HUB24 LIMITED — Annual Report 2017

Aug 27, 2017

Annual Report Presentation 28 August 2017

Funds Under Administration

$5b May 2017 $4b 5 months Dec 2016 7 months $3b May 2016 $2b 7 months Oct 2015 13 months $1b Sept 2014 27 months $100m June 2012

$5.8b Aug 2017 3 months

==> picture [72 x 85] intentionally omitted <==

2

Overview

==> picture [72 x 62] intentionally omitted <==

==> picture [72 x 62] intentionally omitted <==

==> picture [72 x 62] intentionally omitted <==

==> picture [72 x 62] intentionally omitted <==

FY17 Opportunities Outlook Additional Highlights for growth information

==> picture [842 x 37] intentionally omitted <==

3

FY17 Highlights

Our focus on investing in platform Net flows of Acquisition of Launch innovation & of direct investing $2.0b Agility in international FUA increase of growth…… shares across 15 66% since 30 Applications exchanges June 2016, now $5.8b

==> picture [72 x 93] intentionally omitted <==

1st

in categories for Managed Accounts, User Interface and Smartphone/ Tablet Access[1]

==> picture [842 x 37] intentionally omitted <==

4

1. Results from Investment Trends December 2016 Platform Competitive Analysis and Benchmarking Report based on extensive analyst reviews of 19 platforms across 526 functional points.

FY17 Highlights

==> picture [776 x 153] intentionally omitted <==

----- Start of picture text -----

….has
delivered our
Underlying EBITDA [1] of Underlying NPAT [2] of Positive operating
cashflows of
first year of 1st
in overall platform
$5.1m $3.9m satisfaction [3]
profit $4.1m
----- End of picture text -----

1. Underlying EBITDA represents earnings before interest, tax, depreciation, amortisation and other significant items.

2. Underlying NPAT is a non-IFRS measure used internally by management and by some in the investment community to assess the operating performance of the business. Underlying NPAT represents Net Profit After Tax excluding non-recurring items. 3. Equal first from 2017 Investment Trends Planner Technology Report for platform satisfaction.

==> picture [842 x 37] intentionally omitted <==

5

HUB24 - leading change in wealth management

Underpinned by market leading technology

==> picture [348 x 268] intentionally omitted <==

----- Start of picture text -----

Platform Revenue and Retail FUA
FUA Revenue
$B $M
6 30
4 Yr CAGR of FUA 95%
4 Yr CAGR of Revenue 115%
5 25
4 20
3 15
2 10
1 5
- -
FY13 FY14 FY15 FY16 FY17
Revenue FUA
----- End of picture text -----

1. Source: Strategic Insights. Analysis of Wrap, Platform and Master Trust Managed Funds at March 2017. HUB24 is the fastest growing wrap platform relative to its size in percentage terms, 5th fastest in dollar terms of net inflows.

2. The fastest growing platform[1] at a time of significant change for wealth management in Australia

3. Now profitable and Funds Under Administration (FUA) of $5.8b (as at 24 August 2017)

4. Margin expansion occurring at increasing scale

5. Includes Paragem (Licensee with a national adviser network) which advises on client funds of circa $3.8b

6. Acquisition of Agility Applications (specialist provider of technology and application products to the financial services industry)

1[st] for overall platform satisfaction[3]

Fastest growing Best managed platform[1] accounts platform[2]

1. Results from Investment Trends December 2016 Platform Competitive Analysis and Benchmarking Report based on extensive analyst reviews of 19 platforms across 526 functional points.

2. Equal first from Investment Trends 2017 Planner Technology Report for platform satisfaction.

==> picture [842 x 35] intentionally omitted <==

6

Group financial results

First reporting period where all group profit lines are positive – reflecting the benefits of growth and scalability

==> picture [681 x 272] intentionally omitted <==

----- Start of picture text -----

Revenue breakdown
$m 4.7 0.9 0.4 + 45%
FY17 v 3.6
FY17 FY16 10.9
FY16
GROUP FINANCIAL RESULTS
$m $m %
62
Group revenue 61.9 42.7 45% 43
Direct costs (41.1) (31.8) 29%
FY16 Platform Licensee IT Services Fair value gain Interest and FY17
Gross profit 20.8 10.9 91% on contingent other income
consideration
Operating expenses (10.5) (7.2) 46%
$m Underlying EBITDA breakdown
Growth resources expense [1] (5.2) (4.5) 14% 0.2
5.1 0.3
Underlying EBITDA [2] 5.1 (0.8) (0.04)
EBITDA 4.7 (1.7) 5.1
NPAT 18.9 (1.2)
(0.8)
Underlying NPAT [3] 3.9 (1.5)
FY16 Platform - Licensee - IT Services - Corporate - FY17
Underlying EBITDA EBITDA EBITDA EBITDA Underlying
EBITDA EBITDA
----- End of picture text -----*

• Other significant items reported in NPAT include interest, share based payments, non-recurring corporate costs, amortisation and income tax benefit associated with the recognition of prior period tax losses. (refer Annexure 5)

• Growth resources expensed are costs for platform development, strategic development (inclusive of M&A activity) and to accelerate additional FUA onto the platform

• Underlying EBITDA represents earnings before interest, tax, depreciation, amortisation and other significant items

• Underlying NPAT is a non-IFRS measure used internally by management and by some in the investment community to assess the operating performance of the business. Underlying NPAT represents Net Profit After Tax excluding non-recurring items.

==> picture [842 x 35] intentionally omitted <==

7

Platform segment results

Continuing investment and solid execution is being rewarded with FUA growth, industry recognition and expanding profit margins

PLATFORM FINANCIAL RESULTS FY17 FY16 $m $m	Var %
	%
Retail FUA (Now 5.8b) 5.5b 3.3b	66%
Revenue 26.3 15.4	71%
Direct costs (9.9) (6.8)	45%
Gross profit 16.4 8.6	92%
% margin 62% 56%	7%
Operating expenses (6.3) (4.8)	33%
Growth resources expense1 (5.0) (4.4)	15%
Underlying EBITDA2 5.1 (0.6)
% margin 19% -4%	23%
EBITDA 5.2 0.0	515%
% margin 20% 0%	19%
PBT 4.4 (0.6)

==> picture [22 x 19] intentionally omitted <==

==> picture [22 x 19] intentionally omitted <==

==> picture [22 x 20] intentionally omitted <==

==> picture [22 x 19] intentionally omitted <==

• Revenue increase of 71% driven by net inflows from a broadening client base

• Gross profit growth driven by improved margins from increased scale

Combined Operating and Growth resource expenses increase 23% to support record growth and future investment

EBITDA margin continues to expand with increasing scale

Other significant items reported in NPAT include interest, share based payments, non-recurring corporate costs, amortisation and income tax benefit associated with the recognition of prior period tax losses. (refer Appendix B) 1. Growth resource expenses are costs for platform development, strategic development (inclusive of M&A activity) and to accelerate additional FUA onto the platform 2. Underlying EBITDA represents earnings before interest, tax, depreciation, amortisation and other significant items

==> picture [842 x 35] intentionally omitted <==

8

Platform segment results

Margin expansion across profit lines at increasing scale

==> picture [739 x 310] intentionally omitted <==

----- Start of picture text -----

Platform – revenue, gross profit and Platform revenue and expenses
underlying EBITDA [1] trends $m 16
Revenue Gross Profit underlying EBITDA 14
12 71% revenue increase in FY17
30 33% expense increase in FY17
10
25
8
20 6
4
15
2
10 ‐
1HFY15 2HFY15 1HFY16 2HFY16 1HFY17 2HFY17
5 Revenue Platform expenses
‐ PLATFORM PROFIT MARGINS AS A % OF REVENUE
PROFIT LINES
(5) FY14 FY15 FY16 FY17
Gross profit (5%) 39% 56% 63%
(10)
FY13 FY14 FY15 FY16 FY17 Underlying EBITDA [1] (213%) (51%) (4%) 19%
----- End of picture text -----

1. Underlying EBITDA represents earnings before interest, tax, depreciation, amortisation and other significant items

==> picture [842 x 35] intentionally omitted <==

9

Platform segment results

Broadening distribution base

• 108 active licensees

• 15 white labels

• 37 new licensees to the platform in FY17

• 3 new white labels

Delivering across multiple legal structures

• IDPS

• Super

• MDA

• Wholesale

• Reporting service

Now offering

• International managed portfolios

• International direct shares

• Interfaces including online account opening from client systems

	Retail FUA Net inflows Gross inflows Number of advisers	FY17 $M 5,515 1,953 2,629 917	INCREASE ON PCP 66% 21% 36% 39%

==> picture [398 x 210] intentionally omitted <==

----- Start of picture text -----

AVERAGE MONTHLY NET INFLOWS (‘m)
180
160 Large client
transition
140
120
100
80
60
40
20
0
FY12 FY13 FY14 FY15 FY16 FY17
----- End of picture text -----

==> picture [842 x 35] intentionally omitted <==

10

Opportunities for growth

11

==> picture [38 x 76] intentionally omitted <==

==> picture [38 x 75] intentionally omitted <==

At HUB24 we make a difference in our customers’ lives by connecting them to innovative solutions that create wealth

We believe every customer has the right to choose how they do business and connect. It’s not about our world leading technology, it’s about the freedom that gives our customers.

==> picture [38 x 75] intentionally omitted <==

==> picture [38 x 76] intentionally omitted <==

We go the extra mile, move fast and get it right. We are innovative, driven, brave, . creative, real and positive

We make our customers’ lives simpler and better by doing business their way. Businesses get better by change, not by chance and we are the creators of that positive change.

==> picture [842 x 37] intentionally omitted <==

12

HUB24 is well positioned for further growth

Market share by Net flows: top 10 platforms[1]

FUA and number of advisers

• HUB24 has 0.62% share of Wrap, Platform & Master Trusts at 31 Mar ‘17 with 10.47% share of annual net flows

• Non-institutional platforms (disruptors) account for 3.05% of FUA and 28.7% of net flows annually

• Highest growth rate in % terms, 5th in $ terms annually

• 17 new licensees signed in 4QFY17

• Growth in adviser numbers of 39% for the year

• Av FUA per adviser at $6m against industry average of approx. $40m per adviser – demonstrating significant potential for further growth within existing client base

==> picture [367 x 183] intentionally omitted <==

----- Start of picture text -----

Platforms ranked by market share of net flows
25.0% vs FUA (31 March 2017)
HUB24 achieves
20.0% 10.47% of market
flows with a
15.0% current market
share of 0.62%
10.0%
5.0%
0.0%
1 2 3 4 HUB24 6 7 8 9 10
FUA % market share Annual net flows % market share
mkt share
----- End of picture text -----

==> picture [349 x 183] intentionally omitted <==

----- Start of picture text -----

HUB24 share of industry FUA and annual net
flows [1]
----- End of picture text -----

1. Source: Strategic Insights. Analysis of Wrap, Platform and Master Trust Managed Funds at March 2017. HUB24 is the fastest growing wrap platform relative to its size in percentage terms, 5[th] fastest in dollar terms of net inflows.

==> picture [842 x 35] intentionally omitted <==

13

The changing landscape

Trend

==> picture [41 x 28] intentionally omitted <==

1. Adoption of Managed Portfolios across Dealer Group, Advisers

• Usage by advisers has increased for fifth consecutive year, highest growth in the last 12 months[1]

2. Market share continues to shift to new / non-institutional platforms

• New non-institutionally owned platforms are growing market share and two of these, including HUB24 are ranked ahead of all traditional platforms in terms of product offering and platform satisfaction by advisers.

• Dec 2016 saw the first net outflow quarter across bank and institutional platforms[3]

3. Convergence occurring across advisory, stockbroking and financial advice

• Stockbrokers exploring annuity based income models to better service clients

• Accountants and financial advisers collaborating to provide holistic financial advice

• The Stockbrokers association changed its name to Stockbrokers and Financial Advisers Association (Nov 2016)

4. Australians increasing use of international shares.

• Low international investment exposure for self directed / unadvised SMSFs.

• Direct international share ownership (directly through foreign exchanges) has doubled from 4% to 8% since 2010

• HUB24 • HUB24 is the leading[2] provider of

• positioning Platform Managed Portfolio capability.

==> picture [22 x 34] intentionally omitted <==

• Increase of 83 across 24 portfolio managers to 295 – the most in the market

Year to March 2017:

• New non-institutional platforms have a market share of 3.05% and net flow share of 28.7%

• HUB24 has a market share of 0.62% and net flow share of 10.47%[3] (up from 6.4% for the prior year)

• HUB24 designing product and solutions to support this convergence

• Agility acquisition is an investment to support this shift

• HUB24 is providing white labels to licensees & groups with strong accountancy heritage

• HUB24 has secured 2 new relationships with brokers in FY17

• HUB24 has a licensee and platform offer to increase exposure

• HUB24 provides direct access to 15 International share exchanges and provides 12 international share managed portfolios

• Financial Observer – ‘Managed Accounts uptake sees broader appeal’

• 2016 Investment Trends Platform Competitive Analysis and Benchmarking Report.

• Strategic Insights - Analysis of Wrap, Platform and Master Trust Managed Funds at March 2017

==> picture [842 x 37] intentionally omitted <==

14

HUB24 continues to win awards

1st place in Overall Platform Satisfaction

==> picture [193 x 106] intentionally omitted <==

• 1[st] place for Ease of Use/Navigation 1[st] place in 16 out of 24 categories, including

• Relationship support

==> picture [192 x 104] intentionally omitted <==

• Mobile app

• Investment range

• Tax optimisation tools

• Reporting functionality

Recognised for growth

==> picture [63 x 63] intentionally omitted <==

==> picture [63 x 63] intentionally omitted <==

==> picture [136 x 41] intentionally omitted <==

==> picture [136 x 40] intentionally omitted <==

==> picture [63 x 62] intentionally omitted <==

==> picture [63 x 62] intentionally omitted <==

==> picture [136 x 41] intentionally omitted <==

Recognised for platform functionality

==> picture [473 x 89] intentionally omitted <==

==> picture [842 x 35] intentionally omitted <==

15

Agility Applications

Agility acquired 3 January 2017, is a successful specialist technology services provider to the financial services industry, particularly stockbrokers

The opportunity

• Non-institutional advisers, brokers and accountants want to leverage new technology to improve client engagement, increase efficiency and reduce costs

• Together, HUB24 and Agility can deliver an integrated solution that meets these needs through our award winning proprietary platform and integration to best of breed 3rd party applications

• Currently Agility licenses over 2,600 users from within 165 firms, reporting on over $250 billion of client assets

Activity to date

• Integration of data and reporting of HUB24 and Agility resulting in improved user experience and back office efficiency for clients

• A dedicated development team has been established to deliver on connectivity and integration projects between HUB24 and Agility technology

• First joint client win has materialised with significant new client opportunities in the pipeline

==> picture [297 x 268] intentionally omitted <==

----- Start of picture text -----

BANKS
MARGIN EXECUTION &
LENDERS CLEARING SERVICE
PROVIDERS
BACK-OFFICE AGILITY TRADING
SETTLEMENT CONNECT PARTICIPANTS
SYSTEMS (BROKERS)
CHI-X PLATFORMS &
VENDORS
ASX
16
----- End of picture text -----

==> picture [842 x 35] intentionally omitted <==

Outlook

Continued strong FUA growth expected and targeting to more than double FUA in the next 3 years to >$12b

==> picture [97 x 71] intentionally omitted <==

==> picture [97 x 72] intentionally omitted <==

Pursue appropriate corporate activity & strengthening profitability

Continue to lead change and leverage industry dynamics

Increasing distribution footprint by accessing current adviser relationships and targeting new

Growing our investment in:

• Platform innovation

Extend industry leadership position by connecting our customers to innovative solutions

• Agility/HUB24 joint technology initiatives – several projects already underway with joint clients

• Further open architecture interfaces for advisers, licensees, broker and financial product providers 17

Additional Information

Annexure 1 – Licensee segment Annexure 2 – IT Services segment Annexure 3 – Corporate segment Annexure 4 - Corporate Information Annexure 5 - Financial results reconciliation

18

ANNEXURE 1

Licensee segment results

Licensee FY17 FY16 $m $m	VAR %
	%
Revenue 30.8 27.3	13%
Direct costs (28.2) (24.9)	13%
Gross profit 2.7 2.3	15%
% 9% 8%	0%
Operating expenses (2.3) (2.1)	11%
Underlying EBITDA1 0.3 0.2	11%
% 1% 1%	0%
PBT 0.3 0.2

• Licensee now has circa $3.8b in funds under advice

• Recruitment of 5 practices during FY17 to 30

• Addition of 10 individual advisers to 70

• Revenue increase of 13% over prior corresponding period

==> picture [842 x 35] intentionally omitted <==

19

1. Underlying EBITDA represents earnings before interest, tax, depreciation, amortisation and other significant items

ANNEXURE 2

IT Services segment results

		Period from 3 Jan 17	Period from 3 Jan 17
	IT Services	to	30 Jun 17
			$m
	Revenue		4.7
	Direct costs		(3.0)
	Gross profit		1.7
	%		36%
	Operating expenses Underlying EBITDA1		(1.5) 0.2
	%		5%
	PBT		0.1

• An increase of 250 users of the Connect software over the period

• Investment in headcount to support new business and new client initiatives

• Corporate integration activities completed during initial reporting period and expensed

• Joint development and sales initiatives with the platform business are generating a strong pipeline of opportunities

==> picture [842 x 35] intentionally omitted <==

20

1. Underlying EBITDA represents earnings before interest, tax, depreciation, amortisation and other significant items

ANNEXURE 3

Corporate segment results

Corporate FY17 FY16 $m $m	VAR %
	%
Operating expenses (0.4) (0.3)	11%
Growth resources expenses (0.1) (0.1)	3%
Underlying EBITDA1 (0.5) (0.5)	9%
Interest revenue 0.4 0.2	96%
Fair value gain - contingent consideration 0.9 0.0
Share based payment expense - Employees (0.8) (0.7)	6%
Payroll tax - employee options (0.3)
Share based payment expense - Paragem Option holders 0.2 (0.6)
Transaction costs & other non-recurring (0.5) (0.2)	149%
Other Operating Expenses (0.4) (0.1)	165%
PBT (1.0) (1.9)	(47%)
Tax Benefit / (Expense) 15.1 1.1	1244%
NPAT 14.1 (0.8)

==> picture [23 x 19] intentionally omitted <==

==> picture [23 x 19] intentionally omitted <==

==> picture [23 x 20] intentionally omitted <==

==> picture [23 x 19] intentionally omitted <==

==> picture [22 x 19] intentionally omitted <==

==> picture [23 x 20] intentionally omitted <==

Corporate overhead expenses allocated to the corporate segment

Fair value gain - Contingent consideration of $0.9m due to revised estimate for Paragem earnout

Issue of options during the year to employees

Due diligence expenses for the Agility acquisition and other costs relating to the evaluation of potential business opportunities Interest costs relating to the discount on the present value of deferred and contingent consideration

Recognition of deferred tax asset relating to prior period tax losses and R&D offsets

Other significant items reported in NPAT include interest, share based payments, transaction costs, amortisation and tax expense. (refer Appendix B) 1. Underlying EBITDA represents earnings before interest, tax, depreciation and amortisation and other significant items

==> picture [842 x 35] intentionally omitted <==

21

ANNEXURE 4

Corporate Information

CAPITAL STRUCTURE AT 24 AUGUST ‘17
Shares on issue	55.97m
Share price	$6.50
Market capitalisation	$364m
SUBSTANTIAL SHAREHOLDERS
Thorney Holdings Ltd	17.16%
Acorn Capital Ltd	8.18%
Ian Litster	6.50%
BALANCE SHEET AS AT 30 JUNE ‘17
Cash and cash equivalents	$10.84m
Other current assets	$7.51m
Non-current assets	$44.76m
Total assets	$63.11m
Current liabilities	$11.94m
Non-current liabilities	$7.56m
Total liabilities	$19.50m
Net assets	$43.61m
Equity	$43.61m

HUB24 Share price

==> picture [380 x 248] intentionally omitted <==

==> picture [842 x 35] intentionally omitted <==

22

ANNEXURE 5

Financial Results Reconciliation

Segment Results Platform Licensee IT Services Corporate FY17 FY16 $m $m $m $m $m $m	FY17 v FY16
	%
Revenue 26.3 30.8 4.7 61.9 42.7 Direct costs (9.9) (28.2) (3.0) (41.1) (31.8) Gross profit 16.4 2.7 1.7 0.0 20.8 10.9 Operating expenses (6.3) (2.3) (1.5) (0.4) (10.5) (7.2) Growth resources expense1 (5.0) (0.1) (5.2) (4.5) Underlying EBITDA~~2~~ 5.1 0.3 0.24 (0.5) 5.1 (0.8) Non-recurring revenue 0.1 0.1 0.6 Fair value gain - contingent consideration 0.9 0.9 0.0 Share based payment expense - Employees (1.1) (1.1) (0.8) Share based payment expense - Paragem Option holders 0.2 0.2 (0.6) Non-recurring corporate costs (0.5) (0.5) (0.2) EBITDA 5.2 0.3 0.2 (1.0) 4.7 (1.7) Interest revenue 0.5 0.4 0.9 0.4 Other interest expense 0.0 (0.4) (0.4) (0.1) Depreciation and amortisation (1.2) (0.2) (1.4) (0.8) Profit before Tax 4.4 0.3 0.1 (1.0) 3.8 (2.3)	45%
	29%
	91%
	46%
	14%
	740%
	(82%)
	n/a
	51%
	(140%)
	149%
	128%
	166%
	81%
	265%
Tax Benefit /(Expense) 0.0 0.0 0.0 15.1 15.1 1.1	1244%
NPAT 4.4 0.3 0.1 14.1 18.9 (1.2) Fair value gain - contingent consideration (0.9) (0.9) 0.0 Share based payment expense - Paragem Option holders (0.2) (0.2) 0.6 Non-recurring corporate costs 0.5 0.5 0.2 Recognition of deferred tax asset (14.3) (14.3) (1.2) Underlying NPAT3 4.4 0.3 0.1 -0.9 3.9 -1.6	1690%
	149%
	1133%

Other significant items reported in NPAT include interest, share based payments, non-recurring corporate costs, amortisation and income tax benefit associated with the recognition of prior period tax losses.

1. Growth resource expenses are costs for platform development, strategic development (inclusive of M&A activity) and to accelerate additional FUA onto the platform

2. Underlying EBITDA represents earnings before interest, tax, depreciation, amortisation and other significant items

3. Underlying NPAT is a non-IFRS measure used internally by management and by some in the investment community to assess the operating performance of the business. Underlying NPAT represents Net Profit After Tax excluding non-recurring items.

==> picture [842 x 35] intentionally omitted <==

23

Disclaimer

SUMMARY INFORMATION

FORWARD LOOKING STATEMENTS

The material herein is a presentation of general background information about HUB24 Limited’s (‘HUB’) activities current as at date of presentation. This information given in summary form does not purport to be complete and should be read in conjunction with previous ASX filings, Half Year Report and the audited Annual Report as applicable.

NOT INVESTMENT ADVICE

This presentation is not a prospectus or a product disclosure statement under the Corporations Act 2001 (Cth) and has not been lodged with ASIC. The information provided in this presentation is not intended to be relied upon as advice to investors or potential investors and does not take into account the investment objectives, financial situation or needs of any particular investor. These should be considered, with or without professional advice when deciding if an investment is appropriate.

This presentation contains certain forward-looking statements. The words ‘anticipate’, ‘believe’, ‘expect’, ‘project’, forecast’, ‘estimate’, ‘intend’, ‘should’, ‘could’, ‘may’, ‘target’, ‘plan’ and other similar expressions are intended to identify forward-looking statements. Indications of, and guidance on, future earnings and financial position and performance are also forward-looking statements. Such forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors, many of which are beyond the control of HUB, that may cause actual results to differ materially from those expressed or implied in such statements. There can be no assurance that actual outcomes will not differ materially from these statements. You should not place reliance on forward-looking statements and neither HUB nor any of its directors, employees, consultants, contractors, advisers or agents assume any obligation to update such information.

RISK OF INVESTMENT

An investment in HUB shares is subject to investment and other known and unknown risks, some of which are beyond the control of HUB. HUB does not guarantee any particular rate of return or the performance of HUB nor does it guarantee the repayment of capital from HUB or any particular tax treatment.

==> picture [842 x 37] intentionally omitted <==

24