- 01FY27 cash EBTDA target held at $340m.
- 02Q1 TTV +18% to $4.6b; US TTV +34%.
- 03Fraud cost $10.1m; adjusted EBTDA +19.5%.
- 04US TTV growth hit 41% in September.
Zip Co (ASX: ZIP) has reaffirmed its full-year earnings guidance after first-quarter transaction volumes climbed 18% to $4.6 billion, led by continued expansion in the US.
The digital payments group generated $65 million in cash earnings before tax, depreciation and amortisation (EBTDA) for the three months to 30 September, up 3.4% from a year earlier.
An external fraud incident in the US added $10.1m to operating expenses, reducing reported profitability despite a 17% increase in total income to $376.1m.
Excluding those fraud-related costs, adjusted cash EBTDA reached $75.1m, up 19.5%, while Zip maintained its $340m full-year target, subject to market conditions.
Group net bad debts increased to 1.97% of TTV from 1.65% a year earlier, while cash net transaction margin narrowed to 3.8% from 4%.
Continued US Growth
US total transaction volume (TTV) rose 34.1% in US-dollar terms and revenue increased 32%, driven by customers spending and transacting more frequently.
Zip identified coordinated fraud involving new accounts opened with legitimate credentials to make unpaid purchases, with preventive measures temporarily constraining growth in July and August.
The business reported that US TTV growth accelerated to 41% year on year in September, with the stronger momentum continuing into October.
US net bad debts reached 1.93% of TTV, against 1.67% in the preceding quarter, as the group absorbed seasonal effects and the impact of fraud controls on transaction volumes.
Zip expects that US loss ratio to improve in the second quarter and remains committed to a full-year target range of 1.5% to 2%.
Increased Customer Spend
Transaction numbers across the group increased 21.8% to 31.6 million, while active customers remained broadly steady at 6.4 million and merchant numbers reached 96,600.
In the US, transactions per customer rose 27% to an annualised 14, while annualised spend per customer increased 30.2% to US$1,958.
Australian revenue rose 8.3% and customer receivables increased 11.8% to $2.33 billion, despite a challenging consumer environment.
Australian arrears eased to 2.35% from 2.67% at June, although annualised net bad debts of 3.51% remained above the 3.33% recorded a year earlier.
The Australian operation maintained an 18.9% portfolio yield and an 8.5% excess spread, alongside higher spending and transaction frequency among existing customers.
Revenue Margin Target
Zip continues to target a group revenue margin of about 8%, a cash net transaction margin of 3.8% to 4% and a full-year operating margin of 20% to 22%.
“Customers are choosing to use Zip more often, driving strong top line growth, with transactions per customer up 27.0% in the US and 14.2% in Australia, positioning us well ahead of the second-quarter holiday season,” chief executive officer and managing director Cynthia Scott said.
“We have reconfirmed all of our FY27 guidance metrics including Group cash EBTDA of $340 million (up 26% year on year), and remain focused on executing on our strategic priorities to drive growth and innovation, and invest for long-term scale.”
The group completed its first US asset-backed securities issuance, a two-year US$300m transaction, and began an on-market share buyback of up to $50m.
At quarter-end Zip held $452m in total cash, including $224.4m in available cash and liquidity, supporting investment alongside its capital management program.
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