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Afterpay delivers more stunning growth and announces VISA partnership

Afterpay share price
Source: APT

The Afterpay Touch Group Ltd (ASX: APT) share price has pushed higher following the release of the payments company’s highly anticipated full year results this morning.

At the time of writing the Afterpay Touch share price is up 3% to $26.70.

What happened in FY 2019?

For the 12 months ended June 30, Afterpay Touch reported an 86% increase in total income to $264.1 million. This growth was primarily driven by the first full year performance of the Afterpay US business and continued strong growth in the Australian and New Zealand. The UK business launched in March and only made a minor contribution during the period.

Pro forma EBITDA (excluding significant items) came in at $35.5 million, which was slightly above FY 2018’s $35.2 million. This was achieved despite the company making a significant investment in start-up costs to grow and launch the US and UK platforms.

On the bottom line the company posted a statutory loss after tax of $43.8 million, which was 387% more than FY 2018’s loss after tax of $9 million. This was due to one-off and non-cash items including share-based payment expenses and the initial application of new accounting standards. Excluding these items Afterpay Touch would have made a small profit.

What were the drivers of this result?

In FY 2019 the company reported underlying sales of $5.2 billion, up a sizeable 140% on the prior corresponding period. This was driven by a 130% lift in active customers to 4.6 million and a 101% increase in active merchants to 32,300.

US underlying sales reached almost $1 billion in FY 2019 and currently have a run-rate in excess of $1.7 billion.

The company’s UK launch has gone very well. Over 200,000 UK customers have been on-boarded in the first 15 weeks, which is higher than the US at the same time post-launch. This has helped drive total customer numbers to 5.2 million as of August 23.

This ultimately led to Afterpay Touch finishing the period with a net transaction margin (NTM) of $136.5 million, which was an increase of 93% on the prior year.

VISA agreement.

According to the release, Afterpay has entered into agreements with VISA which will form the basis of a strategic partnership to support the development of innovative new solutions and business growth in the US market.

The agreements will facilitate the ability for Afterpay to expand the delivery of its services to merchants and customers in a more flexible and efficient manner. Management advised that both Afterpay and VISA see significant scope for collaboration for their mutual benefit.

How does this compare to expectations?

According to a note out of Goldman Sachs, it was expecting the company to report total customers of 4,546,134, total global merchant sales of $5.05 billion, total income of $255.8 million, and group net transaction profit of $108.4 million. Which means that Afterpay appears to have beaten each of Goldman’s estimates.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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