The EML Payments Ltd (ASX: EML) share price will be on watch today after revealing a Q3 profit update yesterday.
What happened?
As my colleague Lachlan Buur-Jensen covered yesterday, EML revealed continue growth.
EML said that its gross debit volume (GDV) of $14.9 billion for the nine months to March 2021 was an increase of 52%.
Revenue was up 65% to $143.5 million in the first nine months of FY21. EBITDA (EBITDA explained) growth was slightly slower at 62% to $43.8 million.
In the first quarter of FY21, it generated $10 million of EBITDA. In the second quarter, which includes Christmas, it made $18.1 million of EBITDA. The third quarter of FY21 saw EBITDA of $15.7 million, which was a sizeable improvement on the first quarter of FY21.
Its general purpose reloadable (GPR) segment, GDV was in line with the prior quarter despite COVID-19 lockdown impacts. Excluding PFS EML GDV, there was growth of 22% mainly from improved volumes in Australia.
GDV in the gift and incentive section was lower than the prior corresponding period because of Canadian and European lockdowns. However, the yield improved because of higher breakage rates due to COVID-19.
Virtual account numbers (VANS) GDV was down a little because of lower volumes in North America.
Central Bank of Ireland (CBI) regulatory update
Investor attention is on what the CBI may say about EML’s operations with regards to regulatory risks relating to anti-money laundering and counter terrorism financing (AML/CTF). There were “significant regulatory concerns”.
EML said it remains in an ongoing dialogue with the CBI about these concerns through “substantial responses, data and access to our teams”. There is no statutory timeframe for the CBI to finalise its consideration of this matter.
The business has formed a governance structure to assist the team in Ireland, including a subcommittee of the EML board, members of the EML executive team and external expert regulatory consultants and legal resources.
Outlook for EML and the share price
Management said that it continues to focus on its strong pipeline of new customers and support existing customers. But it acknowledged the ongoing uncertainty is a risk and challenge.
In FY21 it expects to spend less than $2 million on costs relating to the investigation. EML also warned that it may see an impact of delayed program launches on establishment income and transaction fees which can’t be quantified yet. The financial impacts for FY22 can’t be fully determined either.
It’s hard to know what is going to happen, so whether this is a buying opportunity is hard to say. EML is a good business though, so this situation is worth watching.
