PROPOSED MERGER OF AFTERPAY AND TOUCHCORP 30 MARCH 2017
INTRODUCTION MERGER IMPLEMENTATION AGREEMENT SIGNED BETWEEN AFTERPAY AND TOUCHCORP ON 30 MARCH 2017 RATIONALE ACCELERATE GROWTH PROFILE OF AFTERPAY NEW VERTICALS AND GEOGRAPHIES CREATE A LEADING PLATFORM TO PROVIDE PAYMENT SOLUTIONS FOR CUSTOMERS AND RETAILERS CORE TOUCHCORP RECURRING REVENUE STREAMS ENHANCED THROUGH FOCUSED BUSINESS DEVELOPMENT AND STRONG SALES PLATFORM CLEAR SYNERGIES COMBINED PLATFORM BENEFITS, STRONG FOCUS ON SUBSTANTIAL COST SAVINGS AND A SINGULAR STRATEGIC FOCUS ENHANCED INTELLECTUAL PROPERTY PROFILE AND TRANSACTION INTEGRITY CAPABILITY STRONG COMBINED LEADERSHIP TEAM FOCUSED ON SUCCESS AND OPERATIONAL EXCELLENCE 2
AFTERPAY TOUCH GROUP OUR DNA Motivation Driven by innovation, inspired by people Application We employ leading technology to provide retailers with payment services that delight customers and enhance the retail economy 3
AFTERPAY TOUCH GROUP PROFILE PAY LATER 1 VERTICALLY INTEGRATED PAY NOW MOBILITY eservices HEALTH CUSTOMER CENTRIC PRODUCTS DATA 2 DRIVEN TRANSACTION INTEGRITY AND DATA ANALYTICS 3 PRODUCT TECHNOLOGY & IP ADVANTAGE FOCUSED LEADING TECHNOLOGY DEVELOPMENT CAPABILITY SCALABLE TRANSACTION PROCESSING INFRASTRUCTURE (PCI DSS LEVEL 1, IRAP CERTIFIED) ENTERPRISE SCALABILITY 4
PAY LATER AFTERPAY LEADING OVER OVER BUY NOW, PAY LATER HALF A MILLION CUSTOMERS 3,100 RETAILERS SERVICE IN AUSTRALIA AND GROWING FAST AND GROWING FAST RAPID ADOPTION BY THE LEADING CUSTOMER FACING BRANDS IN THE COUNTRY STRONG PIPELINE AND UNDERLYING SALES MOMENTUM CONTINUES TO GATHER PACE NEW VERTICALS AND INTERNATIONAL EXPANSION OPPORTUNITIES ARE BEING ACTIVELY PURSUED 5
PAY NOW STRONG RECURRING REVENUE STREAMS WITH INDUSTRY LEADING PARTNERS: MOBILITY ALL BUSINESS LINES POSITIVELY CONTRIBUTE TO EARNINGS BEFORE INDIRECT OVERHEAD RESOURCES AND CORPORATE COSTS HEALTH PRODUCTS RELEVANT TO AFTERPAY CUSTOMER BASE WITH SOME EXISTING CROSSOVER FOCUS ON CORE EXISTING PAY NOW PRODUCTS AND RECURRING REVENUE STREAMS AND TOWARDS EXPANDING PROFIT CONTRIBUTION eservices 6
ENHANCED TRANSACTION INTEGRITY AND DATA CAPABILITIES CONTINUOUS DATA ANALYTICS PAY LATER PAY NOW MULTIPLE VERTICALS INTERNATIONAL MORE TRANSACTIONS PAY LATER >2.2M TRANSACTIONS SINCE INCEPTION >500,000 CUSTOMERS >3,100 RETAILERS MORE MERCHANTS REAL TIME DECISION MAKING PAY NOW 72.8M RECURRING TRANSACTION NUMBERS IN 2016 FRAUD AND REPAYMENT CAPABILITY ASSESSMENT RETAIL INSIGHTS AND RETAILER VALUE-ADD BROADER CUSTOMER DEMOGRAPHIC/TOUCH POINTS CROSS-BORDER ADVANTAGE AND CAPABILITY MORE CUSTOMERS 7
CLEAR SYNERGIES 1 2 STRONG COMMERCIAL AND SALES TRACK RECORD TO COMBINE WITH LEADING TECHNICAL CAPABILITY AFTERPAY DEVELOPMENT ACCELERATED TO PENETRATE NEW CHANNELS AND MARKETS CORE PAY NOW RECURRING REVENUE STREAMS ENHANCED WITH A STRONGER PRODUCT AND SALES FORCE FOCUS TRANSACTION INTEGRITY AND DATA ANALYTICS STREAMLINED AND ENHANCED, LEVERAGING A BROADER TRANSACTION AND DATA UNIVERSE 3 4 5 TECHNOLOGY DEVELOPMENT PRIORITISED TOWARDS HIGHEST ROI OPPORTUNITIES COMBINED AND RAPIDLY GROWING TRANSACTION VOLUME LEVERAGED TO ACHIEVE ECONOMIES OF SCALE AND LOWER INPUT COSTS SCOPE TO STREAMLINE CORPORATE OVERHEADS AND REDUCE COSTS 8
FINANCIAL DISCIPLINE AND PRIORITIES MAINTAIN AND ACCELERATE AFTERPAY GROWTH while maintaining positive net transaction margin performance FOCUS ON ACHIEVING POSITIVE NET CASH FLOWS from PAY NOW revenue streams after both direct and indirect (corporate/overhead) costs PRIORITISE FUTURE INVESTMENT only to highest ROI activities INSULATE EXISTING AFTERPAY GROWTH capital (cash and receivables funding facility) to ensure scope for substantial future growth is maintained UTILISE EXISTING TOUCHCORP EXCESS CAPITAL (cash) to facilitate restructuring activities, transaction costs and future investment CLEAN, TRANSPARENT GO FORWARD BALANCE SHEET and key performance metrics 9
FOCUS ON PEOPLE AND OPERATIONAL EXCELLENCE Bringing together a highly talented team of people that have already been working together for several years Will strive to always be an employer of choice for the best talent in the industry Merger and vertically integrated structure will provide greater scope for engagement, communication, achievement and career progression International footprint provides more opportunities to learn and grow Investment will continue to be maintained in core systems and processes 10
TRANSACTION OVERVIEW Merger will be implemented by inter-conditional schemes of arrangement which are expected to take effect in June (see page 15 for indicative dates) A newly incorporated Australian company, Afterpay Touch Group Limited (Afterpay Touch Group), will issue new shares to Afterpay shareholders (excluding Touchcorp), on a 1:1 basis and to Touchcorp shareholders on a 0.64:1 basis At completion Afterpay Touch Group will be owned approximately 64% by Afterpay shareholders (excluding Touchcorp) and approximately 36% by Touchcorp shareholders, each on a fully diluted basis Touchcorp and Afterpay will each become wholly-owned subsidiaries of Afterpay Touch Group Afterpay Touch Group will be listed on the Australian Securities Exchange (ASX) Anthony Eisen will be Afterpay Touch Group s Executive Chairman, Nick Molnar will be the Managing Director and Chief Executive Officer and Nadine Lennie will be the Chief Financial Officer Afterpay Touch Group board will comprise four representatives from Afterpay and two from Touchcorp The Merger is subject to conditions see page 14 11
KEY MERGER METRICS NON-DILUTED FULLY DILUTED* AFY TCH CURRENT SHARES ON ISSUE 180.3M 131.5M SHARES SUBJECT TO MERGER 130.3M 131.5M AFTERPAY TOUCH GROUP AFTERPAY TOUCH GROUP SHARES TO BE ISSUED 130.3M 84.2M 214.5M AFTERPAY TOUCH GROUP SHAREHOLDER SPLIT 61% 39% CURRENT SHARES ON ISSUE 196.7M 131.5M SHARES SUBJECT TO MERGER 146.7M 131.5M AFTERPAY TOUCH GROUP SHARES TO BE ISSUED 146.7M 84.2M 230.9M AFTERPAY TOUCH GROUP SHAREHOLDER SPLIT 64% 36% Touchcorp currently holds approximately 26% of Afterpay shares on issue (on a fully diluted basis) Post implementation of the schemes of arrangement on a fully diluted basis: Approximately 64% of Afterpay Touch Group shares will be owned by Afterpay shareholders (excluding Touchcorp) Approximately 36% of Afterpay Touch Group shares will be owned by Touchcorp shareholders IN THE FULLY DILUTED FIGURES THE TERM "SHARES" INCLUDES EMPLOYEE OPTIONS AND RIGHTS WHICH WILL BE EXCHANGED FOR OPTIONS AND RIGHTS IN AFTERPAY TOUCH GROUP 12
AFTERPAY TOUCH GROUP PROPOSED BOARD & CFO ANTHONY EISEN EXECUTIVE CHAIRMAN NADINE LENNIE CHIEF FINANCIAL OFFICER NICHOLAS MOLNAR MANAGING DIRECTOR DAVID HANCOCK NON-EXECUTIVE DIRECTOR MICHAEL JEFFERIES NON-EXECUTIVE DIRECTOR CLIFFORD ROSENBERG NON-EXECUTIVE DIRECTOR ELANA RUBIN NON-EXECUTIVE DIRECTOR 13
CONDITIONS The Afterpay Scheme and Touchcorp Scheme are inter-conditional and subject to conditions Full details of the conditions to the Merger are set out in the Merger Implementation Agreement attached to the joint ASX announcement dated 30 March 2017 These conditions include: Each party obtaining all necessary regulatory court and shareholder approvals No material adverse change or certain specific company events in relation to Afterpay or Touchcorp occurring No prescribed occurrences in relation to Afterpay or Touchcorp occurring The entry into appropriate exchange or variation documentation in respect of Afterpay and Touchcorp employee awards Each party's warranties remaining true and correct in all material rspects Afterpay Touch Group obtaining ASX listing approval The receipt of independent expert reports for each scheme that the scheme is in the best interests of, and fair and reasonable to, the respective shareholders 14
INDICATIVE TIMETABLE (2017) EVENT AFTERPAY TOUCHCORP MIA EXECUTED 30 MARCH SCHEME BOOKLET LODGED WITH ASIC 13 APRIL N/A FIRST COURT DATE 2 MAY 5 MAY DISPATCH MEETINGS 9 MAY 9 JUNE SECOND COURT HEARING 21 JUNE 16 JUNE EFFECTIVE DATE IMPLEMENTATION DATE AFTERPAY TOUCH GROUP STARTS TRADING ON THE ASX 21 JUNE 29 JUNE EARLY JULY 15
DISCLAIMER This presentation contains forward looking statements. Often, but not always, forward looking statements may be identified by the use of words such as may, will, expect, intend, target, anticipate, continue, guidance and outlook, or similar expressions and may include (without limitation) statements regarding plans, strategies, objectives, anticipated operating or financial performance. Forward looking statements involve subjective judgments regarding future matters which are subject to known and unknown risks, uncertainties and other factors. Readers are cautioned not to place undue reliance on forward looking statements as actual results may vary materially from projected future results expressed or implied by forward looking statements. No person gives any assurance that assumptions upon which forward looking statements may be based will prove to be correct. Forward looking statements in this presentation speak only as to the date of issue. Subject to any continuing obligations under applicable law, including the rules of relevant securities exchanges, no company undertakes any obligation to publicly update or revise any of the forward looking statements or to advise of any change in events, conditions or circumstances on which any such statement is based. 16
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