Annual Report 2021 Annual Report 2021 | OFX Group Limited a Table of Contents 2 Financial Highlights 3 Operational Highlights 4 From the Chairman 6 From the CEO 8 Executive Team 10 Environmental, Social, Governance 31 Directors’ Report and Financial Statements 103 Independent Auditor’s Report 109 Shareholder Information 111 Corporate Information Human and digital OFX grew from the idea that there had to be a better, fairer way to move money around the world. That was 20 years ago, and we’re still driven by the same mission today. We believe real help from real people counts, and that’s why we offer our clients the best of both worlds – an easy-to-use digital platform, combined with 24/7 phone access to our currency experts (we call them OFXperts). Annual Report 2021 | OFX Group Limited 1 Financial Highlights FY21 Underlying EBITDA $30.4m First half $10.8m Second half $19.6m FY21 Underlying NPAT $13.5m First half $3.2m Second half $10.3m Net cash held (as at 31 March 2021) $60.6m Statutory NPAT $12.8m 2 Annual Report 2021 | OFX Group Limited Operational Highlights Total transfers (turnover) up 1.4% Transactions 1.4m Corporate new revenue up 29.8% Revenue from existing clients 79% Net promoter score 68.7 Annual Report 2021 | OFX Group Limited 3 From the Chairman From the Chairman Fellow Shareholders, We continue to operate in a very uncertain world. In this context, our investments, our execution and our culture come under the sharpest scrutiny. I am pleased to share that execution and progress against our strategic priorities remains on track and that the Board and I are very clear that we are building a more valuable Company. Our industry • The availability of cheap capital has led to a deluge We operate in a global industry – payments – that of new entrants and innovation, which is healthy; is large (estimated to be more than $130 trillion by but capital alone does not win, and the cost of turnover), highly regulated (we are licensed in over 55 capital is unlikely to remain at historic lows forever. different regulatory regimes), and highly fragmented Business models that succeed through the cycle do (we have seen more than 10,000 new entrants in the not rely solely on cheap capital. last five years alone). In addition to all of this, client • Regulators, rightly, are becoming increasingly expectations grow every quarter – they want faster, concerned with business models that do not cheaper, easier payment transfer experiences. have the solid risk management and compliance foundations that are set up to measure, monitor It is tempting against this backdrop to imagine the and address the risks inherent in the transfers only winners will be those who have huge scale, of huge amounts of money. At OFX we have our limitless technology and an endless supply of cheap risk management and compliance regimes tightly capital to compete with. infused throughout our culture, our people and our We don’t subscribe to this view of our industry. In fact, operating mechanisms. our view is that: Executing and creating value • The entire industry is underpinned on trust. To build a valuable Company, management must There are almost no physical exchanges, in fact execute well in the environment they are in and build none across the $25 billion+ in cross-border for the future. It is unacceptable to sacrifice one for the payments that we supported, so clients have to have other, especially in financial services and payments. faith in our technology, our people, our culture, our regulators and our experience in operating through Skander will touch on the trading highlights, but from cycles. Trust has to be earned and it takes time. the Board’s perspective I would highlight a few areas However, you can lose it in hours. that we were particularly focused on. • Whilst we see scale as an advantage, we don’t • Delivering top line growth in our chosen segments, believe it will be a ‘winner-take-all’ industry. We see whilst ensuring it is good quality. The growth in segments, of a sizeable nature, that value a great Corporate, at 11%, was impressive, especially as we digital plus human experience – fast and reliable have not seen the substantial losses some of our but with the opportunity for human interaction competitors saw in this segment. The growth in new if required. Corporate revenue also augurs well for our future • We don’t believe all payments segments will be recurring revenue. commoditised. While some segments, typically low • Delivering a scalable technology platform, that will value segments, certainly will be, there will remain allow us to grow, remain secure, and drive a great large segments where clients appreciate added value client experience. As I mentioned in last year’s features, which is where we’re focusing our offering. letter, we have now invested over $32.3 million in 4 Annual Report 2021 | OFX Group Limited From the Chairman our technology in the last four years to both deliver what’s needed today, as well as create what’s needed for tomorrow. We executed well in FY21, keeping operating expenses flat despite transactions growth, and delivered an increase in turnover while losses declined. This, along with improved regulator engagement, builds on the strong foundations of the business, strengthening our outlook for the future. This will continue in FY22. • Building and improving a world class team. Over the last year Skander and his team have continued, with the Board’s support, to grow our investment in Learning and Development, in Leadership Development and in attracting high quality professionals. We firmly believe we have the best team in the industry as a result of these efforts, and it is incredibly encouraging to see the engagement scores, the diverse representation and the unwanted attrition statistics all improving materially. Naturally we believe we can do better, and we will continue to build on this strong foundation. Outlook In this financial year we remain committed to the strategy we laid out in FY21. We expect to see industry consolidation as business models grapple with the new realities and players look for scale. We are very supportive of the management team in their efforts to grow Corporate, grow our Online Seller segment and win new Enterprise clients. We are working more closely than ever on our risk management programs, especially in cyber and operational risk, and we expect to see growth in revenue that is delivered in a sustainable way. I want to thank my fellow Directors for their dedication and commitment when the Company needed it. Whilst we were sorry to lose Lisa Frazier from our Board, we are delighted to welcome Cathy Kovacs to it. Cathy brings a strong industry track record, particularly in Corporate Development and Strategy, as well as a creative and inclusive style. Finally, on behalf of our clients and our partners, I want to thank the OFX team for their extraordinary hard We have focused on work, skill and perseverance in these uncertain times. building and operating a Last year you created a more valuable Company for our shareholders and for our society. sustainable company that serves our shareholders, our clients, our regulators, and our employees, as well Steven Sargent Chairman as society at large. 18 May 2021 From the CEO From the CEO Fellow Shareholders, In FY21, we experienced both the highs and lows of competing in a global payments environment in unprecedented times; but through that, we have emerged stronger, clearer about our competitive advantages, and more resolute in our assessment that we are building a more valuable Company. Whilst our revenues fluctuated, primarily due to • A substantial total addressable market that we can the uncertainty in global environments causing a grow into. decline in Consumer activity, our strategic pivot to • Value proposition(s) that are difficult to execute Corporate, Online Seller and Enterprise has proved consistently, or replicate. very worthwhile, with each of those segments growing • A strong risk culture that protects clients, shareholders globally in very difficult conditions. That growth has and staff from those who seek to take shortcuts. also been underpinned by substantial improvements in our technology and operations – highlighted by the • A strong, global operating model, led by a team that fact that we processed 1.4 million transactions, an wants to make a difference, and overseen by a Board increase of 26%, whilst holding our operating expenses that has relevant experience and can ask the right flat. Furthermore, we did that against a clear increase questions of management to grow value. in our investment in both technology and commercial • A scalable global platform – both in terms of a strong initiatives (people and marketing). In Corporate alone technical infrastructure and through our operational we are seeing very encouraging signs of progress, with execution, that, when harnessed well, delivers an revenue from Corporate clients up 29.8% – the fastest outstanding client experience. growth in new Corporate revenue in over 10 years. With these in mind, in FY21 we continued to invest Trading highlights and execute in building a more valuable company. For example: • Revenue of $134.2 million, down 2.2%, however within that: • Our investment in Online Sellers, starting in 2016, grew to $2.5 million across people, systems, marketing, – Growth in Corporate revenue of 11% risk and operations. In FY21 we supported $2 billion – Growth in Online Seller revenue of 11% in turnover, and are well represented in every major – North America revenue growth of 5.2% region and marketplace as this segment grows. – Australia and New Zealand revenue growth of 1.4%, • Our value proposition in Corporate continued to be and within that, Corporate revenue growth of 23.8%.