Public Lenders Presentation January 2019 Disclaimer This - - PowerPoint PPT Presentation

Public Lenders Presentation

January 2019

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 overview of Concardis and Dotpay / eCard

3

Nets current trading update

4

Introduction

Notes Based on EUR / DKK FX rate of 7.45 1. Comprises Nets LTM Sept-18 adjusted EBITDA of DKK3,298m (as per Q3 2018 Compliance certificate), Concardis and Dotpay FY18E adjusted EBITDA of €83m and €4m respectively. Excludes any synergies arising from the combination of Nets with Concardis and Dotpay

 Following the closing of the Dotpay and Concardis acquisitions, Nets A/S (“Nets” or the “Company”) continues to explore potential opportunities for

• pportunistic bolt-on M&A growth, in line with the strategy outlined previously

 Concardis closed on 31st December 2018 and Dotpay closed on 4th January 2019  The combined group encompassing Nets, Concardis and Dotpay (the “Group”) is 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 continued optimization of the Group’s capital structure and liquidity position, the Group is considering a €100m EUR Term Loan B add-on, (the “Transaction”) for the purposes of repaying drawn RCF and funding excess cash to balance sheet, which may be used to fund a small bolt-on acquisition in the future  The €2.7bn equity contributed at the time of the LBO and the additional rolled equity from Bain & Advent as part of the Concardis transaction together imply a significant equity cushion  The transaction will leave senior secured net leverage and total net leverage unchanged at 5.0x and 6.1x respectively, based on Financing EBITDA of €530m1 / DKK3,947m which is based on Nets standalone Q3 LTM EBITDA as reported pro forma for the Concardis and Dotpay acquisitions

5

Agenda

1 Introduction

2

Refresher on Nets and overview of Concardis and Dotpay / eCard

3

Nets current trading update

6

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

35% 30 % 36% 35% 38% 30% 32%

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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 (2018Prelim.) EBITDA b.s.i. (2018Prelim.)

DKK855m, margin: 35.4% DKK1,000m, margin: 43.1%

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

Merchants Banks DKK1,034m, margin: 35.9% 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 European real-time product offering c.78% of Danish and c.88% of Norwegian issued card transactions volume DKK2,415m DKK2,319m DKK2,882m

KPI (2018Prelim.)

Total transactions value: DKK517bn

• 2% growth y-o-y

Total transactions volume: DKK0.95bn 3% growth y-o-y Total transactions processed: DKK5.9bn 4% growth y-o-y Notes

• 1. First Annapolis. Ranking based on number of card payment transactions processed or acquired

191 225 246 2016 2017 LTM Sept-18 58 66 75 2016 2017 LTM Sept-18

Concardis is a scale player with a strong track record

For over 35 years successfully operating at scale… (as of 2017) …and profitability2,4 €67bn1 Transaction Volume €225m2,3 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
• 6. Adj. EBITDA excludes pro forma adjustments from the combination of Concardis and MPSI
• Adj. EBITDA Margin (% of net revenue)

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…driving revenue growth…2,4

Net revenue (3), €m

5

30% 29% 30%

Leading full service provided across the merchant payment value chain

Position #1 #2 #4

Illustrative German Payments Value Chain Merchant Acquiring Issuing Processing Capture/Routing Acquiring (incl. front-office) Technical Processing Value-Added Services e-Commerce POS Terminals (software/ hardware) Own the capability via MPSI Network Concardis offering 6

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Business overview



Dotpay is a leading provider of online banking transfers (Pay-By-Link), the most popular payment method in Poland. The company offers more than 200 Pay-By-Link channels and mobile payment solutions such as BLIK and mobile SDK



eCard is licensed card acquirer focused on delivering payment cards solutions including: one click payments, recurring payments, multiple currencies as well as cashless terminals POS & mPOS



Provides more than 250 payment methods to clients, cooperating with all Polish banks, a network of leading international PSPs and card associations



More than 15 years of experience in the Polish market One of the leading e-payment services provider in Poland with 20% market share Diverse product offering and extensive client portfolio of >30k blue-chip and SME merchants

1 4

Growing payments market supported by a strong macro- economic backdrop with penetration upside Excellent existing relationships with domestic and international organisations

3 2

Business overview Transaction Volume Investment highlights Key Financials

Consolidated TPV1 PLNbn Consolidated net revenue2 PLNm Consolidated normalized EBITDA PLNm

Source Company Information Notes

• 1. TPV from discounted operations (top-up, SMS) has been excluded
• 2. Net revenue is based on revenue after deduction of direct costs (bank and scheme fees) which is equal to gross profit
• 3. Based on gross profit (revenue after deduction of direct costs, which include bank and scheme fees)

y/y growth Normalised EBITDA margin3

Dotpay / eCard is one of the leading e-payment services providers in Poland

3.9 5.1 6.9 8.6 2015 2016 2017 LTM Sept-18 21% 30% 35% 25% 23.6 24.2 29.4 34.6 2015 2016 2017 LTM Sept-18 9.1 10.1 15.4 19.7 2015 2016 2017 LTM Sept-18 52% 57% 42% 39%

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Agenda

1 Introduction

2

Refresher on Nets and overview of Concardis and Dotpay / eCard

3

Nets current trading update

11

Preliminary FY2018 results reflect a stable performance…

Net revenue Comments

DKKm

EBITDA b.s.i.

DKKm 

Preliminary FY2018 net revenue is in line with LTM March 2018 (flat on an organic basis1) and was driven by a continued solid growth in eCommerce and higher volumes across products in Financial Network & Services



As expected, Preliminary FY2018 net revenues continued to be impacted by non-recurring effects in Merchant Services



These effects are tapering off and the business continues to show a solid underlying performance



2018 preliminary EBITDA b.s.i. is up +3.5% year-on-year on an FX adjusted basis



EBITDA b.s.i. margin of 37.9%, up from 36.4% as of LTM Mar-18

Notes 2018Prelim. numbers are management unaudited figures for year-end 2018. EBITDA b.s.i. is based on actual reported FX 1. Organic growth is calculated on a constant business scope (e.g. excluding the effect of M&A) and a constant currency basis

36.4% 36.9% 37.9% EBITDA b.s.i margin 7,679 7,657 7,616 LTM Mar-18 LTM Sept-18 2018Prelim. 2,798 2,825 2,889 LTM Mar-18 LTM Sept-18 2018Prelim.

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…driven by Financial & Network Services, partially countered by non- recurring events at Merchant Services

• 4.2%
• 3.5% organic1

DKKm

Notes 2018Prelim. numbers are management unaudited figures for year-end 2018. EBITDA b.s.i. is based on actual reported FX 1. Organic growth is calculated on a constant business scope (e.g. excluding the effect of M&A) and a constant currency basis

Merchant Services Financial & Network Services Corporate Services

+0.3% +2.1% organic1

• 0.3%

+0.6% organic1



Performance was negatively affected by churning of a large customer, one-off adjustments and lower prices within acquiring and POS. This was partly offset by solid growth in eCommerce



Invested in growth and business turnaround following sponsor takeover



Strong volumes across products



Organic growth from Q4 negatively impacted by some Norwegian banks change to own principal license leading to lower revenue and lower cost (EBITDA b.s.i. neutral)



Growth was negatively impacted by the change to principal license and high implementation revenue in 2017. Adjusting for this the underlying organic growth was +3.5%



Solid volume growth partly countered by tough comps from high implementation revenues in 2017



Growth was negatively impacted by non recurring income from Betalingsservice notifications and implementation revenue in 2017. Adjusting for this underlying organic growth is +1.8%

Revenue EBITDA b.s.i.

DKKm DKKm 37.4% 35.4% 39.0% 43.1% 34.3% 35.9% % organic revenue growth / EBITDA b.s.i margin 2,519 2,415 2017 2018Prelim. 2,313 2,319 2017 2018Prelim. 2,892 2,882 2017 2018Prelim. 943 855 2017 2018Prelim. 901 1,000 2017 2018Prelim. 991 1,034 2017 2018Prelim.

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Deep dive into Merchant Services net revenue performance

Solid underlying performance, impacted by FX headwinds and non-recurring events

2,519 2,415 2017 2018Prelim. 2,535 2,478 2017 2018Prelim. 2,535 2,447 2017 2018Prelim. 2,355 2,404 2017 2018Prelim.

Reported revenue Constant currency revenue Organic revenue1 Underlying revenue2

• 4.2%
• 2.3%
• 3.5%

+2.1% % organic revenue growth



Adjusting for P2P scheme migration which moved from cards to account-to-account, interchange give-back and termination of a large account

Notes 2018Prelim. numbers are management unaudited figures for year-end 2018 1. Organic growth is calculated on a constant business scope (e.g. excluding the effect of M&A) and a constant currency basis 2. Actual revenues have been adjusted for FX, scope (M&A) and non-recurring effects 

Adjusting for full-year impact of

• f two small portfolio

acquisitions which occurred during 2018 in order to compare like-for-like perimeter

Adjusting for FX and scope FX, scope and non- recurring effects



Converting underling local currency revenues on a constant currency basis shows FX headwinds impacted net revenue performance by c. (2)%

Key comments



Underlying growth in 2018 remained positive (+2.1%)



This was negatively impacted by price pressure, specifically in certain segments (e.g. LAKA)



2019 expected to improve mainly driven by new initiatives within commercial management, retention management and go-to-market - supported by operating metrics in last part of 2018

DKKm DKKm DKKm DKKm Adjusting for FX

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Nets has demonstrated a strong historical revenue growth and margin expansion…

Merchant Services Financial & Network Services Corporate Services Revenue EBITDA b.s.i.

DKKm DKKm DKKm 7% 13% 8% 11% 10% 3% 2% 2% 4% 30.0% 34.2% 37.4% 36.7% 39.3% 39.0% 31.8% 33.4% 34.3% 35.4% 43.1% 35.9% % organic revenue growth / EBITDA b.s.i margin



New management team



Ongoing commercialisation



Meaningful M&A implemented with potential for synergies and expected growth acceleration



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

1,866 2,317 2,519 2,415 2015 2016 2017 2018Prelim. (3)% 2,206 2,273 2,313 2,319 2015 2016 2017 2018Prelim. 2% 2,764 2,795 2,892 2,882 2015 2016 2017 2018Prelim. 1% 560 792 943 855 2015 2016 2017 2018Prelim. 811 893 901 1,000 2015 2016 2017 2018Prelim. 880 934 991 1,034 2015 2016 2017 2018Prelim.

Notes 2018Prelim. numbers are management unaudited figures for year-end 2018. EBITDA b.s.i. is based on actual reported FX

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

Key cash flow items

2015 2016 2017 2018 Prelim.

DKKm EURm

EBITDA before special items 2,248 2,619 2,835 2,889 388 Special items (538) (606) (254) (1,309) (176)

Reorganisation and restructuring (159) (113) (60) (157) (21) External advisors (44) (14) (15) (253) (34) Transformation programme (353) (219) (110) (431) (58) IPO-related costs

• (261)

(31)

• Costs related to the take-over
• (37)

(464) (62) Other costs and income, net (18) (1) 1 (4) (1)

Change in narrow working capital 64 67 (188) 203 27 Capex (539) (646) (665) (630) (85) Other non-cash items (21) 6 41 (23) (3) Tax paid (80) (653) (200) (108) (14) Free cash flow 1,134 787 1,569 1,022 137

Comments

• Special items mainly includes reorganization, restructuring and
• ptimization programs-related costs
• Recent increase was mainly due to one-off costs related to the

H&F take-private transaction: mainly retainer fees to M&A advisors, legal fees and internal bonuses to selected employees

• Special items are expected to tapper off in 2019 as most of costs

related to the take-over have been incurred in 2018

• Relatively stable capex at 6-9% of revenues historically supporting strong
• rganic growth and margin expansion
• Slight increase in 2016-2017 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

• Negative change in narrow working capital in 2017 was due to

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

Notes Based on EUR/DKK FX rate of 7.45