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Zip (ASX:Z1P) share price races 11% higher on record Q3 performance

ASX bank profit upgrade Red rocket and arrow boosting up a share price chart
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The Zip Co Ltd (ASX: Z1P) share price is racing higher on Tuesday morning.

In early trade, the buy now pay later (BNPL) provider’s shares are up a sizeable 11% to $9.25.

Why is the Zip share price racing higher?

Investors have been fighting to get hold of Zip shares this morning following the release of its third quarter update.

According to the release, Zip’s strong form continued during the quarter, with the company delivering record quarterly revenue and transactions.

For the three months ended 31 March, Zip posted an 80% increase in group quarterly revenue to $114.4 million. This was driven by a 195% increase in transaction numbers to 12.4 million and a 114% jump in quarterly transaction volume to $1.6 billion.

In further news boosting the Zip share price, the company’s customer numbers have continued to grow. At the end of the period, Zip had 6.4 million active customers globally. This was up 88% from the prior corresponding period and 12.3% from 5.7 million at the end of December.

How did its businesses perform?

The company’s US-based QuadPay business was the standout performer. It achieved record results across all core metrics during the quarter.

QuadPay’s transaction volume grew 234% to $762 million, its revenue rose 188% to $54.4 million, and customer numbers grew 674,000 or 153% to 3.8 million.

This was complemented by the Zip ANZ business, which continued its strong momentum. It recorded a 61% increase in transaction volume to $837.3 million and a 37% lift in customer numbers to 2.6 million. Positively, quarterly revenue rose 10% quarter on quarter to $57.9 million despite seasonal trends.

Another positive was that the net bad debts for its ANZ business reduced to 1.78% from 1.93%. Management notes that this is a very strong result which further validates the strength of Zip’s proprietary credit decision technology and ability to manage risk.

Management commentary

Zip’s Managing Director and CEO, Larry Diamond, said: “We are extremely pleased with the strong growth and momentum in the business, delivering another exceptional set of numbers. Our US business was again a standout, confirming our position as truly one of the fastest growing global BNPL leaders.”

“The resilience of the UK team is now delivering results and we look forward to a very exciting future for that region. It was fantastic to see more lighthouse brands join the platform and the global merchant pipeline is extremely healthy. Our focus on unit economics continues to provide a point of difference and points to a strong bottom line at scale. We continue to innovate and deliver new features to our customers in line with our mission to become the first payment choice everywhere, every day,” he added.

International expansion

Zip also revealed that it is following in the footsteps of rival Afterpay Ltd (ASX: APT) by expanding into other markets.

During the quarter, Zip made a number of key moves including a soft launch into Canada. This was driven by US merchant demand.

It also agreed terms for a strategic investment into South East Asia via leading Philippines BNPL player, TendoPay, and made a follow-on investment into leading Eastern European BNPL player, Twisto.

Management commented: “Outside of Zip’s core markets of Australia, New Zealand, US and the UK, the Company is investing in New Markets to expand its global footprint across both the developed and developing world. The aversion to traditional credit cards, long term revolving debt and the rapid adoption of BNPL is truly a global phenomenon.”

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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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