Zip Co (ASX:Z1P) share price pushes higher on trading update

The Zip Co Ltd (ASX: Z1P) share price is pushing higher on Monday following the release of a trading update.

At the time of writing, the buy now pay later (BNPL) provider’s shares are up 1% to $6.24.

The Zip Co share price was up as much as 5.5% to $6.52 at one stage but has since faded.

How is Zip Co performing?

Zip Co has continued its positive form during FY 2021, with record results being driven across all regions.

According to the release, during the month of October, Zip delivered record transaction volume of $401.1 million. This was up 104% on the prior corresponding period. This means the company now has annualised transaction volume of $4.8 billion.

A key driver of this growth was its Zip US business. The QuadPay brand experienced an acceleration in its growth in October. It delivered a 200% jump in transaction volume to $160.6 million, revenue of $11.4 million, and grew its customer base to over 2.5 million.

Together with its 2.3 million ANZ customers, this took Zip’s customer numbers to 4.8 million globally, which represents a 109% increase since this time last year.

Also growing strongly was its merchant numbers. Zip now has over 36,500 merchants on its platform, which is up 74% year on year.

This underpinned another strong increase in overall BNPL revenue growth during the first four months of FY 2021.

Zip recorded a 91% increase in BNPL revenue to $96.7 million for the period, with approximately $27.6 million being generated in October. Including Zip Business, FY 2021 year to date total revenue on a pro forma basis stood at $100.2 million, with $28.4 million recorded in October.

Pleasingly, the company appears to be making positive progress with its bad debts. Although it didn’t provide any actual loss data for the period, it provided monthly arrears data for Australia. This forward indicator of future losses reduced from 1.33% in June to 0.89% in October. Management commented that this is an outstanding result in the current climate.

Zip’s Managing Director and CEO, Larry Diamond, was very pleased with the company’s performance in October.

He said: “We are pleased to report yet another record month for the Company across all its key metrics, as we accelerate into the final quarter of the calendar year.”

“We finished the October month processing over $400m in transaction volume, with November now seeing annualised volume in excess $5bn per annum. All regions are trading very strongly, and the US is now seeing more than 15,000 downloads per day – more than 5m users have now downloaded our apps worldwide,” he added.

Outlook.

While no guidance has been provided for the remainder of the half or the full year, management advised that November has been a strong month.

It advised that momentum across the company has continued this month and all regions are set to deliver step change month-on-month growth. This is prior to the inclusion of the cyber promotional activity at the end of the month.

Mr Diamond added: “Whilst online trade is expected to be very strong this year, and Zip will enjoy its share, this season Zip expects to significantly lift its instore volumes. Our partnership with Visa and access to Apple Pay and Google Pay wallets, unlocks everyday spend, providing our customers with more utility and choice.”

“Zip is well on its way to becoming the first payment choice everywhere and every day. We would like to wish all our merchant partners a strong trading period over the Black Friday – Cyber Monday weekend and into Christmas and Boxing Day. It has been a very different year for many businesses, large and small, online and offline, and we hope this quarter brings positivity and good cheer throughout,” he concluded.

More reading

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• Is buy now, pay later (BNPL) giving Aussies a headache?
• ASX ends trading early, ASX 200 up 1.2%
• Afterpay (ASX:APT) share price underperforming after ASIC finds more BNPL customers falling behind
• Why does the Afterpay (ASX:APT) share price continue to outperform Zip (ASX:Z1P)?

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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