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The market valuation of Zip Co (ASX: ZIP) has surged by $380 million today after the buy-now-pay-later (BNPL) company reported a 219 per cent year-on-year jump in cash earnings to $46 million in the March quarter, amidst steady increases in merchant and active customer numbers.
Zip Co's revenue margin fell to 8.6 per cent from 9.2 per cent in the same period last year, but this was mainly due to a much higher contribution from its US business.
Whilst revenue in Australia-New Zealand (ANZ) declined slightly by 1.3 per cent to $103.1 million, US revenue soared by 51.4 per cent to reach $173.2 million.
Zip Co platforms processed 27.3 per cent more transactions at 22.8 million, while the percentage of net bad debts was marginally down and active customer numbers reached 6.3 million.
The company also saw a 7.2 per cent lift in merchant numbers to 83,300, including sign-ons for large merchants in the US such as Temu and Tire Agent, while also expanding GameStop to online.
"Zip’s momentum continued in the third quarter, reflecting the resilience of our business model, accelerated growth across both markets, and disciplined execution of our strategy. We delivered the largest ever quarterly cash earnings in Zip’s history of $46 million, underpinned by material operating leverage," says Zip Group CEO and managing director Cynthia Scott.
"Our US business continues to deliver significant growth, with TTV (total transaction value) and revenue increasing 40.2 per cent and 44.1 per cent year on year respectively, driven by deeper customer engagement. Momentum in the ANZ business continued, with TTV increasing 12.6 per cent year on year.
"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."
She adds the company has upgraded its earnings expectations to deliver cash EBTDA of at least $153 million in FY25.
Today's news led to a 20.95 per cent spike in ZIP shares to $1.79, regaining much of the losses seen over the past month.
Following US President Donald Trump's announcement of so-called reciprocal tariffs on 2 April, ZIP shares lost 25 per cent of their value in five days, closing at $1.19 on 7 April after being down to $1.06 at one point.
Shares were already recovering prior to today's results following a $50 million share buy-back scheme from the group to make the most of the lull well below the most recent 12-month average.
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