Capstone Headwaters FINANCIAL TECHNOLOGY & PAYMENTS Q3 2019 TABLE OF CONTENTS FINANCIAL TECHNOLOGY INDUSTRY OVERVIEW FinTech Industry Overview Year-to-date (YTD) 2019 continues to see strong deal volume and financing across the Financial Technology (FinTech) industry. In Q3, 83 mergers and Payments Industry Overview acquisitions (M&A) were completed in the space and 224 transactions were Unicorns completed YTD. Notable IPOs Financing markets in 2019 have been extremely active. FinTech financings are Select Transactions on pace to have the most active year in terms of total volume of financings in FinTech Coverage Verticals the history of the vertical. This has been driven by numerous late-stage mega- Multiples By Sector rounds ($100 million+) for FinTech startups. While late-stage mega-rounds ran rapid this quarter, early-stage venture capital backed funding dropped quarter- Public Company Data over-quarter. Firm Track Record Notable mega-round financings in Q3 included Klarna, an online payments and CONTRIBUTORS point-of-sale (POS) lender. Klarna received a $460 million equity fundinground led by Dragoneer Investment Group, valuing Klarna at $5.5 billion, post-money. Additionally, C2FO raised $200 million in financing led by SoftBank Vision Fund, David Francione valuing C2FO at $1.3 billion, post-money. Managing Director 617-419-2040 M&A Activity: Financial Technology [email protected] 150 Michael J. Warren 121 109 Analyst 96 100 86 978-587-7920 85 77 83 [email protected] 64 50 Number of Transactions 0 Q4 '17 Q1 '18 Q2 '18 Q3 '18 Q4 '18 Q1 '19 Q2 '19 Q3 '19 Source: Capital IQ, PitchBook, and Capstone Headwaters Research 3 www.capstoneheadwaters.com October 2019 Financial Technology & Payments | Q3 2019 PAYMENTS INDUSTRY OVERVIEW – B2B OFFERS SIGNIFICANT GROWTH OPPORTUNITY M&A activity in the Payments industry remained strong with a total of 44 transactions completed in Q3 2019 and 133 transactions completed through YTD 2019. Combined, total M&A dollar values for FinTech & Payments have already hit a record high in 2019, driven by numerous mega-deal announcements. Notable mega-deals in 2019 included Fidelity National Information Services, Inc. (NYSE:FIS) acquisition of WorldPay, Inc. for $43 billion; Fiserv, Inc. (Nasdaq:FISV) acquisition of First Data Corporation for $41 billion; and Global Payments Inc. (NYSE:GPN) acquisition of Total System Services, Inc. for $26 billion. The significant increase in the dollar value of M&A activity across the FinTech & Payments industries highlights the importance of building a strong technology infrastructure amongst financial institutions. Companies are currently under tremendous pressure from competition and the threat of disruptive technologies. With that being said, acquiring FinTech & Payments companies has become simpler than building in-house. Moreover, post-crisis regulatory frameworks are actively affecting financial institutions and the way they run their business models. Business models need to be adjusted in accordance to these regulations and outdated technology is no longer being tolerated amongst financial institutions and regulators. M&A has proven to be a powerful lever to pull in order to address these challenges. M&A Activity: Payments 60 46 50 43 44 39 36 40 34 29 30 26 20 10 Number of Transactions 0 Q4 '17 Q1 '18 Q2 '18 Q3 '18 Q4 '18 Q1 '19 Q2 '19 Q3 '19 Source: Capital IQ, PitchBook, and Capstone Headwaters Research FINTECH & PAYMENTS UNICORNS Globally, the volume of FinTech unicorns (VC-backed) increased in 2019. Notable new FinTech unicorns include: Region: North America Region: North America Region: Europe Region: North America Region: Europe Region: Australia 2 Financial Technology & Payments | Q3 2019 HIGHLIGHTED FINTECH IPOS Initial Public Offering (IPO) activity in Q3 across the FinTech industry remained healthy. Two notable IPOs were 9F Inc. (market cap of $2,467.8 million) and Phreesia, Inc. (market cap of $824.3 million). Overall, public financing options through IPOs have been pursued less than private financing alternatives in 2019. With private financing being the preferred method, FinTech valuations have been up. Company: 9F Inc. Ticker: JFU Exchange: NASDAQ Amount Raised ($mm): $84.6 IPO Price Per Share: $9.50 Enterprise Value ($mm): $1,834.0 EV/LTM Revenue: 3.0x Business Description 9F Inc. operates an online consumer finance platform that integrates and personalizes financial service offerings. The Company offers digital financial accounts; revolving and non-revolving loan products to borrowers, as well as traffic referral services to institutional funding partners; and a suite of online wealth management products through various in-house platforms. The Company also offers payment services. The Company was founded in 2006 and went public through its IPO offering on August 15, 2019. Company: Phreesia, Inc. Ticker: PHR Exchange: New York Stock Exchange Amount Raised ($mm): $167.2 IPO Price Per Share: $18.00 Enterprise Value ($mm): $748.1 EV/LTM Revenue: 6.8x Business Description Phreesia, Inc. provides an integrated Software-as-a-Service (SaaS) based software and payments platform (known as the Phreesia platform) to the Healthcare industry. The Phreesia platform offers a robust suite of solutions that aim to manage the patient intake process and integrate patient payment processing. The Company was founded in 2005 and went public through its IPO offering on July 18, 2019. ADDITIONAL FINTECH IPOS Enterprise Date Company Business Description Listing Exchange Ticker Value (mm) Provides data and analytics 07/24/19 Health Catalyst NASDAQ HCAT $1,611.4 technology and services. Provides wealth management New York Stock 07/18/19 AssetMark AMK $1,952.6 and technology solutions. Exchange (NYSE) Source: Capital IQ, PitchBook and Capstone Headwaters Research 3 Financial Technology & Payments | Q3 2019 HIGHLIGHTED PAYMENTS IPOS IPO activity in Q3 across the Payments industry remained healthy. Two notableIPOswereFinablrPLC(marketcapof £1,050.0) and Network International Holdings PLC (market cap of £2,565.0). Overall, public financing options through IPOs have been pursued less than private financing alternatives in 2019. With private financing being the preferred method, payments valuations have been up. Company: Finablr PLC Ticker: FIN Exchange: London Stock Exchange Amount Raised (£mm): £306.3 IPO Price Per Share: £1.75 Enterprise Value (£mm): £738.5 EV/LTM Revenue: 0.7x Business Description Finablr PLC provides a global platform for business to business (B2B) payments and foreign exchange (FX) solutions. The Company’s platform covers cross-border payments and consumer solutions, consumer foreign exchange solutions, and B2B and payment technology solutions. The Company is headquartered in Abu Dhabi, United Arab Emirates and went public through its IPO offering on May 15, 2019. Company: Network International Holdings PLC Ticker: NETW Exchange: London Stock Exchange Amount Raised (£mm): £1,087.3 IPO Price Per Share: £4.35 Enterprise Value (£mm): £2,854.8 EV/LTM Revenue: 11.5x Business Description Network International Holdings PLC provides a robust suite of technology-enabled payments solutions to merchants and financial institutions. The company was founded in 1994 and went public through its IPO offering on April 10, 2019. ADDITIONAL PAYMENTS IPOS Enterprise Date Company Business Description Listing Exchange Ticker Value (mm) Provides foreign exchange London Stock 06/25/19 Argentex Group PLC HAIM £155.7 services. Exchange (AIM) Provides payment solutions to 04/12/19 Nexi S.p.A. Borsa Italiana (BIT) NEXI €8,395.1 banks, financial institutions, etc. Source: Capital IQ, PitchBook and Capstone Headwaters Research 4 Financial Technology & Payments | Q3 2019 SELECT TRANSACTIONS Enterprise EV / LTM Date Target Acquirer Target Business Description Value (mm) Revenue EBITDA Beijing Forever China Traffic Provides smart grid solutions and services in the 09/30/19 $1,163.5 7.2x 25.7x (SZSE:300365) Information Center People's Republic of China and internationally. Assets of Stax Specializes in blockchain mining that develops 09/27/19 Core Scientific --- Digital enterprise mining solutions for GPUs. StatPro Group Confluence Provides software, data solutions, and professional 09/20/19 $234.8 3.4x 28.1x (AIM:SOG) Technologies services to the asset management industry. Investrack Business SS&C Technologies Provides client engagement software for private banks, 09/12/19 --- of Globacom (NasdaqGS:SSNC) wealth, and investment management firms. EVO Payments, Inc. Provides SAP integrated applications for credit card 09/10/19 Delego Software --- (NasdaqGM:EVOP) payment cards. Ventiv Develops cloud-based risk management, claims, and 09/09/19 Tailwind Capital --- Technology safety software platforms and solutions. Develops software and database solutions in the 09/05/19 safir Wirtschafts. VÖB- Service --- promotion business. 09/04/19 SIA FSIA Investimenti Provides technology infrastructures and services. - - - TUTUKA 09/04/19 Apis Partners Offers third party payment processing services. - - - SOFTWARE Deus Provides solutions that allow banks to automate their 09/04/19 Engineering --- Technology consulting and investment processes. Rocket and Crypto Hyperion Crypto 09/04/19 Provides blockchain-based platforms and applications. - - - Taxes of Vanbex Exchange Mind Your NK Digital Offers a blockchain platform for music 08/30/19 --- Rights Solutions rights management. CIMB Group Provides electronic payment solutions to individuals, 08/29/19 Touch