Tyro (ASX:TYR) share price plummets 25% as COVID takes its toll

The Tyro Payments Ltd (ASX: TYR) share price is tumbling after the company released its earnings for the first half of financial year 2022.

At the time of writing, the Tyro share price is $1.64, 24.77% lower than its previous close.

Tyro share price plunges as EBITDA falls 67%

• Processed $15.8 billion in transactions ­– a 31% increase on the first half of financial year 2021
• Earnings before interest, tax, depreciation, and amortisation (EBITDA) of $2.8 million – down 67%
• Payments business' statutory gross profits reached a record $68.1 million – up 25%
• Banking business' gross profits came to $2.4 million ­– up 35%
• Normalised gross profit – post Bendigo and Adelaide Bank Ltd's (ASX: BEN) share – rose 11% to $68.1 million
• A record 61,554 merchants using Tyro – up 68%

Tyro has recorded increased profits, transactions, and merchants despite many of its users suffering through outbreaks of COVID-19's Omicron variant.

Over the half, the company provided terminal rental relief to impacted merchants and deferred its annual pricing adjustments.

However, that, as well as investments in growth initiatives, wage inflation, the removal of JobKeeper, and costs associated with its acquisition of Medipass, saw the company's EBITDA tumble.  

Tyro ended the period with $157 million in cash and financial investments – down from $173 million at the end of the previous half.

The company is now Australia's fifth largest merchant acquiring bank by terminal count, with 103,935 terminals handed out – an increase of 52.1%.

Additionally, merchant deposits grew to $100.8 million over the half and merchant and transaction value churn rates fell to 10.1% and 9% respectively.

Finally, merchant loan originations rebounded to $36.2 million – a 1,279% increase.

What else happened in the half?

Last half marked the first time the company reported an entire half's earnings inclusive of its deal with Bendigo Bank.

The alliance between the financial institutions was completed on 1 June 2021 and saw all Bendigo Bank merchants novated across to Tyro. Bendigo Bank merchants brought Tyro $2.5 billion of transactions last half – consistent with expectations.

Additionally, Tyro generated $22.4 million in payments from Medipass health providers in the period and $77 million in claims. It acquired Medipass in May 2021.

The company's merchants in New South Wales and the Australian Capital Territory saw their transaction values fall a combined 9.4% over the first half.

Though, excluding those regions, Tyro's payments business reported transaction value growth of 23.2%.

Additionally, Tyro's banking business saw lending income from its Merchant Cash Advance product increase 25.4% to $2.6 million.

Tyro's Bank Account also saw greater uptake. It had 4,964 active accounts as of 31 December, representing a 19.6% increase on the prior comparable period.

Finally, during the half the company made a deal with Telstra Corporation Ltd (ASX: TLS) that saw the telco's business customers offered Tyro's merchant acquiring solutions.

What did management say?

Tyro CEO and managing director Robbie Cooke commented on the company's first half results, saying:

Booking a 31% lift in transactions processed to set a new record of $15.8 billion is something as a team we are really proud of. We worked alongside our 61,500 merchants as they continued to navigate the impact of lockdowns and provided all the assistance we could including terminal rental relief, loan repayment relief and we did not pass on scheme and interchange fee increases we incurred in the half.

While lower than first half last year, our positive EBITDA result of $2.8 million reflected our continuing investment in growth initiatives, the absence of any JobKeeper benefits, wage inflation and first time costs associated with our newly acquired Medipass operation.

What's next?

The company didn't provide any guidance for financial year 2022.

However, it said it's expecting a return of workers to Australia's CBDs which will likely help boost card transitions in retail and hospitality in the second half.

Additionally, the company is looking to roll out its new card reader shortly and is working on its android-based terminal.

Tyro also provided a trading update for the start of the second half.

The company's transaction values for January increased 35% on the previous year's to $2.7 billion.

For the first 3 weeks of February, its transaction values were 50% higher, reaching $1.8 billion.

Its eCommerce transactions grew to a new record of $36.5 million in January – up 836% on the same month of 2021.

Its payments business – post Bendigo Bank's share of the profits and on a normalised basis – saw $11.1 million of profit for January, a 24% increase.  

Finally, for the first 7 weeks of the calendar year, Tyro's banking business saw loan originations total $5.8 million – a 1,099% increase.

The bank business' deposit balance also remained relatively stable at $96.1 million at the end of January.

Tyro share price snapshot

It's been a rough start to the year for the payments provider's stock.

Right now, the Tyro share price is 43% lower than it was at the start of 2022.

It's also 45% lower than it was this time last year.