Zip Co Limited (ZIP) Earnings Call Transcript & Summary

Good morning. Welcome to the Annual General Meeting for Zip Co Limited. My name is Diane Smith-Gander, and I'm the Chair of the company and of today's meeting. It is now 10 a.m., and as there is a quorum present, I declare the meeting open and confirm that the AGM has been properly constituted. I'm joining you today from Sydney on the lands of the Gadigal people of the Eora Nation. I acknowledge and respect their continuing culture and the contribution they make to the life of the city and region. I pay my respects to their elders, past, present and emerging. Many of you are joining this meeting virtually from other parts of the country, and I also pay my respects to the traditional owners of the lands on which you are participating. Thank you, shareholders, proxy holders and guests for joining us via the virtual meeting platform. All attendees can watch a live webcast of the meeting. In addition, shareholders and proxy holders can ask questions and submit votes. In opening the meeting, I would like to introduce my fellow Board members and the management team of Zip Co Limited who are attending, including Mr. Larry Diamond, our Managing Director and CEO; and Ms. Meredith Scott, newly appointed Nonexecutive Director up for election today, who are both joining us from New York. And with me in Sydney are Mr. Peter Gray, Executive Director and Group COO; Mr. John Batistich, Nonexecutive Director; Mr. Martin Brooke, our Chief Financial Officer; and Mr. David Tyler, our Global General Counsel. Also in attendance are our company secretaries, Mr. Tai Phan and Mr. David Franks; and Mr. Chris Dedrick representative from Computershare Investment Services. Mark Lumsden from Deloitte Touche Tohmatsu will also be available to answer any questions on the audit, Zip's accounting policies, Deloitte Touche's auditor's report and their independence. There are no apologies for me to read for this meeting. The agenda for today's meeting is as follows. I will first provide the Chair's address. I will then hand over to Larry Diamond, who will provide the Managing Director and CEO's address. We will then go through the formal items of business included within the Notice of Meeting, including conducting a poll on all resolutions. Following the formal part of today's AGM, 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 and proxy holders will be able to enter questions into the online question portal. Our company secretary, Tai Phan, will now run us through the question process.

Thank you, Chairman. Security holders and proxy holders can submit questions at any time by submitting a written question using the online platform or a verbal question via telephone. [Operator Instructions] If you experience any technical issues, call the number on your screen. Please note that while you can submit questions from now on, we 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 may not get to all your questions. If this happens, we will answer them in due course via e-mail or placing responses on our website. Security holders and proxy holders may vote on the items of business via the Computershare online platform once the polls are open. When the Chair declares the polls open, a voting icon will appear on your screen, and the items of business will be displayed. To vote, press the vote icon, and the voting options will appear on your screen. You can then select your voting direction and a tick will appear to confirm receipt of your vote. There is no need to hit a submit or enter button as the vote is automatically recorded. You will receive a confirmation notification on your screen. To change your vote, select click here to change vote and press a different voting direction to overwrite. You may change your vote up to the time the polls are closed after the meetings are finished. Diane will now provide the Chair's address.

Thank you, Tai. Let me just note that voting today will be conducted by way of a poll on all items of business. In order to provide you with enough time to vote, I will now open voting for all resolutions. [Voting]

So before we move to the formal part of the meeting, I'll make some comments on performance in the financial year to 30 June 2022 and reflect on our areas of focus as a Board. I will then hand over to Larry Diamond, Zip's Co-Founder, CEO and Managing Director for his remarks, including an update on the company's current performance and outlook. As I reflect on the past 12 months, it has been another year of significant growth for Zip in terms of revenue, number of customers and merchants. Your company delivered revenue of $620 million, up 57%, and ended financial year 2022 with 11.4 million customers and over 90,000 integrated merchants globally. These figures demonstrate the increasing relevance of our products to both customers and merchants. In the first half of the year, Zip expanded into geographies outside Australia, New Zealand and the United States as part of our global growth strategy. Markets shifted significantly towards the end of the half, perhaps faster than most observers thought really possible. This has required a review of our strategy. While it is clear buy now, pay later is relevant globally, in light of these changing market conditions, your Board recalibrated strategy to focus on Zip's core markets of Australia, New Zealand and the United States. The clear aim is accelerating the pursuit of positive group cash flow. We are now well advanced in a strategic review of our noncore markets and reallocating capital and resources accordingly. During the year, Zip also announced both the acquisition of Sezzle as part of the U.S. growth strategy and then the subsequent mutually agreed termination of the proposed transaction. Your Board determined the changes to the broader macroeconomic environment and market conditions post signing made it in the best interest of the company and shareholders to mutually agree to terminate the proposed acquisition. In the year, a combination of both internal and external factors contributed to credit losses increasing beyond our target range. Zip responded by adjusting risk settings and implementing portfolio management and collections initiatives to lower credit losses back towards target levels. Due to Zip's product construct and therefore, short recycling of the loan book, we've been able to deliver results quickly. In the U.S., credit loss rates for the most recent cohorts in this market are now in line with target levels of below 2% of TTV, and losses in the Australian business have peaked and are declining in line with expectations. In a rising interest rate and inflationary environment, Zip's products continue to provide useful cash flow and budgeting solutions for consumers and more value for merchants with benefits of new and repeat customers and increased order values. Through our unique offering and partnerships with merchants, we provide short- and long-term lending across both open and integrated networks, giving our customers the flexibility to manage payments of all types, from daily necessities to larger purchases. At Zip, we recognize that our obligations extend beyond simply our product and financial performance. In the previous financial year, we launched our strategic framework for sustainability, Zip It Forward, with initiatives delivering on our environmental, social and governance considerations and we have progressed this meaningfully in financial year 2022. As a Board, we've continued to assess our performance and take the time to bring together the right mix of skills and experience to support the business and its strategic priorities. This is critical to steering the business with confidence, and it's our intention to expand the Board as we continue to grow in our core markets. Pippa Downes left the Board during the year, and we welcome Meredith Scott as Chair of our Audit and Risk Committee. Meredith will speak to her profile later in the meeting to support her election. But suffice to say, the Board has been well strengthened by Meredith's extensive audit experience, built on more than 3 decades with Ernst & Young. We're devoting time to developing robust governance frameworks that guide the business as it scales, without hindering innovation and speed. The Board ensures that we have the ability to manage and mitigate key risks. This year, we undertook an external review of Zip's risk management framework to ensure that it remains appropriate. During the year, we further strengthened our capabilities with additional investments in our risk and compliance functions and cybersecurity resilience. This is particularly important as we scale. Your Board and senior management constitute a Cyber Security Council, which meets monthly under Nonexecutive Director John Batistich's leadership. John's energy and attention to this important topic is really noteworthy. Zip has always been proactive in our approach to our obligations as a key player in financial services, and we are attuned to the regulatory environment. Your company takes seriously its responsibilities to consumers and supports appropriate fit-for-purpose regulation. Responsible lending and genuine care for the consumer is in our DNA, reflected in our practice of conducting credit and affordability checks on our customers. Given this approach, this may give us an additional operating advantage should regulation develop across our core markets. We engage actively with regulators, including with Treasury for their current review in the Australian market and in the U.S. where the recent CFPB report makes very positive statements of the role buy now, pay later plays in supporting underserved consumer segments. As a financial technology company, we also understand the challenges of financial inequality, as well as the importance of financial well-being and feeling financially empowered. We remain committed to providing simple, fair and transparent products that allow customers to take control of their financial future. We work with key partners such as Young Change Agents and Way Forward that aid financial well-being in our communities, something that we are looking forward to developing further in the current financial year. Decreased global mobility from the pandemic continues to drive competition for skilled people in many markets. Zip's commitment to driving a people-first culture is key to the recruitment and retention of the talent that fuels innovation throughout our business. Our employees are highly engaged. And over the last 12 months, we have focused on building the capability of our senior leaders on career development and on employee well-being. We've also recruited and retained talent in areas that require additional focus, contributing to our resilience and competitive positioning. Zip knows that businesses with greater diversity achieve improved longer-term success. Though we have taken many steps, including implementing a global strategy for diversity, equity and inclusion, there is more to do. On gender equality, I am pleased that this year, we reviewed and extended our measurable objectives for gender diversity to 40% women, 40% men, 20% any gender by the 2026 financial year. And that's at all levels, including for our executive team and the Board. This year, we'll be extending our DEI initiatives with the design and rollout of our First Nations Inclusion Strategy in Australia. Your company acknowledges that climate change is a risk to Zip and to people, customers and communities around the globe. That is why we've been integrating climate change considerations into our governance, risk management and strategy processes in alignment with the recommendations of the Financial Stability Board's Task Force on Climate-related Financial Disclosures. I'm also pleased to say that we continued our commitment to being a global climate-neutral organization, and more work is underway to establish science-based emission reduction targets and an emissions reduction strategy. Zip has a clear plan and a focused strategy. Your company is intent on becoming self-sufficient. And in the past year, your Board and management team has acted decisively to secure this objective, taking steps to make our organization simpler and more efficient and choosing to refocus on Zip's core markets. During financial year 2022, Zip also raised $173 million through a fully underwritten institutional placement and a share purchase plan, providing the company with the capital to progress our strategic priorities and sufficient runway to deliver positive cash flow. Zip remains steadfast in its mission to deliver fair and transparent payment solutions and the opportunity ahead is significant. In Australia, New Zealand, our product continues to gain traction, and we're focused on deepening customer engagement and delivering increased lifetime value. With a renewed focus on the higher-margin product Zip Money, and execution of further operating efficiencies, we expect to deliver margin expansion and EBTDA growth in this segment. In the U.S., the opportunity for buy now, pay later is nascent, with penetration below 2% of the total addressable market. Zip's differentiated offering is well placed to claim meaningful market share, and we're focused on scale and sustainable growth, key to our goal of positive cash EBTDA in the U.S. as we exit financial year 2023. With Larry relocating to the U.S. to bring additional focus to this strategic market, your company fully recognizes the significant opportunity and its importance to Zip's growth trajectory. Our Board renewal focus remains on securing a credentialed U.S.-based director. To the directors and management team, thank you for your clear thinking and stewardship in financial year 2022. To our Zipsters, your hard work, your character and your commitment directly improved our business. Financial year 2022 was a challenging year. However, the company has come through that year with a sharpened focus and is well positioned for the future. And finally, thanks to you, our shareholders, for your support of our business. There are exciting opportunities ahead for Zip. I'm pleased with how the team is executing on its plan to support our mission and drive long-term shareholder value. We still have much more to do on the Zip journey, and we look forward to your ongoing support. I'll now ask Larry to update us on the company's strategy, current performance and outlook.

Thank you, Diane. Good morning and good evening from New York. Thank you to all for joining us today, in particular, our shareholders, key stakeholders and our Zipsters. I would like to thank all shareholders for your investment in Zip and your continued support of the company. As Diane mentioned today, I'm going to take you through my presentation for the 2022 Annual General Meeting, which covers reflections on our company's achievements in the financial year, year-to-date trading and our priorities for the current financial year, together with some comments on the outlook. But before we get started, I would like to remind investors of Zip's mission and purpose that underscore who Zip is and why we exist. As you know, our purpose is to create a world where people can live fearlessly today, knowing they're in control of tomorrow. And our mission is to be the first payments choice everywhere and every day. We believe we have the opportunity to rebalance the payments landscape by putting people, not financial institutions, at the center. We exist to create a more financially fearless world knowing that when you give people the knowledge, access and ability to control their financial lives, you give them the opportunity to live every day with confidence. And we do this by providing customers and merchants with simpler, fairer and more transparent ways to pay. Next slide. Financial year 2022 was another transformative 12 months for Zip. We delivered significant growth in what was our ninth year of operations, though we acknowledge it has also been a year of change and consolidation. We started the fiscal year executing on our global growth strategy at a rapid pace, operating in many markets and taking advantage of the early BNPL adoption curve. However, over the last 12 months, the external environment for technology and financial services changed significantly, and we have responded. We proactively refined our strategic initiatives to deliver on sustainable growth, strong unit economics and cost management with a focus on our core markets, being Australia, New Zealand and the U.S. And I'm pleased with the progress of our strategy reset and what we have achieved in this financial year. In FY '22, Zip continued to deliver strong growth across all key operating metrics. Top line metrics, including transaction volumes and revenue, as you can see, were all up over 50% year-over-year. And we finished FY '22 with 11.4 million customers, up 56% year-over-year, and over 90,000 integrated merchants globally. During the year, we increased our focus on sustainable growth and have a clear line of sight on our path to profitable group cash EBTDA. Revenue margins lifted by 30 basis points to 7.1% driven by our differentiated and robust revenue model, and the cash transaction margin was solid at 2.3%. Moving on to the next slide. Our network business model continues to deliver value to both customers and merchants. In FY '22, we welcomed new major brands to the Zip platform, including Best Buy, Bed Bath & Beyond, Qantas and Virgin Australia. We're also excited to sign eBay, Australia's largest online marketplace. All of this has expanded our presence across electronics, homewares, travel and everyday spend categories. And it also demonstrates that as a true credit card disruptor, we are diversifying away from traditional -- from, sorry, discretionary spend verticals of fashion, beauty and apparel. Our ongoing investment in product development and engineering continues to provide enhanced value to our customers. In Australia, we now enable our users to shop anywhere with Zip Money which, as you know, is our longer-term installment product, as well as the ability to redeem rewards in store. This has provided solid growth as customers have shifted from online back to physical bricks and mortar post COVID. While in the U.S., we were excited to recently announce the launch of a Zip Pay in 4 physical card with our partners over here, Stripe and WebBank, enabling customers to shop everywhere. Given some of the legacy payments infrastructure in the U.S., this was key to unlocking the large addressable in-store opportunity. And as we introduce more customers to more merchant partners, we can see that our proposition continues to resonate, driving deeper engagement. Transactions per active customer in core markets increased 45% in the financial year. And it's also worth highlighting our Australian business, which really serves as a blueprint for a more mature BNPL operating model, has now delivered 4 years of positive cash EBTDA, including a record $28 million in FY '22. Now the past 12 months has made it clear that a focused, agile business, guided by its purpose and mission can emerge stronger from challenging times. Financial year '22 saw Zip pivot to accelerate our path to profitability as the market conditions shifted with a rising rate and cost of living environment emerging globally. I would like to thank our shareholders, as Diane also mentioned, who supported our capital raising of just over $170 million earlier this year. We are well placed with sufficient cash and liquidity to support the business through to cash EBTDA profitability in FY '24. So now moving on to the next slide. Fellow shareholders, we are laser-focused on our priorities for the FY '23 financial year as we execute on our strategic pillars, being sustainable growth in core markets, improved unit economics and a reduction in our global cost base, with a focus on accelerating our path to profitability. In line with the company goals we shared with you at the end of financial year '22, we have 3 clear areas of focus that we are working towards. The first, as a group, capital allocation and resources will be focused on sustainable growth in the core markets of ANZ and the U.S. Merchants are a significant driver of growth and customer engagement for Zip. And in this financial year, we will continue to pursue new profitable merchant partnerships, which will fuel customer acquisition, transaction activity and TTV growth, with a focus on driving growth in higher-margin merchant segments and customer engagement in higher-margin products. Secondly, we are continuing to adjust and optimize risk rules and executing on portfolio management and collection initiatives to manage credit losses. Further margin initiatives, such as lower processing costs, are also being explored and implemented to improve unit economics. And finally, we are resetting the business and rightsizing our global cost base. The wind down of the Singapore business is now complete and closure of the U.K. is progressing smoothly. As a more streamlined business in financial year '23, continued cost discipline will be necessary, and we are pursuing options to do more to reduce spend in our core markets. Just moving on to the next slide. As we continue to reset the business in the financial year '20 -- in the first quarter, sorry, of financial year '23, Zip maintained solid top line growth. We saw TTV up 15% year-over-year and revenue growth, up 19%. In line with our focus on customer engagement. Just one second. We're having a technical difficulty here. [Technical Difficulty] In line with our focus on customer engagement, active customers is a metric that we started reporting in -- at the end of FY '22. This was up 17% year-over-year in the first quarter, and there is an opportunity to deliver future upside as we reengage with customers who have not transacted in the last 12 months. ANZ continued its strong performance with revenue growth of 29% and transactions up 21%, demonstrating healthy customer engagement. In the U.S., we have successfully tempered growth to drive better credit performance, and we saw TTV up 7%, while credit losses improved substantially. And cohort performance is now at or below target levels of 2% of TTV. Group cash transaction margin and revenue margins were both solid at 7.4% and 2.2%, respectively. Finally, in the month of October, which just passed, TTV has been strong, which, as you can see, was up 8% month-over-month in our core markets, and the business is now well placed for seasonal peak volumes. Just moving on to the next slide. We continue to make great progress on our refresh strategy. We've secured new merchants, adding Barnes & Noble College in the U.S., and in Australia, we signed with HOYTS. eBay launched in October, and we are excited to announce that we are preparing to go live with Jetstar this quarter, just in time for the peak holiday season. Our focus on higher-margin products is really starting to gain traction with limits for Zip Money in Australia -- Zip Money account limits up 26% in the first quarter, and the U.S. physical card program scaling well, driving over 10% of in-store volume in September and increasing steadily. We have substantially improved credit losses, a key area of focus for management and, importantly, positioning the business strongly ahead of the peak retail season. With the achievements so far on this priority, we are confident that we will be able to deliver on management's target range in this financial year. As Diane mentioned, as part of the strategic review of our Rest of World footprint, we are working through several options to neutralize cash burn, which may also include opportunities for some cash realization. We are close to finalizing the outcome of this review, and we will update the market in due course. And while we've been resetting the business, the company also took a number of actions to optimize its balance sheet, and we announced recently that we successfully retired $40 million of interest-bearing liabilities in September. In addition, Zip completed an upsized $300 million debt raising, which was used to refinance one of our Australian master trust facilities that matured in the middle of October. This is a great result given the current environment and a testament to the strength of Zip's business model and its technology-led credit decision capabilities. Just moving on to the next slide. With regards to unit economics, there are a number of actions we've taken to maintain and increase margin. In particular, the considerable response underway to drive credit performance. As you can see here, we have made substantial progress to bring losses back towards our target range. And our ability to swiftly influence credit outcomes is enabled by Zip's product construct and rapid repayment cycles, which is an advantage over traditional consumer credit card businesses. We have demonstrated our ability to execute quickly, adjust risk settings and minimize losses with dynamic portfolio management. In the U.S., we exited the quarter with an expected loss rate of below 2%, excuse me, for the September cohort. It was very important for us to position the business well ahead of peak volumes, and performance is now at or better than target levels despite further deterioration in the external environment. In Australia, credit losses continued to improve after peaking in the fourth quarter of last financial year. And to date, in financial year '23, we have delivered ahead of expectations that we presented in our full year results. Zip continues to expect credit losses to improve and deliver on medium-term targets of below 2% of TTV over the course of this financial year. Just moving on to the next slide. We are confident that Zip is well placed with its unique product offering and business model, which continues to deliver results despite the challenging macro environment. With interest rates rising, we are strongly focused on how we maintain margins in this environment. Our product construct and repayment velocity means that the U.S. business, in particular, is well placed to mitigate rate rises, where a 25 basis point rise in the Fed reserve rate impacts our cost of funds by only 2 basis points on a per transaction basis. We are continuing to innovate and implement initiatives to drive improvements in repayments such as customized repayment schedules and collection strategies. And importantly, our differentiated, 2-sided revenue model also provides us with the flexibility to manage our margins in a rising inflation and interest rate environment. We know that inflation has lifted substantially and is influencing consumer spending profiles, putting pressure on merchants, both in discretionary but also everyday categories. At a time of heightened inflation, we believe our product offering becomes even more important to consumers who are looking to manage their monthly cash flows, giving consumers a zero-interest payment option that enables them to budget and spread their costs over time. And on the other side, it's also a real necessity for merchants to drive conversion at the checkout, and we continue to do this by delivering new and repeat customers and higher baskets. Finally, as Diane flagged in her opening remarks, we are well positioned for any potential change to the regulatory landscape. Zip is supportive, and always has been, of simple, fit-for-purpose regulation. Our first product, Zip Money, is already regulated under the National Consumer Credit Protection Act, and we conduct identity, credit and affordability checks on customers. Similarly, in the U.S., Zip continues to ensure that its products are compliant with federal and state laws. We note that the U.S. Consumer Financial Protection Bureau's recent report into the sector positions BNPL generally more favorably than other forms of credit. And as a quote from that report that says, "The fact is that BNPL imposes significantly lower direct financial costs on consumers than legacy credit products." Zip is committed to providing consumer-friendly products, and we look forward to continuing an open dialogue with the CFPB and other regulators. Just moving on to the next slide. While our near-term focus on profitability has tempered our top line growth rate, the continued growth of the business across key metrics in the face of external challenges reflects the incredible opportunity that exists. In the U.S., the addressable market, as you can see, is estimated to be over $10 trillion with BNPL penetration still under 2%, including 4% in e-commerce online and 1% of in-store spend. This really demonstrates the sheer size and the early stage of the BNPL opportunity that we are positioned to capture. With Worldpay predicting BNPL volumes to more than double in 2025 from the 2021 levels, we believe that the U.S. penetration is on a similar trajectory to a more mature market like where we started in Australia. And if you look at Australia, around 1/3 of adults have a BNPL account, and this number is growing. Zip's brand awareness in Australia amongst 18 to 45 is now close to 60%, which is a fantastic result. And in the last financial year, Zip's Australian business, as I flagged earlier, recorded $28 million in cash EBTDA, which was 2.5x greater than FY '21. This clearly demonstrates the operating leverage of the business model and the potential to deliver strong EBTDA growth at scale. Building scale in Zip's core markets is critical to the future success of the business. That is the primary reason why I've recently relocated with my family to the U.S. to be on the ground and drive execution in this very important strategic market. I'm very excited to be here working alongside our talented team, bringing learnings from our experiences in Australia and embedding company-wide alignment of our thinking, culture and focus as we navigate a path that delivers scale and the next phase of growth for Zip. Just moving on to the next slide. Now as we look to the remainder of FY '23, we will continue to execute on our strategy at pace, building on the momentum we have achieved so far. Our outlook is unchanged, and we remain as committed as ever to achieve the best outcomes for customers and merchants as well as driving long-term shareholder value creation. We have clear medium-term targets, which we are driving the business towards as we scale. Revenue as a percentage of TTV is targeted at 7% to 7.5%. Cost of sales as a percentage of TTV, we are targeting 4% to 4.5%. And we expect to deliver a cash transaction margin of 2.5% to 3% over the medium term. Achievement of these targets delivers a very profitable business. We also believe Zip's differentiated business model will prove resilient in the current operating environment when coupled together with our innovative products and positions us well to capture and grow market share. We have simplified the business following adjustments to strategy, our underlying monthly cash burn is improving and we are well funded with approximately $141 million in available cash and liquidity. We are confident that we have the balance sheet to fund the company through to cash EBTDA profitability, and we expect to see the U.S. exiting FY '23 cash EBTDA positive and to neutralize the cash burn from our rest of world footprint during the second half of FY '23. We are on track to deliver positive cash EBTDA as a group, therefore, in the first half of financial year 2024. I'd like to thank our Zipsters for their dedication and execution, the leadership team for their tireless efforts and incredible focus and our Board for your guidance, which sees us well placed to meet the challenges while also capitalizing on the opportunity ahead. That is the end of my formal presentation. I want to thank you once again, our shareholders, for your support today into FY '23 and beyond. Apologies for the technical difficulties earlier. And I'll hand back to Diane to go through the AGM's formal items of business, and I look forward to shareholder questions later on. Thank you.

Thanks very much, Larry. We will take questions from shareholders on the Chair's address or Larry's MD/CEO address at the end of the meeting. So now let's move to the formal business as set out in the Notice of Meeting. First, tabling of the minutes of the last Annual General Meeting held on the third of November 2021. If any shareholders wish to review these minutes, they're available for inspection, so please reach out to company secretaries, either Tai Phan or David Franks. We now move to the formal business as set out in the Notice of Meeting. The Notice of General Meeting was provided to all registered members on the 28th of September 2022 and is to be taken as read. Voting on all resolutions will be conducted by a poll. Proxies have been inspected, and all those validly lodged have been accepted. Votes have been received, representing approximately 22% of the issued capital of the company, 154.6 million shares. Undirected proxies or open votes that have been nominating the Chair as their proxy will be cast in favor of each resolution in the Notice of Meeting. Voting today will be conducted by way of a poll on all items of business. You can change your vote up until the time I declare voting closed. I now appoint Chris Dedrick from Computershare as a returning officer of the poll, and declare voting open on all items of business. The polling icon will soon appear, please submit your votes at any time. I will give you a warning before I move to close voting. The first item of business is to receive and to consider the annual financial report of Zip and its consolidated entities and the reports of the directors and auditor for the year ended 30 June 2022. The annual financial report and the reports of the directors and the auditors are now laid before the meeting. There will be no vote on this item as this item is for discussion only. The company's auditor, Mr. Mark Lumsden of Deloitte Touche Tohmatsu is present to take questions relevant to the audit, Zip's accounting policies, the auditor's report and their independence. Are there any questions or comments on the financial report or the reports of the directors and auditors on the management of the company that are relevant to the conduct of the audit and the preparation and content of the auditor's report, which will be put to the auditor?

And we have a question from [ Stephen Maine ]. Could Larry please comment on how much Zip has lost on bad debts over the years? And what he thinks the trend will be over the next few years? Isn't credit risk the ultimate problem with buy now, pay later model and the fundamental difference between credit card providers which take no credit risk?

I think this is a question that I might direct to Peter Gray as it relates to credit losses. And I will say, I'm very happy to answer the question here. But in terms of a question that relates to the accounts itself, I don't think there's any question that the statement and the way that we have communicated the position is under question. So perhaps, Peter, can you comment and we can maybe come back to it later in the [ new ] operations piece.

Yes, sure. So in terms of specific numbers -- but for FY '22, the credit losses on a net basis were $228 million. So that's about 2.6% of total transaction volume. We have made significant progress with regards to the improvement on that number and that metric is carrier focused and, as we disclosed to market, we have short-term -- short- to medium-term target of less than 2% of total transaction volume. So we really are making significant progress. A 60 basis point improvement on $8 billion is circa $50 million difference to the bottom line. I think with regards to the comparison to credit cards, we actually issue credit in exactly the same way that a credit card business does. Our transactions are funded in off-balance sheet warehouse facilities where there's no credit risk per se to Zip HeadCo. And our performance with regard to the Australian business, which is an account-based concept, it would be a direct comparison to a credit card portfolio, our numbers are actually directly comparable or, in fact, superior. We have a higher-yielding product and our losses are in the same sort of range. I guess that's validated by our debt funding facilities, which have a AAA rating north of $2 billion in terms of receivables fund. So we have a very strong capability for our credit assessment processes, and we believe that's a key differentiator between ourselves and some of our competitive peers.

Okay. Thanks very much, Pete.

There is another further question from [ Stephen Maine ]. Could auditor Mark Lumsden please comment on why he didn't push for bigger write-downs as at 30th of June this year given that, even after this year's $658 million full year loss, our claimed net assets of $1.142 billion are more than double the current market capitalization of $451 million.

Tai, there's more to this question, but I think we'll get Mark to address that piece around then we'll come to the balance of the question. Thanks, Mark.

Thanks, Diane. We're comfortable that the positions taken were in accordance with the accounting standards. And that did include very significant write-downs in asset values, particularly in respect of goodwill and intangibles, which were appropriately disclosed in the financial statements. The share price and market capitalization reflects market sentiment at a particular point in time, and that doesn't always align to asset valuations in accordance with the accounting standards.

Thanks very much, Mark. The question goes on to ask for some comment on what aspects of our book value that Larry and I might believe the market is not currently recognizing, and I think Mark has pretty much answered that question around market sentiment. And there is some more in the question asking us to make some predictions about what we might or might not do given on where the share price might or might not go in the balance of the 2022, '23 financial year. And so I think we're not in the basis of making those sorts of predictions. There is a question as to whether there are any credit risks that might emerge in terms of solvency ratios with lenders and so forth, and Pete, I might hand that question to you.

There's no solvency or HeadCo covenants in our lending facilities.

Okay. And thanks, [ Stephen, ] for that question. Do we have any further questions on the financial report, directors' report or auditor's report?

It doesn't seem so.

I'm not seeing any more questions on that topic. So thank you for those questions, [ Stephen ]. And we'll now proceed to the resolution set out in the notice of Annual General Meeting. Item 2 is as follows. To consider, and if thought fit, to pass the following resolution as an ordinary resolution: to adopt the remuneration report for the financial year ended 30 June 2022 as set out in the directors' report on the annual financial report. Tai, are there any questions on this resolution?

Indeed, there's a question in relation to our proxy advisers. Did any of the main 5 proxy advisers recommend a vote against any of today's resolutions, including the remuneration report? Which of the proxy providers are covering us and has there been a material proxy protest vote against any of today's resolutions?

Thanks very much Tai. We didn't receive any substantive no votes on any of the resolutions, and we're thankful for shareholder support for these resolutions. There were 2 proxy advisers who recommended against some individual resolutions relating to Resolution 4 and Resolution 6(b). So Resolution 4 relates to the carve-out of the securities that related to our institutional placement that I referred to earlier that raised $173 million. Listing Rule 7.4 allows security holders to retrospectively approve an issue. So it doesn't count towards our cap, and that is what we are asking shareholders to provide us with that flexibility. But there was a proxy adviser who recommended against that. The Resolution 6(b) is a resolution relating to shareholders providing approval of potential termination benefits. As you'd be aware, in the case of termination at the company's decision, we're limited to an amount equal to 12 months of base pay. Now that's a very sensible cap. But in an industry where equity-based remuneration is the norm, there are many foreseeable circumstances where a moving share price, which would be attractive to all of us, would see that cap potentially breached. And that's the circumstance that the Board is seeking to protect against in that particular resolution. Can I just check with my Rem Committee Chair, John Batistich, that there isn't anything further? Anything to [indiscernible]?

No, everything's good.

Okay. Super. Thank you so much. I don't think we have any further questions on the rem report. The proxies received in relation to the resolution are now on the screen. I now put the motion. Shareholders can vote via the online portal. We'll now proceed to Item 3, election and reelection of directors. Item 3(a) is as follows. To consider, and if thought fit, to pass the following resolution as an ordinary resolution: that Ms. Meredith Scott is elected as a director of the company in accordance with clause 22.6 of the company's constitution and ASX Listing Rule 14.4. Meredith will now say a few words as to her experience and qualifications. Meredith?

Thank you, Diane. I seek election as a Director of the company at today's AGM for the purpose of clause 22.6 of the constitution and the ASX Listing Rule 14.4. I was appointed as an independent nonexecutive director on September 1 this year. It's a real privilege to be a candidate for election to the Board of Zip Co Limited. I hope I will have your support as I believe I bring very relevant skills to the Board table. My tertiary qualifications are a Bachelor of Economics from the University of Sydney, and I'm a fellow of Chartered Accountants, Australia and New Zealand, and a graduate of the Company Directors Course from the Australian Institute of Company Directors. I have over 35 years' experience and, previously, was the CEO of Opportunity International Australia and Chair of its Indian subsidiary. Opportunity International is an Australian charity that uses small, unsecured short-term micro loans to address poverty and financial exclusion of the poor in predominantly rural and remote areas of Asia. So there's a little bit of alignment with Zip. Prior to that, I worked for Ernst & Young for 32 years, including as an audit partner for them for 19 years. During that time as a partner, I was a member of the governing bodies at the national, Asian and global level. As an audit partner at EY, I had signing responsibilities for clients across the technology, publishing, telecommunications, not-for-profit, movie production and education sectors, and was the first female to be appointed to the Oceania executive team in the role of diversity and inclusion partner. Whilst at EY, I also served on the Boards and chaired the audit committees of both Wesley Mission and Pymble Ladies' College and was a member of the Sydney University Audit Committee for over 10 years. I believe with my experience, particularly in audit, I bring valuable knowledge and capabilities to the Audit and Risk Committee Chair role and the Zip Board more broadly. Zip is on an exciting journey that I am very much looking forward to being part of and, as a Director of the Board, promise to guide and assist the company in navigating this journey. Thanks.

Thank you, Meredith. Tai, do we have questions on this resolution? I don't believe so.

I don't think so.

No. Okay. Thank you. The proxies received in relation to the resolution are on the screen. And so I'll now put the motion. Again, shareholders can vote by the online portal, and we'll proceed to Item 3(b). Item 3(b) is as follows. To consider, and if thought fit, to pass the following resolution as an ordinary resolution: that Mr. Peter Gray, who retires by rotation in accordance with clause 22.10 of the company's constitution, be reelected as a director of the company. Peter, I'll pass it to you now for a few words as to your experience.

Thank you, Diane. I have elected to retire by rotation. And as I am eligible to seek reelection as a director of the company at the AGM for the purposes of clause 22.10 of Constitution -- as you may be aware, I cofounded the company with Larry in 2013. We've grown the company to become a leading player in digital retail finance and the largest ASX-listed buy now, pay later company. I have a deep knowledge of operations and credit experience, with over 20 years in the industry in a regulated consumer credit operations, risk, legal, compliance and public listed companies background. As a COO, I currently oversee Zip's global operations and sit on a number of Zip's subsidiary boards. I'm extremely proud of what Zip achieved since we started out 9 years ago, and I'm very grateful for the continuing support from our shareholders since listing. As a Director of our company, I remain committed to guiding Zip on its pathway to provide simple, fair and transparent credit products, helping consumers and businesses to take control of their financial future. Thank you for the opportunity to speak.

Thanks, Pete. Tai, I think we have a question on this particular resolution.

Indeed, we do. If we could like bring up the question, [ Richard. ] Peter Gray is a top 20 shareholder with 15.5 million shares, which is a great amount of skin in the game. But could Peter please detail the history of his Zip shareholding and include if he's ever sold or participated in the latest capital raising? Also, there's a question in relation to the margin loans over these shares and if there's any position to be disclosed to the Chair.

Thanks, Tai. I'll just make a couple of comments in relation to margin loans. We have a securities trading policy, which covers this. Such arrangements can't be entered into without first seeking and obtaining written approval from the approving officer, which in this case would be me. And I can confirm that we have no margin loans against any of our shares. It's not a practice that we're comfortable with. We actually would, of course, disclose related party and any lending arrangements in our annual report. And you'll see there are none of those, and I confirmed with our Chief Financial Officer that there are, of course, some Zipsters, including myself, who have Zip accounts but no loans from the company. Also, I will note that clearly, any trading that Pete as a KMP and Director would have in our shares would be appropriately notified to the exchange. But Pete, you might want to address the question of whether you've sold any shares and whether you supported the recent capital raise.

Absolutely. Thank you. So since we listed, I have sold a very modest number of my shares, less than 10% of my entire holding, for personal and tax reasons some time ago. Nothing in the last 18 months or financial year. I have bought on-market in the last financial year to support the company, and I also participated in the recent capital raise.

Thanks very much, Pete. The proxies that have been received in relation to the resolution are on the screen, and I'll now put the motion. Shareholders can vote via the online portal. Let's proceed now to item number 4. So item 4 is as follows. To consider and, if thought fit, to pass the following resolution as an ordinary resolution: To ratify the allotment and issue of 78,285,139 shares issued to institutional, sophisticated and professional investors on the 4th of March 2022 under the placement at the issue price of $1.90 per share for the purposes of ASX listing rule 7.4. Tai, are there any questions on the resolution?

There appears to be none.

Okay. All right. Thank you. The proxies that we received in relation to this resolution are on the screen, and I will now put the motion. Again, shareholders can vote via the online portal. We'll now proceed to item 5. As Item 5(a) relates to restricted rights proposed to be issued to me, I will now hand over the chairing of this meeting to my fellow director, John Batistich.

Thanks, Diane. Item 5(a) is as follows. To consider and, if thought fit, to pass the following as an ordinary resolution: that approval is given for the issue of up to AUD 40,000 worth of restricted rights to Diane Smith-Gander under the Zip net equity plan. If you wish to discuss this resolution, please submit your questions now.

Thanks, John. There's no questions on this resolution.

Proxies received in relation to this resolution are on the screen. I now put the motion. Shareholders can vote via the online portal. We will now proceed to Item 5(b). As Item 5(b) relates to restricted rights issued to me, I will now return chairing of this meeting to Diane.

Thank you, John. Item 5(b) is as follows. To consider, and if thought fit, to pass the following as an ordinary resolution: that approval is given for the issue of up to $20,000 worth of restricted rights to John Batistich under the ZIPNEP. Tai, any questions on this one?

No.

No. Okay. Thank you. The proxies that we have received in relation to the resolution are on the screen, and so I'll now put the motion. And again, shareholders can vote via the online portal. The next item of business is item 5(c). As item 5(c) relates to restricted rights to be issued to Meredith Scott. Tai, do we have any questions on this? The approval of 16, 667 worth of restricted rights to Meredith Scott under the Zip NEP. Are there any questions on the resolution?

No. There's no questions here.

There's no questions here. So the proxies are on the screen, and I'm going to put the motion. Shareholders can vote via the online portal, and we'll go now to Item 6. Item 6(a) is as follows. To consider, and if thought fit, to pass the following as an ordinary resolution: that the employee incentive plan, an issue of equity securities under the employee incentive plan, be approved. Tai, do we have any questions on this resolution?

There are no questions on this resolution.

Okay. Thank you. So the proxies received in relation to the resolution are on the screen, and I now put the motion. Shareholders can vote via the online portal, and we'll now proceed to Item 6(b). Item 6(b) is as follows. To consider and, if thought fit, to pass the following as an ordinary resolution: that the giving of benefits to any current or future holder of a managerial or executive office in the group to which Section 200B and 200E of the Corporations Act apply in connection with that person ceasing to hold that office be approved. Tai, do we have any questions on this resolution?

No.

All right. Thank you. The proxies received in relation to the resolution are on the screen, and I now put the motion. Shareholders can vote via the online portal and we'll proceed to Item 7(a). Item 7(a) is as follows. To consider and, if thought fit, to pass the following each as an ordinary resolution: to grant $255,154 worth of performance rights under the employee incentive plan to Larry Diamond. Tai, do we have any questions on the resolution?

Indeed. We have a question from [ Stephen Maine. ] It states that Larry Diamond is our largest shareholder with 55 million shares. Would Larry please detail the history of his shareholding, including whether he has sold and participated in the latest capital raise? There's also a question about the margin loans and his positions that have been disclosed to the chair.

Okay. Thank you. Well, I think, [ Steve ] and my answer on the previous question related to Pete around how we handle our securities trading policy will stand. But we'll give Larry an opportunity to address those pieces of the question that are specific to him around his share trading and also participation in the latest capital raising. Larry?

Thank you, Diane. Yes, so very similar history to Pete. As founders, we secured equity early on. And alongside Pete, I also sold a modest amount, sort of 10% to 15%, in a couple of discrete tranches for personal and tax reasons. And just like Pete recently, when we conducted the capital raise, we bought shortly thereafter. So we are extremely committed to the long-term opportunity of the business. We have significant skin in the game, and we believe our interests are aligned. I'll just make one comment in relation to the stock borrow. We did enter into a $400 million convertible note capital raise well over a year ago. And as part of getting that capital raising away, I provided a personal stock borrow at the time, which lasted for about 12 months and rolled off earlier this year. And that obviously facilitated a great capital raise for the business when interest rate conditions were very favorable. But that finished at the 12-month anniversary and wasn't extended. Thank you.

Thanks very much, Larry. I don't think we have any further questions. So we're showing the proxies received in relation to the resolution on the screen, and I'll now put the motion. Shareholders can vote via the online portal, and we'll proceed to Item 7(b). So Item 7(b) is as follows. To consider and, if thought fit, to pass the following as an ordinary resolution: to grant $244,854 worth of performance rights under the employee incentive plan to Peter Gray. Tai, do we have any questions?

There appears to be no questions.

Okay. No questions. So the proxies received in relation to the resolution are on the screen, and I'll now put the motion. Shareholders can vote via the online portal, and we will proceed to Item 8. Item 8(a) is as follows. To consider and, if thought fit, to pass the following as an ordinary resolution: to grant 228,326 performance rights under the employee incentive plan to Larry Diamond. If you wish to discuss this resolution, please submit your questions. I don't think we have any questions.

No.

All right. So the proxies received in relation to the resolution on the screen, and I will put the motion. Again, shareholders can vote via the online portal. We'll now proceed to Item 8(b). I think everyone should be right on the format that we're following now. 8(b). To consider and, if thought fit, to pass the following as an ordinary resolution: To grant 219,109 performance rights under the employee incentive plan to Peter Gray. And Tai, I'm not seeing any questions on this one either.

No.

So the proxies received in relation to the resolution are on the screen, and I'll now put the motion. Shareholders know they can vote via the online portal. So that concludes the resolutions to be voted on today. Could all shareholders and proxy holders voting online please now ensure that they have submitted their votes? In a couple of minutes, I will close the voting system. So please ensure that you have cast your votes on all resolutions. So I'm now going to pause to allow you time to finalize those votes. [Voting]

Let me just check if anyone has any questions in relation to the submission of these online votes before I go ahead and close the poll. I'm just wanting to make sure technically, everything is in order. I'm being given the view that technically, everything is in order, and we're seeing no questions. So at this point, let me declare the poll closed. The staff of Computershare will now process the poll, and the results of the poll will be announced to the ASX once they are available. So now is there any other business that can lawfully be brought forward? I am seeing no question.

So if there's no other business...

So there's no other business, so that concludes the business of the meeting. But we will address questions from shareholders before I close the meeting. So Tai, I think we can now go into the questions.

Okay. We have a question from [ Stephen Maine. ] Peter has just said that he chose to offer himself for the election. Is that a reference to the fact that a CEO doesn't have to be elected and he could have asked Larry to run the corporate instead?

That's a really interesting question. But as you pointed out, the Chief Executive Officer and Managing Director doesn't participate in the rotation process because the Board of Directors' role is to hire and fire. So that is our role. And so Pete's reference was to the fact that there are a number of directors that need to stand each year. And so you can draw from the hat, depending on who is up for reelection. And this year, Pete was the one who said, "Well, I think it's time I went up for reelection". So nothing nefarious in it at all. Okay. So the next question, Tai?

There's another question from [ Stephen Maine, ] in relation to the voter turnout, 22%, which is low for an ASX 300 company, suggesting that more than 70% of the company is owned by our 120,000 retail shareholders, the vast majority of which haven't voted today. When disclosing the outcome of Meredith's election and all other resolutions today, will we provide the shareholders voted for, against each item, similar to what happens within a scheme of arrangement?

Yes. Okay. Thanks, Tai. And I do note [ Steven ] goes on to say that this is a good way to gauge retail shareholder sentiment, and that some companies are starting to adopt this practice. It hasn't been Zip's practice in the past and I don't think it is a practice of the vast majority of ASX-listed companies to disclose that information. It's not required to be disclosed. And so we will have a look at our practice here and consider this given the commentary that you've made, [ Stephen, ] but it's not our -- it will not be our practice this year. I do think that we would all much rather a larger voter turnout. And so we've been very active engaging with shareholders and encouraging voting. But at the end of the day, the shareholders are in control of whether they decide to exercise their voting rights or not. The next question also is coming from [ Stephen ] who is asking us if we will make a copy of the webcast available. And that is our practice, and we will do that. Have we any further questions?

One has appeared. The question is in relation -- again from [ Stephen Maine. ] Afterpay was the world leader in the disruptive play buy now, pay later sector. How have they changed as a competitor as Square Block has taken them over? Are they more or less formidable and aggressive competitors now that Twitter founder Jack Dorsey is in charge of Afterpay?

Okay. I think this element of the question is relevant to our competitive positioning. And Larry, it would be interesting to hear your reflections on that. There is a bit of a balance of the question, which goes to credit risk inherent in the buy now, pay later model, but also some questions about whether we believe Dorsey overpaid for Afterpay or not, which I don't think is a matter we need to address. That's a matter for him. But Larry, it would be really good to hear from you about how you're seeing Afterpay as a competitor, in the U.S. in particular.

Thanks, Diane, and thanks for the question. Yes, as you flagged, really, Afterpay and Zip started out together in Australia in 2012 and 2013. And when you kind of look at that competitive relationship, Zip was really able to chart its own course. And if you look at most of -- many checkouts across Australia, you'll see both Zip and Afterpay where we've built quite different customer bases, our product construct is slightly different. As you know, we have customer fees and also merchant fees, and we have more -- a line of credit product, and we sit alongside them. And each deliver great value to our merchants. And so differentiation is a big piece of our equation. And is a very similar model we've adopted over here in the U.S., candidly. Now since Afterpay has been taken over by Square, I wouldn't say we've noticed anything different on the ground here. We are very focused on our strategy locally. We have, we believe, good differentiation. We have flexible pricing across both customer and merchants that allows us to play in a variety of different categories but categories where we aren't seeing a lot of competition. We also are continuing to innovate. Currently, we have a Pay in 4 product, and we're looking at a range of other extensions of that. And we were actually the first to pioneer the ability to not just check out with a Pay in 4 short duration through an integrated experience, but actually, through customer surveys, being able to allow customers to Pay in 4 everywhere, both online and in store, and we've pioneered a Pay in 4 card recently. So I think competition is healthy. Our pipeline is looking very exciting, and we'll be continuing to innovate here. We think we are one of very few pure play Pay in 4 businesses. And I think if you look at, say, the credit card landscape as a proxy, who are the 6 largest credit card issuers? You've got Chase and Wells Fargo, Bank of America, really focused on the customer of yesterday. But the customer of tomorrow, which is really the Gen Zennial, the Gen Z and the millennials, that's where we believe we can play a role, and we don't believe it is a winner take all. The ecosystem is going to grow substantially, and we believe we can build a very significant business. So thank you.

The next question, I believe, relates to the performance of Zip Money.

Indeed it does. The question is from [ Nicolas Beatty and Lucinda Beatty. ] Basically is questioning the performance of ZestMoney since Zip's investment into it. Specifically, the growth in customer numbers and the growth in revenue. As a consequence of this, is there a requirement to reevaluate this investment?

Pete, I think this is a question that, as our director on our Zest Board, we might hand to you.

Yes, great. Thanks for the question. So the business continues to perform pretty strongly, in line with the investment thesis to that business. So I think customer growth and revenue numbers will reflect the business case that supported our investment. Like other jurisdictions, there is some challenging external conditions, and the business has tempered its credit risk appetite to some degree with a view, again, on fast tracking profitability, looking at higher-margin products, potentially to accelerate that runway or that journey to profitability. They have an outstanding network of merchants. They're clearly the #1 pure-play BNPL play in that market. And clearly, there's a huge addressable population to explore there. As I touched on, the merchant network has been particularly strong. In light of the growth in the external environment, there was discussion about the valuation. But in the same way that we have looked at all the investments across the portfolio of companies, there was no adjustment required in this instance.

Okay. Thanks very much, Pete. The next question is quite a long question, Tai. And so I can set it on the question, it's from [ Penyan Yang ], and thanks very much. So I'm assuming he is a proxy holder. It's not showing a number of votes.

It looks like a proxy holder question.

Okay. All right. So it's okay for me to accept this one? Thank you. So the question is around whether the success in Australia positive cash flow can be replicated in the United States and his suggestion that it might be nice to hear from Cynthia Scott, who's running that business, at some point to understand the secret to success. But I think Larry will be well positioned to talk about expectations around the profitability in the Australian market. And also the second part of the question strikes to cost of living pressures and rising interest rates and whether buy now, pay later is relevant in this time. And I think that both Larry and I addressed this to a degree in our commentary, in our addresses, about the relevance of buy now, pay later to underserved segments as market conditions worsen. But Larry, perhaps you'd like to underscore some of your earlier comments.

Yes, sure. Thanks for the question. And I think we highlighted in our opening remarks and in the full year presentation the $28 million cash EBTDA that we delivered in the Australian market, really to kind of demonstrate what operating leverage can do to a payments business that has strong unit economics at the gross profit level and, obviously, strong unit economics at the [ EBTDA ] level. We don't believe we've achieved those goals yet even in Australia. We think we can hopefully get [ EBTDA ] margins closer to 30%. But it does provide a really good framework for how we also look at the U.S., which is less mature in terms of tenure versus the Australian business but is on a similar glide trajectory. And I think by focusing on the net transaction margin where we've guided as a group, in that 2.5% to sort of 3% mark, and then continuing to grow the franchise. So over here, top line is growing well. We're going to continue to drive top line growth with profitable merchants but also drive the lifetime value, or LTV, of customers and how much revenue we can get from customers that we acquired from our merchant interfaces into the app and things like physical card in store where many terminals actually don't accept tap-and-pay, Google Pay and Apple Pay, that's sort of where the physical card or working with affiliates to really monetize more economics across our revenue lines. There's a lot of focus on those levers. That's going well, and really helping us bridge the gap. Other elements include our cost of goods sold, and really, that comes down to 3 key elements: credit losses, cost of funds but also processing costs. And as you've seen in our results, we are making really good inroads on our credit performance. And again, due to the fact that the platform is entirely digital, we use machine learning models and machine learning engineering with data science, and because the velocity repeats very quickly, we can adapt to changing conditions. And I think we've clearly demonstrated that. The other 2 levers really talk to the cost of credit. And because of the 42-day product, which really has an average capital days of 21 days, a 25 basis point increase in the cost of funds is about a 2 basis point on a per transaction basis cost. And so even -- we just saw 75 basis points increase today over in Australia, that's only adding about 6 basis points in that variable cost. But on the processing side, where we're paying between 1.5% to 2% to collect repayments, we haven't even begun to -- we believe, really take a dent in there, and we can easily recover what we're seeing on the cost of credit side. So there's a lot of focus in the business here around all of those key drivers. We've organized the company across a number of strategic goals around revenue, gross profit and monetization of customers, and we're keeping a very close eye on our fixed cost base, right? What is the right fixed cost base? We did announce earlier this year a reduction in force to sort of rightsize the business given that there were a number of projects that what we've put into more future horizons that we sort of put on hold. And you saw some of that also in Australia where we paused investment in financial services, business trade, et cetera. So very focused on the glide path here and targeting positive cash EBTDA by the end of the financial year. So thank you.

Thanks very much, Larry. We have another question from [ Stephen Maine. ] And this one notes that we disclosed in our annual report that we have 121,000 shareholders. And [ Stephen ] has done a bit of math on the back of the envelope to note that the average holding, therefore, would be around $3,719. Now, [ Stephen, ] we all know averages can be tricky things and that the distribution of holdings will be quite different. But the suggestion is that perhaps there are some unmarketable parcels in there, and we might think about making an offer around those as a cost-saving measure. So I'll take that comment and we'll take that on advisement. [ Stephen ] is also interested in how many of our shareholders have provided e-mail address and signed up for online communication, and that's running at 32% of our shareholders. So thanks very much for that question. I think we may have a couple of more questions still in the portal. So I'm just waiting for the next question. The question has been asked by Mr. [ Kenneth Barry, ] and thank you, [ Mr. Barry, ] for your question, whether we intend to hold our meetings in person in future or perhaps in a hybrid form. So this year, consistent with our last 2 years, to allow shareholders wherever they are located to participate, we've held a virtual AGM. We did look at a hybrid AGM. The cost involved in a hybrid AGM, we didn't believe would be appropriate for the number of shareholders we thought may be able to attend in person. But we will continue each year as a Board to look at what's the best way to communicate with our shareholders. The next question is for me. So Tai, I will just roll through. So [ Stephen ] has suggested that last year, when Josh Frydenberg, the then Treasurer, proposed proxy adviser regulation, that I was a prominent supporter of that regulation. Now [ Stephen, ] I think you might be slightly misquoting me. And I did check earlier, and those of you who might be alert enough on the [ double screens ] to see that I had a look at my phone to see if I could find out exactly what it was I was quoted as saying because, of course, that can be quite different to what you actually said. But in The West Australian in February, it was noted that I said that then Treasurer Frydenberg had overreached with his suggestions of regulation for proxy advisers. I will always support transparency and good regulation, just in a way that Zip has made it very clear that we support transparency and appropriate regulation in the market sector in which we operate. I am a great believer that this should extend to all sectors. So I'd like to see a bit more transparency, but I was not a cheerleader for the entirety of that proposed regulation, which, of course, as we know, did fail. Okay. Let's keep moving on. So we have another question from [ Stephen, ] and [ Stephen ] says this is his final question and he thanks us for reading all 12 of these questions. And [ Stephen, ] I will read all your questions and, of course, every shareholder's question. He did say it's a bit of a shame that there weren't more questions from our other 100,000-plus shareholders. And he's described Zip as an issues-rich company. I think we're an opportunity-rich company. And I do think we understand the issues and the risks ahead of us and are working in a very flexible and sensible way to recharge our strategy. But he has asked the killer question, which is why refresh the placement approval capacity? And does that suggest you're about to do another placement? No, I think we noted in our explanatory notes to that resolution 4 that this is all about flexibility. This is what a pragmatic and sensible Board does in making sure that it has every tool in its armory to address the future. And so we have said very clearly that we're very comfortable with the cash available and liquidity available to the company to be able to take ourselves through to profitability, and that's the pathway that we are on. So I think we have come to all of our questions.

I think so.

Thank you. And thank you, [ Stephen, ] for giving me the opportunity to finish on that particular question. Thank you, everyone, for your continued support of Zip and for your attendance today. So I'm now going to declare the meeting closed at 11:25 a.m. Sydney Time and ask Computershare to close the virtual meeting system. Thank you very much.