I would rather go for other ASX growth shares where the future margins and growth are easier to predict. It has already led to the business retreating from some markets. The economic changes that are happening could hamper Zip’s growth. But, I wouldn’t expect it to get back to former heights any time soon. However, the huge drop of Zip shares and the massive impairment show a big destruction of value for shareholders. It’s good that Zip is getting closer to cash profitability so that its operations are more sustainable. Summary thoughts on the Zip share price and FY22 result Zip is also winding down ‘non-core’ products in ANZ. It has undertaken an internal reorganisation to reduce people costs, which will help to the tune of at least $30 million in FY23. Zip made the decision to close its Singapore and UK operations, in line with its goal of reducing its cash burn, while commencing a “strategic review” of the rest of the world businesses. Zip also cancelled the planned acquisition of Sezzle Inc ( ASX: SZL). It also said that in FY22, it implemented a number of product re-pricing initiatives in ANZ to reflect the higher cost operating environment, supporting “strong” revenue margins of 8.3% for the fourth quarter in ANZ. It tightened its decisioning rules and cut off scores, enhanced credit limit management and “optimised” its approach to repayments and collections. Zip said that it took a number of actions to improve losses in Australia and the US. In other words, Zip doesn’t think its business is worth as much and this has impacted the balance sheet. It has reduced its forecast growth rate and cash flows, resulting in a lower recoverable amount than what Zip had the carrying value as on the balance sheet. The statutory net loss includes a total impairment of goodwill of $768.4 million, of which $589.3 million related to the US. One of the growth initiatives that Zip launched during the year was a physical card in the US, making it easier for customers to pay in four instalments with Zip in-store. So, it’s looking to achieve sustainable growth in core markets, with an improvement in unit economics and by optimising its global cost base. Zip believes that it can reach EBTDA profitability in FY24. It demonstrated the “profitability of strong unit economics and Zip’s unique model as the business continues to scale”. The company was very pleased to report that it made a cash operating profit in Australia.
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