Creating a European payments champion July 2018 Disclaimer This - - PowerPoint PPT Presentation

Creating a European payments champion

July 2018

This presentation contains certain forward-looking statements with respect to certain of the Company’s current expectations and projections about future events. These statements, which sometimes use words such as “intend,” “proposed,” “plan,” “expect,” and words of similar meaning, reflect management’s beliefs and expectations and involve a number of risks, uncertainties and assumptions (including the completion of the transactions described in this presentation) that could cause actual results and performance to differ materially from any expected future results or performance expressed or implied by the forward-looking statement. Statements contained in this presentation regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. The information contained in this presentation is subject to change without notice and, except as required by applicable law, the Company assumes no responsibility or obligation to update publicly or review any of the forward-looking statements contained in it. Readers should not place undue reliance on forward-looking statements, which speak only as at the date of this presentation.

Disclaimer

3

Agenda

1 Introduction

2

Refresher on Nets and Concardis

3

Combination rationale

4

Key credit highlights

5

Financial highlights

4

Introduction

Notes 1. Pro forma adjusted EBITDA of DKK 3,642m using FY2017 average actual EUR/DKK FX rate of 7.438

 On June 4th 2018, Nets A/S (“Nets” or the “Company”) and the Germany-based Concardis Payment Group (“Concardis”) announced that the two companies would merge under a share exchange transaction. On June 19th 2018, Nets also announced the acquisition of the Poland-based payments company Dotpay (“Dotpay”)  The merger with Concardis and the acquisition of Dotpay are subject to the approval of the respective authorities and are expected to close around Q4 2018  The combined group encompassing Nets, Concardis and Dotpay (the “Group”) will become a leading European payments player, hence validating Hellman & Friedman’s (“H&F”) vision to create a payments European champion following their take-private of Nets (which closed in February 2018)  As part of the proposed transaction, the refinancing of Concardis’ existing debt of c.€400m and the Dotpay acquisition of c.€75m is expected to be funded via a financing package consisting of:  €475m EUR Term Loan B; and  €40m equiv. multicurrency add-on Revolving Credit Facility with a view to further bolster liquidity and expected to be undrawn at closing  Existing shareholders of Concardis, Advent and Bain, will roll their ownership of Concardis into the overall Nets ownership structure  In addition to the €2.7bn equity from the time of the LBO, the additional rolled equity from Concardis existing shareholders gives a significant equity cushion  The transaction will reduce net senior secured and total net leverage from 5.4x and 6.9x to 5.3x and 6.5x respectively, based on Financing EBITDA of €490m1 / DKK3,642m

5

Investment thesis

The Group is a leading European payments player

 Strong platform with vertical integration across the card and account-based payments value chain driving network effects and scale  Excellent track record of innovation and operating in world's most advanced payments regions  Ideal platform for consolidation in the fragmented European payments sector

Defensible and stable market position

 Nets is #1 digital payments operator in the Nordic region(1), with a fragmented SME customer base and long-term relationships with banking and corporate customers  Concardis is one of the market leaders in the DACH region(2), operating at scale with excellent customer relationships and long- standing, diversified blue-chip and customer base and superior value proposition  Dotpay / eCard is one of the leading e-payments service providers in Poland

Attractive financial model

 Track record of transaction growth across economic cycles driven by cash to digital payments transition  Contracted, recurring revenue resulting in significant high free cash flow generation  Strong operating leverage with further optimisation potential as some of the faster growing areas reach scale

Initiatives to accelerate growth

 Opportunity to further enhance commercialisation initiatives to accelerate growth and benefit from continued and increased digitalisation of Nordic society driving structural growth  Expanding selected products and capabilities outside the Nordic region  The acquisitions provide entry into growing payments markets with significant penetration upside and a structural shift towards international cards and online card usage

Proven and experienced management team

 Visionary team with interests aligned through equity investment alongside Sponsors  Strong track record of delivering commitments and financial targets

Source Company Information Notes

• 1. #1 in Denmark, Norway and Finland and #2 in Sweden
• 2. #1 in Germany, #2 in Switzerland and #3 in Austria

6

Transaction rationale

+ +

Strong partnership Strategic fit Superior customer offerings Extensive industrial scale Organic growth and synergies Solid springboard for further European expansion

7

Agenda

1 Introduction

2

Refresher on Nets and Concardis

3

Combination rationale

4

Key credit highlights

5

Financial highlights

8

Nets has compelling value proposition to customers through integrated solutions

Overview

Integrated payment solutions for merchants Omni-channel offering Operating critical account-based payments and digital ID ecosystem primarily to corporates Operator of only national debit card networks in Denmark and Norway Offers payment and processing solutions to financial institutions

Primary revenue model

% Of Acquired Transaction Value Fee per Transaction Processed Fee per Transaction Processed

Net revenue (FY2017) EBITDA b.s.i. (FY2017)

DKK943m, margin: 37.4% DKK901m, margin: 39.0%

Financial & Network Services (FNS) Merchant Services (MS) Corporate Services (CS) Key customers

Merchants Banks DKK991m, margin: 34.3% Corporates

Competitive position

#1 in online/mobile and in-store in the Nordics(1) Excellent local scale and scope >90% of Danish households use Nets’ recurring bill payment for utility bills in Denmark >80% of Norwegians access online/mobile banking using Nets’ BankID platform Strong integrated value chain offering c.78% of Danish and c.88% of Norwegian issued card transactions volume #1 pan-Nordic payment processor (2) A leading operator in European Payment(3) DKK2,519m DKK2,313m DKK2,892m

KPI (FY2017)

Total transactions value: DKK526bn 11% growth y-o-y Total transactions volume: 0.92bn 5% growth y-o-y Total transactions processed: DKK5.7bn 9% growth y-o-y Notes

• 1. First Annapolis. Ranking based on number of card payment transactions processed or acquired
• 2. Management estimate based on First Annapolis report. Ranking based on number of cards processed
• 3. Based on management estimates

33% 30% 37% 33% 32% 35%

191 225 2016 2017 58 66 2016 2017

Concardis is a scale player with a strong track record

For over 35 years successfully operating at scale… (as of 2017) …and profitability (2),(4)

€67bn(1) Transaction Volume €225m (2),(3) Net Revenue 116k Customers 470k Connected Terminals

• Adj. EBITDA, €m

Source Company Information Notes

• 1. Total value of transactions processed by Concardis Payments Group (DACH Merchant Services, MPSI, RatePAY)
• 2. Based on DACH Merchant Services, MPSI, RatePAY, PCS & Simplepay
• 3. Based on Contribution Margin 0 before deduction of commissions to sales partners
• 4. DACH Merchant Services in 2016 adjusted for c.€9.1m net revenue / €9.1m EBITDA of one-time windfall profits
• 5. Excluding c.€2m of exceptional costs in 2017 not normalised by management, translating into a decrease in adj. EBITDA margin compared to 2016
• Adj. EBITDA Margin (% of Net Revenue)

31% 29% 9 …driving revenue growth… (2),(4)

Net revenue (3), €m

(5) (5)

10

Concardis is a leading full-service payment solution provider for DACH merchants

Strategic framework for Concardis centres around 5 pillars

Terminal / Network Operation iPSP mPOS

CREDIT

Integrated processing

Leading full service provided across the merchant payment value chain

Position Acquiring & VAS

Illustrative German Payments Value Chain

Concardis Offering

POS Terminals (software/ hardware) Capture/Routing e-Commerce Acquiring (incl. front-office) Value-Added Services Technical Processing Own the capability via MPSI Merchant Acquiring Network Issuing Processing

#1 #2 #4

11

Agenda

1 Introduction

2

Refresher on Nets and Concardis

3

Combination rationale

4

Key credit highlights

5

Financial highlights

12

Laying the foundation for path to long term sustainable growth and to become a continental European payments champion

Transformational transaction … … leading to sustainable performance 1 Increased focus on both advanced payment countries and markets with penetration upside  Continued focus on advanced payment Nordic countries  High penetration potential of high growth DACH region 2 Contribution to end-to-end value chain coverage with local scale  Provide enhanced value proposition  Potential pass-through of scale benefits to customers 3 Scalable presence across continental Europe with leading market positions and customer propositions  Strong position in all core markets (Nordics, DACH)  Leading capabilities to offer world class propositions to merchants, financial institutions and corporates 4 Combination creates a broader business portfolio and solid

• rganic growth

 Strong and diversified revenue generation profile  Lays the foundation for transition to a leading European payments company 5 Combined experiences of management teams with strong support from sponsors highly experienced in the payments sector  Management teams with strong and proven execution capabilities  Sponsors bring significant sector expertise, operational resources and capital

13

85% 79% 78% 74% 72% 61% 53% 42% 38% 37% 36% 29% 17% Italy Spain Poland Austria Portugal Germany Switzerland France UK Netherlands Sweden Denmark Norway

1 Increased focus on both advanced payment countries and

markets with penetration upside

Source McKinsey Global Payments Map, World Bank

Share of cash transactions relative to total number of transactions (%) and household consumption expenditure (US$bn), 2016

1,131 713 276 206 134 1,852 359 1,364 1,745 344 228 146 169 Share of cash transactions relative to total number of transactions (%) Household consumption expenditure (US$bn)

Contribution to end-to-end value chain coverage with local scale

14

2 Integrated value chain capabilities End-to-end value chain coverage with local scale

Acquiring E-Com Network Issuing processing e-bill payments Selected Nordic players Selected international players Strong Medium None/Low Integrated Payments Value chain coverage Local scale

15

3 Scalable presence across Europe with excellent market

positions with perfect geographical match

 Strong merchant acquirer  Strong provider of VAS

Merchant Services Financial & Network Services

 Strong issuer processor and provider of VAS  Sole operator of the domestic debit card schemes in DK & NO

Corporate Services

 Strong provider of recurring payments, e-ID and VAS  Operating ACH / instant payments infrastructure in DK & NO FY2017 Key Financials1 Revenue: DKK9.4bn EBITDA: DKK3.3bn Net CAPEX: DKK0.9bn Key transaction statistics +8.9bn transactions Initiate transactions from +40m cards Geography Represented in 19 countries across Europe Represented in 11 countries across Europe Represented in 15 countries across Europe

Notes Based on EUR / DKK FX rate of 7.44618 1. Excluding Dotpay

16

33% 83% 30% 17% Merchant Services FNS Corporate Services

4 Combination creates a broader business portfolio and

world-class propositions for clients

Business mix by segment Leading customer propositions

€1,037m €225m

FY2017, net revenues

Enabling / Smart POS Mobility Convergence E-commerce Technology Security

Driver of customer satisfaction and growth in payments Increasing penetration (e-wallet and P2P) Data analytics and vertical know-how as key success factors Omnichannel / next gen ecommerce proposition Scalable IT platforms and strong capabilities Infrastructure assets with best in class security knowledge

1

Notes 1. Based on DACH Merchant Services, MPSI, RatePAY and PCS & Simplepay. Based on Contribution Margin 0 before deduction of commissions to sales partners

17

Agenda

1 Introduction

2

Refresher on Nets and Concardis

3

Combination rationale

4

Key credit highlights

5

Financial highlights

18

Key credit highlights

Strong presence in key segments of the payments value chain with increased scale Diversified and complimentary presence in attractive growth markets across the Nordic and DACH region which are amongst the strongest economies in Europe Robust and attractive financial profile with a recurring and growing revenue base, attractive margins, and high cash conversion Experienced, industry-leading management with proven track-record

1 2 5 6

Long-standing customer base with high retention rates and limited customer concentration

3

Well positioned to capitalise on structural growth drivers, with an innovative, fully invested, and scalable platform

4

19

Agenda

1 Introduction

2

Refresher on Nets and Concardis

3

Combination rationale

4

Key credit highlights

5

Financial highlights

20

Combined group historical performance

Net revenue1 EBITDA1

DKKm DKKm Nets Concardis2, 3 Merchant Services Financial & Network Services Corporate Services 1,866 2,317 2,519 2,206 2,273 2,313 2,764 2,795 2,892 6,836 7,385 7,725 2015 2016 2017 Nets Concardis2, 3 9.5%

% growth

8.1% 2.3% 2.3% 18.3% CAGR 15–17 6.8% 34.7% 35.4% 32.3%

% margin Notes Based on EUR / DKK FX rate of 7.44618 1. Excluding Dotpay 2. DACH Merchant Services, RatePAY, PCS & Simplepay included within Merchant Services and MPSI included within Financial Network & Services 3. DACH Merchant Services in 2016 adjusted for c.€9.1m net revenue / €9.1m EBITDA of one-time windfall profits. Adjusted for PCS and Simplepay EBITDA contribution from 2016 onwards 4. Excluding c.€2m of exceptional costs in 2017 not normalised by management, translating into a decrease in adj. EBITDA margin compared to 2016

560 792 943 811 893 901 880 934 991 2,251 2,619 2,835 2015 2016 2017 833 1,158 1,356 882 963 980 880 934 991 2,595 3,055 3,327 2015 2016 2017 2,794 3,467 3,912 2,480 2,542 2,596 2,764 2,795 2,892 8,038 8,805 9,399 2015 2016 2017 273 366 413 71 70 79 344 436 492 2015 2016 2017 928 1,150 1,392 274 269 282 1,202 1,419 1,675 2015 2016 2017

4 4

21

Nets has demonstrated a strong historical organic revenue growth and margin expansion across all segments…

Merchant Services Financial & Network Services Corporate Services

1,687 1,866 2,317 2,519 2014 2015 2016 2017 2,097 2,206 2,273 2,313 2014 2015 2016 2017 2,762 2,764 2,795 2,892 2014 2015 2016 2017 DKKm DKKm DKKm 7% 13% 8% 11% 10% 3% 2% 2% 4% % organic revenue growth / EBITDA b.s.i margin

Revenue EBITDA b.s.i.



New management team



Business area not in focus during bank

• wnership



Ongoing commercialisation



Meaningful M&A



Higher volumes in International & Third-party Processing and for all main products in National Debit Card Networks



Revenue from new solutions, e.g. fraud prevention and contactless projects contributed to additional growth



Stable growth in volumes and revenue from recurring payments in both Norway and Denmark



Stable growth in volumes and revenue from eBilling

426 560 792 943 2014 2015 2016 2017 517 811 893 901 2014 2015 2016 2017 719 880 934 991 2014 2015 2016 2017 30.0% 34.2% 37.4% 36.7% 39.3% 39.0% 31.8% 33.4% 34.3% 25.3% 24.7% 26.0%

22

…as well as a solid and steady cash flow conversion historically

Key cash flow items

2014 2015 2016 2017 EBITDA before special items 1,663 2,248 2,619 2,835 Special items (411) (538) (606) (254) Change in narrow working capital 173 64 67 (188) Capex (401) (539) (646) (665) Other non-cash items (26) (21) 6 41 Tax paid (318) (80) (653) (200) Free cash flow 680 1,134 787 1,569

DKKm

Comments

• High cash flow conversion underpinned by steady EBITDA margin

expansion, targeted capex, carefully managed working capital and slightly impacted by one-offs costs

• Special items mainly includes reorganization, restructuring and
• ptimization programs-related costs
• Relatively stable capex at 6-9% of revenues historically supporting strong
• rganic growth and margin expansion
• Slight recent increase due to investments in software and network

segregation projects and data centers in Norway

• 2015 tax payments partially impacted by extraordinary payments

received in Finland relating to tax amortization of intangible assets in connection with the acquisition of Nets Oy (formerly Luottokunta Oy) as well as a group contribution arrangement in Norway

• Very limited narrow working capital requirements historically, in line with

top line growth

• Recent negative change in narrow working capital due to

exceptionally high positive change in narrow working capital in Q3 2016 driven by IPO-related accrual build-up

23

Nets current trading

Strong underlying performance, slightly impacted by non-recurring events

7,724 7,679 7,908 2017A LTM Mar-18 2018 Bank Case

Net revenue Comments

2,835 2,798 2,996 2017A LTM Mar-18 2018 Bank Case +2.4% +5.7% DKKm

Capex

DKKm 150 131 Q1 2017 Q1 2018

EBITDA b.s.i.

DKKm 

YTD net revenue is up +2.9% on an underlying basis2 and was driven by a strong growth in eCommerce and international card volumes

• Net revenue (YTD net revenue down (2.4)% year-on-year) was

impacted by non-recurring events inflating YTD Q1 2017 performance thereby masking the continued solid performance

• f the underlying business



Non-recurring effects during Q1 will impact the remainder of the year to a more limited extent, driving higher growth for the remaining quarters of 2018



YTD the business is on track to meet the 2018 Budget set by the management team after the H&F takeover. The Budget for 2018 is higher than the Bank Case figures presented to lenders

Notes 1. Adjusted for FX and scope (M&A) 2. Adjusted for FX, scope (M&A), project revenue and non-recurring effects

24

Nets revenue current trading by segment

Strong underlying performance, slightly impacted by non-recurring events

Merchant Services Financial & Network Services Corporate Services

DKKm DKKm DKKm

524 547 24 571 2017 Q1 underlying 2018 Q1 underlying 2018 adjustments 2018 Q1 Actual 500 528 14 542 2017 Q1 underlying 2018 Q1 underlying 2018 adjustments 2018 Q1 Actual 716 717 22 739 2017 Q1 underlying 2018 Q1 underlying 2018 adjustments 2018 Q1 Actual

+4.3% +5.5% +0.1%



Strong growth in eCommerce and underlying acquiring volumes



Positive impact from the acquisition of OP’s merchant acquiring portfolio and a terminal customer base in Finland (Elisa)



YTD Q1 2018 performance impacted by a few non-recurring events which mostly include:

• Migration of P2P schemes from international

cards to A2A infrastructures

• Give back of the interchange reduction that
• ccurred in September 2016
• Key Account terminated due to its low

profitability



Strong growth in international credit and debit card transactions



YTD Q1 2018 performance impacted by an exceptionally strong Q1 2017 driven by the launch of Mobile Dankort (finalized in 2017)



YTD performance in line with expectations and expected to accelerate in Q2-4 driven by Real Time Clearing pipeline / order book



YTD Q1 2018 performance impacted by non- recurring income from Betalingsservice notifications and late transaction charges income in Q1 2017

Notes 1. Actual revenues have been adjusted for FX, scope (M&A), project revenue and non-recurring effects, thus taking out the non-recurring benefits which increased Q1 2017 actual revenue and therefore reflecting the underlying performance of the business

1 1 1 1 1 1

10.5 0.1 0.2 10.6 11.4 Q1 2017 Q1 2018 DACH Merchant Services 13 14 0.5 2 2 3 0.1 16 19 Q1 2017 Q1 2018 DACH Merchant Services RatePAY MPSI PCS & Simplepay

Notes

• 1. Based on DACH Merchant Services and RatePAY
• 2. Based on Contribution Margin 0 before deduction of commissions to sales partners (€4.7 MM in Q1

2017 and €4.2 MM in Q1 2018); Based on DACH Merchant Services, MPSI, RatePAY, PCS &

• Simplepay. PCS & Simplepay not available for Q1 2017
• 3. Including ATM
• 4. Adjusted EBITDA – capex
• 5. Including -€0.1m corporate & HoldCo adjustment

€m

25

Concardis current trading

10 14 Q1 2017 Q1 2018 % Growth €bn 18%

Transaction Volume (1) Net Revenue (2)

€m €m

• Adj. FCF Conversion

% Growth 37 39 5 10 9 10 0.5 50 59 Q1 2017 Q1 2018 DACH Merchant Services RatePAY MPSI PCS & Simplepay 8%

(3)

Adjusted EBITDA (2) Adjusted Free Cash Flow (4)

31% 32% 36% 10% 22% 37% 20% 27%

(5)

74% 61% 20%

• Adj. EBITDA Margin

26

Concardis – net debt and provision update

Commentary



Substantial available liquidity through cash on balance sheet of €95m and €40m revolving credit facility

–

In May 2018 cash on balance sheet was used to repay the existing €26m drawing under the RCF

–

Remaining cash on balance is available for use in addition to undrawn RCF



One-off costs incurred for implementation of strategic initiatives



For FY2016, Concardis made a one time provision in relation to a potential historical customer exposure

–

Entire provision has been reversed in FY17 as agreement was reached and provision is no longer needed 1 2

Term Loan Cash Net Debt

2017 LTM Mar 2018

Net debt and leverage

Concardis (Reported) (1) 96.2 DACH Merchant Services (34.0) Project related costs 15.6 Release of provision (49.0) Others (0.6) Normalizations RatePAY 0.6 Normalizations MPSI 1.4 Normalizations Concardis Payment Group 1.9 Normalization of Concardis entities' exceptional costs 1.1 Pro forma for PCS / SP acquisition 0.8 Total Normalizations (30.1) Adjusted EBITDA(2) 66.1

EBITDA reconciliation and provisions update

300 (21) 279 Initial syndication (Mar-2017) Current, as of Q1 2018

Term Loan RCF Short Term Debt Cash Net Debt

390 26 6 (95) 327

FY 2017, €m

1 2

€m

Notes

• 1. Including the impact of MPSI and RatePAY acquisitions
• 2. Adjusted EBITDA excludes pro forma adjustments of €16m, mostly related to re-pricing actions and MPSI migration synergies, resulting in a Pro Forma Adjusted EBITDA of €83m

Appendix I

Additional information on Concardis

Well identified strategy for accelerating growth along with further upside opportunities together with Nets

Merchant base growth

 New sales model  Proactive retention

Product initiatives

 New SME proposition  Invoice at POS  Smart POS

Further enhancing IT platform

 Develop MPSI platform for

acquiring needs

 Deliver product

requirements High-performance

• rganisation with efficient

processes

 Building world-class

leadership team

 Digital target operating

model

 Organisation effectiveness /

engagement

 Further operational

efficiencies and margin expansion 28

 Strengthen operational

improvements through best practice sharing with Nets

 Benefit from Nets’

transformation experience and track record Further upside opportunities together with Nets 1 2 3 4 5

Reinforces Concardis’ sales force capabilities

• nline and offline

Consolidate terminals and network operation

• nto Cardtech

platform State-of-the-art payment gateway Launched in Q1 ’18 3,500 customers to date, adding 60 per month Modern IT platform for Concardis providing an alternative to First Data Competency centre in merchant processing Increases exposure to

• nline, fast-growing

payment method Complements Concardis value proposition in e-commerce

Successful track record of inorganic growth

Successful track record of adding capabilities across the payments value chain to build a full-service offering Illustrative

29

Processing

Pre acquisition M&A and development since acquisition Capability strength

Specialist payment methods Acquiring PSP NSP Sales / ISO 100% stake

(in-house development)

70% stake White-label w/ Ingenico (Dec-2017) (Aug-2017) (Apr-2017) (May-2016) (Q1-2018) (Dec-2017) (Sep-2016)

30

Significant progress on investment thesis since acquisition

Successful track record of inorganic growth

2

Well identified strategy for accelerating organic growth and well positioned to participate in natural market consolidation, along with further upside from Nets

1

Recurring revenues, attractive margins and strong cashflow generation confirmed

3

Successful track record of adding capabilities to build a full-service

• ffering

Clear path to execution and strong position for consolidation Further opportunities together with Nets

• Confirmed. See ‘Financial highlights

Section’