The Zip Co Ltd (ASX: ZIP) share price will be on watch on Tuesday.
That's because the buy now pay later (BNPL) provider has just released its FY 2023 results. Let's see how it performed.
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Zip share price on watch following record FY 2023 results
- Record transaction volume (TTV) up 7% to $8.9 billion
- Transaction numbers up 8.3% to record 72.7 million
- Record group revenue up 16.1% to $693.2 million
- Revenue margin improved 60 basis points to 7.8%
- Cash gross profit up 20.4% to $250.6 million
- Expenses down 34% to $618.8 million
- Loss before tax improved 53.9% to $372 million
What happened in FY 2023?
For the 12 months ended 30 June, Zip reported a 16.1% increase in revenue to $693.2 million.
This was driven by record transaction volumes and numbers, despite US and ANZ active customers falling from 9.6 million to 6.2 million, combined with an increase in its revenue margin to 7.8%. The latter is above its medium-term targets.
As for profits, Zip reported a 20.4% increase in cash gross profit to $250.6 million for the year.
However, while Zip has managed to cut its expenses down by over a third to $618.8 million, this couldn't stop the company from posting another large loss.
Zip's core Cash EBTDA was negative $48.2 million and its loss before tax came in at $372 million. The latter represents an improvement of 53.9% year on year.
At the end of the period, Zip had cash and cash equivalents of $152 million, down from $241.3 million a year ago.
Management commentary
Zip's new Group CEO, Cynthia Scott, said:
In the last 12 months, Zip has delivered strongly against our updated strategy. The strength of our FY23 results was driven by record transaction volumes and revenue, and improved credit losses and margins as well as cost reductions and capital management initiatives.
Revenue growth was solid at 16.1% year on year and revenue margins expanded by 60 basis points to 7.8%. We took targeted action and brought credit losses within our target range to 2.0% of TTV and delivered NTM expansion to 2.8% of TTV. We achieved this against a backdrop of rising interest rates and inflationary conditions, demonstrating the resilience and increasing relevance of our product offering to our customers and merchants.
Outlook
Management notes that Zip US and NZ exited FY 2023 cash EBTDA positive on a monthly basis. Whereas Zip's AU business has been cash EBTDA positive for five years.
In light of this, the company expects to achieve cash EBTDA profit during the first half of FY 2024.
Scott adds:
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. Cash EBTDA from core businesses improved by 54.8% in the second half versus first half, exceeding our guidance (of a half-on-half improvement of up to 50%) and reflecting a business that is growing sustainably and on track to deliver group positive cash EBTDA during 1H24.
Looking ahead, we are focusing on maintaining the momentum, driving sustainable growth and product innovation in our core markets of ANZ and the US as we deliver on our mission to be the first payment choice, everywhere and every day.
The Zip share price is down 60% over the last 12 months.
