Araxi Limited · JSE:AXX
Araxi — Capital Appreciation — FY2023 Earnings Presentation
50 slides from Araxi's earnings presentation, June 2023
Slide 1: Annual Results Presentation
Annual Results Presentation For the year ended 31 March 2023
Slide 2: Outline
Outline 1 Introduction 2 Highlights 3 Dariel Software Transaction 4 The Opportunity 5 Strategy Execution 6 Financial Performance 7 Prospects 2
Slide 3: We are a financial technology company
We are a financial technology company that seeks to serve and partner with established and emerging financial enterprises and other large corporates International Payments Software 3
Slide 4: Investment Case
✓ Strong Secular Growth Trends Capital Appreciation’s Investment ✓ Large Market Opportunity – Domestic and International Case ✓ Trusted Partner to Blue-Chip Clients ✓ Demonstrated Leadership and Track Record An extremely strong ✓ Deliberate focus on and investment in the foundation on which to grow
Slide 5: Events & Highlights
Recent ✓ Retirement of Founding Chairman Events & ✓ Appointment of Michael Pimstein as Executive Highlights Chairman ✓ Relocated Payments division and corporate office It’s been a busy year ✓ BEE continued improvement ✓ Synthesis – Level 1 ✓ Group, African Resonance and Dashpay – Level 2 ✓ Netherlan
Slide 6: Pleasing Momentum
Pleasing Momentum HEPS down 44.5%, DPS up 10% ✓ Demand for Group’s products and services Excluding ECL, HEPS down only 1.6% unabated 15 14 ✓ Terminal estate up 18% 13 ✓ Payments annuity revenue up 24% 12 11 ✓ Software revenue up 58% Cents per share 10 ✓ International revenue up 177% 9 8 ✓ Responsive
Slide 7: Strong Topline Growth
Strong Topline Growth Revenue up 20% Gross margin down 140bps 60.0 1000 50.0 Revenue growth 800 R million 40.0 restrained by 600 % 30.0 995.1 delays in 50.2 51.6 50.2 400 831.0 20.0 619.5 terminal orders 200 10.0 0 0.0 2021 2022 2023 2021 2022 2023 Profits impacted EBITDA down 6% EBITDA margin down
Slide 8: Growth Across the Group
Growth Across the Group Total terminal estate up 18% Payments Annuity Revenue up 24% Payments revenue sources 37% 6yr CAGR (now >50% of Payments’ revenue) 328 12% 277 Sale of terminals 217 R million ‘000s 185 Terminals rental income 140 268.6 49% Maintenance and support 216.5 92 34% serviced fees fr
Slide 9: Everything Digital
Everything Digital The new, post-Covid world General Payments Software ✓ Increased interest in digitalisation ✓ Substantial demand for payment ✓ Increasing demand for Synthesis terminals and Responsive offerings ✓ Increased understanding of strategic importance and ✓ Strong demand for Android ✓ Dema
Slide 10: 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 10
Slide 11: Investing for Tomorrow
Investing Launch of Halo Dot offering in for international markets Launch of Dashpay Glass in South R30m Tomorrow Africa, both including advertising & marketing International expansion in Europe Substantial investment expensed Net new employee hires (97 YoY) in current period R36m Responsive acquisi
Slide 12: Impact of Load Shedding
Impact of ✓ Smaller retailers impacted by lower retail Load activity, resulted in delays in customer orders Shedding ✓ Network connectivity outages impact transaction completion rates Limited direct impact to ✓ Terminal estates are resilient the Group ✓ Increased client appreciation for cloud- based
Slide 13: GovChat Placed in Business Rescue
GovChat ✓ Platform – Functioning well, international opportunities in public sector Placed in ✓ Government Contracting – Long and protracted Business ✓ Meta/Facebook/WhatsApp Litigation – ✓ Competition Commission prosecuting Meta Rescue in front of Competition Tribunal ✓ Impacted ability to launch n
Slide 14: Consistent Approach To ESG
Consistent Sound governance, aligned with King IV R3.8 million training spend* Approach Diverse, representative Board of directors 85 learnerships A solid foundation of transparency, To ESG effective control, accountability and responsibility R2.7 million CSI spend* Education, nourishment, social de
Slide 15: B-BBEE
B-BBEE Group BEE Ratings Continued commitment to 2017 2018 2019 2020 2021 2022 2023 improvement 1 2 2 2 3 3 3 3 4 4 4 6 7 7 African Resonance Dashpay Synthesis CTA 15
Slide 16: Dariel Software Transaction
Dariel Software Transaction
Slide 17: Announced Acquisition of Dariel
Capital Appreciation Announced Acquisition of Dariel Cash and share deal; anticipated closing end of June 2023 Capital Appreciation % Acquired (R millions, except multiple) Amount EBITDA Multiple (1) Headline Consideration 131.2 23.8 FY23 Actual 5.5 x (1) Initial Consideration 85.3 23.8 FY23 Actual
Slide 18: Other Important Elements of Transaction
Other Important ✓ Experienced leadership with 22-year track record of delivery Elements of ✓ Existing leadership committed to the business and Transaction have 3-year employment contracts ✓ Business model and culture aligned with Synthesis Subject to satisfaction ✓ Limited commercial duplication of
Slide 19: Getting To Know Dariel
Getting To Know Dariel Services Cloud Practice Partners App Development Digital Transformation Active Clients Building for Converting for Cloud Cloud Integration Audit/Review Leveraging for Using the Cloud Cloud Cloud Managed Services “Engineered software is an art” – Malcolm Rabson, Dariel Managing
Slide 20: The Opportunity
A The Opportunity [A
Slide 21: Strategic Benefits are Driving Cloud Adoption
Agility and Productivity Strategic 8% 13% Benefits are Cost Savings Reduces the percentage of IT Operational Resilience Cloud availability and security Driving Cloud spend on infrastructure, freeing enables customers to improve budget for reinvestment in other SLAs while reducing unplanned areas dow
Slide 22: AI – it’s Here and Reliant on Cloud
Generative Sentiment Analysis Algorithms Data Science Reinforcement Learning AI – it’s Here Predictive Learning Automation Analysis Machine Learning Data and Reliant Processing Chat GPT Language GPT 3 Algo Natural on Cloud AI Recommendation Systems Chatbots Robotics Generative AI LLM Big Deep Artifi
Slide 23: Simply Astonishing!!!
Simply Astonishing!!! Time Taken to Reach 100 Million Users Time Taken to Reach 1 Million Users (Months) (Days) 1 400 90 80 1 200 70 100 million 1 000 60 users within 50 60 days 800 1 277 40 78 600 70 61 30 912 912 55 400 730 41 20 30 395 10 200 304 76 213 2 9 152 0 5 0 23 Sources: UBS / Yahoo Finan
Slide 24: Everyone’s Assistant
Everyone’s If you are wondering what to use ChatGPT Assistant for here is a poem it just wrote...share with Brad. Diane. In a world where fetch is a delight, There’s Lucy, our dog, shining so bright. She doesn’t retrieve like others might, A poem generated about Brad’s family dog But her cuteness fi
Slide 25: Global View of Terminal Demand
Global View Drivers of Ongoing Demand of Terminal Demand ✓ Growing Market – Increase in terminal enabled retail footprint ✓ Enhanced Technology 136 million ✓ Increased Functionality – Provide terminals shipped in 2021 % YoY merchants enhanced services Geography Volume (m) Change ✓ Terminal Envy – Me
Slide 26: Strategy Execution
Strategy Execution
Slide 27: 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 28: Continued Product Evolution
Continued Product Evolution Full end-to-end solution available in components – branded or on white label basis Halo Dot SDK is a software development Halo Dot Plus allows you to apply kit that allows integrators to embed a your brand to a pre-certified app and contactless payments into their own rap
Slide 29: Driving Real Results
Driving Real Results Still early days . . . > 900 Unit of Measurement FY22 YoY Growth Merchants Payment Plans created QTY Thousands + 569.40% Tens of millions 95% Merchant Order Value User Sign Up QTY Tens of thousands + 446.01% + 635.58% Completion rates Transaction Revenue Tens of millions + 382.0
Slide 30: Growth Strategy
Organic growth opportunities are plentiful for a Payments business with an established base, immense Growth industry knowledge and deep technical expertise Strategy ✓ Grow market for devices ✓ Continue to take market share in established segments ✓ Support existing clients ✓ Refresh industry’s legac
Slide 31: Growth Strategy
Boundless opportunity for a business with an established Software track-record in thought-leadership and innovation Growth ✓ Leverage partnerships – New and existing - Confluent, Strategy AWS , GCP - to grow domestically and internationally ✓ Grow license revenue – from proprietary software solution
Slide 32: Operating Units
Synthesis Operating Intelligent Data Managed Services Payment Technology • Data Intelligence is critical to (MSP) & Cryptography Units drive business success • 24 x 7 x 365 support and • Responsible for Keystone and • Our team of Machine Learning management of high availability Halo Dot development
Slide 33: PayShap
PayShap Cloud Division The PayShap platform was launched in March 2023 and was built to BankservAfrica address key goals recognised by the South African Reserve Bank (SARB) and Payments Association of South Africa (PASA) to deliver a low-value, instant consumer-to-consumer payment service that can r
Slide 34: RegTech for South African financial services & insurance giant
RegTech for RegTech Division South African Solution financial services Synthesis built a central reporting function that collates data from all business units to prepare a unified view of the & insurance giant customer from the group's perspective and then sends it on to SARS to meet its regulatory
Slide 35: Financial Performance
A Financial Performance [A
Slide 36: Payments Performance
Payments R million Performance 533.8 600 524.8 500 397.4 400 • Record comparable performance in 2022 • Terminal estate up 18% 300 218.2 206.3 • Android continues to drive terminal activity 140.4 200 • Product mix and delay in order volumes moderated revenue growth (impact of loadshedding on SMME) 10
Slide 37: Payments Revenue Composition
Payments Revenue Composition Sale of Terminals Maintenance and Support Service fees down 20% from terminals 350 up 19% • Small business closures 300 200 temporarily slow terminal 250 demand R million 150 R million 200 150 317.3 100 209.5 255.1 137.9 148.7 177.4 • Strong demand for Android 100 50 ter
Slide 38: Software Performance
Software R million 469.9 Performance 500 450 400 297.2 350 • Excellent revenue and good profit growth 300 222.1 • Responsive acquisition well-integrated 250 and contributing positively 200 • Substantial investment in talent, business 150 89.7 development and marketing, new 70.1 57.5 technology platf
Slide 39: Software Revenue Composition
Software Revenue Composition Services and Consultancy Fees License and Subscription Fees up 39% up 4% 320 70 280 60 240 • Cloud extending to 50 Azure and Google Cloud R million R million 200 40 160 305.0 Platform as well 30 60.0 62.5 120 219.4 53.5 80 163.9 20 • New project wins in SA 40 10 and inte
Slide 40: International Performance
International Performance 160 R million 150.9 140 • Division is in its infancy – mostly still transacted from South Africa 120 • Promising international opportunities 100 • New international contracts landed for 80 Halo Dot and Intelligent Data during the 54.5 60 year 41.1 40 • New appointments made
Slide 41: Condensed Group Statement Of Financial Position
Condensed Group Statement Of Financial Position Re-classified 31 March (R million) 31 March Uncomplicated Balance 2023 2022 Sheet ASSETS No debt Goodwill 760.2 760.2 No contingent liabilities Intangible assets 68.4 68.2 Asset-light business Other non-current assets 66.2 95.4 Non-current assets 907.0
Slide 42: Group Condensed Statement of Comprehensive Income
Group Condensed Statement of Comprehensive Income 31 March 31 March % increase / (R million) Strong demand for 2023 2022 (decrease) products and services and first annual contribution Revenue 995.1 831.0 19.8% from Responsive Gross Profit 499.5 428.9 16.4% Gross margin contracted Gross Profit margin
Slide 43: Group Condensed Statement of Comprehensive Income (continued)
Group Condensed Statement of Comprehensive Income (continued) Includes ECL provision 31 March 31 March % increase / and early development (R million) 2023 2022 (decrease) expenses Operating profit 193.0 211.8 (8.9%) Finance income 36.9 23.2 59.1% Higher interest rates Expected credit loss raised (70
Slide 44: Cash Flow (Key Features)
Cash Flow (Key Features) Sustainable cash 31 March 31 March generator, accounts (R million) 2023 2022 receivable collected in April and May Cash generated from operations 183.1 204.3 350bps Interest rate increase Finance income received 33.1 22.0 Effective asset Dividends paid (98.5) (82.1) manageme
Slide 45: Sustainable Cash Flow From Operations Supports Dividends
Sustainable Cash Flow From Operations Supports Dividends Cash Cover Dividends R million Times (cents per share) 212.7 206.1 250 4 8.25 204.3 200.9 3.5 7.50 3.6 183.1 200 166.3 3.2 3 3.1 5.50 2.7 2.5 150 5.00 2.5 1.9 4.25 2 4.00 98.4 82.1 100 1.5 66.1 64.6 62.2 57.8 1 50 0.5 0 0 2018 2019 2020 2021 2
Slide 46: Prospects
Prospects
Slide 47: General Prospects
General ✓ A broad range of organic and acquisitive growth opportunities available to Capital Appreciation Prospects ✓ Acquisition activity will depend on strategic fit as well as valuations ✓ Economic climate is impacting our clients and remains present in our planning Capital Appreciation is well ✓
Slide 48: Investment Case
Capital Appreciation Investment ✓ Leadership position in industry with 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 grow – organically ✓ Trusted partner t
Slide 49: Q&A Thank you
KX Q&A Thank you [A
Slide 50: Glossary
Glossary AI AWS B2B Artificial intelligence Amazon Web Services Business to business M MPoC MSP Million Mobile payments on COTS Managed Services Provider B2B2C Business to business to consumer NA Not available B-BBEE Broad-Based Black Economic Empowerment NAV Net asset value Bn Billion NFC Near fiel