Airtasker Ltd

ASX:ART

Earnings Call Transcript 2022-Q2

[Timothy Fung, Co]

[Audio Gap] Tim Fung and Nathan Chadwick here are from Airtasker, and pleased to be providing you with an operational update following H2 FY '22. Alex, did you have any [indiscernible] that you wanted to mention?

[Unknown Executive]

Good morning, everybody. My name is Alex, I'm from Airtasker. We will be kicking off shortly. [Operator Instructions] And just a reminder that we have our half year earnings coming out at the end of the month -- end of February rather. So there'll be more information there. All right. Over to you, Tim, and Nathan.

[Timothy Fung, Co]

Awesome. Thanks so much, Alex. And yes, as Alex mentioned. We've decided to bring forward an operational update. Usually, we would do a bigger presentation following the half year results, but we thought would bring that forward. And this is really all part of Airtasker opening up and upgrading how much we're sharing with investors as we go along on this journey. So a quick reminder about Airtasker. We're Australia's #1 marketplace for local services. And in really simple terms, we connect people who need work done with the people who want to work. And we believe this is an absolutely huge opportunity because if you look at the way that people buy our physical products, the experience is just so slick on Amazon, Alibaba or Kogan, but when you think about the way people engage with local services, if you've got a leak in your bathroom or something like that, what you have to do, you have to ask a brand, roll the dice and go to the suppliers or a lead generation platform. And it's so difficult that most people just avoid this all together. So at Airtasker, we're treating simple e-commerce for local services. Our mission at Air so is to empower people to realize the full value of their skills. Creating jobs isn't a byproduct of what we do in Airtasker. It's actually part of our core purpose. And we believe this is an absolutely massive opportunity because 7.1% of Australians are already using our flexible platforms to be able to generate an income and 34.8% of those people choose to use Airtasker. In fact, since we started, I'm pleased to say that we've created more than $1.7 billion in job opportunities. And although this is a really, really significant number, it represents only about 0.3% of the opportunity in Australia. So an update on last quarter. Q2 saw a strong performance with GMV up 39% to $48.6 million. That was up around 23% on the previous corresponding period in FY '21. We also saw revenue increased 37.5% to $8.1 million, and the difference then the growth rate is that Airtasker really invested into creating trust with our [indiscernible] by taking certain actions to talk them and support workers during the COVID pandemic. That had a temporary impact on take rate, which has now normalized into the second quarter. Looking at GMV on a weekly basis, actually tells an even more clear story. Whilst lockdowns did have a temporary impact in the first quarter, this really bounced back in the second quarter. And you can see there that we've reached a GMV of around $4.5 million per week, which was record not only in terms of the absolute number that we've reached, being an all-time record of course, but also the annualized growth from kick to peak accelerating from 2020, 2019 [indiscernible] to 2020 and then into 2021. So looking at what drove this accelerating GMV trajectory. There were 2 main things that happened here. The first is that we saw unique paying customers. That, of course, was depressed while the lockdowns were happening immediately following the lockdown in October and November and December, we saw an increasing our unique paying customer acquisition with the number of unique paying customers being [2.6%] ahead on [indiscernible] October, 6.6% in Denver and then 8.9% in December. So really pleased with the way that, that has gone back. I'm going to now pass on to Nathan to talk a little bit about the average task price.

[Nathan Chadwick, Chief Financial Officer]

Thanks, Tim. So we're seeing a consistent upward trend in task price since Airtasker's inception, and that's a function of improved cost marketplace over time with customers more comfortable transacting increasingly complex tasks in the marketplace. That trend has accelerated somewhat over the past couple of years. And it's a function of 2 things really that we're aware of. Firstly, we're seeing consistent above-trend growth in trade categories, which have higher task values, our electrical, plumbing, filing, et cetera. Now 3 or 4 years ago, those would have been quite niche vertical marketplaces for us. They're now very much mainstream categories on Airtasker. And secondly, we're seeing a period of rebalancing in supply and demand for tasks, which is resulting in improving wages for all workers, which is a great outcome, obviously, for Airtasker.

[Timothy Fung, Co]

So in terms of our data in lockdown, we've looked in and analyzed the impact of lockdowns on marketplace activity. So between Q1 of FY '22, we can see that there is clearly a very large impact of 188 major city days in lockdown and that's an impact of around $12 million in GMV to Airtasker. This then reduced in Q2 to having about 32 major city days in lockdown. And this resulted in a much lower impact to our GMV growth in Q2. Although, if we normalize that out, that would have added about $2 million in additional GMV in the second quarter. So if we look at our H2 guidance, we're actually updating the guidance there from initially where we had $105 million of GMV in the second half, up to an increase of $107 million to $110 million in the second half. This represents full year GMV of $191 million to $194 million and lockdown-adjusted GMV of $205 million to $208 million. This, of course, is under the assumption of no further lockdowns maturing and a new COVID normal. I can do the chart here, it's virtually -- had a bit of a glitch in it. So that will be updated and shared -- and there we go. So what's driving our increase in our H2 guidance? And why are we upgrading our guidance from $105 million in the second half, up to $107 million to $110 million in the second half? Well, first of all, there's an absolutely enormous global TAM [indiscernible]. So if you look at the Australian opportunity, we have $52 billion total addressable market. But if we don't add the U.S. and the U.K. to that, it's almost 10x the opportunity. And we're talking about a global TAM of more than $600 billion in the local services space. Looking at Australia, we've penetrated the market and by that 0.3%, I'm generating about $153 million of GMV in FY '21. So we've got absolutely massive runway [indiscernible] in Australia. But actually, we just sort of -- we're able to just replicate this level of penetration in the U.K. and the U.S. We're talking about nearly $1.9 billion GMV opportunity and that's more than a $300 million revenue opportunity. If we can just replicate the penetration that we've built in Australia. So let's start with our progress in the U.S. So in the U.S., we're in what we call the zero to one stage of [indiscernible] around the marketplace. This is a very, very first stage of the marketplace where you're going from 0 activity to igniting that spark and getting our first traction in there. So the metric that we focused on during this period is posted tasks. The reason why that we focus on posted tasks is because every posted task is traded represents a job opportunity for our taskers, and as these job opportunities spin up, that's how we create an engaged base of taskers, an engaged base of supply. And really, this is all about building out infrastructure, the network effects that drive the Airtasker marketplace. So in the last quarter, we saw about 71% increase posted tasks quarter-on-quarter. And you can see here that we've focused on our 4 key cities which we play Atlanta, Dallas, Kansas City and Miami and we're seeing significant traction and growth in each of those markets on that metric. What we're also seeing now in those blue bars on the right-hand side chart there is we're seeing a trickle over effect into non-core U.S. cities as well. So they're all the cities that we're not putting core investments into. And you're seeing there that a big base of growth is going outside of the non-core cities. And this is the same effect that we saw in Australia. And it's a really positive byproduct, really positive side effect of the marketing that we do when we focus on cities. If we then hop across the fund to the U.K. So in the U.K., we're in the second phase of building out the marketplace. So we've already developed that posted tasks transaction. And we're now focused on balancing the marketplace to get the demand side, the posted tasks up as well as the supply side, that really engaged base of taskers and then focusing on connecting those 2 things together to produce transactions which are measured in GMV or gross marketplace volume. So in terms of an update there, in Q2, we saw the posted tasks, the demand for the marketplace increased by 106% on pcp. We also saw the supply side of the market, as measured by the number of [ quotes ] going to the platform increased by 102% on PCP. So those 2 things demand and supply and our growing imbalance and that resulted in GMV growing by 121% on the pier corresponding period. In addition, we hired a U.K. Country Manager to focus initially on growth in London, but then across all of the U.K. And we're investing into marketing in the second half of the year due to the seasonality and the seasonal nature of growth in the U.K. with a marketing media split of around 20% in the first half and 80% in the second half. So a much more aggressive market investment in the second half of FY '22. In terms of the team that we're building, we've had a really significant leveling up of our leadership team. So in July of '21, we brought on board our first ever CMO at Airtasker, Noelle Kim. She joined us from being the Head of Marketing at Instagram Asia Pacific. In the second quarter of this year, we onboarded Patrick Collins, in the role of Chief Product Officer. And Patrick was formerly the Head of Product and Technology at Zip. So really very great win to bring him on board to lead our product and operations functions at Airtasker. And then in Q3, in January of 2022, we brought on board Isa Notermans, as our first ever Chief HR Officer. Isa was previously the Head of Diversity at Spotify in [indiscernible] city and before that had rolls at Pandora, DesignCrowd and Google. What's really been fantastic here is onboarding this international experience with these key executives, or bringing on board experience from the U.S. market as well as, of course, having a strong understanding of the Australian tech landscape. Speaking about the investment into product, we've had some really, really key wins here. So we are continuing to invest into our core products and continuing to iterate and optimize the sales funnel. One thing that I've been really [ excited ] about is while Airtasker is [indiscernible] horizontal marketplace, we enable people to place any [indiscernible] verticalized [indiscernible] So as [indiscernible] into our specific task experience, actually, we actually just have been learning now to predict the task category that you're anticipating using Airtasker before. What we then do is we present you with an optimized experience. So for example, if you start typing [indiscernible] or tidying up or vacuuming, we predict that that's a cleaning task, and we offer you a series of questions, which makes it much easier to post a cleaning task. We've seen this increase conversion rate by up to 10% in core categories. So by removing that friction and making Airtasker much more frictionless marketplace, they're actually able to drive significant growth. Another example of investing to our core product is we implement [indiscernible] on [ tasks ] marked [indiscernible]. We're seeing upward [indiscernible] platform, you're seeing that you have to be able to get really good at matching up a task with the right tasker. So the initial launch of Smart Tasker Alerts been really exciting and we've seen that increased engagement with our taskers up by more than 34%. Our listings continue to become part of the core experience on Airtasker, continues to grow. We're seeing more than 3,500 bookings per week now. And that's really showing there that there's a real preference for this listings model in certain categories. Finally, a feature that we've all really excited and our customers have just been really begging us to roll out is our rebooking. And this is rolling out as a feature called Contacts. It's actually started to roll out to customers, and we're seeing some really, really exciting results here. But what is enabled I used [indiscernible] is go back into Airtasker, find that tasker that they've worked with before, really simply message that tasker and then to be able to transact through the Airtasker platform in a seamless way with an attractive SIM model, which makes it worthwhile for both the customer and the tasker to transact with Airtasker and also a whole range of incentives and conveniences. So this is rolling out in February of 2022, and that's starting tomorrow, which is really, really exciting. And we believe this is a whole new range of opportunity in Airtasker's product space. So just any transaction, which isn't just the first transaction between a customer and a tasker. So we talked a lot about our leakage in this area. And people ask us, what is the leakage on Airtasker between a customer and a tasker who's met before on the platform? And the answer was previously 100%, we did not have a functionality to enable those 2 people to reconnect and now we do. So super, super excited about that. Let's turn now for a little bit to an update on marketing. So as mentioned, our follow onboarding of our first ever CMO back in July, we've really boosted our marketing capabilities. So we had our headcount double from 10 folks to 20. So really key senior hirings being made in marketing. We continue to invest into core organic growth marketing channels, things like SEO, content development and CRM and seen some really [indiscernible] in marketing to our existing user base, which is more than 4 million people. We've also established marketing operations teams to address some of these localized and seasonal things that happened in our marketplace. So for example, when lockdowns were occurring, we through the tiers of our taskers like we made sure that they were able to maintain their status on the platform. And that was really important to build [shop] with our taskers. We also worked on things like COVID badges to enable people to be able to display their vaccination status on our platform and on their profile. And again, it's all about building shops between customers and taskers, and that's what really makes the flywheel move on Airtasker. In the first half, we primarily focused on a program of making infrastructure investments. So investing with things like strategy and creative production. And I'm super pleased to say that after investing into significant research, strategy and content production, we're now getting ready to launch our brand-new brand campaign called the Joy of Done. And that's going to really ramp-up in the second half with a marketing -- a working media and marketing investment split of 25% in the first half of FY '22, ramping up to 75% in the second half of FY '22. This campaign is going to roll out first in Australia. And I'm actually pleased to say that this campaign is going to start rolling out today. So literally, this morning, it's the first time we're all going to be seeing the Joy of Done. Were then going to be rolling it out into the U.K. in Q4 of FY '22 and also investing significantly into marketing in the U.S. as well. So thanks so much for your time today. I really appreciate taking your time to hear our [indiscernible] Airtasker can really grow totally [indiscernible] our hope with lockdowns. Thank you very much [indiscernible] Either myself or Nathan and are happy to answer them. Alex, do we have any questions coming through?

[Unknown Executive]

Thanks, Tim. Yes, we do. We've got 2 questions so far. The first line is from [ Steve Satin ]. It is on the U.S. market. With the trickle over effect into noncore cities, is Airtasker looking at expanding core city focus in the near term? And do you anticipate a further ramp-up in non-core city contribution with additional marketing spend?

[Timothy Fung, Co]

So I would characterize the trickle-over effect that we're seeing into noncore cities. It's a really, really pleasant side effect of our business model. What we can do is when we see pockets of growth coming out. We can really start to invest into those, and we saw this exact same phenomenon happening in the Australian market. We focused on Sidney and we're really actually the fact that we saw a trickle over into Melbourne that we thought, geez, there's a real command for what Airtasker is doing in Melbourne, so we got to go over the air and the same thing happened in Brisbane and in Perth. And so it's a very organic process and a very potent side effect that we're aware of in our business model. In terms of where we focus, over the next 6 months, we're really going to focus on these 4 key cities that we flagged, and what I think is really important about our business model is that we've really got this variable investment that we can make into the U.S. and the U.K. So the vast, vast majority of Airtasker's investment has gone into product investment in our head office and with the. Australian and our market now spinning off our cash flows and being able to [indiscernible] base, we can really choose how much we want to invest out of our cash flow that comes in Australia into the U.S. and the U.K. And of course, we're adding additional cash flow investment into the U.S. and the U.K. as well. But important to call out is that's very variable. And at this stage, we're focused on investing into those 4 key cities that we've mentioned over the coming [ quarters ].

[Unknown Executive]

We've got 2 more questions on the same topic actually from [ Steven Satin ] and [ Raj Amid ]. And the question is, will the resulting functionality be available in all regions initially? And how do you think about the take rate of that product? So what sort of pricing should we expect for these repeat tasks?

[Timothy Fung, Co]

From an overall level, so if I speak to my engineers, there's definitely a progressive rollout of a future like this, you got to deploy it across multiple servers all across the world. But certainly, in terms of -- when you take a monthly or a quarterly view, yes, Contacts, which is the product that powers booking is going to roll out globally from day 1. So that's really exciting. And I believe that it can have a huge impact on engagement in the U.S. and the U.K. as well as in the Australian market. In terms of the take rate on this product, so we have a pricing model, which really makes sense for our taskers. And so we focus on having a really attractive fee model on tasker over the marketplace with our service fee side of the market up there. And we are running a number of experiments to determine the final rate on that. But on the tasker side of the market, it will be considerably lower than the 10% to 20% that we currently charge in service fees. That said, on the customer side of the marketplace, where we charge a booking fee, our current proposition is to maintain that booking fee on the customer side of the transaction. If I -- to provide an anecdote on sort of the overall take rate that we are intending to charge for Contacts, in the U.S., learning from Zaarly's experience, they had a take rate of that 15% after a first customer, first tasker transaction and that progressively lowered over time, so that's 5% if a customer and a tasker continued a relationship. At that 5% level, are they saw close to 0 friction due to that fee model. And so I think that this is a good benchmark for us to think about Airtasker charges 17% currently on first transaction, so a little bit higher than where Zaarly was. And so that probably also puts a little bit of perspective on that 5%, where we believe there's virtually no friction between same customer and same tasker.

[Unknown Executive]

Okay. So the next question regarding U.S. metrics and the uplift in December. Is there any benefit from the Zaarly acquisition in there?

[Timothy Fung, Co]

Sure. So I think the first thing to call out is that we acquired a large registered user base from Zaarly. We started to contract that tasker base, which has been really fruitful for us. At the same time, as ramping up paid marketing investment and, of course, organic growth kicking in. I'd say the other massive advantage of the Zaarly acquisition was the acquisition of the marketplace ops team that we have on the ground in the U.S. So our Boeing team over there have a cracked team of executives who are able to get in direct contact with the local tasker community and really make sure that as we drive increasing demand into the marketplace, we're also able to onboard and intelligently match tasks to taskers in the local area. So to sum that up, I would say the big advantages of the Zaarly acquisition in relation to U.S. growth has been CRM, the database that was acquired there as well as other marketplace ops function.

[Unknown Analyst]

Thanks, Tim. One more question. Are you able to talk to your customer acquisition costs over the first half by region? There's a comment here that they've heard some recent commentary about the cost of SEO and SEM increasing as companies throwing more marketing dollars into the mix.

[Timothy Fung, Co]

So in terms of providing updates as to the market on some of these specific metrics, I flagged there that we've got that half yearly results coming out at the end of February. We're going to be providing a little bit more color on a number of those metrics in that presentation. Also I want to call out that in terms of the split, we're really seeing in a ramp-up phase in this first half. As we kind of flagged, in the U.S., we're talking about a market spend of roughly 20 [indiscernible] in the first half and second half. So we're really in the nascent stages. I'd also call out one important phenomenon related to marketplaces, which is that as we grow, not only do we gather scale and economics of being -- or having a larger marketing spend, but we're also gathering better unit economics as we go. The product is actually predicated on the network effect, and as we get larger, the product itself actually improves. And so you get that dual effect in terms of marketing efficiency improving. Of course, the marketing gets better, but also the product, the network effects are also improving over time, which drives even better marketing metrics.

[Unknown Executive]

That's it for questions.

[Timothy Fung, Co]

Awesome. Thanks so much for your time, everyone, this morning. Thanks, Alex and Nathan. And as always, looking forward to really the next step of the journey of Airtasker. Thanks, everyone.

[Nathan Chadwick, Chief Financial Officer]

Thank you Bye-bye.

[Unknown Executive]

Thanks.