Zip Co seals record quarterly revenue

15 July 2020, Written by Matt Ogg

Zip Co seals record quarterly revenue

Zip Co (ASX: Z1P) CEO Larry Diamond (pictured) says the fintech's business model has proved "extremely resilient" through the COVID-19 pandemic, achieving record revenue of $46.4 million in the fourth quarter of FY20.

This represents a 72 per cent year-on-year rise, compared to a 91 per cent jump in revenue overall for the financial year to $161.2 million.

The buy-now-pay-later (BNPL) company's market capitalisation has risen by more than $1.4 billion since announcing an acquisition deal with New York-based QuadPay in June.

Customer numbers have also jumped 63 per cent to 2.1 million, while new merchants came on board with the platform in Australia during the fourth quarter including Cotton On, Canon and Greencross Vets, along with brands like Sony and Bunnings in New Zealand.

"The business model was tested during COVID-19 and proved extremely resilient - in terms of transaction volume, strong revenue mix and outstanding customer repayment performance," says Diamond.

"Our product differentiation, strong proprietary credit platform and penetration into defensive, everyday spend categories delivered in spades.

"Pleasingly, we beat the goals we set for the Company in 2019 with a target of $2.2 billion in annualised transaction volume, which was supported by a number of marquee merchants and a top-10 rated app."

As at the end of FY20 the group had drawn $1.05 billion of its available facilities of $1.14 billion, and since then it has secured an increase of $95 million within the Master Trust.

"Zip is well funded and uniquely positioned to continue to trade and grow in the current environment," says Diamond.

"We continue to believe the credit card model is fundamentally broken with customers demanding flexible, responsible, interest free alternatives the flight to BNPL is indeed a global trend.

"The recently announced QuadPay transaction is an important step in our global expansion and provides access to the world's largest retail market, the USA ($5tr and 15x Australia) during a time when interest-free instalments are transforming the way people pay. We look forward to the EGM in August and completing the transaction."

Zip Co also tightened credit in March in response to COVID-19, adjusting its application of underwriting algorithms and leveraging realtime portfolio management tools to actively monitor account behaviour and adjust limits accordingly.

The company highlights "exceptional repayment rates" with receivables increasing by 2 per cent over the quarter to $1.143 billion, while the average monthly repayment rate increased to 15.6 per cent, translating to a book recycling period of six months. 

In early trading, Z1P shares are down by close to 1 per cent at $6.97 each.

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Author: Matt Ogg

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