fy2018 results presentation - afterpay touch...lifetime customer value • global, scalable system...
Post on 16-Jul-2020
2 Views
Preview:
TRANSCRIPT
FY2018 r es u l ts p r es e nt at i o n
SECTION 1. OUR STORY 3
SECTION 2. FY2018 FINANCIAL OVERVIEW 9
SECTION 3. OUR CORE - OUR CUSTOMERS AND RETAILERS 28
SECTION 4. RETAILER LED INTERNATIONAL EXPANSION 42
AGENDA
2
Our storySection one
3
TO BE THE WORLD’S MOST LOVED WAY TO PAY.
OUR MISSION ( O U R T O D A Y )
'I LOVE AFTERPAY’
'I LOVE HOW I PAID FOR THAT ITEM’
BUT...
THEY DO SAYNO ONE SAYS
4
AfterpaY has been great for my family…Afterpay has been great for
my family we are able to
buy things we want without
having to break the bank.
I found Afterpay to be very
flexible thank you Afterpay!
Josh, Trustpilot
Will always choose afterpayI’ve used them so many times. The best of all
of them. Got Supercheapauto new battery so
easy. Thank you Afterpay. Saved me. Big time.
Dane.K.2017, Trustpilot
Absolutely LOVE AfterpayAbsolutely love Afterpay. It makes
it so much easier to afford, when
it’s spread over 4 fortnightly
payments. And if something
unexpected comes up, I have
found Afterpay excellent, in moving
a payment back a few days. Also
the app is insanely easy to use!
Susan, Trustpilot
Afterpay is an amazing and wonderful…Afterpay is an amazing and
wonderful way of getting
the things you need and
want without having to pay
everything upfront. They are
understanding when you miss
a payment, just get in touch
with them and they are there
to help.
Nicole Smith, Trustpilot
Love love love Afterpay!Love love love Afterpay!! Best
thing ever!! I have been able to
buy so many items from lighting
for the house, to clothes, birthday
gifts galore and treats for myself
without having to spend hundreds
of dollars in one go!! I have 5
orders at the moment, and I
can afford to do it this way as
because [sic] I have always paid
my past orders on time, if I order
something today, Afterpay do not
charge me until another fortnight
but send my orders right away!!
It is the best thing ever - just like
layby except you just need to pay
it within 4 installments and you
get it right away!! I recommend it
to everyone! Better than a credit
card, no interest fees - I will
continue to use Afterpay forever!!
MS Latu, Trustpilot
All I have to say‘I love afterpay’Lena Fuller, Trustpilot
OUR CUSTOMERS LOVE US BECAUSE WE ARE DIFFERENT
5
WE HAVE BUILT A TRUE PARTNERSHIP WITH OUR RETAILERSAfterpay transforms paying into the most pleasant part of shopping
Unlike traditional credit products, our
retailers understand that they are paying
a fee to us on behalf of the customer
because they too want to provide
the customer an amazing purchase
experience. They love their customers as
much as we do.
Consumers don’t want to take out a loan
to purchase a smaller lifestyle item, they
simply want more flexibility and a better
paying experience that aligns with their
spending preferences.
“I have been amazed at howquickly our customers haveembraced Afterpay; so much
so, that iT is now the single most popular payment method for our website”
Adore Beauty
“Afterpay is a perfect match for the M.A.C. brand
and ouR customers”M.A.C Cosmetics
“Since launching Afterpay on our online channel in 2016 we have seen consistent growth and conversion over the time”
Lorna Jane
6
TEAM AND CAPABILITIES presence produc
t
com
mun it
y
17.7K RETAILERSACTIVE
2.3M CUSTOMERS
21M TRANSACTIONSSINCE INCEPTION
AUSTRALIA
AUSTRALIAN BUILT
LOAD BASED, SCALABLE SYSTEM
CUSTOMER EMPOWERMENT
PAY IT IN 4
ONLINE
IN-STORE
PERSONALISATION
SOCIAL VIRALITY AND RETAIL LEAD GENERATION
HIGH ENGAGEMENT - REPEAT ACTIVITY
AFTERPAY RETAIL EVENTS
MORE TO COME... ATTRACTING AND GROWING GLOBAL TALENT
NEW ZEALAND
U.S.A. U.K.
MORE TO COME...MORE TO COME...
APP SHOPPING
BUILDING FROM OUR CORE - OUR CUSTOMERS AND RETAILERS
7
financial overview
FY2018 Section TWO
8
INVESTING FOR SUSTAINABLE GROWTH AND LIFETIME CUSTOMER VALUE• Global, scalable system and world class team
• Product innovation and new customer benefit features
• Retailer value added service - building partnership benefits
PLATFORM GROWTH• Over $2.18b underlying Afterpay
sales (+289%)
• Q4 2018 underlying sales annualised is approximately $3b
• Stable Pay Now revenue
STRONG FINANCIAL PERFORMANCE• Revenue and Other Income $142m
(+390%)
• EBITDA excluding significant items $34m (+468%)
• EBTDA excluding significant items $28m (+380%)
LOWERING AFTERPAY LOSSES AND LEVERAGING DATA AT SCALE Net Transaction Loss - 0.4% (FY17 0.6%) declined while:
• Growing underlying sales
• Moving into new verticals
• Expanding to new geographies
CAPITAL MANAGEMENT• Citi $200m Australian facility completed
• Complements existing NAB $300m1 Australian facility and NZ$20m ASB N.Z. facility
• $50m Australian bond completed in H2FY18
• Underwritten institutional placement (and SPP) to facilitate international expansion and cornerstone future international debt facilities
INTERNATIONAL EXPANSION• Developing a retailer-led
expansion strategy
• U.S. building momentum
• Small U.K. acquisition
• Consolidating position in N.Z.
NOTE: 1. AT AFTERPAY'S REQUEST NAB AUSTRALIAN RECEIVABLES WAREHOUSE FACILITY REDUCED FROM $350M TO $300M
FY18 - KEY HIGHLIGHTS
9
AFTERPAY TOUCH AFTERPAY CHANGE1
A$M (UNLESS OTHERWISE STATED) FY18 FY17 %
GROUP - KEY FINANCIAL METRICS
REVENUE AND OTHER INCOME 142.3 29.0 390%
AFTERPAY 116.8 29.0 302%
PAY NOW 25.6 ~ ~
EBITDA (EXCLUDING SIGNIFICANT ITEMS) 33.8 6.0 468%
EBTDA (EXCLUDING SIGNIFICANT ITEMS) 27.7 5.8 380%
EBTDA 9.7 (11.7) 183%
NET PROFIT/(LOSS) AFTER TAX - STATUTORY (9.0) (9.6) 7%
AFTERPAY - KEY METRICS
UNDERLYING MERCHANT SALES 2,184.6 561.2 289%
MERCHANT REVENUE %2 4.0% 4.1% ~
NET TRANSACTION LOSS (NTL) %2 (0.4)% (0.6)% ~
NET TRANSACTION MARGIN (NTM) %2 2.6% 2.5% ~
TOTAL ACTIVE CUSTOMERS (M) - CURRENT3 2.3 0.8 176%
NUMBER OF MERCHANTS (‘000) - CURRENT3 17.7 6.0 195%
NOTE: 1. CHANGE PERCENTAGE IS BASED ON FINANCIALS PRESENTED IN THE ANNUAL REPORT 2. % OF UNDERLYING SALES 3. FY18 METRICS AS AT 31 JULY 2018 4. CALCULATION BASED ON SEGMENT EBTDA (EXCLUDING SIGNIFICANT ITEMS) WHICH IS PRE $14.5M OF CORPORATE COSTS
COMMENTS
Strong financial performance in FY18, driven by strong growth in Afterpay and a full year contribution from Pay Now.
FY18 revenue and other income of $142.3m, up 390% on FY17, with Afterpay now comprising the majority (82%) of Group revenue.
FY18 revenue and other income growth driven by significant increase in Afterpay underlying sales and a stable merchant margin.
FY18 Afterpay underlying sales of over $2.18b, up 289% on FY17 and driven by growth across all key demand drivers (new customers, repeat customer activity, new retailers, increased share of checkout).
EBTDA (excluding significant items) of $27.7m in FY18, up 380% on FY17.
EBTDA (excluding significant items) positively impacted by lower NTL% and higher NTM%.
REVENUE CONTRIBUTION
82%
18%
EBTDA CONTRIBUTION4
83%
17%
PAY NOWAFTERPAY
FY18 - GROUP FINANCIAL SNAPSHOT
10
COMMENTS
D&A increased largely due to a full year contribution from Touchcorp and the amortisation of acquired intangibles from the merger of Afterpay and Touchcorp (non-cash).
Employment expenses increased largely due to a share-based payment expense (non-cash) of $16.4m in the period and a full year of Touch employment expenses.
Receivables impairment expense increased in line with the significant increase in Afterpay underlying sales.
Operating expenses increased to $27.1m in FY18 but declined as a % of sales due to operating leverage.
Tax paid in FY18 due to the profitability of Afterpay.
Statutory net loss after tax improved from $9.6m in FY17 to $9.0m in FY18 in spite of a significant increase in D&A (non-cash) and share-based payment expenses (non-cash).
AFTERPAY TOUCH AFTERPAYA$M (UNLESS OTHERWISE STATED) FY18 FY17
REVENUE FROM AFTERPAY 88.3 22.9
REVENUE FROM PAY NOW 25.6 ~
REVENUE 113.9 22.9
COST OF SALES (28.2) (5.3)
GROSS PROFIT 85.7 17.6
OTHER INCOME 28.4 6.1
DEPRECIATION AND AMORTISATION (17.3) (2.7)
EMPLOYMENT EXPENSES (38.6) (6.6)
RECEIVABLES IMPAIRMENT EXPENSE (32.6) (8.2)
OPERATING EXPENSES (27.1) (20.3)
OPERATING PROFIT/(LOSS) (1.5) (14.0)
FINANCE INCOME 0.5 0.3
FINANCE COST (6.6) (0.8)
PROFIT/(LOSS) BEFORE TAX (7.6) (14.4)
INCOME TAX (EXPENSE)/BENEFIT (1.4) 4.8
PROFIT/(LOSS) AFTER TAX (9.0) (9.6)
FY18 - GROUP STATUTORY FINANCIAL SUMMARY
11
COMMENTS
EBTDA of $9.7m includes the impact of the following Significant Items:
• Accounting for share-based payments of $16.4m which is a non-cash item (refer p26); and
• One-off costs of $1.6m which includes consultancy fees and an FX gain (refer p27).
$12.5m or 76% of the total share-based payments expense of $16.4m relates to a proposed issue of loan shares for the Group Head - driven by the increase in Afterpay's share price as it remains subject to shareholder approval.
Unlike other SBP related issuances to employees that are not subject to shareholder approval, and are valued for accounting purposes at the time of the grant, the value of the Group Head’s proposed LTI grant is calculated using the closing share price at each reporting date (opposed to offer date) until such time as it is approved by shareholders (refer p26).
9.7
27.7
33.8
17.31.6
16.4
6.1
(7.6)(9.0)
1.4
Reconciliation - Statutory net profit/(loss) after tax to ebitda
NE
T P
RO
FIT
/(L
OS
S) A
FT
ER
TA
X
TAX
E
XP
EN
SE
NE
T P
RO
FIT
/(L
OS
S)
BE
FO
RE
TA
X
DE
PR
EC
IAT
ION
&
AM
OR
TIS
AT
ION
EB
TD
A
ON
E-O
FF
CO
ST
S
SH
AR
E-B
AS
ED
P
AY
ME
NT
S
FIN
AN
CIN
G
CO
ST
S
EB
TD
A (
EX
CL
SIG
NIF
ICA
NT
IT
EM
S)
EB
ITD
A (
EX
CL
SIG
NIF
ICA
NT
IT
EM
S)
SIGNIFICANT ITEMS
A$M
FY18 - GROUP STATUTORY FINANCIAL SUMMARY (CONT’D)
12
COMMENTS
Afterpay underlying sales of over $2.18b up 289% on FY17 driven by:
• New customers
• Repeat customer activity
• New retailers
• Increased share of checkout
In-store contribution increasing, ending at 12% of underlying sales in Q4 FY18.
Average merchant margin stable in FY18 at 4.0%
• Increase in sales across both Enterprise and Small to Medium Business (SMB)
• In-store mainly Enterprise in FY18, yet to benefit from higher SMB margin mix.
Increase in NTM reflecting an improvement in NTL as a % of sales
• NTL as a % of sales declined from 0.6% in FY17 to 0.4% in FY18.
Strong growth in EBTDA contribution, up 504% in FY18 reflecting both increased sales and increased NTM.
AFTERPAY CHANGE1
A$M (UNLESS OTHERWISE STATED) FY18 FY17 %
UNDERLYING MERCHANT SALES (GMV) 2,184.6 561.2 289%
AFTERPAY MERCHANT REVENUE 88.3 22.9 286%
% OF UNDERLYING MERCHANT SALES 4.0% 4.1% ~
NET TRANSACTION LOSS (NTL) (9.3) (3.1) ~
% OF UNDERLYING MERCHANT SALES (0.4)% (0.6)% ~
OTHER VARIABLE TRANSACTION COSTS (23.3) (5.8) ~
% OF UNDERLYING MERCHANT SALES (1.1)% (1.0)% ~
NET TRANSACTION MARGIN (NTM) 55.7 14.1 295%
% OF UNDERLYING MERCHANT SALES 2.6% 2.5% ~
EBTDA CONTRIBUTION2 34.9 5.8 504%
TOTAL ACTIVE CUSTOMERS (M) - CURRENT3 2.3 0.8 176%
NUMBER OF MERCHANTS (‘000) - CURRENT3 17.7 6.0 195%
NOTE: 1. CHANGE PERCENTAGE IS BASED ON FINANCIALS PRESENTED IN THE ANNUAL REPORT 2. CALCULATION BASED ON EBTDA (EXCLUDING SIGNIFICANT ITEMS) WHICH IS PRE $14.5M OF CORPORATE COSTS. 3. FY18 METRICS AS AT 31 JULY 2018
FY18 - AFTERPAY KEY FINANCIAL METRICS
13
COMMENTS
Improvement in NTL while generating significant growth in customers, growth in underlying sales, entry into new geographies, new industry verticals and also new channels (In-store).
A$B %
0 0
2
FY16 FY17 FY18
0.8
1 0.4
NET TRANSACTION LOSSUNDERLYING SALES
underlying sales vs NTL - FY16 to Fy18
FY18 - DRIVING LOWER LOSSES WHILE SCALING
14
COMMENTS
Provision for bad and doubtful debts of $15.1m as at 30 June 2018.
Afterpay adopts a conservative approach to bad and doubtful debt provisioning. Actual collections post balance date confirms that provisioning was appropriate.
NTL declined from 0.6% in FY17 to 0.4% in FY18 driven by declines in gross losses in H2 FY18 and the impact of late fees.
Reflects improving customer repayment profile, increasing orders from returning customers and continuous evolution of Afterpay’s transaction integrity engine.
Late fees are only recognised at 'collectable' value (not total late fees invoiced).
Late fees are now capped at the lesser of 25% (min $10) of the order value or a maximum of $68.
FY18 FY17
1.3% 1.1%
LATE FEES AS PERCENTAGE OF UNDERLYING SALES
NOTE: 1. ‘PROVISION FOR DOUBTFUL DEBTS’ IS REFERRED TO AS THE ‘TOTAL ALLOWANCE FOR DOUBTFUL DEBTS’ IN THE FINANCIAL STATEMENTS 2. 'BAD AND DOUBTFUL DEBTS (BDD) EXPENSE' IS REFERRED TO AS THE 'RECEIVABLES IMPAIRMENT EXPENSE' IN THE FINANCIAL STATEMENTS
BALANCE SHEET
5.3
9.9
32.622.8
5.1 9.3
32.6
15.1
(22.8)
(28.4)
OPENING PROVISION1
WRITE-OFF OF RECEIVABLES
NET WRITE-OFF
LATE FEES NET TRANSACTION
LOSSBDD EXPENSE2
(MVT IN PROVISIONS)
PROVISION FOR BAD AND DOUBTFUL DEBTS1 PROFIT AND LOSS NTL BRIDGE
BDD EXPENSE2 FY18
CLOSING PROVISION1
PAYMENT RECOVERY COSTS
AND BANK CHARGES
NET INCREASE IN BDD2
0.4% OF UNDERLYING
SALES
1.5% OF UNDERLYING
SALES
INCOME STATEMENT
A$M
FY18 - NET TRANSACTION LOSS ANALYSIS
15
PAY NOWA$M (UNLESS OTHERWISE STATED) FY18 FY171
REVENUE
MOBILITY 15.2 15.8
E-SERVICES 7.0 7.3
HEALTH 3.4 2.3
TOTAL REVENUE 25.6 25.4
COST OF SALES 10.6 8.0
GROSS MARGIN 15.0 17.4
GROSS MARGIN 15.0
OTHER EXPENSES 7.7
EBTDA CONTRIBUTION2 7.3
PR
OF
ES
SIO
NA
L S
ER
VIC
ES
MO
BIL
ITY
E-S
ER
VIC
ES
TR
AN
SA
CT
ION
HE
ALT
H
TOTA
L R
EV
EN
UE
RevenueUNAUDITEDA$M12
6
10
4
8
2
0
FY17
FY18
15.2
2.6
23.0
7.0
3.4
25.6
15.8
2.8
22.6
7.3
2.3
25.4
UNAUDITEDA$M
revenue mix
NOTE: 1. FY17 IS SHOWN FOR COMPARATIVE PURPOSES ONLY AS THE FINANCIALS RELATE TO PRE-MERGER ACTIVITIES AND ARE UNAUDITED 2. CALCULATION BASED ON EBTDA (EXCLUDING SIGNIFICANT ITEMS) WHICH IS PRE $14.5M OF CORPORATE COSTS.
FY18 - PAY NOW KEY FINANCIAL METRICS
16
LO
SS
B
EF
OR
E T
AX
NON-CASH ITEMS
FIN
AN
CE
CO
ST
S
AD
JUS
TE
D
OP
ER
AT
ING
C
AS
H F
LOW
INC
RE
AS
E I
N
PR
EP
AY
ME
NT
S A
ND
O
TH
ER
AS
SE
TS
OP
ER
AT
ING
C
AS
H F
LO
W
DE
PR
EC
IAT
ION
A
ND
A
MO
RT
ISA
TIO
N
FIN
AN
CE
IN
CO
ME
FX
GA
IN
INC
RE
AS
E
IN T
RA
DE
R
EC
EIV
AB
LE
S
SH
AR
E-B
AS
ED
P
AY
ME
NT
E
XP
EN
SE
INC
RE
AS
E I
N
TR
AD
E A
ND
OT
HE
R
PA
YA
BL
ES
0
A$M
(7.6)
35.4
(105.3)17.3
16.4 6.6 (1.6) (0.5) (4.5)9.1 (140.7)
POSITIVE UNDERLYING OPERATING CASH FLOW
AFTERPAY TOUCH
AFTERPAY
A$M (UNLESS OTHERWISE STATED) FY18 FY17
RECEIPTS FROM CUSTOMERS 2,201.5 440.9
PAYMENTS TO MERCHANTS AND SUPPLIERS (2,288.0) (516.1)
PAYMENTS TO EMPLOYEES AND OTHER (18.9) (3.7)
OPERATING CASH FLOW (105.3) (78.9)
INCREASE IN TRADE RECEIVABLES (140.7) (91.2)
ADJUSTED OPERATING CASH FLOW 35.4 12.3
PAYMENTS FOR INTANGIBLES (11.5) (0.5)
OTHER (2.7) 17.4
INVESTING CASH FLOW (14.2) 17.0
PROCEEDS FROM BORROWINGS 99.8 37.9
PROCEEDS FROM EQUITY 21.0 36.1
INTEREST (5.9) (0.5)
OTHER (1.1) (1.6)
FINANCING CASH FLOW 113.8 71.8
NET INCREASE / (DECREASE) IN CASH (5.8) 9.9
FX ON CASH BALANCE 1.6 0.0
STARTING CASH 29.6 19.7
ENDING CASH 25.5 29.6
COMMENTS
Positive underlying operating cash flow after adjusting for the change in receivables (funding of receivables).
Proceeds from borrowing reflects the drawdown of receivables funding and A$50m bond.
Proceeds from equity reflects the issue of shares to Matrix on 16 January 2018 and proceeds from employee share issuance.
OPERATING CASH FLOW ADJUSTED FOR INCREASE IN TRADE RECEIVABLES
FY18 - GROUP CASH FLOW ANALYSIS
17
COMMENTS
Increase in receivables and payables due to the continued growth in Afterpay underlying sales.
Increase in debt reflects the growth in drawn debt to support Afterpay underlying sales growth and A$50m bond issuance.
CONSOLIDATED AFTERPAY TOUCH
A$M (UNLESS OTHERWISE STATED) 30 JUNE 2018 30 JUNE 2017
CASH 25.5 29.6
RESTRICTED CASH1 23.7 8.9
RECEIVABLES 239.1 98.4
OTHER CURRENT AND NON-CURRENT ASSETS 104.0 103.4
TOTAL ASSETS 392.2 240.3
PAYABLES 42.9 22.8
DEBT 161.6 46.7
OTHER LIABILITIES 4.2 10.7
TOTAL LIABILITIES 208.7 80.2
EQUITY 183.6 160.1
JUN 18 5.2
6.3
233.9
92.1JUN 17
PAY NOW
RECEIVABLES - SPLIT BY BUSINESS UNIT
AFTERPAY
NOTE: 1. RESTRICTED CASH RELATES TO CASH HELD IN TRUST
A$M
FY18 - GROUP BALANCE SHEET
18
EXPANSION OF AUSTRALIAN AND NEW ZEALAND WAREHOUSE FACILITIESA$M 30 JUNE 2018
TOTAL BORROWING
CAPACITY2
FACILITY LIMIT
DRAWN DEBT
UNUSED CAPACITY
CAPACITY TO FUND RECEIVABLES GROWTH
99
112
211
300
200
18
5181
1. COMPLETED $200M COMMITTED RECEIVABLES WAREHOUSE FACILITY WITH CITI IN AUGUST 2018. IN NOVEMBER 2017, AFTERPAY INCREASED THE NAB FACILITY FROM $200M TO $350M AND EXTENDED THE TERM TO NOVEMBER 2019 AND SUBSEQUENTLY, AFTERPAY REQUESTED A REDUCTION IN THE TOTAL FACILITY LIMIT FROM $350M TO $300M IN AUGUST 2018 2. TOTAL BORROWING CAPACITY BASED ON RECEIVABLES BALANCE AS AT 30 JUNE 2018 3. NET OF ESTIMATED TRANSACTION COSTS
COMMENTS
Cash position will facilitate accelerated global expansion and cornerstone international receivables funding facilities in due course.
COMMENTS
Significant capacity in Australia – Recently completed A$200m Australian receivables warehouse facility with Citi, increasing total available facilities to A$500m.
CASH FOR INTERNATIONAL EXPANSION AND FUNDING BUFFER
• Total cash of $49.2m as at 30 June 2018 incorporating $50m bond issue in April 2018
• Fully underwritten institutional placement to raise at least $104.2m3
• Pro forma cash of $129.7m including institutional placement and excluding restricted cash
1. build ing capacity to fund growth
A B
NEW ZEALAND FACILITYAUSTRALIAN FACILITY
Significant capacity in N.Z. – Committed NZ$20m corporate facility with ASB in N.Z. completed in December 2017.
FY18 - CAPITAL MANAGEMENT UPDATE
19
FUNDING FACILITY MATURITY PROFILEA$M, 30 JUNE 2018
LIQUIDITY POSITIONA$M, 30 JUNE 2018
FY20FY19 FY21 FY22
50
200
NABCITI
318
0
NEW ZEALAND FACILITY
A$ BOND
AUSTRALIAN FACILITY CITI FACILITY AND A$ BOND EXTENDS AVERAGE LIFE OF LOAN FACILITIES FROM 1.6 TO 1.9 YEARS
UNUSED BORROWING
CAPACITY IN AU/NZ
CASH ON HAND
TOTAL LIQUIDITY
1251041
1041
99
229
26
UNDERWRITTEN INSTITUTIONAL PLACEMENT
Diversification of providers: NAB, Citi, ASB and A$ bond investors
Diversification of sources: Receivables facilities, corporate facilities, A$ bond
• Focused capital management effort
• Commenced U.S. receivables funding facility process
• Extension of NAB Australian warehouse facility term
2. funding diversification 3. extension of maturity profile 4 . improved l iqu id ity pos it ion 5. ongoing in it iatives
(BASED ON CURRENT RECEIVABLES)
1. NET OF ESTIMATED TRANSACTION COSTS
FY18 - CAPITAL MANAGEMENT UPDATE (CONT'D)
20
BALANCE SHEET CONSOLIDATED
AFTERPAY TOUCH
A$M (UNLESS OTHERWISE STATED) 30 JUNE 2018
CASH1 49.2
SECURED INTEREST BEARING BORROWINGS 111.6
SENIOR UNSECURED NOTES 49.5
OTHER 0.5
TOTAL DEBT 161.6
NET DEBT2 112.4
DEBT PROFILE CONSOLIDATED
AFTERPAY TOUCH
A$M (UNLESS OTHERWISE STATED) 30 JUNE 2018
INTEREST COVER RATIO3 5.5x
TOTAL LIQUIDITY4 124.6
BANK DEBT/RECEIVABLES5 46.7%
UNDRAWN COMMITTED FACILITIES6 256.8
FIXED/FLOATING INTEREST RATE RATIO 30.6%
NOTES
1. Cash includes cash in bank of $25.5m as well as cash held in trust of $23.7m.
2. Comprised of $161.6m of debt and $49.2m of cash across the Group.
3. Comprised of $33.8m EBITDA and $6.1m of Net Interest Expense, stated as “times” (“x”).
4. Comprised of undrawn borrowing capacity of $98.0m in the Australian receivables facility, $1.1m of undrawn borrowing capacity in the New Zealand cash advance facility and $25.5m of cash across the Group.
5. Comprised of $111.6m of debt and $239.1m of receivables across the Group.
6. Comprised of $418.4m of facility limit less $161.6m of debt drawn across the Group which includes the Australian receivables facility (excluding Citi), the N.Z. cash advance facility and the A$ bond.
FY18 - BALANCE SHEET AND DEBT PROFILE
21
ACCOUNTING ITEMS - FURTHER DETAIL
22
IntroductionThe Group has undertaken a review of the
impact of AASB 9 and AASB 15 with input
from accounting advisers and a review by
its auditors.
The Group will adopt AASB 9 for the
FY19 reporting period. In line with ASIC
guidelines, the Group has estimated the
pro forma impact of adopting AASB 9
in FY18.
Further work will be undertaken on the
impact of adopting the standards during
FY19, however, the Group’s current
assessment is that AASB 9 will impact on
Afterpay's receivables impairment and
revenue recognition methodology.
ImpairmentThe pro forma impact of AASB 9 on the Group’s FY18
closing provision for bad and doubtful debts (i.e.
total allowance for doubtful debts) is an increase of
$2.9m to $18.0m, resulting from the application of the
forward looking ‘expected loss’ impairment model
under AASB 9.
As a result of a pro forma adjustment of both the
opening and closing balances for the provision for bad
and doubtful debts in FY18, Afterpay's FY18 bad and
doubtful debts expense (i.e. receivables impairment
expense) increases by $1.6m to $34.2m. This results in
a reduction in FY18 pro forma EBITDA of $1.6m.
Based on the short term nature of Afterpay’s
receivables, we have confidence that our provision
methodology is currently conservative (prior to
the application of AASB 9) and will be even more
conservative with the adoption of AASB 9.
Revenue RecognitionThe adoption of AASB 9 will require Afterpay merchant
fee revenue to be recognised over the life of the
associated consumer receivable.
This results in merchant fee revenue being deferred over
the average time its takes for the collection of the receivable
to occur.
Assuming an average receivables duration of 30 days, the
FY18 pro forma impact of AASB 9 on revenue due to the
deferral of merchant fees is a reduction in revenue of $3.0m
from $113.9m to $110.9m.
This analysis assumes that 100% of merchant fee revenue
is deferred. Further work is required to determine the actual
percentage of merchant fee revenue that may be deferred.
A deferral of merchant fee revenue in this manner is a
timing difference only and does not effect the receipt in
cash when an order is processed.
AASB 9 - ILLUSTRATIVE FY18 IMPACTS
23
COMMENTS
FY18 pro forma impact of adopting AASB 9 for the 12 months ending 30 June 2018.
Increase in Bad and Doubtful Debts Provision and NTL calculation resulting from transition from incurred loss provisioning under AASB 139 to a forward-looking ‘expected loss’ impairment model under AASB 9.
Based on the short term nature of Afterpay’s receivables, we have confidence that our provision methodology was conservative based on historical performance prior to the adoption of AASB 9 and will be even more conservative with the adoption of AASB 9.
This is an accounting impact only and does not affect the Group’s cash position.
FY18 PRO FORMA - AASB 9 ADJUSTMENT
FY18 PRO FORMA - UNADJUSTED
NOTE: . 1. ‘PROVISION FOR DOUBTFUL DEBTS’ IS REFERRED TO AS THE ‘TOTAL ALLOWANCE FOR DOUBTFUL DEBTS’ IN THE FINANCIAL STATEMENTS 2. 'BAD AND DOUBTFUL DEBTS (BDD) EXPENSE' IS REFERRED TO AS THE 'RECEIVABLES IMPAIRMENT EXPENSE' IN THE FINANCIAL STATEMENTS
ILLUSTRATIVE FY18 PRO FORMA IMPACT OF AASB 9
BALANCE SHEET
6.6
5.3
1.3
1.6
9.9
1.611.5
34.2
32.6
22.8
5.1
9.3
1.6
1.6
10.9
32.6
34.2
18.0
15.1
(22.8)
(28.4)
OPENING PROVISION1
NET WRITE-OFFNET WRITE-OFF
LATE FEES NET TRANSACTION
LOSSBDD EXPENSE2
(MVT IN PROVISIONS)
PROVISION FOR BAD AND DOUBTFUL DEBTS1 PROFIT AND LOSS NTL BRIDGE
BDD EXPENSE2 FY18
CLOSING PROVISION1
PAYMENT RECOVERY COSTS
AND BANK CHARGES
NET INCREASE IN BDD2
INCOME STATEMENT
2.9
INCREASES FROM 0.4% OF
UNDERLYING SALES TO 0.5% PRO FORMA
A$M
AASB 9 FY18 PRO FORMA IMPACT – BAD AND DOUBTFUL DEBTS
24
COMMENTS
FY18 pro forma impact of adoption of AASB 9 on receivables and revenue based on certain assumptions.
The adoption of AASB 9 will require merchant fee revenue (received upfront in cash) to be recognised over the life of the associated consumer receivable under AASB 9.
Analysis assumes:
• 4% Merchant margin
• Average 30 day repayment cycle
• 100% of merchant fee revenue is deferred.
FY18 pro forma revenue is reduced by $3.0M by the adoption of AASB 9 in this manner.
This is a timing difference only with the deferred revenue recognised over time.
This is also an accounting impact only and does not effect the receipt of merchant fee revenue.
An average 30 day repayment cycle implies that it is only merchant fee revenue on orders made in June that will be subject to deferral as at 30 June.
NOTE: ILLUSTRATIVE ANALYSIS ONLY AND SUBJECT TO CHANGE IN FY19 DEPENDING ON FURTHER REVIEW
239.1
FY18 FY18
NET IMPACT$3.0m
STEP UP FROM FY17 DEFERRAL
STEP DOWN FROM FY18 DEFERRAL
STEP DOWN FROM FY18 DEFERRAL
FY18 PRO FORMA
FY18 PRO FORMA
113.9
110.9
1.9 (4.9)
234.2
(4.9)
BALANCe sheet receivables income statement revenue
A$M (UNLESS OTHERWISE STATED)
ILLUSTRATIVE FY18 PRO FORMA IMPACT OF AASB 9
FY18 PRO FORMA - AASB 9 ADJUSTMENT
AASB 9 FY18 PRO FORMA IMPACT - RECEIVABLES AND REVENUE
25
COMMENTS
At-risk remuneration in the form of option grants are a key component of Afterpay’s remuneration framework.
The Group competes in a global technology sector and executive talent pool where option grants are common place and critical to attracting and retaining key talent.
In FY18, Afterpay accrued $16.4m in share based payment expenses related to options, performance rights and loan shares.
$12.5m or 76% of this total expense was an accrual for a proposed 2 million issue of loan shares for the Group Head announced on 30 August 2017.
The size of the accrual reflects the significant increase in Afterpay’s share price, of 246%, from the $2.70 exercise price (being the opening price on the first day of trade as AfterpayTouch) to the closing price on 30 June 2018.
Unlike other SBP related issuances to employees that are not subject to shareholder approval and are valued for accounting purposes at the time of the grant, the value of the Group Head’s proposed LTI grant is calculated using the closing share price at each reporting date until such time as it is approved by shareholders.
The share based payments expense is an accounting accrual only and is non-cash.
SHARE BASED PAYMENTS EXPENSE - BREAKDOWN
A$M (UNLESS OTHERWISE STATED)
OPTIONS1 3.5
LOAN SHARES2 12.5
AFTERPAY U.S. OPTIONS3 0.4
TOTAL SHARE BASED PAYMENTS 16.4NOTES:
1. ALSO INCLUDES EXPENSES RELATED TO A SMALL NUMBER OF PERFORMANCE RIGHTS AND LOAN SHARES
2. EXPENSE RELATED TO THE PROPOSED GRANT OF 2M LOAN SHARES TO DAVID HANCOCK, GROUP HEAD ANNOUNCED ON 30 AUGUST 2017. THE EXPENSE RELATED TO THE LOAN SHARES INCLUDES AN ACCRUAL FOR FBT, PAYROLL TAX AND WORKCOVER PAYMENTS ON A PORTION OF THE LOAN WHICH MAY BE WAIVED BY THE COMPANY
3. INCLUDES AN EXPENSE RELATED TO A SMALL NUMBER OF OPTIONS AND THE MATRIX CONVERTIBLE NOTE
FY18 - SHARE BASED PAYMENTS
26
SIGNIFICANT ITEMS - BREAKDOWN AFTERPAY TOUCH
AFTERPAY
A$M (UNLESS OTHERWISE STATED) FY18 FY17
ONE-OFF COSTS
INTERNATIONAL EXPANSION COSTS (1.2) (0.0)
MERGER RELATED COSTS (1.7) (1.5)
FACILITY ESTABLISHMENT COSTS (0.1) (0.6)
SUBTOTAL (3.0) (2.1)
FOREIGN CURRENCY GAINS 1.4 0.0
TOTAL (1.6) (2.1)
DEPRECIATION & AMORTISATION AFTERPAY TOUCH
AFTERPAY
A$M (UNLESS OTHERWISE STATED) FY18 FY17
DEPRECIATION (1.8) 0.0
AMORTISATION (15.5) (2.7)
TOTAL (17.3) (2.7)
COMMENTS
International expansion costs primarily comprise one-off legal, recruitment and other consultancy fees for the establishment of the NZ and US businesses.
Merger related costs primarily comprise one-off consultancy fees (tax, financial, integration advisory and retention bonus fees) associated with the merger of Afterpay and Touchcorp.
Facility establishment cost relates to one-off fees for establishment of the NZ loan facility and increase in the NAB facility from $200m to $350m in November 2017.
Foreign currency gains relate to a foreign currency gain on the US$15m proceeds from the Matrix Convertible Note.
COMMENTS
D&A increased largely due to a full year contribution from Touchcorp and the amortisation of acquired intangibles from the merger of Afterpay and Touchcorp.
This is a non cash charge.
FY18 - SIGNIFICANT ITEMS AND D&A
27
Our core - our customers and retailersSection three
28
CREDIT CARDS
DEBIT CARDS
Millennials prefer debit cards and want to spend their own money67% of millennials do not own a single credit card.1 1 in 3 have never had a credit card3
Today there are 2x as many debit card transactions as credit card transactions2
The power has shifted to the millennial consumerBy 2030, millennials will earn 2 out of every 3 dollars in Australia4
Alternative to credit
85% of Afterpay’s orders use debit cards
1994 2018
1. BANKRATE MONEY PULSE SURVEY 2016 2. SOURCE: RESERVE BANK OF AUSTRALIA 3. CREDITCARDS.COM 4. MACQUARIE BANK RESEARCH
500
AUSTRALIAN CARD TRANSACTIONS2
MONTHLY, BY VOLUME, ‘000DEBIT
CARD
BUILDING A CUSTOMER FIRST, MILLENNIAL MINDSET
29
We are on the customers’ side
Product rules encourage responsible customer spending
Afterpay is a free service for customers who pay on time
Afterpay charges retailers a fee instead of customers
No hidden fees whatsoever (interest or otherwise)
Late fees, if charged, are capped and don’t accumulate
One transaction at a time – not a line of credit
Small transaction sizes – low
outstanding balances
Strict limits, including age, actively monitored
Payment terms are short and cannot be extended
Missed payments result in immediate suspension
of service – customers can’t keep spending
Debt cannot ‘revolve’
Bad debt cannot accrue
Customer base quickly refined to those who use Afterpay repeatedly and
responsibly
HOW WE ARE DIFFERENTWE ARE NOT ANOTHER VERSION OF CREDIT – WE ARE AN ALTERNATIVE THAT PUTS CUSTOMERS’ INTERESTS FIRST
30
(77 )
*REVIEW CONDUCTED BY ALPHABETA ADVISORS WITH DATA SUPPLIED BY AFTERPAY, IPSOS AND ILLION JUNE 2018
Afterpay’s customers are
loyalReturning customers account for ~90% of monthly transactions.
Without Afterpay, many (39%)
customers say they would look
elsewhere or not purchase at all
(23%). One-third of customers say the
availability of Afterpay is critical to
their decision on where to shop
INSIGHTS INTO OUR CUSTOMERS AND SERVICERESULTS FROM THE REVIEW CONDUCTED BY ALPHABETA ADVISERS FOUND…
Approximately 2.3 million active customers budgeting tool
The majority of customers use Afterpay as a
%
OVER 85%transactionsare via a linked Debit card(as opposed to a credit card)
than credit card users and overall have lower debt than similar peers and the general population (up to $5,000 less)
Afterpay customers pay
lower fees
>90% of accounts are less than $500
>75% of accounts are less than $350
Average purchase amount is $140–$150 and outstanding account
customers
balances are low
31
*REVIEW CONDUCTED BY ALPHABETA ADVISORS WITH DATA SUPPLIED BY AFTERPAY, IPSOS AND ILLION JUNE 2018
DELIVERING RESPONSIBLE SPENDING OUTCOMES AND LOW LOSSES
• An average of 30% of attempted transactions are rejected
• Because of the very short duration of the repayment cycle and the inability to revolve, bad debt is detected quickly and usage suspended
• Net Transaction Loss is at 0.4% (gross 1.5%) in FY18. Improving with scale
• ~95% of instalment payments do not incur a late fee
• 78% of customers have never paid a late fee
• Late fees are stable 1.3% of underlying sales in FY18
32
The initiatives not expected to have
a material financial or performance
impact on the business
While Afterpay can do everything
within its power to prevent fraud
from occurring, there will be
instances in which people are not
honest. Illegal and inappropriate use
of the Afterpay platform is acted
upon, including the immediate
suspension of accounts
COMMITTED TO CONTINUOUS IMPROVEMENTSEVERAL PRODUCT AND RESPONSIBILITY ENHANCEMENTS COMPLETED IN FY18
Late fees are intended to be a proportionate incentive
for customers to pay on time for what is otherwise a
free service
Not a source of profits - Afterpay loses more in bad
debts than it collects in late fees
Our communication and practices encourage late fee
avoidance – if all customers paid on time and we didn’t
collect any late fees we would make more money
Afterpay late fee structure is transparent and Afterpay
is absent of any other fees – however termed (e.g.
interest, administration, monthly, account keeping,
service, management etc.)
Late fees are now capped at the lesser of 25%
(min $10) of the order value or $68
External third-party ID Verification has been
implemented in partnership with Illion to
supplement Afterpay’s proprietary systems
Checks will strengthen fraud prevention
and help ensure everyone who uses
Afterpay is over 18 years old, in line with
Afterpay’s Terms
The ID verification process designed to
minimise customer impact and is largely
automated and instantaneous for the
majority of customers
Capping of late fees Enhanced ID verification
33
Proactive and voluntary approach with ASIC and other regulators
Engage strongly with all relevant parties with a determination to listen and incorporate feedback
Engagement process currently underway to drive towards a Code of Practice with input from all relevant industry participants
C U S T OM E R S C U S T OM E R A D V O C A T E S BANKS AND SCHEMES PAYMENTS INDUSTRY
MER
CHANTS
RE
GULA
T OR S
GO V
E R
NME N T
COMMITMENT TO STAKEHOLDER ENGAGEMENT AND SUSTAINABILITY
34
JUN 15% DEC 15 DEC 16 DEC 17 JUN 18JUN 16 JUN 17
Average age of customer base increased to 32
73% millennial core
ACTIVE CUSTOMER GROWTH
RETURNING CUSTOMER SPEND increasingAVERAGE SPEND PER CUSTOMER
RETURNING CUSTOMER SPENDMONTHLY TRANSACTION SPEND
Broadening appeal
49%54%
66%
75%
86%90% 92%
2.0m2.3m
1.7m1.5m
1.1m
0.8m0.6m
Q4 FY18
TODAYQ3 FY18
Q2 FY18
Q1 FY18
Q4 FY17
Q3 FY17
12 MONTHS TO JUN 17
12 MONTHS TO DEC 17
12 MONTHS TO JUN 18
A$1.1k
A$0.9k
A$0.7k
CUSTOMER GROWTH ACCELERATED TO OVER 4,000 PER DAY IN Q4 FY18
FY18 AVERAGE TRANSACTIONS PER
RETURNING AFTERPAY CUSTOMER
9 TIMES
GEN X
OTHER
MILLENNIALS
39%
23%
28%
10%
72%
1%7%
20%
BABY BOOMER
AfterpayAUSTRALIA Australia
18+1
1. SOURCE: AUSTRALIAN BUREAU OF STATISTICS
AFTERPAY IS RESONATING
35
Retailer lead generation from our shop directory in July 2018 reached its highest level ever, beating December 2017, to reach 4.5m with over 70% of those clicks originating from the mobile app.
4.8/5 for the iOS app and 4.7/5 for the Android app
Now ~170k in July 18 up from ~125k in Q4 FY18
MILLIONAPP DOWNLOADS1.7
OVER
MILLIONMOBILE APP SESSIONS
5.5JULY 2018
App ratings
Average daily users
USERS (THOUSANDS)
~125
~170
JUL 18Q4
shop directory
Afteryay Day16 August 2018 biggest day (underlying sales) in Afterpay's history
DRIVING STRONG CUSTOMER ENGAGEMENT
36
Today, it is estimated that Afterpay processes more than 10% of all physical online retail in Australia and over 10% of the purchasing Australian population has transacted with Afterpay since inception.
21 mill ion transact ions2 .3 mill ion act ive customers17 .7k reta ilers integrated
Australia New ZEALAND The United States The United kingdom (Next)
CONNECTING BRANDS AND CUSTOMERS
37
A U S T R A L I A
H2FY17H1FY17
BY HALF
800
3,600
8,700
13,700
17,700
H1FY18 H2FY18 TODAY
Total merchants onboarded
PARTNERING WITH THE LEADING LOCAL AND INTERNATIONAL BRANDS
38
A U S T R A L I A
ONlINE
AUSTRALIA
NEW ZEALAND
INSTORESIGNIFICANT NEW MERCHANT CONTRACTSTHE FOLLOWING RETAILERS ARE EITHER RECENTLY ON-BOARDED OR IN THE PROCESS OF INTEGRATION AND HAVE NOT CONTRIBUTED MATERIALLY TO FY18 UNDERLYING SALES
39
Over 10,000 shop
fronts
Full pipeline of
integrating merchants
SMB stand-alone
in-store roll-out has
commenced
On boarding between
600 – 1,000 SMBs per
month
Higher margin
Long-tail (only minimally
penetrated online ~8%*,
and to a lesser extent
In-store)
In-Store SMB New verticals T r a v e LPartnership with Jetstar
was expanded towards the
end of FY18 with a national
advertising campaign,
which followed a more
extensive roll-out of the
Afterpay product on the
Jetstar platform.
H e a l t hSignificant sector covering a number
of sub-verticals.
Five-year agreement with major
dental PMS provider, Software of
Excellence (A Henry Schein One
company), integrating Afterpay in to
its practice management platforms
across Australia and New Zealand.
Afterpay now rolled out across all
Primary Dental Clinics in Australia.
A lot more in the pipeline.
E n t e r t a i n m e n tDreamworld recently
commenced offering
Afterpay and other
entertainment related
opportunities are being
actively pursued.
B e a u t yOver 250 shop fronts are
now live with Salonpay and
at least 500 shop fronts are
in the pipeline with partners
including Ella Bache &
Hairhouse Warehouse.
*SOURCE: IBISWORLD - RETAIL TRADE AUSTRALIA
larger market versus online in
Australia
~5-8x
SIGNIFICANT GROWTH OPPORTUNITIES IN AUSTRALIA AND NEW ZEALAND
40
Rich-data co-marketing retailer programmes focused on new customer growth and brand positioning
Shop directory enhancements and lead generation value metrics
In-store product and integration enhancements
1.
2.
3.
4.Personalisation – App based targeted offers based on personal profile and shopping history
RETAIL INNOVATION AND NEW VALUE ADDED SERVICES PLANNED
41
retailer led international expansion
Section four
42
As part of the execution plan for the US business, we purposely built infrastructure for global scalability.
Technology is based on a single core code base (vs multiple code bases by region) and can be deployed in individual instances by region, tailored to local requirements.
The strategic rationale for entering the US in partnership with Matrix was to establish the foundation for a world class team with global responsibility.
Key hires made in the US include Sales, Risk, Data & Analytics, Technology and Product personnel with a combined headcount in excess of 30.
Each part of the Afterpay business has been assessed individually and also strategically guided to global responsibilities.
Afterpay’s existing partnerships with many global retailers provide the framework to leverage and grow internationally.
BUILDING GLOBAL CAPABILITY
43
MAY2018 JUNE JUNEJULY JULYMID-AUGUST 2018
UNAUDITED
Over 800 contracts signed and over 400 merchants liveAS OF MID-AUGUST 2018
Over 150,000 unique customers since launch
Establishing a presence with retail industry leading brands
integrated retail merchants underlying merchant salesA$M
28
282
20.4
121
11.7
422
MOMENTUM BUILDING IN THE U.S.
44
Favourable market dynamics• Large and influential millennial customer cohort• Strong debit card transaction preference• Aversion to traditional credit options for online purchasing
3rd largest e-commerce market in the world• >£133b online retail sales p.a.• 87% of consumers shop online
Timing & targets• Afterpay will launch globally scalable
system into the U.K. within six months• Immediate engagement with retailers• Not expected to materially contribute
to revenue in H1 FY19
Global Retailer Led Strategy• Several existing key retailers
encouraging Afterpay to expand• U.K. fits with strategy to serve globally
recognised brands and customers across borders
Acquisition Rationale• Accelerate and de-risk Afterpay’s entry
into the U.K.• Established operational footprint, local
relationships and understanding of local regulatory conditions
• Key employees to integrate and deploy Afterpay’s global system
Acquisition• Acquiring 90% of Clearpay Finance
Limited for 1m Afterpay Shares• Clear path to 100% control
(after China and the U.S.)
U.K. A KEY EXPANSION MARKET
45
Signing up the largest retailers and most well-loved
brands in New Zealand.
Afterpay is also continuing to expand its Australian retail
base to New Zealand.
Smaller retail market compared to Australia
Good progress made during H2 FY18 and since inception (approximately 9 months)
New Zealand customer growth is consistently growing in line with our retail footprint expansion
CONSOLIDATING NEW ZEALAND
46
THANK YOU
top related