Slide 1: FY18 Results Investor Presentation
FY18 Results Investor Presentation Zip Co Ltd (ASX: Z1P) August 2018
Slide 2: Problem: The credit card model is broken
Problem The credit card model is broken.
Slide 3: Our Purpose
Our Purpose Reimagining payments. Improving every day.
Slide 4: Our Mission
Our Mission We create simple, fair and transparent, credit and payment solutions that improve lives every day.
Slide 5: Highlights
Highlights Company Operations Financials Outlook Year in Review Key Metrics Financial Dashboard Strategic Focus
Slide 6: Key Highlights FY18
Key Highlights FY18 1. Circa 1.3 million consumers across Zip and Pocketbook. 2. Run-rate annualised transaction volume as at 30 June 2018. 7
Slide 7: Year in Review
Year in Review We achieved the goals we set for FY18. 1. Operating Costs per definition on Financial Dashboard slide. 8
Slide 8: FY18 Key Metrics
FY18 Key Metrics $40.4m $316.7m $17.0m Revenue1 $152.0m Receivables2 ↑138% ↑108% $40.4m $316.7m FY17 FY18 FY17 FY18 $542.9m 2.61% $230.6m Transaction 1.28% Net Bad Debts3 Volume ↑135% ↑1.33% $542.9m 2.61% FY17 FY18 FY17 FY18 738.1k 10.6k 300.9k Consumers 4.4k Retail Partners ↑145% ↑141% 738.1k 10.6k
Slide 9: Financial Dashboard
Financial Dashboard Cash Earnings Before Tax, Depreciation and Amortisation (Cash EBTDA) as a yield of average receivables. 1. All figures expressed as a percentage of half year average receivables. All figures are on an annualised basis. 2. Cash Cost of Sales includes interest, bank fees, data cost
Slide 10: Cash Flow Breakeven Milestone
Cash Flow Breakeven Milestone Zip achieved cash flow breakeven on a monthly basis in Q4 2018, including bad debt write-offs. Reported Cash Flow from Operations Quarterly Cash Operating Margin of $1.4m in FY18, jumping to $3.2m in Q4 2018. 20.0% Clear demonstration of operating 10.0% leverage as volu
Slide 11: We're Just Getting Started
We’re Just Getting Started We are currently processing annualised transaction volume of $750m+, less than 0.1% of the market. There is an estimated $1 trillion+ in annual payment volume in Australia. Zip is uniquely placed to penetrate across all verticals given its diverse model. Increasing adoptio
Slide 12: Winning Major Partners
Winning Major Partners Zip continues to add significantly larger enterprise retailers to its platform. Many large retailers offer multiple alternate payment methods at checkout, as they value 2018 the right complimentary “mix” of options to drive conversion. The sales pipeline continues to expand wi
Slide 13: Key Opportunities FY19 and Beyond
Key Opportunities FY19 and Beyond Supercharge growth to deliver $1.0 billion+ in annual transaction volume. 14
Slide 14: Our Products
Highlights Company Operations Financials Outlook Our Products Business Model Zip Difference Responsibility
Slide 15: Our Great Products
Our Great Products Zip offers simple and convenient financial products, with a strong focus on financial wellbeing. Credit and Payments Budgeting and Saving 16
Slide 16: Differentiated Business Model
Differentiated Business Model Zip issues credit (at the point-of-sale) and processes payments, instore and online, in a ‘closed loop’ network. We build direct relationships with both consumers and retail partners. + = 17
Slide 17: The Zip Difference
The Zip Difference Zip’s model is unique in market as it stands alongside credit cards and other Pay Later peers. 18
Slide 18: Responsibility and Transparency
Responsibility and Transparency Zip prides itself on providing fair and transparent financial products, aligned to our core values. In recent months, there has been increased publicity surrounding credit cards and the Pay Later industry. Right from the outset, Zip built its product on a foundation o
Slide 19: Retail Partners
Highlights Company Operations Financials Outlook Retail Partners Consumers Product Update New Brand Pocketbook
Slide 20: Expanding Retailer Base
Expanding Retailer Base Over 10,000 places for consumers to shop – in its target categories, Zip has some of the biggest players. Home Improvement (24%) Auto (4%) Travel & Entertainment (3%) Retail (63%) Transaction Volume by Category1 Health and Wellness (6%) 1. Chart illustrative of Zip’s key segm
Slide 21: Successful Co-Marketing Campaigns
Successful Co-Marketing Campaigns We collaborate with our retail partners to help drive both customer acquisition and retransaction behaviour. EOFY saw up to 100%+ uplift for Partner partners launches and promos New Social Inclusion in-app campaigns in partner features for to increase TVCs partners
Slide 22: Growing Consumer Base
Growing Consumer Base Our consumer numbers and engagement metrics continue to grow. Driven by a range of initiatives delivered in FY18: • Expanded Zip network Consumers 738.1k • Targeted marketing campaigns 529.3k 300.9k • New brand launched in June 119.1k • Product feature releases 1H17 2H17 1H18 2
Slide 23: High Quality Consumer Base, Strong Demand for Interest Free
High Quality Consumer Base, Strong Demand for Interest Free Alternate payments appeal to a diverse audience. Strong appeal to millennials: • 60% below 35 • Median age 31 Large share of home ownership with proven credit history. Home owners see Zip as a ‘better deal’. Note: Residential and employment
Slide 24: New Store Directory
New Store Directory An easier way for consumers to find the stores and products they need and want. 2.4M user sessions per month across our websites 25
Slide 25: New Native App
New Native App Now live in the App and Play Stores as of August 2018. Consumers can browse, shop and manage their account from one, convenient place. Captive platform for promoting retailer offers and discounts. Scannable barcodes and QR codes will improve the instore experience. 26
Slide 26: New Product Feature – Pay Bills with Zip
New Product Feature – Pay Bills with Zip New, innovative product feature released, giving consumers more ways to use their Zip account. In March, Zip ran a beta trial of a new feature, Pay Bills With Zip: • Consumers were able to make BPAY payments from their Zip Money account with 3 months interest
Slide 27: A New Brand – Architecture
A New Brand – Architecture Our new brand clearly unifies Zip Pay and Zip money as two distinct accounts under one master brand. 28
Slide 28: A New Brand – Visual Design and Voice
A New Brand – Visual Design and Voice We’re fresh, bold and dynamic. 29
Slide 29: A New Brand – The 'Own it' Platform
A New Brand – The ‘Own it’ Platform We launched ‘Own it’ as a brand platform – a powerful, evocative phrase that sums up how the brand empowers both shoppers and sellers. It also speaks to how seriously Zip owns its responsibilities and integrity. 30
Slide 30: Pocketbook FY18 Highlights
Pocketbook FY18 Highlights 540,000 users, 30 institutions. 500m+ transactions, totaling ~$200b. Australian first open banking integration 3m+ bill notifications, users saved $30m+. (Macquarie Bank). 31
Slide 31: Pocketbook's Growing Features
Pocketbook’s Growing Features Evolving capabilities continue to set the bar by helping users track, budget and save. Single view of all bank accounts “Safely Spend” budgeting tool Smart notifications Receipt capture Bills and Income scheduling Home loan insights Separate apps for tax 32
Slide 32: Financials
Highlights Company Operations Financials Outlook Receivables Credit Performance Funding Update Credit Performance Financial Performance Financial Performance
Slide 33: Strong Credit Performance
Strong Credit Performance • Credit performance significantly better than industry benchmarks, Credit Performance1 and in line with management’s expectations. 4.00% 3.50% • Bad debt recoveries improving bottom line. 3.00% 2.62% 2.69% 2.75% 2.70% 2.50% • Application flow re-designed to optimise decisi
Slide 34: Funding Update
Funding Update • Completed the refinancing of all receivables out of expensive legacy Jun 18 Jun 17 $M $M funding program during the 1H FY18. Facility Size (Class A and B) • Existing trust structure provides flexibility at a reduced cost. 2017-1 Trust 360.0 240.0 • Total facility size to increase to
Slide 35: Income Statement
Income Statement FY18 FY17 Change • Portfolio Income hit record levels, 140% increase on FY17. $M $M % • Cash EBTDA1 ($1.2m) in 2H18, compared to ($7.6m) in 1H18. Portfolio Income 39.3 16.4 140% • Demonstrating operating leverage in the cost base half on half, as Other Income 1.1 0.6 83% growth in i
Slide 36: Cost Base
Cost Base • Interest Costs reduction reflects the exiting of expensive legacy funding FY18 FY17 $M $M facilities. • Bank Fees and Data Costs reducing per unit costs as business scales. Cash Cost of Sales 25.2 14.7 % of Average Receivables 11.1% 16.4% • Net Bad Debts Written-Off of 2.61% (of the clos
Slide 37: Balance Sheet
Balance Sheet • Restricted Cash of $8.7m at Jun 18 ($12.6m at 30 Jun 17). Jun 18 Jun 17 $M $M • 30 June being a Saturday resulted in an increase in the level of Other Cash and Cash Equivalents 12.7 19.2 Receivables ($4.9m in customer repayments) and Other Payables ($5.0m Other Receivables 6.3 0.4 in
Slide 38: Cash Flows
Cash Flows • Generated positive Operating Cashflow for the first time. FY18 FY17 $M $M • Received 2016 and 2017 R&D Tax Incentives of $1.2m. Future incentives Receipts from Customers 39.6 16.8 will be received by way of reduced tax payments. Payments to Suppliers and Employees (26.5) (14.9) Interest
Slide 39: Outlook
Highlights Company Operations Financials Outlook
Slide 40: Outlook for FY19
Outlook for FY19 Key priorities for the Company in FY19: 1 Targets 2 Increase consumer engagement • Drive towards $1 billion+ in annual transaction • Rollout native app and drive significant volume. monthly active usage. • 1 million+ consumers with an active Zip account. • Complete the rollout of th
Slide 41: Summary
Summary FY18 was a record year for Zip as all parts of the business came together and delivered. • Strong FY18 performance underpinned by record growth across all key metrics – transaction volume, consumers and retail partners. • Large and growing Australian consumer base, now at 730,000 supported b
Slide 42: Disclaimer and Important Notice
Disclaimer and Important Notice The information contained in this presentation has been prepared by Zip Co Limited ACN 139 546 428 (Company).This presentation is not an offer, invitation, solicitation or other recommendation with respect to the subscription for, purchase or sale of any securities in
Slide 43: Thank You
Thank You