Zip Co Limited (ZIP) Earnings Call Transcript

Good morning, ladies and gentlemen. Welcome to the Annual General Meeting for Zip Co Limited. My name is Philip Crutchfield, and I'm the Chair of the company. And I'll be chairing the meeting today. It's now 10:00, and there being a quorum present, I declare the meeting open for business. And I confirm that the meeting has been properly constituted. Given the current restrictions and social distancing practices in place, we are unfortunately unable to meet with you in person today. But I would like to thank those shareholders that are joining via the virtual meeting platform. This allows shareholders and proxies and guests to attend the meeting virtually. All attendees can hear a live broadcast of the meeting. In addition, shareholders and proxies have the ability to ask questions and submit votes virtually. In opening the meeting, I'd like to introduce my fellow Board members and management team of Zip Co Limited, who are attending via the virtual platform, but indeed, in the case of all of them, in person: Mr. Larry Diamond on my left; Mr. Peter Gray on my right; Mr. John Batistich, Nonexecutive Director; Ms. Pippa Downes, Nonexecutive Director; Martin Brooke, the Chief Financial Officer; and Tommy Mermelshtayn, the Chief Strategy Officer. Also in attendance is our company's Secretary, Mr. Franks; Mr. David Squires, representative from Computershare Investor Services; and our auditor, Mark Lumsden; and Nihaad Mohamed of Deloitte. There are no apologies of which I've been notified for this meeting. The agenda for today's meeting is as follows: I will provide a Chair's address. I'll then hand over to Larry Diamond, who will provide a Managing Director, Chief Executive Officer's address. We will then go through the formal resolutions included within the Notice of Meeting, including conducting a poll on all resolutions. Following the formal part of the meeting, we will close the meeting. And finally, the results of the poll will be released to the ASX following the close of the meeting once determined. I note that only registered shareholders will be able to enter questions into the online question portal. Questions can be submitted at any time on the virtual platform. [Operator Instructions] Please note that while you can submit questions from now on, I will not address them until the relevant time in the meeting. Please also note that your questions may be moderated or, if we receive multiple questions on one topic, amalgamated together. Finally, due to time constraints, we'll need to monitor time to answer all your questions during the meeting. I'll now attend to my address. As many of you will know, Zip listed on the ASX in September 2015 with the aim of disrupting the antiquated and opaque credit card market. The company has undoubtedly been successful in that objective, and Buy Now Pay Later, as they're called, solutions are clearly having an impact. Today, Zip has in excess of 4.8 million customers, over 500 employees, more than $5 billion in annualized transaction volumes across 4 markets and is well on its way to becoming a major player and innovator in the fast-changing global payments landscape. However, we believe we're just getting started. The opportunity in a global context is immense, and Zip is well-placed to continue on the ambitious agenda that co-founders Larry and Pete commenced some 7 years ago. All over the world, the biggest shift in consumer finance since credit cards were introduced more than half a century ago is underway. Digital wallets, such as those from Zip, are providing customers with the autonomy to access credit and spread the cost of specific purchases via interest-free installments on their own terms. People can do this seamlessly through a digital experience at checkout, both online and in-store, without a cumbersome sign-up process, crushing interest, the need to visit a physical bank branch or waste half a morning on a bank help line as part of a credit card application. Customers can now access fairer, more transparent and friendly products, such as those offered by Zip, that don't rely on hidden fees or dead traps or customers being late to make the economics work. We firmly believe that new forms of payments that provide simple, transparent and fair alternatives will continue their phenomenal growth. From day 1, Zip's founders made a decision that growth at all costs would not be pursued. Credit would be provided responsibly and only after proper due diligence on those wanting access to Zip's services. This focus on responsibility is at the core of the business and is the reason why every new customer undergoes a credit and ID check and why account limits are tailored to customer-specific circumstances. This focus on upfront due diligence and responsibility is evident in the customer outcomes that Zip consistently delivers. For example, less than 1 Zip customer in 100 is late with a payment each month. Compare that with 1 out of 6 for credit cards and other Buy Now Pay Later offerings. Our purpose is the freedom to own it, and we own the responsibilities that come from issuing microcredit in real time. The uncertainty of life revealed itself with all its force this year with the onset of a global pandemic that threw the world into lockdown, convulsed the health of millions and upended world economies. Our hearts go out to all of those people who have lost loved ones or been otherwise affected by this continuing pandemic. And we thank all of the incredible health workers for their services and for keeping us safe. We should cherish our world-leading doctors, nurses and health care providers that we have in Australia. We also commend government for quick responses, protecting citizens and providing timely and essential financial support to affected workers and businesses. Some 8 months on from the onset of the pandemic in Australia, and it is clear that the Zip business model stood tall, with continued growth in transaction volume, strong revenue and market-leading credit performance. This resilience during COVID can be explained, not only by Zip's robust business model that embodies flexibility, transparency and fairness but also the fast forwarding of the global move to online shopping, the continued diversion towards traditional credit products and the global uptake of digital payment solutions. And while we saw a small spike in customer hardship request in March and April, at year-end, that is at 30 June, Zip had only 1,000 of our 2.1 million customers in hardship. This figure is now at less than pre-COVID levels. It would be remiss of me not to publicly thank Westpac's nominee to our Board, Di Challenor, for her service to Zip. I and my co-directors have forged a lifelong friendship with Di, and we thank her for a wise counsel and advice, and we wish her well. Ladies and gentlemen, you will notice a new face among our directors today. It is my pleasure to welcome Pippa Downes to her first Zip AGM. Pippa is an experienced listed-company director, who will be a tremendous asset to Zip's Board and governance, especially as the company executes on its global expansion strategy. Pippa has had a successful banking and finance career of more than 20 years, and her experience and advice will be of immense benefit to the management and also to the Board. I thank by other co-nonexecutive director, John Batistich, for his energy and numerous contributions to the company and for chairing our Audit and Risk Committee and Remuneration and Nominations Committee. We also continue to look at expanding our Board with a focus on diversity and the global nature of our business. I also thank and congratulate Larry and Pete, the Zip management team and all the remarkable Zipsters all over the world. Together, you are building an extraordinary global payments business that is delivering valuable, innovative and better solutions to millions of customers, whilst, importantly, retaining the essential ingredients that make Zip such a joyful place to work. Some comments about global expansion. While we pushed through COVID, the pandemic did temporarily delay our global expansion plans. During the early days of the pandemic, with unprecedented uncertainty, we made the decision to scale back some of our expansion plans and delayed our U.K. launch. It was in June this year that Zip announced the acquisition of QuadPay, a leading U.S. Buy Now Pay Later company that provides Zip access to the world's largest retail market, which, at USD 5 trillion a year, is 15x larger than the Australian retail sector. QuadPay, founded by Australian tech pioneers, Brad Lindenberg and Adam Ezra, has similar technology to Zip and, more importantly, an aligned culture based on moving fast, innovation and an identical commitment to responsibility. As our market updates show, and as Larry will elaborate upon, the U.S. business is growing extremely quickly. With 2.5 million customers, over $2 billion in annualized volume and 15,000 daily downloads, they are leading the way in payments innovation. We are very optimistic about the growth in the U.S. and the experienced team and partners we have in place. I can also report today that Zip is officially launching in the United Kingdom. We are live with over 150 merchants, and we'll be bringing on global fashion and apparel brands, JD Sports, Boohoo, Fanatics and Fashion Nova as we scale in the region. As one of only a few truly global Buy Now Pay Later players, Zip has a unique and huge opportunity in this region. We've also extended our BNPL offering to small- and medium-sized enterprises. We see that as a natural evolution. Small businesses have the same needs, specifically the ability to easily spread the cost of the purchase over time on fair and transparent terms. The pilot we recently completed validated the market opportunity and provided key learnings that flowed through to our product development. The strategic acquisition of SpotCap in December 2019 delivered a proven SME credit decisioning platform that will enable us to rapidly scale Zip Business. Further, we've recently launched our own new BNPL product for SMEs, where small businesses can access interest-free installments to manage their cash flow, leveraging the deep network Zip has already built with its major trading partners. Something about Pocketbook. The need for customers to understand their spending and saving is ever more present, given the uncertainty that has arisen from COVID. We're continue in -- to invest in the Pocketbook app, which is one of Australia's leading personal finance apps. And in the coming weeks, we will enable customers to link hundreds of more bank accounts to give our 800,000 users a more complete view of their finances. We are also looking forward to the continued evolution of the Customer Data Rights and Open Banking as they will enable us to continue to deliver innovative features to the app. I want to say something about people and culture. As our presence has grown into new markets, so has our headcount. Globally, there are now 535 people at Zip. As our focus on product and technology continues, so, too, has our investment in these functions, which now make up well over 30% of our global workforce. To name just a few of the initiatives our Chief People Officer, Anna Buber-Farovich, and her team are working on, they include: scaling our global culture and performance through our values of Customer First, Own It, Stronger Together and Change the Game, and embedding those values into the everyday life of the group; building a leadership through a newly formed extended leadership team and the rollout of global manager development training to help build world-class leadership; and investing heavily in corporate social responsibility and diversity and inclusion with the appointment of 2 key new hires to drive our strategy and execution in these extremely important areas. All of these projects and initiatives are furthering our goal of building a global company with enviable values and enabling the fast-moving, innovative culture that is Zip. I want to tell something about the ASIC report. On the regulatory front, ASIC this month released its Report 672 on the Australian Buy Now Pay Later sector. The report confirms what we've known for a long time, which is that millions of mainstream Australians is shifting away from the broken credit card model towards interest-free alternatives, where balances are repaid in weeks or months, not years. As the ASIC report also confirms, there are different Buy Now Pay Later providers in Australia with very different business models and very different ways of engaging with customers. The report also confirms that Zip makes less than 1% of its revenue from late fees. That's among the lowest of all Buy Now Pay Later providers. Zip does not rely on consumers falling behind to drive its economics. Our sector is developing a self-regulatory industry code of practice, which will establish minimum standards for the industry. However, while we believe the code is a good start, Zip will continue to implement its own higher standards, it's particularly around customer suitability for responsible access to Zip's products. We believe the continued growth of the segment will inevitably lead to increased focus from legislators and regulators around the world. This is as it should be. Zip supports further and fit-for-purpose regulation of players in the industry. In closing, financial year 2020 was another watershed year for Zip as we made specific moves to deliver on our global ambitions, expanded our offerings to small businesses and executed our plan against a backdrop of significant uncertainty. The first half of this year has continued this positive momentum, and we consider we are exceptionally well-placed to accelerate growth and capitalize on the opportunity to be a Buy Now Pay Later world leader. Thank you again for your interest in the affairs of the company. I'll now hand over to Larry to provide his Managing Director's/CEO's update. Thanks, Larry.

Thanks, Philip, and welcome to Zip Co's 2020 AGM. Yes, I'd first like to thank all our shareholders out there for their support over the year. We'd like to thank our retailers who have really underpinned our model. We'd like to thank our customers, and of course, we'd like to thank our staff for a really strong year. And as Philip mentioned, even though we are 5 years into life as a listed company, it genuinely feels like we are only getting started. Next slide. So as Philip touched on, Zip's purpose is the freedom to own it. We give customers the freedom to own the experience, on the couch, on their financial well-being. We give merchants the freedom to own their growth. As a financial services player, we own the responsibilities that come from this role. And we give our Zipsters the freedom to own it inside Zip. And our mission, to be the first payment choice everywhere and every day, and we've seen some really great strides just in this last half at trying to achieve that mission. So today, I'm going to cover a little bit of a brief overview about the company for those new to the story. We'll talk about the results update on Slide 3, and we'll talk about the strategic priorities that we set at the beginning of financial 2021. So over to Slide 5. Next one. Next. So just a quick refresher. Zip is one of very few truly global Buy Now Pay Later companies. And this is a big, big point of differentiation and advantage. We're currently in 5 markets, Australia, New Zealand, U.K., the U.S., and we have a strategic interest in South Africa. The business today is doing actually over $5 billion in annualized transaction volume, which is a great result, and over $300 million in annualized revenue. In the last 12 months, a big step-change for us was the acquisition of QuadPay, where we consolidated our interest. We had a strategic interest, and it's really helped us become a truly global player with a strong U.S. base. And we'll talk about some of these numbers a bit later on. On the next slide, Zip really is building a digital ecosystem. So we are trying to connect customers with retailers or merchants through a fair and valuable payments experience. And we really like the space where we play because it is truly a win-win-win. It's a win for the customer. It's a win for the merchant, and of course, it's a win for our financial model. For customers, we provide customers the ability to pay over time, interest-free. We've built a very powerful and engaged mobile app, and we'll talk about that later, being the centerpiece of that relationship. We allow customers to pay bills, to budget and deliver the offers and content from our merchant partners. For merchants, it's a win. We help them convert browses into paid customers. We deliver new customers to our merchants, and we drive conversion through the checkout. And we've also announced more tools to offer small business, particularly new Buy Now Pay Later. And our objective really here is to own more of the transaction commerce that happens between these 2 peers and become incredibly important to both sides of the equation. On the next slide, as we spoke about in our purpose, the freedom to own it, we own the responsibilities that come with issuing microcredit in real-time. As Philip touched on, since inception, we've done identity and credit checks on all applicants. We also pull bank transactional data in real-time. And using our Pocketbook engine, we categorize that bank data in microseconds and use it for our financial underwriting. We have a model that derives income from customers and merchants and doesn't rely on late fees, and we've been investing significantly over the last 7 years in Australia's leading proprietary, Decision Tech, which allows us to underwrite customers in microseconds, looking at conventional credit data but also unconventional credit data. And what again is a rules-based engine is now full machine learning models, where we have a wonderful mix of credit underwriters and data scientists that have built this model. And the proof's in the pudding. The average Zip credit score is higher than a big 4 bank credit card applicant. 1 in 100 customers are late in any given month, and again, we contrast that with the broken credit card and some of the other Pay Later companies. And our arrears is now less than 1%. On the next slide. Our hearts do go out to a lot of the pain that we've seen across the industry as a result of COVID, both consumers, businesses. The Zip model has held up very, very well. And I think what we've seen at the outset of COVID in early March, continued growth in consumption, strength in our credit performance and the ability for Zip to adapt very, very quickly. So our exposure to online has certainly benefited from customers at home, shopping in their living room, and close to 85% of our transactions tend to happen online, not in store. We are a credit card disruptor. So we have great exposure to many categories, such as the home electronics. Bunnings is a major retailer, and that has held us in very good stead. We also have good exposure to the every day, grocery, fuel and these purchase decisions are part of the customers every day. So that's held up very, very well. Due to our credit underwriting and investment there, we've actually seen our arrears rates dropped below 1% for the first time in quite a few years. And in fact, cash repayments from customers are higher than they were pre-COVID. So we've seen customers become net savers. The government stimulus has also helped many Australians out there. And pleasingly, on the small business front, it's a big focus of ours, and we'll touch on it a bit later. But Zip is really about helping small business, and we were able to fast track our Buy Now Pay Later solution for small business, and we were also able to access the government guarantee, which is helping our future growth. And the DNA of the organization. As we always talk about, one of our pride and joy is Zipsters' resilience to change, and very quickly, we were able to adapt to remote working. Many of our teams actually do this already, and obviously, trying to retain the culture during this decentralized operating environment. And we've done a really great job there. And finally, before we go into the results on the next slide, we at Zip, we have to move fast. It's all in the name. We have to execute on our mission and constantly innovate. And pleasingly, what we actually saw just in this last quarter, even though we were remote working, is, as you've seen here by Julian Potter, who is the Country Manager for Visa. Zip was able to deliver issuing virtual cards in the Apple Pay and Google Pay wallet as fast as of any implementation that they have done to date. So I think a remarkable achievement to deliver the speed, the growth in our staff and to innovate all during these unique circumstances. So moving on to the business update. What we've seen is really a transformational year for Zip -- just on the next slide. Globally, we've now become a true global player. We saw continued growth in Australia, customer numbers growing, merchant numbers growing. The U.S. is scaling incredibly well, and we've just announced the launch in the U.K., and we now have close to 5 million customers and run rating over $5 billion in annual transaction volume. We've also maintained really strong unit economics. In Australia, our gross profit margins are around 50%. And in the U.S., on the pay in full product, we are able to deliver net transaction margins of around 2%. So really strong unit economics, which is critical as we invest for growth globally. We've also seen the app continue to be a source of strength for the business. And we've now had more than 5 million apps downloaded globally. We launched Tap & Zip, which was a really unique and pioneering initiative over here in Australia to unlock everyday spend, and we'll talk about that. And we launched Zip Business, which is going to become a huge tribe inside Zip and able to bring on eBay to help strengthen our network. Just on the next slide. So FY '20 was a great year. We've shown these figures on a pro forma basis. And as you can see, transaction volume, transactions, revenue, all up well over 100%. And this is providing really great momentum into financial year 2021. And this is both the Australian business as well as U.S. business, including New Zealand as well, And in this coming financial year, we'll also see the results from the U.K. But if you look on the next slide, this growth is really part of Zip. We are a growth business. We invest for growth. And as you can see there between just FY '17 and FY '20, again, well over 100% CAGR on all our key metrics, transaction volume, revenue and transactions. So a really strong result and continued growth. We also announced earlier last week, the October year-to-date update, we saw, again, the business continued to accelerate. If you just look at the last few months of the year-to-date, annualizing over $4 billion. We did $100 million in revenue, which is a great result over the period. We did $400 million in TTV over --in the October month. And just this month -- we're obviously coming towards the end of the month with Black Friday and Cyber Monday. And again, we're expecting another record month for Zip across all geographies. So very, very exciting. Now moving on to our strategic priorities. We set out at the beginning of FY '21 with 4 key initiatives to focus on for the year. We spoke about payments acceptance, we spoke about app engagement, global expansion and Zip Business. And for the rest of the presentation, I'll go into these. The first one was about payments acceptance. Our mission is to be the first payment choice everywhere and every day. We have to get Zip accepted into as many places as possible. And also in-store is a big focus for us because clearly, even though we have a huge weighting towards online, 90% of transactions happen in the physical world. The second pillar was around app engagement. We have to continue to invest to ensure we have Australia's leading financial app because that's where customers go. That's where we build deep connection with our customers. The global story, we'll continue to invest globally, and we'll talk about that. And the fourth one being Zip business and helping small business really grow post COVID. So as we drill down now into payments acceptance, we'll do a quick status update on how we're going. So just on the next slide, pleasingly, in this half, we've been able to become a principal issuer with Visa on the scheme, and we launched Tap & Zip, which is really a pioneering solution for Buy Now Pay Later, where Zip customers can tap with their phone anywhere Visa is accepted by adding the Zip virtual card into a Google Pay or Apple Pay Wallet. As we mentioned, it was one of the fastest deliveries that Visa has ever seen, and we had quite a number of squads working on this. And this is really imagining in-store. When we surveyed our customers, many of them said, "The reason we aren't using Zip today is because we can't use Zip in the grocery store, We can't use Zip to pay for fuel." So this really has delivered on the everywhere strategy as well as the everyday strategy by unlocking everyday spend. I'll talk about some of the interesting numbers that we're seeing already with these initial adopters. Moving on to the next slide. We've also increased our global network and merchant acceptance network across all regions. We've seen 74% growth in our merchants, and we now have over 36,000 merchants that can accept Zip customers in Australia. We've won great brands such as North Face, Speedo and Puma. New Zealand has been doing fantastically well. They brought on Auckland's Transport, showing that Buy Now Pay Later can enter many categories, as well as leveraging some of our relationships we have in Australia with Dick Smith and Kogan. I'll leave the U.K. for a bit later. And the U.S. has also done a great job. We'll go into the U.S. business very, very shortly. So that was the first pillar, which was all about acceptance, and we're doing a great job there. The next pillar was all around app engagement. And on the next slide, you can see that our apps are loved by customers globally. We've had 5.2 million downloads globally. And pleasingly, close to 2 million monthly active use, which is really the key metric. How many customers are logged into the app every month and using it to make a purchase, make a repayment, pay a bill, access the jobs to be done? Really strong ratings on the app stores for Apple Pay and -- for Apple and Google. And again, we've seen more growth in transactions. So customers are becoming a lot more engaged, which is great. Now we've got to keep growing these numbers, and we've got to keep growing the engagement because if we're not important to our customers, we can't win over time. And on the next slide, if we look at engagement specifically, we've seen a real step change in the business. We launched Tap & Zip really to unlock everyday spend in categories and merchants where Zip isn't accepted today. And we've seen early adopters transacting 6 times already in November. So really step-changing engagement and Zip becoming their preferred way to pay. We've also run an experiment this month with cash back so we can deliver additional value to our customers. And what we've seen in that bottom right chart is that our frequent users are now 3x more engaged than they were 3 years ago. So through investing in the app, through increasing the acceptance network, through adding jobs to be done and through issuing virtual card, we've really step-change engagement. And this is what we're going to continue to focus on, what are the monthly transacting users that Zip has. Because if people are using us every day, every week, every month, we are important to them, and we can do a lot more. So that was the second pillar. Moving on to the next slide. We now talk about global. Now global is a big story for Zip. We've got a great business over here in Australia, but our ambition is to become the preferred wallet globally. This phenomenon that we've seen in Buy Now Pay Later is truly a global phenomenon, and we are seeing incredible speed and adoption in most markets. Accordingly, we recently established a dedicated New Markets division that's being spearheaded by Tommy Mermelshtayn, our Chief Strategy Officer. It's a large team that is really capitalizing on a number of active opportunities through a mixture of investments, partnerships. This is going to become the focus for us as we move globally. Many markets are still very much underpenetrated. For the next 24, 36 months, Buy Now Pay Later is going to become a huge part of those markets, and we have to be there. This is being driven by the collapse of the credit card, the adoption of debit cards, the growth in online, and COVID has obviously accelerated that with expectations of $5 trillion in online spend this year. And the Millennials segment moving away from the unfair and broken credit card and towards digital wallets and interest-free wallets. On the next slide, if we go into the different markets. The U.S. has really been a growth engine for us. And every time we update the market, as you can see, the guys led by Adam Ezra and Brad Lindenberg are doing an unbelievable job. We announced earlier last week that the QuadPay app, which is our app in the U.S., was 25th on the Apple store. I just checked recently, it's now 16th. So it's really getting enormous traction, which is a great result. Revenue. The team did about $11 million over the month of October, which, if you look at last year, they're looking to do 3x that at least in the coming year if that annualized rate continues. Similarly, in transaction volume, the U.S. did $160 million. And again, if you just contrast that with the -- what they did last year, we're looking to double -- to triple those numbers. And with 2.5 million customers, just in October, the team had 325,000 downloads. And when we looked at the November numbers, they were doing over 15,000. So a really great result and coming into an app that again is loved and used by many, many Americans. A long, long way to go. And that's really been underpinned on the next slide by a number of strategic partnerships that the U.S. team have been able to deliver. As you can see, most recently, they brought on Fanatics and GameStop. They've also got a fantastic relationship with Fiserv, which is helping a lot of the go-to-market strategy. We've been investing heavily in the leadership team over there and have added quite a number of great leaders that helped the go-to-market. And just like Zip, this team invests heavily in innovation, and they were the first Buy Now Pay Later to introduce a Chrome extension to, again, allow customers to use QuadPay paying for outside the network. And again, it's a means to an end. These tools and innovation help us win merchants over time, and the guys have a really strong pipeline going into the next calendar year. And on the next slide, if we look at, again, around the globe, we're very excited to announce today that Zip is officially launching in the U.K. We were going to launch prior to COVID, but given what we saw there, we had to put things on ice. And we're very excited to announce that team, led by Anthony Drury, has now scaled back up and have done a fantastic job to launch today. They've signed a number of merchants. And we're really starting to leverage a lot of our global relationships, and we're seeing that from the U.S. into the U.K., from Australia into the U.K., and again, even from the U.K. into Australia. So being one of very few Buy Now Pay Later companies that can offer multiple markets through a single integration to merchants is going to put us in really, really good stead. We've got boohoo and JD coming on board. We've also been able to leverage a lot of the relationships that we've built over here in Australia and the U.S. such as Stripe and BigCommerce and Shopify to truly build a global platform. Why are we excited about the U.K.? Even though we are only entering now, Buy Now Pay Later is still a very small share of the online checkout and even smaller share of the off-line checkout. It is a market that has about $600 billion in retail spend and an online market that's about 3 to 5x the size of Australia. So we are -- we believe we are incredibly well-placed to deliver on our promise. We're going live with 150 merchants, as Philip said, and we will be investing a lot in the product strategy in that market. We will be starting with a pay in full. But Zip's mission is really to deliver interest-free installments, not just for consumers but for a small business, whether it's small dollar or large dollar, and handling all the complexity in the back end, which is risk, regulatory and conversion. So very excited to announce that and expect to announce progress over the next 9 months. And finally, the fourth pillar that we announced to market was around Zip Business. So just on the next slide, as we know, the small business community in Australia has about 2 million to 3 million small business. Some of them have been very much affected by COVID. That's a sector that employs around 7 million Australians and delivers close to 60% of GDP, so a really important sector for Australia for -- and for Zip. We started with small business. That was our heritage, and we're very excited to be able to go back out and really help small business grow during this post-COVID recovery. So today, small business can accept Zip as a payment type, but now that small business can also sign up to a Zip interest-free digital wallet to pay for their everyday expenses. We signed up eBay recently to offer interest-free and capital to those businesses. And we've got a very exciting pipeline coming up. The team led by Geof, who comes from Kabbage over in the U.S., is building a large tribe. And we expect by the end of this financial year that this segment will be a very large part of Zip. We're also pleasingly able to secure $100 million facility from Victory Park Capital, which was one of our earlier backers, and pleased to be able to bring them back on. And you should expect to see good growth coming from this part of the business and more announcement at the half year and full year. So just in closing. We had a great FY '20, but FY '21 has really kicked off and accelerated. We really believe that we've got all the building blocks in place for accelerated growth. And thank you for your support. Cheers.

Thank you, Larry. Are there any questions from shareholders on my address or Larry's presentation?

We've got 2 questions that have come in. There's an operational question and a question about share price. So first question is, "Shareholders are interested to understand whether the new Tap & Zip function will have a potential negative impact to the core merchant fee and merchant partnership business model."

Thanks, David. I might ask Larry or Pete to take that.

Yes. Great. So the solution that we've struck with Visa, we are a principal issuer, so we'll be earning interchange on those cards. And it's very much for an in-store transaction. So if you look at our volume, about 50% of our transactions are coming from in-store. Interestingly, if you look at the top places that customers are using Zip, it's at all the places where Zip currently isn't accepted, the grocery channel, the fuel and many others. So we are adding incremental revenue right now. We also see it as a great tool for us to go back in and strike commercial agreements with these merchant partners. Because of the value that we bring to these merchant partners, we identify the customers, and we have a great demand gen for retailers. I think the second piece to keep in mind is that Zip derives income from really 2 sources: merchant fee income and customer fee income, which is more than 50% of our income. So by customers using Zip more often, again, in places where they weren't using us today and truly incremental, which is additional revenue, but also becoming a much more engaged customer, we expect our monthly customer fees to also increase over time. So it's been a great result. We do have a long way to go. We're still rolling it out across our merchant network. But more engaged customers means more transactions, more revenue and more customer fees.

Thanks, Larry. There's a question in relation to share price. Shareholder would like to get a sense from the Board and MD as to why they think Zip Co's share price has not risen with the overall market over the past 2 months.

Pete, do you want to go?

No, it's fine.

Look, we can't really comment on the share price. There's a lot of trading volume, a lot of volatility. All we can do is really focus on the key results. And I think what we've shown you today is really strong results for the financial year '20 and acceleration in the first quarter, and again, in October. So again, we prefer not to comment on share price. All we're going to do is continue to work on the business and continue to make sure that we're going to do our best to deliver great results over time.

Thanks, Larry. There are no further questions at this point.

Thank you, Mr. Franks. That's the end of our questions. So I'll now move to the formal business, as set out in the Notice of Meeting. The first item of business is tabling the minutes of the last Annual General Meeting, which took place on the 29th of November last year, and the Extraordinary General Meeting, which took place on the 31st of August this year. If any shareholders wish to review these minutes, they are available for inspection with the company secretary, David Franks. Moving then to the formal business as set out in the Notice of Meeting. The Notice of Meeting was provided to all registered shareholders on the 29th of October 2020 and is taken as read. Voting on all resolutions will be conducted by poll. Proxies have been inspected, and all those validly lodged have been accepted. Proxies have been received, representing approximately 30.75% of the issued capital of the company. Undirected proxies or open votes that have nominated the Chair as their proxy will be cast for, that is in favor of each resolution in the Notice of Meeting. As I mentioned, voting will be conducted by way of a poll. In order to provide you with enough time to vote, I will shortly open voting for all resolutions. At that time, if you are eligible to vote at the meeting, a new polling icon will appear in the virtual platform. Selecting this icon will bring up a list of the resolutions and present you with voting options. To cast your vote, simply select one of the options. There's no need to hit the Submit or Enter button as the vote is automatically recorded. You do, however, have the ability to change your vote up until the time I declare voting is closed. I now appoint David Squires from Computershare as the returning officer for the poll and declare voting open on all items of business. The polling icon should soon appear. When it does, please submit your votes at any time. I will give you a warning before I move to close the meeting. The first item of business is to receive the company's annual financial report for the year ended 30 June 2020. The financial report and the reports of the directors and the auditors are now formally laid before the meeting. There's no vote on this item, and it's a discussion item only. The company's auditor for the 2020 financial year, Mark Lumsden, and also Nihaad Mohamed of Deloitte, are present to take questions relevant to the conduct of the audit and the preparation and conduct of the independent auditor's report. Are there any questions or comments on the financial report, the report of the directors and auditors on the management of the company, or otherwise relevant to the conduct of the audits and the preparation and content of the auditor's report to be put to the auditors?

There are no questions in relation to that.

Thank you, Mr. Franks. We'll then, therefore, proceed to the resolutions that are set out in the Notice of Meeting. The first resolution is adoption of the remuneration report, and it is as follows: to consider and, if thought fit, to pass the following resolution as an ordinary resolution, that for the purposes of Section 250R subsection 2 of the Corporations Act and for all other purposes, approval is given for the adoption of the remuneration report as contained in the company's annual financial report for the financial year ended 30 June 2020. If you wish to discuss this resolution, could you please submit your questions?

Thanks, Phil. I will note, there are a couple of other questions coming in, which are more general in nature, which we'll deal with at the end of the meeting. But in terms of Resolution 1, there are no questions.

Thank you, Mr. Franks. The proxies received in relation to this resolution are now on the screen, and I now put the motion. Shareholders can vote via the online portal. [Voting]

We'll now proceed to resolution 2. Resolution 2 is as follows: to consider and, if thought fit, to pass the following resolution as an ordinary resolution, that Mr. Peter Gray, a director who retires by rotation in accordance with the company's constitution and ASX Listing Rule 14.4, and being eligible, be reelected as a director of the company. If you wish to discuss this resolution, please submit your questions.

Once again, there's a couple of general questions but nothing specific on this resolution. We'll deal with those other questions at the end of the meeting.

Thank you. The proxies received in relation to this resolution are on the screen. I now put the motion. Shareholders can vote via the online portal. [Voting]

And I'll move to resolution 3, which is as follows: to consider and, if thought fit, to pass the following resolution as an ordinary resolution, that Ms. Pippa Downes, being eligible, be elected as a director of the company. If you wish to discuss this resolution, please submit your questions.

Once again, no questions on this resolution.

Thank you. The proxies received in relation to this resolution are on the screen. I now put the motion. Shareholders can vote via the online portal. [Voting]

And we'll proceed to Resolution 4. Resolution 4 is as follows: to consider and, if thought fit, to pass, with or without amendment, the following resolution as a special resolution, that for the purposes of Section 136 of the Corporations Act and for all other purposes, the constitution of the company be repealed and replaced with a constitution in the form of the document, which has been tabled at this meeting and signed by the Chair for the purposes of identification, effective immediately. If you wish to discuss this resolution, please submit your questions.

Once again, Philip, there's no question on this resolution.

Thank you. The proxies received in relation to this resolution are on the screen. I now put the motion. Shareholders can vote via the online portal. [Voting]

And we will proceed to Resolution 5. Resolution 5 is as follows: to consider and, if thought fit, to pass the following resolution as an ordinary resolution, that for the purposes of ASX Listing Rule 10.14 and for all other purposes, approval is given for the issue and allotment of 30,268 STIP, short-term incentive plan, shares under the employee incentive plan to Larry Diamond or his nominee on the terms and conditions set out in the explanatory statement accompanying this Notice of Meeting. Are there any questions in relation to this resolution?

Thanks, Philip. Once again, for the resolution, there aren't any questions. A few more general questions, which we'll deal with later.

Thank you. The proxies received in relation to this resolution are on the screen. I now put the motion. Shareholders can vote via the online portal. [Voting]

And we will proceed to Resolution 6, which is as follows: to consider and, if thought fit, to pass the following resolution as an ordinary resolution, that for the purposes of ASX Listing Rule 10.14 and for all other purposes, approval is given for the issue and allotment of 29,174 short-term incentive plan shares under the employee incentive plan to Peter Gray or his nominee on the terms and conditions set out in the explanatory statement accompanying this Notice of Meeting. Are there any questions relating to this resolution?

Once again, Philip, not to the resolution.

Thank you, Mr. Franks. The proxies received in relation to this resolution are on the screen. I now put the motion. Shareholders can vote via the online portal. [Voting]

And we'll proceed to resolution 7, which is as follows: to consider and, if thought fit, to pass the following resolution as an ordinary resolution, that for the purposes of ASX Listing Rule 10.14, Section 200B of the Corporations Act, and for all other purposes, approval is given for the company to grant $249,150 worth of performance rights under the employee incentive plan to Larry Diamond or his nominee on the terms and conditions set out in the explanatory statement, which accompanies this Notice of Meeting. Are there any questions relating to this resolution?

Thanks, Philip. No, not in relation to this resolution.

Thank you. The proxies received in relation to this resolution are on the screen. I now put the motion. Shareholders can vote via the online portal. [Voting]

We'll move to resolution 8, which is in the following terms: to consider and, if thought fit, to pass the following resolution as an ordinary resolution, that for the purposes of ASX Listing Rule 10.14, Section 200B of the Corporations Act, and for all other purposes, approval is given for the company to grant $239,150 worth of performance rights under the employee incentive plan to Peter Gray or his nominee on the terms and conditions set out in the explanatory statement, which accompanies this Notice of Meeting. If you wish to discuss this resolution, please submit your questions.

Once again, Philip, no questions on the resolution.