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Zip Co Limited, looking forward to accelerate growth

Team Veye | 22 Jan 2021 ASX - Z1P
Zip Co Limited, looking forward to accelerate growth

Zip Co Limited (ASX: Z1P)

Q2 FY21 Trading Update

Zip cements itself as a true global BNPL leader

Zip Co Limited (ASX: Z1P) on 21 January 2021 provided the trading update for the quarter Q2 FY21 ended 31 December 2020

Zip has firmly maintained its position as one of the fastest growing BNPL players in the US, and as a true global BNPL leader, with over 5.7m customers, annualised TTV of c.$7.5bn and annualised revenue of c$480m.

Group Highlights

  • Quarterly revenue reported growth of 88% YoY to $102m
  • BNPL December revenue was up by 94% YoY to $40.2m
  • Quarterly transaction volume was up by 103% YoY to $1.6b
  • December transaction volume was up by 104% YoY to $628.4m.
  • Quarterly transaction numbers reported to 10.7m , up by 149% YOY
  • Customer numbers increased to 5.7m, up 97% YoY.
  • Merchants on the platform reported an increase of 73% YoY to 38.5k (up 73% YoY).
  • Zip US (QuadPay) delivered record results in Q2 across all core metrics – $673.1m in transaction volume, $47.6m in revenue and 915k new customers.
  • The Company raised $176.7m in equity, with the majority of funds allocated to fuel the significant US growth opportunity.

(Chart source: TradingView)

On 18 January 2021, the company completed its share purchase plan announced to the market on 16 and 17 December 2020.

Highlights:

  • The SPP followed the successful completion of the $120 million (before costs) placements to new and existing institutional, sophisticated and professional investors. Proceeds will be used primarily to fund global growth (US, UK and New Markets) and product expansion in Australia with Zip Business
  • Tremendous support from the existing shareholders resulted in the oversubscriptions of $26,739,524.95, which have been accepted in full.
  • The final issue price under the SPP is $5.29 per share.
  • Total of 10,724,674 new ordinary shares were issues under SPP, which are expected to be quoted on the ASX on Thursday, 21 January 2021.

ZIP entered into a partnership with Harvey Norman franchisees, Domayne, and Joyce Mayne on 15 December 2020. The partnership will provide customers with additional choice and better ways to pay with Zip’s BNPL payment solutions.

On 11 December 2020, the company has entered into a partnership with Facebook. This will help small and medium business owners access Zip’s buy now pay later digital wallet to help run their business and pay for advertising on the global social platform.

On November 16, 2020, ASIC’s Report 672 into the “Buy Now Pay Later” (BNPL) sector was released.

  • Only 1 in 100 Zip Pay customers are late each month, as compared to the data in the report that shows 1 in 5 customers across the broader BNPL industry has missed a payment.
  • The report also confirms that Zip makes less than 1% of its revenue from late fees, among the lowest of all BNPL providers (Data Source – Company Reports)

 

Veye’s Take

The quarter witnessed the continued roll out of the Zip Business suite of products in Australia with the launch of Zip Trade in December. The company expects to launch Zip Trade+, an interest free account up to $150k, in Q3 FY21. The partnership with Facebook, enabling Australian SMBs to use Zip Business to purchase ads on the social platform, as well as Zip Business gaining approval for the Australian Government SME Guarantee together are laying a strong future growth foundation. The stock has gained momentum after facing a bearish trend for a long. The upside momentum is well supported by MACD entering in positive territory and RSI holding above 50. The stock has become bullish in the short term and can have the potential to accelerate momentum on a close above $7.99, which offers strong resistance. Veye maintains a "Hold" on “Zip Co Limited” at the current price of $7.36

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