Wisr Limited
Annual Report 2021

Plain-text annual report

ANNUAL REPORT 2021 WISR LIMITED • ANNUAL REPORT 2021CONTENTS Our Vision Chairman’s review CEO’s review FY21 Highlights We are a purpose-led high-growth consumer finance platform Revenue acceleration 20 quarters of consecutive growth Delivering on milestones and growth Cash EBTDA Wisr continues to attract very creditworthy customers Diversified loan portfolio, aligning with our purpose Wisr brand set up for long term growth The Wisr brand campaign Smarter new website and dashboard Putting our strong balance sheet to work Wisr Financial Wellness Platform fuelling future growth Award-winning momentum Recognised as one of Australia’s best places to work Executive leadership team Board of directors Financial report Directors’ report Auditor’s independence declaration Consolidated statement of profit or loss and other income Consolidated statement of financial position Consolidated statement of changes in equity Consolidated statement of cash flows Notes to the financial statements Directors’ declaration Independent auditor’s report ASX additional information Corporate directory 3 4 8 12 14 15 16 18 19 21 22 25 26 27 28 29 30 31 32 34 36 37 55 56 57 58 59 60 84 85 89 92 1 2 WISR LIMITED • ANNUAL REPORT 2021OUR VISION IS TO BRING FINANCIAL WELLNESS TO ALL AUSTRALIANS 3 CHAIRMAN’S REVIEW Dear Shareholders, On behalf of the Wisr Board of Directors, it gives me great pleasure to present the Wisr Annual Report for FY21. It has been a truly outstanding year. The Company’s business model has been proven, continuing to rapidly respond and thrive despite the unprecedented challenges from COVID-19, delivering significant results across all of the key financial metrics, and world-class innovation via the Wisr Financial Wellness Platform. There is no doubt that the underlying strengths of Wisr are centred around the calibre of its people, the Executive Leadership Team and the Company’s high- performance culture. Our CEO, Anthony Nantes, has built an extremely strong Executive Team under his leadership - they are dedicated to driving the company’s growth, drawing from their years of experience at Australia’s most innovative and successful companies. This has been demonstrated by Wisr thriving in the new normal of working-from-home and throughout the unprecedented COVID-19 disruptions. The Company continues to innovate Wisr’s high-performance culture, delivering an average +75 Employee Net Promoter score for FY21. In recognition of the superb leadership and unique Wisr culture, we received two prestigious awards as first- time entrants this year: coming in at #6 in the AFR Best Places to Work, Financial Services category and #8 in the WRK+ Best Places to Work, over 100 employee’s category. As a Board, we are always conscious of the importance of the right culture inside the Company, and the difference this can make to the results delivered. We are proud of our high-performance culture at Wisr and the recognition it receives both internally, and externally. 74 WISR LIMITED • ANNUAL REPORT 2021As the Company continues its mission to improve the financial wellness of all Australians, by redefining the lending experience, through its purpose-led model, post-year end, we welcomed the appointment of Matt Brown to the Wisr Board in the position of non- executive director. As the Company grows in scale and complexity, this appointment is in keeping with Wisr’s commitment to maintain strong and appropriate governance. Matt will also chair the Wisr Risk and Audit Committee, adding further depth to the Company’s governance and oversight. We are also well placed to continue to expand the board, as the Company continues to grow, and provide the right level of diversity and experience to Wisr to make the Company stronger, and well prepared for the next period of growth. As this process progresses, we will advise the market accordingly. MANAGING COVID-19 IMPACTS As a financial services industry challenger, particularly one that is committed to fairer financial services, Wisr’s commitment to; responsible lending, financial wellness and fairer customer outcomes, has certainly resonated strongly with Australians. The result of this commitment resulted in our total portfolio arrears reducing, with 90+ Day arrears of 0.92% as at 30 June 2021 (FY20: 1.44%). Throughout FY21, Wisr continually reviewed the Company’s credit decisioning to drive organic growth, while optimising profitability, but also ensuring we supported our customers through these challenging times. STRONG REVENUE GROWTH 280% increase on FY20 ($7.2M). This was supported by 169% growth in loan originations from $135.9M in FY20, to $365.8M in FY21. BUILDING FINANCIAL STRENGTH The Company is very well capitalised with $92.4M of cash, made up of $64.8M unrestricted cash and $27.6M restricted cash. The $27.6M is restricted to the funding of loans and operations of the Wisr Warehouse, and Freedom Trust. There are also $3.3M liquid loan assets available for sale as at 30 June 2021. Wisr continued to experience an improvement in operating leverage driven by revenue growth and expense management, which resulted in operating cash flow break-even, for the month of June 2021. At 30 June 2021 Wisr had a total loan book of $432M, consisting of: • $379M Wisr Warehouse and Wisr Freedom Trusts • $48M off-balance sheet • $5M other Operational leverage in the Company is evident with 280% growth in revenue for FY21, compared to 43% growth in operating expenses. For FY21, Wisr had a Cash EBTDA of $(9.7)M, a 30% improvement on FY20 ($13.7M) and an accounting loss of $(17.6)M, a 25% improvement on FY20 ($23.5M), notwithstanding material non-cash items during the period, particularly the expected credit loss provision. The Company’s Wisr Warehouse funding model delivered significant margin benefit for the Company, with $27.2M in operating revenue achieved in FY21, a LOOKING FORWARD TO THE YEAR AHEAD As we enter FY22, the Company’s success in FY21 has provided a solid foundation for growth and scale. We 5 have an exceptionally strong balance sheet and the innovative, proprietary Wisr Financial Wellness Platform differentiates Wisr with increased operational leverage, market-leading economics, and a clear competitive advantage that opens up a number of potential revenue models over the coming years. It is an exciting time for the Company, one which could not have been possible if not for the hard work and expertise of the entire Wisr team, and the incredibly talented Executive Management group. I couldn’t be prouder to see the entire Wisr team not only continue to deliver incredible milestones for the Company, but also adapt to the ongoing upheaval in their everyday lives. To our shareholders, on behalf of the Wisr Board, we wish to sincerely thank you for your ongoing support - without you, there would be no Wisr. I would like to thank the Board, Executive Management and all of Wisr’s staff for their continued support, vision and experience, and we look forward to helping more Australians improve their financial wellness, and change the way Australians experience credit. JOHN NANTES Executive Chairman 6 WISR LIMITED • ANNUAL REPORT 2021 7 CEO’S REVIEW FY21 marks another incredible set of results. Wisr’s purpose-led brand, differentiated business model and unique Financial Wellness Platform has delivered 20 consecutive quarters of growth, accelerated revenue growth, and a maiden operating cash flow break-even month in June 2021. We continue to disrupt and take market share with a superior alternative: a highly automated digital lending experience based on market-leading UX, delivered alongside a customer platform, focused on improving our customers’ financial wellness. We’ve completely reimagined the entire consumer finance experience. As one of Australia’s fastest-growing and most innovative companies, we’ve also climbed 200 places to #167 in the Deloitte Tech Fast 500 APAC ranking. The Deloitte APAC ranking follows Wisr’s recognition in Q2FY21 as one of the fastest-growing technology companies in Australia, by the Deloitte Technology Fast 50 Awards, coming in at #19. To continue our clear competitive advantage and position in the consumer finance market, we strengthened our brand through developing a national brand launch, “For Your Smart Part”. The brand work has resonated strongly with consumers and our broadcast, and digital sponsorship of the Olympic Games Tokyo 2020 coverage, offered the ideal platform to introduce Wisr to a national audience, for the first time. Positioned alongside iconic global and domestic brands, Wisr reached over 16.5M Australians, giving us a unique presence in Australian homes throughout the event, and setting us up to reach our medium-term target of a $1B loan book, and beyond. We’ve also focused on strengthening our balance sheet with the recent equity raise that was supported by Goldman Sachs. Combined with our inaugural $225M ABS issue, these two transactions in FY21 put Wisr in an incredibly strong position, to extend our technology advantage and aggressively grow 8 WISR LIMITED • ANNUAL REPORT 2021lending market share in the years ahead, as we build a Company of significant scale, profitability, and impact in the Australian consumer finance market. FY21 PERFORMANCE Originations: We have delivered an unbroken track record of 20 quarters of growth, with total new loan originations up 169% to $365.8M as at 30 June 2021 (FY20: $135.9M). Growth accelerated during the year, with loan originations of $221M in H2; 52% growth on H1 ($145M). Wisr has now reached $611M in total loan originations since inception. Revenue: As the superior loan unit economics of the Wisr Warehouse funding model came into full effect, the Company delivered accelerated revenue growth of 280% to $27.2M for the year ending 30 June 2021 (FY20: $7.2M). Product: At the end of Q1FY21, we launched our second major competitive product, secured vehicle loans and through the backing of the Wisr Warehouse, the new product has quickly become a significant contributor to the Company’s loan book originations, and revenue growth, with 64% QonQ growth and comprising 20% of Wisr’s loan book as at 30 June 2021. Equity Raise: The market strongly supported our $55M equity raise in June 2021, led by Goldman Sachs as Sole Lead Manager and Underwriter. As part of our commitment to building a purpose-led company with a focus on financial fairness, a Share Purchase Plan (SPP) to retail investors was also included. Wisr Freedom Trust securitisation: Our inaugural ABS transaction (of personal loans), the Wisr Freedom Trust 2021-1, received an AAA-rated top tranche from Moody’s. The oversubscribed demand achieved across all tranches was a clear indication that investors want high quality assets originated by high quality companies, and Wisr has delivered that. The transaction delivered a material ~50% reduction in Wisr’s cost of funds. Wisr Warehouse and Loan Book: There was an increase in committed funding into the Wisr Warehouse from $150M to $350M in March 2021, from existing senior and mezzanine investors. The Wisr Warehouse (including recent Wisr Freedom Trust securitisation) Loan Book balance is now at $379M. For the first time, the Company achieved operating cash flow break-even for the month of June 2021. Wisr appreciates the significant support provided by its funders during FY21. Financial Wellness Platform: Our proprietary channel passed 450,000 profiles (80% growth on pcp), and is well on the path to 1M customer profiles. In June 2021, the Platform was 88% more cost effective as a loan acquisition channel, compared to the established competitive channels where Wisr also has leading customer acquisitions costs. It also continues to show an impact on the financial wellbeing of Wisr customers: Wisr customers that frequently engage with the Platform, see a +83 increase on their Equifax credit score. Wisr Brand redesign: We launched our brand redesign and new creative positioning ‘For Your Smart Part’ in May 2021. Built to deliver a clear, simple message around Wisr’s financial wellness purpose, the new creative positioning engages the “smart part” of the brain to help Australians make better personal financial decisions. The comprehensive project runs across all brand design, product and communication. The launch of the new www.wisr.com.au website integrates the full suite of products, tools, and resources on the Wisr Financial Wellness Platform. 9 In FY22, we’ll be putting the strong balance sheet to work, focusing on achieving a loan book well beyond $1B in the long term, by funding loan book growth, technology investment and feature enhancement, and expanding TAM by exploring new markets, and growth opportunities. As we enter the huge auto finance market with our secured vehicle product, a dedicated secured vehicle loan warehouse will also be established in FY22. To our Wisr shareholders, thank you for your continued support as we continue our mission to improve the financial wellness of all Australians, by reinventing the consumer finance experience. To our amazing Wisr Team, thank you for delivering 20 consecutive quarters of growth, world-class high- performance culture and a real, and lasting impact on our customers’ financial wellbeing. We truly are unique and provide a clear differentiation in the market. I couldn’t be more excited about the path ahead of us as we establish the Wisr brand and build something of real size, scale, and meaning in FY22. ANTHONY NANTES Chief Executive Officer Overseas expansion: In March 2021, we took a small but highly strategic first step in taking Wisr’s business model global, executing a term sheet to invest in European financial wellness fintech platform, Arbor. The investment gives Wisr a small minority shareholding in Arbor, with a pathway to potentially increase the shareholding to 45% over the medium term. This strategic investment opens up an entry pathway to circa $1.76 Trillion (AUD) consumer finance market1 in the EU and a number of potential revenue models for the Company. WISR IN FY22 While the Australian macroeconomic outlook continued to change in FY21 due to COVID-19, Wisr is strongly capitalised with market-leading unit economics and a purpose-driven business model that delivers smarter financial outcomes for customers and investors, and we’re in prime position to build a company of significant scale, profitability and impact. We’re delivering a clear competitive advantage through a superior alternative model that actually improves financial wellness, going far beyond the traditional lending experience, to attract Australia’s most creditworthy customers. It’s a phenomenal achievement to receive a AAA- rated top tranche from Moody’s on an inaugural transaction of unsecured personal loans and it’s a significant external validation of the quality of the Wisr business operations, underwriting performance capability, and the mature stage the business has reached. This milestone result should give the market confidence around our market-leading unit economics and our ability to deliver a highly profitable business as we continue to scale. 1Source: European Banking Authority (EBA) Report - CONSUMER LENDING IN THE EU BANKING SECTOR MARCH 2020 – THEMATIC NOTE: EUR 1.14 Trillion converted to AUD 10 WISR LIMITED • ANNUAL REPORT 202111 FY21 HIGHLIGHTS $366M in new loan originations Total loan originations $27M in Operating revenue $(10)M Cash EBTDA 169% on pcp (FY20 $136M) $611M Wisr Warehouse and Wisr Freedom Trust $379M 280% on pcp 30% on pcp (FY20 $7M) (FY20 $(14)M) Market-leading net promoter scores NPS +77 Business +75 Employee NPS 450K Wisr Financial Wellness Platform profiles 80% on pcp 90+ day arrears 0.92% down by 36% on pcp (FY20 251K) (FY20 1.44%) Term deal margin of 1.5% + 1M BBSW reduces cost of funds by circa 50% on Wisr Warehouse 12 WISR LIMITED • ANNUAL REPORT 2021Growth stepped up in H2FY21, with loan originations of $221M in H2FY21; 52% growth on H1FY21 ($145M) Launch of secured vehicle loan product in Q1FY21, opening up a $51B+ market opportunity1 $225M ABS transaction, Wisr Freedom Trust 2021-1, and AAA rating from Moody’s $55M equity raise, led by Goldman Sachs; Wisr well capitalised with $64.8M unrestricted cash and $27.6M restricted cash2 at 30 June 2021 Recognition by AFR (#6) and WRK+ (#8), as one of Australia’s best places to work Strategic investment3 in Arbor, opening up entry pathway to circa AU$1.76 Trillion consumer finance market in EU4 Launch of new Wisr brand and website 1ABS, Nov 19 to Nov 20 new vehicle market ($85B), Wisr conservatively calculates $51B dollars in consumer vehicle finance per annum, equating to over half of market requiring finance 2Restricted cash is limited to the funding of loans and operations of the Wisr Warehouse and Freedom Trust 3Initial investment made post 30 June 2021 4Source: European Banking Authority (EBA) Report - CONSUMER LENDING IN THE EU BANKING SECTOR MARCH 2020 – THEMATIC NOTE: EUR 1.14 Trillion converted to AUD 13 WE ARE A PURPOSE-LED HIGH-GROWTH CONSUMER FINANCE PLATFORM Purpose-led fintech High-growth • Our purpose is to bring financial wellness to all Australians, by redefining the consumer finance experience • Strong core business with 20 consecutive quarters of growth • Delivered $27M operating revenue in FY21 (280% • Our unique brand appeals to people’s “smart increase on pcp) part” that makes better decisions • $611M in total loan origination to 30 June 2021 Products Dual platform • $5K-$65K personal loans and secured vehicle loans over 3, 5, or 7 year terms, with no hidden, ongoing or early exit fees • The typical Wisr loan is $25K over 5 years, but paid off over 4 years • The first of its kind in Australia, our proprietary Financial Wellness Platform (with over 450K customers), reduces lending platform CAC by 88%1 and improves customers’ financial wellness • Platform provides access to our suite of products, financial wellness tools and features (such as a free credit score check, or “rounding-up” spare change to pay off debts faster) Wisr Loan Origination growth^ Wisr Financial Wellness Platform growth^ ) 1 F Y 2 o Q 4 t 9 F Y 1 o m Q 1 r f ( 0 % C A G R 5 . 1 c ) t o Q 4 F Y 2 1 r o m Q 1 F Y 1 9 f ( c . 3 5 0 % C A G R 1As at June 2021, Wisr internal data ^Full graphs with scale and relevant data can be see on pages 16, 29 14 WISR LIMITED • ANNUAL REPORT 2021REVENUE ACCELERATION • Revenue growth up 280% in FY21 vs FY20 • Strong revenue growth with Wisr Warehouse funding model now in full effect • On the back of 20 consecutive quarters of loan origination growth, Wisr is set up for: • Driving significant revenue growth in FY22, and beyond, and • Continual delivery of operational leverage going forward (evidenced through 280% revenue growth vs 43% for operating expenses in FY21) Wisr quarterly and annual revenue growth 15 20 QUARTERS OF CONSECUTIVE GROWTH Loan origination growth ) t o Q 4 F Y 2 1 r o m Q 1 F Y 1 8 f ( c . 1 5 0 % C A G R Strong loan book growth ) r o m Q 1 F Y 1 8 t o Q 4 F Y 2 1 f c . 1 6 0 % C A G R ( 16 WISR LIMITED • ANNUAL REPORT 2021Wisr Warehouse growth ) r o m Q 2 F Y 2 0 t o Q 4 F Y 2 1 f c . 5 5 0 % C A G R ( Accelerating revenue growth ) r o m Q 1 F Y 1 9 t o Q 4 F Y 2 1 f c . 2 0 0 % C A G R ( 17 DELIVERING ON MILESTONES AND GROWTH Positive operating cash flow Wisr delivered maiden positive operating cash flow result for the month of June 2021 Strong funding platform 18 • The Wisr Warehouse has $350M of committed funding and undrawn capacity of $169M • The Wisr Freedom Trust represents Wisr’s inaugural ABS transaction • Both personal loans and secured vehicle loans are funded via the Wisr Warehouse, with a dedicated secured vehicle loan warehouse to be established in FY22, with anticipated cost of funds and loan loss rate benefits • The $21.5M Head Co Loan was established in May 2021 to provide additional balance sheet strength, with $6.5M drawn upon inception WISR LIMITED • ANNUAL REPORT 2021CASH EBTDA • In FY21, the Company had a Cash EBTDA of $(9.7)M, a 30% improvement on $(13.7)M in FY20 • The operational leverage in the business is evidenced through 280% operating revenue growth, compared to 43% for operating expenses • Loan write offs represent 0.95% of the average loan book balance for FY21 • In FY21, the Company had a loss for the year of $17.6M, a 25% improvement on FY20 ($23.5M) FY21 ($’000) FY20 ($’000)) VARIANCE Operating revenue Total revenue Operating expenses Loan write offs Interest expense Cash EBTDA Depreciation & amortisation expense Finance cost amortisation Hedge ineffectiveness ECL provision Share based payment expense 27,231 27,575 7,166 7,714 (27,943) (19,548) (2,227) (7,060) (602) (1,265) (9,655) (13,702) (542) (247) (307) (5,708) (1,181) (117) (64) (22) (3,496) (6,133) Profit (loss) for the year (17,639) (23,535) 280% 257% 43% 270% 458% (30%) 362% 284% 1,276% 63% (81%) (25%) 19 20 WISR LIMITED • ANNUAL REPORT 2021MARKET PRESENCE ESTABLISHED WISR CONTINUES TO ATTRACT VERY CREDITWORTHY CUSTOMERS Strong credit quality for the market-leading growth delivered, with consistent 90+ day arrears and observable improvements, to average credit scores Wisr Loan Customer Average Credit Score Whole portfolio 90+ day arrears Q1FY21 742 Q1FY21 1.01% Q4FY21 780 Q3FY21 771 Q2FY21 759 Q2FY21 0.79% Q3FY21 0.83% Q4FY21 0.92% Wisr’s applicants consistently have higher median credit scores compared to our nearest competitors: the Big 4, Large non-banks, Internationals and Fintech lender groups1 Median Equifax scores 1Source: Equifax Consumer Update, Jun 2021. Used with permission from Equifax 21 DIVERSIFIED LOAN PORTFOLIO, ALIGNING WITH OUR PURPOSE Wisr lends to creditworthy customers all over Australia, for any worthwhile purpose, primarily debt consolidation Customers all over Australia Customer employment status 78% Full-time 9% Casual 5% Self-employed 1% Other 7% Part-time 1% NT 32% QLD 18% WA 22% NSW 1% ACT 19% VIC 5% SA 2% TAS Wisr loan purposes 31% Debt consolidation loans 18% Vehicle loans 18% Other1 Source: Wisr data on loan principal balance, as at 30 Jun 2021. 1Includes travel, medical, legal, weddings, and/or mixed purposes 22 WISR LIMITED • ANNUAL REPORT 2021Secured vehicle loans already making material contribution to Wisr loan book $86M Secured vehicle loans comprised 20% of Wisr’s loan book as at 30 June 2021 Launched in Q1FY21 with highly competitive lending product and category-leading flexibility $346M Personal loans Omni-channel distribution including Wisr Platform, direct to consumer, partnerships and broker channel TOTAL WISR LOAN BOOK 20% Secured vehicle loans Other1 13% Home improvements & contents loans 23 24 WISR LIMITED • ANNUAL REPORT 2021WISR BRAND SET UP FOR LONG TERM GROWTH Built to deliver a clear, simple message around Wisr’s financial wellness purpose, the new brand positioning engages the “smart part” of the brain, to help Australians make better personal financial decisions. This brand positioning runs across all Wisr’s design, product and communication. 25 THE WISR BRAND CAMPAIGN 16.5M+ AUSTRALIANS reached through national brand campaign Broadcast sponsor of the Olympic Games Tokyo 2020 63% of Australians in market for a personal loan in the next 6 months, recall the Wisr campaign1 Brand awareness increased for all groups considering a loan, demonstrating longer term brand impact to build the funnel2 The national campaign has allowed Wisr to come to dominate advertising awareness with our recent activity3 1Source: Forward Scout, Wisr Brand Research August 2021. Base: All respondents (1023) 2All groups considering a loan defined as next 6 months, 6-12 months, next few years. 3Base: 165 22-45 year-olds who watched the Olympics frequently 26 WISR LIMITED • ANNUAL REPORT 2021SMARTER NEW WEBSITE AND DASHBOARD The launch of the new wisr.com.au platform Award-winning reimagined web experience represents a complete reimagining of what a consumer finance digital experience can be, integrating the full suite of products, tools, and resources on the Wisr Financial Wellness Platform. Wisr Financial Wellness Platform dashboard The new Wisr dashboard represents a consolidation of the Wisr Financial Wellness Platform - giving customers the opportunity to manage their loan payments, keep up to date on their credit scores, and more - in one place. 27 FY22 KEY PRIORITIES PUTTING OUR STRONG BALANCE SHEET TO WORK Loan book growth • Accelerate the pace to achieve the medium term target of a $1B loan book, and continue growth past this milestone • Support credit enhancement in Term Securitisation Facility • Capital base to support establishment of additional financing facilities Technology investment and feature enhancement • Invest further in the technology stack to take advantage of changes in the consumer finance space, and create market leading innovation and opportunities, and deliver operational leverage at scale • Accelerate Wisr’s current trajectory towards 1M customer profiles in Australia, providing a proprietary channel for growth and differentiation in the consumer finance space Expanding TAM by exploring new markets and growth opportunities • Provide investment into further product development and innovation, to continue to strengthen Wisr’s unique position in the consumer finance market • Growth Opex and transaction costs • Strategic investment in Arbor1 by Wisr, opens up entry pathway to circa $1.76 Trillion (AUD) EU consumer finance market2 • National brand campaign setting Wisr up for years of growth 1 Initial investment made post 30 June 2021 2 Source: European Banking Authority (EBA) Report - CONSUMER LENDING IN THE EU BANKING SECTOR MARCH 2020 – THEMATIC NOTE: EUR 1.14 Trillion converted to AUD 28 WISR LIMITED • ANNUAL REPORT 2021WISR FINANCIAL WELLNESS PLATFORM FUELLING FUTURE GROWTH Strong customer growth achieved via the Wisr Financial Wellness Platform Wisr Financial Wellness Platform profiles ) F Y 1 9 t o Q 4 F Y 2 1 r o m Q 1 f c . 3 5 0 % C A G R ( Customer acquisition cost by channel group In June 2021, the Financial Wellness Platform was 88% more cost effective as a loan acquisition channel compared to direct and broker channel averages. Across H2FY21, the cost efficiency improved 33%, as we continue to improve conversion, and grow and mature the platform. 29 AWARD-WINNING MOMENTUM 30 WISR LIMITED • ANNUAL REPORT 2021RECOGNISED AS ONE OF AUSTRALIA’S BEST PLACES TO WORK #6 CATEGORY: BANKING, SUPERANNUATION & FINANCIAL SERVICES #8 CATEGORY: OVER 100 EMPLOYEES 31 EXECUTIVE LEADERSHIP TEAM ANTHONY NANTES Chief Executive Officer ANDREW GOODWIN Chief Financial Officer At Wisr, Anthony’s proven track record in technology and business innovation has been recognised through multiple award accolades including the Optus MyBusiness Awards, Business Leader of the Year (2018); 2019 Executive of the Year Awards, Highly Commended - CEO of the Year; and in the 2020 Finnies Awards, Outstanding Fintech Leader of the Year. In 2020, Wisr was recognised as one of the fastest growing technology companies in Australia by the Deloitte Technology Fast 50 Awards, coming in at #19. Prior to Wisr, Anthony was the Chief Operating Officer at fintech Prospa. Andrew has over 15 years’ experience in the financial services industry, including investment banking and principal investment with Macquarie Capital, as well as having worked across Europe and Asia. Prior to Wisr, Andrew was partner at Draycap, a secondary private equity and infrastructure firm, and preceded his time at Macquarie Capital at FontEnergy, and in particular KPMG where he was focused on assurance and advisory for the Financial Services sector JOANNE EDWARDS Chief Risk and Data Officer MATHEW LU Chief Operating Officer Joanne is a respected leader of multiple disciplines within Banking, with 17+ years’ experience ranging from credit risk, product management, pricing, analytics and strategic project delivery. Joanne is passionate about using data and analytics to solve business problems, drive profitable growth, streamline processes and improve customer experience.  Mathew brings a wealth of financial services experience twinned with a deep technology background where he started his career as an IT management consultant with Accenture. Prior to joining Wisr, Mathew was with the Commonwealth Bank as Executive Manager for the Retail and Commercial Credit Cards business. He is adept at leading the delivery of large-scale transformational changes. 32 WISR LIMITED • ANNUAL REPORT 2021DR LILI SUSSMAN Chief Strategy Officer BEN BERGER Chief Product Officer Lili has diverse international experience across the public, social purpose and corporate sectors. She has worked with government, international development organisations, BCG, and the Commonwealth Bank. Prior to Wisr, Lili was the Chief Strategy Officer at Social Ventures. Lili holds a PhD in Political Science from Harvard University and has taught at Harvard and Yale. Ben’s 19+ years’ experience spans all stages of the product life cycle, from formulating market approach, to building and delivering innovative tech-driven solutions for amazing customer experiences and services. Prior to Wisr, Ben was Head of Product at THE ICONIC. PETER BEAUMONT Chief Commercial Officer JAMES GOODWIN Chief Marketing Officer Peter is a senior business executive with over 25 years’ global banking, finance and project delivery experience gained with leading international investment banks Citibank, UBS AG, Bank of America Merrill Lynch and ABN AMRO. Peter brings to Wisr a broad set of customer acquisition and client sales leadership skills along with deep experience transitioning high volume financial products businesses from traditional channels to online processing models. James is a marketing and communications professional with a passion for leading high-performance teams. At Wisr, James is responsible for the delivery of Wisr’s purpose-led brand strategy and customer-first marketing approach. He has over 12 years’ experience in advertising and marketing, with extensive experience in the financial services sector working with brands including Bankwest, ING and American Express. 33 BOARD OF DIRECTORS JOHN NANTES Executive Chairman B.A.; B.Comm; LLB; Dip. Fin Planning Mr Nantes has over 24 years of experience in Financial Services, Private Equity, Tax and Accounting, Corporate Finance, Capital Markets, and M&A. He is also the Executive Chairman of Cashwerkz, a leading fintech in Australia, as well as a non- executive director for Thinxtra, a public non-listed IOT technology company and advises Adcock Private Equity in a CEO capacity. Mr Nantes has a strong reputation for building growth businesses especially those reliant on technology and innovation, having previously also held roles such as; Group Head of WHK/Crowe Horwath Wealth Management, CEO Prescott Securities, and Executive roles at St George Bank/ Bank SA and advisory and leadership advisory roles at Colonial State Bank. CRAIG SWANGER Non-Executive Director BCom (Hons); SIA GD Mr Swanger has extensive board experience, including Macquarie Bank’s major funds management entity, Macquarie Investment Management Limited and a total of 15 internal and external boards since 2003. Since Macquarie, Mr Swanger has invested in and advised a large portfolio of technology companies across finance, social impact, and health. More specifically in areas related to Wisr, Mr Swanger was Chairman of 5 of the largest debt listed investment companies in Australia and New Zealand issued over the past decade, and more recently worked with Australia’s largest corporate bond and securitisation distribution specialists and is on the Investment Committee of a large SME direct lending fund. CHRISTOPHER WHITEHEAD Non-Executive Director Chartered Banker, B.Sc, F FIN, FAICD Mr Whitehead has over 30 years’ experience in financial services and technology, across a wide range of roles. He is currently the Managing Director and CEO of FINSIA, Australia’s leading professional body in financial services. He was formally CEO of Credit Union Australia from 2009 to 2015, Regional Director at the Bank of Scotland from 2007 to 2008 and Chief Executive Retail Banking at BankWest from 2001 to 2007. Prior to this he was CIO at BankWest and Advance Bank. He worked in the IT sector for 15 years, including leading a successful start-up and in marketing and technical roles for a global technology provider. Mr Whitehead has previously served as non-executive director for Cuscal Limited, St Andrews Insurance Group and a number of other financial services, technology and community organisations. 34 WISR LIMITED • ANNUAL REPORT 202135 WISR LIMITED • ABN 80 004 661 205 FINANCIAL REPORT for the year ended 30 June 2021 36 WISR LIMITED • ANNUAL REPORT 2021WISR LIMITED • ANNUAL REPORT 2021 DIRECTORS’ REPORT For the year ended 30 June 2021 The directors present their report, together with the financial statements, on the consolidated entity (also referred to hereafter as the Group) consisting of Wisr Limited (referred to hereafter as the Company or Parent Entity) and the entities it controlled at the end of, or during, the year ended 30 June 2021. Directors The following persons were directors of the Company during the whole of the financial year and up to the date of this report, unless otherwise stated: Name Position John Nantes Executive Chairman Craig Swanger Non-Executive Director Christopher Whitehead Non-Executive Director Particulars of each director’s experience and qualifications are set out later in this report. Principal activities During the financial year, the Group’s primary activity was writing personal loans and secured vehicle loans for 3, 5 and 7-year maturities to Australian consumers, and funding these loans through the Wisr Warehouse. Review of operations Key Group highlights include: - - - - - - - - - - - Operating revenue up 280% to $27.2M (FY20: $7.2M) Total loan originations $611M as at 30 June 2021 Total new loan originations up 169% to $365.8M (FY20: $135.9M) Total portfolio arrears rate is down with 90+ Day arrears of 0.92% at 30 June 2021 (FY20: 1.44%) Launch of second major competitive product into market, secured vehicle loans in September 2020 (Q1FY21) 80% increase (FY21 compared to FY20) in the Wisr Financial Wellness Platform, with over 450,000 profiles (FY20: 250,554) as at 30 June 2021 The Company is well capitalised with $92.4M cash ($64.8M unrestricted cash) and $3.3M liquid loan assets available for sale as at 30 June 2021 (FY20: $37.9M cash) An increase in committed funding into the Wisr Warehouse from $150M to $350M in March 2021 The Company executed a term sheet to invest in European financial wellness fintech platform, Arbor (and settled it post 30 June 2021) The Company's inaugural $225M ABS transaction, the Wisr Freedom Trust 2021-1 (made up of personal loans), received a AAA Moody’s rating for the top tranche and significantly reduced cost of funds The Company raised $55M ($50M institutional and $5M SPP for retail shareholders), in a strongly supported equity raise in June 2021 Business model proven As at 30 June 2021, Wisr reached $611M in total loan originations since inception, with the year delivering $365.8M in new loan originations, a 169% increase on FY20 ($135.9M). This growth was supported by the introduction of Wisr’s second competitive product, secured vehicle loans, delivering strong results since launch with 63% quarter- on-quarter growth for Q4FY21. The long planned moved to a balance sheet driven, Wisr Warehouse funding model continued its significant operating benefits for the Company and allowed Wisr to achieve operating cash flow break-even for the month of June 2021. The Wisr Warehouse delivered significantly improved unit economics and operational leverage, including $27.2M in operating revenue for the year, a 280% increase on FY20 ($7.2M). Committed funding into the Wisr Warehouse increased to $350M in March 2021 by existing senior and mezzanine investors. As at 30 June 2021, the Wisr Warehouse and Wisr Freedom Trust had a combined loan book balance of $379M, as the Company scales towards the medium-term target of a wholly owned $1B loan book. In May 2021, the Group announced Wisr's inaugural $225M ABS transaction, the Wisr Freedom Trust 2021-1 (made up of personal loans) received a AAA Moody’s rating for the top tranche, providing significant external validation 37 WISR LIMITED • ANNUAL REPORT 2021 DIRECTORS’ REPORT For the year ended 30 June 2021 Review of operations (cont.) of Wisr’s business operations, underwriting capability, loan book quality and the mature stage the business has reached. The transaction has delivered a material reduction in Wisr’s costs of funds. In June 2021, Wisr undertook prudent steps to strengthen the balance sheet with a successfully completed $55M equity raise, led by Goldman Sachs as Sole Lead Manager and Underwriter, and included a Share Purchase Plan (SPP) to retail investors. Proceeds from the capital raise will be used to fund loan book growth, technology investment and feature enhancement, and expanding TAM by exploring new markets and growth opportunities. Post 30 June 2021, Wisr executed an initial ownership stake of 12.5% in EU fintech Arbor, with a pathway to potentially increasing the shareholding to 45% over the next 36 months, as the model is proven out across the EU. The small but highly strategic investment by Wisr, opens up an entry pathway to a circa $1.76 Trillion (AUD) consumer finance market in the EU as the Group takes the first step in potentially taking Wisr’s business model global (with low risk). Risk and arrears Wisr wrote prime quality credit during FY21. Total portfolio arrears were down with 90+ Day arrears of 0.92% as at 30 June 2021 (FY20: 1.44%). Throughout FY21, Wisr continually reviewed the Company’s credit decisioning to drive organic growth while optimising profitability. As at 30 June 2021, $598k or 0.14% of total portfolio loan balances were on payment assistance. COVID-19 financial assistance requests had stopped at the end of November 2020. Standard financial assistance requests have returned to pre-COVID-19 levels for the remainder of FY21. The cure rate for the segment of accounts entering COVID-19 financial assistance was 83%, 12% were written off and 5% remained on long term assistance. Financial Position and Loan Book The Group is very well capitalised with $92.4M cash ($64.8M unrestricted cash) and $3.3M liquid loan assets as at 30 June 2021, following a strongly supported capital raise in June 2021. At 30 June 2021 the Group had a total loan book of $432M consisting of: - $379M Wisr Warehouse and Wisr Freedom Trust - $48M off-balance sheet - $5M other AASB 9 requires a forecast of lifetime expected credit losses that uses a three-staged approach based on the credit profile of the receivable. The total expected credit loss provision for FY21 was $9.4M or 2.5% of gross loan receivables (FY20: 4.2%) which represents $2.4M actual loss and $7.9M incremental provisions for expected future credit loss, and $0.2M recoveries. Revenue The Company’s Wisr Warehouse funding model continued its significant operating benefits for the Company with $27.2M in operating revenue, a 280% increase on FY20 ($7.2M). This was driven by 169% growth in loan originations from $135.9M in FY20 to $365.8M in FY21. Expenses The Group continues to experience improvement in operating leverage driven by revenue growth and expense management which resulted in operating cash flow break-even for the month of June 2021. For FY21, the Group had a Cash EBTDA of $(9.7)M, a 30% improvement on FY20 ($13.7M) and an accounting loss of $(17.6)M, a 25% improvement on FY20 ($23.5M), which had material non-cash items during the period including: - - Provision for expected credit loss expense of $5.7M. Net loan write-offs for FY21 were $2.2M Share based payment expense of $1.2M Other expense items include: - - Increase in employee benefits and marketing expense driven by scaling of the Group including through growth investment into the Wisr Financial Wellness Platform and Wisr brand Increase in customer processing costs driven by growth in loan volume and entrants into the Wisr Financial Wellness Platform - Other expenses include Public Company costs, accounting, legal fees, insurance and administration items 38 WISR LIMITED • ANNUAL REPORT 2021 DIRECTORS’ REPORT For the year ended 30 June 2021 Review of operations (cont.) Wisr Financial Wellness Platform In FY21 the Group continued to deliver on the Company’s proprietary channel, the Wisr Financial Wellness Platform, introducing over 200,000 new customer profiles (80% increase on FY20) taking the total platform to over 450,000 as at 30 June 2021 and on the path to 1M customer profiles. Wisr App has now paid down over $2.5M in customer high-interest debt. The Platform allows Wisr to build better, data-driven relationships with customers at every stage of their lifecycle and has proven to be a highly cost-effective acquisition channel. In June 2021, the Platform was 88% more cost effective as a loan acquisition channel compared to the established competitive channels where Wisr also has leading customer acquisitions costs. The Platform continues to show an impact on the financial wellbeing of Wisr customers and in some cases, helping customers to become more creditworthy. Wisr customers that frequently engage with the Platform, see a +83 increase on their Equifax credit score. The launch of the new www.wisr.com.au website integrates the full suite of products, tools, and resources on the Wisr Financial Wellness Platform. Since launch in May 2021, the refreshed website has resonated strongly with consumers and sponsorship of the Olympic Games Tokyo 2020 coverage offered the ideal platform to introduce Wisr to a national audience for the first time. Positioned alongside iconic global and domestic brands, Wisr reached over 16.5M Australians as the broadcast and digital sponsor of Tokyo 2020 with Seven West Media, giving it a unique presence in Australian homes throughout the event and establishing the Wisr brand for growth in the years to come. Outlook – FY22 and Beyond In FY21, the Group proved Wisr’s purpose-led, fully digital and agile fintech business model could rapidly respond, instantly adjust operating models and succeed with significant growth through ongoing unprecedented macroeconomic changes, delivering 20 consecutive quarters of growth and a maiden cash flow break-even month (June 2021). The Group’s launch of its second major competitive product into market, secured vehicle loans, opens up a significant market opportunity and positions the Group in a prime position to build a company of significant scale, profitability and impact in the Australian consumer loan market. While the Group remains focused on the significant growth potential in the Australian market, the investment in Arbor provides the potential to extend the Wisr model into a much bigger market over time (EU circa $1.76 Trillion consumer finance TAM in 2019). The modest upfront consideration allows for a small entry position, with any follow-on investment staged around the achievement of various milestones and entirely at the Group’s option. The innovative Wisr Financial Wellness Platform, unique in the Australian market, market-leading new brand redesign and website, differentiates Wisr by not only providing a platform to scale and grow with increased operational leverage and market leading economics, but also enables the Group to support customers and improve their financial wellness, delivering a clear competitive advantage that opens up a number of potential revenue models over the coming years. Across all areas of the business, Wisr’s team continues to deliver exceptional results. The Group continues to innovate Wisr’s high-performance culture, delivering an average +75 Employee Net Promoter score for FY21, and being awarded twice as one of Australia’s best places to work. The Group is set up for continued strong revenue growth and scale in FY22, and beyond, delivering a new and fairer type of lending experience for Australian consumers. Putting the strong balance sheet to work, key executive priorities for FY22 include: Loan origination growth - - Continue to safely grow significant market share of personal loans and secured vehicle loans Lead the market in operational and customer experience excellence Loan book growth - - Achieve the medium-term target of a $1B loan book, and continue growth past this milestone Capital base to support establishment of additional financing facilities 39 WISR LIMITED • ANNUAL REPORT 2021 DIRECTORS’ REPORT For the year ended 30 June 2021 Review of operations (cont.) Technology investment and feature enhancement - Further invest in technology stack to take advantage of changes in the consumer finance space, and create market leading innovation and opportunities, while delivering operational leverage at scale - Continue Wisr’s current trajectory towards 1M customer profiles in Australia, providing a proprietary channel for growth and differentiation in the consumer finance space Expanding TAM by exploring new markets and growth opportunities - Investment into further product development and innovation, to continue to strengthen Wisr’s unique position in the consumer finance market - Creative new revenue models (beyond financial products) - New product launch in FY22 with additional/innovative credit products and/or geographic expansion - Growth Opex and transaction costs Omni-Channel Product Distribution - Grow distribution including Wisr Financial Wellness Platform, direct to consumer, and broker channel - - Increase Introducers and Aggregators through the Groups online broker portal Further extend Wisr’s reach to Australian consumers through trusted third-party brands People - Ongoing growth and development of team and culture to achieve high-performance outcomes - Continue to bring diversity and inclusion throughout all hiring areas Dividends There were no dividends declared or paid in the financial year. Significant changes in state of affairs There were no significant changes in the state of affairs of the Group during the financial year. Events since the end of the financial year In March 2021, the Group announced execution of a term sheet for an investment in European fintech platform Arbor. On 5 August 2021, the Group completed its initial investment, consisting of EUR715,358 in exchange for a 12.5% ownership stake. In addition to the 12.5%, Wisr has options in place to increase its ownership stake to 45% over three years subject to valuation thresholds and contingent upon certain milestones being achieved. Arbor is an EU based fintech with a financial wellness platform, utilising a digital wallet to offer savings, investment and lending features. Environmental matters The Group is not subject to any significant environmental regulations under Australian Commonwealth or State law. Indemnity and insurance of auditor The Company has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of the company or any related entity against a liability incurred by the auditor. During the financial year, the company has not paid a premium in respect of a contract to insure the auditor of the Company or any related entity. 40 WISR LIMITED • ANNUAL REPORT 2021 DIRECTORS’ REPORT For the year ended 30 June 2021 Information on directors The names and details of the Company's directors in office during the financial year and until the date of this report are presented below. John Nantes - Executive Chairman Qualifications Experience - B.A.; B.Comm; LLB; Dip. Fin Planning - Mr Nantes has over 24 years of experience in Financial Services, Private Equity, Tax and Accounting, Corporate Finance, Capital Markets, and M&A. He is also the Executive Chairman of Cashwerkz, a leading fintech in Australia, as well as a non-executive director for Thinxtra, a public non-listed IOT technology company and advises Adcock Private Equity in a CEO capacity. Mr Nantes has a strong reputation for building growth businesses especially those reliant on technology and innovation, having previously also held roles such as; Group Head of WHK/Crowe Horwath Wealth Management, CEO Prescott Securities, and Executive roles at St George Bank/ Bank SA and advisory and leadership advisory roles at Colonial State Bank. Interest in shares and options as at 30 June 2021 Former directorships (last 3 years) Other current directorships - Ordinary shares held: 13,201,370 Performance rights held: 5,960,000 - None - Income Asset Management Group Ltd (ASX: CWZ) Craig Swanger - Non-Executive Director Qualifications Experience - BCom (Hons); SIA GD - Mr Swanger has extensive board experience, including Macquarie Bank’s major funds management entity, Macquarie Investment Management Limited and a total of 15 internal and external boards since 2003. Since Macquarie, Mr Swanger has invested in and advised a large portfolio of technology companies across finance, social impact, and health. More specifically in areas related to Wisr, Mr Swanger was Chairman of 5 of the largest debt listed investment companies in Australia and New Zealand issued over the past decade, and more recently worked with Australia’s largest corporate bond and securitisation distribution specialists and is on the Investment Committee of a large SME direct lending fund. Interest in shares and options as at 30 June 2021 Former directorships (last 3 years) Other current directorships - Ordinary shares held: 4,091,666 Performance rights held: 3,310,000 - None - Income Asset Management Group Ltd (ASX: CWZ) 41 WISR LIMITED • ANNUAL REPORT 2021 DIRECTORS’ REPORT For the year ended 30 June 2021 Christopher Whitehead Qualifications Experience Interest in shares and options as at 30 June 2021 Former directorships (last 3 years) Other directorships current - Non-Executive Director - Chartered Banker BSc, F FIN, FAICD - Mr Whitehead has over 30 years’ experience in financial services and technology, across a wide range of roles. He is currently the Managing Director and CEO of FINSIA, Australia’s leading professional body in financial services. He was formally CEO of Credit Union Australia from 2009 to 2015, Regional Director at the Bank of Scotland from 2007 to 2008 and Chief Executive Retail Banking at BankWest from 2001 to 2007. Prior to this he was CIO at BankWest and Advance Bank. He worked in the IT sector for 15 years, including leading a successful start-up and in marketing and technical roles for a global technology provider. Mr Whitehead has previously served as non-executive director for Cuscal Limited, St Andrews Insurance Group and a number of other financial services, technology and community organisations. - Ordinary shares held: 5,830,000 Performance rights held: 3,310,000 - None - None Information on company secretaries Vanessa Chidrawi Experience May Ho Experience - Vanessa is a highly experienced governance professional, having held leadership and executive management roles in companies listed on ASX, TSX, Nasdaq and JSE over the past fifteen years. She obtained degrees in law and commerce and then practised as an attorney for twelve years before entering the corporate world. Vanessa has acted as company secretary to a range of companies listed on ASX and TSX and brings with her a wealth of experience in governance management, board advisory, corporate structuring and capital raising in the listed company space. - Miss Ho holds a Bachelor of Laws and Bachelor of Business (Accounting Major) degree and has completed a Graduate Diploma in Applied Corporate Governance. She is currently also Financial Controller and Compliance Officer of the Group. Miss Ho has also had over 3 years’ experience practicing as a solicitor in a private law firm in Sydney. 42 WISR LIMITED • ANNUAL REPORT 2021 DIRECTORS’ REPORT For the year ended 30 June 2021 Indemnification and insurance of officers and auditors The Group has entered into agreements with the following to indemnify them against liabilities incurred in their capacity as an officer/director of the Group to the extent permitted by law: - - - - - - John Nantes Craig Swanger Christopher Michael Whitehead Peter Beaumont Vanessa Chidrawi Leanne Ralph Stephen Porges Campbell McComb - - - Winton Willesee - Andrew McKay - Robert Parton During the financial year, the Group incurred a premium to insure the directors and officers of the Group. Disclosure of the nature of the liabilities covered and the amount of the premium payable is prohibited by the insurance contract. The Group has not otherwise, during or since the end of the financial year, except to the extent permitted by law indemnified or agreed to indemnify an officer or auditor of the company or any of its controlled entities against a liability incurred as such an officer or auditor. Meetings of directors The number of meetings of the Company’s Board of Directors and of each board committee held during the year ended 30 June 2021, and the number of meetings attended by each director were: Directors' Meetings Risk Committee Meetings Number eligible to attend 14 14 14 Number attended 14 14 14 Number eligible to attend 4 - 4 Number attended 4 - 4 Remuneration and Nominations Meetings Number Number attended eligible to attend - 2 2 - 2 2 John Nantes Craig Swanger Chris Whitehead Proceedings on behalf of the Company No proceedings have been brought or intervened in on behalf of the Company with leave of the Court under section 237 of the Corporations Act 2001. 43 WISR LIMITED • ANNUAL REPORT 2021 DIRECTORS’ REPORT For the year ended 30 June 2021 Non-audit services BDO Audit Pty Ltd were appointed Company auditor on 25 September 2020 and will continue in office in accordance with section 327 of the Corporations Act 2001. The Company may decide to engage the auditor on assignments additional to their statutory audit duties where the auditor’s expertise and experience with the Group are important. The following fees were paid or payable to BDO for non-audit services provided during the year ended 30 June 2021: Taxation services $ 2,500 The directors are satisfied that the provision of non-audit services during the financial year, by the auditor (or by another person or firm on the auditor's behalf), is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are of the opinion that the services as disclosed in note 18 to the financial statements do not compromise the external auditor's independence requirements of the Corporations Act 2001 for the following reasons: • all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of the auditor; and none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards Board, including reviewing or auditing the auditor's own work, acting in a management or decision-making capacity for the company, acting as advocate for the company or jointly sharing economic risks and rewards. • Auditor's independence declaration The auditor's independence declaration in accordance with section 307C of the Corporations Act 2001 for the year ended 30 June 2021 has been received and can be found within the financial report. Performance rights At the date of this report, the unissued ordinary shares of Wisr Limited under performance rights are as follows: Effective Grant Date Date of Expiry Exercise Price Number under Performance Rights 19 February 2019 1 September 2019 1 September 2019 31 July 2021 31 July 2021 31 July 2022 1 September 2019 30 June 2022 1 July 2020 1 July 2020 31 July 2022 31 July 2023 Nil Nil Nil Nil Nil Nil 10,438,422 4,901,178 4,802,382 39,350,000 5,407,833 5,407,861 70,307,676 Performance rights holders do not have any rights to participate in any issues of shares or other interests of the Company or any other entity. There have been no performance rights granted over unissued shares or interests of any controlled entity within the Group during or since the end of the reporting period. For details of performance rights issued to directors and executives as remuneration, refer to the remuneration report. Corporate governance statement Our Corporate Governance Statement is available on our website at: www.wisr.com.au/policies-and-governance 44 WISR LIMITED • ANNUAL REPORT 2021 DIRECTORS’ REPORT For the year ended 30 June 2021 Remuneration report Letter from Chairperson of the Remuneration and Nominations Committee Dear Shareholders, On behalf of the Board, I am pleased to present Wisr’s Remuneration Report (Report) for the financial year ended 30 June 2021 (FY21). This report outlines Wisr’s remuneration strategy set by the Board in 2019 and executed over the past 24 months. Wisr’s remuneration framework, as outlined in the accompanying Report, reflects our commitment to deliver competitive remuneration for outstanding performance in order to attract and retain talented individuals, while aligning the interests of executives and shareholders. Most importantly in FY20 and FY21, cash conservation was and continues to be the key to protect shareholder value and avoid unnecessary dilution. As such, performance-based non-cash remuneration forms a significant portion of Wisr’s remuneration strategy. This approach is used for KMPs, directors and senior management, and the KPIs and behaviours required to qualify for awards are linked all the way through the organisation, aligning values, behaviours and shareholder-interests. When it comes to KMPs and directors in particular, Wisr’s strategy involves recipients receiving significantly less fixed (cash) remuneration than their market value. The trade-off for them is that they receive equity-based incentives that could take their total remuneration to more than their market value. This is an “executives win only if shareholders win” remuneration strategy targeted at entrepreneurial leaders that will back themselves to deliver for shareholders. If shareholder returns don’t perform at 15% p.a. at least, total remuneration will be well below market as it will be limited to fixed cash remuneration and potentially STI where applicable. If they exceed 15% p.a. but less than 30% p.a., total remuneration will be in line with market for the same individuals; and if returns reach 200% or more over the three year period, total remuneration will be above market. Similarly and unlike the remuneration approach of many ASX-listed companies, equity-based incentives also require minimum service and behaviour standards. The total value of these packages has been benchmarked to relevant peers on the ASX in terms of fixed (cash) remuneration components and maximum remuneration. The share price triggers were set in consultation with KMPs, with the team collectively choosing shareholder return triggers well above those typically used by peers on the ASX, allowing us greater alignment of interests while managing the cost of the total packages. Regarding STI, each year the Board will assess several factors including the quality of the results, adherence to risk management policies, achievement against individual objectives and the effectiveness of strategic initiatives implemented to determine the extent to which the overall outcomes adequately reflect actual performance and returns to shareholders. This Report is structured to provide shareholders with insights into the remuneration governance, policies, procedures and practices being applied. Remuneration is a complex topic, particularly when equity-based incentives are included. We trust that should you have any questions about the rationale for our approach or any of the details, that you will let us know. Craig Swanger Chairperson, Remuneration and Nominations Committee 45 WISR LIMITED • ANNUAL REPORT 2021 DIRECTORS’ REPORT For the year ended 30 June 2021 Remuneration report (audited) Wisr Limited’s 2021 remuneration report sets out remuneration information for the Company’s directors and other key management personnel. The report contains the following sections: a) Key management personnel disclosed in this report b) Remuneration governance c) Service agreements d) Details of remuneration e) Equity instruments held by key management personnel f) Movement in performance rights g) Fair value of performance rights a) Key management personnel disclosed in this report The key management personnel are those persons having authority and responsibility for planning, directing and controlling the major activities of the Group, directly or indirectly, including any director (whether executive or otherwise) of the Parent Entity. During the year ended 30 June 2021 and up to the date of this report, the following were classified as key management personnel: Name Position John Nantes Executive Chairman Craig Swanger Non-Executive Director Chris Whitehead Non-Executive Director Anthony Nantes Chief Executive Officer Andrew Goodwin Chief Financial Officer b) Remuneration governance The Board ensures that executive reward satisfies the following key criteria for good reward governance practices: - - - - - competitiveness and reasonableness; acceptability to shareholders; performance linkage and alignment of executive compensation; transparency; and capital management. i. Our remuneration framework Wisr’s remuneration strategy is approved by the Board. A Remuneration and Nominations Committee (RNC) was established on 26 June 2020. The role of the RNC is set out in its charter, which is reviewed annually. 46 WISR LIMITED • ANNUAL REPORT 2021 DIRECTORS’ REPORT For the year ended 30 June 2021 Remuneration report (audited) (cont.) b) Remuneration governance (cont.) Wisr Remuneration Framework (2019-2022) Objectives Attract, motivate and retain executive talent required to deliver strategy. Appropriately balance fixed and at-risk components. Remuneration Component Total Remuneration (TR) Total Fixed Remuneration (TFR) TFR set according to similar positions at ASX companies of WZR size today. This will result in fixed (cash) rem being at market if executives do not grow the Company in line with the strategy, but well under market if they do. n/a Create reward differentiation to drive performance values and behaviours. Variable Cash Remuneration (STI) 0-50% depending upon position. None for directors. Can be taken as equity at executive’s option with 10% discount to reflect premium on cash. Create shareholder value through equity alignment. Variable Equity Remuneration (LTI) LTI to form 40-70% of TR. 100% of LTI is at- risk, meaning that the minimum LTI payment is nil for all executives. Must pass all compliance KPIs to exceed nil, then performance driven according to individual but aligned KPIs. All LTI linked to share price increases of 15%- 200% from the share price of 12.51c at the time of issue (2019). LTI also requires min service and compliance KPIs to be satisfied. Conserve cash and therefore minimise shareholder dilution. Align behaviour in short-term, including risk management and revenue growth, while conserving cash. Align executives to manage all aspects required for shareholder growth including earnings growth, compliance and attracting shareholders. Amount and Range (Min Rem – Max Rem) Conditions to exceed Min Strategy behind this approach Min Rem 2nd-3rd quartile level for WZR current size Max Rem at 2nd – 3rd quartile at WZR market cap if LTI hurdles achieved (38.00 cents per share by 2022). Must pass all compliance KPIs to exceed Min Rem. In order to reach Max Rem, individual STI hurdles must be exceeded each year, share price hurdles of up to 200% growth over 3 years must be passed, and tenure must be at least 3 years. WZR’s strategy requires executives with experience well beyond what WZR can afford in cash rem. Further there are no guarantees of success, so the framework relies heavily upon at-risk components. In accordance with best practice corporate governance, the structure of non-executive director and executive remuneration is separate and distinct. ii. Remuneration Structures for non-executive directors Non-executive director remuneration was designed to attract and retain directors of the highest calibre, whilst incurring a cost which is acceptable to shareholders. 47 WISR LIMITED • ANNUAL REPORT 2021 DIRECTORS’ REPORT For the year ended 30 June 2021 Remuneration report (audited) (cont.) b) Remuneration governance (cont.) The Constitution and the ASX Listing Rules specify that the aggregate remuneration of non-executive directors shall be determined from time to time by a general meeting. An amount not exceeding the amount determined is then divided between the directors as agreed. The latest determination was adopted by a special resolution passed at the Annual General Meeting held on 17 November 2016 when shareholders adopted a new constitution providing for an aggregate remuneration of up to a maximum of $500,000 per year, excluding share-based payments such as performance rights. The aggregate remuneration is reviewed annually. The remuneration for non-executive directors is currently comprised of cash, superannuation contributions and performance rights. Retirement allowances for non-executive directors There is no scheme to provide retirement benefits, other than statutory superannuation, to non-executive directors. iii. Remuneration Structures for current executives The remuneration aspects for current executives aims to reward executives with a level and mix of remuneration commensurate with the position and responsibilities within the Company and so as to: - - align the interests of executives with those of the shareholder; and ensure total remuneration is competitive by market standards in order to attract and retain talented individuals. Fixed remuneration The level of fixed remuneration for executives is set so as to provide a base level of remuneration which is both appropriate to the position and is competitive in the market. Executives receive fixed remuneration by way of salary and company superannuation payments. At-risk remuneration Wisr’s performance hurdles, particularly for the LTI, are at the higher end of the market (ASX peer companies) in terms of degree of difficulty. Any STI and LTI award will only have value to the executive if the performance hurdles are met to enable vesting to occur, and for performance rights related awards, if the share price on vesting exceeds the trigger price. In the event of serious misconduct or a material misstatement in the company’s financial statements, the RNC can cancel or defer performance-based remuneration and may also claw back performance-based remuneration paid in previous financial years. In addition, all executives above have entered into a voluntary escrow agreement in which they have agreed to retain all remuneration-related equity for their full tenure (other than as required to cover any income tax liabilities relating to this equity). This was not a condition of the LTI Plan, but agreed collectively by the executives. Retirement benefits No executives have entered into employment agreements that provide additional retirement benefits. iv. Company Performance linked to remuneration Given the growth nature of the Company, the lack of profit and other key financial variables as shown in the table below, the award of LTI are made on the basis of each individual’s contribution to their specific role in the Company to date and their expected importance to the future of the Company. LTI were deemed to provide an appropriate performance incentive for each individual as applicable. 30 June 2021 30 June 2020 30 June 2019 30 June 2018 30 June 2017 $ 27.231m (17.639m) nil 92.410m $0.26 $ 7.166m (23.535m) nil 37.973m $0.22 $ 3.043m (7.731m) nil 11.993m $0.15 $ 1.591m (6.208m) nil 1.549m $0.02 $ 1.160m (5.432m) nil 3.479m $0.03 Operating revenue Loss Dividend Cash balance Share price 48 WISR LIMITED • ANNUAL REPORT 2021 DIRECTORS’ REPORT For the year ended 30 June 2021 Remuneration report (audited) (cont.) c) Service agreements The remuneration agreements of key management personnel as at 30 June 2021 are set out below: KMP Position held as at 30 June 2021 and any change during the year Contract details (duration and termination) J Nantes Executive Chairman C Swanger Non-executive director C Whitehead Non-executive director A Nantes Chief Executive Officer No determined duration – subject to retirement and re-election rules of the Company’s constitution. No notice required to terminate. No determined duration – subject to retirement and re-election rules of the Company’s constitution. No notice required to terminate. No determined duration – subject to retirement and re-election rules of the Company’s constitution. No notice required to terminate. No fixed term. 6 months’ notice to terminate. A Goodwin Chief Financial Officer No fixed term. 6 months’ notice to terminate. Agreed gross cash salary per annum incl. superannuation $ 100,000 60,000 60,000 317,550 (base cash salary per service agreement) 317,550 (base cash salary per service agreement) 49 WISR LIMITED • ANNUAL REPORT 2021 DIRECTORS’ REPORT For the year ended 30 June 2021 Remuneration report (audited) (cont.) c) Service agreements (cont.) In addition to the above salary based compensation, the following key management personnel have been granted performance rights to align their compensation with the performance of the Company, as reflected in its share price. Performance rights are granted in tranches and are linked to share prices over designated periods, as per the following table: KMP J Nantes C Swanger C Whitehead A Nantes A Goodwin VWAP share price target * No. performance rights that will vest Earliest determination date for vesting Date performance rights lapse if conditions not met $0.1924 $0.3800 $0.1924 $0.3800 $0.1924 $0.3800 $0.1924 $0.3000 $0.3800 $0.1924 $0.3000 $0.3800 2,880,000 3,080,000 01/07/2021 01/09/2019 30/06/2022 30/06/2022 1,600,000 1,710,000 01/07/2021 01/09/2019 30/06/2022 30/06/2022 1,600,000 1,710,000 01/07/2021 01/09/2019 30/06/2022 30/06/2022 10,010,000 3,500,000 5,000,000 4,300,000 1,630,000 2,330,000 01/07/2021 01/09/2019 01/09/2019 01/07/2021 01/09/2019 01/09/2019 30/06/2022 30/06/2022 30/06/2022 30/06/2022 30/06/2022 30/06/2022 * These Performance Rights will automatically vest and exercise for nil consideration on satisfaction of the Vesting Conditions. The Vesting Conditions for the Performance Rights are: - - The holder being a director/employee of the Company as at the relevant vesting determination dates specified in the table; and The relevant volume weighted average price (VWAP) of the Company’s ordinary shares traded on ASX over any 20- day period exceeds the prices specified in the table. 50 WISR LIMITED • ANNUAL REPORT 2021 DIRECTORS’ REPORT For the year ended 30 June 2021 Remuneration report (audited) (cont.) d) Details of remuneration The following table of benefits and payment details, in respect to the financial year, represents the components of remuneration for each member of the key management personnel of the Group: Post employment Long-term Short term benefits benefits benefits Share based payments Cash salary, fees & short- Short- term term compensated incentive Long service Performance Performance absences schemes Superannuation leave Rights Shares Total Related ($) ($) ($) ($) ($) ($) ($) (%) Directors (2021) J Nantes C Swanger C Whitehead 106,887 54,795 54,795 Total: 216,477 - - - - 1,446 5,205 5,205 11,856 - - - - 33,152 18,418 18,418 69,988 Executives (2021) A Nantes 290,000 94,830 28,960 3,593 A Goodwin 290,000 64,218 Total: 580,000 159,048 27,572 56,532 3,281 6,874 Directors (2020) J Nantes C Swanger C Whitehead 91,324 54,795 54,795 Total: 200,914 - - - - 8,676 5,205 5,205 19,086 - - - - 115,178 49,596 164,774 530,113 391,487 293,926 - - - - - - - - - - 141,485 78,418 78,418 298,321 532,561 434,667 967,228 630,113 451,487 353,926 23.43 23.49 23.49 37.65 25.74 84.13 86.71 83.05 1,215,526 - 1,435,526 Executives (2020) A Nantes 290,000 164,155 A Goodwin 290,000 65,050 25,341 23,952 2,729 2,492 2,024,716 711,187 3,218,128 1,116,069 - 1,497,563 90.12 78.87 Total: 580,000 229,205 49,293 5,221 3,140,785 711,187 4,715,691 Further details of performance-related remuneration paid or accrued for FY2021 in respect of specific key management personnel are discussed below: - Mr A Nantes Mr Nantes is eligible to receive a short-term incentive (STI) of up to $50,000 in respect of each six-month period, subject to the achievement of key performance indicators as agreed by the Board of Directors from time to time, assessed in the sole discretion of the Board and paid following the Board’s approval of the Company’s audited accounts for the relevant period. - Mr A Goodwin Mr Goodwin is eligible to receive an STI of up to $34,000 in respect of each six-month period, subject to the achievement of key performance indicators as agreed by the Board of Directors from time to time, assessed in the sole discretion of the Board. Short-term and long-term incentives established in the year for the above KMPs are also set out in Note 22 of the financial report. Performance conditions set for KMP short-term and long-term incentives (as discussed above and in Note 22 of the financial report) align the KMP interests with the outcomes for shareholders, customers, and staff. The achievement of these performance conditions support the growth of company value whilst providing KMPs with 51 WISR LIMITED • ANNUAL REPORT 2021 DIRECTORS’ REPORT For the year ended 30 June 2021 Remuneration report (audited) (cont.) d) Details of remuneration (cont.) remuneration packages that are above market rates relative to peer roles. Conversely, an underperformance of goals expose KMPs to a level of financial risk where their remuneration packages become well below market rates. e) Equity instruments held by key management personnel The table below shows the number of ordinary shares in the Company held by key management personnel. Balance at the start Received as exercise of options Other changes Balance at end of of the year compensation or rights during the year the year Received on 2,390,000 1,430,000 1,330,000 5,150,000 44,355 (2,031,953) 50,000 13,201,370 4,091,666 5,830,000 (1,937,598) 23,123,036 Directors (2021) J Nantes C Swanger C Whitehead 10,767,015 4,693,619 4,450,000 Total: 19,910,634 Executives (2021) A Nantes A Goodwin Total: Directors (2020) J Nantes C Swanger C Whitehead Total: Executives (2020) A Nantes A Goodwin 39,108,736 12,871,491 51,980,227 8,847,015 2,773,619 3,390,000 15,010,634 8,950,016 1,704,079 Total: 10,654,095 - - - - - 5,037,412 5,037,412 8,150,000 3,900,000 12,050,000 - - - - 1,920,000 1,920,000 1,060,000 4,900,000 20,158,720 5,037,412 25,196,132 10,000,000 6,130,000 16,130,000 - - - - - - - - - - 47,258,736 21,808,903 69,067,639 10,767,015 4,693,619 4,450,000 19,910,634 39,108,736 12,871,491 51,980,227 f) Movement in performance rights The table below provides the number of performance rights held by Key Management Personnel at 30 June 2020 and 30 June 2021. Name June 2020 during FY21 during FY21 during FY21 June 2021 Rights held at 30 Rights granted Rights exercised Rights lapsed Rights held as at 30 Directors J Nantes C Swanger C Whitehead Total: Executives A Nantes A Goodwin Total: 52 8,350,000 4,640,000 4,640,000 17,630,000 26,660,000 12,160,000 38,820,000 - - - - - - - 2,390,000 1,330,000 1,330,000 5,050,000 8,150,000 3,900,000 12,050,000 - - - - - - - 5,960,000 3,310,000 3,310,000 12,580,000 18,510,000 8,260,000 26,770,000 WISR LIMITED • ANNUAL REPORT 2021 DIRECTORS’ REPORT For the year ended 30 June 2021 Remuneration report (cont.) g) Fair value of performance rights Performance Rights granted Vesting Conditions Fair Value per right at Effective effective grant Number grant date date ($) Earliest vesting VWAP Share determination Price condition date ($) Expiry date 2,880,000 1 Sep 2019 0.02065 01/07/2021 0.1924 30 Jun 2022 3,080,000 1 Sep 2019 0.02284 01/09/2019 0.3800 30 Jun 2022 1,600,000 1 Sep 2019 0.02065 01/07/2021 0.1924 30 Jun 2022 1,710,000 1 Sep 2019 0.02284 01/09/2019 0.3800 30 Jun 2022 Directors (2021) J Nantes J Nantes C Swanger C Swanger C Whitehead 1,600,000 1 Sep 2019 0.02065 01/07/2021 0.1924 30 Jun 2022 C Whitehead 1,710,000 1 Sep 2019 0.02284 01/09/2019 0.3800 30 Jun 2022 Executives (2021) A Nantes A Nantes A Nantes A Goodwin A Goodwin A Goodwin 10,010,000 1 Sep 2019 0.02065 01/07/2021 0.1924 30 Jun 2022 3,500,000 1 Sep 2019 0.03926 01/09/2019 5,000,000 1 Sep 2019 0.02284 01/09/2019 0.3000 0.3800 30 Jun 2022 30 Jun 2022 4,300,000 1 Sep 2019 0.02065 01/07/2021 0.1924 30 Jun 2022 1,630,000 1 Sep 2019 0.03926 01/09/2019 2,330,000 1 Sep 2019 0.02284 01/09/2019 0.3000 0.3800 30 Jun 2022 30 Jun 2022 These Performance Rights will automatically vest and exercise for nil consideration on satisfaction of the Vesting Conditions. The Vesting Conditions for the Performance Rights are: - - The holder being a director/employee of the Company as at the relevant vesting determination dates specified in the table; and The relevant volume weighted average price (VWAP) of the Company’s ordinary shares traded on ASX over any 20-day period exceeds the prices specified in the table. The total fair value of above rights at grant date issued to key management personnel is $938,267. The value of rights differs to the expense recognised as part of each key management person’s remuneration in table d) above because this value is the grant date fair value calculated in accordance with AASB 2 Share Based Payment whereby the expense is recognised throughout the vesting period. 53 WISR LIMITED • ANNUAL REPORT 2021 DIRECTORS’ REPORT For the year ended 30 June 2021 This concludes the remuneration report, which has been audited. This report is made in accordance with a resolution of directors. ............................................................... John Nantes Director Sydney 26 August 2021 54 WISR LIMITED • ANNUAL REPORT 2021 AUDITOR’S INDEPENDENCE DECLARATION 55 WISR LIMITED • ANNUAL REPORT 2021 FINANCIAL REPORT Consolidated statement of profit or loss and other comprehensive income For the year ended 30 June 2021 Revenue Other income Expenses Employee benefits expense Marketing expense Customer processing costs Property expenses Other expenses Finance costs Depreciation and amortisation expense Provision for expected credit loss expense Share based payment expense Loss before income tax Income tax expense Loss after income tax for the year Loss for the year is attributable to: Owners of Wisr Limited Earnings per share for loss attributable to the owners of Wisr Limited Basic earnings per share Diluted earnings per share Other comprehensive loss Gain (loss) arising from changes in fair value of cash flow hedging instruments entered into Other comprehensive loss for the year, net of tax Note 2021 $ 2020 $ 2 3 27,230,985 344,188 7,166,322 547,402 (14,191,169) (6,264,211) (3,067,701) (187,949) (4,232,284) (7,614,021) (541,922) (7,934,680) (1,180,559) (9,510,059) (4,464,333) (1,898,724) (244,969) (3,430,393) (1,351,689) (117,336) (4,097,956) (6,133,091) (17,639,323) (23,534,826) - - (17,639,323) (23,534,826) (17,639,323) (23,534,826) Cents (1.60) (1.60) Cents (2.60) (2.60) 795,948 795,948 (202,842) (202,842) 5 29 17 26 26 15 Total comprehensive loss for the year (16,843,375) (23,737,668) Total comprehensive loss for the year is attributable to: Owners of Wisr Limited (16,843,375) (23,737,668) The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes 56 WISR LIMITED • ANNUAL REPORT 2021 FINANCIAL REPORT Consolidated statement of financial position As at 30 June 2021 Assets Cash and cash equivalents Trade and other receivables Loan receivables Property, plant and equipment Other assets Right of use assets Derivative financial instruments Intangible assets Total assets Liabilities Trade and other payables Provision for employee benefits Lease liability Derivative financial instruments Borrowings Total liabilities Net assets Equity Issued capital Reserves Accumulated losses Total equity Note 2021 $ 2020 $ 4 6 5 7 11 13 8 9 10 11 13 12 92,409,558 1,208,633 374,651,379 263,471 521,759 1,729,578 264,050 384,544 37,973,266 1,023,326 85,997,500 5,733 489,569 - - 471,760 471,432,972 125,961,154 3,945,333 872,215 1,886,648 - 392,472,477 2,512,852 541,540 - 225,129 86,710,392 399,176,673 89,989,913 72,256,299 35,971,241 14 15 15 143,678,390 3,250,454 (74,672,545) 89,827,317 3,181,186 (57,037,262) 72,256,299 35,971,241 The above consolidated statement of financial position should be read in conjunction with the accompanying notes 57 WISR LIMITED • ANNUAL REPORT 2021 FINANCIAL REPORT Consolidated statement of changes in equity For the year ended 30 June 2021 Balance at 1 July 2019 Loss after income tax expense for the year Other comprehensive loss for the year, net of tax Total comprehensive loss for the year Transactions with owners in their capacity as owners: Issued capital $ 48,412,004 Reserves $ 1,895,421 Accumulated losses $ (33,534,592) Total equity $ 16,772,833 - - - - (23,534,826) (23,534,826) (202,842) - (202,842) (202,842) (23,534,826) (23,737,668) Issue of share capital Costs of raising capital 36,500,100 (859,972) - - Share based payment expense (Note 15) 1,318,542 4,814,549 Transfer of share based reserve to issued capital on exercise of options 3,255,476 (3,255,476) Issue of shares as a result of exercise of options for consideration 1,201,167 (38,310) - - - - - 36,500,100 (859,972) 6,133,091 - 1,162,857 Transfer of share based payment reserve - (32,156) 32,156 - Balance at 30 June 2020 89,827,317 3,181,186 (57,037,262) 35,971,241 Balance at 1 July 2020 89,827,317 3,181,186 (57,037,262) 35,971,241 Loss after income tax expense for the year Other comprehensive gain for the year, net of tax Total comprehensive loss for the year Transactions with owners in their capacity as owners: - - - - (17,639,323) (17,639,323) 795,948 - 795,948 795,948 (17,639,323) (16,843,375) Issue of share capital Costs of raising capital 54,999,914 (3,160,131) - - Share based payments expense (Note 15) - 1,180,559 - - - 54,999,914 (3,160,131) 1,180,559 Transfer of share-based reserve to issued capital on exercise of options Issue of shares as a result of exercise of options for consideration 1,835,713 (1,835,713) - 145,577 (37,486) 108,091 Issue of shares for services rendered 30,000 (30,000) Transfer of share-based payment reserve - (4,040) 4,040 - - Balance at 30 June 2021 143,678,390 3,250,454 (74,672,545) 72,256,299 The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes 58 WISR LIMITED • ANNUAL REPORT 2021 FINANCIAL REPORT Consolidated statement of cash flows For the year ended 30 June 2021 Cash flows from operating activities Receipts from customers Payments to suppliers and employees Interest received on investments and cash Management fees received Interest and other finance costs paid Proceeds from R&D tax incentive Note 2021 $ 2020 $ 24,305,699 (27,595,351) (3,289,652) 4,814,906 (18,256,184) (13,441,278) 11,285 1,176,790 (6,261,893) 380,874 48,843 1,472,386 (1,109,037) 219,078 Net cash used in operating activities 25 (7,982,596) (12,810,008) Cash flows from investing activities Payments for plant and equipment Receipts from investments Net movement in customer loans (308,875) - (294,052,383) - 518,000 (83,078,103) Net cash used in investing activities (294,361,258) (82,560,103) Cash flows from financing activities Proceeds from issue of shares Proceeds from exercise of share options Costs of raising capital paid Repayment of borrowings – secured notes Proceeds from issuance of borrowings Transaction costs related to borrowings Payments for right of use asset 54,999,914 108,091 (3,076,009) (1,675,000) 309,325,000 (2,552,511) (349,339) 36,500,100 1,162,857 (859,972) (425,000) 85,600,000 (627,773) - Net cash provided by financing activities 356,780,146 121,350,212 Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year 54,436,292 37,973,266 25,980,101 11,993,165 Cash and cash equivalents at the end of the financial year 92,409,558 37,973,266 The above consolidated statement of cash flows should be read in conjunction with the accompanying notes 59 WISR LIMITED • ANNUAL REPORT 2021 FINANCIAL REPORT Notes to the financial statements For the year ended 30 June 2021 The consolidated financial statements of Wisr Limited (the Group) for the year ended 30 June 2021 was authorised for issue in accordance with a resolution of the directors on 26 August 2021. The directors have the power to amend and revise the financial report. The consolidated financial statements and notes represent those of Wisr Limited and its controlled entities (the Group). Wisr Limited is a company limited by shares incorporated and domiciled in Australia whose shares are publicly traded on the Australian Stock Exchange. Note 1. Summary of significant accounting policies a. Basis of preparation These general purpose consolidated financial statements have been prepared in accordance with the Corporations Act 2001, Australian Accounting Standards and Interpretations of the Australian Accounting Standards Board and in compliance with International Financial Reporting Standards as issued by the International Accounting Standards Board. The Group is a for-profit entity for financial reporting purposes under Australian Accounting Standards. Material accounting policies adopted in the preparation of these financial statements are presented below and have been consistently applied unless stated otherwise. Except for cash flow information, the financial statements have been prepared on an accrual basis and are based on historical costs, modified, where applicable, by the measurement at fair value of selected non-current assets, financial assets and financial liabilities. The statement of financial position is presented on a liquidity basis. Assets and liabilities are presented in decreasing order of liquidity and do not distinguish between current and non-current. All balances are expected to be recovered within 12 months except for intangible assets, property, plant and equipment and financial instruments, for which expected term is disclosed. Where required by Accounting Standards and/or for improved presentation purposes, comparative figures have been adjusted to conform with changes in presentation for the current year. i) Going concern These financial statements have been prepared under a going concern basis. The Directors believe that the Group will have sufficient resources to pay its debts and meet its commitments for at least the next 12 months from the date of this financial report due to the Group having: - - both of which support its operational commitments. strong cash reserves boosted by the successful capital raise it completed in H2FY21; and wholesale funding arrangements for future loan originations; ii) New and revised accounting standards and interpretations The Group has adopted all of the new, revised or amending Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (AASB) that are mandatory for the current reporting period. Any new, revised or amending Accounting Standards or Interpretations that are not yet mandatory have not been early adopted. 60 WISR LIMITED • ANNUAL REPORT 2021 FINANCIAL REPORT Notes to the financial statements For the year ended 30 June 2021 b. Principles of consolidation The consolidated financial statements incorporate the assets and liabilities of the Company and all subsidiaries as at 30 June 2021, and the results of all subsidiaries for the year then ended. Subsidiaries are all those entities over which the Company has the power to govern the financial and operating policies, generally accompanying a shareholding of 100% of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Company controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de- consolidated from the date that control ceases. Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. Investments in subsidiaries are accounted for at cost in the individual financial statements of the Company, less any impairment charges. c. Foreign currency transactions and balances Functional and presentation currency Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The consolidated financial statements are presented in Australian dollars, which is Wisr Limited’s functional and presentation currency. Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised through profit or loss, except when deferred in equity as qualifying cash flow hedges and qualifying net investment hedges. d. Impairment of assets Assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable, and as a minimum, annually. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets, other than goodwill, that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period. e. Investments and other financial assets Investments and other financial assets are initially measured at fair value. Transaction costs are included as part of the initial measurement, except for financial assets at fair value through profit or loss. Such assets are subsequently measured at either amortised cost or fair value depending on their classification. Classification is determined based on both the business model within which such assets are held and the contractual cash flow characteristics of the financial asset unless, an accounting mismatch is being avoided. Financial assets are derecognised when the rights to receive cash flows have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership. When there is no reasonable expectation of recovering part or all of a financial asset, it's carrying value is written off. 61 WISR LIMITED • ANNUAL REPORT 2021 FINANCIAL REPORT Notes to the financial statements For the year ended 30 June 2021 e. Investments and other financial assets (cont.) Financial assets at fair value through profit or loss Financial assets not measured at amortised cost or at fair value through other comprehensive income are classified as financial assets at fair value through profit or loss. Typically, such financial assets will be either: (i) held for trading, where they are acquired for the purpose of selling in the short-term with an intention of making a profit, or a derivative; or (ii) designated as such upon initial recognition where permitted. Fair value movements are recognised in profit or loss. Impairment of financial assets The consolidated entity recognises a loss allowance for expected credit losses on financial assets which are either measured at amortised cost or fair value through other comprehensive income. The measurement of the loss allowance depends upon the consolidated entity's assessment at the end of each reporting period as to whether the financial instrument's credit risk has increased significantly since initial recognition, based on reasonable and supportable information that is available, without undue cost or effort to obtain. Where there has not been a significant increase in exposure to credit risk since initial recognition, a 12-month expected credit loss allowance is estimated. This represents a portion of the asset's lifetime expected credit losses that is attributable to a default event that is possible within the next 12 months. Where a financial asset has become credit impaired or where it is determined that credit risk has increased significantly, the loss allowance is based on the asset's lifetime expected credit losses. The amount of expected credit loss recognised is measured on the basis of the probability weighted present value of anticipated cash shortfalls over the life of the instrument discounted at the original effective interest rate. For financial assets measured at fair value through other comprehensive income, the loss allowance is recognised within other comprehensive income. In all other cases, the loss allowance is recognised in profit or loss. f. Goods and services tax (GST) Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Taxation Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the statement of financial position are shown inclusive of GST. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the statement of financial position. g. Critical accounting estimates and judgments The Directors evaluate estimates and judgments incorporated into the financial statements based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the Group. Allowance for expected credit losses The allowance for expected credit losses assessment requires a degree of estimation and judgement. It is based on the lifetime expected credit loss, grouped based on days overdue, and makes assumptions to allocate an overall expected credit loss rate for each group. These assumptions include historical collection rates along with a COVID- 19 overlay. h. Fair value measurements The Group measures some of its assets and liabilities at fair value on either a recurring or non-recurring basis, depending on the requirements of the applicable Accounting Standard. Fair value is the price the Group would receive to sell an asset or would have to pay to transfer a liability in an orderly (ie unforced) transaction between independent, knowledgeable and willing market participants at the measurement date. 62 WISR LIMITED • ANNUAL REPORT 2021 FINANCIAL REPORT Notes to the financial statements For the year ended 30 June 2021 h. Fair value measurements (cont.) As fair value is a market-based measure, the closest equivalent observable market pricing information is used to determine fair value. Adjustments to market values may be made having regard to the characteristics of the specific asset or liability. The fair values of assets and liabilities that are not traded in an active market are determined using one or more valuation techniques. These valuation techniques maximise, to the extent possible, the use of observable market data. To the extent possible, market information is extracted from either the principal market for the asset or liability (ie the market with the greatest volume and level of activity for the asset or liability) or, in the absence of such a market, the most advantageous market available to the entity at the end of the reporting period (ie the market that maximises the receipts from the sale of the asset or minimises the payments made to transfer the liability, after taking into account transaction costs and transport costs). The fair value of liabilities and the entity’s own equity instruments (excluding those related to share-based payment arrangements) may be valued, where there is no observable market price in relation to the transfer of such financial instruments, by reference to observable market information where such instruments are held as assets. Where this information is not available, other valuation techniques are adopted and, where significant, are detailed in the respective note to the financial statements. The Group measures and recognises the following assets and liabilities at fair value on a recurring basis after initial recognition: - - Financial assets at fair value through profit & loss (investment) Derivative financial instruments at fair value asset or (liability). Hedging ineffectiveness being recognised through profit & loss. (a) Fair Value Hierarchy AASB 13: Fair Value Measurement requires the disclosure of fair value information by level of the fair value hierarchy, which categorises fair value measurements into one of three possible levels based on the lowest level that an input that is significant to the measurement can be categorised into as follows: Level 1 Level 2 Level 3 Measurements based on quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. Measurements based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Measurements based on unobservable inputs for the asset or liability. The fair values of assets and liabilities that are not traded in an active market are determined using one or more valuation techniques. These valuation techniques maximise, to the extent possible, the use of observable market data. If all significant inputs required to measure fair value are observable, the asset or liability is included in Level 2. If one or more significant inputs are not based on observable market data, the asset or liability is included in Level 3. Valuation techniques The Group selects a valuation technique that is appropriate in the circumstances and for which sufficient data is available to measure fair value. The availability of sufficient and relevant data primarily depends on the specific characteristics of the asset or liability being measured. The valuation techniques selected by the Group are consistent with one or more of the following valuation approaches: - Market approach: valuation techniques that use prices and other relevant information generated by - - market transactions for identical or similar assets or liabilities. Income approach: valuation techniques that convert estimated future cash flows or income and expenses into a single discounted present value. Cost approach: valuation techniques that reflect the current replacement cost of an asset at its current service capacity. 63 WISR LIMITED • ANNUAL REPORT 2021 FINANCIAL REPORT Notes to the financial statements For the year ended 30 June 2021 h. Fair value measurements (cont.) Each valuation technique requires inputs that reflect the assumptions that buyers and sellers would use when pricing the asset or liability, including assumptions about risks. When selecting a valuation technique, the Group gives priority to those techniques that maximise the use of observable inputs and minimise the use of unobservable inputs. Inputs that are developed using market data (such as publicly available information on actual transactions) and reflect the assumptions that buyers and sellers would generally use when pricing the asset or liability are considered observable, whereas inputs for which market data is not available and therefore are developed using the best information available about such assumptions are considered unobservable Interest rate swap contracts are valued using a discounted cash flow approach. Future cash flows are estimated based on observable forward interest rates and discounted based on applicable yield curves at the reporting date, taking into consideration the credit risk of the Group and various counterparties. These are deemed to be level 2 inputs as related to both quoted prices and observable inputs to the asset or liability. i. Hedge accounting The Group designates interest rate swaps as hedging instruments as cash flow hedges. At the inception of the hedge relationship, the Group documents the relationship between the hedging instrument and the hedged item, along with its risk management objectives and its strategy for undertaking hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the Group documents whether the hedging instrument is effective in offsetting changes in cash flows of the hedged item attributable to the hedged risk, which is when the hedging relationships meet all of the following hedge effectiveness requirements: - - - there is an economic relationship between the hedged item and the hedging instrument; the effect of credit risk does not dominate the value changes that result from that economic relationship; and the hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that the Group actually hedges and the quantity of the hedging instrument that the Group actually uses to hedge that quantity of hedged item. If a hedging relationship ceases to meet the hedge effectiveness requirement relating to the hedge ratio but the risk management objective for that designated hedging relationship remains the same, the Group adjusts the hedge ratio of the hedging relationship (i.e. rebalances the hedge) so that it meets the qualifying criteria again. Cash flow hedges The effective portion of changes in the fair value of derivatives and other qualifying hedging instruments that are designated and qualify as cash flow hedges is recognised in other comprehensive income and accumulated under the heading of cash flow hedging reserve, limited to the cumulative change in fair value of the hedged item from inception of the hedge. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss, and is included in the ‘other gains and losses’ line item. Amounts previously recognised in other comprehensive income and accumulated in equity are reclassified to profit or loss in the periods when the hedged item affects profit or loss, in the same line as the recognised hedged item. The Group discontinues hedge accounting only when the hedging relationship (or a part thereof) ceases to meet the qualifying criteria (after rebalancing, if applicable). This includes instances when the hedging instrument expires or is sold, terminated or exercised. The discontinuation is accounted for prospectively. Any gain or loss recognised in other comprehensive income and accumulated in cash flow hedge reserve at that time remains in equity and is reclassified to profit or loss when the forecast transaction occurs. Movements in the hedging reserve in equity are detailed in note 15. 64 WISR LIMITED • ANNUAL REPORT 2021 FINANCIAL REPORT Notes to the financial statements For the year ended 30 June 2021 Note 2. Revenue Interest income on financial assets Effective interest income on financial assets Other revenue from financial assets Interest on cash Interest from investments Total income from financial assets Revenue from contracts with customers Management fees Total revenue from contracts with customers Total revenue Disaggregation of revenue Consolidated 2021 $ 2020 $ 25,586,055 170,806 11,285 - 25,768,146 4,903,505 320,887 10,544 38,299 5,273,235 1,462,839 1,462,839 1,893,087 1,893,087 27,230,985 7,166,322 The above provides a breakdown of revenue by major revenue stream. The categories above depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic data. As disclosed in the directors’ report, the Group has one operating segment. Revenue is recognised to the extent that it is probable that the economic benefits will flow to the entity and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised: Interest income on financial assets i) Interest income Interest revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset. ii) Loan establishment fees Loan establishment fees are deferred and recognised as an adjustment to the effective interest rate as these fees are an integral part of generating an involvement with the resulting financial instrument. Revenue from contracts with customers Management fees Management fees are earned through the contracts with funders (customers) which entitle the consolidated entity to fees as a result of satisfying the performance obligation, being the monthly management of the associated loan portfolio. Revenue is recognised on an over-time basis. The allocation of the transaction price is calculated as a percentage of the loan balance managed by the consolidated entity on a monthly basis, being the satisfaction of the performance obligation. Revenue is recognised at an amount that reflects the consideration to which the consolidated entity is expected to be entitled in exchange for transferring services to a customer. The consolidated entity invoice on a monthly basis which aligns to the recognition criteria noted above and as a result, there is no recognition of contract assets or liabilities required. 65 WISR LIMITED • ANNUAL REPORT 2021 FINANCIAL REPORT Notes to the financial statements For the year ended 30 June 2021 Note 3. Other income R&D and other tax incentives Gain on loan purchase Other income Consolidated 2021 $ 330,133 14,055 344,188 2020 $ 430,874 116,528 547,402 Government grants revenue is recognised at fair value when there is reasonable assurance that the grant will be received and the grant conditions will be met. Note 4. Cash and cash equivalents Cash at bank Restricted cash Consolidated 2021 $ 64,756,642 27,652,916 92,409,558 2020 $ 33,242,349 4,730,917 37,973,266 Reconciliation to cash and cash equivalents at the end of the financial year The above figures are reconciled to cash and cash equivalents at the end of the financial year as shown in the statement of cash flows as follows: Balance as above Balance as per statement of cash flows 92,409,558 92,409,558 37,973,266 37,973,266 Cash and cash equivalents include cash on hand, deposits held at call with banks, other short term highly liquid investments with original maturities of three months or less, bank overdrafts, and restricted cash. Restricted cash is held by the Wisr Warehouse and is utilised for loan funding and not available to pay creditors of other entities within the Group. Note 5. Loan receivables A financial asset shall be measured at amortised cost if it is held within a business model whose objective is to hold assets in order to collect contractual cash flows which arise on specified dates and that are solely principal and interest. A debt investment shall be measured at fair value through other comprehensive income if it is held within a business model whose objective is to both hold assets in order to collect contractual cash flows which arise on specified dates that are solely principal and interest as well as selling the asset on the basis of its fair value. All other financial assets are classified and measured at fair value through profit or loss unless the entity makes an irrevocable election on initial recognition to present gains and losses on equity instruments (that are not held-for-trading or contingent consideration recognised in a business combination) in other comprehensive income ('OCI'). Despite these requirements, a financial asset may be irrevocably designated as measured at fair value through profit or loss to reduce the effect of, or eliminate, an accounting mismatch. Impairment of financial assets The Group recognises a loss allowance for ECL on financial assets which are either measured at amortised cost or fair value through other comprehensive income. The measurement of the loss allowance depends upon the Group’s assessment at the end of each reporting period as to whether the financial instrument's credit risk has increased significantly since initial recognition, based on reasonable and supportable information that is available, without undue cost or effort to obtain. The Group has adopted a three-stage model for ECL provisioning: Stage 1: 12 months ECL Where there has not been a significant increase in exposure to credit risk since initial recognition, a 12-month ECL allowance is estimated. This represents a portion of the loan receivable lifetime ECL that is attributable to a default event that is possible within the next 12 months. Effective interest is calculated on the gross carrying amount of the loan receivable. 66 WISR LIMITED • ANNUAL REPORT 2021 FINANCIAL REPORT Notes to the financial statements For the year ended 30 June 2021 Note 5. Loan receivables (cont.) Stage 2: Lifetime ECL – not credit impaired Where a loan receivable credit risk has increased significantly since initial recognition, but is not credit impaired, the loss allowance is based on the loan receivable lifetime ECL. For these loan receivables, the Group recognises as a collective provision a lifetime ECL (i.e. reflecting the remaining term of the loans receivable). Effective interest is calculated on the gross carrying amount of the financial instrument. Stage 3: Lifetime ECL – credit impaired Where there is objective evidence that the loan receivable has become credit impaired, the loss allowance is based on the loan receivable lifetime ECL. Effective interest is calculated on the net carrying amount of the financial instrument. For financial assets measured at fair value through other comprehensive income, the loss allowance is recognised within other comprehensive income. In all other cases, the loss allowance is recognised in profit or loss. Allowance for expected credit losses The Group has historically adopted an off-balance sheet loan funding model which resulted in relatively low loan receivables on balance sheet. With the Wisr Warehouse Trust No. 1 going live in mid-November 2019, loan receivables on the balance sheet have increased significantly. The ECL analysis was performed on three distinct loan receivable books: Book 1 – Wisr Warehouse Trust - Predominantly Stage 1 Book 2 – Wisr Freedom Trust 2021-1 - Predominantly Stage 1 Book 3 – Wisr Finance - Combination of Stages 1 to 3. This book consists of seasoned, mostly legacy loan receivables which didn’t qualify for sale to funding partners etc. Credit loss refers to the instance whereby a counterparty defaults on its contractual obligations resulting in financial loss to the group. Default is defined as loan receivables which are at least 90 days past due. A significant increase in credit risk is defined as loan receivables which are at least 30 days past due. The Group calculates ECL using three main components, the exposure at default (EAD), the probability of default (PD) and the loss given default (LGD). The EAD represents the total value the Group is exposed to when the loan receivable defaults. The 12-month ECL is calculated by multiplying the 12-month EAD, PD and LGD. Lifetime ECL is calculated using the lifetime PD instead. The 12-month and lifetime PDs represent the probability of default occurring over the next 12 months and the remaining maturity of the loan receivable respectively. The LGD represents the unrecovered portion of the EAD taking into account any applicable recovery of the loan receivable. The Group originates loan receivables of 3, 5, and 7 year maturities to Australian consumers. These loans are retained to maturity within the Wisr Warehouse Trust No. 1 and Wisr Freedom Trust 2021-1. The allowance for ECL assessment requires a degree of estimation and judgement. It is based on 12-month and lifetime ECL, grouped based on risk score determined at date of origination and days overdue, and makes assumptions to allocate an overall ECL for each group. These assumptions include the Group loan book performance history, existing economic and market conditions. Loan receivables which were on a COVID-19 payment arrangement, where normal loan repayments have resumed or the loan contract has been restructured, have been classified either at the stage prior to entering a payment arrangement or under the terms of the new contract. Remaining COVID-19 affected loans have been classified as a significant increase in credit risk or in default, however the number remaining in the portfolio is only 10 loans as at 30 June 2021 which is 0.07%. Scenario analysis and forward-looking macroeconomic assessments were not incorporated as a result of the following factors: - COVID-19 affected loans were specifically assessed and it was noted that as only a very small number remain in the portfolio no specific provision has been taken. The Group enacted tightened credit policy and reduced risk tolerance in response to the COVID-19 pandemic. - 67 WISR LIMITED • ANNUAL REPORT 2021 FINANCIAL REPORT Notes to the financial statements For the year ended 30 June 2021 Note 5. Loan receivables (cont.) - The more recent pandemic impacts have not affected the 30 June 2021 position and new hardship assistance request post June 30 have been negligible compared to FY20 impacts. It was also noted that further scenario analysis and macroeconomic forecasting would result in undue cost and effort. Gross loan receivables Less provision for expected credit loss Consolidated 2021 $ 384,091,403 (9,440,024) 374,651,379 2020 $ 89,729,432 (3,731,932) 85,997,500 The following tables summarise gross carrying amount of loan receivables and provision for expected credit loss by stages: Gross loan receivables 12-month (Stage 1) Lifetime (Stage 2 & 3) Total gross carrying amount Less provision for expected credit loss 12 month expected credit loss Lifetime expected credit loss Total provision for expected credit loss 376,868,793 7,222,610 384,091,403 84,019,478 5,709,954 89,729,432 5,413,601 4,026,423 9,440,024 1,970,134 1,761,798 3,731,932 Net balance sheet carrying value 374,651,379 85,997,500 Expected credit loss per gross loan receivables 12-month (Stage 1) Lifetime (Stage 2 & 3) Total expected credit loss per total gross loan receivables Reconciliation of total provision for expected credit loss Balance at 1 July Expected credit loss expense recognised during the year to profit or loss Receivables written-off during the year Recoveries during the year Balance at 30 June Note 6. Trade and other receivables Expected to be settled within 12 months Accrued management fee income R&D tax incentive receivable % 1.44 55.75 2.46 % 2.34 30.85 4.16 $ 3,731,932 7,934,680 (2,377,963) 151,375 9,440,024 $ 235,646 4,097,956 (660,060) 58,390 3,731,932 Consolidated 2021 $ 2020 $ 928,501 280,133 1,208,634 642,452 380,874 1,023,326 Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less any allowance for expected credit losses. Trade receivables are generally due for settlement within 30 days. The consolidated entity has applied the simplified approach to measuring expected credit losses for trade and other receivables, which uses a lifetime expected loss allowance. To measure the expected credit losses, trade receivables have been grouped based on days overdue. Other receivables are recognised at amortised cost, less any allowance for expected credit losses. 68 WISR LIMITED • ANNUAL REPORT 2021 FINANCIAL REPORT Notes to the financial statements For the year ended 30 June 2021 Note 7. Other assets Expected to be settled within 12 months Prepayments Deposits Cash held in trust Note 8. Intangible assets Technology assets: Cost Accumulated amortisation Net carrying amount Technology assets under development: Cost Accumulated amortisation Net carrying amount Total intangible assets Consolidated 2021 $ 2020 $ 381,772 43,098 96,889 521,759 238,394 131,883 119,292 489,569 Consolidated 2021 $ 2020 $ 609,240 (237,424) 371,816 609,240 (150,208) 459,032 12,728 - 12,728 384,544 12,728 - 12,728 471,760 Technology assets are recognised at cost of acquisition. They have a finite life and are carried at cost less any accumulated amortisation and any impairment losses. Technology assets are amortised over their useful lives ranging from 2 to 5 years on a straight-line basis. Development costs are charged to the statement of profit of loss and other comprehensive income as incurred, or deferred where it is probable that sufficient future benefits will be derived so as to recover those deferred costs. The recoverable amount of the group’s intangible assets have been tested for impairment via a value-in-use calculation using a discounted cash flow model, based on discounted projected cashflows derived by the cash generating unit over the useful life of the assets. The cash generating unit was identified as being related to the operating cashflows earned via the Wisr App, being derived via account maintenance fees and loan referral income and is related to the intangible assets noted above. No impairment has been identified (2020: no impairment). Note 9. Trade and other payables Expected to be settled within 12 months Trade payables Sundry payables Accrued expenses Superannuation payable Consolidated 2021 $ 2020 $ 2,043,859 597,994 1,031,724 271,756 3,945,333 1,357,320 274,635 708,354 172,543 2,512,852 These amounts represent liabilities for goods and services provided to the Group prior to the end of financial year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. Trade and other payables are presented as current liabilities. The fair value of the trade and other payables is considered to approximate their carrying value. 69 WISR LIMITED • ANNUAL REPORT 2021 FINANCIAL REPORT Notes to the financial statements For the year ended 30 June 2021 Note 10. Employee benefits Expected to be settled within 12 months Provision for annual leave Not expected to be settled within 12 months Provision for long service leave Total employee benefits Consolidated 2021 $ 2020 $ 754,409 469,986 117,806 71,554 872,215 541,540 Provision is made for the Group’s obligation for employee benefits arising from services rendered by employees to the end of the reporting period. Short term employee benefits are benefits (other than termination benefits and equity compensation benefits) that are expected to be settled wholly within 12 months after the end of the annual reporting period in which the employees render the related service, including wages, salaries and personal leave. Short term employee benefits are measured at the (undiscounted) amounts expected to be paid when the obligation is settled, plus any related costs. Long-term employee benefits are subjected to discounting and actuarial valuations. Note 11. Leases The Group has a property lease which commenced in December 2020 with a 3 year and 1 month term. The Group also had two non-cancellable property leases which expired in September 2020 at which point became month on month agreements. AASB 16 related amounts recognised in the statement of financial position: Right of use assets Leased property Accumulated depreciation Net right of use asset Lease liabilities Lease liabilities – expected to be settled within 12 months Lease liabilities – not expected to be settled within 12 months AASB 16 related amounts recognised in the statement of profit or loss Depreciation charge related to right of use assets Interest expense on lease liabilities Government levies Short-term lease expense prior to entering into above lease arrangement 2021 $ 2020 $ 2,133,146 (403,568) 1,729,578 684,336 1,202,312 1,886,648 2021 $ 403,568 71,082 31,758 143,357 649,765 - - - - - - 2020 $ - - - 244,969 244,969 Right-of-use assets A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost, which comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the commencement date net of any lease incentives received, any initial direct costs incurred, and, except where included in the cost of inventories, an estimate of costs expected to be incurred for dismantling and removing the underlying asset, and restoring the site or asset. Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful life of the asset, whichever is the shorter. Where the consolidated entity expects to obtain ownership of the leased asset at the end of the lease term, the depreciation is over its estimated useful life. Right-of use assets are subject to impairment or adjusted for any remeasurement of lease liabilities. 70 WISR LIMITED • ANNUAL REPORT 2021 FINANCIAL REPORT Notes to the financial statements For the year ended 30 June 2021 Note 11. Leases (cont.) The consolidated entity has elected not to recognise a right-of-use asset and corresponding lease liability for short-term leases with terms of 12 months or less and leases of low-value assets. Lease payments on these assets are expensed to profit or loss as incurred. Lease liabilities A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present value of the lease payments to be made over the term of the lease, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the consolidated entity’s incremental borrowing rate. Lease payments comprise of fixed payments less any lease incentives receivable, variable lease payments that depend on an index or a rate, amounts expected to be paid under residual value guarantees, exercise price of a purchase option when the exercise of the option is reasonably certain to occur, and any anticipated termination penalties. The variable lease payments that do not depend on an index or a rate are expensed in the period in which they are incurred. Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured if there is a change in the following: future lease payments arising from a change in an index or a rate used; residual guarantee; lease term; certainty of a purchase option and termination penalties. When a lease liability is remeasured, an adjustment is made to the corresponding right-of use asset, or to profit or loss if the carrying amount of the right-of-use asset is fully written down. Critical accounting judgements, estimates and assumptions Lease term The lease term is a significant component in the measurement of both the right-of-use asset and lease liability. Judgement is exercised in determining whether there is reasonable certainty that an option to extend the lease or purchase the underlying asset will be exercised, or an option to terminate the lease will not be exercised, when ascertaining the periods to be included in the lease term. In determining the lease term, all facts and circumstances that create an economical incentive to exercise an extension option, or not to exercise a termination option, are considered at the lease commencement date. Factors considered may include the importance of the asset to the Group's operations; comparison of terms and conditions to prevailing market rates; incurrence of significant penalties; existence of significant leasehold improvements; and the costs and disruption to replace the asset. The Group reassesses whether it is reasonably certain to exercise an extension option, or not exercise a termination option, if there is a significant event or significant change in circumstances. Lease make good provision A provision has been made for the present value of anticipated costs for future restoration of leased premises. The provision includes future cost estimates associated with closure of the premises. The calculation of this provision requires assumptions such as application of closure dates and cost estimates. The provision recognised for each site is periodically reviewed and updated based on the facts and circumstances available at the time. Changes to the estimated future costs for sites are recognised in the statement of financial position by adjusting the asset and the provision. Reductions in the provision that exceed the carrying amount of the asset will be recognised in profit or loss. Incremental borrowing rate An incremental borrowing rate of 6% is used as an estimate of the market borrowing rate. Note 12. Borrowings Secured note Unsecured facility Wisr Warehouse funding Less transaction costs Total borrowings Consolidated 2021 $ - 2020 $ 1,675,000 6,500,000 388,841,736 (2,869,259) 392,472,477 - 85,598,949 (563,557) 85,035,392 392,472,477 86,710,392 71 WISR LIMITED • ANNUAL REPORT 2021 FINANCIAL REPORT Notes to the financial statements For the year ended 30 June 2021 Note 12. Borrowings (cont.) Secured note In FY2020, the note was used for working capital purposes through initial funding of loan receivables prior to them being sold to funding partners as part of normal business operations. Unsecured facility As at 30 June 2021, the Group has drawn $6.5m of its $21.5m unsecured loan facility with a 9.5% p.a. coupon and maturity in May 2023. Wisr Warehouse funding Wisr Warehouse funding are the facilities of Wisr Warehouse Trust No. 1 and Wisr Freedom Trust 2021-1. Both facilities fund loan receivables for 3, 5 and 7 year maturities. At 30 June 2021, Wisr Warehouse Trust No. 1 had $361.5m (2020: $95.0m) in committed financing, $174.6m (2020: $85.9m) of which has been utilised. The facility is secured against the underlying pool of loan receivables with no credit recourse back to the consolidated entity. Wisr Warehouse Trust No. 1 consists of four classes of notes with Wisr the holder of the Class 4 note. The availability period of the facility is until November 2022. The all in cost of funds for the Wisr Warehouse Trust No. 1 is circa 3.50% per annum. Wisr Freedom Trust 2021-1 Trust represents the inaugural securitisation for the Group with a balance of $204.7m (amortising loan book) as at 30 June 2021 and day one weighted average margin of circa 1.5% + 1 month BBSW. The Unsecured facility and Wisr Warehouse borrowings are initially recognised at the fair value of the consideration received, net of transaction costs. It is subsequently measured at amortised cost using the effective interest method. Note 13. Derivative financial instruments Derivative financial instruments Consolidated 2021 $ 264,050 2020 $ (225,129) The Group enters into derivative financial instruments (interest rate swaps) to manage its exposure to interest rate risk. Derivatives are recognised initially at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair value at each reporting date. The resulting gain or loss is recognised in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship. A derivative with a positive fair value is recognised as a financial asset whereas a derivative with a negative fair value is recognised as a financial liability. Derivatives are not offset in the financial statements unless the Group has both legal right and intention to offset. Other derivatives are presented as current assets or current liabilities. Interest swap contracts are categorised as Level 2 financial instruments as they are valued using observable forward interest rates. Note 14. Issued capital (a) Issued and paid up capital Ordinary shares fully paid Costs of raising capital Consolidated 2021 $ 2020 $ 149,162,775 (5,484,385) 143,678,390 92,151,571 (2,324,254) 89,827,317 Ordinary shares participate in dividends and the proceeds on winding up the Company. At shareholder meetings, each ordinary share is entitled to one vote when a poll is called. Otherwise, each shareholder has one vote on show of hands. 72 WISR LIMITED • ANNUAL REPORT 2021 FINANCIAL REPORT Notes to the financial statements For the year ended 30 June 2021 Note 14. Issued capital (cont.) Ordinary shares are classified as equity and recognised at the fair value of the consideration received by the Group. No subsequent fair valuation is performed. Incremental costs directly attributable to the issue of new shares or options are deducted from the value of issued capital. (b) Reconciliation of issued and paid-up capital Opening balance as at 1 July Issue of shares from raising capital Costs of raising capital Issue of shares to CEO on vesting of performance rights/for long-term incentives Issue of shares to CFO on vesting of performance rights/for long-term incentives Issue of shares to directors on vesting of performance rights Issue of shares to staff on vesting of long-term incentives Issue of shares on exercise of options Issue of shares for service Issue of shares to Head of Growth (former COO) as part of long-term incentive Closing Balance as at 30 June 2021 Number of shares 2020 $ Number of shares $ 1,059,391,937 219,999,654 - 8,150,000 89,827,317 54,999,914 (3,160,131) 735,650 790,208,152 197,297,792 - 30,158,720 48,412,004 36,500,100 (859,972) 2,384,173 8,937,412 506,476 11,167,412 762,226 5,050,000 455,832 4,900,000 555,872 12,901,001 137,755 2,696,079 101,273 1,113,637 888,303 - 145,577 30,000 - 14,535,715 - 8,428,067 1,201,167 - 770,474 1,316,431,944 143,678,390 1,059,391,937 89,827,317 (c) Performance rights As at 30 June 2021, there were a total of 70,307,676 (2020: 92,717,541) performance rights outstanding. Refer to Note 29. Under the Company’s Performance Rights Plan, these performance rights were issued at no cost to the recipients and represent a right to one ordinary share in the Company in the future for no consideration, subject to satisfying the performance conditions and compliance with the rules of the Plan. (d) Capital management Management controls the capital of the Group in order to maintain a sustainable debt to equity ratio, generate long term shareholder value and ensure that the Group can fund its operations and continue as a going concern. The Group’s debt and capital includes ordinary share capital and financial liabilities, supported by financial assets. The Group is not subject to any externally imposed capital requirements. The Group’s objectives when managing capital are to maximize shareholder value and to maintain an optimal capital structure. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders. Management gives particular regard to conservation of liquidity in its recommendations as to the declaration of dividends. There were no dividends declared in in the year. Note 15. Equity – reserves and accumulated losses Employee equity benefits reserve (a) The employee equity benefits reserve records items recognised as expenses on valuation of employee performance rights and accrual of employee short-term and long-term incentives. (b) Other share based payments reserve The other share based payments reserve records funding expenses accrued and are expected to be paid in the form of shares. (c) Cash flow hedge reserve The reserve is used to recognise the effective portion of the gain or loss of cash flow hedge instruments that is determined to be an effective hedge. 73 WISR LIMITED • ANNUAL REPORT 2021 FINANCIAL REPORT Notes to the financial statements For the year ended 30 June 2021 Note 15. Equity – reserves and accumulated losses (cont.) Movement in reserves: At 1 July 2019 Share based payments expense Transfer from reserve to retained earnings Transfer from reserve on exercise of options Issue of shares as a result of exercise of options for consideration Gain/(loss) arising on changes in fair value of hedging instruments entered into for cash flow hedges Cumulative loss arising on changes in fair value of hedging instruments reclassified to profit or loss At 30 June 2020 Employee equity benefits reserve $ 1,476,920 4,764,670 (32,156) (3,255,476) - Other share based payments reserve $ 418,501 49,879 - - (38,310) Cash flow hedge reserve $ - - - - - Total $ 1,895,421 4,814,549 (32,156) (3,255,476) (38,310) - - - - (231,976) (231,976) 29,134 29,134 2,953,958 430,070 (202,842) 3,181,186 At 1 July 2020 Share based payments expense Transfer from reserve to retained earnings Transfer from reserve on exercise of options Issue of shares as a result of exercise of options for consideration Issue of shares for services rendered Gain/(loss) arising on changes in fair value of hedging instruments entered into for cash flow hedges Cumulative loss arising on changes in fair value of hedging instruments reclassified to profit or loss At 30 June 2021 2,953,958 1,167,984 (4,040) (1,835,713) - - - - 430,070 12,575 - - (37,486) (30,000) - (202,842) - - - - 3,181,186 1,180,559 (4,040) (1,835,713) (37,486) - 172,635 (30,000) 172,635 - 623,313 623,313 2,282,189 375,159 593,106 3,250,454 Accumulated losses: Opening balance Total loss after income tax for the year Transfer from reserve to retained earnings Total Note 16. Capital and lease commitments Finance lease commitments (a) There are no finance lease commitments (2020: nil). Consolidated 2021 $ (57,037,262) (17,639,323) 4,040 (74,672,545) 2020 $ (33,534,592) (23,534,826) 32,156 (57,037,262) (b) Operating lease commitments Non-cancellable operating leases contracted for but not recognised in the financial statements. Payable – minimum lease payments: i) ii) iii) Within one year One to five years More than five years Consolidated 2021 $ - - - - 2020 $ 58,129 - - 58,129 Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are recognised as expenses in the periods in which they are incurred on a straight line basis. 74 WISR LIMITED • ANNUAL REPORT 2021 FINANCIAL REPORT Notes to the financial statements For the year ended 30 June 2021 Note 16. Capital and lease commitments (cont.) Wisr Finance Pty Ltd had two property leases which expired in September 2020 at which point became month on month agreements and terminated in December 2020. In December 2020 the Group entered into a property lease with a 3 year and 1 month term. Due to the adoption of AASB 16, in the prior period, the Group had no outstanding operating lease commitments due at 30 June 2021. Note 17. Income tax Numerical reconciliation of income tax expense to prima facie tax payable Consolidated 2021 $ 2020 $ Loss from continuing operations before income tax expense Tax benefit at the tax rate of 26% (2020: 27.5%) (17,639,323) (4,586,24) (23,534,826) (6,472,077) Tax effect of amounts which are not deductible (taxable) in calculating taxable income: - - Temporary differences not recognised Non-recognition of current year tax losses Income tax expense 2,324,309 2,261,915 - 2,539,136 3,932,941 - As at 30 June 2021, the entity has unrecognised carried forward tax losses of $54,934,273 (2020: $46,234,600), the utilisation of which is dependent on the entity satisfying the requirements of the Same Business Test (SBT). The income tax expense or benefit for the period is the tax payable / refundable on the current period's taxable income based on the national income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities, attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses. Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted for each jurisdiction. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity. Wisr Limited and its wholly owned controlled entities have implemented the tax consolidation legislation as of 1 January 2004. 75 WISR LIMITED • ANNUAL REPORT 2021 FINANCIAL REPORT Notes to the financial statements For the year ended 30 June 2021 Note 17. Income tax (cont.) The head entity, Wisr Limited, and the controlled entities in the tax consolidated group continue to account for their own current and deferred tax amounts. These tax amounts are measured as if each entity in the tax consolidated group continues to be a standalone taxpayer in its own right. In addition to its own current and deferred tax amounts, Wisr Limited also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax consolidated group. Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts receivable from or payable to other entities in the group. Any difference between the amounts assumed and amounts receivable or payable under the tax funding agreement are recognised as a contribution to (or distribution from) wholly owned tax consolidated entities. Note 18. Remuneration of auditors During the year, the following fees were paid or payable for services provided by the auditor: BDO Audit Pty Ltd - - - - Audit of the financial report – assurance services Taxation services – non-assurance services Review of the half-yearly financial report – assurance services Accounting advice – non-assurance services Consolidated 2021 $ 97,500 2,500 43,699 - 143,699 2020 $ 85,000 9,900 34,000 4,000 132,900 The BDO entity performing the audit of the Group transitioned from BDO East Coast Partnership to BDO Audit Pty Ltd on 25 September 2020. The FY2020 comparatives include amounts received or due and receivable by BDO East Coast Partnership, BDO Audit Pty Ltd and their respective related entities. Note 19. Contingent liabilities There were no material contingent liabilities reportable during the period (2020: nil). Note 20. Subsidiaries The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policies described in Note 1: Name Wisr Finance Pty Ltd Wisr Investment Management Pty Ltd Wisr Loans Servicing Pty Ltd Wisr Credit Management Pty Ltd Wisr Marketplace Limited Wisr Services Pty Ltd Wisr Funding Pty Ltd Wisr Notes 1 Pty Ltd Wisr Warehouse Trust No. 1 Wisr Freedom Trust 2021-1 Status Registered 2 May 2006 Registered 20 February 2015 Registered 20 February 2015 Registered 19 March 2015 Registered 16 March 2015 Registered 13 January 2017 Registered 9 April 2018 Registered 31 July 2018 Registered 28 October 2019 Registered 29 March 2021 Country of incorporation Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia % owned 2021 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% % owned 2020 100% 100% 100% 100% 100% 100% 100% 100% 100% - 76 WISR LIMITED • ANNUAL REPORT 2021 FINANCIAL REPORT Notes to the financial statements For the year ended 30 June 2021 Note 21. Events after the reporting period In March 2021, the Group announced execution of a term sheet for an investment in European fintech platform Arbor. On 5 August 2021, the Group completed its initial investment, consisting of EUR715,358 in exchange for a 12.5% ownership stake. In addition to the 12.5%, Wisr has options in place to increase its ownership stake to 45% over three years subject to valuation thresholds and contingent upon certain milestones being achieved. Arbor is an EU based fintech with a financial wellness platform, utilising a digital wallet to offer savings, investment and lending features. Note 22. Key management personnel disclosures Compensation The aggregate compensation made to directors and other members of key management personnel of the consolidated entity is set out below: Short-term employee benefits Post-employment benefits Long-term benefits Share-based payments Total KMP compensation Consolidated 2021 $ 955,525 68,389 6,874 234,762 1,265,550 2020 $ 1,010,119 68,379 5,221 5,067,498 6,151,217 Short-term employee benefits These amounts include fees and benefits paid to the executive Chair and non-executive directors as well as all salary, paid leave benefits, fringe benefits and cash bonuses awarded to executive directors and other KMP. Post-employment benefits These amounts are the current year’s estimated cost of providing for the Group’s superannuation contributions made during the year. Long-term benefits These amounts represent long service leave benefits accruing during the year. Share-based payments These amounts represent the expense related to the participation of KMP in equity-settled benefit schemes as measured by the fair value of the options, rights and shares granted on grant date. Note 23. Related party transactions (a) Parent entity The legal parent is Wisr Limited. (b) Subsidiaries Interest in subsidiaries are set out in Note 20. (c) Transactions with related parties As at 30 June 2021, all transactions that have occurred among the subsidiaries within the Group have been eliminated for consolidation purposes. During the period, an amount of $100,000 in capital repayment plus $1,745 (2020: $7,192) in interest was paid to a director related party relating to their capital participation in the Wisr secured note. There were no other related party transactions. 77 WISR LIMITED • ANNUAL REPORT 2021 FINANCIAL REPORT Notes to the financial statements For the year ended 30 June 2021 Note 24. Parent entity information (a) Summary financial information The individual financial statements for the parent entity show the following aggregate amounts: Statement of financial position Total assets Total liabilities Shareholders’ equity Issued capital Reserves Accumulated losses Loss for the year Total comprehensive loss 2021 $ 2020 $ 135,597,217 76,815,933 6,760,996 135,678 136,666,162 2,657,348 (10,487,289) 128,836,221 82,815,088 3,384,027 (9,518,861) 76,680,254 (969,627) (2,913,825) (969,627) (2,913,825) The financial information for the parent entity, Wisr Limited, has been prepared on the same basis as the consolidated financial statements, except that investments in subsidiaries are accounted for at cost net of impairment in the parent financial statements. (b) Contingent liabilities See Note 19. (c) Contractual commitments The parent entity had no capital commitments for property, plant and equipment as at 30 June 2021 and 30 June 2020. Note 25. Cash flow information Reconciliation of loss after income tax to net cash outflows from operating activities Consolidated 2021 $ 2020 $ Loss for the year (17,639,323) (23,534,826) Adjustments for non-cash items or items for which the cash flows are investing or financing cash flows Depreciation and amortisation Share-based payments and accruals Fundraising expenses Expected credit losses expense / loan asset impairments and write-offs Right of use asset expenses Changes in operating assets and liabilities: (Increase) in loan receivables (Increase) in trade and other receivables (Increase)/decrease in other assets Increase in trade and other payables Increase in provision for employee benefits Increase in accrued finance costs 541,922 1,180,559 592,044 7,934,680 102,840 (2,536,175) (185,308) (32,189) 1,348,359 330,675 379,320 117,336 6,133,091 94,419 4,097,956 - (519,999) (582,497) 61,028 1,070,973 161,478 91,033 Net cash flows used in operating activities (7,982,596) (12,810,008) 78 WISR LIMITED • ANNUAL REPORT 2021 FINANCIAL REPORT Notes to the financial statements For the year ended 30 June 2021 Note 26. Earnings per share Basic earnings per share Diluted earnings per share Weighted average number of shares used as the denominator Weighted average number of shares used as the denominator in calculating basic earnings per share Adjustments for calculation of diluted earnings per share Weighted average number of ordinary shares used in calculating dilutive earnings per share 2021 Cents (1.60) (1.60) 2020 Cents (2.60) (2.60) Number of shares Number of shares 1,105,463,088 904,602,487 - - 1,105,463,088 904,602,487 The performance rights on issue have not been considered in the diluted earnings per share as their effect is anti-dilutive. Basic earnings per share Basic earnings per share is calculated by dividing the result attributable to equity holders of the Company by the weighted average number of ordinary shares outstanding during the financial year. Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. Note 27. Segment information Management has determined that the Group has one operating segment, being the provision of personal loans to consumers. The internal reporting framework is based on the principal activity as discussed above and is the most relevant to assist the Board as Chief Operating Decision Maker with making decisions regarding the Group and its ongoing growth. The assets as presented relate to the operating segment. The Group operates in Australia only as at 30 June 2021. Note 28. Dividends (a) Dividends paid during the year Ordinary shares There were no dividends paid during the year (2020: nil). (b) Franking Credits 2021 $ 2020 $ Franking credits available for subsequent reporting periods based on a tax rate of 26% (2020 – 27.5%) 1,542,955 1,542,955 The above amounts are calculated from the balance of the franking account as at the end of the reporting period, adjusted for franking credits and debits that will arise from the settlement of liabilities or receivables for income tax and dividends after the end of the year. Note 29. Share based payments The share-based payment expense of $1,180,559 (2020: $6,133,091) consists of: - KMP LTIs of $234,762 (2020: $5,067,498) accrued up to 30 June 2021 which were set in FY20 and relate to FY20, FY21 and FY22. 79 WISR LIMITED • ANNUAL REPORT 2021 FINANCIAL REPORT Notes to the financial statements For the year ended 30 June 2021 Note 29. Share based payments (cont.) - - Staff LTIs $933,222 (2020: $1,015,714) accrued up to 30 June 2020 and relate to FY18 – FY21; and Recruitment expense of $12,575 (2020: $49,879). The fair value of the Board/KMP performance rights and staff LTI scheme has been calculated in accordance with AASB 2 Share-based Payment using a Hoadley Barrier model which included the below inputs. FY21 Staff LTI scheme: Assumptions - Grant date 1 July 2020, Volatility 40%, Spot price $0.2000. Tranche 1 2 Expiry date 31 Jul 22 31 Jul 23 Barrier price $0.23 $0.23 Fair value $0.1060 $0.1099 Performance rights Balance at beginning of year - - - granted forfeited exercised Balance at end of year Number of performance rights 92,717,541 11,645,187 (4,054,051) (30,001,001) 70,307,676 2021 Exercise price Nil Nil Nil Nil Nil Number of performance rights 38,966,725 91,116,364 (13,639,469) (23,726,079) 92,717,541 2020 Exercise price Nil Nil Nil Nil Nil The Group provides benefits to employees in the form of share-based payment transactions, whereby employees render services in exchange for shares or performance rights (equity-settled transactions). The cost of the transactions with employees is measured by reference to the fair value at the date at which they are granted. The fair value is determined by using a binomial model. In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions linked to the price of the shares of the Company (market conditions). The cost of equity-settled transactions is recognised as an expense, together with a corresponding increase in equity, over the period in which the performance conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to exercise the rights (vesting date). The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects (i) the extent to which the vesting period has expired and (ii) the number of rights that, in the opinion of the Directors of the Company, will ultimately vest. This opinion is formed based on the best available information at balance date. No adjustment is made for the likelihood of market performance conditions being met as the effect of these conditions is included in the determination of fair value at grant date. Where the terms of an equity-settled option are modified, at a minimum an expense is recognised as if the terms had not been modified. In addition, an expense is recognised for any increase in the value of the transaction as a result of the modification, as measured at the date of the modification. Note 30. Financial risk management The business of the Group and the industry in which it operates are subject to risk factors both of a general nature and risks which are specific to the industry and/or the Group’s business activities. The potential effect of these risk factors either individually, or in combination, may have an adverse effect on the future financial and operating performance of the Group, its financial position, its prospects and the value of its shares. The following are the key risks that specifically relate to the Group: 80 WISR LIMITED • ANNUAL REPORT 2021 FINANCIAL REPORT Notes to the financial statements For the year ended 30 June 2021 Note 30. Financial risk management (cont.) (a) Credit risk As a lending business, the Group is at risk of a larger than expected number of its borrowers failing or becoming unable to repay their loans, particularly for loans which are held on balance sheet as opposed to being funded by a third party. While loans are assessed according to a strict Credit Manual and Credit Risk Policy as well as being targeted at prime retail borrowers (not ‘payday’ lending customers), the loans may be unsecured and so are subject to the capacity of the individual borrower to repay the loan. As a lending business, the Group is at risk of a larger than expected number of its borrowers failing or becoming unable to repay their loans, particularly for loans which are held on balance sheet as opposed to being funded by a third party. While loans are assessed according to a strict Credit Manual and Credit Risk Policy as well as being targeted at prime retail borrowers (not ‘payday’ lending customers), the loans may be unsecured and so are subject to the capacity of the individual borrower to repay the loan. The Group has assessed COVID-19 affected loan receivables through consideration of both qualitative and quantitative factors surrounding the customer’s credit risk. The Group also enacted tightened credit policy and reduced risk tolerance in response to COVID-19. (b) Inability to recover defaulted loans Default is defined by the group as the failure of the borrower to meet required contractual cashflows, this definition is selected as it aligns with the operational analysis of the loan books. If a borrower does not meet their required loan payments and the loan goes into default, the Group may not be able to recover the relevant portion of the value of the loan or the cost of recovery of the loan may be deemed to be greater than the amount potentially recoverable, even if the borrower owns assets such as a house. In this case the loan may be sold (at a loss) to a third party or written off as a bad debt. High levels of bad debts could limit profitability and adversely affect future performance. The Group mitigates this risk by approving loans according to a strict credit criteria. The risk is also mitigated through the use of third party funders for a proportion of loans. (c) Fraudulent borrowers There is a general ongoing risk that borrowers may deliberately fabricate evidence to support loan applications and they have no intention of paying off their loan. The Group has procedures in place to detect fraudulent applications and activities, however the risk of fraud cannot be totally removed. (d) Personal Loans may be unsecured The Group’s loans may be issued on an unsecured basis. The Group’s reputation and financial position could be adversely impacted if the Group’s targeted credit performance of its loan book is not met and collections and debt recovery procedures prove less than effective. (e) Costs of acquiring loans The Group’s business model and on-going commercial viability is directly linked to its ability to attract suitable borrowers and increase the volume of loans funded and managed by the Group. The Group has built its existing loan volumes using a mix of direct channel marketing (using search engine marketing and media advertising) and developing relationships with mortgage and finance brokers to introduce loans. The Group has forecasted the future costs of acquiring loans in the desired volumes however these costs are subject to market forces and cannot be predicted with certainty. (f) Ability to source third party funding and sell loans The Group’s business model and on-going commercial viability is strongly linked to its ability to source sufficient third-party funding to enable it to sell its loans and raise the funds to lend to potential borrowers. 81 WISR LIMITED • ANNUAL REPORT 2021 FINANCIAL REPORT Notes to the financial statements For the year ended 30 June 2021 Note 30. Financial risk management (cont.) (f) Ability to source third party funding and sell loans (cont.) The Group seeks to manage this risk by establishing multiple sources of institutional loan buyers. (g) Liquidity risk Prudent liquidity risk management implies maintaining sufficient cash to ensure the ability to meet financial obligations as they fall due. The Group manages liquidity risk by maintaining a cash reserve and continuously monitoring forecast and actual cash flows. Maturity Analysis – Group 2021 Financial assets Non-derivatives Cash and cash equivalents Loan receivables Trade and other receivables Other assets Derivatives at fair value Interest rate swaps – cash flow hedges Total financial assets Financial liabilities Non-derivatives Trade creditors Other payables Borrowings Total financial liabilities Within 1 year $ 1 – 5 years $ Total $ 92,409,558 61,941,741 1,208,633 139,987 - 312,709,638 - - 92,409,558 374,651,379 1,208,633 139,987 (945,755) 158,513,396 1,236,631 310,187,037 290,876 468,700,433 2,043,859 1,901,473 516,736 4,462,068 - - 391,955,741 391,955,741 2,043,859 1,901,473 392,472,477 396,417,809 Net financial assets 154,051,328 (81,768,704) 72,282,624 2020 Financial assets Cash and cash equivalents Loan receivables Trade and other receivables Other assets Total financial assets Financial liabilities Non-derivatives Trade creditors Other payables Secured notes Warehouse trust funding Derivatives at fair value Interest rate swaps – cash flow hedges Total financial liabilities Within 1 year $ 37,973,266 15,242,964 1,023,326 251,175 54,490,731 1,357,320 1,155,532 1,675,000 98,950 148,275 4,435,077 1 – 5 years $ - 70,754,536 - - 70,654,536 - - - 84,936,442 Total $ 37,973,266 85,997,500 1,023,326 251,175 125,245,267 1,357,320 1,155,532 1,675,000 85,035,392 78,615 85,015,057 226,890 89,450,134 Net financial assets 50,055,654 (14,260,521) 35,795,133 82 WISR LIMITED • ANNUAL REPORT 2021 FINANCIAL REPORT Notes to the financial statements For the year ended 30 June 2021 Note 30. Financial risk management (cont.) (h) Market risk Price risk The Group is not exposed to any significant price risk at 30 June 2021. (i) Interest rate risk Interest rate risk is the risk that the Group will experience deterioration in its financial position as interest rates change over time. The Group is exposed to interest rate risk due to repricing and mismatches in interest rates between assets and liabilities (i.e. borrowing at floating interest rates and lending at fixed interest rates). The risk is managed by the Group using interest rate swap contracts to convert the floating rate exposure on the Warehouse trust borrowings to fixed interest rates. Hedging activities are undertaken in line with the Group's hedging policy. Interest rate swap contracts Under interest rate swap contracts, the Group agrees to exchange the difference between fixed and floating rate interest amounts calculated on agreed notional principal amounts. Such contracts enable the Group to mitigate the cash flow exposures on its variable rate borrowings. The Group designates the interest rate swap contracts as cash flow hedges. As the critical terms of the interest rate swap contracts and their corresponding hedged items are the same, the Group performs a qualitative assessment of effectiveness and it is expected that the value of the interest rate swap contracts and the value of the corresponding hedged items will systematically change in opposite direction in response to movements in the underlying interest rates. The main source of hedge ineffectiveness in these hedge relationships is the effect of the counterparty and the Group’s own credit risk on the fair value of the interest rate swap contracts, which is not reflected in the fair value of the hedged item attributable to the change in interest rates. Other sources of ineffectiveness include the re-designation of amended interest rate swap contracts, which have a non-zero fair value at inception of the hedge relationship. The following table details various information regarding interest rate swap contracts outstanding at the end of the reporting period and their related hedged items. Interest rate swap contract assets and liabilities are included in note 13. Hedging instruments Average contracted fixed interest rate Notional principal (borrowings) Carrying amount of the hedging instrument (liability) Change in fair value used for calculating hedge ineffectiveness Hedged items Nominal amount of the hedged item Change in value used for calculating hedge ineffectiveness Interest rate swaps 2021 2020 0.37050% 336,825,995 0.40900% 60,354,017 264,050 (225,129) 710,674 6,031 336,825,995 797,545 60,354,017 14,532 Balance in cash flow hedge reserve for continuing hedges Balance in cash flow hedge reserve arising from hedging relationships for which hedge accounting is no longer applied Hedge ineffectiveness recognised in profit or loss (within Finance costs) 710,674 (117,568) 6,031 (208,873) (51,240) (22,287) 83 WISR LIMITED • ANNUAL REPORT 2021 DIRECTORS’ DECLARATION Directors’ Declaration The directors of the Company declare that, in the opinion of the directors: (a) the attached financial statements and notes thereto are in accordance with the Corporations Act 2001, including: (i) (ii) giving a true and fair view of the financial position and performance of the consolidated entity; and complying with Australian Accounting Standards, including the interpretations, and the Corporations Regulations 2001; (b) the financial statements and notes thereto also comply with International Financial Reporting Standards, as disclosed in Note 1; (c) the directors have been given the declarations required by s.295A of the Corporations Act 2001; and (d) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable; Signed in accordance with a resolution of the directors made pursuant to s.295(5) of the Corporations Act 2001. ............................................................... John Nantes Director Sydney 26 August 2021 84 WISR LIMITED • ANNUAL REPORT 2021 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF WISR LIMITED 85 WISR LIMITED • ANNUAL REPORT 2021 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF WISR LIMITED 86 WISR LIMITED • ANNUAL REPORT 2021 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF WISR LIMITED 87 WISR LIMITED • ANNUAL REPORT 2021 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF WISR LIMITED 88 WISR LIMITED • ANNUAL REPORT 2021 ASX ADDITIONAL INFORMATION Additional information required by the ASX Limited Listing Rules and not disclosed elsewhere in this report is set out below. This information is effective as at 29 September 2021. a. Distribution of shareholders The distribution of issued capital as at 29 September 2021 were as follows: Size of Holding - 1 - 1,001 5,001 - 10,001 - 100,001 - Total 1,000 5,000 10,000 100,000 and over Number of shareholders Number of ordinary shares Percentage of issued capital (%) 189 1,553 1,208 3,428 1,044 7,422 41,444 5,104,729 9,701,258 132,572,583 1,208,784,715 1,356,204,729 0.00 0.38 0.71 9.78 89.13 100.00 There were 311 shareholders with unmarketable parcels totalling 242,834 shares based on the share price as at close of business on 29 September 2021. b. Distribution of performance rights holders The distribution of unquoted Performance Rights on issue as at 29 September 2021 were as follows: Size of holding Number of holders Number of unquoted rights 1 1,001 5,001 10,001 100,001 Total 1,000 - 5,000 - 10,000 - 100,000 - - and over c. Distribution of options - - 1 25 38 64 - - 5,063 1,141,888 37,705,644 38,852,595 The distribution of unquoted Options on issue as at 29 September 2021 were as follows: Size of holding 1 1,001 5,001 10,001 100,001 Total - - - - - 1,000 5,000 10,000 100,000 and over Number of holders Number of unquoted options - - - - 5 5 - - - - 9,731,948 9,731,948 89 WISR LIMITED • ANNUAL REPORT 2021 ASX ADDITIONAL INFORMATION d. Substantial shareholders The names of substantial shareholders listed in the Company’s register as at 29 September 2021 were as follows: Shareholder ADCOCK PRIVATE EQUITY PTY LTD ADCOCK GROUP SUPER PTY LTD MR BROOK ANTHONY ADCOCK CS THIRD NOMINEES PTY LIMITED ALCEON GROUP PTY LTD Number of fully paid ordinary shares Percentage of issued capital (%) 159,847,138 40,877,864 519,631 201,244,633 105,179,350 54,054,054 159,233,404 11.79 3.01 0.04 14.84 7.76 3.99 11.75 Total 360,478,037 26.58 e. Twenty largest shareholders of quoted equity securities The twenty largest shareholders of quoted equity securities were as follows: Shareholder ADCOCK PRIVATE EQUITY PTY LTD CS THIRD NOMINEES PTY LIMITED HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED ANTHONY NANTES ALCEON GROUP PTY LTD ADCOCK GROUP SUPER PTY LTD J P MORGAN NOMINEES AUSTRALIA PTY LIMITED NATIONAL NOMINEES LIMITED NETWEALTH INVESTMENTS LIMITED ANDREW GOODWIN BNP PARIBAS NOMS PTY LTD LUAGA PTY LTD MACQUARIE BANK LIMITED DE NANTES INVESTMENT CO PTY LTD MOSLOF SERVICES PTY LTD CITICORP NOMINEES PTY LIMITED EQUITAS NOMINEES PTY LIMITED UBS NOMINEES PTY LTD EQUITAS NOMINEES PTY LIMITED MR CHRISTOPHER MICHAEL WHITEHEAD Total f. Restricted securities Number of fully paid ordinary shares Percentage of issued capital (%) 159,847,138 105,179,350 82,453,547 57,268,736 54,054,054 40,877,864 37,663,087 35,741,643 30,827,748 29,442,237 24,833,813 23,467,952 18,998,019 13,201,370 12,775,000 11,419,954 11,223,007 8,950,166 7,403,725 6,990,000 11.79 7.76 6.08 4.22 3.99 3.01 2.78 2.64 2.27 2.17 1.83 1.73 1.40 0.97 0.94 0.84 0.83 0.66 0.55 0.52 772,618,410 56.98 79,120,359 ordinary shares are currently subject to voluntary escrow pending Company approval. g. Unquoted equity securities The Company had the following unquoted securities on issue as at 29 September 2021: 90 WISR LIMITED • ANNUAL REPORT 2021 ASX ADDITIONAL INFORMATION Unquoted Options The Company had 5 holders of options with a total of 9,731,948 unquoted options on issue as at 29 September 2021. 2,345,585 options are held by 255 Finance Investments Pty Ltd and 2,316,676 options are held by Teragoal Pty Ltd. Performance Rights The Company had 64 holders of performance rights issued as part of an employee incentive scheme. h. Voting rights Ordinary Shares In accordance with the Constitution each member present at a meeting whether in person, or by proxy, or by power of attorney, or in a duly authorised representative in the case of a corporate member, shall have one vote on a show of hands, and one vote for each fully paid ordinary share, on a poll. Performance Rights and Options Holders of Performance Rights and Options have no voting rights. i. On-market buy-backs There is no current on-market buy back in relation to the Company’s securities. 91 WISR LIMITED • ANNUAL REPORT 2021 CORPORATE DIRECTORY DIRECTORS John Nantes (Executive Chairman) Craig Swanger Chris Whitehead Matt Brown (appointed 13 September 2021) COMPANY SECRETARY Vanessa Chidrawi May Ho REGISTERED OFFICE Level 4, 55 Harrington Street, The Rocks, New South Wales, Australia Telephone: (02) 8379 4008 Facsimile: (02) 8076 3341 SHARE REGISTER Computershare Investor Services Pty Limited 452 Johnston Street Abbotsford, Victoria Telephone: (03) 9415 5000 AUDITOR BDO Audit Pty Ltd Level 11, 1 Margaret Street Sydney, New South Wales STOCK EXCHANGE LISTING Shares are listed on the Australian Stock Exchange (ASX: WZR) DOMICILE Publicly listed company incorporated in Australia 92 ABN 80 004 661 205 Level 4, 55 Harrington St The Rocks NSW 2000 +61 2 8379 4008 wisr.com.au WISR LIMITED • ANNUAL REPORT 2021

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