Araxi Limited · JSE:AXX
Araxi — Capital Appreciation — FY2022 Earnings Presentation
57 slides from Araxi's earnings presentation, June 2022
Slide 1: Annual Results Presentation
Annual Results Presentation For the year ended 31 March 2022 1
Slide 2: Outline
Outline 1 Introduction 2 Highlights For The Period 3 The Opportunity 4 Strategy Execution 5 Financial Performance 6 Prospects
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: The Covid Accelerant: Everything digital
The Covid Accelerant: Everything digital General Payments Software ✓ Increased interest in ✓ Substantial demand for ✓ Increasing demand for “Digitalisation” payment terminals Synthesis offerings ✓ Increased understanding of ✓ Strong demand for Android ✓ New cadence to sales cycle strategic importanc
Slide 5: Consistent Approach To ESG
Sound governance, aligned R1.3 million training spend* Consistent with King IV Diverse, representative Board of 52 learnerships Approach directors A solid foundation of transparency, effective control, R2.8 million CSI spend* To ESG accountability and responsibility Education, alleviating hunger, jo
Slide 6: B-BBEE
B-BBEE Commitment to B-BBEE has Group Rating • Shareholding been an area of focus for the Level 4 • Deliberate focus Group since initial listing, on advancing our with more than 30% profile with HR Synthesis led initiatives shareholding in BEE hands Level 2 ** • Training • CSI Investment Dashpay • J
Slide 7: Positioning Remains Strong
Capital Appreciation’s ✓ Healthy balance sheet, enables management to focus on execution Positioning ✓ Experienced executive and formidable skills pool Remains ✓ Deep domain expertise and proprietary technologies in high demand (high priority) areas Strong ✓ Accelerating imperative for economies to
Slide 8: Highlights
Highlights
Slide 9: Strong Results
Strong Results Excellent operational performance ✓ Strong demand for Group’s products and culminating in HEPS up 30%, DPS up 36% services 15 ✓ Terminal sales up 51% 14 ✓ Software revenue up 34% 13 12 ✓ International income up 33% 11 ✓ Improved operating margins 10 9 ✓ International division establis
Slide 10: Topline Growth With Expanding Margins
Topline Growth With Expanding Margins Revenue up 34% EBITDA up 46% 900 300 800 250 700 600 200 R million R million 500 150 400 831.0 251.6 300 619.5 100 172.9 200 50 100 0 0 2021 2022 2021 2022 Operating Profit up 54% EBITDA Margin up 240bps Operating Profit Margin up 324bps 250 35 200 30 R million
Slide 11: Growth Across The Group
Growth Across The Group Payments Revenue up 34% Software Revenue up 34% 600 350 500 300 250 400 R million R million 200 300 150 533.8 297.2 200 397.4 100 222.1 100 50 0 0 2021 2022 2021 2022 International Revenue up 33% Employees up 24% 60 500 427 50 19.2 400 344 40 2.0 321 R million 8.5 Number 4.9
Slide 12: Payments Highlights
✓ More than 277 000 terminals in hands of Payments clients, up 28% YoY and 41% compound since 2017 Highlights ✓ Android solutions well received by customers Terminal sales increased ✓ Launched Halo Dot offerings with 5 new by 51.4% to R317.3 million customers contracted, and more imminent ✓ Expanded
Slide 13: Software Highlights
Software ✓ Recognised as AWS Consulting Partner of the year for Sub Saharan Africa – 2021 Highlights ✓ R300m in new business contracted ✓ Significant increase in cloud projects ✓ Secured additional AWS competencies, A positive result with strong further cementing leadership position, now +200 certif
Slide 14: International Highlights
International ✓ Launched new offices in Amsterdam Highlights ✓ Focused effort to further diversify the customer base Considerable progress in ✓ Enhanced access to international establishing an opportunities international presence ✓ Regal Digital investment ✓ Already profitable ✓ International VC par
Slide 15: Continued Growth of Capital Appreciation's SA Blue Chip Clients
Continued Growth of Capital Appreciation’s SA Blue Chip Clients In addition to the Financial Services leaders, CTA continues to penetrate new sectors. We deliver services in over 20 countries across the globe. Financial Retail Healthcare Telecoms Logistics Services 15
Slide 16: The Opportunity
The Opportunity
Slide 17: Strategic Benefits are Driving Cloud Adoption
Agility and Productivity 8% 13% Strategic Cost Savings Operational Resilience Benefits are Reduces the percentage of IT spend on infrastructure, freeing Cloud availability and security enables customers to improve Driving Cloud budget for reinvestment in other areas SLAs while reducing unplanned dow
Slide 18: The Value Of Cloud Transcends IT
The Value Of Cloud 1 Rejuvenate $340 billion Transcends IT • IT cost optimization • Risk reduction • Core-operations digitization Estimated at more than US$1 trillion 2 Innovate $750 billion • Innovation-driven growth Source: McKinsey & Company - Independent third-party research data (Omnicom Group
Slide 19: Investing in Customer Experience
UI and UX* Investing in Customer Experience Customer experience leaders outperform the market * User Interface (UI) and User Experience (UX) 19
Slide 20: Acquired The Responsive Group
Capital Appreciation Capital % Acquired Consideration Appreciation (Combination of Cash & Shares) Acquired Responsive Tech 100% The Responsive 100% Initial R32.5m Responsive Digital Rethink Additional R23.2m* Group Digital 71% Amsterdam Regal 20% Digital Invested €500,000 Another International Flame
Slide 21: About Responsive
Focus of Business About Deliver innovative digital solutions and products from initial client engagement through discovery, design and development Develop fast, secure and scalable web and mobile applications as well as expertly implementing Digital Experience RESPONSIVE creates web and mobile produ
Slide 22: Design Thinking
Empathise About Test Define Design Mission is to design delightful experiences that Thinking intersect user needs and business goals resulting in at its core successful digital products and services Prototype Ideate 22
Slide 23: Headless CMS SaaS
- Headless CMS SaaS Key Stats 19k+ Users 10k+ Projects Illustrative Customers 23
Slide 24: Web 3.0 software consulting and implementation
Web 3.0 software consulting and implementation company, partnering with clients to build Web 3.0 products Web 1.0 Web 2.0 Web 3.0 (1990 – 2000) (2000 – 2020) (2020 – Onwards) The INFORMATION Economy The PLATFORM Economy The OWNERSHIP Economy Username Sign in with Google Connect wallet Password Sign
Slide 25: Getting To Know Web 3.0
Getting To Know Web 3.0 Web 1.0 Web 2.0 Web 3.0 Read only / Information Participatory / Platform No intermediaries / Ownership Decentralised Centralised Decentralised Web 1.0 – Yahoo, Netscape, Amazon, Google, Internet Explorer, Mosaic, MSN (Microsoft) Web 2.0 – AWS, Firefox, SnapChat, Explorer, Twi
Slide 26: South Africa's Digital Acceptance Footprint is Increasing
South Africa’s Digital Acceptance The number of POS terminals is set to grow further Footprint is Number of POS terminals (000s) 900 800 Increasing 700 600 Market opportunity of more than 500 800 000 payment acceptance 400 devices in South Africa alone, with many more across Africa 300 • Standalone
Slide 27: South Africa's Expanding Merchant Profile
South Africa’s Breakdown of acceptance frontier by number of stores per business segment Expanding Merchants in these Merchant sectors will be well within the current acceptance frontier, and should all have access to a POS Large & corporate ~ 2,654 companies The conventional acceptance frontier is
Slide 28: Strategy Execution
A Strategy Execution [A
Slide 29: 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 30: Payment Terminal Estate Continues To Grow
277 Payment Terminals 217 Total Terminal Estate Estate 140 185 • Number of terminals in clients’ hands grew 28% YoY, 41% 5yr Continues 49 92 CAGR • Includes terminals subject to rental agreements To Grow Apr 17 Mar 18 Mar 19 Mar 20 Mar 21 Mar 22 Terminals at period 220 end, in thousands 175 135 Acti
Slide 31: Halo Dot Pursuing Opportunities Globally
Market Opportunity Is Huge Halo Dot Pursuing Opportunities According to a 2021 study by Juniper Research, the global Globally number of smartphones being used for SoftPOS payments will increase from 3.2 million in 2021 to almost 24 million in 2026 31
Slide 32: Continued Progress In Payment Services Offering
Continued Progress In Payment Gross Tx Value Services > 12.5x in 4 years 31% R6.4bn 6% R6.8bn Offering 340% 123% R4.9bn ✓ Merchant terminal count continues to increase ✓ Transaction related revenue continues to R2.2bn increase – by 69% ✓ Focus on solving complex enterprise problems R500m ✓ Enhanced
Slide 33: Not BNPL, 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 33
Slide 34: Encouraged By LayUp's Progress
Encouraged By Year-On-Year Comparison LayUp’s Progress > 10x Monthly new Payment Plans 89.2% Completion Rate * ~ 3x Merchant sign-ups > 9x Monthly new Users > 5x Monthly transaction value * Completion rate measures the % of payment plans initiated that are paid through to completion and the goods ar
Slide 35: Payments Growth Strategy
Organic growth opportunities are Payments plentiful for a business with an established base, immense industry Growth 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 36: Synthesis Operating Units
Synthesis Intelligent Data Managed Services Payment Technology Operating • Data Intelligence is critical to drive business success • Our team of Machine (MSP) • 24 x 7 x 365 support and management of high & Cryptography Responsible for Keystone and Halo Dot development Units Learning Engineers and D
Slide 37: Synthesis Leads With Ideas
Synthesis Leads With Ideas Finding our audience where they are with subjects that matter Almost half a Launched Synthesis Establishing Increasing clients’ Internal thought million Synthesis TV – a TV channel thought skills by opening leaders sought after podcast & video keeping viewers on leadership
Slide 38: Synthesis' AWS Leadership Continues
Synthesis’ AWS Leadership Continues Partner Of The Year 2021 (Sub Saharan Africa) Synthesis’ partnership with Amazon Web Services, enables world-class solutions for our clients More than 200 AWS certifications 38
Slide 39: Alumni Steers Success
Challenge Alumni Client based in Singapore and is the largest Independent Shipping Feeder operator in the world, falling behind due to Steers Success aging infrastructure Needed to increase efficiency, accuracy and costs for clients Full digital transformation - setting up of Solution a ‘Scaled Agil
Slide 40: DG Capital Reshapes Employee Rewards
Challenge DG Capital DG Capital required the development of a SaaS platform to manage large enterprise’s employee Reshapes Employee rewards and incentives schemes Rewards with Total Solution • One platform for organizations to manage Reward SaaS software employee rewards & incentives as a digital pr
Slide 41: Positioned To Enhance Partnerships
A citizen-government engagement platform in cooperation with COGTA Positioned To Enhance UNITED NATIONS Partnerships Platform development Actively participated Delivered more than in Covid response 13.2 million grant work done by Synthesis efforts applications digitally Recognised by AWS as Sub-Saha
Slide 42: GovChat Success To Date
187 7 13.2 Thousand Success Million Covid Connect Users Million Social Grants – Applications received Ward Councilor searches To Date 1.18 Million Booking 19.8 Thousand 625 GBV Million enquiries GovChat South Reports GovChat Messages Africa User Activity 4.4 processed Thousand GBV Call center 124 10
Slide 43: GovChat vs Meta WhatsApp Facebook
✓ Towards the end of 2020 FB/WhatsApp attempted to GovChat vs remove GovChat from its platform Meta ✓ In November 2020 GovChat sought relief from the Competition Tribunal alleging anti-competitive behaviour WhatsApp ✓ GovChat prevailed and continued to have access to the WhatsApp platform on a limit
Slide 44: Financial performance
Financial performance
Slide 45: Payments Performance
Payments R million 533.8 600 506.2 Performance 469.9 500 415.1 397.4 400 • Significant pipeline of terminal 300 218.2 orders 161.8 140.4 151.7 200 135.3 • Growth in payment services activities 100 • Operating leverage from 0 FY '18 FY '19 FY '20# FY '21*# FY '22 increased scale delivers 550bps Reven
Slide 46: Payment Revenue Composition
Payment Revenue Composition Sale of Terminals Maintenance and Support Service up 51% Fees 350 from terminals up 8% 300 200 • Strong demand for Android 250 terminals R million 150 R million 200 331.6 317.3 150 100 100 209.5 50 115.3 137.9 148.7 • Transaction related income 50 benefiting from speciali
Slide 47: Software Performance
Software R million 350 297.2 Performance 300 222.1 250 195.0 • 5 years of sustainable revenue and EBITDA growth, even 200 137.8 during COVID crisis 150 • R300 million of contracted new 93.1 sales will flow through over 70.1 100 57.5 53.8 multiple years 43.3 33.9 • Historic margins on core product 50
Slide 48: Software Revenue Composition
Software Revenue Composition Services and Consultancy Fees License and Subscription Fees up 34% up 12% 240 70 200 60 50 160 R million R million 40 120 219.4 30 60.0 163.9 53.5 80 153.0 20 36.4 • Strong acceleration in 40 10 demand across all 0 0 products and services 2020 2021 2022 2020 2021 2022 •
Slide 49: Group Condensed Statement of Comprehensive Income
Group Condensed Statement of Comprehensive Income Strong demand for 31 March 31 March % increase / (R million) products and services 2022 2021 (decrease) Expensed additional Revenue 831.0 619.5 34.1% staff, Netherlands office, marketing and product Operating expenses (156.4) (125.0) 25.1% developmen
Slide 50: Condensed Group Statement Of Financial Position
Condensed Group Statement Of Financial Position 31 March 31 March (R million) 2022 2021 Uncomplicated Balance Sheet ASSETS No debt Goodwill 769.7 728.6 Intangible assets 55.2 61.2 No contingent liabilities Other non-current assets 95.3 85.9 Asset-light business Non-current assets 920.2 875.7 Cash an
Slide 51: Cash Flow (Key Features)
Cash Flow (Key Features) 31 March 31 March (R million) 2022 2021 Cash generated from operations 204.3 200.9 Interest rate increase Finance income received 22.0 21.0 Dividends paid (82.1) (64.6) Effective asset management Taxation paid (56.9) (53.4) Asset-light business Changes in working capital (59
Slide 52: Robust Cash Flow From Operations Supports Dividends
Robust Cash Flow From Operations Supports Dividends Cash Cover R million Times 212.7 250 3.2 3.5 Dividends (cents per share) 204.4 206.1 200.9 3.0 2.8 2.8 2.7 7.50 200 166.3 2.5 2.1 150 5.50 2.0 5.00 98.3 4.25 4.00 1.5 100 74.9 72.1 66.1 62.2 1.0 50 0.5 0 - 2018 2019 2020 2021 2022 2018 2019 2020 20
Slide 53: Prospects
Prospects
Slide 54: General Prospects
✓ A broad range of organic and acquisitive General growth opportunities available to Capital Appreciation Prospects ✓ Acquisition activity will depend on strategic fit as well as valuations ✓ Economic climate and supply chain issues are impacting our clients and remains present in Capital Appreciati
Slide 55: Investment Case
Capital Appreciation ✓ Leadership position in industry with Investment strong secular growth trajectory Case ✓ Strong culture of innovation resulting in relevant client solutions ✓ Demonstrated track record of delivery An extremely strong foundation on which to ✓ Trusted partner to blue-chip clients
Slide 56: Q&A Thank you
KX Q&A Thank you [A
Slide 57: Glossary
Glossary AI AWS B2B B2B2C Artificial intelligence Amazon Web Services Business to business Business to business to consumer M MPoC MSP Million Mobile payments on COTS Managed Services Provider NA Not available B-BBEE Broad-Based Black Economic Empowerment NAV Net asset value Bn Billion NFC Near fiel