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Why the Splitit share price is crashing 18% lower today

In morning trade the Splitit Ltd (ASX: SPT) share price has come under pressure following the release of its quarterly update.

At the time of writing the buy now pay later provider’s shares are down 18% to 56 cents.

How has Splitit been performing?

Although Splitit reported record sales during the fourth quarter of FY 2019, its overall performance was reasonably subdued in comparison to rivals Afterpay Ltd (ASX: APT) and Zip Co Ltd (ASX: Z1P)

According to the release, Splitit’s Merchant Sales Volume (MSV) for the quarter came in at US$27.1 million, which was a 20% increase on previous quarter. A key driver of this growth was its North America business which delivered a 35% quarter on quarter increase in MSV.

Things weren’t quite as positive for Splitit’s revenue. Revenue for the quarter came in at US$433,000, which was down 7% on previous quarter.

The company’s 12 Month Active Merchants reached 386, which was up 17% on the previous quarter. Management advised that this was driven by a strategic focus on merchants with higher Average Order Value with a stronger product-market fit.

Rather worryingly, especially given how the fourth quarter contained the Black Friday and Christmas periods, Splitit reported a decline in Active Shoppers during the quarter. Its 12 Month Active Shoppers fell 6% quarter on quarter to 118,000.

Management believes this reflects a customer base that is becoming more concentrated on shoppers making higher value purchases.

Over the quarter the company continued to burn through its cash. It reported a net operating cash outflow of US$4.76 million. This left it with US$11.7 million in cash at the end of the period.


Management appears confident that its growth will accelerate in FY 2020.

It said: “Merchant Sales Volume, Revenue and 12M Active Merchants are expected to accelerate in FY20 as key foundational pillars, such as streamlined onboarding and new credit facilities unlock growth opportunities, particularly in the second half of the year.”

“Repeat Shoppers is also expected to grow as merchant acceptance accelerates. This will allow Splitit to capitalise on growing demand from merchants, especially via its partner platforms and its unique position in the market as the only provider of instalments on any credit card at the point of sale.”

But judging by its share price weakness today, investors don’t appear as confident as management.

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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of AFTERPAY T FPO and ZIPCOLTD FPO. The Motley Fool Australia has no position in any of the stocks mentioned. 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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