MEETING OPENING ANNUAL GENERAL MEETING WEDNESDAY 28 NOVEMBER 2018
CHAIRMAN’S ADDRESS ANNUAL GENERAL MEETING WEDNESDAY 28 NOVEMBER 2018
AFTERPAYTOUCH GROUP TODAY OUR JOURNEY IS STILL JUST • Top 200 ASX listed company BEGINNING • >2.5m customers (>10% of Australian purchasing population) AFTERPAY HAS BEEN IN • >20,000 retail partners EXISTENCE < 4 YEARS AND LISTED FOR APPROXIMATELY • Processing over 10% of Australian online commerce 2.5 YEARS • Growing in-store penetration – over 15,000 shop fronts AFTERPAY MERGED WITH TOUCHCORP IN JULY 2017 • Expanding globally - U.S. (in-progress) / U.K. (soon) • Australian proprietary technology and entrepreneurial heritage 1
AFTERPAY COMPETITIVE ADVANTAGES WE ARE NOT TRADITIONAL CREDIT AFTERPAY WORKS WHEREVER 1 3 THE CUSTOMER WANTS TO BE We champion the customer and Online and In-store we don’t employ a hybrid or “up-sell” business model WE ARE NOT FOR EVERYONE AFTERPAY IS A DATA DRIVEN 2 4 OR EVERYTHING PLATFORM, NOT JUST A PRODUCT We focus specifjcally on a Already one of the largest segment of the market for life’s retailer lead referrers in Australia purchases that customers don’t and New Zealand; we connect want a loan for retailers with new customers 2
WHY AFTERPAY IS DIFFERENT 1 We started and continue with a clear mission TO BE THE WORLD’S MOST LOVED WAY TO PAY 3
WHY AFTERPAY IS DIFFERENT 2 We are solving a clear problem To allow people to budget and achieve their lifestyle goals, while avoiding the traditional debt trap 4
AVOIDING THE DEBT TRAP – THE ISSUE WE ARE ADDRESSING The pitfalls of Interest costs Traditional credit Outstanding using traditional and other hidden providers are not on the balances build up credit products charges are customer’s side – they quickly if signifjcant to fund lifestyle generally high and make more money when repayments are not purchasing accumulate customers persist in debt made regularly BALANCES OUTSTANDING DEBT MORE SPENDING DEBT DEBT REVOLVE REVOLVE REVOLVE DEBT DEBT INTEREST FEES 5
WHY AFTERPAY IS DIFFERENT 3 We are well positioned for one of world largest demographic and economic shifts We ar one o 6
THE POWER HAS SHIFTED TO MILLENNIALS D T R I A B C E D AUSTRALIAN CARD TRANSACTIONS 2 MILLENNIALS PREFER THE POWER HAS MONTHLY, BY VOLUME, ‘000 DEBIT CARDS AND WANT TO SHIFTED TO THE 500 SPEND THEIR OWN MONEY MILLENNIAL CONSUMER By 2030, millennials 67% of millennials do not 1 own a single credit card. will earn 2 out of every 1 in 3 have never had 3 dollars in Australia 4 a credit card 3 Alternative to credit Today there are 2x as many 85% of Afterpay’s orders debit card transactions as use debit cards credit card transactions 2 1994 2018 DEBIT CARDS CREDIT CARDS 7 SOURCE: 1. BANKRATE MONEY PULSE SURVEY 2016 (FOR USA) 2. RESERVE BANK OF AUSTRALIA 3. CREDITCARDS.COM 4. MACQUARIE BANK RESEARCH
WHY AFTERPAY IS DIFFERENT 4 Our simple and transparent business model is the source of our integrity 8
AFTERPAY BUSINESS MODEL Generate majority of our revenue from 1 retailers for providing a value added service We make more money when customers buy 2 what they can afgord, pay on time and stick to their simple instalment plan 3 We do not profjt from late fees (we lose more than we collect) RESPONSIBLE SPENDING IS FUNDAMENTAL TO THE SUCCESS OF OUR BUSINESS 9
AFTERPAY IS FUNDAMENTALLY DIFFERENT TO TRADITIONAL CREDIT PRODUCTS WE ARE NOT ANOTHER VERSION OF CREDIT – WE ARE AN ALTERNATIVE THAT PUTS CUSTOMERS’ INTERESTS FIRST TRADITIONAL AFTERPAY CREDIT PRODUCT Free service for customers who pay on time Must pay purchases ofg in full in short time period Discrete transactions / not a line of credit “Have you ever heard of a Suspended if a single payment is late traditional finance product that stops customers spending Late fees minimal, capped and don’t accumulate and revolving in debt?” Low transaction values Rewarded for positive behaviour 10
WHEN GROWTH HAPPENS BECAUSE OF DISCIPLINE, NOT IN SPITE OF IT: 90 75 85 75 % % OVER OVER OVER % % OVER of all Afterpay of customers of our users prefer of Afterpay users transactions are by have never to pay with debit say they use returning customers incurred a late cards rather than our service as a – which means they fee credit cards budgeting tool all have settled their outstanding payments on time and on budget SOURCE: ALPHABETA 2018 - UNDERSTANDING AFTERPAY: HELPING AUSTRALIANS BUDGET 11
AFTERPAY IS FOR LOWER VALUE PURCHASES AUSTRALIAN CREDIT CARD DEBT AVERAGE BALANCE AVERAGE BALANCE OUTSTANDING OUTSTANDING $ 121 $ 4,268 >90% of consumers <$500 >75% of consumers <$350 SOURCE: FINDER SURVEY MARCH 2018 12
LOW DEFAULTS 44 90 79 AFTERPAY % % % FY18 GROSS LOSS lower than lower than lower than 1.5 other buy payday consumer % now pay later 1 lending 2 leasing fjnance providers 2 13 SOURCE: 1. 2018 BNPL PUBLISHED RESULTS 2. ALPHABETA RESEARCH
DELIVERING A DIFFERENT Our business model does not rely on extracting VALUE PROPOSITION value from the customer and stands in stark contrast to traditional retail and consumer fjnance providers Listed small cash loans/equipment 40% rental company RISK ADJUSTED RETURN 1 30% AFTERPAY Bubble size based on >A$3.0b sales 7 Listed domestic 20% non-bank consumer/ commercial rental and leasing companies 2 Ofgshore 10% Key domestic consumer fjnance peer 6 banks 5 Regional banks Major banks NOT DRAWN TO SCALE average 4 average 3 BUBBLE SIZE REFLECTS AVERAGE INTEREST / REVENUE GENERATING ASSETS /RECEIVABLES 0 10% 20% 30% 40% 50% 60% 70% 80% PROPORTION OF NON-INTEREST INCOME TO TOTAL INCOME SOURCE CITIBANK: COMPANY FILINGS. CALCULATIONS BASED ON LAST REPORTED (FY18 UNLESS OTHERWISE INDICATED) NOTES: (1) RISK ADJUSTED RETURN IS CALCULATED BASED ON TOTAL INCOME LESS IMPAIRMENT EXPENSE AS A PERCENTAGE OF 14 AVERAGE INTEREST EARNING ASSETS; (2) INCLUDES FLEXIGROUP AND THORN; (3) INCLUDES CBA, NAB, WBC AND ANZ. INCLUDES INCOME FROM ASSETS ANNOUNCED FOR DIVESTMENT BUT WHICH HAVE NOT YET BEEN DIVESTED; (4) INCLUDES BOQ AND BEN; (5) INCLUDES SYNCHRONY, CEMBRA AND MONETA. BASED ON FY17 REPORTED METRICS DUE TO THE ABNORMAL IMPACT OF IFRS 9 CHANGES ON RESULTS REPORTED IN 2018; (6) BASED ON REPORTED PROPORTION OF NON-CUSTOMER BASED INCOME IN FY16 OF ~58% (7) AS DISCLOSED IN THE AFTERPAY TOUCH BUSINESS UPDATE DATED 19TH JULY 2018 AND BASED ON JUNE 2018 UNDERLYING SALES MULTIPLIED BY 12.
THE BANKING INDUSTRY HAS THE LOWEST NET TRUST SCORE Individual scores are available only to Full Report subscribers SOURCE: ALL BRAND NET TRUST SCORE SURVEY, JULY 2018, N=1, 198. BASE ROY MORGAN SINGLE SOURCE (AUSTRALIANS 18+) 15
DIGITAL PAYMENTS NPS 70 Bill Payment Services Online Payment Platforms Banks’ Own Mobile Payments Other Contactless/Cardless Mobile Payments Buy-Now-Pay-Later Payments 4 61.1 60 Net Promoter Score 48.3 50 46.4 43.2 42.3 42.0 37.5 40 35.4 33.1 32.4 31.5 30.4 30.3 30.1 30 24.4 20 16.6 10 0 BPay Australia Post PayPal Visa Checkout MasterPass by Western Union CommBank ANZ Mobile NAB Pay Apple Pay Android Pay Google Wallet Samsung Pay Afterpay zipPay zipMoney Billpay Mastercard Pay Tap & Pay Pay 4. BUY NOW PAY LATER PAYMENTS (AFTERPAY, ZIPPAY, ZIPMONEY) FROM OCTOBER 2017 SOURCE: ROY MORGAN RESEARCH. BASE: AUSTRALIANS 14+: JULY 17-JULY 18. NPS AND NET PROMOTER SCORE IS A SERVICE MARK OF BAIN & COMPANY, INC, SATMETRIX SYSTEMS INC, AND MR FREDERICK REICHHELD 16
INTRODUCTION TO AFTERPAY VIDEO
WHY AFTERPAY IS DIFFERENT 5 We are not a product but a platform that has global applicability 17
OUR TECHNOLOGY PLATFORM LINKS CUSTOMERS WITH >20K AUSTRALIAN BUSINESSES AVERAGE DAILY USERS SHOP DIRECTORY OVER 2 MILLION A vast number of customers Now ~170k ~170k in July 18 up come to Afterpay to APP DOWNLOADS from ~125k ~125k determine where to shop. in Q4 FY18 Over 4 million retail and service online business leads JULY 2018 5.5 are generated every month. MILLION Q4 JUL 18 MOBILE APP SESSIONS APP RATINGS 4.8/5 for the iOS app and 4.7/5 for the Android app 18
WHY AFTERPAY IS DIFFERENT 6 Our proprietary technology is globally scalable and efgective 19
WHY AFTERPAY IS DIFFERENT 7 Our company is powered by an incredibly talented team with shared core values and a passion to innovate and continuously improve 20
FY19 Growth remains Customer additions strong in respect in all geographies YEAR to all key metrics are in line with past TO DATE experience and are accelerating into November More importantly, Losses or default Strong repeat customer rates remain well pre-Christmas behaviour remains within expected trading period strong and ranges in all represents well over geographies 90% of monthly GMV 21
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