Jul 13, 2020 SOURCE: PR NewsWire
Afterpay Announces FY20 Business Update
SAN FRANCISCO, July 13, 2020 /PRNewswire/ -- Afterpay Limited (ASX: APT) is pleased to announce business performance for the three month period ended 30 June 2020 (Q4 FY20) and the financial year ended 30 June 2020 (FY20).
KEY HIGHLIGHTS((1))
-- Strong performance across the business has delivered underlying sales of
$11.1b in FY20, more than doubling the prior corresponding period (pcp)
(up 112%).
-- Underlying sales in Q4 FY20 was $3.8b, 127% above Q4 FY19.
-- Q4 FY20 sales performance represented the highest quarterly performance
ever, reflecting the accelerating shift to e-commerce spending since the
impacts of COVID-19 emerged globally.
-- Merchant revenue margins for FY20 are expected to be in line with or
better than H1 FY20 and FY19.
-- Net Transaction Loss (NTL) for FY20 is expected to be up to 55 basis
points. ANZ NTL has remained at historically low levels and NTL within
the US and UK regions has improved in 2H FY20 compared to 1H FY20 as a
result of improving risk performance and historically high payment
recovery rates.
-- Net Transaction Margin (NTM) for FY20 is expected to be approximately
2%, underpinning a pathway to longer term profitability for the overall
business.
-- EBITDA (excluding significant items)((2)) for FY20 is expected to be
between $20-25m.
-- Active customers((3)) of 9.9m for FY20, 116% above FY19, reflects the
flight to online spending, and the attractiveness of our budget-focused
business model in the current environment.
-- Key active customer milestones were achieved in both the US and the UK
in June 2020, with the US reaching 5.6m and the UK 1m active customers.
Strong new customer acquisition saw the company exceed its target of
9.5m active customers by the end of FY20.
-- Active merchants((4)) reached 55.4k in FY20, 72% above FY19, driven by
strong merchant acceptance in both the US (up 202%) and the UK. The UK
exceeded 1k merchants in its first 12 months of operations.
-- Expansion into Canada and rollout of in-store in the US expected in Q1
FY21.
-- FY21 is expected to be a year of increased investment for Afterpay as it
maintains the strong momentum in the business and capitalises the
opportunity to scale globally.
1. OUR PEOPLE
COVID-19
-- Afterpay continued to prioritise the health and wellbeing of our people
through COVID-19. A return to office program is being rolled out
gradually across our regions and in alignment with State and National
recommendations.
-- Employees globally were given a paid leave day - Wellbeing Day - to
acknowledge the hard work and ongoing commitment in the challenging
environment.
ENHANCING TALENT AND CAPABILITIES
-- During Q4 FY20 the company has continued to strengthen its capabilities
across the business.
-- Key additions to the leadership teams include:
-- Lee Hatton - Executive Vice President, New Platforms, joined the
business in June 2020 with over 20 years' experience in the finance
industry. Lee's role is focused on identifying opportunities to
further enhance the customer relationship with adjacent and
value-adding products or services.
-- Mark Teperson - Chief Strategy Officer, will join the business in
the coming months. Mark will draw on his invaluable experience at
one of Australia's leading omni-channel retailers, Accent Group, to
leverage the Company's vast data assets, deepening the connection
and network effect of customers and merchants.
2. TRADING UPDATE -- Q4 AND FY20
GLOBAL (A$) Q4 FY20 Q4 FY19
Q4 FY20 FY19 Variance
Variance
(unaudited)
---
UNDERLYING
3.8b
1.7b 127% 11.1b 5.2b 112%
SALES
---
ANZ
2.0b
1.3b 57%
6.6b
4.3b 52%
---
US
1.6b
0.4b 299%
4.0b
0.9b 330%
---
UK
0.2b
0.0b
na
0.6b
0.0b
na
---
GLOBAL (unaudited)
AS AT 30 JUNE 2020 AS AT 30 JUNE 2019 Variance
---
ACTIVE CUSTOMERS
9.9m 4.6m 116%
---
ANZ
3.3m
2.8m 18%
---
US
5.6m
1.8m 219%
---
UK
1.0m
0.0m
na
---
ACTIVE MERCHANTS
55.4k 32.3k 72%
---
ANZ
42.8k
28.4k 51%
---
US
11.5k
3.8k 202%
---
UK
1.1k
0.0k
na
---
NOTE: CHANGE CALCULATIONS MAY NOT EQUATE
DUE TO ROUNDING.
-- Strong performance across the business delivered underlying sales of
$11.1b in FY20, more than double pcp.
-- FY20 underlying sales in ANZ, our most mature market, delivered strong
growth (up 52% on FY19). Online sales increased by 46% in FY20 compared
to FY19, while in-store volumes grew by 81%. In-store sales growth
remained strong for FY20 despite COVID-19 related impacts in H2 FY20.
-- The US continued to grow underlying sales substantially (up 330% on
pcp), driven by the introduction of new global enterprise retailers to
the platform and an acceleration of e-commerce spending.
-- Strong sales growth in the UK was positively impacted by a growing
retailer base. Active merchants in Q4 FY20 increased by 74% compared to
Q3 FY20.
-- Record global performance in Q4 FY20 led to a 48% increase in global
underlying sales on Q3 FY20. This reflects the increase in online
spending, various government stimulus initiatives introduced in each
region and the attractiveness of our budget-focused model in the current
environment.
-- All regions performed well in Q4 FY20 with sales in the UK 62% higher,
US 62% higher and ANZ 38% higher than Q3 FY20.
-- Contribution of underlying sales from the developing US and UK markets
increased to 47% in Q4 FY20 compared to 43% in Q3 FY20.
3. CUSTOMERS AND MERCHANTS
-- Growth in global active customers to 9.9m has seen the company exceed
its target of 9.5m active customers by the end of FY20.
-- Afterpay added an average of 20.5k new customers to its platform per day
in Q4 FY20, an acceleration on the Q3 FY20 rate of 15.1k per day.
-- Customer engagement remained strong with 91% of global underlying sales
coming from repeat purchasers during Q4 FY20.
-- In FY20 there was a shift to debit card usage by customers globally with
87% of customers in ANZ, 89% in the US and 96% in the UK now using debit
cards on Afterpay.
-- Sustained growth in ANZ customer base continues to be driven by the
expansion into new verticals, including eBay, which launched in April.
-- Strong active customer growth in the US resulted in a 219% increase on
pcp. Having reached over 5m customers, in only two years, further
validates our ability to scale quickly in a much larger and deeper
market.
-- Exceeding 1m customers in the UK, within only 12 months, is a testament
to our maturing brand and differentiated business model in that region.
-- Customer frequency has improved across all regions. In FY20 the earliest
customer cohorts in ANZ are now, on average, transacting 25 times per
annum (up from 23 times in H1 FY20).
-- Global average order value was $153 for FY20.
-- Over 23k new merchants have transacted on the platform in FY20 with a
number of new global enterprise retailers going live in FY20.
-- The number of small to medium sized retailers (SMBs) joining the
platform accelerated in Q4. In June 2020, underlying sales from SMB
merchants providing Afterpay in-store, was up 92% year on year,
demonstrating that customers are continuing to support smaller and local
retailers through the COVID-19 period.
NEW MERCHANTS
Key merchants that went live or contracted during Q4 FY20:
-- ANZ - Aesop, Swarovski, KitchenAid Australia, Repco, Riot Stores,
Drummond Golf, Catch Fitness, Sportitude, Insport, Running Warehouse,
Chemist Warehouse (in-store), Direct Chemist Outlet, Wizard Pharmacy,
Chempro, Ticketek, WebJet.
-- US - American Eagle, ASOS, Birkenstock, FILA, FTD Flowers, Furla, Hanna
Andersson, Herschel, Kiehl's, Lancer Skincare, Lancome, La Mer, IT
Cosmetics, Living Proof, Marc Jacobs Beauty, New Balance, Perricone MD,
Soko Glam, The Hut Group, Tilly's, YSL Beauty, Drunk Elephant.
-- UK - Shein, REISS, I Saw it First, Quiz Clothing, Secret Sales, Femme
Lux, Current Body, Be Inspired Clothing, e.l.f Cosmetics, Just Hype,
Unilever Prestige Brands, Bare Minerals.
EBAY AUSTRALIA
-- The launch of eBay in Australia has driven strong customer acquisition
and a more diversified customer profile.
-- Hundreds of new customers join Afterpay through eBay each day, the
majority of which are male and are older than Afterpay's average
customer.
-- Since launch, top categories have included vehicle parts and
accessories, home and garden, and electronics (including computers and
tablets).
QANTAS FREQUENT FLYER
-- Afterpay and Qantas Frequent Flyer have announced an exclusive
partnership that allows members to earn Qantas Points through the
Afterpay platform.
-- Qantas Frequent Flyers can earn up to 5,000 Qantas Points on purchases
made through the Afterpay platform when they link their membership to
their Afterpay account.
4. GLOBAL EXPANSION
NEW MARKETS
-- Planning for expansion into Canada has progressed with launch expected
in Q1 FY21.
-- As part of the company's strategic planning process, opportunities to
accelerate our expansion into additional markets have been identified.
This has the potential to see us launch into new markets in late 2020 or
early 2021.
-- The Company is exploring a number of small M&A opportunities to
accelerate roll out across potential new international markets. Due
diligence is being undertaken, however, there is no certainty that any
deal will be completed.
US IN-STORE
-- US in-store is expected to launch in Q1 FY21 with our merchant launch
partners. With over 5m active customers already on the Afterpay platform
in the US, we expect our in-store offering to be well received by
customers who are accustomed to using Afterpay online.
5. INNOVATION
-- Product innovations implemented in Q4 FY20 included:
-- Ability for consumers to make overdue payments at checkout which
improves the recovery of late payments and enables them to continue
purchasing with Afterpay
-- Flexibility of payments by allowing customers to nominate any amount
to be paid against an order to help manage their budgets;
-- Ability for customers to request a change to payment schedules to
align with pay days, or help in managing finances; and
-- "Afterpay for Good" program which allows customers to "top up"
purchases and donate to important causes - currently COVID-19-relief
funds.
-- Customer account limit transparency
-- Viewing spending limits is one of the top 3 features requested by
customers as it assists with budgeting and planning of purchases
with Afterpay. It will be available in all regions through the
Afterpay app and Afterpay account online in Q1 FY21.
-- New repayment options
-- Apple Pay was made available as a repayment option for customers in
all markets in the beginning of June. This provides customers with
greater flexibility in how they manage their payments.
-- AMEX is now accepted as a payment option in the US with plans to add
AU and UK by the end of the calendar year.
-- Visa (US) and Mastercard (AU)
-- Commenced issuing activity with both Visa and MasterCard to
accelerate merchant integration in the US and AU, respectively.
-- Realised processing cost benefits from strategic agreements with
both Visa and Mastercard.
-- XBT
-- UK has been added to Afterpay's existing Cross-Border Trade (XBT)
network in AU and NZ. Customers will progressively have access to
this service over the coming months.
-- Adding future markets to the network is in the planning phase.
-- Express Checkout
-- Express Checkout functionality is expected to be introduced in Q1
FY21.
-- This allows customers to view their shipping and payment information
in one screen to make checkout faster and more efficient, in
addition to increasing conversion.
6. REGULATORY UPDATE
AUSTRAC
-- AUSTRAC is still considering the Independent Auditor's report, and
Afterpay continues to fully cooperate with AUSTRAC.
BNPL CODE OF PRACTICE
-- The public consultation process for the BNPL Code of Practice has now
closed. An industry working group, led by AFIA, is reviewing feedback
and continuing engagement with ASIC.
-- Afterpay remains strongly supportive of the Code.
RBA SURCHARGING REVIEW
-- In late 2019 the Reserve Bank of Australia (RBA) announced a review of
retail payments regulation in Australia, including whether BNPL
providers should be allowed to prevent merchants from surcharging
customers who use BNPL schemes.
-- Afterpay made submissions to the RBA as to why it should not be
regulated as a payment system. The RBA has since announced that its
review is on hold, and completion of the review is not expected until
2021.
GOVERNMENT POLICY UPDATE
-- Afterpay continues to welcome Government support measures for consumers
and businesses throughout the COVID-19 period.
US REGULATORY MODEL
-- Afterpay has recently changed the legal structure of its business model
in the US market, which has involved the need for some State-based
licences. There has been no material business interruption to the
overall US operation.
7. CAPITAL MANAGEMENT UPDATE
-- Since the Business Update released on 14 April 2020, Afterpay has
completed a number of capital management initiatives which optimise the
Company's cost of funding and increases total funding capacity and
duration:
-- Repayment of the $50m Australian Corporate Bond, resulting in cash
interest savings of approximately $3.6m per annum on an annualised
basis.
-- Increase of NZ receivables warehouse facility from NZ$20m to NZ$50m
to fund NZ receivables, with Bank of New Zealand. This facility has
been extended to March 2022.
-- Extension of the US$200m receivables warehouse facility with Citi to
May 2022, to fund US receivables.
-- Afterpay has also received terms for the establishment of a GBP100m
facility to fund UK receivables with an existing global banking
partner. This new facility is subject to entry into formal
documentation and final diligence and approvals.
-- Afterpay does not have any debt facilities maturing within the next 12
months and has increased its weighted average life of facilities to
approximately 2 years through the initiatives outlined above.
-- These enhancements are enabled by the continued strong repayment profile
of Afterpay's receivables in each of its regions.
Afterpay CEO Anthony Eisen commented:
"Today's announcement is the outcome of a lot of hard work and unwavering commitment by a world class team. Our ability to achieve such positive operating metrics in the current environment, is a product of our purposefully differentiated business model and our loyal customer and retailer base.
"Given the ongoing impacts from COVID-19 and the uncertain global economic conditions, we have continued to focus on preserving capital and maintaining a strong balance sheet.
"The flexibility in our business model allowed us to manage risk when we needed to, but also take advantage of positive customer sentiment and behaviours. Our ongoing investment in growing our retailer and customer bases, and global expansion objectives, will ensure we continue to deliver long term benefits to our shareholders."
((1)) All currency figures are in Australian dollars unless otherwise stated
((2)) Significant items include expenses related to one-off items, share-based payments and foreign currency gains or losses which are still being finalised. In FY20, foreign currency gains may be higher than prior periods due to favourable foreign exchange rate movements in the period.
((3)) Active customer is defined as having transacted at least once in the last 12 months.
((4)) Active merchant is defined as having transacted at least once in the last 12 months.
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SOURCE Afterpay
