The Zip Co Ltd (ASX: ZIP) share price is taking a tumble today.
Shares in the S&P/ASX 200 Index (ASX: XJO) buy now, pay later (BNPL) stock closed yesterday trading for $3.27. In morning trade on Thursday, shares are changing hands for $2.63 apiece, down 19.57%.
For some context, the ASX 200 is up 0.2% at this same time.
The big move down follows the release of Zip's second quarter results for the three months to 31 December (2Q FY 2025).
Read on for the highlights.
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Sliding margins put Zip share price under pressure
The Zip share price is falling hard today despite the company delivering strong growth across most key financial metrics, demonstrating investors' high expectations for the high-flying stock.
Zip reported cash earnings before taxes, depreciation and amortisation (EBTDA) of $35.3 million. That's an increase of 50.2% from 2Q FY 2024, though it's lower than some analysts have been forecasting.
Total Transaction Volume (TTV) came in at a record $3.4 billion, up 24.8% year on year.
Revenue also grew strongly, up 20.5% to $269.4 million.
However, the Zip share price looks to be catching headwinds today, with revenue margin slipping to 7.9% from 8.2% reported in 2Q FY 2024. Cash transaction margins also dipped slightly to 3.6% from 3.5% in the prior corresponding period.
In a positive sign, bad debts were down year on year, with Zip reporting net bad debts represented approximately 1.5% of TTV. That's down from 1.7% of TTV in 2Q FY 2024.
The ASX 200 BNPL stock also saw its active customers grow to 6.3 million, up 1.5% year on year. And merchants on its platforms increased by 7.6% from the prior year to 81,900.
What did management say?
Commenting on the results that have failed to lift the Zip share price today, CEO Cynthia Scott said, "Zip continued to deliver strong growth and momentum in the second quarter, achieving a record set of results…"
Scott highlighted the strong growth of Zip's US business:
Our strong performance was driven by outstanding US growth, with year on year TTV and revenue growth of 38.3% and 41.0% respectively, driven by an exceptional holiday trading period which included the single largest trading day and month in Zip's history.
As for Zips Australia and New Zealand business, Scott said:
ANZ TTV returned to growth year on year, driven by a strong increase in transaction numbers. Our focus on margin improvement and the rollout of Zip Plus has delivered an increase in the Australian portfolio yield, up 110 basis points year on year to 18.6%, another strong result in a high interest rate environment.
With today's big intraday slide factored in, the Zip share price remains up a whopping 253% since this time last year.
