Zip Co Limited

Welcome to the ZIPP Half Year 2022 Financial Results Call and Webcast. Hosting the call today from ZIPP will be our management team. Today's call is being recorded. At this time, all participants have been placed in a listen-only mode, and the floor will be open for your questions following the prepared remarks. If you would like to ask a question at that time, please press star 1 on your telephone keypad. If at any point your question has been answered, you may remove yourself from the queue by pressing the pound key. Lastly, if you should need any assistance from an operator, please press star zero. It is now my pleasure to turn the floor over to Vivian Lee, Director of Investor Relations for Zip. You may begin.

Thank you, Operator, and good morning, everyone. To open the call, I would like to acknowledge the Gadigal of the AOR Nation. the traditional custodians of this land and pay my respects to their elders past, present and emerging. Thank you for joining us today for ZIP's first half 22 earnings call, during which we will also discuss ZIP's proposed acquisitions, ASX lease of Seville and capital raise of up to $199 million. By now you would have seen the joint ASX announcement by ZIP and Seville regarding the transaction, as well as an accompanying investor presentation. This half-year results announcement and presentation can also be found in the investor relations section of our website. Before we begin, let me remind everyone that today's discussion contains forward-looking statements based on the environment as we currently see it. And as such, it does include risks and uncertainties. There are also certain assumptions and qualifications that underpin forward-looking statements. To further detail, we refer you to the disclaimers and key risk sections in the ASS announcement and investment presentation we released today to understand our assumptions, qualifications and details of the specific factors that could cause actual results to differ materially. We'll start this call with some prepared remarks and then open the call to respond to questions. An audio replay will also be available on our website after the call. I'm joined today by Zip Co-Founder and Global CEO, Larry Diamond, Zip Co-Founder and Global COO, Peter Gray, and Zip CFO, Martian Brooke. Also joining us is Federal Co-Founder, Executive Chairman and CEO, Charlie Uacom. With that, I'll now hand over the call to Larry.

Thanks, Vivian, and welcome to all our investors joining today's call. It is indeed an exciting and transformational day for us at Zip. We are pleased to announce that we are entering into a definitive merger agreement to acquire Sezzle in an Allscript transaction. I'm also proud to welcome to the call Charlie, co-founder of Sezzle and executive chairman and CEO. Peter and I have known Charlie for some time and have been incredibly impressed by what he and his team have achieved in America in the FinTech sector. Founder-led businesses have a unique character to them and an incredible drive, and I'm thrilled to welcome Charlie to Zip. It's amazing to see how far we've come as a company since founding Zip just nine years ago. As you know, we've been on a mission to be the first payment choice everywhere and every day, and to create a world where people can live fearlessly today, knowing they're in control of tomorrow. And as a leader in the Find Our Planet category, we recognise the importance of not simply giving people access to money, but rather giving people the ability to take control of their financial future. And in Sizzle, we have found an ideal partner who shares our vision and all-star, and we believe there is very strong cultural fit between our two companies. Before we talk about the transaction, I also wanted to just acknowledge our concerns for the people of Ukraine, including our Zip team on the ground. We pray those who yield power in this deeply horrifying situation and hear our call for peace. Moving on to the positive transaction, we firmly believe that consolidation makes sense and that Zip and Sezzle are in fact stronger together. Despite the near-term market and macro headwinds, we maintain our conviction that the long-term fundamentals of the BNPL sector remain sound. Customer trends are shifting away from the unfair credit and towards more responsible and fairer alternatives, whilst merchants continue to see the immense benefits of including BNPL at checkout, driving new customer acquisition and driving engagement. We are still very early on in the buy now, pay later journey, evidenced by the fact that only 2% of checkout volumes go through this method today in the US, with growth expected to continue at pace. The internet is forecasted to be the fastest growing e-commerce payment method over the next two years, with the US representing the lion's share. We also acknowledge the recent and aggressive shift in the stock market and also the increasing importance for FinTech growth businesses to deliver sustainable growth. And we believe that Sezzle certainly helps us accelerate this objective. And for all these reasons, we believe that now is the time. This transaction is a continuation of our growth story which began in Australia in 2013 and led us to the USA via our acquisition of QuadPay in 2020. We are now doubling down our efforts in the US and remaining true to our coalition of founders approach to scaling across global markets with local expertise. Between Zip and Fezzle, we have strong alignment on vision, strategy, mission, people, and brand, and we couldn't be more excited to be bringing our combined offer to more consumers and more merchants around the world. I'd like to walk you through the strategic rationale behind this transformational acquisition on slide two. First and foremost, this acquisition will significantly enhance ZIP scale and product offering with the capabilities to accelerate in the U.S. The combined business will have over 13 million customers and 125,000 merchants, with more than 60% of the business weighted towards the U.S. Second, we expect to realize meaningful customer benefits through unlocking buy-now-pay-latter anywhere to Sizzle customers, as well as providing ZIP customers access to Sizzle's expansive U.S. merchant network, accelerating our flywheel. Third, we believe this is a great opportunity to bring together two highly complementary enterprise as well as small and medium-sized business merchant networks with a strengthened set of capabilities to win holistically across a diverse range of verticals. Fourth, we believe this deal should support material cost synergies and provide healthy opportunities for improved revenue and unit economics while supporting this path to profitability. We estimate up to $130 million in annual EBITDA benefits from FY24 from the combined group. And the Zip and Sizzle team have done a lot of work in identifying and validating these synergies and assumptions. And finally, we believe we have an integration path to deliver the targeted new-term financial benefits to Zip, including accretion and balance sheet runway to sustainable growth and synergy realisation. All in all, leading to what we believe to be real potential to create significant value for both Zip and Sezzle stockholders. And we'll get into more of these details in a second. Moving over onto slides three and four, we'll just quickly go through the key terms of the proposed transaction. We've structured this deal as an all-script consideration. with Zip shareholders to own approximately 78% and Sezzle stockholders to own approximately 22% of the issued shares post-transaction. This approach was taken given the conviction of both Zip and Sezzle management, which are large shareholders of the business, in the growth and the synergy story. Sezzle shareholders will receive 0.98 ZIP shares for every Sezzle share, with the implied value for Sezzle $491 million, which was a 22% premium to the last close. The deal is expected to be revenue and EBITDA-creative on a per-share basis, including the full impact of synergies in FY24. As well, together with this transaction, we are conducting an equity raise of up to $199 million, including a fully underwritten institutional placement of $149 million, as well as a non-underwritten share purchase plan to raise up to $50 million. We expect this capital raising to help strengthen our balance sheet and provide sufficient runways to execute on the targeted transaction synergies. And Pete will get into the specifics of this later on in the presentation. As part of the proposed transaction, we are also establishing an ADR program with these securities, the ADR Level 3, to be listed on a US exchange as a closing condition. And as Zip will have undertaken this process as part of the transaction, this provides Zip with a pathway to explore a potential US listing in the future, as well as access to new pools of capital. At the close of the proposed transaction, Charlie, I'm excited to say, will be joining our expanded board of directors, as well as taking on the role of President and CEO of the Americas. And Paul Paredes will join our US leadership team. Given their founder background and established successes to date, I know they will be relentless in driving sustainable growth in these key geographies. And finally, we believe the transaction to complete approximately around the end of the third quarter this calendar year. So a very exciting transaction. And with that, I'd like to hand over to Charlie to provide you an overview of Sezzle and why he's here today. Thanks.