Shares in Zip (ASX: ZIP) were up around 15% in early afternoon trading after the buy-now-pay-later survivor posted record 1H FY25 cash earnings, due largely to the outperformance of its United States operations.
The exceptional holiday trading period in the U.S. included the single largest trading day and month in Zip’s history.
While there was lots to like about Zip’s 1H FY25 result, the market clearly liked the group’s cash earnings guidance of at least $147 million for the year, 4% and 2% ahead of analyst and consensus expectations respectively.
Equally noteworthy was Zip’s record cash earnings of $67.0m, up 117.1% with cash net transaction margin expanding to 3.8%.
Exceptional U.S. growth
Zip's CEO Cynthia Scott was quick to attribute today’s strong results to outstanding U.S. growth and disciplined strategy execution.
“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,” said Scott.
“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.”
Active U.S. customers increased by 400,000 to 4.2 million, while average spend and average transactions per customer increased by 33.1% and 29.8% respectively.
Sticking with the U.S., in-store shopping remains a key growth driver, with Zip’s in-store activity now representing 22% of TTV, with 64% year-on-year growth.
The business added new merchants in targeted verticals of travel, entertainment and automotive, including GameStop, Major League Baseball Ticketing via Tickets.com, Major League Baseball Shop, Vivid Seats and Take 5 Oil Change.
Other key 1H FY25 numbers include:
- Statutory new profit after tax, down 68.4% to $23 million.
- Australian revenue lifted to $302.9 million.
- Merchants on the platform, up 7.6% to 81,900.
- Customer growth, up 1.5% to 6.3 million.
- Net bad debts are down to 1.6% of TTV (from 1.8%).
- Cash gross profit was up 30.1% to $235.5 million.
- Revenue margin down to 8.2% (from 8.5%).
- Total income was up 19.8% to $514 million.
- Total transaction value (TTV) is up 23.9% to $6.2 billion.
- 5.5% increase in total A&NZ transactions for the half.
A&NZ market
Closer to home, the A&NZ market returned to growth in the second quarter with TTV up 0.4% year on year, and December TTV in Australia up 10%.
The portfolio yield on receivables associated with the Australian business increased to 18.6%, up 110 basis points year on year.
New merchants in targeted high spend verticals joined the platform including Cathay Pacific, Lagardère Travel Retail, Travello and James Pascoe Group (Prouds, Angus & Coote and Goldmark).
Outlook
While the U.S. business continued to optimise and scale its "Pay-in-8" instalment solution, Zip Plus was expanded to new A&NZ customers to help generate strong unit economics.
Meanwhile, the monthly acquisition of Zip Plus customers (A&NZ) is now more than double that prior to external launch, with Zip Plus receivables having increased 24% in the last three months.
Zip Personal Loans was launched in January 2025 for both new and existing customers.
As at 31 December 2024, Zip had available cash of $195.5 million with which to fund future growth.
Zip has a market cap of $3.5 billion making it an ASX200 stock; the share price is up 194% in one year and is down 7.6% year to date.
While the stock’s 200-day moving average is trending higher, there is significant evidence that the bullish trend is near an end. Recent price action has shown a lack of strength as the 5-day moving average has fallen below the 50-day moving average and the 20-day moving average is trending lower.
Consensus is Strong Buy.
This article does not constitute financial product advice. You should consider independent advice before making financial decisions.
