Afterpay shares: FY19 results see transaction volumes surge 140%

In anticipation of Afterpay’s FY19 results, investors took a bullish stance during yesterday’s trading session: bidding the company’s share price some 7.79% higher – to A$25.8 per share.

Yet when the market opened this morning, Afterpay saw its share price rise around just 2%, to A$26.4 per share.

Regardless of this, it seems investors were right to be bullish yesterday. APT-AU's full-year results revealed that transaction volumes, revenue and users all increase significantly during 2019.

Below we take an in-depth look at Afterpay’s full-year results.

Afterpay’s key metrics continue to rise

With the release of the company’s 2019 results, APT-AU (ASX: APT) has again delivered stellar growth across the board.

Potentially Afterpay’s most important operating metric – underlying sales, or gross merchandise volume (GMV) – soared 140% in FY19, hitting A$5.2 billion.

Indeed, according to Afterpay’s May investor presentation, in the midterm the tech darling is targeting A$20 billion in underlying sales. On today’s strong GMV figures, Afterpay looks to be making good progress on such an ambition.

Commenting on these results, Afterpay’s management commented that:

‘The Group has delivered strong financial results in FY19 as our brand and business model continues to resonate across multiple markets.’

If Afterpay’s GMV figures reflect the tech darling’s stratospheric growth potential, it is the company’s army of mostly millennial users that are driving this growth forward.

On this front, Afterpay saw its user counts surge to 4.6 million in FY19. Mind you, this figure has continued to rise significantly after the 2019 fiscal year, increasing to 5.2 million as of August 23.

Maybe most impressively, the company pointed out that it was, ‘currently on-boarding over 12,500 new customers per day.’

Speaking to the truly exponential nature of these figures, Afterpay had just 100,000 users in June 2016.

Frontline financials at a glance

Though Afterpay’s (ASX: APT) key operating metrics remain vital, investors should still pay attention to the company’s more traditional financial statistics.

On the top-line Afterpay recorded FY19 revenues of A$272.5 million – an impressive 91% gain from the previous corresponding period.

The company took on further losses in FY19 as well, revealing a statutory loss before tax of A$42 million. Investors would do well to remember that such losses are typical of tech companies growing at a rate such as Afterpay.

Understandably and as management pointed out, Afterpay:

'Has achieved strong growth in total income and has maintained stable pro forma EBITDA, despite investments made to support the Group’s growth strategy.’

The 2020 outlook and beyond

Commenting on the midterm outlook, APT-AU’s management team reiterated that the company is targeting GMV of:

‘$20bn++ and a net transaction margin (NTM) of 2% by the end of FY22.’

This goal looks well supported by the A$317 million Afterpay raised earlier in the year.

It was additionally pointed out that to support this midterm strategy:

‘We will grow our platform in key markets and continue to innovate to ensure that we are meeting the needs of our customers and merchant partners.’

Investors will likely be pleased by such comments, as Afterpay looks to expand its reach internationally and deepen its strategic advantages.

Afterpay share price: competition in focus

Though Afterpay (ASX: APT) continues to grow at a rapid rate, the competitive landscape in the buy now pay later space looks to be growing just as rapidly.

Just yesterday, the Sydney Morning Herald reported that Flexigroup has finalised a deal with Mastercard to launch a buy now pay later product of its own.

This builds on a growing number of Australian-listed competitors in the buy now pay later space that includes: Sezzle, Zip, and Splitit.

Other players such as the un-listed Klarna already have significant operations in the Europe. VISA is also set to enter the space in early 2020, with its own instalments based product offering.

One interesting development that was revealed in Afterpay’s FY19 results was the announcement of a strategic partnership with VISA. Here the company commented that such a partnership will ‘support future expansion and platform innovation in the US.’

In pointing all this out; such competition, nor broader market volatility, has dampened investor enthusiasm when it comes to Afterpay.

Afterall, year-to-date, Afterpay’s share price has risen around 115%.

Indeed, as long as Afterpay maintains its stratospheric growth profile – as it has with the release of its 2019 financials – it is likely that such enthusiasm will continue.