Laybuy : Strategic Update, Q1 FY23 Results and Appendix 4C

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ASX ANNOUNCEMENT (ASX: LBY)

28 July 2022

Strategic Update, Q1 FY23 Results and Appendix 4C

Laybuy Group Holdings Limited (ASX:LBY) ("Laybuy", the "Company") is pleased to provide its quarterly business activities update, its Appendix 4C for the quarter ended 30 June 2022 ("Q1 FY23") and the outcome of its strategic review that was announced in April.

All numbers are stated in New Zealand dollars ("NZ$") and comparisons relate to the quarter ended 31 March 2022 ("Q4 FY22" or quarter on quarter, "QoQ") or the quarter ended 30 June 2021 ("Q1 FY22" or year on year, "YoY"), unless otherwise stated.

Q1 FY23 Highlights

• Quarterly Gross Merchandise Value (GMV) of $215 million, up 17% YoY, equating to annualised GMV of $860 million and up 36% YoY on a 12 month rolling basis.
• United Kingdom (UK) GMV of $128 million in QY FY23, up 34% YoY.
• Revenue of $11.3 million for Q1 FY23, up 9% YoY.
• Net Transaction Margin (NTM) for the quarter was 1.4%, up from -0.5%QoQ.
• NTM for the month of June was 1.9%, with UK NTM of 1.7%.
• Significant reduction in gross losses, falling from 4.9% to 2.8% QoQ
• Positive cash flow for the quarter of $755,000.
• Strategic review completed reaffirming commitment to both the UK market and ANZ business and no medium term requirement for additional capital.
• Initiating cost reduction program that will see profitability across the Group by Q4 FY23.

Strategic Update

Laybuy is pleased to advise that it has now completed its strategic review, which was announced to the market in April and involved the support of European financial advisor NOR Capital.

Whilst the strategic review was thorough and considered various strategic alternatives, the path to profitability has become clearer as the business has had success in reducing credit losses and is focussed on prudent cost measures.

Laybuy Group Holdings Limited | ARBN 642 138 476

74 Taharoto Road, Takapuna

Auckland, New Zealand

Laybuy.com

For personal use only

Laybuy Managing Director Gary Rohloff says that the outcome of the strategic review has determined that, while there was strong interest in Laybuy, a sale or partial sale of the business is not currently in the best interests of shareholders. As part of the review, Laybuy has determined that it has a clear pathway to profitability and is well advanced in executing this strategy.

"We are seeing very strong results in our fraud prevention strategy, which has resulted in a significant reduction in losses attributable to fraudulent activity, particularly in the UK, and this has markedly increased our NTM to 1.4% this quarter," says Gary

"This improvement in NTM demonstrates that our focus on reducing fraud, which is a key plank in our strategy to achieve profitability across the business, is delivering results. Our ANZ sales operations (excluding Group overheads) is already profitable, and this quarterly performance gives the Board confidence in both the strategic direction and in the sustainability and profitability of the business model.

"As a result, the Company will take further steps to reduce costs and improve efficiencies that will significantly shorten the pathway to profitability across the Group. This, in conjunction with the marked reduction in losses from fraudulent activity (which is continuing into this quarter) will ensure Laybuy's business operations are adequately funded, removing the need for an additional capital raise in the medium term.

"As a first step, Laybuy is initiating a significant restructure of its business that will reduce its headcount and associated costs by approximately one third (45 employees). The majority of impacted staff will be from the Head Office in New Zealand, with a number of roles also impacted in the UK and Australia. This coincides with the way we want to do things and, as a result, we do not envisage a significant impact on our customers or merchants. This will, however, deliver significant savings to the business, underpinning cash flow in the medium term.

"This restructure, alongside our continued focus on containing costs, improving efficiencies and reducing fraudulent activity, will see Laybuy achieve profitability by Q4 of this financial year, making the company one of, if not the first, profitable pure play BNPL company on the ASX.

"Laybuy is also able to reaffirm its commitment to the UK market, where our focus will be on achieving profitable growth that supports our ANZ operations, while also allowing the company to take advantage of the ongoing opportunities presented in a market where BNPL is still in its infancy but experiencing significant growth. Our focus in the UK will be attracting and retaining quality customers and driving profitable growth.

Laybuy Group Holdings Limited | ARBN 642 138 476

74 Taharoto Road, Takapuna

Auckland, New Zealand

Laybuy.com

For personal use only

"The changes announced today will ensure Laybuy is well-positioned to deliver its strategic imperative of achieving and maintaining profitability across the business. In doing so, we will be in the best position to deliver shareholder value, with an expectation that Laybuy will be profitable and self- sustaining by the end of the 2023 financial year."

Operational Performance

This quarter has seen Laybuy deliver an improved performance across a number of key metrics as the company continues with its focus on achieving profitability across the group.

"This quarter represented Laybuy's second highest quarter ever in terms of GMV, with GMV increasing by 17% yoy across the group. GMV increased by more than a third in the UK. Our focus on reducing fraudulent transactions is delivering strong results, with losses and defaults down by 210 bps this quarter. As a result, our NTM has shown significant improvement this quarter, increasing to 1.4%.

"We are seeing positive results from our fraud prevention and credit risk management in the UK as we continue to strengthen our focus in this area, enhancing our profitability and ensuring we are providing a service that supports quality customers. Our UK NTM was a pleasing 1.7% in June, supporting a group NTM of 1.9% for the month.

"While there was a small and expected reduction in revenue quarter-on-quarter, this was the result of falling late fees as we continue our focus on attracting high-quality customers who are less likely to default. We are continuing to see a strong revenue growth trend, with a 9% increase when compared to the same period last year. This increases to 13% YoY when the impact of FX is excluded."

Laybuy Group Holdings Limited | ARBN 642 138 476

74 Taharoto Road, Takapuna

Auckland, New Zealand

Laybuy.com

personal use only

Key Operating and Financial Metrics

The table below presents the Laybuy Group's (the "Group's") key operational metrics for Q1 FY23 as compared to Q4 FY22 (QoQ) and Q1 FY22 (YoY), which have been prepared based on unaudited results.

					%	%
					increase
	Group (NZ$'m)	Q1 FY23	Q4 FY22	Q1 FY22	increase
					QoQ	YoY
	GMV	$215m	$203m	$184m	6%	17%
	Annualised GMV	$860m	$811m	$738m	6%	17%
	Active Customers	918,500	931,000	829,000	(1.4%)	11%
	Active Merchants	14,000	13,700	10,400	3%	34%
	Income	$11.3m	$12.1m	$10.4m	(6.7%)	9%
	Net Transaction Margin (NTM) as % of GMV	1.4%	(0.5%)	2.0%	190bps	(60bps)
	Gross Losses as % of GMV	(2.8%)	(4.9%)	(2.5%)	(210bps)	(30bps)
	UK (NZ$'m)
	GMV	$128m	$124m	$96m	4%	34%
	Annualised GMV	$513m	$496m	$384m	4%	34%
	Active Customers	603,000	609,500	517,000	(1.1%)	17%
	Active Merchants	4,000	3,800	2,300	5%	73%
	ANZ (NZ$'m)
	GMV	$87m	$79m	$88m	10%	20%
	Annualised GMV	$346m	$315m	$354m	10%	21%
	Active Customers	315,500	322,000	312,000	(2.0%)	1%
	Active Merchants	10,000	9,900	8,000	1%	23%

For

Gross Merchandise Value (GMV)

Quarterly GMV by region (NZ$m)

ANZ UK	275

206 203215

183 184

161

117127

43 49

64 70

26 30 36

34

Q1 FY19

Q2 FY19

Q3 FY19

Q4 FY19

Q1 FY20

Q2 FY20

Q3 FY20

Q4 FY20

Q1 FY21

Q2 FY21

Q3 FY21

Q4 FY21

Q1 FY22

Q2 FY22

Q3 FY22

Q4 FY22

Q1 FY23

Laybuy Group Holdings Limited | ARBN 642 138 476

74 Taharoto Road, Takapuna

Auckland, New Zealand

Laybuy.com

Annualised quarterly GMV (NZ$m)

				1,099
				824	811 860
			730	738
				645
			467 508
		174 194	257 282
103 121 146	135

Q1 FY19

Q2 FY19

Q3 FY19

Q4 FY19

Q1 FY20

Q2 FY20

Q3 FY20

Q4 FY20

Q1 FY21

Q2 FY21

Q3 FY21

Q4 FY21

Q1 FY22

Q2 FY22

Q3 FY22

Q4 FY22

Q1 FY23

only

Key Highlights:

• Second highest GMV achieved in Q1 FY23, after the traditional peak December quarter Q3 FY22. Steady growth continued in Q1 FY23, with a focus on quality customer growth.
• GMV reached $860 million, up 17% YoY on an annualised basis and up 36% YoY on a 12- month rolling basis.
• UK achieved growth of 34% when compared to the same quarter last year.

Active Customers and Merchants

Active Customers by region ('000)

NZ & AU	889	930 931	918
UK
829

756

Active Merchants by region ('000)

	NZ & AU	13.714.0
	UK
	12.9

687

568

473

405

316

118 147 171 196 224 253

1.5 2.0 2.6 3.2 3.7 4.3 4.9 5.2 5.7

11.7

10.4

9.1

8.0

6.3

Q1 FY19

Q2 FY19

Q3 FY19

Q4 FY19

Q1 FY20

Q2 FY20

Q3 FY20

Q4 FY20

Q1 FY21

Q2 FY21

Q3 FY21

Q4 FY21

Q1 FY22

Q2 FY22

Q3 FY22

Q4 FY22

Q1 FY23

Q1 FY19

Q2 FY19

Q3 FY19

Q4 FY19

Q1 FY20

Q2 FY20

Q3 FY20

Q4 FY20

Q1 FY21

Q2 FY21

Q3 FY21

Q4 FY21

Q1 FY22

Q2 FY22

Q3 FY22

Q4 FY22

Q1 FY23

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Key highlights:

• Active customers dropped to 918,000 at the end of June, reflecting management's efforts in tightening credit and fraud risk management thresholds and focusing on quality customers.
• Over 1,300 new merchants signed up in Q1 FY23.

Regional performance

Key highlights:

• Active customers were 918,000 at the end of June, showing a marginal decline and reflecting management's efforts in tightening credit and fraud risk management threshold and focussing on quality customers.
• Laybuy has signed up 1300 new merchants in Q1 FY23, with 311 of these going live during the quarter.

Laybuy Group Holdings Limited | ARBN 642 138 476

74 Taharoto Road, Takapuna

Auckland, New Zealand

Laybuy.com