Zip’s US rebound keeps A$340m FY27 target intact after fraud disruption

US fraud costs test Zip’s growth engine

Zip Co Limited (ASX:ZIP) absorbed a A$10.1 million hit from an external fraud event in the United States during the first quarter, yet still reported 17.0% growth in total income to A$376.1 million and reaffirmed its A$340 million FY27 cash EBTDA target. The incident temporarily restrained US total transaction volume and new-customer growth in July and August, according to the company, before US TTV growth accelerated to 41% year on year in September.

The quarter’s headline cash EBTDA was A$65.0 million, up 3.4% on the prior corresponding period. Excluding the fraud-related operating expenses, adjusted cash EBTDA reached A$75.1 million, an increase of 19.5%, or 28.7% on a constant-currency basis. That distinction matters: underlying operating momentum was stronger than the reported result, but the event remains a direct cost until any insurance recovery is quantified.

US growth remains strong as credit losses rise

US TTV increased 34.1% in US dollars and revenue rose 32.0%, helped by deeper engagement from existing customers. Spend per customer rose 30.2% to US$1,958 a year, while transactions per customer increased 27.0% to 14.0. The US merchant base also expanded 31.2% to 32,600, with Puma, CommentSold, Crutchfield and Just Energy among the additions.

Credit performance was less tidy. Group net bad debts rose to 1.97% of TTV from 1.65% a year earlier, while US net bad debts came in at 1.93%. Zip said seasonality and temporarily moderated TTV following its fraud-mitigation measures contributed to the quarter-on-quarter movement, and is forecasting a lower US loss rate in the second quarter while retaining its 1.5% to 2.0% FY27 target range.

Australia grows receivables as New Zealand exit continues

Australia provided steadier, smaller-scale growth. Revenue rose 8.3% year on year to A$111.5 million, receivables increased 11.8% to A$2.33 billion and transactions per customer rose 14.2% to 29.7 annually. Portfolio yield remained healthy at 18.9%, while net bad debts eased to 3.51% from 3.83% at 30 June, although they were above the 3.33% recorded a year earlier. The New Zealand operation, whose orderly New Zealand wind-down was announced with the FY26 results, is expected to complete its exit by the end of calendar 2026.

Buyback and US funding reshape capital position

Zip repurchased 7.6 million shares for A$15.7 million by 30 September under its on-market program, which allows purchases of up to A$50 million over 12 months. The program is an active extension of the A$50 million share buyback announced earlier this year. Separately, the company acquired 9.7 million shares for A$23.7 million through its Employee Share Trust to limit dilution from equity incentive allocations.

Funding capacity also broadened in the US. Zip established a two-year US$300 million securitisation at a fixed-rate yield of 5.68%, its first US asset-backed securities issuance, and increased the AR5 facility limit to US$583.4 million. Cash on the balance sheet stood at A$452.0 million, including A$224.4 million of available cash and liquidity. Management’s guidance still calls for US TTV growth above 30%, a group operating margin of 20% to 22% and cash net transaction margin of 3.8% to 4.0%, subject to market conditions.