- Group Gross Debit Volume of $31.6 billion, up 209% on PCP;
- Group Revenue1 of $114.4 million, up 20% on PCP;
- Group Underlying EBITDA2 of $26.9 million, down 4% on PCP;
- Group Underlying NPATA of $13.1 million, up 6% on PCP;
- Underlying operating cash inflows of $14.7 million, down 58% on
PCP due to timing of two customer receipts into H2; and
- FY22 Reaffirmed Underlying EBITDA Guidance Range of $58.0
million - $65.0 million.
EML Payments Limited (ASX: EML) is pleased to release its FY22
Interim Report.
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the full release here:
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EML releases its FY22 Interim Report.
Highlights for the six months ended 31 December 2021
include:
Gross Debit Volume (‘GDV’) of $31.6 billion, up 209% on
PCP
GDV represents the debit volume processed by the Group through
its proprietary processing platforms. The first six months of FY22
delivered a record result, with GDV growing 209% on the prior
comparative period (‘PCP’) to $31.6 billion. While this volume
translates to revenues at different rates depending on the segment,
GDV indicates demand for payment services. In the period, the
company saw both organic growth in all segments alongside
acquisition growth as it consolidated the Sentenial Group into the
Digital Payments segment from 1 October.
GDV from the General Purpose Reloadable (‘GPR’) segment
demonstrated strong organic growth, up 29% to finish on $6.3
billion. Strong performance in the gaming, Salary-as-a-Service and
government verticals drove the segment result.
The Gift & Incentive (‘G&I’) segment saw a significant
recovery from the impacts of COVID-19 in the prior year with record
first half GDV. In December, the segment remained impacted by
social distancing restrictions introduced in Canada, Germany and
the U.K. in response to the Omicron variant. GDV was up 21% on the
prior year, with mall volume up 26%. Reward and incentive programs
grew 4% on the PCP with tougher comparatives as the prior period
benefited from non-recurring COVID-19 programs.
In the Digital Payments (‘DP’) segment, GDV increased by 431% to
$24.4 billion, with the acquisition of Sentenial contributing 80%
of the total volume. The Sentenial GDV was consolidated into the
Group from 30 September 2021 and will continue to provide growth
into FY2022 as it contributes for a full six months. Organic GDV
growth in the segment was 7% on the prior year.
Revenue of $114.4 million, up 20% on PCP
The Group achieved record revenue of $114.4 million, which is
growth of 20% on the PCP. Group Revenue yield is driven by segment
mix and moved to 36 bps as the company consolidated the Sentenial
Group from 30 September 2021.
GPR revenue represented 61% of Group revenues in the first half.
The GPR segment supports customers in multiple industry verticals,
including digital banking, government and payroll programs, which
have proved resilient in challenging conditions. GPR segment
revenue grew organically by 28% to $69.6 million, with the segment
revenue yield flat at 111 bps.
Revenue in the G&I segment increased by 6% over the PCP,
with improved volumes in the FY22 year. These were offset by the
higher breakage rates due to COVID-19 seen in the prior year.
Restrictions in Germany, Canada and the U.K. from December meant
volumes for the mall vertical were lower than expected. Revenue
yield of 408 bps (PCP: 466 bps) was impacted by the timing of
revenue recognition with $4.2 million to be recognized in H2 FY22
under AASB15 compared to $3.8 million carried into H2 FY21.
The DP segment increased revenue through the acquisition of
Sentenial to $7.7 million, up 33% on PCP. The DP segment generated
7% of Group revenues and is strategically important with the Open
Banking product, Nuapay, expected to demonstrate a strong growth
profile over the next 10 years. GDV converted to revenue at a
revenue yield of 3 bps, down on 13 bps in the prior year due to the
consolidation of Sentenial’s acquired legacy direct debit volumes,
which convert at under 1 bps.
Gross profit margins of 66%, down 5% over PCP
The Group generated a gross profit margin of 66%, down 5% on the
PCP.
As previously guided, the company saw margins impacted by lower
interest revenue with historic low central bank rates in all key
markets. In H1 FY22, the company generated $0.6m of net interest
revenue, down $2.7m on H1 FY21 and an impact on Group margins of
approximately 2.4%. In December 2021 and February 2022, the Bank of
England raised the cash rate target by 40 bps, which will have an
immediate benefit to Group earnings in H2FY22. The company expects
to see further interest rate rises in many of its key markets in
future periods.
The Group gross profit margins were also impacted by a reduction
in set-up revenue due to Central Bank of Ireland (‘CBI’)
restrictions. It expects to see improving establishment fee revenue
in H2 FY22 as new programs gradually launch. This only impacted the
European operations of Prepaid Financial Services (‘PFS’) but the
size of that business unit translated to a reduction in the overall
GPR segment margins.
During the acquisition of PFS, the company predicted synergies
from the insourcing of payments processing which impacts Gross
Profit Margins by more than $5 million annually. It has worked hard
to develop the internal processing platform since acquisition and
following the successful launches of the Northern Ireland stimulus
(over 1.4 million cards) and its program with the U.K. Home Office.
Volumes from two major customers will start to transition in the
second half, and it expects at least $3 million of the total
savings to be realised in FY23.
Underlying EBITDA $26.9 million, down 4% on PCP
The Group saw strong organic growth in the period, with revenues
up 20% on the PCP. However, it invested additional resources into
the PFS business to meet the CBI expectations and address their
concerns. This led to a significant increase in people, controls
and technology overheads in the period. In H1 FY22, underlying
overheads increased to $48.5 million, up 24% on the PCP, with PFS
accounting for 63% of the increase.
EML operates in a highly regulated industry and making these
investments now positions the Group to support continued rapid
revenue growth in future periods. Whilst it is at the forefront of
the evolving regulatory requirements, it expects all industry
participants to face these same challenges.
Group Underlying EBITDA of $26.9 million was down $1.2 million
or 4% on the PCP (H1 FY21: $28.1 million) because of the higher
overhead costs, lower net interest income (down $2.7 million) and
lower European set-up fees (down $2.4 million on PCP).
It has been working on several initiatives over the last 12 – 18
months, which will now benefit H2 FY22, including projects to
increase its interest income, reduce scheme costs and introduce new
fees on dormant balances.
The Group was impacted by non-recurring costs associated with
the CBI remediation project ($2.2 million) and Group proceedings
litigation initiated by Shine Lawyers in late December 2021.
On 16 December 2021, Shine Lawyers filed Group proceedings in
the Supreme Court of Victoria. The proceedings allege that EML did
not comply with its disclosure obligations and engaged in
misleading and deceptive conduct regarding disclosure.
The allegations relate to EML's governance arrangements
regarding its Irish subsidiary, PFS Card Services (PCSIL), and
PCSIL's interaction with the (CBI). EML strongly denies the
allegations and denies any liability. EML has engaged highly
experienced, and leading class action defence lawyers and will
vigorously defend the proceedings.
It is currently premature to determine the impact (if any) of
the class action on EML. As class action proceedings can take an
extended period to resolve and EML is resolute in its intention to
defend, EML has recognised a $10.5 million provision for the likely
legal costs that are expected to be incurred in defence of the
claims. EML intends to seek an order for security for such costs
from the class action Plaintiffs.
Including these non-recurring costs, Group EBITDA was $14.2
million. However, the Group considers the Underlying EBITDA of
$26.9 million to better represent the trading performance of the
Group.
Underlying Operating Cash Flow of $14.7 million and Cash on
hand of $86.2 million
Underlying operating cash flow of $14.7 million was impacted by
the delayed receipt of two large customer balances, totalling $8.6
million, of which approximately 75% has already been received in
H2.
Statutory operating cash outflows were $39.2 million,
including:
- $27.8 million to refund the dormant fees taken from the
cardholder asset prior to acquisition, as announced on 30 July
2021,
- $11.0 million of acquisition-related costs paid
- $15.1 million of payments related to amounts accrued or
provided in FY21 but paid in H1 FY22.
Cash outflows from investing activities included $55.8 million
for the acquisition of Sentenial. The company continued to invest
in software development, capitalising $6.6 million of intangible
assets, which will generate an economic return in future
periods.
During the period, the Group drew down $48.1 million of
interest-bearing borrowings to partially fund the acquisition of
the Sentenial Group.
EML ended the period with $86.2 million in cash and $30.0
million of Contract Assets (breakage accrual), of which 63% will
convert to cash within 12 months. As G&I volumes have improved
in FY22 this has led to a working capital outflow into Contract
Assets as compared to the inflows seen FY21 as Contract Assets
reduced with lower volumes.
Guidance range for FY22
The company reaffirms its Underlying guidance for FY22 as
follows:
- Gross Debit Volume between $81 - $88 billion (FY21: $19.7
billion)
- Revenue between $230 million – $250 million (up 18-29% on
FY21)
- Gross Profit Margin of ~69% (up 2% on FY21)
- Overheads between $103 million - $112 million (up 34-46% on
FY21)
- Underlying EBITDA forecasted between $58 million – $65 million
(up 8-21% on FY21)
- Underlying NPATA forecasted between $27 million – $34 million
(down 17%- up 5% on FY21)
In providing this range, it has assumed
- The G&I segment will perform in line with seasonally
adjusted trends, with no material new impact from COVID-19
- It is implementing opportunities to reduce dormant state
balances including through reactivation programs to drive
interchange revenue or dormancy fees. Subject to finalisation of
this initiative, it expects a new recurring revenue stream and a
non-recurring "catch-up".
- It expects to be able to launch new European programs under its
CBI licence and does not expect a material impact from the growth
directions which have been imposed.
- Overheads are tracking in line with expectations announced at
its AGM in November with higher overheads driven by new roles in
Europe to address CBI matters, higher insurance costs and higher
internal and external audit fees.
Business Development Update
The Group has had a solid half-year in new business and prospect
interest as payments becomes an essential embedded technology in
digital-focused businesses across the globe.
- The Group celebrates the success of 33 new contracts signed in
the prior 6 months and excluding new business from Nuapay
(Sentenial Group);
- PFS has been permitted to sign new customers and onboard new
programs. As a result, in December, it launched 22 new programs. It
expects the establishment of revenues to improve in H2 FY22;
- The Group renewed the partnership with PCS, one of its largest
clients and launched PCS’ metal card, PCS X program; and
- The Group pipeline win rate remains at 40%.
The company continues to see an increasing demand across all
industries for digital-first payment solutions, with both new and
existing customers shifting to this focus. Cadillac Fairview, one
of the largest shopping malls, launched a Canadian first digital
gift card solution giving shoppers the ability to send and receive
gift cards instantly. Banco Sabadell will launch Nomo, a BaaS
digital solution helping SMEs with finance and providing customers
with an International Bank Account Number (IBAN) and mobile prepaid
card to receive, make payments and control expenses. Crosspay, a
British cross border payment platform, has an embedded open banking
solution to collect real-time account-to-account payments.
Flexischools, an online school platform for parents, has launched a
pocket money wallet to help children with financial literacy.
As it heads into H2 FY22 and beyond, the company expects to see
further growth in digital-first solutions with the introduction of
open banking products in Europe and the upcoming launch of a new
gaming proposition that couples the latest in open banking
technology with the Group’s industry-leading card solutions for
sports betting and social gaming providers. Work is underway to
integrate the Nuapay business and provide customers with the
ability to access the full suite of open banking, accounts and card
payments via a single integration.
The Group continued to make good progress on the three-year
Accelerator strategy. A few key highlights include launching
Seamless, a fully white-label payment portal solution in the U.S.,
focused on being a digital alternative to paper cheque payments,
which still represents approximately 23% of all payment value made
in the U.S. The Group successfully completed the first migrations
of programs to the new proprietary cloud-based processor ‘TRACE’.
During this period, TRACE proved its scalability with the issuance
of 1.4 million cards in under four weeks. In H2 FY22, the Group
will also complete a data initiative with the consolidation of
multiple data warehouses and making data from all regions available
from a single location. Heading into HY FY22 the Group is focused
on launching two new embedded payment propositions, BNPL and
Subscriptions and furthering the development of the product layer
on the new platform.
The Group’s two FINLAB investments are going strong, with
Interchecks successfully completing a Series B raise in January and
being the technology partner behind the new Seamless product
launch. Hydrogen went live in July 2021 and by January, announced
it has reached 200 card programs on the platform.
About EML Payments
EML provides an innovative payment solutions platform, helping
businesses all over the world create awesome customer experiences.
Wherever money is in motion, our agile technology can power the
payment process, so money can be moved quickly, conveniently and
securely. We offer market-leading programme management and highly
skilled payments expertise to create customisable feature-rich
solutions for businesses, brands and their customers.
Come and explore the many opportunities our platform has to
offer by visiting us at: EMLPayments.com
1 Revenue is adjusted for the reduction of $989,000 of non-cash
amortisation of the fair value uplift relating to the bond
portfolio at the PFS acquisition date. 2 EML generates interest
income on Stored Value balances and, as such, is a source of core
revenue. Earnings Before Interest, Tax, Depreciation and
Amortisation (‘EBITDA’) is used as the most appropriate measure of
assessing the performance of the Group. Underlying EBITDA includes
R&D tax offset and excludes share-based payments, acquisition
costs, foreign exchange gains or losses and non-recurring costs
related to the CBI remediation and Shine group proceedings.
Underlying EBITDA is reconciled to statutory profit and loss within
the FY22 Interim Report.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220215006220/en/
Sarah Bowles, Group Chief Digital Officer EML Payments
Limited (ASX: EML) sbowles@emlpayments.com +61 439 730 968
Marie O’Riordan, Global Director of Public Relations
EML Payments Limited (ASX: EML)
marie.oriordan@emlpayments.com / pr@emlpayments.com +44 207 183
5856 / +353 46 94 2010 9
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