Harmoney Corp Ltd · ASX:HMY
Harmoney — H1 2021 Earnings Presentation
35 slides from Harmoney's earnings presentation, Feb 24, 2021
Slide 1: 1H21 Results
24 FEBRUARY 2021 1H21 RESULTS 1H21 RESULTS 24 FEBRUARY 2021 PAGE 1
Slide 2: Important Notice and Disclaimer
IMPORTANT NOTICE AND DISCLAIMER The material in this presentation is provided for general information purposes only and is No representation or warranty, express or implied, is made as to the fairness, current as at the date of this presentation. It is not a prospectus or product disclosure complete
Slide 3: Contents
CONTENTS 1. 1H21 RESULTS HIGHLIGHTS 2. HARMONEY BUSINESS RECAP 3. 1H21 BUSINESS UPDATE 4. 1H21 FINANCIALS 5. STRATEGY & OUTLOOK 6. APPENDICES 1H21 RESULTS 24 FEBRUARY 2021 PAGE 3
Slide 4: 1H21 Results Highlights
1H21 RESULTS HIGHLIGHTS PAGE 4
Slide 5: Strong Momentum Post IPO
STRONG MOMENTUM POST IPO DEC ‘20 SECURED UP TO FEB ‘21 $200M IN FUNDING RELEASED FROM M&G LIBRA™ 1.7 INVESTMENTS INTO AU 19 NOV ‘20 IPO NET PROCEEDS OF ~$57M RECEIVED JAN ‘21 FEB ‘21 EXCEEDED PAUL LAHIFF PROSPECTUS APPOINTED ORIGINATION INDEPENDENT FORECASTS DIRECTOR (AU BASED) 1H21 RESULTS 24 FEBRU
Slide 6: Results Highlights
RESULTS HIGHLIGHTS $1.9B 47% $42M $290M+ TOTAL PERSONAL LOAN STRONG QUARTER ON QUARTER PRO FORMA REVENUE INCREASED WAREHOUSE LENDING ORIGINATIONS ORIGINATION GROWTH CAPACITY Pro forma revenue has performed despite Harmoney has now originated over $1.9 Originations accelerated through 1H21, impacts o
Slide 7: Libra 1.7: Early results show ~100% improvement in conversion
LIBRA™ 1.7: EARLY RESULTS SHOW A ~100% IMPROVEMENT IN CONVERSION LEADS TO THE DOUBLING OF AU NEW BUSINESS ORIGINATIONS • Libra™ 1.7 initial roll-out on 10 February. • Built specifically for the Australian market. • Libra™ 1.7 is an enabler of the Millennial products. • ~100% uplift in conversion of
Slide 8: Harmoney Business Recap
HARMONEY BUSINESS RECAP PAGE 8
Slide 9: Strong Origination Growth
STRONG ORIGINATION GROWTH $1.9+ BILLION OF LOAN ORIGINATIONS • Harmoney has originated over $1.9 billion in personal loans CAGR across AU and NZ since 2014, making it the largest 100% 79% direct lender in AU / NZ. • Loan origination CAGR growth of 79% over this period. • This being achieved whilst m
Slide 10: Stellare – Investment in Automation Delivers Scalability
STELLARE™ – INVESTMENT IN AUTOMATION DELIVERS SCALABILITY Track record of operating leverage: • Strong growth in both New Zealand and Australian markets (1H21 impacted by COVID underwriting CAGR 20% prudence). • Leveraging our highly scalable Stellare™ platform. • 3Rs business model driven growth fr
Slide 11: Technology and Data Driven Business
TECHNOLOGY AND DATA DRIVEN BUSINESS Software engineers, data scientists and product managers support the continuous advancement of StellareTM AUTOMATION DATA-DRIVEN ● High degree of automation and ● Utilise data analytics to produce straight-through processing unbiased, data-driven credit driving op
Slide 12: 100% Direct Personal Lender: Power of the 3Rs
100% DIRECT PERSONAL LENDER POWER OF THE 3Rs NEW AND EXISTING DEAL FLOW POWER OF THE PROVEN BUSINESS MODEL VOL TO 31 JAN 2021 NEW CUSTOMERS Accounts created in CY2015 $565m Harmoney originates customers of Losses on repeat borrowed $118m in CY2015. By 31 new loan traffic via low/no-cost loans engage
Slide 13: 1H21 Business Update
1H21 BUSINESS UPDATE PAGE 13
Slide 14: Australian Growth 69% Quarter on Quarter
AUSTRALIAN GROWTH 69% QTR ON QTR AS HMY STARTS TO MARKET IN AUSTRALIA ● Origination accelerated through 1H21, with 2Q21 approaching pre-COVID levels. ● 2Q21 Group originations $115m, 47% NZ AU growth on 1Q21. ● 1H21 Group originations of $194m. AUSTRALIA (2Q ON 1Q) ● Total originations grow by 69%.
Slide 15: Power of the Proven Business Model
POWER OF THE PROVEN BUSINESS MODEL ● Harmoney leveraged the 3Rs in 1Q21 to originate from quality existing accounts. ● In 2Q21, Harmoney resumed a marketing program and saw new customer originations grow by 127%. ● Lag effect between marketing activity and origination in 2Q21 with normal marketing r
Slide 16: High Quality Risk-Based Priced Portfolio
HIGH QUALITY RISK-BASED PRICED PORTFOLIO ▪ Harmoney originates high-quality, investment grade receivables, with 92% having a risk grade of A-D, 92% GRADES A-D which typically have high levels of home ownership and full-time income. ▪ Harmoney has an enviable yield as can be seen from the interest ra
Slide 17: Historical Lows in Group Arrears & Losses
HISTORICAL LOWS IN GROUP ARREARS & LOSSES AUSTRALIA • Arrears at historical lows in both AU and NZ. • Upgraded proprietary scorecards and conservative risk settings through 2020 driving improved performance. • Group losses at historical lows and continue to track to forecast. • Portfolio showing res
Slide 18: Diversified Funding: $290M+ Undrawn
DIVERSIFIED FUNDING: $290M+ UNDRAWN NEW ZEALAND AUSTRALIA WAREHOUSE VS $168m UNDRAWN A$113m UNDRAWN PEER-TO-PEER WAREHOUSE PEER-TO-PEER ● M&G warehouse committed facility to January 2024, up to ● AU warehouse facility - In Feb 2021 committed facility The transition to 100% a $200m limit. extended to
Slide 19: 1H21 Financials
1H21 FINANCIALS PAGE 19
Slide 20: Key Operating and Pro Forma Financial Metrics
KEY OPERATING AND PRO FORMA FINANCIAL METRICS 6 months ended 6 months ended 31 December 2020 31 December 2019 ● Originations lower in 1H21 due to more conservative credit underwriting, particularly in 1Q21. $000 $000 Change % LOAN BOOK VALUE AND GROWTH ● Average loan book down 2% on lower originatio
Slide 21: Profit & Loss (Pro Forma)
PROFIT & LOSS (PRO FORMA) 6 months ended 6 months ended • Cash NPAT $1.2m, up $4.0m. 31 December 2020 31 December 2019 • Total income steady despite 1H21 being COVID impacted. $000 $000 Interest income 41,535 41,055 • Interest expense down $2.2m (12%), driven by continuing Other income 19 498 transi
Slide 22: Cashflow (Statutory)
CASHFLOW (STATUTORY) 6 months ended 6 months ended • Net increase in cash of $42.6m, including net IPO proceeds 31 December 2020 31 December 2019 of ~$57m (being $67.6m, less $10.7m corporate debt $000 $000 repayment). CASH FLOWS FROM OPERATING ACTIVITIES • Expansion of warehouse funding used $10.2m
Slide 23: Balance Sheet (Statutory)
BALANCE SHEET (STATUTORY) 31 December 2020 30 June 2020 • Net assets $91m, up $62m during 1H21, driven by $'000 $'000 ASSETS proceeds from IPO. Cash and cash equivalents 77,844 34,779 • Cash $78m, up from $35m at June 2020. Trade and other assets 5,676 5,223 Finance receivables 199,704 129,222 • Fin
Slide 24: P&L Reconciliation – Pro Forma to Statutory
P&L RECONCILIATION – PRO FORMA TO STATUTORY KEY ADJUSTMENTS • Pro forma recognises income from peer-to- 6 months ended 6 months ended 31 December 2020 31 December 2019 peer funded loans as interest income and $'000 NPAT NPAT expenses over the life of the underlying loans. Pro-forma profit/(loss) aft
Slide 25: Strategy and Outlook
STRATEGY AND OUTLOOK PAGE 25
Slide 26: Harmoney Customer Enquiry $7.4B ($3B in AU)
HARMONEY CUSTOMER ENQUIRY $7.4B ($3B IN AU) ~A$150B ~$15B MAJOR BANK MARKET AU PERSONAL NZ PERSONAL SHARE IN DECLINE LENDING MARKET LENDING MARKET 2015: ~90% → 2018: ~50% SOURCE: RBNZ, ‘C5 – SECTOR LENDING (REGISTERED BANKS AND NON-BANK LENDING INSTITUTIONS)’. NOTE: PERSONAL LOANS ARE DEFINED AS PER
Slide 27: $1B p.a. Australian Origination Target
$1B P.A. AUSTRALIAN ORIGINATION TARGET By matching NZ performance to our AU business today = $1B per annum opportunity PARITY IN NEW PARITY IN 3R HARMONEY AU CONVERSION PERFORMANCE ORIGINATION TARGET + GAP TO = $1B NZ PARITY AU ~25% P.A. OF NZ AU CONVERSION NZ CONVERSION Applying Harmoney NZ funnel
Slide 28: Roadmap to $1B p.a. Australian Origination Target
ROADMAP TO $1B P.A. AUSTRALIAN ORIGINATION TARGET 113% + = CUSTOMERS DEMAND MONEY IN MOMENTS FRICTIONLESS FINANCE BROAD LENDING LIMITS Harmoney is meeting customer demand GROWTH IN ANY DEVICE / INTERFACE for a simple and seamless experience and ONLINE TRUSTED BRAND identifying opportunities for prod
Slide 29: Why Is Harmoney's Model Successful?
WHY IS HARMONEY’S MODEL SUCCESSFUL? COMPELLING Attractive revenue profile, loan TECHNOLOGY Proprietary technology, Stellare™ FUNDAMENTALS book, $1.9Bn+ in originations at EMPOWERED enables automation, machine market leading NIM of ~11%. learning, data utilization and direct marketing. STRONG MARKET
Slide 30: Appendices
APPENDICES PAGE 30
Slide 31: Largest Direct Personal Lender Across AU and NZ
LARGEST DIRECT PERSONAL LENDER ACROSS AU AND NZ ORIGINATIONS OF $1.9+ BILLION CUSTOMERS TEAM KEY METRICS 83 NET PROMOTER SCORE FTEs (NZ + AU) 69 1H21 PRO FORMA REVENUE $42m GOOGLE REVIEWS 4.7/ 5 FTE ENGINEERS, PRODUCT MANAGERS, DATA SCIENCE 51% TOTAL ORIGINATIONS $1.9b SHOPPER APPROVED 4.7/ 5 REVENU
Slide 32: Customer Loan Product
CUSTOMER LOAN PRODUCT PERSONAL LOANS USE OF FUNDS • Personalised fixed rates based on customer Unsecured Risk-based pricing personal credit characteristics. loans • Loans up to $70k with terms of three or five DEBT CONSOLIDATION HOME RENOVATIONS years. Automated • Automated simple and streamlined pr
Slide 33: $362M New Zealand Portfolio
$362M NEW ZEALAND PORTFOLIO (as at 31 Dec 2020) LOAN PURPOSE REGION AGE OF BORROWERS EMPLOYMENT STATUS PROPERTY OWNERSHIP 73% of customers are ~49% own office, professional, property trade 1H21 RESULTS 24 FEBRUARY 2021 PAGE 33
Slide 34: $106M Australia Portfolio
$106M AUSTRALIA PORTFOLIO (as at 31 Dec 2020) LOAN PURPOSE REGION AGE OF BORROWERS EMPLOYMENT STATUS PROPERTY OWNERSHIP 79% of customers are office, professional, ~63% own trade property 1H21 RESULTS 24 FEBRUARY 2021 PAGE 34
Slide 35: Harmoney Board of Directors
HARMONEY BOARD OF DIRECTORS DAVID FLACKS PAUL LAHIFF TRACEY JONES NEIL ROBERTS DAVID STEVENS INDEPENDENT CHAIRMAN INDEPENDENT DIRECTOR INDEPENDENT DIRECTOR DIRECTOR AND FOUNDER CHIEF EXECUTIVE OFFICER AND MANAGING DIRECTOR David was a senior corporate partner of Paul was previously Managing Director