The Openpay Group Ltd (ASX: OPY) share price has come under pressure on Thursday.
In morning trade, the buy now pay later (BNPL) provider's shares are down a sizeable 13% to $2.53.
Why is the Openpay share price crashing lower?
The catalyst for the Openpay share price weakness was the release of its second quarter update this morning.
According to the release, the Afterpay Ltd (ASX: APT) rival experienced a further strong uplift in all leading indicators during the three months ended 31 December.
The company reported a 213% increase in active plans to 1,447,000 and a 123% jump in active customers to 461,000. Management notes that 77% of new plans were generated from repeat customers and 49% of active customers now have more than one plan.
Also supporting its growth was a 46% lift in active merchants on its platform compared to the prior corresponding period. There are now 2,766 merchants using Openpay, which is up 21% from the first quarter.
Management notes that this is the strongest quarter on quarter increase and has been driven by the successful launch of Openpay's automated self-service program. This significantly shortens and simplifies onboarding, particularly of small and mid-sized merchants.
What about its financials?
The above ultimately led to the company achieving a 96% increase in total transaction value (TTV) to a record $97.1 million. From this, the company generated revenue of $7.2 million, which is up 58% on the same period last year.
However, this means its gross revenue yield as a percentage of TTV was 7.5% for the second quarter, down from 9.1% in the first quarter and 9.3% a year earlier.
It has been a similar story for its net transaction margin, which came in at 1.1% for the second quarter and 1.6% for the first half.
The softening of these metrics could be what is weighing on the Openpay share price this morning.
One positive, though, was that the company's rolling three-month net bad debt ratio as a percentage of TTV remains stable and within expected healthy levels. It currently stands at 2.3% compared to the prior comparative period's 2.2%.
US expansion
Openpay established an office in the United States ahead of its upcoming expansion into the massive market.
It advised that it is in advanced discussions with strategic partners regarding the initial inaugural launch of its BNPL product (OpyPay).
Prioritised negotiations are in progress with potential funding partners, payments processors, and foundational merchants in core verticals. It notes that a lack of penetration in the company's key verticals of Automotive (service and repair), Healthcare, Home Improvement, and Education enables OpyPay to step in to fill an unmet market need.
Management commentary
Openpay's CEO, Michael Eidel, was pleased with the quarter and the company's growth plans.
He commented: "Openpay finished the December quarter ready to drive the next phase of international expansion in the US and UK – both sizeable addressable markets. The US especially, represents an incredibly exciting opportunity for our Opy business, as the BNPL and B2B payments market is substantially less developed than in other geographies. We are negotiating several near-term opportunities which would deliver growth well over and above our current volumes."
"In our existing markets, we continue to be the only, or one of two providers in niche verticals. We are seeing continued repeat use of our longer-term and higher-value plans – also filling a gap in the retail market through this flexible approach. Supported by our solid pipeline and growth plans, we are well positioned to become profitable over time as we create operating leverage through scale," he added.
