The WISR Ltd (ASX: WZR) share price is down more than 13% today following delivery of the online lender's first-half results. Wisr reported a loss during the half as expenses climbed while the company looks to grow and scale its business.
Wisr's business
Wisr is an online lender that originates personal loans of $5,000 to $50,000 with 3, 5, and 7 year maturities to Australian consumers. Wisr's average loan size is $26,000 with a term of 4 years and an average interest rate of 12.76%. Loans are then onsold to retail, wholesale, and institutional customers. Wisr has also launched a secured vehicle finance pilot which generated its first revenue in Q1FY20.
Loan origination
Wisr reported $54.9 million in originations in the half, a 90% increase over 1H19 and a 35% increase over 2H19. Total loan originations were $163.8 million at 31 December 2019.
Wisr hit the $150 million loan origination mark in November 2019, with the initial $50 million taking 45 months to write, the second $50 million taking more than 8 months, and the most recent $50 million written in less than 6 months.
The total loan book was $114 million at the end of 2019. This includes $89.6 million in off-balance sheet loans which are serviced by Wisr.
New funding facility
A new funding facility became operational in November, which provides for an approximate tripling of average margin compared to previous loan unit economics. The warehouse funding facility is backed by National Australia Bank Ltd. (ASX: NAB) and replaces the off-balance sheet wholesale funding model which had been in place since Q2FY18.
Wisr's 1H20 results
Revenues from ordinary activities increased 83% to $2.2 million in 1H20, up from $1.2 million in 1H19. This was driven primarily by strong growth in loan origination value. Key revenue line items include effective interest income, including loan establishment fees and ongoing loan book management fees.
Expenses increased to $15.17 million during the half, up from $4.67 million in 1H19. This increase is attributed to increases in staff and marketing costs to $4.3 million and $1.7 million respectively, incurred as Wisr continues its growth strategy in rolling out the Wisr Ecosystem.
A loss of $12.85 million was recorded for the half, up 272% on 1H19. Included in the total loss figure was $6.2 million of non-cash expenses predominantly relating to the reset of Board and staff incentive payments for FY20 to FY22, along with a provision for expected credit loss under AASB 9.
Credit quality
Wisr is working to automate, simplify, and optimise credit policy and its underwriting process. Based on industry comparisons, Wisr is attracting customers with higher credit scores across the industry, including the Big 4 banks and Wisr peers. 90-day arrears declined over 2019, reaching 1.51% at 31 December 2019 compared to 1.85% at 31 December 2018.
Maintaining credit quality and Wisr's share of revenue per loan is a priority in 2020. The average credit score of Wisr customers is 710.1. The intelligent credit engine used by Wisr assists by identifying undisclosed liabilities to mitigate risk. It also provides for operational efficiency and faster verifications, enabling scalability.
Wisr Ecosystem
The Wisr Ecosystem consists of a combination of financial wellness products that complement the core lending business. Wisr brands itself as having a vision of improving customers' financial wellness. This trusted value proposition allows Wisr access to B2B2C (business-to-business-to-consumer) channels including employers, superannuation providers, and health insurers who can distribute Wisr products to members.
Wisr@work, a financial wellness program, and the Wisr app, a debt reduction tool, were launched in 2019, allowing for low-cost customer acquisition. Additionally, WisrCredit is a credit score comparison service that provides detailed insight and credit scores across multiple credit score providers.
More than 120,000 Australians had been introduced to the Wisr Ecosystem as at 31 December. This represents an increase of 104% for the half-year with 61,500 introduced as at 30 June 2019. The Wisr brand is perceived positively by customers, with a net promoter score of 68.
Vehicle finance
The secured vehicle finance product aims to increase Wisr's total addressable market. Each year there are more than $80 billion in vehicle sales and Wisr estimates the market for consumer vehicle financing is worth some $20 billion annually. The major lenders are retreating from the market, creating an opportunity for Wisr to leverage its technology, brand, and consumer reach as a disruptive new market entrant.
Piloted in 1H20 through selected distribution channels, the secured vehicle finance product is now revenue-generating and will be rolled out more broadly across Wisr's full range of distribution channels in 2H20.
Capital raising
Wisr reports that it is well capitalised and had $10.2 million in cash at 31 December. In January, Wisr conducted a placement to institutional and sophisticated investors receiving commitments of $33.5 million that will be settled over two tranches.
The first tranche of the capital raise ($17.05 million for approximately 92 million shares) has settled. The second tranche ($16.45 million for approximately 89 million shares) will be issued pursuant to shareholder approval at the general meeting in March.
New regulation
Wisr believes new regulation impacting the industry will work in its favour. Open banking will allow the lender to use customer information to make faster and better credit risk based decisions. Wisr is a full participant in comprehensive credit reporting which it incorporates into credit decisions. As incumbents are forced to disclose this information, Wisr stands to benefit further.
Outlook
The company's Wisr Ecosystem business strategy revolves around developing a platform to scale and grow through a combination of financial wellness products that complement the core lending business. More than 120,000 Australians have now been introduced to the Wisr Ecosystem, with over 54,000 Wisr app downloads.
In FY20, Wisr is focused on growing the number of touch points across the Wisr Ecosystem and enhancing the use of customer data for the benefit of customers within the ecosystem. The aim is to scale the company, growing originations through the core lending business.
