QuadPay, Inc. (ZIP) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Zip Co Limited Merger and Funding Announcement. I would now like to hand over to Mr. Larry Diamond, CEO and Co-Founder. Please go ahead. Ladies and gentlemen, we have temporarily lost connection with the speaker line. Please continue to hold and the conference will recommence shortly. [Technical Difficulty] Mr. Larry Diamond, please go ahead.

Thank you very much, and good morning to everyone, and welcome to this Investor Presentation as we talk about the exciting acquisition of QuadPay and the capital raise. Before I kick off, I'd like to make a couple of introductions. Speaking is Larry Diamond, CEO of Zip. In here with me today, we have Peter Gray, Co-Founder and Chief Operating Officer. We also have Martin Brooke, Zip's Chief Financial Officer; and Tommy Mermelshtayn, our Chief Strategy Officer, and who is the architect behind these transactions. I'd also like to welcome Adam Ezra and Brad Lindenberg, who are the Co-Founders and Co-CEO of QuadPay over in the states. So today is a very exciting day for Zip and a really transformational day for us and great to bring some positive news to the business and more generally. We'll go through today about the QuadPay transaction as well as the investment from Susquehanna. So if we just race through the presentation, and then at the end, we'll also open up for questions. So if anyone wants to submit questions, you can do that, and we'll moderate at the end of the call. Just kicking off on Slide 2. So really, for us, less than 12 months ago, we spoke about the Zip strategy. It focused on executing on our core business over here in Australia. We spoke to product expansion, and we spoke to international expansion. And so we're very excited that less than 12 months from when we announced that, we've been able to sort of demonstrate that we'll continue on that global expansion story and very excited to announce the acquisition of U.S.-based buy now, pay later leader, QuadPay. And we'll kind of go into QuadPay. It's a really exciting and really innovative business. And we'll also talk about the investment, again, which is an innovative and really great result for shareholders from Susquehanna, who are coming in with up to $200 million at a premium to the price. And that's by way of convertible notes and warrants. And I think the full story is post-completion, this business will be one of the world's really exciting global buy now, pay later stories. There aren't many that can talk to being able to offer buy now, pay later services in multiple markets. And this really cements us as being part of that family of global payment leaders. Post-completion, we will be in 5 markets, obviously, Australia and New Zealand, U.K., U.S.A., and we have a strategic interest in PayFlex. The combined business will also be run rating about $3 billion based on the March quarter. And if you kind of turn to Slide 3, this really talks about the scale and growth that combining Zip with QuadPay delivers for shareholders. Post-completion, we can just look at the March run rating about $3 billion. Of that, QuadPay did about $1 billion in run rate volume if you look at the March quarter and it continued to grow. Similarly, on the revenue side, they're contributing just under 30%, about 28% of revenue and they've got a really, really exciting revenue profile. And on the customers, I think that's probably the really exciting piece as well is these products and services are demonstrating the ability to acquire customers at a very low cost and build a long-term financial partnership with those customers. And it's really for us, why the buy now, pay later sector is such an exciting sector for all of us being able to access customers through this payment relationship and build a long-term partnership with them. As we combine the business as well, we will have over 400 staff. In Australia, we have just over -- now across the Zip Group, we have just over 350. And QuadPay has just north of 60 staff operating in America based out of New York, and they also have an operation in the Philippines as well. And I think finally, for us, having a global story without the U.S. really wasn't a global story. The U.S. market is about $5 trillion in sales. Well north of $500 billion is online. And that talks to a market that's 15x to 20x the size of Australia. And if you look at the growth and the excitement we've been able to bring to the Australian market, you can just imagine how much we can bring together with Quad over in the U.S. In terms of the summary of the transaction, we started -- if you kind of cast your eye back to the history here. We acquired the PartPay Technology business last year and as part of that inherited stake in QuadPay. And we started talking to the guys probably about 6 months ago and really got pretty close to announcing something pre-COVID. Obviously, COVID took a lot of us and Boards right around the country -- around the world to really rethink how things are going to play out, and we put a pause on the transaction as we looked at what was going to happen, and we're very pleased to see the resilience of the sector over the last couple of months, not just in the flight to online, but also in the credit performance. And so for us, that gave the Board the confidence to reengage, and we moved pretty swiftly to execute the transaction, which needed not just obviously securing terms with the QuadPay guys, but also making sure we had a strong funding partner. So this was designed very much as a merger ratio. And post-completion, the vendors of Quad will have about 23.3% of the combined group at an implied enterprise value of just over AUD 400 million. Pleasingly as well, this is a win-win result for both sides. It rewards value that's being created by the QuadPay team over in the states and equally to Zip shareholders on both the revenue and transaction multiple basis is accretive. We will -- as we look at QuadPay, the business, really exciting business, started out in 2017. So really only 3 years ago, but if you just look at what's happened in America with buy now, pay later, 3 years ago, it really didn't exist. There was traditional consumer finance models. And so what we've seen happen in 3 years is quite remarkable. But again, I'm sure the guys will say, really only, only getting started. It was founded by 2 Australians actually, Brad Lindenberg and Adam Ezra. And later in the presentation, we'll ask them to introduce themselves and tell us a little bit about their history. They're based in New York. And really, one of the top 4, top 5 consumer finance buy now, pay later models over in the states. But what really has been attractive to us is just they're focused on innovation, really leading the pack here in terms of innovation on the product and customer side, and we'll talk about that shortly with their virtual card technology. The rationale, as I've touched on, is being able to execute quickly on its global expansion story, the buy now, pay later phenomenon that we've seen here in Australia and the version of credit cards, and the shift away from interest-bearing credit cards towards interest-free installments, we see as rapidly evolving, and it was really important for us to have an exposure to that market. And this, we felt, was the quickest way to enter the market by partnering with a really solid business that was on a really great growth curve. The other important piece of the acquisition rationale is, obviously, as we go for growth, partnering with a business that has really strong economic fundamentals. And the -- if you look at this -- at the QuadPay business, how they derive income, the cost of goods sold and the unit economics, it's a very exciting business. And if you look at their net transaction margins, they would be at the top of the pack there with around 2%. So really strong unit economics, which provides a great foundation for us to scale in the U.S. and drive operating leverage to drive profitability over time. The other feature that we saw is really exciting for us was we did see them as a category innovator in the payment space. They're really one of the first to leverage virtual card technology in partnership with Stripe to issue credentials and allow customers to transact anywhere in installments online and in-store. Since then, we've seen a number of players adopt some of that technology. But that's the foundation of this business, founders that are all about innovation. What we have today is not necessarily what we're going to have tomorrow, and being ahead of the pack to compete is really, really important. And I think the other attractive feature about this transaction is the world of payments is large. There are some big players out there, the likes of PayPal and so forth. And really, it was important for us as we take on the payment elephants to build a coalition of founders, a team that can wake up in the morning energized, wake up and really want to drive growth. And so really pleased that we're able to partner with Adam and Brad, founder-led, they have a great team over there. We spent a lot of time working with them during this process as we think about integration post-transaction and are really excited about the caliber of individuals they brought across their management team, marketing, product, technology, but also the founders themselves. The other piece of the transaction is the Susquehana Investment, and we'll talk about that a little bit later, but the highlights really are a partner that has come on board is a U.S. growth equity investor who are able to work creatively with us to deliver flexible capital at a low-cost at a significant premium to the current share price relative to a traditional institutional placement. Documents are signed, of course, but the transaction is subject to a number of conditions and largely shareholder approval, which will happen at the EGM in the next short while. So we'll now jump on to the QuadPay business, and we'll spend a bit of time just understanding the QuadPay business and why it's so attractive for Zip and the Zip shareholders. First and foremost, this is a business that has proven they can scale, proven they've got the ability to move quickly. And if you look at their growth, it's been really phenomenal. Quick summary of the business, at the end of March, they had 1.5 million customers on the platform, they're now well north of that number, over 3,500 merchants. And really a strong app. If you look in the app store towards December, they were bumping up with the likes of Klarna, Affirm and Afterpay in our top 100 app, and that's really a big focus for them. The app experience is everything, and we've been pleased by the customer experience that these guys have been able to deliver. At the end of March, they were run rating about AUD 70 million for the quarter. And when you add that to Zip's $180 million, takes us about a $250 million number, which is really great number for the business. And we're annualizing at just under $1 billion since then. And the other big piece is around differentiation. This business for us was different and it was better. They are unique when you look at some of the peers out there, as with the focus on innovation. The ability to pay installments anywhere, not just online but also in-store by adding Quad into Apple Pay and Google Pay, they've been able to demonstrate really strong customer engagement metrics from this product. If you look on Slide 10, you can just see here really how the last 12 months have been really incredible, month-to-month growth rates of 10% to 20%. And as they keep telling us that they are only getting started, and the pipeline will be very strong. It's a very large market, and we need to continue to kind of drive growth here. At the end of December shopping period, you can kind of see there, they were doing about AUD 90 million to AUD 100 million. And if you look at Zip at the time, we were doing about just under AUD 220 million. So really, really exciting there. On the merchant side, they have 3,500 merchants. Their model has been a little bit different to perhaps some of the others out there, probably less focused on the SMB channel and more focused on quality merchants with TTV, mid-market and enterprise, and they have some really strong merchants there. Really excited by the pipeline as well. And as we come together as a global business, the ability to sign merchants, do a single integration and offer them exposure to multiple markets we see as a really big draw for us. Certainly, one of the reasons we were able to transact with Cotton On recently, being able to offer them a service, not just in Australia, but in New Zealand, U.S., South Africa and the U.K., and we think that's a really important piece to the merchant proposition. In terms of the product construct, this is a paying [ for ]. It's interest-free, you're paying installments over 6 weeks, all terms are interest-free. Merchants are paid up-front and then customers pay back over time, and very similar to the Zip product over New Zealand paying [ for ]. Again, a product that we see as a fantastic product for scaling globally, entering new markets, acquiring customers very seamlessly and frictionlessly. But as you can see in Australia, we are -- we -- our mindset around the types of products that we can offer are not static, and we see an opportunity really to extend product services over in the states. Now there are 3 ways to pay with QuadPay. They have merchant integrations online, again, leading the way in interest integration technology where you have the [ widget ] on the product page, the ability to check out next to Visa, Mastercard, PayPal. That's on the left through an online integration. In the middle there, you can see the app. And that really is where they pioneered shop anywhere which is the ability to, from within the app, reach out and go to Walmart, Amazon, any of these other merchants and pay an installment through a really unique customer experience. Interestingly, in Australia, we delivered a similar service just the last couple of months for customers during the COVID period. These guys rolled that out in early 2019. And also in-store, again ahead of the pack here, integrated into Apple Pay, Google Pay and without the need for [ pause ]-integration, customers can essentially tap and pay after being onboarded. And so with these 3 models, they've been able to demonstrate really strong acquisition across all of these channels, but also really strong engagement, and really pleased by the conversion we've seen across the business from onboarding through to these different payment journeys. As we touched on earlier, these guys really pioneered the QuadPay Anywhere, or in Australia what we call the shop anywhere solution. We're one of the first to market. They've got a really strong partnership with Stripe issuing over in New York and did a lot of work to bring this to life. It, as I said earlier, allows you to pay in installments anywhere online or in-store. That's very scalable. It's also allowing them to integrate much faster into merchants, and leveraging the Visa network is a really smart way to scale. Here in Australia, we adopted a bit of a similar -- a different approach where we spent the last 6, 7 years integrating into a lot of retailers, which required us to invest a lot up-front in CapEx around plug-in integration, POS integration, we definitely view it as a smarter and much faster way to scale. And then finally, on the tech, I mean, tech is really important. And tech is the bedrock of how you scale. A bit of background here. We acquired the PartPay business last year in 2019, working really closely with John O'Sullivan. And they've been able to build a really lightweight, flexible technology stack that could deliver installments into multiple markets, and they ported not just into New Zealand, South Africa and the U.K. What was interesting is they started a relationship with Adam and Brad many years ago, as they were looking to enter the U.S. market how they could move quickly, and they formed a partnership early on in 2017 and actually leveraged the same stack to enter the U.S. market. So Zip's international platform is built on a similar code base. Since then, the team in the U.S. has extended significantly, particularly with the Anywhere solutions. And so this portable platform, a lot of similarities, we believe, is going to be really powerful for us as we scale globally. And as I mentioned earlier, we have, just in the last quarter, built our single merchant interface, which is consolidating all regions into a single integration point and will help us scale much faster with global merchant partnerships. We're just moving to Slide 16. So with any mergers, what's really important is you can have great fundamentals, great metrics, great technology. But at the end of the day, if the 2 parties can't work together, call each other in the middle of the night as we fight in the trenches and build a massive business, it really doesn't come together. And we're incredibly excited to have found common partners culturally aligned with customer innovation, customer centricity and responsibility in the DNA. Now I've personally known the founders for many years. And then professionally, we've gone to them over the last 1.5 years, and we see a lot of similarities across the business. I think what I'd like to do now is probably hand over to Adam and Brad. And I think it'd be great to hear from the guys a little bit about their background and also, how they think we can build a massive business over in the states. So I might hand over to the guys now.

Thanks, Larry, and good morning, everyone. I'm very excited to be part of the Zip family. I wanted to introduce myself and Adam, and tell you a bit about the journey that we've been on. Our background in the fintech space and the opportunity that we see here in the U.S. Adam and are I both Sydney boys. I've been here in New York now for 6 years, and we happen to go to the same school as Larry. Best way to think about Adam and myself is, he's the fin and I'm tech in the fintech, 2 ingredients that are very important in building a large global business in the payments area. I've personally been involved and sold a number of companies in the past in the payments, e-commerce and media sectors. These include CalReply, which is the world's leading mobile calendar marketing platform with over 4 million users, which was sold to ROKT, which is now $100 million revenue referral marketing business where I served on the Board of Directors and as a Chief Strategy Officer. As a background, I'm an engineer. I'm passionate about tech, about innovation and building simple products that millions of people can use at scale across the globe. And that's exactly what we like about the Zip team. They're just as passionate as we are about our growth and product. And as you can see from what we've built here, it's highly differentiated and unique in the marketplace. The U.S. market is large. We're very excited to be addressing a $5 trillion a year opportunity, where buy now, pay later accounts for a tiny fraction of this at the moment, and we see huge upside potential with websites trading around 20% of volume through these types of platforms after you go live. As the stats show, our growth confirms this. The U.S. consumers are looking for a better way and a fairer way to pay as an alternative to credit cards. And that is the exciting landscape that Zip and QuadPay now confront. I'll throw it over to Adam.

Thanks, Brad, and thanks, everyone, for having us this morning. Look, my background's in consumer retail finance debt and marketing. I've got experience in private equity and investment banking. Worked previously at Illyria, and started my career with Larry actually at Macquarie Group in the investment banking division. What really took me over in the U.S. was subsequent experience in the retail fashion space where my business is developing multiple proprietary labels and distributing brands over here. We worked with all of the majors. That's where I cut my teeth on e-commerce, but also, it was bringing the skill sets together across finance, e-commerce and retail, which I guess has helped in developing this business. And look, completely echo what Brad said about, firstly, joining forces with Zip and the opportunity that's in the U.S. market. It's truly enormous, and I believe together, we're a much stronger platform and very well positioned to capitalize on this changing landscape of payments. We've fortunately had a number of options in terms of choosing our path, but to be honest, this partnership has made the most sense strategically in terms of building a truly global platform and is positioning us, both businesses, for long-term success. I'm happy to talk a little bit about the risk management element of the business. And look, that's an area that we've [ invested ] in significantly since we started this business, and it's an area that we're going to continue to. It's really what ultimately is going to drive profitability over the long term. We've been fortunate that in the U.S., the credit bureau system is far more mature than other markets like Australia. So there is a lot of data that we're capturing on the consumer by actually completing soft credit checks on all applicants. But we're also incorporating alternative data sources, looking at data at the merchant level, our digital footprint data, and all of that is being leveraged for our machine-learning model. So it has become this part of the business very, very sophisticated. Like Zip, we're using that credit bureau data, which ensures that we understand who is using the platform and ensuring responsibility and use of this product. And then we also are using a number of very sophisticated or leveraging very sophisticated identification, ID verification source. They also have minimal friction. So it's -- when the customer is checking out, we're able to do this in split seconds on the fly without the consumer really knowing what's happening. So one of the beauties of our model is really this -- the short payment cycle, which gives us a very, very quick feedback loop. So within 14, 15 days, we really have a good gauge as to the performance of a merchant if we're onboarding someone very large. And we also have the ability to very quickly tweak our origination or risk methods if we do see unusual behavior or a change in delinquency level at the merchant level but also at the customer level as well. Performance through this period has been something that we were, naturally on the outset, concerned about but has held up incredibly well. It's actually been surprising to see how it's all played out, which is actually just given us a lot more [ comp ] around our thesis and how this product and model performs through down cycles. I think it's also a testament to the work that the team has been doing around risk management. And it's certainly an area where we think there's still plenty of room to improve. But so far, it's going excellent. I think I'll now hand back over to Larry.

Thanks so much, guys, and appreciate the late hour over there. No doubt, we will be getting used to this over time. And I think what Adam sort of touched on is we genuinely believe the 1 plus 1 equals 3 here. And again, comforted by similar trends we're seeing in the states around the resilience of BNPL, the flight to online and the shift away from traditional credit. Before we open to questions, I think we'll spend some time just on the SIG investment. Really excited about this investment and partnering with Susquehanna Investment Group and Heights Capital in particular. And I've seen a few questions come through on this, which we can tackle afterwards. So at a high level, as we thought about the U.S., and we thought about the next phase of growth, it was really important to sort of tick a couple of boxes. One was start to bring onto the register, some leading U.S. growth equity investors. We obviously need a partner that can meet the timetable and a partner that is -- that we can work with over time, and very privileged to have worked with [ Dan ] and the team over at SIG. SIG, is One of the largest privately held financial services firms. This side of the business is in the long growth equity side. And they've been involved in some really exciting investments, Credit Karma is a big fintech over in the states. Payoneer, another payment company. And everyone's hot flavor of the month Bytedance, which is behind Tik Tok. The -- if we move on to just what we've been able to secure. So it's up to $200 million, which is a mixture of $100 million convertible notes and $100 million in warrants. As we looked at the type of investment to bring into Zip, we obviously looked at a range of opportunities, whether it's straight equity placement. And what we were looking for was a solution that helped us achieve a premium to where the current share price was because we genuinely felt that as a Board we were undervalued, and particularly with the combination of Quad and very pleased to be able to structure this solution. A lot of hard work and effort has gone into this. It's innovative, definitely one of the first for Australia, although quite common globally, must I say. In terms of the actual specifics, the first piece is a convertible note of $100 million. It is a 5-year maturity with a ceiling of $5.53, which was at 50% premium to where we were prior to going into trading halt. And the intention is that the holder will convert every 6 months or so. If you kind of work it out, it's a very low-cost of capital solution for us starting out at sort of 1% to 2%, and if you held over the life, about 3%. So really, really strong there. And obviously, subject to shareholder approval in the next month or 2. The second piece is a warrant, again, $100 million with a exercise price of $5.16, which was about a 40% premium to where we're trading, and that's a 3-year money. So a combination of these is really going to help us achieve our growth story, not just locally, but particularly abroad. And obviously, a majority of those funds support and accelerate our growth overseas. QuadPay is well funded. But with this firepower, we believe that we can grow even faster. As I said, we'll probably leave -- there's some specific questions on this, which I'll give some more airtime to shortly. So I think in summary, really excited about this. It's been a transformational deal for Zip. Very pleased to be able to move so quickly on the global story, which we told you guys just less than a year ago. The combined business will become one of the global leaders in BNPL, but clearly, a long way to go for us to be bumping up against some of the payment giants like PayPal that we believe we can get to over time. And you're certainly able to read some of the rest of the terms in the deal. Probably the other call out, which I didn't touch on is, we've also included a USD 60 million incentive for the founders, which is very -- which aligns a pretty strong growth targets over the next 24 months, where to achieve all of those incentives, they really have to achieve about a $1.2 billion per quarter TTV, which is about USD 4.8 billion. And you can just imagine how big a business we would be by then and the value that would deliver to us. We thought that was really important to align incentives. And as the guys sort of touched on, they're absolutely here to stay as we tackle multiple markets to try and build a really strong global brand. The transaction is obviously subject to a number of conditions. We'll be sending out a Notice of Meeting for the EGM, holding that, and then looking to close the CPs. So thank you very much for that initial part of the presentation. We will now hand over to Martin, who will moderate Q&A. And you'll probably hear from myself, Pete or Tommy as well.

[Operator Instructions] The first question really is, why now? Why are we doing this transaction in this environment?

All right. Thanks, Martin. Back to me. Look that -- that is a good question. And obviously, things have been quite volatile over in the markets. And certainly, as we sort of touched on earlier, when we were looking at this transaction, pre-COVID, we actually put the pause on the transaction while we assessed as a Board customer demand and customer performance with regard to credit. And obviously, we're very supported by the trends that we saw. For us, what's important is about the long-term thesis. And I think that holds absolutely true for us. We're not necessarily worried about the short term. We are about the long term. And for us, the resilience of the BNPL has actually probably invigorated us as to the size of the opportunity. The U.S. market is incredibly big. And if we didn't move now, we felt that we would lose out. It is an absolute land grab. So for us, timing, although looked incredibly challenging 8 weeks ago, we were very fortunate to be able to close quickly, and having a funding partner come in as markets recovered was really important. The business is also still incredibly strong. Growth continues, credit performance continues, capital is recycling really quickly and the unit economics during this time have been holding up. So our view is that with BNPL as a sector that really didn't exist a few years ago, in the next few years, it's going to look incredibly different. If you look at the share of checkout we're seeing over here in Australia, some merchants can have 20% to 40% from different buy now, pay later players. You can expect a similar trend to happen really quickly. And so we felt that the time was now. Things fortunately came together, being able to execute the transaction quickly and get funding. So yes, it's a little bit about that one.

Thank you, Larry. Second question, convertible notes, obviously, a very innovative structure. How did we end up with that structure? How did we choose Susquehanna? What process did we follow?

I'll take that one, Martin. So I think the important call out is that this deal wasn't done overnight. So as a Board, we were certainly very rigorous in looking at the value equation on this instrument. And we genuinely believe this capital is in the best interest of shareholders. So we took a view, as Larry touched on, that we were significantly undervalued. And this instrument was a better outcome for shareholders than perhaps a placement at a discount. So we actually ran a process. We got quite a large number of term sheets on similar structures or alternatives for the Board to consider. And ultimately, we were very impressed by the team at Susquehana. And certainly, we really did sync with them from the early meetings. It's important to call out that this is their first deal in Australia. So we were able to secure great terms as they sort of looked to establish a beachhead here. Hopefully, it's the first of many for them. As Larry touched on, it certainly is a very innovative structure and the first of its type in Australia, although it's somewhat more common in the U.S. So we get capital or -- at very low cost and flexible [ now ] so that we can utilize it to drive growth and take advantage of the massive market opportunity that we're all very excited about. The capital was given to us at a premium to where we were trading, which limits dilution and without the need for any control or governance rights that may accompany similar investments under different structures. Effectively, it's the cash call in the business also because Susquehanna can take interest in shares and regular installments at par as opposed to raising on-market at a discount. And finally, it really did see an alignment of interest between us and Susquehanna. They make their returns if the share price runs. So they're very aligned in terms of -- with Zip and the rest of our shareholder interest, which really did demonstrate a validation of our outlook and view of the world. So we're sort of very pleased to take that investment and partner with the team there.

Thanks, Pete. Next question, obviously, the U.S., big market, very competitive. Maybe talk a little bit about the competitive environment in the U.S. and then why Zip [ stroke caught ] a win.

Maybe we hand over to -- I mean we can have a go at answering, but I think the guys are at hot seat.

We got to give it to the main men.

Adam or Brad, did you want to take this one?

Yes. Look, the environment there is very...

Yes, Adam here...

Sorry. Brad here. The environment here is still very much in its infancy. We see a huge opportunity to scale the business and to really build a differentiated product. Our business model not only relies on the online checkout experience, but we also have this app experience, which allows consumers to use QuadPay wherever they like. And so you're not necessarily competing directly when someone can download the app and use it on Amazon or use it at Whole Foods or buy on sites that you aren't necessarily integrated with. So we have like a flywheel approach where we're trying to sign our merchants online, get them integrated at checkout and then provide those customers with a much broader experience where they can use QuadPay Anywhere. So when you bring those 2 concepts together, it does provide a very differentiated experience that doesn't have the same competitive dynamics as a pure-play online model.

Okay, thanks. And Adam, why don't you guys ...

Just adding to that. No. I'll just add, innovation is absolutely key and not dissimilar to Zip. It's been at our core, and it's been key to getting us to this point today. We've got a very healthy road map of tools and features, which are all aimed at enhancing the consumer experience and driving for mentality and results for our merchant partners. I think longer-term innovation is absolutely critical. And I think we've been able to demonstrate up until today some of the things that are unique that we've been able to do, whether it's the ease of integration where you can deploy QuadPay in-store or online very, very quickly, far quicker than the traditional or the legacy approach to implementation. The act -- there's many things that are in mind, which we think will just continue differentiating us and furthering our position.

Thanks, guys. While you've got the floor, probably another one for you. Maybe if you could talk a little bit about the revenue mix between sort of customers and merchants and sources?

Yes. So look, our core model is still the checkout model. So we're predominantly making revenue from merchants. They pay a fee at discount rates. Our sticker rate is 5.9% plus $0.30. And then we're also looking at other ways in which we can monetize other channels, which we can monetize. But right now, it's predominantly being paid by consumers -- sorry, by merchants. Just to clarify that, by merchant.

Sorry, guys, that was -- I had us on-mute while we were listening to Brad and Adam. Next question was one for Larry in terms of what's our product strategy for the U.S.? Do we plan on taking their products across?

Yes. Thanks, Martin. And apologies there. I was talking for about 5 minutes while we were muted.

I think you maybe got muted.

So as I sort of touched on earlier, the paid-for model is a really powerful model to enter markets and acquire customers at a very low cost of acquisition and obviously, build a relationship with them over time. And that's not just America, but many other jurisdictions. That's why we [ haven't ] seen Afterpay scale, PartPay and QuadPay as well. The Zip Pay product we have here in Australia, which is more an account concept, has also been very successful. It does have a different mix in merchant and customer fees, but it's a model that is actually quite widely used in other geographies such as Asia and Europe. So for us at the end of the day, what we're talking about here is a couple of levers, it's variables, whether it's the repayment lever or the fee lever, it's actually relatively easy to adapt over time. We think right now, it is the right product, absolutely. But over time, we are a product house, and how we evolve products, how we evolve the customer relationship, the products that we can offer to them are really important, and we've done that over here in Australia. And we will absolutely retain an open mind as to how we roll that out. Critically, it's important for us to have a technology stack that has the velocity, ability to scale and adapt. And that's exactly what we have in the QuadPay platform. So that gives us option value as we look to partner with different parts of the market.

Thanks, Larry. Maybe another question for you or maybe or even Tommy. Are there any other markets in the hopper? Where else are we looking to expand?

This is Tom. Thanks for the question, Martin. We have a huge opportunity now in the U.S. We still have lots of growth and upside here in Australia, New Zealand and the business we're trying to build in the U.K. So I think from a management perspective, we have enough on our plate right now and a huge opportunity with the markets we currently play in.

Thanks, Tommy. Maybe one for Pete. Can you share a little on how Quad are currently funded?

So thanks, Martin. As Larry touched on, Quad had significant capital to fund the business on a good runway. We've since raised some money to accelerate that growth. On the debt side, they have an off-balance-sheet warehouse with a top line limit of around about USD 40 million. Currently, utilization is under $30 million of that facility, so they have some nice headroom for that facility to [ be give you ] this type of receivable if they obviously recycle very quickly, which reduces the need to have a warehouse the size of the Australia business, for example. The guys are well advanced in terms of finding -- moving to a new funder with a significantly larger limit. So very pleasingly, as Adam touched on during the call, the performance of the receivables remains remarkably strong in the face of COVID and the downturn in the economy, and we love the ability that the guys had to flex the scorecard and the algorithms to deliver great outcomes. So very, very comfortable where we sit with regard to funding those receivables.

Well, thank you, Pete. We might just take 2 more questions. We're sort of running out of time. Next one is maybe for Adam, Brad. We see a lot of interesting news at the moment happening in the U.S. Obviously, COVID is a very different experience we've had in Australia. What's the impact that you guys have seen in sort of COVID current events on performance in the U.S.?

Yes, Adam here. I'll take this one. Look, we definitely saw a slight dip going into the second half of March. I think at that point in time, there was a bit of panic generally and not knowing what it all meant. Fortunately, the government responded very, very quickly with meaningful stimulus, and it's something that they're, it appears, they're very committed to ensuring there's sufficient stimulus in the economy to keep things moving despite the obvious increase in unemployment. We took quite a defensive approach just obviously entering very uncharted territory just not wanting to be overexposed. I guess it was a watch and learn. And as I mentioned earlier, there is a very quick feedback loop, and the performance had held up very, very well. April, the second half was naturally stronger, far stronger than the second half, and that momentum has continued following. It's -- things seem to have really leveled out, and this is, I think, just a function of being a digitally focused business. We're very, very fortunate that there's this acceleration and transition from off-line to online because everything is shut. At this point in time, our installed business is very nascent, so things have held up relatively well.

Great. Thank you. And maybe the final question is really one for Larry. Where do you see Zip in 3 years' time?

Thanks, Martin. For us, the opportunity before us is incredibly large. And as we sort of talk about here internally at Zip, shame on us if we don't execute on this because at the end of the day, coming up with the right product-market fit is kind of one thing, but the timing, which is -- tends to be external as well is not necessarily in one's control. And I think we are very privileged that the product solution that we come to market with and the shifts of sand that we're seeing, I guess, across Australia and globally are providing enormous tailwinds. I think for us as a business, in 3 years' time, ambition to have a global brand, a global platform that is respected as a true payment leader with innovation and customer centricity at the heart, a large engineering practice that's obviously behind that that gives velocity and the ability to compete in markets. I think we've definitely got a really strong presence in our core markets with a meaningful share. And customers today, we have about 3.5 million, but you look at some of these growth rates and the expectations that we've set with the QuadPay team. And just cast your eyes at how many customers PayPal has hundreds of millions. And again, these products have demonstrated that there is a need. They have demonstrated the ability to sign up [ on-asset ] checkout even faster than some of the traditional payment methods, and there's no reason why we can't build something equivalent over time. Obviously, not a forecast, but these are ambitions, and that's our North Star. And ultimately, the app, an app that we all can be incredibly proud of that builds deep, deep customer engagement. So I think that's probably it for me. I'd like to thank everyone for kind of listening in. Of course, investors, feel free to reach out if you'd like to go deeper on any of the structures. Obviously, some of this takes a little bit of time. And we -- and thanks for your support. And touched on for those in Australia, we look forward to seeing you at the EGM, which will happen very, very shortly. Thank you very much.

Thank you.

Thank you.