Understanding the Impact of COVID-19 on FinTech
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An FT Partners FinTech Industry Research report, Understanding the Impact of COVID-19 on FinTech, dated April 2020. Its contents include an executive summary, a public markets overview, economic indicators, impact on financial services, a CEO interview, PE and VC activity, market participant commentary, recent private FinTech financing activity and an overview of the COVID-19 stimulus bill. The report states that the decline of the stock market into a bear market was the fastest ever at just 22 days, compares FinTech index performance with the S&P 500 and NASDAQ Composite in prior downturns, and describes the support provided under the CARES Act. It presents macroeconomic comparisons, IMF forecasts and consumer spending data, and closes with an overview of FT Partners' advisory experience and awards.
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FT PARTNERS FINTECH INDUSTRY RESEARCH Understanding the Impact of COVID-19 on FinTech April 2020 Featuring: CEO Interview Overview of FT Partners • • FT Partners’ Advisory Capabilities FT Partners’ FinTech Industry Research In-Depth Industry Research Reports FT PARTNERS ADVISORY FINTECH RESEARCH & INSIGHTS Proprietary FinTech Infographics Monthly FinTech Market Analysis FinTech M&A / Financing Transaction Profiles The Only Investment Bank Focused Exclusively on FinTech Steve McLaughlin | Founder, CEO, Managing Partner Contact: steve.mclaughlin@ftpartners.com | 415-992-8880 2 TABLE OF CONTENTS I. Executive Summary II. Public Markets Overview III. Economic Indicators IV. Impact on Financial Services V. OpenExchange CEO Interview VI. PE / VC Activity VII. Market Participant Commentary VIII. Recent Private FinTech Company Financing Activity IX. COVID-19 Stimulus Bill Overview X. Overview of FT Partners FT PARTNERS FINTECH INDUSTRY RESEARCH I. Executive Summary April 2020 Executive Summary The rapid decline in both economic activity and the broad stock market averages along with the lingering uncertainty around the timing of the return to “normal” economic activity will undoubtably negatively impact FinTech financing and M&A activity • The decline in the stock market from its 52week high into a bear market (down 20%), was the fastest ever at just 22 days • Public companies have started to reduce guidance and / or pull full-year guidance, with many more to follow in conjunction with reporting 1Q20 results • Estimates are not very reliable right now as many analysts have not yet adjusted their forecasts Relative to many other areas of the economy, FinTech should hold up well as many FinTech businesses operate in a largely digital environment or are helping financial institutions and enterprises improve their operations by providing mission critical services; moreover, the secular trends driving growth in FinTech businesses are likely to remain intact (and perhaps accelerate) as the coronavirus impact recedes • In past downturns (the Dot Com Bubble and the Great Financial Crisis), FinTech stocks were relative outperformers as investors were attracted to key secular drivers (such as the transition from cash to electronic payments) and the relatively capital light, recurring revenue business models of many FinTech companies • Equilibrium has yet to return to the market, leaving many buyers, sellers, investors, and lenders in a “wait and see” mode 5 Executive Summary (cont.) We are seeing mixed reactions from investors – some are hunkered down and are focused solely on existing portfolio companies, while others are signaling an aggressive posture in looking for new opportunities; broadly, we are finding that investors are open to looking at new opportunities and many investors have significant capital that they will need to put to work We have already seen M&A activity slow across the sector, but some companies may view the current environment as a buying opportunity and accelerate plans to seek out new solutions / capabilities; there may be an increase in stock deals since only “relative value” needs to be determined and no cash has to change hands in a stock-for-stock deal • Venture capital and private equity “dry powder“ stood at $1.45 trillion at the end of 2019, according to Preqin, representing the highest amount ever recorded and over 2x the amount from five years ago • A potentially less competitive M&A and investing environment could be attractive for investors who are willing to push forward on deal activity • Quarantines will undoubtedly present challenges in performing due diligence on new opportunities The Federal Reserve and the U.S. government are providing unprecedented levels of support to the economy; the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which was recently signed, provides approximately $2 trillion to alleviate the damaging effects of the coronavirus pandemic and the Federal Reserve has followed with additional substantial support • • The CARES Act provides direct payments to consumers, expanded unemployment benefits, and substantial support for small and large businesses, among other solutions • If the economic shutdown expands beyond the next couple of months, the government will likely need to provide additional support beyond the initial provisions of the CARES Act Some investors regret not becoming more aggressive during the Great Financial Crisis and may view the current downturn as an opportunity 6 FT PARTNERS FINTECH INDUSTRY RESEARCH II. Public Market Overview April 2020 Stock Market Performance Since February 19, 2020, the S&P 500 and the NASDAQ Composite Index have declined by 17% and 14%, respectively, while FinTech stocks (as measured by our market-cap weighted index of 17 large cap FinTech companies) have declined by slightly more … (1) 0% The decline in the stock market from its 52-week high into a bear market (down 20%), was the fastest ever at just 22 days -20% -40% S&P 500 NASDAQ Composite Index FinTech Index Source: CapIQ as of 04/22/20 (1) FinTech Index: Visa, PayPal, Mastercard, Square, Adyen, Stone, Fiserv, FIS, Global Payments, WEX, Fleetcor, Charles Schwab, Verisk, Intuit, Shopify, EverQuote, Guidewire 8 Stock Market Performance (cont.) … but over the previous five years, our FinTech Index increased by over 220%, compared to 61% and 98% for the S&P 500 and NASDAQ Composite Index, respectively 250% +224% FinTech stocks were strong outperformers headed into the coronavirus downturn 150% +98% +61% 50% -50% Returns Through 02/18/2020 S&P 500 3-Month Return 8% 14% 17% 1-Year Return 21% 30% 44% 3-Year Return 42% 66% 151% NASDAQ Composite Index FinTech Index Source: CapIQ. FinTech Index: Visa, PayPal, Mastercard, Square, Adyen, Stone, Fiserv, FIS, Global Payments, WEX, Fleetcor, Charles Schwab, Verisk, Intuit, Shopify, EverQuote, Guidewire 9 Stock Market Performance (cont.) In prior downturns, FinTech companies have outperformed given the recurring nature of their revenues and the secular trends driving their businesses; from January 2000 through December 2001– during the busting of the Dot Com Bubble – the S&P 500 and NASDAQ Composite Index declined by 18% and 50%, respectively, while an index of prominent FinTech company stocks increased by 30% (1) 60% 40% +30% 20% 0% (18%) -20% -40% (50%) -60% -80% S&P 500 NASDAQ Composite Index FinTech Index Source: CapIQ (1) FinTech Index differs from previous pages as many constituents were not public in 2000. Index constituents: Fiserv, Alliance Data Systems, ADP, Paychex, Total System Services, Global Payments, First Data, Bisys, Ceridian, Certegy, CheckFree, DST Systems, National Processing, Sungard 10 Stock Market Performance (cont.) FinTech stocks were relatively resilient through the 2008 / 2009 Great Financial Crisis – the S&P 500 and NASDAQ Composite Index declined by 23% and 13%, respectively, from January 2008 through December 2009, compared to a gain of over 13% for our index of 12 public FinTech companies (1) 40% 20% +13% 0% (13%) -20% (23%) -40% -60% S&P 500 NASDAQ Composite Index FinTech Index Source: CapIQ (1) FinTech Index differs from previous pages as many constituents were not public in 2008. Index constituents: Visa, Mastercard, Western Union, Total System Services, Global Payments, CyberSource, WEX, Euronet, Heartland Payments, ACI Worldwide, MoneyGram, Online Resources 11 Public Market Valuation Trends – EV / LTM EBITDA Great Financial Crisis 20x 60% decline from peak 15x FinTech LTM EV/EBITDA multiples plummeted into the single digits during the Great Financial Crisis and steadily recovered and then exceeded all prior historical valuation precedents prior to the coronavirus drop 10x 5x 2019 – 2020 YTD 40x S&P 500 NASDAQ Composite While multiples have fallen significantly from their peak, estimates are currently unreliable given that many companies and analysts have not incorporated current conditions into their projections; we will better be able to gauge forward multiples following the first quarter earnings season FinTech Index 38% decline from peak 30x 20x 10x Source: CapIQ as of 04/22/20. 2008 Index constituents: Visa, Mastercard, Western Union, Total System Services, Global Payments, CyberSource, WEX, Euronet, Heartland Payments, ACI Worldwide, MoneyGram, Online Resources 2020 Index constituents: Visa, PayPal, Mastercard, Square, Adyen, Stone, Fiserv, FIS, Global Payments, WEX, Fleetcor, Charles Schwab, Verisk, Intuit, Shopify, EverQuote, Guidewire 12 Public Market Valuation Trends – EV / LTM Revenue Great Financial Crisis 58% decline from peak 5x 0x S&P 500 2019 – 2020 YTD 15x NASDAQ Composite FinTech Index 38% decline from peak 10x 5x 0x Source: CapIQ as of 04/22/20. 2008 Index constituents: Visa, Mastercard, Western Union, Total System Services, Global Payments, CyberSource, WEX, Euronet, Heartland Payments, ACI Worldwide, MoneyGram, Online Resources 2020 Index constituents: Visa, PayPal, Mastercard, Square, Adyen, Stone, Fiserv, FIS, Global Payments, WEX, Fleetcor, Charles Schwab, Verisk, Intuit, Shopify, EverQuote, Guidewire 13 Individual FinTech Stock Impact Most FinTech stocks have declined roughly in line with the overall market since mid-February, though some sectors and specific companies have outperformed or underperformed based on the expected impact of the pandemic and resulting economic downturn • Out of a sample of roughly 200 FinTech stocks, just seven have increased since February 19, one of which (GAIN Capital) is being acquired • The top performing FinTech stocks have primarily been Exchanges or Capital Markets-focused FinTech firms, which are benefiting from market volatility, as well as Healthcare-focused companies and firms providing financial services to Government clients • Many of the worst-performing FinTech stocks have been in Lending-related businesses where investors are concerned about rising defaults or have exposure to areas of the economy likely to be significantly impacted by the downturn Selected Top Performing FinTech Stocks Selected Bottom Performing FinTech Stocks Returns 02/19/20 – 04/22/20 Returns Prior 12 Months (1) Returns 02/19/20 – 04/22/20 Returns Prior 12 Months (1) 34.8% (29.4%) (73.4%) (38.2%) 24.2% 51.3% (72.9%) 75.6% 20.1% 18.7% (72.4%) (30.4%) 10.8% 17.5% (63.8%) (42.0%) Source: CapIQ (1) Returns for 02/19/19 – 02/18/20. 14 Comparison of Market Downturns: 1929, 1987, 2000-01, 2008, and 2020 20% Dow Jones Industrial Average 10% 0% -10% The recent drop in the market looks similar to the 1987 Crash from the perspective of how quickly it happened – this could indicate a “V-shaped” recovery similar to 1987, but the deep economic shock may signal a somewhat longer recovery -20% -30% -40% 1929 1987 2000 2008 2020 Largest DJIA Intra-Day Drop (11.7%) on 10/29/29 (22.6%) on 10/19/87 (5.7%) on 04/14/00 (7.0%) on 10/15/08 (12.9%) on 03/16/20 DJIA Drop from 52-Week High (39.6%) (36.1%) (12.1%) (26.8%) (37.1%) Decline in DJIA P/E Multiples from 52-Week High (1) na na (68.9%) (36.6%) (27.2%) # of Days for S&P 500 to Reach Bear Market (2) na 55 353 272 22 # of Months Bear Market Lasted na 3 30 17 TBD Source: CapIQ as of 04/22/20. (1) Percent drop of Forward P/E multiples from 52-Week High (2) Source: Yahoo Finance; # of days calculated based on when 20% drop was reached 15 FT PARTNERS FINTECH INDUSTRY RESEARCH III. Economic Indicators April 2020 U.S. Macroeconomic Indicators in Previous Downturns Great Depression (1929 – 1935) 1987 Crash and S&L Crisis (1986 – 1994) 10% 30% 20% 5% 10% 0% 0% -10% -5% -20% 1929 1930 1931 GDP Growth 1932 1933 Unemployment 1934 1986 1935 1987 1988 GDP Growth Inflation Dot Com Bubble (1999 – 2004) 1989 1990 1991 1992 Unemployment 1993 1994 Inflation Great Financial Crisis (2006 – 2014) 10% 10% 5% 5% 0% 0% -5% -5% 1999 2000 GDP Growth Source: BLS/BEA Data 2001 2002 2003 Unemployment 2004 2005 Inflation 2006 2007 2008 GDP Growth 2009 2010 2011 Unemployment 2012 2013 Inflation 2014 17 Current U.S. Macroeconomic Indicators Compared to Prior Downturns Current Environment (2015 – 2019) In previous recessions, unemployment remained high for several years, but this is unlikely to be the case this time around assuming the U.S. economy opens back up in the coming months and the government stimulus provides support. A return to relatively normal employment levels, coupled with strong economic conditions prior to the pandemic, should allow for a relatively rapid recovery. 5% 0% 2015 2016 GDP Growth 2017 Unemployment 2018 2019 Inflation While the 2020 annual unemployment rate is still yet to be determined, initial jobless claims increased from 282,000 for the week ending March 14, 2020, to 3.3 million the week of March 21 – the highest figure on record until the following week, when claims more than doubled to 6.9 million. More than 16 million initial jobless claims were filed in the following three weeks, bringing the total to over 26 million in just five weeks. Peak Unemployment (1) Months until Pre-Recession Unemployment Levels (2) Lowest GDP Growth (Quarter) (1) Quarters with Negative GDP Growth 1929 - 1935 1986 – 1994 1999 – 2004 2006 - 2014 2019 24.9% in 1933 7.8% in Jun. 1992 6.3% in Jun. 2003 10.0% in Oct. 2009 TBD na 26 24 71 TBD (12.9%) in 1932 (1.0%) in Q1 1991 0.2% in Q4 2001 (3.9%) in Q2 2009 TBD ~16 (1) 3 0 4 TBD Source: BLS/BEA/Federal Reserve Data (1) Quarterly data not available for 1929-1935, annual data used instead. 1929-1935 had four full years of GDP declines (2) Months from peak unemployment levels to pre-recession levels 18 IMF Forecasts The IMF’s April 2020 World Economic Outlook forecasts a 3% decline in global GDP for 2020, compared to a January projection of 3.3% growth, and a 5.9% decline in U.S. GDP in 2020 About Knoema Global Economic Growth Since 1980 (1) Includes IMF Forecasts for 2020 and 2021, data compiled by Knoema +5.9% 2021 Forecast 6% • Knoema is the most comprehensive source of global decision-making data, with tools that allow individuals and organizations to discover, visualize, model, and present their data and the world's data to facilitate better decisions and better outcomes 4% 2% • The Company offers access to a repository of data from around 1400 public sources and over 200 private sources, including many top alternative data providers 0% • Knoema has published a significant amount of COVID-related data and insights with participation from many alternative data vendors as well as public sources, and provided this data to FT Partners for this report -2% -4% 1980 1985 1990 1995 2000 2005 Source: IMF April 2020 World Economic Outlook, compiled by Knoema (1) Represents global annual GDP growth, includes IMF forecasts for 2020 and 2021 2010 2015 2020 19 Consumer Spending Facteus’ U.S. Consumer Spend Index shows massive declines in U.S. consumer daily spending beginning in late March relative to spending levels in 2019, with a modest recovery in mid-April driven by stimulus checks Daily Consumer Spending Index: About Facteus U.S. Consumer Spend YOY Growth 10% 5% 0% -5% -10% -15% -20% -25% -30% -35% Source: Facteus Insight Report on Consumer Spending and Transactions (FIRST) Note: The US Consumer Spend Index tracks consumer spend percentage changes year over year • Facteus is a leading provider of actionable insights from financial data; the Company’s data products have been gathered directly from over 500 financial institutions, payment companies, FinTechs, and debit card programs • The Company recently launched the Facteus Insight Report on Consumer Spending and Transactions (FIRST), which provides a critical lens into consumer behaviors and economic trends derived from financial transaction data covering more than 1,600 companies and 430 publicly traded stock tickers • Facteus’ newest product, Enlightmint, is composed of key business metrics informed by empirical card transactions and contains one of the largest consumer transaction panels, with the broadest demographic and geographic coverage available 20 Local Business Impact in the U.S. According to Womply, small businesses in the U.S. experienced year-over-year growth in average daily revenue until mid-March 2020, when average revenue began to tumble around the weekend of Friday, March 13; clearly the economic shutdown is hitting small, local businesses very hard U.S. Local Businesses’ Daily Average Revenue: YoY Variance About Womply 75% High: 66.2% 50% • Womply is a leading provider of data and software to local businesses and the top software partner to the payments industry 25% Median: 7.0% • The Company’s AI-powered data platform powers its CRM and marketing software, serving more than 450,000 small businesses across America Low: (25.6%) • In addition, Womply’s data platform helps innovative developers create more powerful software for businesses and consumers alike 0% -25% -50% Source: Womply 21 Local Business Impact in the U.S. (cont.) U.S. restaurants, bars and hotels have been especially hard-hit, as social distancing measures and shelter-in-place orders have drastically cut traffic U.S. Local Restaurants’ Daily Average Revenue: YoY Variance 75% High: 58.3% 50% 25% 0% Median: (1.2%) -25% -50% -75% Source: Womply Low: (67.7%) 22 Local Business Impact in the U.S. (cont.) Grocery has been one of the few verticals that has seen sales grow in recent weeks, as consumers have stocked up on food and groceries in order to self-quarantine Last Week YoY Revenue Variance by Industry – U.S. (1) Median: (16%) Public Services and Government Places 66% Food and Beverage Shops 41% Retail and Wholesale Businesses 27% Educational Institutions 22% Pet Services 8% Healthcare and Medical Centers 8% Professional Services 7% Quick Service Food and Beverage -3% Local Services -5% Sports and Recreation Places -6% Auto Services -16% Religious Organizations -16% Health and Beauty Businesses -22% Auto Sales Businesses -25% Online Businesses -36% Bars and Lounges -40% Restaurants -50% Parking Businesses -54% Lodging Places -72% Arts and Entertainment Transportation Businesses -78% -89% -100% -75% Source: Womply (1) Average revenue for the week of April 13, 2020 compared to the same week in 2019 -50% -25% 0% 25% 50% 75% 23 Local Business Impact in the U.S. (cont.) About Signifyd COVID-19 Impact on Businesses by Type • According to Signifyd’s E-commerce Pulse Report, e-commerce sales were up 8% week-over-week for the week ended April 13, contributing to a nearly 50% rise since the end of February (1) • Signifyd provides Revenue Optimization and Fraud Management, leveraging the Signifyd Commerce Network (10K+ merchants globally) to help merchants maximize conversion (4-6% average lift), automate customer experience (faster order processing, no manual investigation) and eliminate fraud and customer abuse (no chargebacks) − Luxury goods sales were up 35% and Beauty & Cosmetics increased 32% for the week of April 13, representing the largest sales increase for the week • They guarantee decisions and pay for fraud on approved transactions − Auto Parts and Tires sales increased 11% for the week and 21% overall • In 2019, Signifyd was rated as the market leader by industry analysts and merchants alike, and is the only solution to be natively integrated into Cybersource (VISA) and Accertify (Amex) − Leisure & Outdoor e-commerce sales were up 3% for the week and 112% for the period since Feb 25 − Alcohol, Tobacco, E-cigarettes and Cannabis have seen an increase in sales every week since the WHO announced the global pandemic, and a total increase of 77% − Grocery sales have stabilized weekly but are up 32% since February About Thanx • Meanwhile, Thanx reports that restaurant sales have stabilized at 59% below precrisis averages (2) − QSR is 47% below the pre-crisis average − Casual dining is 61% below the pre-crisis average • Thanx is a CRM and digital engagement platform that helps modernize and personalize guest interactions to drive incremental revenue • Merchants analyze purchasing activity without additional hardware or point-of-sale integration • Consumers pay as usual and automatically receive personalized rewards on their phones − Coffee/snack is down 86% from the pre-crisis average − Fine dining is down 98% from the pre-crisis average (1) (2) Signifyd COVID-19 Weekly Pulse Report for Ecommerce Thanx: Impact of Coronavirus on Restaurants 24 U.S. Business Impact Feedzai’s anonymized data from a large gas retailer and a large U.S. card issuer shows daily sales volumes declining drastically beginning in mid-March Daily Transaction Volumes, Large Petrol Retailer (1) About Feedzai 150 100 50 (61%) 0 Daily Transaction Volumes, Large U.S. Issuer (1) ‒ Feedzai was founded and developed by data scientists and aerospace engineers, and its advanced risk management platform is powered by big data and machine learning 150 100 50 0 Source: Feedzai (1) Data is indexed to 100 at the first day in order to anonymize • Feedzai is the market leader in fighting fraud with AI, allowing many of the world’s largest banks, processors and retailers to safeguard trillions of dollars and manage risk, while improving customer experience (55%) • Feedzai has provided this proprietary, anonymized data, which is from a large U.S. acquirer, to FT Partners for this report 25 U.S. Business Impact (cont.) According to Feedzai’s data from a large U.S. acquirer, package stores and food & convenience stores have seen their sales grow relative to January and February averages, while barber & beauty shops have been hardest hit Daily Sales Variation From Average by Industry (1) Restaurants Food & Convenience Stores Barber & Beauty Shops Package Stores - Beer, Wine, Liquor Fast Food Restaurants Other 50% +19% 0% +2% (32%) -50% (54%) (64%) -100% Source: Feedzai (see more about Feedzai on page 24) (1) Represents variation towards average from Jan-Feb. smoothed with a 7-day window. Data is anonymized. (96%) 26 Global Business Impact According to Feedzai’s data from a European e-commerce acquirer, cable services, electronics and book sales have all increased steadily since late February, while travel and transportation-related sales have cratered Daily Transaction Volumes by Industry, European E-Commerce Acquirer (1) Passenger Transportation 400 Cable Services Electronic Sales Bookstores +295% 300 +127% 200 +32% 100 0 Source: Feedzai (1) Data is indexed to 100 at the first day in order to anonymize (91%) 27 Global Business Impact – South Africa Impact of COVID-19 on Small Businesses (1) Food, Drink and Hospitality 80% Healthcare, Beauty and Fitness Small Business Merchant Data Retail Yoco, a leading mPOS player in South Africa, 68% produced a study regarding the COVID-19 impact on its consumer base, which primarily consists of small businesses in South Africa. Research shows that there was a massive spike in retail activity in the days leading up to the lockdown, followed by a collapse in activity in the days that followed. Food, drink and hospitality as well as healthcare, beauty and fitness volumes dropped off upon lockdown but have stabilized in recent weeks. 54% 60% 40% 28% 20% 0% -20% -40% -17%-14% About Yoco -30% -60% -80% -80% -84% -88% -100% -84% -85% -90% -86% -86% -93% -120% Self Isolation (March 16-23) Lockdown Lockdown Week Lockdown Week Lockdown Week Announced (24- 1 (March 27-April 2 (April 4-9) 3 (April 10-16) 26 March) 3) Source: Yoco (1) Represents week-on-week change in spending • Yoco, headquartered in Cape Town, is South Africa’s largest mPOS player, serving over 80,000 merchants in South Africa and processing about $500m in transactions annually 28 Cash Deposit and Withdrawal Impact - Kenya Initial reaction to the pandemic led to a mobile money cash-out spike in Kenya in the first half of March in anticipation of agent locations being less accessible. Since a national curfew was imposed on March 26, there has been a decline in deposit frequency and an increase in average deposit value. 7-Day Rolling Cash-In / Out, Kenya (1) Average Deposit Value (KSh) 0.50 0.40 March 13 March 17 First Announced Case of COVID19 in Kenya Fee-Free Under KSh 1,000 About Caribou Data March 26 Curfew Imposed Number of Deposits / Person 1,000 800 0.30 600 0.20 400 0.10 200 0.00 0 Average Withdrawal Value (KSh) Number of Withdrawals / Person 0.50 1,000 0.40 800 0.30 600 0.20 400 0.10 200 0.00 0 Source: Caribou Data (1) Median CICO deposit and withdrawal value and volume • Caribou Data provides insights into digital market activity and consumer behavior in emerging markets. By sourcing data directly from mobile devices, Caribou Data provides clients with a 360-degree picture of how consumers get online, communicate, use apps, consume content, make financial transactions, and more • The Company’s financial data includes insights into mobile money, OTT FinTechs, and banking, including P2P transfer, CICO, bill pay, and more, allowing it to develop detailed analyses on market activity and consumer spending patterns • Caribou Data has provided this proprietary data to FT Partners on a oneoff basis for solely for this report; FT Partners does not have access to Caribou Data’s platform 29 Individual Merchant Performance Merchant Performance Data Top 10 Performing Merchants 7Park Data’s Merchant Monitor report provides weekly insights that ranks merchants based on online order growth across sectors. The report uses e-mail receipt data to identify the Top 20 and Bottom 20 (Top 10 and Bottom 10 featured) merchants based on year-on-year growth rates of the prior week Merchant Sector 1-Week (3/29-4/04) 1Q20 Final 1. Kiehl’s Health/Beauty 952% 54% 2. Wegmans Grocery/Specialty Foods 839% 434% 3. Sally Beauty Health/Beauty 795% 49% 4. My Pillow Housewares 774% 78% 5. Peloton CE 760% 104% 6. NordicTrack CE 748% 62% 7. Total Wine Grocery/Specialty Foods 701% 145% 8. Ace Hardware Home Improvement 698% 107% 9. Academy Sports Sporting Goods 596% 121% 10. PetSmart Pet 553% 84% About 7Park Data Bottom 10 Performing Merchants • 7Park Data is a provider of data analytics software and leading performance indicators to Institutional Investment Firms and Fortune 500 companies • Leveraging machine learning, entity extraction and linking, and predictive models, they transform unstructured information into contextualized, actionable business insights Source: 7Park Data Merchant Sector 1-Week (3/29-4/04) 1Q20 Final 1. AMC Theatres Tickets -100% -22% 2. Curb Ride Sharing -98% -1% 3. StubHub Tickets -98% -29% 4. Ticketmaster Tickets -98% -8% 5. VIA Ride Sharing -97% -47% 6. Vivid Seats Tickets -97% -32% 7. Live Nation Tickets -97% -9% 8. TicketWeb Tickets -94% -25% 9. Orbitz OTA -93% -24% 10. National Car Rental Transport -91% -10% 30 U.S. Meal Delivery Sales Data In addition to food and beverage shops, meal delivery companies have seen sales increase recently, according to Second Measure data, as social distancing measures have forced people to eat all of their meals at home Year-on-Year Growth in U.S. Meal Delivery Sales, Weekly (1) About Second Measure 40% 32% 30% 32% 29% 30% 28% 29% • Second Measure leverages transaction data from billions of anonymized purchases by U.S. consumers, allowing the Company to provide real-time insights into consumer spending and business performance 23% 20% 23% 23% 21% 17% 10% • Second Measure analyzes billions of credit card, debit card, and bank transactions to give investors a view of how companies are performing ‒ The Company uses its proprietary technology to cleanse and enrich the data to provide market insights • Second Measure has provided this proprietary data to FT Partners on a one-off basis solely for this report; FT Partners does not have access to Second Measure’s platform Source: Second Measure (1) Denotes year-on-year changes in U.S. consumer meal delivery sales for UberEATS, GRUB, Postmates, DoorDash and Waitr. Data includes aggregated debit and credit card purchases from a panel of millions of U.S. consumers. 31 U.S. Meal Delivery Sales Data (cont.) U.S. Meal Delivery Sales Growth – Feb. 2020 (1) Sales Growth by Geography, Week of March 16 (1) 88.6% 85% 22% 13% 35.8% 13% 25.5% -1.8% -29% DoorDash Postmates Uber Eats GRUB Waitr Sales per Customer Growth, Week of March 16 (1) Seattle San Francisco Los Angeles -3.7% New York New Orleans Share of U.S. Meal Delivery Sales, Week of March 16 42% 20.8% 18.0% 17.6% 27% 10.4% 21% 9.8% 9% 2% Uber Eats DoorDash GRUB Waitr Postmates DoorDash GRUB Uber Eats Postmates Waitr Source: Second Measure. Data includes aggregated debit and credit card purchases from a panel of millions of U.S. consumers. (1) Denotes year-on-year changes in U.S. consumer meal delivery sales for UberEATS, GRUB, Postmates, DoorDash and Waitr. Geographical data represents the aggregate of all five companies in each metro area. 32 U.S. Corporate Spending Impact According to leading distributed spend management platform Teampay, corporate spend volume remained steady in March relative to February, but there was a shift to virtual spending Key Insights from Teampay About Teampay • While overall spend volume did not change from February, there has been a massive shift to virtual spending • Physical card spending dropped 58% in March vs. February, while total spending did not change • Companies are reducing spend in office supplies, but supporting home offices for employees • 19.5% decrease in amount spent on office supplies from February to March • Computer software and hardware spending increased 42.7% in March vs. February • Business supplies overall increased 155% from February to March • 460.6% increase in purchases categorized as “morale boosting” in March categories such as employee experience, team meals, holiday events, and team gifts • Events budgets are being eliminated or reallocated • 31% decrease in event-related transactions in the first 3 weeks of March vs. the previous 3 weeks • Teampay is a leading distributed spend management platform, allowing companies to request, approve and track expenditures in real-time • The Company’s SaaS product delivers a user-friendly workflow that aligns spenders and finance, collects critical data, integrates it into legacy systems, and provides safe, intelligent payments • Teampay has provided this data and commentary to FT Partners on a oneoff basis solely for this report • 81% decrease in spend on airfare and 48% decrease in hotels between February and March • Digital advertising on publishers like Facebook and LinkedIn increased 117% from February to March Source: Teampay 33 U.S. Corporate Spending Impact (cont.) According to data from AvidXchange, the middle market has shown resilience in overall Electronic Payment Spending, but in recent weeks has lost the YoY gap in growth that was present earlier in the year AvidXchange Middle Market ePayment Index About AvidXchange Highest week of 2019 & 2020 96% 100% 94% 84% % Relative to Peak 75% 79% 75% 89% 94% 98% 92% 82% 79% 78% 65% 92% 81% 79% 76% 84% 83% 82% 76% 74% 68% 67% 62% 50% YoY Growth shrinking 25% 0% 2 3 4 5 6 7 8 9 Week # of Year 2019 Source: AvidXchange Middle Market ePayment Index 10 11 12 13 14 • AvidXchange is the industry leader in automating invoice and payment processes for mid-market businesses • Founded in 2000, the Company processes over $140 billion transactions annually across its network of more than 600,000 suppliers, transforming the way 6,000 customers in North America pay their bills • AvidXchange is one of the fastest growing technology companies in the U.S. with 1,500 employees supporting customers across seven office locations 2020 34 U.S. Corporate Spending Impact (cont.) According to AvidXchange, Middle Market ePayment spending for maintenance, repair and operations purchases are up solidly year-on-year, though ePayment volumes have been relatively flat in recent weeks AvidXchange Middle Market ePayment Index – Maintenance, Repair and Operations Spending Highest week of 2019 & 2020 100% 93% 83% 69% % Relative to Peak 75% 50% 82% 81% 81% 83% 74% 73% 66% 59% 55% 52% 38% 39% 4 5 49% 50% 6 7 72% 66% 63% 60% 70% 50% 47% 53% 25% 0% 2 3 8 9 10 11 12 13 14 Week # of Year 2019 Source: AvidXchange Middle Market ePayment Index 2020 35 U.S. Corporate Spending Impact (cont.) AvidXchange’s Middle Market ePayment Index provides a breakdown of Middle Market ePayment spend by sector, comparing spend in the 12th – 14th weeks of 2020 compared to the 2nd – 11th weeks. Notably, discretionary healthcare spend has declined in recent weeks as the industry focuses on COVID-19. AvidXchange Middle Market ePayment Index – Sector Data (1) Arts, Entertainment and Recreation Mining, Quarrying, Oil & Gas Extraction Discretionary Healthcare -81% -40% -29% Professional, Scientific and Technical Services -13% Construction -12% Wholesale Trade -9% Administrative Services and Waste Management -8% Other -7% Source: AvidXchange Middle Market ePayment Index (1) Compares the 12th-14th weeks of 2020 to a baseline level from weeks 2 - 11. 36 Subscription Business Performance Zuora’s COVID-19 Subscription Impact Report found that 53% of subscription-based companies have not seen a significant impact to their subscriber acquisition rates COVID-19 Impact on Subscription Businesses: • Accelerating: OTT Video Streaming, Digital News & Media, ELearning, Communications Software − OTT Video Streaming companies grew 7x in March 2020 compared to the growth rate over the previous 12 months 11.4% 12.8% − Telcos & Utilities grew 1.75x, and Communications Software grew 1.4x compared to the previous 12 months Accelerating 53.3% − Subscription growth rate for Digital News & Media grew 3x − E-Learning subscriptions grew 2.9x during this period Limited Impact Slowing 22.5% Contracting • Slowing: Consumer IoT, Business IoT Services, Software for Small Businesses, Memberships − Business IoT services subscription growth rate in March 2020 was only half the rate of the previous 12 months About Zuora − Consumer IoT growth in March 2020 was one-third of the rate compared to the previous year • Contracting: Travel & Hospitality, Sports Related Services − The subscription growth rate for services related to travel & hospitality fell meaningfully in March 2020 – with travel paused, subscriptions such as hotel memberships and flight-related services are seeing a halt in sign-ups and an increase in churn • Zuora is an enterprise software company that creates and provides software for businesses to launch and manage their subscription-based services − OTT sports streaming services have experienced a large decline in sign-ups due to the suspension of professional and amateur sports globally – these companies are also challenged to retain customers • Zuora’s applications are designed to automate recurring billing, collections, quoting, revenue recognition, and subscription metrics • Limited Impact: B2B & B2C Software, Information Services Source: Zuora Subscription Impact Report: COVID-19 Edition 37 Lending and Credit Impact – Auto Loan Applications According to TruDecision’s data, while auto loan application volume declined from mid-February peaks, it remained relatively strong overall and has started growing again. Dealers and lenders are using technology to continue to sell and fund auto transactions, even though most retail locations are closed. In addition, the average credit score of applicants has risen, as people under financial pressure are less likely to apply for new loans. TruDecision Daily API Hits and Average National Credit Score Daily API Hits (1) About TruDecision Average Applicant National Credit Score 6000 5000 595 590 585 4000 3000 2000 580 575 570 565 1000 0 Source: TruDecision (1) TruDecision’s Daily API hits - Model EACS V2.1 – U.S. Clients - all credit tiers 560 555 • Founded by industry veterans with decades of experience in auto finance, analytics and technology, TruDecision provides cutting edge FinTech solutions that create valuable efficiencies for automotive dealers and lenders • TruDecision’s robust technology platform uses artificial intelligence, machine learning and neural network models to perform powerful credit analytics on consumers in real time • The Company’s innovative analytic solutions and proprietary credit risk technology solve real problems for its dealer and lender partners, maximizing deal closures and profitability 38 Term Life Insurance Impact Digital life insurance platform Fabric saw a 250% increase in term life policy sales from February to March, with similar growth in wills created and app downloads, indicating that the pandemic is leading more families to prioritize life insurance Monthly Growth in Fabric Term Life Insurance Sales (1) About Fabric 400 + 273% 300 200 100 Source: Fabric (1) Denotes monthly growth in Fabric’s term life insurance sales, indexed to 100 • Fabric is a digital life insurance platform where parents go to start their family's financial life, offering a one-stop shop where parents can create a will, organize their family's finances, and get affordable life insurance • The proprietary data, engagement mechanics, and network effects generated by Fabric’s free products - including the Fabric mobile app, Fabric Wills, and Fabric Vault - help unlock durable advantages, including lower acquisition costs, higher persistency, and online cross-sell opportunities • Fabric is a digital MGA and is responsible for the full-stack of insurance responsibilities, including algorithmic underwriting (up to $1M in coverage), human-assisted underwriting using RPA (for >$1M coverage or more complex cases), and policy administration 39 FT PARTNERS FINTECH INDUSTRY RESEARCH IV. Impact on Financial Services April 2020 Impact on Financial Services In addition to broad liquidity concerns, the coronavirus pandemic will likely have a near-term net negative impact on many key verticals within financial services Banks • Lower rates will result in reduced spread income – The Federal Reserve cut the Federal Funds rate twice in March: from 1.75% to 1.25% on March 3, and from 1.25% to 0.25% on March 15 • Reduction in customer activity will lead to lower fee income • Economic uncertainty will lead to higher delinquencies and loan losses • Traditional banks may struggle to move offline processes online, inhibiting opportunities • May be an opportunity for banks / lenders to benefit from administering SBA loans as part of the CARES Act (see page 72) Lenders • Lenders will likely increase credit provisioning and see higher loan losses due to high unemployment and reduction in economic activity • Demand for loans, particularly mortgage refinancing activity, is likely elevated, but uncertainty about future economic conditions will result in much tighter credit and therefore, lower volumes 41 Impact on Financial Services (cont.) In addition to broad liquidity concerns, the coronavirus pandemic will likely have a near-term net negative impact on many key verticals within financial services Mortgage Originators • Demand for refinancing activity is strong due to lower interest rates, but the ability to close loans could be challenged by the lack of statewide digital recording infrastructure • Average U.S. 30-year fixed-rate mortgage rate hit an all-time low of 3.29% in early March • High near-term unemployment and economic concerns along with an inability to show homes in person will weigh on origination volumes Real Estate Market • High near-term unemployment and economic concerns along with an inability to show homes in person will weigh on new home purchases • Delays in closings are likely, as many counties do not accept digital documents • Home prices will be adversely impacted in the short term by less demand, as well as builders halting or reducing production, but longer-term supply-demand imbalance should not be as extreme as in 2008-09 • Real estate investments could suffer from reduction in rent payments • Government intervention on evictions and mortgage/rent payments may help stabilize the market somewhat 42 Impact on Financial Services (cont.) In addition to broad liquidity concerns, the coronavirus pandemic will likely have a near-term net negative impact on many key verticals within financial services Capital Markets • • Market volatility has benefited exchanges, trading platforms and other capital markets-related businesses, and has driven greater investor interest in specific asset classes – Commentary from TradingView: “Not only are we seeing a 53% increase in overall traffic trends across the globe, we've seen a 605% increase in oil products and oil futures, 547% spike in volatility product interest, 504% increase in Russian currency trade interest, 442% increase in index product interest, 364% increase in Brazilian index products, 298% spike in oil interest, and 120% spike in Gold interest” – TradingView is the largest active network for self-directed traders and investors with over 10M active monthly users from 50+ countries, and features a web-based all-in-one research and trading platform Valuations remain depressed for heavily affected sectors such as cruise lines, airlines and hotels – According to data from S3, over the past month of trading, Carnival, Royal Caribbean & Norwegian Cruise have seen the largest increase in short Interest as a percentage of float within the entire S&P 500 Index – S3 Partners, LLC is a market-leading integration software and data company that sits between any bank reporting portal and every client workflow, delivering security-level information to Excel, in any language and to any platform; clients use S3's technology and data to create better outcomes at every point in the investment process: Portfolio Management, Trading & Execution, Risk Management, and Treasury Operations Investment Managers • Lower assets under management will lead to reduced fees • Double impact of market declines hurting assets along with fund outflows • Volatility in markets may lead investors to more conservative (and less profitable) investment strategies Source: TradingView, S3 43 Impact on Financial Services (cont.) In addition to broad liquidity concerns, the coronavirus pandemic will likely have a near-term net negative impact on many key verticals within financial services Payment Processors • Spending will decline due to shutdown and high near-term unemployment – Visa and Mastercard withdrew 2020 guidance due to economic concerns • Credit card lenders’ loan losses and provisions likely to increase due to high unemployment and resulting higher default rates • Processors with relatively more exposure to online sales likely to be better positioned • Check processors are not seeing a decline in deposits at ATMs or checks coming into processing centers – for instance, CheckAlt Co-Chairman and CEO Shai Stern states that the company is seeing increased requests for assistance to handle the manual process of opening, batching, scanning, and processing mail – CheckAlt is reporting more check volumes coming to its 13-site processing network, including online bill pay checks Insurance • Claims costs likely to increase across select categories • Premiums will be negatively impacted by unemployment • Proposed legislation (PRIA) to provide potential loss-sharing program relating to losses from pandemics • Many large auto insurers have given partial refunds or credits to customers, as fewer drivers are on the road due to stay-at-home orders and claims have declined 44 Impact on FinTech FinTech companies should be somewhat insulated from the impact of the recession relative to traditional financial services firms due to market and business model dynamics, though a challenging near-term financing environment will be an issue for firms that are not well-funded FinTech • FinTech companies are generally more resilient given less balance-sheet intensive models • Most consumer-facing FinTech companies operate only in an online environment and can still conduct business despite social distancing • B2B FinTech companies are helping financial institutions improve their workflows and online consumer experiences, work that should continue apace or potentially accelerate • Many enterprise FinTech solutions - such as online payment systems, fraud and authentication solutions, and trading infrastructure - are mission critical • Tech (and FinTech) companies generally have a better ability to manage remote workers and working from home for a lengthy period of time • Coming out of the downturn, disaster recovery plans now and in the future will likely include heavy reliance on FinTech solutions, and FinTech companies will likely help in distributing SMB loans and stimulus payments – For instance, Lendio announced plans to hire as many as 200 full-time small business loan agents, as it expects loan demand to increase by over 300% driven by the CARES Act, while Kabbage announced that it had received over 37,000 requests for Paycheck Protection Program loans as of April 7 – Challenger bank Chime announced a pilot program whereby it gives eligible customers cash advances before the government disburses their stimulus checks – CheckAlt is partnering with virtual ATM network application SPARE to provide a remote deposit capture tool that will assist the underbanked access funds from stimulus checks Source: Company press releases 45 FT PARTNERS FINTECH INDUSTRY RESEARCH V. Interview with Mark Loehr, CEO of OpenExchange April 2020 OpenExchange Overview Company Overview Platform Overview OE Connect o o Live video meetings support by seasoned specialists and a proprietary directory Connects conference rooms, desktops, and mobile devices globally regardless of the technology, complexity, or locations OE Conference • OpenExchange is the trusted video exchange for financial services o OpenExchange is the only provider that can deliver secure video for complex meetings, and its client base includes 100% of top investment banks with connectivity to 95% of buy side firms and thousands of corporates • The Company video-enables vital daily communications with advanced one-to-one, one-to-many, and many-to-many video technologies, tools and services OpenExchange network has grown to 50,000+ pre-connected endpoints across 2,600+ entities – all fully tested and validated by each IT and compliance team o OE Livestream o On track to deliver 75 multi-track, global virtual conferences between March and June 2020 • OpenExchange bridges the worlds of real-time video conferencing and video livestreaming with searchable on-demand, branded video archives called showcases o o o Allen Deary Michael Kolowich CEO CTO CCO Kate Cornish Booth Jim Sheehan CAO/COO CFO Source: Company Website Flexible solution for creating, organizing, distributing, and tracking live and on-demand video and multimedia content Uses the Knovio smart media platform, an enterprise-grade video system used by 400,000 registered users OE Learn Management Team Mark Loehr Only provider of digital conferences to financial services firms; the service allows their clients to host traditionally in-person conferences on a secure and branded platform for guests to watch live speakers, participate in panels and interact with other guests Allows clients to record conference events to generate collections of on-demand video assets OE TV o Sophisticated live video streaming tools that create highquality, multimedia-enhanced live viewing and webinar experiences Provider viewers a personalized learning portal that houses the content specific to their needs The best of real time data analysis from Refinitiv, live earnings webcasts from the world’s most important companies, breaking video notes from top independent analysts and provocative interviews with investment thought leaders from RealVision – updated continuously throughout each market day 47 Interview with Mark Loehr, CEO of OpenExchange Mark Loehr CEO What was your vision behind founding OpenExchange and how has the business evolved? What has been the secret to the Company’s success? My vision connected dots that started back on the trading desk with an IPC turret with 120 buttons to reach clients. It was built upon by my observation of the strength of client relationships that were built “cumulatively” over time and reinforced by my role as CEO of Wit Soundview in the dotcom era of how to use technology appropriately to grow a company. The first day I was introduced to OpenExchange I instantly imagined a world where buyside, sellside and companies would communicate in lightning speed – but this time using video. And after a much longer adoption curve than I anticipated, we are seeing that every day around the world. The secret to our success was the decision to embrace the need for managed service. It was not enough to build an interop capability, but to recognize that CEOs and senior portfolio managers were not going to figure out how connect a Cisco call with a Polycom or Skype call just because our technology made it possible. While the world was hoping our model would scale via technology, we had to guide clients into their meetings. So we hired some incredibly talented video specialists to support the process and meet the clients in their comfort level. But added to that was recognition that we needed to test and authenticate each connection to ensure security but to also be sure the call would go smoothly. We also understood that it was important to keep the connection data (not the personal data), so that for the next call the testing would not be required. We now have a database of over 50,000 connections that allows calls that used to take 30 minutes to test to now take 30 seconds. 48 Interview with Mark Loehr, CEO of OpenExchange (cont.) Exclusive CEO Interview – Mark Loehr How has the spread of COVID-19 impacted your business? How have you been able to meet this new demand? Can you provide any real-time stats on what you are seeing today? Just like the evolving story of the virus around the globe, we saw this story evolve for OpenExchange in waves. It started in Asia where we were asked to handle the first 100% virtual conference in mid-February, to Europe where that unfolded as flights and meetings were cancelled. The next big jump was when the OpenExchange Meeting / Events entire world went WFH and not just every conference, but every 24,000 Q4 single physical meeting was cancelled. It was complete chaos Q3 the week of March 11th when Booked Q2 everyone struggled to connect Backlog from home and we were Q1 overwhelmed with over 100x our typical requests for meetings in a 19,500 24 hour period. 14x YoY Growth We have now ramped up our staff so that while we typically handled 100 high value meetings a week in 2019, we are now handling 100 CEO level calls an hour. That requires the full combination of interoperability, terrifically trained and mature video specialists and a technology process that can keep clients up to date with Uberlike experience. 3,421 954 737 1,042 688 2019 4,500 2020 49 Interview with Mark Loehr, CEO of OpenExchange (cont.) Exclusive CEO Interview – Mark Loehr From a management perspective, how are you rallying your employees to respond to the massive new demand you are seeing while they may also be dealing with challenges in their own lives? This is clearly a challenging period for the entire world from many respects and very confusing. The core component keeping our team focused is that we are making a difference in helping people communicate. And while it may not be on the front lines of healthcare, there is a business world to try to keep moving forward. We see first-hand everyday the appreciation companies have for being able to communicate effectively with investors from home (even quarantined with the virus) and from investors to hear directly what companies are doing through this process and how they are planning for 2H20. How has COVID impacted your clients? Have you seen any difference in reaction among sellside, buyside, and corporates? The biggest change has simply been that the adoption curve got lifted from 10% of meetings to 100% of meetings and clients are finding out – hey, this actually works and it works well. That is the first thing. The second is that video is a business continuity issue. It used to be the location of the data center, but now it is how do we effectively allow 400,000 employees to work securely and effectively from home all at the same time. Wow. Brand new concept. And finally, there is no turning back 100%. This is not a 3 month phenomenon. Between adoption curve, cost efficiency and business continuity – video communications will become a major part of every company’s DNA. 50 Interview with Mark Loehr, CEO of OpenExchange (cont.) Exclusive CEO Interview – Mark Loehr How do you think COVID will impact the broader trend of digitization? What will conferences of the future look like? If you can centralize all of that content and make it available to viewers in a personalized way, how can they change the way they work and information they have access to? That is a great question and connects some dots that people have not figured out yet. So many physical meetings have amazing content, but it starts at 1pm and ends at 2pm. If 10% of all meetings are recorded and/or streamed live around the world then the value of that content rises exponentially in that hour but also for some time ahead. A bit like the long tail concept for Amazon books. My vision is that just like in the real world, there will be 3-4 major destinations for live and VOD financial content. Not highly produced content, but millions of authentically created sessions that can find their way to relevant audiences around the world in multiple languages. Please explain the Knovio merger and what this brings to OpenExchange’s overall product offering. Knovio is the livestreaming product for KnowledgeVision which was initially created to address video requirements for the learning arena. They built some great solutions but that is a tough market with tight budgets. But they had the beginnings of syncing content with video that we liked and then were early to adopt HLS livestreaming to replace Flash. And when they created a great looking video library that allowed for transcripts and search, we were hooked. We became a strong customer and then when we saw the market reaction to our combined offering, we recognized it just made sense to join forces. You probably know that the London Stock Exchange has been an early adopter of our livestream product and we are coordinating closely with them to support Virtual Annual General Meetings for listed clients this spring. Livestream and video destinations are where this world is headed, and this combination has given us true speed to market. But beyond that, the teams have fit like a glove and we could not have scaled to handle the volumes if these two sets of talented employees could not have combined hard work, innovative technology solutions and the best attributes of each company. 51 Interview with Mark Loehr, CEO of OpenExchange (cont.) Exclusive CEO Interview – Mark Loehr What do you know now that you wish you could have told yourself five years ago? You can’t force adoption curves. You can only be prepared when the inflection point occurs. I could see this 8 years ago but the world refused to give up on physical meetings. But I guess if I knew that five years ago, I wouldn’t have kept the faith to keep pushing every day while keeping the cash burn low enough to get here. The other part of the equation is how supportive the investors have been. They did not panic when the revenues were slow to develop, but instead took heart that usage was growing 40-50% a year with some of the largest financial firms in the world. I am very grateful and respectful of their unwavering support. What new products and services will OpenExchange be adding in the future? Just one teaser out of many. Everyone wants transcripts and wants them now. In the same way we are gathering (appropriately and compliantly) connection information for clients around the world, we are imagining a process where we ask participants that want transcripts if they can record a preset 30 second audio file. It would gather key words relevant to that participant as well as voice patterns and so transcripts could get to 99% accuracy with named speakers in multiple languages at the close of the meeting. Stay tuned. And thanks for your interest in our story. Examples of momentum for OpenExchange’s video conference solutions: Global Investment Bank #1 3 Days 58 Corporates 250 1x1 & Group Meetings Global Investment Bank #2 4 Days 57 Corporates 240 1x1 & Group Meetings 20 Complex Webinars Global Investment Bank #3 3 Days 10 Countries 800 Meetings Global Investment Bank #4 1 Day 22 Corporates 117 1x1 & Group Meetings 52 FT PARTNERS FINTECH INDUSTRY RESEARCH VI. PE / VC Activity April 2020 PE and VC Activity Declined Rapidly in the Great Recession, Largely Due to Systemic Issues The Great Financial Crisis was caused by systemic issues in the financial system, whereas the economy and financial system were largely strong entering the current crisis, which may prevent declines in deal volume of the magnitude seen in 2008-09 U.S. PE / VC Deal Volume $ in billions $870 $815 $810 140 38 57% annual decline in 2008 $688 $616 72 $485 $482 29 772 $382 $349 $315 37 456 27 284 78 87 84 41 730 46 336 375 137 48 31 $165 312 $416 $596 $716 544 512 2014 2015 434 610 629 2016 2017 678 138 2006 2007 2008 2009 2010 2011 2012 Private Equity Source: PitchBook 2013 Venture Capital 2018 2019 54 PE and VC Dry Powder is at Record Levels, Which Should Soften the Impact of the Recession At the end of 2019, across private equity and venture capital there was a total of $1.45 trillion in dry powder, the highest amount ever recorded and over twice the amount from five years prior PE / VC Dry Powder $ in billions $1,450 $1,228 $1,016 $831 $672 2009 Source: Preqin $613 $598 2010 2011 $670 $682 2013 2014 $746 $559 2012 2015 2016 2017 2018 2019 55 IPO Activity is Likely to Decline Drastically as it did in Prior Recessions IPO activity declined significantly in previous recessions and is likely to do so again in 2020, potentially leaving the private markets as the most palatable option for companies seeking capital $100 476 The number of IPOs declined by 83% between 1999 and 2001 380 450 $85.3 350 275 $75 222 $66.8 $62.6 173 79 $50 66 157 159 153 63 21 $31.2 $28.2 170 125 128 160 250 160 150 105 $54.9 41 $46.9 $46.3 $38.7 $35.7 $34.3 $25 159 192 $42.7 $36.3 $30.5 26 $35.5 -50 $30.0 $22.8 $22.0 -150 $18.8 $9.5 50 $13.2 $6.9 $0 -250 -350 Proceeds in Billions (US$) Source: Renaissance Capital, https://site.warrington.ufl.edu/ritter/files/2017/08/IPOs2016Statistics.pdf Number of IPOs 56 FT PARTNERS FINTECH INDUSTRY RESEARCH VII. Market Participant Commentary April 2020 FinTech Investor Commentary We are hearing mixed commentary from investors For most investors who spend time in the venture and growth space, the feedback is mixed; some remain open for new investments, while others are putting a pause on deals for the next few weeks • Most are focused on their existing portfolio companies and cash runway • Investors are rethinking valuations, so many opportunities will likely face pricing pressure or structured terms For private equity firms, supporting portfolio companies has been top of mind, with firms spending most of their time evaluating and projecting new operating cases • Most PE firms are willing to engage, but are being patient and less likely to move to investment quickly – though some investors will only engage if there is significant dislocation in terms of value, or a tuck-in opportunity that becomes available Credit-oriented investors have been getting many inbounds, particularly those who can provide transitional capital, but commentary has been mixed in terms of cost of capital Public market investors generally have turned to their public book and are not pursuing private opportunities at this time, as they are deploying into cheaper liquid public opportunities 58 Public FinTech Companies – Square (1) Date • • • • 03/24/20 • • • • • 03/19/20 • • 03/17/20 Stock Performance: (NYSE: SQ) (1) Comments • Square revises guidance for Q1 net revenue to $1.30 billion 1.34 billion vs. prior view of $1.34 Bn - 1.36 Bn as the spread of COVID-19 triggers a slowdown in gross processing volume for its seller ecosystem Gross Profit for Q1 revised down to a range of $515 mm 525 mm from $550 mm – 560 mm Over the trailing 10-day period, Seller GPV declined by ~5% year-on-year, with greater declines in recent days Revised ranges assume further deceleration in overall GPV through the last week of March, beyond the levels seen in recent days Impact on Cash App ecosystem gross profit was less pronounced than for the Seller ecosystem Withdraws guidance for the year Expects Q1 2020 net income (loss) per share, adjusted EBITDA and adjusted EPS below its most recent guidance ranges provided on March 5 In January and February, Seller ecosystem gross profit grew 32% y/y and Cash App ecosystem gross profit rose 118% y/y $90 $80 $70 $60 $50 BTIG analyst Mark Palmer upgrades Square to Neutral from Sell, saying the stock is fairly valued after falling 54% in less than a month Removes $37 priced target after stock achieved that level $40 Cowen analyst George Mihalos raises stock to Outperform from Market Perform with a $70 price target Atlantic Equity analyst Kunaal Malde upgrades Square to Neutral from Underweight with a price target of $44 $30 Apr-19 Source: Company Press Releases, Company Website (1) CapIQ as of 04/22/2020 2/19/20 – 4/22/20 SQ declines ~28% Jun-19 Aug-19 Oct-19 Dec-19 Feb-20 Apr-20 59 Public FinTech Companies – Mastercard (1) Date • • • 03/24/20 • • • • 03/11/20 Stock Performance: (NYSE: MA) (2) Comments • • Mastercard suspends annual outlook in response to COVID19, even as “long term fundamentals of our business look strong” Notes the deterioration in cross-border, switched volume and switched transaction metrics, despite service line revenues holding up “reasonably well” Sees Q1 net revenue growth in low single digits (2% negative currency headwind) vs. prior forecast in late Feb. of net revenue growth of 9-10% (2-3 percentage points lower than discussed on Jan. 29 earnings call) Expenses are seen growing in low to mid single digits and the co. is taking actions to evaluate travel and entertainment expenses, advertising and marketing Given the first two months of the quarter likely saw crossborder volume growth of ~15%, this would imply March cross-border volumes are down ~50% (1) Autonomous Research revised 2020 top line growth forecast down to (2.9%) compared to growth of 5.3% (including estimated COVID-19 impact) in March update and 14.9% in February update (after Mastercard’s initial guidance) (1) Mastercard CFO Sachin Mehra says cross-border activity has slowed further as COVID-19 spread beyond the AsiaPacific Region, KBW analyst Sanjay Sakhrani writes in a note to clients Mehra says most of the slowdown was from cross-border travel, and e-commerce slowed to a lesser extent Sakhrani expects MA managing expenses prudently “can help buffer some of the impacts over the near term.” Source: Company Press Releases, Company Website (1) Autonomous Research (2) CapIQ as of 04/22/2020 $360 2/19/20 – 4/22/20 MA declines ~25% $330 $300 $270 $240 $210 $180 $150 Apr-19 Jun-19 Aug-19 Oct-19 Dec-19 Feb-20 Apr-20 60 Public FinTech Companies – Visa (1) Date Stock Performance: (NYSE: V) (1) Comments • Visa reduces Q2 revenue guidance because of a sharp slowdown in its cross-border business due to lower travelrelated spending because of the coronavirus outbreak • Expects Q2 net revenue growth 2.5 - 3.5 percentage points lower than it issued on its Jan. 30, 2020 earnings call • "Cross-border growth rates have deteriorated week by week since the coronavirus outbreak in China, and trends through Feb. 28, 2020 do not yet fully reflect the impact of the coronavirus spreading outside of Asia. As such, we anticipate that this deteriorating trend has not bottomed out yet," the company said in an SEC filing 03/02/20 • Visa plans to update its outlook for future quarters and fiscal full year 2020 on its Q2 earnings call in April • The Company later said on 03/04/20 that cost cuts could help counter the impact $220 2/19/20 – 4/22/20 V declines ~22% $190 $160 $130 $100 Apr-19 Source: Company Press Releases, Company Website (1) CapIQ as of 04/22/2020 Jun-19 Aug-19 Oct-19 Dec-19 Feb-20 Apr-20 61 Public FinTech Companies – Adyen (1) Date • 03/25/20 • • 03/18/20 • • 03/06/20 Stock Performance: (ENXTAM:ADYEN) (1) Comments Morgan Stanley notes that, although digital payments could speed up as a consequence of COVID-19, there’s still downside to numbers in the near term; however, it looks at Adyen on any pullbacks as the winner JPMorgan notes that Adyen has ~27% processed volume exposure to airlines and travel-related sectors. However, it only acts as a gateway for airlines and does not take the acquiring risk. Thus, Adyen has a much lower exposure to airline/travel-related sectors on a net revenue basis (indicated closer to 10% than 20%). This travel part of revenue is likely to collapse, and in the near term could disappear with virtually no revenue in March and 2Q Given the social distancing measures introduced and shutdown imposed, Adyen will likely see a slowdown in nonairline/travel-related verticals as well (most notably POS and quick service restaurants), yet partially offset by higher online/e-commerce volumes JPMorgan lowers estimates for processed volume for 2020 by 4.3%, maintains estimates for net take rates and accordingly lowers net revenue estimates for 2020/21 by 4.2%/4.1%, respectively. It also maintains operating cost estimates; thus, the cut to net revenue numbers translates to 7.3%/7.1% cut to EBITDA estimates for 2020/21. Revised net income and EPS estimates for 2020/21 stand 7.9%/7.7% lower compared to prior estimates Barclays reports that, when asked about Mastercard lowering its outlook due to lower cross-border volumes, Adyen clearly indicated this is a disproportionate effect to MasterCard as Adyen, whose pricing structure is interchange pass through, does not benefit to the same extent as MasterCard from cross-border volumes Source: Company Press Releases, Company Website, Broker reports (1) CapIQ as of 04/22/2020 $1,000 2/19/20 – 4/22/20 ADYEN declines ~6% $950 $900 $850 $800 $750 $700 $650 $600 $550 $500 Apr-19 Jun-19 Aug-19 Oct-19 Dec-19 Feb-20 Apr-20 62 Public FinTech Companies – Nexi (1) Date Stock Performance: (BIT:NEXI) (1) Comments • • 03/06/20 • • Given Nexi’s geographic exposure to Italy, which has been impacted by COVID-19 the most significantly among European countries, Barclays notes how the company will likely see some impacts on transaction volume; much of the Italian payments volume for Nexi is generated in-store (>80%) Barclays notes that, although travel and tourism accounts for 13% of Italy’s GDP and is the sector that is seeing the most disruption from COVID-19, Nexi’s volume and revenue exposure by industry remains unknown. On the other hand, the Italian market is dominated by SMEs that make up 96% of businesses, which could be encouraging as Nexi’s volume is not reliant on one large customer The Company indicates that is has seen no material impact from COVID-19 currently. 50% of Nexi revenue is linked to volumes and despite seeing lower volumes at restaurants and other sectors linked to travel and tourism, these have been more than offset by stronger volumes in groceries and other staple sectors. Nexi also does not have any direct acquiring relationships with airlines as deemed too risky by the company Nexi indicated that is sees no risk to the current guidance of 5-7% revenue growth, but it would anticipate variable costs to come down if the situation were to significantly worsen to the point it did impact revenues $18 $14 $12 $10 $8 $6 $4 $2 $0 Apr-19 Source: Company Press Releases, Company Website, Broker reports (1) CapIQ as of 04/22/2020 2/19/20 – 4/22/20 NEXI declines ~19% $16 Jun-19 Aug-19 Oct-19 Dec-19 Feb-20 Apr-20 63 Public FinTech Companies – Afterpay (1) Date • • 03/19/20 • • 03/18/20 Stock Performance: (ASX:APT) (1) Comments • UBS notes that near term impacts from COVID-19 remain highly unpredictable and potential scenarios remain wide. From a higher level view, however, Afterpay's strong equity funding and naturally high receivables turnover mean nearterm funding risks are likely low; stock upgraded to Neutral with a A$13.20 target price UBS also notes that with higher customer defaults it sees an impairment to longer-term outlook, given such customers cannot use the platform again. It lowers longerterm customer assumptions to 18.0 million by FY25E (compared to 22.5 mm previously), while medium-term net transaction margin estimate increases from 2.10% to 2.20% given a more favorable geographic mix New UBS forecasts assume flat FY21E active customers and flat underlying sales, while an 'extreme scenario' assumes a ~10% reduction in active customers in FY21E, and underlying sales of $8.8 billion $45 $35 $30 $25 $20 In his letter to shareholders, Afterpay advises that it has not seen a material impact on business activity and timing of instalment repayments or transaction losses to date, despite the significant challenges as a result of COVID-19 evidenced by the volatility in its share price $15 Afterpay also noted that the majority of its underlying sales (>75%) are generated from online transactions, and reiterated its support to merchants who are rapidly looking to increase their online exposure in the current environment and that it will redirect a portion of its existing budgeted marketing spend for this purpose $5 Source: Company Press Releases, Company Website, Broker reports (1) CapIQ as of 04/22/2020 2/19/20 – 4/22/20 APT declines ~34% $40 $10 $0 Apr-19 Jun-19 Aug-19 Oct-19 Dec-19 Feb-20 Apr-20 64 Public FinTech Companies – Ingenico (1) Date Stock Performance: (ENXTPA:ING) (1) Comments • • 03/18/20 • • Ingenico has indicated that it has roughly 40% exposure to airline and travel-related companies within its Global Online business, which comprised roughly 5% of Ingenico’s total group net revenue in 2019 JPMorgan believes that Ingenico will be impacted by the slowdown in sales at merchants driven by the lockdown imposed by several European countries, and notes Ingenico’s overall sales declined by 4.8% in 2009, when it was primarily a terminals company JPMorgan lowers estimates for Ingenico’s sales in 2020/21 by 6.3%/6.5%, while forecasts Ingenico’s Retail business to grow by 5.8% y/y and its terminals business to decline by 3.3% y/y in 2020. This translates to 1.3% growth in 2020. Revised adjusted EBITDA and adjusted EPS estimates for 2020/21 stand 16.0%/8.1% and 28.5%/18.1%, respectively, lower compared to previous estimates $160 2/19/20 – 4/22/20 ING declines ~23% $140 $120 $100 $80 $60 $40 $20 $0 Apr-19 Source: Company Press Releases, Company Website, Broker reports (1) CapIQ as of 04/22/2020 Jun-19 Aug-19 Oct-19 Dec-19 Feb-20 Apr-20 65 FT PARTNERS FINTECH INDUSTRY RESEARCH VIII.Recent Private FinTech Company Financing Activity April 2020 FinTech Transaction Activity by Time Period FinTech transaction activity was very strong in 2019 and Q1 2020, but will likely decline significantly for at least the next two quarters, though figures for April 2020 may be inflated by deals that were already in place prior to the pandemic FinTech Transaction Volume by Quarter $ in billions $123.1 $125 10.1 $97.1 $100 10.6 $75 $60.6 $51.7 $50 5.5 $25 8.0 $39.6 $25.7 4.4 21.3 $23.4 8.7 113.0 24.4 $28.7 8.4 34.1 10.7 43.7 $52.7 12.5 11.0 37.6 41.4 41.7 Q2 2019 Q3 2019 Q4 2019 11.3 36.1 27.7 86.5 $30.5 10.7 20.3 14.7 $38.4 $53.9 $48.9 19.8 $0 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 M&A Source: FT Partners’ Proprietary Transaction Database Q3 2018 Q4 2018 Financing Q1 2019 Q1 2020 67 FinTech Transaction Activity by Time Period (cont.) FinTech transaction activity was very strong in 2019 and Q1 2020, but will likely decline significantly for at least the next two quarters, though figures for April 2020 may be inflated by deals that were already in place prior to the pandemic The Number of FinTech Transactions by Quarter 785 675 618 613 646 647 630 664 635 686 674 643 609 520 436 386 402 232 211 Q1 2017 Q2 2017 413 437 414 407 239 233 210 216 228 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 M&A Source: FT Partners’ Proprietary Transaction Database 442 422 436 215 242 238 265 244 243 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 394 Financing 400 68 FinTech Transaction Activity by Time Period (cont.) FinTech financing volume declined precipitously during the recession in 2008 and 2009; while this downturn is likely to be shorter-lived, the near-term declines could look similar to 2009 FinTech Financing Volume by Month, 2008 – 2009 (1) $ in millions $968 $806 FinTech financing volume in January and February 2009 declined by 84% and 88% year-on-year, respectively $624 $523 $474 $466 $292 $253 $228 $185 $443 $344 $315 $205 $192 $280 $242 $220 $170 $169 $121 $77 Source: FT Partners’ Proprietary Transaction Database (1) June 2008 excludes Merrill Lynch’s $4.5 billion sale of its stake in Bloomberg as it was a secondary transaction $168 $96 69 FinTech Transaction Activity by Time Period (cont.) FinTech transaction activity declined precipitously during the recession in 2008 and 2009; while this downturn is likely to be shorter-lived, the near-term declines could look similar to 2009 The Number of FinTech Transactions by Month, 2008 – 2009 The total number of FinTech transactions declined by 38% year-on-year in January 2009 104 92 45 80 80 28 60 28 71 65 71 63 25 33 56 21 43 22 59 34 40 47 Source: FT Partners’ Proprietary Transaction Database 23 22 50 63 49 25 54 19 68 38 55 28 22 34 66 25 33 31 35 55 43 71 69 25 15 64 54 42 65 56 28 25 18 88 86 82 40 43 28 24 M&A Financing 31 35 33 40 28 48 36 46 54 35 70 FinTech Transaction Activity by Geography FinTech transaction activity has been strong across geographies in recent years, and will likely decline across geographies in the near-term, with the timing of recoveries depending on the duration of social distancing measures and resulting economic impacts in each market Total FinTech Financing Transactions by Month, 2017 to present 206 200 173 175 125 100 154 154 143 140 141 128 120 121 128 138 135 143 146 142 139 131 133 92 83 55 155 151 151 153 145 150 100 81 82 78 112 75 84 68 61 74 68 65 75 75 62 79 66 72 59 148 73 25 73 73 84 71 76 73 67 44 50 56 62 117 86 69 56 65 113 127 130 89 96 72 152 148 132 121 91 80 81 94 84 167 165 166 159 70 69 75 60 71 81 79 81 49 53 44 93 84 73 77 69 66 47 61 63 65 63 52 50 70 66 61 76 70 75 81 79 64 51 57 50 North America Source: FT Partners’ Proprietary Transaction Database International Mar-20 Feb-20 Jan-20 Dec-19 Nov-19 Oct-19 Sep-19 Aug-19 Jul-19 Jun-19 May-19 Apr-19 Mar-19 Feb-19 Jan-19 Dec-18 Nov-18 Oct-18 Sep-18 Aug-18 Jul-18 Jun-18 May-18 Apr-18 Mar-18 Feb-18 Jan-18 Dec-17 Nov-17 Oct-17 Sep-17 Aug-17 Jul-17 Jun-17 May-17 Apr-17 Mar-17 Feb-17 Jan-17 0 71 FinTech Transaction Activity by Geography (cont.) FinTech transaction activity has been strong across geographies in recent years, and will likely decline equally across geographies in the near-term, with the timing of recoveries depending on the duration of social distancing measures and resulting economic impacts in each market Monthly FinTech Financing Volume $ in billions $17.2 June 2018 includes Ant Financial’s $14 billion financing 15.5 $5.2 North America Source: FT Partners’ Proprietary Transaction Database 2.7 $2.6 1.8 3.2 1.2 1.7 1.5 1.3 Feb-20 1.0 Jan-20 Nov-19 1.7 1.3 Oct-19 3.0 1.1 Aug-19 Apr-19 Jul-19 2.2 2.1 2.0 2.1 Jun-19 1.6 May-19 1.9 2.3 1.4 1.7 $4.4 $3.7 $3.6 $3.7 $3.4 Dec-19 3.1 $2.8 1.5 Mar-19 1.8 0.8 International 2.0 $3.3 1.4 2.2 Sep-19 $3.5 $3.6 Feb-19 1.4 1.4 2.2 2.4 Jan-19 2.8 1.3 Dec-18 1.2 1.5 1.7 1.1 1.3 2.3 $4.5 $4.3 $4.0 $2.7 2.1 1.6 $2.5 Nov-18 4.1 0.7 $4.3 $3.7 Oct-18 3.1 $2.5 1.2 Sep-18 Mar-18 Feb-18 Jan-18 Dec-17 Nov-17 Oct-17 Sep-17 Aug-17 Jul-17 Jun-17 May-17 Apr-17 Mar-17 Jan-17 Feb-17 2.5 0.7 1.1 1.3 $0.9 0.8 1.1 0.5 1.1 0.7 0.6 1.5 1.2 1.1 1.9 0.5 1.3 1.1 0.8 1.2 1.0 1.4 0.5 0.6 1.0 0.6 0.5 $1.2 $2.2 $4.0 Aug-18 1.8 $2.2 $2.2 $2.4 1.5 Jul-18 2.5 $1.5 $2.0 $2.1 $3.4 Jun-18 $1.5 $1.7 $3.2 $3.0 $4.2 1.0 May-18 2.8 $3.6 Apr-18 $4.1 Mar-20 $5.1 72 Recent FinTech Financing Rounds with New Investors Despite the overall downturn in the market, in recent weeks there have still been a number of large FinTech capital raises with participation from new investors Raises $160 million in Series D Financing Raises $146 million in Series D Financing Raises $128 million in additional Growth Financing for a total of $388 million New investors: ANZi Ventures, Salesforce Ventures New investors: Ping An, Hamilton Lane, Goldman Sahcs, WestCap Group, Affiliated Managers Group New Investors: Lone Pine Capital, Neuberger Berman, Schonfeld Strategic Advisors Raises $145 million in Series C Financing New investors: Bain Capital, Industry Ventures Raises $125 million in Series C Financing New investors: Sapphire Ventures, Recruit Strategic Partners, Alkeon Capital Management Raises $100 million in Financing Raises $67 million in Series B Financing Raises $65 million in Series C Financing Raises $54 million in Series C Financing New investors: Accel, Founders Fund New investor: Index Ventures New Investors: TPG Growth New Investor: Temasek 73 Selected Recent FinTech Financing Transactions Announce Date Company Selected Investor(s) 04/22/20 Lone Pine Capital; Schonfeld Strategic Advisors; Pivot Investment Partners; Mastercard; Sixth Street Partners; Neuberger Berman 04/20/20 Temasek; Index Ventures 04/17/20 Amount ($ in mm) Target Country FinTech Sector Financial Management Solutions USA 54 InsurTech France Andreessen Horowitz; General Catalyst; Sequoia Capital; GV 600 Payments USA 04/17/20 Accel; Founders Fund 68 Securities Germany 04/16/20 ReefKnot Investments; MasterCard; Bessemer Venture Partners; Hambro Perks; Augmentum 11 Financial Management Solutions UK 04/16/20 Index Ventures; Valar Ventures; Creandum; Redalpine Venture Partner 65 Financial Management Solutions Germany 04/16/20 Lingfeng Capital; QBN Capital; Undisclosed Investors 15 Payments Switzerland 04/16/20 General Atlantic 30 Banking / Lending Tech India 04/16/20 Ascot Group; GLP 15 InsurTech USA 04/16/20 Origin Ventures; Signal Peak Ventures 10 Financial Management Solutions USA 04/16/20 Tiger Global; Casa Verde Capital; DNS Capital; Undisclosed Investors 23 Payments USA 04/15/20 AlbionVC; Ascension Health Ventures; Entrepreneur First; Fair by Design Fund; Plug and Play Ventures; TriplePoint 6 Banking / Lending Tech UK 04/15/20 TPG Growth 100 Financial Management Solutions UK 04/15/20 Falcon Edge Capital; Lightspeed Venture Partners; Lightspeed India Partners; Bharat Inclusion Initiative 15 Financial Management Solutions India 04/15/20 ANZi; Salesforce Ventures; DST Global; Tencent; Sequoia Capital China; Hillhouse Capital Group; Horizons Ventures; Hedosophia 160 Payments Australia 04/15/20 Bain Capital Tech Opportunities; Industry Ventures; American Express Ventures; CreditEase; Maverick Ventures; OurCrowd 145 Financial Management Solutions Israel 04/14/20 Nyca Partners 6 Banking / Lending Tech USA Source: FT Partners’ Proprietary Transaction Database $388 74 Selected Recent FinTech Financing Transactions (cont.) Announce Date Company Selected Investor(s) Amount ($ in mm) FinTech Sector Target Country 04/14/20 Initialized Capital; Morgan Creek Digital; ConsenSys $3 Banking / Lending Tech Canada 04/13/20 Ribbit Capital; SAIF Partners; Amazon; Sequoia Capital India 15 Banking / Lending Tech India 04/10/20 TTCER Partners; 8VC; Advisors.fund; Montage Ventures; Mubadala Ventures 4 Healthcare USA 04/10/20 Revel Partners; RZC Investments 5 Wealth / Capital Markets USA Tech 04/09/20 Itochu Corporation 48 Payments Japan 04/09/20 Net Insurance; Luiss Alumni 4 Growth 1 InsurTech Italy 04/09/20 InsurTech Gateway; Finance Durham Fund; North East Development Capital Fund 2 InsurTech UK 04/08/20 Speedinvest na Payments Austria 04/08/20 Efftronics Asia; Draper Dragon 2 Wealth / Capital Markets USA Tech 04/08/20 ATX Venture Partners; Baird Capital; Draper Associates; Silverton Partners 13 Financial Management Solutions USA 04/08/20 Visa; Global Brain na Banking / Lending Tech UK 04/08/20 Mucker Capital; Oregon Venture Fund; Madrona Venture Group; 99 Tartans 8 Payments USA 04/08/20 MassMutual Ventures Southeast Asia; Pacific Century Group; Visa 11 Banking / Lending Tech Hong Kong 04/08/20 Morgan Stanley 21 Banking / Lending Tech Australia 04/07/20 Y Combinator Continuity; Alkeon Capital Management; GV; Accel; Sapphire Ventures; IVP; Recruit Strategic Partners; Summit Partners 125 Payments USA 04/07/20 Crosslink Capital; IAG Firemark Ventures 8 InsurTech USA 04/06/20 HPE Growth Capital; Cinco Capital; Armada Investment 27 Wealth / Capital Markets Germany Tech Source: FT Partners’ Proprietary Transaction Database 75 Selected Recent FinTech Financing Transactions (cont.) Announce Date Company Selected Investor(s) Amount ($ in mm) Target Country FinTech Sector 04/06/20 Prime Ventures; Vertex Ventures $6 Payments India 04/06/20 Lakestar; Holtzbrinck Ventures; Localglobe 13 Banking / Lending Tech UK 04/03/20 SEED Capital; Greyhound Capital; Socii Capital; Augustinus Foundation 22 Banking / Lending Tech Denmark 04/02/20 PSPIB na Banking / Lending Tech USA 04/02/20 OCA Ventures; Founder Equity; Geolo Investments 8 Banking / Lending Tech USA 04/01/20 General Catalyst; Oak HC/FT; Drive Capital; Ascension Health Ventures 51 Healthcare USA 04/01/20 SoftBank; Elliott Management; Resolute Capital Partners 2 Banking / Lending Tech USA 04/01/20 Undisclosed Investors 2 Wealth / Capital Markets Belgium Tech 03/31/20 Wellington Management; Vostok Emerging Finance; Accel 22 Payments India 03/31/20 InsurTech Gateway 1 InsurTech USA 03/31/20 Mosaik Partners 6 Healthcare USA 03/31/20 MatchMove na Payments Singapore 03/31/20 Greenspring Associates; Goodwater Capital; Greyhound Capital; Altos Ventures; Partech Partners; Broadhaven Capital Partners; Tekton Ventures; JAFCO Co 45 Banking / Lending Tech Japan 03/31/20 Companyon Ventures; Base10 Partners; Hyde Park Venture Partners 6 Payments USA 03/30/20 The Phoenix Insurance Company; Kamet 8 Healthcare Israel 03/27/20 Bulgarian American Credit Bank; New Vision 3 1 Payments Bulgaria Source: FT Partners’ Proprietary Transaction Database 76 Selected Recent FinTech Financing Transactions (cont.) Announce Date Company Selected Investor(s) Amount ($ in mm) Target Country FinTech Sector 03/27/20 Bulgarian American Credit Bank; New Vision 3 $3 Payments Bulgaria 03/27/20 Cloud Capital; Better Capital na Banking / Lending Tech India 03/27/20 Undisclosed Investors 2 Banking / Lending Tech UK 03/26/20 Coinbase Ventures; Highland Capital Partners; Fidelity Investments; Castle Island Ventures; Communitas Capital Partners; Collaborative Fund; Avon Ventures; Raptor Group; Digital Currency Group 6 Wealth / Capital Markets Tech USA 03/26/20 Susa Ventures; Index Ventures; Stripe 20 Payments USA 03/26/20 Khosla Ventures; Kleiner Perkins; Top Tier Capital Partners; B Capital Group 75 Payments USA 03/24/20 Bain Capital Ventures; Polychain Capital; BitMEX Ventures 3 Wealth / Capital Markets Tech India 03/24/20 M12; US Venture Partners; PayPal 22 Financial Management Solutions USA 03/24/20 Dubai World 95 Banking / Lending Tech Australia 03/23/20 Undisclosed Investors 5 Banking / Lending Tech USA 03/23/20 Sierra Ventures; Menlo Ventures 13 Financial Management Solutions USA 03/23/20 Ping An Ventures; WestCap Investment Partners; BlackRock; Goldman Sachs; Affiliated Managers Group Inc.; BNY Mellon; Hamilton Lane; UBS; The Blackstone Group 146 Wealth / Capital Markets Tech USA 03/20/20 Norwest Venture Partners; Kedaara Capital; Sarva Capital 46 Banking / Lending Tech India 03/19/20 Undisclosed Investors 1 Wealth / Capital Markets Tech USA 03/19/20 Rising Tide Mobile Entertainment; Mencey Capital; Fidelity National Information Services; Undisclosed Investors 6 Payments Poland 03/19/20 Undisclosed Investors 8 InsurTech USA Source: FT Partners’ Proprietary Transaction Database 77 Selected Recent FinTech Financing Transactions (cont.) Announce Date Company Selected Investor(s) Amount ($ in mm) FinTech Sector Target Country 03/19/20 WestCap Investment Partners; Undisclosed Investors $40 Wealth / Capital Markets Tech USA 03/19/20 LGT Lightstone Aspada 50 Banking / Lending Tech India 03/18/20 LexinFintech 12 Banking / Lending Tech USA 03/17/20 Undisclosed Investors na Financial Management Solutions India 03/17/20 Par Equity 1 Payments UK 03/17/20 Undisclosed Investors 3 Wealth / Capital Markets Tech India 03/17/20 Earlybird Digital East Fund; Undisclosed Investors 5 Real Estate Tech Turkey 03/17/20 LGT Lightstone Aspada; Unicorn India Ventures; Accion Venture Lab 7 Banking / Lending Tech India 03/17/20 Core Innovation Capital; Foundation Capital; Obvious Ventures 17 Banking / Lending Tech USA 03/17/20 RTP Global; ABN AMRO Ventures; Finleap; VR Ventures Management; Holtzbrinck Ventures 21 Banking / Lending Tech Germany 03/16/20 Advent International na Financial BPO USA 03/16/20 Earlybird Digital East Fund; Tiny VC; Undisclosed Investors 3 Banking / Lending Tech UK 03/16/20 Citadele Bank 11 Banking / Lending Tech Lithuania 03/16/20 DCM; Huagai Capital; Matrix Partners China 21 Financial Management Solutions China 03/16/20 Warburg Pincus 59 Financial Management Solutions Brazil 03/16/20 Intercontinental Exchange; PayU; The Boston Consulting Group; Goldfinch Partners; CMT Digital; M12; Pantera Capital 300 Crypto / Blockchain USA Source: FT Partners’ Proprietary Transaction Database 78 FT PARTNERS FINTECH INDUSTRY RESEARCH IX. Coronavirus Stimulus Bill Overview April 2020 Overview of the Coronavirus Stimulus Bill The Coronavirus Aid, Relief, and Economic Security Act (CARES) provides approximately $2 trillion to alleviate the damaging effects of the coronavirus pandemic to the US economy and population Some key highlights from the bill are listed below: Approx. % of Total Spending Category Description 8% State / Local $150 billion Coronavirus Relief Fund for state, local and tribal governments 2% Schools $30 billion for an Education Stabilization Fund for states, school districts and institutions of higher education for costs related to COVID-19 2% Disaster Relief / Response $45 billion for the Disaster Relief Fund for imminent needs of state, local, tribal and territorial governments across the United States to protect the population and help areas recover from COVID-19 >1% National Guard $1.4 billion for deployments of the National Guard – the funds will support 20,000 members of the National Guard for use under the direction of the governors of each state for the next six months >1% CDC $4.3 billion for the Centers for Disease Control and Prevention to help federal, state and local public health agencies prevent, prepare for, and respond to COVID-19 1% Transit Systems $25 billion for transit systems distributed by existing state organizations >1% Elections $400 million in election security grants for the upcoming 2020 election 13% Unemployment $260 billion investment to increase unemployment insurance from 3 to 4 months, and to provide temporary unemployment payments of $600 per week, in addition to the regular state and federal benefits 25% Big Business Creates a $500 billion lending fund for businesses, cities and states 18% Small Business $350 billion for small business loans TBD Direct Payments Provides a $1,200 direct payment to many Americans and $500 for each dependent child Source: National Conference of State Legislatures (NCSL) 80 Overview of the Coronavirus Stimulus Bill (cont.) Direct Payments One-time payment to lower and middle-income Americans based on gross income as reported in latest tax return, 2018 or 2019 Individuals – $1,200 • Full payment for individuals making $75,000 or less • Lower, scaled payments for individuals making $99,000 or less • No payment for individuals making over $99,000 Married Couples – $2,400 • Full payment for couples making $150,000 or less • Lower, scaled payments for couples making $198,000 or less • No payment for couples making over $198,000 Additional Per Child Under 17 years – $500 • Money is expected to go out by April 6, 2020 through direct deposits for people that had a tax refund in the last two years and through checks for everyone else Unemployment Expands unemployment timing and payment amounts • Unemployment benefits expand from 3 to 4 months • Temporary additional payments of $600 per week • Part-time, self-employed and gig economy workers now have access to unemployment benefits Source: National Conference of State Legislatures (NCSL) 81 Overview of the Coronavirus Stimulus Bill (cont.) Small Businesses Provides relief to small businesses through loans and grants Paycheck Protection Program (PPP): $350 billion for small business loans of up to $10 million • Businesses and non-profits with 500 or fewer employees are eligible for loans • Self-employed and gig workers can also qualify • Priority for loans will be given to women-owned businesses, new businesses and businesses run by anyone “socially and economically disadvantaged” (1) • Loans will be provided through banks, credit unions, and other lenders – including FinTech lenders - and guaranteed by the Small Business Administration (SBA) – applications should be submitted through lenders who are partnered with the SBA (2) • Restrictions placed on VC- and PE-backed firms have led to lobbying for amendments to the bill Included in the $350 billion is $10 billion for SBA emergency grants of up to $10,000 for immediate relief for businesses’ operating costs Also included is $17 billion for the SBA to cover 6 months of payments for small businesses with existing SBA loans • Rent, mortgage and utility costs are now eligible for SBA loan forgiveness Provides broader access to bankruptcy relief for small businesses • Chapter 11 bankruptcy is now available to small businesses carrying debt of up to $7.5 million - an increase from the previous limit of $2.7 million (3) A separate $500 billion fund was created for bailing out large businesses affected by the pandemic, such as airlines, with emergency loans • The fund will be overseen by Treasury Secretary Steve Mnuchin, a congressional oversight committee and an Inspector General 82 Source: National Conference of State Legislatures (NCSL) (1) TechCrunch: “House passes historic $2 trillion coronavirus economic rescue bill” (3) (2) Fast Company: “Applying for a small business disaster loan? What to know about the COVID-19 stimulus package” The National Law Review: “COVID-19 Stimulus Package Temporarily Expands Availability of Small Business Reorganization Act” Overview of the Coronavirus Stimulus Bill (cont.) On April 9, 2020, the Federal Reserve announced it will provide up Actions by the Federal Reserve to $2.3 trillion in loans for further support of the economy Provide $600 billion in loans for small and medium businesses through the Main Street Lending Program • 4-year loans for companies with 10,000 workers or less, or with annual revenue of less than $2.5 billion • Principal and interest payments will be deferred for one year • Funds will be disbursed through the top banks in the U.S. • The Treasury is providing $75 billion to the facility from funds designated by the CARES Act Supply financing to the financial institutions that are originating PPP loans • Called the Paycheck Protection Program Liquidity Facility (PPPLF), the Fed will supply liquidity to the participating financial institutions through term financing backed by PPP loans Support the flow of credit to household and businesses through expanding the size and scope of three programs: • Primary and Secondary Market Corporate Credit Facilities (PMCCF and SMCCF) and the Term Asset-Backed Securities Loan Facility (TALF) will now support up to $850 billion in credit backed by $80 billion in credit protection by the Treasury • Broadens the range of assets that are eligible for collateral through TALF, which supports the issuance of assetbacked securities that fund lending for student loans, auto loans, credit card loans and more Provide $500 billion to establish the Municipal Liquidity Facility which will offer loans to states and local governments to help them manage cash flow strain caused by the pandemic • The Fed will also buy short-term debt from states, Washington D.C., counties with 2 million or more residents, and cities with over a million people • The Treasury is providing $35 billion of credit protection to the Federal Reserve using funds from the CARES Act 83 Source: The Federal Reserve; CNN Business Overview of the Coronavirus Stimulus Bill (cont.) The Role of FinTech Companies Several FinTech companies have already played a key role in supporting consumers and small businesses Consumer-Focused Personal Finance companies are finding ways to support customers as they face new difficulties (1) • Propel, a Brooklyn-based startup that aims to help low-income Americans improve their financial health, has partnered with nonprofit GiveDirectly to enable its customers to receive $1,000 donations on their prepaid cards • Chime, a San Francisco-based Challenger Bank, offered eligible users advances on their $1,200 government stimulus checks • Even, which enables customers to access earned wages early and provides budgeting tools, has recently allowed users to take money out every day if their employer permits it • Challenger Banks across the world have also experience increases in downloads as traditional banks have had to close their branches (see FT Partners report on The Rise of Challenger Banks) Small Business-Focused As Traditional Banks experienced hardships issuing PPP loans, Alternative Lenders proved resilient (1) (2) • At the launch of the $349 billion loan program for small business, many traditional banks weren’t prepared to issue loans • Meanwhile, several more agile SMB lenders were quick to provide small businesses with PPP loans, such as Kabbage, which was among the first FinTech lenders to step up in ensuring SMBs could access these loans (2) Forbes: “Fintech Apps Offer Financial First Aid For Hardest-Hit Consumers” Forbes: “Kabbage Teams With SBA Banks To Issue PPP Loans” 84 FT PARTNERS FINTECH INDUSTRY RESEARCH X. Overview of FT Partners April 2020 FT Partners – Focused Exclusively on FinTech FT Partners’ Geopolitical Impacts and Imperatives of COVID-19 Video Panel Geopolitical Impacts and Imperatives Of COVID-19 On April 16, 2020, FT Partners hosted a strategic panel covering the COVID-19 pandemic. This session provided insights into the Geopolitical Impacts and Imperatives of COVID-19. Panelists Marko Papic (Chief Geopolitical Strategist, Clocktower Group) and R.P. Eddy (CEO, Ergo) joined us to provide a geopolitical analysis of the COVID-19 crisis and discuss the effects that policy, national leadership, and stimulus will have on markets in the coming weeks and months. Steve McLaughlin Greg Smith Marko Papic R.P. Eddy Founder & CEO of FT Partners Moderator, FT Partners Clocktower Group Ergo To watch a replay of the video conference: https://www.ftpartners.com/webinar/geo-impact-covid-19 FT Partners – Focused Exclusively on FinTech FT Partners’ EMEA Perspective on Venture Capital Video Conference EMEA Perspective on Venture Capital Amidst COVID-19 On April 9, 2020, FT Partners hosted a world-class panel of venture investors and leaders in the FinTech community to discuss the impacts of the COVID-19 pandemic on the EMEA region Stefan Klestil of Speedinvest Sean Park of Anthemis John Doran of TCV Steve McLaughlin Founder & CEO of FT Partners Moderator Rob Moffat of Balderton Capital Aaron Goldman of General Atlantic To watch a replay of the video conference: https://www.ftpartners.com/webinar/emea-vc-covid-19/ FT Partners – Focused Exclusively on FinTech FT Partners’ Venture Capital Panel Discussion Venture Capital in the Middle of COVID-19 On April 2, 2020, FT Partners hosted a world-class panel of venture investors and leaders in the FinTech community to discuss the global impacts of the COVID-19 pandemic Tom Stafford of DST Nigel Morris of QED Investors Patricia Kemp of Oak HC/FT Steve McLaughlin Founder & CEO of FT Partners Moderator Matt Harris Hans Morris of Bain Capital Ventures of Nyca Partners To listen to a recording of the call : https://www.ftpartners.com/webinar/vc-covid-19 FT Partners – Focused Exclusively on FinTech FT Partners Research – The Rise of Challenger Banks The Rise of Challenger Banks Are the Apps Taking Over? • • • • Click pictures to view report • 89 FT Partners – Focused Exclusively on FinTech FT Partners Research – FinTech in Africa FinTech in Africa Leapfrogging Legacy Straight to Mobile • • • • Click pictures to view report 90 FT Partners – Focused Exclusively on FinTech FT Partners Research – Brazil’s Emerging FinTech Ecosystem Brazil’s Emerging FinTech Ecosystem A Fertile Environment for Disruption and Innovation • • • • • • Click pictures to view report • 91 FT Partners – Focused Exclusively on FinTech FT Partners Research – Beyond the Credit Score Beyond the Credit Score: What’s Next in Consumer Credit Management • • • • Click pictures to view report • 92 FT Partners – Focused Exclusively on FinTech FT Partners Research – Auto FinTech Auto FinTech: The Emerging FinTech Ecosystem Surrounding the Auto Industry FT Partners’ 200+ page report provides an in-depth look at the FinTech ecosystem surrounding the auto industry: The report includes: • • • • Click pictures to view report 93 FT Partners – Focused Exclusively on FinTech FT Partners Research – WealthTech WEALTHTECH The Digitization of Wealth Management • • • Click pictures to view report • 94 FT Partners – Focused Exclusively on FinTech FT Partners Research – InsurTech Industry Report Prepare for the InsurTech Wave: Overview of Key InsurTech Trends FT Partners’ 269-page report provides an in-depth look at the major waves of innovation and disruption that are beginning to radically alter the insurance industry. • • • • Click pictures to view report 95 FT Partners – Focused Exclusively on FinTech FT Partners Research – Global Money Transfer Global Money Transfer: Emerging Trends and Challenges • • • • • • Click picture to view report 96 FT Partners – Focused Exclusively on FinTech FT Partners Advises AvidXchange on its $388 million Growth Financing Overview of Transaction • On April 23, 2020, AvidXchange announced it has raised $128 million in additional equity financing in an oversubscribed round, which brings it to a total of $388 million, after raising $260 million in January of this year • Participating investors include a number of the foremost capital management firms, including new investors Neuberger Berman, on behalf of clients, Lone Pine Capital, and Schonfeld Strategic Advisors, along with existing investors • AvidXchange is a best-in-class business-to-business payments company that is revolutionizing how companies pay their bills by automating the invoice and payment processes for middle market companies The Company focuses on serving mid-market clients and spans multiple industries including Real Estate, Financial Services, Home Owners Associations (HOA), Healthcare Facilities / Social Services, and Construction Significance of Transaction • The new capital will fuel AvidXchange’s continued growth and innovation, allowing the Company to invest in its solutions for both buyers and suppliers while reaching more customers in the middle market • The transaction firmly positions the Company for its next phase of growth FT Partners’ Role • FT Partners served as exclusive strategic and financial advisor to AvidXchange • FT Partners has been AvidXchange’s advisor since 2009, working with the Company on multiple capital raises, as well as a number of acquisitions • Transaction underscores the long-term nature of many of FT Partners’ relationships, as well as our deep expertise in advising leading Financial Management Solution providers 97 FT Partners – Focused Exclusively on FinTech Overview of FT Partners – 18 Years in Business $ 98 FT Partners – Focused Exclusively on FinTech FT Partners is the Advisor of Choice for Leading FinTech Companies FinTech Unicorns / Multi-Billion Dollar Deals Large Corporate Clients 99 FT Partners – Focused Exclusively on FinTech Sellside and Buyside Experience (Selected Examples) Sellside M&A Buyside M&A 100 FT Partners – Focused Exclusively on FinTech Significant Experience Advising Large Financing Rounds and “Unicorns” 101 FT Partners – Focused Exclusively on FinTech Selected FT Partners’ International / Cross-Border Experience 102 FT Partners – Focused Exclusively on FinTech FT Partners’ History of Success Working with Public Companies Public Clients IPOs Public Buyers 103 FT Partners – Focused Exclusively on FinTech FT Partners’ Awards and Recognition LendIt Industry Awards 2018: o FT Partners wins Top Investment Bank in FinTech The FinTech Finance 40: o Ranked #1 in 2017 and 2018 - Steve McLaughlin, FT Partners The Information’s “Silicon Valley’s Most Popular Dealmakers” o Ranked as the #2 top Technology Investment Banker by The Information subscribers (2016) o Only FinTech focused investment banking firm and banker on the list M&A Advisor Awards o Cross Border Deal of the Year and Corporate / Strategic Deal of the Year (2018) o Investment Banker of the Year (2017) – Steve McLaughlin, CEO & Managing Partner of FT Partners o Investment Banking Firm of the Year (2016) – FT Partners 104 FT Partners – Focused Exclusively on FinTech Award-Winning Investment Banking Franchise Focused on Superior Client Results 105 FT Partners – Focused Exclusively on FinTech The FT Partners Senior Banker Team Name / Position Prior Background Experience / Education Years of Experience • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • 106
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