Zip says its future lies overseas, as local growth slows down and bad debts loom on the horizon

Zip founder Larry Diamond and Peter Gray.

  • Zip has released its fourth quarter results, revealing it doubled revenue compared to the same quarter last year which was hit by the pandemic.
  • While CEO Larry Diamond called them “another outstanding set of results”, analysts were less confident, noting margins were declining and bad debts looked like they were on the rise.
  • US growth meanwhile continues to outpace the local Australian market, while shares declined during Thursday’s trade.
  • Visit Business Insider Australia’s homepage for more stories.

The latest results from Zip again emphasises that the future of Australian buy now, pay later sector is well and truly overseas.


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The ASX-listed company, valued at almost $4 billion, released its quarterly results tracking how it performed in the three months to June.

Broadly in line with expectations, Zip doubled quarterly revenue to $129.9 million, processing $1.8 billion worth of transactions.

While CEO Larry Diamond called it “another outstanding set of results”, the growth compares to the first three months after the pandemic was declared last year.

To put it in perspective, transactions are up just 60% after two years when you compare them to 2019 figures. At the same time, the entry of PayPal and the Commonwealth Bank into the BNPL market may place increasing pressure on Zip and its established rivals.

But again, the major message out of Zip’s results was the same as the one emerging from its rivals: the real opportunity lies overseas, and particularly in North America where Zip subsidiary QuadPay operates.

“We continued executing on our global BNPL expansion strategy across both the developed and emerging markets,” Diamond said, noting the company had now launched into Canada and Mexico as well.

“We are now a truly global player with a presence in 12 markets, and this is a real point of difference as we target global retailers.”

US revenue is growing three times quicker than in Australia and New Zealand, with the American market now contributing more than Australia, New Zealand, and Zip’s burgeoning UK footprint combined.

As a much larger market, Americans are spending nearly as much as Australians, making half as many transactions. This despite the fact Zip as 1.6 million more American customers.

Royal Bank of Canada (RBC) analyst Chami Ratnapala noted that while QuadPay growth is helping push Zip’s performance, downloads are also drifting lower in the US market.

Closer to home, Australian customers are using the app more frequently, even as they reign in their spending.

“Growth in the ANZ business continues and the shift to everyday spend is very evident by the continued decline in value per transaction, however pleasingly value per customer continues to tick higher. That said, revenue yield and margin continue to decline,” Ratnapala said.

“Customer metrics [are] positive and credit indicators stable, however, the arrears rate did rise likely indicating higher net bad debts to come.”

It comes as short sellers continue to crowd the company, with ASIC data ranking it as the second-most shorted stock on the ASX, just after Webjet.

Zip shares were down more than 6% early in Thursday’s session.

Source: Thanks