five, eight, ten and beyond years. In conclusion, our platform is a market leader, massively strong in network effects, profound network effects, and they are becoming stronger every single day. We have increased the momentum now on innovation, on digitization. We are enabling our plans to increase and diversify revenue over time and of course also to drive absolute profit growth. So we still call it early days, but we have good confidence for delivering in 2025 and it's also early days from a multi year perspective.

Operator

We're equally confident about that. Thank you very much. And I think we will go over to Q and A. And to be sure you don't forget the model, you have a picture on this slide as well. I think I have some instructions here.

Operator

Can you please use the microphones in front of you? I think they're in the seat armrests. You press and hold the button to speak. I think we can hear you anyways, but and can we please also just limit ourselves to two questions, at least initially?

Speaker 2

Hello. Hi. It's Jessica Parker, Peel Hunt. Two questions. The first one

Speaker 3

is, if

Speaker 2

you look at the new homes, the top package, you've got about 60% of developers now on the top package. So as we move into 2025, how do we think about product uptake and package upgrades? And when can we start thinking about when you'll add a new tier of packaging in new homes? The second is on the investments in 2025. Last year, a bit in marketing, headcount went up by double digits.

Speaker 2

This year, where can we see the investment going in? Should we be thinking about the similar kind of trends? Or were there a bit more in marketing and a bit less in headcount? How should we think about that?

Operator

I'll take the first one. You take the second one. So on the new homes package levels being at 60%, so there are a couple of things I think to say for 2025 and a bit of a reminder. We like a very high penetration of the top end package for new homes. There's a very simple reason.

Operator

New homes is roughly 10% of the overall listings, right? So it competes with resale. It competes for old consumer eyeballs looking at old potential properties. So the fact that new homes package penetration is higher for the top end package, you have to put it in context of who they are competing for. So that's one thing.

Operator

We're happy for it to continue to grow. I think the other piece with 25 is obviously that we have started to see probably coming up out of the valley or trough that, that market segment experienced last year. Cautiously optimistic, but definitely as advertised or communicated by most of the big developers, they are seeing a better '25 than '24 and then probably building even better into '26, right? It takes some time to turn around. But that's reason for optimism because it means that they will start adding more developments.

Operator

So that's what we suffered from last year when they simply didn't add as many developments as was expected. And then maybe the last one is, I mentioned the new product that we're trialing with two of our largest partners right now in new homes, the booking and appointment. So that's been probably researched and tested for quite a while. As usual, we simply asked some of these customers, what is the next thing? What's important to you?

Operator

And two things, we would love to know more about the buyer as opposed to just a lead coming in. And the quicker and easier we can get them to sales center at the site, the better. So we have built enhanced leads where we get more information from the applicant or the interested consumer. And we are also now being able to actually or they can make a reservation or request at a time for that appointment. And that functionality will continue to develop, eventually will actually be integrated with the big and medium sized home developers.

Operator

So consumers that are interested could do literally everything on the right of site and it's going to be smooth journey over and it's going to deliver value to the homes. Now that's early stage. We're in it. We have very good indications early on, right? But it's not something that we bank on big during 'twenty five, but it's a nice, again, builder layer for the outer years.

Speaker 1

And then in terms of your investment question, Jessica. So yes, clearly, we won't have such higher people costs as we saw in 'twenty four, but we are going to continue to grow headcount. So we continue to invest in the business, expect probably just over 50 heads being added in 2025. The makeup of them will be similar to what we saw in 2024 in terms of predominantly in technology roles, and there will be investment across the business in terms of core SGAs and consumer. In terms of the other cost buckets, a bit of a similar story to what we saw in 2024.

Speaker 1

So sensible growth in marketing and slightly higher growth in technology because of the cloud migration overlapping with our data centers. So really a kind of similar picture. The only thing to flag is we'll see a slightly higher amortization charge, of course, based on the higher CapEx that we saw in 2024.

Speaker 4

It's Kieran Dolly from Berenberg. A couple from me. I guess more explicitly just on optimizer edge. When should we expect, I guess, a new upgraded product package on top of that? Obviously, you went from OPTEE twenty twenty to Edge.

Speaker 4

Just kind of getting a sense of timeline as to when we should expect a new top package come in the structure. And I guess just secondly on the SGAs, I know, Johan, you mentioned operationally you feel like you're on track, but could you just, I guess, confirm that you feel like you're financially on track in terms of the contributions you laid out to 2028? Maybe just a joining question that. In terms of the 10,000,000,000 TAM number, could you just help us bridge between, I think it was the 1,800,000,000.0 you gave at the twenty twenty three Investor Day and what that kind of bridge is between those two numbers?

Speaker 1

Sure. So on the top package, look, the way we look at packages is actually three years out. So we have a really clear line of sight. We plan that far ahead. As Johan talked about, we've got a really exciting product road map as well to support that.

Speaker 1

I'm not going to go into the exact make of that based on competitive reasons because we've just seen optimizer edge. It will be too soon for a new top package in '25, and I'll flag a couple of reasons why. One, we still have a number of customers around 300 to migrate across, so that will be a focus in 'twenty five. And secondly, what you'll see back in 2015 and actually, I think we showed some slides on it in 2020 is when customers upgrade to a package, particularly the top package, they're engaging with products. And what we then see is that they actually choose to buy more of the same products or they choose to purchase other products within their marketing suite.

Speaker 1

So we often see very strong ARPA growth from customers once they've first migrated across. And that's certainly what we expect to see in 'twenty five is that the new Optimizer Edge customers will continue to grow ARPA and buy the discretionary choose to purchase more incremental product. So I wouldn't say there is any plans for a top package next year. I would dangle out there that we do have a new product that we are also pathfinding in a state agency. We expect to launch that at some point in 2025.

Speaker 1

Yes, really excited by that, and I think that will also help buoy some spend within that product suite.

Operator

Great. Just so well, the second one on the SG and A sense. So indeed, great operational progress and frankly, good to great financial progress so far, but it's early days. The operational piece is important because we as we laid it out, right, we have good line of sight to these segments. We've operated basically something in these spaces before, right?

Operator

And that's why we feel confident about going after it. But we have also added particularly product resources and we've obviously gone even deeper into the market and we start doing actual activity in the market and we learn as we go. So we're super happy about all of those pieces to date. Again, as I said, it's like it's an execution game for 2025. And we see no reason that we won't continue towards 2028, but also as we said before, it doesn't stop at 2028.

Operator

As a matter of fact, it won't be that big by 2028. Now, I think it's also important to remember that there are three quite different business models, but that's what they are. One is consumer, lead to keys is both consumer and agents. And obviously commercial is much more like the core platform if you want, but with different types of end markets. I would be surprised if they go at exactly the same pace because of that difference and even the end markets from an outside perspective.

Operator

We saw a little bit of that with commercial already, right? There has been a weaker backdrop. And well, you can see it this year, right, a little bit slower there, but mortgages going gangbusters. The totality of running at 27%, we're very happy with that, right, and we're looking to try to clock in at the totality of it. I'm sure we'll see new openings in some of them, and I'm sure we'll come up at one or the other challenge as well.

Operator

But right now, we feel good about it, and that's what we continue to do.

Speaker 4

And just on the TAM that you gave, that CHF 10,000,000,000 number versus the CHF 1,800,000,000.0 at 2023, I guess, just outlining the bridge between that?

Operator

Yes. It's a good upgrade, isn't it? Ben, do you actually want to take it?

Speaker 5

Yes. So the billion that the Capital Markets Day was an initial revenue opportunity. The billion is really a total market for the right business as it is today. I'm happy to run you through the components if that's helpful. Okay.

Speaker 5

Should we go to Rahul and move across?

Speaker 6

Hello, Rahul from HSBC. I have two questions. In terms of could you give us the underlying ARPA growth if you exclude basically the letting only agents and housing associations? Just what is the underlying ARPA growth from the core agency piece? And maybe in terms of guidance for 2025, could you dissect again the ARPA growth and the letting and the agency growth from the core versus the lower yielding ARPA agents?

Speaker 6

That's the first question. The second in terms of high level, in terms of how you're currently using internally AI to gather consumer insights to monetize leads to agents beyond the more traditional way, like for example, more qualified leads to agents? And how you think the new monetization model around those opportunities could be?

Speaker 1

So the off one. Yes. So

Operator

as

Speaker 1

I reiterate I'll just reiterate, I said in the script, absolutely, revenue is our focus. This year, we did see the a bit of ARPA dilution, but that was from the benefit of increased membership numbers, particularly from lower ARPA customers, but overall really good for revenue. It was a 1% impact to total ARPA, so around £15 which, of course, would go into next year as well. We expect to see a similar impact next year as well, Raul, in 2025. So that's baked into that guidance.

Speaker 1

And in terms of your questions and what we would expect in terms of the splits, I think the GBP 95,000,000 to GBP 105,000,000 range is a good range for both new homes and EA.

Operator

And on AI, you're spot on. Again, lots of data, lots of indications of behavior. So we have an initiative, an AI initiative to further in this case, it's not entirely rewriting, it's actually enhancing some of the propensity modeling that we have, let's say, in more old school ways, but they're effective. But enhancing that further, so we can segment and call out that predictability even better, which indeed will generate more qualified leads. It doesn't take away from the volume necessarily, but it is one of the active ones.

Operator

And there's a lot within that, again, the data underpinned products that we have where we can deploy AI.

Speaker 7

Sean. Sean Kieffer from Pammioli. A couple if I can. Firstly, you mentioned that you're a little bit over halfway done with the cloud migration. Are you willing to give us a timeline on exactly when you're expecting that to be complete?

Speaker 7

Secondly, I know a lot of the optimizer edge upgrades have been from moving clients from optimizer to opti edge. Are you seeing or is there anything to call out about uptake from the enhanced package? I think you said there's an eight times ROI. How are you seeing upgrades from that package into OptiEdge? And then just finally, if we can, we haven't talked about home views and anything you're developing for the build to rent sector at all.

Speaker 7

Is there anything any sort of update you can give us on that one as well?

Operator

Okay. I can take one and three. So cloud timeline, we are progressing this in one way as fast as we can, but in the other way or not but and in a very high quality way. We have a big business running, needs to deliver every single second. And Rory alluded to this, right?

Operator

We're a little bit in this challenged land of a number of things in the data center and now over half in the cloud. But actually operating that is not easy, but again, very good progress. So from a time line perspective, we're targeting most of this in the beginning of twenty twenty seven. Brilliant. Thank

Speaker 1

you. So, yeah, I mean, I feel a little bit sorry for the enhanced package actually if I'm honest, it's 15% penetration, but really that's just been the success of Optimizer 20 and Optimizer Edge. Many of our customers, when they're having that discussion with our account managers, it's the opportunity to upgrade, have a higher threshold in terms of products and exclusive products. And I think what we've seen is many of them choose that over the middle package. So in a way delighted, because it comes at the success of that top package.

Speaker 1

We have seen a usual continual increase of upgrades from essential to enhanced this year similar to the year before and the year before that, and we expect to see some again in 'twenty five. And that's what it's there for really is to help customers work themselves up a package the package ladder. So many new joiners may start on essential as their business needs change as perhaps they have different requirements. There's the opportunities to go to enhance and optimize. So we absolutely expect to see that continue going forward.

Operator

Okay. I'll give you the benefit of the third. Try to be quick. So home views, progressing really well. Last year was about obviously getting the two teams together, but particularly also making sure that before we start using home use and or reviews on the right new platform, we hardened their core engine, made sure it was up to snuff from our perspective.

Operator

We also started of course integrating aspects of it. So at the end of the year, we started exposing the review functionality to reviews from HomeViews on Rightmove. This means massively bigger audience potential obviously for the developers that were HomeViews partners already and it's been taken really well in the market And we simply go on from here. I think I said developers, just to be clear. It's mostly rental operators, so built to rent.

Speaker 8

Andrew here from Barclays. I've got two, please. The first one, I guess, is a big picture one. It's the first set of proper results you guys have had since REA made a series of bids for Rightmove. Just kind of curious whether there's any additional perspective that you guys want to share around that whole situation as FERC kind of standstill is due to expire in March?

Speaker 8

And I guess any perspective on cross border M and A in general in the industry, which clearly is a big theme at the moment? That's the first question. The second one is there's been a bit of noise in the last couple of weeks about one of your agent customers complaining about the 18% price rise starting a petition and arguing the CMA should look into your pricing practices. Just kind of high level curious on your take on that whole situation. Thanks.

Operator

Sure. I start with one. So on REA, look, we basically saying now what we said then. The board felt very confident, still feels very confident in Rightmove, continue to deliver value and generate a lot of value beyond the indications in that process. And I think that's exactly what we're showing through these results and hopefully of some of what we laid out as well.

Operator

I mean, in terms of further speculation and so forth, can't speculate on that. We tend to be focused on our business and we continue to feel very good about the opportunities ahead. There is well, there's always, I think, some forms of, of course, poor M and A or at least indications of it. Clearly, there was another one Down Under very recently involving some related parties. But if you were to ask me a specific question on that one, I would say, don't know, not in Australia.

Operator

We're focused on The U. K. That's kind of it.

Speaker 1

On the contract renewal point, we have a long standing pricing policy, which is based on value to all of our customers. And that's what we deliver, great outstanding value across our customer base. And we have to look at it fairly across all of our customers, new and existing. We're not entertaining those sort of increases unless there is absolutely the value commensurate with the package that they're on. And many of them are choosing to upgrade themselves or to take a different approach in terms of buying incremental product.

Speaker 1

So we haven't changed. Yes, there's some noise, but ultimately for the majority of our customers, we are incredibly happy with the value that we provide in the service. And it's something that we continue to monitor. And as you can see from the product road map, we're continually evolving to make sure that we continue to provide that value to them.

Speaker 9

It's Will Packer from BNP Paribas. And a couple for me, please. Firstly, in early twenty twenty four, CoStar spoke to spending $50,000,000 approximately on sales and marketing during 2024. And then there was an interview of their CEO in December, which confirmed they had completed those spending plans. Could you help us think through how that impacted the market?

Speaker 9

Is the way to interpret those comments as they came and spent more than double what you did and your traffic was share was totally unaffected? Or is it more actually they were spending on not specifically on marketing and building their business more widely, so that test hasn't yet come? And then I suppose related to that, any update on OTM or Zoopla's activities recent history? And then the second question is regarding the strategic growth areas. We're now, I think, eighteen months on from the CMD.

Speaker 9

I may be wrong, but that kind of ballpark. How are you thinking around the monetization strategy in those segments? Is it fair that it's kind of still very much in line of subscription products in commercial, mortgage leads on a kind of transactional basis, etcetera? Or has there been some kind of evolution now that you're a bit deeper into that story?

Operator

I'll start. You go on that one. So you referred well to the $50,000,000 and I was about to say as usual, it's a number that is thrown out there. Obviously, can't fully verify that. What we do know and we talked about this before, ever since then, which is now fifteen months, they have been very active in the market signing up and or trying to sign up more supply.

Operator

They have a pretty forward leaning, let's say, posture in terms of the market and how they view it and how they think others should view it. And they have spent marketing in digital format as far as we have ever been able to discover, search and online display. Again, what exactly goes into that number, don't really know, right? I think it's a combination of sales and marketing arguably. But we have not really seen anything nor do we hear literally anything or anything specifically in our conversations with partners.

Operator

So we again, we try to be of course, we keep track of that and measure things and whatnot, but it's really execution focus on our own business. And again, rolling out optimizer edge, both maybe a little bit in the backdrop of the property market and for sure some of that noise, I think, is a testament to our strength. So that's what we're going to continue to do. We continue to obviously closely look at things, just not spend too much time on it and we have to prepare for that more things will come or can come at least. I think you called it the phony war.

Operator

We'll see what the next version is. But the point of that is also that what we laid out as a strategy, first of all, we started in an extremely strong position, right? The network effects, the saliency, the behavior. And what we laid out as a strategy in terms of investing both in the core consumer propositions and the SGAs, that's like an offensive. We want to grow and diversify the business.

Operator

We think that works excellently from a defense perspective as well. So the better we do, the faster we can do that, the better, right? But we think we're in this lane and I know. Analogy might be, when Windows launched Bing, guess what, Google was already on to what, Chrome, Android, a bunch of other ecosystems that I have very good rights to play in. And I think we're sitting there and other people are chasing from a very, very different position.

Speaker 1

In terms of business models, nothing has made us change our view that we're going down the right routes for the SGAs, so no change in that. We're continuing to evaluating that there is the right approach. If it changes or we see something different, then of course, we'll pivot. The nice thing is now that we've got the people on board and those teams skilled up, if we needed to, we can do that at pace. But at the moment, really confident in the direction that we're going.

Speaker 9

And just to follow-up on the competitive context. Have we seen any new behavior from Zoopla in terms of either marketing or pricing that's worthy of our attention?

Operator

I can't really comment in details on it. We don't have that insight. It seems like it's pretty stable again, some of the charts and positions that you see in the market. So I think that's generally the answer. Soupla certainly continues to do business and they have a couple of different arms of the business as you know as well.

Operator

Thank

Speaker 5

you. Okay. Yeah, we're being waved up by the back, so I'm not sure the microphone was on, but I think the question was on broker, broker partners and mortgages and where we are on that journey.

Operator

Yeah. So yes, we have a few brokers to date and we are working to add more of them. And that might entail different paths or accesses for access for broker partners than the typical one that we have today. But re mortgages, for example, is a good that was a new product or another type of mortgage product that didn't follow the model that we had for new purchase exactly. So it will continue to evolve, but we think there is value in partner with our broker agents, again, provide them more volume of leads and high quality leads because of some of the data that we can supply with it.

Operator

So things are going to happen this year or next year within that space. Last one, and Kieran.

Speaker 4

Yes. Just one final one. In terms of the comment that it's the second strongest agency retention you have in a decade, I guess, why are what are the factors you think have driven that performance?

Speaker 1

I'll jump in that. I think it's a testament to the value that Rightmove is offering in a competitive landscape that we have and in, quite frankly, a very subdued property market. We continue to see agents talk with their spend in terms of upgrading an incremental product and still see that in terms of outcomes, Rightmove is the place to deliver those superior outcomes. So honestly, I think it also shows as a testament to the product that we've been providing in the last couple of years that's really coming to the forefront and some fantastic new products. It'll be ten years for me at Rightmove next year.

Speaker 1

I've never been so, so excited about the roadmap that's coming up. And I think honestly that's what's really helped the retention because it's been a tough year for estate agents. And I think it's they're due a better market and some positivity. So I hope it continues, but and then we will continue to deliver that value.

Operator

Great.

Speaker 5

Go on. Go on, just.

Speaker 3

Thank you. Sakian there. First question is back on Andrew's question actually, and I'd be interested to hear from Johan why in reference to the petition, why you think this type of thing keeps happening? Because it's happened more than once. And then secondly, on Commercial, I'd be interested to hear how big a competitive disadvantage, if at all, not being a global platform is.

Operator

Okay. Sorry. So look, I think customer relationships, discussions, agreements or disagreements on views, they happen in all businesses. Would I love to play or pay less to Google Cloud for our services? Yes.

Operator

They're providing a fantastic service and platform that will drive value or is driving value for our business. So I think the fact that a conversation like this can happen, it's really not strange in that sense. And I would also just repeat a little bit what Rory said. What kind of contract renewal rates is there in the market depends on the term of the contract, the timing, how you use or not use the product compared to others in the market. And that's what we're balancing over time, right?

Operator

But it's so clear the outcomes that we deliver and that we need to continue to deliver.

Speaker 1

Upgrade and talk with their feet in terms of that. We have over 50% of our customers choose to spend more than their commitment each month. So even though they've got a commitment, over half of our estate agents choose to spend more on products and therefore, they're seeing the value. So I would just bear that in mind. The fact is we monitor customer sentiment regularly.

Speaker 1

Every month we get an update and we look at that. We perform considerably higher than competitors in a number of the metrics in terms of how customers perceive us, particularly in the value of outputs that we give and innovation. So I would just bear that in mind when you see some of the noise.

Speaker 3

And just to follow-up on the petition, there was a specific point they made about the commercial practice of having a higher price if they leave and they want to come back. Is that standard across your industry? Is there any credence to their complaint there?

Speaker 1

No. In fact, the opposite. What we have to bear in mind is actually being fair to new joiners. The new joiner rate is higher than some customers that have been with us for a long time. And actually, what we have to do is look at fairness, which is why I mentioned the new and old because what we don't want to do is put off agent formation or create an unfair playing ground for those trying to enter the market.

Speaker 1

So what we often see is that actually the new jet joiner rate is higher than the number of those customers getting a contract renewal, and that's partly we have to be fair on on those new entrants as well. So that that's part of the fairness that we have to look at as well. It's not just existing customers, it's also new customers as well and what they're paying.

Operator

Sorry, what was that question? I thought you asked about the disadvantages about the global Yes,

Speaker 3

but you said your business not being a global operator.

Operator

Yes, okay. Sorry, same question. No, I really don't think so because of the fundamentals of this business and what it indeed looks like in most countries around the world. Network effects have been playing out. Most of real estate portal sites have been able to evade to a large extent the usual B2C Google tax and create extremely strong P and Ls, but also very strong network effects.

Operator

So the other piece is of course, yes, a property is a property, but property markets, the commercial models, what's involved, what's entailed and so forth is actually different in each market. I mean, there's been twenty five years of possibilities of building something bigger, and you don't see a lot of examples of that, right? So we don't think there are any massive advantages or something that we would think is actively interesting from that perspective. I would add, look, scale, is that interesting to some extent? Yes.

Operator

But in this case, with our P and L profile, it's from anyone else's perspective, right, it's like there's not a lot you can take out of it and or benefit from a scale perspective.

Speaker 5

Okay. That's great. Thanks all for joining us.

Operator

Thank you, everyone.

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Earnings Conference Call
Rightmove H2 2024
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