Buy now pay later firm Zip Co has banked $217 million in equity, and says it’ll use the funds to pay off its corporate debts.
Key Takeaways
- Zip Co completed a fully-underwritten equity placement, raising $217 million (before costs).
- Proceeds from the equity capital raise will fund early repayment of Zip’s existing corporate debt facility and associated break fee.
- The company also plans to offer existing eligible shareholders the opportunity to participate in a share-purchase plan to raise up to $50 million.
Big number
$2.6 billion. That’s Zip’s total transaction volume, which is up 19% on Q4, 2023. Its net bad debts were approximately 1.4% of that (or about $360 million).
What to watch for
Expansion throughout the United States.
Zip’s revenue is up 22.1% on Q4, 2023, to $223.6 million. Its revenue margin is up 0.1% and transactions are up 8.8% to 19.7 million. In its fourth quarter update, the company said its underlying cash EBTDA for the full-year was expected to be in the range of $77 million to $80 million – which is a big turnaround from its $48 million loss in FY23.
Things in the United States are also looking positive, with the company’s total transaction volume at $1.158 billion – up 40.7% on Q4 2023, and revenue at US$80.2 million. Late last year, Zip flagged the United States was its largest opportunity due to a horde of underserved customers seeking credit, and locked out of the traditional financing system.
“There is a huge opportunity for a player like Zip to meet the needs of those customers,” co-founder Larry Diamond said at the time.
The company’s share price was $1.73 at the time of writing, up $0.13 post-announcement. Its market cap is about $1.95 billion.
Crucial quote
“This is a strong endorsement of our strategy and we thank our existing shareholders for their ongoing support, and welcome our new shareholders to Zip,” Zip Group CEO and managing director, Cynthia Scott, said.
That strategy was canvassed in a 2023 interview with Forbes, where Zip said it would look to focus on its core markets of Australia, New Zealand, the United States and Canada, adapting to changing risk cycles and developing new products. It also went through a leadership restructure, where Cynthia Scott took over as Group CEO from co-founder Larry Diamond.
Tangent
The majority of Australian consumers prefer BNPL to credit cards, when surveyed by BNPL provider Afterpay in January 2024. It was strongest amongst 18-34-year-olds, followed by 35-54-year-olds.
That same survey found almost one-third of Australians (32%) had used a BNPL service in the past year, up 8% from 2019. That’s 3 million households using BNPL as a finance tool.
But, that’s still just a fraction of overall payments in 2023, with BNPL representing just 0.7% of payments, up from 0.5% in 2019.
Are you – or is someone you know -creating the next Afterpay or Canva? Nominations are open for Forbes Australia’s first 30 under 30 list. Entries close midnight, July 31, 2024
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