Tyro Payments (ASX: TYR) has claimed victory in a court case against point of sale (POS) software company and agent Kounta, which the Sydney-based fintech alleged had been marketing its own competing service to existing Tyro merchants.
The Supreme Court of NSW has found Kounta, which was founded by Nick Cloete and acquired by Canada's Lightspeed Commerce for US$35.3 million ($54.7 million) in 2019, was in breach of its contractual and fiduciary obligations to Tyro.
In an announcement to the ASX last night, Tyro revealed its court victory with a restraint placed on Kounta that will be in place until 6 September 2024 preventing it from marketing the 'Lightspeed Payments' payments service to Tyro merchants.
The date aligns with the timeline for Kounta's contractual non-solicitation obligations to Tyro.
"The Court has today made orders that restrain Kounta (without Tyro’s consent) from soliciting, inducing or otherwise attempting to persuade any Tyro merchant to become a merchant of any entity providing Acquiring Services (being the functions and facilities provided by Tyro to facilitate the processing of financial transactions)," Tyro stated in the release.
"This includes restraining Kounta from soliciting, inducing or otherwise attempting to persuade any merchant of Tyro to use Lightspeed Payments."
Tyro has sought damages and an equitable compensation or account of profits, but the court has stood the proceedings over for further directions on 24 November 2023 "in circumstances where Tyro has sought other final relief including, damages, an account of profits or equitable compensation, contractual indemnity and costs".
It has been a tumultuous couple of years for Tyro, having settled a class action in February over the failure of its merchant EFTPOS terminals in early 2021 that led to thousands of businesses losing their card payment capabilities.
Tyro's share price fell considerably after that disaster and has not yet traded anywhere near 2020 levels. In September 2022 a takeover bidding war began, starting with a consortium of private investors including MLC Investments which pitched to buy the company for $660 million, before also attracting interest from Westpac (ASX: WBC) and Potentia Capital.
Tyro's market value slumped somewhat in the aftermath to $724 million. But that figure has fallen to $535 million following a sharp drop in throughout the second half of October.
At the company's annual general meeting (AGM) this week, despite a reaffirmation of earnings guidance of $52-58 million, shareholders demonstrated their displeasure with Tyro's proposed remuneration report with only 42.42 per cent of votes cast in favour.
The company reported transaction value from 1 July to 12 November was up 3 per cent year-on-year at $15.9 billion, and its core transaction value was up 5.1 per cent with boosts in particular from health (+24.9 per cent), services (+9.3 per cent) and its 'Bendigo powered by Tyro' partnership (+10.5 per cent).
Loan originations for that period reached $49.4 million.
At the AGM, CEO Jon Davey highlighted a detailed review of strategy had been underway since he took on the role in October last year.
"This has included an assessment of the competitive environment, expected regulatory changes, and the impact of new technology to our business," said Davey, a former National Australia Bank (ASX: NAB) exec.
"We have also assessed our current processes, capabilities, and cost base, to develop a plan for the future. We adopted a greenfield approach, one where we assessed our current capabilities and costs, and our future needs and investment requirements.
"We adopted a mindset that was open to exiting parts of our business, and sourcing services that are currently performed in-house, from third parties."
He explained that Tyro, Australia’s fifth largest merchant acquirer with a customer base made up of more than 69,000 businesses, has seen an annual merchant growth rate of 29 per cent over the past three years. However, the core customer base grew by just 12 per cent in FY23 with 17,000 new customer applications.
The group reported $193.2 million in normalised gross profit in FY23 and EBITDA of $42.3 million, representing a margin of 22 per cent versus just 7 per cent the year before.
"While these are great results, we acknowledge that the year has been a challenging one for our team, our customers, and our shareholders," he said.
"Headcount reductions, changes in our operating model, and a potential acquisition created uncertainty for our team members.
"For our customers, changing macro-economic conditions in the second half of the year have led to an increase to input costs, resulting in higher business closures. For you, our shareholders, our share price performance has been very disappointing; we share that disappointment."
Tyro's market capitalisation has slumped since then to $535 million after takeover prospects drew to a close, but under the leadership of former National Australia Bank (ASX: NAB) exec Jon Davey as group CEO since October the fintech has reported strong growth.
Gross profit rose 30 per cent to $193.2 million in FY23, while earnings almost quadrupled to $42.3 million.
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