Afterpay and Zip are doubling down on the US market amid growing losses

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  • Afterpay and Zip have reported their first-half results on Thursday, with both buy now, pay later companies recording rising losses.
  • It comes as both refocus their efforts on North America for growth, with the market now representing around 65% of Afterpay’s customers and 56% of Zip’s.
  • In that vein, Afterpay will increase its stake in its US operation to 93%, announcing a $1.25 billion raise.
  • Visit Business Insider Australia’s homepage for more stories.

Australia’s buy now, pay later sector is promising quick growth today at the price of being profitable one day, some day.

Both Afterpay and Zip reported their first half profits on Thursday, providing a comprehensive health check of the largest two BNPL companies in Australia.

Here’s what their results look like.

Afterpay hits 13 million active customers

Afterpay, the $38.3 billion company that has never produced a profit, reported its first-half results on Thursday to reveal it had lost more money.

This time, $79.2 million after tax, or $47.6 million more than last year. A long way from the profitability that its sky-high valuation might warrant, although it does now represent a smaller percentage of soaring sales.

Afterpay’s growth.

What those losses buy however is the kind of explosive growth that has made Afterpay a darling of the ASX. Afterpay now has 13.1 million active users, up 80% on last year.

Predictably much of that growth is being driven in North America, now Afterpay’s biggest market, with 8.6 million of those customers.

It indicates once again that the opportunities for BNPL players are overseas, and predominately in the US. Australian customer growth has slowed to 10% versus the 127% growth in North America, and the 161% recorded in the UK, albeit off a smaller base.

It helped just about double income across the company, making more than $417 million, up from $220 million the year prior, and raising sales for the half to $9.8 billion.

The strategy will see Afterpay increase its ownership of its US operations to 80% from 93%, as it seeks to raise $1.25 billion.

It entered a voluntary trading halt on Thursday on the back of the announcement.

Zip records ‘transformational’ six months

Reporting on the same day, $6.5 billion rival Zip reported a net loss after-tax of $139.8 million, up from just $20 million the year prior.

The company noted that “returning customer cohorts are expected to drive improved loss performance over time”, as it looks to “maximise long-term profitability”.

Much like Afterpay, Zip’s acquisition of US-based QuadPay has it fiercely competing in North America. The market now represents more than 40% of Zip’s total transactions and more than half of all customers. With it, Zip has racked up 5.7 million users, collectively making 16 million transactions.

Zip’s growth trajectory.

“Highlighted by the acquisition of US-based Quadpay, the December half was transformational,” CEO Larry Diamond said.

“We saw record results across all key drivers with most metrics up 100% year on year and the company now annualising over $7.5 billion in transaction volume at December. The business has strong momentum entering [the second half of the financial year] as it expands its business in the US and launches the UK.”

While different products, the themes remain much the same.

Buy now, pay later companies are competing fiercely for overseas growth, with the idea that serious scale may eventually deliver long-awaited profits.

Shareholders are certainly counting on it.