COMPUTERSHARE LIMITED. — Earnings Release 2020

Apr 6, 2020

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MARKET ANNOUNCEMENT

Computershare Limited ABN 71 005 485 825 Yarra Falls, 452 Johnston Street Abbotsford Victoria 3067 Australia PO Box 103 Abbotsford Victoria 3067 Australia Telephone 61 3 9415 5000 Facsimile 61 3 9473 2500 www.computershare.com

Date: 7[th] April 2020 To: Australian Securities Exchange Subject: FY20 Earnings Guidance Revised and Investor Call

FY20 Earnings Guidance Revised

Given recent changes to the external environment and the effect on Computershare’s margin income and transactional revenues, FY20 Management EPS is now expected to be down around 20% compared to FY19, on a constant currency basis.

Previously, on March 11[th] , Computershare expected Management EPS for FY20 to be down around 15%.

Stuart Irving, CEO said, “Over the past few weeks our focus has been on the safety of our employees. We have been implementing a number of measures to reduce operating risks and ensure the delivery of critical projects for our clients globally. The latest interest rate cuts were earlier than we anticipated. Coupled with reduced transactional revenues and foreclosure suspensions, earnings will be impacted.

Whilst some of the transactional volumes are more challenging to predict in this environment, there are a number of opportunities in other parts of the group, and our strategies to build strong businesses with solid long-term growth prospects are intact. Our goal is to update and assist investors through this period and continue to provide guidance.”

Business Performance Update & Investor Call

Stuart Irving, and Nick Oldfield, CFO, invite investors to join them a conference call and Q&A session today at 9.30am AEDT, 7[th] April where they will provide an update on the main business lines.

Call details are as follows:

Callers within Australia: 1800 896 323 London: +44 2033 760 176 New York: +1 855 731 0983 Participant passcode: 92895 42653

A recording of the call will be available on the Investor Relations page of our website www.computershare.com/corporate.

This announcement is authorised by the Board.

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This guidance update is provided subject to the important notice regarding forward looking statements that is set out on page 15 of the presentation that accompanies this announcement.

For further information contact:

Michael Brown Investor Relations Ph +61 (0) 400 24 8080 michael.brown@computershare.com.au

Computershare (ASX:CPU) is a global market leader in transfer agency and share registration, employee equity plans, proxy solicitation and stakeholder communications. We also specialise in corporate trust, mortgage, bankruptcy, class action, utility and tax voucher administration, and a range of other diversified financial and governance services.

Founded in 1978, Computershare is renowned for its expertise in high integrity data management, high volume transaction processing and reconciliations, payments and stakeholder engagement. Many of the world’s leading organisations use us to streamline and maximise the value of relationships with their investors, employees, creditors and customers.

Computershare is represented in all major financial markets and has over 12,000 employees worldwide.

For more information, visit www.computershare.com

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MARKET UPDATE AND
BUSINESS
PERFORMANCE REVIEW
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7 April 2020

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Providing guidance in volatile macro conditions

Computershare is continuing to provide guidance to assist investors through this period of heightened market uncertainty

• › Computershare revised FY20 Management EPS guidance on March 11th

• › Since then the external macro environment has continued to regress

• › While around 80% of our revenues are recurring, transactional revenues have become more challenging to predict

• › Rather than withdraw guidance, our aim is to assist investors through this period. We are providing a contemporary and transparent view of our revised earnings expectations and the performance of our major business lines

• › We now expect FY20 Management EPS to be down around 20%

• › Recognising the primacy of shareholders, we will continue to provide regular updates and as always, “we will tell it how we see it”

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Operations overview

Computershare is working closely with clients to maintain critical services

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Ensuring the health and
Dedicated COVID-19 Computershare deemed a
safety of our employees
response team in place since critical service provider where
remains Computershare’s key
mid-February relevant
focus
Well developed plans for Systems remain Client service
Over 80% of our
managing through fully operational delivered via
global workforce
operationally challenging globally to support existing online and
working from home
periods have been enacted our clients remote channels
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Guidance revised, margin income updated Resilient operating revenues, lower rates and transactional revenues affect earnings

FY20 earnings guidance revised

• › FY20 Management EPS is now expected to be down around 20% (previous guidance down around 15%)

• › Following our Announcement on March 11th

• US Federal Reserve, Bank of England and Bank of Canada have undertaken further rate cuts earlier than expected

• US Government has placed a moratorium on mortgage foreclosures

• Transactional revenue in Employee Share Plans in March is being impacted by equity market volatility with some exercises being deferred

• › On the positive side, recurring operating revenues are resilient, we are seeing a sharp increase in Bankruptcy Administration pre filing work and equity capital raisings activity ramp up, which we expect to continue

Margin income update

• › FY20 margin income is now expected to be around $180M (previously around $185m)

• › FY21 margin income is now expected to be around $100M (previously around $115m)

• › We now assume average client balances will be around $13-14bn for the fourth quarter of this year, and the average in FY21 to be around $14-15bn

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Margin income FY21 Margin income revenue expected to be around $100m

25.0

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125.2 120.0
121.2
116.0
20.0 21.0
100.0
89.4 99.9
86.4
c.100
79.0 17.3 64
15.0 16.3 16.6 16.8 16.6 16.1 16.8 80.0
15.1 15.2 15.0 79.6
14 - 15
74.3 13 - 14
69.6
66.6 60.0
10.0
40.0
5.0
20.0
0.0 0.0
1H15 2H15 1H16 2H16 1H17 2H17 1H18 2H18 1H19 2H19 1H20 2H20F FY21
Outlook
Average balances Margin Income (USD m)
Balances billion
Average income million
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Issuer Services

Register Maintenance has recurring fixed fee revenues

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Assessed
LTM Register Maintenance fee income by type
impact
60%-
70%
Transactional fees
› Annual recurring fixed fees paid by 50 Issuer paid fees
issuers remain stable
46 46
44
› Critical nature of service drives 43
41 41 42
resiliency 38 39 37 38 38 39
› US shareholder paid activity -15%
(last two weeks of March)
› DRIP² take-up unchanged to date
› Dividend suspension currently
immaterial <1%
30%- › AGM’s deferred or transitioned to
40% virtual: $2- $3M revenue postponed
Notes: [1] Shareholder driven event based transactional fees paid by shareholders and / or third parties ² Dividend
Reinvestment Plan [3] March Estimate CC FY19 average rates
Issuer paid fixed fee
Register Maintenance
Event based fees¹
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Issuer Services

Corporate Actions: subdued M&A activity. Upside from potential capital raisings

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Assessed
Corporate Actions fee revenue composition: GFC to today
impact
› Capital raisings expected to increase
131
› Early market signs positive Capital raising and restructuring fee revenue
Other Corporate Actions fee revenue
› Currently subdued M&A environment
95 93
88 87 88
84 13
13 80
› Large mutual fund proxy solicitation 76 5.9x 77 75 10 11 8 69 7 71
underway 14 13 11 5
6
› Positive early signs from Corporate 41
Creations acquisition [1] 82 78 80 76 73 81 4
62 64 63 63 66
-
Revenues +10% for March vs. pcp
47
- 37
Annual filings +20% for March vs.
pcp
Notes: [[1]] Acquisition completed February 2020 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 H1
2020
At actual FX rates
Capital Markets
Actions
Corporate
M&A
Mgmt
Event
Stakeholder R’ship based fees
Services
Registered Agent fees
Governance
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Notes:[[1]] Acquisition completed February 2020

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50% 50%

(30%) vs. Mar 19

Employee Share Plans Stable recurring fee revenues. Market volatility impacts transactional volumes

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Assessed
LTM Global Plans Fee Income
impact
33
31
Transactional fees
29
Issuer paid fees
26 26
23 23 23 22 22 22 22
21
20
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• › Contracted issuer paid fees for management of share plans remain strong

• › Growing number of issuers looking to issue equity or options to employees in current environment

• › Employee transaction volumes impacted by equity market volatility

• › Vast majority of AuA¹ is long shares or time based restricted stock which remains in AuA through cycle. Revenue deferred, not lost

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• › Structural trend in “Equitisation” of remuneration to strengthen

• › Low equity prices typically leads to greater volume of units issued

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CC FY19 average rates

Notes: ¹ Assets under Administration

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US Mortgage Services Core servicing activities remain resilient. Restrictions on foreclosure.

Assessed Refinance activity slowing impact

Strip sales market open

Assessed impact

• › Refinance activity slowed over second half of March and should slow further as shelter in place widens

• › Possibility for refinance activity to increase in FY21. Fulfilment volumes expected to strengthen further

• › Around half of book is non-performing and difficult to refinance

• › Mortgage interest rates volatile in current environment. 30 years’ rates range from 3.25% to 3.87% across originators

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30yr fixed rate mortgage rate vs. US Treasury 10yr rate (last 3 months)
2.5% US 30yr fixed mortgage rate (%) 4.0%
3.5%
1.5% 3.0%
2.5%
US Treasury 10yr rate (%)
0.5% 2.0%
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• › Strip sales allow us to recycle capital and sell part of the revenue on the MSR

• › Investor appetite for excess strip sales remains and expect to complete a transaction in Q4FY20

• › Reduced MSR spending and taking advantage of lower prices in the current market

Assessed Mortgage holidays, revenue unaffected impact

• › US Government instituted payment holidays for mortgagees and imposed restrictions on foreclosures

• › Payment holidays result in payments rolling up to principal, to be repaid at a later date

• › No impact to our performing servicing revenues; however, foreclosure stops will temporarily reduce revenues from default servicing

Source: Federal Reserve Economic Data, United States Treasury Constant Maturity 10 year rate

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US Mortgage Services

Computershare is well positioned in the event of an increase in delinquencies

US delinquencies

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Assessed
impact
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• › A rise in delinquencies creates a need for increased advance funding requirements and special servicing revenue opportunities

• › Our advance funding risk is focused on our performing Freddie Mac and Fannie Mae (“FMFM”) MSR portfolio. Where borrowers default we are required to provide advances to bondholders to cover up to 120 days of payments

• During GFC FMFM delinquencies peaked at 4.2% and 5.6%

• Total US mortgage delinquencies peaked at 9.7%

• A 5% rise in FMFM delinquencies requires c.$28M in advances[1]

• › We are establishing a new $100m advance facility to provide additional liquidity

• › Post 120 days delinquent, the servicer will seek to modify loan creating new incentive fee opportunities.

• › We are receiving enquiries around new non-performing servicing opportunities. Our delinquent flow business should also increase.

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Source: Mortgage Bankers Association, Fannie Mae Freddie Mac.

Notes:[1] Sensitivities to the level of delinquencies are linear, 10% delinquencies would be twice the funding requirement

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Business Services

Strong rebound in Bankruptcy Administration

Assessed impact

Global Claims Administration

Bankruptcy cases during GFC vs. 2020 CYTD

# of bankruptcy cases administered by Computershare

• › Highly counter-cyclical business ramping up

• › Previously contributed c. 10% of Group EBITDA › 20 new bankruptcy administration cases won CYTD vs. average 22 cases p.a.[1]

• › 6 wins in past two weeks › Class Actions volumes expected to increase, although margin income revenues impacted by lower rates

• › More remedies to be administered to plaintiffs

$X CY revenue US$M n.a.² $85³ $65 $41 $48 $33 $25 $16 $26 $23 $20 $35 74 74

• › Previously contributed c. 10% of Group EBITDA

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Vast majority
‘mega cases’ [4]
43
38 38
32
25
23 22 22
20 20
18
CY2008 CY2009 CY2010 CY2011 CY2012 CY2013 CY2014 CY2015 CY2016 CY2017 CY2018 CY2019 3m to
Mar 20 [5]
[[4]] ‘Mega cases’ industry defined as single case or
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Assessed Corporate Trust impact

• › Recurring fee revenue stable

• › Lower rates are impacting margin income, however balances remain stable

Notes:[1] Average over last 3 years[2] Revenue data not available prior to CPU acquisition. ³ CPU acquisition of KCC in April 2009. CY data grossed up for full year.[[4]] ‘Mega cases’ industry defined as single case or set of jointly administered or consolidated cases that involve $100m or more, 1000 or more creditors, or a hold a high degree ofpublic interest[5] Five cases won and filed, fifteen won but yet to be filed. Three months ending March 2020

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Balance Sheet

Leverage ratio within target range and organically improving

Net Debt to EBITDA leverage ratio

• › Net debt to EBITDA leverage ratio is 2.20x at 31 March 2020

• Completed the purchase of Corporate Creations and paid interim dividend

• › Net Debt to EBITDA leverage ratio expected to be c. 2.15x at 30 June 2020

Funding costs

• › Expect $12m reduction in interest expense to flow through via floating interest rate reductions for FY21

• › Floating debt includes bank debt and some US Private Placement debt

• › As at 31 March 2020 Computershare had $2.0BN gross floating debt[1] at an average interest rate of 1.97%[2]

Debt maturity profile

• › Syndicated facility of $450m ($362m drawn at 31 March 2020) refinancing underway ahead of maturity in April 2021

• › Recently established new $100m facility (fully drawn) and finalising a $100m facility to support US Mortgage Services,

• › Current drawn debt profile has an average duration of 3.5 years as at 31 March 2020

Notes: Leverage ratio presented exclude SLS Advances[1] Excludes leases[2 ] Excludes interest costs on the Advance facilities

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Management EBITDA

Excluding the impact of margin income and FX movements – “quality industrial with recurring revenues”

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434.8
428.4
405.3
372.8
357.7
321.5
255.3
221.6
206.2
1H19
FY13 FY14 FY15 FY16 FY17 FY18 FY19 1H20
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Note: Management EBITDA translated at FY19 average rates and excludes margin income. 1H20 results translated to USD at 1H19 average exchange rates. 1H20 EBITDA ex MI includes IFRS16 benefit of $23.9m

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Conclusion

Continued focus on supporting our clients, employees and shareholders

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Underlying operating businesses remain resilient with 80% recurring revenue base

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Transactional revenues expected to decline in short term with improvement anticipated as volatility subsides

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Our strategies to build strong businesses with solid long-term growth prospects remain intact

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Focused on the safety of our team and transitioned 80% of employees to working from home arrangements enabling us to continue to provide our critical services to our clients

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Assessing opportunities to rebalance our pricing model

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Important Notice

Summary information

• This announcement contains summary information about Computershare and its activities current as at the date of this announcement.

• This announcement is for information purposes only and is not a prospectus or product disclosure statement, financial product or investment advice or a recommendation to acquire Computershare’s shares or other securities. It has been prepared without taking into account the objectives, financial situation or needs of a particular investor or a potential investor. Before making an investment decision, a prospective investor should consider the appropriateness of this information having regard to his or her own objectives, financial situation and needs and seek specialist professional advice.

Financial data

• Management results are used, along with other measures, to assess operating business performance. The company believes that exclusion of certain items permits better analysis of the Group’s performance on a comparative basis and provides a better measure of underlying operating performance.

• Management adjustments are made on the same basis as in prior years.

• The non-IFRS financial information contained within this document has not been reviewed or audited in accordance with Australian Auditing Standards.

• All amounts are in United States dollars, unless otherwise stated.

Past performance

• Computershare’s past performance, including past share price performance and financial information given in this announcement is given for illustrative purposes only and does not give an indication or guarantee of future performance.

Future performance and forward-looking statements

• This announcement may contain forward-looking statements regarding Computershare’s intent, belief or current expectations with respect to Computershare’s business and operations, market conditions, results of operations and financial condition, specific provisions and risk management practices.

• When used in this announcement, the words ‘may’, ‘will’, ‘expect’, ‘intend’, ‘plan’, ‘estimate’, ‘anticipate’, ‘believe’, ‘continue’, ‘should’, ‘could’, ‘objectives’, ‘outlook’, ‘guidance’ and similar expressions, are intended to identify forward-looking statements. Indications of, and guidance on, plans, strategies, management objectives, sales, future earnings and financial performance are also forward-looking statements.

• Forward-looking statements are provided as a general guide only and should not be relied upon as a guarantee of future performance. They involve known and unknown risks, uncertainties, contingencies, assumptions and other important factors that are outside the control of Computershare.

• Actual results, performance or achievements may differ materially from those expressed or implied in such statements and any projections and assumptions on which these statements are based. Computershare makes no representation or undertaking that it will update or revise such statements.

Disclaimer

• No representation or warranty, expressed or implied, is made as to the fairness, accuracy, completeness or correctness of the information, opinions and conclusions contained in this announcement. To the maximum extent permitted by law, none of Computershare or its related bodies corporate, or their respective directors, employees or agents, nor any other person accepts liability for any loss arising from the use of this announcement or its contents or otherwise arising in connection with it, including, without limitation, any liability from fault or negligence.

Not intended for foreign recipients

• No part of this announcement is intended for recipients outside Australia. Accordingly, recipients represent and warrant that they are able to receive this announcement without contravention of any applicable legal or regulatory restrictions in the jurisdiction in which they reside or conduct business.

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