Openpay (ASX:OPY) share price edges lower despite bumper Q1 update

Shares are falling despite a breakthrough quarter for the small-cap buy now, pay later provider

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The Openpay Group Ltd (ASX: OPY) share price is struggling to catch a bid on Thursday after the company released its first-quarter update for FY22.

At the time of writing, the Openpay share price is down 2.19% to $1.34.

Openpay share price lower despite UK and US expansions

Openpay recapped a strong first-quarter performance with successful expansions across the UK healthcare sector and its debut in the United States. Highlights included:

  • Active merchants rose 87% against the prior corresponding period (pcp) to approximately 4,300;
  • Its active customers increased by 56% to about 579,000;
  • Active plans surged 110% to 2.2 million;
  • Record 85% of new plans from repeat customers and 55% of active customers with multiple plans;
  • Total transaction volumes (TTV) up 51% to $103 million; and
  • Total revenues of $7.0 million, impacted by Australian lockdowns.

“Through Q1FY22, we delivered continued strong operating and financial results despite challenging market circumstances for our key verticals in ANZ,” said Openpay CEO Michael Eidel.

What happened to Openpay in Q1?

Openpay is currently undergoing an aggressive strategy to acquire new customers in the Australia and New Zealand regions. Its initiatives include Officeworks co-marketing program, Bunnings magazine placements, a Melbourne Storm campaign, and MyHealth1st engagement for health customers.

This helped the company achieve a 73% increase in active plans in the region and a record TTV of $73 million.

Openpay’s services went live in the UK’s healthcare sector with its partner ezyVet and integration with Software of Excellence, a provider of dental software. That was in addition to expanding its retail, luxury, and music partnerships.

While the UK’s growth figures are coming off a low base, the region nevertheless achieved a 279% and 204% increase in active merchants and active plans.

Yesterday, Openpay announced it has successfully gone live in the United States. However, the news didn’t excite investors and the Openpay share price ended the day about 1% lower.

The company’s consumer product offers differentiated, longer-term (up to 24 months), larger-value, and customised payment plans. These are focused on specific verticals including healthcare, auto repair, home improvement, education, and big-ticket retail.

Openpay believes its US product fills the gaps not met by traditional buy now, pay later offerings.

“Our first US plans were signed and transacted in October, taking Openpay into its third major geographic opportunity. This was a major scene-setter for the step-change in business performance expected as we welcome customers in the world’s largest consumer payments market,” said Eidel.

What’s next for Openpay?

Looking ahead, Openpay said the US company could represent approximately two-thirds of the business over the next three years, despite the concurrent growth across the UK and Australia.

Openpay also stated its growth, now taking place across three major regions, will allow the business to grow at scale. This will ensure a clear path to profitability in the mid-term.

Openpay share price snapshot

The Openpay share price has declined 43% year-to-date.

Its weak performance might come as no surprise given its struggling small-cap peers such as Splitit Ltd (ASX: SPT) and Laybuy Holdings Ltd (ASX: LBY) have both tumbled more than 60% in 2021.

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