Slide 1: Zip Co Limited 1H FY24 Investor Presentation
Zip Co Limited al use only 1H FY24 Investor Presentation 27 February 2024 1
Slide 2: 1H FY24 highlights
al use only 01. 1H FY24 highlights 2
Slide 3: Successful strategy execution delivered positive cash EBTDA of $30.8m
Cash transaction margin (% of TTV) Cash gross profit ($m) +90bps YoY +45.9% YoY 176.2 3.5 2.6 120.7 al use only Successful strategy 1H23 1H24 1H23 1H24 execution delivered Net bad debts1 (% of TTV) Group cash EBTDA ($m) positive cash Flat YoY +$64.0m improvement YoY EBTDA of $30.8m 1.9 1.9 30.8 1H23
Slide 4: Profitable growth driven by margin expansion
Revenue ($m) TTV ($b) Active customers1 (#m) +28.9% YoY +9.6% YoY (2.5%) YoY 430.0 5.0 6.3 6.3 4.6 333.5 al use only Profitable 1H23 1H24 1H23 1H24 1H23 1H24 growth driven by margin Revenue margin (% of TTV) +130bps YoY Transactions (#m) +5.0% YoY Merchants (#k) +9.3% YoY expansion 8.5 36.7 38.6 76.2
Slide 5: Zip is delivering on its FY24 priorities
Zip is delivering on its FY24 priorities Growth and Product Operational profitability innovation excellence al use only Extending distribution and Unlocking new customer and Strengthening our platforms and performance of core products market segments for growth balance sheet to support scale ● Record
Slide 6: Positive cash EBTDA result driven by strong seasonal volumes and margin expansion
Positive cash EBTDA result driven by strong seasonal volumes and margin expansion 1H24 cash EBTDA, $30.8m al use only HoH breakdown ($m) Record TTV and revenue in the Americas, up 33.3% and 40.3% vs 1H23 Cash NTM in 1H24 of 3.5% up 90bps vs 1H23, a strong result despite rising interest rates 1H23 2H
Slide 7: Zip is committed to delivering sustainable outcomes for all its stakeholders
Zip is committed to delivering sustainable outcomes for all its stakeholders 1H24 achievements and progress al use only Financial Cyber-security DEI & employee Environmental wellbeing & financial crime wellbeing sustainability ● Guided by responsible ● Ongoing focus on Cyber ● 43% women across total
Slide 8: Business performance
al use only 02. Business performance 8
Slide 9: Strategy focused on strong sustainable growth in its two core markets
Zip’s strategy continues to focus on delivering strong sustainable growth in its two core markets ANZ Americas al use only Distinct Profitable and scale business with Business delivering cash EBTDA strategies 10 years operating history. AU cash profitability, while continuing to pursue EBTDA positive
Slide 10: Americas: Foundations in place to drive our growth opportunity
Americas: Foundations in place to drive our growth opportunity Key performance metrics (AUD) Profitable growth Customer engagement Significant positive cash EBTDA Increased customer engagement 1H24 1H23 Change result driven by strong seasonal (Txn/active customer +30.0% and TTV $3.1b $2.3b 33.3% TTV o
Slide 11: Profitable growth achieved with strong bad debt performance
Profitable growth achieved with strong bad debt performance US monthly cohorts, 120 day bad debt performance (% of cohort TTV) al use only Proactive actions taken by Zip continue to drive superior credit YoY TTV growth (RHS) Actuals (LHS) Early indicators performance and accelerated profitable growth
Slide 12: ANZ: Strong revenue margins the standout
ANZ: Strong revenue margins the standout Key performance metrics (AUD) Profitable growth New merchants and verticals Two-sided revenue model Strong rollout of new merchants 1H24 1H23 Change delivered strong revenue growth across targeted verticals including $1.9b $2.2b (12.9%) of 22.7% and revenue ma
Slide 13: Zip AU's loan book performance remains strong
Zip AU’s loan book performance remains strong, increased yield and reduced losses offsetting the speed of rate rises 1H24 book performance (excess spread) Arrears rate and net bad debts1,2 (% of AU consumer receivables) (% of AU consumer receivables) al use only 17.5% 16.0 14.1% 5.0 14.0 6.2% 4.8 4.
Slide 14: Financial performance
al use only 03. Financial performance 14
Slide 15: Income statement
Income statement $m 1H24 1H234 Change% • Cash EBTDA of $30.8m, up $64.0m vs 1H23 Revenue 430.0 333.5 28.9 • Revenue grew 28.9%, on strong TTV growth and revenue margins up 130bps Cash cost of sales1 (253.8) (212.8) 19.3 • Cash gross profit margin increased to 41.0%, as strong Cash gross profit 176.2 1
Slide 16: Unit economics
Unit economics $m 1H24 1H231 Change% Strong NTM expansion up 90bps to 3.5% and 45.9% increase TTV 5.0b 4.6b +9.6 in cash gross profit despite increasing interest rate Revenue 430.0 333.5 +28.9 environment: 2 Interest expense (98.3) (65.4) +50.3 • Strong revenue growth, up 28.9% vs 1H23 reflecting stro
Slide 17: 1H24 vs 1H23 movements in cash NTM
1H24 vs 1H23 movements in cash NTM (% of TTV) +1.3% al use only 0.0 +0.1% 3.5% (0.5%) Cash NTM 2.6% increased by 90 bps to 3.5% 1H23 Revenue Net bad debts Interest expense Bank & data 1H24 margin variance variance variance costs variance Total Increase Decrease 17
Slide 18: Cash opex
Cash opex $m 1H24 1H232 Change% • Salaries and employment related costs down 12.9% vs 1H23, driven by headcount reductions in FY23 to TTV $5.0b $4.6b +9.6 streamline operations and Zip’s cost base Cash operating costs1 149.3 156.1 (4.4) • Marketing costs declined 18.0% vs 1H23 to 0.4% of TTV due % o
Slide 19: Balance sheet
Balance sheet $m Dec-23 Jun-23 • Cash increase driven by operating cash proceeds and Cash 303.8 276.0 financing to support seasonal growth ● Cash and cash equivalents 160.7 152.0 • Growth in receivables driven by the combined impact of ● Restricted cash 143.2 124.0 revenue growth offset by improvemen
Slide 20: Zip's available cash position improved to $81.3m
Zip’s available cash position improved to $81.3m Available cash and liquidity ($m) 1H24 movements in available cash ($m) 303.8 al use only 30.8 20.0 81.3 57.3 (9.9) (143.2) 1.1 (16.9) 81.3 (80.4) Reported cash Restricted Unavailable AU trusts Available Jun-23 Cash Capex Funding and Non-operating Dec
Slide 21: Funding update
Funding update Corporate debt facility • Successfully completed a new $150.0m corporate debt facility Facility limits ($m) Drawn ($m) with funds managed by Ares Management Corporation for a Secured funding facilities term of four years in Dec-23. Proceeds used to: AU 2,409.2 2,172.3 al use only • Re
Slide 22: Actions to strengthen balance sheet reducing convertible notes outstanding
Zip undertook actions to strengthen its balance sheet reducing convertible notes outstanding Key actions to deleverage the balance sheet Movements in Zip’s convertible note 1H24 activity: debt outstanding face value, ($m) al use only • Consent solicitation to amend certain terms and conditions 340.2
Slide 23: Strategy and outlook
al use only 04. Strategy and outlook 23
Slide 24: Zip remains committed to its FY24 strategic priorities
Zip remains committed to its FY24 strategic priorities al use only Growth and Product Operational profitability innovation excellence Extending distribution Unlocking new customer Strengthening our and performance of and market segments platforms and balance core products for growth sheet to support
Slide 25: Outlook
Outlook1 1H24 result Key management actions and assumptions for FY24 Medium term targets (% of TTV) (% of TTV) Revenue 8.5 ● Increased revenue margin from new products 8.0 - 9.0 al use only ● Expect to achieve upper end of target range Cash cost 5.0 ● Manage net bad debts to optimise transaction mar
Slide 26: Strong momentum in early 2H24
Strong momentum Proven in early 2H24 business al use only model Growth and profitability Unique Strong momentum in US business value January US cohort bad debts at 1.4% of TTV Well positioned proposition AU arrears and net bad debts continuing for the next Platforms improved trends phase of growth to
Slide 27: Q&A
al use only Q&A 27
Slide 28: Appendix
al use only Appendix 28
Slide 29: Income statement
Income statement $m Revenue 1H24 430.0 1H234 333.5 3 Cash EBTDA 30.8 (33.2) Breakdown of non-cash and corporate and Non-cash items 6.2 (51.6) one-off adjustments Unrealised FX movements 0.1 0.5 Effective interest on convertible notes (7.8) (62.6) Movement in expected credit loss and other 16.6 12.8
Slide 30: Balance sheet
Balance sheet $m Cash and cash equivalents Dec-23 160.7 Jun-23 152.0 Restricted cash 143.2 124.0 Other receivables 98.3 87.2 Term deposit 5.3 7.2 Customer receivables 2,624.9 2,596.8 Investments at FVTPL - 13.8 al use only Investments in associates - 2.2 Property, plant and equipment 2.7 5.1 Right-o
Slide 31: Cash flows
Cash flows $m Revenue from customers 1H24 431.0 1H23 352.0 Payments to partners, suppliers and employees (99.3) (165.4) Net increase in receivables (105.7) (328.3) Borrowing transaction costs (2.3) (1.5) Interest received from financial institutions 2.8 1.6 Interest paid (112.8) (68.3) Termination pay
Slide 32: Funding
Funding $m Dec-23 Jun-23 Secured funding facilities Facility limits AU 2,409.2 2,365.6 2 US 328.9 339.4 al use only SME 31.1 59.8 2 NZ 18.6 18.4 Total limits 2,787.8 2,783.2 Facilities drawn AU 2,172.3 2,232.1 2 US 214.9 198.1 SME 31.1 51.9 2 NZ 14.9 10.1 Total drawn 2,433.2 2,492.2 Corporate facili
Slide 33: Glossary
Glossary Term Definition FY Financial year ending 30 June of the relevant financial year 1H Six months ending 31 December of the relevant financial year 2H Six months ending 30 June of the relevant financial year 1Q Three months ending 30 September al use only 2Q Three months ending 31 December 3Q Three
Slide 34: 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 This presentation may contain certain “forward looking statements”. Forward risks, uncertainties and other (Company). factors, many of which are outside the control of