Downsized Zip races after revenue jumps in June

afr.com:

Under-pressure buy now, pay later group Zip recorded revenue and transaction growth in the double digits for the June quarter, sending its shares 9 per cent higher on Thursday.

Quarterly revenue was up 21.1 per cent year-on-year to $193.8 million. 

The positive trading update ruled off a year since the company reset its strategic priorities after a merger with struggling Minnesota-based Sezzle fell apart. The market viewed the collapse of that deal as positive for Zip, unshackling it from a loss-making, would-be partner.

While Zip shares traded at 48¢ on Thursday, they are still well off the $12.35 the group fetched in early 2021.

Zip has since moved away from its global ambitions to focus on the core US and Australian business, winding down its Middle Eastern division and selling the European and South African businesses for $20 million.

While these moves led to a loss of a million customers in the quarter, Zip chief operating officer Peter Gray told The Australian Financial Review that Thursday’s update was “strong”.

Quarterly revenue was up 21.1 per cent year-on-year to $193.8 million, and transaction volumes were up 6.4 per cent to $2.3 billion. Credit losses in the US slowed from 1.2 per cent to 0.85 per cent over the three-month period.

Mr Gray said there was “a slight increase in our arrears” as inflation, interest rates and other cost-of-living pressures hit consumers, but “it is in-line with, or better, than the external data points on consumer credit”.

Zip said it had put in place “adjusted risk settings and proactive portfolio management actions” to respond to cost-of-living pressures, hampering its volume growth.

It comes ahead of a new regulatory code that enforces tougher credit checking requirements on the