Zip share price jumps 11% on record half year result

The Zip Co Ltd (ASX: ZIP) share price is jumping on Tuesday.

In morning trade, the buy now pay later (BNPL) provider's shares are up 11% to $2.65.

This follows the release of its half year results this morning.

Zip share price jumps on half year results

• Total transaction value (TTV) up 23.9% to $6.2 billion
• Total income up 19.8% to $514 million
• Revenue margin down to 8.2% (from 8.5%)
• Cash gross profit up 30.1% to $235.5 million
• Cash EBTDA up 117.1% to $67 million
• Net bad debts down to 1.6% of TTV (from 1.8%)

What happened during the half?

For the 12 months ended 31 December, Zip reported a 23.9% increase in TTV to $6.2 billion. This growth was driven entirely by a 40.3% increase in US TTV to US$2.9 billion (A$4.36 billion), which offset a 1.2% decline in ANZ TTV to $1.89 billion.

Zip's transactions increased 18.4% over the prior corresponding period to 45.7 million. This reflects a 35.9% increase in US transactions to 22.2 million and a 5.5% lift in ANZ transactions to 23.5 million.

Also growing were its active customers, but only modestly thanks to the US market. Zip's active customers increased 1.5% to 6.34 million. In the US its active customers increased 6.2% to 4.22 million, whereas in the ANZ they were down 6.2% to 2.12 million.

Operating leverage

Zip revealed that it continued to deliver operating leverage during the six months, with total operating costs of $168.6 million. This represents 2.7% of total TTV, down from 3% in the prior corresponding period.

This ultimately led to Zip recording a sizeable 117.1% in cash EBTDA to a record of $67 million.

Management commentary

Zip's CEO and managing director, Cynthia Scott, was pleased with the record results. She said:

Zip delivered record cash earnings of $67.0m, an increase of 117.1% with cash net transaction margin expanding to 3.8%. The record financial outcomes achieved this half have been driven by outstanding US growth and disciplined execution of our strategy, with a focus on delivering enhanced customer experiences.

We strengthened our balance sheet to support future growth and, consistent with our focus on cost discipline, continued to deliver significant operating leverage. 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. 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.

Outlook

Management notes that following a strong start to the year, Zip is well placed to deliver continued growth and operating leverage.

It believes it is on track for its FY 2025 results to be within its two-year target ranges. It also expects to deliver cash EBTDA of at least $147 million for the year. This compares to $67 million for the first half. Scott said:

We remain committed to our two-year targets, and following the momentum gained during the half we expect to deliver cash EBTDA of at least $147 million for the year. Our team is focused on executing our FY25 priorities, as we drive long-term shareholder value and fulfil our purpose of 'unlocking financial potential, together.'

The Zip share price is up 180% over the past 12 months.