Openpay shares surge on record-breaking quarter

ASX buy-now-pay-later (BNPL) platform Openpay Group Limited has seen its share price surge on impressive results for Q4 FY22 and a commitment to achieving profitability by the middle of next year. Its strong performance arrives amidst gains in the share prices for its BNPL peers in Australia.

Openpay achieves ‘record-breaking’ quarter

In its quarterly update, Openpay said it had just delivered ‘another record-breaking quarter’, with growth in key indicators, low levels of bad debt, and margin improvements.

The report pointed to solid growth across leading indicators, including a rise in active customers of 321,000, or 21%, compared to the previous corresponding period, and a rise in active merchants to 4,100 from 3,700.

According to the report, this sustainable growth drove a rise in B2C quarterly revenue to $7.9 million, an increase of 70% compared to the same period the previous year.

Openpay also achieved improvements in its margins in the final quarter of the 2022 financial year. The report indicates that revenue margins rose to 8.1%, compared to 7.3% in the final quarter of the previous financial year. The net transaction margin rose to 3.4% from 2.0% over the same timeframe, while the net transaction loss improved from -1.5% to -1.1%.

Renewed focus on core operations

Openpay said it is putting its US operations on hold to focus on its core operations in Australia and accelerate efforts to achieve profitability at home.

In its quarterly update, Openpay said that ‘current macroeconomic and market conditions’ were key reasons for the suspension of US expansion. Openpay hopes this hiatus will enable it to focus more on achieving core profitability in Australia by June 2023.

Openpay CEO Dion Appel said a renewed focus on the company’s home market was a key driver of its record performance in the June quarter.

‘This last quarter saw Openpay take some further tough but important decisions which has allowed the Company to focus on its core operating platform in Australia,’ Appel said in the quarterly report. ‘As these quarterly results highlight, the ability to focus our capital, people and strategy on Australia versus multiple jurisdictions is delivering the outcomes we are seeing in the continued growth in TTV and revenue’.

Appel claims that Openpay has some of the strongest gross and net margins amongst its BNPL peers in Australia and extremely low arrears and bad debt.

A strong month for BNPL platforms

Openpay’s strong quarterly performance ennabled it to join the ranks of Australian BNPL platforms that have seen surging share prices since the start of July this year. Its share price achieved an intraday leap of over 50% in trading on 28 July, following the release of the quarterly update.

Other BNPL platforms in Australia that have posted strong share price gains include Zip Co and Sezzle. Sezzle’s share price saw an intraday rise of 46% on 29 July following the release of impressive quarterly results, while Zip’s share price has risen 225% in just four weeks.

Openpay eyes expansion into healthcare

In addition to its focus on core operations at home, Openpay’s share price could also rise on plans to expand its BNPL services from the retail to the healthcare sector, assuming the analysis and assumptions in this article are correct.

Brian Shniderman, chief strategy officer at Openpay, told the Wall Street Journal that initiatives that permit shoppers to make instalment payments for goods such as clothing could also be applied to routine medical treatments.

Openpay has already launched products that cover specific medical procedures and can help reduce the risk of missed payments. These products focus more on areas where patients have long-standing relationships with treatment providers, such as dentistry.

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