xceed company profile helping canadians make it home
TRANSCRIPT
Xceed Company Profile
Helping Canadians Make It Home
Forward-Looking And Other Statements
This presentation may contain forward-looking statements which reflect management’s expectations regarding Xceed Mortgage Corporation’s future growth, performance (both operational and financial), and business prospects and opportunities. Past results do not constitute a guarantee of future performance. A number of factors could cause actual results, performance, or achievements to differ materially from the results expressed or implied in these materials. Business prospects and opportunities considered are based on approximation and extrapolation of past market indicators. These factors should be considered carefully and prospective investors should not place undue reliance on any forward-looking statements.
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Corporate Overview
Established in Canada in 1997 as a subsidiary of IMC Mortgage Corporation.
Current investor group purchased 90% of common stock from BMO in April 2002 and recapitalized firm with $22.2MM.
IPO of June 2004 raised additional $24.34MM.
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Value Proposition
Focused Origination– Established mortgage broker relationships
– Financial Institution channel
– Direct business
Risk-Reward Management– Credit risk
– Market risk
Business Model– Access to Canada Mortgage Bond Program
and securitization funding
– Entrepreneurial culture
– Structured management processes
– Technology
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Executive TeamIvan Wahl – Chairman, CEO & Director
– 30 years of experience in the Canadian mortgage finance industry.– Played a leading role in the development of the mortgage-backed securitization industry in Canada.– Founded FirstLine Trust Company in 1985, grew and sold the business to CIBC in 1995.– Vice-Chairman and Director of CIBC Mortgages Inc. from 1995 to 2001.– Recipient of the Ernst & Young Financial Services Entrepreneur of the Year award for 2005.
Michael Jones – President & COO– Previously Vice President, Commercial Mortgages for CIBC Mortgages Inc. where he also oversaw the
CIBC Access Program.– Joined FirstLine Trust in 1992.
John Ayanoglou – CFO & Corporate Secretary– Previously the Chief Financial Officer of publicly-listed Cartier Partners Financial Group.– Practiced within Financial Services Group of PricewaterhouseCoopers LLP from 1996 to 2000.
Karen Martin – VP, Securitization and Capital Markets – Previously the Treasurer of Amicus Holdings (division of CIBC), Director of Balance Sheet Management,
and General Manager of Securitization for CIBC.– Manager, Financial Analysis and Manager, Financial Reporting for FirstLine Trust Co. from 1988 to 1996.
Majority of Board consists of non-related independent directors
Approximately 30% control by management*
- 5 -* Inclusive of Akemis Holdings Corp, with which Ivan Wahl and his family are involved.
Financial Performance
Revenue $1,558M $55,947M 81.6%
AUM $132MM $2,685MM 65.2%
Net Income(2) ($1,127M) $18,572M 52.0%
ROAE (2) (34.8%) 16.2%
2001 2007
(1) The pro forma 2007 net income, ROAE and CAGR figures have been computed after removing the negative one-time after-tax effects of infrastructure write-offs and financial instruments valuation adjustment.
(2) The CAGR figure for Net Income and percentage presented for the average ROAE are calculated from fiscal year 2002 as net income was negative in 2001.
CAGR(1)
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Pro forma 2007(1)
$55,947M
$2,685MM
($4,543M)
16.2%(4.1%)
Revenue Growth
$1,558
$8,745
$17,865
$28,761
$46,424
$54,535 $55,947
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
Re
ve
nu
e (
C$
00
0)
2001 2002 2003 2004 2005 2006 2007
CAGR 81.6%
Under Current Management
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* Xceed’s fiscal year end is October 31.
Under Previous
Management
Total Assets Under Administration Growth
$132$284
$663
$1,190
$1,841
$2,252
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000T
ota
l Ass
ets
Un
der
Ad
min
istr
atio
n (C
$mill
ion
)
2001 2002 2003 2004 2005 2006 2007
CAGR 65.2%
Under PreviousManagement after 5 years
Under Current Management
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* Xceed’s fiscal year end is October 31.
$2,685
Increasing Profitability
($1,127)
$2,289
$5,703
$10,412
$20,275
$21,974
($4,553)-$6,000
-$3,000
$0
$3,000
$6,000
$9,000
$12,000
$15,000
$18,000
$21,000
$24,000
Ne
t In
co
me
(C
$0
00
)
2001 2002 2003 2004 2005 2006 2007
Under Current Management
Under Previous
Management
Net Income Growth
CAGR 52.0% *
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* Xceed’s fiscal year end is October 31. The 2007 net income figure has been computed after removing the negative one-time after-tax effects of infrastructure write-offs and financial instruments valuation adjustment.
$18,572 *
Pro forma
Actual
Cash Flows from Operations
-$1,373$944 -$744
$1,482
$8,281
$18,862
$22,022
-$5,000
$0
$5,000
$10,000
$15,000
$20,000
$25,000
Cas
h Fl
ows
from
Ope
ratio
ns (C
$000
)
2001 2002 2003 2004 2005 2006 2007
CAGR 87.8%
Under Current Management
* Xceed’s fiscal year end is October 31.
Under Previous
Management
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Cash from the Securitized Portfolio
$1,420 $1,924
$5,991
$13,176
$24,948
$38,159
$42,935
$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
$40,000
$45,000
Ca
sh
fro
m t
he
Se
cu
riti
zed
Po
rtfo
lio (
C$
00
0)
2001 2002 2003 2004 2005 2006 2007
CAGR 76.5%
Under Current Management
- 11 - * Xceed’s fiscal year end is October 31.
Under Previous
Management
Effective Use of Capital
-34.8%
14.9%
22.7% 21.9%25.5%
22.9%
-4.1%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
Ret
urn
on
Ave
rag
e E
qu
ity (%
)
2001 2002 2003 2004 2005 2006 2007
Under Current Management
Under Previous
Management
Return on Equity
Average 20.7%*
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* Xceed’s fiscal year end is October 31. The 2007 net income figure has been computed after removing the negative one-time after-tax effects of infrastructure write-offs and financial instruments valuation adjustment.
16.2% *
Pro forma
Actual
Non-Traditional Market Growth Potential
Potential size of Canadian non-traditional market is estimated
at 10% of the total residential mortgage financing market
(approximately $700 billion)
Total outstandings of the non-conforming market in Canada are
approximately $12 billion
Over $55 billion in untapped potential!!
This represents 300,000 families living in apartments who may
meet our underwriting requirements and would love to own
their own homes.
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25% 50% 75% 100%
A
B
C
Traditional Lenders(Big 6 Banks)
Home Capital / Equitable Trust
Mortgage Loan to Value (LTV) Ratio
Bo
rro
wer
Cre
dit
Rat
ing
Market Position
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XCEED
First National / GE Money / Wells Fargo
Fundamentals
Opportunity for product innovation beyond vanilla offerings.
Low variable cost business model provides significant operating leverage: electronic approval / funding system, with locations in Toronto and Montreal.
Efficient methods of raising capital provide opportunity for high ROE
Effective improvements in funding ratios to leverage increased volumes.
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Funding Methodology
$350 million warehouse facility
Securitization of mortgages thru non-recourse sales
– Trust senior notes funded with AAA/or R-1 (High) rated floating rate notes
– Trust credit enhancement provided by third party investors and Xceed
New term structure established in 2006
– Two transactions, valued at a combined $1.1 billion, have provided non-recourse funding in the term markets
– Rated AAA by Standard & Poor’s and DBRS
Access to Canada Mortgage Bond Program
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Solid Risk Control
Interest Risk immunization thru swaps and other hedging mechanisms.
Credit Risk control thru frequent asset quality and compliance reviews by Standard & Poor’s, DBRS and Trusts’ securitization agents
– First charge, residential mortgages only, regionally diversified, in pre-approved locales
– Historical average mortgage size is $176,000 with an original LTV of 83%
– On a market value basis, current credit risk exposure is 73% LTV
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Diversification
As at October 31, 2007
7.73%19.25%
1.84%
1.54%
37.23%
27.62%
0.44%
0.24%
1.72%
2.39%
SummaryLimited competition.
Nascent, rapidly growing niche.
Strong experienced management.
Capital markets proprietary funding models.
Performance based culture.
Focused multi-channel origination.
Disciplined underwriting.
Disciplined default management.
Risk adjusted pricing model.
Flexible, scalable technology with comprehensive relevant reporting capability.
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Questions
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