Financial results for FY 2016 28 February 2017 Powering Digital - - PowerPoint PPT Presentation

Powering Digital Payments

28 February 2017

Financial results for FY 2016

Disclaimer

This presentation contains forward-looking statements. Forward-looking statements are statements (other than statements of historical fact) relating to future events and Nets’ anticipated or planned financial and operational performance. The words ‘may’, ‘will’, ‘will continue’, ‘should’, ‘expect’, ‘foresee’, ‘anticipate’, ‘believe’, ‘estimate’, ‘plan’, ‘predict’, ‘intend’ or variations of these words, including negatives thereof, as well as other statements regarding matters that are not historical fact or regarding future events or prospects, constitute forward-looking statements. Nets has based these forward-looking statements on its current views with respect to future events and financial performance. These views involve a number of risks and uncertainties, which could cause actual results to differ materially from those predicted in the forward-looking statements and from the past performance of

• Nets. Although Nets believes that the estimates and projections reflected in the forward-looking statements are reasonable, they

may prove materially incorrect, and actual results may materially differ, e.g. as the result of risks related to the industry in general

• r Nets in particular.

Factors that may affect future results include, but are not limited to, global and economic conditions, including currency exchange rate and interest rate fluctuations, delay or failure of projects related to research and/or development, unexpected contract breaches or terminations, unplanned loss of patents, government-mandated or market-driven price decreases for Nets’ products, introduction of competing products, reliance on information technology, Nets’ ability to successfully market current and new products, exposure to product liability, litigation and investigations, regulatory developments, actual or perceived failure to adhere to ethical marketing practices, unexpected growth in costs and expenses, failure to recruit and retain the right employees, and failure to maintain a culture of compliance.

Forward-looking statements

2

A strong 2016 with 7% organic growth and 260 basis points EBITDA b.s.i. margin expansion

Financial highlights FY 2016

3

*Before special items **Net interest-bearing debt / EBITDA before special items

Organic growth EBITDA b.s.i. margin* Special items Capital structure

(NIBD/EBITDA b.s.i.**)

Guidance 2016

9 November 2016

6-7% 35-36% DKK 630m At or below 3.4x Actual 2016 7% 35.5% DKK 606m 3.2x

Revenues of DKK 7,385m up 8.0% Y/Y driven by Merchant Services and Financial & Network Services EBITDA b.s.i. of DKK 2,619m up 16.5%. Y/Y margin improvement

• f 260 basis points

Slightly lower special items due to reversal of IPO expenses Higher EBITDA and cash flow, partly due to lower investments than expected

   

CAPEX

(% of net revenue)

Around 10% 9%

Capital expenditures of DKK 668m driven by investments in new data centres and network segregation



Strong growth in 2016

– transaction growth across all segments

4 Transaction value (DKKbn)

4.6 4.9 5.2 9% 6% 2014 2015 2016

Merchant Services

Transaction volume (bn) Transaction processed (bn)

Financial & Network Services Corporate Services

55% growth in value of transaction

• Underlying strong growth across

geographies

• Strong growth in Sweden
• The e-commerce business saw strong

growth, especially in Finland

• Growth significantly impacted by the

acquisition of Nordea’s merchant acquiring business in December 2015 Number of processed transactions grew by 6% to 5.2bn transactions

• Dankort grew by 7% to 1.3bn
• Online transactions grew by 25%
• 15% of all in-store transactions were

contactless

• BankAxept grew by 5% to 1.55bn in 2016
• International cards up by 5% to 2.35bn

Strong growth in transaction volumes

• E-bill (e.g. Betalingsservice, eFaktura and

AvtaleGiro) up 5% positively impacted by conversion from quarterly to monthly invoicing

• Real-time clearing up by more than 40%

compared to 2015 0.78 0.83 0.87 6% 5% 2014 2015 2016

2 4 6 8 10 12 14 '15A '16E '17E '18E '19E '20E CAGR 2015 – 20 2% 4% 5%

Nordic electronic payments growth forecast*

*Source First Annapolis report 2016

# Transactions processed (bn) Overall electronic payments transaction growth Cards Direct Debit and Credit Transfer Transaction value growing at 5% CAGR between 2015-20

301 306 475 2% 55% 2014 2015 2016

Good momentum in strategic growth areas

5

• Strong organic growth in Sweden supported by

good momentum in partnership with Nordea on merchant acquiring

• Outbound sales channels further strengthened in

Q4 addressing promising sales pipeline

• Implementation of two Swedish banks on issuer

processing

Mobile Outsourcing Value Chain Expansion Nordic Growth

• Nets to launch Mobile Dankort app in spring 2017
• Approx. 60 Danish banks to launch wallet for in-

store payments – solution will include Mobile Dankort

• In Norway 106 banks have joined forces behind

Vipps – including DNB, SB1 and Eika - Nets is a provider of infrastructure to Vipps Expanded agreement with Santander Consumer Bank to include Sweden

• Credit card portfolios in Norway and Denmark

have been migrated to Nets CMS

• Credit card programmes and operations in

Sweden to be included

• Nets CMS solution enables Santander to achieve

a scalable and uniform solution for their Nordic

• perations
• Strong growth in real-time clearing, including

contract with ICBPI in Italy

• Strong growth in fraud prevention and dispute

services with new contracts

• Nets’ Blockchain lab presenting proof of concepts

to banks and corporates

• Programme in place to deliver tangible

propositions helping customers ensure compliance with PSD2*

* PSD2: Second Payment Service Directive

Strong support from merchants to Mobile Dankort

Mobile Dankort

6

Preparation for the Mobile Dankort

• Pilot testing since Q4 with good results
• Works on iPhones and Android phones
• Mobile acceptance technology being installed at merchants
• Mirror payment experience from contactless Dankort (19% of

all in-store Dankort transactions in January were contactless)

• Payments below DKK 200 do not require use of pin
• Works from locked screen
• Initially based on Bluetooth technology (BLE)
• Will be launched in spring 2017
• Approximately 60 Danish banks (collectively called BOKIS)

launching wallets incorporating the Mobile Dankort

• Other wallets anticipated to incorporate the Mobile Dankort as

well

Launch of third-party wallets in 2017 Functionality of the Mobile Dankort app Below 1% of in-store digital transactions in Denmark are mobile today Mobile Dankort builds on existing agreements with merchants and banks Open infrastructure allowing it to be incorporated in third- party wallet solutions

Financial highlights Q4 2016

7

*Before special items

10%

Revenues of DKK 1,910 million, up 12.1% compared to Q4 2015, driven by strong

• rganic growth in Merchant Services and

Financial & Network Services

Organic revenue growth

35.4%

EBITDA b.s.i. of DKK 676 million, up by 21.1% equivalent to a margin improvement of 270 basis points

EBITDA b.s.i. margin*

11.2%

Capital expenditures of DKK 214 million, up from a ratio of 8.1% Y/Y, driven by investments in new data centres and network segregation

Capital expenditure/ revenues ratio

564

Adjusted EBIT up 14.4% compared to Q4 2015

Adjusted EBIT (in DKK million)

64

Non-IPO-related special items down by DKK 17 million compared to Q4 2015. Special items in Q4 include a reversal of expenses relating to the IPO

Special items (in DKK million)

77%

Down from 105% in Q4 2015, primarily due to higher capital expenditures Cash conversion for the full year 2016 was 78% compared to 79% in 2015

Cash conversion ratio

d

84 156 181 138 146 207 241 198 20.6% 31.6% 37.0% 28.9% 28.2% 35.5% 39.7% 32.5%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2015 2016

Merchant Services

8

Development in Q4 2016

• Strong momentum with a revenue of DKK 609m,

representing an organic growth of 17%, positively impacted by EU regulation on interchange fees

• Sales in Sweden saw strong progress, especially within the

SME segment

• Several customer wins, e.g. Posti, the National postal service

in Finland and Finnish Treasury Full year development

• Revenue in 2016 was DKK 2,317m, representing an organic

growth of 13%

• Organic growth positively impacted by the implementation of

the EU regulation on interchange fees for card-based transactions

• Card turnover was DKK 475bn, up 55% from DKK 306bn

Revenue

DKKm

EBITDA b.s.i.

DKKm 407 493 489 477 518 583 607 609

15% 10% 11% 17% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2015 2016 Organic growth Y/Y

Development in Q4 2016

• Margin of 32.5%, which is 360 bps higher than Q4 2015
• Margin expansion in Q4 is driven by operating leverage and

improved sales efficiency, partly countered by investments in mobile acceptance technology Full year development

• EBITDA b.s.i. in 2016 was DKK 792m, representing an

EBITDA b.s.i. margin of 34.2%, which is 420 bps higher than in 2015

d

Financial & Network Services

9

Revenue

DKKm

EBITDA b.s.i.

DKKm 526 560 569 551 516 575 588 594

6% 11% 10% 11%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2015 2016

160 214 217 219 177 221 260 235 30.4% 38.2% 38.1% 39.7% 34.3% 38.4% 44.2% 39.6%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2015 2016

Development in Q4 2016

• Revenue was DKK 594m, representing an organic growth
• f 11%
• New wins on value-added services in Q4 include:
• Fraud and dispute solutions with Finnish banks
• Risk-based authentication with Sparbank1 and DNB
• Implementation revenue extraordinarily impacted by the

Mobile Dankort also in Q4 Full year development

• Revenue in 2016 was DKK 2,273m, representing an
• rganic growth of 10%
• Total transactions processed was 5.2bn in 2016, up 6%

from 4.9bn

• Implementation revenue impacted by the Mobile Dankort

Organic growth Y/Y

Development in Q4 2016

• Margin of 39.6% in Q4, down 10 bps compared to Q4

2015

• Margin in Q4 is negatively impacted by cost related to

investments within the mobile area, including the Mobile Dankort Full year development

• EBITDA b.s.i. in 2016 was DKK 893m, representing an

EBITDA b.s.i. margin of 39.3%, up 260 bps Y/Y

d

Corporate Services

10

Revenue

DKKm

EBITDA b.s.i.

DKKm 723 683 682 676 709 686 693 707

0% 2% 1% 4% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2015 2016

218 225 235 201 228 218 245 243 30.2% 32.9% 34.5% 29.7% 32.2% 31.8% 35.4% 34.4%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2015 2016

Development in Q4 2016

• Revenue was DKK 707m, representing an organic growth
• f 4% in Q4
• Q4 is positively impacted by implementation revenues from

the contract with ICBPI in Italy as well as a strong momentum in e-bill payment solutions (e.g. Betalingsservice, eFaktura and AvtaleGiro) Full year development

• Revenue in 2016 was DKK 2,795m, representing an
• rganic growth of 2%
• Total transaction volume was 0.87bn in 2016, up 5% from

0.83bn in 2015

Organic growth Y/Y

Development in Q4 2016

• Margin of 34.4% in Q4, which is up 470 bps compared to

Q4 2015

• Margin expansion, primarily driven by continued positive

effects from the transformation programme and operating leverage Full year development

• EBITDA b.s.i. in 2016 was DKK 934m, representing an

EBITDA b.s.i. margin of 33.4%, which is up 160 bps

• Margin expansion primarily driven by continued positive

effects from the transformation programme

d

1,656 1,737 1,739 1,704 1,743 1,844 1,888 1,910 6% 7% 6% 10% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2015 2016

Strong group performance

11

Revenue

DKKm

EBITDA b.s.i.

DKKm

Organic growth Y/Y

462 596 632 558 551 646 746 676 27.9% 34.3% 36.3% 32.7% 31.6% 35.0% 39.5% 35.4%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2015 2016

Strong organic revenue growth of 10% in Q4 driven by Merchant Services and Financial & Network Services Reported revenue increased by 12.1% supported by the acquisition of Nordea’s merchant acquiring business EBITDA b.s.i. grew Y/Y by 21.1% in Q4 2016. EBITDA b.s.i. margin improved by 270 basis points to 35.4% Growth driven by operating leverage as well as improved efficiency related to the continued implementation of the transformation programme

Improved operating expense ratio

Group income statement

12

Operating expense ratio lowered from 67% to 65% in Q4 2016 due to operating leverage and effects from the transformation programme Staff costs impacted by

• Full year effect of acquired companies
• Shift in capitalisation mix towards higher

proportion of external resources

• New incentive programme put in place after

the IPO Special items in Q4 2016 reduced to DKK 87m from DKK 104m last year Reversal of IPO-related costs of DKK 23m in Q4 Amortisation of business combinations increased to DKK 176m due to acquisition of Nordea merchant acquiring business Underlying depreciation higher, related to increased investment levels in recent years. Revised useful lifetime on now fully depreciated assets lifted depreciation with approx. DKK 15m (DKK 60m for FY2016) Net financials in Q4 2016 of DKK -36m positively impacted by foreign exchange adjustments totaling DKK 37m, effects of Visa transaction of DKK 6m and profit from associates of DKK 4m DKKm Q4 Q4 FY FY 2016 2015 2016 2015 Net revenue 1,910 1,704 7,385 6,836 Cost of sales

• 243
• 246
• 963
• 983

External expenses

• 455
• 443
• 1,769
• 1,732

Staff costs

• 536
• 457
• 2,034
• 1,873

EBITDA b.s.i. 676 558 2,619 2,248 Special items

• 87
• 104
• 345
• 538

IPO related costs 23

• 261

EBITDA 612 454 2,013 1,710 Amortisation of business combinations

• 176
• 142
• 654
• 627

Underlying depreciation

• 112
• 65
• 416
• 271

EBIT 324 247 943 812 Visa transaction for previous owners 5 515

• 35

515 Visa transaction for Nets 1 185 Refinancing expenses

• 738

Net financial expenses

• 42
• 217
• 1,051
• 804

Net financials

• 36

298

• 1,639
• 289

Profit before tax 288 545

• 696

523 Tax

• 65
• 434

112

• 404

Net profit 223 111

• 584

119 Adjusted net profit 370 189 997 778

d

Cash flow and capital expenditure

13

Operating free cash flow

DKKm

Capital expenditure

DKKm

Operating free cash flow delivered a strong Q4 despite of higher investments in the quarter Positive narrow working capital despite payment of IPO accruals from Q3 2016 Capital expenditure high, primarily due to investments in data centres in Norway and network segregation project

163 252 355 465 119 416 443 456 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2015 2016 121 151 119 138 132 161 161 192*

7.3% 9.3% 6.8% 8.1% 7.6% 8.7% 8.5% 11.2%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2015 2016 Capital expenditure Capital expenditure/revenue

* Excluding financial leases totaling DKK 22 million

d

Deleveraging faster than expected

14

Net interest-bearing debt

DKKm

Change in net interest-bearing debt in Q4

11,328 11,175 12,279 13,319 13,444 13,061 8,805 8,503 5.8x 5.5x 3.5x 3.2x Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2015 2016 Net interest-bearing debt NIBD/EBITDA b.s.i.

Net interest-bearing debt Q3 2016 8,805 Change in borrowing +393 Currency effects

• 42

Change in own cash

• 653

Net interest-bearing debt Q4 2016 8,503 Own cash Q3 2016 50 Operating cash flow excluding clearing-related balances and effects of Visa transaction +452 Cash flow from investments excluding effects of Visa transaction

• 192

Change in borrowing +393 Own cash Q4 2016 703

Change in own cash in Q4

Guidance

15

Guidance 2017 28 February Medium-term guidance Organic revenue growth

5-6% 5-6% per annum

EBITDA b.s.i. margin

Above 36.0% High 30s

Special Items

DKK 150m

• Of which DKK 30m relates to IPO-related

retention cost

DKK 30m

• IPO-related retention cost for 2018

CAPEX (in % of net revenue)

Around 8% 6-8%

Capital Structure (NIBD/EBITDA b.s.i.)

Around 2.5x

assuming no additional M&A activities

2.0x-2.5x

assuming no M&A

APPENDIX

In the heart of the payments ecosystem

and a leader across the Nordic region

17

Notes

• 1. Management estimate based on First Annapolis study. Ranking based on number of card payment transactions processed or acquired
• 2. Part of the 300,000+ Merchants

Merchants 300,000+ Online Merchants(2) 30,000+ Banks 240+ Consumers Governments Central Banks Households Digital Identities 8 million Corporates 240,000+ Distributors & Partners

• Initiated transaction from approx. 35 million cards
• 7.7+ billion transactions
• DKK 475 billion of card transaction volume

#1

Position across the Nordic region(1)

#1 #1 #1 #2

(#1 in e-Com) DKKm

3,576

DKKm

2,314

DKKm

542

DKKm

885

59% 6% 3% 9%

DKKm

68

26%

50 years of history

18

PBS was established in 1968 and drove consolidation in Denmark BBS was established in 1972 and drove consolidation in Norway

1968-2009 2010-2013 2014-2016

Build-up and in-country consolidation Creation of Nets through the merger

• f two local champions in Denmark

and Norway Strengthening position in Finland Acquisition of Nets by Advent, Bain and ATP Commercialisation of Nets and strengthening of presence in Sweden 2,400 FTEs

Sponsor Ownership Bank Ownership

2010: PBS and Nordito (parent company of BBS and Teller) become Nets 2012: Acquisition

• f Luottokunta,

local Finnish champion 2014-2015: Acquisition of Nordea Merchant Acquiring (Kortaccept), DIBS and Payzone increasing presence in Sweden

Kortaccept

Listed 2016 -

Listed on Nasdaq Copenhagen on 23 September 2016 60% free float

2016 -> Focus 1.Mobile development 2.Outsourcing 3.Value chain expansion 4.Nordic growth

Customer-centric approach

Across three Business Units

19

EBITDA 30% EBITDA 34% EBITDA 36% Revenue 31% Revenue 31% Revenue 38%

Merchant Services

Integrated payment solutions for merchants Omni-channel offering and value-added services

Competitive position

#1 in online/mobile and in-store in the Nordic countries Local scale and scope exceeds that of any

• ther player

Revenue DKK 7.4bn EBITDA bsi DKK 2.6bn

Competitive position

App.78% of Danish and app. 88% of Norwegian issued card transactions volume #1 pan-Nordic payment processor #2 in Europe

Corporate Services

Operating critical account-based payments and digital ID ecosystem primarily to corporates

Competitive position

>90% of Danish households use Nets’ recurring bill payment >80% of Norwegians access

• nline/mobile banking using Nets’

BankID platform Unmatched integrated value chain

• ffering

Financial and Network Services

Owner or operator of national debit card networks in Denmark and Norway Offers payment and processing solutions to financial institutions Value-added services

Nets investment highlights

20

The Nordic countries are among the world's most advanced payments countries and fast-growing digital societies

1

Leading provider of mission-critical services to the Nordic payments ecosystem

2

Well-positioned with an innovative and scalable platform

3

Robust and attractive financial profile

4

Multiple drivers of future growth and upside opportunities

5

Fast growing digital society

The Nordic countries are an advanced digital society

21

23 29 40 45 78 95 133 147 153 153 161

Germany Italy Spain Europe UK Netherlands Norway Finland Sweden France Denmark

High adoption of cashless payments

Number of card payment transactions per card (2014)

Source First Annapolis

Further supported by political push towards digital society Most advanced digital society

Source First Annapolis

Digital economy and society index (2016, digital skills & adoption of digital services) 2.02 2.52 2.61 2.75 2.93 3.30 3.30 3.30 3.34 3.41

Italy France Spain Germany UK Finland Norway Sweden Netherlands Denmark

In the heart of the payments ecosystem

22

…combined with a broad network Nets is positioned across the value chain in the Nordic countries…

Merchant Acquiring Network Issuer Processing

Illustrative UK Card Payments Example(1) Illustrative DK / NO Card Payments Example(1) Merchants Online Merchants Banks Consumers Governments Central Banks Households Digital Identities Corporates Distributors & Partners

(3) (2)

Notes

• 1. Illustrative examples for presentation purposes only. Other payment providers also operate in each of the respective countries
• 2. Nets owns and operates Dankort in Denmark. International card network operators (e.g. Visa, MasterCard) are also present in Denmark and accounted for 22% of the total number of made payments in

Denmark using debit and credit cards issued in Denmark in 2015. Nets also routes and clears Visa and MasterCard transactions

• 3. Nets operates, but does not own, the BankAxept scheme or logo in Norway. However, Nets owns the IT system and operates BankAxept on behalf of the Norwegian banking sector. International card network
• perators (e.g. Visa, MasterCard) are also present in Norway and accounted for 12% of the total card payments transactions in Norway in 2015. Nets also routes and clears Visa and MasterCard transactions

Card-related capabilities

Mobile Credit Cards Recurring Card Payments e-Wallets e-Commerce Card Not Present Debit Cards P2P Private Label Cards Contactless

Account-related capabilities

Mobile P2P Interbank Clearing B2B e-Commerce Recurring Payments Integrated e-Invoicing

$

Instant Payments Authen- tification

…with payment-agnostic capabilities…

A2A Payments

Leading provider of mission critical services

Nets covers the entire value chain

23

Request for payment Initiating transaction Validating and authorising a transaction Clearing and settlement #1 merchant services provider in the Nordic region, with an integrated

• ffering to merchants

#1 provider of issuing processing services in the Nordic region Only

• perator of

national debit card networks in Denmark and Norway(1) Only operator

• f clearing in

Denmark and Norway Over 90% of households use Nets’ integrated e-Bill payments solutions in Denmark Operates de-facto e-ID platforms in Denmark and Norway

Banks

Online banking security providers and in-house bank IT departments Recurring card payments Paper bills Card- based payments Compe- titors Account- based payments Nets Compe- titors

Source Company information Notes

• 1. Nets owns and operates Dankort in Denmark. In Norway, Nets operates, but does not own, BankAxept
• 2. Owned by Verifone
• 3. Owned by Worldline

(2) (3)

Innovative and scalable platform

Well-positioned to capture Nordic growth

24

Acquiring e-Com Network Issuing processing e-Bill payments Selected Nordic Players

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

Selected international players

Local scale Integrated payments Value chain coverage

Strong Medium None/Low Source Company estimates

Innovative and scalable platform

Scale across the Nordic region

25

Source The Nilson Report 2015, Company data

4.2 2.0 0.4 0.2 0.0 1.5 3.0 4.5 Acquired Nordic transactions 2014 (Bn) (2)

Scale achieved – acquiring example

(3)

Significant scale advantages (illustrative) (4)

Country Position

#1 #1 #2 #1

(#1 in e-Com)

Local position(1) Denmark Norway Sweden Finland

Source Company estimates

Cost Per-Transaction Number of Transactions c.50% Volumes x 4

Merchant Acquiring Curve

Notes

• 1. All rankings are based on number of card payment transactions processed or acquired
• 2. Captive (in-house) volumes highlighted in grey
• 3. Nets volumes include processed Dankort and BankAxept transactions of 2.5bn and acquired international transactions of 1.7bn
• 4. c.50% lower cost as a result of movement from app.0.5bn to 2bn acquiring transactions

Babs

Source First Annapolis

Significant strategic opportunities

26 14% 28%

Significant potential to gain volume in Sweden from bank acquirers

3.0 5.0 7.0 9.0 11.0 13.0 15.0 2015A 2016F 2017F 2018F 2019F 2020F Number of Transactions (in billions)

Notes

• 1. Cards transaction value growth in the Nordic countries
• 2. Real-time clearing

Mobile

Source First Annapolis report

Outsourcing Value chain expansion Nordic growth

Contactless and mobile initiatives across business units and geographies Card management services Increased outsourcing of non- core banking processes Increased business scope through value-adding services (including real-time clearing and data analytics) 4.1 1.2 6.5 2015A 2020F Number of transactions (Bn) (incl. C2B, B2B, and B2G)

CAGR 2015 – 20 2% 4% 5% Overall electronic payments transaction growth Cards Direct Debit and Credit Transfer Transaction value growing at 5% CAGR between 2015-20

33.2 63.2 2015 2020E Nordic e-/m-Payments (€ Bn) (1)

Nordic electronic payments growth Instant payments(2)

CAGR 2015 – 20 CAGR 2015 – 20 40%

Fast Mass Adoption

• f e-/m-Commerce

Nets is positioning towards PSD2

27

Comments

• PSD2 mandates banks to expose external APIs to licensed Third

Party payment Providers (TPPs) and to give TPPs access to bank accounts by Q1, 2018

• Emerging TPPs will introduce new payment initiation services

(PIS) and account information services (AIS) that challenge Banks’ traditional online and mobile distribution channels

• PSD2 is a long term strategic play for Nets with opportunities

emerging, e.g:

• Streamlining PSD2 compliance for banks
• Convenient access to banks for emerging TPPs
• Value-added services for Nets’ existing network of banks,

merchants and corporates

• Nets is leveraging existing network and technology assets to

foster innovation in post-PSD2:

• Cost-efficient PSD2 compliance and connectivity
• Monetisation of APIs and account access for banks and TPPs
• Simplified pan-Nordic reach and interoperability
• Standardised platform to facilitate open banking ecosystems

Nets helps banks and third parties monetise PSD2 Nets is a driving force for standardisation

CAPS: Convenient Access to Payments Services Nets’ PSD2 platform will enable connectivity and create network effects in PSD2

Financial profile

Resilient business model

Generating predictable growth and expanding profitability

28

Proven

• perating

leverage

2013-2016 EBITDA b.s.i. margin expansion of 1,280 bps and 260 bps in 2016 vs 2015 Strong scale efficiencies Restructuring of cost base initiated

Stable & predictable revenue model

Entrenched provider of payments infrastructure with high recurring revenues Long-term predictability irrespective of cycle Diversified customer base characterised by long-term relationships

Proven Track record of growth

Organic revenue of 6% and 7% for 2015 and 2016, respectively Innovation track record with strong pipeline Successful M&A (seven acquisitions since June 2014)

Predictable & growing cash flow

Predictable capital expenditures Minimal working capital requirements Resulting in strong cash conversion of 78% in 2016 Y/Y organic growth DKKm

Net revenue

DKKm

Reported EBITDA b.s.i.

6,727 6,546 6,836 7,385 6% 7% 2013 2014 2015 2016 1,525 1,663 2,248 2,619 22.7% 25.4% 32.9% 35.5% 2013 2014 2015 2016

Denmark 49% Norway 31% Finland 12% Sweden 7% Baltics 1%

29

3,379 2,253 809 341 54 3,576 2,314 885 542 68 Denmark Norway Finland Sweden Baltics 2015 2016 6% 3% 9% 59% 26% Distribution of revenue per country

DKKm

Strategic growth areas

Nordic growth

Merchant services

30

Nets enables SMEs to large-size pan-regional merchants to accept digital payments End-to-end omni-channel solutions Extensive payments capabilities - payment method agnostic Multi-channel distribution DKK 475bn transaction value 300,000+ merchants 30,000+ e-Commerce merchants (1) Key statistics What we enable? Strong leading positions Attractive growth fundamentals Integrated customer value proposition Key characteristics Accelerating commercialisation driving further growth Competitive advantage through scale and distribution Multiple avenues for future growth

Notes

• 1. 30,000+ e-Commerce merchants are part of 300,000+ merchants

Financial & Network Services

31

Operator of national debit card schemes in Norway and Denmark Payments and processing solutions across all card payment methods to financial institutions #1 pan-Nordic payment processor(1) #2 in Europe(2) Comprehensive value-added services offering 5.2 billion transactions processed ~35m cards More than 40 card payment types Key statistics What we enable? Leading position Strong underlying market growth End-to-end service offering Key characteristics Superior scale drives cost advantage Highly sticky customer relationships

Notes

• 1. Management estimate based on First Annapolis report. Ranking based on number of cards processed
• 2. Based on management estimates

Corporate Services

32

Seamless recurring payments from consumers to corporates with integrated invoicing Further value to the e-Billing with adjacent digital services, as e-ID Primarily operating in Denmark and Norway 0.87bn transactions 240,000 corporates 8.3 million digital identities Key statistics What we enable? Core to society through provision of mission-critical solutions Proven, stable and highly predictable business model Key characteristics Recurring and resilient revenues and profitability Innovative digital solutions and unique network enabling further growth

Financial profile

Special Items

33

Special Item

Overview Development over time

2013 2014 2015

Reorganisation and restructuring costs Cost mainly reflecting employee termination costs in relation to establishing a customer centric sales organisation and retention teams and optimising group functions 159 109 170 Other costs and income Costs in 2014 were mainly related to transaction costs 178 31 Total Special items should be considered as income / costs not attributed directly to ordinary activities Separately disclosed to allow a more comparable view of underlying trending performance 538 411 201 Transformation programme Costs related to optimisation of business, e.g. Commercialisation of Merchant Services Transformation of procurement function and processes Improving efficiency in Technology and Operations Transformation of stability and security 353 124

2016

26 606 113 219 13 IPO-related expenses IPO on the income statement In addition, DKK 170 was expensed directly on equity 261

Financial profile

Well-invested in the future

34

Capital Expenditure

Higher investment in 2015 and 2016 due to increased focus

• n business development and customer projects:

CMS: Expanding CMS value-added services offering, creating bundled solutions between processing and CMS, incentivising sales forces and focusing on improving customer satisfaction Mobile wallet: Creation of device independent uniform mobile service concept for the Nordic banks’ mobile wallet and the Mobile Dankort app Infrastructure/ new production platforms for merchant acquiring: Dankort Mobile launching paving the way for contactless mobile payments in merchant acquiring on the back of close cooperation between Dankort merchants, issuers and Nets Investment in new data centres in Norway and network segregation project leading to above normal investment level in 2016

DKKm

Comments

327 403 539 646*

4.9% 6.2% 7.9% 9.0% 2013 2014 2015 2016

Capital expenditure / revenue * Excluding financial leases totaling DKK 22 million

Nets’ transformation supported by M&A

35

Step-change in Sweden Creating leading e-Commerce Business Technology & capability enhancement

Purchased Nordea Merchant Acquiring Business (Kortaccept) Increased acquiring customers in the Nordic and the Baltic region Integrated acquiring services to app. 32k merchant contracts with app.70k unique outlets across the Nordic and Baltic region Leverage Nordea’s back book to cross-sell

(Dec-15)

Increased POS share in Sweden Additional solution capabilities to key accounts

(Jul-14)

Increased e-Commerce share in the Nordic countries to #1 Enhanced customer proposition through combination with Paytrail

(Dec-14)

Increased e-Commerce share in Finland Payment service provider capabilities with Nordic potential

(Dec-14)

Innovative capabilities and solutions (e-Receipt and loyalty) Strengthened position with MobilePay

(Jan-16)

Enhanced e-Security value-added services

(Jul-15)

Enhanced capabilities to benefit from digital trends

(Jul-14)

Kortaccept

Merchant Service Related Acquisitions Corporate Service Related Acquisitions

Financial profile

Capital allocation principles

36

Investment into organic growth

1

Ordinary dividends

3

Excess cash distributed via share buybacks and extraordinary dividends

4

Bolt-on M&A

2

Maintain Medium-term Leverage Target at 2.0x - 2.5x