Zip losses deepen as it ploughs revenue into global expansion

Zip Co’s customer numbers have more than tripled, but losses deepened as it chases a bigger slice of the global market.

Zip Co co-founder Larry Diamond

“Buy now, pay later” outfit Zip’s losses have blown out as it ploughs its growing ­revenue into deepening its reach into new markets, including the US, while the company has been bolstered by a pandemic-driven spending spree.

The tech provider posted a net loss for the six months to the end of December of $455.9m, from a $30.3m loss a year earlier.

Its shares fell on the news, closing down 7.6 per cent at $10.95. Zip won’t pay a dividend.

But the result included a $306.2m hit related to Zip taking full ownership of the US-based Quadpay business, in which it previously held a stake.

Zip said Quadpay had grown its total transaction volume by 130 per cent in the four months since the acquisition and “has strong momentum” in the US, the world’s most lucrative buy now, pay later market.

Meanwhile, Zip’s revenue more than doubled to $159.8m, from $69.1m a year earlier, while customer numbers surged.

Co-founder Peter Gray told The Australian that Zip had received a big boost from a spending boom at large retailers during the COVID-19 pandemic.

“There was a big flight during COVID of consumers going ­online, and we saw significant spending with large Australian retailers like Officeworks and Bunnings,” he said. “And online marketplaces like Amazon trended very strongly too.

“We also saw big increases in spending on electronics and purchases for the home. And since the last quarter we’ve implemented a new feature, Tap and Zip, which really allows our customers to user Zip anywhere that Visa is accepted, so we’re seeing large chunks of spending now at Coles and Woolies, and places consumers are spending every day.”

Active consumer accounts more than tripled to over 5.7 million, compared to 1.8 million a year earlier, while transaction ­volumes increased to $2.3bn, up 141 per cent.

“It was a transformational half for us, completing the acquisition of Quadpay and now with very strong momentum in the US,” Mr Gray said.

“The US is still at really early stages in terms of market maturity, and it is the largest addressable opportunity that we have.”

CEO Larry Diamond said that most metrics were up 100 per cent year-on-year and Zip was recording more than $7.5bn in transaction volume by December.

“The business has strong momentum entering the second half as it expands its business in the US and launches in the UK,” he said.

“We believe the ­opportunity for Zip significantly grows each and every day as we continue to execute, build ­momentum and accelerate the global shift away from the broken and unfriendly credit card towards a better, fairer digital alternative.

“We are well on our way to becoming the first payment choice, everywhere and every day.”

Zip this month was slapped with an ASX “speeding ticket” for a massive increase in trading in the stock, with the BNPL sector continuing to surge.

Zip and rivals including Afterpay and Openpay will soon face new regulation in Australia, with a voluntary code of conduct due this year.