Slide 1: 1H23 Investor Presentation
1H23 Investor Presentation David Stevens CEO and Managing Director Simon Ward CFO All values in $AUD unless stated otherwise HARMONEY ©2023 FY23 INVESTOR PRESENTATION 28 28FEBRUARY FEBRUARY2023 2023 1 1
Slide 2: Important notice and disclaimer
Important notice and disclaimer The material in this presentation is provided for general information purposes No representation or warranty, express or implied, is made as to the fairness, only and is current as at the date of this presentation. It is not a prospectus or completeness, accuracy, ade
Slide 3: Contents
Contents 1. Delivering results 1H23 2. Overview of business model 3. Financial results 4. Strategy and outlook HARMONEY ©2023 FY23 INVESTOR PRESENTATION 28 FEBRUARY 2023 3
Slide 4: Delivering results 1H23
Delivering results 1H23 HARMONEY ©2023 FY23 INVESTOR PRESENTATION 28 28FEBRUARY FEBRUARY2023 2023 4
Slide 5: 1H23 results demonstrate a resilient profitable growth story
1H23 results demonstrate a resilient profitable growth story 1H23 1H22 Change Originations $241m $195m 23% Loan book $701m $429m 63% Revenue $50.1m $32.2m 55% Cost to income ratio 29% 43% 34% Cash NPAT $2.3m ($0.1m) $2.4m Cash RoE (annualised) 8% n/a n/a HARMONEY ©2023 FY23 INVESTOR PRESENTATION 28
Slide 6: Key points you should know about us
Key points you should know about us Financial Customer value Risk management Cash NPAT of $2.3m. Customers rate us! Quality portfolio. Cost to income ratio of 29%. Google & Shopper Approved >40% Homeowners. Unrestricted cash $30m. of 4.7/5 from > 50,000 3.1% annualised losses. reviews. 0.46% 90+ day
Slide 7: Continuing growth across all key business metrics
Continuing growth across all key business metrics 1. Account acquisition 2. New customer loans 3. Customer annuity 18% 20% Growth Growth ■ NZ ■ AU from IPO AU expansion powering rapid account Highly automated Stellare® platform Subsequent originations ~130% of first growth. converting more accounts i
Slide 8: Loan book growth drives scalable profits
Loan book growth drives scalable profits Australian loan book overtakes Group Loan Book New Zealand ● Group loan book $701m, up 21% from June 2022. ● Australian loan book $351m, overtaking New Zealand for the first time in like for like currency. ● Loan book growth drives 55% revenue growth on 1H21.
Slide 9: Overview of business model
Overview of business model HARMONEY ©2023 FY23 INVESTOR PRESENTATION 28 28FEBRUARY FEBRUARY2023 2023 9
Slide 10: Customer value proposition
Customer value proposition Delivering faster, fairer loans through our Use of funds smart technology • Personalised fixed rates based on Renovation Loans Debt Consolidation customer credit characteristics. • Loans up to $70,000 with terms of 3, 5 and 7 years. • Average new loan size ~$22,000. Car Loa
Slide 11: Harmoney's strategy: 100% consumer-direct
Harmoney’s strategy: 100% consumer-direct Deep Consumer Lower Return on Data + Lower Lower Fixed Machine = CAC + Losses + Funding + Opex = Equity target Costs of 20% Learning + Automation >20% Growth opportunities of consumer-direct model Unsecured Secured Other financial products personal loan car
Slide 12: Data + ML + Automation
Data + ML + Automation Deep Consumer Data + Machine Learning + = Lower CAC + Lower Losses + Lower Funding Costs + Fixed Opex = Return on Equity target of 20% Automation Every month, over 12,000 new customer accounts help us train High volumes of up-to-the-moment consumer financial data – combined wit
Slide 13: The Harmoney business model maximises customer lifetime value
The Harmoney business model maximises customer lifetime value Right customer Great experience Massive scale • Build reliable target customer model • First-class customer experience • Exploit tech to build scale, speed, through machine learning and high creates annuity revenue as and automation to de
Slide 14: Financial results
Financial results HARMONEY ©2023 FY23 INVESTOR PRESENTATION 28 28FEBRUARY FEBRUARY2023 2023 14
Slide 15: Key performance indicators
Key performance indicators 1H23 1H22 Change Loan book $701m $429m 63% Revenue $50.1m $32.2m 55% Net interest income % (1H22 a high point) 9.8% 13.0% (25%) Risk adjusted income % (1H22 a high point) 6.7% 10.9% (39%) Acquisition costs $6.5m $10.1m 36% Cost to income ratio 29% 43% 34% Statutory NPAT $(
Slide 16: Australian book growth powers revenue growth
Australian book growth powers revenue growth Revenue growth 55% on pcp Group revenue growth ● Revenue of $50m, up 55% on pcp, powered by 63% 55% pcp loan book growth. Growth ● Average interest rate 15.4%, down from 16.6% pcp on loan book weighting towards lower rate calendar year 2021 originations.
Slide 17: Consumer-direct model and data delivers lower CAC
Consumer-direct model and data Deep Consumer Data + Machine Learning + = Lower CAC + Lower Losses + Lower Funding + Fixed Opex = Return on Equity target of 20% delivers lower CAC Costs Automation Acquisition costs reduce 36% on pcp CAC % to originations ● Acquisition model delivered 23% origination
Slide 18: Deep data and machine learning deliver prime loan book
Deep data and machine learning Deep Consumer Data + Machine Learning + = Lower CAC + Lower Losses + Lower Funding + Fixed Opex = Return on Equity target of 20% deliver prime loan book Costs Automation Target Risk Adjusted Income % Credit losses (after losses) ~7% ● Convenient online consumer-direct
Slide 19: Diversified funding and hedging program lower risk
Diversified funding and hedging Deep Consumer Data + Machine Learning + = Lower CAC + Lower Losses + Lower Funding + Fixed Opex = Return on Equity target of 20% program lower risk Costs Automation Funding from 3 of the “Big 4” banks Average funding rate Interest Hedging ● Exceptionally low 1H22 fund
Slide 20: Stellare automation powers scalability
Stellare® automation powers Deep Consumer Data + Machine Learning + = Lower CAC + Lower Losses + Lower Funding + Fixed Opex = Return on Equity target of 20% scalability Costs Automation Scalability drives profitability Cost to income improves 34% Cost to ● Highly automated Stellare® platform enables
Slide 21: Strategy and Outlook
Strategy and Outlook HARMONEY ©2023 FY23 INVESTOR PRESENTATION 28 28FEBRUARY FEBRUARY2023 2023 21
Slide 22: Strategic growth initiative 1: Continue AU expansion
Strategic growth initiative 1: Continue AU expansion AU replicating in 9x market Huge potential for Harmoney in A$143bn market1 ● Stable market and an enormous growth opportunity for Harmoney as consumers gravitate online, with the vast majority of personal lending still provided by banks and tradit
Slide 23: Strategic growth initiative 2: Expand product offering
Strategic growth initiative 2: Expand product offering Non-prime accounts 1,000 / per month avg. New customers funded by Harmoney. 12,000 6,000 / per month avg. - Harmoney Opportunity per month avg. “Prime” accounts - bureau qualified people each month that are New customer not served by our current
Slide 24: Expanding product offering - Car loan
Expanding product offering - Car loan ● Car market: Large market across Australia and New Zealand, not historically a focus for Harmoney’s unsecured loan offering, where interest rates are typically higher than secured loans. ● Product: Harmoney’s disruptive car loan empowers customers with cash buye
Slide 25: Expanding product offering - Enhanced flexibility
Expanding product offering - Enhanced flexibility ● Stellare 2.0 is the next evolution of our proprietary software platform, providing expanded technical and product capability. ● This enhancement will reduce the time to market for innovative financial products, operating alongside our deep consumer
Slide 26: Outlook
Outlook Interest rates and pricing response FY23 outlook ● Ability to pass through targeted interest rate increases to maintain enviable ~10% net interest margin with highly diversified loan book. Origination growth ● Funding costs managed with a diversified funding panel and 75% of borrowings hedged.
Slide 27: Appendix
Appendix HARMONEY ©2023 FY23 INVESTOR PRESENTATION 28 28FEBRUARY FEBRUARY2023 2023 27
Slide 28: $701m Loan Book
$701m Loan Book Loan Employment purpose Region status HARMONEY ©2023 FY23 INVESTOR PRESENTATION 28 FEBRUARY 2023 28
Slide 29: Profit and loss
* Cash NPAT provides a more accurate representation of the underlying profitability of the business, adjusting for the impact of non-cash items, most significantly the movement in expected credit loss provision of $4.6m in 1H23, which is a non-cash provision for credit losses that may occur in future
Slide 30: Key operating and financial metrics
Key operating and financial metrics 6 Months ended 6 Months ended Year ended Year ended 31 December 2022 31 December 2021 Change % 30 June 2022 30 June 2021 Loan book value and growth Total originations (#039;000) 240,536 195,123 23% 442,540 238,738 New customer originations (#039;000) 146,170 122,300 20%
Slide 31: Cash Flow
Cash Flow 6 Months ended 6 Months ended Year ended Year ended 31 December 2022 31 December 2021 30 June 2022 30 June 2021 #039;000 #039;000 #039;000 #039;000 Cash flows from operating activities Interest received 48,131 30,099 68,969 35,684 Interest paid (17,359) (6,666) (17,233) (9,604) Fee income (rebated) / r
Slide 32: Balance Sheet
Balance Sheet 31 December 2022 31 December 2021 30 June 2022 30 June 2021 #039;000 #039;000 #039;000 #039;000 Cash and cash equivalents 55,886 52,623 56,805 71,122 Trade and other assets 2,495 2,484 1,665 1,762 Finance Receivables 701,712 428,639 580,309 288,526 Expected credit loss provision (33,840) (17,092)