Delfin Group

Earnings Release • Mar 1, 2023

Financial report

Unaudited results for 12 months Ending 31 December 2022

Company highlights

Business performance

Q&A session

Key characteristics

income growth +42%

Profit before taxes growth +40%

net loan portfolio growth +54%

years profitable operations 12+1

active clients 50k+

branches 90+

employees 300+

items for sale in online store 42k+

of items purchased directly from clients and B2B partners 50%

dividend payments in 2022 6

Key results

Total loans issued

Total revenue, quarterly cumulative

Net loan portfolio

Profit before tax, quarterly cumulative

Strong new loan issuance in 2022 secured a stable loan portfolio increase, thus reaching an all-time high of EUR 67.4 million, a 54% increase.

The company had a 42% income increase in 2022, facilitated by the growth of all major business segments.

Profit before tax in Q4 reached EUR 1.9 million, but in 12-month period EUR 7.3 million, an increase of 40% year on year.

Periods of COVID-19 restrictions in Latvia

RENEWAL OF ONLINE STORE

One of the largest circular economy store in the Baltics was renewed. It has more than 42 000 products available, including jewelry, smartphones, power tools, and many other product categories.

DIGITALISATION OF SERVICES

Investments to improve financial services such as open banking solutions and introduction of NEOpay secure payment initiation solution to simplify transaction process for clients and reduce the costs of payment provision.

INCREASE OF STOCK FREE FLOAT

The free float of DelfinGroup stock exceeded 15% after the public share offerings of the largest company's shareholders. In total more than 900 investors participated in the offer for 1.07 million euros.

DIVIDEND DISTRIBUTION

During the 2022 shareholders of the company received 6 dividend payments in the amount of EUR 5.4 million, namely 0.1197 EUR/share, reaching dividend yield of 8.1%*.

The Management Board has proposed dividend distribution in the amount of 0.0185 EUR/share from Q4 2022 net profit.

*TTM dividends based on share price of EUR 1.482 on 30 December 2022 and including management's proposed dividends from Q4 2022 net profit.

ANALYST COVERAGE

Share price EUR 1.506**

€

*base case scenario **DelfinGroup closing share price on 21 February 2023

STOCK OPTION PROGRAM

DelfinGroup has launched the staff option program. A total of 450 thousand shares will be issued as part of the program to more than 300 DelfinGroup employees as a part of the long-term motivation program.

SOCIAL RESPONSIBILITY

A total of EUR 289 000 were donated in 2022 from which the main part was transferred to charity foundations that support residents and defenders of Ukraine. Also, in focus was support of elderly people and children.

In process

Largest pawnshop Baltics

It is planned to expand the Banknote branch network with the largest pawnshop in the Baltics. The branch will be more than 400 sq.m. large and will be open in Q2 2023.

Company highlights

Business performance

Q&A session

Financial report

Consumer loans

Weighted average term of loans

Consumer net loan portfolio

Average loan*

Non-performing loan ratio**

Eminent growth of consumer lending segment. The net loan portfolio continued growth during Q4 2022 reaching 61.2 million euros.

54% increase of consumer lending portfolio in 2022.

Data based underwriting processes ensure solid NPL ratio.

issued

Periods of COVID-19 restrictions in Latvia

*Average consumer loan balance for one client at the end of period. **Lower non-performing loan ratio in Q3 due to larger one-off cession (debt sales) deal.

Age analysis of consumer lending portfolio*

Loan portfolio quality remains solid with slight improvements in 2022.

Improved underwriting processes and risk policy.

*Gross consumer lending portfolio

Pawn loans

Pawn net loan portfolio*

Average pawn loan amount

Redemption rate**

The pawn loan segment continues to show significant improvements after lifting Covid-19 restrictions in Latvia starting from Q2 2022. As a result, pawn loan issuance amounts have already significantly exceeded pre-covid 19 levels.

Periods of COVID-19 restrictions in Latvia

* Active portfolio excluding portfolio part where collateral is available for sale ** Items redeemed or extended within 2 months since issuance

Retail of pre-owned goods*

Sale of pre-owned goods**

Gross margin

Record-high sales amount in 2022

Strong growth during H2 2022 since renewal of Banknote online shop in August.

Gross margin remain stable throughout the last years

Periods of COVID-19 restrictions in Latvia

Sales split by product category

Sales split by product category (12M 2022)

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.

Benefits of buying pre-owned goods

An opportunity to buy verified goods that have been checked by professionals.

If needed, clients can return items bought online in 14 days, and can get guarantee for up to 24 months.

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

Consolidated income statement

INCOME STATEMENT, EUR'000	2022 Q4	2021 Q4	Change %	2022 12M	2021 12M	Change %
Total revenue*	10,214	6,891	+48%	35,064	24,683	+42%
Cost of sales*	-1,003	-858	+17%	-3,659	-2,863	+28%
Credit loss expense**	-1,919	-240	+698%***	-5,974	-2,397	+149%***
Interest expenses and similar expenses	-1,632	-1,046	+56%	-4,669	-3,827	+22%
Gross profit	5,660	4,747	+19%	20,762	15,596	+33%
Selling expenses	-2,054	-1,832	+12%	-7,436	-6,125	+21%
Administrative expenses	-1,636	-1,200	+36%	-5,739	-4,213	+36%
Other operating income	37	29	+27%	104	85	+22%
Other operating expenses**	-114	-21	+446%****	-413	-140	+194%****
Profit before tax	1,892	1,723	+10%	7,278	5,203	+40%
Income tax expense	-212	-155	+37%	-1,296	-979	+32%
Net profit	1,679	1,568	+7%	5,982	4,224	+42%
EBITDA	3,823	3,128	+22%	13,131	10,169	+29%

* Data reflected according to restated comparatives in the latest financial statements.

** For the purpose of comparison, losses from cession of non-performing loans (debt sales) are reclassified from other operating expenses to credit loss expense.

*** Due to the fast-growing loan portfolio, credit loss expenses have grown alongside it.

**** Larger increase of other operating expenses is a result of donations related to war in Ukraine.

Consolidated balance sheet Financial report

BALANCE SHEET, EUR'000	31.12.2022	31.12.2021	Change %
Fixed and intangible assets	1,470	1,201	+22%
Right-of-use assets	2,636	2,973	-11%
Net loan portfolio*	67,439	43,657	+54%
Inventory and scrap*	2,290	1,255	+82%
Other assets	1,070	520	+106%**
Cash	2,369	2,460	-4%
TOTAL ASSETS	77,274	52,065	+48%
EQUITY	18,027	17,377	+4%
Share capital and reserves	4,532	4,532	+0%
Share premium	6,984	6,891	+1%
Retained earnings	6,511	5,954	+9%
LIABILITIES	59,247	34,687	+71%
Interest-bearing debt	54,169	29,412	+84%
Trade payables and other liabilities	2,159	1,970	+10%
Lease liabilities for right-of-use assets	2,918	3,305	-12%
TOTAL EQUITY AND LIABILITIES	77,274	52,065	+48%

* Data reflected according to restated comparatives in the latest financial statements.

** Increase of "Other assets" based on costs related to portfolio growth that are recognized in P&L over underlying asset maturity.

Financial ratios

EBITDA margin*

56.1% 56.4% 56.5% 58.0% 56.9% 54.5% 53.0% 50.6%

2021

Q2 Q3 Q4

Cost-to-income ratio*

Changes in equity ratio was mainly impacted by faster growth of loan portfolio and larger annual dividend payment in Q2.

Cost of interest-bearing liabilities

Higher financing costs related to overall interest rate increase in capital markets and on Mintos P2P platform.

Interest coverage ratio*

35.5% 37.6%

ROE**

Q1 2021

Periods of COVID **Annualized. -19 restrictions in Latvia

Q1 Q2 Q3 Q4

2022

*Last 12 months figures.

45.2% 46.7%

32.0% 29.2%

38.8% 37.9%

2022

Capital structure

Capital structure 31.12.2022

Bond financing track record

DelfinGroup on Mintos

• Since 2016
• 90 000 active investors
• Investors from 113 countries

* Latest bond emission registered in the amount of EUR 10 million and 2Y maturity. The bond issue is a private placement, and the subscription period is open. As of 31 December 2022, EUR 4.9 million has been subscribed.

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 12M 2022

Distribution of active clients by age on 31 December 2022*

3% 16% 21% 18% 16% 15% 11% 18-19 20-29 30-39 40-49 50-59 60-69 70+

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

*Active consumer lending segment clients

Financial targets

Indicator	2022 results	2023 target	2024 target	2025 target
Net loan portfolio, mEUR	67.4	77	90	100
EBITDA, mEUR	13.1	17	23	26
Profit before tax, mEUR	7.3	8	12	15
ROE	33.8%	>30%	>30%	>30%
Cost-to-income ratio	50.6%	<45%	<45%	<45%
Equity ratio	23.3%	>20%	>20%	>20%
Dividend payout ratio	51%	>50%	>50%	>50%

Dividends

Unique dividend distribution proposal in Baltics

Up to 6 dividend payments per year:

• 4 quarterly
• 2 annual

Quarterly dividends

• Up to 50% from previous Q profit Annual dividends
• In amount to ensure optimal capital structure

Dividend yield of 8.1%*

Dividend period	Dividend payment date	EUR/share	EUR total	Payout ratio***
Q4 2022	April 2023**	0.0185	839 560	49.93%
Q3 2022	27.12.2022	0.0184	833 881	49.90%
Q2 2022	30.09.2022	0.0134	607 283	49.87%
Q1 2022	29.06.2022	0.0155	702 454	49.69%
Q4 2021	12.04.2022	0.0172	779 497	49.72%
Q3 2021	29.12.2021	0.0113	512 111	49.91%
Dividend period	Dividend payment date	EUR/share	EUR total
Annual 2021	17.05.2022 15.07.2022	0.0552	2 501 642

*Based on share price of EUR 1.482 on 30 December 2022 and including management's proposed dividends from Q4 2022 net profit. **Proposed dividends from the Management Board of DelfinGroup. Payment is a subject to Shareholders meeting decision. ***Dividend amount paid from the net profit of the respective quarter.

Share performance

Share price, €

Share dynamics compared to indexes

31.12.2022	DelfinGroup	Financial industry*
Capitalization m €	67.2	-
EPS TTM €	0.132	-
P/E	11.2	12.2
ROE	33.8%	17.0%

DGR1R – DelfinGroup OMX_Baltic_Benchmark_GI OMX Riga_GI

*Average ratio for financial services companies listed on Nasdaq Baltic Main list on 31.12.2022.

Q&A session

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