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Market Analysis Latest ASX News

Zip Rises On Q1 FY23 Results

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By Kiryll Prakapenka, Thursday, 20 October 2022

ASX BNPL firm Zip Co Limited [ASX:Z1P] released its September quarterly results on Thursday, with revenue up 19% year on year to $163.2 million.

ASX BNPL firm Zip Co Limited [ASX:Z1P] released its September quarterly results on Thursday, with revenue up 19% year on year to $163.2 million.

Transaction volume for the quarter rose 15% YoY to $2.2 billion as ZIP’s revenue margin ‘remained healthy’ at 7.4%.

ZIP shares are down 90% over the past 12 months:

ASX:Z1P stock chart

www.TradingView.com

ZIP: ‘Moving towards positive cash flow’

Zip was enthusiastic about its September quarter results, reporting continued top-line growth and expanding customer base.

Zip co-founder and CEO Larry Diamond went so far as to say the BNPL stock is ‘moving towards positive cash flow’.

Zip’s key metrics for the quarter included:

  • Group quarterly revenue of $163.2m (up 19% YoY)
  • Transaction volume for the quarter of $2.2b (up 15% YoY)
  • Transaction numbers for the quarter of 19.6m (up 33% YoY)
  • Customer numbers 1 for the Group of 12.0m (up 50% YoY)
  • Active customer numbers 2 at quarter end of 7.4m (up 17% YoY)
  • Merchants on the platform increased to 94.1k (up 70% YoY)
  • Revenue margin remained healthy at 7.4%
  • Cash transaction margin remained solid at 2.2%

Zip said that at 30 September, it had $140.7 million in available cash and liquidity.

The fintech expects this to be sufficient to support it ‘through to cash EBTDA profitability’.

In Thursday’s update, Zip said it hopes to be cash EBTDA positive ‘during H1 FY24’.

 

ASX:Z1P finances chart

Source: Z1P

Larry Diamond commented on his company’s performance:

‘We are pleased to deliver another solid set of numbers as Zip resets and moves toward positive cash flow, taking control of our future. During the quarter we made great progress on our refreshed strategy to deliver sustainable growth, right-size our global cost base and accelerate our path to profitability.

‘With a more focused strategy on our core markets ANZ and the US, we substantially lowered credit losses, repaid $40m of debt, and completed an upsized $300m receivables funding transaction, demonstrating the resilience of the business model in the face of ongoing external volatility.

‘The underlying business remains strong, and with the simplification of the business following adjustments to strategy, we are well funded and positioned to execute ahead of seasonal peak volumes and beyond into H2 FY23.

‘Zip’s simple, fair and easy to use product is becoming even more important to customers and we are well on our way to disrupting the traditional credit card model and providing people with control of their financial lives.’

Three exciting fintech stocks

While the fintech sector has been beaten down in 2022, the recent bounce from the likes of Tyro Payments [ASX:TYR] shows there’s still interest in the sector.

Fintechs can still provide value opportunities — at the right price and with the right growth prospects.

There’s no doubt that in recent years many fintechs suffered from overconfidence in the ‘growth-at-all-costs’ business model that caught them off-guard when the markets turned.

You could argue Zip was a victim of this strategy and is now reprioritising profitability and positive cash flow.

Clearly, profitability is back as a priority for the sector.

With the right choices, some fintechs can grow into very sturdy, lucrative businesses.

Our market expert, Ryan Clarkson-Ledward, has done the necessary research required for discerning these.

He’s discovered three profitable fintech stocks flying under the radar. One of them, he says, is a start-up ‘wrestling with the big banks — and winning’.

Download Ryan’s free research report on three exciting fintechs here.


Regards,

Kiryll Prakapenka
For Money Morning

All advice is general advice and has not taken into account your personal circumstances.

Please seek independent financial advice regarding your own situation, or if in doubt about the suitability of an investment.

Kiryll Prakapenka

Kiryll’s Premium Subscriptions

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All advice is general in nature and has not taken into account your personal circumstances. Please seek independent financial advice regarding your own situation, or if in doubt about the suitability of an investment.

The value of any investment and the income derived from it can go down as well as up. Never invest more than you can afford to lose and keep in mind the ultimate risk is that you can lose whatever you’ve invested. While useful for detecting patterns, the past is not a guide to future performance. Some figures contained in our reports are forecasts and may not be a reliable indicator of future results. Any actual or potential gains in these reports may not include taxes, brokerage commissions, or associated fees.

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