The Tyro Payments Ltd (ASX: TYR) share price is on watch after upgrading its profit expectations and delivering a HY23 result sneak peek.
Tyro’s main offering is payment terminals for businesses like cafes and retailers.
Tyro upgrades guidance
The business gave investors a preview of its FY23 half-year result. Here are some of the highlights:
- Transaction value increased 37% to $21.7 billion
- Merchant base increased by 9%
- Total revenue went up 45% to $216.6 million
- Gross profit grew by 45% to $102.8 million
- Operating costs only went up 16% to $75.7 million
- EBITDA (EBITDA explained) surged 601% to $19.5 million
The banking business is “growing strongly” with loan originations up 101% to $72.7 million and banking gross profit rising by 73% to $4.2 million.
Tyro said that the cost reduction program is on track to achieve an $11 million reduction in its annualised cost base. That can help profitability and the Tyro share price.
Management comments
Tyro’s chief financial officer (CFO) Prav Pala said:
We have achieved operating leverage of 80% for the first half of FY23 which is a significant improvement from 96% in the prior period. With a lower cost base and continued growth in transaction value, we are confident that we will continue to improve operating leverage while maintaining our focus on product leadership and innovation.
New Tyro guidance range
Tyro revealed that it’s forecast to achieve a transaction value of between $42.5 billion to $43.5 billion.
The gross profit, after the Bendigo and Adelaide Bank Ltd (ASX: BEN) commission is projected to be between $187 million and $191 million.
The targeted ‘operating leverage’ is around 79%. Tyro is aiming to generate EBITDA of between $37 million to $41 million.
Explaining the guidance change, the Tyro CEO Jon Davey said:
The first half of FY23 has been exceptionally strong, however in forecasting the second half of FY23, we are taking a cautious approach and have allowed for some softening of consumer trading conditions due to rising interest rates and other macro-economic factors. We are also focusing on a more disciplined approach to managing the profitability of our merchant portfolio. Based on our forecast for the remainder of FY23, we will be targeting a full year operating leverage of 79% or better.
Final thoughts on the Tyro share price
It’s promising for Tyro that it’s beating expectations and things are going well. I don’t know how big the company is going to become – there’s a lot of competition in the payment terminals space, I don’t think they can all grow to become large businesses. But, if Tyro can keep growing like this then it may seem cheap at the current level.
