Delfin Group

Quarterly Report • May 10, 2024

Financial report

Unaudited results for 3 months Ending 31 March 2024

Key results

Financial report

Business highlights

Business performance

Appendix

Key characteristics of Q1 2024

3M consumer loan issuance growth y-o-y +2%

3M pawn loan issuance growth y-o-y +11%

3M net loan portfolio growth since the start of 2024 +7%

Lending Financial results

3M revenue growth y-o-y +26%

3M EBITDA growth y-o-y +28%

3M profit before tax growth y-o-y +12%

Key results

Total loans issued

Total revenue

Net loan portfolio

Profit before tax

In Q1 2024, the company continued to focus on a lower-risk client base, thus steadily increasing loan issuance while demand for lending products remained stable.

The net loan portfolio increased by 7% in the first three months of 2024, reaching EUR 95.6 million.

Quarterly revenues reached another all-time high, reaching EUR 14.3 million, a 26% growth compared to the previous year.

Profit before tax in Q1 reached EUR 2 million. Over the last twelve months, the profit margin has been mainly affected by increasing interest and credit loss expenses due to a growing loan portfolio.

Key results

Business highlights

Business performance

Appendix

Launch of digital pawnshop in Latvia

This is the first fully remote pawn lending experience in the Baltics. The new service allows people to obtain a secured loan by completing an online application with no additional fees. The contract is signed remotely, and the goods are sent to the branch via parcel machines.

Submission of an application

Submission of an item for pre-evaluation on the Banknote website

Shipping of the item

Confirmation of the preliminary valuation and transfer of the item via parcel machine

Final evaluation

Client receives a final evaluation and reads the terms of the contract

Transfer of the money

Client confirms final evaluation and receives money in bank account

Return of the pledge

Once the loan is repaid the pledge is sent back to the client

Digital VISA payment card in mobile app

Instantly accessible Banknote credit line on Banknote mobile app

Simple integration with Apple Pay and Google Wallet

High security standards with built-in biometric security checks

Expansion of Banknote XL branches

In April 2023, DelfinGroup opened the first circular economy store, Banknote XL, in Riga.

After a successful first year of operations, it is planned to open two more XL concept stores in Daugavpils and Rēzekne during Q2 2024.

The Banknote XL circular economy stores, unique in their concept, provide clients with a wider shopping area compared to average Banknote branches and with a larger variety of goods available for sale.

Clients in Banknote XL stores can sell and purchase pre-owned goods and receive consumer and pawn lending services.

Financial report

Banknote marketing activities

Recently, DelfinGroup has focused on promoting the circular economy and the Banknote brand, thus engaging in various marketing activities. As a result, the company is able to raise brand awareness and acquire new customers.

Focus on social media marketing:

• TikTok
• Instagram
• Facebook
• Partnerships with influencers

In recent months, various on-site activities have been held at company stores, where clients can spin the wheel of fortune, get snacks, and talk to the welcoming staff.

Signet Bank initiates coverage of DelfinGroup stock

The initiated coverage provides insights into DelfinGroup results, market environment and stock valuation.

Investors can access the independent evaluation of DelfinGroup to enhance their understanding of the company's business model and possible growth opportunities.

Read full report here: DelfinGroup Initiation of Coverage Report

Listing market	Nasdaq Riga
Ticker	DGRIR
Industry	Financial services
Website	https://delfingroup.lv/

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Key Numbers (EURm)	2021	2022	2025	2024E	2025 F	2026E	202713	2028E
Revenue	24.7	35.9	50.4	58.8	63.3	679	70.7	72.8
EBITDA	10.2	13.1	18.2	22.1	23.4	25.0	25.9	26.5
Operating Profit	5.2	7.3	8.3	11.7	12.7	14.5	15.1	15.7
labs	0.09	0.13	0.15	0.2	0.2	0.3	0.3	0.3
Total Net Loans	43.0	67.4	89.0	98.0	107.8	117.8	124.6	130.5
Net Debt	30.3	54.7	74.2	78.3	83.6	88.1	89.4	89.2
Total Equity	17.4	18.0	21.3	26.2	31.4	37.3	43.4	50.2
Dividends	3.7	5.4	3.5	4.5	5.1	5.7	6.0	6.2
Dividend Yield (%)	5.9	8.1	5.9	7 9	8.9	10.1	10.5	10.9
ROE (%)	29.8	33.5	33.6	39.6	35.4	34.0	30.0	27.8
EV/EBITDA (x)	9.4	9.7	7.3	5.9	5.6	5.3	5.1	4.9
P/E (x)	15.8	11.3	8.9	6.1	5.6	4.9	4.7	4.4
P/Book (x)	3.6	3.7	2.8	2.2	1.8	1.5	1.3	1.1

Corporate social responsibility

DelfinGroup, in cooperation with the Children's Hospital Foundation, helped the Children's Clinical University Hospital (BKUS) to provide a new anaesthetic device that will allow young patients to prepare for surgery more calmly. The company has also supported the training of pediatric cardiologists and the purchase of 3D software. The total donation amount to the hospital is almost € 66 000.

As part of Financial Literacy Week, in partnership with Bank of Latvia, the DelfinGroup team educated seniors and taught them to be critical if someone wants to scam personal data and finances. DelfinGroup experts informed seniors about different types of scams and methods and role-played real-life situations where seniors gained practical skills in recognising scams and protecting their data.

Key results

Business highlights

Business performance

Appendix

Consumer loans

Financial report

Consumer net loan portfolio

Average loan*

Non-performing loan ratio Weighted average term of loans

The consumer lending portfolio continued increasing, as did the average loan amount and term. At the end of Q1 2024, the net loan portfolio reached 87.3 million euros.

Due to stable demand and increasing ticket and term size, the consumer loan portfolio grew by 29% over a 12-month period.

NPL ratio continues to be on a solid level due to constant improvements in client scoring, collection and loan cession.

issued

*Average consumer loan balance for one client at the end of period. **Increase of Q3 2022 NPL ratio due to reversal of a one-off cession deal.

Age analysis of consumer lending portfolio*

Consumer loan portfolio quality remains stable with current loans of more than 87%.

Company continue to focus on lower-risk lending clients to reduce portfolio expenses.

Improved underwriting processes and risk policy.

Pawn loans

Financial report

Pawn net loan portfolio*

Average pawn loan amount

Repaid pawn loans**

The pawn lending segment continues to show stable results. The pawn loan portfolio has increased by 19% over the last twelve months and by 8% in the last three months.

Redemption rate of pledged items remain stable, above 70% over the recent years.

* Active portfolio excluding portfolio part where collateral is available for sale ** Pawn loans repaid or extended within 2 months since issuance

Financial report

Retail of pre-owned goods*

Sale of pre-owned goods**

Gross margin***

Stable growth, taking into consideration quieter first months after Christmas and New Year celebrations.

Retail sales of pre-owned goods in Q1 2024 increased by 9% compared to last year's respective period, reaching EUR 3.6 million.

Gross margin remains stable over the last years around 40%.

*Excluding wholesale of precious metals (scrap). **Including directly purchased goods from clients and unredeemed items from pawnshop. ***2023 gross margin figures restated as per audited annual statements of 2023.

Sales split by product category

Sales split by product category (3M 2024)

Clients have access to a wide range of pre-owned goods at Banknote online store and branch network. The most demanded product categories are electronics, such as smartphones, computers, TVs and jewelry.

Jewelry is polished and sold with its original appearance but for a more affordable price.

Financial report

Diversification

Although the most significant part of the revenue stream comes from the consumer loan segment, we see great potential in gradually growing other DelfinGroup segments.

Revenue by business segments 3M 2024

Distribution of active clients by age on 31 March 2024***

DelfinGroup products cover all age groups thanks to customised financial solutions.

*including sold pawn pledges and pledge storage commissions **excluding wholesale of precious metals (scrap) and pawn pledges ***Active consumer lending segment clients

Consolidated income statement Financial report

INCOME STATEMENT, EUR'000	2024 Q1	2023 Q1	Change %
Total revenue	14,260	11,333	+26%
Cost of sales	-1,505	-1,372	+10%
Credit loss expense	-3,421	-2,466	+39%*
Interest expenses and similar expenses	-2,561	-1,792	+43%**
Gross profit	6,773	5,702	+19%
Selling expenses	-2,588	-2,062	+26%
Administrative expenses	-2,068	-1,766	+17%
Other operating income	25	15	+66%
Other operating expenses	-103	-64	+60%
Profit before tax	2,039	1,825	+12%
Income tax expense	-420	-212	+98%***
Net profit	1,619	1,613	+0%
EBITDA	5,028	3,923	+28%

* Due to the increasing loan portfolio, credit loss expenses have grown alongside it.

** Increase of interest expenses due to increasing interest rates in capital markets and growing loan portfolio which is partially financed with debt.

*** Increase of tax due to approved changes in corporate income tax law at the end of 2023. As a result, tax is calculated from full profit amount whereas in Q1 2023 tax was calculated only from the approved dividends.

Consolidated balance sheet Financial report

BALANCE SHEET, EUR'000	31.03.2024	31.12.2023	Change %
Fixed and intangible assets	2,814	2,680	+5%
Right-of-use assets	2,701	2,887	-6%
Net loan portfolio	95,554	89,026	+7%
Inventory and scrap	3,558	3,391	+5%
Other assets	,893	1,149	-22%
Cash	2,995	5,929	-49%
TOTAL ASSETS	108,515	105,061	+3%
EQUITY	22,332	21,322	+5%
Share capital and reserves	4,538	4,538	+0%
Share premium	6,891	6,891	+0%
Other capital reserves	210	170	+24%
Retained earnings	10,694	9,724	+10%
LIABILITIES	86,183	82,613	+3%
Interest-bearing debt	78,152	76,971	+2%
Trade payables and other liabilities	5,045	2,474	+40%
Lease liabilities for right-of-use assets	2,986	3,168	-6%
TOTAL EQUITY AND LIABILITIES	108,515	105,061	+3%

Financial ratios

EBITDA margin*

Decrease of ROE starting from Q4 2023 due to changes in corporate income tax legislation in Latvia. All tax amount was attributed to Q4 2023.

Interest coverage ratio*

Cost-to-income ratio*

37.6% 37.6% 36.6% 36.6% 36.2% 35.9% 36.1% 36.2%

Equity ratio

Adjusted equity ratio including subordinated bonds

Cost of interest-bearing liabilities

Financial report

Capital structure

Capital structure 31.03.2024

DelfinGroup on Mintos

• Since 2016
• 80+ thousand active investors
• Investors from 100+ countries

Bond financing track record

With the maturity of the EUR 10 million bond (LV0000850055) approaching, DelfinGroup is working on a refinancing strategy and intends to initiate a new bond offering during Q3 2024. Also, in order to strengthen the capital structure, company might issue new subordinated bond this year, subject to market conditions.

Dividends

Dividend yield of 6.0%*

Unique dividend distribution proposal in Baltics

Quarterly dividends

• At least 4 dividend payments per year
• Up to 50% from previous Q profit

Dividend period	Dividend payment date	EUR/share	EUR total	Payout ratio***
Q1 2024	Upon shareholders approval**	0.0178**	807 720**	49.89%**
Q4 2023	16.04.2024	0.0143	648 898	49.99%
Q3 2023	28.12.2023	0.0214	969 839	49.80%
Q2 2023	29.09.2023	0.0195	883 732	49.95%
Q1 2023	30.06.2023	0.0177	802 157	49.73%

Dividend period	Dividend payment date	EUR/share EUR total
Annual	2024	Proposed annual dividend for 2023 will be disclosed until 16.05.2024.
Annual	17.05.2022 15.07.2022	0.0552	2 501 642

*Based on share price of EUR 1.222 on 3 May 2024 and including management's proposed dividends from Q1 2024 net profit. **Proposed dividends, distribution is subject to Shareholders meeting decision. ***Dividend amount paid from the net profit of the respective quarter.

Share performance

Share price and turnover, €

31.03.2024	DelfinGroup	Financial industry*
Capitalization m €	56.0	-
EPS TTM €	0.147	-
P/E	8.40	6.32
ROE	29.7%	21.1%

Share dynamics compared to indexes

Decrease of the share price in Q2 2023 due to the largest shareholder's public share offering. The shares were offered at a discount from the previous market price of EUR 1.35 per share.

DelfinGroup investors have received additionally EUR 0.2224 per share in dividends since IPO.

*Average ratio for financial services companies listed on Nasdaq Baltic Main list on 31.03.2024. as per last published financial data.

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www.delfingroup.lv

Key results

Business highlights

Business performance

Appendix

Consolidated income statement Financial report

BALANCE SHEET, EUR'000	2021				2022					2024
	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1*	Q2*	Q3*	Q4	Q1
Total revenue	5,890	5,765	6,335	7,199	7,586	8,095	9,587	10,507	11,333	11,970	13,208	13,912	14,260
Cost of sales	-620	-862	-721	-955	-780	-1,080	-1,179	-1,164	-1,372	-1,096	-1,641	-1,977	-1,505
Credit loss expense	-735	-595	-827	-658	-1,410	-1,082	-1,628	-2,041	-2,466	-2,769	-2,843	-2,608	-3,421
Interest expenses and similar expenses	-1,011	-852	-918	-1,046	-689	-958	-1,390	-1,632	-1,792	-2,052	-2,285	-2,450	-2,561
Gross profit	3,524	3,457	3,868	4,541	4,707	4,975	5,390	5,670	5,702	6,052	6,439	6,878	6,773
Selling expenses	-1,326	-1,442	-1,524	-1,832	-1,757	-1,686	-1,939	-2,118	-2,062	-2,054	-2,244	-2,388	-2,588
Administrative expenses	-945	-1,054	-1,019	-1,200	-1,280	-1,346	-1,477	-1,671	-1,766	-1,957	-1,942	-2,063	-2,068
Other operating income	16	11	29	29	24	22	21	37	15	12	11	37	25
Other operating expenses	-142	154	-127	-20	-115	-123	-60	-16	-64	82	-92	-145	-103
Profit before tax	1,128	1,125	1,227	1,517	1,579	1,842	1,935	1,901	1,825	1,971	2,174	2,319	2,039
Income tax expense	-324	-299	-201	-155	-188	-742	-154	-212	-212	-202	-226	-1,021	-420
Net profit	804	826	1,026	1,362	1,391	1,099	1,782	1,689	1,613	1,769	1,948	1,298	1,619
EBITDA	2,399	2,241	2,400	2,922	2,559	3,091	3,628	3,833	3,923	4,345	4,786	5,137	5,028

*Data for previous periods of 2023 restated as per corrections made in the audited annual statements for 2023

Consolidated balance sheet Financial report

BALANCE SHEET, EUR'000	2021*				2022*					2024
	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1
Fixed and intangible assets	864	818	789	1,201	1,301	1,351	1,387	1,470	1,595	1,823	2,150	2,680	2,814
Right-of-use assets	3,281	3,145	3,013	2,973	2,915	2,773	2,783	2,636	2,698	2,712	2,655	2,887	2,701
Loans to related parties	445	-	-	-	-	-	-	-	-	-	-	-	-
Net loan portfolio	32,937	33,859	38,812	43,755	47,967	54,397	60,501	67,518	73,453	78,099	84,552	89,026	95,554
Inventory and scrap	976	938	1,167	1,255	1,240	1,566	1,844	2,290	3,909	4,662	3,571	3,391	3,558
Other assets	495	331	746	520	541	364	1,333	875	1,042	1,105	1,081	1,149	,893
Cash	1,907	594	2,541	2,460	1,704	2,314	4,010	2,369	2,398	3,013	3,222	5,929	2,995
TOTAL ASSETS	40,905	39,688	47,069	52,163	55,667	62,765	71,858	77,158	85,095	91,415	97,232	105,061	108,515
EQUITY	8,639	8,108	8,696	17,476	17,989	15,885	17,059	18,106	18,915	19,917	21,016	21,322	22,332
Share capital and reserves	4,000	4,000	4,000	4,532	4,532	4,532	4,532	4,532	4,532	4,532	4,532	4,538	4,538
Share premium	-	-	-	6,891	6,891	6,891	6,891	6,981	6,891	6,891	6,891	6,891	6,891
Other capital reserves	-	-	-	-	-	-	-	93	128	163	198	170	210
Retained earnings	4,639	4,108	4,696	6,053	6,566	4,462	5,636	6,590	7,364	8,331	9,395	9,724	10,694
LIABILITIES	32,266	31,580	38,373	34,687	37,678	46,881	54,799	59,052	66,180	71,497	76,216	82,613	86,183
Interest-bearing debt	26,894	26,360	33,290	29,412	31,644	40,477	49,704	53,974	59,840	65,872	71,336	76,971	78,152
Trade payables and other liabilities	1,798	1,768	1,751	1,970	2,788	3,307	1,999	2,159	3,365	2,629	1,934	2,474	5,045
Lease liabilities for right-of use assets	3,574	3,452	3,332	3,305	3,246	3,096	3,097	2,918	2,974	2,997	2,946	3,168	2,986
TOTAL EQUITY AND LIABILITIES	40,905	39,688	47,069	52,163	55,667	62,765	71,858	77,158	85,095	91,415	97,232	105,061	108,515

Sustainability DelfinGroup ESG report for 2022 available here.

Promotion of circular economy

• Prolonged life-cycle of consumer goods.
• More than 160k pre-owned items sold yearly.

Inclusive society

• The most geographically available financial institution in Latvia.
• Serving the underserved customer segments.
• Charitable activities for children, seniors and people living in regions.
• Inclusive workplace.

Sustainable corporate governance

• 3 independent members of the Supervisory Board.
• Independent internal audit unit.

Relevant United Nations Sustainable Development Goals:

Historic timeline

Highly appreciated company

CV-Online Latvia

Top employer

Latvian Traders Association

Best Trader of Latvia

Institute for Corporate Sustainability and Responsibility

Gold category in Sustainability Index 2023

Latvian Corporate Governance Advisory Board

Latvian Corporate Governance Award 2021

The Society Integration Foundation

Family-Friendly Workplace

Bureau Veritas

ISO 9001 ISO 50001 certification

Definitions for Alternative Performance Measures

EBITDA

Earnings before interest, taxes, depreciation and amortization = (Profit before tax) + (Interest expenses and similar expenses) + (Rights of used assets depreciation) + (Depreciation of fixed assets) + (Amortization). Used as a measure of corporate performance as it shows earnings before the influence of accounting and financial deductions.

EBITDA Margin

Operating profitability as a percentage of its total revenue, calculated as EBITDA / (Interest income + Gross profit from sale of foreclosed items). Used as a profitability measure that is factoring out the effects of decisions related to financing and accounting.

Interest Coverage Ratio

Profitability and debt ratio, calculated as EBITDA / Interest expenses and similar expenses. Used to determine how easily a company can pay interest on its outstanding debt.

Cost-to-incomeRatio

((Sales expenses) + (Administrative expenses) + (Other expenses (excluding Loss from cession (debt sales) of non-performing loans)) ) / ((Net sales) – (Cost of sales) + (Interest income and similar income) + (Other operating income) – (Interest expenses and similar expenses))

Return on Equity (ROE)

Net profit for the period/months in the period*12 / ( ((Equity as at start of the period) + (Equity as at period end)) / 2)

Total revenue

Net sales + Interest income and similar income. Represents income generated by Company's business segments.

Interest-Bearing Debt

Liabilities that require the payment of interest, including bonds, other loans, leasing liabilities etc. Interest-Bearing Debt has a priority over other debts.

Cost of interest-bearing liabilities

Weighted average nominal interest rate calculated by amount of interest bearing liabilities as at period end

Equity ratio

Equity/Total assets

Non-performing loan ratio

90+ days overdue portfolio share in consumer loan portfolio

Dividend yield

Dividends per share paid over the last 12 months / price per share. If additional dividend payment is proposed by the company's Management Board but not yet paid, it is included in the calculation, and the last 12 months are calculated from the proposed dividend payment date.

Disclaimer

This presentation is of selective nature and is made to provide an overview of the Company's (AS DelfinGroup and its subsidiaries) business.

Unless stated otherwise, this presentation shows information from consolidated perspective.

Facts and information used in this presentation might be subject to revision in the future. Any forward-looking information may be subject to change as well.

This presentation is not a legally binding document, and the Company has no liability for any direct or indirect loss from the use of this presentation.

This presentation does not intend to contain all the information that investors may require in evaluating the Company. Investors should read publicly available information regarding the Company to make an investment decision.

AS DelfinGroup

Skanstes street 50A Riga, Latvia, LV-1013

IR@delfingroup.lv (+371) 26 18 99 88 www.delfingroup.lv