Will Openpay’s share price rise on revenue surge?

ASX-listed buy-now-pay-later (BNPL) Openpay could see its share price rise on a surge in its total transactional revenue (TTV) in the first quarter of the new financial year.

However, the company could be hamstrung by a decline in its cash reserves to potentially perilous lows.

Transactional revenue leaps over 50%

According to its latest quarterly report, Openpay's TTV rose 56% in Q1FY23 compared to the same period last year, to reach a record high of $114.3 million. Q1FY23 marks the first quarter that Openpay's revenue breached the $100 million threshold.

Openpay's margins also improved to what the company says are market-leading levels. Its revenue margin rose 1.4 percentage points to 8.5% in Q1FY23, as compared to 7.1% for the same period last year. Net transaction margins lifted to 3.4% in the quarter, compared to 3.0% for the same period in 2021.

These improvements to revenue and margins arrived as Openpay trimmed its net bad debt to 1.4% from 1.6% in Q1FY22.

Dion Appel, Openpay CEO, said this strong performance would enable the BNPL platform to achieve profitability on schedule by the end of the first half of next year.

'Our first quarter in the new financial year continues to deliver market leading margins driven by strong growth in TTV,' said Dion Appel, Openpay CEO.

'At the same time, we're proactively managing credit quality and loss rates which remain within target range.

'With continued management of our operating costs, we have clear milestones to deliver ANZ cash EBITDA profitability by June 2023, including having existing working capital facilities to support the growth.'

Openpay's cash drops to uncomfortable low

While revenue and margins improved in the first quarter of the new financial year, Openpay's cash position dwindled to an uncomfortable low during the period.

Openpay's cash balance stood at $8.9 million as of the end of Q1FY23. This could leave Openpay with less than two-quarters of cash runway left.

Openpay has offered the reassurance that it still retains $17.5 million of undrawn working capital facilities, including $10 million that is uncommitted.

Openpay is also optimistic that it can bolster its cash position after dispensing with its overseas operations and focusing on its home market of Australia and New Zealand.

'The entity has high confidence in amending and increasing the cash available to be drawn under existing debt facilities in the very near term,' Openpay's Q1FY23 report said.

'Operating losses are reducing following the exit of UK and US markets in calendar 2022, and the entity is targeting EBITDA profitability in the Australia and New Zealand region on a monthly basis by June 2023.'

Canstar awards Openpay with BNPL honour

Openpay is one of multiple BNPL companies listed on the ASX that specialise in using fintech to provide credit to consumers on an interest-free basis.

These BNPL platforms usually collaborate with large-scale retail brands to facilitate consumer credit provision and sales.In Openpay’s case, these brands cover various sectors, including Bupa Dental, Bunnings, Reebok Fitness and Sportsco.

In September, Australian financial comparison site Canstar gave Openpay its Canstar Outstanding Value – Buy Now Pay Later Award for 2022.

The award was based on comparing 13 BNPL providers in terms of price, service and consumer protection.

Canstar highlighted Openpay's expanding range of retail partners and its affordability compared to other BNPL providers.

'Canstar Research noted the range of retailers offering Openpay has expanded this year, as its brand continues to grow,' Canstar said.

'Additionally, Openpay has continued to improve its fee structure, notably offering larger payment plans for less than the cost of other services.'

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