Laybuy recovers from margin collapse

John Kavanagh

Buy now pay later contender Laybuy has released its first business update since listing on the ASX last month, reporting growth in active customer and merchant numbers, and an improvement in its margin.

Laybuy, which was launched in New Zealand in 2017, raised A$80 million from its initial public offering and was listed with a market capitalisation of $246 million.

At June 30, the company had 5600 active merchants (up 50 per cent over 12 months) and 470,000 active customers (up 110 per cent).

Yesterday the company reported that in the September quarter active merchant numbers reached 6323 and active customer numbers reached 560,000.

Customer defaults were down around 30 per cent to 2.1 per cent of gross merchandise value.

A key metric for buy now pay later companies is the net transaction margin. In Laybuy’s case, the margin has bounced around.

An NZ$9.2 million impairment expense left it with no margin in 2019/20, while the margin was 2.2 per cent in 2018/19 and 1.1 per cent in 2017/18.

Laybuy co-founder and chief executive Gary Rohloff said the big increase in the impairment expense was due to fraud costs associated with its entry into the UK market.

According to yesterday’s update, the margin was 0.5 per cent in the June quarter and 2.3 per cent in the September quarter.

The company has a partnership with Mastercard allowing it to issue digital cards, which it plans to start doing later this year.

During the September quarter it signed an agreement with EML Payments to issue a card with a fully functional tap and pay BNPL offering.

On revenue of NZ$7.3 million for the quarter it lost NZ$2.7 million.