The Zip Co Ltd (ASX: Z1P) share price rocketed 16.5% higher today as investors reacted to its March 2019 quarter update.
Zip Co provides customers with a revolving line of credit to finance their retail purchase with its brands of Zip Pay, Zip Money and Pocketbook. It is one of the largest buy now, pay later providers in Australia. Some of its largest clients include Bunnings Warehouse, Appliances Online, EB Games and Officeworks.
Zip Co’s Great March 2019 Quarter
The buy now, pay later (BNPL) business created a record quarterly revenue of $23 million, which was 20% higher than the December 2018 quarter. Receivables, or money owed to Zip Co, increased to $565.3 million, which was 16% higher than the last quarter.
Underlying transaction volume reached $281.4 million, which was a 107% increase compared to the same quarter in 2018. The company was pleased to report that transaction volume for March was back above $100 million levels.
Customer numbers increased by 143,000 to 1.2 million, which was an increase of 14% compared to the second quarter of FY18.
Zip Co said that its net bad debt of 1.75% was a market leading debt performance, down from 1.81% in the second quarter.
The BNPL business said its operating leverage continues to improve with scale. Costs, as a percentage of average receivables declined from 16.1% in the second quarter to 15.5% in the March 2019 quarter.
Zip Co also plenty of positives during the quarter with a wholesale agreement being signed with global payments provider Adyen, allowing it to market Zip to its Australian clients.
The company also managed to sign up Chemist Warehouse, General Pants and Lorna Jane to the platform with more planned for this quarter.
Finally, Zip Co officially launched in New Zealand and it’s supporting the roll out of Super Retail Group Ltd (ASX: SUL).
Is Zip Co A Buy?
This was the fifth consecutive quarter of positive operating cashflow and management said that it is very well placed to continue its rapid growth, delivering on strategy and guidance and will continue to take advantage of operating leverage as it continues to scale.
Despite the elevated share price, I think Zip Co and the two rapid ASX growth shares are ones to watch in the rest of 2019 and beyond.
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