Funding Circle Holdings Plc · LSE:FCH
Funding Circle — H1 2024 Earnings Presentation
31 slides from Funding Circle's earnings presentation, Sep 5, 2024
Slide 1: Half Year 2024 Results
Half Year 2024 Results 5 September 2024 15 Grams Coffee House 1
Slide 2: Where small businesses get the funding they need to win
Where small businesses get the funding they need to win £13.6bn Credit extended1 We’re the UK’s leading SME lending platform enabling small businesses to borrow, pay later and spend Borrow Longer term c.103,500 Small businesses supported Pay later Monthly Spend Daily c.95,000 Jobs supported in 2023
Slide 3: We provide an unrivalled experience, powered by data and technology
We provide an unrivalled experience, powered by data and technology Large and underserved market Superior customer experience £84bn £1.3trn Addressable SME SME B2B 6min 75 loans market payment Application time Customer NPS Data and tech driven advantage Robust and attractive returns ~£2bn ~5-6% x3 7
Slide 4: A simpler, leaner and profitable business
A simpler, leaner and profitable business US Sale Restructuring ● Sold to iBusiness Funding for a ● Restructuring announced to gain on sale of £10m reduce headcount by c.120 and deliver an annualised benefit of ● Completed on 1 July ~£15m in 2025 ● Focus included management layers, prioritisation an
Slide 5: Strong growth and profitable in H1
Strong growth and profitable in H1 £918m ● Strong delivery in H1; on track for H2 º Revenue growth1 of 12% vs. H2 23 (32% vs H1 23) º Credit extended2 of £918m vs. £733m in H2 23 (£561m in H1 23) Credit extended2 º PBT1 of £0.5m £79.1m ● Continued growth and innovation to support strategic ambitions
Slide 6: Business update
Business update 6
Slide 7: Our multi-product offering
Our multi- product Borrow Pay later Spend Term Loan FlexiPay Line of Credit Cashback Credit Card offering [NEW] enables more businesses to borrow, pay later and spend Loan for long term Flexible line of credit for Cashback credit card for investment purposes to paying bills, supplier invoices everyd
Slide 8: Borrow
Borrow Strong growth as we improve and expand our product offering Launched the Growth Guarantee Scheme (GGS), successor to the Recovery Loan Scheme, in July to continue supporting a broader range of businesses as they look to invest and grow Marketplace continued to show strong growth accounting fo
Slide 9: Pay later
Pay later Growing quickly as we add new features and flexibility £523m in FlexiPay transactions since launch, with £226m in H1 24 FlexiPay Card showing strong momentum with over 13,600 cards issued so far (~7,000 in H1 24) Increased flexibility of terms and billing allowing small businesses to repay
Slide 10: FlexiPay spotlight
FlexiPay spotlight Strong recurring revenue dynamics Transactions by half year cohort, £m1 Attractive growth and unit economics 151% growth in transactions YoY ● Businesses have FlexiPayed more than 140,000 times ● Active customers² FlexiPaying more than once a month Attractive unit economics with 1
Slide 11: Financial performance
Financial performance 11
Slide 12: Go-forward UK business PBT positive in H1
Go-forward UK business PBT positive in H1 Group financial performance, before exceptional costs1 H1 23 H2 23 H1 24 £m Total income 59.7 70.0 78.9 Fair value gains 0.4 2.7 2.8 Cost of funds (0.4) (2.3) (2.6) Net Income (“Revenue”) 59.7 70.4 79.1 Operating expenses (67.1) (72.9) (78.6) Profit / (loss)
Slide 13: Group financial performance
Group financial performance Continuing operations¹; £m Revenue AEBITDA1 PBT1 NAV² Unrestricted cash 0.5 264 247 (2.5) 229 (7.4) 173 170 164 79.1 11.0 59.7 70.4 0.8 5.9 H1 23 H2 23 H1 24 H1 23 H2 23 H1 24 H1 23 H2 23 H1 24 H1 23 H2 23 H1 24 H1 23 H2 23 H1 24 Strong growth in Loans profitable. Investm
Slide 14: Term Loans profit momentum continues
Term Loans profit momentum continues AEBITDA and PBT profitable; £m Originations Loans under Revenue1 AEBITDA1 PBT1 2 Management 67.0 71.6 692 3,021 2,853 2,777 57.5 589 18.3 9.2 471 12.5 8.8 5.1 1.4 H1 23 H2 23 H1 24 H1 23 H2 23 H1 24 H1 23 H2 23 H1 24 H1 23 H2 23 H1 24 H1 23 H2 23 H1 24 LuM stabil
Slide 15: FlexiPay top line growth
FlexiPay top line growth £m Transactions End of month Revenue AEBITDA PBT1 balances (7.8) (6.6) (7.3) (8.6) (7.6) (8.7) 7.5 226 81 144 56 3.3 90 34 1.9 H1 23 H2 23 H1 24 H1 23 H2 23 H1 24 H1 23 H2 23 H1 24 H1 23 H2 23 H1 24 H1 23 H2 23 H1 24 Grew strongly, in Increased in line Ongoing investment in
Slide 16: Focused cost management
Focused cost management Continuing group, £m Group1 costs Term Loans £78.6m • Clear operational leverage demonstrated £72.9m £67.1m • H1 24 vs H2 23: revenue up 7%, costs up 1% 16.2 10.9 10.5 FlexiPay • Product scaling • H1 24 vs H2 23: revenue up 127%, costs up 49% 62.0 62.4 56.6 Total Costs • Staf
Slide 17: Resilient loan returns and funding
Resilient loan returns and funding Projected annualised returns by cohort¹ Forward funding arrangements - - - -50 - 10% Forward flow £1.8bn 9% arrangements in place 8% with institutional investors 7% for Term Loans4 6% 5% 4% £150m 3% Senior facility with Citi 2% successfully renewed for 1% FlexiPay
Slide 18: Robust levels of net assets and cash
Robust levels of net assets and cash Net assets £m Unrestricted cash £m 264.2 6.7 246.8 172.5 169.6 6.9 0.5 2.9 229.0 164.4 (9.0) (10.2) (4.4) (8.2) (8.2) H1 23 H2 23 Term FlexiPay US Share Other H1 24 H1 23 H2 23 Term FlexiPay US Share H1 24 Loans Loans buyback Loans Loans buyback Movement driven b
Slide 19: Capital Allocation
Capital Allocation Available cash Capital allocation framework Deliver growth strategy US proceeds (£8m)1 Share buyback Future growth initiatives (up to £17m + further £25m) £164m Management Buffer (£40m) £90m Invest to make platform stronger Jun-24 Deployable cash Distributions to shareholders 1 Ga
Slide 20: 2024 Outlook: Revenue in line, upgrade to profit
2024 Outlook: Revenue in line, upgrade to profit Term Loans FlexiPay Group Previous Revised Previous Revised Previous Revised Revenue 3x 3x >10% >10% - - growth vs 2023 vs 2023 Loss Loss Profit H2 Full Year 8-12% > 12% similar to similar to before Tax1 Positive¹ Positive¹ 2023 2023 1 Presented befor
Slide 21: Looking ahead
Looking ahead 21
Slide 22: Strong execution in H1
Strong execution in H1 ● Simpler, leaner, streamlined business ● Strong delivery in H1 with >30% revenue growth (12% vs H2 23) and £0.5m PBT ● Continued innovation and product expansion ● On track for revenue guidance, upgrade to profit guidance Powderhall Bronze 22
Slide 23: Leading UK online SME lender with attractive growth and profitability
Leading UK online SME lender with attractive growth and profitability Medium term outlook: growth and profitability Borrow Longer term Pay later Monthly ~15-20% Revenue growth CAGR >15% PBT margins Spend (>25% AEBITDA margin) Daily 23
Slide 24: 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 25: Appendices
Appendices 25
Slide 26: Borrow Pay later Spend
Borrow Pay later Spend Term Loan FlexiPay Line of Credit Cashback Credit Card [NEW] Loan for long term investment Flexible line of credit for paying bills, Cashback credit card for everyday purposes to support business growth supplier invoices and managing short term business spending. or long term
Slide 27: Multi-product view
Multi-product Borrow Pay later Spend Term Loan Line of credit (“FlexiPay”) Cashback Credit Card [New] view Funding Circle loans Product type Government guaranteed loans Rolling line of credit Credit card with cash back Marketplace (3rd party loans) £15k credit limit £75k loan TBC Average size & draw
Slide 28: How we make money
How we make money 92% of income from fees Term % of H1 24 Revenue stream FlexiPay Typical yield Drivers Loans total income ✓ Originations 53% Transaction fees c.6% H1 24: £692m Fees ✓ LuM 27% Servicing fees¹ c.1% H1 24: £2,777m ✓ Transactions 12% Drawdown fees c.4.9% H1 24: £226m Cash balances & Ban
Slide 29: Illustrative - FlexiPay unit economics
Illustrative - FlexiPay unit economics Lifetime Upfront customer revenue acquisition (CPA reducing over time) Lifetime Upfront expected credit value losses Stable repeat usage Cost of funding Operating Payback period 12-18 costs months Wider portfolio benefits with Customer Expected high engagement
Slide 30: Segmental view of Income and Profit
Segmental view of Income and Profit H1 2024 H1 2023 Continuing Operations Continuing Operations £m United Kingdom Total United Kingdom Total Other Total Term Loans FlexiPay Term Loans FlexiPay Term Loans Transaction fees 41.8 0.3 42.1 29.6 - 29.6 - 29.6 Servicing fees 18.6 - 18.6 20.2 - 20.2 0.2 20.
Slide 31: Cash, net assets and invested capital
Cash, net assets and invested capital £m Cash utilisation Net Assets Dec 23 Mov't Jun 24 Invested capital movement Dec 23 Mov't Jun 24 Dec '23 221 Unrestricted 170 (6) 164 Legacy securitisation, warehouse and other loans at fair Free cashflow1 (37) Restricted2 52 (23) 28 19 (11) 8 value Investment /
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