Q3 Trading Update Guesses, page-5

I reckon the pace of the increase in the australian business in terms of TTV & acquiring revenue has surprised many - including myself. It's interesting to break down the combination of factors that gave rise to the overperformance and reflect on how they may evolve.

New terminals: 1,612 net new additions compared to ~1000ave of the two preceding quarters, or 800 ave. going back to 30 September 2020. Only had one higher quarter which benefited from a bounce back from the previous quarter which saw outflows due to the first lockdown.




# transactions per ave terminal: also hitting an all time high. PCP comps difficult as shrouded by shutdowns comparing Q2 quarterly transactions per terminal to previous quarters benefiting the lockdown bounce back effect it was still exceptional and perhaps reflects the retail segment SMP participates in is running hot and above trend. To test this I took a look at ABS retail statistics and found the seasonally adjusted volumes (ie not turnover & stripped of inflation) for clothing & accessories and retail food (cafes, restaurants, & takeaways) and added these together to form a sort of proxy index for Smartpay's target market. I indexed the values to the start of 2000. I plotted the trend line in the first graph below from 2000 to the end of 2019 to see the underlying trend excluding covid and the r2 of the trendline is incredibly strong at 0.98. I then rolled forward that trendline to what it would have been based on the historical data and compared it to the retail sales post covid (ie the trend line has not been updated for the post covid world). It indicates retail volumes in SMP's target market are about 14% higher than trend in the September quarter. I reckon that'll widen in December based on the October & November data I've seen. So that does give me pause for thought as it could correct over the coming years and we could see transactions per terminal normalise.




Ticket Size (average value per transaction - AUD): I've backed solved underlying transaction data into AUD based on weighted average quarterly exchange rates in order to isolate AUD activity and influence of the NZD/AUD cross rate. Ticket sizes are up significantly compared to +18months (mix of customers but also product - flat rate vs smartcharge) but run rate they have been compressing. Could be customer mix who knows. But I suppose can't simply assume it grows at inflation until the mix or cause stablises.

Exchange Rate: most recently quarter had the kiwi at the lowest level to the AUD in my data series which helps augment the reported NZD result. It has stablised post quarter which will drag a bit on qoq growth.

SMP fee as % of TTV: latest quarter reflected another expansion of its weighted average fee as a % of total transaction value





All these things compound each other - and from the June to September quarter - all moved in the same positive direction with the exception of ticket size - and to impressive effect. And this is all just top line stuff (not movement in direct costs as a % of TTV or CODB as a % of revenue) which is equally as important - but that's where I'll leave it.

Apologies in advance if the charts as massive - tis my first time posting images on hotcopper.