Full Year 2026 Zip Co Ltd Earnings Call Transcript
Key Points
- Record group cash earnings up 58% to $269 million, exceeding FY26 guidance and marking the 12th consecutive quarter of group profitability.
- US TTV grew 42.5% to $8.6 billion with revenue up over 44%, while cash earnings grew 51% to USD155 million and operating margin reached 25%.
- ANZ cash earnings almost doubled, with operating margin expansion of more than 750 basis points and a return to revenue and Australian receivables growth.
- Group operating margin expanded by 420 basis points to a record 20%, demonstrating strong operating leverage and scalability.
- US credit losses declined to 1.67% of TTV in Q4, within the target range, while maintaining strong customer repayment behavior.
- Funding costs improved, with a new US warehouse facility at materially lower margins and refinancing of over $2.5 billion of Australian receivables at improved margins.
- Strong customer engagement metrics: US transactions per active customer up 23% to 13.1 times per annum, and ANZ transaction and spend per customer grew 17% and 15% respectively.
- AI integration across the business, with AI assisting 86% of code written by US tech teams and 57% in Australia, enhancing efficiency and speed to market.
- Capital management initiatives include an additional AUD50 million buyback and a proposed share consolidation, alongside a strong balance sheet with available cash and liquidity of $247 million.
- FY27 guidance expects group cash EBITDA of $340 million, representing ~26% growth, with US TTV growth of at least 30%.
- US TTV growth slowed in Q4 due to product mix and customer acquisition levels, though still strong for the year.
- Base interest rate rises in Australia (75 basis points) and the US (25 basis points) could pressure net transaction margins.
- ANZ macro overlay increased in the last quarter due to changes in unemployment, inflation, and interest rate expectations, potentially impacting provisions.
- The wind down of the New Zealand business reflects a strategic focus on Australia, which may limit geographic diversification.
- The company faces seasonality in US credit losses, with losses expected to rise from Q4 into Q1, which could cause market concern.
- The share consolidation is subject to board and shareholder approval, adding uncertainty to capital management plans.
- The US refinancing to a rated ABS transaction is still in progress, with pricing not yet finalized, creating some uncertainty in funding costs.
- The company's guidance for US TTV growth of at least 30% is subject to market conditions, and July growth was above 30%, but there is no guarantee of sustained performance.
- The cash NTM margin guidance of 3.8% to 4% is narrower than before, reflecting potential challenges from interest rate rises and credit losses.
- The company is prioritizing additional investment in the US, which could increase expenses and impact near-term profitability if not managed carefully.
Thank you and good morning, everyone. To open, I'd like to begin by acknowledging the traditional owners of the land on which we meet today, the Gadigal of the Eora Nation, and pay our respects to elders past and present.
This conference call is being webcast and will be made available on Zip's website.
I'm joined today by Zip's Group CEO and Managing Director, Cynthia Scott; Group CFO, Gordon Bell; US CEO, Joe Heck; and ANZ CEO, Soraya Alali.
We will start this call with some prepared remarks and then open up for Q&A.
With that, I'll now hand over the call to Cynthia.
Thanks, Vivienne. On behalf of the Zip team, we're pleased to deliver another year of significant growth and profitability at scale.
We exceeded our FY26 guidance with record group cash earnings up 58% to $269 million and US credit losses declining to 1.67% of TTV in the fourth quarter. These results demonstrate Zip
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