Zip Co Limited

Thanks operator, good morning and thanks everyone for joining us for the presentation of the FY25 results. To open I'd like to begin by acknowledging the traditional owners of the land on which we meet today, the Gadigal of the Eora Nation and pay our respects to elders past and present. This conference is also being webcast and will be available on ZIP's website. I'm joined today by ZIP's Group CEO and Managing Director Cynthia Scott, Group CFO Gordon Bell and US CEO Joe Heck. Cynthia will present our FY25 group highlights and ANZ business performance. Joe will then cover the US business, and Gordon will provide details of the financial results. Cynthia will then conclude with remarks regarding our FY26 strategy and outlook, and the presentation will be followed by Q&A. With that, I'll now hand over the call to Cynthia.

Thanks Vivienne, and good morning everyone. On behalf of the Zip team, we're very pleased to be reporting the strongest financial performance in Zip's history. Disciplined execution, customer focus, and significant operating leverage underpinned cash earnings growth of 147%, and positions us strongly to continue to deliver long-term shareholder value. Our group highlights are set out on slides four and five. We achieved several milestones this year, including delivering over $1 billion in total income. From a regional perspective, our US business delivered an outstanding performance, and our ANZ business returned to TTV growth. Customer engagement strengthened, with average spend and transactions per customer increasing across our 6.3 million customers. This year, we safely processed over 93 million transactions, valued at 13.1 billion, up 30.3%. Our revenue margin was 8.3%, reflecting the increased contribution from the US, now representing 71% of TTV. Turning to slide five. Significant momentum in the business and strong credit outcomes underpinned cash earnings increasing 147% to $170.3 million. Cash gross profit was up 34% to $509 million, supported by net bad debts as a percentage of TTV improving 14 basis points. with good credit performance across both markets. Our focus on cost discipline while driving significant top line growth resulted in our operating margin almost doubling to 15.8%. Our achievements this year have strengthened our unique competitive advantages as shown on slide six. We have two regional growth engines underpinning sustainable profitable growth at a group level. The charts demonstrate the accelerated momentum experienced during the year across key performance metrics, resulting in the delivery of a very strong second half result. Turning now to slide seven. Our cash earnings performance was driven by our US business, which delivered over 100% growth and exceeded US $100 million in cash earnings for the first time. Slide eight details how we've delivered on our FY25 strategic priorities of growth and engagement, product innovation, and operational excellence. Starting on the left, we saw increased customer engagement in both markets, with US transaction frequency reaching double digits, reflecting investment in customer experience, strategic marketing initiatives, and the addition of new merchants across targeted verticals. We continued to innovate new products, which we'll cover in the regional updates. In delivering operational excellence, we made disciplined investments in core systems, processes, and people, and undertook initiatives to transform our balance sheet, which Gordon will provide further detail on. Turning to slide nine, we've continued to deliver against our ESG focus areas. We achieved strong customer NPS scores of 68 and 57 in the US and ANZ respectively, reflecting the value our customers place on ZIP and our commitment to delivering exceptional customer experiences. Our employee engagement score strengthened to 81% and female representation across the group increased to 44%. Pleasingly, we now have 50-50 gender representation across our board and our group executive team. Finally, we continue to measure our scope one, two, and three emissions with the aim to achieve carbon neutrality. Slide 10 provides a snapshot of our key group performance metrics, demonstrating the strength of the results delivered in FY25. Moving to the next slide. Consistent with our objective long-term shareholder value, we're considering a dual listing on the NASDAQ, supporting our significant growth opportunity and growing investor interest in the US. The potential dual listing remains subject to ZIP Board approval and the completion of a number of required processes, including obtaining regulatory approvals in the US. We'll update the market in due course. Before I cover ANZ performance, I'd like to acknowledge and thank Zip co-founder Peter Gray for his significant contributions, most recently as ANZ CEO. As foreshadowed at our half-year results, Pete's moved into a newly created leadership role at Zip as head of strategic growth, with a focus on accelerating our growth agenda across both markets. I'd also like to formally welcome our new ANZ CEO, Soraya Alali, to join us in May. Soraya brings over 20 years' experience in the financial services sector. with a focus on driving scalable growth, digital transformation, and enhanced customer experiences. Turning now to ANZ performance on slide 13. Following a period of optimizing margins in response to the external environment, the ANZ business returned to TTV growth. TTV was up 5.5% for the year and 13.2% in the second half, while the business delivered strong credit outcomes accelerated product innovation, and invested in platforms to scale. Growth was driven by increased transaction frequency and by Zip Plus, which was expanded to new customers at higher limits of up to $8,000. Zip ANZ collaborated with Google on the rollout of new Google Wallet features to enable more seamless and secure payment experiences across Chrome Autofill, Google Pay Online, and Google Services. We also added several large enterprise merchants across Australia and New Zealand in targeted verticals such as travel and health, including Cathay Pacific and National Dental Plant. Turning to slide 14 for more detail on the performance of the Australian loan book. With our account-based product construct in Australia, yield on the loan book and excess spread is the best way to think about the performance of the business. Changes in product mix, lower funding costs and improved credit outcomes delivered a 91 basis point expansion in portfolio yield and a 331 basis point expansion in excess spread. Pleasingly, arrears rates and net bad debts improved in response to management actions and risk settings, positioning the portfolio for continued profitable growth. After returning to quarter-on-quarter growth in Q4, we expect receivables to return to modest growth in the first half of FY26, which will support revenue conversion. Slide 15 sets out our Australian products and their relative contribution to the receivables portfolio. We've continued to innovate to meet our customers' evolving needs, including launching two new products within the past 18 months. ZipPlus continues to attract new customers and generate strong engagement and unit economics, with receivables now accounting for around 12% of the Australian book. We launched our personal loan product in January And Zip customers are using the flexible finance for weddings, holidays and renovations. In terms of current customer spending trends, we've seen continued growth in online marketplaces and non-discretionary categories such as grocery and education. Our more mature customers continue to spend more than other cohorts on a relative basis, particularly in discretionary categories such as travel, entertainment and restaurants. Slide 16 sets out several strategic initiatives that the business delivered on in FY25 to support future growth. During the year, we invested in strengthening our core risk management and cyber platforms, and developing AI-powered capabilities. In Australia, we rolled out an AI-powered customer chatbot, Ziggy, which will facilitate more personalized customer interactions in FY26. Turning to slide 17. With a highly engaged customer base representing approximately 10% of the Australian adult population and products well suited to the current operating environment, we're uniquely placed to deliver sustainable, profitable growth. In FY26, we're focusing on driving new customer acquisition and deepening customer engagement, including through high-value merchant and partner channels, as well as delivering scalability through simplification and automation, expanding digital self-service, and deploying AI. We will continue to explore capital-like propositions that complement our existing product suite through our innovation arm, Fearless Frontiers, which I'll provide more detail on later. I'll now hand over to Joe to talk about our US results in more detail.

Thanks, Cynthia. I'm incredibly proud of the results the team has delivered in the past year since I joined as US CEO. Our laser focus remains on keeping our customers at the center of everything we do, and this is reflected by our high customer NPS of 68, a great achievement. Turning to slide 19, the U.S. business delivered an outstanding performance this year. Cash earnings more than doubled, underpinned by TTV and revenue increasing 41.6% and 43.7% respectively, which included a very strong fourth quarter performance. Topline growth was driven from new and existing customers, as we recorded active customer growth for the first time since FY22. With a simplified and differentiated merchant value proposition, we added several large merchants, such as Heritage Grocers, GameStop, Take5 Oil Change, and Major League Baseball Ticketing and Shop. Channel partnerships and embedded finance continued to build momentum. We've scaled volumes and merchants through Google Pay, and in August 2025, we also integrated with Autofill on Google Chrome, allowing customers to use Zip without switching apps or reentering payment details. Our partnership with Stripe also went live with general availability earlier this month. We continue to enhance our consumer and merchant payment options, scaling Pay in 8 as an expansion of our Pay in Z platform, offering customers increased flexibility and control over their payments. Pay in 8 volumes increased two and a half times, half on half, after being made available to all eligible customers in the app in January, and represented 18% of TTV in the fourth quarter. Turning to slide 20, the US BNPL market has grown 6x in the last five years, with companies like Zip playing a critical role in this transformation. The medium-term opportunity remains compelling, with BNPL representing less than 2% of the $12.8 trillion U.S. payments market, or only 6% of e-commerce spend. This is well below usage rates in markets such as Australia at 15%, and some European countries at over 20%. In-store also remains a major growth opportunity. In FY25, in-store TTV grew 65% year-on-year and made up over 23% of total TTV. Slide 21 shows U.S. active customer base, which grew 11% year-on-year, including an increase in second half versus first half for the first time since FY21. This was a strong result, highlighting our effective credit decisioning and in the face of typical seasonality and macro uncertainty. This growth has been driven by our ability to deliver increased customer engagement and improve dormancy. Monthly transacting users increased circa 20% on average in FY25, indicating strong momentum as we begin FY26. Slide 22 demonstrates how customer engagement has strengthened. Transactions and TTV per active customer increased 62% and 76% respectively over the last two years. In addition, continued improvements in our underwriting capabilities have accelerated our ability to increase spending power for newer cohorts over time. The July 2024 customer cohort experienced a 58% increase in average spend over the last 12 months, and we are seeing continued momentum, with the most recent January 2025 customer cohort outperforming that vintage over its first six months. We have achieved these outcomes by identifying and acquiring high-quality potential customers, investing in personalization and features to drive customer engagement through the app and physical card, and providing spending power increases based on positive repayment behavior. We expect customer engagement to continue to deepen as the collective impact of these initiatives compound, driving increased transaction frequency and as we capture a greater share of our customers' wallets. Moving to slide 23, we serve a unique and resilient customer base, being the everyday American, of which we estimate there to be over 100 million nationally. These Americans have been underestimated and underserved by traditional financial services providers. Today, the majority of our TTV is derived from non-discretionary categories with an average order value of $133 U.S., And our customers are increasingly using our product for non-discretionary spends, such as grocery, health, and education, as seen in the increased spend in these segments. At Zip, we focus on matching customers with appropriate spending power, providing financial flexibility, and giving customers confidence in their financial capability. The fact that over 98% of our transactions are repaid in full reflects the role Zip plays as a cash flow smoothing tool for our customers. Slide 24 covers U.S. credit performance on a cohort basis. As you can see on the chart, our U.S. business continued to deliver loss rates within our target range of 1.5% to 2% of TTV, all while achieving over 40% year-on-year growth in TTV and revenue. These results reinforced the strength and agility of our credit decisioning platform and our ability to maintain strong unit economics during a period of macro uncertainty. and we remain well-placed to perform in a range of economic scenarios given our short-duration portfolio and the ability to swiftly adjust our risk settings. Losses remain within our target range even when accounting for seasonality. With respect to our reporting, historically, a 120-day delinquency as a percentage of cohort TTV has served as a reliable indicator of credit losses within our Pay in 4 offering. However, this metric does not completely reflect the performance of Pay in 8, as it is not yet fully seasoned. To accurately reflect the increased diversification of our portfolio, we will review the reporting of U.S. bad debts. Turning now to slide 25. On the back of an outstanding year, a particularly strong fourth quarter, we are well-placed to continue delivering strong growth with revised value propositions and a highly engaged customer base. We're excited to expand our Pay-in-Z platform with the rollout of Pay-in-2 functionality, providing greater flexibility with smaller ticket items and everyday expenses such as groceries and utilities. We're also exploring opportunities to expand our revenue streams in a way that provides greater utility for our customers, including Money Coach, an AI-powered guided cash flow management solution. We will also continue to drive our flywheel through accelerating customer and merchant growth through channel partners and embedded finance. With that, I will now hand over to Gordon to cover our financial performance.

Thank you, Joe, and good morning to all. I'll start on slide 27. In a challenging macroeconomic environment, we've continued to deliver significant growth and improved margins. Our revenue margin cash net transaction margin, operating margin, and cash EBTDA are all well within the range of our two-year targets originally set in August 2024. This is a testament to the strategic focus, growth mindset, and disciplined execution across the entire organization. The growth in our U.S. business and group operating margin are the key highlights for the year. We've continued to tightly manage costs while investing more to grow our businesses. We are confident in our approach in delivering these outstanding annual results, and they position us well for future growth opportunities. Moving to the income statement on slide 28. As Cynthia highlighted earlier, I'm pleased to report ZIP's record full-year cash EBTDA result of 170.3 million for the group, which is up 147% year-on-year. We achieved a significant milestone with total income reaching over $1 billion up 23.5% from FY24. Cash growth profit increased 34% compared to the prior year, reaching 509 million. The result reflects disciplined management of our bad debt losses and refinancing facilities at improved margins. We invested in business growth and innovation in a disciplined manner, with cost growth at 10.2% year on year. For the full year, ZIP delivered a statutory net profit after tax of $79.9 million and an underlying net profit after tax of $49.7 million after adjusting for one-off items. Further detail is provided in the appendix. Slide 29 covers our unit economics. Cash gross profit increased 34% year-on-year and cash NTM increased by 11 basis points for the year. TTV surpassed $13 billion, fueled by a record performance in the U.S. The increasing contribution of the U.S. business has resulted in a decline in our revenue margin, given that our U.S. product margin is approximately 7%, compared to higher margin products in the Australian New Zealand business. Interest expense as a percentage of TTV was at 1.6%, an improvement of 35 basis points year-on-year, despite higher notional funding facilities increasing as a result of our receivables growth. Net bad debts written off as a percentage of TTV was at 1.5%, the lowest in the last two years. This reflects our disciplined approach to credit settings and our portfolio management. The performance for all aspects of unit economics contributed the 11 basis points strengthening in our net cash transaction margin of 3.9%. Moving to operating efficiency on slide 30. Cash OPEX spend in FY25 reflects the balance spend on marketing initiatives, product innovation, which delivers increased engagement, as well as increased spend in people, processes, and information technology to support the business as it scales. Marketing spend continues to be a priority across both markets to deepen customer engagement. we continue to target total marketing spend being at or below 0.5% of TTV, reflecting the maturity of our businesses. Other operating costs decreased mainly due to the early extinguishment of the corporate debt facility in July 2024. Our deliberate prioritization of cost discipline over the last two years has contributed to the operating margin doubling from 7.9% in FY24 to 15.8% in FY25. Going forward, we'll be using operating margin to manage the cost investment balance as opposed to a year-on-year percentage and or a specific dollar amount. Going forward, on a like-for-like basis, we'll be reviewing intra-spend year-on-year to ensure we are taking advantage of attractive opportunities and supporting our growing businesses. Additionally, in FY26, we will be investing in our future through our fearless frontiers innovation arm and the work on a potential US listing. All these costs will be reported externally in the corporate segment for transparency to the market. Turning to slide 31. Operating margin, where the cost of sales improvement and discipline on cash OPEX drove a 787 basis point improvement in our operating margin. With a very strong cost of sales result in FY25. Outcomes from our credit management provided a year-on-year improvement, with losses at 1.52% of TTV, well down on the prior year. The outstanding work on refinancing funding facilities in Australia was evident, with the outcome being material saving and interest costs. The cash OPEX benefit outlined earlier was also a standout result. Overall, we are targeting a further improvement in operating margin FY26, primarily through the flow-through benefits of funding initiatives and supported by continued credit management and cost discipline. Turning to slide 32, the next few slides starting with slide 32 cover the group's liquidity, funding, and capital management. Slide 32 provides a breakdown of our cash position, along with the year-on-year movement in available cash. In the chart on the left-hand side, you can see the breakdown of ZIP's 391.6 million total cash position. After we allow for cash held at balance sheet date that was unavailable, and including cash that may be withdrawn from funding vehicles, ZIP had 137.8 million of available cash and liquidity as at 30 June 2025. Pleasingly, operating cash flows, comprising cash EBCDA, CapEx, working capital, and funding requirements, contributed a positive 30.5 million of cash inflows. This was driven by the group's operating result, offset by floats and working capital required for TTV growth, especially in the US. Non-operating cash flows of $26.9 million includes the $50.1 million proceeds from the share purchase plan in late 2024, and this was offset by the equity buyback during the year. Collectively, these actions delivered a $57.4 million improvement in our available cash balance since June last year, further strengthening our balance sheet. As at 31 July 2025, available cash increased to $230.8 million as a result of U.S. funding enhancements, which I'll cover next. Slide 33 outlines the financing facilities in place for ZIPS receivables and the headroom for future growth. As of 30 June 2025, Zip had no corporate debt. Zip is committed to preserving our balance sheet strength to support our existing businesses and future opportunities. During the year, we executed approximately $2 billion of funding transactions, improved our margins, extended our maturity profile, and expanded our investor base. In Australia, our strong corporate performance and favourable market conditions have supported new facilities at lower margins. In the US, during the year, we upsized our facility to $300 million to add capacity for growth. As at 30 June, we had facility headroom of $509 million, providing capacity and opportunity to amplify ZIP's long-term value. Slide 34 outlines various funding initiatives. These will diversify our funding, improve tenor, and improve our weighted average margins. Zip has and will continue to successfully build a strong and diversified funding portfolio, strengthen our balance sheet and ensure the business has ample capacity for growth. In May 25, we established a new $400 million warehouse facility in Australia with a new funding partner for a five-year term, which has extended the tenor of our funding program and reduced upcoming refinancing risk. On 10 July 2025, we settled a new $300 million ABS bond issue with a weighted average margin of 1.79%, materially lower than the 2.13% we achieved on the previous deal in September last year. Both of these deals set us up well for refinancings in FY26. In the US in July, we added up to our capacity with an increase to our short-term funding facility with our existing partner. This provides an uplift in the flexibility and capacity leading into Q2 at reduced cost of funds. We are also in advanced stages of establishing a new warehouse in the US, our second in country, which will deliver enhanced capacity from new sources at improved economics. We are targeting this for closure in October. These initiatives reflect ZIP's appetite to continue to build a more resilient, efficient, and globally competitive funding platform to strengthen and support our growth opportunities. Slide 35 outlines our capital management framework, which guides the allocation of financial resources. We aim to accomplish the optimal balance of investments that maintain a resilient balance sheet, enhance our competitive position, and deliver long-term value to maximize shareholder return. In April this year, we successfully launched an on-market share buyback, with 14.8 million shares purchased for $29.8 million today. Following our FY25 results, ZIP intends to neutralize the impact of share-based incentive programs by funding the employee share trust to purchase shares on market. Looking ahead, we'll continue to prioritize preserving a strong balance sheet to support long-term growth and the ability to pursue attractive opportunities as they arise. Our investment approach will continue to be guided through a lens on risk, expected returns, and strategic alignment. I'll hand back to Cynthia to cover the group's strategy and our outlook.

Thanks, Gordon. Before I cover our FY26 priorities and outlook, slide 37 provides useful context on the journey ZIP's been on over the past few years. After strengthening ZIP's foundations, and delivering group profitability, FY25 has been a year of preparing Zips for the next horizon of significant growth. Moving to slide 38. In FY25, we refreshed our mission and purpose to better reflect our future opportunities. We're committed to delivering on our purpose of unlocking financial potential together and are aligned on our mission to bring exceptional experiences, innovation and partnership to every financial journey. Slide 39 sets out our FY26 strategic priorities, which are an evolution of the priorities we delivered in FY25. We will continue to do more for our customers, enhancing our existing propositions and leveraging our channel partnerships to allow our customers to shop seamlessly everywhere. Innovation is at the core of our business and will increasingly deploy AI-powered products and experiences for Zip customers. And as we continue to scale, We'll focus on optimizing our capital structure and ensuring our core systems and processes continue to support future growth efficiently. Turning to slide 40. While we've used machine learning since inception, through FY25 we explored opportunities to leverage generative AI across the group. We've equipped all employees with GenAI tools, our engineers are enabled with AI augmented developer tools, and we've automated a range of business processes, including merchant risk accreditation and improved customer self-service. In FY26 and beyond, we'll develop a sharper focus on scale and depth of impact. We will continue to build our AI knowledge and capability across our people, processes, and products to deliver enhanced and more personalized experiences for our customers and partners. Onto slide 41. We've established Fearless Frontiers, a lean strategic team focused on long-term product innovation aligned to our regional strategies. Fearless Frontiers will assess new products, systems, and processes to accelerate the core business and unlock new profit pools supporting future growth. Examples of this include exploring AI-driven products, such as a guided cash flow management solution, Money Coach, in the US, and capital-like propositions in ANZ. Moving to the outlook on slide 42. As highlighted, we've delivered results this year well within the two-year targets we provided 12 months ago. Today, we're providing refreshed ranges across each of the four metrics for FY26. Firstly, revenue as a percentage of TTV is expected to be circa 8%. This reflects the increased contribution from our US business, which we expect to deliver TTV growth of at least 35% in US dollar terms. Pleasingly, US PTV performance in July tracked in line with FY25 growth. Our cash net transaction margin range has been increased to between 3.8% and 4.2% for FY26. As the business scales, we remain focused on preserving the strong unit economics and operating leverage we've developed. And as a result, we've upgraded our operating margin expectations to between 16% and 19%. Finally, taking into account the other three metrics, we expect cash EBIT TDA as a percentage of TTV to be above the FY25 result of 1.3%. In closing, FY25 has proven to be a defining year for Zip. We're a fundamentally stronger and more efficient business than a year ago, with the team, technology and balance sheet strength to capture future growth opportunities while remaining true to the customer first values that brought us here. On behalf of the executive team, I'd like to thank our incredible team of Zipsters for their passion and commitment and our shareholders for their ongoing support. That concludes our formal presentation and we'll now open the call for Q&A.

Thank you. If you would like to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you would like to cancel your request, please press star 2. If you are on a speakerphone, please pick up the handset to ask your question. For the sake of time today, we ask that you please limit yourself to two questions per person. If you have any further questions, you may rejoin the queue. Your first question today comes from Jonathan Higgins from Unified Capital Partners. Please go ahead.

Hi, guys. Cynthia Gordon, rest of the team, congratulations on the result and also shout out to Peter, obviously, moving to the new role. Congratulations. Look, a couple from me today, probably the first one, which I assume you'll get several questions on, just on the guidance. You know, we can see that you've upgraded the operating margin there, but you've also sort of, I think, been exiting pretty strongly on that cash TTV margin versus guidance in both the third and the fourth quarter. I was wondering if you could just sort of expand on some of those building blocks, noting we've got US TTV, don't have ANZ, and probably a little bit on the costs, wherever you want to take it. Thank you.

Yeah, thanks very much, John. And look, I'll give you my initial perspective, then I'll hand to Gordon just to give you a bit more of a walkthrough. You're absolutely right. So in terms of that, you know, the expectation of growth in the US, we did provide the guidance that we expect the US business to grow at more than 35%. So that's obviously an increase on the guidance that we provided for FY25. There is still very strong momentum in the US business and we do still see the opportunity to deliver at least that 35% growth. It's only six weeks into FY26, but we wanted to also just give you a window into how the in the early part of the financial year, and the momentum that we saw in 25 pleasingly has continued. So we're very confident about where our U.S. business in particular is positioned and the strength of the results that it's delivering at the moment. I might ask Gordon just to walk through, Jono, just the interplay between some of those different metrics for you.

Yeah, thank you. Morning, Jono. The increase for operating margins, so if you recall, the two-year target was 12% to 17%. We feel comfortable with another year under our belt to up that to a range of 16% to 19%. So we've tightened the range and we've increased, which we feel comfortable about. It is a full year 26 range. We note that we've got things moving within the P&L throughout the year in cost of sales, OPEX, et cetera. But we feel really comfortable in that range for the full year.

Thanks, guys. Good call. Just last one from me. Can you just give us probably the number one sort of question you get covering the stock is the interplay between ATV and new customer growth and sort of how that looks like. As Joe, I think, alluded to at the start of the call, you've had good ATV growth year on year. We're heading into the seasonal peak. I was wondering if you can expand on just the interplay of those two factors that makes up that 35% to 40% for the year and how far ATV do you think you can grow? Maybe one if Joe wants to jump into also. Thank you.

Yeah, thanks, Jo. I'll start and then I will throw to Jo. You're absolutely right. Obviously, one of the things we're really pleased with is both the net new customer growth of 11% that we saw in the US, but also that increase in transaction frequency hitting over double digits, sort of 10.6 times now. New customers that come onto the Zip platform are not obviously going to be transacting as frequently as existing customers. And while I'm not going to give you a breakdown of, we're breaking down the 35% between new customer growth and existing customer growth I will say that the team's very focused on driving both of those engines, so both net new customer growth, but also looking for more ways to engage our existing customers more frequently. Maybe, Joe, do you want to talk about some of the specific initiatives underway on both of those?

Yeah, thanks, Cynthia. I think when we look at new customer growth, the best sign of new customer growth is an engaged existing customer growth that's endorsing you across, and I think when you look at the number of transactions per year increasing up to 10.6 now. I think that's a really strong sign of our engagement, and we're excited about that. As we look in FY26, I would say there's initiatives active across both our direct-to-consumer, which probably the most exciting thing to me is around the Pay-in-2 platform, which I think will deliver strong flexibility to that everyday non-discretionary spend that we were anchored to. We continue to invest in the brand and embedded, and we're continuing to see really, really strong in-store growth as well. And the merchant channel, we have seen really good traction on our refreshed value prop, and we expect growth from being in general availability with Stripe and add in an additional embedded and channel partner opportunities in the future.

Thanks, guys.

Thank you. Your next question comes from Phil Chippendale from Ordmanet. Please go ahead.

Good morning, Tim. Thanks for your time. I just want to touch on the NTM margin guidance of 3.8% to 4.2%. You mentioned earlier the revenue margin did expect to come down because of that mix from the US, which I think we understand. But to potentially see an improvement in the NTM margin against that backdrop, what do you think is going to be the primary driver of that? Is that really around interest expense perhaps coming down?

Yeah, thanks, Phil. Exactly. Look, I'll get Gordon to comment on it, but exactly as you said, there's a portfolio mix shift that is going to continue as we see greater TTV across the business coming from the US, and that's obviously at the 7% revenue margin. But the biggest impact is actually going to be on the interest side or the funding cost side. So, Gordon, do you want to talk a bit to that?

Yeah, you're spot on, Phil. There's interest costs increasing. And we obviously look to maintain and keep improving on our credit discipline, of course. On the interest cost side, you've got both aspects, which we're looking to deliver some benefit. You've got the base rate side, which, depending on your outlook, there's a lot of market analysts who've got rate cuts priced in for both Australia and the US, so there's benefit there. We're also refinancing, as we've shown in Australia this year. We'll see the flow through of those refinancings at lower margins, and we are refinancing facilities in the US, which we'll start taking through in 26, and probably more in 27. So they're just a little bit more colour, but you're right on with the building blocks.

Okay, thanks. Just on slide 42, the guidance slide, I think the last bullet point, you've mentioned driving non-TTOV-dependent revenue streams. This is specifically in relation to FY26. Can you just unpack that for us? What are you expecting to see contribute there?

Yeah, sure, Phil. I mean, it's a continuation of the conversations that we had last year. So that is looking at capital life propositions that will drive revenue. Some of the things that we've talked about in relation largely to the Australian business, And then there's obviously, you know, we talked about automation and AI and just the general focus on productivity and driving operating margin in the business that will continue to be a priority for us.

Okay. And just on the dual listing.

Phil, just one more thing. I mean, the thing we also have to balance there with that metric is with TTV now at over $13 billion, You know, the range that we had, the 1% to 2% there, was a pretty wide range and getting wider. That's why we gave it a lower bound and we're looking to go above that, just to explain the change there on the outlook.

Yeah, I understand. Just last one for me and then I'll jump back in the queue. Just on the dual listing, you know, you've obviously said it's subject to board approval. You know, what sort of timeframe should we expect to hear some more about that? Is that something for the first half or is that potentially sort of more of a second half story?

Yeah, no, look, there's obviously a process that we need to go through, and we just announced the intention today, Phil. So, yes, we require board approval. There's SEC requirements that we've got to go through. So there's a number of different processes we'll undertake. We'll keep you updated, you know, and as and when there's something to update you on, we'll let you know. But it's certainly something I would imagine we'd give you an update on in the first half.

OK, thanks. I'll jump back in. Thank you.

Thank you. Thank you. Your next question comes from Elijah Marr from Goldman Sachs. Please go ahead.

Good morning, guys. Congrats on the results. Just firstly, can you sort of just break out, I guess, the key drivers of that fourth quarter outperformance from the cash EBITDA perspective, and if that fourth quarter number is reflective of kind of a run rate looking into FY26, or is there anything unique about the fourth quarter we should be aware of?

Elijah, hey, it's Gordon. Thank you. Look, we do have seasonality in our business. We see... you know, it's the revenue coming through in the second half, you know, from our, you know, primarily that sort of Q2 busy period. So you do see, you know, greater conversion into cash EBITDA in Q3 and Q4. So that's happened again this year. So hence the, you know, you've got to look at those too. What I would say is that, you know, we're really pleased with the TTV and the growth in Q4. I mean, the US was, you know, north of 40%. Credit was managed well, interest costs well, so we saw that flow through, and we maintained our cost discipline. So it was really an all-round performance on the Q4 piece. As we look into 26, we'll look to maintain where we can and improve, but we're also conscious that it's a full year in FY26, hence we're giving an outlook for the whole year there on the metrics.

No problem. And then maybe just for my second question on active customers in the US, it seems to accelerate in the fourth quarter. Can you sort of maybe give some colour on how you think about the cost of acquiring these customers and now that sort of loss rates are within that target range for the US, do you look to push harder or is this kind of the levels you want to maintain and just that relationship focus of how much cost you want to put into acquiring new customers and that loss rate range as it stands today?

Yeah, no, look, it's a good question. And as we've said consistently for the last couple of years, it is always a balance for us around profitable growth, customer growth, and maintaining strong loss performance. As the business scales, though, our CAC is quite low and will continue to drive lower because as we move into some of the channel partnerships, the announcements we've made today in relation to Google, Joe mentioned that we've gone into general availability now with Stripe. The more we've got these one-to-many channel partnerships really moving, then you'll see that CAC continuing to drive down. So we are very confident in our ability to continue to drive strong customer acquisition and not see an increasing CAC on the back of that.

Joe, you want to add? Yeah, I would just add to that. So we maintain strong discipline around our CAC, but I also would just maybe point to our underwriting strategy of a low and grow strategy. We acquire new customers. We make sure that we match the right affordability, and we continue to underwrite based on performance so we maintain a profitable customer. And so we feel really good that we're constantly balancing that perspective of CAC versus ongoing performance.

Perfect. Thanks, guys.

Thank you. Your next question comes from Siraj Ahmed from Citi. Please go ahead.

Morning, Al. Just first question, maybe one for Gordon. Maybe I'm getting the maths wrong, but to get to your sort of cash operating margin midpoint, it implies your OPEX has to grow 20% plus or something. Is that, can you just help me with that as to how much OPEX you're looking to grow next year? Especially given you just mentioned that CAC's expected to go down in the US as well. Thanks.

Hey, so morning, Siraj. I didn't catch all that, but I think you're talking about operating margin. Is that right?

Yeah, so Gordon, if you look at the operating margin, I mean, rough map, if you want to get to the midpoint, it sort of implies your OPEXs to be up like 20% plus, right? Otherwise you get to the top end. So just any color on how much OPEX is going next year would be really helpful.

Yeah, thanks Raj. I understand the question. Look, we're giving an outlook on operating margin for next year. So I outlined we're not giving a dollar or a year-on-year increase for 26%. We're going to manage it within an operating margin context. And what that allows us to do is it allows us to invest in the businesses as they grow and allows us to measure that investment with the translation through the whole income stack. So that's the way we're going to look at it going forward. We feel that's the best way to balance investment in the business and the discipline in the business.

Okay, so it doesn't sound like it's marketing then because your tax is going down. It could be people, technology, something like that. The second one, maybe for Cynthia and George, just certain of the revenue yield, I mean, there are questions on that, getting to 4% at the midpoint, right? Given the losses picking up in the US because of our pain aid, is there something offsetting that to get to 4%? I mean, for instance, are you looking to launch a subscription offering with one of your competitors or is it something else offsetting that that bit's going up?

Thanks. Yeah. Thanks, Suraj. Can I just add one other thing, though, to your prior comment? You just mentioned marketing costs going up at the end of your comment. We're definitely still maintaining the same discipline around marketing costs that we've consistently said, that they won't exceed half a percent of TTV. So I just want to sort of just confirm that. So in terms of the U.S. It's really going to come down to funding costs, I think, is where we're going to go with this one.

That's right. So we've got US Fed rate cuts in the outlook, whether they occur or not is up to Mr Powell and so forth in the next few months. But we are refinancing our U.S. funding facilities, and we do look to delivering some of that. We'll deliver some of the benefit in the cash NTM in the U.S. in 26 and probably flying through in the 27th.

Okay, Cindy, can I just ask a quick one? Just on ANZ, I've heard feedback with regulations impacting some of the other BNPL players, especially in terms of money sort of offering. Are you, because of more on this paperwork, are you seeing anything impacting Australian growth next year in terms of regulation?

Yeah, no, thanks, Siraj. So just to clarify, so the products that we operate in Australia, even prior to this change in regulations, Zip Money, Zip Plus and Personal Loans were already operating under the NCCPA and so that's why we were very pro-advocating for fit-for-purpose regulation for these products in Australia because it's the way we've always been operating our business. So what has changed is with the new BNPL regs coming in, Zip Pay now comes in under the NCCPA. So from our perspective, we've brought Zip Pay in as a fully regulated product now and we've adopted the same rules you know, acquisition flows and operating processes to zip pay as we have for the other products. So while you're right, you know, for others, I know it does add some friction and it's certainly something that we're very alive to, to make sure our customers have a great experience, but we're fully compliant with the new regulations and all of our products are now under the NCCPA.

And just to clarify, you're not seeing any impact from that because you already complained, right?

No, not material, Suraj, and really what we've highlighted in the earlier comments, a lot of the growth we've seen in the ANZ business and the TTV growth has come from Zip Plus, and that's a product where we've had a well-established flow and it's been under the NCCPA since inception.

Super helpful. Thank you.

Thank you. Your next question comes from Tim Piper from UBS. Please go ahead.

Oh, good morning, team. First one, just on the US bad debt performance. You've noted in the preso there that 120-day delinquency is not reflecting pay in aid anymore. Can you just give us a sense on what you're planning on changing towards for bad debt performance there? Is it extending the period from 120 to 180, or what are you sort of planning on doing?

Yeah, no, it's a great question. We'll unpack a little bit. I'll kick off and then Joe can give some detail as well. The 120-day sort of forecast cohort losses is a good guide for the Pay in 4 products because it sort of matches the maturity of that product. When it comes to Pay in 8, at 120 days, the actual write-offs haven't seasoned that well in the product because it's a longer maturity. And so what we're finding is that the one 20-day measure is becoming a little dated in its view on the overall portfolio. And so as Payonate gets to a more material percentage of the overall portfolio, and we're getting close to 20% and it's growing, that metric's becoming a little outdated for us, and there are going to be better ways to show our loss performance. So in FY26, we are making clear that we will be looking to provide sort of more traditional credit type metrics and give more colour as that portfolio develops.

Okay, but are you still going to stick to this 1.5% to 2% loss range in terms of growing the business? And if we do assume you extend that out Like that 1.7 that it's kind of running at now, does that have an artificially depressed kind of impact on that 1.7?

Yeah, so the 1.5 to 2% is still the range for now, absolutely. What we've also done, Tim, just to give sort of more colour, is in the back of the presentation, we did provide an appendix which actually gave the actual dollar write-offs for the past eight quarters, so that you can have a look at that through your models, and And we also, just to point out, those actual write-offs from the P&L, and there's nothing new there, it's been in the 4D and the 4E for a while, but that's also net of recoveries and any fees, whereas the forecast cohort loss graph you're used to seeing, that is a gross number. So we're just giving you both there to do the analysis.

Right, I guess what I'm trying to get at is, is it going to give you more capacity to accelerate customer growth within what would be a target bad debts range in the US if you make those changes?

Yes.

Okay, good one. Sorry, just a quick second question. Just on the OPEX picking up again. I mean, even if you go from 40 bps to 50 bps of TTV on marketing, that only adds sort of 5% OPEX growth. And I know you're guiding to a range, but it does imply quite a lot of OPEX growth. Maybe just a bit of a sense on the areas you're going to be accelerating the cost investment outside of marketing?

We're looking across the board. I mean, one of the things we have said is we're going to grow the businesses. We are having some investment in our fearless frontiers arm, which we mentioned. We're looking at some costs for the consideration of a NASDAQ listing. There's probably a broader range of costs, if you like. But overall, we are anchoring back to the operating margin of 16% to 19%. So we'll be investing in the businesses and spending to the benefit, if we're able to, if we're producing the revenue through the income statement. So we are looking at it on that basis.

Got it. Thanks.

Thank you. Your next question comes from John Marin from CLSA. Please go ahead.

Thank you. So hey guys, congratulations on a great result. Great job. Just wanted to go back to slide 22 for a second and just talk about that new customer cohort and obviously the performance to see it accelerating year over year is good and just hoping to get a little more color around why the January cohort is so strong. We heard some details on So maybe a little more color on what's motivating that new customer to spend so much more. And then I'll have a second to follow up.

Thank you. Great question. I would say a couple different factors play into this. In particular, it's the same as our story back in July. We're getting better and better at targeting the right customer that fits the value proposition of the product. And so we continue to refine our marketing and our omni-channel marketing. approach to find these customers and engage them in the right way. So then the app is built in a way to continue to engage them and stay top of wallet, which I think is reflected in the frequency of transaction. The other is probably a broader macro trend. BNPL is becoming a more common payment method within the U.S., and it's benefiting all players on that front. So we stay really focused on the everyday non-discretionary spend American, and you're seeing that frequency and engagement pick up.

Yeah, yeah, great. And just to build on Elijah's question earlier, I mean, on account growth and Obviously a great result in this quarter, or this half year rather, and just kind of want to hear a little more about what you're thinking about both in the U.S. and ANZ on account growth, what the drivers are, maybe the seasonal cadence as we look into the latter portions of the year, if there are things in place with merchants that might drive growth in the fourth quarter, and what have you.

Yeah. From a U.S. perspective, we're excited, particularly about paying two on the consumer value prop side. We think that fits monthly spend much better. We see heavy, heavy usage on non-discretionary for utilities and other monthly bills. This will This will help with those smaller purchases. So we're excited about that. That should bring in new customers. And then on the merchant side, getting exposure in channel partnerships and embedded opportunities like Google, like Stripe. We see tremendous upside on new customer growth on those fronts.

And on the ANZ side, it's a very similar story. We've made comment in the prepared remarks just in relation to the similar sorts of initiatives we've rolled out with Google. But we've also got a lot of work going on with additional new merchants coming onto the platform. And you've seen a lot of the growth coming through Zip Plus. And that's where we are seeing the transaction frequency. I think, and my final comment would be, that's all really evident through the TTV growth and the pickup in momentum that we've seen in TTV growth in the ANZ business in Q4. And we do expect that that will continue.

Okay. If I could just put one more in, I think. So the 1.3% guy, you know, obviously a lower end of the balance, lower balance there on the guidance. But, you know, do you think about how you could outperform that number? Like, what are the bigger buckets that we're thinking about? Is it just a higher top line, you know, lower interest costs, lower bad debts? Like, how are you thinking about outperformance on that? And if you could be generous enough to give us the upper bound, it'd be great.

Nice try. So let me clarify, it's greater than 1.3%. And the answer to your question is yes to all of those things that you've suggested. So all of those levers we will be looking at this year to drive that higher than the 1.3%. The real focus for us, though, is on operating margin. And as we deliver through op margin, as Gordon said earlier, that will then flow through.

Okay. All right. Good enough. Thanks, guys.

Thank you. Your next question comes from Ware Kowal from Bank of America. Please go ahead.

Good morning, thanks. Just a few questions from me. Number one, just touching on the Pay In Aid product, so good outcomes for TTV growth for Pay In Aid. Have you seen it open up new customer cohorts or has it been more additive to existing customers? And number two, just how are you thinking structurally about average loss rates for Pay In Aid versus Pay In For? And is it correct in that the revenue take rates are similar between the two products?

Yeah, maybe I'll start, then I'll throw to Jo. So thanks for the question. So I'll answer your last question first. Yes, the revenue margin on the product, we optimise them to keep the revenue margin across the portfolio at 7%. So yes, we do look for that balance. In terms of optimising the use cases for customers, some of the areas that we've seen, particularly around health and travel and entertainment and so forth, tickets is where we've been seeing a lot of penetration of pay and aid. And that then aligns to our merchant strategy and where we've been bringing new merchants onto the platform as well. But Joe, do you want to talk a bit more about that and then about maybe the common losses?

Yeah, so from a consumer perspective, opening up additional categories for us, I think it is really important. Cynthia mentioned a couple of those verticals. But I also think like when you kind of play out the U.S. consumer perspective, especially around now, back to school season, our customers are buying iPads and things to get ready for school. Pan-8 offers additional flexibility to allow for a range of purchases that Pan-4 might get tight on. I'm excited about that. From a loss perspective, I think I'll go back to what Gordon's comment was. We're continuing to just evaluate the right metric, but we are very comfortable with the loss rates, and we've got enough history over the last 12 months now where we feel like we're in a really good position to continue to manage the risk at a portfolio level within the range that we've articulated. Great. Thank you.

Thank you. Your next question comes from Wei Sim from Jefferies. Please go ahead.

Hi, Tim. Can you hear me?

We can, Wei. Yeah, hi, Wei.

Great. Thanks, Tim. So just one question. Congratulations on a great result. I've been wrong. You know, U.S. customer growth in fourth quarter, didn't expect that. So really great. One question for me is just really on the U.S. regulatory landscape, on potential risks there. You know, I've seen some news flow on potentially for BNPLs to report to credit rating agencies and the New York BNPL Act. I understand we've got like working with WebBank, but if you can just talk about, I guess, how you see the regulatory landscape, any potential risks and what is being done to mitigate these things.

Thanks, Wei. I'll just start with some comments that I will pass to Jo. I would characterize it as a benign regulatory environment at the moment, certainly from a federal perspective, and it's been constructive for us. Some of the things that you noted in relation to FICO scores and providing data back to the agencies, I'll ask Jo to comment on. The one thing that we have seen is there has been some pickup in state-based regulators focusing on the product, and you mentioned New York, so we'll particularly comment in relation to New York, but Jo, do you just want to comment on FICO and FICO? Neil?

Yeah, thank you. I would say, echo what Cynthia said about a benign environment. In particular, when you look at the FICO side of this, I think it's very, very early days and it's in an exploratory phase. anchoring back to our perspective, we believe in fit for purpose, and I think we're staying firmly with what will benefit our customer base. So we'll continue to stay abreast, but there's no immediacy to that. From a New York perspective, we're in dialogue there, feel very comfortable with our regulatory position. We've always been kind of in a good spot there, and we'll continue to monitor as that plays out, but we're in a very good position in the near and medium term.

Okay, and so just for these, is this in conversation with WebBank or with the regulators, or how does that work?

Yeah, so we partner with WebBank, which we believe is a very strong regulatory position for our products, and so whenever we have any conversations with regulators, state or federal, we partner with WebBank for those conversations. Okay, perfect.

Thank you. Congrats again on the great results. Thank you.

Thank you. Once again, if you'd like to ask a question, please press star one on your telephone and we'll have your name to be announced. For the sake of time, we please ask that you keep it to one question. Your next question comes from Jacqueline from RBC. Please go ahead.

Hi, team. Congratulations on the great result. Just one in terms maybe for Joe, the US adoption rate, 6%, FY24 is feeling a bit dated now. Feedback we're getting is that's floating higher towards sort of the 8% mark. Just any thoughts around the key drivers there that's occurring and how it pertains to some of your segments?

Yeah, so from a U.S. perspective, I think we're still in the early days of understanding and I would say consumer awareness. And as the industry grows, we benefit from that. And I think you're starting to see a normalization and probably an understanding from the U.S. consumer of the utility and, frankly, the benefits of a fixed utility product that really is starting to drive strong adoption across the U.S. industry. So I think it's on an upward trajectory. And I would anchor back to what we see in other markets like Australia, which is 15 percent and some places in Europe of close to 20. So there's a long journey ahead, but we're excited about the growth. Thank you, Joe.

And maybe just one on ANZ revenue margins. Just looking at my numbers, I might be wrong, but a little bit of compression on the revenue margin in the fourth quarter. Just want to get some colour if there's any one-off initiatives in there with merchants or customers that are driving a little bit of softness there and how to think about that in the context of the 8%.

No, I wouldn't say so. No one-offs. The Australian business, we've talked about for a little while, is that we really are trying to balance the, I guess, the return of the economy and making sure that we're growing at the right time. We're really pleased with the products we've got in market, with our personal loan products, and coming into the new year. And with the consumer sentiment print the other day, another potential rate cut coming, We feel that we're well-placed and well-timed for FY26. I'll just point out as well that TTV growth for the ANZ business in Q4 was really strong at 13%. So we are seeing those signs and we're cautiously optimistic.

Thank you. Unfortunately, that is all the time we have for questions today. I'll now hand the conference back to Ms. Scott for any closing remarks.

Thanks everyone. I'm sorry we've run a little bit over time, but thanks everyone for all your questions. Thanks for joining us and I know we're going to speak to many of you and meet over the next couple of weeks with several of you. So thanks again and we look forward to seeing you in the next couple of weeks.

That does conclude our conference for today. Thank you for participating. You may now disconnect.