Ann: H1 FY20 Appendix 4D and Half Year Report, page-78

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Lepio

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27/02/20

23:26

Post #: 43200285
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Originally posted by Andredamus1: ↑

You need to look at Afterpay as a group of individual businesses:
Afterpay ANZ
Afterpay US
Afterpay UK
Pay Later

The company sets this out clearly for us in Note 2 to their financial accounts (segment information). By apportioning corporate costs in the same ratio as each of these segments is contributing to revenue, the EBITDA of each of these segments for the latest half year was:
Afterpay ANZ - $50.6m
Afterpay US - ($36.1m)
Afterpay UK - ($9.7m)
Pay Later - $2.0m
Total Group - $6.8m

So what this tells us is the ANZ business has an EBITDA margin of 37.4% and that by increasing its revenue by $45.4m compared to 1H19, it increased its EBITDA by $22.8m - ie its incremental EBITDA margin was 50.2%. This very clearly demonstrates the economy of scale benefits of this business once it has reached a certain size.

In the US, the EBITDA loss increased from $15.2m in 1H19 to $36.1m in 1H20 at a time when the business acquired almost 3m additional customers. The company's strategy in this market is crystal clear - to grow their customer and merchant base as quickly as possible in order to achieve a dominant position in the market. This strategy comes at a cost - IMO it is absolutely what the company should be doing. I have no doubt that when they have 5m+ customers and $10b+ of annual GMV generated in this market, the losses they incurred in the start up phase (they have only been operating in the US for less than 20 months) will be a distant memory.

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Great analysis, I missed this in the report. A lot of companies claim to be "unprofitable because we invest in growth", but this is proof positive that APT can get there whenever they want. In fact, the USA had income of 57m with EBITDA of (31)m, which is already a huge improvement compared to last year's income of 9.6m with EBITDA of (14m)

APT Price at posting: $36.47 Sentiment: Buy Disclosure: Held
2 Upvote

0 Great analysis

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