Earlypay Limited · ASX:EPY
Earlypay — Investor Presentation (February 2023)
23 slides from Earlypay's investor presentation, Feb 24, 2023
Slide 1: H1 FY23 Results
H1 FY23 Results 24 February 2023 CEO James Beeson CFO Steve Shin COO Paul Murray
Slide 2: Strong growth in funds in use offset by tightening net revenue margin and higher provisioning
Strong growth in funds in use offset by tightening net revenue margin and higher provisioning Profit and Loss ($m) H1'22 H1'23 1 Average funds in use up 40% on previous corresponding period Reported Reported Δ pcp (“pcp”) to $343m Average Funds in Use 244.8 342.8 1 40% Interest Income 12.8 18.7 46%
Slide 3: Robust balance sheet with NTA position of $45m / 15.6 cps at 31 December 2022
Robust balance sheet with Net Tangible Asset (NTA) position of $45m / 15.6 cps at 31 December 2022 Balance Sheet ($m) H1'22 H1'23 Δ pcp 1 Cash position of $68.4m; $6.9m restricted cash held in trust for Cash and cash equivalents 25.0 68.4 1 174% warehouse facilities 1 Receivables - Invoice Finance 1
Slide 4: Earlypay could benefit significantly from a simpler and more efficient funding structure
Earlypay could benefit significantly from a simpler and more efficient funding structure Drawn Interest rate $328m funds were drawn as at December 2022 out of available Facility Size Cost of Funds Amount hedged1 $415m facility limits Invoice Finance Earlypay is unable to pass on increased interest r
Slide 5: RevRoof Impact
earlypay* RevRoof Impact
Slide 6: RevRoof was Earlypay's largest client and the ECL provision materially impacted 1H'23 financials
RevRoof was Earlypay’s largest client and the ECL provision materially impacted 1H’23 financials 7 December 2022: Announced RevRoof P/L, and its related entity, Painted Given the sale of RevRoof P/L, and uncertainty around recovering the Steel Technologies P/L, (collectively, “RevRoof”) appointed PK
Slide 7: RevRoof was an outlier in terms of client size and Earlypay is updating policies and procedures
RevRoof was an outlier in terms of client size and Earlypay is updating policies and procedures to ensure future asset performance remains robust Following RevRoof entering administration, Earlypay undertook a detailed review of its risk governance; underwriting and operational policies & Top 15 Cli
Slide 8: Proforma Financials
earlypay* Proforma Financials
Slide 9: Proforma unaudited financials excluding the impact of RevRoof
NOTE: The remaining presentation is presented based on proforma unaudited financials that exclude the impact of RevRoof, providing investors with an ‘underlying’ profile of the Earlypay business on a continuing basis Profit and Loss ($m) 1H'22 1H'23 1 Strong growth in average funds in use (up 33% pc
Slide 10: Strong growth in funds in use offset by margin compression
Strong growth in funds in use offset by margin compression – working on funding structures to improve 1 Interest income growth higher than ave. funds in use (30% growth in ave. Margin (%) (LHS) vs. Ave. funds in use ($m) (RHS) FUI vs 41% growth in interest income) 25% $210m 2 H1’22 NIM higher due to
Slide 11: Targeted EF proposition that is also used to support IF clients with additional financing
Targeted EF proposition that is also used to support IF clients with additional financing 1 Slower new loan origination in H1’23 reflecting more targeted EF focus. Margin (%) (LHS) vs. Ave. funds in use ($m) (RHS) Ave. funds in use is expected to fall in the short-term 12% $150m 2 Admin fees remaine
Slide 12: Outlook
earlypay* Outlook
Slide 13: The SME market is still nascent in its awareness of invoice financing as a funding alternative
The SME market is still nascent in its awareness of invoice financing as a funding alternative • SMEs mainly use banks for funding • At Dec-22 borrowings was $475b 2.6m SMEs in Australia 2 • ~50% SME lending is secured by residential property 5 ~ 1.0m B2B SMEs 3 Our Opportunity Substantial proportio
Slide 14: Our strategic priorities for FY23 remain largely unchanged
Our strategic priorities for FY23 remain largely unchanged Warehouse funding enhancements Significant cost savings to improve Net Interest Margin across all products More efficient use of Balance Sheet for growth Focused, marketing led distribution for Invoice Finance Large addressable SME market &
Slide 15: Earnings to recover in H2'23 and accelerate in FY'24
Earnings to recover in H2’23 and accelerate in FY’24 with strong organic growth and margin recovery H2’23 Underlying earnings to materially improve on H1’23 driven by continued organic growth at improved margins lower general and specific ECL provisions (compared to 1H’23) Earnings growth to acceler
Slide 16: Appendix
earlypay* Appendix
Slide 17: Generated positive net operating cash flow of $6.8m for 1H23
Generated positive net operating cash flow of $6.8m for 1H23 Cash Flow ($m) H1'22 H1'23 Generated positive cash flow from operating activities despite Receipts 15.6 14.5 significant increase in finance costs Interest received from customer 12.8 18.5 Payments (13.8) (15.8) Interest received 0.0 0.2 F
Slide 18: Tax rate on adjusted profit assumed at 30%
Reported RevRoof Adjustment Proforma Profit and Loss ($m) H1'22 H1'23 Δ pcp H1'22 H1'23 H1'22 1H'23 Δ pcp Average Funds in Use 244.8 342.8 40% (7.9) (26.7) 236.9 316.2 33% Interest Income 12.8 18.7 46% (0.4) (1.6) 12.4 17.1 37% Interest Expense (4.1) (9.5) 133% 0.1 0.7 (4.0) (8.8) 121% Net Interest
Slide 19: IF & Trade Reporting ($m) Key Metrics
Reported RevRoof Adjustment Proforma IF & Trade Reporting ($m) H1'22 H1'23 Δ pcp H1'22 H1'23 H1'22 H1'23 Δ pcp Key Metrics Ave. funds in use1 145.6 204.9 41% (6.1) (23.4) 139.5 181.5 30% Invoices purchased (TTV) 1,198.2 1,478.2 23% (26.9) (44.4) 1,171.4 1,433.8 22% Interest income 7.2 11.2 55% (0.3)
Slide 20: EF Reporting ($m) Key Metrics
Reported RevRoof Adjustment Proforma EF Reporting ($m) H1'22 H1'23 Δ pcp H1'22 H1'23 H1'22 H1'23 Δ pcp Key Metrics Ave. funds in use1 99.2 137.9 39% (1.8) (3.2) 97.4 134.7 39% Loan Originations 44.3 31.9 -28% (3.7) - 40.6 31.9 -28% Interest income 5.6 7.3 30% (0.1) (0.2) 5.5 7.1 30% Interest expense
Slide 21: Employing ~85 people in Brisbane, Sydney and Melbourne, Earlypay provides secured finance to SMEs
Employing ~85 people in Brisbane, Sydney and Melbourne, Earlypay provides secured finance to SME businesses Since 2012, Earlypay (‘EPY’ or the ‘Company’) has become a leading provider of leading provider of business Key Target Industries funding solutions to Australian SME businesses Invoice Finance
Slide 22: Board of Directors and management
Geoffrey Sam OAM, Non-Executive Chairperson Stephen White, Non-Executive Director Qualifications: BCom (UNSW), MHA (UNSW), MA (Econ & Soc Studies) Qualifications: M.Mngt, GAICD (Manchester UK), FAICD Responsibilities: Member of the Risk Committee Responsibilities: Member of the Audit Committee and M
Slide 23: Important notice and disclaimer
This presentation (”this Presentation”) has been prepared by Earlypay Limited [ACN 098 952 277] (“EPY” or the “Company”) and is dated 24th February 2023. Summary information This presentation contains summary information about the current activities of EPY as at the date of this Presentation. The in