Feb 26, 2020 SOURCE: PR NewsWire
Afterpay Announces Half Year Results
SAN FRANCISCO, Feb. 26, 2020 /PRNewswire/ -- Afterpay Limited (ASX: APT) (Afterpay) is pleased to release its half year results for the six-month period ended 31 December 2019.
OVERVIEW
GLOBAL H1 FY20 H1 FY19
Variance
--- ---
Underlying sales
$4.8b
$2.3b 109%
--- ---
Active
customers(1)
7.3m
3.1m 134%
--- ---
Active
merchants(1)
43.2k
23.2k 86%
--- ---
Afterpay net
transaction
margin
$102.0m
$46.7m 118%
--- ---
Gross loss as %
underlying
sales(2) 1.0% 1.2%
17% (improvement)
---
(all currency figures are in Australian dollars unless otherwise stated)
---
Key Operating Highlights
-- Continued growth in global underlying sales, up 109% compared to H1
FY19, with a run rate of over $11.0b per annum (based on Q2 trading).
-- Global expansion momentum continued with accelerated growth in the US
and UK. US underlying sales (over $1.4b in H1 FY20) were more than five
times H1 FY19.
-- Current US and UK underlying sales run rate of over $4.3b per annum
(based on Q2 trading). The addressable online opportunity from our
contracted or currently integrating merchants in the US and UK is
~$30b(3) which is equivalent to the total addressable retail online
opportunity in Australia.
-- Our In-store offering in ANZ continues to grow and currently represents
approximately 24% of total ANZ underlying sales. An additional 14.2k
store fronts are offering In-store compared to H1 FY19.
-- Record number of active customers at 7.3m globally, averaging over
16,800 new customers per day in H1 FY20 and increasing to over 22,900
per day in November and December 2019.
-- An 86% increase in global active merchants on the Afterpay platform was
driven by strong growth in all markets.
-- Customer purchasing frequency continued to grow across all markets.
Increased frequency has translated to lower gross losses and higher
margins, validating the benefits of our business model.
-- Net transaction margin (NTM) as a percentage of underlying sales, our
key indicator of operating profitability, has remained stable at 2.1%
notwithstanding a lower contribution from late fees and a higher
contribution from newer markets, which are initially lower margin.
-- Substantial investment made to pursue our global expansion strategy. Our
growth opportunity is reflected in our current pipeline of new and
integrating merchants which are yet to materially contribute to
underlying sales.
-- Increased investment will continue into H2 FY20 and support plans to
launch In-store in the US in H2 FY20 and expansion into new markets with
Canada being the next target market.
-- Notwithstanding increased investment in growth, maintained positive
EBITDA (excluding significant items) of $6.8m in H1 FY20.
-- Afterpay continues to attract world-class talent with several senior
executives recruited to the executive leadership team.
Key Financial Performance
-- Total Group income of $220.3m was 96% higher than H1 FY19.
-- Total Afterpay income(4) of $212.2m was 105% higher than H1 FY19.
-- Merchant margins remained stable at 3.8% (3.7% in H1 FY19) demonstrating
the appeal of our shared value business model to merchants.
-- Gross loss as a percentage of underlying sales was materially lower at
1.0% (reduced from 1.2% in H1 FY19) despite strong growth in newer
markets, which initially have a higher loss rate.
-- Net transaction loss (NTL) improved by 24% from 0.6% (H1 FY19) to 0.5%
(H1 FY20) with the improvement in gross loss more than offsetting lower
contribution from late fees.
-- Afterpay NTM was $102.0m, a 118% increase on H1 FY19, while Afterpay NTM
as a percentage of underlying sales remained stable at 2.1%. This was
achieved notwithstanding a lower contribution from late fees and an
increased contribution from new and developing markets.
-- EBITDA (excluding significant items) was $6.8m, 51% below H1 FY19. This
was driven by a material investment in marketing, people and technology
targeted towards accelerating growth in existing markets and expanding
our platform for further geographic expansion and product development.
-- The Group recorded a statutory loss after tax of $31.6m for the period
which was impacted by one-off and non-cash items including share-based
payments expenses.
-- Capacity to scale has increased with an increase to total available
funding, including from a new US warehouse facility (US$200m) provided
by Goldman Sachs, and extension of the Group's overall maturity funding
profile. Current liquidity and additional growth capacity within our
$1.1b of total warehouse facilities provides scope to fund incremental
annualised underlying sales in excess of $15.0b above our current run
rate.
Investing to Exceed Mid-Term Targets
-- Ambition to reach 9.5m active customers by the end of FY20.
-- Ambition to exceed previously stated mid-term target of approximately
$20b+ by the end of FY22.
-- Ongoing investment in global talent - with particular focus on the
sales, product and technology teams. New key hires include: Global Chief
Product Officer, David Katz (ex Fanatics, Groupon); Global Chief
Marketing Officer, Geoff Seeley (ex Airbnb); Chief Enterprise Risk
Officer, Cassandra Williams (ex CBA); ANZ Sales Director, Katrina
Konstas (ex AMEX); VP Product Design, Scott Polchleb (ex WeWork); US
Head of Finance, Laura Nadler (ex Visa).
-- Continued investment in existing market acceleration (customer and
merchant acquisition) as well as global expansion with preparations well
underway to launch In-store in the US in H2 FY20 and pursue new target
markets. Canada will be our next market to launch in 2020.
-- While there will be a continued focus on net transaction margins in each
market, short term profitability at the Group level will be impacted by
increased investment in accelerating growth in new and developing
markets.
REGIONAL PERFORMANCE
H1 FY20 H1 FY19 CHANGE %
Underlying sales (A$) 4.8b 2.3b 109%
---
ANZ
3.1b
2.0b 55%
---
US
1.4b
0.3b 445%
---
UK
0.2b
~
~
---
Active customers 7.3m 3.1m 134%
---
ANZ
3.1m
2.5m 26%
---
US
3.6m
0.7m 443%
---
UK
0.6m
~
~
---
Active merchants 43.2k 23.2k 86%
---
ANZ
35.5k
21.8k 63%
---
US
7.4k
1.4k 421%
---
UK
0.4k
~
~
---
ANZ
-- Continued customer growth in our most mature market, with the increase
of new customers tracking consistently over past 12 months.
-- Customers who joined the platform in FY15-FY17 are now purchasing at an
average of approximately 23 times per annum.
-- ANZ experiencing high profitability as a result of higher customer
acceptance and higher frequency which also drives greater data and
insights and lower losses.
-- In-store gaining momentum, now representing approximately 24% of ANZ
underlying sales. Remains largest growth opportunity in this market.
-- Large new verticals still nascent and growing, representing a
significant growth opportunity. Most recent merchants and platforms to
sign up include eBay, NAB Health HICAPS, and Webjet which are set to
come online in 2020.
US
-- Underlying sales more than double H2 FY19 and more than five times H1
FY19. US contribution in H1 FY20 represented more than 30% of Group
underlying sales.
-- Underlying sales run rate at $3.8b per annum based on Q2 FY20 trading.
-- In-store to be launched prior to end of FY20 creating significant
underlying sales growth opportunity.
-- Largest active customer market at 3.6m with over 1.0m new customers
acquired in November and December 2019 alone.
-- Active merchants of 7.4k, nearly double H2 FY19 and more than five times
H1 FY19.
UK
-- Underlying sales of approximately $200m achieved in first full half of
trading, with December 2019 run rate in excess of $650m per annum.
-- Active customers reached over 0.6m, broadly in line with the US at the
same stage post launch.
-- Three of the UK's largest ecommerce retailers (ASOS, Boohoo and Marks &
Spencer) are already onboarded to the Afterpay platform in the first
year of operation.
STRATEGIC PARTNERSHIPS AND INNOVATION
-- Partnerships with Visa and Mastercard include incentives and processing
cost benefits and will facilitate new product development opportunities.
-- Lite Integration product enables enterprise merchants to integrate with
the Afterpay platform faster. Major retailer, Finish Line, was able to
launch on the platform prior to the 2019 holiday season as a result of
this innovation.
-- Variable First Payment product now has 35,000 merchants enabled globally
and our Cross Border Trade product, currently operating between
Australia and New Zealand, will be expanded to the UK by the end of
FY20.
-- Afterpay platform related features and tools relevant to our customers
and merchants continue to be developed as the platform continues to
evolve. Afterpay's platform is becoming a powerful retail ecosystem that
links brands with hard to reach, mainly millennial customers. Lead
referrals from our shop directory to our merchant partners increased to
approximately 14m per month in Q2 FY20, up from approximately 9m per
month in Q1 FY20.
REGULATION
-- Afterpay is supportive of an Australian industry code and welcomed the
Draft BNPL Code of Practice released for public consultation.
-- Submission lodged to Australia's Senate Committee inquiry into FinTech
and RegTech with Chair, Elana Rubin and CEO, Anthony Eisen, appearing
before the inquiry in February 2020.
-- Submission made in response to Reserve Bank of Australia Issues Paper on
surcharging. Afterpay provided arguments against the introduction of
surcharging that focused on the fact that its service is not comparable
to existing regulated payment forms and provides considerable services
to merchants that exceed the value of the merchant fee charged. Afterpay
submissions are available at
https://www.afterpaytouch.com/results-reports.
-- AUSTRAC is considering the independent auditor's report received (as
announced on 25 November 2019). Afterpay is continuing to work on
implementing recommendations made in the report.
-- Included within general and administrative expenses is the recognition
of a $1.5 million provision for estimated settlement costs related to an
ongoing regulatory matter. The Group does not foresee any material
disruption to its ability to offer services, or any ongoing financial
impact, as a consequence of this matter.
BOARD UPDATE
-- We are pleased to announce that Pat O'Sullivan will be joining the
Afterpay Board as an Independent Non-Executive Director in March 2020.
-- Pat is currently Chair of ASX listed company carsales.com Ltd (ASX:CAR)
and was formerly a Director of the following listed companies: APN
Outdoor, iSentia (ASX:ISD), iiNet, iSelect (ASX:ISU) and Marley Spoon
(ASX:MMM).
-- Pat's appointment follows the appointment of Gary Briggs as Independent
Non-Executive Director announced in November 2019.
-- Global recruitment process to appoint further Independent Directors
continues.
AFTERPAY'S CEO AND MANAGING DIRECTOR, ANTHONY EISEN COMMENTS:
"The strong metrics announced today reflect our team's efforts to considerably accelerate sales growth across our global business, while at the same time balancing business performance and developing our team, infrastructure and capabilities for the future.
"We more than doubled our underlying sales and the number of active customers on our platform compared to the same time last year which indicates our differentiated business model continues to resonate with customers and merchants.
"Our global expansion is accelerating with the US and UK growing at considerably faster rate than what we experienced in ANZ. The US now represents over 30% of the Group's total underlying sales and has the largest number of customers actively using the platform.
"Our success compounds as more customers transact more frequently, from a broader cohort of merchants, across a larger global footprint. We are confident in our strategy of investing to significantly expand our platform of customers, merchants and new markets because of our ANZ experience, where high customer frequency and retail penetration has been matched with low losses and strong profitability.
"Early customer cohorts in Australia are now transacting at an average of 23 times per year and our customers in the US and UK are following the same trajectory at the same point in the lifecycle.
"We are now focused on exceeding our mid-term underlying sales target of over $20b by FY22 and we are aiming to reach 9.5 million active customers by the end of this financial year. While this will impact Group profitability in the short term, we expect to achieve higher profitability in each market as they mature over time, in-line with our ANZ experience.
We believe we have the right strategy, the right people and the right business model to continue our momentum and deliver long term value for our shareholders."
Authorised by:
Anthony Eisen
CEO & Managing Director
For further information, contact:
Investors:
Company:
Media:
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Marie Festa
Christopher Stevens
Melissa Patch
Director of Investor Relations
General Counsel & Company Secretary melissa.patch@afterpay.com
marie.festa@afterpay.com chris.stevens@afterpay.com
media@afterpay.com
+61 405 494 705
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NOTES: IN THIS ANNOUNCEMENT ALL CHANGE CALCULATIONS MAY NOT EQUATE DUE TO ROUNDING, ALL METRICS ARE AS AT 31 DECEMBER 2019 UNLESS OTHERWISE STATED.
1. ACTIVE IS DEFINED AS HAVING TRANSACTED AT LEAST ONCE IN THE LAST 12 MONTHS.
2. GROSS LOSSES ARE DEFINED AS AFTERPAY RECEIVABLES IMPAIRMENT EXPENSE AS A PERCENTAGE OF UNDERLYING SALES.
3. MANAGEMENT ESTIMATE.
4. AFTERPAY TOTAL INCOME INCLUDES AFTERPAY INCOME AND OTHER INCOME, EXCLUDES PAY NOW REVENUE
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SOURCE Afterpay
