COMPUTERSHARE LIMITED. - Management Reports 2020

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Computershare Limited

MARKET ANNOUNCEMENT

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:	19 May 2020
To:	Australian Securities Exchange
Subject:	Investor Briefing Business Review and Conference Call

As announced on 14th May, Stuart Irving, CEO and Nick Oldfield, CFO invite investors to join them on a conference call and Q&A session tomorrow, 20th May at 9.00am AEDT.

Management will present a review of Computershare’s business lines. A presentation pack is attached to this announcement.

Call details are as follows:

Callers within Australia: 1800 896 323 United Kingdom: +44 2033 760 176 United States: +1 855 731 0983 Hong Kong: 800 906 887 Singapore: 800 852 3352

Participant passcode: 928954 2653

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.

For further information contact: Michael Brown Investor Relations Ph +61 (0) 400 24 8080 [email protected]

For more information on Computershare please visit www.computershare.com

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INVESTOR BRIEFING
BUSINESS REVIEW
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20 May 2020

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Key messages

Underlying businesses are operating resiliently ex Margin Income, FY20 guidance maintained

› After a period of unprecedented volatility and challenges, Computershare’s key business lines are proving robust and performing in line with expectations
› Continuing to execute long-term growth strategies
› Working with our clients to deliver high levels of service and digital solutions in a challenging operational environment
› Resilient recurring revenues with encouraging trends in transactional and counter cyclical activities
› Guidance maintained - FY20 Management EPS down c. 20%[1]
› Margin Income guidance maintained - FY20 around $180M and FY21 around $100M

Notes:[1] Guidance subject to the following assumptions: Equity markets remain at current levels; Group tax rate to be 29-31% in FY20; The weighted average number of ordinary shares on issue to be the same as FY19; For constant currency comparisons, FY19 average exchange rates are used to translate the FY20 earnings to USD; For comparative purposes, the base FY19 Management EPS is 70.24 cents

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Business review

Continuing to execute long-term growth strategies

› Limited revenue impact from portfolio run off. MSR market value decline driven by volatile rate environment; no impact on servicing revenues

Mortgage › Continuing to carefully invest to build a sustainable, high quality servicing business. New MSR Services purchases extend duration and enhance return on capital › Forbearance requests levelling off, delinquencies and advance funding in line with expectations › UK successful migration of all outstanding loans to Computershare platform › Recurring issuer paid fees demonstrating positive growth Employee › Transaction revenues subdued but seeing early signs of recovery Share Plans › Equatex integration on track, delivering anticipated synergy benefits › Resilient Register Maintenance issuer paid business continues to perform Issuer Services › Shareholder numbers increasing over the last month despite market volatility › Corporate Actions activity improving across a number of geographies Business › Bankruptcy filings seeing continued growth Services › Corporate Trust revenues benefitting from increased activity levels Communication › Deferrals in dividend payments and annual meetings impacting volumes Services › Demand for COVID-19 communications and digital solutions

› Forbearance requests levelling off, delinquencies and advance funding in line with expectations › UK successful migration of all outstanding loans to Computershare platform

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Margin Income Guidance maintained

Margin Income revenue by business unit (USD millions)	Margin Income revenue by business unit (USD millions)	Margin Income revenue by business unit (USD millions)
Business Activity	FY19	1H FY20	2H FY20F	FY20F	FY21F
			Divisional estimates
Issuer Services	112	44	26	70	40
Employee Share Plans (incl. Vouchers)	16	6	4	10	5
Business Services	58	33	17	50	30
Mortgage Services & Property Rental Services	60	32	18	50	25
Total revenue	$246	$116	c.$64	c.$180	c.$100
Group balances (average)	$18.5B	$16.8B	c.$15 – 16B	c.$15 – 16B	c.$14 – 15B

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4 Notes: Translated at actual FX rates

Mortgage Services

Portfolio growth offsetting re-financing led run-off

Portfolio

UPB evolution (US$B)

› UPB up 6.2% to $118.5B at 30 April
› Good mix of performing (+$5B) and non-performing (+$2B)
› Near term opportunities to increase non-performing sub-servicing given trusted reputation and experience in this segment

Valuation

› Market value $364M at 30 April relative to BV $440M at 31 December
› Total run-off over period of $50M includes amortisation and elevated refinancing

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Sub-
serviced
81.8
74.9
Owned /
Part
Owned
Dec-19 Run-off – New Run-off – Non- April-20
UPB performing originations non- performing UPB
loans performing additions
loans
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› New purchases at lower prices – add value and extend duration
› Market rate changes ($94M) driven by volatile interest rate and pre-payment assumptions, no impact on servicing revenues

MSR market valuation (US$M)

› Estimated June 30 BV of around $440M – includes strip sale and May/June purchases and amortisation

Capital

› Strategy of selling excess and recycling capital has helped mitigate market value decline
› Excess strip sale of c.$15B of UPB on track to complete in June
› Next stage of growth expected to be less capital intensive

5 Notes:[1] Market value as at 30 April 2020 as determined by external valuer

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Dec-19 Expected Maintenance Growth MSR April-20 Elevated Net market April-20
Book run-off MSR capex investment Book run-off price Market
Value (amortisation) Value change Value¹
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Mortgage Services

US forbearance requests declining, delinquency levels in line with expectations

US daily forbearance request count and delinquency rate (%)

› Forbearance requests reducing from early April high
Forbearance › Freddie Mac and Fannie May reporting forbearance
requests volume flattening at c.6% as at end April[[1]]
tracking lower › Increased delinquency from COVID-19 in line with expectations
› Freddie Mac and Fannie May reporting forbearance volume flattening at c.6% as at end April[[1]]
› Capital investment in advances stable
Advances › April Net Advances increase reflects onboarding of a
stable with new portfolio of non-performing loans -
any future June 30 expected to be around Dec. 31 levels
increase well › $350M of existing facilities in place for private label
financed advances; new $100M facility for agency advances expected to close in June

UK › Successful migration of all outstanding loans to integration Computershare platform well › Synergies delivered on full run rate basis Sept. ‘20 progressed

› Synergies delivered on full run rate basis Sept. ‘20

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7,000 # forbearance requests Agency delinquency rates (%) (RHS) 10.0%
# forbearance requests (5-day ave.)
6,000
8.0%
5,000
6.0%
4,000
3,000 4.0%
2,000
2.0%
1,000
- 0.0%
12-Mar-20 26-Mar-20 09-Apr-20 23-Apr-20 07-May-20
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US Net Advance capital ($USM)

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101
94
80
68 70
Dec-19 Jan-20 Feb-20 Mar-20 Apr-20
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6 1Source: Mortgage Bankers Association

Employee Share Plans

Continuing to increase exposure to structural growth trends

Global Plans Fee Income, Last 3 months and over PCP (US$M)

› Issuer paid fees increased in April by 13% pcp
› Transactional fees stabilising – reduced decline in April

Recurring fee revenue growth

› Deferred volume, revenue not lost
› Good client momentum in Europe and Asia with client wins in March and April

› Examples of client share plans transitioning to Structural greater equitisation of remuneration growth › Building future transactional volume and improving drivers issuer fee revenue with higher issuance and greater

› Building future transactional volume and improving issuer fee revenue with higher issuance and greater participation

Equatex	› Synergies reaffirmed and integration on track
integration on track	› Client upgrades to Equate+ continue remotely › Feedback highly positive on new platform

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Transactional fees
33
31 Issuer paid fees
29
26
24 23
(34%)
(4%)
13% vs.
pcp
Feb-19 Mar-19 Apr-19 - Feb-20 Mar-20 Apr-20
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Key client case study: Employee equity grant trends

Financial Year	Share price performance over period	# employee grants	# units granted	Value of issued units (USD million)
2019FY		~560	~12 million	~$90M
2020FY YTD April		~715	~39 million	~$152M
YTD20 vs. FY19	22%1	28%	214%	70%

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7 Notes:[1 ] Share price change from 30 June 2019 to 30 April 2020

Issuer Services

Resilient Register Maintenance revenues with Corporate Actions momentum returning

Corporate Actions momentum returning

Resilient Register Maintenance

Corporate Actions activity by geography (# wins), COVID-19 period to date¹

› Corporate Actions April fee revenue strong $2.6M (+67%) on pcp across geographies

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› 161 new Corporate Actions since mid-March

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Total

US activity improving
HK IPO activity rebounding; up 80% over last 3 months vs pcp, outlook positive

ANZ CAN HK UCIA US IPOs 1 26 4 31	ANZ CAN HK UCIA US IPOs 1 26 4 31	ANZ CAN HK UCIA US IPOs 1 26 4 31	ANZ CAN HK UCIA US IPOs 1 26 4 31	ANZ CAN HK UCIA US IPOs 1 26 4 31
Capital Raisings 20		12	8	2 42
Reorganisations 4	10	4		11 29
M&A 5	5			17 27
Other² 3	5	12	1	11 32
Total 33	20	54	9	45 161

› Activity has supported client balances
› Client paid fee revenue remains resilient
› Shareholder numbers are increasing
› Seamless transition to virtual meetings

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8 1Period from 16 March to 30 April; ² ‘Other’ includes Tenders, Distributions and other Corporate Actions activity

Business Services

Positive trends in countercyclical revenue

Number of Bankruptcy cases administered (calendar year)

n.a.[1] $85[2] $65 $41 $48 $33 $25 $16 $26 $23 $20 $35

Bankruptcy momentum

Class actions good momentum

› 26 new cases won in 2020 (as at end April), surpassing full calendar year 2019 case numbers:
16 new cases won but not filed
10 cases filed
› Referrals and case appointment volumes continue at pre-COVID-19 levels, with good April momentum
› c.80 new cases in 2020 year to date

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74 74
$X CY revenue US$m
43
38 38
32
23 20 22 18 22 25 26
CY2008 CY2009 CY2010 CY2011 CY2012 CY2013 CY2014 CY2015 CY2016 CY2017 CY2018 CY2019 YTD
Apr-20
Number of Class Actions case appointments (monthly)
31 30
23 21 22
19
16 15 15
12
Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20
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Number of Class Actions case appointments (monthly)

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9 Notes:[1] Revenue data not available prior to CPU acquisition. ² CPU acquisition of KCC in April 2009. Calendar year data grossed up for full year

Capital Management

Balance sheet provides strength and flexibility to execute long-term growth strategies

Net Debt to EBITDA leverage ratio stable

› Net Debt to EBITDA leverage ratio expected to be around 2.15x at 30 June 2020
› Net Debt organically improving
› Leverage metrics remain comfortably below covenant levels

Ongoing deployment of capital in key strategic areas

› Opportunities remain to invest in strategic acquisitions to complement growth strategies
› Disciplined MSR investments, evolution to ‘capital lite’ Mortgage Services model continuing
› Investing in integration and cost out projects, progress continues remotely, benefits on track

Debt maturity profile

› Re-finance discussions with banking syndicate significantly progressed for $450M facility ahead of maturity in April 2021
› Current drawn debt profile has an average duration of 3.4 years as at 30 April 2020

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Conclusion

Continuing to execute long-term growth strategies

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Strategies to build stronger business with scale, proprietary technologies and increasing efficiencies remain intact

Increasing exposure to structural growth trends – equity remuneration, increasing number of entities in corporate structures, class actions, compliance and regulation Underlying business are operating resiliently ex Margin Income, FY20 guidance maintained

Key business lines with recurring revenues are proving resilient and performing to plan

Cyclical and event based revenues subdued, optionality retained

Good pipeline for counter cyclical revenues - capital raisings, bankruptcies and non-performing mortgage servicing

Leverage within target range, well placed to fund long-term growth strategies

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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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COMPUTERSHARE LIMITED. — Management Reports 2020

64696_rns_2020-05-18_50ebb3f7-6950-4ed2-86e7-75ea0cce4522.pdf