Ladies and gentlemen, thank you for standing by, and welcome to the Afterpay half year results presentation. I will now hand the conference over to your first speaker, Mr. Nick Molnar. Sir, please go ahead. Thank you, operator. Hi, everyone. My name is Nick Molnar. Welcome to our half year FY 2020 briefing, and thank you very much for joining us. I'm here with my co-founder and co-CEO, Anthony Eisen, and CFO, Rebecca Lowde. We have a lot of information to share with you. Hopefully, people have had a time to read the presentation prior to the call, and obviously, we'll take questions at the end of the presentation. Just before we get into results, Afterpay entered a trading halt this morning. We announced that we're increasing our ownership of the US entity by acquiring 35% of Matrix's underlying holding and looking to exchange vested and unvested shares in the US ESOP. The price values Afterpay US at 28% of Afterpay's total market cap. We've announced an AUD 1.25 billion convertible note offering this morning that will fund these initiatives as well as our ongoing growth of our business. If I just turn to page three in the results presentation, I'm really proud of the solid performance that our team across the globe has been able to deliver in this first half. Underlying sales more than doubled. Total income was up, driven by growth across all markets, and particularly in the North American region. We saw strong growth in active consumers and merchants, and net transaction margin remained strong, up 110% year-on-year. Our loss improved despite very significant GMV growth. Really proud of the overall team and the results that we delivered in the first half. If I just look at our key highlights for FY 2021, we reached AUD 9.8 billion in underlying sales, over AUD 2 billion in each of the months of November and December alone. Online and in-store momentum continued to build with 23,000 active consumers acquired across the globe per day. We saw increased frequency across all markets. 91% of underlying sales came from repeat consumers. Strong merchant growth globally, now sitting at approximately 75,000. On average, we sent 27 million leads to our retail partners each month for the half, or 45 million in the month of December. To be able to still accelerate into that curve and be a key marketing driver for our partners has been a critical focus for the half year. If I just look at Australia for a moment, we saw solid growth in our more mature market. Average annualized frequency was up 15 x for the year, or 30% over prior periods. We saw strong in-store sales growth despite COVID challenges. Recent months, we have seen an acceleration as, particularly in Australia, the physical retail world begins to reopen. Our earliest customer cohorts frequency sat at 29 x per year. Most importantly, Australian-New Zealand profitability shows the international opportunity and really the blueprint that gives us confidence to invest into the curve. Anthony will take you through how the different markets are trading relative to each other. We've had a continued focus on new verticals in the region. Our partnership with Australian Fashion Week was an amazing milestone for the company. In terms of North America, we've seen very strong, sustained growth. The U.S. was the largest contributor in Q2 to underlying sales. We have more than 8 million consumers and more than 16 million customers have signed up to the platform. Partnerships with new merchants was up 141% over prior periods. In a reasonably short amount of time, with more significant downward COVID pressures than what we have seen in Australia, to be able to see run rate acceptance of AUD 180 million of in-store growth in January really gives us confidence to keep investing in the channel and be there at the time as the physical footprint, which is still the largest driver of retail across the world, continues to open. Lastly, Canada's off to a strong start with AUD 90 million of run rate GMV through the platform. In terms of our U.K. highlights, momentum definitely continues across all metrics. We've continued to build momentum with increased merchant and customer adoption. It's amazing to see many of the retailers on this page be these global brands that we work with in many parts of the world, and as we keep expanding internationally, to have that relationship set and to see our merchant lifetime value grow over time as we expand with our existing partners is a critical driver of our network effect. Contribution from returning customers sat at 90%, and total app downloads reached a million devices. More recently, I believe it was last week or the week before, announcing a partnership with London Fashion Week also cements our relationships and opportunity within the region. In terms of our focus on doing the right thing, it's always been, since day one, a high priority for us. Health and wellbeing of our people absolutely comes first. Since Meaghan joined. Before that, to keep accelerating our people-first strategy and acquire talent across the globe at a very quick rate, but also maintaining our culture and maintaining the quality of individual that we're so fortunate to work with every single day has been amazing to see unfold over the first half. In terms of our small business campaigns that we've run, it's great to see the support of small businesses over this time period, and particularly as we double our commitment to organizations such as Thread Together, that so eloquently bring together the synergy between our fashion brands and giving. It's an amazing opportunity for us. Continued commitment to good governance and transparency is absolutely at the forefront or top of mind. If I just look at a regulatory update for a moment, the Buy Now Pay Later Code of Practice, as we worked with AFIA and broadened the buy now, pay later sector to agree best practice standards and commitments to the voluntary code. Submissions to the review of the Australian payments system led by Scott Farrell for the government. We also continue engagement with the Reserve Bank of Australia and positive engagements with the Australian Senate Select Committee around fintech growth and innovation. There was the ASIC review of buy now, pay later, acknowledging the importance of consumer choice, protection, and the role the industry plays in self-regulation to achieve outcomes for consumers. Finally, the Woolard Review in the U.K., as we continue to engage with the FCA, government, and stakeholders, have been our core focus for the half. If I just go through some final slides just before I pass over to Anthony. On slide 11, if I just re-anchor the context for a moment, I think it's really important to acknowledge, as we built our business on day one, as we saw particularly the millennial cohort start to shift away from credit to debit and seeing that acceleration start to take place over recent times. Most recently in the pandemic, there has been a further acceleration towards debit and away from credit. In fact, Gen X and older has seen the largest reductions in outstanding credit balances over recent times. Seeing the broader consumer landscape start to engage with our platform and with the debit economy, has been amazing to transpire. Just finally, there is a growing income base in Gen Z and millennial cohorts. As we look at the contribution today and the contribution tomorrow, there are two really important compounding effects, both through debit growth and income growth, and we feel like we're well-placed for both of those two aspects to further accelerate our network effect. Afterpay was built for this generation. We were founded on trust and transparency. I'm really proud of everything that you see on this page. We live our vision and our mission every day. The clarity of our strategy and how our leadership team and the broader organization has executed against these principles. Paramount to that is sticking to our values as we grow. Scaling the people organization and moving at the growth rates that we've been to be able to keep all of this front and center and execute hand on heart against an aligned vision and mission has been a really anchoring exercise, particularly over the past half. Just finally, as we've seen, there is a very large addressable global retail market, particularly even in just the regions that we're live and imminently launching into. Offline retail still does represent the vast majority of retail, so we've seen a lot of growth through our online channel. As we accelerate into the physical world, we hope to prove that the product can work both online and offline, similar to what we've seen in the early days in the Australian region. I'd now love to pass over to Anthony. Thanks very much, Nick. We'd love to spend just a few moments talking to you about what underpins our business. It really is the power of our platform that is fueling not only our growth, but what we very clearly see as an emerging differentiation in the market. Would love just to explain that in a little bit more detail. If you look at slide 15 of the investor presentation, we list eight points here which, in our view, both define our platform but also illustrate compounding dynamics when they work together. I'd like to spend just a moment on each of these because it builds the picture as to what is underpinning our growth cycle at the moment, but also the opportunity that we see as being very significant as we expand, not only in the markets that we're in at the moment, but in international markets, which I'll touch on. If you look at slide 16, the first really key element of our flywheel is the way that customers are responding to our service. Active customers are scaling fast in all of our markets. What's very interesting to us is the blueprint that particularly Australia and New Zealand, our most mature market, is illustrating for the other markets which we're growing in absolute terms at a faster rate. What's been very important to us, more so than the absolute number of customers, is how they're enjoying and using our service more frequently. Frequency is not only very important to compounding underlying sales, it goes to the heart of our business, which is delivering better outcomes to merchants. It's a frequent customer that's really driving that change. On slide 16, you can see how the longer our customers reside on our platform, the more Afterpay is becoming an important way for them to budget in their lives, and you're seeing those frequency curves grow over time. In Australia and New Zealand now, some of our older cohorts now on average are transacting well over 30 x per annum. You're seeing that the growth rates of frequency are there for each cohort that's come on subsequently. The U.S. customer growth is obviously very fast. As important to us is the chart on the right-hand side, which shows with time, this frequency rate is also building in line with what we experience with Australia and New Zealand. If I turn over to slide 17, I think it further illustrates the point. It's great to be growing new customers at a fast pace, but it's actually much better and it's far more pervasive to our merchants if these customers are returning and they're transacting frequently. We believe we're materially differentiating ourselves in the market in this regard. When we spend lots of time with merchants describing and discussing the real outcomes to their business, this is where we believe we're really producing advanced results. It is those customers that we're directing to those merchants as much as their knowledge of Afterpay and their comfort with it across merchants, that's driving some of the growth rates that you're seeing in the business. If we turn to slide 18, this gives you a different perspective. We have a two-sided network, obviously, with customers and with merchants. We've talked about the compounding effect with customers and as frequency builds over time. Perhaps not as much about the compounding effect with merchants, which is actually just as pervasive. On slide 18, we give you an example of a top 10 merchant in Australia and New Zealand, which we started with. The chart on the most left-hand side shows what is the underlying sales from customers associated particularly with that merchant. That's the white line. What's really interesting to see is that once those customers are acquired through a merchant, what they do across the platform. That dark black line shows the increased underlying sales from once those customers are acquired, where they shop across all merchants, which rises the tide. The same compounding effects or an additional compounding effect occurs when we see merchants go from online to in-store. That middle chart illustrates the point. Most of the merchants we started with in Australia and New Zealand obviously started online, and now in-store is becoming a more significant part of our business. That boosts the compounding effect. When we look at what customers spend with merchants, if they're solely an online customer versus solely an in-store customer, you see when they're both, that the impact is much more substantial. That's another layer of compounding in our system. It extends further when we talk about international because the way that we work with merchants internationally also adds to that compounding. If we turn over the page to slide 19, another really important core element of our platform is how we curate a two-sided network and we deliver those benefits to merchants. Much more than a transaction engine that just resides on a merchant's website, the amount of traffic we're now generating from the Afterpay platform out to merchants is now becoming much more substantial. On average, about 27 million leads per month were directed from the Afterpay platform to merchants in the half, and those numbers were much higher than that, obviously, during seasonal periods of the year. What's very interesting about these statistics is a very simple point. There are now millions of customers starting their shopping journey with Afterpay. What we can now track in a very precise way is how those customers are then completing their transactions on the merchant website. Over 17% of all transactions on our platform originate from customers starting their journey on the Afterpay app or website. Turning over to slide 20, this environment or this two-sided network has been enhanced over time by the value propositions and the features that we show to our customers. A key part of our journey over the last couple of years has been listening to our customers and then upgrading our services in a way that's directly relevant to them, that talks to personalization, and creates a better shopping experience. What you've seen on our app and our website is more features, more rewards, and more importantly, rewards that are attuned to the personalized nature of the customers that we're serving. We're really excited about some partnerships that we've announced with Stripe and Squarespace. This is very much part of our one to many strategy about reaching more merchants and therefore more customers. We're excited about all the groundwork and preparation that will produce results coming from this very important partnership. On slide 21, I'll just talk about our international expansion briefly. Obviously, our core focus is about expanding further in North America, which is still very nascent in terms of market development terms. Nick spoke about our progress in North America and the U.K. We're very imminently going to launch in Europe. The Pagantis transaction, which we announced several months ago, is subject to final approval by the Bank of Spain, which again, we're expecting quite imminently. That hasn't prevented quite a lot of work progressing in the background to get ready for that. We have a pipeline of over AUD 1 billion of addressable market to launch into the European market, as soon as we get that go ahead. What's been a real privilege for us is actually working with the Pagantis team, whose core values are very much aligned with our team, and there's a lot of enthusiasm for them to integrate into the Afterpay family. Our base in Asia has been established, as we previously mentioned, and we continue to look at opportunities there. What we see as a prospective opportunity as we move into more regions is cross-border. We've very recently linked the global markets where we're currently present, and we're seeing some really tangible early signs of where we can take cross-border, for example, by Canada and the way that we've seen customers there purchase from over 1,000 merchants in the U.S. Turning over the page. Another element that we're confident we can prove out because of the captured nature of our network and our platform and the way that we're seeing customers adopt the Afterpay brand, and emulate the frequency curves that we showed before, is what opportunities can come from that. Really coming from a place of how do we better serve the customer in line with the core values and the reasons why they love Afterpay in the first place. We think this will produce an environment where we can continue to add new revenue streams without changing our stripes, and we're very excited about Afterpay Money, which is an illustrator of what we believe we can do with the platform that's building. Slides 22 and 23 introduce some of what we have in mind. It's all about the next generation managing their own money with a budgeting and savings mindset. It will be a separate app that we introduce into the market, but it will have Afterpay's look and feel. More importantly, it'll link to the features of Afterpay in a way that we think will deliver a real value-added proposition to customers in how they manage their money going forward. On slide 24, if I go back to the principles of our business model from day one, we see them being quite reinforcing in terms of the outcomes. We haven't changed our stripes in terms of customer budgeting or the built-in protections in our system. What that means is as more customers recur on our platform, we've seen loss rates come down, and we've seen late fees come down. While we've grown exponentially, we've seen these positive jaws emerge. For gross loss rates now to step down materially again to significantly under one percent, 0.7% for the half, and late fees now representing less than 10% of revenue, we feel is progress in the right direction. Finally, on slide 25, talking about our business model and our differentiation. We've been able to maintain margins above two percent per transaction. What's very important to us is that our model is low risk, low average order value, and it's very short duration. Our entire receivables capital base turns over more than 15 times per annum, which very simply produces returns on capital of over 30% before applying leverage. The key thing for us is that level of efficiency mixed with low risk, there's been nothing in our dynamics that has changed those stripes or we intend to change going forward. I'd now like to pass over to Rebecca, to give us some more details on the financials. Thank you, Anthony, and thank you to all of those joining us today. As I'm sure you can imagine, it's very exciting for me to be presenting such strong financials for my first set of results since joining last October. At a snapshot, and what Nick pointed out, is that we've had some amazing achievements in the first six months. We doubled underlying sales. We held the Afterpay income margin stable to the prior half year. We continued to improve losses with receivables impairment expense at a historical low. We achieved a net transaction margin at more than two percent of sales, despite an increase in contribution from our newer regions, and we maintained our strong balance sheet. These achievements are all a reflection of what Anthony have been speaking about this morning. It's about the power of the Afterpay platform, the dynamics of the business model that drive performance, and the strength of our funding arrangements. Because of these, we are well-positioned to continue to scale the business and our investment. If we start with the financial performance, we can see the group total income, which includes Afterpay income, which relates to our core service offering. Pay now revenue and other income was up 89% against the prior corresponding period. The increase in income is a reflection of a greater number of customer orders processed across the Afterpay platform, with underlying sales up 106% as demand continues to grow across all operating regions, particularly the U.K. and North America. The Afterpay net transaction margin was up 110% on the prior half, also supported by the underlying sales growth. You will notice that this increase is slightly higher than the growth seen at the Afterpay income line, due to the gross losses growing at a slower rate. Gross losses continue to decline as a% of underlying sales as a result of our focus on enhancements to the proprietary risk management platform and the benefit of repeat customers. Group EBITDAR, excluding significant items, was AUD 47.9 million, up from AUD 7.7 million in the prior corresponding period, and driven by an increase in net margin that more than offset increased investment in employment and operating expenses. As Nick and Ant both mentioned, we'll continue to invest in scaling our global operations in the second half and targeting underlying sales growth. There's also a useful EBITDAR waterfall slide in the director's report, which reconciles all the movements. You'll also note that the group has reported a statutory loss for the half. This is a result of non-cash and one-off items. In particular, there is an increase to the value of the Clearpay put option liability as a result of better than expected performance by the U.K. Clearpay business. This option relates to the remaining Clearpay shares held by the ThinkSmart Limited. Statutory loss also included foreign currency losses, share-based payment expenses, and share of loss of associate, and one-off items relating to international expansion. One of the really important metrics to note is actually throughout the half, we were able to maintain merchant margins as underlying sales doubled and appreciating that we have a growing contribution from new markets. Other areas of interest that are worth pointing out is the broadening of our merchant portfolio, which is extremely exciting for our consumer base and has not disrupted our ability to maintain margins across all regions. This half also saw North America become Afterpay's largest contributor to underlying sales during the period, as a number of new merchants became active. Loss rates, as mentioned, is a real big focus for the company, and to assure that we are managed effectively, we continue to enhance and invest in our proprietary risk management engine, which is the power of our platform. This half, we saw gross loss improve by 27%. Late fees were further reduced by three basis points as a percentage of underlying sales, which ultimately delivered a stable net transaction loss of 0.5%. The management of risk, coupled with our focus on repeat customers from our longest tenured consumers have proven responsibility on our platform, has resulted in continued improvement of our loss rates. Pay net transaction margin equates to Afterpay income, less net transaction loss, less other variable costs. You'll note that it's strong at 2.2% for the period, with all regions contributing positively to that result. Benefits from global partnerships such as Visa, Mastercard, and Stripe offset the impact of a mix shift towards North America, where transaction costs are typically higher. We're continuing to seek out further international partnerships that will help bolster this in the future. As we continue to accelerate growth, it's really important that we have a strong balance sheet to leverage from. As you can see from the bridge on this slide, the cash has increased since the end of last financial year with the capital raising in July, which has then been utilized to support underlying sales. I think one of the things that most people don't necessarily realize when looking at our balance sheet is the amount of accounts receivable, which are being funded by the use of our own cash, as we've only minimally drawn down from our warehouse facilities. From a funding perspective, we have additional capacity to support a further AUD 26 billion in underlying sales over and above our current annualized run rate, which really does set us up well for future growth. The breakdown on this slide provides more detail on the diversity of our funding, both from a source and a maturity perspective. We established new and extended existing receivables funding facilities during the period, with a weighted average life of debt of 2.1 years. This is important to note not just for how we were today, but how our future growth intentions are. The journey Afterpay's been on has been amazing. There's so much achieved, but there's so much more to come. As a business, we're serious about going after the AUD 9.4 trillion in retail markets that sit within our existing and soon to become international operating regions. To secure that growth and to continue scaling our platform globally, we're investing in people, our customers and merchant relationships, our products and technology globally. Growth in employment expenses in AUD terms reflects the growing number of team members required to support our business globally, particularly across sales, marketing, technology, and product. Operating expenses, which comprise marketing and other operating expenses, was up 62% on the prior year and represented 1.3% of underlying sales. Marketing reflects both co-marketing initiatives with major brand merchant partners and other marketing, such as digital paid media and visual merchandising supporting our in-store growth. The increase in marketing expenses in AUD terms is in line with the group's statements at the previous year-end to accelerate growth in underlying sales. They also supported the global rebrand, there's further investment to occur in the second half. Other operating expenses include a one-off item and foreign currency losses. Excluded in the impact of these items, other operating expenses would've been AUD 55.4 million. As we look ahead and consider the new revenue, product, and technology opportunities available to us and for us to create, we will continue to invest back in the business. I'll now hand back to recap what it means from both a strategic and growth opportunity perspective. Thank you. Thank you very much. I hope this morning's presentation has given you an insight into not just our results, but the context of our journey and where we're heading. From our perspective, investing in our momentum and what we see as an increasing opportunity is firmly in our focus. We've spent the last several months with our team understanding where the current context of the business is, and we're very clear on the strategic opportunities that are ahead of us. When you think about our strategy going forward and that opportunity, we're focusing our investment on scale. That is penetrating further into the markets that we're already in, as well as importantly, establishing a leadership position in newer markets such as Europe, which we're imminently going to launch into. Platform is our differentiation, and it is an area where we continue to invest in. More of the impacts of that are getting felt in the business to date. We're confident that we can increase our lead with the right amount of investment there. In addition to new features, new segments such as Money, Afterpay Money, are important as part of that journey. In combination, we still think that the journey ahead of us is significant. We are at an early stage of what is a new segment and a new industry, which we feel very privileged to have joined right at the very start, and we'd be delighted to answer any questions. Thanks very much for your time this morning. Ladies and gentlemen, we will now begin the question and answer session. Your first question in queue comes from the line of Phil Chippindall from Ord Minnett. Phil, please ask your question. Your line is now open. Good morning, team. Thanks for your time. Just on the Asian expansion. You haven't made much reference there specifically around your timing and what your strategy is there. Anthony, I'm just wondering if you could unpack that a little bit. You obviously have a base there in Singapore. Will that be the first market that you're looking to launch in? Again, just a little bit of nuance maybe around the timeframe there. Yeah. Thanks very much, Phil. Good morning. As we've said, just really only a few months ago, what we're doing in Asia, and particularly in Singapore, does represent early irons in the fire. When we speak about Asia, it is not one market, obviously. It's multiple different markets with different dynamics attached to them. While we've had a lot of different partnership opportunities that have been presented to us, our approach is really from that base in Singapore. We can be very well in tune with our global merchant partners because the strategy of expansion is very much linked to that. It's not a case of trying to just achieve scale for scale's sake in a new market. It's how does it consolidate back to our core and our key leadership's position in the U.S., the U.K., and Australia and New Zealand. We continue to explore how we will launch in a progressive way in some markets in Asia, but we probably are not in a position today to detail more specifically around timing. The team there is looking at opportunities to do so in the relatively near future. Okay, thanks. Just turning to the Matrix transaction. Can you give us just a bit of a sense as to why now? I'd be interested in terms of both from the Afterpay side and from the Matrix side. They've obviously had an interest now in that business for, I think it's three years. Clearly, you're hardly a mature business in the U.S. You've got plenty of growth ahead of you. Why now from both an Afterpay perspective and if you could comment from a Matrix perspective as well? Yeah. Sure. Look, we think the opportunity to do this transaction now is actually very highly accretive. When you talk about Matrix and their decision to participate in this transaction, I'd like to emphasize that it's not for the bulk of their holding. It's for 35% of their holding to date. Matrix has been, and continues to be, an exceptional partner. If you will recall, when we set up the U.S. ESOP right at the start of our journey, it was very much linked to Matrix and how we kicked off our operations in the U.S. What Matrix realized, and what we were encouraging, was how do we act and be more of a global organization and have our entire team now globally aligned? In order to, in effect, collapse the U.S. ESOP, and still link it to the principles from which we established it was important to get that symmetry right and have Matrix participate in this way. From a company perspective, we think negotiating this outcome at an equivalent valuation, which looks at the U.S. as 28% of the whole, is very fortuitous at this time. We see the growth and the opportunity in the U.S. as being as or more substantial as we've thought previously. Obviously, when you look at our raw customer base now, we have the most customers and growing at the fastest rates in the U.S. We think the opportunity for the U.S. to become more of a substantial proportion of our business and our value is absolutely there. If we could combine increasing our ownership of that entity, combined very importantly with having the team aligned on that global structural basis, we think it's a win-win. Thanks, Anthony. One final one from me. You mentioned earlier the potential for additional revenue streams. The store directory appears to be one area where, from my perspective, that could be an opportunity for you. Is that something that you'd be considering? Is a comment like what you've made more around the potential for new products further on down the line? Hey, Phil, it's Nick here. There's a variety of opportunities, both from the consumer side of the equation and the merchant side of the equation. As Ant started to bring to life in part of the deck on just how that flywheel unfolds. There's opportunities for us to deepen the product set and given the trust we have with our consumers to extend that relationship and offer them more services. We feel like there's clearly a path to new revenue opportunities. Similarly, from a retail perspective, there are a variety of opportunities. One is what you mentioned, from cross-border. There's a high-margin opportunity that we're continuing to scale from that perspective. As we keep working with our merchant partners as they grow, there are other discrete opportunities. I feel like I wouldn't limit it to one or the other. My point is that both the merchant side and the equation and the consumer side of the equation are both being scoped in from an intertwined perspective as part of our strategy work to then clearly have new revenue objectives and targets on the business, because that's what we believe is the priority over the next phase. Okay. Thanks, Nick. I'll jump back in the queue. Thanks, Phil. Your next question in queue comes from the line of Andrei Stadnik from MS. Please go ahead, Andrei. Your line is now open. Good morning. Thank you. I wanted to ask two questions. Firstly, just in terms of your in-store rollout strategy. Nick, can you comment a little bit about how much you can further streamline and improve that? It seems like QR codes are dominant in Australia, but the NFC, Google Pay, Apple Pay are also helping out in the U.S. Can you talk a little bit about how to make the in-store experience smoother? Yeah, absolutely. Look, I think that what you can assume that given Australian in-store growth has been primarily enterprise-led because enterprise retailers have the resources to integrate the barcode solution. As we move down the SMB channel and continue to expand into the broader market, we would anticipate leveraging the technology that we've rolled out in the U.S., and similarly, looking at how we get more leverage in our local region. I think that provides margin upside opportunity and increases the addressable TAM that we can then integrate with zero technical work required. From a U.S. perspective, given it was the first market we rolled out with Apple Pay and Google Pay to streamline that process from an onboarding perspective, how we work with the retailers, finance teams, et cetera. I feel like we're now in a far better position to continue to scale. There's no lack of demand from our existing enterprise retailers to go offline. We've actually seen many retailers, some of the key marquee brands in the U.S. start offline before going online, given there is genuinely no technical work required to launch that channel quickly. I hope that gives you some context, just on the thoughts of in-store. Thank you. My second question. I wanted to ask around the average order value. It went up from AUD 151 in the first half 2020 to AUD 155 in this half. I just want to ask how to reconcile that with the media release highlighting that in the 2020 holiday period, the U.S. basket size was up 30%. Is that quite coming through or is that just some currency headwinds that held back the average order value from going high? How do you think the average order value into the future? Well, it's a combination of all those things that you mentioned. Part of this as well is just understanding how we think about this from a strategy perspective. We definitely want to go up the channel, up the chain in terms of increasing average order value, and you've seen initiatives like Variable Payment Upfront start to unfold. At the end of the day, our core business is actually about high frequency, high velocity, and it does actually make more strategic sense to go down the order value objective and curve because of what that does to the network effect and the frequency equation. I think, Andrei, it's a variety of those pieces compounding together. We've been hugely successful in the beauty industry in North America. That has a materially lower average order value than the fashion industry. There are a few different aspects that will contribute to that outcome. Thank you. Your next question in queue comes from the line of Chris Brendler from Seaport Global. Go ahead, Chris. Your line is now open. Hi. Thanks. Good morning, and it's a pleasure to speak with you. I would like to ask about, first, the competitive environment in the U.S. It's been an incredible growth market recently, been seeing a very concerted effort from PayPal. I actually saw my first time I saw a site that had both Afterpay and PayPal listed right next to their on the product display page. Maybe just you sort of think about how you view PayPal as a competitor. Are you seeing them on a lot of your sites? How do you perform when you have more than one provider offering buy now, pay later at one of your checks? Thank you. Yeah, absolutely. Thanks so much for the question. I think what we've seen over the past half is a variety of scale competitors tested alongside us, on both enterprise and smaller businesses. What I can say is that our share of cart hasn't been materially diminished as we would've expected to launch, with a retailer as compared to what did transpire when we went live at the same time as a competitive solution. Given the data points that we released in terms of the positive impact that our shop directory can have on a particular retailer at launch, as we put our marketing assets behind the launch, and as those assets are growing in impact because our customer base is growing, and these numbers now are very significant. To be able to drive traffic to a retailer that, in many instances, is on par with the variety of their social media platforms, that is a powerful position to produce a differentiated set of results for a merchant. While the competitive landscape is unfolding as we're watching closely, and I know you are too, we haven't seen a huge change from a top-line take rate perspective, and the tide is absolutely rising as it brings more awareness from a consumer base. That's very helpful. Thank you. My follow-up question is on credit quality. Really impressed with your results here, the drop in late fees, the drop in charge-offs, despite your rapid growth, and as you mentioned, in new markets. My question is this a mix issue? Like you're mixing into higher quality consumers or in tightening underwriting? Is it more just the effect of the platform maturing and having more repeat customers and no real intentional effort to raise the credit quality of the underlying consumer borrower? Thanks. Yeah, it's Anthony here. Thanks for the question. Again, it's a combination of the things that you've said. I'd highlight a couple of points. Firstly, it's not a function of overly tightening the system. It is way more a function of having a quality customer base that's improving with quality the longer time they spend on the platform. Obviously, losses are higher for new customers. What's interesting is the fact that not just are losses lower for repeat customers, but they get progressively lower the more a customer repeats and stay on the platform. If we can, as we have been, holding that base of highly frequent customers, that's blending to an overall improved loss result. That's why customer numbers are really important, but frequency and virality and tenure will always trump that. Your next question in queue comes from the line of Siraj Ahmed from Citi. Please go ahead, Siraj. Thank you. I have three questions. First one, Anthony, can you just touch on the ANZ performance in the Q2? It looks like customer numbers were flat quarter-on-quarter. If you could just touch on that, and whether you're seeing an impact from competition. Yeah. Thanks, Siraj. Not really seeing a material impact from competition. I guess what I would probably describe is many of our growth verticals that we lent into have probably been more suppressed over recent time frames, whether it was travel, whether it was ticketing. Also, the in-store channel was a core driver of our new customer acquisition funnel. I wouldn't anticipate that we won't see those start to unlock and see the numbers continue to accelerate, but COVID did play a role. There was obviously the flip of that in terms of a material lift in frequency beyond our expectations and not seeing the top of that curve yet as our customers keep engaging with us more as tenure on the platform increases. We're watching both of those very closely, but feel confident in leaning into that new customer acquisition curve. Got it. Secondly, maybe one for Ashwin. I'm just trying to understand the late fee decline. Typically, you've seen late fees increase as repeat users increase, a bit surprised with that. Just following on that, how should we think of net transaction margin trajectory in the second half? You typically have a stronger second half. Yeah. I think there's a regional mix effect as well as it relates to both of those outcomes. When we work with our risk team, their KPIs are increasing approval rates, reducing late fees, and reducing losses. Those three factors are very counterintuitive. When you have the goal of increasing the quality of your book over time and engaging more so with consumers who now are not shopping once a month, they're shopping 2x, 3x a month. That's where you can see a very different bend in the late fee curve. As the portfolio moves up the frequency curve, we have seen that positive contribution. Look, it's been a very conscious effort for us. Late fees aren't good business for us. We would prefer for people to pay us back on time and then increase the frequency curve as it relates to that experience versus the former. It's been a very conscious piece for us. In terms of the net transaction margin point, there is a regional overlay, as you would anticipate. As the U.S. continues to grow, that will place some downstream impact. The partnerships with Squarespace and Stripe that can now launch and scale, that mix effect of small business to enterprise and country overlay will play through in the second half. Last one, Nick. You spoke to competition. Can you just talk to the merchant pipeline, and what are you seeing there? Previously you said it's pretty strong, just how it's looking. The Q1 after Christmas is always the weakest quarter in terms of onboarding new retailers onto the platform, because technical work starts in the new calendar year. The pipeline for next quarter has been very strong. The retailers that came live in the last quarter, and we're talking Bed Bath & Beyond, Adidas, Lululemon, Gap Inc., Glossier. The pipeline that came was billions of addressable GMV, particularly in the North American market. Then also as we build pipeline for in-store and as we build pipeline for international to increase that merchant lifetime value as Ant spoke to. That's a really interesting curve. To start with a retailer that started with you in Australia online and then went Australia offline, and then went into U.S. online and then U.S. offline, and then went into the U.K. and Europe to see one contract scale in GMV like our merchant base now has the opportunity to do, given these are the largest global brands around. I think provides the right framework from a pipeline perspective, both internal and external. Great. Thanks. Once again, if you wish to ask a question, please press star one on your telephone. For the sake of the others, please limit your questions to two. Thank you. Your next question comes from the line of Sameer Chopra from BofA Securities. Go ahead, Sameer, please ask your question. Sure. Thanks. Morning. I had just two questions. Morning. One is on cross-border transactions, and the second one is on the Square and Stripe relationship. Just on cross-border. Maybe if we can get some color around the benefits, both to Afterpay and the merchants. Do you have similar margins as in country, or do you get better margins because there's a foreign currency leg to FX as well? If I can just get a bit more color on that, and then we'll move to Square. Yeah, sure. Hi, it's Anthony here. I'll do the first part, then might hand over to Nick for the second. In terms of cross-border, value proposition is pretty significant to both customers and merchants. The obvious point is if you're a customer in Australia that wants to purchase from, for example, a U.K. retailer that doesn't have a presence here. We can use our platform to personalize that experience and show opportunities that have relevance to the consumer. It opens up a market for both sides that didn't exist before. It is important, and it is a differentiator. What's interesting about cross-border is that it becomes more relevant over time as that platform curation develops. A lot of it is involved with small to medium businesses who don't scale globally, but through our platform can. Making the consumers aware of what is relevant to them is an extended journey over time, but again, an important differentiator. The margins are substantially better, without being draconian at all with the FX rates that we charge. Being able to value add in terms of delivering sales in local currency and purchases in the other, et cetera, that's quite a substantial boost to our net transaction margin as it relates to cross-border. Over time, we think it could be quite substantial, but it's all part of curating that experience for our customers. Do you want to talk about Stripe? Yeah, absolutely. Sameer, there's a couple of different components to Stripe and Squarespace. Stripe provides both an SV opportunity and a one-to-many opportunity across platforms like Squarespace, where Stripe is the primary gateway provider for these platforms. What's important, just to really clarify, this isn't a deal that we've announced that we've signed and now we're commencing the integration, and that integration takes time to get right given the scale of both of these platforms. These are partnerships that retailers can now start onboarding. To be able to lean into the SMB curve with partners that have millions of small to medium sized businesses on them. It's been in the works and a partnership we've been curating and building for, to be honest, for a couple of years. Nick, can I just follow up on that? Does it give you a benefit on cost of sales as well? Do you rely less on the more expensive network rails in the U.S. by using Square and Stripe? Or is it mainly about opening up? No, we're still processing our transactions through our normal acquirers as we would normally. This is more a retail scale play. Perfect. Thank you. Your next question comes from the line of Ashish Chandra from Goldman Sachs. Please go ahead, Ash, your line is now open. Terrific, thank you. Just a couple of areas of questions from me. With Afterpay Money, can I just clarify, this will be a strategy that you will be replicating in every single geography? Well, hi, Ash, it's Anthony here. Look, we'll launch in Australia. Yeah. We think it will be extendable into other parts of the world, but we'll start in Australia first. Sorry, is there a reference to a timeframe? Sorry, there's been a lot to get through, so I may have missed that. Yeah. We'll do a pre-launch testing period, which has actually started now. We expect our MVP to come into market in the Q1 of financial year 2022. Got it. Another area I have a question on is on competition. I know it's been asked several times in different ways. Perhaps I'll just ask it a bit more specifically. Where you are seeing the Afterpay button alongside either a Klarna or a PayPal pay in full button, can you talk about the impact that you are seeing at this particular point in terms of share of checkout? Any visible impact from the PayPal launch in the December quarter? We're not seeing any visible difference in a share of checkout from a retailer that might have both as compared to many that have one. The overlap of customer is also not as significant as you would think between providers. Yeah, given our different demographic, we're seeing significantly higher shares of cart that we're able to achieve as comparable to others in the market when we're tested alongside and no material diminishing. Thank you. Just one very last quick one, sorry. Marketing costs as a percentage of revenues are accelerating, it looks like you're kind of reinvesting the net transaction beat into this marketing investment. It's now 17% of revenues. Can you talk to how much of this is kind of seeding new markets, new merchants, versus existing base, and how much might be for the in-store rollout? Just any sort of granularity you could provide around this would be great. Yeah. The majority is for new merchants launching like we've done in the past. When you're launching with retailers, in the last quarter as an example, that are tens of billions of addressable GMV, to invest upfront in that relationship to drive the success of that launch has been our focus. These aren't on renewals. These are new onto the platform. Got it. They're likely to accelerate as you launch into Europe in the second half. Yeah. The money for Europe, as an example, wouldn't have been spent in the first half because we haven't launched and we haven't started marketing. We've made the appropriate commitment, and we want to launch in a meaningful way with AUD 1 billion plus of pipeline. Terrific. Thanks, Nick. Thanks, team. I'll jump back in the queue. No worries. Thanks. I think we're almost at time, but we'll take one more question and then finish a few minutes after the hour. Your next question in queue comes from the line of Tom Beadle from UBS. Go ahead, Tom, your line is now open. Hey, guys. Thanks for the questions. I'll just go one at a time. Good to see the gross loss% fall. I was just wondering, could you talk through what's driving that% down? I realize you spoke about more customers recurring, but could you talk about what proportion of losses stem from customers in hardship versus, say, fraud and any other factors, and how those factors might have changed over the past 12 months? Yeah, sure. It's Anthony here. Just the key point is what we've already made. The amount of losses coming from fraud or hardship is not in any way discernible and immaterial. Okay. Just on the lead numbers, the 27 million per month, just on the conversions of those leads. I just want to run by some math by you, if that was okay. We've had some feedback that the lead conversion might be somewhere between, say, three percent-five percent. That might imply 5 million-8 million converted leads for the half. I guess that means that roughly 10%, give or take, of your total orders processed in the half might have been from converted leads, based on that logic. Maybe a bit more if you assume online sales only. Just wondering if you could comment on that math. Are we making some reasonable assumptions there? Yeah. Tom, it's Nick here. We made a comment that 17% of our GMV came from those leads. You can assume that your conversion rate is about half what it should be. Okay. Our leads are converting at. Double what it should be. Yeah, double and 2x - 3x what a normal lead. It's a very high quality, high intent customer. Yep. Gotcha. Okay, great. Thanks. Thanks very much. We apologize for those who didn't get to ask a question. We've noted what the queue looks like. We're going to make sure that we follow up with everybody today. Just conscious of everybody's time. Thank you again. We really appreciate the time to explain our half year of results. We'll look forward to being in touch individually during the course of the next couple of days. Thank you again. Thank you. Thank you. Thank you so much, presenters. Ladies and gentlemen, this concludes our conference for today. Thank you all for participating. You may now disconnect.