Consolidation of the BNPL Sector appears imminent

With the 81 per cent share price decline from $13 to $2.50, and the 84 per cent decline from $11.40 to $1.80, respectively, it seems increasingly likely the Buy Now Pay Later (BNPL) Sector will consolidate with a ZIP Co Limited (ASX:Z1P) – Sezzle Inc (ASX:SZL) merger.

Despite Z1P and SZL recording a strong trajectory from a revenue perspective, both remain cash flow negative businesses. From recent ASX announcements I have tried to paint a picture for investors, with a particular focus on the December 2021 Quarter, and in the fourth column below I have assumed the two companies have agreed to a nil premium merger.

December 2021 Quarter ZIP (ASX: Z1P) SEZZLE (ASX: SZL)* Combined
Market Capitalisation A$1.45b A$0.35b A$1.80b
Transaction Value A$2.6b (+53% YoY) A$0.77b (+75% YoY) A$3.37b
Customer Numbers – 31 December 2021 9.9m (+57% YoY) 3.4m (+51% YoY) 13.3m
Transaction Value- December 2021 Qtr./Customer (average) A$262.63 A$226.47 A$253.38
Merchants 81,800 (+110% YoY) 47,000 (+76% YoY) 128,800
Transaction Value – December 2021 Qtr./ Merchant (average) $31,785 $16,383 $26,165
Revenue A$167.4m (+58% YoY) A$47.7m (+49% YoY) A$215.1m
Revenue / Transaction Value 6.4% 6.2% 6.4%
Net Cash Used in Operating Activities $54.1m** A$56.9m A$111.0m
Cash on hand plus undrawn credit as at 31 December 2021 A$212.5m A$148.3m A$360.8m
Period left before Cash is spent < 12 months < 8 months < 10 months

*SZL US$ numbers converted to A$ assuming a US$0.72/A$1.00 exchange rate

**Z1P recorded a cash EBITDA loss of A$108.1m in the 6 months to December 2021. Assume half this for the December 2021 Quarter.

While we don’t have all the data to 31 December at the time of writing, we can still make the following assessment based on a nil premium merger between Z1P and SZL. This assumes no doubling up of numbers:

  1. Market capitalisation of A$1.80 billion.
  2. Transaction Value for the December 2021 Quarter of A$3.37 billion or an annualised A$13.5 billion.
  3. Customer numbers as at 31 December 2021 of 13.3 million.
  4. Transaction Value per customer for the December 2021 Quarter of A$253.38, or an annualised A$1,013.52.
  5. 128,800 merchants.
  6. Transaction Value per merchant for the December 2021 Quarter of A$26,165, or an annualised A$104,660.
  7. Revenue of $215.1 million for the December 2021 Quarter or an annualised A$860.4 million.
  8. Revenue/ Transaction Value of 6.4 per cent.
  9. Cash used in operating activities of $111 million for the December 2021 Quarter, giving “mergeco” less than 10 months of cash on hand and undrawn credit (at 31 December 2021).
  10. Based on SZL’s A$56.9 million of “Net cash used in operating activities” for the December 2021 Quarter, it seems a nil premium merger – followed by a severe cost cutting program – would dramatically reduce the combined company’s current cash burn.


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