The EML Payments Ltd (ASX:EML) share price fell 13.51% lower today following the release of its half-year financial report.
For context, the broader Australian share market or S&P/ASX 200 (ASX: XJO) was trading at 7144.6, up 0.43%.
About EML Payments
EML Payments develops financial technology to provide solutions for payouts, gifts, incentives & rewards and supplier payments. It issues mobile, virtual and physical cards to some of the largest corporate brands, processing billions of payments each year, managing more than 1,400 programs across 23 countries in North America, Europe and Australia.
In the Rask video above, Owen explains SaaS valuation and multiples in great detail. You can take one of our free finance courses by clicking here. Our intermediate business valuation course is 100% free.
EML – financial report highlights
|This period||Last period||Change|
|Gross debit volume (GDV) ($b)||6.62||4.15||59.52%|
Source: EML Payments Ltd announcements; author calculations, AUD millions unless otherwise stated.
As can be seen above, EML’s revenue came in at $59.2 million, up $12.01 million.
Popping the hood on revenue, a key driver behind the growth was a 59% spike in volume going through EML’s platform. Since EML makes a cut of the money flowing through its platforms, GDV is a good indicator of customer demand for its payment services.
For example, although it’s the smallest part of its business in terms of revenue, EML’s Virtual Account Numbers (VANS) solution grew volume 106% to $4.31 billion and revenue jumped 174% higher to $5.5 million. This is one reason it’s important to study the segment report.
EML’s profit was $4.3 million for the half, up $1.73 million versus the prior period. EML was able to increase revenue and at the same time improve its gross profit margin, which rose from 73% to 76%. As discussed in the video above, a wide gross profit margin (%) is often perceived by investors to be a key sign of a product’s competitive advantage.
Finally, looking ahead to the full year, EML expects to report revenue between $120 million and $129 million, with a profit result (after amortisation) between $27.5 million and $30.5 million.
While the top end of the new revenue guidance range is slightly below the $116 million to $132 million previously cited by management, the profit range is an improvement over prior guidance ($26.2 million to $29.4 million).
Meaning, if management can make achieve those forecasts it would result in year-over-year growth.
However, as Claude Walker from A Rich Life wrote today, there is near term uncertainty given the company’s $423 million recent acquisition of Ireland’s Prepaid Financial Services (PFS).
“In reality, the next big challenge for the company will be to integrate PFS successfully,” Walker wrote.
“If they succeed they could seriously kick-start growth, since digital banking is a growing industry and PFS should improve EML’s ability to serve that kind of company,” Walker added. “While the pre-paid gift voucher cards are a solid earner for EML, digital card payments has more potential for growth.”
EML Payments shares were last seen trading at $4.80, giving the company a market capitalisation more than $1 billion.
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