Buy now pay later leader Zip has posted a massive net loss of $1 billion, despite claiming this as a successful year.
Group impairments and write-downs totalled $821.1 million, with total bad debts ballooning to $276.1 million for FY22.
Zip has been riddled with bad debt of late, with “credit losses exceeding Zip’s target range”, as the company puts it.,
In response, Zip has tightened its decisioning rules and cut off scores, enhanced credit limit management and optimised its approach to repayments and collections.
“In our Half Year results we acknowledged changes in the external environment were quicker and more severe than first anticipated,” said CEO Larry Diamond.
“Against this backdrop, we changed strategy and shifted to delivering sustainable growth, right-sizing our global cost base and accelerating the path to profitability.
To that end, I want to share that we have already delivered on a number of initiatives to reduce cash burn, manage credit losses and improve unit economics. Our ability to pivot and adapt to the new world, showcases the resilience and viability of our business model as we focus on the opportunity ahead in FY23.”
Despite the bad debt, business was booming.
The company posted record group revenue of $620 million, up 57 per cent year-on-year.
Zip saw record transaction volume of $8.7b (up 51 per cent), record transaction numbers of 74.3 million (up 80 per cent), and cash gross profit of $203.7 million, up 12 per cent from the previous year.
Australia delivered $28 million cash EBTDA, a jump of 250 per cent year-on-year. In Australia, recoveries of written-off accounts lifted by 71 per cent during the June quarter.
“While FY22 has been a year of change and consolidation, our mission and values remain constant,” Diamond said.
“In times of heightened inflation and cost of living pressures, BNPL has become even more of an important budgeting tool for everyday consumers.
“That is why we have never felt more passionate about giving people the knowledge, access and the ability to control their financial lives so they can live every day with confidence.”
Shares are up 1.2 per cent to 98c, as of 10:40am.
