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By Team Ace Investors

COMPANY OVERVIEW

Tyro Payments Limited (“TYR” or the “Company”) is a technology-focused and value-driven Group providing Australian businesses with payment solutions and value-adding business banking products. The Group offers simple, flexible, and reliable payment solutions as a merchant acquirer and complementary business banking products. More than 73,000 Australian merchants chose to partner with Tyro as of 31 December 2024. Payments are at the core of Tyro’s business, using its proprietary core technology platform to enable credit and debit card acquiring. This offering is enhanced by features purpose-designed for those merchants who choose to partner with the company, including Point of Sale systems integrations, least-cost routing (Tap & Save) and alternative payment types such as integrated Alipay.

On 26^th February 2025, the Company announced its results for the first half of the 2025 financial year. The Company reported solid top-line growth and an improved EBITDA margin driven by an ongoing focus on margin management and effective cost discipline. The Company’s Gross profit grew 6.5% on H1 FY24 to $112.0 million due to increased adoption of integrated banking, with 34% growth in banking users and 9.1% growth in banking gross profit. EBITDA grew 20.6% on H1 FY24 to $33.0 million, with an EBITDA margin of 29.5%. Net profit before tax (statutory) doubled to $10.3m (H1 FY24: $5.1m). Delivering strong profitability, Tyro continued to invest in priorities that enhance the merchant value proposition.

Source – Company’s Report

Having transitioned to a significantly more profitable business, the Company has strengthened its capability that makes Tyro’s payments simple, reliable, fast and safe, helping merchants to get paid anytime, anywhere. With the launch of Payment Links in H1, all merchants can request payment from their customers via text or email. It will continue to accelerate delivery in H2 with the upcoming release of its new Tyro Pro Key terminal, which has been built for the unique environments of many merchants, particularly the complex needs of health providers.

INVESTMENT RATIONALE

• In the first six months of FY25, the Company continued to make progress in innovating its payment solutions, expanding the network of valued partnerships and further developing the key building blocks of future growth. Under one of its most important strategic priorities, to provide integrated payments and banking to more merchants, the Company witnessed positive momentum in the period with a strong increase in the adoption of its banking solutions. This is a great demonstration that its integrated payments and banking proposition is highly valued by Australia’s SMEs.

Source: Company’s Report

• Health, new business growth continues – Tyro Health continued to deliver strong growth in transaction volumes, and it saw encouraging top-line growth in new business volumes. Despite soft market conditions, Tyro Health's business delivered 16.2% growth in transaction value compared to the prior period. The Company also witnessed new merchant transaction values increase across sub-verticals, driven by larger SME customers taking up its unique omnichannel payments offering.
• Strong growth in nondiscretionary verticals – The Company continued to see strong growth in nondiscretionary verticals (Health and Services), which increased by 11.1% to $5.4 billion in the first half. Within this, the Health vertical remained strong with volumes increasing by 16.2% to $3.6 billion, driven by growth in merchant numbers and an increased average transaction value. The Company is encouraged by the level of new business being written (transaction volumes processed in the first calendar month for new merchants in the period) which increased by 17% compared with the first half of FY24, and for Hospitality and Retail the new business written was 22% higher than in the first half of FY24.
• Positive banking momentum heralds new phase of delivery – More merchants adopted Tyro’s integrated banking product suite in H1, creating positive momentum for accelerated product delivery into the second half of FY25. The active bank account users grow by 34%. Merchants who use its banking products are the strongest advocates, reinforcing its belief that merchants need and value the integrated payments and banking proposition.
• Outlook and Guidance: Gross profit growth and improved profitability – Tyro expects continued gross profit growth and improved profitability, despite ongoing challenging market conditions facing our merchants. • Gross profit of between $218m and $226m in FY25 at an EBITDA margin of c.28% expected in FY25. Tyro also announced medium-term targets that demonstrate a commitment to delivering profitable and sustainable growth, expecting to deliver ‘Rule of 40’ or greater for FY26 onwards (basis: normalised gross profit growth + EBITDA margin).
• With total cash and financial investments (excluding equity investments) of $155.4 million (30 June 2024: $165.0 million), the Company has sufficient liquidity in place to continue to fund its growth strategy.

ACE’s RECOMMENDATION

The Company reported strong results for the first half of FY25. Its focus on delivering sustainable, profitable growth led to $33.0 million of EBITDA, up 20.6%, and an EBITDA margin of 29.5%. This was supported by net margin growth and ongoing cost discipline.  The Company has become the payment provider of choice for over 70,000 merchants because of the vertical-specific solutions and by being easy to do business with.

Leveraging its core strengths will allow it to unlock the potential of more businesses. These strengths are: End-to-end ownership of tech stack, Targeted distribution channels, and Integrated payments and banking. The Company continued to innovate to bolster its online payments offering for merchants and broad partner network, which increased by more than 100 active partners this year. Merchants can now process payments within the Tyro Merchant Portal and send payment invoice links directly to customers. It also enabled card-matching for the Australian-first instant cashback app, Hello Clever, and integrated payments for StoreConnect, the first Salesforce-native POS for small businesses.

Tyro will leverage its unique in-house payments infrastructure to enter new verticals in 2025. It remains focused on extending its product offering and continuing to develop valuable innovations for the partners and merchants. In FY25, the Company will enter two new verticals where it has a unique capability that will provide a competitive advantage, including unattended payments and a growing vertical adjacent to Health. With these initiatives in play, the Company is confident in its runway for growth. We recommend the stock as BUY at the closing price of $0.80.

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