Slide 1: FY24 Investor Presentation
FY24 Investor Presentation Zip Co Limited 27 August 2024
Slide 2: 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
Slide 3: FY24 highlights
01. FY24 highlights . 3 ZIP
Slide 4: Zip is a simpler, stronger and sustainably profitable business
Zip is a simpler, stronger and sustainably profitable business Record profitable Simplified Standout Continued ANZ Well positioned growth balance sheet US performance profitability for future growth Zip has reset its capital structure, delivered record profitability in FY24 and established strong foundat
Slide 5: Disciplined execution drove strong business momentum
Revenue ($m) Cash transaction margin (%) TTV ($b) +28.2% YoY +96bps YoY +14.0% YoY 868.0 3.8 10.1 8.8 677.2 2.8 Disciplined execution drove strong business momentum and FY23 FY24 FY23 FY24 FY23 FY24 outstanding Revenue margin (% of TTV) +96bps YoY Net bad debts (% of TTV) -18bps YoY Merchants (#k) +
Slide 6: Zip delivered record profitability in FY24
Zip delivered record profitability in FY24 Group cash EBTDA1 ($m) Americas cash EBTDA ($m) ANZ cash EBTDA ($m) 78.8 69.0 77.2 +127.0 33.0 +117.2 +19.1 +101.3 13.9 (24.1) (48.2) FY23 FY24 FY23 FY24 FY23 FY24 Underlying Cash EBTDA group cash EBTDA Strong revenue growth and disciplined cost management
Slide 7: Zip delivered on its FY24 strategic priorities
Zip delivered on its FY24 strategic priorities Growth and Product Operational profitability innovation excellence Extending distribution and Unlocking new customer and Strengthening our platforms and performance of core products market segments for growth balance sheet to support scale Revenue margi
Slide 8: Zip remains committed to operating sustainably and responsibly
Zip remains committed to operating sustainably and responsibly • In Australia, Zip enhanced its hardship application flow to ensure a simplified and streamlined process that Financial supports strong customer outcomes inclusion and • In the US, Zip piloted a financial literacy hub for our most engaged
Slide 9: Business performance
02. Business performance 9
Slide 10: Zip is focused on balancing growth, profitability and capital efficiency
Zip is focused on balancing growth, profitability and capital efficiency Measures of success TTV Active customers Growth ($m) (#m) Regional Revenue margin Cash NTM Cash EBTDA Profitability (% of TTV) (% of TTV) ($m) Operating margin Profitability (Cash EBTDA / Revenue) Group Capital efficiency Return o
Slide 11: Americas: Accelerated QoQ business momentum led to >$100m improvement in cash EBTDA
Americas: Accelerated QoQ business momentum led to a >$100m improvement in cash EBTDA Key performance metrics (AUD) FY24 FY23 Change • Record TTV and revenue, with growth accelerating through the year due to continued optimisation across product and underwriting, TTV $6.5b $4.7b 39.5% deepening cust
Slide 12: Americas: Focused credit decisioning and recovery management
Americas: Focused credit decisioning and recovery management US monthly cohorts, 120-day bad debt performance (% of cohort TTV) Actuals Early indicators Consumer 2.0 Bad debts target range (1.5% - 2.0%) demand and Zip’s 1.5 credit risk 1.3 1.3 1.3 1.3 management 1.0 1.2 1.2 1.1 1.1 1.1 1.2 1.2 1.0 0
Slide 13: ANZ: Cash EBTDA grew 2.3x YoY underpinned by margin expansion
ANZ: Cash EBTDA grew 2.3x YoY underpinned by margin expansion Key performance metrics (AUD) • Record cash EBTDA result despite a significant increase in interest costs and a more challenged operating environment FY24 FY23 Change TTV $3.6b $4.2b (14.5%) • Two-sided revenue model delivered strong reven
Slide 14: ANZ: Portfolio positioned for yield with strong credit performance
ANZ: Portfolio positioned for yield with strong credit performance despite the challenging macro environment FY24 book performance (excess spread)1 Arrears rate and net bad debts1,2 (% of AU consumer receivables) 18.9% (% of AU consumer receivables) 18.4% 19 18 16.4% 5.0 4.7 17 16.1% 16 5.4% 6.5% 4.
Slide 15: Financial performance
03. Financial performance 15
Slide 16: Income statement
Income statement Revenue growth, margin expansion and continued cost management delivered a step change in profitability Change • Revenue increased 28.2% vs FY23 due to a 39.5% increase in TTV in $m FY24 FY23 4 % the Americas and further portfolio yield expansion in ANZ Revenue 868.0 677.2 +28.2 • Ca
Slide 17: Unit economics
Unit economics Transaction margins improved 96bps despite rising interest rates, enabling a 50% improvement in cash gross profit Strong Group NTM expansion of 96bps to 3.8% and a 52.8% Change $m FY24 FY23 1 % increase in cash gross profit despite increasing interest rate TTV 10.1b 8.8b +14.0 environme
Slide 18: Cash NTM increased by 96 bps to 3.8%
FY24 vs FY23 movements in cash NTM (% of TTV) +1.0% +0.2% +0.1% 3.8% Cash NTM (0.3%) increased by 2.8% 96 bps to 3.8% underpinned by margin expansion FY23 Revenue Interest expense Net bad debts Bank and data FY24 margin variance variance variance costs variance Total Increase Decrease 18
Slide 19: Cash operating expenses
Cash operating expenses Strong cost discipline has enabled Zip to develop material operating leverage Change $m FY24 FY23 2 • FY24 cash operating expenses of $306.9m reflecting Zip’s % disciplined approach in an inflationary environment whilst TTV $10.1b $8.8b +14.0 maintaining business growth Cash op
Slide 20: Liquidity
Liquidity Material improvement in available cash with four consecutive quarters of positive operating cash flow Cash at 30 June 2024 ($m) FY24 movements in available cash ($m) 353.0 +69.0 (17.5) +4.7 80.4 57.3 (33.1) (231.7) +3.0 80.4 (43.9) Reported cash Restricted Unavailable AU trusts Available Ju
Slide 21: Receivables financing
Receivables financing With transactions executed in FY24, Zip has extended the tenor of financing with both existing and new debt investors involved, at materially improved credit margins • In the US, executed an agreement to refinance the US$225.0m As at 30 June 2024 facility for a three-year term wit
Slide 22: Capital structure
Capital structure Zip reset in FY24 providing flexibility and liquidity to pursue further profitable growth Convertible notes1 Zip corporate debt Extinguished all $340m notional of existing Convertible Notes being: 430 • $50m of CVI Convertible Notes (Private) 90 • $290m Senior Convertible Notes (Publ
Slide 23: Strategy and outlook
04. Strategy and outlook 23
Slide 24: Zip remains strongly positioned to drive growth in a dynamic operating environment
Zip remains strongly positioned to drive growth in a dynamic operating environment Operating Consumer credit growth environment Regulatory Continued shift to remains strong; arrears developments in both digital wallets and trending back to core markets instalment payments pre-pandemic levels Zip pos
Slide 25: Merchants and payment ecosystem partners create a significant distribution network
Merchants and payment ecosystem partners create a significant distribution network for Zip Key merchants Distribution partners E-commerce platforms 2525
Slide 26: Americas: Significant potential to expand TAM
Americas: Significant potential to expand TAM by investing in growth multipliers across core and adjacent markets Total addressable market (USD) 12.3t1 Levers to grow Zip’s core consumer finance offering US payments market1 with 100m underserved Americans 85% in-store, 15% e-commerce Continued momentu
Slide 27: ANZ: Disrupting financial services profit pools
ANZ: Disrupting financial services profit pools with compelling, next generation consumer propositions Future focus areas Deeper penetration of personal lending market $2t1 + Home Loans Developing capital-light propositions in new profit pools $870b2 + Payments Strategic partnerships that unlock new cu
Slide 28: Zip has a clear strategy to drive growth in FY25 and beyond
Zip has a clear strategy to drive growth in FY25 and beyond Growth and Product Operational engagement innovation excellence Secure new merchant and Scale Pay in 8 (US) Design and build strategic partnerships exceptional customer Scale Zip Plus (ANZ) journeys Scale embedded distribution channels Laun
Slide 29: Zip's two-year outlook
Zip’s two-year outlook FY24 result FY25 focus areas Two-year range 1 Revenue ● Drive shift to higher margin channels and products (% of TTV) 8.7% ● Share of revenue from US expected to increase 8.0% - 9.0% 2 ● US TTV growth outlook for FY25 above average pay in 4 market growth Cash NTM ● Drive impro
Slide 30: Q&A
Q&A 30
Slide 31: Appendix
Appendix 31
Slide 32: Segment information
Segment information FY24 Corporate and Consolidated $m ANZ Americas non-core Group Total revenue (inc. other income) 423.0 451.3 0.8 875.1 Cash cost of sales (279.3) (215.6) (0.2) (495.1) Cash gross profit 143.7 235.7 0.7 380.0 Cash operating expenses (110.7) (158.5) (37.7) (306.9) One-off items 0.0
Slide 33: Income statement
Income statement $m FY24 FY231 Revenue 868.0 677.2 Breakdown of corporate and one-off adjustments Cash EBTDA 69.0 (48.2) Non-cash items (5.0) (102.4) Reported EBTDA 64.0 (150.6) Corporate and one-off adjustments 25.5 (152.9) Share‑based payments (6.6) (14.3) Non-operating expenses, gains and losses
Slide 34: Balance sheet
Balance sheet $m Jun-24 Jun-23 Cash and cash equivalents 121.3 152.0 Restricted cash 231.7 124.0 Other receivables 100.8 87.2 Term deposit 4.5 7.2 Customer receivables 2,398.6 2,596.8 Investments at FVTPL and in associates - 16.0 Property, plant and equipment and ROU assets 19.7 23.7 Intangible asse
Slide 35: Cash flows
Cash flows $m Revenue from customers FY24 871.8 FY23 728.8 Payments to partners, suppliers and employees (363.0) (438.5) Net increase in receivables (6.6) (338.3) Borrowing transaction costs (6.6) (2.8) Interest received from financial institutions 6.2 3.6 Interest paid (229.4) (161.5) Proceeds from d
Slide 36: Funding
Funding $m Jun-24 Jun-23 Secured funding facilities Facility limits AU 2,293.4 2,365.6 2 US 339.7 339.4 SME - 59.8 2 NZ 18.3 18.4 Total limits 2,651.4 2,783.2 Facilities drawn AU 2,024.4 2,232.1 2 US 283.8 198.1 SME - 51.9 2 NZ 10.1 10.1 Total drawn 2,318.3 2,492.2 Corporate facility Facility limit
Slide 37: 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 2Q Three months ending 31 December 3Q Three months endi