NEO Finance, AB

Sales report 2019Q3

Vilnius

2019-10-10

Management comments

2

2019 Q3 sales amounted to 5.12 million EUR of loans issued. Precisely planned TV

and online campaign together with affiliate campaign assisted in reaching such amount issued.

“NEO Finance” shares were listed on Nasdaq Vilnius First North market, dedicated to

fast growth potential small and medium companies. NEO Finance is the first Baltic fintech start-up

to enter the stock exchange.

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

“NEO Finance” P2P lending platform. Number of foreign lenders are continuously growing faster

than Lithuanian. In 2019 Q3 the largest numbers of foreign lenders registered from Germany, Spain

and the Netherlands. Investors from the Netherlands surpassed investors from Estonia, who were

the third largest investor group in 2019 Q2.

2019 Q3 was successful providing Payment Initiation Service for Lithuanian e-shops

and service providers. Number of transactions exceeded 3 million in total. Moreover, starting with

September 14th, “NEO Finance” was the first and only company in Lithuania to provide Payment

Initiation Service with the most popular banks via the API (Application Programming Interface).

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

upgraded Invite Your Friend referral programme.

Events

3

New referral programme introduced for

lenders;

September

Presentation in “Corporate Finance

2019” conference. This conference is

organized for the 7th time for the top

corporate finance executives;

Lenders from The Netherlands visit to

Lithuania and NEO Finance;

Seminar for lenders in Vilnius;

Social events

On September 14th, “NEO Finance” started

providing Payment Initiation Service via API;

New in-depth upgrades in “Portfolio Overview”

for lenders;

July

First “NEO Finance” community meet

up in Amsterdam;

Registration of new Articles of Association

allowing the Board of Directors to issue

bonds;

“NEO Finance” shares were admitted to

Nasdaq First North in August;

New feature, which allows “NEO Finance” to

sell its investments on the secondary market;

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 Q3 receivable intermediary fee amounted to 4.22 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. 414 thousand EUR is a result of 5,115 thousand EUR issued and will be received

throughout entire loan period.

2019 Q3 2019 Q2 ∆, % 2018 Q3 ∆, %

Loans issued,K EUR 5,115 4,549 12% 3,928 30%

Intermediary fee income, K EUR* 414 362 14% 282 47%

Intermediary fee / Loans issued

ratio8.1% 8.0% - 7.2% -

PIS income, K EUR 36 30 22% 5 562%

Other income, K EUR 367 318 15% 187 96%

Total income, K EUR 817 710 15% 474 72%

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 Q3 “NEO Finance” clients made 867 654 transactions. Moreover, starting with September 14th, “NEO

Finance” was the first company in Lithuania to provide Payment Initiation Service with the most popular banks via the API

(Application Programming Interface). The transition to a new technological solution has gone smoothly and without major

disruption. Providing service through API interfaces is a very important milestone in the development of PIS.

132

533

734

808868

2018 Q3 2018 Q4 2019 Q1 2019 Q2 2019 Q3

PIS transactions, quantity, thousands

P2P consumer loan market in Lithuania

6

In 2019 Q3 P2P consumer loan market size reached 9.42 million EUR. Compared to 2018 Q3 year on

year the issued loans volume grew by 36% from 6.90 million EUR. “NEO Finance” growth was 30%

in the same period. “NEO Finance” market share during 2019 Q3 was 54% with 5.12 million EUR of

loans issued.

Monthly amount of issued consumer loans through all Lithuanian platforms reached the peak of 3.24

million EUR in July. “NEO Finance” reached a record of 1.75 million EUR financed in July.

Compared to the same month in 2018, “NEO Finance” issued loans volume grew by 46%.

Source: Data from Lithuanian P2P lending platforms

1.51 1.45

1.22

1.46 1.431.60

1.511.63

1.41

1.751.65 1.71

2.49 2.39

2.16

2.67

2.94 2.79

2.91 2.76

2.66

3.24

2.97

3.21

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

2018-10 2018-11 2018-12 2019-01 2019-02 2019-03 2019-04 2019-05 2019-06 2019-07 2019-08 2019-09

P2P consumer market, loans issued, million EUR

NEO Finance Market size

Refinancing

7

Out of 5.12 million EUR financed in 2019 Q3 – 1.93 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 calculated without additional loan amount.

326 238 262

24 28 6

184 167 241

1,314

1,101

1,257

224

245

163

2,071

1,778

1,930

-

500

1,000

1,500

2,000

2,500

2019 Q1 2019 Q2 2019 Q3

Refinancing distribution, K EUR

Banks Credit Unions Operators of Peer-To-Peer Lending Platforms

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

Borrowers

8

In 2019 Q3 established brand and proven

acquisition strategy attracted 4 260 new

registered borrowers. At the end of 2019 Q3

the number of registered borrowers grew to a

total of 62 688. Compared to 2018 Q3, the

number of registered borrowers grew by 32%.

In 2019 Q3 the number of active borrowers grew

by 699 users. At the end of 2019 Q3 the number

of active borrowers reached a total of 7 368.

Compared to 2018 Q3, the number of active

borrowers grew by 51%.

47,338 51,147

54,993 58,428

62,688

2018 Q3 2018 Q4 2019 Q1 2019 Q2 2019 Q3

Registered borrowers

4,878

5,412

6,101

6,669

7,368

2018 Q3 2018 Q4 2019 Q1 2019 Q2 2019 Q3

Active borrowers

Lenders

9

In 2019 Q3 increasing number of international

partners and referral programme attracted 1 619

new registered lenders to a total of 14 593.

Compared to 2018 Q3, the number of registered

lenders grew by 73%. Cooperation with

publishers attracts an increasing amount of

foreign lenders.

Lenders have already earned 5.21 million EUR in returns.

In 2019 Q3 the number of active lenders grew

by 796. At the end of 2019 Q3 the number of

active lenders reached a total of 8 165.

Compared to 2018 Q3, the number of active

lenders grew by 53%. TOP 3 foreign countries

regarding new active lenders in the descending

order are Germany, Spain and The Netherlands.

8,417

9,515

11,078

12,974

14,593

2018 Q3 2018 Q4 2019 Q1 2019 Q2 2019 Q3

Registered lenders

5,348 5,755

6,590

7,369

8,165

2018 Q3 2018 Q4 2019 Q1 2019 Q2 2019 Q3

Active lenders

Lenders (Ex-Lithuania)

10

Registered lenders from outside Lithuania

during 2019 Q3 grew by 36% compared to the

same quarter last year. Registered lenders

during 2019 Q3 distribution by TOP 5 countries

is provided below:

Active lenders, who registered during 2019 Q3

distribution by TOP 5 countries is provided

below:

53%

17%

14%

10%

6%

Registered lenders distribution by country

Germany Spain Netherlands Portugal Italy

56%

17%

13%

10%4%

Active lenders distribution by country

Germany Spain Netherlands Portugal Austria

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 Q3 “NEO Finance” invested 624

thousand EUR. Invested amount saw an increase, as more borrowers approached “NEO Finance”

platform than ever, and amount issued reached a record of 5.12 million EUR.

Since the launch in December, 2015 “NEO Finance” investments into loans reached 3.90 million

EUR.

379

518

573

539

624

0

100

200

300

400

500

600

700

2018 Q3 2018 Q4 2019 Q1 2019 Q2 2019 Q3

NEO Finance investments, K EUR

Overdue loans

12

At the end of 2019 Q3 out of 14 703 issued loans - 1 432 loans, or 9.74%, were overdue for more than 90

consecutive days. Respectively, out of 39.95 million EUR financed – 4.59 million EUR or 11.48% 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 Q3 a record amount of 144 thousand EUR were recovered and

distributed to lenders.

In 2018 Q4 our debt recovery partners “Legal Balance” signed a contract with “EOS Holding GmbH”, therefore

enabling cross-border debt recovery.

3.13%

10.70%

22.25%

11.48%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

A rating B rating C rating Total

EUR, overdue >90 days, %.

80

64

90

111

144

0

20

40

60

80

100

120

140

160

2018 Q3 2018 Q4 2019 Q1 2019 Q2 2019 Q3

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

Principal at

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

Loans, units 195 134 80 34 14

20.0% 21.1% 24.1% 24.7% 25.3%

47.3%58.3%

67.6% 67.9%75.4%

67.3%

79.4%

91.8% 92.6%100.7%

24 months 27 months 30 months 33 months 36 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 Q3 the service

covered 150 411 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 79 842 EUR. At the end of 2019 Q3 there were

408 742 EUR of accumulated funds, and the total guaranteed amount was

3 075 237 EUR, resulting in 13% coverage ratio.

213 240296

329

187

222

213240

296329

409

0

50

100

150

200

250

300

350

400

450

2018 Q3 2018 Q4 2019 Q1 2019 Q2 2019 Q3

Provision fund, K EUR

Cash Invested amount

1882

2144

2454

2784

3075

0

500

1000

1500

2000

2500

3000

3500

2018 Q3 2018 Q4 2019 Q1 2019 Q2 2019 Q3

Guaranteed amount, K EUR

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 Q3 lenders sold

4 021 investments for 68 081 EUR.

49,464 € 47,432 €

60,769 €

69,149 € 68,081 €

30323169

3879

4784

4021

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 Q3 2018 Q4 2019 Q1 2019 Q2 2019 Q3

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. During 2019 Q3 secondary market turnover was 180 378 EUR.

Average transaction was 20 EUR.

123,259 €

102,577 €

182,581 € 180,565 € 180,378 €

7321

6244

11820

10620

8914

0

2000

4000

6000

8000

10000

12000

14000

0 €

20,000 €

40,000 €

60,000 €

80,000 €

100,000 €

120,000 €

140,000 €

160,000 €

180,000 €

200,000 €

2018 Q3 2018 Q4 2019 Q1 2019 Q2 2019 Q3

Secondary market

Turnover, EUR Turnover, units

17

Main statisticsSince launch till the end of 2019

Q3

8,165Active lenders

3,129 €Average portfolio

5,209,444 €Interest received

39,950,071 €Issued loans

Investments sold in

secondary market

1,373,437 € 25,622,192 €Outstanding principal