Zip Co shares have fallen more than seven per cent after the buy now, pay later provider reported shrinking margins as it spends more on growth initiatives in the buildup to the holiday season.
Zip reported on Wednesday that it only made 1.0 per cent in cash earnings on its average receivables in the three months to September 30, compared to 2.2 per cent in the prior quarter.
“The company increased spending on brand and marketing in the quarter in preparation for … the seasonally strongest quarter,” Zip said.
“Permanent headcount increased, predominantly in the areas of product and engineering.”
But Zip chief executive Larry Diamond said he was pleased with revenue growth of 15 per cent to $31 million.
Receivables – the amount due from customers – also increased to 15 per cent, to $783.6 million.
Zip also added 147,000 customers over the quarter, to 1.4 million, putting it more than halfway to its goal of 2.5 million customers by June 30.
Its merchant partners increased 10 per cent to 17,890, as it added brands including the Big W, T2 Tea and the Chemist Warehouse.
“We are well on our way to achieving our mission to be the first payment choice everywhere and every day,” Mr Diamond said.
Zip said it would launch its first brand awareness campaign this quarter leading into Christmas.
Also Wednesday, shareholders at the company’s general meeting approved the issue of shares to pay for its acquisition of PartPay for $NZ50.8 million ($A47 million) plus up to $NZ15 million ($A13.9 million) in performance milestones.
Partpay, headquartered in Auckland, also has operations in the UK and holds stakes in Payflex in South Africa and Quadpay in the US.
AAP
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