Вы находитесь на странице: 1из 19

ENGAGEMENT POWERED CONSUMER FINANCE

November 2016

DLS:TSXV
Disclaimer
Certain information in this presentation are forward-looking and relate to Except as required by law, we undertake no obligation to update or revise
DealNet Capital anticipated financial position, business strategy, events publicly any forward-looking statements, whether as a result of new
and courses of action. Words or phrases such as anticipate, objective, information, future event or otherwise, after the date on which the
may, will, might, should, could, can, intend, expect, statements are made or to reflect the occurrence of unanticipated events.
believe, estimate, predict, potential, plan, target, goal, is set Neither we nor any of our representatives make any representation or
to, is designed to or similar expressions suggest future outcomes. warranty, express or implied, as to the accuracy, sufficiency or
Forward-looking statements include, among other things, statements completeness of the information in this presentation. Neither we nor any
about: our expectations regarding our expenses, sales and operations; our of our representatives shall have any liability whatsoever, under contract,
future customer concentration; our anticipated cash needs and our tort, trust or otherwise, to you or any person resulting from the use of the
estimates regarding our capital requirements and our need for additional
information in this presentation by you or any of your representatives or
financing; our ability to anticipate the future needs of our customers; our
for omissions from the information in this presentation.
plans for future products and enhancements of existing products and
services; our future growth strategy and growth rate; partnerships and
transactions that are subject to negotiations; possible expansion into new
markets and our anticipated trends, including the growth rate of our loan
originations and challenges in the markets in which we operate. Such
statements reflect our current views with respect to future events and are
based on assumptions and subject to significant risks and uncertainties.
Such assumptions include, without limitation, that DealNet Capital will
conduct its operations in a manner consistent with its expectations and,
where applicable, consistent with past practice; the general continuance of
current or, where applicable, assumed industry conditions; the continuance
of existing (and in certain circumstances, the implementation of proposed)
tax and regulatory regimes; our ability to conclude new partnerships or
transactions in a satisfactory manner; certain cost assumptions; the
continued availability of adequate debt and/or equity financing and cash
flow to fund our capital and operating requirements as needed; and the
extent of our liabilities. Although we believe that the assumptions
underlying these statements are reasonable, they may prove to be
incorrect. Given these risks, uncertainties and assumptions, you should not
place undue reliance on these forward-looking statements. Our actual
results, performance or achievements could differ materially from those
contemplated, expressed or implied in our statements as a result of various
risk factors, including, but not limited to, business, economic and capital
market conditions; market conditions and the demand and pricing; our
relationships with our customers, business partners; our ability to conclude
new partnerships or transactions in a satisfactory manner; competition in
our industry; our ability to manage our growth; fluctuation in our quarterly
operating results; and our dependence on key personnel.

Page 2
What we do..
We attract dealers by
We do this by leveraging providing value added
We are in the business of
an extensive home engagement services
attracting PRIME bank
improvement dealer (front office, back office,
quality customers and
network that serves as our mobile technology
lending them long term
low cost origination solutions) that make them
home improvement loans.
channel. look bigger and help
Customer Growth them organize their
business.

Dealer Growth
Loan Mix Dealer Growth Significant Market
500
350
400300
250
300
200
200150
100
10050 In 6 months we capture 4% of the
0
0 Q4 2015 Q1 2016 Q2 2016 HVAC market alone.
Q4 2015 Q1 2016 Q2 2016 Q3 2016

Page 3
Our Lending Ecosystem

Page 4
Powerful Analytics Support Future Manufacturer Marketing and Dealer Reward Programs Page 5

Distributors
Manufacturers /
Home Improvement
Attracting Bigger Dealers

Page 5
Page 6
Strong Quarterly Portfolio Growth
Consumer Finance Receivables Origination Volumes
(C$ millions) (C$ millions)
$23.0

$20.5

$100.6

$83.0
$12.3

Q1 2016 Q2 2016 2015 Q1 2016 Q2 2016 Q3 2016


Closing finance receivables are net of payments.

Highlights
Consumer Finance Business reported first quarterly segmented profit of $0.4 Million
Material origination growth
Active dealers was at 400 before recent news that serves to add another 300 dealers
to drive origination volumes

Page 6
Q2 2016 Company Highlights
Key Performance Indicators

Q3 2016 Q2 2016 Q1 2016

Consumer
Finance

Finance $100.6 MM $83.0 MM


Receivables*

Quarterly $23.0 MM $20.5 MM $12.3 MM


Originations

Net Interest 5.7%


Margin

Cash Based ($0.92) MM ($2.2) MM


Loss**

ROE (4%)

ROAA (0%)

*Finance receivables is net of servicing, pre-payments and amortization.


** Cash used in operating activities before changes in working capital balance.

Growing Finance Receivables & Significant Reduction in Cash Losses Translates to


Improving Key Metrics

Page 7
Balance Sheet Mechanics
1. Dealers Deliver Consumer Loans to Dealnet
2. Thousands of Loans Each Quarter are Funded by Dealnet.
3. Dealnet Pays the dealer for the work once consumer says ok
4. The initial capital to fund the loan comes from our cash and warehouse capacity.
5. Once a batch of loans approximating $5 MM + is funded, we create a pool for our
Consumer underwriters of those loans
Loans 6. Our funders securitize the loans (buy the stream of payment or capital amount at lower
cost of capital then the face rate of the loan)
7. Our funders advance us cash plus a gain on securitization LESS a Cash Reserve which
we provide for equity enhancement. This event recapitalizes the Dealnet Balance
sheet replenishing cash and warehouse capacity for continued securitization.
One Loan 8. Each event of securitization builds cash which is earned over time representing
Funded the Funds significant increases in cash flow annually.
event is Provided to
effectively a Dealer for Q2 BS Movement of Cash Replenish Cash Plus Gain to
purchase of the Work Done fud operations and
R loan I originations before
e n securitization
d c
u r Increase in Cash Reserves Use
Includes Cash Used to
c e to support securitization
Warehouse Before
e a (carried interest in loans)
Securitization
L s
i e
Releases Capacity of
Warehousing of Non- L
q Warehouse to ADD more
Securitized Loans i
u q
loans.
i u
d Securitized Borrowings Increase in Securitized
i
i d Borrowings
t We then bill and collect for the i
y term of the loan recognizing t
interest revenue and margin y
monthly

Page 8
Page 9
Securitization Economics & Preliminary Q3 2016

Consumer
Securitization
Contract Preliminary Consumer Finance Originations and
Contract Size $6,700
Securitizations for Q3 2016
$23 Million of new consumer finance
Funding Amount $8,397 receivables.
Payment $83.43 $83.43 Received gross proceeds of $21 Million from the
securitization of consumer finance receivables,
Term 120 120 utilizing the new and renewed secured borrowing
Face Rate 8.60% facilities

Escalation 3.50%

IRR 11.64%
Cost of Funds
(Bond 5 Year 0.6% 3.60%
+Spread 3%)

Page 9
Manufacturer Deals

First deal announced adds 80 dealers in Ontario with plans to roll platform out
Q2 nationally up to 200 dealers

3 Additional OEM Financing Partnerships Announced access to 300


Q4 dealers once fully deployed

Example of Economics:

Each Dealer Average Deal 100 Dealers Potential Annual


Size Origination
Volumes

$6 MM to $30
MM
Annually
1-5 Deals a Month $5,000

Page 10
Page 11
Current Funding Relationships
$75 Million Securitization Facility
Major Canadian Life Insurance Co.

Up to $100 Million Funding Facility


Asset Management Arm of Canadian Insurer

$20 Million Funding Facility


Financial Institution Government Sponsored

Securitization Facility ($3-4 Million Month)


Schedule 1 Bank

Average Direct Cost of Funding Below 4% Based on Current Market Pricing

Priced using contracted spread over the Government of Canadas nearest duration bond at the time of
securitization.
Declining spread based on funding usage volume in certain facilities.
Dealnet expects new capital or funding relationships to be put in place at similar or lower costs of funds as a
normal course of business going forward.

Page 11
Investment Highlights Continuing to Execute
Investment Highlights

1 2 3 4 5
Rapidly Growing Growing Dealer Manufacturer Experienced
Scalable Platform
Originations Network Partnerships Management Team

87% Growth Q1 to Q3 3 Years of building out: 400 Active Dealers Partnerships with Management has been
$56 MM in Originations Systems Manufacturer deals have merchants, wholesalers instrumental in several
YTD Infrastructure potential to add significant and manufactures non-bank finance
dealers in short period HVAC, home improvement, companies which have
Processes
etc. grown to +$Billion
4 Partnerships announced valuations
YTD

6 7 8 9 10
Large and Growing Multiple Funding Long Term Prime
Low Origination Costs Low Cost of Funding
Market Partners Loans

Dealers finance Estimated annual HVAC Syndicate of funding Average term ~7.5 years At current rates less than
opportunities as part of financing opportunity in partners for warehouse Notice of security interest 4%
their owns selling process Canada +$7.5 Billion and facilities and securitization on home with <2% Default
market is expected to grow and adding incremental Rates
at 9% annually capacity to expand Risk is spread-out over
Source: Consulting Specifying +22,000 loan contracts
Engineer

Page 12
Focus Growth Areas 2016-2018

Grow Increase
Leverage
Origination Funding
Equity
Volumes Facilities

Manufacturer Deals
Reduce Cost of Funds
High Volume Dealers Generate long term cash
flow
Expanding Loan
Products Increase ROAA and ROE

Geographic Expansion

Page 13
APPENDIX

Michael A. Hilmer Nicole Marchand


Chief Executive Officer Investor Relations
mhilmer@Dealnetcapital.com nmarchand@Dealnetcapital.com
416.420.5529 416.428.3533

DLS:TSXV
Page 14
Capital Structure

Capital Structure Ownership


TSX Venture Exchange DLS

Basic Shares Outstanding 243 MM

Fully Diluted Shares Outstanding 298 MM


12%
Warrants 25 MM

Options 16 MM Management
32% Institutions
Expected Cash Proceeds from Warrants ~$11.3 MM 56% Retail & Other

Current Share Price $0.51

Analyst Coverage
Cormark Securities Jeff Fenwick
GMP Securities Stephen Boland
Paradigm Capital Corey Hammill
Canaccord Scott Chan

Page 15
Proven Leadership Team

Dr. Steven Small Michael Hilmer Paul Leonard Roy Murzello John Leon
Executive Chairman CEO & Director CFO SVP Consumer Finance SVP Engagement
Dr. Small brings decades of After several years with Wood Mr. Leonard was CFO of CFF Mr. Murzello has spent the John has extensive hi-tech
experience in identifying and Gundy financial services, Mr. Bank, a Canadian schedule 1 last 10 years as a Senior experience with different
building successful Hilmer moved to MCI bank that had approximately Leader at one of Canadas corporations: He worked for
businesses in the non Bank Systemhouse with $245 million in assets and largest providers of HVAC 15 years at Nortel Networks
asset finance sector as well responsibility for large over $1.5 billion in loans finance solutions. His various in various functions; his last
as business and consumer financial services customers. under administration. Prior, roles have included Director position was VP-GM of
service companies. Dr. Small In 2000, Mr. Hilmer founded he was the CFO of Ally Credit of Dealer Programs, where Nortels Wireless Solutions
recently retired from his Millennium Care, a call Canada which offered Mr. Murzello was directly Group in Canada. After
position as a Co-Founder and centre outsourcing and savings products, retail and responsible for leading and leaving Nortel, John held the
seed capital investor of software company. Mr. wholesale auto loans and growing the dealer finance position of VP, Sales &
Element Financial Hilmer acquired the OC residential mortgages programs including HVAC Marketing at Unique
Corporation, where he acted Communications Group of through both direct and leasing. In this role, he also Broadband Systems and VP
as Executive Vice Chairman. Companies in 2008 and indirect channels. Ally had led a large leasing business Sales & Marketing for
He also was a Co-Founder, successfully turned them into over $13 billion in assets that was acquired and OnMobile Systems, a Silicon
seed capital investor, and strong solutions provider for before being acquired by subsequently integrated into Valley start-up. John has an
Director of Newcourt Credit the financial services, Royal Bank of Canada. In the core business. His prior honors B.A.Sc. (Chemical
Group. Newcourt was, when utilities, retail, telecom and addition, he was founding experience includes Vice Engineering) and MBA
sold, the largest independent pharmaceutical industries. Chief Financial Officer of ING President for Citi Group degrees from University of
non bank asset backed DIRECT, an innovator in managing a major credit card Toronto, and is a member of
finance company in the offering direct to consumer initiative, a Senior Professional Engineers of
world. savings and lending products. Underwriter Manager at GE Ontario.
Capital and Credit Manager
at CIBC.

Page 16
Board of Directors

Dr. Steven Small Harold Bridge Brent Houlden John Radford Victoria Davies Michael Hilmer
Executive Chairman Lead Director Director Chair Compensation Director CEO & Director
Chair Audit Committee Committee
Dr. Small brings decades Mr. Bridge is the Mr. Houlden is a retail Mr. Radford has held Ms. Davies is the former After several years with
of experience in identifying Chairman & Chief strategy & operations senior executive level Chief Financial Officer for Wood Gundy financial
and building successful Executive Officer of consultant with deep positions in the Lee Hecht Harrison services, Mr. Hilmer
businesses in the non Kathar Enterprises Inc., a financial advisory automotive sector at Knightsbridge, Canadas moved to MCI
Bank asset finance Toronto-based firm that skills. He understands both Corporate and largest human capital Systemhouse with
sector as well as business provides corporate how digital and mobile Retail spheres in the consulting firm. Prior to responsibility for large
and consumer service finance, mergers & technologies have USA and Canada for joining Knightsbridge, Ms. financial services
companies. Dr. Small acquisition and financial changed shopping over three decades and Davies career included customers. In 2000, Mr.
recently retired from his advisory services to patterns and the path- retired as Senior working at Pepsi. Ms. Hilmer founded
position as a Co-Founder national and to-purchase of Executive Vice President Davies is a director and a Millennium Care, a call
and seed capital investor international clients. Mr. consumers. After 26 of National Sales and member of the audit centre outsourcing and
of Element Financial Bridge currently serves years as a Deloitte Marketing of Ford Motor committee of Axsium software company. Mr.
Corporation, where he on the board of Element partner, he retired from Company of Canada in Group, a workforce Hilmer acquired the OC
acted as Executive Vice Financial, and is the Firm in November 2000. That role carried management Communications Group
Chairman. He also was a Chairman of the Element 2014 to co-found CR direct and material P&L implementation of Companies in 2008
Co-Founder, seed capital audit committee. From Advisors a consulting responsibility in one of company. Ms. Davies is a and successfully turned
investor, and Director of 1976 to 2006, Mr. boutique focusing on Canadas largest director and member of them into strong
Newcourt Credit Group. Bridge served as a formulating high impact corporations. Currently, the finance committee for solutions provider for
Newcourt was, when sold, partner in the financial and practical business Mr. Radford is the senior Action Against Hunger the financial services,
the largest independent advisory, audit and solutions. Through his Executive Auto Recruiter (ACF-Canada). She is utilities, retail, telecom
non bank asset backed consulting services career, he led Deloittes at the Marckis Group, also a Director and and pharmaceutical
finance company in the practice at Deloitte & retail practice in Canada Canadas leading Treasurer for The industries.
world. Touche LLP and as while serving numerous exclusive auto executive Churchill Society for the
Executive Vice President retailers, consumer recruiting company for Advancement of
and Director at Deloitte & product companies, real international OEMs and Parliamentary
Touche Corporate estate developers and OEMs captive auto loan Democracy.
Finance Canada Inc. landlords. operations.

Page 17
Emerging Leader in Non-Bank Point of Sale Consumer Lending

Dealnet DLS $101 Million $56 Million +600


Listed on the June Finance Q1 +Q2+ Q3 Employees
TSXV Receivables Originations

Lease & Loan Products Overview Management Team


Michael A. Hilmer - CEO
Prime Consumer: ~730 Credit
Dr. Steven Small Executive Charmain
Term: 5-10 Years

Defaults: <2%, Loss Rate 0.32% Paul Leonard CFO


Products: HVAC, Water Tanks,
Windows, Doors, and Roofs
Roy Murzello Consumer Finance

Customer: Prime Consumer who John Leon Engagement


Own Home

Cost of Funding: <4%


Long Duration Loan Up to 10 Years Allow
Avg. Size Loan / Lease : $6,500 us to Grow the Book Quickly and
Geography: 90% Ontario Compound Cash Earnings Year Over Year

Page 18
2015 / 2016 Key Accomplishments
June 15 Enhanced Leadership Team and Implemented Strategy Board

Institutional Equity Funding $13.8 MM


Aug 15
Roy Murzello Appointed SVP of Consumer Finance

Paul Leonard Appointed CFO


Oct 15
Acquisition of Gemma Communications

Jan 16 Expanded Credit Facility and Reduced Cost of Funding

Acquisition of EcoHome Financial


Feb 16
Bought Deal Financing $30 MM

May 16
Signed 5 Year Exclusivity with Large HVAC Dealer

June 16 Strategic Financing Agreement with Global HVAC Manufacturer

July 16 New Funding Capacity Exceeds $100 MM

Oct. 16 Enters into Multiple Vendor Finance Agreements with Home Improvement OEMs

Page 19