Reporting Season

Does Zip's ugly first half result lay a painful path to future profitability?

Mon 28 Feb 22, 4:20pm (AEST)
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Key Points

  • Zip shares are halted pending a capital raising and Sezzle acquisition announcement
  • Losses continued to widen after an unexpected jump in bad debts
  • Expenses including salaries, marketing and technology all rose more than 100% compared to last year

Zip (ASX: Z1P) has reported a classic BNPL result where top-line metrics hit new record highs while losses continue to widen.

Zip shares are currently halted due a $150m capital raising and a proposed acquisition of rival Sezzle (ASX: SZL).

Half-year financials at a glance

  • Revenue of $294.1m, up 89%

  • Adjusted loss of -$154m versus -$140m a year ago 

  • Total transaction volumes (TTV) of $4.45bn, up 92% 

  • Customers of 9.9m, up 74%

  • Merchants of 81,800, up 113%  

The net loss exceeded Bell Potter and Citi forecasts of -$123m. 

Same growth narrative but losses widen

At the cost of sales level, Zip experienced a sharp rise in reported bad debts and expected credit losses, spiking 403% to $148.3m.

The company said that it previously adjusted its risk settings in core markets during the course of 2021 with the objective of "maximising growth whilst balancing revenue and net bad debt write offs".

Evidently, the company is now paying the price for taking on too much risk.

Zip income statement
Source: Zip Half Yearly Report and Accounts

At the expenditure level, segments including salaries, marketing and technology expenses all increased more than 100%.

Expenditure prior period included a $306m net adjustment relating to the acquisition of QuadPay.


In response to the disappointing bottom-line, CEO Larry Diamond said:

"Accordingly, we have refined our strategy with a focus on sustainable growth in our core markets, maintaining strong unit economics – particularly credit performance, broader cost management, right-sizing our international footprint, which accelerates our path to profitability. We have already taken decisive actions in line with this focus."

Zip expects to normalise its margins over the medium term, including:

  • Revenue as a percentage of TTV of 6.5-7% (1H22: 6.7%)

  • Cost of sales as a percentage of TTV of 3.5-4% (1H22: 5.4%)


Written By

Kerry Sun

Finance Writer & Social Media

Kerry holds a Bachelor of Commerce from Monash University. He is an avid swing trader, focused on technical set ups and breakouts. Outside of writing and trading, Kerry is a big UFC fan, loves poker and training Muay Thai. Connect via LinkedIn or email.

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