IPO Preparation: Financial Risk and Debt Structuring

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1 Mark Battistoni Brian Conly IPO Preparation: Financial Risk and Debt Structuring Lars Cordi

2 IPO Preparation: Financial Risk and Debt Structuring EXIT Other PE Investor Strategic IPO

3 IPO Preparation: Financial Risk and Debt Structuring Initial Proceeds Initial Valuation QUANTUM TENOR(S) Capital Structure of Listed Company TYPE(S) TERMS Final / Total Proceeds Long-Term Valuation

4 IPO Preparation: Financial Risk and Debt Structuring Lars Cordi SVP Head of Treasury & Risk Management, Nets A/S PREVIEW OF QUESTIONS: CORE IPO TEAM 1. Key structural changes? Timeline? 2. Main financial risks perceived? 3. Interplay with equity sponsors? 4. What were the contingency plans? 5. What investments did preparation entail? 6. Role of financing banks in process? 7. What compromises were necessary? 8. What follow-on steps did you anticipate? 9. What would you have done differently?

5 In the heart of the payments ecosystem and a leader across the Nordic region #1 Position across the Nordic region (1) #1 Online Merchants (2) 30,000+ Distributors & Partners Merchants 300,000+ Banks 240+ Corporates 240,000+ DKKm 2,314 3% #2 (#1 in e-com) DKKm 885 9% Households Digital Identities 8 million #1 DKKm % DKKm 68 26% Consumers Central Banks Governments DKKm 3,576 #1 6% Initiated transaction from approx. 35 million cards 7.7+ billion transactions DKK 475 billion of card transaction volume Notes 1. Management estimate based on First Annapolis study. Ranking based on number of card payment transactions processed or acquired 2. Part of the 300,000+ Merchants 5

6 50 years of history Bank Ownership Sponsor Ownership Listed Build-up and in-country consolidation Creation of Nets through the merger of two local champions in Denmark and Norway Strengthening position in Finland Acquisition of Nets by Advent, Bain and ATP Commercialisation of Nets and strengthening of presence in Sweden 2,400 FTEs Listed on Nasdaq Copenhagen on 23 September % free float PBS was established in 1968 and drove consolidation in Denmark BBS was established in 1972 and drove consolidation in Norway 2010: PBS and Nordito (parent company of BBS and Teller) become Nets 2012: Acquisition of Luottokunta, local Finnish champion : Acquisition of Nordea Merchant Acquiring (Kortaccept), DIBS and Payzone increasing presence in Sweden Kortaccept > Focus 1.Mobile development 2.Outsourcing 3.Value chain expansion 4.Nordic growth 6

7 In the heart of the payments ecosystem Nets is positioned across the value chain in the Nordic countries with payment-agnostic capabilities combined with a broad network Illustrative DK / NO Card Payments Example (1) Illustrative UK Card Payments Example (1) Card-related capabilities Account-related capabilities Merchants Online Merchants Banks Merchant Acquiring Debit Cards Credit Cards A2A Payments P2P Distributors & Partners Corporates Private Label Cards e-wallets Recurring Payments B2B Network (2) (3) Households Digital Identities Contactless e-commerce e-commerce Mobile $ Issuer Processing Card Not Present Mobile Integrated e-invoicing Instant Payments Consumers Governments P2P Recurring Card Payments Authentification Interbank Clearing Central Banks Notes 1. Illustrative examples for presentation purposes only. Other payment providers also operate in each of the respective countries 2. Nets owns and operates Dankort in Denmark. International card network operators (e.g. Visa, MasterCard) are also present in Denmark and accounted for 22% of the total number of made payments in Denmark using debit and credit cards issued in Denmark in Nets also routes and clears Visa and MasterCard transactions 3. Nets operates, but does not own, the BankAxept scheme or logo in Norway. However, Nets owns the IT system and operates BankAxept on behalf of the Norwegian banking sector. International card network operators (e.g. Visa, MasterCard) are also present in Norway and accounted for 12% of the total card payments transactions in Norway in Nets also routes and clears Visa and MasterCard transactions 7

8 Financial highlights FY 2016 A strong 2016 with 7% organic growth and 260 basis points EBITDA b.s.i. margin expansion Organic growth Guidance November % Actual % Revenues of DKK 7,385m up 8.0% Y/Y driven by Merchant Services and Financial & Network Services EBITDA b.s.i. margin* 35-36% 35.5% EBITDA b.s.i. of DKK 2,619m up 16.5%. Y/Y margin improvement of 260 basis points Special items DKK 630m DKK 606m Slightly lower special items due to reversal of IPO expenses CAPEX (% of net revenue) Around 10% 9% Capital expenditures of DKK 668m driven by investments in new data centres and network segregation Capital structure (NIBD/EBITDA b.s.i.**) At or below 3.4x 3.2x Higher EBITDA and cash flow, partly due to lower investments than expected *Before special items **Net interest-bearing debt / EBITDA before special items 8

9 Nets IPO - Sources and Uses Sources and Uses Sources DKKm Uses DKKm Own Cash 1,521 Repayment of existing debt 15,592 Equity 5,500 Fees and others 589 Term loans 7,222 Drawn RCF 1,938 Total 16,181 Total 16,181 Pro forma capitalisation Amount (DKKm) Pro forma leverage (1) Own Cash 0 RCF (DKK3,539m) 1,938 (2) 0.9x 3-year Term Loan 3, x 5-year Term Loan 3, x Total net debt 9, x Notes 1. Based on LTM June 2016 Adjusted Underlying EBITDA 2. Drawn portion of the RCF

10 IPO Preparation: Financial Risk and Debt Structuring