NEO Finance, AB

Sales report 2019Q4

Vilnius

2020-01-15

Management comments

2

2019 Q4 sales amounted to 4.47 million EUR of loans issued. 2019 Q4 was a time of

change. Not only did we change our creditworthiness rating to the one calculated by AI, but also

“NEO Finance” had to adapt to migration to a new Bank of Lithuania database. Both factors had

their adaption period, which resulted in the decrease of loans issued. As the transition period is left

behind – we are looking forward to stronger results in 2020 Q1.

An increasing number of lenders from all over Europe discover consumer loans on

“NEO Finance” P2P lending platform. The number of foreign lenders is continuously growing faster

than Lithuanian. In 2019 Q4 most of foreign lenders registered from Spain, Netherlands and

Germany.

During 2019 Q4 more than 1.1 million transactions was made through the Neopay

payment initiation service. Most payments were made through APIs with major banks. Neopay

team successfully participated in Fintech Inn 2019 - the largest fintech conference in the Baltics.

PIS was integrated with the largest Latvian and Estonian banks and with 4 banks from Netherlands.

To meet the needs of our borrowers and lenders “NEO Finance” introduced an

upgraded Invite Your Friend referral programme, which was a huge success in attracting new

lenders.

On the lower note – Bank of Lithuania imposed a fine of 4 500 EUR for

misrepresenting typical loan examples in advertising. The internal processes were improved to

prevent errors in advertising in the future. The fine will not affect the Company’s results of

operations.

Events

3

A record of 440 thousand transactions in PIS

reached in December;

November

Seminar for advanced lenders in Kaunas

and Vilnius;

Presentation about funding in Agency for

Science, Innovation and Technology event

“How to grow Lithuanian unicorn”;

Participation in SLUSH 2019 event in

Helsinki;

Participation in Fintech Inn 2019

conference in Vilnius and presentation

„Startup funding success case“;

Social events

Bank of Lithuania imposed a fine of 4500 EUR

regarding typical loan examples;

October

Seminar for begginer lenders in Vilnius;

Updated Invite Your Friend programme,

where lenders get 1% on investments

made by invited friend for 12 months;

Starting from October creditworthiness rating

is calculated by Artificial Intelligence;

NEO Finance B.V. capital increased by 55

thousand EUR;

Transition to new Bank of Lithuania nPRDB

database, where data regarding borrower‘s

liabilities and debt history is stored;

Management accounts

4

The vast majority of revenues related to P2P lending activities are distributed throughout the loan period. Management

accounts represent future intermediary fee income as the result of loans issued in specific quarter.

At the end of 2019 Q4 receivable intermediary fee amounted to 4.58 million EUR

* Intermediary fee income in the table is represented as a result of the loans issued at the same quarter, which will be

received throghout the loan period. E.g. 370 thousand EUR is a result of 4,549 thousand EUR issued and will be received

throughout entire loan period.

2019 Q4 2019 Q3 ∆, % 2018 Q4 ∆, %

Loans issued,K EUR 4,469 5,115 -13% 4,186 7%

Intermediary fee income, K EUR* 370 404 -8% 329 13%

Intermediary fee / Loans issued

ratio8.3% 7.9% - 7.9% -

PIS income, K EUR 51 36 40% 18 178%

Other income, K EUR 364 367 -1% 230 58%

Total income, K EUR 785 807 -3% 577 36%

Payment Initiation Service (PIS)

5

Payment initiation service (PIS) means a payment service, where at the request of the payment service user, a payment

order is initiated from a payment account opened at the institution of another payment service provider. Payment initiation

service is an alternative to a bank transfer ("banklink" service) that is used for billing for goods or services at e-shops when

the payment initiation service is provided by a licensed broker. Using PIS e-shop makes payment faster, more convenient

and cheaper.

“NEO Finance” is a licensed payment initiation service provider which provides this service using the Neopay brand

trademark.

During 2019 Q4 “NEO Finance” clients made 1 140 122 transactions. Most payments were made through APIs with

major banks. Neopay team successfully participated in Fintech Inn 2019 - the largest fintech conference in the Baltics. PIS

was integrated with the largest Latvian and Estonian banks and with 4 banks from the Netherlands.

533

734808

868

1140

2018 Q4 2019 Q1 2019 Q2 2019 Q3 2019 Q4

PIS transactions, quantity, thousands

P2P consumer loan market in Lithuania

6

Due to transition period of PSD2 and migration to Bank of Lithuania database P2P consumer loan market in Q4 was

slower than in Q3. In 2019 Q4 P2P consumer loan market size was 8.39 million EUR. Compared to 2018 Q4 year

on year the issued loans volume grew by 19% from 7.04 million EUR. “NEO Finance” growth was 7% in the

same period. “NEO Finance” market share during 2019 Q4 was 53% with 4.47 million EUR of loans issued.

Monthly amount of issued consumer loans through all Lithuanian platforms during 2019 Q4 reached the peak of

2.90 million EUR in December. “NEO Finance” clients borrowed 1.50 million EUR in November. Compared to

the same month in 2018, “NEO Finance” issued loans volume grew by 3%.

Source: Data from Lithuanian P2P lending platforms

1.46 1.431.60

1.511.63

1.41

1.751.65 1.71

1.48 1.50 1.49

2.67

2.94 2.79

2.91 2.76

2.66

3.24

2.97

3.21

2.83 2.66

2.90

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

2019-01 2019-02 2019-03 2019-04 2019-05 2019-06 2019-07 2019-08 2019-09 2019-10 2019-11 2019-12

P2P consumer market, loans issued, million EUR

NEO Finance Market size

Refinancing

7

Starting with 2019 Q4 “NEO Finance” made it available to refinance it’s own loans for borrowers who

are being refinanced by competition. Out of 4.47 million EUR financed in 2019 Q4 – 1.90 million

EUR was refinancing loans, meaning that “NEO Finance” lenders helped these borrowers to reduce

their instalment amount.

At “NEO Finance” borrowers can get a loan where a part of funds are for refinancing purpose and

additional amount is for consuming purpose. Refinancing is shown without additional loan amount.

1,314 1,101

1,257

969

326

238

262

338

224

245

163

234

195

184

167

241 141

24

28

6 22

2,071

1,778

1,930 1,899

-

500

1,000

1,500

2,000

2,500

2019 Q1 2019 Q2 2019 Q3 2019 Q4

Refinancing distribution, K EUR

Consumer Credit Providers (Ex-Leasing) Banks Consumer Credit Providers (Leasing only)

NEO Finance Operators of Peer-To-Peer Lending Platforms Credit Unions

Borrowers

8

In 2019 Q4 established brand and proven

acquisition strategy attracted 3 957 new

registered borrowers. At the end of 2019 Q4

the number of registered borrowers grew to a

total of 66 645. Compared to 2018 Q4, the

number of registered borrowers grew by 30%.

In 2019 Q4 the number of active borrowers grew

by 492 users. At the end of 2019 Q4 the number

of active borrowers reached a total of 7 860.

Compared to 2018 Q4, the number of active

borrowers grew by 45%.

51,147 54,993

58,428

62,688

66,645

2018 Q4 2019 Q1 2019 Q2 2019 Q3 2019 Q4

Registered borrowers

5,412

6,101

6,669

7,368 7,860

2018 Q4 2019 Q1 2019 Q2 2019 Q3 2019 Q4

Active borrowers

Lenders

9

In 2019 Q4 increasing number of international

partners and referral programme attracted a

record of 4 032 new registrations to a total of

18 625. 1 494 of them did not finish the

identification step. Compared to 2018 Q4, the

number of registered lenders grew by 96%.

Cooperation with publishers attracts an

increasing amount of foreign lenders.

Lenders have already earned 6.21 million EUR in returns.

In 2019 Q4 the number of active lenders grew

by 1310. At the end of 2019 Q4 the number of

active lenders reached a total of 9 475.

Compared to 2018 Q4, the number of active

lenders grew by 65%. TOP 3 foreign countries

regarding new active lenders in the descending

order are The Netherlands, Spain and Germany.

5,755

6,590

7,369

8,165

9,475

2018 Q4 2019 Q1 2019 Q2 2019 Q3 2019 Q4

Active lenders

- 81 480 758 1,494

9,515 11,078

12,494 13,835

17,131 9,515

11,078

12,974

14,593

18,625

2018 Q4 2019 Q1 2019 Q2 2019 Q3 2019 Q4

Registered lenders

Pre-registered lenders Registered lenders

Lenders (Ex-Lithuania)

10

Registered lenders from outside Lithuania

during 2019 Q4 amounted to 2973 and grew

by 362% compared to the same quarter last

year. Registered lenders during 2019 Q4

distribution by TOP 5 countries is provided

below:

Active lenders, who registered during 2019 Q4

distribution by TOP 5 countries is provided

below:

58%

18%

15%

5%4%

Registered lenders distribution by country

Spain Netherlands Germany Latvia Portugal

33%

32%

24%

6%5%

Active lenders distribution by country

Netherlands Spain Germany Belgium Portugal

NEO Finance investments

11

“NEO Finance”, as a consumer credit provider, co-invests into loans together with lenders. A policy of

avoiding conflicts of interest is provided to every lender. In 2019 Q4 “NEO Finance” invested only 217

thousand EUR. The reason behind such a drop is Invite Your Friend programme, which attracted a

record number of new lenders, together with slightly slower market compared to last quarter.

Since the launch in December, 2015 “NEO Finance” investments into loans reached 4.04 million

EUR.

518

573

539

624

217

0

100

200

300

400

500

600

700

2018 Q4 2019 Q1 2019 Q2 2019 Q3 2019 Q4

NEO Finance investments, K EUR

Overdue loans

12

At the end of 2019 Q4 out of 16 303 issued loans - 1 686 loans, or 10.34%, were overdue for more than 90

consecutive days. Respectively, out of 44.41 million EUR financed – 5.32 million EUR or 11.97% were overdue

more than 90 days.

“NEO Finance” is highly concerned about loan repayments, therefore great effort was put in a recovery of

payments from terminated loans. During 2019 Q4 a record amount of 210 thousand EUR were recovered and

distributed to lenders.

3.45%

11.50%

22.50%

11.97%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

A rating B rating C rating Total

EUR, overdue >90 days, %.

64

90

111

144

210

0

50

100

150

200

250

2018 Q4 2019 Q1 2019 Q2 2019 Q3 2019 Q4

Amount recovered, K EUR

Recovery

13

Recovery is presented starting at 24 months after termination. The table represents initial amounts at

termination, while chart shows distribution between “NEO Finance” and lenders.

It should be noted, that all third party legal costs incurred by “NEO Finance” related to recovery process are

covered first, while NEO Finance intermediary fees are covered on par with lenders.

Recoveries are calculated as follows: The oldest batch of terminated loans consists of 14 loans with 21 670 EUR

principal at termination. Next batch consists of 20 loans with 31 347 EUR principal at termination. The longest

period of recovery will represent only 14 loans with 21 670 EUR. Next period will represent 34 loans (14 from the

first batch and 20 from the second) and will reflect recoveries from a total of 53 017 EUR and etc.

Months after

termination

24 months 27 months 30 months 33 months 36 months 39 months

Principal at

termination€ 696,857 € 436,744 € 272,552 € 151,459 € 53,017 € 21,670

Loans, units 275 195 134 80 34 14

20.0% 21.3% 21.8% 24.9% 25.0% 25.7%

47.3% 52.0%61.8%

71.2% 69.3%78.1%

67.3%73.3%

83.6%

96.2% 94.3%103.8%

24 months 27 months 30 months 33 months 36 months 39 months

Recovery as % of principal outstanding at termination

NEO Finance Lenders

Provision fund

14

“NEO Finance” offers a “Provision fund“

service, which allows lenders to reduce their

investment risk. If a loan defaults – “NEO

Finance” guarantees to repay the lender with

all of its assets. During 2019 Q4 the service

covered 175 652 EUR.

For liquidity risk management, “NEO Finance” calculates the sufficiency of

funds to cover liabilities under “Provision fund“. Starting with 2019 Q3 a part of

the funds is invested into loans, whereas another part is held in a separate bank

account. The purpose of this account is to ensure the company's internal cash

flow management. In order to fulfill its obligations to lenders, the company may, if

necessary, use other assets of the company.

The fund's growth amounted to 5 905 EUR. At the end of 2019 Q4 there were

373 005 EUR of accumulated funds, and the total guaranteed amount was

3 080 478 EUR, resulting in 12% coverage ratio.

2144

2454

2784

3075 3080

0

500

1000

1500

2000

2500

3000

3500

2018 Q4 2019 Q1 2019 Q2 2019 Q3 2019 Q4

Guaranteed amount, K EUR

240296

329

187 180

180 193240

296

329

367 373

0

50

100

150

200

250

300

350

400

2018 Q4 2019 Q1 2019 Q2 2019 Q3 2019 Q4

Provision fund, K EUR

Cash Invested amount

Buybacks

15

“NEO Finance” offers a buyback service. When an agreement with a borrower is terminated, lenders have

an option to sell their investment for 50-80% of it‘s face value to “NEO Finance” . In 2019 Q4 lenders sold

4 258 investments for 72 675 EUR.

47,432 €

60,769 €

69,149 € 68,081 €72,675 €

3169

3879

4784

40214258

0

1000

2000

3000

4000

5000

6000

0 €

10,000 €

20,000 €

30,000 €

40,000 €

50,000 €

60,000 €

70,000 €

80,000 €

2018 Q4 2019 Q1 2019 Q2 2019 Q3 2019 Q4

Buybacks

Buybacks, EUR Buybacks, units

Secondary market

16

Secondary market is a feature where lenders can sell or buy investments. It allows lenders to adjust their risk

exposure in pursuit of aggressive returns, or sell a nonperforming investment. It also provides liquidity when

an lender feels the need to cash out. The increase in secondary market turnover was led by increase in

lenders as well as loan scarcity on the primary market.

During 2019 Q4 secondary market turnover was 376 876 EUR. Average transaction was 22 EUR.

102,577 €

182,581 € 180,565 € 180,378 €

376,876 €

6244

11820

10620

8914

16974

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

0 €

50,000 €

100,000 €

150,000 €

200,000 €

250,000 €

300,000 €

350,000 €

400,000 €

2018 Q4 2019 Q1 2019 Q2 2019 Q3 2019 Q4

Secondary market

Turnover, EUR Turnover, units

17

Main statisticsSince launch till the end of 2019

Q4

9,475Active lenders

2,884 €Average portfolio

6,207,314 €Interest received

44,412,150 €Issued loans

Investments sold in

secondary market

1,750,313 € 27,410,671 €Outstanding principal