EML Payments — New three-year plan to transform the business

EML Payments (ASX: EML)

Last close As at 20/04/2024

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Market capitalisation

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Research: TMT

EML Payments — New three-year plan to transform the business

At its AGM in November, EML Payments presented the outcome of its recent strategic review and the new three-year transformation plan. This includes fully integrating previous acquisitions, streamlining operations, becoming more customer-focused and developing EML’s product suite to evolve from prepaid cards to embedded finance. Based on Q123 trading we have revised our forecasts down to the lower end of new FY23 guidance.

Katherine Thompson

Written by

Katherine Thompson

Director

TMT

EML Payments

New three-year plan to transform the business

Q123 update and AGM

Software and comp services

9 December 2022

Price

A$0.635

Market cap

A$237m

Net debt (A$m) at end FY22

10

Shares in issue

374.0m

Free float

93%

Code

EML

Primary exchange

ASX

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

20.8

(32.6)

(81.6)

Rel (local)

17.2

(35.2)

(80.7)

52-week high/low

A$3.45

A$0.41

Business description

EML Payments is a payment solutions company managing thousands of programmes across 32 countries in Europe, North America and Australia. It provides payment solutions for banking, credit and disbursement services, earned wage access, gifts, incentives and rewards, and open banking and FX.

Next events

H123 results

February 2023

Analyst

Katherine Thompson

+44 (0)20 3077 5730

EML Payments is a research client of Edison Investment Research Limited

At its AGM in November, EML Payments presented the outcome of its recent strategic review and the new three-year transformation plan. This includes fully integrating previous acquisitions, streamlining operations, becoming more customer-focused and developing EML’s product suite to evolve from prepaid cards to embedded finance. Based on Q123 trading we have revised our forecasts down to the lower end of new FY23 guidance.

Year end

Revenue
(A$m)

PBT*
(A$m)

NPATA** (A$m)

Diluted EPS* (c)

DPS
(c)

P/E
(x)

EV/EBITDA
(x)

06/21

192.2

30.2

21.0

6.6

0

9.7

5.9

06/22

232.4

16.0

19.3

3.4

0

18.7

7.2

06/23e

240.9

3.3

(8.1)

0.7

0

90.5

9.3

06/24e

271.3

12.4

11.9

2.6

0

24.4

6.3

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. **NPATA = net profit after tax, excluding acquisition-related costs.

Strategic review concluded, three-year plan unveiled

The outcome of the strategic review launched by EML’s new CEO in August was presented at the AGM on 25 November. Many of the issues currently affecting the business have arisen from the lack of integration of the seven acquisitions made since FY15. To build on the existing customer and product base, a three-year transformation strategy has been announced, formulated around three pillars: elevate, streamline and reposition for growth. No disposals or business closures were announced, and in our view, the strategy represents an evolution of the business rather than a change in direction.

FY23 estimates reflect ongoing remediation work

The company gave an update on Q123 trading, which, as expected, was affected by the ongoing remediation work for the Irish regulator in the European general purpose reloadable (GPR) business. EML also presented FY23 guidance for the first time. We have revised down our forecasts for FY23 and FY24 to reflect Q123 trading and the new guidance. The company continues to expect resolution of the regulatory issues in the UK and the EU during CY23. Cost reductions are planned for FY24, but we expect these to only take effect in the latter half of the year, with the full effect in FY25.

Valuation: Positive reaction to new plan

The stock is up 20% since the new strategy was announced and changes to the board were made. EML continues to trade at a material discount to global payment processor and prepaid card peers on an EV/sales and EV/EBITDA basis. Repeated downgrades have reduced confidence in EML’s outlook. Factors that could drive a return to an upgrade cycle and a re-rating of the stock include lifting of the growth constraints on the European GPR business, clawback of the costs of the Sentenial fraud and evidence of progress with the new three-year strategy.

Outcome of strategic review

In August, CEO Emma Shand announced that she was launching a strategic review of the business. At the AGM, she unveiled the results of the review and the new strategy for the company.

Findings of the review

After reviewing the operations of the business over the last three months, Ms Shand came to the following conclusions:

Regulation: the remediation plan is ongoing, with more to be done to mend operational shortcomings and rebuild stakeholder trust.

Organisation structure: the structure is not aligned to customers – internal reporting is on a geographic level rather than at a product or sector level.

Fragmented business: acquisitions have not all been integrated resulting in silos, misaligned culture, operational inefficiency and out-of-date technology.

Operational efficiency: the lack of analysis and insights about client, sector and product profitability makes data-driven decisions difficult. Legacy technology, manual processes and slow time to market all reduce efficiency.

Employee engagement: there is a remote-first ethos, with many staff working from home. There is a lack of clarity around strategy and performance expectations, and an inconsistent employee value proposition.

Product and proposition: the company is spread too wide and thin in its geographical reach and propositions. Bespoke point solutions and architecture limit its ability to scale.

Exhibit 1 summarises the future of the payments market as it applies to EML. Ms Shand highlighted that the company needs to continuously assess the megatrends and policy shaping the payments sector, in order to focus on customer needs and innovation while operating within the company’s risk appetite.

Exhibit 1: Payments market outlook

Source: EML Payments

Proposed action plan

The chart below shows the company’s strategy to transform the business.

Exhibit 2: Transformation strategy

Source: EML Payments

Looking at each pillar in more detail (date references are to calendar quarters):

Elevate: the remediation programme is ongoing. For the Central Bank of Ireland (CBI – the regulator of EML’s EU-based business), the company anticipates further remediation and implementation work during Q422–Q123, with further quality assurance work continuing in Q223, before seeking third-party assurance and dealing with any residual issues in Q3–Q423. In parallel, EML is working on satisfying the requirements of the UK regulator (Financial Conduct Authority (FCA)). Once this work is complete, the company should have much stronger governance and risk management functions. We would estimate that a proportion of the cost incurred in building out the regulatory-related teams will remain once the CBI and FCA have signed off on the work, to ensure that the group meets its regulatory requirements in all jurisdictions.

Streamline: actions include transforming the customer journey and service (including automated and self-service processes); developing a centralised technology, operations, innovation and delivery hub; rationalising and modernising the technology estate; creating a single source of data in an integrated data platform to help with decision-making, data protection and governance, and automating reporting; strengthening compliance; and right-sizing the organisation to align it to the new strategy.

Reposition for growth: reposition the base to evolve from prepaid cards into an embedded finance leader in four key sectors: human capital management, financial services, retail and government. The company estimates that these four verticals provide a serviceable addressable market of c A$114bn, of which EML currently makes up 0.15%. We note that EML is already active in all four of the verticals so this will be an evolutionary rather than a revolutionary process.

As part of this process, management is aiming to reduce controllable cost by c 10–15%, starting in FY24 and with the full impact in FY25. It also expects to provide a sustainability report, with benchmarking against recognised ESG standards, in FY24.

Board changes

At the AGM, Peter Martin was not re-elected as chairman. Consequently, David Liddy, the deputy chairman, was appointed chairman with immediate effect. A new non-executive director, Brent Cubis, who in October had been proposed with an effective start date of 6 February 2023, was elected. His appointment was made effective immediately.

While the proposal to approve the remuneration report was passed with 71.14% of votes, as more than 25% of votes were against the proposal, the company received ‘one strike’. If the company receives a second strike, shareholders would have the opportunity to vote the board out of office.

Q123 trading update and FY23 guidance

At the AGM, the company provided an update on trading in Q123 (see Exhibit 3).

Exhibit 3: Q123 trading highlights

Q123

Q122

y-o-y

Gross debit volume (GDV)

A$bn

23.2

5.7

307%

Revenue

A$m

49.0

51.3

-5%

Yield

bp

21

90

Gross profit

A$m

32.5

33.7

-3%

Gross margin

66.3%

65.6%

Underlying overheads

A$m

29.3

22.7

29%

Underlying EBITDA

A$m

3.4

11.5

-70%

GDV

Q123

Q122

y-o-y

General Purpose Reloadable

A$bn

3.23

2.98

9%

Gift and Incentive

A$bn

0.25

0.25

0%

Digital Payments

A$bn

19.67

2.45

703%

Source: EML Payments

General Purpose Reloadable (GPR) gross debit volume (GDV) increased 9% y-o-y despite growth restrictions in Europe during the period. GPR yield declined from 124bp in Q122 to 100bp in Q123, reflecting the A$3.2m in non-recurring dormant account fees that was recognised in Q122 and a reduction in establishment fees of A$3.2m y-o-y. Despite this, GPR gross margin of 58% was in line with Q122. Gift and Incentive (G&I) GDV was flat year-on-year and 10% higher quarter-on-quarter. The company noted that during the first six weeks of Q223, GDV was up 30% y-o-y, with incentives driving most of the growth but with malls up 20% y-o-y. The two weeks leading up to Christmas will be the crucial weeks for this business. The company did not disclose the G&I yield for Q123. In Digital Payments, Q122 only included the Virtual Account Numbers (VANs) business prior to the Sentenial acquisition in Q222. The company noted that group GDV was 8% higher year-on-year once the Sentenial contribution is excluded (which implies GDV of A$17.0bn for Sentenial). Open banking volumes were 40% higher year-on-year (on a pro-forma basis) with an annualised revenue run rate in October of A$6m versus A$4m in March. The company noted that direct debit volumes were lower quarter-on-quarter as the business focused on open banking.

Group overheads were 29% higher year-on-year, but were lower than in Q422. Further costs are likely to be incurred to manage regulatory matters in FY23. Underlying EBITDA excludes A$14m in one-off costs relating to the European regulatory remediation programmes, restructuring, Sentential fraud and executive retention.

The company noted that, as expected, interest income on stored float had increased as central banks have raised their rates, with net interest income of A$2.5m for Q123 compared to A$1.4m for the whole of FY22. Interest income was A$0.5m in July rising to A$1.6m in October and an estimated A$1.8m for November (A$21m annualised).

Outlook for FY23 and changes to forecasts

The company issued guidance for FY23 for the first time (see Exhibit 4). Our estimates prior to this guidance were at the lower end of the revenue range and the middle of the underlying EBITDA range. We have revised our forecasts (Exhibit 5) to take account of the Q123 performance and new gross margin and overheads guidance, conservatively reducing both revenue and underlying EBITDA to the bottom of the ranges.

Exhibit 4: FY23 company guidance

FY23 outlook

Bridge to FY23 underlying EBITDA

A$m

Revenue

A$240–260m

Underlying EBITDA FY22

51

Gross margin

c 67%

Less: one-off account management fee revenue in FY22

18

Underlying EBITDA

A$26–34m

Less: cost increases year-on-year

27–37

Overheads

A$135–145m

Add: revenue growth

6–26

Net interest income

A$17–21m

Add: interest revenue

16–20

Underlying EBITDA FY23

26–34

Source: EML Payments

Exhibit 5: Changes to estimates

FY23e

FY23e

FY24e

FY24e

Old

New

Change

y-o-y

Old

New

Change

y-o-y

Revenues

A$m

244.1

240.9

-1.3%

3.7%

273.9

271.3

-1.0%

12.6%

Gross profit

A$m

166.7

161.5

-3.1%

2.3%

188.1

183.8

-2.3%

13.8%

Gross margin

68.3%

67.0%

-1.2%

-0.9%

68.7%

67.8%

-0.9%

0.7%

EBITDA

A$m

30.4

10.5

-65.5%

-69.4%

39.3

39.2

-0.4%

273.0%

EBITDA margin

12.5%

4.4%

-8.1%

-10.4%

14.4%

14.4%

0.1%

10.1%

Add back one-off costs

A$m

0.0

16.0

0.0

0.0

Underlying EBITDA

A$m

30.4

26.5

-12.9%

-48.2%

39.3

39.2

-0.4%

47.8%

Underlying EBITDA margin

12.5%

11.0%

-1.5%

-11.0%

14.4%

14.4%

0.1%

3.4%

Normalised operating profit

A$m

11.0

7.1

-35.8%

-61.6%

16.3

16.1

-1.0%

127.8%

Normalised operating margin

4.5%

2.9%

-1.6%

-5.0%

5.9%

5.9%

0.0%

3.0%

Reported operating profit

A$m

-19.5

-31.4

61.1%

N/A

-6.2

-6.4

2.7%

-79.6%

Reported operating margin

-8.0%

-13.0%

-5.1%

-13.2%

-2.3%

-2.4%

-0.1%

10.7%

Normalised PBT

A$m

7.3

3.3

-54.2%

-79.2%

12.5

12.4

-1.3%

271.4%

Reported PBT

A$m

(23.2)

(35.2)

51.3%

10245.5%

(10.0)

(10.1)

1.7%

-71.1%

Normalised net income

A$m

5.8

2.7

-54.2%

-79.2%

10.0

9.9

-1.3%

271.4%

NPATA

A$m

1.4

(8.1)

-679.9%

-142.1%

12.0

11.9

-1.1%

-246.0%

Add back one-off costs

A$m

0.0

12.8

0.0

0.0

Underlying NPATA

A$m

1.4

4.7

232.0%

-85.5%

12.0

11.9

-1.1%

154.9%

Reported net income

A$m

(18.6)

(28.1)

51.3%

486.1%

-8.0

-8.1

1.7%

-71.1%

Normalised basic EPS

A$

0.02

0.01

-54.2%

-79.4%

0.03

0.03

-1.3%

271.4%

Normalised diluted EPS

A$

0.02

0.01

-54.2%

-79.4%

0.03

0.03

-1.3%

271.4%

Reported basic EPS

A$

(0.05)

(0.08)

51.3%

481.8%

(0.02)

(0.02)

1.7%

-71.1%

NPATA/share

A$

0.00

(0.02)

-679.9%

-141.8%

0.03

0.03

-1.1%

-246.0%

Dividend per share

A$

0.00

0.00

N/A

N/A

0.00

0.00

N/A

N/A

Net debt/(cash)

A$m

(13.3)

(4.5)

-66.6%

-145.8%

6.7

16.8

151.9%

-476.7%

GDV

A$bn

102.3

100.5

-1.8%

25.2%

108.9

107.2

-1.6%

6.7%

Yield

bp

24

24

0

-5

25

25

0

1

Divisional data

GDV

G&I

A$bn

1.5

1.4

-2%

7%

1.6

1.6

-2%

10%

GPR

A$bn

13.1

13.1

0%

6%

14.4

14.4

0%

10%

Digital Payments

A$bn

87.8

85.9

-2%

29%

92.9

91.2

-2%

6%

Revenue

G&I

A$m

75.4

74.7

-1%

9%

83.7

82.2

-2%

10%

GPR

A$m

144.1

142.7

-1%

-4%

159.9

158.5

-1%

11%

Digital Payments

A$m

24.5

23.3

-5%

29%

30.0

30.4

1%

31%

Gross profit

G&I

A$m

60.3

59.0

-2%

67.0

64.9

-3%

GPR

A$m

85.7

82.8

-3%

95.9

93.5

-3%

Digital Payments

A$m

20.5

19.5

-5%

24.9

25.2

1%

Gross margin

G&I

80.0%

79.0%

80.0%

79.0%

GPR

59.5%

58.0%

60.0%

59.0%

Digital Payments

83.6%

83.7%

83.0%

82.8%

Source: Edison Investment Research

Exhibit 6: Financial summary

A$m

2018

2019

2020

2021

2022

2023e

2024e

Year end 30 June

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

71.0

97.2

121.0

192.2

232.4

240.9

271.3

Cost of Sales

(17.7)

(24.2)

(32.9)

(63.8)

(74.6)

(79.4)

(87.4)

Gross Profit

53.3

73.0

88.1

128.4

157.8

161.5

183.8

EBITDA

 

 

21.0

29.7

32.5

42.2

34.3

26.5

39.2

Normalised operating profit

 

 

18.1

25.6

22.4

31.6

18.4

7.1

16.1

Amortisation of acquired intangibles

(7.2)

(7.5)

(11.1)

(20.2)

(16.5)

(20.0)

(20.0)

Exceptionals

(0.3)

(3.0)

(13.6)

(11.2)

1.4

(16.0)

0.0

Share-based payments

(5.0)

(4.2)

(6.1)

(5.0)

(3.0)

(2.5)

(2.5)

Reported operating profit

5.6

10.9

(8.5)

(4.8)

0.3

(31.4)

(6.4)

Net Interest

(0.1)

(0.0)

(0.7)

(1.4)

(2.4)

(3.7)

(3.7)

Joint ventures & associates (post tax)

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Exceptionals

(0.5)

(1.8)

1.3

(17.1)

1.8

0.0

0.0

Profit Before Tax (norm)

 

 

17.9

25.6

21.6

30.2

16.0

3.3

12.4

Profit Before Tax (reported)

 

 

5.0

9.0

(7.9)

(23.3)

(0.3)

(35.2)

(10.1)

Reported tax

(2.8)

(0.6)

0.7

(5.4)

(4.5)

7.0

2.0

Profit After Tax (norm)

14.4

20.5

17.2

24.1

12.8

2.7

9.9

Profit After Tax (reported)

2.2

8.5

(7.1)

(28.7)

(4.8)

(28.1)

(8.1)

Minority interests

0.0

(0.2)

0.0

0.0

0.0

0.0

0.0

Discontinued operations

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Net income (normalised)

14.4

20.3

17.2

24.1

12.8

2.7

9.9

Net income (reported)

2.2

8.3

(7.1)

(28.7)

(4.8)

(28.1)

(8.1)

Basic ave. number of shares outstanding (m)

246

249

304

360

371

373

373

EPS - basic normalised (A$)

 

 

0.058

0.081

0.056

0.067

0.035

0.007

0.026

EPS - diluted normalised (A$)

 

 

0.057

0.078

0.055

0.066

0.034

0.007

0.026

EPS - basic reported (A$)

 

 

0.009

0.033

(0.023)

(0.080)

(0.013)

(0.075)

(0.022)

Dividend (A$)

0.00

0.00

0.00

0.00

0.00

0.00

0.00

Revenue growth (%)

22.5

36.9

24.4

58.9

20.9

3.7

12.6

Gross Margin (%)

75.1

75.1

72.8

66.8

67.9

67.0

67.8

EBITDA Margin (%)

29.6

30.6

26.9

21.9

14.8

11.0

14.4

Normalised Operating Margin

25.4

26.4

18.5

16.4

7.9

2.9

5.9

BALANCE SHEET

Fixed Assets

 

 

108.0

162.9

872.1

685.3

827.3

941.5

971.4

Intangible Assets

65.8

104.6

371.7

350.1

448.5

430.9

412.1

Tangible Assets

3.5

5.4

14.6

11.2

12.7

9.7

11.5

Investments & other

38.7

53.0

485.8

323.9

366.1

501.0

547.8

Current Assets

 

 

131.6

313.8

1,008.6

1,603.5

1,855.1

1,946.0

2,089.8

Stocks

12.6

18.2

22.3

16.4

21.5

15.9

17.4

Debtors

8.9

14.4

21.7

22.0

35.8

33.1

37.3

Cash & cash equivalents

39.0

33.1

118.4

141.2

73.7

87.9

46.6

Other

71.1

248.2

846.2

1,424.0

1,724.1

1,809.1

1,988.5

Current Liabilities

 

 

(90.5)

(299.0)

(1,357.8)

(1,792.8)

(2,100.1)

(2,332.7)

(2,557.8)

Creditors

(21.2)

(33.9)

(47.5)

(62.9)

(65.7)

(69.9)

(75.6)

Tax and social security

0.0

(0.8)

(2.6)

(6.0)

(2.8)

(2.8)

(2.8)

Short term borrowings

0.0

(15.0)

0.0

(1.4)

(1.8)

(1.8)

(1.8)

Other

(69.3)

(249.4)

(1,307.7)

(1,722.5)

(2,029.8)

(2,258.3)

(2,477.6)

Long Term Liabilities

 

 

(19.3)

(33.5)

(82.6)

(81.1)

(145.2)

(143.3)

(97.6)

Long term borrowings

0.0

0.0

(35.8)

(36.9)

(81.6)

(81.6)

(61.6)

Other long term liabilities

(19.3)

(33.5)

(46.8)

(44.2)

(63.6)

(61.7)

(35.9)

Net Assets

 

 

129.8

144.2

440.2

414.9

437.1

411.5

405.8

Minority interests

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Shareholders' equity

 

 

129.8

144.2

440.2

414.9

437.1

411.5

405.8

CASH FLOW

Op Cash Flow before WC and tax

19.7

28.4

31.2

41.2

33.3

25.5

38.2

Working capital

(9.2)

2.0

3.6

31.7

(68.4)

10.9

(6.8)

Exceptional & other

(1.2)

(0.7)

(12.7)

(17.3)

0.4

(16.4)

0.0

Tax

(2.8)

(0.6)

0.7

(5.4)

(4.5)

7.0

2.0

Net operating cash flow

 

 

6.5

29.2

22.8

50.2

(39.2)

27.1

33.4

Capex

(5.3)

(5.8)

(11.0)

(12.6)

(14.1)

(17.9)

(20.1)

Acquisitions/disposals

(0.7)

(44.0)

(142.5)

(3.5)

(57.1)

10.6

(28.9)

Net interest

(0.1)

(0.0)

(0.7)

(1.4)

(2.4)

(3.7)

(3.7)

Equity financing

0.0

0.4

240.8

0.6

0.0

0.0

0.0

Dividends

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Other

(0.6)

(0.4)

(7.0)

(11.0)

(1.9)

(1.9)

(1.9)

Net Cash Flow

(0.2)

(20.6)

102.3

22.2

(114.6)

14.2

(21.2)

Opening net debt/(cash)

 

 

(39.9)

(39.0)

(18.1)

(82.5)

(103.0)

9.7

(4.5)

FX

(0.6)

(0.3)

(2.0)

0.6

(1.1)

0.0

0.0

Other non-cash movements

0.0

0.0

(35.8)

(2.4)

3.0

(0.0)

0.0

Closing net debt/(cash)

 

 

(39.0)

(18.1)

(82.5)

(103.0)

9.7

(4.5)

16.8

Source: EML Payments, Edison Investment Research

General disclaimer and copyright

This report has been commissioned by EML Payments and prepared and issued by Edison, in consideration of a fee payable by EML Payments. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by EML Payments and prepared and issued by Edison, in consideration of a fee payable by EML Payments. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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