Zip has released its Q3 results and with margins improved plus revenue and transactions numbers up, will it be enough to safeguard the BNPL company as regulators crack down and a recession looms?
Australia’s largest BNPL company Zip has released its results for the third quarter, reporting a group quarterly revenue of $182.1m, up 15 percent YoY. Zip ANZ in particular delivered a very strong revenue growth of 23 percent YoY.
In January, the company shared its impressive first half results, with Zip staying steadily on the path to meeting targets and is continuing its momentum into the second half.
Transaction volume for the quarter has risen 9 percent up to $2.2b. With transaction numbers for the quarter totalling 20.3m, up 12 percent YoY. Active customer numbers at the quarter totalled 7.2 million.
Cash Transaction Margin for the core business improved to 2.8 percent for the quarter (up from 2.5 percent in Q3 FY22), which Zip identifies as a very strong result in a rising interest rate environment, and in line with medium term targets. Revenue margin for the core business also improved to 8.3 percent (vs 7.9 percent in Q3 FY22).
In this quarter, Zip signed on Peleton and ASICS in Australia, PlaceMakers in New Zealand, and Pet Supermarket and World Wrestling Entertainment in the US.
Last year it was announced the company was focusing on its newly founded US reach and its ANZ operations. Zip US continued its solid momentum despite the external environment and remains on track to exit FY23 cash EBTDA positive on a sustainable basis. Zip US credit loss rates were 1.2 percent of TTV (vs 3.7 percent in Q3 FY22). “The US business continued its solid momentum despite the external environment and remains on track to exit FY23 cash EBTDA positive on a sustainable basis,” Zip Co-Founder, Global CEO and Managing Director, Larry Diamond said.
“We are very pleased to again deliver both solid topline growth and strong, improved margins for the quarter,” said Diamond. “Zip’s differentiated business model, which is less reliant on discretionary consumer spending, is proving resilient in the current operating environment with core cash transaction margin increasing to 2.8 percent, driven by revenue margin expansion to 8.3 percent and an ongoing focus on credit performance. The cash flow positive Australian business delivered strong growth with record revenue, while market conditions and industry consolidation provide a great opportunity to increase market share.”
Overall, Zip remains on track to deliver up to 50 percent Core Cash EBTDA improvement in H2 FY23 versus the $33.2m result for H1 FY23.
“With expected cash inflows from strategic review outcomes of approximately $20m this half, RoW cash burn neutralised and the up to 50 percent improvement in Core Cash EBTDA we are expecting in H2 FY23 versus H1 FY23, we remain confident that we have sufficient cash and liquidity to deliver on our target of group positive cash EBTDA during H1 FY24,” said Diamond.
With cost of living and inflation on the rise, the BNPL sector is expected to see growth over the following months. A new report from FIS projects that BNPL is set to maintain its ecommerce market share of 14 percent across the next four years, up from 5 percent in 2021 and 3 percent in 2018, a market share that is expected to rise as ecommerce transaction value near doubles in that period.
“We recognise that many household budgets are under pressure, whether it be inflation or the rising cost of living, which means our mission and purpose has never been more relevant,” said Co-Founder and CEO Larry Diamond. “We aim to provide customers with a simple, fair and easy to use product that can be used everywhere and every day, creating a world where people can live fearlessly today, knowing they’re in control of tomorrow.”
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