Announcement PDF COMPANY UPDATE FY23 24 August 2023 1 KEEPING PROMISES DELIVERING ON FY23 OBJECTIVES Objectives set for FY23 Focus on near-term profitability Our prudent and proactive adjustment of strategy and cost base, in response to macroeconomic conditions, successfully delivered profitability^ on a run-rate basis in FY23 and positioned Wisr for long-term sustainable growth. ✓ Significant reduction in short-term growth → Growth moderated and profitability^ ✓ Uplift of front book yield → June 2023 run-rate new loan origination aspirations in lending ✓ Switching from high to moderate growth to Wisr began FY23 with the goal of achieving profitability^ within 12 months. Outcomes delivered yield (c. 13%) and Net Interest Margin (NIM) (c. 5%) - refer to slide 6 positively impact EBTDA Cost management ✓ Material reduction in employee expenses and headcount ✓ Material reduction in external spend Strategic adjustments ✓ Pausing all new credit product expansion and/or go-to-market expenditure → Operating cash flow of $7.4M1 and 78% EBTDA1 improvement (FY23 vs FY22), including two positive quarters (Q2FY23 and Q4FY23) ✓ Exited support for Arbor (EU market) and any short-term geographical expansion ✓ Reduced investment in the Wisr Financial Wellness Platform ^Profitability is on a run-rate EBTDA basis 1 Operating cash flow is audited and on a cash basis per the 4E versus EBTDA (audited) which is a profit and loss statement metric. Both operating cash flow and EBTDA exclude $1.1M one-off restructuring costs. Source: FY23 (Appendix and Financials) 2 WISR HAS A UNIQUE AND DIFFERENTIATED STRATEGY Moderated lending growth $495M1 DIGITAL LENDING PLATFORM in new loan originations ↓19% on pcp (FY22 $611M) WISR’S UNIQUE COMPETITIVE ADVANTAGE in operating revenue 1 2 3 Total loan originations 781 average credit score of total book as at 30 June 2023 (FY22 780) $931M Wisr loan book ↑19% on pcp $(1.6)M3 EBTDA 78% improvement on pcp (FY22 $59M) (FY22 $(7.2)M) Loan originations audited Revenue audited and percentage increase is on previous corresponding period (PCP) Excludes $1.1M restructuring costs ABS transaction, Wisr Independence Trust 2023-1, 2.58% over one-month BBSW Wisr well capitalised with cash balance of $23.1M Includes $21.7M unrestricted cash and $1.4M loans for sale. Refer to slide 11 for full detail Proprietary Financial Wellness Platform 1.25% On-balance sheet 90+ day arrears as at 30 June 2023 ↑55% on pcp $200M (FY22 $780M) Focused on profitability $92M2 FINANCIAL WELLNESS PLATFORM $1.6B1 Strong balance sheet (0.98% as at 30 June 2022) 758K+ Wisr Financial Wellness Platform profiles $6.3M in round-ups on customer debt as at 30 June 2023 ↑17% on pcp (647K as at 30 June 2022) 3 POSITIVE OPERATING CASH FLOW DELIVERED Operating cash flow1 We responded to changing macroeconomic conditions in FY23 with a series of material operating expense reductions, implemented in Q1FY23 and Q4FY23, while also growing revenue. This has had a materially positive impact, delivering $7.4M of operating cash flow (excluding $1.1M one-off restructuring costs), a 386% improvement on FY22 ($(2.6M)). 1 Operating cash flow is audited and on a cash basis per the 4E versus EBTDA (audited) which is a profit and loss statement metric. Source: FY23 (Appendix and Financials) 2 Includes one-off Olympics & Brand campaign spend 4 OPERATIONAL LEVERAGE EXPANSION ● ● ● ● In FY23 the Company continued on the path to profitability with EBTDA of $(1.6)M, which is a 78% improvement on $(7.2)M in FY22 The continued operational leverage expansion in the business is evidenced through 55% operating revenue growth and a 20% reduction in opex Net loan write-offs represent 1.59% of the average loan book balance for FY23 which is within management expectations also refer to slide 7 Interest expense (including head company debt facility) increased 146%, driven by 19% loan book growth, along with higher funding costs ● The interest expense represents c. 5.4% of the average loan book balance for FY23 FY23 FY22 Variance $91.9M $59.4M 55% Operating expenses^ $(32.8)M $(41.0)M 20% Net loan write-offs $(14.5)M $(6.9)M 112% Interest expense $(46.2)M $(18.8M) 146% EBTDA $(1.6)M $(7.2) 78% Revenue ^ Operating expenses exclude $1.1M restructuring costs FOR YOUR SMART PART 5 WISR LOAN UNIT ECONOMICS AND NIM EXPANSION Wisr is well positioned in the medium-term to deliver a business with a NIM of c. 6% 1, which would deliver strong profitability at scale. PRE NIM COMPRESSION (2021) WISR CURRENT BUSINESS WISR JUNE 2023 RUN-RATE SHORT TERM TARGET RUN-RATE MEDIUM TERM TARGET (Example for $1B loan Book) (Example for $1B loan Book) (Example for $1B loan Book) (Example for $1B loan Book) (Example for $2B loan Book) 10% 10.25% 13% 13.25% 13.5% - Annualised net losses 1.25% 1.5% 1.5% 1.75% 2% - Cost of funds 2.5% 5% 6.5% 5.75% 5.5% = NIM 6.25% 3.75% 5% 5.75% 6% $62.5M $37.5M $50M $57.5M $120M $40M $30M $30M $35M $55M $22.5M $7.5M $20M $22.5M $65M Yield Example NIM = - Opex Example EBTDA 1 Subject to a relatively stable cost of funds over the same period. Rapid changes in cost of funds would alter this materially Disclaimer: This is not a forecast. The data represents an indicative scenario of the economics of the Wisr Loan Book. Indicative economics are illustrative only and may vary due to a range of assumptions and variables. Data is subject to broader market conditions, including (but not limited to) movement in interest rates, macroeconomic conditions, and/or significant market volatility events. 6 NET LOAN WRITE-OFFS AND PROVISIONING As at 30 June 2023, Wisr had a total ECL provision of 2.9% of the loan book and a total credit loss expense (P&L) of 2.4% of the loan book. Provision coverage rates have increased in FY23 as a reflection of higher growth in stage 2 and 3 balances compared to total balances. Provision coverage % FOR YOUR SMART PART Net loan write-offs are 1.59% compared to the 30 June 2023 balances. The increase in FY23 was in line with book maturity, higher 90+ arrears and decreasing growth rates of the loan book. Net loan write-offs as % of average balance 7 DUAL PLATFORM STRATEGY HAS DELIVERED CONSISTENT GROWTH Lending platform growth^ ^As previously advised in Q2FY23, Wisr has deliberately moderated loan origination growth to maintain balance sheet strength and prioritise profitability. Financial Wellness Platform profile balance 8 WISR’S LENDING PLATFORM IS DELIVERING SCALE Wisr YOY loan book balance1 1 2 Wisr YOY revenue growth2 Loan Book includes all loans in WH1, WH2, Freedom Trust 2021-1, Freedom Trust 2022-1, Independence 2023-1, and balance sheet, excludes off-balance sheet of $8.8M as at 30 June 2023 Revenue audited 9 STRONG FUNDING PLATFORM ● WH1 has $450M of committed funding and an undrawn capacity of $75M, while WH2 has committed funding of $250M and an undrawn capacity of $75M (total $150M available) ● Wisr has now delivered three ABS transactions - Freedom 2021, Freedom 2022 and Independence 2023 ● In June 2023, Wisr released term deal capital with the sale of the $3.6M Freedom 21 G1 notes ● A debt facility (Head Company) is in place which is fully drawn to $25M. The facility is due to mature in July 2025 ● Work is continuing on a third warehouse with a new senior funder and ability to fund both PL and SVL (senior funder credit approval received) ● Credit approval was received for an intraday overdraft facility for working capital requirements and is currently going through implementation FOR YOUR SMART PART Funding as at 30 June 2023 10 CAPITAL POSITION Cash per balance sheet $53.6M Cash and cash equivalents $23.1M Wisr equity holding in Wisr Warehouses $48.3M 1 Call dates are forecasted based on expected prepayment rates and actual dates may vary. CAPITAL ASSETS DESCRIPTION Restricted cash $31.9M Cash held in the Wisr Warehouses consists of customer loan repayments (principal and interest) and unutilised funds from note subscriptions (predominantly third-party debt). Use of these funds is restricted to the purposes of funding loans and operating the Wisr Warehouses e.g. Trustee fees. Unrestricted cash $21.7M Cash on hand available to be used for any purpose of the business. Loans available for sale $1.4M Loans held on the balance sheet as at the reporting date are available to sell to the Wisr Warehouses, thereby effectively being a cash equivalent. Wisr equity holding in Wisr Warehouses $48.3M Wisr’s equity investment in the Wisr Warehouses: ● ● ● ● ● Freedom 2021 ($3.6M, call date1 March 2024) Freedom 2022 ($11.3M, call date1 September 2025) WH1 ($19.6M) WH2 ($5.4M) Independence 2023 ($8.4M, call date1 December 2026) 11 FINANCIAL WELLNESS PLATFORM (FWP) FOR YOUR SMART PART 12 FINANCIAL WELLNESS PLATFORM (FWP) HOW WISR’S FWP SUPPORTS CUSTOMERS Where do I stand financially? CREDIT SCORES ● Free access to Equifax and Experian credit scores ● Overview of credit insights and liabilities, indicates eligibility for a Wisr loan ● Alerts when scores change FOR YOUR SMART PART How do I improve my finances? MONEY COACHING ● Daily coaching and tips to help improve spending, savings and credit scores How do I access credit? How do I manage my loan? How do I keep going? ROUND UPS LOAN OFFER REPAYMENT TOOLS CONTINUED PLATFORM ACCESS ● Send digital spare change from daily purchases, towards a debt/other money goal By accompanying a customer through their money moments, Wisr can offer them a personalised offer at the right time ● Monitor repayment progress ● Monitor credit scores IMPROVE FINANCES IMPROVE CREDIT SCORES Transaction data helps determine a customer’s creditworthiness We know when a customer’s credit scores improve enough to make them eligible for a loan ● Pay loans back faster using round ups ● One-off extra payments, used frequently by early arrears customers ● Make payments, set round ups & other goals ● Keep improving money habits ● Future access to credit ● No early repayment fees 13 BACKED BY RESULTS WISR FWP IMPROVES LOAN CUSTOMERS’ FINANCIAL HEALTH Wisr loan customers who engaged with the FWP during FY23 were on average 41%1 further ahead on their loan repayment balance compared to loan customers who didn’t engage with the FWP. 1 2 The FWP can help loan customers save on interest. For example, if a customer on a $30K loan pays an extra $50 per month through round-ups, the loan will be paid off 5 months2 ahead of schedule. Based on average comparison of engaged and not engaged loan customers that are current and not in arrears between 01 July 2022 - 30 June 2023 Calculation is based on average loan size of $30k and a baseline interest rate of 8.79% 14 SUMMARY FOR YOUR SMART PART 15 EXECUTIVE SUMMARY WISR DELIVERS RUN-RATE PROFITABILITY POSITIVE OPERATING CASH FLOW AND EBTDA IMPROVEMENT FY23 operating cash flow of $7.4M2 and 78% EBTDA improvement (FY23: $(1.6)M2 vs FY22: $(7.2)M). DELIBERATE MODERATION OF GROWTH TO FOCUS ON PROFITABILITY1 Loan origination volume has been deliberately moderated with FY23 new loan originations of $495M (19% decrease on FY22 $611M), prime $931M loan book and FY23 operating revenue up 55% 3. The moderation of loan origination volume was deemed prudent given ongoing monetary tightening, maintaining balance sheet strength and a focus on profitability. OPEX REDUCTION INITIATIVES With a focus on profitability, opex reduction activities (including headcount) undertaken in Q1FY23 and Q4FY23 delivered a 20% reduction (FY23 versus FY22). CONTINUED NIM EXPANSION AFTER 12 MONTHS OF CONTRACTION Positioned for medium-term delivery of c. 6%4 Net Interest Margin (NIM) to deliver a highly profitable Company at scale. UNIQUE STRATEGY Over 758K Australians in proprietary Financial Wellness Platform reduces customer acquisition cost, drives loan conversion and improves customer financial wellbeing. 1 Profitability is on a run-rate EBTDA basis Operating cash flow is audited and on a cash basis per the 4E versus EBTDA (audited) which is a profit and loss statement metric. Both operating cash flow and EBTDA exclude $1.1M one-off restructuring costs. Source: FY23 (Appendix and Financials) 3 Revenue audited and percentage increase is on previous corresponding period (PCP) 4 Subject to a relatively stable cost of funds over the same period. Rapid changes in cost of funds would alter this materially 2 16 QUESTIONS FOR YOUR SMART PART 17 FY23 AUDITED FINANCIAL RESULTS AND APPENDIX FOR YOUR SMART PART 18 PROFIT AND LOSS ● ● ● ● Operating revenue of $91.9M (FY22: $59.4M), a 55% increase driven by loan book growth and increased yield on new loan origination Employment benefits expense increased 7% notwithstanding the headcount reduction during FY23 Marketing expense decreased 81%, consistent with the moderated growth strategy Finance expense increased 146% driven by loan book growth of 19% along with higher funding costs ● Provision for expected credit loss expense - refer to slide 20 ● Loss before income tax decreased 34% driven by improved operational leverage 30-JUN-23 $ 30-JUN-22 $ % VARIANCE 91,857,224 59,392,199 55% - 31 (100)% Employee benefits expense (20,261,961) (18,926,195) 7% Marketing expense (2,263,532) (12,089,987) (81)% Customer processing costs (4,709,663) (3,688,843) 28% (65,624) (69,473) (6)% Other expenses (6,673,405) (6,197,511) 8% Finance expense (46,152,209) (18,753,814) 146% (926,275) (931,461) (1)% - (1,168,695) (100)% (22,323,943) (16,352,472) 37% (1,634,672) (1,118,686) 46% (13,154,060) (19,904,907) (34)% REVENUE Operating income Other income EXPENSES Property lease costs Depreciation and amortisation expense Loss on investments Provision for expected credit loss expense Share based payment expense Loss before income tax FOR YOUR SMART PART 19 EXPECTED CREDIT LOSS PROVISION The total credit loss expense for FY23 was $22.3M (2.4%), representing $7.8M of incremental provisions and $14.5M of net losses ($17.5M gross losses net of $3.0M recoveries). Provision movement Jul 2022 - Jun 2023 As at 30 June 2023, the total provisions held are $26.7M (2.9%), an increase from $18.9M (FY22). The increase reflects 19% portfolio growth (YoY) and an increase in balances (stages 2 and 3). RECONCILIATION OF TOTAL PROVISION OF EXPECTED CREDIT LOSS (ECL) $ Opening balance at 1 July 22 18.9M 2.4% Expected credit loss expense recognised during the year 22.3M 2.4% Receivables written-off (17.5)M Recoveries 3.0M Closing balance at 30 June 23 26.7M FOR YOUR SMART PART 2.9% 20 BALANCE SHEET 30-Jun-23 $ 30-Jun-22 $ Cash and cash equivalents 53,576,843 71,489,070 Trade and other receivables 2,031,621 1,065,176 909,217,193 764,838,727 279,576 487,866 1,620,362 1,562,249 345,915 1,037,746 27,780,456 24,856,717 7,009,219 2,736,735 1,002,081,185 868,074,286 Trade and other payables 1,320,088 5,435,693 Provision for employee benefits 1,249,336 1,307,554 441,204 1,203,052 931,055,661 782,282,354 934,066,289 790,228,653 68,014,896 77,845,633 Issued capital 144,702,718 144,477,325 Reserves 30,580,043 27,906,702 Accumulated losses (107,267,865) (94,538,394) TOTAL (DEFICIENCY IN EQUITY) / EQUITY 68,014,896 77,845,633 ASSETS Loan receivables ● ● ● ● Well capitalised with cash of $53.6M ($21.7M unrestricted cash and $1.4M loans available for sale) Loan receivables of $909.2M (30 June 2022: $764.8M), a 19% increase driven by $495M of loan originations in FY23 Derivative financial instruments of $27.8M (30 June 2022: $24.9M) represents the interest rate swap fair value as forecast market interest rates at 30 June 2023 have increased compared to the fixed rate Wisr pays on these contracts Borrowings of $931.1M (30 June 2022: $782.3M), a 19% increase driven by the increase in warehouse trust funded loan receivables Property, plant and equipment Other assets Right of use assets Derivative financial instruments Intangible assets Total assets LIABILITIES Lease liability Borrowings Total liabilities NET (LIABILITIES) / ASSETS EQUITY FOR YOUR SMART PART 21 30-Jun-23 $ 30-Jun-22 $ 88,930,737 56,963,941 (38,780,698) (43,012,102) 50,150,039 13,951,839 Interest received 666,338 19,473 Net cash used in operating activities improved significantly, driven by improvements in operational leverage through an increase operating revenue and decrease in operating expenses Management fees received 290,529 643,750 (44,855,735) (17,473,304) - 280,164 6,251,171 (2,578,078) Net cash used in investing activities increase driven by lower relative loan book growth in FY23 v FY22 Payments for plant and equipment (50,431) (371,751) Payment for investments - (1,168,695) Transfer for term deposit - (561,629) Net cash from financing activities decrease driven by lower relative warehouse trust borrowings for new loan origination in FY23 v FY22 Payments for technology assets (4,256,340) (2,297,136) Net movement in customer loans (164,145,958) (401,956,547) Net cash used in investing activities (168,672,729) (406,355,758) Proceeds from issue of shares - - Proceeds from exercise of share options - - Costs of raising capital paid - (148,183) Repayment of borrowings (6,500,000) - Proceeds from borrowings 154,329,418 390,614,465 Transaction costs related to loans and borrowings (2,558,239) (1,769,338) (761,848) (683,596) Net cash from financing activities 144,509,331 388,013,348 Net increase in cash and cash equivalents (17,912,227) (20,920,488) Cash and cash equivalents at the beginning of the financial half-year 71,489,070 92,409,558 Cash and cash equivalents at the end of the financial half-year 53,576,843 71,489,070 Cash flows from operating activities CASH FLOW ● ● ● Receipts from customers Payments to suppliers and employees (inclusive of GST) Interest and other finance costs paid Proceeds from R&D Net cash used in operating activities Cash flows from investing activities Cash flows from financing activities Payments for right of use asset FOR YOUR SMART PART 22 THANK YOU ASX: WZR ABN 80 004 661 205 Level 4, 55 Harrington St, The Rocks, NSW 2000 1300 992 007 23 DISCLAIMER No investment advice or offer of shares This presentation does not constitute investment advice, or an inducement or recommendation to acquire or dispose in any shares of Wisr, in any jurisdiction. presentation is based or the accuracy, completeness or reliability of the information contained in this presentation. Non-GAAP financial measures Risks and assumptions This presentation contains statements (including forward-looking statements), opinions, projections, forecasts and other material, based on various assumptions. Whilst this presentation was prepared with care and attention, those assumptions may or may not prove to be correct. All forward-looking statements, whilst considered reasonable by Wisr at the date of this presentation, involve known and unknown risks, assumptions and uncertainties, many of which are beyond Wisr’s control. There can be no assurance that actual outcomes will not differ materially from those stated or implied by these forward-looking statements, and readers are cautioned not to place undue weight on such forward-looking statements. To understand more about the risks and uncertainties faced by Wisr refer to the 2022 Annual Report. A number of non-GAAP financial measures are used in this presentation. You should not consider any of these in isolation from, or as a substitute for, the information provided in the audited consolidated financial statements, which are available at: www.wisr.com.au Dollar estimates All references to dollars, cents or $ in this presentation are to Australian currency, unless otherwise stated. Statements about past performance are not necessarily indicative of future performance. To the extent required by law, neither Wisr of any of its directors, officers, employees and agents give any warranty, representation or guarantee as to the accuracy or likelihood of fulfillment of any forward-looking statement in this presentation or assumption upon which any part of this ABN 80 004 661 205 24