Funding Circle Holdings Plc · LSE:FCH
Funding Circle — FY2022 Earnings Presentation
38 slides from Funding Circle's earnings presentation, Mar 2, 2023
Slide 1: Full Year 2022 Results
FULL YEAR Full Year 2021 2022 RESULTS Results Presentation 2 March 2023 10 March 2022 Funding Circle | Small business lending powered by machine learning, technology and data
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: Where small businesses get the funding they need to win
Where small businesses get the funding they need to win £15bn credit extended to 135,000 small businesses since 2010 “ Funding Circle lending in the UK during 2022 supported £6.9 bn GDP contribution 106,000 “We’ve taken out three term loans with Funding Circle and had a fantastic experience. The fun
Slide 4: What we do
What we do Borrow Longer term Pay We enable small Monthly businesses to borrow, pay and spend Spend Daily (in beta) 4
Slide 5: How we do it
How we do it >2 bn 3x Data points in Better risk discrimination data lake (Group) than bureau scores We deliver an unrivalled experience 6 min 70% for small businesses, Application time (UK Loans) Instant decision (UK Loans) powered by data and technology 77 4.6 Customer NPS Trustpilot score (Group)
Slide 6: Funding Circle is better positioned today than it has ever been
Funding Circle is better positioned today than it has ever been Proven resilience through change What this means for Funding Circle Last few years have brought significant challenges: UK Loans: more muted performance in short term • Covid-19 operating impact on small businesses • 2022 return to comm
Slide 7: Financial performance
© Funding Circle Financial performance
Slide 8: Revenue model: almost 90% of income from fees
Revenue model: almost 90% of income from fees FY 22 Driver Typical yield % % of FY 22 Total income Transaction Originations fees1 £1.5bn c.5% 55% c.1% Operating Servicing LuM fees £3.7bn 32% per annum Transactions 4.5%2 over 3 FlexiPay fees £60m 1% months Investment Investment Equity invested Variab
Slide 9: Key financial metrics
Key financial metrics H1 21 H2 21 H1 22 H2 22 FY 21 FY 22 • Originations of £1.5bn were down 35% from the peak £m of the government support schemes in FY 21 and from prudent credit strategy in the UK in H2 22. Originations 1,635 661 803 678 2,296 1,481 • LuM was £3.7bn, amortising down 16% from the
Slide 10: Strong growth in commercial lending following the peak of government support schemes
Strong growth in commercial lending following the peak of government support schemes in FY 21 £m Originations LuM 4,457 2,296 3,743 1,481 3,229 2,353 2,142 372 1,110 1,228 1,390 154 2021 2022 2021 2022 Government loan schemes Commercial Government loan schemes Commercial 10
Slide 11: The Group continued to be AEBITDA positive in FY22
The Group continued to be AEBITDA positive in FY 22, whilst total income reduced in line with originations £m Total income AEBITDA Operating profit / (loss) 206.9 41.4 91.8 148.7 17.3 70.0 165.5 131.4 6.8 64.2 21.8 22.1 2021 2022 (15.3) (14.7) Investment Operating 2021 2022 2021 2022 Investment Oper
Slide 12: UK Loans originations reduced from the peak of government support schemes
UK Loans1 originations reduced from the peak of government support schemes. Prudent approach taken on credit in H2 22 £m Originations LuM 3,944 1,972 1,972 3,311 1,095 1,095 3,104 2,325 1,909 1,909 372 372 723 723 840 986 63 63 2021 2021 2022 2022 2021 2022 Government loan schemes Commercial Governm
Slide 13: UK Loans continued to be AEBITDA positive
UK Loans continued to be AEBITDA positive £m Total income AEBITDA Operating profit / (loss) 159.4 117.0 61.9 44.3 11.7 (3.7) 2021 2022 2021 2022 2021 2022 13
Slide 14: US Loans showing strong momentum in commercial lending
US Loans showing strong momentum in commercial lending with originations more than doubling H2 21 to H2 22 $m Originations LuM 437 574 401 8 454 169 34 337 393 405 420 100 2021 2022 2021 2022 Government loan schemes Commercial Government loan schemes Commercial H1 H2 H1 H2 343 94 187 214 Numbers abo
Slide 15: US Loans underlying operating income continuing growth trend
US Loans underlying operating income continuing growth trend $m Total income AEBITDA Operating profit / (loss) 61.3 39.0 35.5 25.3 2021 2022 (4.1) 2021 2022 (11.5) Operating income ex. PPP Operating AEBITDA ex. PPP 2021 2022 H1 H2 H1 H2 H1 H2 H1 H2 23.2 4.0 7.5 10.9 5.5 (13.0) (10.1) (10.8) Numbers
Slide 16: Group operating expenses are broadly in line with FY21
Group operating expenses1 are broadly in line with FY 21 £m Costs broadly in line with FY 21 Marketing costs broadly flat at c.30% of operating income 28% 29% 167.4 168.2 2021 2022 2021 2022 1. Operating expenses are shown before exceptional items. 16
Slide 17: Proven track record delivering attractive and robust returns
Proven track record delivering attractive and robust returns, underpinning funding sustainability and resilience Projected annualised returns by cohort1 Projected annualised returns by cohort1 9% 9% +10 +10 +80 - - - +10 +70 +100 - 8% 8% 7% 7% 6% 6% 5% 5% 4% 4% 3% 3% 2% 2% 1% 1% 0% 0% 2017 2018 2019
Slide 18: Funding Circle has a sustainable funding model
Funding Circle has a sustainable funding model Loans under management £3.7bn ü Institutional investors assured by track record in with 3% funded by Funding Circle delivering attractive and robust returns at scale through the cycle ü Proven to be diverse and sustainable ü Agile to respond to market c
Slide 19: Expertise in aggregating institutional capital delivered sustainable funding
Expertise in aggregating institutional capital delivered sustainable funding in FY 22 and strong funding flow for FY 23 • Strong institutional funding and pipeline Institutional - UK: During 2022, four forward flow agreements signed, totalling £2.4bn. Additional material 86% forward flow agreement s
Slide 20: Net assets of £284m including cash of £178m
Net assets of £284m including cash of £178m • Net assets predominantly made up of unrestricted cash of £166m, restricted cash of £12m and equity invested of £97m £m • Unrestricted cash of £166m has reduced by £33m since Dec FY21 of which only £8m due to operating outflows • Other £25m outflows inclu
Slide 21: Our balance sheet is a source of strategic advantage
Our balance sheet is a source of strategic advantage Investing where it Supporting Managing share makes the platform FlexiPay funding Future growth operations dilution stronger • Cash retained for • Limited co- • FlexiPay funded • Further • Employee benefit prudential stress investment for on balanc
Slide 22: Looking ahead
© Funding Circle Looking ahead
Slide 23: Our growth strategy focuses on helping more small businesses win
Our growth strategy focuses on helping more small businesses win
Slide 24: Technology and data is at the heart of everything we do
Technology and data is at the heart of everything we do Funding Circle at the start of 2022 Thousands of '"(%#!" Funding Circle !"#$%!#!&% funding they need to win small businesses Direct Tech platform Prime loans Partner Data advantage Marketplace Broker Institutional capital aggregation Customer e
Slide 25: Growth strategy: expanded distribution, increased conversion, expanded product set
Our growth strategy is focused on expanded distribution, increased conversion and an expanded product set Funding Circle at the start of 2022 Thousands of '"(%#!" Funding Circle !"#$%!#!&% funding they need to win small businesses Direct Tech platform Prime loans Partner Data advantage Marketplace B
Slide 26: In FY22 we built the foundations to borrow, pay and spend
In FY 22 we built the foundations to enable small businesses to borrow, pay and spend Funding Circle today Thousands of '"(%#!" Funding Circle !"#$%!#!&% funding they need to win small businesses Direct Tech platform Super prime loans Partner Data advantage Prime loans Broker Institutional capital a
Slide 27: Our platform gets stronger with each customer interaction
Our platform gets stronger with each customer interaction and creates a deep moat around our business New products Attract (Funding Circle more & marketplace) borrowers Greater Accumulate operating more data leverage Say yes to Develop more better businesses machine (increased learning conversion) m
Slide 28: FlexiPay solves one of our customers' biggest pain points
FlexiPay solves one of our customers’ biggest pain points 67% 2022: the #1 platform for small of SMEs business sayloan term cashflow is borrowing their biggest issue1 “ With FlexiPay I can now buy in bulk, helping me get a discount from my supplier and increasing my margins. ” Vik Gubskis, Founder,
Slide 29: FlexiPay enables SMEs to manage their cashflow
FlexiPay enables SMEs to manage their cashflow by spreading the cost of payments How does it work? 1 Apply online: Instant decision 2 Get an approved line of credit for business payments 3 FlexiPay: Pay supplier now 4 Repay over 3 months with 0% interest and a flat fee 29
Slide 30: FlexiPay tripled cumulative transactions in last six months
FlexiPay tripled cumulative transactions in last six months with growing base of both repeat and new customer transactions FlexiPay continues to show strong traction and growth: New and repeat customer transactions • >3x growth in cumulative transaction value H1 22 to H2 22 £m • ~£60m total transact
Slide 31: SME B2B payments represents a major new market opportunity
SME B2B payments represents a major new market opportunity and our capabilities enable us to win in this space • Cashflow is a significant SME pain point • SME B2B payments is a huge market opportunity c.£1.3tr • We see significant growth opportunity in this space • We will scale FlexiPay in FY 23 –
Slide 32: Outlook
Outlook Funding Circle continues to be well positioned for long term success FY 23 Medium Term (FY 25) Expectation of challenging UK economic Group to double total income by FY 25 (incl. FlexiPay); environment in FY 23 prior UK medium-term guidance delayed by one year1 UK and US Loans FlexiPay UK Lo
Slide 33: Conclusion
Conclusion • Funding Circle is better positioned today than it has ever been • Technology and data driven competitive advantage continues to deliver superior borrower experience • Attractive and proven business model with robust loan returns • Executing on attractive growth opportunities over the me
Slide 34: Financial appendices
© Funding Circle Financial appendices
Slide 35: Group income statement
Group income statement H1 2022 H2 2022 2021 2022 Before Before Before Before exceptional Exceptional exceptional Exceptional exceptional Exceptional exceptional Exceptional items items Total items items Total items items Total items items Total £m £m £m £m £m £m £m £m £m £m £m £m Transaction fees 40
Slide 36: Segment profit split
Segment profit split Operating and investment income¹ and AEBITDA² (£m) H1 2021 H2 2021 H1 2022 H2 2022 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 King
Slide 37: Cash, capital and net assets
Cash, capital and net assets Unrestricted cash £166m Equity invested of £97m Net assets of £284m Unrestricted cash utilisation Equity invested movement Dec '21 Mov't Dec '22 Net Assets Dec '21 Dec '22 Dec '21 199 Securitisations 22 (15) 7 Cash 1 Free cashflow (14) Securitisation loan buyout - 19 19
Slide 38: Net assets and investment in vehicles
Net assets and investment in vehicles As at 31 December As at 31 December 2022 2021 Operating business Investment business Trading Securitisation Securitisation loan FlexiPay US funding loans CBILS/RLS/Core Private funds Total Total business SPVs buyout £m £m £m £m £m £m £m £m £m Investment in SME l
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