Zip Co Ltd. ((AU:ZIP)) has held its Q2 earnings call. Read on for the main highlights of the call.
Zip Co Ltd. recently held an earnings call that exuded a strong positive sentiment, highlighted by record transaction volumes, significant revenue growth, and strategic advancements in both the US and ANZ markets. Despite facing challenges such as a reduction in statutory net profit due to prior period adjustments and an increase in provisions in Australia, the company’s strategic initiatives and financial performance suggest a robust outlook.
Record Transaction Volumes
Zip Co Limited achieved an impressive AUD 6.2 billion in transaction volumes, marking a 24% year-on-year increase from over 45 million transactions. This growth was significantly bolstered by contributions from the US market, showcasing the company’s expanding footprint.
Strong Revenue Growth
The company reported a total income increase of nearly 20% to AUD 514 million. This growth was driven by strong US volume and increased customer engagement, underscoring the effectiveness of Zip’s strategies in enhancing revenue streams.
Improved Credit Performance
Zip Co’s credit performance showed marked improvement, with credit losses improving by 22 basis points from 1.6% of TTV. This reflects the company’s strong credit management practices in both the US and ANZ markets.
Significant US Growth
The US business was a standout performer, with TTV growth of 40.3% and cash earnings growth of 80%. Additionally, active customer growth in the US increased by 6.2% year-on-year, highlighting the market’s potential.
ANZ Business Recovery
The ANZ business demonstrated signs of recovery, with TTV returning to year-on-year growth in the second quarter. Notably, Australian TTV for December was up 10% year-on-year, indicating a positive trajectory.
Operating Margin Improvement
Zip Co’s operating margin improved by 584 basis points to 13%, supported by disciplined investment in the cost base, reflecting the company’s focus on operational efficiency.
Carbon Neutral Status Achieved
For the fourth consecutive year, Zip achieved carbon neutral status, reinforcing its commitment to sustainability and responsible business practices.
Statutory Net Profit Reduction
The statutory net profit after tax was AUD 23 million, lower than the prior period due to one-off gains related to convertible bond restructuring. This highlights some of the financial challenges faced by the company.
Provision Increase in Australia
Provisions in Australia saw an increase, attributed to a mix of modeled outcomes and macroeconomic overlays, indicating cautious financial planning in response to external factors.
Forward-Looking Guidance
During the HY 2025 results briefing, Zip Co Limited reported significant metrics indicating strong financial performance. The company reaffirmed its FY 2025 targets, projecting cash EBTDA of at least AUD 147 million for the year. With continued momentum and significant growth opportunities in both the US and ANZ markets, Zip Co is poised for further expansion.
In summary, Zip Co Ltd.’s earnings call painted a picture of a company on a strong upward trajectory, with positive sentiment driven by record transaction volumes and strategic growth in key markets. Despite some financial challenges, the company’s forward-looking guidance suggests continued growth and robust financial health.