Slide 1: FY22 Investor Presentation
ZIP CO LIMITED FY22 Investor Presentation 25 AUGUST 2022 1
Slide 2: Our Mission, Our Purpose
OUR MISSION OUR PURPOSE To be the first payments choice To create a world where people can live everywhere and every day. fearlessly today, knowing they are in control of tomorrow. 2
Slide 3: Agenda
Agenda 01 Highlights 02 Business performance 03 Financial performance 04 Financial statements 05 Priorities and outlook 3
Slide 4: Highlights
01. Highlights 4
Slide 5: Continued strong operating performance in FY22
TTV ($) Transactions (#) Up 51% YoY 8.7b Up 80% YoY 74.3m 5.8b 41.3m 2.1b 10.5m Continued strong operating FY20 FY21 FY22 FY20 FY21 FY22 performance in Customers1 (#) Merchants (#) Up 56% YoY Up 77% YoY FY22 11.4m 90.7k 7.3m 51.3k 2.1m 24.5k 32.3k 55.2k Jun 20 Jun 21 Jun 22 Jun 20 Jun 21 Jun 22 All
Slide 6: Financial performance
Financial performance Revenue1,2 ($) Revenue margin (%) Available cash Up 57% YoY 620.0m and liquidity3 ($) 7.6% 6.8% 7.1% 393.9m 160.1m $279m FY20 FY214 FY22 FY20 FY214 FY22 FY22 cash EBTDA ($) Cash gross profit ($) Cash transaction margin (%) Up 12% YoY 203.7m 181.5m 80.1m 3.8% 3.1% 2.3% ($207m) 32
Slide 7: FY22 highlights
FY22 highlights Strong growth across all key operating metrics: TTV up 51% YoY to $8.7b; Revenue up 57% YoY Growth to $620.0m; total customers increasing 56% YoY to 11.4m and total merchant partners up 77% YoY to 91k. Launched with Top 100 US Retailers Best Buy and Bed Bath & Beyond1 in the US. In A
Slide 8: In FY22 we pivoted our focus to execute on growth in core markets
In FY22 we pivoted our focus to execute on growth in core markets and accelerate our path to profitability Growth Unit economics Cost management >50% YoY TTV growth and added 4.1m Clear path to target range, with Took decisions to exit non-core markets customers in FY22 driven by merchant Q4 FY22 at
Slide 9: Sustainability and social impact
Sustainability and social impact Financial empowerment Environmental sustainability ● Partnered with Young Change Agents, ● Undertaking continued work to remain a global, promoting financial literacy and entrepreneurial Climate Neutral certified organisation skills for youth in AU ● Established a base
Slide 10: Business performance
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Slide 11: US - Growing strongly
US - Growing strongly Growth Customer engagement Key performance metrics Strong growth, delivered 67% YoY Driving deeper engagement, with TTV Transactions 4.1 23.2 in TTV while adding 2m new top 10% of app customers $b #m customers to the platform. transacting ~40x p.a., compared to 35x in FY21. 91%
Slide 12: App engagement in the US is driving significant customer lifetime value
App engagement in the US is driving significant customer lifetime value Spend per US active customer1 Cumulative revenue per US active customer1, 2 140 FY19 Annual spend per active customer ($USD) FY20 800 120 FY21 $725 Cumulative revenue ($USD) FY22 100 600 $554 80 400 60 $316 $222 40 200 20 0 0 FY1
Slide 13: ANZ - Delivering profitable growth
ANZ - Delivering profitable growth Profitable growth Customer engagement Key performance metrics1 Delivered strong growth across key Customers are engaging with Zip more TTV 4.2 Transactions 43.9 metrics, with revenue growing at than ever with monthly users $b #m >1.5x the rate of transaction volume.
Slide 14: Cross-product adoption and deeper engagement is delivering higher customer lifetime value in ANZ
Cross-product adoption and deeper engagement is delivering higher customer lifetime value in ANZ Total transactions, top 20% AU customers1 Cumulative revenue per ANZ customer2 Yet to fully 400 FY18 72x season FY19 63x 350 Cumulative revenue ($AUD) FY20 # Transactions, 12 months to FY21 300 52x FY22
Slide 15: Rest of world markets delivered >$450m in TTV
Rest of world markets delivered >$450m in TTV Twisto Strong TTV and revenue growth up >60% and >80% YoY1 with >1m Continuing to scale with a focus on all time customers having transacted on the platform. Taking targeted action to achieve profitability (i.e. deprioritised further EU sustainable growth
Slide 16: Active customers
Active customers • We are also moving to align customer definitions closer to industry standards to more accurately demonstrate the performance of the Zip business on an active customer basis • Active customers are being measured as the number of customer accounts with transaction activity in the las
Slide 17: Financial performance
03. Financial performance 17
Slide 18: Unit economics
Unit economics Financial performance1 FY22 FY213 % change Total Transaction Volume $8.7b $5.8b 50.8% (TTV) We continue to deliver sustainable financial performance: Revenue $620.0m $393.9m 57.4% ● Transaction volumes grew 50.8% YoY with revenue up 57.4% YoY % of TTV 7.1% 6.8% +0.3% ● Revenue margins
Slide 19: Cash cost of sales
Cash cost of sales % of TTV FY22 FY212 Medium term target • Interest expense declined YoY driven by benefits Revenue 7.1% 6.8% 7.0%-7.5% from changed business mix and reduced funding costs in AU Interest expense1 0.9% 1.1% • Net bad debts increase YoY driven by both external (e.g. slow down in US sti
Slide 20: The Australian business has proven that at scale, strong unit economics converts to profitability
The Australian business has proven that at scale, strong unit economics converts to profitability Cash GP1 Cash Opex1 Cash EBTDA1 Up 20% YoY Up 2% YoY Up 250% YoY $132m $28m $110m $102m $104m $8m FY21 FY22 FY21 FY22 FY21 FY22 Maintain healthy margins Scale the network Drive profitability Note: 1. Gros
Slide 21: In AU actions taken across the credit lifecycle are delivering improved credit performance
In AU actions taken across the credit lifecycle are delivering improved credit performance Decisioning and risk management driving write-offs to <2% Collections are recovering more from written-off accounts (AU net bad debts written-off, as a % of TTV) (Recoveries of written-off accounts, $m) +71% A
Slide 22: Risk adjustments are driving US bad debts towards target range
Risk adjustments are driving US bad debts towards target range; recent cohorts seasoning at 2.1% Credit underwriting adjustments in H2 FY22 are now Losses are trending to target range on a cohort basis delivering outcomes with loss rates trending at 18 (Monthly cohorts, 120 day performance as a % of
Slide 23: Accelerated capital recycling and improved funding costs mitigate interest rate fluctuations
Accelerated capital recycling and improved funding costs mitigate the impact of interest rate fluctuations ● Group receivables recycled every 3.8 months on Repayment velocity Interest expense average in FY22 vs 4.1 months in FY21, with the (Average months to recycle book) (Interest expense as a % of
Slide 24: Zip has the strategy and funding runway to deliver on positive cash EBTDA
Zip has the strategy and funding runway to deliver on positive cash EBTDA $279m $50m+ $660m+ In available cash and liquidity Annualised cost savings from management In available debt funding in core actions to reduce cash burn markets Sufficient capital and strong Reducing annual cash burn Significan
Slide 25: Financial statements
04. Financial statements 25
Slide 26: Segment financials
Segment financials Zip FY22 $m APAC AMERICAS EMEA Total Business ● APAC delivering growth and strong cash EBTDA Revenue outcomes. Increasing cash EBTDA forecast for FY23 (incl. other 298.1 282.9 23.4 16.9 621.3 supported by closure of Singapore and simplification income) initiatives including closure
Slide 27: Income statement
Income statement $m Revenue FY22 620.0 FY214 393.9 2 • Revenue grew 57%, hitting record levels, on strong growth in Cash cost of sales (416.3) (212.4) TTV and revenue margins up 0.3% Interest expense (73.1) (58.7) • Zip has diverse income streams, from merchants, customers, Bank fees and data costs
Slide 28: Corporate items and one-off adjustments
Corporate items and $m FY22 FY211 Reported EBTDA (288.0) (114.3) one-off adjustments Share of loss of associates (8.3) (0.8) Acquisition costs (17.5) (9.9) • Acquisition costs incurred on acquisitions and investments made in the year, including the mutually Share-based payments (30.9) (142.8) termin
Slide 29: Balance sheet
Balance sheet $m JUN 22 JUN 211 Cash and cash equivalents 241.3 289.2 Restricted cash 58.4 41.0 • $241.3m of cash and cash equivalents at Jun-22 • Restricted cash up due to increase in volumes and Other receivables 72.8 30.2 number of securitisation vehicles Term deposit 3.9 1.5 • Revised processing
Slide 30: Cash flows
Cash flows FY22 FY211 $m Revenue from customers 620.2 403.0 Payments to suppliers and employees (517.9) (292.6) • Net cash flow to operations of $752.4m, including Net increase in receivables (767.0) (930.1) $20.3m on the global re-brand, investment in growth and new markets ($738.3m excluding acquisi
Slide 31: Available cash
Available cash Zip Group - Total available cash and liquidity at 30 June 2022 Increase Decrease Total ● Zip had $278.6m available cash and liquidity at 30 Jun- 2022 $350 Millions ● Unavailable cash for the Group of $154.1m at Jun-22 $299.7 -$154.1 includes restricted cash held in securitisation $300
Slide 32: Funding update
Funding update JUN 22 $m JUN 21 $m Facility limits • In Sep-21, Zip issued its first issuance under the Master Trust AU 2,477.6 2,131.4 with a AAA rating assigned on the senior notes reflecting Zip’s receivables performance achieving a weighted average margin US2 435.5 399.0 reduction of 1.58% compare
Slide 33: Priorities and outlook
05. Priorities and outlook 33
Slide 34: Our flywheel continues to provide value to both customers and merchants
Our flywheel continues to provide value to both customers and merchants For customers: For merchants: a digital wallet a single solution Flexible, high and low value purchasing Risk free payments Budgeting and bill Demand generation smoothing CONSUMERS MERCHANTS (deals and rewards) Fair and transpare
Slide 35: Our business model is resilient
Our business model is resilient Operating environment Interest rates Inflation Regulation Implications Higher cost of borrowing Higher cost of living, Potential for increasing reduced discretionary spend regulatory requirements Our model ● Accelerated capital ● Products support cash flow ● Licensed cr
Slide 36: A unique set of competitive advantages enable us to win in all operating conditions
A unique set of competitive advantages enable us to win in all operating conditions Products Network flexibility Revenue model Risk management We offer short and long We operate both an open Our unique revenue model Our proprietary decisioning duration instalments in a and integrated network, derives
Slide 37: Our opportunity remains significant
Our opportunity remains significant; we drive product adoption and engagement to increase penetration Opportunity Growth Zip The total addressable market (TAM) is Demand continues to drive Customers are choosing significant market penetration Zip more often BNPL growth2 Adoption 2.4x +2.4m New custome
Slide 38: FY23 priorities
FY23 priorities: We continue to pursue profitable growth Growth in core markets (US, ANZ) Improve unit economics Reduce global cost base ● Win and scale profitable ● Execute actions across the ● Complete closure of merchant partnerships credit lifecycle (decisioning, Singapore and UK businesses throug
Slide 39: Outlook: Accelerated path to profitability
Outlook: Accelerated path to profitability Key management actions and assumptions Medium term targets (% of TTV) ● Profitable TTV growth in FY23 across ANZ and US, reduced RoW Revenue contribution 7.0% - 7.5% (previously 6.5%-7.0%) ● Full year impact of ANZ repricing initiatives ● Continue to execute
Slide 40: Conclusion
Conclusion BNPL The addressable opportunity remains significant with BNPL opportunity still maturing in Zip’s core markets Business Zip’s differentiated business model and innovative products model position us to capture significant market share Balance We have the balance sheet strength to support th
Slide 41: Appendix
05. Appendix 41
Slide 42: Income statement (FY21 restatement)
Income statement FY21 Previously presented $m Restatements $m Currently reported $m (FY21 restatement) Revenue 397.0 (3.1) 393.9 Cash cost of sales (204.8) (7.6) (212.4) As part of the ongoing improvement in the receivables Interest expense (58.7) - (58.7) and payables reconciliation processes’ for
Slide 43: Corporate items and one-off adjustments (FY21 restatement)
Corporate items and FY21 Previously Presented $m Restatements $m Currently Reported $m one-off adjustments Reported EBTDA (95.0) (19.3) (114.3) Share of loss of associates (0.8) - (0.8) (FY 21 restatement) Acquisition costs (9.9) - (9.9) Share-based payments (142.8) - (142.8) Fair value gain / (loss
Slide 44: Balance sheet (FY21 restatement)
Balance sheet FY21 Previously presented $m Reclassi fications $m Restatem ents $m Currently reported $m (FY21 Restatement) Cash and cash equivalents 330.2 (41.0) - 289.2 The presentation of the consolidated balance sheet changed to: Restricted cash - 41.0 - 41.0 • Offset “Deferred tax assets” and “De
Slide 45: Cash flow (FY21 restatement)
Cash flow Previously Reclassifi Restate Currently Presented cations ments Reported $m $m $m $m FY21 (FY21 Restatement) Net increase in - - (930.0) (930.0) receivables In accordance with AASB 107 Statement of Cash Flows, Borrowing transaction this change in presentation was considered appropriate - - (
Slide 46: Glossary
Glossary Term Definition FY Financial year ending 30 June of the relevant financial year HY Six months ending 31 December of the relevant financial year H1 Six months ending 31 December of the relevant financial year H2 Six months ending 30 June of the relevant financial year Q1 Three months ending 30 Se
Slide 47: Disclaimer and important notices
Disclaimer and important notices The information contained in this presentation has been prepared by Zip Co Limited ACN 139 546 428 (Company). This presentation may contain certain “forward looking statements”. Forward risks, uncertainties and other factors, many of which are outside the control of