The Zip Co Ltd (ASX: ZIP) share price has jumped more than 11% after reporting its FY25 half-year result.
Zip is one of the larger buy now, pay later businesses in Australia and the US.
Zip HY25 result
Here are some of the highlights from the six months to 31 December 2024:
- Total transaction value (TTV) up 23.9% to $6.2 billion
- Income up 19.8% to $514 million
- Cash gross profit up 30.1% to $235.5 million
- Cash EBTDA up 117.1% to $67 million
- Cash net transaction margin (NTM) of 3.8% (up from 3.6%)
- Reported net profit down 21% to $45.1 million
Zip noted that its number of transactions increased by 18.4% to 45.7 million, with the number of active customers rising by 1.5% year on year to 6.3 million and the number of merchants on the platform rising 7.6% year on year to 81,900.
There was a significantly differing performance between the US which saw 41.1% revenue growth to $302.9 million and ANZ which saw revenue decline 2.1% to $206.3 million. The US is vital for the Zip share price’s success.
This was driven by 39.2% TTV growth for the US to $4.36 billion and a 1.2% decline for ANZ TTV to $1.9 billion.
The revenue margin declined to 8.2%, down from 8.5% in HY24, due to a higher contribution from the US (now 70% of TTV).
US active customers rose 6.2% to 4.22 million, while ANZ active customers decreased 6.2% to 2.12 million.
The company’s net bad debt position improved significantly. In HY24 the net bad debt was 1.78% of TTV, but this dropped to 1.56% in HY25.
Zip was pleased to report operating leverage, with total operating costs of $168.6 million representing 2.7% of total TTV, down from 3% in the prior corresponding period.
Zip noted it repaid all corporate debt and associated exit fees during HY25 after capital raisings. During the half, Zip generated $59 million of operating cash flow.
Management comments
The Zip CEO and Managing Director Cynthia Scott said:
The record financial outcomes achieved this half have been driven by outstanding US growth and disciplined execution of our strategy, with a focus on delivering enhanced customer experiences. We strengthened our balance sheet to support future growth and, consistent with our focus on cost discipline, continued to deliver significant operating leverage.
Our US business continued to grow above market with TTV up 40.3% year on year, driven by an exceptional holiday trading period and deeper customer engagement. We are well positioned for our significant growth opportunity as we scale more flexible payment solutions to meet the needs of everyday Americans and leverage our merchant and channel partnerships to expand into new verticals.
We remain committed to our two-year targets, and following the momentum gained during the half we expect to deliver cash EBTDA of at least $147 million for the year. Our team is focused on executing our FY25 priorities, as we drive long-term shareholder value and fulfil our purpose of ‘unlocking financial potential, together’.
Final thoughts on the Zip share price
Zip continues to grow, which is impressive considering the challenging economic conditions, the high interest rate environment and its already large size.
If the business can continue growing then it could still be an opportunity. However, I don’t know how high its profit can go, so it’s not one I’m looking at for my own portfolio.
