Eml Payments Ltd Ord

Thank you for standing by and welcome to the EML Payments first half FY26 results call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press the star 1 again. For operator assistance throughout the call, please press star 0 and finally I would like to advise all participants that this call is being recorded. I'd now like to welcome Anthony Hines, Executive Chairman, to begin the conference. Anthony, over to you.

Thank you and good morning everyone. Welcome to the AML Payments Ltd H1 FY26 results telecall. I'm Anthony Hines, Executive Chairman, and it's great to be here with our new CFO Stuart Will to report our interim results for FY26 and provide an update on our progress on AML 2.0. Following our presentation, we'll open a call to questions. I refer you to the ASX announcements which were issued by AML Payments Ltd this morning and form the basis for this call. Now let's kick this off. Moderator, moving to slide 4 please. I'd like to commence today's presentation with a summary of our first half progress against the key themes of this transformation year. First, I've made it clear to our investors and to our internal team that FY26 is the final year of our restructuring program. Project Arlo will naturally continue past June 30, 2026 but our plan is to close out organisational and management restructuring, key process re-engineering and the standardisation of our internal toolkit by the end of this financial year. We are on track and have completed a significant body of work in H1. We have refreshed management at all levels of the organisation and our output has increased dramatically thanks to a re-energised team aided by fresh talent, And importantly, they are working together as one EML. We're also more efficient. Our Global Ops Centre is just one example, allowing us to recycle expenditure into commercial functions, supporting future growth. Second, our commercial team is hitting its strides. The market in which we operate are growing and we're now on the pitch competing and winning in a meaningful way. It's terrific to see so much activity. There is now a clear and evident growth mindset permeating the business. The vast majority of the pipeline is from existing product sets delivered by our existing infrastructure. Over time, Arlo will expand this capability materially. Third, product development is now part of our operating cadence, which will fuel future growth alongside organic performance. We have welcomed a talented group of product managers into the business in recent times and they are busy advancing several initiatives, all of which are aligned to client needs with a clear path to market. Importantly, product development is now a structured, cross-functional activity focused on optimising commercial outcomes and creating sound operational platforms so that we avoid the challenges of the past. A more efficient EML, combined with a strong order book and growing pipeline, supports our EML 2.0 strategy and performance targets. We have, however, seen some lag in new client onboarding over the last four months. 58 to 64 million, down to 58 to 60 million. I'm energised by our progress in the first half. Importantly, we are winning where it matters, both commercially and in terms of building the infrastructure for our future success. Moving to slide five, please. I'll summarise our performance for the half, and Stuart will cover this in more detail shortly. Revenue for the period was down 6% on PCP to 108.4 million. The loss of a number of customers for various reasons in H2 FY24 suppressed customer revenue growth somewhat. Pleasingly, the runoff of these programs is almost complete. Interest income was lower in H1 reflecting lower central bank rates flowing through to our yields. This continues to be well managed and the downwards curve on cash rates remains consistent with our projections. We do see less volatility in the period ahead compared to experience over the last 12 months. Overheads were well managed during the period, down marginally on PCP with a 1.3 million run rate better than H2 FY25. Quarter on quarter we improved 3.6 million demonstrating improved efficiency and better control over resource levels. Underlying EBITDA was down 16% on PCP to 28 million. This was largely driven by the impact of one-off non-recurring income in H1 FY25 and terminating clients from 2024. Our cash balance reduced by $11.5 million against 30 June 2025, reflecting the provisional class action settlement payment, peaceful loan repayment and capital expenditure for Project ILO. Overall, liquidity is sound. Moving to slide 6 please. Shareholders know that they have a keen interest in accountability and execution and a key part of that is regularly reporting against our plans. There are three key pillars supporting our growth and efficiency agenda through to FY28. Firstly, building a global operating model to move away from silos and drive efficiency and scale benefits. Secondly, reviving our revenue engine by rebuilding our commercial and product teams to capture the significant opportunities that we see in the market. And third, deploying a single technology platform across EML to dramatically increase our speed, digitise manual processes and drive consistency of offering across all of our markets. Firstly on our global operating model. We have this deployed which aligns with our life resources together to build scale, synergy and quality. We're clearly seeing the benefit of this structure and a focused and refreshed leadership team across both day-to-day operations and the larger bodies of work. Our global ops centre established year and a half has grown quickly to 18 FTE and is forecast to double or more over the next six months. We're seeing a 35% cost saving on these roles versus traditional market employment. And the talent pool of qualified English-speaking candidates is significant. We're now in a single HR information system across the globe. We've gone from five payroll systems to one. This has seen streamlining of our HR operations with further advancements in both L&D and engagement over the coming quarter. And I'm very pleased to report that we actually have engagement now. On our revived revenue engine, I'll talk further to the pipeline and order book shortly, but hitting the highlights for the half. We exceeded our pipeline target of $90 million at 31 December with a result of $91.5. Our conversion rate is ahead of target. We continue to renew our largest clients with a further top five renewal due in the half, which was well ahead of cycle. Commercial and product leadership continues to attract investment in response to opportunities and client demand. On our single technology platform, Project Arlo, core platform build is in full swing and In parallel, migration planning is underway to create an efficient, timely and client-responsive workstream following regional production deployment. We will stand up Arlo in the UK by the end of this financial year. In summary, much progress has been made on our EML 2.0 plan. I look forward to sharing further update at the full year, which will feature a further shift from internal programs to commercial activity. Moving to slide 7, please. I want to go ahead and lay a brief on our business development momentum as I said I would during our investor discussions over the last six months. It's worth remembering that our commercial function was virtually non-existent at the start of last calendar year. And given we operate a B2B to C business, forming a view on things like normalised conversion rates and time to revenue etc. will take some time. I do think it's useful to note our progress, so let me share a snapshot of how we're travelling today. Please note that all the numbers discussed today are forecast annualised revenue. Depending on our client start date, we'll see a portion of that flow through to the relevant financial year. Our overall pipeline continues to grow and now sits at $102 million. We've secured close to $24 million of new program revenue. Our conversion rate is tracking at 51%, which is terrific. As previously mentioned, the sample size is still relatively small, so I think this may moderate somewhat as our activity increases. But let's see. Of these secured programs, 10.3 million has launched and is active on system, with a further 13.5 million to launch over the remainder of the financial year, hopefully most in the next 60 days. We have welcomed some exciting partners with strong growth prospects. Thanks to an energized team in North America, we're seeing a re-emergence of the digital payments vertical, which is high-volume, low take rate, but high-margin business, and importantly, relatively quick to implement. That said, we're somewhat frustrated by lags between signing and activation. Sometimes this is an internal process, or a partner's process, or its client side. We're super focused on optimising our critical onboarding programs and expect better results in the period ahead. Proportionately, Europe has underperformed, but we will shortly welcome new commercial leadership to this key market, which represents circa 50% of our global footprint. Overall, our activity and approach are light years better than they were 12 months ago. The winds are flowing and our order book is strong for the forward period. We can and will continue to improve both metrics and work quickly to compress the time to revenue. So we see the fruits of our labour in the shortest time possible, recognising that not all of the processes are within our control. Moving to slide 8 please. Alongside business development, our growth will Our EML 2.0 plan forecasts growth in existing clients of 4-5% which is being realised, excluding those clients in run-off from 2024. The business also enjoys a good spread of key clients. In other words, we don't suffer a pronounced client concentration risk. Our top 5 clients represent just over a quarter of our revenue. Our renewal profile is also well spread and pleasingly we continue to see early renewal activity. We have a great asset base across our existing clients. As we improve our performance and behaviours, our clients are welcoming us into their strategic and innovation planning. Naturally, this provides a ready-made market for product expansion. Moving to slide 9, please. As I've noted, product development is firmly back in the day-to-day lives of EML. The first cap off the rank is mobility, and when you think of mobility today, think about those magnetic-striped fuel cars, probably multiple, This is the product of intent on making obsolete. It's an enormous global market that suffers from several structural challenges. It's expensive relative to other payment networks. The technology is mostly old, complex and inflexible. Clients and card holders want a better experience whether at wider acceptance or digitisation or both. And EVs are growing factor in fleet and related expense management. We are convinced that the market is hungry for new ways to manage motor vehicle expenses in the digital age. Slide 10 which we'll go to next, validates the size of this price. What you can see from the market data here is both the size of the market today and the forecast growth rate over the medium term. To be clear, that is double-digit CAGR. But here now we see great overlap in attractive markets with our existing footprint and we have the capacity to geographically expand as we improve the price in our home markets. Turning to our solution on slide 11. EML is exceptionally well placed to play a key role in the digitisation of vehicle and other corporate expense management. We bring a pedigree in industry specific product design, utilising open and private loop payment rails and the underlying regulatory framework to support large scale programs of this nature. We also have the operational presence in several of the most attractive markets. We are finalising key partnerships including with an emerging global leader in fuel retailing technology integrations. These guys have deep expertise in the bowser and fuel retailer side of the transaction flow, with technologies that are deeply integrated into major four core controllers worldwide. Our product and technology teams are working through a proof of concept and technology integrations. Imagine having a digital wallet on your phone, being able to purchase fuel anywhere and from any brand, with all of the controls that vehicle owners, fleet managers and corporates demand, enabling you to also activate the pump from your app without stepping inside the shop. And you can use this wallet for vehicle related expenses beyond service factions, providing the first proper look into total cost of ownership of vehicles. This is the solution we're aiming for. It doesn't really do it justice, but there's more to come in future investor updates. As I said, the team is busy working on a technology platform and we expect to launch our MVP by mid-year. Co-design discussions with key clients are underway. And turning to slides 4 please. Before handing over to Stuart, I'll share an update on Project Arlo, our new single global platform replacing three disparate regional systems. I think it's worth reminding everyone that we've taken a modern, pragmatic and flexible approach to systems architecture for Arlo. What we are doing is we are building the core IP that goes to our business model, being the presentation layer and the business logic or interoperability layer. This is where great experiences are made and programs are configured and activated rapidly. The commoditised elements of the As you can see from the chart on slide 12, Our core build is expected to be complete around the end of this calendar year. We will deploy firstly in the UK mid-year and then in the other two regions at the end of the year. New clients can launch on the platform from these points. Migration planning is underway and will be a progressive activity through the back half of calendar years 26 and 27 and likely into the first half of 28, subject to key client engagement. Rest assured, we'll go as fast as we can without causing unnecessary risk or disturbance to our runway. I'll now hand over to Stuart to dive into the financials.

Thank you, Anthony. I'm pleased to be here today, having stepped into the CFO role on 1 December and look forward to meeting our shareholders over the coming days. I'll begin on slide 14, which shows the key operating metrics. As Anthony has said, the group experienced the challenging starts of the year with a well-managed cost base helping to offset Revenue challenges Revenue performance reflects previously communicated headwinds of lower interest rates across all regions and the impact of customer terminations from the prior financial year. Customer revenue declined 4%, driven primarily by Europe, partially offset by growth in Australia and North America. Interest revenue declined as expected, following central bank rate cuts with higher bond yields in Europe partially mitigating the impact. Net overheads of $53.1 million were consistent with the comparative period following leadership-led simplification, allowing reinvestment into commercial and sales capability. As a result, underlying EBITDA is down 16% to $28 million. Cash has decreased over the half by $11.5 million. I will expand on that later. Moving to slide 15, which shows the results of our European business. Europe remains our largest segment, with just under 500 customers across the UK and the broader European region, operating across government, financial services and human capital management. GDP or gross debit volume has increased 5% to $3.4 billion, driven by higher volumes with existing customers. However, total revenue declined 12% to $60.1 million 10% decline in interest revenue in the lower yield environment. Excluding terminated customers, existing customer revenue grew by 5%, which is consistent with the growth in GDP. Net overheads increased 11% to $31.6 million in the region, driven by higher irrecoverable VAT charges. As part of EML 2.0, the business transitioned from a regional to a global operating model, and this has resulted in an increase in some costs allocated from Gross profit margins were maintained despite the revenue pressure. I'll now move to slide 16 which shows the performance of the Asia Pacific region. This region comprises Australian and New Zealand businesses which are predominantly general purpose reloaded products with a strong human capital management presence and just under 200 active customers. Customer revenue increased 10% largely driven by a 5% increase in active HCM benefit accounts. which helped offset an 18% decline in interest revenue. GDV has increased 13% in line with the growth in retail and HCM sectors. Net overheads increased 5% to support the investment of EML 2.0 with the underlying gross profit and EBITDA margins broadly in line with the comparative period. If we now turn to slide 17, we'll focus on our North American segment. North America operates predominantly in retail gifts and incentive products, with participation in financial services via the BAN product and some exposures to gaming. The segment is just under 500 customers. GDP declined 6%, primarily due to lower BAN volumes, a high volume, low yield product with high margins. Pleasingly, customer revenue was up 1%, resulting in improved revenue yield and stable gross profit dollars and margins. Consistent with other regions, we saw lower interest income. Net overheads increased 13% driven by higher irrecoverable GST in Canada and targeted spend on professional fees. Slide 18 shows us our overhead cost base. Group overheads remained stable in the first half of 26 compared to the same period last year and fell 2% on the previous six-month period, being the second half of 25. Reflecting the ongoing refinement of the EML 2.0 operating model. The savings were driven by 1.4 million in employee entitlements, 1.6 million from reduced reliance on professional fees and partially offset by higher irrecoverable VAT and GST in Europe and Canada. Arlo Product Costs Expensed in the period of $4.5 million relating to the build are excluded from net overhands and underlying EBITDA as previously guided. Moving to slide 19, we provide an overview of interest income and stored float balances. Interest income is a conscious and key source of revenue for EML. Interest revenue decreased 11% to $29 million due to lower cash rates, partially offset by higher bond reinvestment returns. Float balances increased 5% to $2.6 billion with an annualised yield of 3.1% compared to 3.7% in the prior period, excluding non-interest bearing float. The exit rate at 31 December 2025 is 2.8%. We expect less volatility over the forward period compared with our experience of the last 12 months. The bond portfolio contributed 51% of the group's total interest income in the period. The current portfolio has Portfolio has a yield of 3.9% with an average duration of 2.5 years, helping moderate interest rate headwinds. Slide 20 shows a cash bridge for the period. As I've mentioned earlier, cash has decreased over the half by $11.5 million, reflecting cash outflows to provisionally settle the class action of $40.9 million. Repayments to the PSIL liquidator, $13.3 million. CapEx of $4.4 million Prince of Leon, Arlo and that has been funded by a debt drawdown of $44 billion Excluding one-off items, the underlying operating cash flow was $22.2 million representing a 79% EBITDA to cash conversion ratio. This is an area of continued focus of mine. With the majority of historic one-off outflows behind us and strategic actions we've taken over the last few periods, we remain focused on improving our cash conversion rate and optimising our cash flow management to drive greater financial stability and shareholder value. Next half, we see continued investment in the Arlo CapEx and we expect to make the final line repayment to the piece of liquid data, approximately AU$6.6 million. FY26 remains a transition year as EML moves to a globalised operating model, closes out a range of historical matters and positions the group for growth in FY27 and beyond. I'll now pass back to Anthony who will cover our priorities for the second half and an outlook for the business.