Zip loss narrows, volumes rise as BNPL adapts to downturn

afr.com:

Zip Co is still running a hefty annual loss but reported record transaction volumes and revenue, despite the discretionary spending slowdown, suggesting there may still be some life in the buy now, pay later sector.

Zip shares – which have been under significant pressure amid the Reserve Bank’s rates tightening campaign – opened up 8 per cent at 35.7¢ after it narrowed its statutory net loss to $413 million for the year, down from a whopping $1.1 billion.

Zip said the business in the US and Australia is now “growing sustainably”. Julia Nikhinson

However, after a dramatic restructuring program, it declared its financial performance is improving: Zip hit monthly profitability in the United States, New Zealand and Australia for the first time in June.

Cash gross profit was $250.6 million, up 20 per cent, which removes the impact of various costs, including a payout to Sezzle when their merger was terminated last year; incentive payments on its convertible notes; and impairments relating to it offloading its European businesses.

Once other corporate costs are accounted for, it said on Tuesday it made a loss at the cash earnings line of $48.2 million, better than the $151.4 million a year earlier.

Zip’s Australian business has been cash EBTDA positive for five years, but Zip has run huge group losses as it ploughed profits into global growth. This vision has now pared back to focus on the US and Australia.

Zip said the US and Australia are now “growing sustainably” and it is on track to deliver group positive cash earnings before tax, depreciation and amortisation during the first half of this financial year. This comes after cash EBTDA from its core businesses improved 55 per cent in the second half compared to the first