EML (ASX:EML) share price plunges 8% after reporting record results

The ASX-listed payments solutions company’s share price is down this morning…

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The EML Payments Ltd (ASX: EML) share price has taken a hit in early morning trading after the payment solutions provider reported its full-year results for the FY21 after market close yesterday.

The EML share price is sitting at $3.25 in early trading, an 8.19% drop on Tuesday’s closing price of $3.54. This adds to a 1.4% fall during Tuesday’s trading session.

EML share price in focus after record year

The EML share price drop comes after the company reported the following key results:

  • Group gross debit volume (GDV) up 42% to $19.7 billion.
  • Record revenue of $194.2 million, an increase of 60% on FY20.
  • Record underlying group earnings before interest, tax, depreciation, and amortisation (EBITDA) of $53.5 million, up 65%.
  • Gross profit margins of 67%, down from 73% in FY20 due to a shift in business segments.
  • New business GDV pipeline of $10.5 billion, with more than 300 prospects.
  • Costs and provisions totalling $11.4 million in FY21 in relation to the Central Bank of Ireland regulatory investigation.

What happened in FY21 for EML Payments?

It will be interesting to see whether the EML share price rebounds during the day after the company announced a record year, with growth across most financial metrics.

Possibly EML’s most important metric, GDV, increased 42% on the prior year to $19.7 billion. The bulk of this growth was delivered by the company’s general purpose reloadable (GPR) segment, with an increase of 130% to $9.7 billion.

While organic growth at EML was reasonable, a substantial portion of it was via its Prepaid Financial Services (PFS) acquisition. For example, PFS contributed $6.4 billion to the GPR segment during the financial period.

Meanwhile, continued challenging conditions as a result of lockdowns during the period impacted the company’s gift and incentive (G&I) segment. Specifically, gross debit volume fell 6% to $1.1 billion in FY21.

The increased GDV also helped EML to achieve record group revenue in FY21. Growth in salary packaging and gaming programs assisted in the $194.2 million of revenue — representing an increase of 60%.

EML derived 58% of this revenue from its higher-margin GPR segment, demonstrating the company’s commitment to generate the majority of its revenue from the more profitable business.

Throughout the year, EML signed 121 new clients, 70% of which came from its new growth verticals in GPR programs.

The company said, “We believe the growing demand for embedded, innovative and highly configurable payment solutions will drive further growth for the next 5 – 10 years.” Examples of new deals in the last year include Quid, Laybuy, Humm, and Coinjar.

What did management say?

Commenting on the result, EML Payments Non-Executive Chairman Peter Martin said:

At the end of the year, we were supporting programs in 27 countries. Approximately 60% of our global revenue comes from Europe, over 25% from North America and the balance from Australia. Over 80% of our revenues are recurring which provides a very strong underlying platform for growth.

Additionally, regarding further acquisition opportunities, Mr Martin said:

Further major opportunistic acquisitions to expand our global reach or capabilities are unlikely in the next 12 months. During the next financial year, management will be focused on bedding down the PFS remediation plan and the Sentenial acquisition. However, small investments through our Accelerator strategy are being considered.

What’s next for EML Payments?

Heading into FY22, the company holds more than 300 prospects. These potential growth drivers hold an estimated value of $10.5 billion in GDV.

At the same time, ASX-listed EML Payments will be working closely with the Central Bank of Ireland. In the company’s annual report, it notes CBI investigated aspects of its PFS Ireland Limited business including governance, resourcing, reporting, risk methodologies, and capital adequacy.

A remediation plan has been put together by the company and provided to CBI. As per the plan, EML intends to complete most of the remediation efforts by the end of this calendar year, with the remainder to be done by the end of March 2022.

Finally, the group provided guidance ranges for FY22 for various metrics, these include:

  • Gross Debit Volume of $93 billion to $100 billion ( with recently acquired Sentenial expected to generate $69 to $74 billion of this)
  • Revenue of $220 million to $255 million
  • Underlying EBITDA of $58 million to $65 million
  • Operating cash flow of 80% to 90% of EBITDA

EML Payments share price snapshot

Prior to today, the EML Payments share price had gained 8.3% during the past 12 months. For comparison, the S&P/ASX 200 Index (ASX: XJO) returned 22.7% over the same time period.

Based on its current share price, EML Payments has a market capitalisation of $1.28 billion.

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Motley Fool contributor Mitchell Lawler owns shares of EML Payments. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and has recommended EML Payments. The Motley Fool Australia owns shares of and has recommended EML Payments. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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