Zip share price lower on $243m first-half loss

Zip is still making large losses but is heading in the right direction…

| More on:
a young woman sits with her hands holding up her face as she stares unhappily at a laptop computer screen as if she is disappointed with something she is seeing there.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • Zip has released its half-year results
  • The company has delivered a record top line result but another sizeable loss
  • Zip continues to expect to be cash EBTDA positive during FY 2024

The Zip Co Ltd (ASX: ZIP) share price is trading lower on Thursday.

In morning trade, the buy now pay later (BNPL) provider's shares are down 2.5% to 55 cents.

This follows the release of the company's half-year results today.

Zip share price lower on big loss

  • Half-year revenue up 19% to a record of $351 million
  • Net transaction margin (NTM) up 20 basis points to 2.5%
  • Group credit losses down 50 basis points to 1.9% of total transaction value (TTV)
  • Cash gross profit up 20% to $121.7 million
  • Core cash EBTDA loss of $33.2 million
  • Loss after tax of $242.5 million
  • Cash and cash equivalents of $153.9 million

What happened during the half?

For the six months ended 31 December, Zip reported a 19% increase in revenue to a record of $351 million. This reflects a 10% increase in TTV to $4.9 billion and a 50 basis point increase in its revenue margin to 7.1%.

Underpinning its TTV growth was a 4% lift in active customer numbers to 7.3 million, a 20% jump in merchant numbers to 97,500, and a 17% increase in transaction numbers to 42.2 million.

Combined with its cost reductions and improving margins, this ultimately led to a $27.3 million improvement in its core cash EBTDA to a loss of $33.2 million from a loss of $60.5 million a year earlier.

Finally, on the very bottom line, Zip reported a loss after tax of $242.5 million. This includes a number of items such as merger termination fees, incentive payments, effective interest on convertible notes, and goodwill impairment.

At the end of the period, Zip had a cash and cash equivalents balance of $153.9 million. It believes this leaves it well funded with sufficient available cash and liquidity to deliver on its target of positive group cash EBTDA during FY 2024.

Particularly given that Zip US and NZ remain on track to exit FY 2023 with positive cash EBTDA on a sustainable basis, along with Zip's AU business which has been cash flow positive for four years.

In addition, the company has completed the strategic review of its rest of world and non-core operations and is now taking action to divest, restructure, or wind down these businesses. This is expected to neutralise cash burn and deliver additional cash inflows during the second half.

Management commentary

Zip's Co-Founder and Global CEO, Larry Diamond, was pleased with the half. He said:

We are pleased to deliver another strong set of results driven by record transaction volumes and revenue, and improved credit losses and margins. Zip continues to accelerate its path to profitability as we execute on our strategic priorities of sustainable growth, a focus on our core markets and right-sizing our cost base.

Although topline growth has been tempered by deliberate adjustments to risk settings, our strong net margin performance is a very clear proof point of the successful execution of our strategy to increase revenue margins and reduce credit losses. We continue to streamline our business, with Cash EBTDA used in core markets and corporate costs improving by $27.3m to ($33.2m) for the half. We expect this to improve further again in the second half of FY23 and this very strong result has us well and truly on the path to positive group cash EBTDA during HY24.

Outlook

Management provided a short update on its performance so far in the second half.

It advised that trading was strong in January, with TTV up 9%, revenue up 12%, and its cash NTM at 3.5%.

It also revealed that its US net bad debts for January was trending at 1.4% of TTV on a cohort basis.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Zip Co. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on BNPL shares

A man looking at his laptop and thinking.
BNPL shares

Down 6% in a week, should you buy the dip on Zip shares?

Where to next for the BNPL player?

Read more »

A businessman stacks building blocks.
Technology Shares

Why is the Block share price rocketing 10% today?

Brokers continue to be bullish.

Read more »

A happy girl in a yellow playsuit with a zip gives the thumbs up
BNPL shares

Is this why the Zip share price keeps breaking records?

Zip shareholders have been enjoying a record breaking year. Is this why?

Read more »

A cool dude looks back at the camera while ziplining above the treetops.
BNPL shares

Why is the Zip share price on a rollercoaster today?

Zip shares are now up an eye-watering 670% in a year.

Read more »

Man holding out $50 and $100 notes in his hands, symbolising ex dividend.
BNPL shares

Owners of Zip shares are projected to start receiving dividends in the next few years

An expert is forecasting that passive income could start flowing.

Read more »

woman using affirm to pay
BNPL shares

Are Zip shares a buy following the ASX 200 stock's bumper quarter?

This stock continues to impress.

Read more »

Two happy excited friends in euphoria mood after winning in a bet with a smartphone in hand.
BNPL shares

Why is the Zip share price jumping 10% today?

Let's see what is getting investors excited about this buy now pay later provider today.

Read more »

A happy girl in a yellow playsuit with a zip gives the thumbs up
BNPL shares

Here is the earnings forecast out to 2029 for Zip shares

How much could Zip’s earnings grow in the next few years?

Read more »