The Zip Co Ltd (ASX: Z1P) share price has risen in early trade in reaction to the release of its FY19 report.
Zip Co provides customers with a revolving line of credit to finance their retail purchase with its brands of Zip Pay, Zip Money and Pocketbook. It is one of the largest buy now, pay later providers in Australia. Some of its largest clients include Bunnings Warehouse, Appliances Online, EB Games and Officeworks.
Zip’s Zooming FY19 Report
The buy now, pay later company announced that its revenue went up by 138% to $84.2 million. The revenue is now at an ‘annualised’ rate of more than $100 million. This was driven by transaction volume growth of 108% to $1.13 billion. Zip’s loan book, also known as receivables, rose by 115% to $682.6 million.
Zip revealed that it now has over 1.3 million customers (up 80% over the year) and 16,000 partners (up 54%) using the platform. The number of transactions increased by 154% to 4.8 million.
Its net bad debt write-off was only 1.63%, much lower than industry standards, helping it achieve cash flow breakeven status for the last six quarters. Monthly repayments are roughly 13% to 14% of the prior month’s closing balance, meaning customers are generally repaying their entire balance over seven to eight months, on average.
Reported cash EBTDA (which is EBITDA without interest, click here to learn what EBITDA means) was $9.2 million, which was a good swing from the $8.8 loss in FY18.
Zip also showed that its statutory net loss halved from $22.5 million in FY18 to $11.1 million this year.
Zip Balance Sheet
Zip ended FY19 with $12.6 million of cash, inclusive of $6.4 million of restricted cash.
It had funding facilities of $631.5 million, of which $587.5 million is being utilised. But, the total facility increased to $731.5 million after an increase provided by National Australia Bank Ltd (ASX: NAB).
Zip also recently announced acquisitions that would make it a global buy now, pay later player. The acquisition of PartPay and investment in QuadPay could be a very shrewd move in the coming years.
Is The Zip Share Price A Buy?
In FY20 Zip is aiming for 2.5 million customers and $2.2 billion of annualised transaction volume whilst focusing on integrating PartPay, growing its market share in New Zealand and launching in the UK.
I can see why the Zip share price has responded positively to this report. But, although it’s not the type of business I’d put in my own portfolio, Zip could be one to watch if it’s able to grow profitably over the long term. But, I prefer the idea of the growth shares in the FREE report below for my own portfolio.
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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).
At the time of publishing, Jaz does not have a financial interest in any of the companies mentioned.