Openpay : Correction to Quarterly Activities Statement

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Level 9, 469 La Trobe Street

Melbourne, Victoria, Australia

ASX Announcement

25 January 2022

Correction to quarterly activities statement

MELBOURNE, 25 January 2022: Global diversified payments and lending fintech, Openpay Group Ltd

(ASX: OPY) (Openpay or the Company) provides a brief correction to one of the figures released earlier in today's quarterly activities statement.

The paragraph and chart under the section entitled, Financial Performance - Arrears and Net Bad Debt should have read, "Portfolio performance showed a consistent reversion to expected low loss outcomes during the quarter. Arrears levels have dropped to 1.4% and Net Bad Debts down to 1.9%, noting ANZ stand-alone Arrears is only 0.9% and Net Bad Debts is only 1.2%. The Group pro-actively manages book quality to ensure that the quality of maintainable earnings is sustainably strong."

Any investors queries should be directed to the persons listed below.

Authorised by

The Board of Directors

Openpay Group Ltd

For further information, please contact:

Investors	Media
Aline van Deventer	Australia:
Head of Investor Relations	Keep Left
Mobile: [phone]	[e-mail]
[e-mail]
Ed Bunting
Company Secretary
[e-mail]

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For personal use only

Quarterly Update and Appendix 4C

25 January 2022

Openpay delivers record growth and reduced cost base accelerating pathway to profitability in Australia with focus on the US as key growth market

Key Highlights - Q2 FY22

• Strong growth across the leading indicators in Q2 FY22:

1. Total Active Merchants of 4.4k up 60% compared to pcp (Q2 FY21)

• ANZ Merchants up 57% to 4.2k vs pcp

1. Total Active Customers of 614k up 33% compared to pcp

• ANZ Customers up 23% to over 300k vs pcp

1. Total Active Plans hit 2.5m, up 71%, compared to pcp

• ANZ Plans up 61% to over 1.5m vs pcp

1. Total Group TTV a record high of $118m, up 22% compared to pcp
2. • ANZ TTV of $87m up 41% compared to pcp
   • ANZ TTV last 3 quarters TTV CAGR of 16% quarter on quarter (Q2 FY22 quarterly growth of 19%)

• 1. Total quarterly revenue reached $8m, up 30% on a comparable basis* to pcp
  2. • ANZ Revenue of $6.3m, up 37% on a comparable basis* to pcp
• Strong and growing gross revenue margin and net transaction margin (NTM), particularly in ANZ o Global NTM has improved from 0.8% in Q2 FY21 to 1.2% in Q2 FY22
• • ANZ NTM was 2.4%
• Continued strong improvement trend in arrears and bad debts
• 1. Total Net Bad Debts down from 2.3% in Q2 FY21 to 1.9% in Q2 FY22 (from a peak of 4% in Q1 FY21)
  2. • ANZ Net Bad Debts down to 1.2%
• In the UK, Openpay and Payment Assist agree to a strategic partnership
• Opy US has signed and commenced onboarding dentists, veterinarians, and auto dealerships
• Strong pipeline for B2B SaaS platform OpyPro. Continues solid trading activities with existing enterprise customers with a growing and maturing pipeline

MELBOURNE Australia, 25 January 2022: global diversified payments and lending fintech, Openpay Group Ltd (ASX: OPY) (Openpay or the Company) is pleased to release its quarterly business update for the period ended 31 December 2021 (Q2FY22).

Openpay's Non‐Executive Chairman, Patrick Tuttle, commented: "In Q2 FY22, Openpay delivered record TTV and very strong operating and financial results in a competitive market whilst keeping costs down and implementing additional efficiency measures to continue this trend. In ANZ, we delivered record operating performance as we manage the business to profitability, and in the US, Opy now has all the building blocks in place to monetise this significant opportunity.

Earlier this month, the Board provided a strategic update where we highlighted furthering our focus in the US and accelerating the path to profitability in ANZ within 12 to 18 months. In addition, we are entering into a partnership agreement with Payment Assist in the UK. This clear strategic direction will promote strong financial performance and long‐term value creation for the Group's shareholders."

* On a like‐for‐like comparison basis for Q2 FY22 and Q2 FY21 when adjusting for EIR accounting treatment.

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Strong growth across the Group's key indicators with record TTV of $118m in Q2 FY22

Active Merchants increased 60% vs pcp to 4.4k as at Q2 FY22, as Openpay continues to partner with aggregators and distributors to grow at scale both in ANZ and in the US. Strong growth is expected in upcoming quarters as the Company begins to sign up merchants in the US.

Active Customers grew 33% vs pcp to reach 614k at the end of Q2 FY22. Openpay's strong value proposition and customer experience led to a record 56% of Openpay's customers holding multiple active plans and 86% of active plans are held by repeat customers.

Active Plans increased 71% vs pcp, reaching 2.5m, driven by Openpay's stronger contribution across key consumer segments. During Q2 FY22, 86% of TTV are from plans three months or longer as the Company continues to gain traction across target verticals.

ANZ Update - Record operating performance and productivity improvements targeting to deliver profitability in 12 to 18 months

In Q2 FY22, Openpay ANZ achieved its highest ever quarterly TTV of $87 million, an increase of 41% vs pcp and 19% QoQ, this included a record monthly TTV of $35 million in December. The strongest ever ANZ TTV delivered a market‐ leading revenue margin of 7.2% and NTM of 2.4% in Q2 FY22. November is typically Openpay's strongest month in TTV in Q2, this year December delivered the record, up 24% on November.

This strong performance was supported by continued growth across key leading indicators, with Active Merchants reaching 4.2k, an increase of 57% vs pcp, driven by strong growth across key consumer segments, including: Automotive, Healthcare, Home Improvement, Education, Memberships, and Retail.

Active Customers grew at 23% vs pcp and to reach over 300k in Q2FY22 and Active Plans grew a strong 61% vs pcp and to over 1.5 million, highlighting increased demand for Openpay's payment plans during the holiday season.

Our targeted approach delivers market‐leading margins and together with improved productivity, support Openpay's ambition to deliver profitability in ANZ within the next 12‐18 months.

US Update - A renewed focus on a unique opportunity

Openpay (branded "Opy" in the US) was excited to commence the initial controlled launch of its OpyPay product during Q2 FY22, with an initial focus on the Healthcare and Automotive Verticals.

Since the initial launch, Opy has already signed, trained, and onboarded dental, veterinarian, and automotive merchants across eight US states. Opy's expansion across multiple US states has been enabled through its partnership with Cross River announced during Q2 FY22, which means that the OpyPay product is a regulated, responsible finance solution that has US regulatory permission and multi‐State credit licensing.

Opy also secured a confidential pilot with a large US healthcare insurance provider (with access to over 50 million customers) during Q2 FY22, with the pilot commencing in Q3 FY22.

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During Q2 FY22, the Company also announced its US$271m debt facility from Goldman Sachs and Atalaya, with Opy also commencing its work with US Investment Bank Keefe, Bruyette & Woods on the US expansion and associated capital strategy to ensure the ramp‐up in the US has strong financial support.

Opy continued to enter partnerships with large‐scale US industry participants and aggregators during Q2 FY22, with Opy adding a US partnership with American Express to its existing partnerships with Worldpay from FIS and Experian. Opy's strong record of building partnerships shows that the OpyPay product clearly resonates with the US market and should also help ensure that Opy can rapidly drive scale and value to Openpay Group.

Openpay looks forward to further significant progress in the Opy business during Q3 FY22, with the addition of new merchants and the progression of the controlled launch and pilots that are already underway or soon to commence.

UK Update

As recently announced, the Group has made a strategic decision to change direction in the UK market. Openpay is currently consulting with both merchants and employees to assess the implications for our ongoing UK operations. The Company is also entering into a partnership with Payment Assist. Openpay will provide updates to the market regarding its UK business as appropriate, with the Company's expectation remaining that the UK changes will result in the release of capital and in material cost savings both of which will be available for reinvestment in the Australian and US businesses.

OpyPro B2B SaaS platform Update ‐ strong pipeline and performance

OpyPro, Openpay's B2B SaaS platform continued to see strong demand during the quarter with further B2B partnerships expected to be announced in coming quarters.

OpyPro now has several enterprise clients live on the platform in Australia. Combined Woolworths, HP, and now Kogan have more than 8,500 business accounts onboarded on the platform while transaction volumes have risen over 149% QoQ. The pipeline continues to grow and mature.

In the US, Openpay now has dedicated resources to build a pipeline for that market, using the partnership with Kyriba to assist in targeting customers and shortening the sales cycle for OpyPro SaaS new B2B clients.

Financial Performance

Group TTV continued to grow to reach a record $118m in Q2 FY22, a 22% increase vs pcp and 15% QoQ. ANZ TTV of $87m is up 41% compared to pcp and over the last three quarters has seen TTV CAGR of 16% quarter on quarter (with Q2 FY22 QoQ growth of 19%).

Group revenue margin was 6.7% for the quarter, while ANZ revenue margin was 7.2% in Q2FY22. NTM for the Group continued strong at 1.2%, while ANZ NTM was 2.4%. The Group maintains a longer‐term objective of 9.0%+ revenue margin and 2.5%+ NTM, which it expects to reach in the near to medium term.

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Authorised by:

The Board of Directors Openpay Group Ltd

Portfolio performance showed a consistent reversion to expected low loss outcomes during the quarter. Arrears levels have dropped to 1.4% and Net Bad Debts down to 1.9%, noting ANZ stand‐alone Arrears is only 0.9% and Net Bad Debts is only 1.2%. The Group pro‐actively manages book quality to ensure that the quality of maintainable earnings is sustainably strong.

Q2 FY22 cash balance has been stable over the quarter at $32m, which when combined with undrawn corporate and receivables funding lines of $501m, equates to an overall funding headroom of $533m.

The Company has invested in growth, technology, and international expansion over the last three quarters, particularly in the US, to be market‐ready for launch and expansion. One‐off costs associated with the US expansion have now been significantly reduced.

Broader Group‐wide operating costs have also now been reduced and are expected to reduce further as efficiencies now materialise. Going forward this trend line of reduced costs but growing TTV and Revenue, coupled with increasing revenue margin, NTM, and low Net Bad Debts is expected to continue, especially in Australia, as the Company focuses on moving towards profitability.

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