Afterpay (ASX:APT) delivers more explosive growth and launches $1.25bn notes offering

The Afterpay Ltd (ASX:APT) share price will be on watch when it returns from its trading halt. This morning it revealed stellar growth and a capital raising…

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The Afterpay Ltd (ASX: APT) share price won’t be going anywhere today after it requested a trading halt.

The payments giant made the request following the release of its half year results and the announcement of a capital raising.

How did Afterpay perform in the first half?

Afterpay continued its impressive form during the first half and delivered strong growth across all key metrics.

For the six months ended 31 December, the company reported a 106% increase in underlying sales to $9.8 billion. On a constant currency basis, Afterpay’s underlying sales were up 112% to $10.1 billion.

This led to total income growth of 108% to $374.2 million for the half. Once again, excluding currency headwinds, Afterpay’s income would have been up 114% to $385.2 million.

Thanks to a stable net transaction loss (NTL) margin of 0.5%, Afterpay’s net transaction margin came in 110% higher at $213.9 million.

In respect to earnings, the company reported a massive 521% increase in earnings before interest, tax, depreciation and amortisation (EBITDA) to $47.9 million.

And on the bottom line, Afterpay didn’t post a maiden half year profit as many were expecting. It recorded a loss after tax of $79.2 million. This was primarily driven by the net loss on financial liabilities at fair value of $64.8 million relating to its Clearpay business.

What were the drivers of its growth?

Key drivers of Afterpay’s growth during the first half were its customer numbers and repeat use.

At the end of the period, active customers reached 13.1 million. This was up 80% on the prior corresponding period. North American active customers now exceed 8 million and are up 127% since this time last year.

In respect to repeat use, management revealed that the Afterpay platform continues to enjoy sector-leading customer transaction frequency and retention. It notes that over 91% of underlying sales came from repeat customers.

Global expansion

The company advised that its acquisition of Pagantis in Spain is expected to complete in the middle of March, pending regulatory approval being granted by the Bank of Spain.

Preparations for a launch into Spain, France, and Italy are currently underway with a pipeline of over $1 billion global merchants in the process of contracting.

Work on the required infrastructure, processes, and systems is well progressed. As are its plans to integrate the Pagantis team into the existing Afterpay organisation.

In addition, the company is continuing to focus on progressing its early stage investment into Asia. It has established a base in Singapore following the acquisition of EmpatKali in August. From here, it intends to drive the strategic development of its potential expansion into South East Asia.

Afterpay Money

Last year Afterpay announced a partnership with Westpac Banking Corp (ASX: WBC) to launch savings and transaction accounts.

This will see the launch of a standalone Afterpay Money app in the first quarter of FY 2022. This app is being designed to help Australians manage their money.

The company notes that Afterpay Money app customers will be able to make it their primary money management app, complete with linked debit card. It is intended that new cards will be able to be added into the digital wallet for payments, a salary will be able to be paid into the account directly, money will be able to be transferred to other financial accounts, and up to 15 savings goals can be created.

Capital raising

Afterpay has announced a $1.25 billion convertible notes offering this morning. The company is undertaking the offering in order to increase its ownership of Afterpay US business.

It advised: “Afterpay has entered into an agreement with Matrix pursuant to which Matrix will waive 35% of the underlying interest it holds in Afterpay US, Inc. under the Matrix Convertible Notes for approximately A$373 million in cash (Matrix Transaction). The final price will be determined by reference to the reference share price of the Convertible Notes Offering.”

Management notes that the acquisition price will be accretive to Afterpay shareholders across GMV, revenue, and customer multiples. The company will own 93% of the business following the transaction.

Outlook

Surprisingly, no update was given on its performance since the end of the first half. This could potentially weigh on the Afterpay share price when it returns to trade.

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Motley Fool contributor James Mickleboro owns shares of Westpac Banking. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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