The Z1P Co Ltd (ASX: Z1P) share price is up 23 cents or 7% to $3.41 this morning after the buy now, pay later rival to Afterpay Touch Group Ltd (ASX: APT) handed investors a positive trading update for the quarter ending June 30, 2019.
Z1P posted record quarterly revenue up 17% quarter on quarter to $27 million on record total transaction volume of $351.8 million, which was more than double the transaction volume it posted in the prior corresponding quarter.
For the entire financial year it also doubled total transaction volume to $1.1 billion, with customer numbers up 80% to 1.3 million. For the quarter it added 159,000 customers, which represents growth of 14%.
It also flagged that costs as a percentage of average receivables continue to fall from 15.5% as at March 31 2019 to 14.8% as at June 30, 2019. This is a decent result and the 70 basis points fall over just one quarter for a key operating metric shows how its clearer route to profitability is probably what's impressing investors this morning.
Z1P also reported that it was cash flow positive on a cash earnings before tax, depreciation, and amortisation (EBTA) basis over the period, with EBTDA clocking in at 2.2% of average receivables over the quarter. This compares favourably to 1.7% in the March 2019 quarter.
In generally the company boasts key operating metrics such as cash costs of sales, cash operating costs, and revenue yield are all heading in the right direction for the business as it scales.
Obviously though other metrics like the direction of bad debts are something keen investors should watch, and this is not something the company is likely to highlight so much.
Over the quarter it raised $57 million from investors to strengthen its balance sheet as it's in a scale game and effectively competing in a market grab race with Afterpay.
It also signed some big name Aussie retailers over the period including Kmart, Bing Lee and Freedom, alongside the stable of fast-fashion brands owned by Premier Investments Limited (ASX: PMV). These include Just Jeans, Jay Jay, Peter Alexander, and Smiggle, among other.
According to its latest regulatory filing it has 352.1 million shares on issue to give it a market value around $1.2 billion at $3.44 per share. This is a fair bit, but nothing compared to its wildly popular rival Afterpay that has a value around $6.4 billion in part due to investor excitement over its efforts to expand in the US and UK.
It also boasted it has now posted six consecutive quarters of positive 'operating cash flow', but looking at the profit and loss statement for the six months to December 2018 we can see it actually posted a net loss of $6.7 million that half year.
Z1P looks an interesting growth business to me and I would not be surprised to see investors bid the stock higher through 2019. However, I'd need to do a lot more research on it before concluding whether or not the shares are a buy.
