The Zip Co Ltd (ASX: ZIP) share price has gone up more than 5% after its latest quarterly update.
Zip is one of the larger buy now, pay later businesses in Australia and the US.
FY26 first quarter
Zip reported total transaction value (TTV) increased by 38.7% year on year to $3.9 billion and total income grew by 32.8% to $321.5 million.
Income grew at a slower pace than TTV because the revenue margin declined to 8.2%, down from 8.6% a year ago. This was due to the higher contribution from the US.
Both customer and merchant numbers increased year on year. Active customers grew 5.3% to 6.4 million and merchants on Zip’s platforms increased 9.1% to 87,500.
The business also reported that net bad debt of TTV was maintained at 1.6%, the same as the first quarter of FY25.
The cash net transaction margin (NTM) improved to 4% during the period, up from 3.9% in the FY25 first quarter.
Zip has been focused on operating leverage, which saw the cash EBTDA margin improve to 19.5%, up from 13.1% in the FY25 first quarter.
Management comments
The Zip CEO and Managing Director Cynthia Scott said:
We are committed to delivering exceptional experiences for our customers, with engagement deepening across both markets. In the US, TTV and revenue increased (in USD) 47.2% and 51.2% respectively, with customer growth of 12.2% (+483k) year on year ahead of the holiday trading period. In ANZ, TTV increased 11.1% year on year driven by growth in Zip Plus, and pleasingly both revenue and AU receivables returned to year on year growth.
Following a strong start to the year, we have upgraded our expectation for US TTV growth to be above 40% (in USD) for the year and reconfirm the remainder of our target ranges as previously announced in August. We remain focused on executing our strategic priorities of growth and engagement, product innovation and platforms for scale.
Zip share buyback
The buy now, pay later has announced an increase in the limit of its on-market Zip share buyback from $50 million to $100 million.
It has already repurchased 17.8 million Zip shares for a total consideration of $43.4 million.
Zip said the on-market share buyback limit increase reflects the strength of its balance sheet, the continued delivery of operating cashflows and its outlook for future profitable growth.
Outlook for the Zip share price
The company is clearly doing well and its outlook seems still positive. If its net bad debts remain sustainable then the company has a solid outlook. But, it is challenging to say what a good price to buy at is after such a strong rise (55% this year).
There are other ASX growth shares that I’d rather buy.
