Financial results for Q2 2017 August 2017 Powering Digital Payments - PowerPoint PPT Presentation

Financial results for Q2 2017 August 2017 Powering Digital Payments

Forward-looking statements 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 v ariations of these words, including negatives thereof, as well as other statements regarding matters that are not historical facts 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 or 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. 2

Financial highlights Q2 2017 A solid Q2 2017 performance Organic revenue growth EBITDA b.s.i. margin* Adjusted net profit (in DKKm) 5% 36.0% 389 Revenues of DKK 1,919m, up 4.1% EBITDA b.s.i. of DKK 690m, Adjusted net profit up 84.4% compared to Q2 2016, driven by strong up 6.8% compared to Q2 2016 equivalent compared to Q2 2016 organic growth in Merchant Services and to a margin improvement of 100 basis Corporate Services points Capital expenditure/ revenues Net interest-bearing debt/LTM LTM Cash conversion ratio EBITDA b.s.i. 10.7% 3.1x 73% Down from 75% in Q2 2016 due to higher Capital expenditure of DKK 205m, up At the same level as Q1 2017 negatively impacted by the acquisition on OP’s CAPEX and a negative change in narrow from a ratio of 8.7% Y/Y, driven by investments in development projects, merchant acquiring business and share- working capital compared to a positive in software and data centre in Norway buyback programme the same period of 2016 driven by IPO- related accrual build-up last year *Before special items 3

Business highlights Merchant Services Financial & Network Services Corporate Services Organic revenue growth of 10% Organic revenue growth of 2% Organic revenue growth of 3% 8.1% growth in number of transactions – 6.5% growth in value of transactions driven 3.6% growth in e-bill transactions driven by especially by merchant acquiring and e- especially driven by international cards strong growth in Norwegian e-bill solution and commerce solid growth in Betalingsservice transactions Lower implementation revenue negatively Still some positive effects from new impacted organic growth in Q2. Adjusting for Agreement on instant-clearing with Danish interchange regulation in Norway, but this growth would have been approx. 5 ppts Banks prolonged until 2022 increased scheme fees impacts negatively higher Instant-clearing solution delivered to ICBPI in e-commerce continues to develop strongly Fraud and dispute continues to show strong Italy d growth rates and is positively impacted by DIBS Easy launched in Sweden, which Nets and the banks in Denmark have agreed volumes from Finnish banks onboarded in improves check-out process to develop a mobile solution to NemID 2017 Save My Card reached two million saved cards Dankort App and Bokis wallets updated for First customers from the Finnish State Treasury both iPhones and Android phones so they in pilot testing work from a locked screen and using Several customer wins within the transport fingerprint acceptance instead of the four-digit sector in Norway; Ruter, NSB and Flytoget code Acquisition of OP’s merchant acquiring business completed Value of transactions (DKKbn) Number of transactions (million) Number of e-bill transactions (million) +3.6% +6.5% 223 129 1,432 +8.1% 215 121 1,324 Q2 '16 Q2 '17 Q2 '16 Q2 '17 Q2 '16 Q2 '17 4

Increased activity within mobile payments Full version of the Mobile Dankort launched in Q2 Launched for iPhone in June and Android phones in July and for both Dankort app and wallet for Bokis Banks Full version enables locked-screen payments and use of fingerprint verification instead of four-digit code Continued roll-out of in-store acceptance technology Installation of BLE* pads on existing terminals Updated terminals account for around 40% of all transactions in Denmark Multiple mobile wallets to launch in 2017 SamsungPay launched in Sweden and Apple confirmed their intention to launch ApplePay in Denmark, Sweden and Finland later in 2017 Nets open infrastructure can technically support wallets like ApplePay and SamsungPay Nets is already today the service provider for several mobile wallets based on both domestic and international card schemes in the Nordic countries *Bluetooth Low Energy 5

Launch of EASY With EASY Nets will benefit from collecting on the total e-commerce volume, which will increase take rates compared to gateway-only solutions EASY integration EASY signup New e-commerce value proposition launched in Sweden  Can handle payments from partner system with API  Fully digital and automated sign-up  Modern and logical platform build for easy  One agreement including all payment types Will be rolled out in Denmark and integration  Accept payments within 24 hours Norway after full launch in  It is created to be designed to be easily Sweden embedded in merchants’ websites Driver of future growth in Merchant Services EASY checkout EASY administration Collection on the total e- commerce volume  One agreement, one reconciliation - saves Will lead to improved conversion  Fast checkout regardless of payment substantial administration time and increase in take rates method and across all devices  User friendly administration portal compared to gateway-only  Two million cards already stored  Clear and detailed view of payments and solutions  One-click payment for returning consumers payouts 6

Merchant Services Strong organic growth of 10% in net revenue Organic growth Y/Y DKKm • Driven by strong growth in financial acquiring supported by +8.2% underlying growth in value of transactions of 6.5% compared to last year 631 609 607 • Growth was particularly strong in Denmark and Finland 585 583 10% • Strong growth in e-commerce and solid growth from point-of- Net revenue 17% 11% 12% sales solutions 10% • Positive impact from interchange regulation in Norway where d the new regulation was implemented on 1 September 2016 • The underlying organic growth, adjusted for the temporary positive effect from the lower interchange fees and effect of increased scheme fees, was 9% Q2 '16 Q3 '16 Q4 '16 Q1 '17 Q2 '17 DKKm +8.7% Further margin expansion 241 225 • EBITDA b.s.i. up by 8.7% Y/Y leading to a 20 basis points 207 198 margin expansion EBITDA b.s.i. 174 • Improved profitability is primarily driven by operating leverage partly offset by 39.7% • Higher cost related to outbound sales activities 35.5% 35.7% 32.5% • Investments into mobile acceptance technology related 29.7% to Mobile Dankort Q2 '16 Q3 '16 Q4 '16 Q1 '17 Q2 '17 7

Financial & Network Services Organic growth Y/Y DKKm Organic growth of 2% in net revenue +1.4% • Strong underlying structural growth in number of transactions of 594 588 583 575 8.1% driven by strong growth in international cards 550 11% 10% • Strong growth in fraud and dispute services and in issuer 2% 11% processing services 5% Net revenue • Growth negatively impacted by lower implementation revenue, especially related to the development of mobile services and d new prices on processing of VISA/Dankort • When adjusting for implementation fees, growth in Financial & Network Services would have been approx. 7% Q2 '16 Q3 '16 Q4 '16 Q1 '17 Q2 '17 DKKm -1.8% Further margin expansion • EBITDA b.s.i. down by 1.8% to DKK 217m primarily driven by 260 235 lower implementation revenue and changes in the project 221 217 portfolio resulting in lower capitalisation compared to last year 191 EBITDA b.s.i. • EBITDA b.s.i. margin of 37.2%, down 120 basis points 44.2% 39.6% 38.4% 37.2% 34.7% Q2 '16 Q3 '16 Q4 '16 Q1 '17 Q2 '17 8