Australia’s largest buy now, pay later (BNPL) delivered record volumes in Q2 and saw its US business deliver a cash EBITDA positive result for the first time.

Zip Co (ASX:ZIP) has kicked 2023 off with a bang, delivering a set of record results for the second quarter of the financial year.

Group revenue hit a record $188 million for the period, up 12% from the same period the year before. Transaction volume for the quarter rose 22% (QoQ) to $2.7 billion. Transaction numbers grew by 15% QoQ Y to 22.6 million.

The company’s cash transaction margin lifted to 2.6% for the quarter, a very strong number in a rising interest rate environment, with a steady revenue margin of 6.9%, both numbers in line with company targets.

Global CEO and managing director Larry Diamond said the company was very pleased with the results especially given the challenging external environment.

“Zip continued to make great progress on our strategy to deliver sustainable growth, right-size our global cost base and accelerate our path to profitability,” he said.

Profitability plan

 Diamond singled out the company’s US business which was cash EBITDA positive for the months of November and December, off strong seasonal performance in the period which included the Black Friday, Cyber Monday, Christmas and Boxing Day sales periods.

Diamond said it was exciting to hit the milestone and deliver such strong results on credit losses during peak trading.

US credit loss rates more than halved from the quarter before to 1.1% of total transaction volumes (TTV).

Zip also reaffirmed its plan to exit the first half of FY24 cash EBITDA group positive, reporting $78.5 million in available cash and liquidity as of the 31st of December, which it said was sufficient to achieve this target.

Immune to regulatory changes

 2023 will see major changes for the BNPL sector in Australia, with the Treasury currently running consultations after releasing a discussion paper outlining three possible regulatory options.

Zip has always been a strong supporter of fit for purpose regulation and Diamond took the opportunity to reaffirm how well placed the company is for potential changes.

Even if the most robust option was adopted, the company has said it would be business as usual for the company to comply.

Zip is one of the few BNPLs that holds an Australian Credit Licence (ACL) and already conducts identity, credit and affordability checks on Zip Pay customers.

This article was developed in collaboration with Zip Co, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.

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