Fintech stock EML Payments [ASX:EML] has announced a share buyback program and narrowing losses as it released its FY22 results.
EML reported a reduced net loss and ‘record’ gross debit volume while announcing a share buyback.
EML shares were up 10% in late Monday trade, despite the ASX 200 slumping 1% lower.
Despite today’s spike, EML shares are down 65% year-to-date.
Source: www.tradingview.com
EML reports record revenue
Payment provider EML announced on Monday that it registered record revenue in FY22 on the back of rising gross debit volumes.
Here are the key results:
- ‘Record Group Gross Debit Volume of $80.2 billion, up 308% on PCP;
- ‘Record Group Revenue of $234.1 million, up 21% on PCP;
- ‘Group Underlying EBITDA of $51.2 million, down 4% on PCP;
- ‘Group Underlying NPATA of $32.1 million, down 1% on PCP; and,
- ‘Continuing strong Balance Sheet and Cash position – $20 Million Buy-Back to be conducted over next 12 months’
EML ended FY22 with a net loss of $4.8 million, an improvement on FY21’s net loss of $28.7 million.
While GDV (gross debit volume) rose more than 300% on FY21 (helped by a nine-month contribution from its Sentenial acquisition), revenue didn’t rise in tandem, up a still-solid 21% on FY21.
And while revenue didn’t keep pace with GDV, profit didn’t keep pace with revenue.
EML’s underlying net profit after tax fell 1% to $32.1 million.
EML was aware of the discrepancy between its top-line and bottom-line growth, emphasising the importance of a coming strategic review.
Incoming CEO Emma Shand will conduct the review:
Source: EML
EML reported a gross profit margin of 68%, an increase of 1% on 2021.
EML said the fall in underlying EBITDA reflects ‘increased investment in EML’s European operations’.
EML announces share buyback
EML also revealed on Monday that it would participate in an ‘on-market share buy-back’.
As part of its capital management strategy, EML will buy back up to $20 million in shares, supported by EML’s $73.7 million FY22 closing cash balance.
The buyback will take place across 12 months, from 5 September.
Shand commented:
‘EMLs’ robust balance sheet and consistently strong operating cash flow generation will support our ongoing growth and development of the business whilst returning cash to shareholders.
‘We are focussed on investing in organic growth initiatives, product adjacencies and pursing operational improvements.’
While investors took today’s news well, it’ll be interesting to see how the stock trades in the coming weeks.
Will the market think the share buyback is prudent?
In FY22, EML ended the year with negative free cash flow of more than $110 million, partly driven by the $57.1 million spent on business combinations and partly by operating cash outflows of $41.5 million.
EML and future strategies
Commenting on EML’s FY22 results today, Ms Shand said:
‘From what I have already learned, I am highly enthusiastic about EML’s growth and value potential. However, we won’t successfully deliver improved value of those opportunities for our shareholders, if we don’t take a good hard look at how best to set our operating structure and align our capabilities, systems and processes to execute effectively for growth.
‘We have already taken some early steps to improve operating focus, elevate a culture of regulatory compliance to support sustainable growth and in optimising balance sheet strength.’
Now, fintech may be important in its own way, but let’s talk about a different type of tech that will be flooding the market in the not-too-distant future: battery technology.
EVs will require huge quantities of lithium, copper, graphite, and nickel.
And this offers opportunities…
Lithium stocks were massive last year, and even though the money came easy for a while, the battery theme isn’t going anywhere.
Our small-cap expert, Callum Newman, knows of three battery material stocks that have been overlooked.
Find out more, for free, by accessing the research report here.
Regards,
Kiryll Prakapenka,
For Money Morning
