Afterpay interim results: 5 important things we learnt

Top-line growth remains strong

Predictably, Afterpay (APT) delivered another half of stunning growth, reporting triple digit growth in underlying sales and revenue.

Here, underlying sales – merchant transaction volumes – hit $9.8 billion or $10.1 billion (on a constant currency basis), implying gains of 106% and 112%, respectively.

This translated to strong revenue growth, with Group Total income coming in at $417.2 million, up 89%

'This growth was driven by strong Underlying Sales across all regions, particularly North America and the United Kingdom,’ the company said.

Customers & merchants continue to flock to Afterpay

If Afterpay is indisputably one thing, it is customer centric. To that end, the company again reported a massive influx of customers for the half ending December 31, noting that Active Customers now stood at 13.1 million.

Active Merchants increased a comparable amount in the half, now at 74.7 thousand.

Yet maybe the most impressive customer metric on show were the repeat usage figures the company reported. Here it was noted that 91% of underlying sales during the first half came from repeat customers.

EBITDA improves, losses widen

While Afterpay’s earnings (EBITDA) improved strong during the first half of 2020, the company saw its after tax losses dramatically widen.

On that first metric, the company reported EBITDA of $47.9 million, implying an astounding year-on-year growth rate of 521%.

Yet like the rest of the company’s results, Afterpay also saw its losses accelerate during the half, reporting a loss after tax of $79.2 million, up 151% on the prior corresponding period.

Primarily driven by non-cash losses, the company noted that this was a result of ‘an increase in the valuation of the Clearpay Put Option liability for the remaining shares in Clearpay Finance Limited.'

Cap raise looms

Despite posting strong growth, Afterpay is again tapping the market to raise fresh capital.

Here the company said it would raise some AUD$1.25 billion through a convertible notes offering. The unsecured, zero coupon notes will mature in 2026, while it was noted that the offering may be upsized by AUD$250 million.

'The Notes are convertible into fully paid ordinary shares in Afterpay,’ the company said.

Broker views at a glance

Analysts from RBC – who currently have an Overweight rating and $107 price target on the stock, seemed generally impressed with Afterpay’s interim results, saying ‘Today’s result saw all key metrics heading north.’

RBC analysts were impressed by active customer data, customer transaction performance, while also noting that Group underlying sales came in ahead of expectations. Group revenue and EBITDA however were slightly below what RBC had modelled for.

UBS, by comparison, remains downbeat on the stock, repeating its $30.00 price target in the wake of the H1 release.

‘Cumulatively, APT has now raised >$2bn in capital since last July. We believe this vindicates our view that the market continues to mis-price or ignore how much capital is required to fund APT's growth,’ the investment bank said.

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