Oct 28, 2020 SOURCE: PR NewsWire
Afterpay Announces Q1 FY21 Business Update
SAN FRANCISCO, Oct. 28, 2020 /PRNewswire/ -- Afterpay (ASX:APT), the leader in "Buy Now, Pay Later" payments, today announced its business update for the first quarter ended September 30, 2020 (Q1 FY21).
KEY HIGHLIGHTS((1))
-- Strong performance in Q1 FY21 across all regions led to underlying sales
increasing 115% to $4.1b, up from $1.9b Q1 FY20. This was 9% higher than
the record underlying sales achieved in Q4 FY20.
-- Momentum towards the end of FY20 continued into Q1 FY21 with the run
rate for Q1 FY21 now at $16.4b, up from $15.0b in Q4 FY20.
-- Merchant revenue margins (unaudited) remained firm in Q1 FY21 and
continued to perform in line with what was achieved in FY20.
-- The trend towards lower Gross Losses (unaudited) continued throughout
the first quarter with customer default payments remaining below
historical rates in all regions. This has resulted in Net Transaction
Losses (unaudited) as a percentage of underlying sales also remaining
low.
-- Consequently, strong Net Transaction Margins (unaudited) have been
maintained in the first quarter.
-- Active customers((2)) globally increased 98% to 11.2m (up from 5.7m in
Q1 FY20), with the US reaching over 6.5m.
-- 45% of our like for like sales growth in Q1 FY21 was driven by
Millennials, with Gen X and Gen Z driving 25% and 24% respectively.
-- Active merchants(1) increased by 70% to 63.8k (up from 37.5k in Q1
FY20), with a number of major enterprise retailers launching in
October..
-- Merchants with over $10b of total addressable online sales went live in
the US at various points in Q1. Positive impacts on customer acquisition
have started to be realised in October with an 18% increase in the daily
average number of new customers month to date compared to the Q1 FY21
average.
-- In-store underlying sales in ANZ recovered well in Q1 FY21, following a
gradual opening of stores, and is trending back towards pre COVID-19
levels at approximately 20% of total ANZ underlying sales. Rollout of
in-store in the US progressed with a number of high profile retailers
now live in open stores across the country.
-- Launch into Canada has progressed well with a number of large retailers
now live, integrating or signed. Key new retailers include Aritzia,
Lush, Ardene and Goop.
-- Afterpay's network effect continues to drive value with an average of
over 19m lead referrals generated per month to retailers in Q1 FY21.
-- ANZ blueprint demonstrates the network effect potential globally. Top
10% of customers((3)) in ANZ, on average, transact:
-- 54 times per year;
-- across 26 different merchants;
-- within 11 different verticals.
-- Experience to date in newer international markets is showing similar
trends at similar points in the ANZ life cycle.
-- In October, Afterpay and Westpac Group entered into a Collaboration
Agreement to facilitate the introduction of Afterpay savings accounts
and cash flow tools for customers in Australia. The Afterpay-branded
savings and transaction accounts, facilitated by Wetspac's digital
bank-as-a-service technology, will be linked to a customers' existing
Afterpay accounts. The new offering:
-- will provide customers with an alternative to traditional banking
products and will empower them to have greater control over their
budget;
-- has the potential to facilitate new revenue streams over time and
improve risk management and processing costs in Afterpay's existing
activities;
-- is globally scalable as it uses cloud-native technology from 10x
Future Technologies.
-- Received final notification from AUSTRAC in October that it will not be
taking any further regulatory action following its consideration of the
external audit report examining the Company's compliance with the
Anti-Money Laundering and Counter-Terrorism Financing Act 2006.
-- Afterpay is the naming rights partner for Australian Fashion Week. This
partnership represents our commitment to supporting Australian designers
achieve success locally and abroad. Our platform provides this important
industry that we grew up with, the opportunity to continue its success
over the long term.
OUR PEOPLE
-- Focus remains on the health and wellbeing of our people. As COVID-19
continues to have an impact on all of our communities globally we
continue to roll out initiatives that focus on mental health and
wellbeing and offer support to all of our employees.
-- Continue to attract senior talent, with the recent appointments of
Rebecca Lowde - Chief Financial Officer, Meahan Callaghan - Chief People
Officer and Mark Teperson - Chief Strategy Officer.
BUSINESS PERFORMANCE
Q1 FY21
GLOBAL
(unaudited) Q1 FY21 Q1 FY20
VARIANCE
---
Underlying
Sales (A$) 4.1b 1.9b 115%
---
ANZ
2.2b
1.4b 63%
---
US
1.6b
0.5b 229%
---
UK
0.3b
0.1b 346%
---
Underlying
Sales on a
constant
currency
basis4
4.2b
1.9b 119%
---
GLOBAL
(unaudited) As at As at
VARIANCE
30 SEPT 2020 30 SEPT 2019
---
Active
Customers 11.2m 5.7m 98%
---
ANZ
3.4m
3.0m 15%
---
US
6.5m
2.4m 175%
---
UK
1.2m
0.3m 282%
---
Active
Merchants 63.8k 37.5k 70%
---
ANZ
48.0k
32.0k 50%
---
US
13.9k
5.4k 159%
---
UK
1.9k
0.2k 1038%
---
ANZ
-- ANZ grew strongly year on year (up 63% on Q1 FY20) with underlying sales
momentum for both online and in-store continuing on from Q4 FY20.
-- Underlying sales from SMBs was 79% above Q1 FY20 as customers continue
to support local stores through the COVID-19 pandemic.
-- In-store volumes in Q1 FY21 continued to increase as States reduced the
levels of COVID-19 related restrictions.
-- In-store now represents around 20% of total ANZ underlying sales despite
the State of Victoria being in stage 4 lock down during the period.
-- Adoption of Afterpay's in-store offering, particularly with SMBs,
continues to grow, with 36% of Afterpay's merchants now offering
Afterpay in-store.
-- New merchants that went live, are integrating or contracted during Q1
FY21 include, Estee Lauder NZ, Baby Kingdom, Vinomofo, Cettire,
Providoor, 99 Bikes, Urban Outfitters, The Hamper Emporium, Fossil
In-store, Tommy Hilfiger In-store, Calvin Klein In-store, Deals Direct,
Dr Boom Communications In-store, Miss Louise
US
-- Underlying sales in the US increased by 229% compared to Q1 FY20.
-- Sales grew in Q1 FY21 when compared to Q4 FY20 but were impacted by a
stronger AUD currency. On a local currency basis double digit percentage
growth was achieved.
-- Approximately 12.5k new customers joined the platform per day during the
quarter with total Active customers for the period reaching 6.5m (175%
up on Q1 FY20). In October to date this average increased to over 15k
new customers per day.
-- Merchants that went live at various points in Q1 FY21 represent
approximately $10b of total addressable online sales and are expected to
contribute significantly during the seasonally strong second quarter.
-- In-store launched nationwide with major retailers including Forever 21,
Levi's, Skechers, Finish Line, JD Sports, APL, Solstice Sunglasses
during the period.
-- New merchants that went live, are integrating or contracted during Q1
FY21 include, Gap Inc., lululemon, Fabletics, Goop, Chico's FAS,
Aritzia, Lush, Carters, Cos Bar, Pandora.
-- Announced national collaboration with Simon Property Group to support
retailers and promote Afterpay in-store payment services to consumers
ahead of the busy holiday shopping season. Simon has over 200 retail
assets in the US.
UK
-- Underlying sales in the UK in Q1 FY21 grew by 346% when compared to Q1
FY20.
-- On a local currency basis underlying sales grew by over 40% compared to
Q4 FY20.
-- Active customers increased by 282% with the growth in average frequency
per customer outperforming both ANZ and the US.
-- New merchants that went live, are integrating or contracted during Q1
FY21 include, Jo Malone, Smashbox, Clarins, La Mer, Pandora, Hunter
Boots, Karen Miller, Coast, Ernst & Jones, H. Samuel, e.l.f Cosmetics,
Maniere de Voir, Medisave, Rebellious Fashion, Fabletics, Savage x
Fenty, Deckers, Clinique, Shade Station.
GLOBAL EXPANSION
-- Acquisition of Pagantis is progressing well and is on track for
completion by the end of the 2020 calendar year, pending regulatory
approval by the Bank of Spain.
-- Pagantis provides us with a licence to operate in Spain, France,
Italy and Portugal as well as pending licence passport applications
in Germany and Poland.
-- A cross functional detailed 100 day integration and launch plan has
been developed to ensure we can launch as soon as possible post
completion.
-- Plans to expand into Asia are progressing well:
-- Established a base in Singapore to drive the development of the
South East Asia market. Initial development of the EmpatKali
opportunity in Indonesia is also underway.
INNOVATION
-- Introduced Afterpay's in-store payment service to all US retailers
nationwide.
-- Launched Express Checkout which gives consumers the ability to complete
purchases directly from retailers' product pages, driving higher
conversion and average order values.
-- Entered into a strategic partnership with Stripe to allow its millions
of users to quickly and seamlessly offer Afterpay to their customers,
driving higher conversion rates and expanding their reach among online
shoppers.
-- Planning and development of Afterpay savings accounts and cash flow
tools for customers underway as part of the new money management
services. Minimum Viable Product launch expected in Australia Q4 FY21.
REGULATION UPDATE
-- AUSTRAC considered the Final Audit Report undertaken by Independent
Auditor, examining the Company's compliance with the Anti-Money
Laundering and Counter-Terrorism Financing Act 2006 and decided it would
not be taking any further regulatory action. AUSTRAC noted that Afterpay
had uplifted its AML/CTF compliance framework and financial crime
function, and satisfactorily completed all required remediation
activity.
-- Afterpay welcomed the interim report of the Senate Inquiry into FinTech
and RegTech which found that regulation should be fit for purpose and
that self regulation is an effective initial step for innovative
industries with more formal co-regulation to occur over time.
-- Afterpay has continued to cooperate with ASIC as it finalises its
follow-up review of the BNPL industry. The industry-led BNPL Code of
Practice is expected to be finalised post ASIC's report.
-- Recent proposed responsible lending reforms by the Australian Government
demonstrate a move away from a 'one-size-fits-all' approach to
regulation while ensuring consumer protections. This is consistent with
our support for outcomes-based regulation.
-- Afterpay welcomes the Australian Government's review of the regulatory
architecture of the Australian payments system, including its
consideration of whether the regulatory framework adequately
accommodates new and innovative systems. Afterpay will continue to
engage with the RBA as it continues work on its Review of Retail
Payments.
-- Continuing to engage and provide information to relevant regulators in
the US (at both a national and state level) and the Financial Conduct
Authority in the UK to ensure they understand the Afterpay model and how
we differ from other BNPL and traditional credit providers.
THE NETWORK EFFECT IN ANZ AS A BLUEPRINT FOR GLOBAL EXPANSION
-- Afterpay's model seeks to add value to both customers and retailers.
This value is driven by creating a win-win outcome for all stakeholders.
-- Afterpay's flywheel drives an important symbiotic relationship between
our retailers and customers.
-- As more retailers join our platform and as we add new verticals, the
flywheel drives both acceptance and new customer acquisition into
the Afterpay network.
-- Acceptance amplifies network usage and drives frequency of customers
utilisation across the network and with customers' preferred
merchants.
-- When the compounding impact of frequency and active customers
reaches a tipping point we see an acceleration of our network
effect.
-- The value of this network effect positively impacts the customer, the
retailer and Afterpay.
-- ANZ experience to date demonstrates this impact and we are seeing the
rate of frequency growing faster with new customers today than they have
historically.
-- Experience to date in newer international markets is showing similar
trends at similar points in the ANZ life cycle.
ANZ TOP CUSTOMERS (based on value of underlying sales)5
---
Customers Frequency Merchants Verticals Millennials Gen Z
---
TOP 10% 54 26 11 52% 16%
---
TOP 30% 34 18 8 50% 21%
---
INTERNATIONAL TOP CUSTOMERS AVERAGE FREQUENCY (based on underlying sales)4
---
Customers Frequency Millennials Gen Z
US 10% 19 55% 17%
---
UK 10% 24 58% 18%
---
UNDERSTANDING OUR CUSTOMER AND RETAIL'S NEXT GENERATION CONSUMERS
-- Afterpay's customer base cuts across Millennials, Gen Z and Gen X.
Afterpay's top customers by value of underlying sales over-index in the
Millennial demographic.
CUSTOMER COHORTS BY AGE AND REGION (based on number of customers)6
---
Gen X Millennials Gen Z
GLOBAL 21% 48% 25%
---
ANZ 22% 45% 25%
---
US 21% 48% 25%
---
UK 19% 51% 26%
---
-- As Millennials and Gen Z customers reach their peak earning years over
the next 10 years, the percentage of total retail spend globally coming
from these generations will increase significantly.
-- In Australia, Millennials and Gen Z represent:
-- 50% of the labour force (37% and 13% respectively)((7)), and account
for 30% of all dollars spent in the economy.((8))
-- 36% of total retail spend (35% and 1% respectively). By 2030, this
will increase to 48% of total retail spend.((9))
-- In the US, Millennials and Gen Z represent:
-- 46% of the labour force (35% and 11% respectively)((10)), and
account for 27% of all dollars spent in the economy.((11))
-- 32% of total retail spend (27% and 5% respectively), increasing to
48% by 2030.((12))
-- In the UK, Millennials and Gen Z represent:
-- 46% of the labour force (36% and 10% respectively)((13)), and
account for 26% of all dollars spent in the economy.((14))
-- 25% of total retail spend (22% and 3% respectively) increasing to
39% by 2030.((15))
Afterpay's model was developed to meet the needs of these two important generations and align with their core values.
The trust and ongoing loyalty of our customer base is evidenced by the growing frequency per customer the longer they remain on the platform. The Lifetime value of a customer therefore compounds over time as a result of this habitual use. This is being replicated in new regions as we expand globally.
The new money management services being developed will expand our ecosystem while reinforcing our value proposition to our customers. The network effect from this offering and any future complementary product offerings, will not only drive incremental revenue streams, but also enhance the lifetime value of our customers.
About Afterpay Limited
Afterpay Limited (ASX: APT) is transforming the way we pay by allowing customers to receive products immediately and pay for their purchases over four installments, always interest-free. The service is completely free for customers who pay on time - helping people spend responsibly without incurring interest, fees or extended debt. As of September 30, 2020, Afterpay is offered by nearly 64,000 of the world's favorite retailers, and is used by more than 11 million active customers globally.
Afterpay is currently available in Australia, Canada, New Zealand, the United States and the United Kingdom, where it is known as Clearpay. Afterpay is on a mission to power an economy in which everyone wins.
((1)) All currency figures are in Australian dollars unless otherwise stated
((2)) Active defined as having transacted at least once in the last 12 months.
((3)) Top 10% of customers measured by value of underlying sales contribution over rolling 12 month period to 30 September 2020
((4)) Underlying sales on a Constant currency basis has been calculated by translating underlying sales for Q1 FY21 at the effective exchange rates for the prior corresponding period of Q1 FY20
((5)) Based on rolling 12 month period to 30 September 2020
((6)) Based on active customers in Q1 FY21
((7)) ABS Labour Force Survey - Detailed
((8)) ABS Household Expenditure Survey
((9)) Forecasts based on: HILDA Waves 6-18; ABS Household Expenditure Survey 2015-2018
((10)) Current Population Survey - U.S. Census Bureau & U.S. Bureau of Labor Statistics
((11)) Bureau of Labour Statistics CE Generation Tables
((12)) Forecasts based on: University of Michigan Panel Study of Income Dynamic 2005-2017; Bureau of Labor Statistics CE Generation Tables and Census Bureau Population projections for United States
((13)) ONS Labour Force Survey
((14)) Living Costs and Food Survey 2015-2019
((15)) Forecasts based on: Living Costs and Food Survey 2015-2019
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SOURCE Afterpay
