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Sydney-based fintech Tyro Payments (ASX: TYR) has sweetened the pot for a potential takeover after announcing an upgrade to its earnings guidance for FY23, despite expectations of lower transaction volumes.
The payments technology company, which remains in the sights of Potentia Capital Management as a buyout target, says cost cutting and higher margins are set to push EBITDA to between $41 million and $43 million in the 12 months to the end of June.
This is up from the previously upgraded target of between $37 million and $41 million announced in January, which was announced ahead of record first-half EBITDA of $19.5 million
The interim earnings result was delivered on a 37 per cent increase in the payments transaction value across Tyro’s network to $21.7 billion.
However, Tyro, which provides point-of-sale payment services to about 64,000 retailers, has revised down the total transaction value for FY23 to between $42.25 billion and $42.75 billion from the previous target of $42.5 billion to $43.5 billion.
“Having achieved profitability and free cash flow in the first half of FY23, we continue our growth trajectory giving us the confidence to upgrade our gross profit and EBITDA guidance ranges,” Tyro CEO Jon Davey says.
“The strong performance over the 10 months of FY23 has been driven by a combination of improved margins and an ongoing focus on cost reduction.
“Transaction value across our three core verticals remains strong albeit with some expected softening due to a slowdown in consumer discretionary spending. Despite this, we remain optimistic about the outlook for FY24.”
Tyro is targeting gross profit of between $192 million and $194 million in FY23, up from between $187 million and $191 million earlier this year.
Margin improvements and cost savings have led Tyro to lift its targeted EBITDA margin to 22 per cent from 21 per cent previously.
The robust earnings outlook has put a shine on Tyro as a takeover target for Potentia Capital which has been eyeing the company since late last year.
Tyro rejected a revised $875 million takeover offer from Potentia in December, but the private equity group reignited talks shortly afterwards. Recent market rumours have suggested a takeover deal is imminent.
In line with an announcement to the ASX in March, Tyro says it ‘remains in talks’ with Potentia Capital regarding the potential takeover.
“There is no certainty that these discussions will result in a nonbinding indicative offer, a binding offer or a transaction of any kind,” the company says.
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