Announcement PDF Q1 FY24 Investor Presentation 31 October 2023 Delivering innovative and scalable payments solutions Payments solutions provider driving innovation in the u Change leverages innovative and scalable technology to provide tailored payment solutions, card issuing and testing to 150+ banks & fintechs across 40+ countries u Two core products in the banking & payments ecosystem – Vertexon & PaySim banking ecosystem Banking as a Service Payment testing Payments as a Service Physical & virtual card issuing 2 Transaction processing for all major card schemes Digital payments (Apple, Google & Samsung Pay), BNPL Full payment simulation ATM & POS emulation 63% 37% of Q1 FY24 Revenue of Q1 FY24 Revenue Visa, Mastercard, UnionPay, Amex, JCB validation Vertexon issuing capabilities Change has completed all necessary regulatory and licensing requirements to enable card issuing in Australia, NZ and the US All regulatory and licensing requirements Change can now issue debit and prepaid cards in Australia, NZ and the US for card issuing in Australian Vertexon PaaS platform now certified by Mastercard Australia, New Zealand Australian Bank Identification Number (BIN) now live – ready to onboard Australian clients and the US are now in Mastercard Principal Memberships in Australia and New Zealand enables Change to offer BIN Sponsorship in these regions place Enables clients without local issuing capabilities to access Change’s principal issuing status with Mastercard to issue and manage prepaid and debit cards Also provides an efficient and cost-effective solution for clients looking to expand their service offerings in the region 1. 3 Regulatory Licence Mastercard Issuing Licence Mastercard Certified Processor Mastercard Prepaid Issuing Mastercard Debit Issuing¹ New Zealand Registered FSP Licenced Certified Live Live Australia AFSL Licenced Certified Live Live United States Issuing Bank Partner Licenced Certified Live Approved Debit issuing requires a partner bank (US) or customers to be a licensed deposit taking entity (NZ & AU) Financial Update – Q1 FY24 Revenue by Quarter (US$m) Q1 FY24 revenue of US$2.2m (A$3.4m¹) Change has now commenced migrating Professional services revenue impacted by the Company’s increased activity on the Vertexon PaaS platform NZ cardholders to Vertexon and PaaS revenues will 2.3 2.4 2.2 1.9 1.9 2.0 2.4 2.1 2.0 Full NZ market coverage of Mastercard and EFTPOS now achieved – has enabled NZ card migrations to Vertexon to commence progressively ramp up until the full migration PaaS revenues will progressively ramp up until the full migration is complete is complete Q1 Q2 FY22 Cash receipts of US$2.5m (A$3.9m), up 10% on pcp Cash payments for operating activities (excluding income tax and interest) of US$2.3m (A$3.6m), down 13% on pcp Decrease relative to the pcp primarily due to staff costs – Q1 FY23 had an additional fortnightly pay-run and employee costs associated with the cost base realignment FY23 Q3 FY24 Q4 Cash Receipts by Quarter (US$m) 2.9 2.8 2.3 2.5 2.6 2.3 2.3 1.8 1.5 Cash holdings of US$4.7m (A$7.3m) Additional US$0.5m (A$0.8m) held in cash-backed security guarantees relating to card issuing activities Q1 4 1. AUD/USD = 0.64 Q2 FY22 FY23 Q3 FY24 Q4 Delivering on Key Milestones Clear and focussed operational roadmap to deliver shareholder value 1 Shared Success & Growth Transition NZ card programs to Change which will drive transactional revenue growth – IN PROGRESS All NZ financial institution clients issued ‘live’ cards and migration of cardholders to the Vertexon platform underway Onboard US clients once platform operational in market – IN PROGRESS Rolling Thunder’s Latin Pay and PlutusM – planned ‘go-live’ in Q2 FY24 Drive new client wins by leveraging Vertexon and PaySim technology and partner ecosystem – ONGOING FY24 FOCUS Q1 New Vetexon Client Wins: HealthNow (NZ), Simply Zibra & Fintech Actuator (Australia) and Onni (US) Q1 New PaySim Client Wins: three new licence sales to global financial institutions 5 Delivering on Key Milestones (cont.) Clear and focussed 2 operational roadmap to Operational Excellence Achieve go-live for NZ EFTPOS acceptance – COMPLETE deliver shareholder value Full market acceptance in NZ for Mastercard and EFTPOS transactions Strengthen core operations and capabilities – compliance, security, fraud & transaction monitoring – COMPLETE Continue working with existing Vertexon on-premise clients to upgrade or migrate to PaaS – ONGOING FY24 FOCUS 3 Market Leading Solutions Mastercard technical certification in Australia – COMPLETE Australian BIN now live – ready to onboard Australian clients Mastercard debit card issuing approval in the US – COMPLETE Launch latest version of Vertexon PaaS platform in US market – COMPLETE Undertake PaySim modernisation program (UX/UI improvements) – ONGOING FY24 FOCUS 6 Outlook Focused execution and u Profitable revenue growth delivery to achieve u Realigned cost base has positioned Change to deliver profitable revenue growth in FY24+ success u Despite initial delays with NZ clients, first live cards have been issued and the migration of cardholders is underway u Cashflow breakeven u Targeting to achieve a monthly cashflow breakeven run-rate exiting FY24 through u Existing client base + contracted PaaS clients + new client / partner wins 4 Key Objectives to Drive Success 7 Shared Success & Growth Operational Excellence Market Leading Solutions Powering our People Appendix Vertexon in the payments process Change’s role in the payments process depends on the region, client type and services provided u Processing: An Issuer (Change’s client) using the Vertexon Platform (technology only) to manage their cards – client is the Issuer and cards can be issued on any card network supported by Vertexon u Processing & Issuing (P&I): A client using the Vertexon Platform (technology) to manage their cards with Change as Issuer (regulatory & licence) – Change is the Issuer and cards are issued on the Mastercard Network 2 3 1 2 3 Transaction submitted – merchant acquirer asks card network to get authorisation from the issuer (i.e. customer’s bank) Change (as Issuer) 1 5 Acquiring Bank (Acquirer) Merchant 5 Issuing Bank (Issuer) Card Networks 5 Processing: Authorisation requested – card network submits transaction to issuer for authorisation P&I: Authorisation requested – card network submits transaction to Change (as Issuer) for authorisation Processing: Authorisation response – using Vertexon Platform issuer authorises the transaction and routes the response back via the card network and acquirer P&I: Authorisation response - using the Vertexon Platform Change (as Issuer) authorises the transaction and routes the response back via the card network and acquirer Processing: Settlement – card network debits the issuer and pays the acquirer who in turn makes payment to the merchant 5 6 6 P&I: Customer pays with a Change issued Mastercard & purchases goods/services from a merchant Payment authenticated – the merchant point-of-sale system captures the customer’s account information & securely sends it to the acquirer (i.e. merchant’s bank) 4 4 Processing: Customer pays with card (all card networks supported) & purchases goods/services from merchant P&I: Settlement – card network (Mastercard) debits the issuer (Change) and pays the acquirer who in turn makes payment to the merchant 9 Cards can be physical and virtual cards (inc. Apple Pay, Google Pay, etc.) available via Vertexon Vertexon product offering Vertexon offering can Processing Processing & Issuing be tailored by client to Overview • Provide core technology to enable card issuing and management including: o Transaction processing o Card management o Fraud monitoring o Digital and virtual cards o BNPL functionality • Platform offers innovative processing capabilities to rival the major banks in a capital efficient manager (Change responsible for PCI DSS compliance, hosting etc) • Client responsible for card issuing – client holds the necessary scheme and regulatory licences • Provide Processing capability + the following key card Issuing capabilities: o Card design and production o Card issuing o AML / CTF o Settlement and reconciliation o KYC & Onboarding • Change responsible for card issuing – Change holds the necessary scheme (Mastercard) and regulatory licences (i.e. AFSL / FSP / Issuing Bank Partner) Cards Supported • Prepaid, Debit and Credit • Prepaid and Debit Target Clients • Banks & financial institutions • Large entities with direct issuing capability • Migration of key existing Vertexon on-premise clients • Mid / Small banks & financial institutions incl. credit unions • Fintechs and corporates • BIN sponsorship (Australia & New Zealand only) Regions • Global - processing does not require scheme or regulatory licences • Australia, New Zealand and the US offer services that best suit client and end customer needs Supported Schemes 10 PaySim: critical payments infrastructure testing tool Software facilitates remote testing without the need for physical devices such as ATMs & POS u Simulates the full transaction lifecycle, enabling banks & fintechs to complete end-to-end testing of their payment platforms, processes & scheme rule compliance u Enables financial institutions to test their payment systems to meet the reliability & performance expectations of their customers terminals Licence Model Growth Strategy Description Revenue type Licences Additional Modules SaaS Model Maintenance New licence sales to New licence sales for c.20% p.a. of licence new clients additional features & module sales One-off upfront One-off upfront Recurring Monthly Subscription Key benefits of SaaS solution for client All in monthly subscription fee u Reduced capex Recurring u Access to new features & updates as they are Target clients Primary sales channels 11 New banks, financial institutions & fintechs Partnerships (e.g. EFTPOS mandate), resellers & direct Existing clients Direct & retargeted marketing - - New banks, financial institutions & fintechs Partnerships (e.g. EFTPOS mandate), resellers & direct released u API & cloud focused solution (improves scalability) Disclaimer Change Financial Limited ASX: CCA Important Notice This presentation has been prepared by Change Financial Limited (Change Financial) in good faith. No express or implied warranty is given as to the accuracy or completeness of the information in this document or the accompanying presentation. All statutory representations and warranties are excluded, and any liability in negligence is excluded, in both cases to the fullest extent permitted by law. No responsibility is assumed for any reliance by any person on this document or the accompanying presentation. Summary information The information contained in this presentation is a summary overview of the current activities of Change Financial. This presentation does not purport to be all inclusive or to contain all the information that a prospective investor may require in evaluating a possible investment. This presentation is for general information purposes and is not intended to be and does not constitute an offer to sell or a solicitation of an offer to buy or sell securities, a prospectus, product disclosure statement, pathfinder document or other disclosure document for the purposes of the Corporations Act and has not been, and is not required to be, lodged with the Australian Securities & Investments Commission. This presentation should be read in conjunction with all other periodic and continuous disclosure announcements lodged by Change Financial with the Australian Securities Exchange, available at www.asx.com.au. Not financial product advice The material contained in this presentation is not, and should not be considered as, financial product or investment advice. This presentation is not an offer, invitation or recommendation to acquire New Shares, and does not take into account the investment objectives, financial situation or particular needs of any particular investor. You must make your own independent assessment and review of Change Financial, and the information contained, or referred to, in this presentation, including its financial condition, assets and liabilities, financial position, profits and losses, prospects and business affairs, including the merits and risks involved. Nothing in this presentation constitutes investment, legal, tax or other advice. You should seek legal, financial, tax and other advice appropriate for your jurisdiction. Past and future performance This presentation contains information as to past performance of Change Financial. Such information is given for illustrative purposes only, and is not – and should not be relied upon as – an indication of future performance of Change Financial. The historical information in this presentation is, or is based upon, information contained in previous announcements made by Change Financial to the market. These announcements are available at www.asx.com.au. This presentation contains certain “forward looking statements”. Forward looking words such as “expect”, “should”, “could”, “may”, “will”, “believe”, “forecast”, “estimate” and other similar expressions are intended to identify forward-looking statements. Such statements are subject to various known and unknown risks, uncertainties and other factors that are in some cases beyond Change Financial’s control. These risks, uncertainties and factors may cause actual results, performance or achievements to differ materially from those expressed or implied by the forward-looking statements and from past results, performance or achievements. Change Financial cannot give any assurance or guarantee that the assumptions upon which management based its forward-looking statements will prove to be correct or exhaustive beyond the date of its making, or that Change Financial’s business and operations will not be affected by other factors not currently foreseeable by management or beyond its control. Such forwardlooking statements only speak as at the date of this announcement and Change Financial assumes no obligation to update such information. 12 Thank you. Get in touch investors@changefinancial.com