Zip Improves Margins and Strengthens Balance Sheet

Zip Co Limited (ASX: ZIP), a leading digital payment and finance technology company, has reported its fourth-quarter results for the period ending 30 June 2023, showcasing impressive growth and a strengthened balance sheet.

Key Highlights:

Group quarterly revenue: The company saw a substantial increase in group quarterly revenue, reaching $193. 8 million, representing a 21. 1% year-on-year growth.
Transaction volume: Zip also reported a notable increase in transaction volume for the quarter, totaling $2. 3 billion, reflecting a 6. 4% year-on-year increase.

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Cash Transaction Margin: Zip's core business showed significant improvement in cash transaction margin, reaching 3. 1% for the quarter. This positive result is particularly notable considering the current rising interest rate environment.

Revenue growth: Both of Zip's core markets, Zip ANZ and Zip US, demonstrated strong revenue growth with a 26. 1% and 13. 6% year-on-year increase, respectively.
Improved revenue margin: The revenue margin for the core business improved to 8. 5% compared to 7. 6% in Q4 FY22.

Active customer numbers: Zip's core business reported 6. 2 million active customer numbers at the end of the quarter.

Low credit loss rates: Zip US showcased exceptional credit loss rates, with only 0. 85% of TTV (Total Transaction Volume), demonstrating a significant improvement compared to previous quarters.

Expansion and partnerships: Zip secured key deals with prominent enterprise merchants such as Webjet, Peloton, Sheike, Hewlett Packard, WHP Global, Mitchell and Ness, Fevo, Hanes Brand, and Lovely Wholesale in both Australia and the US.

Divestment of businesses: Zip successfully completed the divestment of its businesses in Central and Eastern Europe (Twisto), South Africa (Payflex), and the Middle East (Spotii). This accomplishment aligns with Zip's objective of neutralising cash burn from its Rest of World (“RoW”) footprint by the end of the financial year.

Liability management exercise: In June, Zip executed a significant liability management exercise, reducing its zero coupon convertible note liabilities by $192. 2 million, resulting in an effective rate of 47. 5 cents in the dollar. This exercise is expected to have a material impact on Zip's balance sheet with no cash impact on the company.

Rated note issuance: Zip successfully completed a $200 million rated note issuance in the Zip Master Trust (2023-1) to fund its Australian receivables. The senior notes in this issuance have been given a AAA rating.

Upcoming Cash EBTDA performance report: Zip will soon report on its Cash EBTDA performance, including Core Cash EBTDA relative to its target of up to a 50% improvement in H2 FY23.

With available cash and liquidity of $57. 3 million as of 30 June 2023, Zip remains well funded, positioning the company to achieve group cash EBTDA profitability during H1 FY24.

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