Why is Zip Co Limited Making Significant Improvement in Cash EBTDA?

Zip Co Limited (ASX: ZIP) announces its full-year results for the period ending 30 June 2023, showcasing a significant improvement in Cash EBTDA and being on track to achieve group positive cash EBTDA during 1H24.

Key Highlights

Zip Co Limited has achieved notable milestones, including:

Recording a group revenue of $693. 2m, experiencing a YoY growth of 16. 1%.

Achieving a record transaction volume (TTV) of $8. 9b, showing a YoY growth of 7. 0%.

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Conducting a record number of transactions, with 72. 7m, indicating an 8. 3% YoY increase.

Maintaining a revenue margin of 7. 8%, surpassing the medium-term targets by 60 basis points.

Successfully reducing group net bad debts to 2. 0% of TTV, adhering to the target range.

Demonstrating a strong Net Transaction Margin (NTM) of 2. 8%, despite the rising interest rate environment.

Garnering a cash gross profit of $250. 6m, reflecting a YoY growth of 20. 4%.

Increasing merchant numbers to 72. 3k, experiencing an 11. 2% YoY growth.

Observing a decline in active customer numbers for the core business to 6. 2m due to tightened risk settings.

Exhibiting a core Cash EBTDA improvement of 54. 8% in 2H23 compared to 1H23, surpassing the guidance provided.

Achieving cash EBTDA positive results for Zip US and NZ on a monthly basis, while NZ maintained a full-year positive cash EBTDA outcome. Zip's AU business has also remained cash EBTDA positive for five years.
Completing a strategic review of rest of world ("RoW") and non-core operations, resulting in divestments, restructures, or wind-downs of these businesses. Divestments of Twisto, Payflex, and Spotii successfully neutralized cash burn in line with Zip's strategy.

Moreover, Zip Co Limited executed two significant liability management exercises to reduce its Senior Convertible Note outstanding face value from $400. 0m to $137. 8m. These actions have positively impacted Zip's balance sheet with no cash impact to the company.

With ample available cash and liquidity, Zip Co Limited is well-positioned to achieve group cash EBTDA profitability during 1H24.

Please note that all the presented figures pertain to Zip's continuing operations as of June 2023, excluding operations in the UK, Singapore, Mexico, the Middle East, Central and Eastern Europe, and South Africa, which were discontinued or divested during the period.

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