Can Zip's share price rise on record first-half results?

The share price of ASX-listed buy-now-pay-later (BNPL) company Zip (ASX: ZIP) could see gains on the back of a strong performance in the first half of FY24.

Zip managed to achieve a profitable half on the back of a leap in revenue and strong seasonal performance for its stateside operations. CEO Cynthia Scott says the company has now set its sights on underserved financial consumers in the US market.

Revenue leaps in H1 FY24

Zip's revenue posted a robust 28.9% rise in H1 FY24 to reach $430 million in total.

Revenue received a boost from a 5% rise in transaction numbers to 38.6 million, as well as a 9.6% rise in total transaction volume (TTV) to $5 billion. Zip's revenue margin rose 130 basis points to 8.5%.

Group cash EBTDA for the first half was $30.8 million, for a sharp reversal compared to losses of $33.2 million the year previously.

According to Zip, this shift was driven by improved margins and cost discipline, alongside a strong seasonal performance in the US market.

Zip Americas posted a record-high TTV OF $3.1 billion following a 33.3% increase, while revenue jumped 40.3% to $214.7 million.

Australia and New Zealand also saw impressive results, with a 22.7% jump in revenue helping to compensate for rising interest costs.

These robust performances for the six months ended 31 December alongside a number of positive one-offs helped Zip to post after-tax profits of $73 million for the half.

Zip's CEO and Managing Director Cynthia Scott hailed the results for the half as 'outstanding,' attesting to the company's 'consistent strong performance and continued successful execution of...strategic priorities.'

Balance sheet health improves

In addition to its strong revenue and profit results, Zip highlighted efforts to enhance the health of the company's balance sheet.

Zip obtained a new $150.0 million corporate debt facility, as well as an incentivised conversion and repayment of $40.0 million in outstanding CVI convertible notes.

The company also said it had engaged in continued deleveraging of its balance sheet, with the outstanding face value of its senior convertible notes falling to $68.8 million by the end of 2023, before further declining to $34.6 million by 23 February 2024.

Zip sets sights on US market

Zip is a BNPL fintech company with operations in Australia, New Zealand and the US. The company was founded in 2013 by Larry Diamond and Peter Gray as Zip Money, with the goal of providing customers with digital credit services. Its flagship Zip Pay and Zip Money products are digital wallets that enable customers to make BNPL transactions both online and in physical stores.

Zip embarked upon an ambitious expansion drive shortly after its founding. It listed on the ASX in 2015, and acquired Pocketbook, a highly popular finance app in Australia, the following year.

In 2017 Zip secured the support of Australia's big four banks, with Westpac making a $40 million investment in the company and National Australia Bank (NAB ) ponying up $200 million of a $260 million debt facility.

By the start of the 2020's Zip had set its eyes on global expansion. In June 2020, Zip acquired a $430 million equity stake in New York-based BNPL platform Quadpay, further expanding upon a prior 14% holding.

Given the strong performance of its state-side operations in the first half of FY24, Zip is heavily focused on the US market.

CEO Cynthia Scott recently said to The Australian that Zip is now focused on financial inclusion opportunities in the US, targeting 'underserved' American consumers.

'Zip is very well-positioned to capitalise on the near and medium term opportunities in our core markets of ANZ and the Americas and deliver greater value for our customers and merchants,' Scott said in the company's first half report.

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