Afterpay (ASX:APT) share price on watch after reporting 90% sales growth

Afterpay was on form again in FY 2021…

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The Afterpay Ltd (ASX: APT) share price will be on watch this morning.

This follows the release of the buy now pay later (BNPL) provider's full year results for FY 2021.

Afterpay share price on watch after delivering more strong growth

  • Underlying sales grew 90% (or 102% in constant currency) to $21.1 billion
  • Total income up 78% (or 89% in constant currency) to $924.7 million
  • Gross loss to underlying sales ratio flat at 0.9%
  • Net transaction loss up 210% to $132.6 million
  • EBITDA down 13% to $38.7 million
  • Active customers increased 63% to 16.2 million
  • Active merchants up 77% to 98,200
  • Square-Afterpay transaction on track to complete in Q1 of calendar year 2022

What happened for Afterpay in FY 2021?

For the 12 months ended 30 June, Afterpay was on form again and delivered stellar underlying sales growth of 90% to $21.1 billion. In constant currency, its underlying sales would have doubled year on year.

This was driven by growth across its ANZ, Clearpay, and North America operations. The latter was arguably the highlight, delivering a 146% increase in underlying sales to $9.8 billion for the year. This was complemented by a 44% jump in ANZ underlying sales to $9.4 billion and a 227% jump in Clearpay underlying sales to $1.8 billion.

This sales growth was underpinned by increased repeat use and further strong customer growth. In respect to the latter, active customers grew 63% year on year to 16.2 million. Once again, the North America business was the highlight, delivering an 88% jump in active customers to 10.5 million. This was supported by a 104% increase in Clearpay customers to 2.1 million and a modest 8% lift in ANZ customers to 3.6 million.

In respect to repeat use, the company notes that in its most established ANZ region, the top 10% of consumers are now using Afterpay more than 60 times per year. Positively, it notes that international regions continue to follow the ANZ trajectory with both North America and Clearpay recording increases in consumer frequency during the period. This led to approximately ~93% of FY 2021 underlying sales coming from repeat customers.

Afterpay's net transaction loss for the year came in at 0.6% of underlying sales. This was up from 0.4% a year earlier, which reflects a lower contribution of late fees from customers. Late fees contributed less than 10% of Afterpay's total income, down from 14% in FY 2020 and 19% in FY 2019. Late fees now represent less than 0.4% of underlying sales.

What did management say?

Afterpay's Chair, Elana Rubin AM, continues to see a bright future for the company, particularly given the demise of credit cards.

She commented: "Global research continues to indicate that credit cards and credit-based products are in decline, while BNPL continues to expand as a preferred way to pay. Millennials and Gen Z are less likely than their parents to use a credit card, and more likely to engage with organisations and brands that they trust. These factors underpin the important role that Afterpay now plays in social and economic empowerment."

Rubin also notes that the company is aiming to support and enhance financial inclusion for younger women.

Afterpay's Chair explained: "The forthcoming launch of the Money by Afterpay product is a great example. This is a testament to the skill and innovation of the team in bringing a new and inclusive financial product to life. It also signals our commitment to supporting and enhancing financial inclusion, particularly for younger women."

"Data shows that female engagement with financial services is comparatively low, but they are seeing that this issue is theirs to solve. This demographic has seen several societal shifts during the past 20 years, and yet less than a third of women have been taught about investing, and the wage and superannuation gaps remain."

"These same women make up the majority of the Afterpay consumer base. They want a sensible way to afford discretionary items, using their own money, and greater financial empowerment. Money by Afterpay will make money management simple and frictionless for these consumers, as they improve their financial literacy, grow their wealth, and ultimately secure future life goals by saving alongside responsible spending," Rubin said.

What's next for Afterpay?

As you might have seen recently with the rampant rise by the Afterpay share price, the company is in the process of being acquired by US payments giant Square. This morning the company confirmed that the transaction is expected to complete in the first quarter of calendar year 2022.

But management isn't resting on its laurels and continues to work on its bold growth plans.

This includes expanding its in-store cards offering beyond the ANZ and the US markets and into the UK market in the second quarter of FY 2022.

In addition, the company intends to enhance its merchant value proposition with the launch of Afterpay iQ in September. This is a new merchant insights platform that combines artificial intelligence, machine learning, and data science to provide merchants with deep consumer insights to optimise their marketing investment.

The Afterpay share price is up 46% year on year.

Motley Fool contributor 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 and has recommended AFTERPAY T FPO. The Motley Fool Australia owns shares of and has recommended 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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