Earnings Highlights: What is driving the Stupendous Run for Afterpay share price on ASX 

Summary

• Afterpay shares have given positive return of 919% between $8.90 on 23 March to $90.72 on 26 August.
• The BNPL firm, APT performed remarkably in FY20 ended 30 June, delivering a 112% increase in underlying sales to stand at $11.1 billion led by increased repeat usage and a 116% rise in active customers to 9.9 million.
• APT reported a 97% rise in group total income to $519.2, propelled by solid business performance, contributing total income of $502.7 million.
• Afterpay laid out plans to expand its services to at least 4 continents with expansion plans in European markets in FY21 through the acquisition of Spain based entity Pagantis. Also, APT has already been launched in Canada during August.

Afterpay Limited (ASX:APT) share price has skyrocketed by 919% after hitting a low point of $8.90 on 23 March to $90.72 on 26 August. The Australian BNPL firm has been achieving company’s milestones and record growth rates even though it was established in 2015.

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On 27 August, the Company announced its full-year results for FY20 ended 30 June, which showed fiery growth in sales and customer figures.

Some of the highlights of the key operating metrics of Afterpay from the FY20 results are as follows:

• 112% rise in underlying sales growth to $11.1 billion for FY20 with a run rate of over $15 billion per annum
• Combined underlying sales contribution from the US and the UK rose from 18% in FY19 to 41% in FY20
• Nearly 90% of underlying monthly sales are coming from repeat customers
• Active customers more than doubled to 9.9 million in FY20, while active merchants rose by 72% to 55,400 in FY20 on pcp
• An average of 17,300 new customers per day was added during FY20, growing to 20,500 new customers per day in Q4 FY20

Source: APT FY20 results presentation, dated 27 August

Key financial indicators

Afterpay posted a rise of 97% in group total income, which included Afterpay Income, Other Income and Pay Now Revenue, to $519.2 million for 12 months ending 30 June 2020 led by robust performance of APT business.

Let’s have a look at the performance of other financial indicators of the group for FY20.

• Sustained merchant margins at 3.9% of Underlying Sales, supported by a growing number of SMBs joining the platform
• APT’s gross loss reflected through 0.95% of underlying sales represents a historic low
• Net Transaction Loss (NTL) of 0.4% remained unchanged since FY19, while late Fees (other income) contributed less than 14% of Afterpay Total Income, decreasing from 19% on pcp
• Group Net Transaction Margin (NTM) stood at $261.3 million, up 101% on FY19, while Afterpay NTM was at $250.2 million, up 110%
• EBITDA (excluding significant items) of $44.4 million, up 73% on FY19, driven by growth in underlying sales, income and NTM

Source: APT FY20 results presentation, dated 27 August

The Company delivered statutory loss after tax of $22.9 million, which was affected by significant items that amounted to $20 million in the year on a pre-tax basis.

Afterpay has a solid balance sheet, and liquidity positions were additionally boosted by successful capital raising in early July 2020 that delivered net proceeds of $769.8 million.

Performance in FY21 and global expansion plans

Afterpay performed strongly in Q4FY20, which has continued for FY21 as well.

Online sales in ANZ has speeded up in July and August. The on boarding of large scale new vertical merchants in ANZ is anticipated to post continued growth in FY21. Underlying sales in the US in July have persisted at the record levels achieved in Q4FY20, while merchant acceptance has continued in the UK since 30 June 2020, with 450 further active merchants added to the platform.

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Afterpay was unveiled in Canada during August extending its major US market position throughout North America. Last week, the BNPL firm also acquired European based Pagantis that will help Clearpay (APT’s subsidiary) to expand into multiple European markets in FY21. Pagantis provides BNPL and traditional credit services across Spain, France, and Italy.

The Company has also taken preliminary steps to explore opportunities in select Asian markets in FY21. An in-region team would be formed through a small acquisition of a Singapore-based entity functional in Indonesia named EmpatKali.

Afterpay has also been constantly innovating by indulging in strategic partnerships across US, UK and ANZ. Some of the initiatives taken by the Company are as follows:

• Pulse, Afterpay’s loyalty program was launched successfully in the US in July 2020, which will be followed by launches in the UK and ANZ
• Cross border trade was introduced in ANZ and UK with the US and Canada expected to be concluded at the beginning of 2021
• Limit transparency, the ability to make alterations to payment schedules and Variable Payment Upfront was introduced to ensure increased flexibility for customers
• The virtual in-store card was successfully launched in the US with Apple Pay and Google Pay
• Afterpay also integrated with Plaid in the US, which enables direct debits from consumer bank accounts.

With new markets tracking, in accordance, with ANZ blueprint and other markets coming online in FY21, Afterpay plans to further hasten investment to enhance its platform, pursue co-marketing opportunities and speed up expansion in new markets during the period.