Slide 1: FY20 Results Presentation
FY20 Results Presentation August 2020 Zip Co Ltd (ASX: Z1P)
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 (Company). This presentation may contain certain “forward looking statements”. Forward risks, uncertainties and other factors, many of which are outside the control of
Slide 3: Contents
Contents Company Overview 4 Business Update 11 Image to be sourced FY20 Growth Levers 19 Customers 20 Merchants 28 Global Expansion 33 Financials Results 39 FY21 Outlook 48 3
Slide 4: Company Overview
Image to be sourced 01 Company Overview
Slide 5: Purpose
Purpose Mission The freedom To be the first payment choice to own it everywhere and every day 5
Slide 6: Zip at a glance
Zip at a glance ZIP IS A LEADING GLOBAL BNPL PLAYER WITH OPERATIONS ACROSS 5 MARKETS: AUSTRALIA, NEW ZEALAND, UK, USA AND SOUTH AFRICA. $2.1b $161m 100%+ FY20 FY20 Trx growth volume revenue YoY 371 2.1m 24.5k 1 Employees Customers Brands 5 Markets 4.9 $2.9b $1.2b Apple store Market Debt rating cap1
Slide 7: The credit card model is fundamentally broken
The credit card model THE NUMBER OF CREDIT CARDS IS DECLINING is fundamentally broken AS CUSTOMERS SWITCH TO BNPL2 Number of Credit Cards (LHS) BNPL Revenue (RHS) ⠂ High revolving interest, confusing terms, lack of trust and brand loyalty has accelerated the decline 17K $800 of credit cards. ⠂ Austr
Slide 8: Millennial spend is fast becoming the dominant category
Millennial spend is fast becoming the dominant category, accelerating the shift away from credit cards MILLENNIALS ARE THE LARGEST POPULATION SEGMENT, CREDIT CARD USAGE IS SEEING LEADING GEN X IN PURCHASING POWER1,2 A SUSTAINED GLOBAL DECLINE Millennial Gen Z Gen X Baby Boomers CC growth rates have
Slide 9: Zip brings customers and merchants together with a better, fairer digital payments experience
Zip brings customers and merchants together with a better, fairer digital payments experience CUSTOMERS MERCHANTS Spending & budgeting Sales growth ⠂ Interest free terms ⠂ Higher conversions, larger ⠂ Payment flexibility baskets and customer referrals ⠂ Budgeting with Pocketbook ⠂ Increased repurchas
Slide 10: Financial responsibility is how we work
Financial responsibility is how we work 1 4 3 Interest free A revenue model terms, flexible Credit and ID checks that does not rely repayments and for all applicants on customers transparent 2 Tailored account limits falling behind fees 5 with great transparency Significant investment Uniquely paired
Slide 11: Business Update
Image to be sourced 02 Business Update
Slide 12: FY20 Highlights
FY20 Highlights GLOBAL BNPL LEADER: Following the acquisition of US-based QuadPay, Zip bolsters position as a global BNPL player across 5 markets, with combined annualised TTV of $3.2b and 4m customers. EXCEEDED TARGETS, ATTRACTIVE UNIT ECONOMICS: Achieved $2.3b in annualised TTV in FY20, surpassing
Slide 13: The acquisition of US-based QuadPay cements Zip as a global BNPL leader
Zip QuadPay The acquisition of US-based QuadPay cements Zip as a $0.9b $67m global BNPL leader $3.2b $253m ⠂ Access to the world’s largest retail market (US$5t1 and 15x Pro forma Annualised TTV Pro forma Annualised Revenue AU), during a time when interest-free instalments are transforming the credit
Slide 14: FY20 Results Scorecard
FY20 Results Scorecard 91% 91% 62% $2.1b $161.0m 2.1m Transaction Volume Revenue Customers FY19 FY20 FY19 FY20 FY19 FY20 FY19 $1.1b FY19 $84.2m FY19 $1.3m 76% 51% 61bps $1.2b 24.5k 2.24% Receivables Retail Partners Net Bad Debts1 FY19 FY20 FY19 FY20 FY19 FY20 FY19 $682.6m FY19 16.2k FY19 1.63% Sourc
Slide 15: Zip continues to deliver significant YoY growth
Zip continues to deliver significant YoY growth $2.1b $161m TTV Revenue 109% CAGR1 112% CAGR1 $1.1b $84m $543m $40m $231m $17m FY17 FY18 FY19 FY20 FY17 FY18 FY19 FY20 2.1m $1.2b Customers Receivables 91% CAGR1 1.3m 99% CAGR1 $683m 738k $317m 301k $152m FY17 FY18 FY19 FY20 FY17 FY18 FY19 FY20 Source:
Slide 16: Demonstrated resilience during COVID-19
Demonstrated resilience during COVID-19 Business Model Merchants Customers TTV has remained strong with Diversified volume across the Monthly repayment rates are online growing to over home, everyday spend and higher than pre-COVID at 16%1. 80% of TTV. marketplaces delivers robust figures. Credit chec
Slide 17: Delivering best in class credit performance
Delivering best in class credit performance Portfolio performance Transaction history, delinquencies, AoV Application data Residential & employment 2.24% status, dependencies Credit bureau Credit score, enquiries, Net bad debts¹ payday exposure Market leading loss rates with a healthy loan book. Mer
Slide 18: Investing in our people and fostering a culture of innovation
Investing in our people and fostering a culture of innovation 370+ 3 40% GLOBAL ZIPSTERS¹ COUNTRIES PRODUCT AND TECH3 Recent executive hires to take Zip to the next level HAMISH MOLINE ANNA BUBER-FAROVICH STEVE BRENNEN PATRICK COLLINS Chief Commercial Officer Chief People & Culture Officer Chief Custome
Slide 19: FY20 Growth Levers
03 FY20 Growth Levers 3.1 Customers 21 3.2 Merchants 28 3.3 Global Expansion 33
Slide 20: 3.1 Customers
03 FY20 Growth Levers 3.1 Customers Drive acquisition and deepen engagement 20
Slide 21: Zip is a top Australian app loved by its users
Zip is a top Australian app loved by its users 4.8 on Google Play3 815k 4.9 110% Monthly App Users1 On Apple Store3 Growth in Downloads1 2m Downloads1,2 120% Growth in Transactions1 1. Numbers are sourced as at 30th June 2020. 2. Based on internal customer metrics. 21 3. App Annie for the month of J
Slide 22: Delivering to customers' needs
Delivering to customers’ needs Highly relevant product, continues to show strong market fit for new users We're delivering on our promise Key reasons for opening a Zip Pay account: Strong NPS and Satisfaction Scores2: Spread out payments / helps me budget 83% Allows me to pay no interest 80% 55 NPS S
Slide 23: Engagement continues to deepen across both older and newer cohorts
Engagement continues to NEWER COHORTS ARE TRANSACTING 2X MORE FREQUENTLY IN THEIR FIRST YEAR COMPARED TO FY181,3 July ‘19 July ‘18 July ‘17 deepen across both older Transaction frequency (#) and newer cohorts Older cohorts transact up to Newer cohorts are transacting 3.5x 2x 0 Months Since Joining Z
Slide 24: High quality customer base with strong demand for interest free
High quality customer FEMALES REPRESENT 60% OF THE CUSTOMER BASE3 base with strong demand AGE FEMALE MALE for interest free 18-24 11% 7% 25-34 20% 15% ⠂ Zip skews to tech-savvy millennials & young families. ⠂ Have steady incomes and a good credit rating. 35-44 14% 10% ⠂ Shop online frequently and ar
Slide 25: Continued investment in building Zip awareness
Continued investment in building Zip awareness ⠂ Shifted Zip brand awareness from 1 in 4 adult customers to 1 in 21. ⠂ Zip has a strong association with household names including Amazon AU, Bunnings, Officeworks, Kmart, Target. ⠂ The brand with strong product marketing is attracting a growing and high
Slide 26: Shop Everywhere feature fast-tracked at the onset of COVID
Shop Everywhere feature fast-tracked at the onset of COVID ⠂ Shop Everywhere is a customer-driven initiative with strong adoption since its launch in March 2020. "It’s the best feature ⠂ A single-use virtual card is generated ever. I think this will at checkout and pre-fills payment and be the definin
Slide 27: Pocketbook relaunched with a new look & feel
Pocketbook relaunched with a new look & feel 800k Users1 THE LEADING NON-BANK PERSONAL FINANCE MANAGEMENT APP IN AUSTRALIA PROVIDING USERS WITH THE ABILITY TO TRACK, BUDGET AND SAVE. New brand design and improved user experience, with strong early results. Helping COVID affected users understand and
Slide 28: 3.2 Merchants
03 FY20 Growth Levers 3.2 Merchants Drive more traffic and launch business instalments 28
Slide 29: Increasing merchant acceptance
Increasing merchant acceptance NEW ZEALAND AUSTRALIA Unlike other BNPL players, Zip is a true credit card Cotton On Chemist Warehouse Seafolly disruptor, playing in all categories - retail, auto, travel, The Market Petbarn Apollo Kitchens everyday, bills and grocery. Chemist Warehouse Mighty Ape Fre
Slide 30: Launched Amazon Australia in FY20
Launched Amazon Australia in FY20 MOBILE LINKING EXPRESS CHECKOUT Zip became Amazon’s first Australian instalment payment option in early FY20, delivering on Zip’s mission to provide customers with a better everyday payment choice. Strong innovation brought to the customer payments experience. In tan
Slide 31: Zip delivers BNPL and cashflow solutions for small business
Zip delivers BNPL and cashflow solutions for small business 77% OF SMES HAVE A B2B OFFERING2 Large addressable market: There are 2.3m1+ SMEs in Australia, many of these underserved by the banks and in need of cashflow solutions. Zip is uniquely placed to assist with its real-time decision-technology,
Slide 32: Zip announces partnership with eBay, launches Zip Business
Zip announces partnership with eBay, launches Zip Business Marking the official launch of Zip Business, eBay’s 40,0001 Australian small and medium-sized businesses now have the opportunity to access working capital via the eBay marketplace. 40,000+ eBay sellers1 “This comes at a time when Australia’s
Slide 33: 3.3 Global Expansion
03 FY20 Growth Levers 3.3 Global Expansion Integrate PartPay, invest in New Markets and consolidate QuadPay 33
Slide 34: The global BNPL market is significant and Zip is uniquely positioned to capitalise on this opportunity
The global BNPL market is significant and Zip is uniquely positioned to capitalise on this opportunity ⠂ The global retail market is estimated at $22t8, with instalments estimated at $1.2t1 per annum. $5t3 ⠂ Many of Zip’s merchant partners have a global presence and are seeking a global BNPL payment
Slide 35: Investing in global merchant integrations
Investing in global merchant integrations ⠂ To support global merchants, Zip has developed a single interface, which gives merchants the ability to go anywhere Zip goes. ⠂ Currently provides access to five markets globally via a single merchant interface with integrations into Zip, QuadPay and Payflex
Slide 36: US business update
US business update ⠂ QuadPay had a strong start to FY21 with US$70m+ TTV in July, up 30% on the June quarter average. ⠂ Added 133k customers in July to surpass 2 million. 1m+ downloads with a 4.8 star app rating. Partnered with Mastercard to enable BNPL in Vyze’s ⠂ Signed multiple Internet Retail 10
Slide 37: US demonstrating strong growth into FY21
US demonstrating strong growth into FY21 QUADPAY CUSTOMER BASE GROWING STRONG REBOUND IN TTV GROWTH AT A MONTHLY CAGR OF 13%1 FOLLOWING THE ONSET OF COVID2 Customer Monthly TTV Base (#M) 2m (USD$M) 80m $70m 2.0 1.5 60m 1.0 40m covid risk tightening 0.5 20m 0.0 0 Jul 20 Jan 19 Apr 19 Jul 19 Oct 19 Ja
Slide 38: NZ performing well, UK set for launch and SA starting to accelerate
NZ performing well, UK set for launch and SA starting to accelerate NZ UK SA Payflex (25% share) Over 100% YoY TTV growth. Anticipated launch H1 FY21, following First BNPL instalment provider a pause due to Covid. Team building in a $67b2 market. Launched app, with instore underway. now driving a sig
Slide 39: Financial Results
Image to be sourced 03 Financial Results Image to be sourced
Slide 40: Financial dashboard
Financial dashboard Cash Earnings Before Tax, Depreciation and Amortisation (Cash EBTDA) as a percentage of average receivables: H1FY18 H2FY18 H1FY19 H2FY19 H1FY20 H2FY20 Revenue Yield1 17.0% 17.7% 17.6% 17.1% 16.4% 15.9% Cash Cost of Sales1,2 (13.2%) (9.7%) (8.5%) (8.0%) (8.0%) (7.9%) Cash Operatin
Slide 41: Credit performance
CREDIT PERFORMANCE1,3 Credit performance 4.0% Net Bad Debts Bad Debts Arrears 3.0% 2.52% • Bad debt write‑offs (net of recoveries) were 2.24% at Jun-20, 2.24% 2.0% compared with 1.63% at Jun-19, and remain well below management’s expectations of 2.5%-3%, and market 1.0% 1.33% comparisons. 0.0% • Arre
Slide 42: Funding update
Funding update FY20 FY19 $M $M • Launched the ZIp Master Trust in August 2019, the world’s first Facility Limits BNPL Master Trust program. The Trust provides the best structure to support Zip’s long-term growth ambitions. - Consumer Receivables 1,144.5 631.5 • The Trust allows Zip to issue new note
Slide 43: Income statement
Income statement FY20 $M FY19 $M Change % Portfolio Income 159.4 82.9 92% • Portfolio Income hit record levels, 92% increase on FY19. Cash Cost Of Sales2 (80. 0) (39.9) 101% • Cash Gross Profit of $79.4M, 85% increase on FY19. Cash Gross Profit 79.4 43.0 1 • Positive Cash EBTDA reported of $3.5M in FY
Slide 44: Adjusted Loss before Tax
Adjusted Loss before Tax FY20 $M Reported loss before tax adjusted for the following one-off items: Reported Loss before Tax (20.6) • Acquisition costs in relation to Spotcap, PartPay and QuadPay. Add back: • 100% amortisation of the PartPay brand on rebranding to Zip. Acquisition Costs 10.3 Amortisa
Slide 45: Cost Base
Cost Base FY20 $M FY19 $M Cash Cost of Sales 80.0 39.9 • Interest Costs reduced due to lower average rate across the % of Average Receivables 8.1% 8.3% portfolio including impact of lower BBSW, and proceeds from the capital raise used to fund receivables. Interest Costs 38.9 22.9 % of Average Receiv
Slide 46: Balance Sheet
FY20 FY19 $M $M Balance Sheet Cash and Cash Equivalents 32.7 12.6 Other Receivables 6.8 11.0 • Cash includes restricted cash of $8.4M at 30 June 2020 Term Deposit 1.5 1.2 ($6.4m at 30 Jun 2019). Unrestricted balance includes Customer Receivables 1,116.7 647.5 amounts remitted to Trusts the following
Slide 47: Cash Flows
FY20 FY19 $M $M Cash Flows Receipts from customers 160.5 83.7 Payments to suppliers and employees (99.3) (39.0) Interest received from financial institutions 0.1 0.2 • Generated positive Operating Cashflow of $14.6M in FY20 ($22.9 excluding acquisition costs) compared to $22.6M in FY19. Interest paid
Slide 48: FY21 Outlook
Image to be sourced 04 FY21 Outlook
Slide 49: Highly competitive and dynamic landscape with strong tailwinds driving BNPL adoption globally
Highly competitive and dynamic landscape with strong tailwinds driving BNPL adoption globally CREDIT CARDS FACING A SUSTAINED ECOMMERCE GROWTH IS ACCELERATING2 LARGE GLOBAL INSTALMENT MARKET DECLINE WITH DEBIT ON THE RISE1 Trillions of USD 60% $4.9t 1.2t $4.1t 55% $3.5t $2.8t 2x $2.3t 50% $1.8t GLOB
Slide 50: Commitment to developing a resilient and sustainable global growth business
Commitment to developing a resilient and sustainable global growth business Our Our Our People Customers Governance Diverse and inclusive workforce Financial responsibility Board independence Open, fair, and inclusive culture, led from Being a responsible credit provider since Transitioning to a maj
Slide 51: Goals for FY21
Goals for FY21 Maintain a strong core business in ANZ, whilst investing for growth globally and capitalising on the present market opportunity. 1 2 3 4 Payment acceptance App engagement Global expansion Zip Business ➔ Deliver on Zip’s mission to be the ➔ Continue to invest in one of ➔ Post completio
Slide 52: Compelling Investment Case
Compelling Investment Case MASSIVE GLOBAL OPPORTUNITY: Market leader in a fast growing $1.2t1 global instalment segment. Immediate access to ANZ, UK, US and SA geographies with a portable instalment technology platform. NETWORK-DRIVEN BUSINESS: $2.3b² in annualised transaction volume, 2.1m customers
Slide 53: Thank you
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