For those following Afterpay, they announced their H1 results last week.
You can find the results announcement, the presentation and a playback of the earnings call here:-
https://corporate.afterpay.com/investors/asx-announcements
https://edge.media-server.com/mmc/p/mvcds7uk
The results were on track but probably didn’t blow investors away with any major announcements or reaching a clear profitability break through. Also the results were accompanied by a capital raise by way of a convertible loan note which whilst on exceptional terms, is never taken well.
Headline growth metrics are all looking great:-
So just to match ANZ’s current penetration (10% of the population) in terms of active customers that means an opportunity of 10x in both UK and North America! Wow! Then take a market size differential of 10x in US and 2x in UK, then add something for whatever that’s worth in Europe and SE Asia! Then plus plus. Seems like a real growth story with a long run way.
**H1_FY21 H1_FY20 VARIANCE**
**Underlying Sales (A$)**
9.8b 4.8b 106%
ANZ
4.8b 3.1b 53%
North America
4.2b 1.4b 195%
UK
0.8b 0.2b 288%
**Active Customers**
13.1m 7.3m 80%
ANZ
3.4m 3.1m 10%
North America
8.1m 3.6m 127%
UK
1.6m 0.6m 161%
**Active Merchants**
74.7k 43.2k 73%
ANZ
53.6k 35.5k 51%
North America
17.9k 7.4k 141%
UK
3.3k 0.4k 812%
To me the most important new news and highlights from:-
The prepared slides and remarks are:
NTM as a % of sales increasing from 2.1% to 2.2% - the business quality is getting better
EBITDA excluding items rose from 7.7m to 47.9m up 521% - that’s incredible leverage
Canada run rate now at $90m
US instore run rate at $180m
UK outperformance in terms of growth and value of the business with underlying sales growing by 288% and merchants by 190%, active customers by 161% and clearpay app reaching 1m device downloads
Total retail TAM = $9.4 trillion
Afterpay Money - Mobile banking product to be launched in Australian later in 2021 (FY22) (prelaunch already begun) and rolled out beyond AUS in 2022 and this will integrate banking functionality with cards with Afterpay with Pulse - this could dis-intermediate banks and banking as we know it. Scalable to all other Geos
European Expansion - to be approved in Q3 (so in the next 6 weeks) to be followed by immediate launch in 4 countries and $1bn pipeline identified - that’s huge
International region overtook ANZ for the first time in H1 FY2021
Loss rates reduced from 0.7% to 0.4%
Capacity to support an additional $26bn gross transaction value (underlying sales) OVER & ABOVE the current annualised $23bn run rate
NEW Opportunities say only “starting” with Afterpay Money!
Q&A:
Asia expansion timeline and sequence: going to link with consolidation and leverage of core merchant relationships and to launch in the “relative near term future”
Doing the Matrix transaction now is aimed at optimising accretion and growth plus opportunity in the US is even greater than they previously thought hence needing to increase ownership
Looking for new revenue opportunities on both the merchant and consumer side
Looking to continue increasing in-store business although usually built up after launching online first as well as going up the transaction value curve as well as up the frequency curve - sometimes these are different directions
Seen scale competitors during the H1 within retailers and platforms. Not seeing any impact on top line take rate and using referral and marketing investment to win
Analysts really impressed with credit quality and wanted to know was this due to maturity of the platform or improved quality of consumers with increased duration with repeat customers. Definitely not as a result of tightening the system.
Customer numbers appeared flat in Q2, not due to competition but maybe suppressed by market / pandemic situation but expected to accelerate
Merchant pipeline is always weakest in new calendar year quarter but next quarter looking very strong esp in Nth America
Cross border becoming more relevant over time
Stripe is a primary gateway and Squarespace is the platform for SMB. These partnerships are ready to onboard merchants and customers immediately. Still processing transactions through usual lines but this is a retail scale play.
No visible impact from Paypal on share of checkout where PayPal exists alongside Afterpay and overlap of customer between providers is not as significant as you would imagine. No material diminishing.
Good to see gross loss % fall - what’s behind it? What proportion of losses are from hardship vs fraud? Answer - nothing material in hardship or fraud. Q2 What are you seeing in lead conversion? Answer: Conversion is very high quality.
Ant