Zip Co Ltd (ASX: ZIP) shares are starting the week with a bang.
In morning trade, the buy now pay later provider's shares are up 16% to 73.5 cents.
Why are Zip shares jumping?
Investors have been buying the company's shares this morning after responding positively to the release of a quarterly and half year update.
According to the release, for the second quarter, Zip delivered an 8.5% lift in transaction value over the prior corresponding period to $2.8 billion.
And thanks to a material improvement in its revenue margin to 8.2% (from 7.1%), Zip's revenue was up 26.1% to $225.6 million for the quarter. This was driven by strong performances across both the Americas and ANZ markets, which reported revenue growth of 35.5% and 20.4%, respectively.
This ultimately supported "outstanding" cash EBTDA during the quarter according to management. Zip's Group CEO and Managing Director, Cynthia Scott, said:
Zip delivered an outstanding Group cash EBTDA result for the second quarter, underpinned by a particularly strong seasonal performance in US TTV, the resilience of the ANZ business, improved margins and continued cost discipline.
As a result, the company's group cash EBTDA for the first half of FY 2024 is expected to be between $29 million and $33 million. This compares favourably to a cash EBTDA loss of $33.2 million during the first half of FY 2023.
Another positive potentially given Zip's shares a boost was its bad debts. It advised that US bad debts continued to perform well with monthly cohort loss rates approximately 1.3% – 1.4% of total transaction value. This is below the target range of 1.5% -to 2.0%. In Australia, net bad debts improved by 54bps quarter on quarter to 3.64% of receivables.
Self-sustaining business
Scott believes that this result demonstrates that Zip is now a self-sustaining business. She adds:
Today's result reinforces that Zip is delivering as a self-sustaining business. Group revenue grew by 26.1% and revenue margins were 8.2%, up 110bps versus 2Q23. Cash transaction margin improved 70bps versus 2Q23 to 3.5%, demonstrating the strength of the business model in a challenging external environment.
At the end of the period, Zip had $81.3 million in available cash and liquidity, which is an increase from $53.2 million on 30 September 2023.
