Zip Co’s Debt-Free Balance Sheet Masks Regulatory Risks Ahead

Strong Financial Performance

Zip Co Limited (ASX, ZIP) has delivered a standout financial year for FY25, reporting a 23.5% increase in revenue to $1.07 billion and a remarkable 147% jump in cash earnings before tax, depreciation, and amortisation (EBTDA) to $170.3 million. This surge was largely driven by significant growth in its US operations, which now contribute over 80% of divisional earnings.

The company’s operating margin improved substantially, rising 787 basis points to 15.8%, reflecting both top-line growth and disciplined cost management. Total transaction volume (TTV) across the group expanded by 30.3% to $13.1 billion, underscoring increased customer engagement and merchant adoption.

US Market Momentum

Zip’s US business was the engine behind the growth, with TTV climbing 41.6% in US dollars, outpacing the broader BNPL market growth estimated at 30-32%. The US segment also achieved a milestone of generating over US$100 million in cash earnings, a testament to the strength of its customer base and credit discipline.

Customer engagement deepened, with average spend and transactions per customer rising by 27.6% and 20.3% respectively. The expansion of Zip’s installment offerings, including the rollout of the innovative ‘Pay-in-8’ product, has broadened its appeal to everyday Americans seeking flexible payment options.

ANZ Business Returns to Growth

Meanwhile, Zip’s Australia and New Zealand (ANZ) business reversed a cautious margin optimisation stance to return to transaction volume growth, increasing TTV by 5.5%. The segment improved portfolio yield and excess spread on Australian receivables, despite a challenging higher interest rate environment.

New product launches such as Zip Plus and Zip Personal Loan have contributed to enhanced customer engagement and portfolio quality. The ANZ business also strengthened its funding position with a new $400 million warehouse facility and refinanced receivables at lower margins.

Capital Management and Board Renewal

Zip entered FY26 with a clean balance sheet, having fully repaid its corporate debt facility in July 2024. The company launched a $50 million on-market share buyback program in April 2025, signaling confidence in its cash flow generation and growth outlook.

The Board saw renewal with the appointments of two new independent directors, Matthew W. Schuyler, bringing US market expertise, and Andrew Stevens, with deep experience in business transformation and governance. These additions reflect Zip’s strategic focus on its key markets and long-term growth ambitions.

Sustainability and Responsible Lending

Zip continues to emphasize sustainability, inclusion, and responsible lending practices. The company reported strong customer satisfaction scores, low net bad debts at 1.5% of TTV, and ongoing investments in AI to enhance operational efficiency and customer experience.

Employee engagement remains high at 81%, with gender representation balanced at 50% on the Board and executive team. Zip also maintains a proactive approach to environmental impact, aiming for carbon neutrality and advancing climate-related disclosures.

Looking Ahead

For FY26, Zip plans to accelerate growth through new commercial and channel partnerships, further product innovation powered by AI, and continued operational excellence. The company’s strategic priorities focus on enhancing customer engagement, expanding flexible payment options, and optimizing capital allocation to sustain profitable growth.