EMLs FY20 Results

I thought if I putsome thoughts together it might help some people with their understanding ofEML. Note that my calculations may be shizenhousen.

Firstly, EML is a payments technology company, that provides customised paymentsolutions to their B2B clients. Not a one trick pony gift card company, and Ithink that will be evident in the future period as the wider company grows andthe Mall gift card sector 'potentially' shrinks. There is a bit of amisconception out there with what EML does and I think it can be simply puthere;

• EML enter into multiyear contracts with customers to provided tailored solutions to improve their customers customers' experience. EML continually improve their technology and product offering and therefore once a customer is captured the churn of these customers is relatively low.
  • This is why payments companies capture a niche in the payment market
  • This is also why if payment companies fail to innovate, then they can potentially face losing customers - hence the benefit of R&D and Project Accelerator
  • This is why EML may be able to carve out niches in the LT, through customised/integrated solutions.

Now to the results

The Good:

• EML have done an amazing job at managing what is in their control. You can't really fault them here. Once you put the COVID impact aside, the PFS renegotiation/product development/resource allocation have all been awesome - hopefully we see this pay off in the future.
• Growth in new customers and new verticals is positive and I think this may be underappreciated in the market right now.
  • Incentive programs launched:
    • 10 incentive partener contract on PAYS tech
  • GPR programs launched
    • 2 dozen contracts in Banking, Control Pay, Disbursements & Salary
    • Focus here on Sezzle and Laybuy being guided into multiple regions with EML as a processor.
      • I didn’t appreciate the single touch point focus here, but to be able to onboard a customer once and into EMLs 3 regional processors would be very nice
  • VANS
  • AU Business (smallest business) (aus-biz)
    • 4 dozen opportunities being worked on in pipeline
• July run rate of GDV - there are a few different ways to model this out and I'll try do it simply in aggregation. Note that this is using the July run rate and factoring in no growth from new business / change in revenue mix / impacts from further lockdowns. Basically, I think we can assume 55m EBITDA for FY21 as a baseline scenario. This would equate to ~$40 in underlying cash inflo

	Option 1 - Total Business Aggregation ($m)
1
2		July GDV Performance	July GDV Annualised
3	GI	$72.00	$864.00
4	GPR	$835.00	$10,020.00
5	VANS	$727.00	$8,724.00
6	Total	$1,634.00	$19,608.00
7
8	GDV to Rev		90 bps
9	Total Revenue		$176.47
10
11	GP Margin		70.00%
12	GP		$123.53
13	Less Overheads		$68.00
14	Underlying EBITDA		$55.53
15	Underlying Cash Inflow - 70%		$38.87

The Bad:

EBITDA margins in H2Fy22 had fallen to 21%, with the COVID & PFS impacts on the numbers I wouldreally prefer to wait for a clean set of numbers to see this wash through thefinancials. My baseline EBITDA margins for the business remains at 30%.

The Ugly:

Let's face it theimpact on the malls sector was huge. I found some comments suggestion thatMalls GDV was on track to do 1.1b seldom - the G&I segment's actual FY20performance was $1.175b. My assumption here is that maybe $250m in GDV wasimpacted which converts to

• $15m revenue
• $12m GP

The flip side tothis is that

• As the G&I segment rebases, which will rebase the entire groups financials, then to call EML a gift card business will become very inaccurate
• $1.175 was the total G&I GDV for FY20 and in July EML generated $72m in G&I (annual $860m) without considering any seasonal effects.