EML Payments Limited (EML) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. My name is Peter Martin, and it's my pleasure as Chairman to welcome you to the 2020 Virtual Annual General Meeting of EML Payments Limited. Before we begin, I'd like to acknowledge the traditional owners and custodians of the many lands on which we are all joining today. For my location here in Sydney, it's the Gadigal and Wangal People of the Eora Nation, to whom I pay my respects to their elders, past, present and emerging. Thanks for joining today's meeting. It's a new experience for us all as we'll all be completely online due to the current COVID-19 pandemic and related health concerns. I do hope that you and those you care about are keeping safe and well in these challenging and uncertain times. We hope that holding a virtual meeting will assist to further curb the spread of the COVID-19 virus, and encourage greater participation and engagement amongst our shareholders. I want to assure you that you will have the same opportunity to participate today as you would at a physical meeting. This includes being able to ask questions through the online platform and vote using an electronic voting card. I'll discuss these processes a little later. But I encourage you to download the virtual meeting online guide from the EML's website if you haven't already done so. If we do experience any technical issues today, a short recess or an adjournment may be required depending on the issue. If this occurs, I'll advise you accordingly. I'll now move to the formal business of the meeting. This meeting is being convened in accordance with the provisions of the Corporations Act. It's now after 10 a.m., the nominated time for the meeting, and I've been advised, a quorum of shareholders is present. The meeting is validly constituted, and I'm pleased to declare the meeting open. I'd now like to take the opportunity to introduce my fellow directors joining us via audio link. The directors are available to answer any questions that apply to them. David Liddy AM, Independent Nonexecutive Director and Chair of the People and Remuneration Committee; Tony Adcock, Independent Nonexecutive Director and Chair of the Audit and Risk Committee; Melanie Wilson, Independent Nonexecutive Director and Chair of the Investment Committee; Dr. Kirstin Ferguson, Independent Nonexecutive Director; George Gresham, recently appointed Independent Nonexecutive Director; and Tom Cregan, the Managing Director and Group CEO. Mr. Cregan will be joining us via video link from Melbourne, and we'll also have various EML executives online. In particular, we have Rob Shore, Group Chief Financial Officer; Joint Company Secretaries Paul Wenk and Sonya Tissera-Isaacs; Andrea Roy, audit partner of the company auditor, Deloitte Touche Tohmatsu; and representatives of the company's share register, Link Market Services Limited, who are providing the virtual meeting platform today. Mr. Wenk is in Melbourne and will be reading our questions submitted by shareholders later in the meeting. Today's meeting will occur in the following order. Firstly, I'll provide you with a brief update on the business over the past year. We'll then hear from our Group CEO, Tom Cregan, who will discuss the 2020 fiscal year and the year ahead in more detail. Thirdly, we have 9 resolutions for the meeting today. After the resolutions have been read and votes are being tallied, there'll be an opportunity for shareholders to ask questions of the Board or management. Voting on the resolutions will be conducted by way of a poll using electronic voting card you should receive after clicking the Get A Voting Card button. Shareholders who wish to ask a question, please click on the Ask Question button, type your question and press Submit. I encourage shareholders who have questions to submit them as soon as possible during the meeting. We've received a number of questions prior to the meeting, most of which have been addressed during the presentations. If you have any trouble using the online platform, please check the virtual meeting online guide on EML's website, or please feel free to contact the help line shown on the screen. I turn now to my Chairman's address, in which I'd like to say a few short words about the year we've had, the company's longer-term strategy and business focus and how our people have adapted to changed circumstances. The COVID-19 pandemic has affected the world deeply both at an economic and business level, but also at a human level. The immediate effects of the virus and the response of various governments and communities around the world hit parts of EML's business hard and continues to be a headwind in some segments. However, it's a testament to the diversification of our business and the talent of our people that we maintain strong growth in the 2020 fiscal year. It's also inspiring to see how our people have adapted to changing circumstances and more generally, the level of innovation that's been spurred on by some fundamental shifts that COVID-19 appears to have accelerated. This is particularly true in the payments industry. At EML, we've responded to the crisis proactively. COVID-19 has provided us with the opportunity to review our longer-term strategy and reset our vision statement to offer customers a feature-rich, fully embedded payment solution for a simple, single touch point. Some of the 2020 achievements that we're particularly proud include: entering the ASX in December 2019; the acquisition of Prepaid Financial Services in March 2020, under favorably renegotiated terms; we now generate the majority of revenues from the general purpose reloadable segment, which has been a longer-term strategic priority; refining the group's strategy and the launch of Project Accelerator to drive the group's growth over the next 3 years; strong financial performance during the first month, the 8 months of the year before COVID-19 impacted trading conditions and our resilience since then; maintaining a strong balance sheet with significant cash reserves and no senior secured debt, thus ensuring that the group can successfully execute on our strategy and be positioned to take advantage of opportunistic acquisitions; signing and launching major new customers in all verticals with significant sales momentum in all of our markets. We have released our investor presentation to the ASX, and I'd recommend it to you for more information about our longer-term strategy. On behalf of the Board, I'd like to say thank you to the whole EML team. EML has a very strong people culture, and that's been shown in the outstanding commitment of all existing and new staff, the majority of whom are now working remotely. Finally, I'd like to thank the Board, who've once again provided me with strong support, put in a considerable amount of time and effort in a very busy and challenging year. I'll now hand over to our Group CEO, Tom Cregan, to take you through the results for 2020 fiscal year and talk more about the year ahead. Thank you.

Good morning, and thanks for attending our 2020 Annual General Meeting. My name is Tom Cregan, Group CEO and Managing Director, and I look forward to providing this update to you, which will focus on our business model and strategy, which ultimately is the most relevant factor for investors in relation to an investment. It's our first virtual meeting. And my thanks to the EML team, Paul Wenk, our General Counsel; and Sonya Tissera-Isaacs, our Company Secretary, who have made this event possible and dealt with the logistical challenges involved. I also think it's a step forward in the democratization of these meetings. Historically, we would hold a meeting in Sydney and have an attendance in the 100 to 150 range. Yet as we've grown as a company, our shareholder base has grown to almost 30,000 shareholders from 7,000 shareholders a year ago. Holding this meeting today in a virtual format provides maximum access for our shareholders, and I think that's a very positive thing. On Slide 2, we outline our mission, vision and purpose statements. And for those who attended our third EML.CON event yesterday, you would have heard presentations from customers, payment schemes, venture capitalists, technology companies, and how that ties back to our mission, vision and purpose. Turning to Slide 3. EML is a leading payment technology company, providing end-to-end payment solutions for corporations and governments in 28 countries. We manage over 3,000 programs globally, and service customers across a range of industries, including NGOs, fintechs, neo banking, neo lending, multicurrency, salary as a service, incentives, retail malls, government disbursements and gaming, to name a few. And we will continue to work with our customers to help them use our payment technology to grow their own businesses. And we will continue to identify new customers in emerging verticals that will drive our growth in the years to come. In FY '20, we generated EBITDA of $32.5 million from revenue of $121.6 million, driven by gross debit volume of almost $14 billion. And that's the first point I'd like to make today. In 2012, we had a business in Australia only with a handful of customers and with gross debit volume of $60 million a year and revenue of $3 million a year. And a constant question from investors was, "Where is your growth going to come from?" And 8 years later, with gross debit volume run rates in the $17 billion to $20 billion a year range, that's the same question we get. And the reality is that our business evolves as global commerce evolves. We have customers in the digital banking space that you've only seen take shape in Australia in the last 2-or-so years, following on from trends in the U.K. and Europe. And there are a number of industries that are evolving, such as open banking, and we'll be a player in that space as well. Slide 4 tells a similar story of product evolution, geographic expansion, acquisitions and more recently, the launch of Project Accelerator. Put simply, investors don't need to understand every customer we have or every industry they operate in. The investment thesis is simple. Can the executive team continue to expand programs that we have in market? And can we continue to do as we've done for the last 8 years in finding new use cases and customers? If we can, our debit volumes will grow into the future, and so, too, will our revenues. And that's a company you would invest in. And conversely, if you don't believe in that thesis, it's not one you should invest in. Turning to Slide 5. We sit at the epicenter of a $1 trillion payments market that will undergo a significant transformation to digital payments in the coming decade, and we intend to capture our share of that long-term market opportunity. Market data for the prepaid payments industry is both bespoke and regional in nature. So you can imagine it includes all products, including gift and GPR and every imaginable industry vertical, including many verticals EML does not compete in today. But putting that to one side for a moment. The U.S. prepaid market was estimated to be USD 395 billion in GDV in 2019. The U.K. market was estimated to be a GBP 23 billion market in 2019. And the European prepaid market is estimated to be a EUR 350 billion GDV market by 2023. And the Australian market was estimated by the RBA to be almost $12 billion of GDV in 2019. And this is another important point. Competition in the prepaid industry can also be regional and bespoke with some global players. But if we have a company with consensus revenues of $180 million and market shares in the U.S., U.K. and Europe of sub-5%, and we have an incredible runway of growth ahead of us, as do our competitors. It's "a rising tide lifts all boats" analogy versus a binary analogy where there's one winner and multiple losers. And as a result, we don't focus on competitors, but we do focus on our own competencies and execute our strategy to take advantage of this growth runway in the years ahead. Turning to Slide 6. You'll see the solutions we provide and our various revenue streams. We offer new age payment issuing and processing through real-time API connectivity. And as the transaction processor, we provide our customers with access to analytics and insights that inform the ways in which they market and grow their programs. Our solution suite encompasses Know Your Customer, fraud management tools, treasury management, regulatory, compliance oversight, program management and the list goes on. The ability to get an end-to-end solution is one of our competitive advantages and explains the varying yields depending on the program. For example, a GPR program for a neo bank that uses all of that solution suite will have a correspondingly higher yield than a program where we are just acting as the transaction processor. And as we launch new programs with customers, we generate a range of revenue streams, including interchange, transaction fees, breakage on gift cards, with 85% of our revenues being recurring in nature. And whilst we retain all interest on cardholder deposits, obviously, we're at a historic low in terms of interest rates. But it is worth remembering that for every 25 basis points lift in interest rates on a current float balance of $1.5 billion, we'd be making $3.75 million extra in gross margin. So our revenue model is resilient and agile and has some future optionality built into it. Now that you've seen what we do and how we generate revenue, Slide 7 now takes you to the way in which our business has been able to grow. This is a cohort analysis, which shows 3 customers, which we've launched with in different industries and the GDV growth in those programs since launch. When we launch a new program, irrespective of what that is, often that program starts with 0 cardholders, unless it's an existing program from a competitor that we are winning across to EML. As our customers launch their programs, market the programs and consumers adopt the program, the cardholder base grows, debit volume increases and our revenues increase with it. These programs grow over many years. And whilst program scale and grow at varying levels, the point is that as they scale, our revenues scale. It's unlikely that we would launch a program in a given year that becomes a needle mover in terms of debit volume, unless it is an existing program, as I said, that we've won across from a competitor. So whilst it's natural for some investors to want to seek a catalyst to time their purchases or shares of sales based on things like new contract signings, the reality is that our new contracts we announced will be more material to our financials in 3 years versus 3 months. And our unrelenting focus remains on building the business for the long-term benefit of stakeholders. The graph to the right shows the same thematic in a different way. And over several years, how our revenues grow from working with our customers to maximize the success of their programs in market and launching programs with new customers. Turning to Slide 8, and you'll see this demonstrated again. The first chart shows GDV analysis for EML over several years and the same analysis for PFS as a stand-alone business. And then you'll see the combined pro forma GDV of those businesses as if they had been the 1 company since inception. So as I said earlier, programs take some years to scale, and that is evident in each graph. Programs that are launched will typically be material to our financials in 3 to 4 years. And we have virtually no churn, which is another fundamental point. We measure churn in terms of GDV versus the number of customers, because not all customers are created equal in terms of their financial contribution. But when we look at programs launched in 2017 and where those programs are at today, our GDV retention rate was 99.9%. And you'll see with our sales pipeline that we've signed 46 contracts in the last 2 quarters, and we have over 300 prospects in our pipeline with a heavy focus on digital incentive gift cards and GPR programs. And in addition, we've got 100 programs awaiting implementation that will be launched in the next 6 to 9 months, which includes those 46 recent wins as well as earlier wins that have been won and are working their way through the implementation process. We believe that if we close our win rate of deals, the year 3 to 4 maturity level of gross debit volume incrementally would be circa $5 billion. Therefore, the programs that we've launched in any given year are more accretive in those years 3 and 4 post launch and as those programs expand. And we've seen that time and time again with gaming and salary packaging, and it will continue to be the case going forward. We have mentioned on a number of occasions that whilst we have signed a number of Buy Now Pay Later providers, this is a segment quickly becoming disaggregated and moving to a transaction processing model, which will be a lower yield than our current VANs business, for example. As a pure transaction processor, it's a vertical that represents the opportunity for incremental revenues, but it's not a vertical that we would want to build our business on. So in much the same way that we view the VANs segment, it's opportunistic revenue but not where our focus is relative to GPR. On Slide 9, we show our track record of growth going back 6 years, and this is made possible by the business that we have established in the past 8 years, which is on Slide 10. We operate in a heavily regulated industry. We're responsible for moving and reconciling billions of dollars. So systems, infrastructure, regulatory, compliance, other bits under the iceberg -- the bits of the iceberg under the surface that investors don't necessarily see. But without it, you've got no business being in this business. Looking at Slide 11, and you'll see a 4-year history of our reporting segments, including the use cases and the growth thematic for each one. And across each segment, we find the financial elements to be very stable because we enter into long term, predominantly exclusive contracts that don't have any repricing within them. So you would expect to see yield and margin stability within each segment over time. In FY '20, you'll see declining yields in the Gift & Incentive segment and the GPR segment. But if we look to the trading statement, we can see how a less COVID-impacted quarter has trended. Moving on to our Q1 trading update. I think the short summary is that we're off to a reasonable start. We suspended guidance in May, and we will recommence in February with the release of the half year results. But most of you will know that the consensus range is in that mid-$40 million to mid-$60 million range for EBITDA, and the assumption driving that variance is largely the performance of mall gift cards over the peak season. On Slide 2 (sic) [ Slide 12 ], we've got our trading update for the first quarter of FY '21. This information was released to the market on the 21st of October. GDV was 51% up on the prior period, and we're showing that data relative to the -- to Q4 of FY '20 as well, which was up 20% on that COVID-impacted quarter. That drove a revenue outcome of $40.6 million, up 75% on the prior comparative period and also 20% up on the last quarter. GDV and revenue both grew 20% over the last quarter of FY '20. So that would tell you that yields in each segment have been stable over that period. And as you can see, EBITDA was $10.05 million, up 213% on the prior comparative period. And Q1 is historically our weakest quarter. So it is a positive start to the year. As you move to Slide 13 and looking at this on a segment level, there were some good takeaways. The Gift & Incentive segment grew 41% quarter-on-quarter, and was only 11% below the prior comparative period a year ago. And yields increased back to almost 600 basis points as cards were used. And we benefited from interchange income that we would have other -- we didn't receive in Q4 with lockdowns and mall closures. The GPR segment has seen massive growth, as you'd expect, post the acquisition of PFS. And pleasingly, PFS grew GDV and gross profit by 24% on Q4 FY '20 with 2 record GDV months in July and September. And the old, dare I say it, EML GPR segment also saw a 16% growth due to higher volumes in gaming and salary packaging. And the VANs segment recovered its GDV over the previous quarter and is consistent with previous quarters and at a consistent yield. As I said, we suspended our guidance in May, given the importance of the Gift & Incentive segment to our full year results. And as you can see, the approximate seasonal mall volume equates to approximately $400 million of GDV. That would correspond to approximately $19 million in gross profit, most of which will translate to EBITDA. So whilst not commenting on consensus broker estimates, as I said, estimates range from mid-$40 million to mid-$60 million, and I dare say that there are assumptions on that item on Gift & Incentive in the seasonal period is really the biggest swing factor. So we're happy with $10 million as an EBITDA for Q1, and we think that gives you some idea of how we think the business could perform if we keep the performance going and we get a reasonable seasonal benefit in the G&I segment. Of course, we don't know what Mother Nature and what COVID has planned for Europe in the months to come, and hence, our resumption of guidance in February 2021. Finishing up here on Slide 14. We've communicated to the market that our strategic focus is Project Accelerator. It's a multiyear program focused on 3 things: implementing changes to our technology platforms that will allow us to launch multi-regionable customer programs as seamlessly as possible; and to work across both major payment schemes and nonpayment schemes. Examples of that are the pending launch of Laybuy in the U.K. and Australia and plans to launch tokenized payments on the Visa network by the end of FY '21 in all of our markets; expanding our product range to maximize revenue-generating opportunities; and accelerating our growth through direct investment, in which we'll spend $10 million to $15 million over 2 years; and indirect investment or what we refer to as FinLabs. We've concluded 2 FinLabs investments to date with more in the pipeline. On Slide 15, you'll see the details of our first 2 investments, but I'd like to take this opportunity to remind investors that we're not entering into these investments as a traditional VC investor would where we are focused on the exit price or the capital gain that we can create. We're investing in these companies where -- because their technology can be integrated into our own, and it expands our own go-to-market offering, which in turn, should increase our sales opportunities. We're also gaining distribution opportunities by being the provider of prepaid solutions to their customers. And from this, we would expect to generate a cash-on-cash return for each investment we make. Some of those investments might lead to outright acquisitions down the road or they might not. So we have no predefined position on that. But you could consider it a form of R&D because these would otherwise be pieces of our tech solution that we would have needed to build, which would have taken time and would have involved an investment in headcount to do so. Interchecks was the first FinLabs investment we made for a total of USD 2 million for a 10% stake in the company based in the U.S.A., and we recently closed a USD 5 million Series A investment in a company called Hydrogen, which is also in the U.S. Rather than go through those in details now, I would encourage investors to look at their presentations at EML.CON. And you'll understand more about their business and what the strategic fit is with Project Accelerator. Slide 16 refers to EML.CON, which I've referred to already. It was a great event with over 1,000 people logging into it. And it just gets better every year. My thanks to Richard Anderson, who heads up our global marketing function, along with Matt, Wade and everyone at Prodigy+ who have made that event possible. On Slide 17, we'd like to show investors the level of media coverage that we're obtaining. We recognize that some investors look only to the ASX platform for updates, but that isn't intended to be a marketing platform. And unless investors are following e-mail on social media channels, they might miss the level of coverage that we do obtain internationally, which is far more than we obtain domestically. That makes sense given we're an international business, and media and PR is one of our marketing strategies to build awareness of the company and to use that to build out our sales footprint. And finally, it's important that we talked to you today about our people initiatives and the company on Slide 18 to 20. We are a people-driven business. We can have the best technology, the best systems, the best customers, but it's our people that make us successful. I'm unapologetic about having what I think is the best team in the industry, and as executive teams go, the best that I've worked with. Their commitment this year, the hours that they have worked, the sense of cooperation and teamwork and the results that they've achieved is fantastic. Integrating a major acquisition and communicating across regions, so these people on calls at 5 a.m. through to 11 p.m., and they do it because they're committed to the company, to their teammates and they want to win. This year, to name just a few initiatives, we've implemented paid parental leave and flexible working hours. In terms of diversity, we've got a 50-50 gender balance within the executive team, and 3 of our 4 P&L owners are female, which I doubt many other companies could claim to have. We're focused on diversity because it's the right thing to do. And we have more projects to focus on this year, including ensuring that we have now implicit gender paying equalities for the same roles within the company. Under our Change for Good strategy, we have committed to replacing tens of millions of plastic gift cards over the coming years through a move to digital gift cards and transitioning to more environmentally friendly card types. And in line with our purpose statement, we're focusing on what we can do for our communities, which includes volunteering and philanthropic efforts. We will be focusing on the absolute scourge that is domestic violence. Kristen Shaw heads up our People and Culture team, and she's a one-person force of nature for positive change across the business, and I'd like to thank her again for her tireless efforts as well. I'd like to thank everyone for your attendance today, and I look forward to answering any questions following the formal business a little later in the meeting.

Thank you, Tom. We now move to the formal part of today's proceedings. And after this, we'll address any general shareholder questions for the Board, the Group CEO, the Audit Partner or the Group CFO. For resolution-specific questions, we're going to answer those as we move through each of the resolutions shortly. The notice convening this meeting was dated 25th of September 2020, and made available online to all shareholders of the company at that time. The matters requiring consideration today are outlined in detail in the Notice of Meeting. Unless there are any objections, I'll take the Notice of Meeting as read. We have 10 items on the agenda today for shareholders to consider. 9 of these are in the form of resolutions. The resolutions will be displayed on the screen. EML share registry provider, Link Market Services, will conduct the meeting -- the voting by way of a poll, and Matt Foster of Link will act as returning officer. Votes will be counted after the end of the meeting and the results published on the ASX and EML's website. Shareholders can cast their vote using the electronic voting card received after validating their online registration. To validate registration, you'll be asked to enter your security holder reference number, that is your SRN, and you'll also need to enter your post code if you're in Australia, or the country if you're outside Australia. To then cast your vote, click the Get Voting Card button. If you're intending to vote, you can finalize and submit your vote up to 5 minutes after the end of the meeting. The company has received the number of proxy and direct votes on each of the resolutions. The votes already cast will be set out on the slide shown on each resolution. Valid proxies and direct votes have been received, representing 172,966,680 shares, which equates to 47.81% of voting shares. Shareholders have appointed the chair of today's meetings, that's me, as proxy for approximately 149,105,946 shares voting either for, against or with discretion for all resolutions. As indicated on the proxy form and in the Notice of Meeting, my intention as chair is to vote all discretionary or undirected proxies held by me in favor of each resolution. As I said earlier, shareholders can submit written questions during the meeting by clicking on the Ask a Question button. To ensure questions reach us in time, I'd like to remind you to please submit them as soon as you can. Any general questions submitted online will be addressed after formal business is completed. Questions specific to particular resolutions will be answered when we read the relevant resolution. If we receive a number of similar questions on a similar topic, we'll aim to cover these as one. If we're unable to get through all of the questions today, or if there are specific questions better addressed on an individual basis, we'll respond to them after the meeting. The first item of business at today's meeting deals with the presentation of the annual financial report of the company for the financial period ended 30th of June 2020, together with the declaration of directors, the directors' report, the remuneration report and the auditor's report. No resolution is required to be moved in respect of this item, however, shareholders are now invited to ask questions and make comments on the accounts and on the business, operations and management of the company. Shareholders may also ask the company's auditor, Andrea Roy of Deloitte Touche Tohmatsu, questions relevant to the conduct of the audit, the preparation and content of the independent auditor's report, the accounting policies adopted by the company in relation to the preparation of the accounts and the independence of the auditor in relation to the conduct of the audit. I now invite shareholders to submit any questions regarding the financials. I'll pause for roughly 10 seconds to allow enough time to receive them from you and to check whether any questions were received. Paul, are there any questions on the financial statements?

Thanks, Peter. There are no questions on the financial statements.

Okay. If there are no questions, I'll move to the resolutions to be considered at today's meeting. Resolution 2 deals with the remuneration report. I put to the meeting that shareholders consider, and if in favor, to pass the following advisory resolution under Section 250R(2) of the Corporations Act that the remuneration report for the financial year ended 30 June 2020, be adopted. Proxy and direct votes received in respect of this resolution are displayed on the screen. Again, I'd like to invite shareholders to submit any questions in relation to this resolution. And we'll roughly pause for 10 seconds and then check whether any questions were received. Paul, are there any questions on the remuneration report?

Peter, there's 1 comment and question from Steven Mabb of the Australian Shareholders Association. I'll read that out to you now. Firstly, we thank the Chairman, Peter Martin; and Head of the Remuneration Committee, David Liddy, for the chance to meet prior to the AGM and for your thorough feedback on our voting intentions. We have had to agree to disagree on supporting a number of this year's resolutions, and it's important that shareholders hear these concerns and questions prior to voting on each resolution today and the Board's position on them. The question is, we understand that COVID-19 and its impact on the second half was an unexpected event. Yet equally, it has affected shareholders and customers in a negative way. For example, the share price has declined from $5.60 in February 2020 to $3.25 at the end of the financial year, which is a decline in shareholder value of 42% during the period. How did the Board decide to use upward discretion and pay the short-term incentive at 50% and long-term incentive at 92% despite the gateway hurdles not being met? And that's the end of the question.

Thanks, Paul. Look, good question. I think I'll hand that to David Liddy, who's the Chair of our Rem Committee. Can you turn on David's microphone, please? David, do you want to handle that question?

Thanks, Peter, and thanks Steven, and good morning. This was explained, Steven, to you during our recent meetings or discussions. The remuneration framework, has steadfast involve 3 key elements. The fixed paid, which was sort of set around about 70th percentile of the benchmark; a short-term incentive called STI, which is an annual incentive program, and that's paid in stock; and a long-term incentive program, which is a 3-year program, and that's also paid in stock. So just taking the LTI, which we paid 92%. And I guess there's no brief way to answer your questions, but I'll endeavor to explain our Board's position in as much detail as possible in order to give any of your members who may be listening, a good understanding of our thinking and decision-making process. So on the LTI. The LTI was for the period of 1st of July '17, through to 30th June 2020, so a 36-month period. So by March 2020, we've already had 33 months in that period, which is 92% of the 3 years. EML has completed financing a very strategic acquisition at PFS in November '19, and we closed that acquisition in March, on the 31st of March. And that is a long-term strategic action, which were immediately -- initially diluted to the performance measures. It only contributed 3 months of profits to the financial '20 year in light of the -- even though it's a strategic acquisition of the group. So adjusting to the impact of PFS, that March '20 management was clearly on track to exceed the performance measures. And then, of course, COVID hit. And as a Board, we consider that it wouldn't be appropriate to ignore the previous 33 months of exceptional hard work and achievements. And Tom's already outlined some of those in his earlier address. So the Board decided to apply a discretion, and to award at 92% of the maximum. Obviously, our management didn't get to 100%, and that was representing the 3 months for that past year. I guess it's worth reminding ourselves of some of those achievements during that 33 months. And these are considerations that we took into account when coming up with the 92%. For financial year '16, so as of June -- 30 of June 2017, our revenues were $23.3 million, and our EBITDA was $5.5 million. By June 2020, our revenues were $121.6 million and EBITDA of $32.5 million. In each case, we all note a sixfold increase. Also in that period, we've expanded the far more complex business, going from operations in 13 countries and 850 programs, we now operate in 28 countries and have thousands of programs. We acquired 3 new businesses in Presend, Perfect Card and Flex-e-Card, and that was before making the PFS acquisition. So the Board took a view that, that was fair and reasonable in light of the performance and the movement of the company over that 30 to 36 months. The STI was paid at 50% of the maximum. The maximum period -- the measurement period for our STI is 12 months. And there is an important element of the Board's exercise of discretion that appears not to be understood. That is the Board's waive to financial gateway test. We didn't waive the financial performance measures. The whole of the STI is to be paid in equity and not cash. And the whole of the STI is deferred for 12 months. So if any of our people are not here in 12 months, they forfeit that STI. And as I mentioned previously, the management team really have performed incredibly well during the year. Major acquisitions, new products, new markets, and notwithstanding the financial gateway test was not achieved, all key nonfinancial objectives were achieved, particularly the strategic decisions which will create long-term shareholder value. So then, the Board took the view that our staff has worked exceptionally well. That's all the strategic initiatives that we wanted our staff to undertake have been completed. And we felt that 50% payment on that was the trick way to go. Your other point regarding the share price, and the Board recognizes that the company's share price retreated from probably an all-time high of about $5.60 or so in February, down to about $3.25, I think, at the end of June. That short-term share price movements are not the right basis upon which to assess management's performance. The share price is certainly not controllable by management. But for those who minded to use that as the only measure, I should point out that the market capitalization as of June -- July 2017, which was the beginning of this management measurement period, was $391 million or $1.61 per share. So even with the effects of COVID, the market cap increased to $1.25 billion, and the share price has doubled. So I think we need to take that into account as well when we're thinking about share price and management's impact on that. So I hope that answers your question, Steven.

Thanks, David. Look, I'll just make a couple of my comments about the question. We can't forget EML's competing in a global marketplace. Therefore, Tom said it in his presentation, people are key in this industry. We're not competing against Australian companies for our executives. We're competing as global fintech companies who are quite happy to poach our people at times if it suits their own strategy. And we've seen that. So when you've got top-quality people performing at a very high level during times of great uncertainty, you'd be crazy to start trimming their remuneration or reducing their upside in the business for short-term purposes. And we're not going to do that. EML is going to play this game medium, long term, and we're going to remunerate our people accordingly. So you're going to see those sort of decisions come through from this company for exactly that reason. Now the only other thing on the share price, I think when we come through all the uncertainty that COVID has put on ourselves and other companies, I think you'll see a fair level of share price recovery come through because uncertainty is the enemy of investment. No one can get their handle around what's going to happen with COVID. I think we have performed extremely well through this period despite COVID. But it's the uncertainty that sets in that makes people a bit nervous about the future. But let's wait and see to the half year results and then the full year results for this financial year we're now in, and I think that will settle that issue once and for all. Now Paul, are there any further questions on this particular resolution?

Peter, that's the end of the questions on resolution 2.

Okay. If there's no further questions, I now propose resolution is set out in the Notice of Meeting and put the motion to a vote. Please cast your vote. I'll pause for a few seconds, and we'll then move on to the next resolution concerning the election and reelection of directors. [Voting]

Okay. I hope you've had time to vote. We'll now move on to the next resolution. I put to the meeting that shareholders to consider and, if in favor, to pass the following resolution as an ordinary resolution. That Ms. Melanie Wilson, who retires by rotation in accordance with rule 3.6(c) of the company's constitution and Listing Rule 14.5, and being eligible, offers herself for reelection. The Board recommends Ms. Wilson to you as an EML director and unanimously supports her reelection. Ms. Wilson will not vote on this matter. Proxy and direct votes received in respect of this resolution are displayed on the screen. And I would like to invite shareholders to submit any questions in relation to this resolution, and we'll roughly pause for 10 seconds. Paul, are there any questions concerning resolution 3a?

No questions, Peter.

Okay. If there are no questions. I now propose resolution 3a as set out in the Notice of Meeting and put the motion to vote. Please cast your votes, and I'll pause for a few seconds, and we'll then move on to the next resolution. [Voting]

We'll now move on to the next resolution. Resolution 3b deals with the reelection of Mr. Tony Adcock. That Mr. Tony Adcock, who retires by rotation in accordance with rule 3.6(c) of the company's constitution and Listing Rule 14.5, and being eligible, offers himself for reelection. The Board recommends Mr. Adcock to you as an EML director and unanimously supports his reelection. Mr. Adcock will not vote on this matter. Proxy and direct votes received in respect of this resolution are displayed on the screen. Again, I'd like to invite shareholders to submit any questions in relation to this resolution, and we'll roughly pause for 10 seconds. Paul, are there any questions concerning resolution 3b?

No questions, Peter.

If there are no questions, I now propose resolution 3b as set out in the Notice of Meeting and put the motion to vote. Please cast your vote, and I'll pause for a few seconds, and we'll then move on to the next resolution. [Voting]

I'll now move on to the next resolution. Resolution 3c deals with the election of George Gresham. That Mr. George Gresham, who was appointed a director on 18th of May 2020, retires in accordance with rule 3.3 of the company's constitution and Listing Rule 14.5. And being eligible, offers himself for election. The Board recommends Mr. Gresham to you as an EML director and unanimously supports his election. Proxy and direct votes received in respect of this resolution as displayed on the screen. Again, I'd like to invite shareholders to submit any questions in relation to this resolution, and we'll pause for roughly 10 seconds. Paul, are there any questions concerning resolution 3c?

No questions, Peter.

If there are no questions, I now propose resolution 3c as set out in the Notice of Meeting and put the motion to vote. Please cast your vote, and I'll pause for a few seconds. We'll then move on to the next resolution. [Voting]

I'll now move on to the next resolution. Resolution 4 deals with the approval to grant short-term incentive options to Group CEO, Mr. Tom Cregan. I put to the meeting that shareholders consider, and if in favor, to pass the following resolution as an ordinary resolution. That approval is given for the company to grant to the company's Managing Director and Group Chief Executive Officer, Mr. Tom Cregan, 56,620 options, under the EML Employee Equity Incentive Plan on the terms set out in the explanatory notes to this Notice of Meeting. Proxy and direct votes received in respect of this resolution are displayed on the screen. Again, I'd like to invite shareholders to submit any questions in relation to this resolution, and we'll pause for roughly 10 seconds. Paul, are there any questions regarding -- concerning resolution 4?

No questions, Peter.

There's no questions. I now propose resolution 4 as set out in the Notice of Meeting, and put the notice of the motion to vote. Please cast your vote, and I'll pause for a few seconds, and we'll then move on to the next resolution. [Voting]

I'll now move on to the next resolution. Resolution 5 deals with the approval to grant long-term incentive options to Group CEO, Mr. Tom Cregan. I put to the meeting that shareholders consider, and if in favor, to pass the following resolution as an ordinary resolution, that approval is given for the company to grant to the company's Managing Director and Chief Executive Officer, Mr. Tom Cregan, up to 255,236 options under the EML Employee Equity Incentive Plan on the terms set out in the explanatory memorandum to this Notice of Meeting. Proxy and direct votes received in respect of this resolution are displayed on the screen. Again, I'd ask or invite shareholders to submit any questions in relation to this resolution, and we'll pause for roughly 10 seconds. Paul, are there any questions concerning resolution 5?

Peter, there's 1 question concerning resolution 5. It's from Steven Mabb of the Australian Shareholders' Association. I'll read the question. It's unclear to us whether the CEO long-term incentive opportunity is 100% of fixed remuneration as listed in the annual report or 150% as listed in the Notice of Meeting. Can you please confirm that the CEO long-term incentive for financial year 2021 is being increased by 50%? And was this communicated to shareholders in the annual report or elsewhere? That's the end of the question.

Thanks, Paul. I think this, again, is a question for David Liddy, the Chair of our Rem Committee. David?

Thanks, Peter. And thanks again, Steven. Firstly, just the confusion around annual report versus Notice of Meeting. The annual report for the financial year '20 year, so I guess backward-looking to the extent that it deals with LTIs there historical. The relevant resolution that you're referring to in the Notice of Meeting is dealing with Tom's FY '21 long-term incentive, so it's forward-looking. So in prior years, we've used EBITDA and return on capital as the key financial measures going forward. Going forward, through the next 3 years, we're using NPATA and return on capital, bring more appropriate measurements to our company, given the changing and broader focus of our business. And regarding the level of LTI payments. Firstly, our CEO's normal maximum available LTI is 100% of his base salary. For the financial year 2021 only, we introduced a special one-off retention payment equivalent to 50% of the base salary for some 15 of our core key executives, including our CEO, Tom. And Peter explained earlier, regarding the competitive nature of business that we're in, in a global context and the approaching a key quality stack. So what we wanted to do as a special one-off, given our changes over the last 12 months and certainly those going forward, is to certainly ring-fence or protect 15 key people by offering them a 3-year 50% additional to any other LTI payment that they might have receive. So Tom's -- I'll answer the question again. Tom's ordinary LTI is 100% of his base salary for this year. Based on his current salary, he's getting 150% that will mature in 3 years' time, again, all in stock. I hope that answers that question.

Thanks, David. Hopefully, that answers Steven's question. Paul, are there any other questions regarding resolution 5?

No other questions, Peter.

Okay. If there's no other questions, I now propose resolution 5 as set out in the Notice of Meeting and put the motion to vote. Please cast your vote, and I'll pause for a few seconds. We'll then move on to the next resolution. [Voting]

I'll now move on to the next resolution. Resolution 6 deals with the approval of prior issue of securities to refresh the company's 15% placement capacity. I put to the meeting that shareholders consider, and if in favor, to pass the following resolution as an ordinary resolution. That for the purposes of Listing Rule 7.4 and all other purposes, shareholders ratify and approve the previous issues of company shares as detailed in the explanatory memorandum. Proxy and direct votes received in respect of this resolution are displayed on the screen. Again, I'd like to invite shareholders to submit any questions in relation to this resolution, and we'll roughly pause for 10 seconds. Paul, are there any questions concerning resolution 6?

Peter, there's 1 question from Steven Mabb at the Australian Shareholders Association. I'll read the question. Given the capital raised and deployed to acquire Prepaid Financial Services, there has been a deterioration in the liabilities to tangible asset ratio, the cash balance to total assets ratio and a significant reduction in operating cash flow per share. So we would prefer to see some consolidation and improved return on equity and invested capital before significant acquisitions and/or capital was raised again. That's the end of the question.

Thanks, Paul. I hope shareholders could follow that one. But I think it's a question for Rob Shore, who's our Chief Financial Officer. Could you turn on Rob's microphone, please? Rob?

Thanks, Peter. Happy to answer that one. EML is a payment technology company. We're not capital intensive. And so by the nature of our business, we're going to have limited tangible assets. The company has been built using a strategy of international expansion, and it's included acquisition of other companies. And so we've got a large amount of intangible assets, including, for example, customer relationships, starting contracts on our balance sheet. And so a liability to tangible assets measure isn't a key measure to assess the business upon. So that's probably the one thing obtained. Secondly, I'd say, we closed FY '20 in excess of $119 million of cash on hand, which obviously impacts that ratio, but it does give certainty to key stakeholders, including investors and customers and partners alike of our financial stability during some of those challenging months of COVID-19. So it's probably how I'd respond to that.

Okay. Hopefully, that addresses Steven's question. Any other questions on resolution 6, Paul?

No other questions, Peter.

I now propose resolution 6 as set out in the Notice of Meeting and put the motion to vote. Please cast your vote, and I'll pause for a few seconds, and we'll then move on to the next resolution. [Voting]

I'll now move on to the next resolution. Resolution 7 deals with the approval to renew rule 38 of the company's constitution. I put to the meeting that shareholders consider, and if in favor, to pass the following resolution as a special resolution. That for the purposes of Listing Rule 7.4 and all other purposes, shareholders ratify and approve the previous issues of company shares as detailed in the explanatory memorandum. Proxy and direct votes received in respect of this resolution are displayed on the screen. Again, I'd like to invite shareholders to submit any questions in relation to this resolution, and we'll pause for roughly 10 seconds. Paul, are there any questions concerning resolution 7?

No questions, Peter.

Okay. If there's no questions, I now propose resolution 7 as set out in the Notice of Meeting and put the motion to vote. Please cast your votes, and I'll pause for a few seconds, and we'll then move on to the next resolution. [Voting]

I'll now move on to the final resolution for today's meeting. Resolution 8 deals with the approval to amend the company's constitution. I put to the meeting that shareholders consider, and if in favor, to pass the following resolution as a special resolution. With effect from the end of the meeting, shareholders ratify and approve the deletion and replacement of rules 13.3 and 13.7, respectively, of the company's constitution as detailed in the explanatory memorandum. Proxy votes received in respect of this resolution are displayed on the screen. Again, I'd like to invite shareholders to submit any questions in relation to this resolution, and we'll pause for roughly 10 seconds. Paul, are there any questions concerning resolution 8?

No questions, Peter.

I now propose resolution 8 as set out in the Notice of Meeting and put the motion to vote. Please cast your votes, and I'll pause for a few seconds. [Voting]

Ladies and gentlemen, that brings the reading of resolutions and addressing any questions on them to an end. I'd like to remind you that voting is open for a further 5 minutes after the close of the meeting. I'd like now to invite shareholders to ask any general questions of the Board. While questions received during the meeting are being collated, we'll address some questions asked prior to the meeting.

Paul, what's the first question?

The first question comes from a shareholder concerning EML's strategy. The question is, does EML's strategy include capturing and cornering the rise of blockchain and cryptocurrencies? That's the end of the question.

Well, that's a pretty interesting question. I think it's probably a question for Tom, Tom Cregan, our CEO. Could you open Tom's microphone, please? Tom?

In that space, we've got a number of payout programs where we work with companies like CoinJar and other exchanges to provide a fee-at-currency conversion, if you like. So we're sitting on fee at currency, allowing individuals who have made a gain in crypto to cash that out in fair currency, in a similar way to what they would with one of our gaming programs. So we're continuing to look for those opportunities in the different regions that we're in. Historically, it has not been as easy as it would seem because obviously, our programs will require approval from the schemes, from Visa and Mastercard. And some of those, in particular, have been quite anti-crypto for obvious reasons, because it doesn't typically run on the Mastercard rails. But over time and persistence and 3 years of knocking our head against brick walls, we're now starting to see progress on that front, which is positive. It does fit into Accelerator. That whole strategy is about working with disruptive fintechs. And crypto, by definition, is disruptive. So that is an area that we want to increase our presence in. In a corporate sense, if the question was leading in that direction, there's not much we can do with it corporately. So in other words, we can't hold cardholder funds in crypto, for example, because of volatility and liquidity issues and regulatory issues. So most of our focus on crypto is more as a program, as an opportunity. On blockchain, that's the opposite. I think blockchain works very well in payments for highly homogenous repetitive transactions. A lot of our programs are quite bespoke programs. So there's not a natural fit there. But we are looking at it within the IT section of accelerator in terms of what blockchain technologies could we use within our own code and within our own tech stack to improve the overall kind of product proposition for our customers, but without marketing ourselves as a blockchain company, per se.

Thanks, Tom. Paul, next question.

Sure. Thanks, Peter. A question from Steven Mabb at the Australian Shareholders Association. And there's a couple of bits to this question, so bear with me. In relation -- and the question is, in relation to the completed capital raising, why did EML include a placement component without compensating retail shareholders with a share purchase plan? Wouldn't it have been fairer to do a straight pro rata offer rather than diluting retail investors down from about 50% of EML before the raising to closer to 40% of EML after the raising? And going forward, if EML does another capital raising involving institutional investors, can EML commit that it will be a PAITREO, that's P-A-I-T-R-E-O, offer, which is pro rata and renounceable and ensures that nonparticipating retail shareholders are fairly compensated for their rights if they can't participate? That's the end of the question.

Interesting question from Steven. Thanks, Paul. Look, I'll turn that question over to Rob Shore, our Chief Financial Officer. Could you open Rob's microphone, please? Rob, would you like to take that one on?

Sure. Thank you, Peter. Back in November 2019, the group completed a fully underwritten accelerated pro rata non renounceable entitlement offer, and now it's a 73% of entitlement rate. We also did a fully underwritten placement to new and existing institutional shareholders, but that only represented 27% of the total amount rate. I think whenever you do a capital raise, you're trying to find the appropriate structure that balances need for shareholders with the need of the raise and the purpose of raise that you're undertaking. And so the structure was appropriate, we felt, given the need with an M&A transaction, we needed to provide the vendors of PFS business with funding certainty and ensure that EML could secure the acquisition. And so that's why we undertook that structure. EML is not in a position to commit to any particular structure moving forward, and we intend on choosing the most appropriate funding mechanism for the circumstance, whether that be whatever type of raise there is or use of debt or any other mechanisms that we choose in the future.

Thanks, Rob. I hope that answers Steven's question. Paul, next question.

One final -- sorry, another question has come in. So second to the last question. This question concerns our EML business, Peter. What is the geographical split of the mall cards revenue prior to COVID in December 2019 half year? And that's end of the question.

I think I'll turn that one over to Tom. Tom?

Thanks, Peter. We don't actually talk about revenue per region when it comes to mall gift cards because that would, in some ways, identify the revenue when we are obtaining from individual customers that are in those markets. Germany, for example, we have 2 large partners. So you wouldn't want to be talking about revenue in Germany per se, for obvious reasons. The rough split is that -- and I've just got double checked these numbers shortly though. 55% of our GDV in the mall segment is Europe; 40% is North America, which is kind of an even split between north -- between the U.S. and Canada; and Australia is -- makes up the remainder of it. I think, as you said earlier, Pete, there's obvious uncertainty with COVID and with lockdowns and how that impacts the mall segment, particularly as 40-odd percent of that GDV is in the last week of December. So clearly, uncertainty will reign there for a little bit until we kind of get through that. If you looked at Europe, the main 4 markets are the U.K., Germany, Italy and Poland. We don't really have a presence to speak of in Spain nor France. And unfortunately, both of those have got fairly restrictive freedom of movement coming back in. So we don't have much of a presence there, but we do in those other 4 markets. The U.K. as well, and this has been on the public record for quite some time, In2property has been one of our customers there, went into bankruptcy some months ago. So that's impacted mall sales with that particular customer. Now obviously, that bankruptcy was kind of created, if you like, by COVID because they had a pretty stretched balance sheet. And so volume is down in that customer, as you would expect.

Thanks, Tom. Paul, last question.

Last question, Peter, from one of our shareholders. The question is, how can I purchase electronic gift cards in order to reduce the number of single-use plastic gift cards in circulation? That's the end of the question.

Okay. I think I'll ask Tom to answer that one again.

Yes, that's right in the wheelhouse of our strategy. So we are a B2B provider. So we are providing -- particularly, if you think about malls, we're obviously providing gift cards to the malls, and we're providing -- in the Incentive segment, we're providing gift cards to incentive companies. So these are employee incentive agencies, advertising agencies, marketing agencies, who, in turn, have the relationship with the kind of FMCG company, for example. So in Australia, one of our customers could be Edge Loyalty, it could be Ink, it could be iGoDirect, it could be Vault. We've got a number of those distribution partners who are, in turn, managing the relationships with groups like Fujitsu, Harvey Norman, the AFL and kind of the list goes on. The key to getting rid of gift card volumes in a plastic sense is digital. And so we are seeing a real move from those companies in the incentive space wanting just to put a piece of plastic in someone's hand to doing it digitally. And it makes total sense because in a gift sense, if I can split that up for a second, I buy a gift card for someone in a mall, and part of that experience is that it is tangible. So part of it is, I'm buying something physical that's in a packet, and I am giving it to someone as a present. So that isn't something that translates to a digital version all that well without losing a lot of that kind of engagement. So the key there is to move them to environmentally sustainable products, like cardboard and other things that are biodegradable. In the incentive space, it's more of a transactional relationship. So nib, that we did a program for recently, if I'm renewing my health insurance or my life insurance or buying an air conditioner or taking a plan out for a mobile phone, it's transactional in nature. So if I get that sent to my phone, I get that texted to me, and I'm clicking a link, and that then is loaded up into Apple Pay, and I'm ready to use it, that's how we get rid of physical cards in that space. We don't sell digital cards direct to consumers. So we don't have a direct-to-consumer play. So if the question is, how could I buy those cards from EML? The short answer is you couldn't because our customers are always companies and government agencies, in some respects, that are then giving them out to their customers.

Thanks, Tom. Paul, have any further questions come in?

No, Peter, that's the end of the questions.

Okay. I'd like to thank everyone who's submitted a question, and I'd also encourage shareholders to direct any questions or suggestions to the executive team at any time. I know that they're more than happy to assist you in understanding more about EML. That brings us to the end of the Annual General Meeting for 2020. In a moment, I'll formally close the meeting. And if you're intending to vote on the formal business of the meeting, you should now finalize and submit your votes as voting will close in approximately 5 minutes from now. As I mentioned earlier, the results of this meeting will be released in the ASX once the votes have been counted after this meeting. Now I'd like to take this opportunity to thank EML's committed and loyal stakeholders, including the Board of Directors, our staff, our clients, our investors and the communities in which we operate around the world for their continued support. I'd also like to thank the team that's put so much effort into preparing today's meeting. And on behalf of the Board, I'd also like to thank everyone for their online attendance and participation at today's virtual meeting. I now declare the Annual General Meeting closed. Thank you.