Last Wednesday it seemed positive results out of Afterpay Touch Group Ltd (ASX: APT) had led the market to question zipMoney Ltd's (ASX: ZML) prospects for continuing to scale up the size and profitability of its business.
zipMoney was able to announce record quarterly revenue last Friday of $6.9 million for Q1 FY18, and the company maintained its guidance for cashflow breakeven on a monthly basis in FY18.
The zipMoney CEO Larry Diamond noted the strong quarterly revenues result, up 22% on the Q4 FY17 figures. Mr Diamond also pointed to the significant amount of new merchant business in the pipeline for the company, allied to a halving of funding costs from the recently available NAB facility. This alongside the stabilisation in the operating cost base were reasons why the company was well placed to expect the cashflow position to move to the point of breakeven.
The company also announced that Westpac Banking Corp (ASX: WBC) had recently made a $40 million investment, amounting to a minority equity interest of 17% in Zip. Mr Diamond described this investment as a significant strengthening of Zip's financial position and its ability to pursue growth and investment opportunities as they arose.
The company welcomed iconic brands such as Mitre10 and Beacon Lighting onto its platform and reported that a large number of SMEs and large enterprise retailers were at a contract stage.
The quarterly update shows an increase in the number of merchants using zipMoney of 34% in Q1 FY18 from Q4 FY17, and the number of customers increasing by 34% also in that time. Volume of transactions rose 23%, and the value of those transactions rose by 10% to just over $95 million.
Year on year Q1 revenues have increased 148% and the number of transactions a huge 673%.
Pleasingly the amount of return transaction business grew from 46% at the beginning of the year to 70% in September.
November should see a significant decline in funding costs as the company transitions fully to the NAB facility and away from expensive legacy funding facilities.
The update points out that zipMoney's operations have necessarily scaled significantly over the past 12 months, to both support the company's strong growth and to position it to take advantage of the large market opportunity ahead. This trend will slow now and is forecast to remain largely flat in Q2 18 and to rise only marginally over the remainder of FY18.
The update concludes that zipMoney is rapidly scaling towards breakeven, driven by strong growth in all key operating metrics.
zipMoney is a leading player in the digital retail finance and payments industry, offering point-of-sale credit and digital payment services to the retail, health, travel and education industries.
Shares in zipMoney ended last week at $0.65 cents, up 12% on the day.
