Two of Australia's buy now, pay later giants – Afterpay Ltd (ASX: APT) and Zip Co Ltd (ASX: Z1P) reported earnings for the 2021 financial year yesterday. Unfortunately for shareholders, the metrics did no favours for the respective share prices of the two on the day.
Often it can be worthwhile to compare between companies in the same industry to gain a sense of market position between peers. Although Afterpay's earnings are considerably larger, the comparison can still provide some insights into how the two stack up.
So, let's take a closer look at the financials.
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Afterpay earnings failed to impress
If you didn't have a chance to catch up prior, here are the highlights from Afterpay's full-year results.
- Underlying sales grew 90% (or 102% in constant currency) to $21.1 billion
- Total income up 78% (or 89% in constant currency) to $924.7 million
- EBITDA down 13% to $38.7 million
- Active customers increased 63% to 16.2 million
- Active merchants up 77% to 98,200
- Square-Afterpay transaction on track to complete in Q1 of calendar year 2022
Following the release of its earnings, the Afterpay share price fell slightly. This is likely attributable to the payment company falling short of some investor and analyst expectations. As covered by my colleague, James, Afterpay fell short of broker Ord Minnett's expectations. Analysts at the broker anticipated an underlying EBITDA of $75.4 million. However, Afterpay posted less than half of this expectation with $38.7 million.
How does this compare to the Zip earnings result?
Zip released its own FY21 result on the same day as Afterpay. Although the two companies vary drastically in terms of scale, both operate in the same industry and measure success through very similar metrics. In fact, it is possible that the two even share an overlap in customers.
For that reason, here's a closer look at Zip's earnings highlights for comparison:
- Total transaction volume grew 176% to $5.8 billion
- Revenue of $403.2 million, up 150% year on year
- Cash EBTDA loss of $22.9 million compared to $3.5 million profit in prior year
- Active customers at 7.3 million, up 247.5%
- Active merchants at 51,300, up 109.4%
Evidently, Zip is growing its customer and merchant base at a faster rate than Afterpay. Although, it is worth keeping in mind that Zip is operating from a lower base. However, that doesn't mean we should completely dismiss this rapid growth.
The smaller BNPL contender now boasts an active customer base that is nearly half the size of Afterpay's. This is despite Zip holding a market capitalisation that is roughly one-tenth that of its larger rival.
Likewise, we can see from comparing with Afterpay's earnings that Zip is processing roughly one-fourth as much as Afterpay in the way of sales.
