Chrysalis Investments Limited · LSE:CHRY
Chrysalis Investments — Investor Day (November 2022)
45 slides from Chrysalis Investments's investor day presentation, November 2022
Slide 1: Chrysalis Investments – Capital Markets Day
Chrysalis Investments – Capital Markets Day Managed by Jupiter Investment Management Limited Richard Watts Nick Williamson Co-Manager Co-Manager For professional investors in the UK only November 2022
Slide 2: Disclaimer – Important Notice
Disclaimer – Important Notice This document has been prepared by Jupiter Investment Management Limited (the "Investment Manager") for distribution at the Capital Markets Day relating to Chrysalis Investments Limited (the "Company"). This document is being made on the basis that the recipients keep c
Slide 3: Disclaimer – Important Notice
Disclaimer – Important Notice This document is only being distributed to, and is only directed at: (a) persons in the United Kingdom that are "qualified investors" within the meaning of the UK version of Regulation (EU) 2017/1129 and are (ii) persons who have professional experience in matters relat
Slide 4: Running order
Running order Questions we hope to answer What is our purpose? What is the market outlook? What are our thoughts on valuation? What are our thoughts on positioning and strategy? 4
Slide 5: What is our purpose?
What is our purpose?
Slide 6: Straddling public and private markets
Straddling public and private markets The concept PRIVATE EQUITY JUPITER INVESTMENT INVESTORS MANAGEMENT Natural sellers at IPO Natural buyer of listed equity Limited life funds need Long-term supportive capital liquidity, but companies Committed >£2.5bn at IPO1 staying private for longer • Full cro
Slide 7: Straddling public and private markets
Straddling public and private markets The concept PRIVATE EQUITY JUPITER INVESTMENT INVESTORS MANAGEMENT Principle 1: Natural sellers at IPO Principle 2: Natural buyer of listed equity Limited life funds need Long-term supportive capital Companies were staying liquidity, but companies staying privat
Slide 8: Private for longer
Private for longer Trends have continued Average age at exit for UK privately financed companies# Number of UK IPOs (Aim and Main Market) 12 450 No IPOs Companies continue to stay private 11 400 Ave 1995-2007 for longer Ave 2010-21 350 10 The number of IPOs remains well 300 9 below historical levels
Slide 9: Chrysalis blueprint
Chrysalis blueprint Seeking extraordinary growth opportunities Portfolio composition (as of 30 Sep-22) We look for companies displaying all or some of Wise 2% Net cash 7% the following traits: wefox InfoSum 18% 3% Operating in huge addressable markets with structural tailwinds Tactus 4% Potential to
Slide 10: Wise
Wise KPIs Mar-17 Mar-22 Factor Mar-26e Factor Active users (m) 1.7 7.4 4.4x Volume per active (£k) 5.6 10.3 1.8x Revenue (£m) 66 560 8.4x 1,847 3.3x EBITDA adj (£m) 4 121 32.8x 425 3.5x Margin (%) 6% 22% 23% Source: Wise and Bloomberg estimates (top of range) Wise has been a standout example of the
Slide 11: Wise – the benchmark
Wise – the benchmark Growth profile Growth in revenues since investment Wise – Financial performance (£m) 10 Wise 1200 Sales EBITDA 9 Strong rates of organic growth projected 1000 to continue Increase in reenues since investment (x) c5x 8 CAGR 48% 7 Business remains exceptionally profitable, 800 6 d
Slide 12: Klarna – exceptional US growth
Klarna – exceptional US growth Growth delivery Growth in revenues since investment Net user adds Dec-18 to Jun-22 (millions)# 10 Klarna Wise 180 US Worldwide 9 160 Klarna’s US growth has been dramatic: despite lapping COVID-19 comparatives Increase in reenues since investment (x) 8 140 in 1H22 reven
Slide 13: Starling Bank – stand out performer
Starling Bank – stand out performer Growth delivery Growth in revenues since investment 40 Starling wefox Wise 38x 35 Increase in reenues since investment (x) 30 25 20 15 10 5 0 0 10 20 30 40 50 60 Months since investment Source: Jupiter Asset Management Starling has been the star growth performer 1
Slide 14: BrandTech – sub 1% share of massive market
BrandTech – sub 1% share of massive market Growth delivery Growth in revenues since investment 10 >$500m 9 BrandTech Klarna Wise 2021 revenues Increase in reenues since investment (x) 8 >2x 50% 7 6 5 4 organic growth 3 Profitable 2 1 0 0 10 20 30 40 50 60 Months since investment c. $640bn Source: Ju
Slide 15: Wefox – multiple avenues for growth
Wefox – multiple avenues for growth Growth delivery Growth in revenues since investment 10 wefox BrandTech Klarna Wise 9x 9 Increase in reenues since investment (x) 8 7 6 2019 2020 5 $600m 4 3 2 1 2022 revenue target 0 0 10 20 30 40 50 60 Largest and most valuable Months since investment InsurTech g
Slide 16: Smart Pension – offering significant efficiencies
Smart Pension – offering significant efficiencies Growth delivery Growth in revenues since investment Consistently delivering 10 wefox Smart BrandTech Klarna Wise for clients >75% 10x 9 Increase in reenues since investment (x) 8 6x 7 6 Reduction in More operationally admin personnel efficient 5 4 3
Slide 17: Deep Instinct – market leading performance
Deep Instinct – market leading performance Growth delivery Growth in revenues since investment 10 wefox Smart BrandTech Deep Instinct Klarna Wise Sep-22: Lane Bess was appointed CEO – 9 Lane is ex-CEO of Palo Alto Networks ($50bn MV) and ex-COO fo Zscaler Increase in reenues since investment (x) 8 (
Slide 18: Featurespace – protecting consumers and companies
Featurespace – protecting consumers and companies Growth delivery Growth in revenues since investment wefox Smart BrandTech Deep Instinct Klarna Wise Featurespace 10 9 x2 Increase in reenues since investment (x) 8 7 6 5 >2x 4 3 x3 2 1 0 0 10 20 30 40 50 60 500m 50.4bn 75% Months since investment con
Slide 19: Over £2.5bn of revenues added since investment
Growth delivery Over £2.5bn of revenues added since investment 3x Aggregate change in portfolio revenues – from point of investment to now (£m) The cumulative impact of these growth rates is that the portfolio has added 4,000 over £2.5bn in revenues since 3,500 investment, or a c3x increase, driven
Slide 20: TAM penetration remains very low
Growth delivery TAM penetration remains very low Split of top 6 assets aggregate TAM Aggregate market share of top 6 assets as percentage The TAM (Total Addressable Market) for of TAM our top six assets is approximately $800bn This equates to an aggregate market Unaddressed market share of this TAM
Slide 21: Conclusion: What is our purpose?
Conclusion What is our purpose? To find great, high growth and disruptive companies We have had some low points this year: the Klarna down round, which we believe will have proved to be a good point to follow-on the performance of THG, in light of the inflationary environment REVB, where we await th
Slide 22: What is the market outlook?
What is the market outlook? 22
Slide 23: Current state of the late-stage private market
Current state of the late-stage private market Still a massive market European late-stage VC market 2018-3Q22 (calendar years, £bn) FY21 was a record year of issuance 60 1Q 2Q 3Q 4Q FY 1Q22 likely saw the closing of deals 50 struck in FY21 40 The market has seen a rapid slowdown from 2Q 2022, as 30
Slide 24: Early signs of pricing stabilising?
Early signs of pricing stabilising? Green shoots? Investor indicated future valuation expectations (as of 3Q22)# 40% 35% Compared with 2Q22, future valuation 30% expectations have stabilised. 25% In 3Q22, 50% of investors expected to 20% offer valuations in the next six months roughly similar to tho
Slide 25: Investors increasingly focused on profits
Profitability Investors increasingly focused on profits Duration of investors’ shift in focus to profitability from growth# There is now a strong focus on 18-24 months 27% profitability by growth investors 12-18 months 31% Well over 50% of investors believe 24-36 months profits will now be more impo
Slide 26: Our companies have defied the market
Portfolio raises in 2022 Our companies have defied the market Five of our companies have raised capital to date in 2022 Portfolio company raises 2022 to date vs GS Nonprofitable Tech index 280 900 Four of these companies have raised capital at a higher 260 800 valuation than the prior round (excepti
Slide 27: The portfolio is well funded
Profitability The portfolio is well funded Chrysalis – Funding status of the portfolio (% of investable assets) 2yr runway 14% Approximately 1/3 of our portfolio is Funded to Consider already profitable, led by names such profitability 32% follow on as Starling and Brandtech Funding options: We beli
Slide 28: Liquidity would be game changing
When will the IPO market reopen? Liquidity would be game changing IPOs by quarter and All Share Index In recent periods of market 120 4000 dislocation, IPO activity has suffered IPOs All Share 3500 for 5-7 quarters. 100 3000 Anecdotally, we believe these 80 2500 bottlenecks often create a backlog of
Slide 29: Conclusion: What is the market outlook?
Conclusion What is the market outlook? The market is showing some signs of prices stabilising In addition, profitability looks to be a theme that is likely to persist Anecdotally, structuring has also become more prevalent The strength of our companies’ propositions has meant many have been able to
Slide 30: What are our thoughts on valuation?
What are our thoughts on valuation? 30
Slide 31: Setting the scene: Markets vs Chrysalis
Valuations Setting the scene: Markets vs Chrysalis NASDAQ EV/sales development (2001-22) Sales growth vs EV/sales ratios (1yr forward)# 10.0x 60% Major tech or growth indices have 9.0x CHRY derated to c5x EV/sales (NDX on 5.4x) 50% 8.0x The market seems appears not to be 7.0x paying up for growth; i
Slide 32: A large discount to a significantly written down NAV
Valuation thoughts A large discount to a significantly written down NAV Chrysalis – Effective discount to NAV (if crystalised at carrying value) 1,000 The average position size of our four latest-stage assets is c£107m 900 On average, these four assets have 800 already been written down by 40% 700 o
Slide 33: Bulk of NAV sits c6x and below
Valuation distribution Bulk of NAV sits c6x and below Chrysalis – valuation distribution by holding EV/sales Cumulative weight (%) c70% of the portfolio trades on 16 100% roughly valuations at or below c70% of NAV 90% NASDAQ Cummulative weight (% of total investments) 14 80% 12 Nearly 60% sits below
Slide 34: Movement over the year really driven by Klarna
Valuation thoughts Movement over the year really driven by Klarna Chrysalis – NAV movement Sep21-Sep22 (pence per share) Klarna caused c56p of the change in 20 NAV ps over the period 10 It has a single class of share, so no - protections (10) Ex-Klarna, the rest of the portfolio (20) decreased by c4
Slide 35: Conclusion: What are our thoughts on valuation?
Conclusion What are our thoughts on valuation? We believe Chrysalis is attractively valued for the growth it offers; the majority of the portfolio is valued more cheaply than the Nasdaq Our valuation metrics are skewed by exposure to some particularly high growth industries that command high multipl
Slide 36: What are our thoughts on positioning and strategy?
What are our thoughts on positioning and strategy? 36
Slide 37: Well capitalised
Current positioning Well capitalised As of Sep-22 we had net cash of Cash & liquidity position (£m as of Sep-22, adjusted for REVB) approximately £57m 70 As recently announced, we disposed of our 60 REVB position for approximately £5m As discussed, known possible follow-ons 50 are unlikely to exceed
Slide 38: NAV performance: Later stage assets support MV
NAV performance Later stage assets support MV Chrysalis – NAV construction (pence, as of Sep-22) The weighted average of all the 160 investments’ drawdowns from peak is 140 c50% 23 148 120 9 Net cash accounts for c10p; WISE and Four later stage assets 16 REVB (cash) add c4p 100 14 Starling accounts
Slide 39: ESG
ESG Substantial progress made in assessing our companies’ ESG progress 41% of NAV has calculated Scope 1&2 GHG emissions 36% of NAV has committed to net zero Environment Social Governance 50% of NAV has an independent chair 21% of NAV has a female CEO Influence private Encourage founders to Women ac
Slide 40: Conclusion: positioning and strategy
Conclusion What are our thoughts on positioning and strategy? Chrysalis retains significant liquidity This allows us to: protect our shareholdings from potential dilutive rounds; allows us to continue to support the growth in the portfolio pursue share buybacks, with our stance constantly under revi
Slide 41: Questions we hope we have answered
Conclusion Questions we hope we have answered What is our purpose? What is the market outlook? What are our thoughts on valuation? What are our thoughts on positioning and strategy? 41
Slide 42: Thank you
Thank you
Slide 43: Appendix
Appendix
Slide 44: Core team
Core team Resourcing has been added RICHARD WATTS NICK WILLIAMSON We have invested in our capability HEAD OF STRATEGY UK SMALL & MIDCAP FUND MANAGER Joined Merian in 2002 (now part of the Jupiter Group) Joined Merian in 2008 (now part of the Jupiter Group) We are likely to continue to do so Jupiter
Slide 45: Downside Protection
Downside Protection Illustrative example of a distribution waterfall Company XYZ Seniority Structure (£m) Company XYZ payout 1x liquidity preference (£m) A £200m Series C round is raise at 300 £450m post money with a 1x 1000 preference structure 250 900 800 The Series C should receive its money 200