Funding Circle Holdings Plc · LSE:FCH
Funding Circle — H1 2023 Earnings Presentation
31 slides from Funding Circle's earnings presentation, Sep 7, 2023
Slide 1: Half Year 2023 Results
HALF YEAR 2023 RESULTS 7 September 2023 “ Getting a loan from Funding Circle was simple and speedy. The funding is helping me develop our new ” product line which I’m really excited to launch. Bruna Piaui Graf, Founder, Bruna's Brazilian Cheese Bread
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: Who we are
Who we are Borrow We’re the UK’s leading SME lending Longer term platform, with a material and growing presence in the US Pay Monthly c.£16bn c.140,000 144 Credit extended Small businesses Institutional supported investors We enable small businesses to borrow, pay and spend – offering an unrivalled
Slide 4: We deliver an unrivalled experience for small businesses, powered by data and technology
How we do it >2 bn 3x We deliver an Data points in Better risk discrimination data lake (Group) than bureau scores unrivalled experience for small businesses, 6 min 75% powered by data and Application time (UK Loans) Instant decision (UK Loans) technology 76 4.6 Customer NPS Trustpilot (Group) score
Slide 5: Delivering on our strategy in H1 23
Delivering on our strategy in H1 23 ORIGINATIONS ROBUST & ATTRACTIVE ONGOING MOMENTUM LOAN RETURNS INVESTOR DEMAND 5-6% 3 new £771m average annualised forward flow up 14% on H2 22 returns since 2018 agreements UK LOANS US LOANS STRONG FLEXIPAY PROFITABLE GROWTH MOMENTUM £1.4m 21% >£90m UK Loans orig
Slide 6: Financial performance
© Funding Circle Financial performance
Slide 7: How we make money: 90% of income from fees
How we make money: 90% of income from fees H1 23 Driver Typical yield % % of H1 23 Total income Transaction Originations fees £0.8bn c.6% 54% c.1% Operating Servicing LuM fees1 £3.5bn 33% per annum Transactions c.4.9% over 3 FlexiPay fees £90m 3% months³ Investment Investment Invested capital Variab
Slide 8: Resilient Group financial performance in H1
Resilient Group financial performance in H1 £m Originations¹ Loans under Management¹ Total income AEBITDA PBT 803 771 4,071 678 3,743 3,475 372 1.6 2,862 11.2 2,353 1,953 678 771 77.8 73.2 76.6 (14.5) (16.6) 431 1,390 1,522 1,209 (1.7) (3.0) H1 22 H2 22 H1 23 H1 22 H2 22 H1 23 Government loan scheme
Slide 9: UK Loans profitable and well positioned for growth
UK Loans profitable and well positioned for growth £m Originations Loans under Management Total income AEBITDA PBT 641 3,632 3,311 3,021 454 471 372 2,814 2,325 1,945 62.3 0.9 1.4 454 471 56.5 57.1 269 8.1 8.8 (2.7) 818 986 1,076 5.7 H1 22 H2 22 H1 23 H1 22 H2 22 H1 23 Government loan schemes Commer
Slide 10: US Loans showing good growth
US Loans showing good growth $m Originations Loans under Management Total income AEBITDA PBT 20.7 259 502 18.6 450 454 17.4 2.5 214 9 187 34 (0.5) 59 17.8 (4.8) 259 493 13.2 (6.0) 214 391 420 (11.1) (11.5) 187 9.9 H1 22 H2 22 H1 23 H1 22 H2 22 H1 23 H1 22 H2 22 H1 23 Government loan schemes Commerci
Slide 11: Continued momentum in FlexiPay
Continued momentum in FlexiPay £m Transactions1 End of month balances1 Total income AEBITDA PBT (0.7) (0.7) (3.3) (3.3) (7.8) (8.6) 90 34 2.3 42 18 1.1 17 8 0.4 H1 22 H2 22 H1 23 H1 22 H2 22 H1 23 H1 22 H2 22 H1 23 H1 22 H2 22 H1 23 H1 22 H2 22 H1 23 Sustained acceleration with Investment in FlexiPa
Slide 12: Aligning costs to strategic needs
Aligning costs to strategic needs £m UK Loans US Loans FlexiPay Managing cost efficiencies Controlled investment New product investment 1.1 4.4 10.5 H1 22 H2 22 H1 23 H1 22 H2 22 H1 23 H1 22 H2 22 H1 23 • UK Loans is an established business, • Controlled investment in the US, with • Investment in Fl
Slide 13: 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 +10 +30 0 0 -40 +40 +40 +100 +100 -30 2 2 Most recent expectations (H1 23) bps Change vs H2 22 expectations Base rate³ 1. The projected annualised return show
Slide 14: Diverse, agile and sustainable funding model continues to attract institutional investors
Diverse, agile and sustainable funding model continues to attract new and existing institutional investors The breadth and depth of our investor Continuing to secure institutional funding in a relationships ensure diversity of funding higher rate environment Loans under Management¹ • UK: £1.6bn of a
Slide 15: Strong balance sheet and cash position
Strong balance sheet and cash position • Net assets of £264m includes cash of £204m and invested capital of £69m £m • The decrease in net assets of £20m is driven principally by investment into US Loans and FlexiPay • Cash has increased by a net £26m to £204m as a result of: - Working capital due to
Slide 16: 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 FlexiPay funding Future growth operations dilution platform stronger • Cash retained for • Limited • FlexiPay funded • Further • Employee benefit prudential stress co-investment on balance inv
Slide 17: Outlook
Outlook Funding Circle continues to be well positioned for long term success No change to guidance provided in March 2023 FY 23 Medium Term (FY 25) UK and US Loans FlexiPay UK Loans US Loans FlexiPay Total income £150m-160m Over £10m At least £175m At least £70m At least £50m AEBITDA £0-10m £(10-20)
Slide 18: Looking ahead
© Funding Circle Looking ahead
Slide 19: Our growth strategy focuses on helping more small businesses win
Our growth strategy focuses on helping more small businesses win
Slide 20: We’re attracting more businesses
We’re attracting more businesses Attract more Strengthening existing distribution channels and expanding into new businesses embedded and intermediated channels to enable more businesses to reach us FlexiPay extends our product range so customers can now borrow, pay and spend with Funding Circle Say
Slide 21: We’re saying yes to more businesses
We’re saying yes to more businesses Attract more Serving more businesses through an expanded set of Funding Circle businesses products and further integration with third party lenders Strong start to participation in third iteration of the UK government Recovery Loan Scheme helping an incremental se
Slide 22: We’re continuing to develop new products
We’re continuing to develop new products Attract more Using our capabilities to enter new markets where we can develop businesses market-leading products £150m+ FlexiPay transactions since launch; with £90m in H1 2023 Say yes to more businesses Following a successful beta phase, we are now moving in
Slide 23: FlexiPay transactions more than doubled in H1 23 to ~£90m
FlexiPay transactions more than doubled in H1 23 to ~£90m FlexiPay continues to show strong traction and growth: Transactions by half year cohort² • > 2x growth in transaction value H2 22 to H1 23 £m • > 3,800 active1 accounts at end H1 23 (~2,000 FY 22) High customer engagement: • 1.3 transactions/
Slide 24: Conclusion
Conclusion • Performance in line with expectations despite macroeconomic environment • Delivering on our medium-term plan – capturing growth in a large, underserved market • Technology and data driven competitive advantage continues to deliver superior borrower experience • Attractive and proven bus
Slide 25: Financial appendices
© Funding Circle Financial appendices
Slide 26: Income statement re-presentation for FY22
Income statement re-presentation for FY22 £m Before re-presentation Adjustments After re-presentation The comparative financial information has been H1 22 H2 22 FY22 H1 22 H2 22 FY22 H1 22 H2 22 FY22 re-presented with Operating profit now removed and instead AEBITDA is reconciled to profit UK Loans
Slide 27: Group income statement
Group income statement £m H1 22 H2 22 H1 23 1. Total income is defined as operating income and investment income less investment expense and before non-cash fair value gains/losses. 2. Adjusted EBITDA represents profit for the period before finance costs (being the discount unwind on lease liabiliti
Slide 28: Segmental view of income
Segmental view of income £m H1 22 H2 22 H1 23 Loans FlexiPay Total Loans FlexiPay Total Loans FlexiPay Total United United United United United United United United United Other Other Other Kingdom States Kingdom Kingdom States Kingdom Kingdom States Kingdom Transaction fees 31.9 8.8 - - 40.7 27.9 8
Slide 29: Segmental view of profit
Segmental view of profit £m H1 22 H2 22 H1 23 Loans FlexiPay Total Loans FlexiPay Total Loans FlexiPay Total United United United United United United United United United Other Other Other Kingdom States Kingdom Kingdom States Kingdom Kingdom States Kingdom Operating AEBITDA 5.4 (7.7) 1.8 (0.7) (1.
Slide 30: Net assets, cash and invested capital
Net assets, cash and invested capital £m Cash utilisation Net Assets Dec 22 Mov't Jun 23 Invested capital movement Dec 22 Mov't Jun 23 Dec '22 178 Unrestricted 166 7 173 Legacy securitisation, Free cashflow (5) Restricted 12 19 31 warehouse and other loans Investment / funding cashflows 14 Cash 178
Slide 31: FlexiPay financial metrics
FlexiPay financial metrics Transactions Comparable to Loans business Originations End of month balances Comparable to Loans business LuM Operating Interest Income Fee % charged on Transactions Other revenue Card interchange fees and forex fees, late fees Total income Cost of funds Cost of senior fun
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