4finance investor presentation Pareto Securities Conference 21 - - PowerPoint PPT Presentation

4finance investor presentation

Pareto Securities Conference 21 January, 2016

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KEY FIGURES, mEUR 2012 2013 2014 9M’2015(4) Interest income 76 149 221 229 Adjusted EBITDA(1) 38 71 83 79 Net profit 26 36 46 51 Total loans issued 313 538 805 791 Net loan portfolio(2) 110 178 241 299 Total equity 43 66 113 161 Net margin(3) 33% 24% 21% 22% Capital to assets ratio(5) 35% 29% 35% 38%

Overview of 4finance

European online and mobile lending leader Data and technology driven company Large scale Diversification Solid financial performance Outstanding growth Highly experienced management team Flexible business model

• 82% of assets are self-liquidating
• 90% of expenses are variable
• Revenue tripled in 2014 vs. 2012
• EBITDA doubled during the same period
• Profitable every month since end of 2009
• 45% return on equity (9M’15), high capital to assets ratio
• Operations in 14 countries, key markets: CEE, Baltics, Nordics
• Largest single country share in net loan portfolio: 24%
• >EUR 2.8 bln loans granted since inception in 2008
• >4.3 million registered customers (9M’2015)

(1) Adjusted EBITDA is defined as net profit, plus tax, plus interest expense, plus depreciation and amortization; adjusted for discontinued operations, non-cash impact of foreign exchange hedging, and goodwill write-offs (2) Gross loan portfolio less provisions for bad debts (3) Calculated as net profit (reported) to interest income (4) As per 9M’2015 published unaudited management accounts (5) Total equity/total assets (2014 figure adjusted for effect of first USD bond defeasance)

Credit ratings S&P: B+ stable Moody’s: B3 Positive

• Extensive banking, asset management, risk and audit experience

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{acquisition}

Historical growth

2008

• Establishment of the Company
• Active product development
• First foreign expansion
• Business amount tripled vs. 2008
• Served 100,000 customers
• New IT platform
• First “offline” loan granted
• No. of loans issued tripled

compared to 2009

2009 2010 2011 2012 2014 2013 2015

• EUR 100m total issued loans
• Financial investor Finstar attracted
• 450,000 registered customers
• > 10,000 loans issued per day
• > 4,000 registrations per day
• 1 million registered customers
• > EUR 1bn total issued loans
• 670 employees
• 4.2 million loans granted
• 2.3 million registered customers
• 6.8 million loans granted
• 3.8 million registered customers
• Moody’s and S&P ratings assigned for

the first time

• > EUR 2.8 bln total issued loans
• > 1,300 employees
• 10 million loans granted (Jan ‘16)
• > 4.3 million registered customers
• New product roll-out: credit line

Group milestones Entries to new markets and brands

Number of countries:

2 3 4 4 7 10 10 14

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Clear and simple product structure

Term

• Up to 30 days
• Up to 36 months

Fee structure

• Single fee payable at maturity
• Nominal annual interest rate: 61.9%–

108.0%(2)

• EUR 5–2’010
• EUR 50–3’846

Extension

• Option to extend up to 30 days
• Extension fee payable before extension
• Option to reset scheduled repayment by

a month

• Extension fee payable before extension

Markets

• Latvia, Lithuania, Finland, Sweden,

Poland, Denmark, Georgia, Spain, Czech Republic, Bulgaria, Romania, Argentina, Mexico

• Latvia, Lithuania, Finland, Sweden,

Poland, Denmark, Armenia

Single payment loan Instalment loan

Interest rate

• Monthly interest rate:

9%–35%(2)

• Monthly interest payments
• Repayment in multiple instalments

Loan amount

(1) Gross performing loan portfolio, as of 30/09/2015 (2) Max term and max loan amount pricing

Distribution channels

• Websites (mobile / tablet / web)
• Apple & Android native apps
• Phone call and SMS
• Offline: agents, loan shops and other partners
• Open-ended revolving credit line
• Monthly interest rate:

8.5%

• Limit up to EUR 3’000
• Flexible payment options as long as

MRP is met

• Customers can change their repayment

date

• Launched in Finland

New product: credit line

• Minimum monthly repayment (MRP)
• Withdrawal fees

% in portfolio(1)

33% 67%

• n/a (initial launch 09/2015)
• Online / mobile

Average loan size(1)

• 307 EUR
• 686 EUR
• n/a

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Most common customer characteristics:

Customer profile

• Has a bank account
• Expenditure matches monthly

income

• Little or no savings
• Limited credit history
• Employed + self employed
• Uses financing for lifestyle

choices or necessities

• Not willing to pay more for

value-added services

• 78% are repeat customers

(6M’2015)

Client split by gender Client split by age Sessions by device, online & mobile

77% 16% 3% 1% 4%

Desktop Mobile: Android Mobile: iOS Mobile: other Tablet

Sep 2015 9M’ 2015 9M’ 2015

6% 17% 17% 23% 18% 13% 6% 18-20 21-24 25-29 30-39 40-49 50-59 60+

Loan usage(1)

(1) Loan usage distribution in Latvia, smscredit.lv. Research agency: SKDS, 2015

34% 33% 12% 15% 6% Emergency/unexpected expenses Pay regular bills (house, utilities, food) Debt consolidation/repayment Maintaining my lifestyle (e.g. holidays, shopping, trips, etc.) Other (wedding costs, medical expenses, etc.)

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Business process

Marketing

• Customer

Acquisition

• Distribution

Channels

Underwriting

• Scorecards
• Credit bureaus
• Proprietary

database

Process

• Customer Care
• Debt Collection
• Fulfillment

Data

IT

Operational Risk Compliance Finance Legal Business Analysis

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IT platform

!

Efficient

• Centralized IT function
• Cloud-based servers
• Full automatization

Modern

• Latest technologies
• Highly integrated into the

business Secure & scalable

• 24/7 monitoring
• Regular external audits
• Infrastructure scaled by code

Credit bureaus

Digital marketing Anti-fraud tools Risk tools Payment systems Customer gets the loan

• Search engine
• ptimization
• Paid ads
• Targeting

Loan application

• Big data utilization
• Data mining & econometric

models Partner systems

Fully integrated platform Client service Paying back the loan

• Websites
• Mobile
• Apps
• Offline partners

The average loan issue time: 4 min 54 sec

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Sustainable growth Strengthening foundation Leveraging on technology

• Maintain market leadership in

established core markets

• Marketing Technology: for better

targeting and product offering

• Continuous development of scoring

systems

• Electronic wallet, card payment
• Big data: leverage existing

proprietary database for product development

Product roll-out Geographical expansion

• Developing operations in recently

entered markets: Romania, Armenia, Argentina, Mexico

• Line of credit already launched in

Finland, planned in other markets

• Expansion to Latin America,

Africa and Asia

• Continuous operational

improvements, including adaptation to new regulation

Strategy for sustainable growth

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Financial Review

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• Strong performance across the business
• Loan issuance up 33%
• Revenue up 39%, growth in all countries
• Net profit up 29% to EUR 51.3 million
• Continuing to invest for the future
• People, platforms, data analytics
• Marketing technology
• Diversifying the business
• Launch of third product: Line of Credit
• Launch of Vivus brand in Argentina and now Mexico
• Strengthening management team
• Appointment of experienced Chief Risk Officer

Highlights of 9M 2015 results

164.5 229.3

9M 2014 9M 2015

Revenue

+39% 39.7 51.3

9M 2014 9M 2015

+29%

Net profit

mEUR mEUR

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INCOME STATEMENT, M EUR 9M’2014 9M’2015 % Change Interest income 164.5 229.3 39% Interest expense (16.4) (21.1) 29% Net interest income 148.1 208.2 41% Net impairment losses on loans and receivables (41.7) (57.0) 37% General administrative expenses (58.1) (89.0) 53% Other (expense)/income (0.3) (2.9) >100% Profit before tax 48.0 59.3 24% Tax (10.0) (13.3) 33% Net profit from continuing operations 38.0 46.0 21% Discontinued operations, net of tax 1.7 5.3 >100% Net profit 39.7 51.3 29% Cost to income ratio % 35% 39% Net Margin, % 24% 22%

Income statement

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Balance sheet

KEY RATIOS 2014 9M’2015 Capital/assets ratio(1) 35% 38% Capital/net loan portfolio 47% 54% Interest coverage ratio 3.5x 3.7x Return on average equity(2) 54% 45% BALANCE SHEET, M EUR 2014 9M'2015 % Change Loans and advances 241.4 299.1 24% Cash and cash equivalents 33.7 47.5 41% Other assets 94.9 77.1 (19%) Total assets 370.0 423.7 14% Loans and borrowings 231.6 226.9 (2%) Other liabilities 25.4 36.2 42% Total liabilities 257.0 263.1 2% Total equity 113.0 160.6 42% Total equity and liabilities 370.0 423.7 14%

(1) 2014 figure adjusted for effect of Notes defeasance (2) RoAE based on net profit from continuing operations

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Diversified loan portfolio

110 178 241 299

2012 2013 2014 9M'2015

Net loan portfolio(1), mEUR

24% 17% 16% 10% 8% 8% 8% 6% 2% 1%

Poland Latvia Lithuania Sweden Georgia Finland Spain Denmark Czech Rp. Other

3% 9% 22% 9% 13% 27% 10% 7%

Net loan portfolio(1) by country, 30/09/2015 Portfolio split by average loan amount, EUR, 30/09/2015

(1) Gross loan portfolio less provisions for bad debts

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Last 12 months: net incoming cash* 148m EUR

Loan portfolio cash flow

* From continuing operations

126 144 153 167 198 201 224 250 261 279 139 160 177 184 218 234 261 273 304 324 50 100 150 200 250 300 350 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2014 2015 Total outgoing cash Total incoming cash

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EUR 1,599m EUR 1,453m EUR 145m

Loans issued 07/2013- 06/2015 (730 days) NPLs as of 30/09/2015 Repaid and performing loans 30/09/2015

Non-performing loans

Conservative provision coverage 30/09/2015 Non-performing loans (NPLs) as % of total loans issued(1)

9.1% of total loans issued

47% 57% 10%

Loss given default Provision for default Provision coverage buffer

Stable NPLs to issued loans ratio(1) 9.2% 8.8% 9.1%

2013 2014 3Q'2015

• Loans that are overdue more than 90 days are considered

as non-performing (NPLs)

• At the end of 3Q’2015 NPLs represented c.9.1% of total

issued loans over the last 730 days

• Actual loss experienced on NPLs is approximately 50%

(47% as of 30/09/2015)

• Provisions for default are c. 10 p.p. higher

(1) Total issued loans include the amount of loans issued during the 730 days ending 90 days prior to the balance sheet date

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Solid credit metrics

29% 35% 38% 2013 2014 9M 2015 1.6x 1.9x 1.7x 2013 2014 9M 2015 4.5x 3.5x 3.7x 2013 2014 9M 2015

Capital / Assets (1) Net Debt / Adj.EBITDA (1) Interest Coverage (2) Capital / Net Loans

• Financial strength enhanced with

increased capital to assets and capital to net loans

• Stable interest coverage
• Funding diversification with

Swedish bond issuance of SEK 375m in 2015 from a programme

• f SEK 600m
• Focused on reducing cost of funds

(12.2% in 9M15)

• Good cashflow generation
• Substantial headroom to bond

covenants

Comments

37% 47% 54% 2013 2014 9M 2015

(1) Adjusted to exclude the effect from 2015 Notes’ defeasance; (2) Calculated as adj.EBITDA divided by interest expense

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Key Credit strengths

• Proven data-driven business model realized on large scale
• Massive proprietary database
• 82% of assets are self liquidating
• Highly flexible cost base
• 90% of costs are variable
• Strong profitability and high level of capitalization
• Capital to assets ratio of 38%
• No concentration risks
• Strong level of geographical, product and customer diversification

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Thank you!