The Zip Co Ltd (ASX: ZIP) share price is down in line with the rest of the market amid the company holding its annual general meeting (AGM) today.
The Zip share price is down 2.3% to 62.5 cents at the time of writing. By comparison, the S&P/ASX All Ordinaries Index (ASX: XAO) is down 1.8%.
At the AGM, Zip provided an investor presentation and CEO and managing director Larry Diamond made a speech.
Let's see what he had to say.
EBTDA cash flow positive by first half of FY24
The key takeout from today's AGM is that the buy now, pay later (BNPL) share expects to turn cash EBTDA (earnings before taxes, depreciation and amortisation) positive as a group in the first half of FY24.
Zip mapped out its strategy to become cash flow positive in its annual report in late September.
Following various changes in 2022, including the shutdown of its Singapore and United Kingdom businesses, Zip is now focused on two core markets — Australia and New Zealand, and the US.
The Australia and New Zealand business has been cash flow positive for four years already.
Zip now anticipates that its United States business will be cash flow positive by the end of FY23.
We've got the funds to reach profitability
Diamond said Zip has approximately $141 million in available cash and liquidity:
We are confident that we have the balance sheet to fund the Company through to cash EBTDA profitability.
We expect to see the US exiting FY23 cash EBTDA positive and to neutralise the cash burn from our rest of world footprint during the second half of FY23.
We are on track to deliver positive cash EBTDA as a group in the first half of financial year 2024.
$10 trillion addressable market in US
Zip sees the US business as crucial for the company's growth. This prompted Diamond and his family to relocate to the US this year.
Diamond said the US market was on a similar trajectory to Australia's market:
In the US, the addressable market is estimated to be over US$10 trillion and BNPL penetration is still under 2%, including just 4% of e-commerce and 1% of in-store spend. This demonstrates the sheer size, and early stage of the BNPL opportunity that we are positioned to capture.
With Worldpay predicting BNPL volumes to more than double in 2025 from 2021 levels, we believe that the US penetration is on a similar trajectory to a more mature market like where we started in Australia.
In Australia, around one-third of adults have a BNPL account and this number is growing. Zip's brand awareness amongst 18-45 is now close to 60%.
In the last financial year, Zip's Australian business made a record $28 million cash EBTDA, 2.5 times cash EBTDA from financial year 2021. This clearly demonstrates the operating leverage of the business model and the potential to deliver strong EBTDA growth at scale.
Zip share price snapshot
The Zip share price is down 86% in the year to date.
The shares have been rangebound in the low 60 cents since early October.
They are currently trading 43% above their 52-week low of 44 cents.
