Funding Circle Holdings Plc · LSE:FCH
Funding Circle — FY2023 Earnings Presentation
32 slides from Funding Circle's earnings presentation, Mar 7, 2024
Slide 1: Full Year 2023 Results
FULL YEAR 2023 RESULTS “ 7 March 2024 Funding Circle’s loan has opened up new possibilities for our future growth. It was easy to apply and we received the money really quickly - it was a no-brainer ” for us! Anna Tyler, ANNA Cake Couture
Slide 2: Disclaimer
Disclaimer Information regarding forward-looking statements This Presentation includes forward-looking statements. These forward-looking statements involve known and unknown risks and uncertainties, many of which are beyond the Group’s control and all of which are based on the Group’s current belief
Slide 3: Group performance in line with expectations; go forward focus on profitable UK business
Group performance in line with expectations; go forward focus on profitable UK business Looking ahead: simplifying 2023 results: UK Loans business profitable business; cash and profit focus • Group performance in line with • Focus on UK business: expectations: ○ Indications of interest received for
Slide 4: Our go forward UK business
© Funding Circle Our go forward UK business
Slide 5: Where small businesses get the funding they need to win
Where small businesses get the funding they need to win We’re the UK’s leading SME lending platform £16.9bn c.150,000 146 Credit Small businesses Institutional extended supported investors We enable small businesses to borrow, pay and spend - offering an unrivalled customer experience powered by dat
Slide 6: Attractive growing and profitable go forward business
Attractive growing and profitable go forward business 2023 results: good growth; UK business meets broad set of Medium term outlook: investment in FlexiPay customer needs growth and profitability Borrow £1.29bn Longer term 2023 total originations1 (+12% YoY) Pay ~15-20% Monthly Net income growth CAG
Slide 7: Well positioned to grow in a large, underserved market
Well positioned to grow in a large, underserved market Large and underserved market Delivering superior customer experience £84bn £1.3trn Addressable SME SME B2B 6min 79 loans market payments Application time Customer NPS Data and tech led advantage Robust and attractive loan returns ~6% £1.1bn 3x 8
Slide 8: Our UK focus continues to be centred around our three strategic pillars
Our UK focus continues to be centred around our three strategic pillars 8
Slide 9: We are executing against these strategic pillars
We are executing against these strategic pillars Attract more Say yes to #1 in new businesses more businesses products FlexiPay extends our product range, Marketplace showing strong momentum, £297m FlexiPay driving increased relevance and with continued expansion and >£100m UK transactions since lau
Slide 10: FlexiPay spotlight: continued momentum, predictable repeat revenue and attractive unit economics
FlexiPay spotlight: continued momentum, predictable repeat revenue and attractive unit economics Strong recurring revenue dynamics Attractive growth, unit economics and risk profile Transactions by half year cohort, £m1 FlexiPay continues to show strong traction and growth: • ~4x growth in transacti
Slide 11: Leading UK online SME lender with attractive growth and profitability profile
Leading UK online SME lender with attractive growth and profitability profile • UK’s leading online SME lender with proven business model • Executing against our strategic plan in the UK • Go forward UK business is simpler and profitable with attractive growth opportunities
Slide 12: Financial performance
© Funding Circle Financial performance
Slide 13: Group financial performance
Group financial performance £m Total income AEBITDA PBT NAV2 Unrestricted cash 9.5 (12.9) (33.2) 284.0 165.6 169.6 151.0 162.2 246.8 (3.9) (3.0) 2022 2023 2022 2023 2022 2023 Dec 22 Dec 23 Dec 22 Dec 23 Growth in each business UK Loans profitable. Investment in US Loans and Strong balance sheet and
Slide 14: Group results in line with guidance
Group results in line with guidance 2023 guidance Performance against guidance UK and US Loans FlexiPay UK and US Loans FlexiPay Total income £150m-160m Over £10m £153.9m £7.9m AEBITDA £0-10m £(10-20)m £10.7m £(14.4)m 14
Slide 15: UK Loans AEBITDA and PBT profitable
UK Loans AEBITDA and PBT profitable £m Originations Loans under Management Total income AEBITDA PBT 1,095 1,060 3,311 2,853 101 98 372 2,325 1,456 6.5 959 118.8 121.4 21.3 723 1,397 13.8 (1.8) 986 2022 2023 2022 2023 Legacy loan schemes RLS 3.0 Commercial 2022 2023 2022 2023 2022 2023 Total income g
Slide 16: FlexiPay momentum continues, with card launch in H2 23
FlexiPay momentum continues, with card launch in H2 23 £m Transactions1 End of month balances1 Total income AEBITDA PBT (4.0) (4.0) (14.4) (16.2) 234 56 7.9 59 18 1.5 2022 2023 2022 2023 2022 2023 2022 2023 2022 2023 Transactions almost Investment in FlexiPay technology and team as Grew strongly, in
Slide 17: 2023 US Performance
2023 US Performance $m Originations Loans under Management Total income AEBITDA PBT² (3.5) (11.6) (13.3) (29.0) 535 40.4 491 454 36.0 401 2022 2023 2022 2023 2022 2023 2022 2023 2022 2023 1. Numbers above as translated into GBP for Group consolidation: Originations 2022 £327m, 2023 £396m; LuM Dec-22
Slide 18: Aligning costs to strategic needs
Aligning costs to strategic needs £m UK Loans FlexiPay US Loans¹ Managing cost efficiencies New product investment 118.2 118.0 55.6 44.3 21.4 5.5 2022 2023 2022 2023 2022 2023 • UK Loans is an established business, • Investment in FlexiPay technology and team demonstrating cost efficiency with costs
Slide 19: Track record in delivering robust and attractive loan returns
Track record in delivering robust and attractive loan returns Projected annualised returns by cohort1 Projected annualised returns by cohort1 - +20 +20 +30 -40 +20 +60 +100 +100 -40 2 2 Most recent expectations (H2 23) bps Change vs H1 23 expectations Base rate³ 1. The projected annualised return sh
Slide 20: Robust balance sheet position creates capital allocation options
Robust balance sheet position creates capital allocation options £m Net Assets Capital allocation framework • Sufficient cash for the full execution Deliver growth of our strategy 288.0 284.0 strategy • Funding FlexiPay to profitability and 246.8 funding lines of credit Dec 21 Dec 22 Dec 23 Prudenti
Slide 21: 2024 Outlook
2024 Outlook The UK businesses (UK Loans and FlexiPay) will be PBT positive from H2 24 FlexiPay AEBITDA positive in 2025 2024 Outlook UK Loans FlexiPay Net income >10% growth 3x growth PBT Margins of Continued investment, 8-12% with losses at a similar (equivalent to 20-25% level to 2023 AEBITDA mar
Slide 22: Looking ahead
© Funding Circle Looking ahead
Slide 23: Attractive growing and profitable go forward UK business
Attractive growing and profitable go forward UK business Multi-product business well positioned to capitalise on market opportunity Medium term outlook: growth and profitability Borrow Large and underserved Longer term market ~15-20% Pay Net income growth Monthly Tech & data competitive CAGR advanta
Slide 24: Appendices
© Funding Circle Appendices
Slide 25: FlexiPay: payments on your terms
FlexiPay: payments on your terms Pay bills or expenses by card or transfer directly Apply in minutes on our website and get an instant credit limit decision Congratulations! Use the FlexiPay app to paya business cost oa as FlexiPay ‘ratabetosoend £20,000.00 e: ...or use your FlexiPay card to pay in
Slide 26: Financial appendices
© Funding Circle Financial appendices
Slide 27: Group income statement
Group income statement £m H1 23 H2 23 2022 2023 1. Total income is defined as operating income and investment income less investment expense and before non-cash fair value gains/losses. Total Total Total Total 2. Adjusted EBITDA represents profit for the period before finance costs (being the £m £m
Slide 28: Segmental view of income
Segmental view of income £m H1 22 H2 22 H1 23 H2 23 Loans FlexiPay Total Loans FlexiPay Total Loans FlexiPay Total Loans FlexiPay Total United United United United United United United United United United United United Other Other Other Other Kingdom States Kingdom Kingdom States Kingdom Kingdom St
Slide 29: Segmental view of profit
Segmental view of profit £m split H1 22 H2 22 H1 23 H2 23 Loans FlexiPay Total Loans FlexiPay Total Loans FlexiPay Total Loans FlexiPay Total United United United United United United United United United United United United Other Other Other Other Kingdom States Kingdom Kingdom States Kingdom King
Slide 30: Cash, net assets and invested capital
Cash, net assets and invested capital £m Cash utilisation Net Assets Dec 22 Mov't Dec 23 Invested capital movement Dec 22 Mov't Dec 23 Dec '22 178 Unrestricted 166 4 170 Legacy securitisation, Free cashflow (5) Restricted 12 39 51 warehouse and other loans at Investment / funding cashflows 28 Cash 1
Slide 31: How we make money: 90% of income from fees
How we make money: 90% of income from fees Loans: FlexiPay: % of 2023 Total Revenue stream Typical yield Drivers UK & US UK income² Loan Originations Transaction fees ✓ c.6% 55% 2023: £1,456m LuM Fees Servicing fees¹ ✓ c.1% 30% 2023: £3,284m FlexiPay Transactions Drawdown fees ✓ c.4.9% 5% 2023: £234
Slide 32: Income statement re-presentation for 2022
Income statement re-presentation for 2022 £m Before re-presentation Adjustments After re-presentation The comparative financial information has been re- FY22 FY22 FY22 presented with Operating profit now removed and instead AEBITDA is reconciled to profit before tax. UK Loans 117.0 1.8 118.8 US Loan
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