Afterpay trumpeted the strong “unit economics” of its growing business during the December half, based on various margin measures, but at the same time suffered a huge blowout in cash outflows from operating activities, which increased from A$342 million in the December half 2019 to $526.7 million in the latest half.
Leaving aside the company’s (non-IFRS) metrics, the basics of the business are that receipts from customers were $8.4 billion, while payments to merchants and suppliers were $8.9 billion and payments to employees were $64.7 million. It is bleeding buckets of cash.
Afterpay is betting big that its global expansion plans will give it a market-leading position in the growing buy now pay later market and deliver profits.
Yesterday it announced that it had entered into an agreement with US investor Matrix Partners to buy Matrix’s stake in Afterpay US Inc.
The deal will take Afterpay Ltd’s holding in the US business from 80 per cent to 93 per cent. Afterpay has launched a A$1.25 billion convertible note issue to fund the deal.
The company believes the US market represents its biggest opportunity. It has 8.1 million active customers there, an increase of 127 per cent over the previous corresponding period.
Overall, it has 13.1 million active customers, with 3.4 million in Australia and New Zealand and 1.6 million in the United Kingdom.
Underlying sales were up 195 per cent in the US during the December half, compared with 53 per cent growth in Australia and New Zealand.
The company said it is also developing its business in the United Kingdom and is on track to make an acquisition in Spain that will allow it to launch into Europe.
It has set up an office in Singapore and is looking for opportunities in the South East Asian market.
Overall, the company reported 106 per cent increase in underlying sales to $9.8 billion during the half and an 80 per cent increase in active customers. Merchant numbers rose 73 per cent to 74,700.
Losses as a percentage of underlying sales fell from 1 per cent to 70 basis points. Late fees as a percentage of underlying sales fell from 70 bps to 40 bps.
Late fees as a percentage of income fell from 15.3 per cent to 8.6 per cent.
Income rose 89 per cent to $417.2 million and the company reported a loss of $79.2 million, compared with a loss of $31.6 million in the previous corresponding period.
The company said it will continue to invest in marketing, platform innovation, distribution and new products.
It said it has the capacity to fund its ambitious growth plans, with cash and cash equivalents of $458.8 million, and receivables warehouse facilities in Australia, the US and the UK with $892 million of undrawn capacity.