Ballooning bad debts drive worsening Afterpay losses in latest half

Ballooning bad debts drive worsening Afterpay losses in latest half

Buy-now pay-later (BNPL) giant Afterpay, now owned by US tech conglomerate Block, has today revealed mounting losses driven mostly by impaired receivables, skyrocketing marketing costs and higher employment expenses in the six months to 31 December 2021.

The Australian-founded company, which remains listed on the ASX via its parent’s secondary shares under the ticker SQ2, did not manage to offset losses despite a major increase in total income for the half.

Afterpay chalked up $645 million in total income during the half, of which $78.5 million was derived from customer late fees. This compares to $417.2 million in total income for 1H21, of which $36.1 million was from late fees.

However, the company’s losses continue to worsen, up from $79.2 million in 1H21 to $345.5 million as of 31 December 2021 - a percentage change of 336 per cent.

The company’s losses can be attributed in large part to bad debts (aka receivables impairment expenses) more than doubling from $72.1 million to $176.8 million.

Further, an extra $68.4 million in marketing costs drove expenses for that segment up to $137.5 million, while ‘finance costs’ rose by $241.5 million to $251.5 million in the half.

Employment expenses also rose significantly, nearly doubling from $62.6 million in the prior corresponding period to $112 million this latest half.

Overall, the company’s loss was somewhat softened by an income tax benefit of $156.4 million.

The company entered 2022 with $3.7 billion in assets, but liabilities of $2.7 billion (mostly comprised of borrowings) drove the company’s total equity down to $1.06 billion.

For Afterpay and new parent Block - tech billionaire and Twitter founder Jack Dorsey’s company which also owns payments processor Square - the results are largely historic, with the reporting period ending before the major merger of the two giants earlier this year.

That multi-billion merger was completed in late-January, and SQ2’s share price is largely level with where it launched back then - noting that Bloc’s own share price is quite dependent on the movement in the price of Bitcoin considering the company’s substantial holdings of the cryptocurrency.

Following the release of Afterpay’s latest results, shares in the BNPL player have risen very slightly by 0.06 per cent to $164.58 per share.

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