RESULTS PRESENTATION H1 FY19
DISCLAIMER The material in this presentation is general background information about Afterpay Touch Group Limited (APT) and is current at the date of the presentation, 26 February 2019. The information in the presentation is given for informational purposes only, is in summary form and does not purport to be complete. It is intended to be read by a professional analyst audience in conjunction with APT’s other announcements to ASX, including the H1 FY19 Half Year Results announcement. It is not intended to be relied upon as advice to current shareholders, investors or potential investors and does not take into account the investment objectives, financial situation or needs of any particular shareholder or investor. No representation is made as to the accuracy, completeness or reliability of the presentation. APT is not obliged to, and does not represent that it will, update the presentation for future developments. All currency figures are in Australian dollars unless otherwise stated. Totals may not add up precisely due to rounding. This presentation contains statements that are, or may be deemed to be, forward looking statements. These forward-looking statements may be identified by the use of forward-looking terminology, including the terms “believe”, “estimate”, “plan”, “target”, “project”, “anticipate”, “expect”, “intend”, “likely”, “may”, “will”, “could” or “should” or similar expressions, or by discussions of strategy, plans, objectives, targets, goals, future events or intentions. Indications of, and guidance on, future earnings and financial position and performance are also forward-looking statements. You are cautioned not to place undue reliance on such forward-looking statements. Such forward looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors, many of which are beyond the control of APT or any of its related entities which may cause actual results to differ materially from those expressed or implied in such statements. There can be no assurance that actual outcomes will not differ materially from these statements. 2
AFTERPAY IS SCALING… 2.3b $ 107.1m $ AFTERPAY AFTERPAY UNDERLYING TOTAL INCOME 2 UP UP $ 47.8m 0.9b $ 147 % 124 % SALES/GMV 3 (PRO FORMA) H1 FY18 H1 FY19 H1 FY18 H1 FY19 3.1m 1.6% AFTERPAY AFTERPAY 1.1% ACTIVE IMPROVED 1.4m UP GROSS LOSSES 4 118 32 % % CUSTOMERS 1 3 (PRO FORMA) H1 FY18 H1 FY19 H1 FY18 H1 FY19 23.2k 2.3% 2.3% AFTERPAY NET TRANSACTION AFTERPAY ACTIVE UP 11.5k MARGIN 101 % MERCHANTS 1 3 (PRO FORMA) H1 FY18 H1 FY19 H1 FY18 H1 FY19 NOTE: CHANGE CALCULATIONS MAY NOT EQUATE DUE TO ROUNDING 1. AS AT 31 DECEMBER 2018, DEFINED AS HAVING TRANSACTED AT LEAST ONCE IN THE LAST 12 MONTHS 2. AFTERPAY TOTAL INCOME INCLUDES AFTERPAY INCOME AND OTHER INCOME 3 (LATE FEES) 3. NEW ACCOUNTING STANDARDS ADOPTED FROM 1 JULY 2018 IMPACTED AFTERPAY INCOME AND RECEIVABLES IMPAIRMENT EXPENSE. TO ENABLE COMPARABILITY TO PRIOR YEAR PERFORMANCE WE HAVE PRESENTED PRO FORMA FINANCIALS WHICH REMOVE THE IMPACT OF THESE ACCOUNTING STANDARD CHANGES. SEE PAGE 26 FOR FURTHER DETAIL 4. GROSS LOSSES ARE DEFINED AS THE AFTERPAY RECEIVABLES IMPAIRMENT EXPENSE AS A PERCENTAGE OF UNDERLYING SALES
KEY HIGHLIGHTS - H1 FY19 PLATFORM FINANCIAL REDUCED LOSSES REDUCED GROWTH PERFORMANCE LATE FEES • Gross losses significantly reduced (1.6% to 1.1% pro • Afterpay underlying sales • Group total income +91% • Significantly reduced from forma 1 ) +147% over pcp (pro forma 1 ) over pcp 1.2% of underlying sales to 0.8% (a 32% improvement) • >30% improvement over pcp • Significant growth in • Transaction ANZ continues margins maintained • Capped late fees from • Improvement notwithstanding notwithstanding rapid 1 July 2018 contribution of higher US • US scale-up above scaling in US (early lifecycle) losses expectations • Improved customer tiering • Significant investment in and scoring • UK preparing for launch international expansion in H2 FY19 STRONG CAPITAL INNOVATION REGULATION BALANCE SHEET MANAGEMENT • Continue to invest • Strongly supportive of significantly in platform regulatory development • Significant growth • Increased AU facilities growth headroom ($500m) and extended term • Support proposed ASIC • Customer engagement spend product intervention powers • Equity capital raising • Stand-alone US facility and ‘lifetime value’ increasing (PIP) completed September (US$300m) in progress; 2018 ($142m before costs) similar terms to AU • Major lead referrer to • Senate Committee supportive merchant partners of PIP and Afterpay supports other recommendations NOTE: CHANGE CALCULATIONS MAY NOT EQUATE DUE TO ROUNDING 1. NEW ACCOUNTING STANDARDS ADOPTED FROM 1 JULY 2018 IMPACTED AFTERPAY INCOME AND RECEIVABLES IMPAIRMENT EXPENSE. TO ENABLE COMPARABILITY TO PRIOR YEAR PERFORMANCE 4 WE HAVE PRESENTED PRO FORMA FINANCIALS WHICH REMOVE THE IMPACT OF THESE ACCOUNTING STANDARD CHANGES. SEE PAGE 26 FOR FURTHER DETAIL
OUR MISSION AND PROGRESS 5
THE POWER HAS SHIFTED TO THE MILLENNIAL CONSUMER MILLENNIALS BY 2020, BY 2025, MAKE UP 27% OF MILLENNIALS WILL MILLENNIALS WILL THE ENTIRE GLOBAL HAVE THE HIGHEST CONTRIBUTE ALMOST 1 POPULATION SPENDING POWER HALF OF ALL SALARY AT ALMOST $15 EARNED INCOME 2 3 TRILLION WORLDWIDE IN THE U.S. 6 SOURCE: 1. A.T. KEARNEY (2016) 2. FINANCIAL TIMES (2018) 3. VISA (2015)
AUSTRALIAN CARD TRANSACTIONS 1 MONTHLY, BY VOLUME, ‘000 OUR MISSION 500 TO BE THE DEBIT CARDS CREDIT CARDS WORLD’S MOST LOVED WAY TO PAY 0 1994 2018 We are empowering a generational movement away from traditional credit AFTERPAY DEMOGRAPHICS products 7% 22% The power has shifted to 39% 36% the millennial consumer and AFTERPAY AUSTRALIA AUSTRALIA 18+ 2 we are building a long-term relationship with them today 71% 25% MILLENNIALS GEN X BABY BOOMER SOURCE: 1. RESERVE BANK OF AUSTRALIA (2018) 2. AUSTRALIAN BUREAU OF STATISTICS (2018). NOTE: 7 “MILLENNIALS” ARE DEFINED AS PEOPLE BORN AFTER 1981 AND OLDER THAN 18; “GEN X” ARE DEFINED AS PEOPLE BORN BETWEEN 1960-1981; “BABY BOOMERS” ARE DEFINED AS PEOPLE BORN BEFORE 1959
PURPOSEFULL Y DIFFERENT ...TO TRADITIONAL CREDIT AND OTHER BNPL 1 PRODUCTS MAJORITY OF INCOME EARNED MUST BUY TO OWN; NOT RENT – PAY 1 6 FROM RETAILER NOT CUSTOMER OFF IN FULL IN SHORT TIME FRAMES FREE SERVICE TO CUSTOMERS FREEZE ACCOUNTS IF A 2 7 WHO PAY ON TIME SINGLE PAYMENT IS LATE NO INTEREST AND NO HIDDEN FEES LOW TRANSACTION VALUES 3 8 (SIGN-ON, ADMIN, MONTHL Y , ETC.) WITH STRICT CAPS NOT A LINE OF CREDIT – ONL Y LOWER FIRST-TIME LIMITS - ONL Y 4 9 FOR DISCRETE PURCHASES EXPANDS FROM GOOD BEHAVIOUR TEST EVERY SINGLE TRANSACTION LATE FEES CAPPED AND 5 10 IN REAL-TIME (REJECT ~30%) DON’T ACCUMULATE NOTE 1. BUY NOW PAY LATER 8
AFTERPAY HIGHEST NTS SCORE BUILDING TRUST (ROY MORGAN) DIGITAL PAYMENTS NTS - ROY MORGAN 1 NET TRUST SCORE BECAUSE WE 70 BILL PAYMENT SERVICES ONLINE PAYMENT PLATFORMS BANKS’ OWN MOBILE PAYMENTS OTHER CONTACTLESS/CARDLESS BUY NOW PAY LATER PAYMENTS 2 MOBILE PAYMENTS 61.1 ARE DIFFERENT 60 48.3 50 46.4 43.2 42.3 42.0 37.5 40 35.4 33.1 32.4 31.5 30.1 30.4 30.3 30 24.4 20 16.6 10 0 BILLPAY MASTERCARD PAY TAP & PAY PAY BANKS NTS 3 NEGATIVE MAJORITY OF AFTERPAY REVENUE FROM MERCHANT (NOT CUSTOMER) 4 LISTED SMALL CASH 40% LOANS/EQUIPMENT RENTAL COMPANY 11 RISK ADJUSTED RETURN 5 30% LISTED DOMESTIC NON-BANK CONSUMER/COMMERCIAL RENTAL AND LEASING COMPANIES 6 20% OFFSHORE 10% CONSUMER BANKS 9 PUBLISHED BNPL REGIONAL MAJOR COMPARATOR 10 NOT DRAWN TO SCALE BANKS BANKS BUBBLE SIZE REFLECTS AVERAGE REVENUE AVERAGE 8 AVERAGE 7 GENERATING ASSETS / RECEIVABLES 0 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% PROPORTION OF NON-INTEREST INCOME TO TOTAL INCOME SOURCE: 1. ROY MORGAN RESEARCH BASE: AUSTRALIANS 14+; JULY 17 – JUNE 18 NPSSM AND NET TRUST SCORE IS A SERVICE MARK OF BAIN & COMPANY, INC., SATMETRIX SYSTEMS, INC., AND MR. FREDERICK REICHHELD. 2. BUY NOW PAY LATER PAYMENTS (AFTERPAY, ZIPPAY, ZIPMONEY) FROM OCT 2017 3. ROY MORGAN ARTICLE (14 FEB 2019) 4. CITIBANK: COMPANY FILINGS. CALCULATIONS BASED ON LAST REPORTED OR LAST TWELVE MONTHS (FY18 UNLESS OTHERWISE INDICATED) 5. RISK ADJUSTED RETURN IS CALCULATED BASED ON TOTAL INCOME LESS IMPAIRMENT EXPENSE AS A PERCENTAGE OF AVERAGE INTEREST EARNING ASSETS; 6. INCLUDES FLEXIGROUP AND THORN (LTM 31 DEC 2018); 7. INCLUDES CBA (LTM 31 DEC 2018), NAB, WBC AND ANZ. INCLUDES INCOME FROM ASSETS 9 ANNOUNCED FOR DIVESTMENT BUT WHICH HAVE NOT YET BEEN DIVESTED; 8. INCLUDES BOQ AND BEN (LTM 31 DEC 2018); 9. INCLUDES SYNCHRONY, CEMBRA (LTM 30 JUN 2018) AND MONETA; 10. BASED ON REPORTED PROPORTION OF NON-CUSTOMER BASED INCOME IN FY16 OF ~58% 11. BUBBLE SIZE BASED ON H1 FY19 UNDERLYING SALES ANNUALISED
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