ASX buy now, pay later shares continued to storm higher in the quarter ended 30 September, reporting record results on expanding markets. One of the few sectors to flourish during the COVID-19 crisis, the buy now, pay later (BNPL) industry now has continued to gain ground as consumers move online to shop. BNPL accounted for 8% of all ecommerce payments in 2019, according to Mergermarket, and is predicted to double in the next 3 years.
Regulatory concerns that plagued the industry late last year seem to have been put on the backburner as authorities focus on combating the pandemic. The Australian Transaction Reports and Analysis Centre (Austrac) recently gave Afterpay Ltd (ASX: APT) a clean bill of health, saying it would not take legal action over historical breaches of anti-money laundering laws. The threat of a hefty fine had loomed, but Austrac ultimately found Afterpay was a "low risk" business, deciding no further action would be taken.
With that in mind, let's take a look at how ASX BNPL shares performed in the last quarter.
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Afterpay Ltd (ASX: APT)
The Afterpay share price continued its steady upwards trajectory in the most recent quarter, with the BNPL giant's market capitalisation recently topping $27 billion. Now firmly ensconced in the S&P/ASX 20 (ASX: XTL), Afterpay has seen customer numbers boom this year. The pandemic and associated increase in online shopping has worked in Afterpay's favour, with customer numbers climbing towards the 10 million mark.
The BNPL provider transacted a whopping $11.1 billion in underlying sales in FY20, 112% up on FY19. Afterpay's annualised run rate is over $15 billion, with 90% of underlying sales from repeat customers. The company now has more than 55,000 active merchants across Australia, New Zealand, the United States, and the UK.
Afterpay announced plans to expand into Europe in August. The EU has been identified as the next logical step for international expansion given its large millennial population, vast fashion and beauty retail markets, and significant debit card usage. With an addressable e-commerce market of over $494 billion, the EU represents a compelling value proposition for Afterpay.
In September Afterpay announced a change of CFO, appointing Rebecca Lowde to the position. Lowde was previously Chief Executive of Salmat and CFO of Bravura Solutions Ltd (ASX: BVS). Afterpay says Lowde's skills and experience will assist the company as it accelerates its growth to scale globally. Afterpay is looking to expedite its expansion into new markets in FY21 to leverage early mover advantages. New verticals are also expected to add to sales momentum.
Zip Co Ltd (ASX: Z1P)
The Zip Co share price also gained ground in the last quarter as investors favoured the BNPL sector. Zip Co investors were rewarded with record transaction volumes and revenue for the quarter. Quarterly transaction volumes were $943.1 million, up 96% year on year (YoY). Revenue was $71.7 million, up 88% YoY. Zip Co ended the quarter with 4.5 million customers and 34,400 merchants.
The BNPL provider entered the S&P/ASX 200 Index (ASX: XJO) in the September quarter rebalance with a market capitalisation of around $3.6 billion. Zip Co also completed its acquisition of US player QuadPay during the quarter, which delivered US$70 million in monthly transaction volumes and over 2 million customers. Further growth is expected as US consumers increasingly turn to BNPL solutions.
Zip Co is now well on its way to becoming a global BNPL provider. It currently operates across Australia, New Zealand, the United States, UK, and South Africa. Annualised total transaction volumes are north of $3.8 billion and annualised revenue over $280 million. The US market demonstrated significant growth in revenue and transaction volumes in the September quarter, up 50% and 42% quarter on quarter (QoQ), respectively.
The company says the current quarter has begun strongly in all markets. The company has also teased a number of upcoming announcements on the product and merchant pipeline. Seasonally, the quarter ending 31 December is the strongest as it includes key spending dates such as Black Friday, Cyber Monday, Christmas Day, and Boxing Day.
Sezzle Inc (ASX: SZL)
The Sezzle share price almost doubled over the last quarter, as the company reported record results. Its third quarter underlying merchant sales increased 231.5% YoY and 21% QoQ to US$228 million. Active customer numbers grew to 1.79 million, an increase of 178.1% YoY and 21.5% QoQ. Merchant numbers also grew, climbing 178.3% YoY and 29.7% QoQ to 20,890.
"Our product offering continues to prove its resiliency as well as its necessity during these difficult times," said CEO Charlie Youakim. "Our strong performance in 3Q is reflective of an improving Sezzle consumer profile along with the continued acceleration of ecommerce in the marketplace."
Repeat usage grew to 89% in the quarter ended 30 September. This metric, which is a key driver in lowering loss rates and improving net transaction margin, has been rising for 21 months straight.
The company has seen rapid growth and attained material scale since its 2019 IPO. An $86.3 million capital raising was conducted in July to accelerate growth and strengthen Sezzle's balance sheet. Proceeds will fund additional sales and marketing activities, as well as product enhancement and expansion costs. Investments will also be made to support market development in Canada and testing in other markets.
