Digital financial services business Zip Co (ASX: ZIP) saw its share price jump by 12 per cent on Tuesday after delivering a strong set of numbers for the first quarter of FY25. Notably, group cash operating earnings (EBITDA) of $31.7 million soared by 234 per cent from the same time last year as the company continued to build up steam in the lucrative American market.
Revenue in the US of $137.4 million surged by 40 per cent from twelve months prior, with total transaction volume (TTV) in the nation also lifting by the same amount to reach $1.94 billion. Management noted that this robust performance was driven by ongoing engagement in higher-margin channels such as the company’s App.
In US-dollar terms, these two metrics performed even more impressively, rising by 43 per cent and 44 per cent, respectively.
Active customers in the US also grew in Q1 FY25 to reach 3.94 million, underpinned by demand for the company’s App and initiatives to drive brand and customer awareness in the nation. This outcome represents a 2.6 per cent increase from twelve months prior and a 2.9 per cent lift sequentially.
During the quarter, Zip Co continued to expand its US merchant partnerships in target verticals segments including entertainment and experiences, and automotive and tools. New merchant wins included FanBasis, GameStop, and Major League Baseball Ticketing via Tickets.com.
Overall, the number of accredited American merchants signed up to Zip Co surpassed 24,000 in Q1 FY25.
In the group’s other operating market, Australia and New Zealand (ANZ), revenue of $102.5 million during the quarter saw a slight uptick from a year ago, as did TTV of $871.5 million which inched up by 3.1 per cent.
Although the number of ANZ customers in Q1 FY25 dipped by seven per cent to 2.14 million year-on-year, revenue margins increased by 19 basis points to come in at 11.8 per cent.
Management added that the company’s Zip Plus offering is now available to new customers ahead of seasonal peak in the ANZ segment, with additional marketing spend set to commence in the second half of the current financial year.
Separately, the company saw its total ANZ merchants rise by about 10 per cent year-on-year to top 55,000, including the addition of Cathay Pacific in Q1 FY25.
In total, Zip Co generated about $240 million in revenue during the quarter from the US and ANZ markets combined. This represents a jump of nearly 19 per cent from the same time last year.
Similarly, TTV of $2.8 billion lifted by close to 23 per cent during this period as overall transaction volumes of 21.3 million rose by 18 per cent after recording strong growth in the US.
On the bottom line, Zip Co ended the quarter with $147 million in available cash and liquidity, up from $80.4 million three months earlier. This boost to the balance sheet takes into account $50.1 million in proceeds from a recent capital raise, and $14.6 million of cash released from investments in funding vehicles.
Founded in 2013, Zip Co is a fintech business specialising in ‘buy now, pay later’ services, with its platform enabling consumers to buy items on the spot but pay them off over time. Its financial offerings also include a virtual card, rewards programs, and personal finance management tools.
The strong performance in Q1 FY25 has now seen the group’s share price surpass $3 for the first time since early 2022, continuing an eye-catching rise from as low as 26c per share about a year ago.
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Shraddha13
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