O ti
l P
t Pl
Optimal Payments Plc
Interim Results
for the six months ended 30 June 2011
Joel Leonoff CEO Joel Leonoff, CEO Keith Butcher, CFO
Tuesday, 20 September 2011
© Optimal Payments Plc. www.optimalpayments.com
1 www.optimalpayments.com
Legal Disclaimer
Certain statements in this document are looking statements. These forward-looking statements speak only as at the date of this document. These statements concern, or may affect, future matters and include matters that are not facts. Such statements are based on current expectations and beliefs and, by their nature, are
bj t t b f k d k i k d t i ti th t ld
subject to a number of known and unknown risks and uncertainties that could cause actual results and outcomes to differ materially from any expected future results or performance expressed or implied by the forward-looking statements. You are cautioned not to place undue reliance on these forward-looking statements.
The information and opinions expressed in this document are subject to change without notice and neither the Company nor any other person assumes any responsibility or obligation to update publicly or review any of the forward-looking statements contained within this document, regardless of whether those statements are affected as a result of new information, future events or otherwise.
Agenda
1
Introduction
2
Highlights
3
Financial performance
4
Business update
5
C
t t di
d
tl
k
5
Current trading and outlook
Appendices
Presentation team:
Joel Leonoff
Keith Butcher
CEO
CFO
© Optimal Payments Plc. www.optimalpayments.com
About
About
•• Global scale Global scale –– focused on CNP / Trusted solutions Trusted solutions safe and securefocused on CNP / eCommercesafe and secureeCommerce marketmarketAbout
Optimal Payments
About
Optimal Payments
•••• Trusted solutions Trusted solutions –– safe and secureProven since 1996Proven since 1996safe and secure
Leading online payments company, processing more than $9 billion in
transactions annually
Optimal Payments formed from combination of two leading payments
p
y
g p y
businesses in early 2011
Providing innovative payment solutions to online merchants and consumers
through our two growth platforms
NETBANX
Straight Through Processing
NETELLER Stored Value
(eWallet & prepaid cards)© Optimal Payments Plc. www.optimalpayments.com
5
NETBANX STP - transaction flow
eCommerce or MOTO Merchant Hosted Page Virtual Terminal Payment Gateway API Batch Upload Risk Engine Merchant Account Funds Settled ToNETELLER Stored Value – transaction model
Payment account loaded via multiple CONSUMER
1.
Payment account loaded via multiple options, then “no risk” transfer to merchant, funds easily available to consumer via many
“withdrawal” methods TRANSFER TO SIGN-UP 1. 2. Payment Account TRANSFER TO LOADSACCOUNT TRANSFERFROM ONLINE 3. W D B A 4.
1. Consumer signs up, loads account
4.
MERCHANT
WITHDRAWSDIRECTLY TOBANKACCOUNT
PEER2PEER
2. Consumer “pushes” funds to merchant / P2P
3. Consumer “pulls” funds back from merchant
4. Consumer uses funds (either Net+ /
© Optimal Payments Plc. www.optimalpayments.com 7 ATM / POS ONLINE VIA NET+ CARD P2P/ withdrawal to bank) MOBILE/ DESKTOP
A broad mix of
customers
A broad mix of
customers
•• Targeting customers across selected verticalsTargeting customers across selected verticals •• Increasingly offering a “one stop” solutionIncreasingly offering a “one stop” solution
NETELLER Stored Value
NETBANX Gateway
NETBANX Bureau
Gaming Gaming
Digital download / MMOG / MLM Retail – high street Retail – online Travel / online FX / entertainment Subscription Online dating Government/ enterprise Other
Highlights
© Optimal Payments Plc. www.optimalpayments.com
9 www.optimalpayments.com
••
Significant progress in first half following
Significant progress in first half following
First Half Highlights
First Half Highlights
transformational OP acquisition
transformational OP acquisition
g
g
p g
p g
g
g
Completed acquisition (1 Feb)
Operational achievements
Operational achievements
First half slightly ahead of
Financial achievements
Financial achievements
and emerged as new Optimal
Payments
Integration on track
expectations
Revenue
$57.4m
EBITDA
$6.4m
Technology / platforms
Organisational structure
Rationalisation substantially
l t
Headcount
415 @ 30 June
Now at 375
Group cash
$53 8m
complete
Headcount reductions post H1
Duplicated costs eliminated
Annualised savings $4m+
Group cash
$53.8m
Well positioned for second half
growth
Financial performance
© Optimal Payments Plc. www.optimalpayments.com
11 www.optimalpayments.com
Revenue
2011 H1 Financials
2011 H1 Financials
Revenue
Trading revenue $57.0m (ex investment
$57.0 m
g
$
(
income)
NETBANX STP:
$36.9m
64% of total
$30.4 m $23.0m contribution from acquired OP business
(5 months from 1 Feb 2011)
$13.9m from original NETBANX business, up 26% from $11.0m
NETELLER:
$20.1m
36% of total
In line in challenging marketsg g - regulatory impacts
- poker weakness
Impact of H1 product developments expected in H2 / 2012
Note
Revenue for H1 2010 adjusted to show impact of change of Asian business model.
Asia Pacific revenues of $3.9m re-categorised to STP total revenues from Stored Value total to STP total revenues from Stored Value total revenues.
Gross margin, EBITDA, cash
2011 H1 Financials
2011 H1 Financials
EBITDA $6.4m
Slightly ahead of Board expectations
Gross margin
(1)H1 2011
NETBANX STP 46 %
Impacted by
Direct and G&A costs impacted by stronger Canadian dollar = higher US$ costs
Additional integration costs including W b it b di d NETBANX l tf
NETBANX STP 46 %
NETELLER Stored Value 85 %
Total (blended) 60 %
Website rebranding and NETBANX platform integrations
Headcount 415 at 30 June now 375
(1) Gross margin % calculated excluding $0.4m of investment income
Headcount 415 at 30 June, now 375
Further reductions made in July/August as
part of planned rationalisation and integration programme
Group Cash $53.8m
$33.8m after deducting merchant cash
© Optimal Payments Plc. www.optimalpayments.com
2011 H1 Summary
2011 H1 Summary
Exceeded H1 revenue and EBITDA expectations
Exited H1 with headcount and cost reduction programmes in place
Completed integration of platforms
Restructured organisation (single CEO and functional heads)
Restructured organisation (single CEO and functional heads)
Well positioned to leverage new organisation and cost structure for growth
and profitability into second half
Business update
© Optimal Payments Plc. www.optimalpayments.com
15 www.optimalpayments.com
Our two growth
Our two growth
•• Focused on growing CNP / Focused on growing CNP / eCommerceMerchant proposition driven by tailored solutionsMerchant proposition driven by tailored solutionseCommerce marketsmarketsOur two growth
platforms
Our two growth
platforms
•• Merchant proposition driven by tailored solutionsMerchant proposition driven by tailored solutionsbuilt on differentiation built on differentiation andand innovationinnovationNETBANX
Straight Through Processing
NETELLER Stored Value
(eWallet and prepaid cards)
Focused on “customer not present”
Focused on online gaming market Private label eWallet solution targeted
at top tier retail brands B2B / B2C offering p
(CNP) market (eCommerce & Mail Order Telephone Order)
Targeting online merchants
Processing online transactions via
multiple banking partners g
NETBANX STP
NETBANX STP
Revenues H1 2011
NETBANX STP (gateway and bureau)
U d l i NETBANX b i
$ 36.9 m
$ 13 9 - Underlying NETBANX business
- Acquired OP business $ 13.9 m$ 23.0 m
Strong growth with numerous contract wins
and healthy pipeline
Leveraging proven North American model into
Europe with additional resources
Scalable, robust platform and business model
Scalable, robust platform and business model
Integration of NETBANX platforms nearing
completion, underpinning new product roll out
© Optimal Payments Plc. www.optimalpayments.com
NETELLER Stored Value
NETELLER Stored Value
Revenue H1 2011
NETELLER Stored Value $ 20.1 m
Stable performance in challenging markets
Stable performance in challenging markets
Longer term prospects encouraging:
Recovery of position in gaming market
Recovery of position in gaming market
Expanded product offering in H2 2011 building
on Newteller platform
US market potential although timing remains uncertain
uncertain
Non-gaming – developing “White label”
The Optimal solution
Private Label
Customer
A partnership for a private label full-service offering that bridges the in-store and online
Customer
Account
Credit & Cash
Management Loyalty and
retention
bridges the in store and online consumer experience.
Provided by a sophisticated array of cutting edge
technology – where the
The
Optimal
S l i
Payments, Card Mobile andmerchant has full access and ownership of the customer data.
Solution
Acquiring,Card &Issuing socially connected Fraud Prevention Customer Insight
Secure acquiring & Consumer account
powered by
Our future
Our future
•••• Extends customer relationship beyond storeExtends customer relationship beyond storeConnects retail experience into consumers’ lifeConnects retail experience into consumers’ life •• Builds and rewards customer loyaltyBuilds and rewards customer loyaltySecure acquiring &
payment processing Consumer accountand card services
© Optimal Payments Plc. www.optimalpayments.com
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eWallet solution
eWallet solution
•• Builds and rewards customer loyaltyBuilds and rewards customer loyalty •• Provides unparalleled customer insightProvides unparalleled customer insightExtends merchants’ channels beyond store & web
Desktop, Mobile and TV Set-top Shopping Apps/Widgets
Virtual card app Embedded micro-cart for mobile/device for mobile/device shopping Socially connected POS/contactless/ mobile payment b d barcode app
Our competitive
advantage
Our competitive
advantage
Innovative customised solutions
Single gateway connected to multiple banking relationships
Risk management expertise
g
p
Integrated offering of both STP and Stored Value
Sophisticated development capabilities
Loto Quebec, Desjardins, Shop Direct Group
Expertise in online gaming
Respected and recognised leader in gaming industry
13 year track record of innovative solutions
At peak, handling $10m per day in deposits
One of few companies processing online transactions for brick & mortar
casino
Strong management team
Many years of collective payments experience across senior executives
Online payments (processing and eWallet) and online gaming expertise
E t
i l h
ith
bli
k t ti
© Optimal Payments Plc. www.optimalpayments.com
21
Entrepreneurial approach with public market perspective
Innovative focus
Business outlook
Business outlook
Transition from focus on integration / rationalisation to business execution
Transition from focus on integration / rationalisation to business execution
NETBANX STP
Replicating North American success in Europe
NETELLER eWallet
Continued growth in gaming
Positioned for potential re-opening of US market
Positioned for potential re opening of US market
Expansion outside of gaming (white label)
Further investment in improving functionality (mobile)
Continually evaluating M&A and partnership opportunities in a
consolidating market
© Optimal Payments Plc. www.optimalpayments.com
Current trading and
tl
k
Current trading and
tl
k
B
d
t
d EBITDA t b
t i ll hi h i H2
outlook
outlook
Board expects revenues and EBITDA to be materially higher in H2
Driven by strong H1, seasonality and STP pipeline
Cost base optimised through headcount reductions and streamlined
processes
processes
High % of revenue growth flows through to EBITDA
On track to meet full year expectations
On track to meet full year expectations
For further information contact Optimal Payments Plc at p y investorrelations@optimalpayments.comp p y
Keith Butcher Andrew Gilchrist
CFO EVP Corporate Affairs
keith.butcher@optimalpayments.com andrew.gilchrist@optimalpayments.com Tel: +44 (0) 7584 344784 Tel: +44 (0) 1624 698 713 © Optimal Payments Plc. www.optimalpayments.com 25 www.optimalpayments.com 25 © Optimal Payments Plc. ( ) ( ) Mob: +44 (0) 7747 637 248
Appendices
1 The market
© Optimal Payments Plc. www.optimalpayments.com
27 www.optimalpayments.com
The changing
The changing
•• Online payments is a rapidly developing marketOnline payments is a rapidly developing marketTraditional payment methods and players givingTraditional payment methods and players givingThe changing
payments landscape
The changing
payments landscape
•• Traditional payment methods and players givingTraditional payment methods and players givingway to “alternative payments” and new entrantsway to “alternative payments” and new entrantsWhere does Optimal
Where does Optimal
•• True combination of online processing (NETBANX)True combination of online processing (NETBANX)and stored value (NETELLER) solutionsand stored value (NETELLER) solutionsWhere does Optimal
Payments fit?
Where does Optimal
Payments fit?
( )
( )
•• Branded propositions built on innovation … Branded propositions built on innovation … and differentiation
and differentiation
eCommerce Engine /
Shopping Carts AggregatorGateway / ISO / Acquirer / Processor Payments / Alternative Stored Value
© Optimal Payments Plc. www.optimalpayments.com
Global alternate payments industry
eWallet penetration of global
market size by segment ($bn)
B2C eCommerce (%)
2010 2015
2010-2015
The online
payments market
The online
payments market
•• Strong growth forecast in alternate payments industry Strong growth forecast in alternate payments industry –– across multiple channels (online, mobile, contactless) across multiple channels (online, mobile, contactless)
i f i i ifi
i f i i ifi
payments market
2 Our business – in more detail
© Optimal Payments Plc. www.optimalpayments.com
31 www.optimalpayments.com
Optimal Payments: a short … but eventful … history
Exceptional US i Stabilisation Business
Exceptional growth and success US issues & resolution Stabilisation and refocus Business transformation Drive to scale 1999 - 2006 2006 - 2007 2007 - 2009 2010 - ongoing
2006 Entered STP market with Netbanx acquisition 2005 Optimal spins off gaming
division (FireOne) on LSE
2007 DPA (Aug) resolution with US DOJ 2011 NEOVIA acquires Optimal Payments business and renames 2009 Strengthened management team
division (FireOne) on LSE 2004 IPO in London; NETELLER gains FSA authorisation 2005 Optimal (OPMR) purchases SureFire 2006 UIGEA enacted e a es 2010 Newteller platform 2008 Group rename and rebrand to NEOVIA purchases SureFire Commerce, renamed Optimal Payments 2003 NETELLER launches
world’s first truly global prepaid card
p launched Q3 Business transformation – headcount reduced from 443 2008 Private group acquires CNP division of Optimal g p p
2001 InstaCASH first service to make bank transfers instant to 310 during 2010 2008 Launch of Net+ physical, web and i t l d 1999 NETELLER eWallet service
launched for US/Canada
virtual card brand
Our two growth
Our two growth
•• Focused on growing CNP / Focused on growing CNP / eCommerceMerchant proposition driven by tailored solutionsMerchant proposition driven by tailored solutionseCommerce marketsmarketsOur two growth
platforms
Our two growth
platforms
•• Merchant proposition driven by tailored solutionsMerchant proposition driven by tailored solutionsbuilt on differentiation built on differentiation andand innovationinnovationNETBANX
Straight Through Processing
NETELLER Stored Value
(eWallet and prepaid cards )
Focused on “customer not present”
Focused on online gaming market Private label eWallet solution targeted
at top tier retail brands B2B / B2C offering p
(CNP) market (eCommerce & Mail Order Telephone Order)
Targeting online merchants
Processing online transactions via multiple banking partners
© Optimal Payments Plc. www.optimalpayments.com
33
g multiple banking partners
The NETBANX STP payment processing offering
NETBANX
NETBANX
Processing gateway
Merchant account
Risk & Compliance services
Why merchants need it
To accept customer-not-present (“CNP”) payments from merchant websites over the phone (IVR) mail websites, over the phone (IVR), mail order, or via contact centres
Feature rich gateway
Multi-currency platformy p
Tokenisation Recurring billing
Sophisticated client reporting system Easy to use back office
Differentiation
27 banking/acquiring relationships around the world
Si l i t ti t it ll
Single integration to access it all
Stored Value - the NETELLER Payment Account
NETELLER Payment Account
Online stored value consumer account
Strong privacy and convenience for
online financial transactions
Direct settlement with merchants i
bypassing card networks
Accepted at 30m locations either directly or via physical, web and virtual MasterCards
Merchant Value
Improves shopping conversions
Improves margin & reduces fraud
Instant access to consumers in over
180 countries
Customer acquisition, stimulation and retention programs
Guaranteed funds
Proves the customer identity Differentiation
Bridging online and offline worlds
Iron-clad risk and identity tools
Instant settlement Hi h i © Optimal Payments Plc. www.optimalpayments.com 35 High conversions
The Optimal Payments
b i
d l
The Optimal Payments
b i
d l
•• Revenues principally driven by merchantsRevenues principally driven by merchants •• Gross margin higher for stored value as Gross margin higher for stored value as
business model
business model
lower variable costslower variable costsStored Value
Straight Through Processing
CONSUMER
ONLINE MERCHANT
ONLINE MERCHANT
100%
Stored Value revenue
C. 40% C. 60%STP revenue
PROCESSING COSTSc.46% margin
PROCESSING COSTS BAD DEBTSc 85% margin
PROCESSING COSTS BADDEBTSNOTE: Figures are based on 2011 first half results, and may not be
A highly
leveragable
A highly
leveragable
•• Operationally geared, scalable businessOperationally geared, scalable business E ti ll fi d t b ith hi h i E ti ll fi d t b ith hi h i
leveragable
business
leveragable
business
•• Essentially fixed cost base … with high marginsEssentially fixed cost base … with high marginsIllustrative impact of a $10m increase in revenue
Mix
Revenue Gross
EBITDA
uplift
margin
(1)uplift
NETELLER
36%
$ 3.6m
85%
$ 3.06m
Stored Value
Stored Value
NETBANX STP
64%
$ 6.4m
46%
$ 2.94m
$ 10.0m
$ 6.00m
+60%
Increases in revenue drive significant improvements in gross margin …
and EBITDA due to fixed nature of cost base
(1) Figures are based on H1 2011 interim results and may not be indicative of forward looking periods’
© Optimal Payments Plc. www.optimalpayments.com
37
(1) Figures are based on H1 2011 interim results, and may not be indicative of forward looking periods figures for these measures
Actuals and
f
t
Actuals and
f
t
•• Return to growth following acquisition of OP businessReturn to growth following acquisition of OP business EBITDA th d i b i l
EBITDA th d i b i l
Revenue ($m)
EBITDA ($m) & EBITDA margin (%)
consensus forecasts
consensus forecasts
•• EBITDA growth driven by margin leverageEBITDA growth driven by margin leverageRevenue ($m)
EBITDA ($m) & EBITDA margin (%)
Interest Income (1) STP Stored Value 124.6 111.0 +38% growth +12% growth 69.6 80.7 61.6 +55% growth 16.7 11 2 17.4 24.0 44.1 40.6 43.1 2010A 2011F 2012F 11.2 2010A 2011F 2012F 18.2% 15.7% 19.5%
Balance sheet
Balance sheet
•• Cash position remains solid postCash position remains solid post--dealdeal
2 tibl d bt $28 5 i d t f d d l 2 tibl d bt $28 5 i d t f d d l
Balance sheet
Balance sheet
•• 2 year convertible debt $28.5m issued to fund deal 2 year convertible debt $28.5m issued to fund dealGroup “own” cash 30 Jun 11 31 Dec 10
Cash $ 48.1 m $ 51.1 m
Restricted cash $ 1.5 m $ 2.3 m
$ $
Surplus Qualifying Liquid Assets $ 4.1 m $ 10.8 m
Total group cash $ 53.8 m $ 64.2 m
less Merchant cash included in cash ($ 20.0 m) ($ 10.6 m) less Merchant cash included in cash ($ 20.0 m) ($ 10.6 m)
(within current liabilities)
Group “own” cash $ 33.8 m $ 53.6 m
L t tfl f d l (1) ($16 4 )
Less net outflow for deal (1) ($16.4 m)
Group cash – pro-forma post deal $ 37.2 m
(1) N t hfl l t d t i iti 1 F b 2011 i fl f $10 5 f f d i i h tfl
© Optimal Payments Plc. www.optimalpayments.com
39
(1) Net cashflow related to acquisition 1 Feb 2011 – inflow of $10.5m from fundraising, cash outflow of $25.0m to vendors on closing, and deal costs of $1.9m
Optimal Payments Plc - senior leadership team
Leadership team combines expertise and experience in payments, cards, online
gaming and internet technology
Joel
Joel
Leonoff
President & CEO
Danny
Chazonoff
Butcher
Keith
Chief Operating Officer
Chief Financial Officer
Supported by experienced executive team and employees from both businesses
across locations
Calgary Montreal Gatineau Canada; Cambridge London UK; IOM HQ
© Optimal Payments Plc. www.optimalpayments.com
41
Senior leadership team biographies
Joel
Leonoff CEO
Joel is an entrepreneurial leader and visionary, with a proven track record, having served as CEO, COO and CFO of private and publicly traded companies. Joel founded SureFire Commerce Inc. (renamed Terra Payments), a Canadian TSE‐listed company, where he served as COO and CFO and as a board member and Chairman of the audit committee, and which merged with Optimal Payments Inc. Joel has previously served as the COO of PartyGaming
l th l di t d li i J l i Ch t d A t t plc, the leading quoted online gaming company. Joel is a Chartered Accountant.
Keith
Butcher CFO
Keith has extensive experience in the payments and technology sectors having previously been Finance Director of a number of AIM listed businesses including 6 years at DataCash Group plc the online payments company where he was Finance Director during its period of Group plc, the online payments company, where he was Finance Director during its period of rapid growth from a market capitalization of £8m to £300m. DataCash was recently sold to MasterCard for £350m. Keith is a UK qualified Chartered Accountant and was appointed as CFO in May 2010.
Danny
Chazonoff COO
Danny served as Chief Operating Officer and Chief Technology Officer at Optimal from November 2006. He has held a number of roles including CTO and COO with Optimal since its formation in 1999 as SureFire Commerce (renamed Terra Payments) and also at BCE Emergis. He brings a wealth of international payments expertise and IT experience to the STP business of the combined group.
Optimal Payments Plc – shareholder structure
IIU Nominees Limited
Shareholder structure – 1 September 2011
Total shares in issue126,279,043
Source: Company website
28.39% (Ireland)
Franklin Templeton Institutional LLC
18.21% (US)
QVT Fund LP
10.68% (UK/US)
97.9%
Blackrock Asset Management
10.26% (UK)
Close Asset Management
Free float
Close Asset Management
4.15% (UK)
River & Mercantile Asset Management
3.26% (UK)
K2 Principal Fund 3.02% (Canada)
© Optimal Payments Plc. www.optimalpayments.com
43
p % ( )
Vendors of Optimal Payments 2.10% Other holders 19.13%