Funding Circle Holdings Plc · LSE:FCH
Funding Circle — H1 2019 Earnings Presentation
36 slides from Funding Circle's earnings presentation, Aug 8, 2019
Slide 1: Results for the six months to 30 June 2019
Results for the six months to 30 June 2019 8 August 2019
Slide 2: H1 2019 highlights
Growth in loans under management to 29% Growth in revenue to £81.4m 37% (H1 2018: £63.0m) £3.54bn (H1 2018: £2.58bn) 46% Revenue from existing customers 14% Growth in originations to £1.19bn (H1 2018: 41%) (H1 2018: £1.04bn) 1% Segment Adjusted EBITDA margin 72,000 Total SME borrowers at end of H1 2
Slide 3: Small businesses' share of economic activity and employment
2.1% 1 52% 2 60% 2 0.7% 1 44% 3 48% 4 0.6% 5 45-60% 5 60-70% 5 1. Based on data from the “The Big Business of Small Business” report from Oxford Economics –April 2019 2. Federation of Small Businesses: https://www.fsb.org.uk/media-centre/small-business-statistics 3. Small Business Administration: ht
Slide 4: Small business contribution to GDP and jobs
drives opportunity, creativity, and community £4.1 billion 72,000 jobs $2.8 billion 38,000 jobs €216 million 3,200 jobs €140 million 1,900 jobs Source: “The Big Business of Small Business” report from Oxford Economics –April 2019 4 1. Funding Circle’s loans under management at the end of 2018 used a
Slide 5: Current TAM across geographies ~£470bn
Current TAM across 4 geographies1 ~£470bn ~£220bn ~£140bn ~£85bn ~£20bn US DE UK NL ~0.5% ~0.1% ~2.9% ~0.6% +14% +19% +11% +21% 1. OC&C analysis, aggregated and triangulated from >30 publically available sources (e.g. BoE, FDIC, Bundesbank, DNB, industry associations, government/bank survey data). T
Slide 6: Funding Circle at a glance
Small businesses access fast, Investors earn attractive returns affordable finance 92,000 investors globally 10 years’ trading history ~5,000 investors started lending 7 employees in H1 2019 ~£1m revenue 5.0-8.5% projected returns across all geos1 ~£80k loan size 56% of funding from inst. 48 months
Slide 7: Net Promoter Score and borrower satisfaction
2.4 2.2 Net Promoter Score between 80-90 in UK and US 2 82% of borrowers would choose Funding Circle 1.8 1 again in the future rather than their bank 1.6 70% would choose Funding Circle first because 1.4 the process is too long or too inconvenient at a bank1 1.2 1 0 3 6 9 12 15 18 21 24 27 30 33 36
Slide 8: Investors and projected annual returns
Institutions Funds Insurance 56% companies Banks Asset Projected annual returns of 5.0-8.5% across management companies European SME Direct Lending Fund I all geographies2 FC ABS Bonds 5% 8% Exposure to asset class that was previously UK SME Direct Lending Fund I ABS Bonds inaccessible 25% 6% Nation
Slide 9: Group Financial Performance
Group Financial Performance
Slide 10: Loans under management and originations
Growth (1) Growth (1) Loans under Management (£m) 37% YoY Originations (£m) 14% YoY 3,540 14 1,192 244 56% 0 1,043 83 1% 848 49% 5 2,584 82 311 18% 50 797 153 249 549 77 1,705 21 151 150 33% 13% 55 322 2,434 798 1,832 707 548 1,179 H1 2017 H1 2018 H1 2019 H1 2017 H1 2018 H1 2019 United Kingdom (excl
Slide 11: Revenue
Transaction yield 4.8% 5.2% Growth (1) Growth (1) Revenue (£m) 29% YoY Servicing yield 1.0% 0.9% YoY 81.4 0.0 81.4 6.5 26% 0.0 63.0 63.0 0.3 21.9 37% 5.2 0.3 20% 43.8 15.0 40.9 40.9 36.6 0.9 2.2 2.2 8.3 25% 53.0 23.0 42.5 37.6 44% 29.5 26.1 15.7 H1 2017 H1 2018 H1 2019 H1 2017 H1 2018 H1 2019 United
Slide 12: Revenue growth breakdown and segment result
Revenue growth breakdown (%) Segment Result (£m)1 Change 40000% 38000% (0.9) 3.3 1.2 (64%) 1% 36000% 2% 4% 34000% 32000% 5% 24% 30000% 13.9 10.6 11.2 6% 29% 28000% 26000% 24000% 11% (4.4) (52%) 22000% (6.6) (6.7) 20000% (3.5) Originations Servicing Transaction Net Policy FX Revenue (4.9) (6.0) (71%)
Slide 13: UK revenue and segment margin
Revenue (£m) Segment Margin – H1 2019 (%)1 Growth YoY 53.0 25% 42.8 0.3 24.7 31.7 8% 2.2 22.9 68% 16.5 26% 28.3 19.6 44% (21%) 13.0 H1 2017 H1 2018 H1 2019 Existing New Property Existing New Combined Existing as a % of revenue Marketing spend as a % of revenue 53% 46% 41% 28.3 38% 41% 32% 19.6 13.0
Slide 14: US revenue and segment margin
Revenue ($m) Segment Margin – 2019 (%)1 28.3 Growth YoY 20.6 37% 33% 19.4 42% 13.7 (31%) 10.6 (60%) 7.5 8.9 29% 6.9 3.1 H1 2017 H1 2018 H1 2019 Existing New Combined Existing New Existing as a % of revenue Marketing spend as a % of revenue 31% 33% 54% 50% 44% 29% 8.9 6.9 3.1 H1 2017 H1 2018 H1 2019
Slide 15: Developing Markets revenue and segment margin
Revenue (€m) 7.5 Growth Segment Margin – 2019 (%)1 YoY 11% 5.9 27% 4.7 (88%) 2% 4.6 (147%) 1.0 2.8 115% 0.8 1.3 0.2 H1 2017 H1 2018 H1 2019 Existing New Combined Existing New Existing as a % of revenue Marketing spend as a % of revenue 37% 127% 22% 2.8 20% 1.3 34% 42% 0.2 H1 2017 H1 2018 H1 2019 H1
Slide 16: Adjusted EBITDA and free cash flow
Adjusted EBITDA2,3 (£m) (22%) (24%) Free Cash Flow4 (£m) (36%) (35%) Margin Margin (10.9) (13.9) (19.7) 3.3 (22.0) (22.5) (28.1) 1.2 1% (0.9) (6.7) (10.9) (24%) (12.2) (13.9) (14.3) (18%) (3.3) (19.7) (4.7) (7%) (5.0) (0.3) (4.7) (6.6) (8%) (6.1) (1.3) (3%) (2.6) (5.9) (2.2) H1 2017 H1 2018 H1 2019
Slide 17: Segmental and income statement view
Segmental View H1 2017 H1 2018 H1 2019 Income Statement View H1 2017 H1 2018 H1 2019 Restated Restated Restated Restated £m £m £m £m £m £m United Kingdom 29.5 42.5 53.0 Transaction revenue 33.0 50.3 62.5 United States 8.3 15.0 21.9 Servicing revenue 7.6 11.3 15.2 Developing Markets 0.9 5.2 6.5 Net i
Slide 18: Our investor products and investor TAM increase
Our Investor Products Estimated Increase in Investor TAM1 *NEW* 2019 Bonds (ABS) Private Fund 2015 Listed Fund ~4x increase ~£2.8trn New investor TAM 2013 Whole Loans ~£657bn Old investor TAM 2010 Fractional Loans 18 1. Bank of England / Funding Circle prospectus; 2. Preqin / Funding Circle prospect
Slide 19: Bond (ABS) programme illustrative timeline
Year End Year End Illustrative timeline 5 - 7 months 5 - 7 months 5 - 7 months • SME loans are originated into a warehouse in a given period, funded 1st Issuance through FC working capital (approx. 25%) and a banking partner • Once accumulated, loans are Bank debt Warehouse Stage Securitisation Stag
Slide 20: Funding of investments in bond products
30 30 - 3 270 147 FC working capital FC loan curing Bank debt funding Cash 1. Short term investment of £180 million include i) Investments under loan curing (£3m) – typically held for 2-3 days; and ii) Investments in Bond products (£177m) – loans held in the warehouse phase of the ABS programme expe
Slide 21: Balance sheet and cash movement
Balance Sheet1 30 June 31 December 30 June 2018 2018 2019 Restated Restated £m £m £m Goodwill 41.5 42.3 42.3 Intangible assets 17.9 21.5 23.7 Property, plant and equipment 26.9 25.2 25.3 Investment in associates - - 5.6 Cash and cash equivalents (£m) Investment in loans (other) 0.2 0.3 2.0 Non-curre
Slide 22: Market Outlook
Market Outlook
Slide 23: Annualised lifetime returns by cohort
Cohort 2012 2013 2014 2015 2016 2017 2018 2019 UK 7.1 - 7.2% 6.0 - 6.2% 7.0 - 7.3% 6.4 - 7.0% 5.0 - 5.6% 4.0 - 5.0% 4.4 - 5.4% 5.0 - 7.0% Q2-Q1 change unchanged unchanged unchanged (10bps) – 0bps (10bps) – (10bps) (10bps) – (10bps) (10bps) – (10bps) unchanged US 2.6 - 2.8% 4.1 - 4.9% 5.4 - 6.3% 5.0
Slide 24: Funding Circle UK risk performance
UK Market Insolvencies Funding Circle UK Risk Performance % unit defaults at 12 months by cohort 160 10% 15% 140 120 8% 100 6% 80 60 4% 100% 40 85% 2% 20 0 0% Q1-06 Q2-07 Q3-08 Q4-09 Q1-11 Q2-12 Q3-13 Q4-14 Q1-16 Q2-17 Q3-18 H1 2015 H2 2015 H1 2016 H2 2016 H1 2017 H2 2017 H1 2018 Company insolvencie
Slide 25: Expected lifetime annualised net yield range by market
Expected Lifetime Annualised Net Yield Range by Market 2019 H1 originations 6.5% - 8.5% 5.7% - 7.8% 5.5% - 7.5% 5.0% - 7.0% UK US Germany Netherlands Loss Coverage 2.2x to 4.5x 1.8x to 2.6x 2.4x to 5.1x 2.5x to 4.9x Source: Funding Circle 25
Slide 26: 2019 guidance and strategy
• Guidance for 2019 unchanged from Q2 Trading Update • 2019 revenue growth to be c.20% • Adjusted EBITDA loss margin for 2019 to be better than 20181 Invest in Diversify Build a data, tech funding highly scalable, • Funding Circle remains confident of delivering its stated and analytics sources glob
Slide 27: Trevor Mather
Trevor Mather
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: Adoption of new leasing standard (IFRS 16)
Adoption of new leasing standard (IFRS16) from 1st January 2019. For the 2019 Financial Statements, the six month ended 30 June 2018 comparative has been restated Statement of Financial Position Prior to implementation Impact of IFRS 16 Post implementation of IFRS 16 of IFRS 16 The balance sheet eff
Slide 31: Cash flow statement
31 December 30 June Cash Flow Statement H1 2018 FY 2018 H1 2019 Reconciliation of cash 2018 2019 £m £m £m £m £m Loss before taxation (27.1) (50.9) (30.8) Cash and cash equivalents at the beginning of the year 88.9 333.0 Depreciation 3.1 6.4 3.5 Net increase/(decrease) in cash and cash equivalents 24
Slide 32: Private funds illustrative timeline
Illustrative timeline 3 year investment period 5 year distribution period • Funding Circle will invest own capital upfront • This will attract additional Private investors over 12-18 months Funds • The fund will continue to grow for a 3 year period through new funds and re-investment of repayments I
Slide 33: Notes
Notes
Slide 34: Notes
Notes
Slide 35: Notes
Notes
Slide 36: «~ Eunding
«~ Eunding » Circle
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