Investors have swarmed to buy now, pay later lender Zip after it delivered its largest-ever quarterly cash earnings of $46m.
The tech player also updated its full-year guidance. “Following continued strong performance year to date, Zip upgraded its guidance for FY25 and now expects to deliver cash EBTDA (earnings before tax, depreciation and amortisation) of at least $153m,” it said .Its previous guidance was for earnings of $147m.
The upbeat outlook ignited interest in its shares, which soared 16.2 per cent on Wednesday to $1.72, adding $313m to Zip’s market value. The stock was trading as high as $3.56 in December. Its third-quarter EBTDA of $46m was up from $18.2m in the prior corresponding period.
Overall, total transaction volume (TTV) for the three months to March 31 came in at $3.3bn, up 36 per cent, while revenue jumped 26 per cent to $276.3m. That revenue result was despite a dip of 1 per cent in ANZ revenues to $103.1m, which was more than offset by a 51 per cent jump in US revenues to $173.2m.
The number of active customers at the end of the quarter end of 6.3 million was up 4 per cent versus the prior corresponding period, but down slightly on the December quarter. Net bad debts across both its US and ANZ markets fell to 1.6 per cent of TTV.
Zip CEO Cynthia Scott said the company’s momentum continued in the third quarter, reflecting the resilience of its business model, accelerated growth across the US and Australia/NZ markets and disciplined execution of its strategy. “We delivered the largest ever quarterly cash earnings in Zip’s history of $46m, underpinned by material operating leverage,” she said. She said the US business continued to deliver significant growth, with TTV and revenue rising 40.2 per cent and 44.1 per cent year on year respectively, driven by deeper customer engagement. TTV for the Australia/NZ business rose 12.6 per cent.“We delivered a strong result in net bad debts across both markets, which reduced to 1.6 per cent of TTV, reflecting the discipline of our credit decisioning processes. Pleasingly, monthly US cohort loss rates for the third quarter are expected to be approximately 1.3 per cent to 1.5 per cent of TTV.“We are focused on executing our strategic priorities and, following the strong third quarter, we reconfirm our two-year targets provided at the start of FY25 and upgrade our earnings expectations to deliver cash EBTDA of at least $153m in FY25.
”The company is waiting to lodge its appeal against a March court decision on the use of its trademark Zip name in a case brought by Firstmac.
ZIP Price at posting:
$1.72 Sentiment: Hold Disclosure: Held
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