Funding Circle Holdings Plc · LSE:FCH
Funding Circle — FY2019 Earnings Presentation
39 slides from Funding Circle's earnings presentation, Mar 12, 2020
Slide 1: Year ended 31 December 2019
Year ended 31 December 2019 Liverpool Cheese Company 12 March 2020
Slide 2: Financial Performance, Business Initiatives, Outlook
FINANCIAL PERFORMANCE • Revenue of £167.4m (2018: £141.9m) up 18% with LuM up 19% to record £3.7bn (2018: £3.1bn) despite a challenging economic environment. • Adjusted EBITDA of negative £27.5m (2018: negative £23.4m) with loss margin of 16% (2018: 16%). • Loss before taxation and exceptional costs
Slide 3: Target addressable SME lending market
1. Based on data from the “The Big Business of Small Business” report from Oxford Economics –April 2019 2. OC&C analysis, aggregated and triangulated from >30 publically available sources (e.g. BoE, FDIC, Bundesbank, DNB, industry associations, government/bank survey data). Target addressable market
Slide 4: Small businesses access fast, affordable finance; investors earn attractive returns
Small businesses access fast, Investors earn attractive returns affordable finance c.95,000 investors globally c.80,000 borrowers globally c.8.5 billion lent by investors to - 10 years’ trading history borrowers - 7 employees - ~£1m revenue 5.0-7.8% projected returns - ~£80k loan size across UK and
Slide 5: Net Promoter Score between 80-90 in UK and US
2012 Q1 2012 Q2 2.4 2012 Q3 2012 Q4 2013 Q1 2013 Q2 2.2 2013 Q3 Net Promoter Score between 80-90 in UK and US 2013 Q4 2014 Q1 2014 Q2 2 2014 Q3 82% of borrowers would choose Funding Circle 2014 Q4 2015 Q1 2015 Q2 1.8 again in the future rather than their bank1 2015 Q3 2015 Q4 2016 Q1 2016 Q2 1.6 201
Slide 6: Investor types and projected annual returns
Institutions Institutional investors directly purchasing whole loans – including banks, assets manager, insurance Funds companies. 50% Private and Public Funds purchasing whole loans. Projected annual returns of 5.0-7.8% across UK and US2 Bonds 16% 7% Funding Circle sponsored ABS bonds backed by a D
Slide 7: Group Financial Performance
Group Financial Performance
Slide 8: Loans under Management and Originations
Growth (1) Growth (1) Loans under Management (£m) 19% YoY Originations (£m) (2) 3% YoY 37% 8% 24% 0% 17% 2% 8 1. Geo segment growth stated in local currency to eliminate FX variations
Slide 9: Revenue
Transaction yield 4.9% 5.2% Growth (1) Growth (1) Revenue (£m) 18% YoY Servicing yield 0.9% 0.9% YoY 20% 29% 19% 22% 16% 7% 9 1. Geo revenue growth stated in local currency to eliminate FX variations
Slide 10: Revenue growth breakdown and Segment Result
Revenue growth breakdown (%) Segment Result (£m) Change (1) (7%) 38% (69%) (71%) 10 1. Geo revenue growth stated in local currency to eliminate FX variations
Slide 11: Adjusted EBITDA and Free Cash Flow
Adjusted EBITDA1,2 (£m) (16%) (16%) Margin Free Cash Flow3 (£m) (20%) (21%) Change (7%) (16%) (18%) (87%) (7%) (32%) 89% 1. Adjusted EBITDA represents EBITDA (Earnings before Interest, Tax, Depreciation and Amortisation) excluding share-based payments, exceptional items and foreign exchange gains or
Slide 12: Income statement
2019 2018 2017 Restated¹ Restated¹ £m £m £m Revenue 167.4 141.9 94.5 People costs (90.3) (79.2) (47.4) Marketing costs (66.5) (57.8) (38.7) Depreciation and amortisation (14.9) (12.5) (11.3) Loan repurchase charge (6.5) (2.6) - Impairment (exceptional) (34.3) - - IPO adviser costs (exceptional) - (5
Slide 13: Change in segmental reporting
2019 2019 £m UK US DM Total £m UK US DM Total Revenue Revenue Segment adjusted EBITDA Segment adjusted EBITDA Product and development Product and development Corporate costs Costs reported by geo Corporate costs Adjusted EBITDA Adjusted EBITDA Depreciation and amortisation Depreciation and amortisat
Slide 14: Segment margins
Margin 10% (2%) (48%) (66%) (124%) (397%) 14
Slide 15: AEBITDA and Operating (Loss)/Profit and Margin
AEBITDA (£m) & Margin Operating (Loss)/Profit (£m) & Margin 15
Slide 16: 2019 Funding Circle Securitisations
• The global ABS market is deep and diverse with 2019 FC Securitisations c.£1.5 trillion of outstanding assets in the US and UK alone. US UK • ABS bonds help to increase Funding Circle’s Date of transaction August November investor TAM 4x to c.2.5trn. Size of deal $210m £250m • The Funding Circle sp
Slide 17: Working Capital and Investments of £145.2m
Group Group Trading Warehouse Securitisation Private Fund December December Business Stage Stage Investment 2019 2018 £m £m £m £m £m £m Investment in SME Loans 1.7 342.0 366.6 13.2 723.5 5.0 Cash & Cash Equivalents 132.2 18.2 14.1 - 164.5 333.0 Borrowings/Bonds 2.8 (265.8) (351.5) - (614.5) - Other
Slide 18: Strategy and Outlook
Strategy and Outlook
Slide 19: Change in conversion and projected annualised returns
Change in conversion of Projected Annualised Return Ranges1 Change in conversion of Projected Annualised Return Ranges1 applications 2018-2019 (%) applications 2018-2019 (%) 10-20% 13% drop improvement 20-30% 5.7% - 7.8% improvement 5.0% - 7.0% 5.0% - 6.3% 4.1 – 25% drop 4.1%5.1% - 5.1% 2018 2019 20
Slide 20: SBOLT and SBIZ; BancAlliance
SBOLT and SBIZ Banks BancAlliance, a network of 250+ Successfully launched the Funding community banks, and Funding Circle Circle ABS programme in the UK and are building a comprehensive US in 2019. program for US community banks to buy loans. US SBIZ: $210m oversubscribed transaction saw demand fro
Slide 21: Developing Markets: existing model vs new model
Existing model New model Marketplace focused on originating loans to Marketplace focused on originating loans for institutional and retail investors local lenders Low overall conversion Better conversion Income earned from transaction and servicing fee Income earned from transaction fee only c.150 b
Slide 22: Transport and Food Ecommerce
Transport and Food Ecommerce Instant taxis and food Instant ordering and Instant Decision drives a delivery anytime, anywhere fulfilment revolutionised e- superior customer experience commerce and competitive advantage 22
Slide 23: Instant decision platform and data
c.1M Applications Multi 10 years channel Proprietary data lake of experience acquisition containing data on data 5 year loan terms 26m businesses and Personalisation: 2bn data points decision orientated 300+ c.90 architecture Engineering NPS team 200+ Data Pipeline Risk & Analytics team Cloud based
Slide 24: From Application to Acceptance in c.6 minutes
From Application to Acceptance in c.6 minutes Get started Answer a few questions to check if you're eligible in 30 seconds. © This check doe: Is this the first time you’ve checked your eligibility with us? Funding Circle Discover more Lega notice Excellent SOGGE A Trustpitot 90% sted by Over 52,000
Slide 25: Adding other lenders to fund loans outside core
• Adding other lenders to fund loans outside FC • Help smaller businesses access funding and core loans (larger loans, higher risk etc.) helps build their credit profile. more small businesses access finance. • Companies typically looking for <£50k loan size • Pilot in Q4 2019 working with lenders i
Slide 26: Outlook for 2020
• Focus on improving conversion across the platform, keeping net returns attractive and delivering profitable growth. • Trading for the year has started well. We continue to assess the possible impact of COVID-19 on borrowers and investors. We have not seen an impact of the virus on recent trading,
Slide 27: Q&A
Q&A
Slide 28: Appendices
Appendices
Slide 29: Information regarding forward-looking statements
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 beliefs and expec
Slide 30: Consolidated balance sheet
Total assets 2019 2018 2017 Liabilities & equity 2019 2018 2017 Restated¹ Restated¹ Restated¹ Restated¹ £m £m £m £m £m £m Non-current assets Current liabilities Goodwill 11.3 42.3 41.3 Trade and other payables 19.7 19.3 9.6 Intangible assets 23.6 21.5 16.2 Short-term provisions 3.1 3.8 2.2 Property,
Slide 31: Consolidated statement of cash flows and free cash flow reconciliation
2019 2018 2017 2019 2018 2017 Consolidated statement of cash flows £m £m £m Reconciliation to free cash flow £m £m £m Net cash outflow from operating activities (27.0) (30.6) (19.9) Net cash outflow from operating activities (27.0) (30.6) (19.9) Investing activities Purchase of intangible assets (14
Slide 32: Segmental reporting bridge
2019 2019 £m UK US DM Total £m UK US DM Total Revenue 108.5 45.6 13.3 167.4 Revenue 108.5 45.6 13.3 167.4 Segment adjusted EBITDA 34.0 (10.3) (12.5) 11.2 Segment adjusted EBITDA 34.0 (10.3) (12.5) 11.2 Product and development (26.4) Product and development (26.4) (23.0) (11.7) (4.0) Corporate costs
Slide 33: 2012 Q1 2012 Q2 2.4 2012 Q3 2012 Q4 2013 Q1 2013 Q2 2.2
2012 Q1 2012 Q2 2.4 2012 Q3 2012 Q4 2013 Q1 2013 Q2 2.2 2013 Q3 2013 Q4 2014 Q1 2014 Q2 2 2014 Q3 2014 Q4 2015 Q1 2015 Q2 1.8 2015 Q3 2015 Q4 2016 Q1 2016 Q2 1.6 2016 Q3 2016 Q4 2017 Q1 2017 Q2 1.4 2017 Q3 2017 Q4 2018 Q1 2018 Q2 1.2 2018 Q3 2018 Q4 2019 Q1 2019 Q2 1 2019 Q3 0 1 2 3 4 5 6 7 33
Slide 34: Base and stress scenario returns
Base(1) Stress(2) Base(1) Stress(2) 5.7% - 7.8% 5.0% - 7.0% 2.0% - 5.0% 0.8% - 2.8% 7,000 5 6,000 5,000 4 4,000 3 3,000 2 2,000 1,000 1 - 0 2012Q3 1990Q1 1994Q3 1999Q1 2003Q3 2008Q1 2017Q1 2021Q3 2021 Q1 2005 Q1 2007 Q1 2009 Q1 2011 Q1 2013 Q1 2015 Q1 2017 Q1 2019 Q1 Actual Predicted Stress SBDI_Act
Slide 35: Scale flywheel
…scale attracts …funding more more investors to loans and the platform… generating more data… …generating higher …creating more conversion, better predictive net returns and models and targeting… more repeat borrowers… 35
Slide 36: Notes
Notes
Slide 37: Notes
Notes
Slide 38: Notes
Notes
Slide 39: Funding Circle
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