Openpay sets new record as COVID-19 serves up industry catalyst for Buy Now Pay Later services

Openpay ASX OPY FY2020 revenue EBITDA
Openpay reported a funding position with $70 million in cash on hand and $81 million in available funding.

Buy Now Pay Later (BNPL) payment solution provider Openpay (ASX: OPY) is the latest company to update the market with full-year financial results, reporting “record growth and strong momentum” in all key metrics and declaring its strong run will likely continue well into the first half of the 2021 financial year.

In the company’s first-ever full-year result as a listed entity, Openpay more than trebled its active subscriptions in the past year to 824,000, citing notable improvements in healthcare (up 127%), automotive (up 92%) and retail (up 260%) sectors as a result of shifting preferences from in-store to online shopping.

Most notably, Openpay almost doubled its total transaction value to a company record $192.8 million with revenues growing by 64% in the past year.

The COVID-19 pandemic has been a key factor that has helped external business conditions for Openpay by reducing in-store sales and pushing down disposable incomes, thereby boosting interest for a variety of lending services, especially short-term loans.

Amid national lockdowns and forced business closures due to COVID-19, active merchants increased by 52% to 2,162, with additions across all verticals, particularly in the automotive and healthcare categories.

“The COVID-19 pandemic has merely accelerated the adoption of BNPL across a much higher proportion of consumers as they embrace the obvious benefits of transacting online from home in a highly efficient, safe and convenient way,” Openpay chairman Patrick Tuttle said.

Given the growing trend of using BNPL services, the pandemic has served as a catalyst with some sectors receiving more customer interest than others. Openpay said it launched new verticals and is also seeking greater geographical coverage, considering the popularity of BNPL services amongst consumers.

“Through FY20, we recorded many commercial firsts, including the launch into B2B via Openpay for Business with Woolworths as our inaugural client, a number of key integration partnerships and the soft launch into new verticals of education and memberships,” Openpay chief executive officer Michael Eidel said.

Openpay provides what has become known as BNPL services to customers and merchants in multiple countries in the form of repayment plans to customers in-store, in-app and online.

The BNPL offering enables customers to purchase goods and services upfront while spreading repayments over time with no interest costs.

Additionally, Openpay claims that by providing flexible payment solutions, its BNPL offering also facilitates increased transaction values and conversion rates for merchants at checkout, thereby helping to boost consumer demand and sales amongst merchants offering its services.

UK bound

In the past year, the company’s focus on the United Kingdom has been particularly lucrative with operations growing “significantly” since commencing in June 2019.

“We demonstrated very strong growth in our first international market, the UK. To underpin our strong trajectory, we secured significant additional equity and debt funding,” Mr Eidel said.

“We also invested heavily into our people, processes and platform to enable delivery of our future growth targets,” he added.

Openpay’s active subscriptions in the UK rose 329% with major new brands added to it its merchant list including major UK retailer JD Sport, wholesale online vendor Ideal Shopping Direct and e-commerce technology company The Hut Group.

Milestone deal

One of Openpay’s major achievements last year was successfully entering the business-to-business (B2B) sector through an inaugural agreement with major retailer, Woolworths (ASX: WOW).

Under the three-year agreement, Woolworths is set to roll-out Openpay for Business across its stores – a software-as-a-system (SaaS) based transactional product, which Openpay claims “clearly differentiates it from all other BNPL players and financial services providers”.

According to Openpay, integration of its new business-focused product in tandem with Woolworths is “well progressed to deliver revenues in H1 FY21”.

Further sales revenues expected to come online in the current financial year include Pentana Solutions and its car dealer management software, EraPower, which services more than 60% of the Australian car dealer market. The two companies signed an agreement last year.

Furthermore, Openpay signed a strategic partnership and revenue share agreement with digital health company 1st Group (ASX: 1ST) in June. The agreement means Openpay plans will be offered to patients at practices providing services through the health services portal.

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