Fintech Zip Co cuts loss in half

Fintech Zip Co cuts loss in half

In FY20 the company plans to launch instalments for business, secure strategic deals with banks and partners, enter everyday spend categories, and oversee the launch of its recently acquired PartPay in the UK.

With buy-now pay-later (BNPL) players in a frantic race against time to capture international market share and brand recognition, profit is still an afterthought for the likes of Afterpay (ASX: APT) and Zip Co (ASX: Z1P).

But for the latter this year was a bit different. In its results announced today, Zip highlights an EBTDA of $9.2 million in FY19 compared to a loss of $8.8 million in FY18.

The company still reported a loss before income tax of $11.1 million, but this is a significant improvement on the $22.5 million loss recorded in the previous year.

This improvement been driven by a very strong result with revenue up 138 per cent at $84.2 million and customer numbers rising 80 per cent to more than 1.3 million.

Customers are paying off their entire balance in seven to eight months on average, while net bad debt write-offs were 1.63 per cent compared to 2.61 per cent in FY18.

In a bid to keep up momentum, on Tuesday Zip Co announced it had reached a deal to buy New Zealand company PartPay, which has operations in NZ as well as the United Kingdom, the United States and South Africa.

The Sydney-headquartered fintech saw its transaction volume more than double to $1.13 billion in FY19, and it is targeting that figure to hit $2.2 billion in the current financial year with a goal to have 2.5 million customers on the books.

"2019 has been a huge year for Zip as we continued the rapid growth in customer accounts, transactions and revenue," says CEO and co-founder Larry Diamond (pictured), who came in fifth in last year's Australia's top 100 young entrepreneurs list. 

"We also were successful in signing many $1bn+ enterprise accounts to the platform, launching the Zip App and more recently announcing the expansion of Zip globally.

"These outstanding results and achievements are testament to the incredible hard work of the entire Zip team, and on behalf of the Board I would like to thank everyone for their dedication and commitment.

"We are proud of these results, but are only just beginning and are now well positioned to drive more customers, to transact at more places, more often. We have a number of strategies in place to execute, both locally and globally, and are genuinely excited by the opportunities that lie ahead."

In FY20 the company plans to launch instalments for business, secure strategic deals with banks and partners, and enter everyday spend categories.

Zip Co's budget planner app Pocketbook, acquired in 2016, increased its number of users to 700,000 over the year and the company soon plans to announce an expansion of its product offering beyond tracking, budgeting and saving.

As at 30 June the company only had $12.6 million on its balance sheet as much of its $54.4 million capital raising conducted in the last quarter has been invested into various funding programs. However, for the same date it did have funding facilities available of $631.5 million, of which $587.5 million was utilised.

The total facility size increased to $731.5 million in July following an increase in the facility provided by National Australia Bank (ASX: NAB) in the zipMoney Trust 2017-1.

The group highlights that since its formation, Zip Co's "unwavering goal" has been to disrupt the credit card industry using big data and technology to build leading-edge, digital consumer products which provide fairness, transparency and genuine payment flexibility, without the need for customers to fall into arrears to drive revenue.

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