The Tyro Payments Ltd
(ASX: TYR) share price has fallen more than 3% despite giving a positive update about FY23.
Tyro is a payment solution business, whilst also offering value-adding business banking products.
FY23 update
The business gave an update about the three months to 30 September 2022.
In the last quarter, it saw $10.37 billion of transaction value processed by Tyro merchants, which was an increase of 59%.
It also saw 4,281 new applications received in the period, up from 3,659 new applications in the prior corresponding period.
Over the quarter, merchant loan originations amounted to $32.7 million, up 116%.
Tyro also announced a cost reduction program, targeting an $11 million decrease in the annualised cost base – this is underway. It said that $5 million in savings will be achieved during FY23. This includes an overall reduction in headcount, changes to the mix of permanent employees, and onshore and offshore contractors in technology, and reduced operational and discretionary expenditure.
FY23 uplift of guidance
The cost reduction program has led to an uplift in FY23 guidance. This is usually a good thing for the Tyro share price.
Tyro said that “FY23 operating leverage now guided to a mid-point of 82%” and that EBITDA (EBITDA explained) before the share based payments expense range of $28 million to $34 million, up from $23 million to $29 million.
The new digital onboarding platform will be launched in November 2022 and the Tyro Pro next generation terminal will be delivered in December 2022 and the Tyro Go reader will be available through partner channels from January 2023.
Management comments
Tyro’s new CEO, Jon Davey, said:
This program is targeted at reducing costs in non-revenue generating parts of the business without impacting our customer experience or product delivery timeline. These are difficult but necessary decisions. It is imperative that Tyro continues to invest for growth, but that we do so within an operating approach that reflects long-term sustainability.
Alongside the cost reduction program, we are reviewing our operating model which will include a lean organisational structure supported by efficient systems and processes to ensure the delivery of our strategic objectives.
Final thoughts on the Tyro share price
Tyro does seem to be exposed to a number of attractive tailwinds like the growth of digital payments. However, there are plenty of competitors in the space and I’m not sure how likely it is that Tyro can win. I’m not saying Tyro can’t, but it’s hard to say how strong its competitive position is, and how strong it will remain. It’s also possible it could be taken over, but there also may not be a takeover.
