Slide 1: FY19 Results Presentation
FY19 Results Presentation Zip Co Ltd (ASX: Z1P) August 2019
Slide 2: Our purpose: The freedom to own it
OUR PURPOSE The freedom to own it. 2
Slide 3: Our mission: first payment choice everywhere
OUR MISSION To be the first payment choice everywhere and every day. 3
Slide 4: Contents
Contents 01 Vision & Opportunity 02 Business Update 03 Financial Results 04 Growth & Outlook 4
Slide 5: Vision & Opportunity
£ c =| £ fe) o. [oo Oo (sé zip ) Vision &
Slide 6: A compelling investment case
A compelling investment case SIGNIFICANT GROWTH Market leader in dynamic industry, delivering 100%+ YoY revenue growth for the last five years NETWORK-DRIVEN BUSINESS $1B+ annual payments, 1.3M customers, 16K retail partners 100% PROPRIETARY PLATFORM Leveraging data to provide sophisticated real-tim
Slide 7: The next digital wallet
The next digital wallet Connecting customers and retailers together, through an enriched payments experience PLATFORM • Proprietary decisioning • ID & credit verification • Unified commerce • Closed loop network EXPERIENCE DATA • Real-time approval • Personalisation • Frictionless checkout • SKU dat
Slide 8: Responsibility is in our DNA
Responsibility is in our DNA A revenue model that does not rely on customers falling into arrears Flexible and affordable repayments, simple and transparent fees 4 2 5 3 Better and fairer alternative to credit cards 1 External credit + financial and ID checks on management tools all applications Int
Slide 9: High growth and dynamic sector
High growth and dynamic sector BNPL growth is outstripping Technology is accelerating adoption Payments landscape credit and debit cards online1 Invisible payments $1T i.e. biometrics Authentication becomes the payment i.e. 1-click checkout Payments4 Debit card 7% BNPL 16% Credit card 24% $320B Payp
Slide 10: How we will win
How we will win Deep focus on the core, whilst expanding into new markets and segments More More More customers places often • Australia and NZ • Going global • New verticals • Unified commerce • Native app • Personalisation ‘10X’ • Launch instalments • Channel • Everyday growth for business partner
Slide 11: Business Update
02 Business Update 11
Slide 12: FY19 highlights
FY19 highlights We exceeded the goals we set for the year $84M 108% 3.3M $ 1.1 B Revenue Growth YoY Unique monthly web visits Annual transaction volume1 Target $1.0B 1.3 M Customer accounts2 16,000+ 37,000 230+ Partners (Kmart, Locations Staff Target 1M BigW, Bunnings) 6X Consecutive quarters of pos
Slide 13: FY19 scorecard
FY19 scorecard FY18 FY19 ↑108% ↑80% $84.2M 1.3M Revenue Customers FY18 $40.4M FY18 0.7M ↑108% ↑116% ↑53% ↓1% $1,128.5M $682.6M 16.2K 1.63% Transaction Volume Receivables Retail Partners Net Bad Debts FY18 $542.9M FY18 $316.7M FY18 10.6K FY18 2.61% Source: Zip’s unaudited financials as at 30 June 201
Slide 14: Financial dashboard
Financial dashboard Cash Earnings Before Tax, Depreciation and Amortisation (Cash EBTDA) as a percentage of average receivables MEDIUM MEDIUM H1FY18 H2FY18 H1FY19 H2FY19 TERM TARGET TERM TARGET Revenue Yield1 17.0% 17.7% 17.6% 17.1% 18% Cash Cost of Sales1,2 (13.2)% (9.7)% (8.5)% (8.0)% (7)% Cash Op
Slide 15: More customers than ever
More customers than ever BY AGE ONLINE VS INSTORE2 1.3M 80% Instore is growing 97 % Average age 34 Customers Growth YoY Retention rate1 AGE FEMALE MALE 68% 32% 18-24 11% 8% Online Instore BY REGION 25-34 22% 14% 1% 35-44 15% 9% 26% BY GENDER 10% 45-55 10% 5% 19% growth in males3 7% 30% 55+ 4% 2% 2%
Slide 16: Market leading app
Market leading app 30% 75% 4.9 OF ALL DIRECT OF ALL USER STAR VOLUME1 ACTIVITY1 RATING2 ALL YOUR THOUSANDS SUPERCHARGE OF BRANDS INSTORE WITH BILLS IN IN YOUR ‘STORES ONE PLACE POCKET! NEAR YOU’ 1. Internal data for FY19. 16 2. iOS App metrics, as at 30 June 2019.
Slide 17: Don't take our word for it
Don’t take our word for it 4.8 Google Play Rating2 4.9 “ “Simple application process, very fair terms and an easy, Apple Store Rating2 80% “ user-friendly app! Couldn't ask CSAT1 for more!” “..gives the user options to buy now, pay later, pay bills while — Karoline letting you control how much and h
Slide 18: We connect with customers everywhere, every day
We connect with customers everywhere, every day 37,000 bricks and mortar locations High visibility, high value collaborations 3.3M unique monthly web visits Geo-search tools Personalised marketing conversations 18
Slide 19: We put more brands in more hands
We put more brands in more hands 53% growth in partners1 $217 average order value2 compared to $95 for credit cards3 Travel Auto 2% 4% Health 6% Home 21% 16K+partners Retail 52% 1. Partner growth in numbers year on year, 2. Average order value calculated in June 2019, 19 3. Average credit card order
Slide 20: Embedding ourselves into every layer of the payments ecosystem
Embedding ourselves into every BANKS AND ACQUIRERS layer of the payments ecosystem POS VENDORS CARD SCHEMES API ECOMMERCE PLATFORMS PAYMENT GATEWAYS 20 Note: Representative sample of the payments universe, some of whom Zip does has a direct relationship with.
Slide 21: The SME market is large and underserved by the banks
The SME market is large and underserved by the banks 77% SMEs are the backbone of the economy • 2.3M SMEs in Australia, represent 99% of all businesses1 have a B2B • Segment contributes 57% to Australia’s GDP2 offering • 77% of SMEs service the B2B market2 • Sector creates ~7M jobs2 2.3M SMEs Zip wa
Slide 22: We're launching an instalment product for small business
We’re launching an instalment product for small business Welcome to Zip Biz! • A fair, transparent and flexible instalment product • Interest-free digital wallet up to $25k • Real-time decisioning Why Zip? • Leaders in real-time micro-credit decisioning • Current Zip SMEs have expressed demand • Our
Slide 23: Pocketbook update
Track Budget Pocketbook update Save Free, personal financial management app that lets users track, budget and save 700K users 510M transactions Australia’s first open banking integration with Macquarie Bank 30 institutions 23 Source: Internal data as at 30 June 2019
Slide 24: Investing in the brilliant basics
Investing in the brilliant basics TECHNOLOGY-LED DISCIPLINED RISK WELL FOCUS ON PEOPLE MANAGEMENT CAPITALISED • Invested in platform • Market leading • $1B+ market • Strong employee performance to support credit management capitalisation engagement across scale our 230+ staff • Robust credit, fraud
Slide 25: Financial Results
03 Financial Results 25
Slide 26: Credit performance
CREDIT PERFORMANCE1 3.0% Credit performance 2.5% • Net bad debts of 1.63% down from 2.61% at June 2018. 2.0% 1.89% • Arrears at 1.89% compared to 1.87% at June 2018. 1.82% • Credit performance significantly better than industry 1.5% 1.63% benchmarks, and ahead of management’s guidance. • Repayment p
Slide 27: Credit underwriting
Credit underwriting We blend an array of traditional and differentiated data sources, and half a billion transactions to derive Portfolio performance consumer insights and proactively manage risk Transaction history, delinquencies, AoV Application data Residential & Credit bureau employment status,
Slide 28: Funding Update
FY19 FY18 $M $M Funding Update Facility Size (Class A and B) 2017-1 Trust 560.0 360.0 • Completed the refinancing of all receivables out of 2017-2 Trust 71.5 20.0 expensive legacy funding programs during H1FY18. Total Available 631.5 380.0 • Total facility size increased to $731.5M in July 2019, fol
Slide 29: Overview: Zip Master Trust
Overview: Zip Master Trust First note issuance September 2019 TRUST HOLDING FUNDING (TRADITIONAL BORROWING BASE) RECEIVABLES SERIES 2019-1 Seller Note Interest (Zip) Class A1 Borrowers Aggregate Series Series Class A2 2019-VFN1 Zip Master Trust (Relationship Payments Credit Lender) Class B Class C S
Slide 30: Income Statement
FY19 FY18 Change $M $M % Income Statement Portfolio Income 82.9 39.3 111% Cash Cost Of Sales2 (39.2) (25.1) 56% • Portfolio Income hit record levels, 111% increase on FY18. Cash Gross Profit 43.7 14.2 • Cash Gross Profit a record $43.7M, 208% increase on FY18. Other Income 1.3 1.1 18% • Positive Cas
Slide 31: Cost Base
FY19 FY18 $M $M Cost Base Cash Cost of Sales 39.2 25.1 % of Average Receivables 8.2% 11.1% • Interest Costs reduction reflects the exiting of expensive Interest Costs 22.9 13.0 legacy funding facilities in November 2017 and funds from % of Average Receivables 4.8% 5.7% the capital raise used to fund
Slide 32: Balance Sheet
FY19 FY18 $M $M Balance Sheet Cash and Cash Equivalents 12.6 12.7 Other Receivables 11.0 5.1 • Cash includes Restricted Cash of $6.4M at 30 June Term Deposit 1.2 1.2 2019 ($8.7m at 30 Jun 2018). Unrestricted balance includes amounts remitted to Trusts the following Customer Receivables 647.5 300.6 b
Slide 33: Cash Flows
FY19 FY18 $M $M Cash Flows Receipts from Customers 83.7 39.6 Payments to Suppliers and Employees (39) (26.5) • Generated positive Operating Cashflow of $22.6M in R&D Tax Incentives - 1.2 FY19 compared to $1.4M in FY18. $15.1M generated in Interest Received 0.2 0.3 H2FY19. Interest Paid (22.3) (13.2)
Slide 34: Provision for Expected Credit Loss
Customer Provision Provisio Receivables for ECL ECL $M $M % Provision for Expected 30-Jun-18 316.7 9.5 3.00% Credit Loss AASB 9 Adjustment 5.0 1-Jul-18 316.7 14.5 4.57% • AASB 9 is applicable for the first time in FY19 and Provision Recognised in the 21.9 requires a provision for expected credit los
Slide 35: Growth & Outlook
04 Growth & Outlook 35
Slide 36: We have multiple levers for accelerating growth
We have multiple levers for accelerating growth FOCUS ON CORE PRODUCT EXPANSION GLOBAL EXPANSION
Slide 37: Strong growth drivers within the core business
Strong growth drivers within the core business With only 0.2%1 of the Australian retail market, we remain laser focused the Australian opportunity INCREASED ACCEPTANCE Continue to grow the closed loop network online and instore DEEPEN CUSTOMER ENGAGEMENT TODAY Drive monthly transacting users via nat
Slide 38: We are just getting started
We are just getting started USA $5T1 While focused on Australia, the global opportunity dwarfs the local region UK $630B2 • BNPL in its infancy in most markets TOMORROW • Total BNPL market share in the US and UK The world estimated at less than 1% • Payments increasingly require global utility 320B5
Slide 39: Global is now a key part of our future growth story
Global is now a key part of our future growth story The recently announced PartPay acquisition provides the technology platform to accelerate growth in a number of global markets while concurrently focusing on Australia and New Zealand UK 100% stake US Launched 2019 15% stake Operational platform Fo
Slide 40: PartPay acquisition rationale
PartPay acquisition rationale PartPay was acquired for NZ$50.8M1, providing entry into four new markets (NZ, UK, US & SA), and we increased our shareholding in US-based, QuadPay to 15%2 1 2 3 4 5 Activate global Grow NZ Fast track entry to Global BNPL Capable team with growth potential market share
Slide 41: Next steps on going global
Next steps on going global Working towards an expeditious closing late October, subject to shareholder approval and other conditions precedent PartPay integration will occur over the coming months; inclusive of branding, product, technology and talent Expansion and consolidation of our Australian re
Slide 42: Market conditions
Market conditions Many factors to consider when planning the year ahead Strong demand from retailers for alternative payments and BNPL at checkout Increasing awareness and a general decline of credit cards, driving BNPL consumer adoption Overseas demand is starting to accelerate, time to get in earl
Slide 43: FY20 Outlook Statement
FY20 Outlook Statement We are confident in our ability to drive growth, achieve our targets, and expand globally with a deliberate lift, shift & scale strategy 1 FINANCIAL TARGETS 3 TECHNOLOGY & • 2.5M customers MARKETING • Invest in brand • $2.2B in annualised awareness, customer transaction volume
Slide 44: Disclaimer and important notice
Disclaimer and important notice The information contained in this presentation has jurisdiction. The Company is not licensed to provide, the acquisition and retention of customers, personal, as well as political and operational risks, and been prepared by Zip Co Limited ACN 139 546 428 and this pres
Slide 45: Thank You & Questions
4 zip Thank You & Questions