Araxi Limited · JSE:AXX
Araxi — Capital Appreciation — H1 FY2023 Earnings Presentation
59 slides from Araxi's earnings presentation, November 2022
Slide 1: Interim Results Presentation
Interim Results Presentation For the six months ended 30 September 2022 1
Slide 2: Outline
Outline 1 Introduction 2 Highlights 3 The Opportunity 4 Strategy Execution 5 Financial Performance 6 Prospects 2
Slide 3: Capital Appreciation
Capital Appreciation We are a financial technology company that seeks to serve and partner with established and emerging financial institutions and other large corporates Payments Software International Enterprise Development 3
Slide 4: Everything Digital
Everything Digital General Payments Software ✓ Increased interest in digitalisation ✓ Substantial demand for payment ✓ Increasing demand for Synthesis terminals offerings ✓ Increased understanding of strategic importance and ✓ Strong demand for Android ✓ Demand across multiple industry competitive p
Slide 5: Consistent Approach To ESG
Consistent Sound governance, aligned with King IV R1.3 million training spend* Approach Diverse, representative Board of 52 learnerships* directors R2.8 million CSI spend* To ESG A solid foundation of transparency, effective control, accountability and Education, alleviating hunger, job responsibili
Slide 6: B-BBEE
B-BBEE Group Rating • Shareholding Commitment to B-BBEE has Level 3 • Deliberate focus on been an area of focus for the advancing our profile Group since initial listing Synthesis with HR led initiatives Level 2 ** • Training • CSI investment Dashpay Level 2 ** • Job creation • Enterprise developmen
Slide 7: Continued Growth of Capital Appreciation's Blue-Chip Clients
Continued Growth of Capital Appreciation’s Blue-Chip Clients In addition to the Financial Services leaders, CTA continues to penetrate new sectors and now delivers services in over 20 countries across the globe Financial Retail Healthcare Telecoms Logistics Services 7
Slide 8: Highlights
Highlights 8
Slide 9: Summary Group Financial Results
Summary Revenue Earnings & Dividends Group Revenue R 538.1 m 22.5% EPS 3.13 cents 58.0% Payments Division R 318.3 m 1.4% HEPS 7.76 cents 4.4% Financial Software Division R 219.8 m 75.4% Dividends 4.25 cents 13.5% Results Profit EBITDA* R 138.0 m Stable Strong results reflecting continued digitalisat
Slide 10: Investing for Tomorrow
Investing for Launch of Halo Dot offering in international markets Tomorrow Launch of Dashpay Glass in R14m South Africa International expansion in Europe Substantial investment expensed in current period Net new employee hires, excluding Responsive (81 YoY) R19m Responsive acquisition’s operating e
Slide 11: GovChat Update
GovChat ✓ Platform – Functioning well, international opportunities in public sector Update ✓ Government Contracting – Long and protracted Capital Appreciation has ✓ Meta/Facebook/WhatsApp Litigation – elected to impair the loan ✓ Competition Commission prosecuting Meta of R56.3m to GovChat in front
Slide 12: Payments Highlights
Payments Revenue R 318m 1.4% Highlights EBITDA R 120m 5.4% Terminal sales remain ✓ More than 315,000 terminals in hands of clients, near record levels of up 22% YoY H1 2022 ✓ Android solutions in high demand ✓ 23% increase in annuity revenue ✓ Halo Dot live in 5 instances, more to launch imminently
Slide 13: Software Highlights
Software Revenue R 220m 75.4% Highlights EBITDA R 46m 57.1% Superb results with ✓ Strong pipeline of new business ✓ strong momentum Significant increase in cloud projects ✓ Diversified revenue stream ✓ New verticals ✓ New geographies - Europe and Australasia ✓ Successfully Integrated Responsive Grou
Slide 14: International Highlights
International ✓ International revenue up 195% Highlights ✓ Offices in Amsterdam gaining momentum Considerable progress in ✓ Focused effort to further diversify establishing an the customer base international presence ✓ Enhanced access to international opportunities ✓ Sponsorship of FinTech event sho
Slide 15: The Opportunity
A The Opportunity [A
Slide 16: The Post Covid Landscape
The Post Covid Landscape Four irreversible shifts that are transforming operations 1 Rapid and extreme digitisation 2 Ascent of contactless operations 3 Virtualisation workplace of 4 Rise in alternative sources for talent From electronification to Shift to contactless customer Reorganisation of tale
Slide 17: Global Market for Cloud Continues to Grow
Global Market for Worldwide market share of leading cloud infrastructure service providers in Q3 2022 Cloud 34% Continues 21% to Grow . . . 11% 5% Up 24% YoY 3% 3% SA market expects 30% 2% Global Cloud Revenue for 12 4-year CAGR 2% months to Sept 2022 estimated at $217 bn *includes platform as a ser
Slide 18: Cloud Implications
Cloud Implications Cloud has a multitude of implications for corporate strategy, risk, and the broader business Category Example impact Improved speed and agility ~90% Improvement in time to market Easier innovation ~95% Time reduction for adding digital features Efficient scalability ~10-15% Saving
Slide 19: Drivers of Terminal Demand
Drivers of ✓ Growing Market – Increase in terminal Terminal enabled retail footprint Demand ✓ Enhanced Technology ✓ Increased Functionality – Provide merchants enhanced services Anticipate good demand for ✓ Terminal Envy – Merchants want contemporary new terminals equipment ✓ Regulatory Compliance –
Slide 20: Global View of Terminal Demand
Global View of Shipments by Type of Device In Millions with Market Shares Terminal Traditional Unattended 89.8 1.5 Demand (66.1%) (1.1%) MPOS/Chip & Signature 1.6 136 Terminal Shipments 2021 (and change since 2020) (1.2%) million Geography Volume % Change QR Code Middle East / Africa 8.9 m 35.7 % 1.
Slide 21: Digital Payments Expected to Grow in South Africa
Digital Payments Expected to Grow in South Africa The number of POS terminals is set to Card transactions growing rapidly grow further Number of POS terminals (000s) 900 6000 800 Transaction volume (millions) 5000 700 1113 600 4000 500 858 3000 400 687 2000 3835 300 2841 200 1000 2071 100 0 0 2016 2
Slide 22: Digital Acceptance in South Africa
Digital Number of stores per business Acceptance segment in South >70% of transactions are cash Africa Large & Large & corporate corporate 60 billion+ cash ~~2,654 2,654 companies companies transactions p.a. Businesses currently Medium Medium serviced ~ 8,193 companies Cash is big and continues to b
Slide 23: Fintech Revenue Growth in Africa
Fintech Revenues for Africa fintechs could grow by up to eight times if penetration reaches levels in other markets Revenue Total Africa fintech revenue potential, $ billion Growth in 35 30 25 Africa R million 20 15 30.3 8x 10 18.6 5 11.7 8x by 2025 3.8 0 2020 2025 (1) 2025 (2) 2025 (3) Estimated fi
Slide 24: Strategy Execution
A Strategy Execution [A
Slide 25: Consistent Strategy & Execution
Consistent Strategy & Execution Strategy has delivered substantial growth and our objectives remain unchanged since initially formulated Partner Innovate Execute • Work with corporate clients • State of the art proprietary • Service excellence • Create ecosystems for technology • Alleviate pain poin
Slide 26: Rebranding
Rebranding A fresh new look, with the same commitment to excellence Key Differentiators Proprietary platform End-to-end solutions 26
Slide 27: CTA Estate Continues To Grow
Payment Terminals 277 315 CTA Estate 185 217 Total Terminal Estate • Number of terminals in clients’ Continues 140 hands grew 22% YoY 92 • Includes terminals subject to rental agreements To Grow 49 Apr 17 Mar 18 Mar 19 Mar 20 Mar 21 Mar 22 Sep 22 12 months 233 6 months Terminals at period 220 end, i
Slide 28: Halo Dot Pursuing Opportunities Globally
Market Opportunity Is Huge Halo Dot Pursuing Opportunities Globally According to a 2021 study by Juniper Research, the global number of smartphones being used for SoftPOS payments will increase from 3.2 million in 2021 to almost 24 million in 2026 28
Slide 29: Anatomy of Dashpay Glass Experience
Anatomy of Dashpay Glass Experience Day: Sunday || Location: Remote Market 12.43pm App downloaded Merchant account registered 12.46pm (create a profile) First transaction initiated and first card 1.07pm payment received – R450 29
Slide 30: Save Now Buy Later
Not BNPL, Save Now Buy Later LayUp is a digital lay-by solution that provides for periodic instalment payments 87% Of people are defaulting on repayments of loans + 40% Unemployment + 20 Million rate People locked out of the economy South African statistics 30
Slide 31: Encouraged By LayUp's Progress
Encouraged By LayUp’s MTN Business App of the Year Progress R550k Largest Purchase 88% Completion Rate * R30k Average Order Size in Key Segment R80 Smallest Purchase > 2x YoY Increase in Merchants > 11x Payment Plans Created * Completion rate measures the % of payment plans initiated with currently
Slide 32: Synthesis Operating Units
Synthesis Operating Intelligent Data Managed Services Payment Technology • Data Intelligence is critical to (MSP) & Cryptography Units drive business success • 24 x 7 x 365 support and Responsible for Keystone and • Our team of Machine Learning management of high availability Halo Dot development En
Slide 33: Synthesis Leads With Ideas
Synthesis Leads With Ideas Finding our audience where they are with subjects that matter More than half a Launched Synthesis TV – Establishing thought Increasing clients’ Internal thought million Synthesis a TV channel keeping leadership with more skills by opening leaders sought after podcast & vid
Slide 34: Use Case
Use Case Solution Automated quality assurance system that parses verbiage to check agent compliance How a top 5 bank has Using: scaled to meet • An inference pipeline using multiple AWS services to process text with a Transformer language model regulatory • Analytics dashboard to ingest the results
Slide 35: Use Case
Use Case Challenge • Rollout throughout Africa - each country is designing and deploying in isolation • Isolated development removes reusability - diverse Standard Bank Delivers Data-Centric technology platforms selected to manage chatbots AI through Chat – Automating Africa • Valuable opportunity m
Slide 36: Use Case
Use Case Capitec approached Responsive to partner in the redesign and development of their public facing website. The goal was to be more customer centric and to drive new client acquisition from a Africa’s First Optimizely Digital retail banking perspective. Experience Cloud Responsive enabled and
Slide 37: Use Case
Use Case MoneyGram IOS | Android Mobile App MoneyGram International wanted to enter the retail cross border payment market in South Africa and chose Responsive as their preferred design and development partner. Working alongside the international product team and armed with knowledge of the local ma
Slide 38: Financial Performance
A Financial Performance [A
Slide 39: Payments Performance
Payments 533.8 Performance 506.2 6 months 469.9 415.1 397.4 • Terminal sales resilient – approaching 318.3 314.0 prior year record sales • Terminal estate up 22% 218.2 R million 161.8 • Terminal mix impacted nominal Rand 151.7 140.4 135.3 126.3 contribution 119.5 • Pleasing growth in annuity-based f
Slide 40: Payments Revenue Composition
Payments Revenue Composition Sale of Terminals Maintenance and Support Service Fees down 8.5% from terminals up 24% R million R million 210 193 85 • Terminal sales resilient after record 64 68 125 57 sales in prior year 99 Sep 19 Sep 20 Sep 21 Sep 22 Sep 19 Sep 20 Sep 21 Sep 22 • Strong demand for A
Slide 41: Software Performance
Software 297.2 Performance 6 months 222.1 219.8 195.0 21,5 Responsive R million 137.8 198,3 Synthesis 125.3 93.1 • Exceptional trading performance 70.1 57.5 53.8 • Strong demand for products and 45.6 43.3 33.9 services 29.0 7,7 • Responsive financials included for the 37,9 first time • Significant i
Slide 42: Software Revenue Composition
Software Revenue Composition Services and Consultancy Fees Licence and Subscription Fees up 51% up 3% • Positive trajectory and strong pipeline R million R million 145 68 82 96 26 26 26 27 • International opportunities Sep 19 Sep 20 Sep 21 Sep22 Sep 19 Sep 20 Sep 21 Sep 22 promising, currently mainl
Slide 43: Summarised Group Statement of Financial Position
Summarised Group Statement of Financial Position September September March (R million) 2022 2021 2022 Uncomplicated Balance Sheet ASSETS No debt Goodwill 769.7 728.6 769.7 No contingent liabilities Intangible assets 53.2 60.0 55.2 Asset-light business Investments in associates 4.0 5.4 4.8 Loan to as
Slide 44: Summarised Group Statement of Comprehensive Income
Summarised Group Statement of Comprehensive Income September September % increase / (R million) 2022 2021 (decrease) Strong demand for products and services Revenue 538.1 439.4 22.5% Increase mainly due to Operating expenses (108.8) (62.8) 73.2% growth related initiatives Responsive Group expenses (
Slide 45: Summarised Group Statement of Comprehensive Income Continued
Summarised Group Statement of Comprehensive Income Continued… September September % increase / (R million) 2022 2021 (decrease) Trading profit 150.5 147.5 2.0% Impairment of loan to associate (56.3) - n/a Competitive advantage in skills race Share-based payment expense (7.2) (4.7) 53.2% Amortisation
Slide 46: Summarised Cash Flow (Key Features)
Summarised Cash Flow (Key Features) September September (R million) 2022 2021 Strong cash generated Cash generated from operations 103.1 9.0 Finance income received 13.8 10.0 Larger cash balances and interest rate increases Acquisition of property, plant and equipment (8.7) (3.8) Strong dividend gro
Slide 47: Robust Cash Flow From Operations Supports Dividends
Robust Cash Flow From Operations Supports Dividends R million Cash cover Times Dividends (cents per share) 250 3.2 3.5 7 2.8 2.8 3.0 200 2.7 6 3.75 2.5 2.1 5 150 1.9 2.0 4 3.00 2.75 212.7 206.1 204.4 200.9 1.5 2.00 100 3 2.00 166.3 1.0 2 4.25 3.75 103.1 98.3 50 74.9 72.1 55.7 66.1 2.50 62.2 0.5 1 2.
Slide 48: Prospects
A Prospects [A
Slide 49: General Prospects
General ✓ A broad range of organic and acquisitive growth opportunities available to Capital Appreciation Prospects ✓ Valuations are more reasonable ✓ Economic climate impacting our clients and supply chain issues remain present in our planning Capital Appreciation is well ✓ Strong demand across div
Slide 50: Capital Appreciation's Positioning Remains Strong
Capital Appreciation’s Positioning ✓ Large and growing addressable markets Remains ✓ Experienced executive and formidable skills pool Strong ✓ Deep domain expertise and proprietary technologies in high demand (in high priority areas) ✓ Products and services have demonstrable global While challenges
Slide 51: Investment Case
Capital Appreciation’s ✓ Accelerating imperative for economies and Investment companies to digitalise ✓ Leadership position in industry with strong Case secular growth trajectory ✓ Demonstrated track record of delivery ✓ Trusted partner to blue-chip clients An extremely strong foundation on which to
Slide 52: Q&A Thank you
KX Q&A Thank you [A
Slide 53: Appendix
oN Appendix [A
Slide 54: Payment Revenue Model
Payment Revenue Model POS Devices Maintenance & POS Estate Transactions Licensing & Services Management Solutions Terminal sales Generates monthly Generates monthly Variable based on Generates monthly generate gross profit recurring revenue recurring revenue transaction type and recurring revenue Re
Slide 55: Software Revenue Model
Software Revenue Model Services and Licensing of Third-Party Software Hardware Sales Consulting Proprietary Software Licensing Generates monthly Generates monthly Generates monthly Sale of specialised recurring revenue on recurring revenue recurring revenue from Hardware Security project basis depen
Slide 56: Payments Proprietary Platform
Payments Proprietary Platform Unique, proprietary technology platform enabling rapid development and implementation of customised corporate solutions across a diverse range of sectors Blue Chip Clients Provide and operate payment and processing solutions for leading brands and International Banks En
Slide 57: Payment Services Offered
Payment Services Offered Customers can select packages or selected services a la carte Devices Software Activations & Logistics Call Centre • Stand alone: counter-top and • Software development and testing • Asset management • Product support portable • R&D • Key injection • Problem identification •
Slide 58: Payments Growth Strategy
Payments Organic growth opportunities are plentiful for a business with an established base, Growth immense industry knowledge and deep technical expertise Strategy ✓ Grow market for devices ✓ Continue to take market share in established segments ✓ Support existing clients ✓ Grow SA client base ✓ Fo
Slide 59: Glossary
Glossary AI AWS B2B Artificial intelligence Amazon Web Services Business to business M MPoC MSP Million Mobile payments on COTS Managed Services Provider B2B2C Business to business to consumer NA Not available B-BBEE Broad-Based Black Economic Empowerment NAV Net asset value Bn Billion NFC Near fiel
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