The Afterpay Ltd (ASX: APT) share price will be in focus today following the release of the payments company’s full year results for FY 2020.
How did Afterpay perform in FY 2020?
Afterpay was an exceptionally strong performer in FY 2020 and delivered further explosive growth in sales and customer numbers.
For the 12 months ended 30 June 2020, Afterpay delivered a 112% increase in underlying sales to $11.1 billion. This comprises underlying sales of $6.6 billion in the ANZ market, $0.6 billion in the UK market, and $4 billion in the US market. The latter was up a whopping 330% on the prior corresponding period.
Based on its fourth quarter trading, Afterpay ended the period with an underlying sales run rate of $15 billion.
This strong result was driven by increased repeat usage and a 116% lift in active customers to 9.9 million. ANZ customers grew 18% to 3.3 million, UK customers reached 1 million, and US customers increased 219% to 5.6 million. The latter now contributes 56.5% of its total customers. In respect to repeat usage, approximately 90% of underlying monthly sales are coming from repeat customers.
Also supporting its growth was an increase in its active merchants. There are now 55,400 active merchants on the Afterpay platform, up 72% year on year. This comprises 42,800 merchants in the ANZ market, 11,500 in the US, and 1,100 in the UK.
What about its profits?
Over the 12 months, Afterpay reported a 97% increase in total income to $519.2 million and a 73% lift in earnings before interest, tax, depreciation and amortisation (EBITDA) of $44.4 million.
This was supported by a 24% improvement in its gross loss as a percentage of underlying sales to 0.9%. Management notes this represents a historic low, which was achieved despite the uncertain economic conditions and higher contributions from newer markets.
Also of note was that its late fees are contributing less to its total income. In FY 2020 they contributed under 14% of total income, down from 19% in FY 2019 and 24% in FY 2018. Late fee revenue now represents 0.6% of underlying sales, which the company feels is validating its inbuilt customer protections and budget-focused and differentiated business model.
On the bottom line, the company posted a statutory loss after tax of $22.9 million. This statutory loss includes the impact of significant items (including one-off items, Share-Based Payments, Net Loss on Financial Liabilities at Fair Value, Share of Loss of Associate, and foreign currency gains) which totalled $20 million on a pre-tax basis.
FY 2021 update.
Management revealed that its strong fourth quarter performance has continued into FY 2021 across all regions.
It notes that online sales in the ANZ market accelerated into July and August. Furthermore, the recent on-boarding of large scale, new vertical merchants in ANZ is expected to deliver continued growth into FY 2021.
The company also advised that US underlying sales in July continued at the record levels experienced in the fourth quarter and customer acquisition has remained strong.
Over in the UK, merchant acceptance has continued strongly since 30 June, with 450 additional active merchants added to the platform.
Management advised that the company has launched into Canada this month as planned, extending its prominent US market position across North America.
As was announced earlier this week, its acquisition of European-based Pagantis will facilitate the expansion of the Clearpay business into multiple European markets in FY 2021.
And the company has set its sights on the Asian market. It is exploring opportunities in select Asian markets this year. An in-region team will be established via a small acquisition of a Singapore-based company operating in Indonesia – EmpatKali. It is also looking to leverage Tencent’s network and relationships to expand into these markets. Tencent is the owner of WeChat and a major Afterpay shareholder.
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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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