Zip Co dips under $11 after BNPL leader reports accelerating losses
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Zip Co (ASX:Z1P) shares have dropped after the buy now, pay leader reported its customers tripled in the first half but its loss more than quadrupled.
The company had 5.7 million active customers as of December 31, up 217 per cent from a year ago, and processed $2.3 billion in transactions, up 141 per cent.
But it also reported a $139.8 million adjusted half-year loss, up 361 per cent from the $30.3 million Zip lost a year ago.
The company’s statutory loss looked even worse: a staggering $455.9 million. But Zip had to declare a $306.2 million hit to goodwill because its share price had jumped substantially between the time of its acquisition of QuadPay was announced in June and when it was approved by shareholders in August. (Zip funded the acquisition by issuing new shares). The adjustment is for accounting purposes only and has no cash or business impact on the company.
Zip’s revenue was up 131 per cent to $159.8 million – $58.2 million from the USA and $97.3 million from Australia and New Zealand.
Zip had $217.8 million in cash as of December 31, following a $121 million capital raising and issuing $96.8 million in convertible notes, and generated positive operating cashflow of $13.9 million in HY21, compared to $4.4 million in HY20. It also had undrawn debt facilities of $308.1 million.
Zip chief executive Larry Diamond said the first half was “transformational”, highlighted by the acquisition of US-based QuadPay, “and saw the Company position itself as a truly global BNPL leader with its footprint across 9 markets”.
“We saw record results across all key drivers with most metrics up 100% YoY and the Company now annualising over $7.5bn in transaction volume at December,” he said.
“The business has strong momentum entering H2 as it expands its business in the US and launches the UK.”
But the market seemed to see things differently — with Zip shares down 8.1 per cent to $10.90 at 12.08pm.
any idea why Z1P dropped so much today? Metrics seemed good to me, I’m a bit confused
— SkyNinjaXD (@SkyNinjaXD) February 24, 2021
— Aus Equity Flash (@EquityAus) February 24, 2021
The company said despite its strong growth, BNPL was still in its infancy. There’s a $22 trillion addressable retail market, and buy now, pay later offerings have just 1.6 per cent penetration of the global e-commerce spend.