The Tyro Payments Ltd (ASX: TYR) share price is tumbling today as the market makes sense of its FY24 half-year results.
Shares in the payments solutions provider are down a staggering 12.5% to $1.05 currently. The move marks a swift reversal from the $1.30 price that Tyro shares changed hands in the first moments of trading.
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Tyro share price ignores first-half growth
Here are some of the key metrics for the six months ended 31 December 2023:
- Transaction value up 2.2% to $22.17 billion
- Merchant count grew by 2.8% to 68,780
- Revenue up 9.5% to $237.1 million
- Gross profit up 10.5% to $105.2 million
- EBITDA up 40.6% to $27.35 million
- Statutory net profit after tax (NPAT) up 367.2% to $5.14 million
What else happened in the first half?
Tyro's latest report showed transaction value derived from its discretionary merchants — retail and hospitality — were soft in the first half.
Of the two, retail suffered the most, experiencing a 2.1% decline to $5.393 billion processed. Meanwhile, the hospitality vertical saw transaction value increase a meagre 1.8% to $9.455 billion.
The company's non-discretionary segment delivered the source of growth. Tyro's 'services/other' vertical clipped the ticket on $1.704 billion of card tapping, up 7.2% from the prior corresponding period. However, 'health' merchants stole the show, increasing payment value by 24.2% to $3.139 billion.
The company also noted its new merchant applications were offset by "elevated merchant churn of 16%" versus 11.7% in the previous first half. Interestingly, Tyro attributed this churn to the macroeconomic environment, aggressive competitive behaviour from one of its point of sale partners and the 'Bring Your Own (BYO)' offering.
Finally, legal matters between Tyro and Kounta (a point-of-sale provider) unfollowed throughout the period. On 16 November 2023, the courts ruled in favour of Tyro as Kounta was found to be in breach of its contractual obligations, sending the Tyro share price higher.
Shortly after, Kounta filed an appeal to the New South Wales courts. The two companies have since reached a settlement resulting in Tyro receiving $10 million in damages and Kounta being barred from offering competing products until 6 September 2024.
What did management say?
Tyro CEO and managing director Jon Davey highlighted the improving economics from broadened solutions, stating:
Our customers appreciate the simplicity of our integrated payments and cashflow offering. During the half, almost one in five new customers signed up for our payments and banking products, valuing the benefits that an integrated solution provides, and we expect this number to grow significantly over the calendar year.
Furthermore, Davey highlighted an accelerated development of new payments and banking features, which will be released to merchants from June.
What next for Tyro?
A glimpse into the next six months was shared through the company's updated FY24 guidance. Based on the figures, management expects the second half to resemble the first. The company's FY24 guidance is as follows:
- Transaction value between $43 billion to $44 billion
- Gross profit between $208 million to $215 million
- EBITDA between $54 million to $58 million
- Targeted EBITDA margin of approximately 26%
Pleasingly for shareholders, positive free cash flow is forecast to continue.
Tyro share price snapshot
In light of today's decline, the Tyro share price is now 34% below where it was a year ago. For context, the broader S&P/ASX 200 Financials (ASX: XFJ) sector is up nearly 12% over the same span of time.
Factoring in its latest earnings, Tyro now trades on a price-to-earnings (P/E) ratio of roughly 56 times.
