Zip Co Ltd. · ASX:ZIP
Zip — Merger or Acquisition (February 2022)
48 slides from Zip's merger presentation, Feb 28, 2022
Slide 1: Zip and Sezzle: Stronger Together
28 FEBRUARY 2022 Zip and Sezzle: Stronger Together
Slide 2: Today's presenters
Today’s presenters Larry Diamond Peter Gray Charlie Youakim Co-Founder & Global CEO Co-Founder & Global COO Co-Founder, Chairman & CEO ● Co-founded Zip Co in 2013 ● Co-founded Zip Co in 2013 ● Co-founded Sezzle in 2016 ● Has overseen Zip’s growth ● 25+ years experience in the ● Charlie is a serial f
Slide 3: Compelling strategic and financial rationale
Compelling strategic and financial rationale A Transformational Significantly enhances Zip’s scale and product offering, with the capabilities to combination accelerate in the US B Provides meaningful customer benefits unlocking BNPL anywhere for Sezzle Meaningful customers and provides Zip customer
Slide 4: Transaction overview: key terms
Transaction overview: key terms Transaction ● Zip and Sezzle have entered into a definitive merger agreement under which Zip has agreed to acquire Sezzle in an all-scrip transaction (the “Proposed Transaction”) overview ● The Proposed Transaction has been unanimously recommended by the Sezzle and Zi
Slide 5: Transaction overview: key terms (cont'd)
Transaction overview: key terms (cont’d) SEC registration ● In connection with the Proposed Transaction, Zip will also file with the United States Securities and Exchange Commission (the and US listing “SEC”) a registration statement on Form F-4 (which will include a definitive proxy statement of Se
Slide 6: Sezzle: A US BNPL platform with strength in SMB
Sezzle: A US BNPL platform with strength in SMB Key highlights Omni-channel solutions Other institutions ● US based Buy Now, Pay Later platform facilitating Merchants & retailers (credit agencies, card networks, banks) fast, secure and easy digital payments ● Provides short term (<2 month) interest-
Slide 7: Sezzle: continued strong growth across key metrics
Sezzle: continued strong Key Metrics growth across key metrics Total Transaction Volume (TTV) (US$bn) Total revenue Average annual TTV % of TTV transactions4 LTM Dec. 2020 $0.9 US$2.3B 5.9% 49x Average annual transaction LTM Dec. Dec. 2021 annualised 4Q21 +111% for Top 10% of Consumers 2021 $1.8 YoY
Slide 8: Sezzle: industry recognition across product capabilities, customer and employee experiences
Sezzle: industry recognition across product capabilities, customer and employee experiences Core capabilities Product Industry recognition of Sezzle’s Product development technology and product capabilities 4.8 4.9 32,500 Reviews 78,100 Reviews Sezzle has attracted and retained top Technology and en
Slide 9: Significant opportunity in the global BNPL space
Significant opportunity A. Transformational combination in the global BNPL space With the capabilities to accelerate in the US, our highest priority Enlarged customer base Addressable retail BNPL penetration of Estimated growth in BNPL market1,2,5 eCommerce spend3,4 penetration of eCommerce (by 2024
Slide 10: Enhanced US footprint with strong Pay in 4 offering
Enhanced US footprint with strong Pay in 4 A. Transformational combination offering Geographic mix (by TTV) Product mix (by TTV) A$7.9bn A$2.5bn A$10.4bn A$7.9bn A$2.5bn A$10.4bn Other 2% <1% 2% 1% markets 38% 40% ANZ 50% Account, longer 50% duration 100% 99% 60% 60% US 48% Pay in 4 50% Pro-forma Pr
Slide 11: Global scale and an enhanced customer and merchant network in the US
Zip and Sezzle deliver global scale and an enhanced A. Transformational combination customer and merchant network in the US Pro forma metrics exclude any customer or merchant overlap and any potential synergies (which have the potential to exceed the financial impact of overlap). Estimated c. 25% cu
Slide 12: Providing customers access to each other's product suite to drive deeper engagement
Providing Zip and Sezzle customers access to each B. Meaningful customer benefits other’s product suite to drive deeper engagement Combined proposition for US customers Complementary US product suite Select Products Pro Forma Merchant Short Duration ✔ ✔ ✔ 18.5k 42.0k network1 Long Duration ✕ ✔ ✔ (of
Slide 13: Deepening our commitment to customers through a shared product vision
Deepening our commitment to customers B. Meaningful customer benefits through a shared product vision Customer solutions Merchant solutions Incremental Sezzle solutions WALLET VISION ● Spend and Earn ● Budget and Learn Physical cards ● Banking 2018 ● Save and Invest Debit spend (Pay Now) 2018 PFM Su
Slide 14: Driving customer engagement and unit economics through access to Zip's open loop network
Driving customer engagement B. Meaningful customer benefits and unit economics through access to Zip’s open loop US TTV channel mix (CY21) (illustrative) network Access to Zip’s unique model to support sustainable growth Sezzle’s significant Sezzle customers Checkout low cost customer acquisition ch
Slide 15: Complementary enterprise and SMB merchant networks across diverse verticals
Brings together highly complementary enterprise C. Complementary merchant networks and SMB merchant networks across a diverse set of verticals… Combined proposition for US merchants Highly complementary merchant networks (enterprise shown only) Customer network1,2 5.7m 3.1m Products Pay in 4 Pay in
Slide 16: Proof points strengthening the combined company's capabilities to win together
…strengthening the combined company’s C. Complementary merchant networks capabilities to win together Products Network Flexibility Revenue Model Risk Management Global Scale Short and long A high margin, open A two sided revenue Combined data and A truly global duration installments loop app combine
Slide 17: Potential to realise up to c. $130m in EBTDA synergies
Potential to realise up to c. $130m in EBTDA D. Synergies & path to profitability synergies, supporting Zip’s path to profitability Component Potential synergy Potential opportunities Timing ● Reduction in combined employee expenses and duplicative roles (e.g. corporate functions) c. A$60-80m ● Incr
Slide 18: Robust plan to deliver near-term and medium term financial benefits
Robust plan to deliver near-term and medium term E. Accretion and balance sheet strength financial benefits Accretion ● Proposed Transaction expected to be accretive to revenue per share and EBTDA per share in FY24F, including the full impact of potential synergies ● Expect to realise material cost
Slide 19: Equity raising – balance sheet strength to support sustainable growth
Equity raising – balance sheet strength to support sustainable growth with runway to execute on potential synergies ● Fully underwritten institutional Placement to eligible institutional, professional and sophisticated investors to raise approximately Placement size A$148.7m and structure ● Issue of
Slide 20: Key information for the Placement and the SPP
Key information for the Placement and the SPP Placement timetable Event Date Announcement of completion of the Placement Tuesday, 1 March 2022 Settlement of Placement Shares issued under the Placement Thursday, 3 March 2022 Allotment and commencement of trading of Placement Shares issued under the P
Slide 21: Concluding comments and takeaways
Concluding comments and takeaways A Transformational Pro forma business with 13.3m customers and 128.8k merchants globally and combination 8.8m customers and 60.5k merchants in the US, our highest priority geography1 B Immediate customer More complete product suite including short and long duration
Slide 22: Appendix A: Supporting Information
Appendix A: Supporting Information
Slide 23: Pro forma balance sheet
Pro forma balance sheet Acquisition Capital Raise Total Pro Forma Adjustments Adjustments Adjustments 31 December 20211 (A$m) (US$m) (A$m)2 (A$m) (A$m) (A$m)4 (A$m)3 Assets Cash and cash equivalents 266.8 78.9 110.3 (30.0) 148.7 118.7 495.8 Other receivables 64.0 8.4 11.8 - - - 75.8 Term deposit 1.5
Slide 24: Appendix B: Key Risks
Appendix B: Key Risks
Slide 25: Key risks
Key risks This section describes the key business risks associated with the Proposed Transaction together with the risks relating to participation in the Placement and the SPP (together, the Capital Raising) that may affect the value of Zip’s shares and Zip’s ADRs. Before investing in Zip, you shoul
Slide 26: Key risks (cont'd)
Key risks (cont’d) 1. Proposed Transaction specific risks The price at which Zip’s shares will be quoted on the ASX and Zip’s American Depository Receipts (“ADRs") will be quoted on a U.S. exchange may experience price and volume fluctuations that are due to a number of factors outside Zip’s control
Slide 27: Key risks (cont'd)
Key risks (cont’d) 1. Proposed Transaction specific risks Under the Proposed Transaction, Zip will be acquiring an entity incorporated in Delaware, and consequently Zip must comply with the laws and regulations of Delaware and the 1.8. Regulatory risks in United States in relation to the Proposed Tr
Slide 28: Key risks (cont'd)
Key risks (cont’d) 1. Proposed Transaction specific risks As described more fully below, under current law, Zip is not expected to be treated as a U.S. corporation for U.S. federal income tax purposes as a result of the Proposed Transaction. A corporation is generally considered a tax resident in th
Slide 29: Key risks (cont'd)
Key risks (cont’d) 1. Proposed Transaction specific risks It is expected that the Proposed Transaction will qualify as a “reorganization” within the meaning of Section 368(a) of the Code and that Section 367(a) of the Code may apply to the exchange of Sezzle shares for Zip ordinary shares or Zip ADR
Slide 30: Key risks (cont'd)
Key risks (cont’d) 2. Zip risks, including post completion Post completion of the Proposed Transaction, Zip will operate in a number of new jurisdictions including India and Germany, in addition to its existing jurisdictions, each with differing legal and regulatory requirements. Zip will be subject
Slide 31: Key risks (cont'd)
Key risks (cont’d) 2. Zip risks, including post completion The continued success of the Combined Business relies on each of Sezzle and Zip retaining their key contracts including their third party merchant partners. There is no guarantee that the key contracts and partnerships will continue after th
Slide 32: Key risks (cont'd)
Key risks (cont’d) 2. Zip risks, including post completion The Combined Business will rely heavily on its reputation to retain and increase its customer base, merchant partnerships and relationships after the Proposed Transaction. Maintaining Zip’s and Sezzle’s reputations in the future as the Combi
Slide 33: Key risks (cont'd)
Key risks (cont’d) 2. Zip risks, including post completion As a result of the Proposed Transaction, Zip is further increasing its concentration in the United States and therefore Zip will be further exposed to the performance of the United States’ domestic economy as well as global macroeconomic con
Slide 34: Key risks (cont'd)
Key risks (cont’d) 2. Zip risks post completion Zip and Sezzle’s business models rely on third party partners over which they have limited control to originate customers. The conduct, standing and product offerings of such partners has the potential to negatively affect Zip and Sezzle’s brand and re
Slide 35: General risks
Key risks (cont’d) 3. General risks Zip considers it maintains insurance customary for businesses of its size and type. Not all risks are insured or insurable and Zip cannot be certain that its current insurance is adequate or that adequate insurance coverage for potential losses and liabilities wil
Slide 36: Key risks (cont'd)
Key risks (cont’d) 4. Capital raising specific risks Investment in equity capital and stock markets attract general risks. For example, as set out in the risks above, the price of Zip’s shares and Zip’s ADRs may fluctuate in line with broader market movements or in response to specific circumstances
Slide 37: Appendix C: Summary of Underwriting Agreement
Appendix C: Summary of Underwriting Agreement
Slide 38: Underwriting Agreement Summary
Underwriting Agreement Summary Zip has entered into an underwriting agreement with Merrill Lynch Equities (Australia) Limited (ABN 65 006 276 795) and Jarden Australia Pty Limited (ABN 33 608 611 687) (each an Underwriter, and together the Underwriters), pursuant to which the Underwriters have agree
Slide 39: Underwriting Agreement Summary (cont'd)
Underwriting Agreement Summary (cont’d) r) (*) hostilities not presently existing commence (whether war has been declared or not) or a major escalation in existing hostilities occurs (whether war has been declared or not) involving any one or more of Australia, New Zealand, the United States, any me
Slide 40: Appendix D: Disclaimers and other notices
Appendix D: Disclaimers and other notices
Slide 41: Disclaimer
Disclaimer This presentation (together with oral statements made in connection herewith, the “Presentation”) is being delivered to you by Zip Co Limited (“Zip”) in connection with the : • definitive agreement under which Zip proposes to acquire Sezzle, Inc. (“Sezzle”, and together with Zip, the “Com
Slide 42: Disclaimer (cont'd)
Disclaimer (cont’d) No Representations and Warranties This Presentation is for informational purposes only and does not purport to contain all of the information that may be required to evaluate a possible investment decision with respect to Zip, Sezzle and the Proposed Transaction and Capital Raisi
Slide 43: Disclaimer (cont'd)
Disclaimer (cont’d) Cautionary Statement Regarding Forward-Looking Statements (Cont’d) (xx) impact of the costs of complying with various laws and regulations applicable to the BNPL industry in the United States and the international markets in which Sezzle and Zip operate; (xxi) impact of macro- ec
Slide 44: Disclaimer (cont'd)
Disclaimer (cont’d) Financial and Other Information The financial information contained in this Presentation has been taken from or prepared based on the historical financial statements of Zip and Sezzle for the periods presented. An audit of certain of these financial statements has not been comple
Slide 45: International Offer Restrictions (Placement)
International Offer Restrictions (Placement) This Presentation does not constitute an offer of new ordinary shares under the Placement (Placement Shares) of the Company in any jurisdiction in which it would be unlawful. In particular, this Presentation may not be distributed to any person, and the P
Slide 46: International Offer Restrictions (Placement) (cont'd)
International Offer Restrictions (Placement) (cont’d) Hong Kong WARNING: This Presentation has not been, and will not be, registered as a prospectus under the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) of Hong Kong, nor has it been authorised by the Securities and Future
Slide 47: International Offer Restrictions (Placement) (cont'd)
International Offer Restrictions (Placement) (cont’d) Singapore This Presentation and any other materials relating to the Placement Shares have not been, and will not be, lodged or registered as a prospectus in Singapore with the Monetary Authority of Singapore. Accordingly, this Presentation and an
Slide 48: International Offer Restrictions (Placement) (cont'd)
International Offer Restrictions (Placement) (cont’d) United Kingdom Neither this Presentation nor any other document relating to the offer has been delivered for approval to the Financial Conduct Authority in the United Kingdom and no prospectus (within the meaning of section 85 of the Financial Se