Zip share price jumps 14% on strong Q4 update

The Zip Co Ltd (ASX: ZIP) share price is charging higher on Thursday morning.

At the time of writing, the buy now pay later (BNPL) provider’s shares are up 14% to 49.5 cents.

Why is the Zip share price jumping?

Investors have been bidding the Zip share higher price today after the company released its fourth-quarter update.

Here’s a summary of how the company performed:

• Total transaction volume (TTV) up 6.4% year on year to $2.3 billion
• Quarterly revenue up 21.1% year on year to $193.8 million
• Core cash transaction margin up 30 basis points quarter on quarter to 3.1%
• Active customers down to 6.2 million
• Zip US credit loss rates (net) down 35 basis points QoQ to 0.85% of TTV

What happened during the quarter?

For the three months ended 30 June, Zip reported TTV of $2,297.2 million and revenue of $190.3 million. This was an increase of 3.7% and 6.7%, respectively, over the prior quarter. This was underpinned by QoQ growth in both the ANZ and US regions.

In the ANZ region, TTV grew by 4.9% and revenue increased by 4.9%. Whereas in the US, TTV was up 14.3% and revenue lifted 12.2%. This was despite transaction numbers falling 2.2% to 19.9 million since the third quarter.

Zip’s active customer numbers fell by 1 million during the three months. However, this was largely driven by divestments. Active customers in the core ANZ and US regions fell only 0.9% to 6.2 million.

One metric that the company didn’t provide with this update is the all-important Cash EBTDA metric. Management intends to report on this with its FY 2023 results next month. Though, it is worth noting that its US business was cash EBTDA positive on a monthly basis at the end of the quarter.

Management commentary

Zip Co-Founder, Global CEO and Managing Director, Larry Diamond said:

Today we delivered another strong set of results driven by particularly strong revenue growth of 21.1%, improved margins, and a disciplined approach in how we grow and run our business. We’ve seen the cash transaction margin for the core business improve again to 3.1% and we are pleased to deliver such a strong result despite the rising cost and interest rate environment. This performance yet again demonstrates the resilience and strength of the business in a challenging macroeconomic environment.

Pleasingly, this result was underpinned by strong revenue growth in both our core markets, with the credit performance in the US business also a standout at 0.85% of TTV. As we finish FY23, I am excited to see the US business exit the year cash EBTDA positive on a monthly basis and very well-positioned for sustainable growth in FY24.