Zip Co. Expects Positive Cash Earnings for Fiscal 2024
Australian buy-now-pay-later provider Zip Co. has announced that it generated positive cash earnings during the first quarter of its fiscal year and is now expecting to achieve the same for the entire fiscal year of 2024. This improved outlook is attributed to growth in U.S. volumes, margin expansion, and cost discipline.
Strong Financial Performance in Q1
Despite a 1.8% decrease in active customers, Zip reported a 32% year-on-year increase in revenue for the three months ending September, amounting to AUD 204.4 million (USD 129.5 million). The total value of transactions on the Zip platform rose by 13% year-on-year to AUD 2.29 billion, with the revenue margin expanding from 7.5% to 8.9%.
"Resilience Amidst Challenging External Environment"
Chief Executive Cynthia Scott highlighted the company's improved cash transaction margin, which increased by 110 basis points to 3.5%. This improvement underscores the resilience of Zip's business model even in a challenging external environment.
Focus on Profitability
Zip has prioritized achieving profitability in light of total statutory losses exceeding AUD 1.4 billion over the past two fiscal years. These losses were mainly driven by impairments and the divestment or closure of non-core businesses, including those in the U.K. and mainland Europe.
Business-Lending Unit Wind-Down on Track
The wind-down of Zip's business-lending unit, which began in the last quarter of fiscal 2023, is progressing as planned. In the first quarter, Zip Business contributed AUD 2.5 million to its revenue.
Adjustments Made to Adapt to Changing Market
As the popularity of the installment-payment sector waned among investors amid the surge in online shopping during the Covid era, Zip Co. has undertaken cost-cutting measures and job reductions. These adjustments have been crucial for the company as it navigates the evolving market dynamics.
Zip's stock, which reached a peak of AUD 14.53 in 2021, is currently trading at 30 Australian cents.
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