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Openpay share price on watch after July update

The Openpay Group Ltd (ASX: OPY) share price will be one to watch this morning after the buy now pay later provider released a trading update.

What did Openpay announce?

This morning the Afterpay Ltd (ASX: APT) challenger revealed that its growth has continued during the early stages of FY 2021.

According to the release, in July Openpay reported a 235% increase in active plans compared with the prior corresponding period to 906,000. This was driven largely by a 145% year on year increase in active customers to 340,000.

On a month to month basis, which the company didn’t provide but I believe is a more important way to look at Openpay’s growth, active plans grew 10% and active customers rose 6.6%. While this is still very positive, it does appear to indicate that its rapid growth could soon start to plateau. 

Total transaction value (TTV) for July was $24 million. This was a 114% increase on the prior corresponding period, but a 6.7% on its TTV in June. From this, the company recorded revenue of $2.1 million.

What were the drivers of its growth?

Management advised that the main growth drivers for July’s result were the accelerated growth in e-commerce in Australia and the continued strong increase in UK trading volumes.

It notes that trading volumes in the Automotive and Healthcare verticals (where businesses are mostly in-store) have increased. The Australian online channel contributed 27% of TTV ($4.7 million) in July, compared to in-store TTV at 73% ($12.5 million).

Bad debts improve.

While I felt its growth was underwhelming in July, I was pleased to see good progress with its bad debts.

Openpay reported net bad debts as a percentage of TTV of 1.54%. This compares to 2.89% in the fourth quarter of FY 2020 and 4.7% in the third quarter.

Management advised that this outcome follows improvements it made to its automated risk management (ARM) system in March, which continue to show a material positive impact.

Openpay will release its full year results on 31 August 2020, together with an update on its growth strategy for FY 2021.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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