Home / News / Afterpay (ASX:APT) shares tank despite solid result

Shares in Afterpay (ASX:APT) are down close to 10% after the release of their half year accounts and post a trading halt. The leading BNPL platform announced a complex deal through which their partners in the US have waived a portion of their investment in return for A$373 million, whilst issuing another convertible note to prospective investments.

The announcement comes on the back of what was a strong profit result with growth across all key metrics, albeit a slight slowdown on previous eye watering numbers. EBITDA came in at $47.9m which was a beat on consensus earnings estimates of $36.1m.

Growth was driven by strong Underlying Sales across all regions, particularly North America and the United Kingdom. Here are the highlights:

• Global Underlying Sales on the platform for H1 FY21 were $9.8b, 106% higher than H1 FY20 (or prior corresponding period, pcp).
• Group Total Income or revenue of $417.2 million for the H1 FY21 was up 89% on pcp.
• Afterpay Income increased by 108% on pcp to $374.2m and 114% on a constant currency basis.
• Afterpay Income Margin as a percentage of Underlying Sales in H1 FY21 remained stable on pcp at 3.8%, as Afterpay continues to broaden its global merchant portfolio.
• Gross Loss as a percentage of Underlying Sales in H1 FY21, at 0.7%, improved by 0.3 percentage points from the pcp, highlighting Afterpay’s differentiated, customer centric business model. This was achieved despite record new customer acquisition in international regions, which typically results in higher loss rates.
• Net Transaction Loss (NTL) as a percentage of Underlying Sales of 0.5% was in line with H1 FY20.

Afterpay recorded an after-tax loss of $79.2m which was due to liabilities relating to its Clearpay business of $64.8m. Despite still remaining a loss-making business at a true profit level, its customer numbers hit 13.1m up 80% on the 1HFY20 with active customers in North America exceeding 8m. Customer growth momentum increased strongly during Q2 FY21 with active customers in the US and UK growing by 20% and 23% respectively compared to Q1 FY21. In the same way, active merchant numbers also grew by 73% to 74.7k from.

Afterpay’s mission to be a global heavyweight is tracking well with preparations to launch in Spain, France and Italy. Underlying sales contributions from international markets was from 34% in H1FY20 to 51% in H1FY21 with the US representing 43% of total underlying sales.

In Australia, the platform will launch Afterpay Money to help Australians manage their money – including all of their payments, savings and upcoming Afterpay payments – in one simple, seamless app. The Afterpay Money stand-alone app is on track to formally launch in Q1 FY22 with a pilot underway and testing slated for Q4 FY21. The company said “with the Afterpay Money app customers will be able to make it their primary money management app, complete with linked debit card. It is intended that new cards will be able to be added into the digital wallet for payments, a salary will be able to be paid into the account directly, money will be able to be transferred to other financial accounts and up to 15 savings goals can be created.”

RBC have an Overweight recommendation with a target price of $107 and were impressed with the results, highlighting customer transaction performance and group underlying sales being better than expected but a slight disappointment on revenue and EBITDA.

The world leading BNPL platform has launched a A$1.5bn convertible notes raising via three brokers. The notes will have a strike price at a 35 per cent to 45 per cent premium to the last close, will be due in 2026 and not pay any coupon, according to terms sent to potential investors.