Announcement PDF Wisr Limited ABN: 80 004 661 205 Financial Report For the Year Ended 30 June 2019 Wisr Limited Financial report For the year ended 30 June 2019 Contents Directors’ report Auditor’s independence declaration Statement of profit or loss and other comprehensive income Statement of financial position Statement of changes in equity Statement of cash flows Notes to the financial statements Directors’ declaration Independent auditor’s report Page 2 17 18 19 20 21 22 47 48 1 Wisr Limited Directors’ report For the year ended 30 June 2019 The directors present their report, together with the financial statements, on the consolidated entity (also referred to hereafter as the Group) consisting of Wisr Limited (referred to hereafter as the Company or Parent Entity) and the entities it controlled at the end of, or during, the year ended 30 June 2019. Directors The following persons were directors of the Company during the whole of the financial year and up to the date of this report, unless otherwise stated: Name Position John Nantes Executive Chairman Craig Swanger Non-Executive Director Chris Whitehead Non-Executive Director Particulars of each director’s experience and qualifications are set out later in this report. Principal activities During the financial year, the Group’s primary activity was writing personal loans for 3, 5 and 7 year maturities to Australian consumers, then on-selling these loans to retail, wholesale and institutional investors. Review of operations Key Group highlights include: - Operating revenue up 91%, to $3.04m (FY18 $1.59m) - Loan origination volume up 281% to $68.90m (FY18 $18.10m) - Marketing expense down 4%, to $1.46m (FY18 $1.52m) - The Group is well capitalised with $16.77m net assets (FY18 $4.66m) including $11.99m cash as at 30 June 2019 (FY18 $1.55m) - Raised $15m, net of costs, in an oversubscribed equity raise in H2FY19 - Launched Wisr App to promote more financial wellness and encourage debt reduction for Australians, with over 25,000 downloads in its first few months - Launched WisrCredit, the country’s only credit score comparison service with over 32,000 Australians comparing their scores as at 30 June 2019 - Significantly extended the reach and potential of the Wisr Financial Wellness Ecosystem (“Wisr Ecosystem”) through the launch of Wisr@Work and Wisr&Co B2B2C partnership models - Strategic partnership announcements including Smartgroup, HCF and an industry super fund - Progress towards evolving Wisr debt funding facilities with multiple parties Scaling efficiently Wisr continued the efficient scaling of its core personal loans business, delivering 281% loan volume growth and 91% revenue growth despite reducing marketing spend by 4%. This demonstrates the value of Wisr’s purpose-led unique ecosystem, which allows the Group to scale efficiently, whilst maintaining consistently strong credit quality. Wisr underwriting performance The Wisr credit engine continues to deliver consistent, but safe growth of the loan book in line with management expectations. Wisr continued its balance of long-term sustainable book growth delivered by market leading unit economics, operating excellence and conservative loss rates. The Group’s strategy not to maximise loan book growth for short term volume at the expense of unit economics is evident. The Group recognises the opportunity is significant in the Australian market but maintains the strategy that wins over the medium to long term is the most important and is focused on building the strongest platform foundation in the market for long term sustainable, profitable success. 2 Wisr Limited Directors’ report For the year ended 30 June 2019 Review of operations (cont.) Wisr Financial Wellness Ecosystem In FY19 Wisr delivered the preliminary rollout of the Wisr Ecosystem, acquiring over 60,000 Australians to 30 June 2019 into its channels. The Wisr Ecosystem includes the launch of a number of individually powerful, and collectively unique products aligned to financial wellness: - - Australia’s only credit score comparison site, WisrCredit, attracted over 32,000 users since launching in Q2FY19, the majority of whom are amongst the most creditworthy in Australia. Debt reduction tool Wisr App, launched in Q3FY19, garnered over 25,000 downloads in the first months of launch. The app rounds up everyday transactions to help pay down extra debt, specifically targeting high-interest credit card debt. Workplace financial wellness program Wisr@Work launched with Smartgroup (ASX:SIQ) as a founding partner. The program addresses the number one cause of stress in the workplace, stress related to personal finances, and will be rolled out more broadly in the coming year. Revenue The Group increased operating revenue by 91% during the year to $3.04m from $1.59m in FY18. Revenue is predominantly derived from loan establishment fees and management fees from servicing loans sold to third parties. The growth in revenue was driven by the 281% increase in loan volume during the year to $68.90m from $18.10m in FY18. The FY18 revenue figure included interest revenue from loans held on balance sheet prior to the commencement of wholesale funding in October 2017 which inflates the FY18 revenue figure relative to FY19. Expenses Employee expenses, the majority line item for Wisr, increased 32% to $5.02m in FY19 from $3.80m in FY18 driven by an increase in headcount from circa 33 to 52. A significant portion of growth in headcount has been driven by the build and rollout of the Wisr Ecosystem, as the Group invests in building assets of long-term strategic value. Marketing expense decreased 4% to $1.46m in FY19 from $1.52m in FY18 which highlights the continued effective scaling of the business. Loan originations increased 281% during the same period. A material portion of the marketing spend was also related to the rollout of the Wisr Ecosystem products as opposed to pure loan origination. Customer processing costs of $1.17m are now being separately disclosed given their materiality (FY18 $0.21m). These relate to the processing of loans, but a significant portion relates to the onboarding of customers into the Wisr Ecosystem. Financial Position and Debt Funding The Group is well capitalised with $16.77m net assets including $11.99m cash as at 30 June 2019 following an oversubscribed $15m equity raise in H2FY19. The $11.99m cash excludes liquid loans held on balance sheet, $1.80m of which were sold and realised as cash on 2 July 2019 as part of standard business operations. AASB 9 Financial Instruments, adopted for the first time in FY19, requires loan receivable provisions to be calculated on an expected credit loss basis using a three-stage process. An expected credit loss provision of $235,646 was raised at 30 June 2019. Today, Wisr utilises a predominantly capital light funding model through off balance sheet funding structures which has allowed the business to scale from a capital allocation perspective. That means, capital has been used to fund company growth and deliver on the Wisr Ecosystem strategy as opposed to supporting loan funding. This approach has been successful and allowed Wisr to be a true platform play in the market. Wisr is currently in advanced discussions with new funding partners and is pleased with the strong interest shown by major bank funders to provide debt capital to Wisr’s fast growing loan book. The Group’s objectives in pursuing the new funding opportunities are increasing debt capacity to fund our rapid growth, diversification of funding partners and therefore risk, improved overall margins for Wisr and improvement in specific loan unit economics. 3 Wisr Limited Directors’ report For the year ended 30 June 2019 Review of operations (cont.) The structures of the new facilities are diverse and will see Wisr benefit from a hybrid funding model while maintaining its capital light attributes. Outlook – FY20 and Beyond With an unwavering commitment to improving the financial wellness of all Australians, Wisr is building a purpose-led business delivering a smarter, fairer alternative to the millions of Australians who apply for a personal loan each year1. Fusing the best of emerging fintech with the operational reliability of a traditional lender, Wisr will continue to deliver exceptional customer experiences and a business model that is scalable and built to deliver long term profitability. Key priorities for FY20 include: Origination Growth - Efficiently scale the core lending business and grow origination volumes - Maintain credit quality and improve loan unit economics to deliver a greater share of revenue per loan to Wisr - Launch Wisr Secured Vehicle Finance product to increase total addressable market Debt funding - Diversification of debt funding models through new structures and facilities, whilst maintaining capital-light attributes Financial Wellness Ecosystem - Evolution of the Wisr experience to incorporate all Wisr financial wellness touchpoints - Expansion of the Wisr App across Android and web platforms - Building on the Wisr Ecosystem with the launch of new features - Increasing customer numbers in the Wisr Ecosystem Partnership Distribution - Activate existing strategic partnerships to make the Wisr Ecosystem available to millions of Australians - On-board more strategic partners who share Wisr’s vision to deliver financial wellness to Australians People - Hire superstar talent to help deliver on Wisr’s vision - Continue to bring diversity and inclusion throughout all hiring areas - Extend on the existing high performance culture within the Company 1 Equifax Credit Pulse 2019 (published August 2019) Dividends There were no dividends declared or paid in the financial year. Significant changes in state of affairs There were no significant changes in the state of affairs of the Group during the financial year. Events since the end of the financial year In July 2019, the Group entered into a three-year agreement with SmartGroup Corporation Ltd (ASX:SIQ) (SmartGroup) to partner on the distribution of Wisr’s ecosystem of financial wellness products. Environmental matters The Group is not subject to any significant environmental regulations under Australian Commonwealth or State law. Indemnity and insurance of auditor The Company has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of the company or any related entity against a liability incurred by the auditor. During the financial year, the company has not paid a premium in respect of a contract to insure the auditor of the Company or any related entity. 4 Wisr Limited Directors’ report For the year ended 30 June 2019 Information on directors The names and details of the Company's directors in office during the financial year and until the date of this report are presented below. John Nantes - Executive Chairman Qualifications Experience - LLB, B.Comm, B.A., Dip Financial Planning - Mr Nantes has over 23 years of experience in Financial Services. Prior to being the Chief Executive Officer of Adcock Private Equity Pty Ltd, Mr Nantes was Group Head of Financial Services at Crowe Horwath, which held over $10b in funds under management and was Australia’s largest SMSF provider with over 10,000 funds. Mr Nantes has also been the CEO of Prescott Securities, a Stockbroking and Financial Planning business managing over $2b in FUM, as well as the CEO of WHK Eastern Victoria, an accounting and specialist tax business. Mr Nantes has also held various Senior Executive roles in St George Bank and Colonial State Bank across retail, private banking and wealth management. Mr Nantes is also currently Executive Chairman and Responsible Manager for Cashwerkz Limited (ASX:CWZ), a financial services company and Non-Executive Director of Thinkxtra, a non-listed IOT public company. - Ordinary shares held: 8,847,015 Performance rights held: 4,000,000 Interest in shares and options as at 30 June 2019 Former directorships (last 3 years) Other current directorships - None - Cashwerkz Limited (ASX: CWZ) Craig Swanger - Non-Executive Director Qualifications Experience - BCom (Hons), Graduate Diploma in Financial Markets - Mr Swanger has over 20 years of experience in financial services. He was Executive Director of Macquarie Global Investments, responsible for managing around $10bn in client funds across Asia, North America and Australia. Interest in shares and options as at 30 June 2019 Former directorships (last 3 years) Other current directorships Mr Swanger has extensive board experience, including Macquarie Bank’s major funds management entity, Macquarie Investment Management Limited and a total of 15 internal external boards since 2003. Since Macquarie, Mr Swanger has invested in and advised a large portfolio of technology companies across finance, health and entertainment. More specifically in areas related to Wisr, Mr Swanger was Chairman of 5 of the largest debt listed investment companies in Australia and New Zealand issued over the past decade, and more recently worked with Australia’s largest corporate bond and securitization distribution specialists, is on the board of Xinja Bank and on the Investment Committee for two investors in SME financing in Australia and Asia. - Ordinary shares held: 2,773,619 Performance rights held: 333,334 - None - None 5 Wisr Limited Directors’ report For the year ended 30 June 2019 Chris Whitehead - Non-Executive Director Qualifications Experience - BSc in Chemistry, Wharton Advanced Management Program, FAICD, F Fin - Mr Whitehead has over 30 years’ experience in financial services and technology, over a wide range of roles. He was formerly CEO of Credit Union Australia Limited (2009 to 2015) and CEO Retail Banking at BankWest (2001 to 2007). He has served as CIO at BankWest and Advance and prior to this worked within the IT industry. Chris has previously served as non-executive director for Cuscal Limited, St Andrews Insurance Group, Unisys West and a number of other financial services, technology and community organisations. Mr Whitehead is also Managing Director of FINSIA, the Financial Services Institute of Australasia. - Ordinary shares held: 3,190,000 Performance rights held: 1,500,000 Interest in shares and options as at 30 June 2019 Former directorships (last 3 years) Other current directorships - None - None Information on company secretaries Vanessa Chidrawi Experience - Vanessa is a highly experienced governance professional, having held leadership and executive management roles in companies listed on ASX, TSX, Nasdaq and JSE over the past fifteen years. She obtained degrees in law and commerce and then practised as an attorney for twelve years before entering the corporate world. Vanessa has acted as company secretary to a range of companies listed on ASX and TSX and brings with her a wealth of experience in governance management, board advisory, corporate structuring and capital raising in the listed company space. May Ho Experience - Miss Ho holds a Bachelor of Laws and Bachelor of Business (Accounting Major) degree and has completed a Graduate Diploma in Applied Corporate Governance. She is currently also Office Manager and Compliance Officer of the Group. Miss Ho has also had over 3 years’ experience practicing as a solicitor in a private law firm in Sydney. 6 Wisr Limited Directors’ report For the year ended 30 June 2019 Indemnification and insurance of officers and auditors The Group has entered into agreements with the following to indemnify them against liabilities incurred in their capacity as an officer/director of the Group to the extent permitted by law: - John Nantes Craig Swanger Chris Whitehead Peter Beaumont Vanessa Chidrawi Leanne Ralph - Stephen Porges Campbell McComb Winton Willesee Andrew McKay Robert Parton During the financial year, the Group incurred a premium to insure the directors and officers of the Group. Disclosure of the nature of the liabilities covered and the amount of the premium payable is prohibited by the insurance contract. The Group has not otherwise, during or since the end of the financial year, except to the extent permitted by law indemnified or agreed to indemnify an officer or auditor of the company or any of its controlled entities against a liability incurred as such an officer or auditor. Meetings of directors The number of meetings of the Company’s Board of Directors and of each board committee held during the year ended 30 June 2019, and the number of meetings attended by each director were: Remuneration and Nomination Committee Meetings Number eligible to Number eligible to attend Number attended attend Number attended 14 14 14 11 2 2 14 14 2 2 Directors' Meetings John Nantes Craig Swanger Chris Whitehead Proceedings on behalf of the Company No proceedings have been brought or intervened in on behalf of the Company with leave of the Court under section 237 of the Corporations Act 2001. Non-audit services BDO East Coast Partnership were appointed Company auditor on 20 May 2015 and will continue in office in accordance with section 327 of the Corporations Act 2001. The Company may decide to engage the auditor on assignments additional to their statutory audit duties where the auditor’s expertise and experience with the Group are important. The following fees were paid or payable to BDO East Coast Partnership for non-audit services provided during the year ended 30 June 2019: $ Accounting advice services 2,000 The directors are satisfied that the provision of non-audit services during the financial year, by the auditor (or by another person or firm on the auditor's behalf), is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are of the opinion that the services as disclosed in note 19 to the financial statements do not compromise the external auditor's independence requirements of the Corporations Act 2001 for the following reasons: • all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of the auditor; and 7 Wisr Limited Directors’ report For the year ended 30 June 2019 Non-audit services (cont.) • none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards Board, including reviewing or auditing the auditor's own work, acting in a management or decision-making capacity for the company, acting as advocate for the company or jointly sharing economic risks and rewards. Auditor's independence declaration The auditor's independence declaration in accordance with section 307C of the Corporations Act 2001 for the year ended 30 June 2019 has been received and can be found within the financial report. Performance rights At the date of this report, the unissued ordinary shares of Wisr Limited under performance rights are as follows: Effective Grant Date Date of Expiry Exercise Price Number under Performance Rights 17 November 2016 17 November 2019 Nil 5,833,334 7 August 2017 31 July 2019 Nil 192,576 7 August 2017 31 July 2020 Nil 2,214,637 19 February 2019 31 July 2020 Nil 13,430,088 19 February 2019 31 July 2021 Nil 13,430,089 35,100,724 Performance rights holders do not have any rights to participate in any issues of shares or other interests of the Company or any other entity. There have been no performance rights granted over unissued shares or interests of any controlled entity within the Group during or since the end of the reporting period. For details of performance rights issued to directors and executives as remuneration, refer to the remuneration report. Corporate governance statement 0B Our Corporate Governance Statement is available on our website at: www.wisr.com.au/About/Policies. 8 Wisr Limited Directors’ report For the year ended 30 June 2019 Remuneration report (audited) The Directors present Wisr Limited’s 2019 remuneration report which sets out remuneration information for the Company’s non-executive directors and other key management personnel. The report contains the following sections: a) Key management personnel disclosed in this report b) Remuneration governance c) Service agreements d) Details of remuneration e) Equity instruments held by key management personnel f) Movement in performance rights g) Fair value of performance rights a) Key management personnel disclosed in this report The key management personnel are those persons having authority and responsibility for planning, directing and controlling the major activities of the Group, directly or indirectly, including any director (whether executive or otherwise) of the Parent Entity. During the year ended 30 June 2019 and up to the date of this report, the following were classified as key management personnel: Name Position John Nantes Executive Chairman Craig Swanger Non-Executive Director Chris Whitehead Non-Executive Director Anthony Nantes Chief Executive Officer Andrew Goodwin Chief Financial Officer Mathew Lu Chief Operating Officer b) Remuneration governance The Board ensures that executive reward satisfies the following key criteria for good reward governance practices: - competitiveness and reasonableness; acceptability to shareholders; performance linkage and alignment of executive compensation; transparency; and capital management. The Company has structured an executive remuneration framework that is market competitive and complementary to the reward strategy of the organisation. Aligning to shareholders’ interests, the framework: - has economic profit as a core component; focuses on sustained growth in shareholder wealth as well as focusing the executive on key non-financial drivers of value; and attracts and retains high calibre executives who receive a base salary (which is based on factors such as length of service and experience), superannuation, and performance incentives. In accordance with best practice corporate governance, the structure of non-executive director and executive remuneration is separate and distinct. 9 Wisr Limited Directors’ report For the year ended 30 June 2019 Remuneration report (cont.) b) Remuneration governance (cont.) Company Performance Given the growth nature of the Company, the lack of profit and other key financial variables as shown in the table below, salary and the award of Performance Rights are made on the basis of each individual’s contribution to their specific role in the Company to date and their expected importance to the future of the Company. Performance Rights were deemed to provide an appropriate performance incentive for each individual as applicable. Operating revenue Loss Dividend Cash balance Share price 30 June 2019 $ 3.043m (7.731m) nil 11,993m $0.15 30 June 2018 $ 1.591m (6.208m) nil 1.549m $0.02 30 June 2017 $ 1.160m (5.432m) nil 3.479m $0.03 30 June 2016 $ 1.237m (8.754m) nil 1.265m $0.05 Non-executive directors Non-executive director remuneration was designed to attract and retain directors of the highest calibre, whilst incurring a cost which is acceptable to shareholders. The Constitution and the ASX Listing Rules specify that the aggregate remuneration of non-executive directors shall be determined from time to time by a general meeting. An amount not exceeding the amount determined is then divided between the directors as agreed. The latest determination was adopted by a special resolution passed at the Annual General Meeting held on 24 November 2006 when shareholders approved an aggregate remuneration of up to a maximum of $500,000 per year. The aggregate remuneration is reviewed annually. The remuneration for non-executive directors is comprised of cash, superannuation contributions and performance rights. Retirement allowances for non-executive directors There is no scheme to provide retirement benefits, other than statutory superannuation, to non-executive directors. CEO remuneration The remuneration aspects of the contract for the CEO aims to reward the CEO with a level and mix of remuneration commensurate with the position and responsibilities within the Company and so as to: - align the interests of the CEO with those of the shareholders; and ensure total remuneration is competitive by market standards. The Remuneration and Nominations Committee assesses the appropriateness of the nature and amount of remuneration of the CEO on a periodic basis by reference to relevant employment market conditions with the overall objective of ensuring maximum stakeholder benefit from the retention of a high quality CEO. Fixed remuneration The level of fixed remuneration for the CEO is set so as to provide a base level of remuneration which is both appropriate to the position and is competitive in the market. The CEO receives fixed remuneration by way of salary and company superannuation payments. Other employees’ remuneration The Company aims to reward employees with a level of remuneration commensurate with their position and responsibilities within the Company and so as to ensure total remuneration is competitive by market standards. The CEO makes assessments and recommendations to the Board regarding employee remuneration. Retirement benefits No executives have entered into employment agreements that provide additional retirement benefits. 10 Wisr Limited Directors’ report For the year ended 30 June 2019 Remuneration report (cont.) b) Service agreements The remuneration agreements of key management personnel as at 30 June 2019 are set out below: Agreed gross cash salary per annum incl. superannuation $ Position held as at 30 June 2019 and any change during the year Contract details (duration and termination) Executive Chairman No determined duration – subject to retirement and re-election rules of the Company’s constitution. No notice required to terminate. 100,000 Non-executive director No determined duration – subject to retirement and re-election rules of the Company’s constitution. No notice required to terminate. 60,000 Mr C Whitehead Non-executive director No determined duration – subject to retirement and re-election rules of the Company’s constitution. No notice required to terminate. 60,000 Mr A Nantes Chief Executive Officer No fixed term. 6 months’ notice to terminate. 273,750 Mr A Goodwin Chief Financial Officer No fixed term. 3 months’ notice to terminate. 240,900 Mr M Lu Chief Operating Officer No fixed term. 1 months’ notice to terminate 200,000 KMP Mr J Nantes Mr C Swanger 11 Wisr Limited Directors’ report For the year ended 30 June 2019 Remuneration report (cont.) c) Service agreements (cont.) In addition to the above salary based compensation, the following key management personnel have been granted performance rights to align their compensation with the performance of the Company, as reflected in its share price. Performance rights are granted in tranches and are linked to increasing share prices over designated periods, as per the following table: KMP Mr J Nantes Mr C Swanger Mr C Whitehead Mr M Lu Share price target 4 cents** 6 cents** 18 cents* No. of performance rights that will vest - - 4,000,000 Minimum period to remain a director after readmission N/A N/A 24 months from 17 Nov 2016 Date performance rights lapse if conditions not met N/A N/A 17 Nov 2019 No. of performance rights that will vest - - 333,334 Minimum period to remain a director after readmission N/A N/A 24 months from 17 Nov 2016 Date performance rights lapse if conditions not met N/A N/A 17 Nov 2019 No. of performance rights that will vest - - 1,500,000 Minimum period to remain a director after readmission N/A N/A 24 months from 17 Nov 2016 Date performance rights lapse if conditions not met N/A N/A 17 Nov 2019 No. of performance rights that will vest 2,202,643 2,202,643 - Date employee must remain employed with Company 31 Jul 2020 31 Jul 2021 N/A Measurement Date 31 Jul 2020 31 Jul 2021 Date performance rights lapse if conditions not met 31 Jul 2020 31 Jul 2021 N/A * The Performance Rights will be issued and will vest in tranches based on the volume weighted average price at or above the hurdle price for at least ten consecutive trading days. In addition, the term hurdle must be met. ** The Performance Rights will be issued and will vest in tranches based on the volume weighted average price being at or above the hurdle price for a 30day trading period prior to the Measurement Date. In addition, the employment hurdle must be met. 12 Wisr Limited Directors’ report For the year ended 30 June 2019 Remuneration report (cont.) d) Details of remuneration The following table of benefits and payment details, in respect to the financial year, represents the components of remuneration for each member of the key management personnel of the Group: Short term benefits Cash salary, fees & shortShortterm term compensated incentive absences schemes $ $ Post employment Long-term benefits benefits Share based payments Superannuation $ Long service leave $ Performance Rights $ Directors (2019) John Nantes Craig Swanger Chris Whitehead Total: 91,324 54,795 54,795 200,914 - 8,676 5,205 5,205 19,086 - 1,017 85 382 1,484 Executives (2019) Anthony Nantes Andrew Goodwin Mathew Lu Total: 250,000 220,000 182,648 652,648 - 21,771 20,900 17,352 60,023 1,247 863 185 2,295 5,755 5,755 Directors (2018) John Nantes Craig Swanger Chris Whitehead Total: 91,324 54,795 54,795 200,914 - 8,676 5,205 5,205 19,086 - 9,493 791 3,615 13,899 Executives (2018) Anthony Nantes Andrew Goodwin Mathew Lu Peter Beaumont1 David Doust2 Total: 250,000 210,000 23,728 159,817 31,857 675,402 95,890 95,890 32,860 19,950 2,254 15,183 2,160 72,407 - 337 337 Shares $ Total $ - % Performance