The Tyro Payments Ltd (ASX: TYR) share price is surging higher this morning as the company reported strong increases in transaction volumes for the year to date, despite many of its merchants struggling with the impacts of COVID-19. Tyro provides payment and banking services to some 32,000 small and medium enterprises.
The company reports that it has implemented measures to provide what assistance it can to those of its merchants that are undergoing hardship. It reported that many of its merchants are finding the current environment extremely challenging, and some, particularly in the hospitality vertical, are severely impacted.
Transaction value updates
Tyro today moved to provide weekly transaction value updates for the remainder of FY20 given the uncertainty surrounding the impact of COVID-19 on transaction values for payments businesses.
In January, Tyro saw transaction values rise 27% year on year to $1.83 billion. In February, values rose 30% to $1.785 billion. This month, up to 20 March, transaction volumes rose 20% to $1.19 billion, while in the year to date, transaction volumes are up 28% to $15.869 billion.
Tyro shares
Tyro listed in December in the biggest public float of 2019. Shares were issued at $2.75 and debuted at $3.30, giving the company a market capitalisation of $1.37 billion. Tyro shares traded as high as $4.53 in February before crashing to earth in the coronavirus maelstrom.
After rocketing by as much as 30.84% in early trade today, Tyro shares are now trading 14.02% higher for the day at $1.22.
At the time of the initial public offering (IPO), there were high hopes for Tyro, which has bucked the 2019 market trend of failed listings led by Latitude Financial Group and Retail Zoo. Tyro's core business lies in EFTPOS and merchant payment services, also offering some deposits and loans.
Tyro planned to use funds from the float to accelerate expansion into business lending and the buy-now-pay-later sector. Those plans may now be on hold with the economy screeching to a halt as coronavirus shutdowns put thousands out of work.
Financial position
The company has said that it is in a strong financial position. At the end of February, it had cash, cash equivalents, and financial investments of $154 million (excluding net banking funds). This was an increase over the balance of $149 million at 31 December 2019, with the increase attributable to relatively higher December trade receivables received in January.
Business of payments
Tyro is Australia's fifth largest merchant acquiring bank by number of terminals in the market, behind the four major banks. Traditionally focused on in-store payments, Tyro has recently expanded into eCommerce.
The company generates revenue by enabling merchants to process debit and credit card payments. However, with spending likely to slip in the near future, Tyro's earnings may well come under pressure.
