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Disclaimer
This presentation has been prepared by Afterpay Holdings Limited (‘Afterpay’). It is not
a prospectus, disclosure document or other offering document. It does not constitute
or form part of, and should not be considered to constitute or form part of, any offer,
invitation or recommendation to subscribe for or purchase any securities in Afterpay
or as an inducement to make an offer or invitation with respect to those securities in
any jurisdiction in which it would be unlawful. No agreement to subscribe for shares in
Afterpay will be entered into on the basis of this presentation.
This presentation contains forward-looking statements that are not based on historical
fact, including those identified by the use of forward-looking terminology containing
such words as ‘believes’, ‘may’, ‘will’, ‘estimates’, ‘continue’, ‘anticipates’, ‘intends’, ‘expects’,
‘should’, ‘schedule’, ‘program’, ‘potential’ or the negatives thereof and words of similar
import. These forward-looking statements are subject to risks and uncertainties that could
cause actual events or results to differ materially from those expressed or implied by the
statements. None of Afterpay nor its respective officers, shareholders, related bodies
corporate, affiliates, employees, representatives and advisers make any representation,
warranty (express or implied), or assurance as to the completeness or accuracy of these
forward-looking statements and, accordingly, expresses no opinion or any other form of
assurance regarding them. Afterpay will not necessarily publish updates or revisions of
these forward-looking statements to reflect Afterpay’s circumstances after the date of this
presentation. Afterpay hereby excludes all warranties, whether as to the past or the future,
that can be excluded by law.
There are a number of risks, both specific to Afterpay and of a general nature which may
affect the future operating and financial performance of Afterpay and the value of an
investment in Afterpay including and not limited to economic conditions, stock market
fluctuations, timing of approvals from relevant authorities, regulatory risks, operational
risks, reliance on key personnel and foreign currency fluctuations.
This presentation has been prepared for general information purposes only and does not
purport to be all inclusive or to contain all information which you may require in order to
make an informed assessment of Afterpay’s prospects. It contains general background
information about Afterpay and its activities current as at the date of the presentation.
The information in this presentation is in summary form only and does not contain all the
information necessary to fully evaluate any transaction or investment. You should conduct
your own investigation, perform your own analysis, and seek your own advice from your
professional adviser before making any investment decision.
The presentation does not form the basis of any contract or commitment nor will it or
any part of it or the fact of its distribution form the basis of, or be relied on in connection
with, any contract or commitment or investment decisions relating thereto, nor does it
constitute a recommendation regarding the shares of Afterpay. Past performance cannot
be relied upon as a guide to future performance.
Images used in this presentation which do not have descriptions are for illustration
purposes only and should not be interpreted to mean that any person shown endorses
the document or its contents or that the assets shown in them are owned by Afterpay.
Diagrams used in this presentation are illustrative only and may not be drawn to scale.
References are made in this presentation to entities that have certain dealings with
Afterpay, including counterparties to contractual arrangements referred to in this
presentation. These parties have been referred to for information purposes only.
Those entities did not authorise or cause the issue of this document and have had no
involvement in the preparation of any part of this presentation.
To the maximum extent permitted by law, Afterpay and its advisors disclaim all liability for
any expenses, losses, damages or costs incurred by you as a result of your participation
in the offer described in this presentation and the information in this presentation being
inaccurate or incomplete. Afterpay makes no representation or warranty, express or
implied, as to the currency, accuracy, reliability or completeness of the information in this
presentation. The information in this presentation remains subject to change without
notice.
All persons should consider seeking appropriate professional advice in reviewing the
presentation and Afterpay.
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Introduction
Afterpay has continued to experience strong growth and performance in relation to all key operating metrics in the first quarter
of FY17
Afterpay's recently on-boarded and pipeline of integrating new retail merchants is substantial
Afterpay is well progressed in discussions with a major Australian domestic bank for the provision of a receivables funding facility
which remains subject to final documentation. Should the funding arrangements proceed, it will provide Afterpay with a highly
efficient funding model, from both a structural and transaction cost basis. Afterpay is aiming to have the facility operational prior
to the end of 1H FY17 with an initial facility of $20m
Opportunities to expand the Afterpay product into new verticals and international markets have become more apparent given
Afterpay's developing capabilities and network of retailers and customers
In light of the above developments, Afterpay has successfully completed an equity capital raising of 15.0m shares at $2.40 per
share to raise A$36.0m
> Will place Afterpay in a strong position to build and consolidate the considerable momentum achieved to date
> Will allow Afterpay to support a significantly larger underlying sales opportunity (as highlighted by its current pipeline)
as it implements its initial bank funding facility during the course of FY17
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Q1 FY17 Business Update
Continued strong growth in
relation to all key operating
metrics
Over $40m in underlying
sales in Q1 FY17 ($37m in
FY16 as a whole)
High returning customer
rates (~70% up from 65%
in Q4 FY16)
Significant recent and
strong pipeline of
on-boarding retailers
(not reflected in Q1 FY17
underlying sales)
Currently, over 900 merchants
now integrated with Afterpay (over 180% increase since 30 June)
Transaction integrity
capability improving with net transaction loss of less than
1% in Q1 FY17 (in line with FY16)
Currently, over 190,000
unique end-customers have now used Afterpay (>90% increase since 30 June)
Continued innovation with
successful “in-store” rollout
with Cue, Veronika Maine,
Topshop, Topman and
General Pants
1
8
2
9
4 5 6
7
Afterpay merchant fees
increasing at a faster rate
than underlying sales
3
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Key Operating Metrics - Q1 FY17 Summary
Operating Metric
Number of integrated retail merchant clients 166% (increase from end of FY16 to end of Q1 FY17)
Underlying merchant sales 95% (Q1 FY17 total versus Q4 FY16 total)
Afterpay merchant fees 108% (Q1 FY17 total versus Q4 FY16 total)
Unique Afterpay end-customers 83% (increase from end of Q4 FY16 to end of Q1 FY17)
%Increase(Unaudited)
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Underlying Sales and Revenue Growth
Underlying Quarterly Sales ($m)
$0
$5
$10
$15
$20
$25
Q1 FY16 Q2 FY16 Q3 FY16 Q4 FY16
$30
$35
$40
$45
Q1 FY17
$0
$200
$400
$600
$800
$1000
Q1 FY16 Q2 FY16 Q3 FY16 Q4 FY16
$1200
$1400
$1600
$1800
Q1 FY17
Afterpay Quarterly Revenue ($’000)
Underlying sales, merchant margin and merchant
revenue grew strongly in Q1 FY17
> Q1 FY17 underlying sales of $41.9m (unaudited)
- Underlying sales of $37.3m in FY16 as a whole
- Q1 FY17 Afterpay merchant fee revenue of $1.7m
(unaudited)
> Merchant concentration reduced as the ‘number’ of new
merchants increases
> SMB reverse enquiry, integrations increasing since year-end
> Average merchant fees increasing as the merchant portfolio
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Growing Customer Base with Strong Returning Customer Rates
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
-AUG15
SEP15
OCT15
NOV15
DEC15
JAN16
FEB16
MAR16
APR16
MAY 16
JUN16
100,000
120,000
JUL16
AUG 16
SEP16
20,000
40,000
60,000
80,000
100,000
120,000
140,000
-AUG15
SEP15
OCT15
NOV15
DEC15
JAN16
FEB16
MAR16
APR16
MAY 16
JUN16
160,000
180,000
200,000
JUL16
AUG 16
SEP16
80%
70%
60%
50%
40%
30%
20%
10%
0% -AUG15
SEP15
OCT15
NOV15
DEC15
JAN16
FEB16
MAR16
APR16
MAY 16
JUN16
JUL16
AUG 16
SEP16
~180,000 Unique End-Customers are Transacting Regularly
~190,000 current
unique customers
(up >90% post 30
June)
Strong Returning End-Customer Rates Returning End-Customers - % of Total Orders
~180,000 unique Afterpay end-customers
~80,000+ new end-customers over past 3 months
~70% return end-customer rate over past 3 months
35% of end-customers have shopped across 2 or more Afterpay retailers
New end-customer ordersReturning end-customer orders
1
2
3
4
End-Customer Statistics at End of Q1 FY17
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Focus on Customer and Retail Analytics
Transaction integrity capability enhanced as new and repeat customer transaction volumes grow
Strong Net Transaction Margin and Net Transaction Loss performance achieved in FY16 has continued into Q1 FY17
Afterpay will continue to invest in end-customer and retail data analytics
Based on our experience to date, majority of Afterpay end-customers prefer to utilise their own funds through a
debit card (approximately 85%)
> This is in line with general market trends and millennial demographic online purchasing behavior
> Afterpay will continue to develop innovative solutions to enhance bank account linked functionality during the
course of FY17
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Significant Recently On-Boarded + Pipeline of Leading Retailers
Afterpay has had continued success in on-boarding Australia's leading retail brands in Q1 FY17
Very recently integrated retailers, together with the pipeline of contracted and currently integrating retailers,
represents an underlying sales and physical retail store base that is as large as Afterpay's current footprint
Afterpay remains focused on delivering strong growth and becoming the preferred 'buy now, pay later' payment
solution to both Australian retailers and consumers
Retailers and key brands that have recently integrated or are in the process of integrating include the following:
TOPSHOP TOYS R US BEST & LESS COTTON ON STRANDBAGS
THE ICONIC SPORTSCRAFT SHOWPO HYPE DC MERRELL
MJ BALE BETTS JAG JETS GUESS
TAROCASH PEPPER MAYO YD TIGER MIST SABA
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Bank Funding Update
Afterpay is well progressed in discussions with a major Australian domestic bank for the provision of an initial $20
million receivables funding facility (Bank Facility)
Bank Facility will provide Afterpay with a highly efficient funding model, from both a structural and
transaction cost basis
It is intended that the Bank Facility will be operational prior to the end of 1H FY17
The Bank Facility is subject to, amongst other things, the execution of transaction documentation
satisfactory to both parties
The initial Bank Facility is intended to compliment Afterpay's equity capital base employed to facilitate payment
receivables growth. As at 30 September 2016, Afterpay had cash at bank and end-customer receivables balances of
approximately $13.8m and $13.7m respectively (unaudited)
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Capital Raising
Afterpay has completed an equity capital raising of A$36.0 million
> Placement of 15.0m ordinary shares at $2.40 per share
Rationale
Support Larger Underlying Sales Opportunity
> Afterpay’s strong growth profile has continued to accelerate post IPO
> Expectation of increasing underlying sales, as highlighted by current pipeline
> In tandem with initial bank funding facility, additional equity will support a much larger underlying sales
opportunity
Support Other Business Development Opportunities
> Opportunity to expand into potential new online verticals and international markets has become
more apparent
Use of funds
> The new capital will provide Afterpay with increased funding and working capital to execute its growth
objectives and achieve its strategic initiatives over the near term
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Offer Details & Timetable
Total shares currently on issue
Includes escrowed shares:
Until May 2018 103,000,000
Until March 2017 40,000,000
Number of shares to be issued under Offer 15,000,000
Offer price per share $2.40
Total amount to be raised under Offer (before costs) $36,000,000
Total number of shares on issue post Offer 180,000,000
165,000,000
Offer Details
Events
Trading halt 17 October
Placement Offer bookbuild (open and close) 17 October
Trading halt lifted 18 October
Settlement of Placement Offer 25 October
Issue of Placement Offer Shares 26 October
Indicative Date (2016)
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Our PurposeIts simple
We believe in evolving the retail status quo to provide
customers a better way to shop.
With the customer sitting at the core of our offering, we’ve
introduced a simple payment model that favours the customer
whilst maintaining a true win-win for our retail partners.
Life doesn’t wait #afterpayit
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What Does Afterpay Do?
Afterpay integrates directly into merchant web sites and retail environments
Retailers, at their discretion, offer products to end-customers with a separate, Afterpay branded,
Buy Now, Receive Now, Pay Later offer
The Afterpay Buy Now, Receive Now, Pay Later offer is very simple:
> End-customers pay the original purchase price (and no more) in four fortnightly instalments (unless late fees apply)
> Afterpay does not charge customers any interest, establishment or monthly fees
> End-customers become Afterpay's customers (direct contractual relationship)
> Afterpay facilitates product returns and customer service.
Afterpay then settles with merchants upfront (less Afterpay fee)
Afterpay retrieves funds from end-customers through an automated end-to-end process
Purchase
End-customer selects Afterpay at checkout
Shipment
Purchase shipped to returning customer with no payment
Settlement
Afterpay settles funds with merchant upfront
Payment
End-customer pays directly to Afterpay in 4 instalments
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2
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Integrated Afterpay Value-Added Service
Afterpay is "Bundled" with a Retailer's ProductIt is a Value-Added Service; Not a Payment Option
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Afterpay is Genuinely Customer Centric
We have shifted the economics in the customer’s favour by earning our revenue primarily from the retailer, not
the end-customer.
We are aligned with customers to pay on time and in full – we only benefit from repeat, completed purchases
rather than interest or service fees on outstanding customer balances
We promote purchasing responsibly through our technology, our processes and our people
> Real time Transaction Integrity process applied to every Afterpay Transaction
> A customer is unable to make a repeat purchase if they have any amounts overdue on their account
> Transaction velocity limits ensure end-customers do not over extend themselves
> Low average transaction values, short instalment plans (max 56 days)
Proactive and collaborative communication strategy to help customers pay on time
> Reminders, alerts, transparency around late fees, automated payments
We do not sell a finance product following a customer acquisition or at any time
> The customer only pays the original purchase price (unless late fees apply)
1
2
3
4
Effectiveness of Afterpay's approach is evidenced through its low Net Transaction Loss (NTL) experience (0.9% of underlying
sales in FY16)
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Afterpay is a Valuable "Lay-By" Replacement Service
Cue Online Cue In-store
Fully Integrated Online and Physical Store Applications
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Partnered with the Leading Australian Retail Brands
500+
A&erpayMerchants
NOW OVER
900RETAILERS
Afterpay has grown its
merchant partnerships to over
900 retailers including many of
Australia’s household brands.
Afterpay is receiving strong
demand from retailers
requesting to integrate. Recent
brand additions include:
ToysRUs
Topshop
Showpo
Jeanswest
Peppermayo
Hype DC
Tiger Mist
Spell Designs
Marcs
David Lawrence
Dissh
Splice Boutique
The Next Pair
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Driving Brand Loyalty
We aren’t just changing how people buy, we are changing how people shop
Currently, over
190,000 unique end- customers
Currently, over
750k Visits to Afterpay shop
directory in the last 30 days
70%+ of purchases in Q1 FY17
were made by returning end-
customers
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Delivering Material Results for Retailers
NOTE – RESULTS PROVIDED BY RETAILER AND TIME FRAME IS SINCE AFTERPAY LAUNCHED ON RETAILER WEBSITE UNTIL AUGUST 2016.
+22% +26%
+25%
+15%
+34%
+20%
+21%
+32%
+20%
Average Order Value Conversion Rate Total Online Sales
Some illustrative results...
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Continued Innovation - Afterpay In-store
We focus on delivering enterprise technology innovation with leading retail customer experiences.
As outlined in the prospectus, a key focus was the in-store point of sale integration product aimed at replacing or providing a better alternative to lay-by.
Afterpay’s online partners have a store network of over 1,000 stores and we maintain a strong pipeline of partners currently piloting and scoping an integration of the Afterpay in-store solution.
We have successfully rolled out the technical solution to over 160 stores through Cue Clothing, Veronika Maine, Dion Lee, Topshop, General Pants and are closely partnering with all brands on experience optimisation.
We have a patent pending for the in-store instalment payment system.
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Afterpay Business Model Overview
Afterpay experienced positive and improving net transaction margins throughout FY16 and Q1 FY17:
> Increasing as Merchant ‘mix’ develops
> Favoured-nation‘ pricing from Touchcorp
> Current average funding duration is
<30 days (equity funded to date)
> Unrecovered late payments less late fees
> Improving with transaction history and increasing returning customer mix
Transaction Profitability (per transaction, pre-overheads)
Merchant Fee
-
-
-
=
Transaction Processing Costs
Transaction Funding Finance Costs
Net Transaction Losses
Net Transaction Margin
+Net Transaction
Margin
Increasing transaction
volumes
Increasing Afterpay earnings
(pre-overheads)
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Continual Improvement Through Scaled Data Analytics
Integral to Afterpay System is its fraud detection and repayment capability assessment technology
Individual repayment capability scoring and rules are dynamic, continuously updating in a data driven, self learning
transaction history environment
Multiple transaction characteristics assessed in real-time
Automated decision making based on transaction history
Continual rules-based optimisation
Progress reflected in improving Net Transaction Loss performance in FY16
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High Return on Capital Employed Objective
Merchant paid upfront
<30 days(average duration)
Payments collected from
customers
Multiple payment cycles per annum (>12x)
Recycled capital supports large volume of annualised underlying sales
Recycled capital at positive net transaction margin creates high ROCE
Intention to introduce receivables financing facility to further benefit ROE
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Strategic Path
Focus to remain on existing short duration product (steps 1 and 2)
E-commerce payments facilitationSIMPLE ‘BUY NOW – PAY LATER’
PRODUCT
> Simple ‘service’ to both end-customers and merchants
> Net transaction margin positive
> Large addressable market
International expansionNEW MARKETS
> Afterpay system/Touchcorp relationship exportable
> Assessing local partner opportunities
Omni-channel (online + in-store)PHYSICAL / IN STORE RETAIL
APPLICATION
> Afterpay service and functionality in physical as well as online environments
> Allow merchants to partially or wholly do away with traditional ‘lay-by’ services
> Leverage Touchcorp's deep point of sale experience
Longer duration instalmentsINTRODUCE EXTENDED ‘PAY BY
INSTALMENT’ PRODUCT
> Longer-term, instalment product
> Greater end-customer flexibility
> Selectively offered to Afterpay end-customers
> Possible licensing requirement (Australian Credit Licence granted August 2016)
STEP
1STEP
2STEP
3STEP
4
Core business focus Longer term opportunities
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Contact Details
Nick Molnar
Managing Director
Sophie Karzis
Company Secretary
03 9286 7501
Investors: Company:
Fleur Brown
Director
0419 270 863
Media:
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