Netwealth Group Ltd. · ASX:NWL
Netwealth — H1 2020 Earnings Presentation
41 slides from Netwealth's earnings presentation, Feb 18, 2020
Slide 1: Netwealth 1H2020 Results Presentation
Netwealth 1H2020 Results Presentation | netwealth
Slide 2: Our purpose
Our purpose is To enable people to see wealth differently and discover a brighter future
Slide 3: Our culture is value-driven
Our culture is value-driven Curious Optimistic Collaborative
Slide 4: Our strategy
Our strategy is to deliver Best-in-class technology Market leading, home grown platform, agile and tailored to client needs Best-in-class service Award winning, nimble and highly responsive — ‘we make our clients look good’ Insights that matter Provide deep insights to our clients and spot change th
Slide 5: Today's presenters and agenda
1H2020 Results Presentation Today's presenters and agenda Michael Heine Joint Managing Director Matt Heine Joint Managing Director Grant Boyle Chief Financial Officer 1. 1H2020 business and financial highlights 2. 1H2020 financial performance 3. Outlook 4. Questions 5. Appendix and additional inform
Slide 6: Business and Financial highlights
1H2020 Business and Financial highlights 1H2020 Results Presentation
Slide 7: Financial highlights 1H2020
1H2020 Results Presentation Financial highlights 1H2020 Further revenue and profit growth | or $58.7M $30.5M' Revenue EBITDA Ss & $30.5M' 84 cents’ Operating net cashflow EPS pretax S al 52.0%! $20.6M' EBITDA margin NPAT sa Vv Dividend 6.9 cps ASX 200 Interim dividend NWL in the S&P ASX200 index fro
Slide 8: Business highlights 1H2020
1H2020 Results Presentation 8 Business highlights 1H2020 S al ©& al $28.5B FUA $4.4B $5.7B FUM $1.7B Growth $5.2B (+22.2%) FUA net inflows Growth $1.8B (+45.7%) FUM net inflows Growth $9.5B (+50.2%) CY2019 UP $2.4B (+124.9%) Growth $2.6B (+83.2%) CY2019 UP $1.3B (+306.8%)
Slide 9: Recognised by the industry
1H2020 Results Presentation Recognised by the industry Ranked 15 for net promoter score, adviser experience, ongoing adviser support, overall functionality and client experience by Adviser Ratings! Ranked 15 for digital wealth application/service among wealth institutions? Ranked 1* platform for ove
Slide 10: Accelerating growth
1H2020 Results Presentation 10 Accelerating growth Continuous quarters of FUA, FUM and member Gaining market share, up 0.7% for the year to Sep 2019 account growth $ Billions No member accounts 35.0 75,000 30.0 65,000 25.0 20.0 55,000 2.9% 15.0 45,000 9% 2.2% pe | | 1.8% 35,000 5.0 1.3% 1.0% 0 25,00
Slide 11: Growth in financial intermediaries
1H2020 Results Presentation n Growth in financial intermediaries 2,711 Financial Intermediaries on the platform at 31 Dec 2019, up 13.3% compared to 31 Dec 2018 Growth is driven by Breakdown of FUA growth FY2015 to 1HFY2020 + Existing Financial Intermediaries: Continued migration of accounts from ou
Slide 12: Significant market opportunity for growth
1H2020 Results Presentation 12 Significant market opportunity for growth Platform providers by FUA market share! Platform provider net funds flows? % market share (Sep 2019) $'Billions (12 months to Sep 2019) #8 #1 18.4% S48B fea sp 16.7% 15.1% 13.6% $138 $1.2B $1.1B $0.98 $088 5038 $0.28 10.2% 45%
Slide 13: Opportunity in an evolving industry
1H2020 Results Presentation Opportunity in an evolving industry Scalable and innovative functionality plus superior customer service - as verified by our clients Adviser switching Ranked 1* platform NPS (Net promoter score) Advisers are transitioning from institutionally aligned and owned licensees
Slide 14: Australia's premier platform
1H2020 Results Presentation Australia's premier platform Ranked No! for overall functionality for the fifth year in a row and No! for overall satisfaction for the eighth year in a row by Investment Trends Award-winning technology enhanced by an exceptional service commitment 100% 95% oo netwealth 85
Slide 15: Financial performance
FY2019 Financial performance 1H2020 Results Presentation
Slide 16: Delivered scalable growth
1H2020 Results Presentation Delivered scalable growth Total revenue of $58.7M increased by $10.4M (up 21.7%) Underlying EBITDA of $30.5M increased by $5.7M (up compared to PCP 22.8%) compared to PCP $50.6M $27.2M $42.8M $21.8M $32.3M $10.9M $58.7M $30.5M $40.5M et $20.5M ba $29.0M $13.1M FY2017 FY20
Slide 17: Financial results
1H2020 Results Presentation 1H2020 financial results 1H2019 1H2020 Change %Change Financials” Actual Actual Platform Revenue 47.1 57.3 10.3 21.8% Other Income 1 13 0.2 145% Total Income 48.2 58.7 10.4 2.7% Employee Benefits Expenses (16.0) (19.9) 38 23.9% Other Costs & Expenses (74) (83) 1.0 13.0% T
Slide 18: Key performance metrics
1H2020 Results Presentation 1H2020 key performance metrics 1H2019 1H2020 Change %Change Platform Statistics Actual Actual Funds Under Administration FUA (eop) 18988-28511 9523.80.28 Fee Paying FUA% 623% 60.9% = (1.4%) (2.2%) FUA net inflows 1,936 4355, 2419 124.9% Funds Under Management Managed Acco
Slide 19: Platform revenue analysis
1H2020 Results Presentation 19 Pp | atfo rm reve n u e a n a lys i Ss == Average FUA / Average no of accounts Focused on profitable & sustainable revenue growth ee sik $255K —o 206K —o— * Average member account size increased to $351K for 1H2020 - —_o— and $376K for Dec 2019 (Wrap $878K, Super $201k
Slide 20: Platform revenue composition 1H2020
1H2020 Results Presentation 20 Platform revenue composition 1H2020 Non Admin fee income at 45% of platform revenue (increased by 2% compared to 1H2019) @ 55% Administration fees (57%) @ 7% Transaction fees (6%) + Wrap * Brokerage + Super * — Share settlement * Managed account brokerage @ 34%Ancillar
Slide 21: Strategic investment in our people
1H2020 Results Presentation 21 Strategic investment in our people Across technology, distribution and operations to support continued scalability and innovation Headcount increased across the business Headcount by function 31 Dec 2019 Information technology mnvestor services mlnvestment operations &
Slide 22: Strong cost management and exceptional cash generation
1H2020 Results Presentation 22 Strong cost management and exceptional cash generation High correlation between Underlying EBITDA and cash flow 50.5% 51.5% 52.0% 45.1% —o - o -_— 100.0%, 101.3%, 92.0% 30.5 $30.5 $24.8 | $25.1 $205 | $18.9 $13.1 | $17.0 12017 112018 1112019 12020 wm Underlying EBITDA
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Slide 24: Our investment in technology
1H2020 Results Presentation Our investment in technology Strategic increase in investment in our IT infrastructure, people and software for FY2020 * Maintaining our scalability and efficiency as growth accelerates * Compliance with regulatory changes * Continuing to build market leading product feat
Slide 25: Our investment in distribution
1H2020 Results Presentation 25 Our investment in distribution * Distribution headcount of 24 at 31 Dec 2019 * Further investment in distribution is : expected for 2H2020 adding three additional roles, increasing the total distribution team to 27 + Increased the distribution team across all states an
Slide 26: Outlook
Outlook 1H2020 Results Presentation
Slide 27: Outlook
1H2020 Results Presentation Outlook + With the end to all grandfathered commissions by 31 December 2020 estimated to represent approximately 34% of the advice industry's annual revenue!, Netwealth expects significant transition opportunities as advisers seek to provide their clients greater competit
Slide 28: Outlook: FY2020 forecast
1H2020 Results Presentation Outlook: FY2020 forecast Subject to no material change to economic conditions and financial markets we forecast: + Full year FUA net inflows of approximately $9 billion (subject to timing of client transitions) * FY2020 revenue to be in the range $120M to $122M * Underlyi
Slide 29: Thank you
Thank you
Slide 30: Questions
Questions 1H2020 Results Presentation 30
Slide 31: Important notice and disclaimer
1H2020 Results Presentation 31 Important notice and disclaimer General Information only Information provided is general information presented in a summary format as at 18 February 2020, and is therefore not necessarily complete. This presentation is for informational purposes only and is not to be r
Slide 32: Appendix and additional information
Appendix and additional information 1H2020 Results Presentation 32
Slide 33: Appendix 1- Reconciliation of underlying adjustments
1H2020 Results Presentation 33 Appendix 1- Reconciliation of underlying adjustments 1H2020 1H2019- Change _% Change Reconcilation of underlying adjustments Actual Actual Net profit before tax 29.5 2.3 62 26.7% Depreciation and amortisation 09 04 0.6 149.3% Depreciation on right-of-use assets (post A
Slide 34: Appendix 2- Reconciliation to underlying net cash flow pre tax
1H2020 Results Presentation 34 Appendix 2- Reconciliation to underlying net cash flow pre tax Cash flowworkings 1H2020 1H2019 Underlying EBITDA 30.5 24.8 Non-cash items in EBITDA 0.3 0.2 Changes in working capital 0.0 0.8 Capital expenditure (0.4) (0.3) Net (purchases) / sale proceeds on financial i
Slide 35: Appendix - Consolidated statement of financial position
1H2020 Results Presentation 35 Appendix 3 - Consolidated statement of financial position Asat 31862019 30,un 2019 ‘ASSETS ‘CURRENT ASSETS Cash and cash equivalents T3885 Debt free with $73.3M in cash Trade and other receivables 10.1 86 Other current assets 42 35 a *, . Financial assets 330033 Includ
Slide 36: Appendix 4- Netwealth Accelerator Plus
1H2020 Results Presentation Appendix 4- Netwealth Accelerator Plus Details of the Netwealth Accelerator Plus account fees that intend to be included in the Wealth Accelerator IDPS Guide and Super Accelerator PDS dated 1 March 2020 (the ‘Disclosure Documents’) are set out below. Super Accelerator Plu
Slide 37: Netwealth's Board of Directors
1H2020 Results Presentation Netwealth's Board of Directors Jane Tongs Chairman and Non-Executive Director (joined 2000) Previously a partner at PwC specialising in the financial services sector + Director of Cromwell Property Group, Warakirri Group, CCI Insurance Ltd, Hollard General Insurance and B
Slide 38: Netwealth's Management Team
1H2020 Results Presentation Netwealth’s Management Team Grant Boyle Chief Financial Officer and Joint Company Secretary (joined 2017) Over 30 years’ experience in financial services and accounting Was most recently the CFO of EMR Capital Has held CFO/COO roles at BlackRock (Aus), Phillip Capital and
Slide 39: Jun-17 Jun-18 Jun-19
4.00 2.71 2.93 1.85 2.11 1.40 Jun-12 Jun-14 Jun-16 Jun-18 Dec-19 Jun-25 668 690 768 848 886 888 518 598 431 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17 Jun-18 Jun-19 Sep-19 71 57 62 39 Dec-16 Dec-17 Dec-18 Jun-19
Slide 40: Strategic initiatives — evolving the revenue model
1H2020 Results Presentation 40 Strategic initiatives — evolving the revenue model “Software as a service” (SAAS) based subscriptions + extension of FUA & FUM revenue * Advice delivery is changing as consumers demand different Traditional platform revenue model Netwealth’s evolved engagement and serv
Slide 41: API-first, Microservice architecture
1H2020 Results Presentation 4 API-first, Microservice architecture API-first back-end Example microservices services support web . tas and native client apps Annuities Old New and 3rd party * Application interfaces. . User _ User Bank Feeds interface interface Microservice * Fees architecture enable