Zip Co (ASX:ZIP) Trading Volumes Fall, Bad Debts Rise Ahead of Sezzle (ASX:SZL) Merger – The Market Herald

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  • Zip Co (ZIP) Reports Increase in Customers and Merchants in March 2022 Quarter, Although Financial Performance Continues to Decline
  • Zip says the March quarter is typically a weaker seasonal period for the company, and while financial metrics are down quarter over quarter, they have improved year over year.
  • Quarterly revenue fell 4% from the December quarter to $155 million, with quarterly trading volumes down 21% to around $2 billion
  • Zip’s arrears reached 2.29% of its total transaction volume at the end of March, compared to 1.64% in December, with bad debts reaching 3.4%.
  • Zip Co shares rose 0.83% to $1.22 each at 11:45 a.m. AEST

Struggling fintech Zip Co (ZIP) reported an increase in the number of customers and merchants in the March 2022 quarter, although its financial performance continues to decline.

The company, which trades under the new zip code ZIP, said the March quarter was generally a “weaker seasonal quarter” for the business and, while financial metrics were lower than the December quarter, they remained higher than in the March quarter of last year.

Zip’s quarterly revenue fell 4% from the December quarter to $155 million for the March quarter. This is a 38% year-over-year increase.

Zip’s transaction volumes fell 21% quarter-on-quarter to just over $2 billion. The company facilitated 18.3 million transactions in the quarter, down 16% from the previous quarter but up 48% year-on-year.

Co-founder and CEO Larry Diamond said in his latest semi-annual report that Zip recognized a shift in “external factors” and adjusted its business strategy accordingly.

“During the quarter, we continued to deliver top line growth and strong revenue margins as we began to execute on this renewed strategy,” said Mr. Diamond.

As part of this strategy to improve its merchant base and shift to profitability over the next few years, Zip confirmed in February its intention to merge with buy now, pay later rival Sezzle (SZL) as part of of a $491 million deal.

“The acquisition of Sezzle remains on track and will bring significant scale and synergies, directly supporting our goal of accelerating and conquering our core U.S. market, and building a profitable business at scale,” said said Mr. Diamond.

“Our merchant pipeline is exceptionally healthy and we look forward to welcoming game-changing merchants to the platform in Q4.”

Looking at Zip’s balance sheet, the fintech company had just over $300 million in the bank at the end of March, with an additional $24 million on the company’s books in April thanks to a stock purchase plan under – subscribed.

Additionally, Zip said it had $401.9 million of undrawn receivables available to fund at the end of the March quarter.

Regarding the company’s credit performance, Zip’s arrears reached 2.29% of its total trading volume at the end of March, compared to 1.64% in December, with bad debts reaching 3.4% against 2, 83% in December.

Zip, once touted as a rival to Afterpay, is one of a string of Australian fintech and buy-now-pay-later entities that have seen their share prices fall dramatically over the past 14 months.

Zip shares hit $12.46 in February 2021, but steep losses since that peak have sent the stock price down more than 90%.

Today, Zip shares rose slightly but remain well below recent highs. As of 11:45 a.m. AEST, Zip was up 0.83% with shares worth $1.22 each.

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