FY2018 results presentation - Afterpay Touch
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FY2018 results presentation
AGENDA
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
2
Section one
Our story
3
NO ONE SAYS THEY DO SAY OUR MISSION (OUR TODAY)
'I LOVE HOW I PAID BUT... 'I LOVE TO BE THE WORLD’S MOST
FOR THAT ITEM’ AFTERPAY’ LOVED WAY TO PAY.
4
OUR CUSTOMERS LOVE Afterpay is an amazing
US BECAUSE WE ARE and wonderful… Love love love Afterpay!
DIFFERENT
Afterpay is an amazing and Love love love Afterpay!! Best
wonderful way of getting thing ever!! I have been able to
the things you need and buy so many items from lighting
want without having to pay for the house, to clothes, birthday
AfterpaY has been Absolutely LOVE Afterpay everything upfront. They are
understanding when you miss
gifts galore and treats for myself
without having to spend hundreds
great for my family… Absolutely love Afterpay. It makes a payment, just get in touch of dollars in one go!! I have 5
it so much easier to afford, when with them and they are there orders at the moment, and I
Afterpay has been great for
it’s spread over 4 fortnightly to help. can afford to do it this way as
my family we are able to
payments. And if something because [sic] I have always paid
buy things we want without Nicole Smith, Trustpilot
unexpected comes up, I have my past orders on time, if I order
having to break the bank.
found Afterpay excellent, in moving something today, Afterpay do not
I found Afterpay to be very
a payment back a few days. Also charge me until another fortnight
flexible thank you Afterpay!
the app is insanely easy to use! but send my orders right away!!
Josh, Trustpilot
Susan, Trustpilot It is the best thing ever - just like
layby except you just need to pay
it within 4 installments and you
All I have to say get it right away!! I recommend it
Will always choose afterpay ‘I love afterpay’ to everyone! Better than a credit
card, no interest fees - I will
I’ve used them so many times. The best of all Lena Fuller, Trustpilot continue to use Afterpay forever!!
of them. Got Supercheapauto new battery so
MS Latu, Trustpilot
easy. Thank you Afterpay. Saved me. Big time.
Dane.K.2017, Trustpilot 5
WE HAVE BUILT A TRUE
PARTNERSHIP WITH OUR RETAILERS
Afterpay transforms paying into the most pleasant part of shopping
Unlike traditional credit products, our
“Afterpay is a perfect
retailers understand that they are paying match for the M.A.C. brand
a fee to us on behalf of the customer and ouR customers”
because they too want to provide M.A.C Cosmetics
the customer an amazing purchase
“I have been amazed at how
experience. They love their customers as quickly our customers have
much as we do. embraced Afterpay; so much
Consumers don’t want to take out a loan
so, that iT is now the
to purchase a smaller lifestyle item, they
single most popular payment
simply want more flexibility and a better method for our website” “Since launching Afterpay on
paying experience that aligns with their Adore Beauty our online channel in 2016 we
spending preferences. have seen consistent growth
and conversion over the time”
Lorna Jane
6
BUILDING FROM OUR CORE - OUR CUSTOMERS AND RETAILERS
MORE TO COME... ATTRACTING AND GROWING
GLOBAL TALENT
SOCIAL VIRALITY AND
RETAIL LEAD GENERATION TEAM AND C LOAD BASED,
AFTERPAY
RETAIL EVENTS
APA SCALABLE SYSTEM
AUSTRALIAN BUILT
BIL
HIGH ENGAGEMENT -
y
17.7K RETAILERS
communit
REPEAT ACTIVITY
ITIES
CUSTOMER
EMPOWERMENT
ACTIVE
2.3M CUSTOMERS
21M TRANSACTIONS
SINCE INCEPTION
rp e
IN-STORE PAY IT IN 4 c t sen AUSTRALIA
rod u ce
PERSONALISATION ONLINE p NEW ZEALAND
APP SHOPPING U.S.A. U.K.
MORE TO COME... MORE TO COME...
7
Section TWO
FY2018
financial
overview
8
FY18 - KEY HIGHLIGHTS
PLATFORM STRONG FINANCIAL LOWERING AFTERPAY
GROWTH PERFORMANCE LOSSES AND LEVERAGING
• Over $2.18b underlying Afterpay •R
evenue and Other Income $142m DATA AT SCALE
sales (+289%) (+390%)
Net Transaction Loss - 0.4% (FY17 0.6%)
• Q4 2018 underlying sales •E
BITDA excluding significant items $34m declined while:
annualised is approximately $3b (+468%) • Growing underlying sales
• Stable Pay Now revenue BTDA excluding significant items $28m
•E • Moving into new verticals
(+380%) • Expanding to new geographies
CAPITAL MANAGEMENT INTERNATIONAL INVESTING FOR
• Citi $200m Australian facility completed EXPANSION SUSTAINABLE GROWTH AND
• Complements existing NAB $300m1 Australian •D
eveloping a retailer-led LIFETIME CUSTOMER VALUE
facility and NZ$20m ASB N.Z. facility expansion strategy
• Global, scalable system and world class team
• $50m Australian bond completed in H2FY18 •U
.S. building momentum
• Product innovation and new customer benefit features
• Underwritten institutional placement (and •S
mall U.K. acquisition
• Retailer value added service -
SPP) to facilitate international expansion and •C
onsolidating position in N.Z. building partnership benefits
cornerstone future international debt facilities
NOTE: 1. AT AFTERPAY'S REQUEST NAB AUSTRALIAN RECEIVABLES WAREHOUSE FACILITY REDUCED FROM $350M TO $300M 9
FY18 - GROUP FINANCIAL SNAPSHOT
AFTERPAY TOUCH AFTERPAY CHANGE1 COMMENTS
A$M (UNLESS OTHERWISE STATED) FY18 FY17 % Strong financial performance in FY18, driven by strong growth
in Afterpay and a full year contribution from Pay Now.
GROUP - KEY FINANCIAL METRICS FY18 revenue and other income of $142.3m, up 390% on FY17,
REVENUE AND OTHER INCOME 142.3 29.0 390% with Afterpay now comprising the majority (82%) of Group
revenue.
AFTERPAY 116.8 29.0 302%
FY18 revenue and other income growth driven by significant
PAY NOW 25.6 ~ ~ increase in Afterpay underlying sales and a stable merchant
margin.
EBITDA (EXCLUDING SIGNIFICANT ITEMS) 33.8 6.0 468%
FY18 Afterpay underlying sales of over $2.18b, up 289% on
EBTDA (EXCLUDING SIGNIFICANT ITEMS) 27.7 5.8 380% FY17 and driven by growth across all key demand drivers
EBTDA 9.7 (11.7) 183% (new customers, repeat customer activity, new retailers,
increased share of checkout).
NET PROFIT/(LOSS) AFTER TAX - STATUTORY (9.0) (9.6) 7%
EBTDA (excluding significant items) of $27.7m in FY18, up
380% on FY17.
AFTERPAY - KEY METRICS
EBTDA (excluding significant items) positively impacted by
UNDERLYING MERCHANT SALES 2,184.6 561.2 289% lower NTL% and higher NTM%.
MERCHANT REVENUE %2 4.0% 4.1% ~
NET TRANSACTION LOSS (NTL) %2 (0.4)% (0.6)% ~ 18% 17%
NET TRANSACTION MARGIN (NTM) %2 2.6% 2.5% ~
TOTAL ACTIVE CUSTOMERS (M) - CURRENT3 2.3 0.8 176% REVENUE EBTDA
CONTRIBUTION CONTRIBUTION 4
NUMBER OF MERCHANTS (‘000) - CURRENT3 17.7 6.0 195%
82% 83%
AFTERPAY PAY NOW
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 10
$14.5M OF CORPORATE COSTSFY18 - GROUP STATUTORY FINANCIAL SUMMARY
AFTERPAY TOUCH AFTERPAY COMMENTS
A$M (UNLESS OTHERWISE STATED) FY18 FY17
D&A increased largely due to a full year
REVENUE FROM AFTERPAY 88.3 22.9 contribution from Touchcorp and the amortisation
of acquired intangibles from the merger of Afterpay
REVENUE FROM PAY NOW 25.6 ~
and Touchcorp (non-cash).
REVENUE 113.9 22.9
Employment expenses increased largely due
COST OF SALES (28.2) (5.3) to a share-based payment expense (non-cash)
of $16.4m in the period and a full year of Touch
GROSS PROFIT 85.7 17.6 employment expenses.
OTHER INCOME 28.4 6.1 Receivables impairment expense increased
in line with the significant increase in Afterpay
DEPRECIATION AND AMORTISATION (17.3) (2.7) underlying sales.
EMPLOYMENT EXPENSES (38.6) (6.6) Operating expenses increased to $27.1m
RECEIVABLES IMPAIRMENT EXPENSE (32.6) (8.2) in FY18 but declined as a % of sales due to
operating leverage.
OPERATING EXPENSES (27.1) (20.3)
Tax paid in FY18 due to the profitability of Afterpay.
OPERATING PROFIT/(LOSS) (1.5) (14.0)
Statutory net loss after tax improved from $9.6m
FINANCE INCOME 0.5 0.3 in FY17 to $9.0m in FY18 in spite of a significant
increase in D&A (non-cash) and share-based
FINANCE COST (6.6) (0.8)
payment expenses (non-cash).
PROFIT/(LOSS) BEFORE TAX (7.6) (14.4)
INCOME TAX (EXPENSE)/BENEFIT (1.4) 4.8
PROFIT/(LOSS) AFTER TAX (9.0) (9.6)
11FY18 - GROUP STATUTORY FINANCIAL SUMMARY (CONT’D)
COMMENTS
Reconciliation - Statutory net profit/(loss) after tax to ebitda EBTDA of $9.7m includes the impact of
6.1 33.8
the following Significant Items:
• Accounting for share-based payments
16.4 27.7
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).
1.6
$12.5m or 76% of the total share-based
17.3 9.7 payments expense of $16.4m relates to
a proposed issue of loan shares for the
Group Head - driven by the increase
in Afterpay's share price as it remains
A$M
(9.0) (7.6) subject to shareholder approval.
Unlike other SBP related issuances
to employees that are not subject to
1.4 shareholder approval, and are valued
for accounting purposes at the time of
the grant, the value of the Group Head’s
EBTDA
EBTDA (EXCL
SIGNIFICANT
EBITDA (EXCL
SIGNIFICANT
ONE-OFF
(LOSS) AFTER TAX
TAX
BEFORE TAX
NET PROFIT/
EXPENSE
NET PROFIT/(LOSS)
DEPRECIATION &
AMORTISATION
COSTS
SHARE-BASED
PAYMENTS
ITEMS)
FINANCING
COSTS
ITEMS)
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).
SIGNIFICANT
ITEMS
12FY18 - AFTERPAY KEY FINANCIAL METRICS
AFTERPAY CHANGE1 COMMENTS
A$M (UNLESS OTHERWISE STATED) FY18 FY17 %
Afterpay underlying sales of over $2.18b up 289%
UNDERLYING MERCHANT SALES (GMV) 2,184.6 561.2 289% on FY17 driven by:
• New customers
AFTERPAY MERCHANT REVENUE 88.3 22.9 286% • Repeat customer activity
% OF UNDERLYING MERCHANT SALES 4.0% 4.1% ~ • New retailers
• Increased share of checkout
NET TRANSACTION LOSS (NTL) (9.3) (3.1) ~
In-store contribution increasing, ending at 12% of
% OF UNDERLYING MERCHANT SALES (0.4)% (0.6)% ~ underlying sales in Q4 FY18.
Average merchant margin stable in FY18 at 4.0%
OTHER VARIABLE TRANSACTION COSTS (23.3) (5.8) ~
• Increase in sales across both Enterprise and
% OF UNDERLYING MERCHANT SALES (1.1)% (1.0)% ~ Small to Medium Business (SMB)
• In-store mainly Enterprise in FY18, yet to benefit
NET TRANSACTION MARGIN (NTM) 55.7 14.1 295% from higher SMB margin mix.
% OF UNDERLYING MERCHANT SALES 2.6% 2.5% ~ Increase in NTM reflecting an improvement in NTL
as a % of sales
EBTDA CONTRIBUTION2 34.9 5.8 504% • NTL as a % of sales declined from 0.6% in FY17 to
0.4% in FY18.
TOTAL ACTIVE CUSTOMERS (M) - CURRENT3 2.3 0.8 176%
Strong growth in EBTDA contribution, up 504% in
NUMBER OF MERCHANTS (‘000) - CURRENT3 17.7 6.0 195% FY18 reflecting both increased sales and
increased NTM.
NOTE: 1. CHANGE PERCENTAGE IS BASED ON FINANCIALS PRESENTED IN THE ANNUAL REPORT 2. CALCULATION BASED ON EBTDA (EXCLUDING SIGNIFICANT ITEMS) WHICH IS PRE $14.5M OF CORPORATE COSTS. 3. FY18 METRICS AS AT 31 JULY 2018 13FY18 - DRIVING LOWER LOSSES WHILE SCALING
COMMENTS
Improvement in NTL while generating significant
underlying sales vs NTL - FY16 to Fy18 growth in customers, growth in underlying sales,
entry into new geographies, new industry verticals
and also new channels (In-store).
A$B %
2 0.8
1 0.4
0 0
FY16 FY17 FY18
UNDERLYING SALES NET TRANSACTION LOSS
14FY18 - NET TRANSACTION LOSS ANALYSIS
COMMENTS
BALANCE SHEET INCOME STATEMENT Provision for bad and doubtful debts of $15.1m as at 30
PROVISION FOR BAD AND DOUBTFUL DEBTS 1 PROFIT AND LOSS NTL BRIDGE June 2018.
Afterpay adopts a conservative approach to bad and
1.5% OF
32.6 (22.8) UNDERLYING doubtful debt provisioning. Actual collections post
SALES balance date confirms that provisioning was appropriate.
22.8 32.6 (28.4)
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,
0.4% OF increasing orders from returning customers and
15.1 UNDERLYING continuous evolution of Afterpay’s transaction
SALES
integrity engine.
9.9 5.1 9.3
Late fees are only recognised at 'collectable' value
5.3 (not total late fees invoiced).
Late fees are now capped at the lesser of 25% (min $10)
A$M
of the order value or a maximum of $68.
OPENING NET WRITE-OFF OF LATE FEES NET
PROVISION 1 WRITE-OFF RECEIVABLES TRANSACTION
LOSS
BDD EXPENSE 2 CLOSING NET INCREASE BDD EXPENSE 2 PAYMENT
(MVT IN PROVISIONS) PROVISION 1 IN BDD 2 FY18 RECOVERY COSTS LATE FEES AS FY18 FY17
AND BANK CHARGES PERCENTAGE OF
UNDERLYING SALES 1.3% 1.1%
NOTE: 1. ‘PROVISION FOR DOUBTFUL DEBTS’ IS REFERRED TO AS THE ‘TOTAL ALLOWANCE FOR DOUBTFUL DEBTS’ IN THE FINANCIAL STATEMENTS 2. 'BAD AND DOUBTFUL DEBTS (BDD) EXPENSE' IS REFERRED TO AS THE 'RECEIVABLES IMPAIRMENT EXPENSE' 15
IN THE FINANCIAL STATEMENTSFY18 - PAY NOW KEY FINANCIAL METRICS
PAY NOW
A$M (UNLESS OTHERWISE STATED) FY18 FY171 revenue mix Revenue FY18
UNAUDITED UNAUDITED FY17
REVENUE 12
A$M A$M
MOBILITY 15.2 15.8 25.6 25.4
23.0 22.6
E-SERVICES 7.0 7.3 10
HEALTH 3.4 2.3
TOTAL REVENUE 25.6 25.4 8
15.2 15.8
COST OF SALES 10.6 8.0
6
GROSS MARGIN 15.0 17.4
4
GROSS MARGIN 15.0 7.0 7.3
OTHER EXPENSES 7.7
2 3.4
2.6 2.8
EBTDA CONTRIBUTION2 7.3 2.3
0
MOBILITY
TOTAL
PROFESSIONAL
E-SERVICES
HEALTH
REVENUE
SERVICES
TRANSACTION
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 $14.5M OF CORPORATE COSTS. 16FY18 - GROUP CASH FLOW ANALYSIS
AFTERPAY AFTERPAY
TOUCH
OPERATING CASH FLOW A$M (UNLESS OTHERWISE STATED) FY18 FY17
ADJUSTED FOR INCREASE POSITIVE RECEIPTS FROM CUSTOMERS 2,201.5 440.9
IN TRADE RECEIVABLES UNDERLYING
OPERATING
PAYMENTS TO MERCHANTS AND SUPPLIERS (2,288.0) (516.1)
CASH FLOW PAYMENTS TO EMPLOYEES AND OTHER (18.9) (3.7)
A$M
OPERATING CASH FLOW (105.3) (78.9)
9.1 35.4 (140.7)
6.6 (1.6) (0.5) (4.5) INCREASE IN TRADE RECEIVABLES (140.7) (91.2)
16.4
ADJUSTED OPERATING CASH FLOW 35.4 12.3
17.3 PAYMENTS FOR INTANGIBLES (11.5) (0.5)
(105.3) OTHER (2.7) 17.4
0
INVESTING CASH FLOW (14.2) 17.0
(7.6) 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
CASH FLOW
CASH FLOW
FX GAIN
FINANCE INCOME
PAYMENT
BEFORE TAX
LOSS
DEPRECIATION
AND
AMORTISATION
SHARE-BASED
EXPENSE
FINANCE COSTS
INCREASE IN
PREPAYMENTS AND
OTHER ASSETS
INCREASE IN
TRADE AND OTHER
PAYABLES
ADJUSTED
OPERATING
OPERATING
INCREASE
IN TRADE
RECEIVABLES
receivables (funding of receivables).
Proceeds from borrowing reflects the drawdown of receivables funding and
A$50m bond.
Proceeds from equity reflects the issue of shares to Matrix on 16 January 2018
NON-CASH ITEMS
and proceeds from employee share issuance.
17FY18 - GROUP BALANCE SHEET
CONSOLIDATED COMMENTS
AFTERPAY TOUCH
A$M (UNLESS OTHERWISE STATED) 30 JUNE 2018 30 JUNE 2017 Increase in receivables and payables due to the continued growth in
Afterpay underlying sales.
CASH 25.5 29.6
Increase in debt reflects the growth in drawn debt to support Afterpay
RESTRICTED CASH1 23.7 8.9
underlying sales growth and A$50m bond issuance.
RECEIVABLES 239.1 98.4
OTHER CURRENT AND NON-CURRENT ASSETS 104.0 103.4
RECEIVABLES - SPLIT BY BUSINESS UNIT
TOTAL ASSETS 392.2 240.3 A$M
PAYABLES 42.9 22.8 JUN 18 233.9 5.2
DEBT 161.6 46.7 JUN 17 92.1 6.3
AFTERPAY
OTHER LIABILITIES 4.2 10.7
PAY NOW
TOTAL LIABILITIES 208.7 80.2
EQUITY 183.6 160.1
NOTE: 1. RESTRICTED CASH RELATES TO CASH HELD IN TRUST 18FY18 - CAPITAL MANAGEMENT UPDATE
1. building capacity to fund growth
A B COMMENTS
EXPANSION OF 518 1 CASH FOR INTERNATIONAL Cash position will facilitate
AUSTRALIAN EXPANSION AND FUNDING accelerated global expansion
AND NEW CAPACITY
BUFFER and cornerstone international
200 TO FUND
ZEALAND RECEIVABLES receivables funding facilities
• Total cash of $49.2m as at 30 June
WAREHOUSE GROWTH
in due course.
18 UNUSED 2018 incorporating $50m bond issue
FACILITIES CAPACITY
in April 2018
A$M
30 JUNE 2018 • Fully underwritten institutional
211 placement to raise at least $104.2m3
300 • Pro forma cash of $129.7m including
99
institutional placement and excluding
restricted cash
112
FACILITY TOTAL DRAWN
AUSTRALIAN FACILITY LIMIT BORROWING DEBT
NEW ZEALAND FACILITY CAPACITY 2
COMMENTS
Significant capacity in Australia – Recently Significant capacity in N.Z. –
completed A$200m Australian receivables Committed NZ$20m corporate
warehouse facility with Citi, increasing total facility with ASB in N.Z. completed
available facilities to A$500m. in December 2017.
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, 19
AFTERPAY REQUESTED A REDUCTION IN THE TOTAL FACILITY LIMIT FROM $350M TO $300M IN AUGUST 2018 2. TOTAL BORROWING CAPACITY BASED ON RECEIVABLES BALANCE AS AT 30 JUNE 2018 3. NET OF ESTIMATED TRANSACTION COSTSFY18 - CAPITAL MANAGEMENT UPDATE (CONT'D)
2. funding diversification 3. extension of maturity profile 4. improved liquidity position 5. ongoing initiatives
Diversification of FUNDING FACILITY LIQUIDITY POSITION
providers: NAB, Citi, MATURITY PROFILE • Focused capital
A$M, 30 JUNE 2018
ASB and A$ bond management effort
A$M, 30 JUNE 2018
investors • Commenced U.S.
AUSTRALIAN FACILITY CITI FACILITY AND
UNDERWRITTEN 229 receivables
Diversification of NEW ZEALAND FACILITY A$ BOND EXTENDS
INSTITUTIONAL funding facility process
A$ BOND AVERAGE LIFE OF
sources: Receivables PLACEMENT
LOAN FACILITIES FROM
1.6 TO 1.9 YEARS • Extension of NAB
facilities, corporate
Australian warehouse
facilities, A$ bond 318
104 1
facility term
200 99
104 1
NAB 125
CITI
50
26
0
FY19 FY20 FY21 FY22 CASH UNUSED TOTAL
ON HAND BORROWING LIQUIDITY
CAPACITY
IN AU/NZ
(BASED ON CURRENT
RECEIVABLES)
1. NET OF ESTIMATED TRANSACTION COSTS 20FY18 - BALANCE SHEET AND DEBT PROFILE
BALANCE SHEET CONSOLIDATED NOTES
AFTERPAY TOUCH
1. Cash includes cash in bank of $25.5m as well as cash
A$M (UNLESS OTHERWISE STATED) 30 JUNE 2018
held in trust of $23.7m.
CASH1 49.2
2. Comprised of $161.6m of debt and $49.2m of cash
SECURED INTEREST BEARING BORROWINGS 111.6 across the Group.
SENIOR UNSECURED NOTES 49.5 3. Comprised of $33.8m EBITDA and $6.1m of Net Interest
OTHER 0.5 Expense, stated as “times” (“x”).
TOTAL DEBT 161.6 4. Comprised of undrawn borrowing capacity of $98.0m
NET DEBT 2
112.4 in the Australian receivables facility, $1.1m of undrawn
borrowing capacity in the New Zealand cash advance
DEBT PROFILE CONSOLIDATED facility and $25.5m of cash across the Group.
AFTERPAY TOUCH 5. Comprised of $111.6m of debt and $239.1m of
A$M (UNLESS OTHERWISE STATED) 30 JUNE 2018 receivables across the Group.
INTEREST COVER RATIO3 5.5x 6. Comprised of $418.4m of facility limit less $161.6m
of debt drawn across the Group which includes the
TOTAL LIQUIDITY 4
124.6
Australian receivables facility (excluding Citi), the N.Z.
BANK DEBT/RECEIVABLES5 46.7% cash advance facility and the A$ bond.
UNDRAWN COMMITTED FACILITIES6 256.8
FIXED/FLOATING INTEREST RATE RATIO 30.6%
21ACCOUNTING ITEMS - FURTHER DETAIL
22AASB 9 - ILLUSTRATIVE FY18 IMPACTS
Introduction Impairment Revenue Recognition
The Group has undertaken a review of the The pro forma impact of AASB 9 on the Group’s FY18 The adoption of AASB 9 will require Afterpay merchant
impact of AASB 9 and AASB 15 with input closing provision for bad and doubtful debts (i.e. fee revenue to be recognised over the life of the
from accounting advisers and a review by total allowance for doubtful debts) is an increase of associated consumer receivable.
its auditors. $2.9m to $18.0m, resulting from the application of the
forward looking ‘expected loss’ impairment model This results in merchant fee revenue being deferred over
The Group will adopt AASB 9 for the under AASB 9. the average time its takes for the collection of the receivable
FY19 reporting period. In line with ASIC to occur.
guidelines, the Group has estimated the As a result of a pro forma adjustment of both the
pro forma impact of adopting AASB 9 opening and closing balances for the provision for bad Assuming an average receivables duration of 30 days, the
in FY18. and doubtful debts in FY18, Afterpay's FY18 bad and FY18 pro forma impact of AASB 9 on revenue due to the
doubtful debts expense (i.e. receivables impairment deferral of merchant fees is a reduction in revenue of $3.0m
Further work will be undertaken on the expense) increases by $1.6m to $34.2m. This results in from $113.9m to $110.9m.
impact of adopting the standards during a reduction in FY18 pro forma EBITDA of $1.6m.
FY19, however, the Group’s current This analysis assumes that 100% of merchant fee revenue
assessment is that AASB 9 will impact on Based on the short term nature of Afterpay’s is deferred. Further work is required to determine the actual
Afterpay's receivables impairment and receivables, we have confidence that our provision percentage of merchant fee revenue that may be deferred.
revenue recognition methodology. methodology is currently conservative (prior to
A deferral of merchant fee revenue in this manner is a
the application of AASB 9) and will be even more
timing difference only and does not effect the receipt in
conservative with the adoption of AASB 9.
cash when an order is processed.
23AASB 9 FY18 PRO FORMA IMPACT – BAD AND DOUBTFUL DEBTS
ILLUSTRATIVE FY18 PRO FORMA IMPACT OF AASB 9
COMMENTS
BALANCE SHEET INCOME STATEMENT FY18 pro forma impact of adopting AASB 9 for
PROVISION FOR BAD AND DOUBTFUL DEBTS 1 PROFIT AND LOSS NTL BRIDGE the 12 months ending 30 June 2018.
Increase in Bad and Doubtful Debts Provision
34.2 and NTL calculation resulting from transition
1.6 (22.8)
from incurred loss provisioning under AASB 139
34.2
(28.4) to a forward-looking ‘expected loss’ impairment
22.8 1.6
model under AASB 9.
Based on the short term nature of Afterpay’s
receivables, we have confidence that our
INCREASES provision methodology was conservative based
18.0 FROM 0.4% OF
32.6 32.6 UNDERLYING SALES on historical performance prior to the adoption
2.9 TO 0.5% PRO FORMA of AASB 9 and will be even more conservative
11.5 10.9
with the adoption of AASB 9.
1.6 5.1
1.6 This is an accounting impact only and does not
6.6
1.3 15.1 9.9 affect the Group’s cash position.
9.3
5.3
A$M
OPENING NET NET WRITE-OFF LATE FEES NET
PROVISION 1 WRITE-OFF TRANSACTION
LOSS
BDD EXPENSE 2 CLOSING NET INCREASE BDD EXPENSE 2 PAYMENT
(MVT IN PROVISIONS) PROVISION 1 IN BDD 2 FY18 RECOVERY COSTS
AND BANK CHARGES
FY18 PRO FORMA - UNADJUSTED
FY18 PRO FORMA - AASB 9 ADJUSTMENT
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 24
EXPENSE' IN THE FINANCIAL STATEMENTSAASB 9 FY18 PRO FORMA IMPACT - RECEIVABLES AND REVENUE
ILLUSTRATIVE FY18 PRO FORMA IMPACT OF AASB 9
COMMENTS
FY18 pro forma impact of adoption of AASB 9
BALANCe sheet receivables income statement revenue on receivables and revenue based on certain
assumptions.
The adoption of AASB 9 will require merchant
239.1 (4.9) STEP UP FROM STEP DOWN FROM fee revenue (received upfront in cash) to be
FY17 DEFERRAL FY18 DEFERRAL recognised over the life of the associated
consumer receivable under AASB 9.
234.2
Analysis assumes:
1.9 (4.9)
• 4% Merchant margin
113.9
• Average 30 day repayment cycle
STEP DOWN 110.9 • 100% of merchant fee revenue is deferred.
FROM FY18
DEFERRAL FY18 pro forma revenue is reduced by $3.0M by
NET IMPACT the adoption of AASB 9 in this manner.
$3.0m
This is a timing difference only with the deferred
revenue recognised over time.
This is also an accounting impact only and does
FY18 FY18 FY18 FY18 not effect the receipt of merchant fee revenue.
PRO FORMA PRO FORMA
An average 30 day repayment cycle implies that
it is only merchant fee revenue on orders made in
A$M (UNLESS OTHERWISE STATED) FY18 PRO FORMA - AASB 9 ADJUSTMENT
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 25FY18 - SHARE BASED PAYMENTS
SHARE BASED PAYMENTS EXPENSE - BREAKDOWN COMMENTS
A$M (UNLESS OTHERWISE STATED)
At-risk remuneration in the form of option grants are a key component of Afterpay’s
OPTIONS1 3.5 remuneration framework.
LOAN SHARES2 12.5 The Group competes in a global technology sector and executive talent pool where option
AFTERPAY U.S. OPTIONS3 0.4 grants are common place and critical to attracting and retaining key talent.
TOTAL SHARE BASED PAYMENTS 16.4 In FY18, Afterpay accrued $16.4m in share based payment expenses related to options,
performance rights and loan shares.
NOTES:
1. ALSO I NCLUDES EXPENSES RELATED TO A SMALL NUMBER OF PERFORMANCE RIGHTS AND LOAN SHARES
$12.5m or 76% of this total expense was an accrual for a proposed 2 million issue of loan
2. E
XPENSE 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 shares for the Group Head announced on 30 August 2017.
WORKCOVER PAYMENTS ON A PORTION OF THE LOAN WHICH MAY BE WAIVED BY THE COMPANY
3. I NCLUDES AN EXPENSE RELATED TO A SMALL NUMBER OF OPTIONS AND THE MATRIX CONVERTIBLE NOTE
The size of the accrual reflects the significant increase in Afterpay’s share price, of
246%, from the $2.70 exercise price (being the opening price on the first day of trade as
AfterpayTouch) to the closing price on 30 June 2018.
Unlike other SBP related issuances to employees that are not subject to shareholder
approval and are valued for accounting purposes at the time of the grant, the value of
the Group Head’s proposed LTI grant is calculated using the closing share price at each
reporting date until such time as it is approved by shareholders.
The share based payments expense is an accounting accrual only and is non-cash.
26FY18 - SIGNIFICANT ITEMS AND D&A
SIGNIFICANT ITEMS - BREAKDOWN AFTERPAY AFTERPAY DEPRECIATION & AMORTISATION AFTERPAY AFTERPAY
TOUCH TOUCH
A$M (UNLESS OTHERWISE STATED) FY18 FY17 A$M (UNLESS OTHERWISE STATED) FY18 FY17
ONE-OFF COSTS DEPRECIATION (1.8) 0.0
INTERNATIONAL EXPANSION COSTS (1.2) (0.0) AMORTISATION (15.5) (2.7)
MERGER RELATED COSTS (1.7) (1.5) TOTAL (17.3) (2.7)
FACILITY ESTABLISHMENT COSTS (0.1) (0.6)
SUBTOTAL (3.0) (2.1)
FOREIGN CURRENCY GAINS 1.4 0.0
TOTAL (1.6) (2.1)
COMMENTS COMMENTS
International expansion costs primarily comprise one-off legal, recruitment and D&A increased largely due to a full year contribution from Touchcorp and the amortisation
other consultancy fees for the establishment of the NZ and US businesses. of acquired intangibles from the merger of Afterpay and Touchcorp.
Merger related costs primarily comprise one-off consultancy fees (tax, financial, This is a non cash charge.
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.
27Section three
Our core - our customers and retailers
28BUILDING A CUSTOMER FIRST,
MILLENNIAL MINDSET
A R D
TC ED B I
AUSTRALIAN CARD TRANSACTIONS 2
Millennials prefer debit The power has MONTHLY, BY VOLUME, ‘000
cards and want to shifted to the 500
spend their own money millennial consumer
67% of millennials do not By 2030, millennials
own a single credit card.1 will earn 2 out of every
1 in 3 have never had 3 dollars in Australia4
a credit card3
Alternative to credit
Today there are 2x as many
85% of Afterpay’s orders 1994 2018
debit card transactions as
use debit cards
credit card transactions2 DEBIT CARDS
CREDIT CARDS
1. BANKRATE MONEY PULSE SURVEY 2016 2. SOURCE: RESERVE BANK OF AUSTRALIA 3. CREDITCARDS.COM 4. MACQUARIE BANK RESEARCH 29HOW WE ARE DIFFERENT
WE ARE NOT ANOTHER VERSION OF CREDIT – WE ARE AN
ALTERNATIVE THAT PUTS CUSTOMERS’ INTERESTS FIRST
Product rules
encourage responsible
customer spending
We are on the One transaction at a time
customers’ side – not a line of credit
Small transaction
Afterpay is a free service for Debt cannot ‘revolve’
sizes – low
customers who pay on time outstanding balances Bad debt cannot accrue
Customer base quickly
Afterpay charges retailers a Strict limits, including age, refined to those who use
fee instead of customers actively monitored Afterpay repeatedly and
No hidden fees whatsoever Payment terms are short responsibly
(interest or otherwise) and cannot be extended
Late fees, if charged, are Missed payments result
capped and don’t accumulate in immediate suspension
of service – customers
can’t keep spending
30INSIGHTS INTO OUR
CUSTOMERS AND SERVICE
RESULTS FROM THE REVIEW CONDUCTED
BY ALPHABETA ADVISERS FOUND…
The majority of Afterpay customers pay
customers (77 % )
lower fees
customers use
Afterpay as a
budgeting tool
Approximately
2.3 million active than credit card users and overall have
customers lower debt than similar peers and the
general population (up to $5,000 less)
Average purchase
OVER
85% amount is $140–$150 and Afterpay’s Returning customers account
for ~90% of monthly transactions.
transactions outstanding account customers are
Without Afterpay, many (39%)
are via a linked
Debit card
(as opposed to a credit card)
balances are low
>90% of accounts are less than $500
>75% of accounts are less than $350
loyal 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
*REVIEW CONDUCTED BY ALPHABETA ADVISORS WITH DATA SUPPLIED BY AFTERPAY, IPSOS AND ILLION JUNE 2018 31DELIVERING RESPONSIBLE
SPENDING OUTCOMES AND
LOW LOSSES
• An average of 30% of attempted • ~95% of instalment payments
transactions are rejected do not incur a late fee
• Because of the very short duration of • 78% of customers have
the repayment cycle and the inability never paid a late fee
to revolve, bad debt is detected
• Late fees are stable 1.3% of
quickly and usage suspended
underlying sales in FY18
• Net Transaction Loss is at 0.4%
(gross 1.5%) in FY18.
Improving with scale
*REVIEW CONDUCTED BY ALPHABETA ADVISORS WITH DATA SUPPLIED BY AFTERPAY, IPSOS AND ILLION JUNE 2018 32COMMITTED TO CONTINUOUS IMPROVEMENT
SEVERAL PRODUCT AND RESPONSIBILITY ENHANCEMENTS COMPLETED IN FY18
Capping of late fees Enhanced ID
Late fees are intended to be a proportionate incentive
for customers to pay on time for what is otherwise a
verification
External third-party ID Verification has been The initiatives not expected to have
free service
implemented in partnership with Illion to a material financial or performance
Not a source of profits - Afterpay loses more in bad supplement Afterpay’s proprietary systems impact on the business
debts than it collects in late fees
Checks will strengthen fraud prevention
While Afterpay can do everything
Our communication and practices encourage late fee and help ensure everyone who uses
within its power to prevent fraud
avoidance – if all customers paid on time and we didn’t Afterpay is over 18 years old, in line with
from occurring, there will be
collect any late fees we would make more money Afterpay’s Terms
instances in which people are not
Afterpay late fee structure is transparent and Afterpay The ID verification process designed to honest. Illegal and inappropriate use
is absent of any other fees – however termed (e.g. minimise customer impact and is largely of the Afterpay platform is acted
interest, administration, monthly, account keeping, automated and instantaneous for the upon, including the immediate
service, management etc.) majority of customers suspension of accounts
Late fees are now capped at the lesser of 25%
(min $10) of the order value or $68
33COMMITMENT
TO STAKEHOLDER CUSTOMERS
ENGAGEMENT AND CUS
ENT TOM
SUSTAINABILITY NM
ER
ER
GOV
ADV
OCAT
ES
Proactive and voluntary approach
REGULATORS
with ASIC and other regulators
Engage strongly with all relevant
BAN
parties with a determination to
K
listen and incorporate feedback
S A N
Engagement process currently
D
S
underway to drive towards a Code
SC
N T
H
of Practice with input from all
HA
E M
ES
C
relevant industry participants
R
ME
PAYME
NTS INDUSTRY
34AFTERPAY IS RESONATING
ACTIVE CUSTOMER GROWTH 2.3m RETURNING FY18 AVERAGE
TRANSACTIONS PER
CUSTOMER GROWTH
ACCELERATED TO
OVER 4,000 PER DAY
1.7m
2.0m
CUSTOMER SPEND 86%
90% 92% RETURNING AFTERPAY
CUSTOMER
IN Q4 FY18 1.5m MONTHLY TRANSACTION
9
SPEND
1.1m 75%
0.8m 66%
0.6m
49%
54% TIMES
Q3 Q4 Q1 Q2 Q3 Q4 TODAY % JUN 15 DEC 15 JUN 16 DEC 16 JUN 17 DEC 17 JUN 18
FY17 FY17 FY18 FY18 FY18 FY18
RETURNING CUSTOMER A$1.1k
Broadening 7% 1% 10%
SPEND increasing
AVERAGE SPEND
A$0.7k
A$0.9k
appeal 20%
28%
39%
PER CUSTOMER
Average age of Afterpay MILLENNIALS
customer base AUSTRALIA Australia GEN X
18+ 1
increased to 32 72%
BABY BOOMER
OTHER
73% millennial core
23%
12 MONTHS 12 MONTHS 12 MONTHS
TO JUN 17 TO DEC 17 TO JUN 18
1. SOURCE: AUSTRALIAN BUREAU OF STATISTICS 35DRIVING STRONG
CUSTOMER ENGAGEMENT
shop directory
Average daily users Retailer lead generation
Now ~170k ~170
from our shop directory
in July 2018 reached its
1.7
OVER in July 18 up
MILLION from ~125k
in Q4 FY18
~125 highest level ever, beating
APP DOWNLOADS December 2017, to reach
4.5m with over 70% of
those clicks originating
from the mobile app.
JULY 2018
5.5 MILLION
USERS (THOUSANDS) Q4 JUL 18
MOBILE APP
SESSIONS
App ratings Afteryay Day
16 August 2018 biggest
4.8/5 for the iOS app and day (underlying sales)
4.7/5 for the Android app in Afterpay's history
36CONNECTING BRANDS
AND CUSTOMERS
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 million transactions
2.3 million active customers
17.7k retailers integrated
Australia New ZEALAND The United States The United kingdom (Next)
37PARTNERING WITH
THE LEADING
LOCAL AND
INTERNATIONAL
BRANDS
17,700
Total merchants
onboarded 13,700
BY HALF
8,700
3,600
800
H1FY17 H2FY17 H1FY18 H2FY18 TODAY
38SIGNIFICANT NEW
MERCHANT CONTRACTS INSTORE
THE FOLLOWING RETAILERS ARE EITHER RECENTLY ON-
BOARDED OR IN THE PROCESS OF INTEGRATION AND HAVE
NOT CONTRIBUTED MATERIALLY TO FY18 UNDERLYING SALES
ONlINE
AUSTRALIA
AUSTRALIA
NEW ZEALAND
39SIGNIFICANT GROWTH OPPORTUNITIES
IN AUSTRALIA AND NEW ZEALAND
In-Store SMB New verticals Entertainment
Dreamworld recently
TraveL
Partnership with Jetstar
Over 10,000 shop On boarding between commenced offering was expanded towards the
fronts 600 – 1,000 SMBs per
Health Afterpay and other end of FY18 with a national
month Significant sector covering a number entertainment related advertising campaign,
Full pipeline of
of sub-verticals. opportunities are being which followed a more
integrating merchants Higher margin
Five-year agreement with major actively pursued. extensive roll-out of the
SMB stand-alone Long-tail (only minimally
dental PMS provider, Software of Afterpay product on the
in-store roll-out has penetrated online ~8%*,
Excellence (A Henry Schein One Beauty Jetstar platform.
commenced and to a lesser extent
company), integrating Afterpay in to Over 250 shop fronts are
In-store)
its practice management platforms now live with Salonpay and
across Australia and New Zealand. at least 500 shop fronts are
~5-8x
larger market
Afterpay now rolled out across all
Primary Dental Clinics in Australia.
in the pipeline with partners
including Ella Bache &
Hairhouse Warehouse.
versus online in A lot more in the pipeline.
Australia
*SOURCE: IBISWORLD - RETAIL TRADE AUSTRALIA 40RETAIL INNOVATION
AND NEW VALUE ADDED
SERVICES PLANNED
1. In-store product
and integration
3. Shop directory
enhancements and
lead generation
enhancements
value metrics
Personalisation –
App based targeted
Rich-data co-marketing 4. offers based on
2. retailer programmes personal profile and
shopping history
focused on new
customer growth and
brand positioning
41Section four
retailer led
international expansion
42BUILDING GLOBAL CAPABILITY
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.
43MOMENTUM BUILDING
IN THE U.S.
integrated retail merchants underlying merchant sales Establishing a presence with
A$M
UNAUDITED
retail industry leading brands
422 20.4
282
11.7
121
28
2018 MAY JUNE JULY MID-AUGUST 2018 JUNE JULY
Over 800 contracts signed Over 150,000 unique
and over 400 merchants live customers since launch
AS OF MID-AUGUST 2018
44U.K. A KEY EXPANSION MARKET
Acquisition
3rd largest e-commerce • Acquiring 90% of Clearpay Finance
market in the world (after China and the U.S.) Limited for 1m Afterpay Shares
• Clear path to 100% control
• >£133b online retail sales p.a.
• 87% of consumers shop online
Acquisition Rationale
• Accelerate and de-risk Afterpay’s entry
Global Retailer Led Strategy into the U.K.
• Established operational footprint, local
• Several existing key retailers relationships and understanding of local
encouraging Afterpay to expand regulatory conditions
• U.K. fits with strategy to serve globally • Key employees to integrate and deploy
recognised brands and customers across borders Afterpay’s global system
Timing & targets
Favourable market dynamics • Afterpay will launch globally scalable
system into the U.K. within six months
• Large and influential millennial customer cohort • Immediate engagement with retailers
• Strong debit card transaction preference • Not expected to materially contribute
• Aversion to traditional credit options for online purchasing to revenue in H1 FY19
45CONSOLIDATING NEW ZEALAND
Signing up the largest
retailers and most well-loved
Smaller retail market brands in New Zealand.
compared to Australia
Good progress made
during H2 FY18
and since inception
(approximately 9 months)
Afterpay is also continuing
to expand its Australian retail
New Zealand base to New Zealand.
customer growth is
consistently growing
in line with our retail
footprint expansion
46THANK YOU
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