Zip's share price could rise on record revenue

ASX-listed buy-now-pay-later (BNPL) platform Zip Co. (ZIP) could see its share price benefit from strong results for FY23, including a record level of revenue.

Zip is not the only BNPL company to release impressive results for the 2023 financial year, with EML Payments (EML) and Tyro Payments (TYR) also posting strong performances.

The strong results for ASX-listed BNPL companies arrives during a period of uncertainty for the sector, due to the imposition of stricter regulatory requirements by Australian authorities.

Zip posts record levels of revenue

ZIP's notched up a strong performance in the 2023 financial year, with transaction volumes, revenues and cash gross profits all seeing impressive gains.

According to its annual results, ZIP posted record revenue of $693.2 million for FY23, representing a year-on-year (YoY) rise of 16.1%.

Cash gross profit increased 20.4% YoY to reach $250.6 million, while transaction volumes saw a 7% rise to reach a record $8.9 billion. ZIP's transaction numbers also breached a new record in FY23, tapping 72.8 million purchases.

ZIP's revenue margins increased by 60 basis points compared to the end of FY22, for a 7.8% YoY increase.

The number of merchants making use of Zip's platform also saw robust growth, rising 11.2% YoY to around 72,300.

Zip strips down operations, expands partnerships

ZIP CEO Cynthia Scott imputed the strong performance in FY23 to new partnerships with some of the top online brands that operate within Australia, as the fintech sector continues to consolidate.

'In Australia, we launched new merchant relationships with marquee merchants including eBay AU, Webjet, Jetstar, Peloton and Uber,' Scott said in a statement.

'The expected consolidation in digital financial service is playing out and there are significant opportunities for Zip.'

Scott highlighted efforts to streamline ZIP's businesses and focus more on core operations as part of its profitability drive. These efforts proved successful, with operations outside of Australia ending the year in the black.

'We completed our strategic review of RoW and non-core businesses and took actions to close or wind down these businesses, delivering cash inflows back to Zip and neutralising cash burn.

'We achieved an important milestone, exiting FY23 with the US and NZ businesses cash EBTDA positive, along with the Australian business which has been cash EBTDA positive for five years.'

Other BNPL players also strong in FY23

ZIP was far from the only BNPL player to perform well in FY23, with key peers EML and TYR also releasing strong results.

EML reported a 9% rise in revenue to a record $254.2 million, ahead of its guidance range of $235 million to $245 million. EBITDA also beat EML's guidance, coming in at $37.1 million.

TYR's FY23 results pointed to a 30% rise in gross profits to $193.2 million, as well as a near 300% YoY rise in EBITDA to a record $42.3 million.

Theese strong results highlight the health of Australia's BNPL sector, despite plans by authorities to step up regulatory scrutiny in the wake of breakneck growth since the Covid pandemic.

In May, the Australian federal government announced that it planned to treat BNPL services as credit products, making them subject to stricter requirements under the Credit Act.

'The plan will protect people from the spirals of harm that unregulated, unrestricted lending can cause,' said Financial Services Minister Stephen Jones.

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