The report was fantastic from my perspective!
Couple things in particular that stood out:
1. Refinancing went well -
With the improvement in corporate performance and our receivables credit performance, we have been able to refinance a majority of our financing facilities, especially in the second half, with extended tenor and at materially improved credit margins. Secondly, last week, we launched and priced a A$350 million rated ABS public issuance, labeled Series 2024-2, which had a weighted average margin of 2.13%, which is tighter than our April bond deal.
2. No concerns regarding regulations including those in the US but there is some further work to do in some small number of states -
There have been regulatory developments in both our core markets during the past year and Zip is well-positioned as a result of our commitment to responsible lending and our current business practices. Positioning the business to respond well to the evolving regulatory landscape by moving Zip’s online integrated checkout on merchant websites to the third party bank partnership model. Fully compliant with new CFPB interpretive rule (US). Yeah. So in terms of the CFPB's interpretive rule, so the requirement for us to comply with the interpretive rule was by the end of July. And we have adjusted all of our operating processes and procedures to ensure that we are compliant with the CFPB's interpretive rule. So we met that deadline. There are some specific licensing requirements in some states, and one of them you've mentioned is Maryland and in a very small number of states. We have some further work to do to make sure that we've got compliance from a licensing perspective. And so that's why at the moment, Maryland, we're just going through the process of getting that compliant before we turn that back on. But it's not material, Siraj, in the context of our overall flows in the US.3. Zip forecasts above average growth in the US this financial year compared to competitors (>32%) -
We're often asked about expectations for growth in the US market in terms of TTV. And what I would say is that looking at our peers' performance, we've observed average market growth rates of 30% to 32% year-on-year for comparable US installment products over the last six months. This backdrop and our own strong momentum has Zip well-positioned to grow above the average market rate for installment products in FY '25, subject to trading conditions.
4. New products and diversified revenue streams coming this year -
Launch and rollout new higher margin products. And finally, we're also exploring options to participate in other consumer lending segments such as home loans through capital-light propositions that leverage our engaged customer base and deliver a diversified revenue stream.
5. Cash EBTDA as a percentage of TTV to increase to 1%+ of TTV in FY25. This means cash EBTDA would increase from $69 million in FY24 to $98 million in FY25 if there is 0% growth in FY25, so with a good year of growth we will see great numbers for cash EBTDA -
And on cash EBTDA, we're targeting to deliver more than 1% of TTV in FY '25 and between 1% and 2% over the next two years.6. 1Q25 is currently doing well -
Just in terms of the US, we are seeing continued strong momentum in the US and our loss rates continue around that 1.3% of TTV. But I think the external operating environment, we still see very constructive consumer sentiment, constructive retail sales. And then the other big shift in the US is, of course, we're starting to see more commentary in relation to interest rates coming down, which, as we've talked about, is a definite tailwind, both for Zip customers but also for our own financial performance. So, very constructive operating environment in the US.
7. There will be a renenewed focus this FY on getting new customers -
Going forward, for FY '25, there is a very strong focus on both bringing net new customers directly to Zip, particularly directly to our app, but also prioritizing merchant integrations for embedded finance, but also, as you've mentioned, the channel partnerships. So, we've just announced the extension of our strategic partnership with Stripe. And Stripe has literally 4 million merchants on their platform in the US, so it is a very significant opportunity for us to partner with the likes of Stripe and GPay, Adyen and others.
8. TTV dropped for a while in Australia but they are now refocusing on increasing TTV and getting new customers particularly through their new Zip Plus product -
Yeah, so a couple of the initiatives that we undertook at the -- in the middle of Q4 towards the end of last financial year in the ANZ business were designed to reposition the ANZ business for growth. And so that was things like turning back on credit limit increases, cross-sell between Zip Pay and Zip Money, et cetera. But we've also -- and I should say, and as a result of those initiatives, we've now seen monthly transacting users between March and June pick up in ANZ, which is, as we've talked about before, is a positive leading indicator for us in terms of customer activity.In terms of FY '25, the new customer growth will come from not only bringing new merchants on to the platform, but also particularly from Zip Plus. So, we have actually done a soft launch of Zip Plus already, but we will go above the line with Zip Plus and there will be external marketing, et cetera, from Q2. And that product is really designed for customers who are looking for a low rate virtual card, given it has all the great functionality of Zip Pay, but also behaves more like a credit card and has a very low competitive rate on it.
Looks like it'll be another exciting 12 months coming up, and I certainly won't be selling any shares any time soon based on what this report indicates about the future of the company!
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