‘Leaner and more disciplined’ Tyro Payments achieves profitability

Tyro Payments (ASX: TYR) looks to be putting the worst behind itself after revealing a first half profit and, for the first time as a publicly listed company, positive free cash flow.

The company, which recently settled a class action law suit relating to a 2021 system outage, says initiatives to focus on growth and cost management delivered the strong 1H23 results and a profit of $1.1 million.

This represents a major improvement from the 1H22 loss of $18 million, and also included EBITDA rising by 601 per cent from $2.8 million to $19.5 million - a record result.

Group revenue on a statutory basis rose by 48 per cent to $220.6 million, while total transaction value jumped by 37 per cent to $21.7 billion.

“An increased focus on growth, cost management and delivery excellence has led to very pleasing first half results, including a record EBITDA and achieving positive free cash flow for the first time as a publicly listed company,” Tyro CEO Jon Davey said.

“We have become a leaner and more disciplined organisation. Through our cost reduction program, we are on track to deliver an $11 million annualised cost saving.

“This has allowed us to streamline our operations and focus our investment to be the leading specialist payment and banking solutions provider for Australian business.”

The results come as Tyro is in the midst of a potential takeover from Potentia Capital, which had previously seen two of its offers for the payments systems provider rejected.

Potentia will likely be keeping a close eye on Tyro’s latest results as it conducts non-exclusive due diligence for four weeks, afforded to it by the target two weeks ago.

If any deal does go forward, Potentia would take control of a company that has ‘delivered foundational initiatives which will deliver lasting benefits to our competitiveness and growth profile’ according to Tyro CEO Davey.

“We have a long runway of growth and opportunity ahead of us. We are proud to support more than 66,000 customers across the nation, however this still only represents less than 6 per cent of the card payments market,” Davey said.

Davey added that new partnerships were creating another avenue to build market share, including with Telstra and more recently Australia Post to make Tyro’s products available in more than 750 retail outlets and business centres.

“Already 13 per cent of this half’s applications were generated from Telstra, demonstrating the potential upside,” Davey said.

Davey also sung praises of the firm’s banking solutions, which he described as “the leading cash flow management product in market”.

“Over the last half, we have seen a 101 per cent increase in loan originations and a 73 per cent uplift in banking gross profit. Despite this growth, just less than 10 per cent of our merchants have a Tyro bank account and in the first half less than 2 per cent of our merchants took out a loan,” qualified the CEO.

“We are confident we can further leverage our banking license to deepen our customer relationships.”

Tyro rode the momentum of the six months to 31 December into the new year, with transaction values for the period 1 January 2023 to 24 February lifting 23 per cent on the same period last year to $6.3 billion.

New loan originations in the first eight weeks were also up to $22.5 million - representing an increase of 30 per cent on the prior corresponding period.

Based on this start to the year, Tyro today reaffirmed guidance on all metrics with an EBITDA guidance range of $37 million to $41 million.

“Tyro remains as ambitious today as when it was founded two decades ago, and the market opportunity is as compelling as it has ever been,” Davey said.

“As we look forward, our focus will be on payment and banking product innovation, revenue growth and margin optimisation, operating efficiency, and cost reduction.

“This financial year is off to a strong start, and we are well positioned to maintain this momentum into the second half.”