Slide 1: 1H24 Investor Presentation
1H24 Investor Presentation David Stevens CEO and Managing Director Simon Ward CFO All values in $AUD unless stated otherwise HARMONEY ©2024 1H24 INVESTOR PRESENTATION 23 23FEBRUARY FEBRUARY2024 2024 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: Join our Investor Hub
Join our Investor Hub: harmoney.com.au/invest ● Investor Hub is the best way to stay informed and connected with all things HMY.ASX ● See videos accompanying our ASX announcements, interviews, research reports, and webinars. ● Engage directly with Harmoney’s leadership team. Comment and ask question
Slide 4: Contents
Contents 1. Delivering results 1H24 2. Overview of business model 3. Financial results 4. Strategy and outlook HARMONEY ©2024 1H24 INVESTOR PRESENTATION 23 FEBRUARY 2024 4
Slide 5: Delivering results 1H24
Delivering results 1H24 HARMONEY ©2024 1H24 INVESTOR PRESENTATION 23 23FEBRUARY FEBRUARY2024 2024 5
Slide 6: 1H24 key achievements
1H24 key achievements ACHIEVED GROWTH ACHIEVED GROWTH Cash NPAT Profitable Loan book growth $200m NZ ABS Warehouse capacity extended 4th consecutive half of Loan book continued to Successfully completed New $140m warehouse added Cash NPAT profitability grow profitably despite New Zealand’s first ever a
Slide 7: Profitability continues through rising interest rate cycle
Profitability continues through rising interest rate cycle 1H24 2H23 1H23 Loan book $756m $744m $701m Revenue $60.4m $57.0m $50.1m Net Interest Margin 9.2% 9.4% 9.8% Credit losses 4.2% 4.0% 3.1% 90+ day arrears 65bps 58bps 46bps Cost to income ratio 24% 28% 29% Cash NPAT $0.5m $2.4m $2.3m HARMONEY ©
Slide 8: Key points you should know about Harmoney
Key points you should know about Harmoney Financial Customer value Risk management - Cash NPAT profitable. Customers rate us! Quality portfolio. - Cost to income ratio of 24%. Google & Shopper Approved ~40% Homeowners. - Unrestricted cash of $21m. 4.8/5 overall rating from 4.2% losses. - Undrawn ware
Slide 9: Overview of business model
Overview of business model HARMONEY ©2024 1H24 INVESTOR PRESENTATION 23 23FEBRUARY FEBRUARY2024 2024 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 customer credit characteristics. Renovation Loans Debt Consolidation • Loans up to $70,000 with terms of 3, 5 and 7 years. • Average new loan size $20,000. • Disper
Slide 11: Data + AI + Automation
Data + AI + Automation Every month, over 10,000 new High volumes of up-to-the-moment consumer customer applications help us financial data – combined with our 9+ years of improve our AI and automation historic data – supercharges training of our AI models, helping us optimise for: 2021 & 2023 ● Highl
Slide 12: 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 AI and high quality first-party creates annuity revenue as and automation
Slide 13: Financial results
Financial results HARMONEY ©2024 1H24 INVESTOR PRESENTATION 23 23FEBRUARY FEBRUARY2024 2024 13
Slide 14: Key performance indicators
Key performance indicators 1H24 1H23 Change Loan book $756m $701m 8% Revenue $60.4m $50.1m 21% Net interest income % 9.2% 9.8% (60bps) Risk adjusted income % 5.0% 6.7% (170bps) Acquisition costs $5.4m $6.5m (17%) Cost to income ratio 24% 29% (500bps) Statutory NPAT $(0.6m) $(3.4m) 82% Cash NPAT $0.5
Slide 15: Loan book and revenue growth continue
Loan book and revenue growth continue Revenue growth 21% on pcp Group revenue growth ● Group loan book $756m, up 8% on pcp, with growth in both countries, and Australia now 52% of total loan CAGR portfolio. 37% ● Higher market interest rates constraining borrower appetite and capacity. ● Revenue gre
Slide 16: Acquisition costs reduce 17%
Acquisition costs reduce 17% Flexible consumer-direct model CAC % to originations ● Responsive to lower consumer borrowing appetite and capacity from rising market interest rates. ● Acquisition cost to income ratio falls to 9% (13% pcp). ● Small increase in CAC% to originations due to lower existing
Slide 17: Deep data and AI deliver prime loan book
Deep data and AI deliver prime loan book Risk Adjusted Income (after losses) 5% Static loss rate Portfolio ● Lower originations increased portfolio “seasoning” Earlier AU scorecard to 13 months (1H23: 9 months) placing higher Rest of portfolio proportion in “peak hazard” loss period. ● Improved Aust
Slide 18: Diversified funding and hedging program lower risk
Diversified funding and hedging program lower risk Funding from 3 of the “Big 4” banks Average funding rate Interest Hedging ● Poised for portfolio growth with: rate % coverage % ○ Unused warehouse capacity: ~$250m ○ Unused corporate debt capacity: $7.5m ○ Unrestricted cash $20.7m ● Capital efficient
Slide 19: Stellare automation powers scalability
Stellare® automation powers scalability Scalability drives profitability Cost to income ratio at 24% Cost to ● Cost to income ratio improves further to 24%. income % Loan book $ ● Highly automated Stellare® platform enables loan book to scale faster than operating expenses. ● Stellare®’s scalability
Slide 20: Strategy and outlook
Strategy and outlook HARMONEY ©2024 1H24 INVESTOR PRESENTATION 23 23FEBRUARY FEBRUARY2024 2024 20
Slide 21: Continue AU expansion, a large addressable market
Continue AU expansion, a large addressable market AU replicating in 9x market Huge potential for Harmoney in $145bn 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 traditiona
Slide 22: Stellare 2.0: Core banking + Automation = Market opportunity
Stellare® 2.0 Core banking + Automation = Market opportunity Core banking - Cloud native 100% Process automation Market Opportunity Implemented a Tier 1 cloud native core Automated platform enabling scale, Core banking platform plus process banking suite, used by Global Banks. speed and a superior c
Slide 23: Stellare 2.0 improved customer experience drives conversion
Stellare® 2.0 improved customer experience drives conversion Australian new customer launch complete Customer growth After a 12 month build and launch by our internal team, Stellare® 2.0 focus now moves to launching improved Stellare® 2.0 is starting to deliver customer value in the features and pro
Slide 24: Stellare 2.0 unlocks an expanded product offering
Stellare® 2.0 unlocks an expanded product offering Stellare® 2.0 represents a significant modernisation of our technology stack, and allows us to innovate on new products faster than ever before, while delivering further efficiency and scalability. 25x 12% Code releases per week Technology cost saving
Slide 25: Outlook - Targeting 20% Cash RoE
Outlook - Targeting 20% Cash RoE Interest rates & asset quality Growth outlook FY24/FY25 outlook Ability to pass through targeted Harmoney’s consumer-direct interest rate increases to maintain model is taking market share from FY24 Outlook 9-10% net interest margin. banks in $145bn Australian ● Cont
Slide 26: Outlook continued: 20% Cash RoE run rate in FY25
Outlook continued: 20% Cash RoE run rate in FY25 Pathways to 20% Cash RoE Average loan book required at RAI% ● At the current equity of ~$50m, Cash NPAT of $10m Risk adjusted income 6.0% 5.5% 5.0% delivers 20% Cash RoE. Required average loan book ($m) 783 855 940 Required growth from current loan bo
Slide 27: Appendix
Appendix HARMONEY ©2024 1H24 INVESTOR PRESENTATION 23 23FEBRUARY FEBRUARY2024 2024 27
Slide 28: $756m Loan Book
$756m Loan Book Loan Employment purpose Region status HARMONEY ©2024 1H24 INVESTOR PRESENTATION 23 FEBRUARY 2024 28
Slide 29: Profit and loss
Profit and loss 6 Months ended 6 Months ended 6 Months ended 31 December 2023 30 June 2023 31 December 2022 #039;000 #039;000 #039;000 Interest income 60,323 56,013 49,526 Other income 70 985 549 Total income 60,393 56,998 50,075 Interest expense 26,026 21,867 17,957 Incurred credit losses 15,643 14,525 10,0
Slide 30: Key operating and financial metrics
Key operating and financial metrics 6 Months ended 6 Months ended 6 Months ended 31 December 2023 30 June 2023 31 December 2022 Loan book value and growth Total originations (#039;000) 165,932 185,698 240,536 New customer originations (#039;000) 93,379 107,425 146,170 Existing customer originations (#039;000
Slide 31: Cash Flow
Cash Flow 6 Months ended 6 Months ended 6 Months ended 31 December 2023 30 June 2023 31 December 2022 #039;000 #039;000 #039;000 Cash flows from operating activities Interest received 59,220 54,427 48,131 Interest paid (27,527) (21,375) (17,359) Fee income rebated (1,076) (887) (797) Payments to suppliers and
Slide 32: Balance Sheet
Balance Sheet 31 December 2023 30 June 2023 31 December 2022 #039;000 #039;000 #039;000 Cash and cash equivalents 40,982 43,454 55,886 Trade and other assets 2,671 1,968 2,495 Finance receivables 758,861 745,790 701,712 Expected credit loss provision (36,500) (36,919) (33,840) Property and equipment 3,372 3,