Afterpay adds 23,000 new merchants: Four things we learnt from the buy-now-pay-later giant’s results

Buy-now-pay-later company Afterpay will accelerate its global expansion after revealing a multibillion-dollar increase in underlying sales amid the COVID-19 pandemic, with an average of 17,300 new customers added to the platform each day over the last financial year.

The s0-called market darling saw its share price rocket to new heights on the back of its annual financial disclosure on Thursday morning, now worth well over $90 a share after a 20% increase over the last month.

Afterpay had given investors a look at much of its financial performance over the last financial year already, but on Thursday, revealed its momentum had actually picked up in the first few months of the new financial year (July and August).

The broader figures cover the 12-months ended 30 June (the financial year 2020).

Here are some of the key points:

• Group total income (revenue) reached $519.2 million, up 97%;
• Net losses fell to $22.8 million, down 48%;
• Net transaction margins remained at 2.3% as a percentage of underlying sales;
• Earnings (BITDA), excluding significant items, reached $44.4 million, up 73%; and
• Underlying sales reached $11.1 billion, up 112%.

Afterpay is dipping a toe into Asia

Afterpay is simultaneously expanding into most major geographies around the world and can now add Asia, the world’s largest consumer market, to its list.

The company told investors on Thursday it was exploring opportunities in “select Asian markets” and would focus on this part of its business in FY21.

Afterpay has purchased EmpatKali, a Singapore-based company operating in Indonesia, to host one of its teams working on the expansion.

Afterpay will soon be bigger overseas than in Australia

Afterpay is expanding around the world at a breakneck pace, and in FY20 significantly increased the proportion of its sales sourced from international markets.

The combined underlying sales contribution from Afterpay’s international operations increased to 41% in FY20, up from 18% in FY19.

With plans in place to move into Canada and Asia, its likely Afterpay will soon be making more money overseas than in Australia.

Small businesses appear to be flocking to Afterpay

Afterpay says “rapidly expanding” numbers of small-to-medium businesses are signing onto its platform around the world as the pandemic forces many to adopt new online channels.

While the company did not break down its number of SME users specifically, the number of active merchants on Afterpay increased 72% in FY20, moving from about 32,300 to more than 55,400.

Interestingly, the growing number of smaller companies on the platform supported Afterpay’s merchant margins, which remained at about 3.9% of underlying sales.

Merchant numbers grew faster in Afterpay’s newer markets than in Australia. Active merchants increased 202% amid significant investment in its United States expansion, with 11,500 businesses now on the platform.

Meanwhile, in Australia, merchants increased 51% to 42,800, remaining the company’s largest market for merchant participation.

Buy-now-pay-later is still copping regulatory scrutiny

Afterpay has a long and at times torrid relationship with regulators in Australia, having escaped the spectre of consumer credit laws during a Senate probe last year.

The company said on Thursday much of that scrutiny continues, with corporate regulator ASIC undertaking a follow-up review of the buy-now-pay-later industry slated to be published in September.

ASIC has also made “regular” requests for Afterpay to provide information about its dealings with customers throughout the COVID-19 pandemic.

The business booked $3.7 million in costs related to an investigation by money laundering regulator AUSTRAC, while the company says it continues to co-operate with ongoing consideration of an audit undertaken last year.

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