EML share price crashes 35% amid guidance cuts

What did the payment solution company’s latest quarterly results reveal?

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Key points

  • The EML share price has plunged 35% so far today
  • Among the company's third-quarter result figures, net profit dropped 22% on PCP, while underlying EBITDA also dropped 14%
  • Today's dive has sent the company's share price 67% lower in a year 

The EML Payments Ltd (ASX: EML) share price is in the red today amid the company releasing a third-quarter trading update.

At the time of writing, shares in the payment solutions company are trading at $1.76 each, a 35.06% fall.

Let’s take a look at what this payments technology company reported today.

EML share price slides following quarterly update

The company’s third-quarter FY2022 results included:

  • Underlying earnings before interest, tax depreciation and amortisation (EBITDA) dropped 14% on prior corresponding period (PCP) to $13.6 million
  • Underlying net profit after tax amortisation (NPATA) fell 22% on PCP to $13.6 million
  • Gross debt volume surged 408% on PCP to $23.9 billion
  • Underlying overheads surged 50% on PCP to $28.6 million
  • EBITDA guidance for FY22 cut by 8% to $52-$55 million
  • Revenue jumped 21% on PCP to $59.8 million

What else happened during the quarter?

Underpinning this result was the operating performance of the company’s European prepaid business which EML payments described as “significantly behind”. This business has been impacted by remediation activities.

However, EML said the Australian and North American businesses are trading in line with expectations.

Underlying overheads increased on the back of headcount investment, more IT expenditure, and the acquisition of Sentenial.

EML is expecting more challenges in the fourth quarter, leading to “a reduction in the guidance range”. Commenting on this fall, EML said:

Deterioration in current FX forecast rates from the prevailing rates in mid February are driving approximately $1.5m of the guidance reduction.

Overheads spend in H2 towards higher end of expectations.

What’s next for EML?

EML is expecting operational initiatives to drive the Europe business recovery in FY2023. This includes four operational improvement projects in Europe that were pushed back from H2 FY2022.

Subject to regulatory approval, EML is planning to invest in EUR bonds. The company is also undertaking a project to find efficiency opportunities globally and combat the cost pressure of inflation.

EML share price snapshot

The EML share price has fallen 67% in the past 12 months, while it has slid 44% in the year to date.

By comparison, S&P/ASX 200 Index (ASX: XJO) has returned nearly 4% in the past year.

EML has a market capitalisation of about $674 million based on the current share price.

The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns and has recommended EML Payments. The Motley Fool Australia owns 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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