Afterpay reports $7.3b in sales, mitigates COVID-19 impact

Renowned buy now pay later (BNPL) company Afterpay (ASX: APT) has revealed “continued strong performance” with underlying year-to-date sales reaching $7.3 billion while reducing costs to preserve cash and mitigate any COVID-19 induced downturn.

Year-to-date underlying sales of $7.3 billion are up 105% compared to the previous corresponding period.

Sales for the three months ending March 2020 reached $2.6 billion and were 97% higher than those achieved in the March quarter of 2019.

Shoring up this growth were US sales increasing 263% in Q3 2020 compared to Q3 2019, and the Australia and New Zealand market expanding 40% over the same period.

At the end of March 2020, Afterpay had 8.4 million active customers – up 122% on the same period last year of 3.8 million.

Active merchants rose 78% from 27,300 in 2019 to 48,400 by the end of March 2020.

Additionally, preliminary figures reveal income margins for March and FY 2020 to-date are already higher than 1H 2020 (July to December 2020).

Boosting the continued March growth was online sales which accounted for 88% of total global underlying sales.

Sales in the second half of March were softer – with global overall sales decreasing 4% in the second part of the month compared to the first half.

However, figures for April to-date already show a 10% increase on the second half of March – possibly a result of Afterpay’s partnership with eBay which was formally launched in Australia at the start of the month.

At the end of March 2020, Afterpay’s balance sheet was $541.1 million – up on $425.6 million at the end of December 2019.

For the same period, debt was lower at $355.7 million compared to $416.9 million.

Meanwhile, net cash had risen to $185.4 million by the end of March from $8.7 million at the end of December.

COVID-19 response

While Afterpay noted it was too early to anticipate the full broader impact of COVID-19, it pointed out it had implemented the first phase of a response plan to navigate the company through this cycle.

The response plan aims to limit losses, while preserving margins and protecting the company’s balance sheet.

Risk setting modifications were introduced in March such as tighter transaction approval parameters and implementing spending limits – focusing on restricting high risk purchases from high risk customers.

Afterpay noted it also had contingency plans to introduce further restrictions should its payment recovery situation deteriorate.

As part of the company’s strategy to protect its workforce, all employees have been working from home since mid-March.

“Our dynamic business model and strong balance sheet means we are well positioned to respond and adapt through this period,” Afterpay chief executive officer Anthony Eisen said.

“We are confident that our customer-centric model, which encourages budgeting and responsible spending will be even more relevant in a post COVID-19 environment,” he added