Tyro Payments Limited (TYR.AX) Earnings Call Transcript & Summary

Good afternoon, everyone, and welcome. My name is Fiona Pak-Poy. I am the Chair of Tyro Board. On behalf of my fellow directors and the whole Tyro team, I'm delighted to welcome you to this year's 2025 Annual General Meeting. Before we begin today, I would like to acknowledge that I'm hosting this meeting in Sydney on the land of the traditional owners, the Gadigal people. I'd also acknowledge the traditional owners and custodians of the various lands from which you are all meeting today or joining the meeting virtually, and I wish to pay my respect to elders past, present and emerging. Thank you to everybody who's joined us today, either in person here in Sydney or through the webcast. For those of you who are joining virtually, I will shortly go through some of the technical aspects to ensure that you're comfortable with how to ask questions and to vote. If you haven't already done so, I would encourage you to download the virtual meeting guide, which can be found on the Tyro Investor Center. I'm informed by Jay, our Company Secretary, that in accordance with the company's constitution, a quorum is present, and I now declare the meeting formally open. I'd like to introduce my fellow nonexecutive directors here on stage. Joining me today in person are Claire Hatton, Paul Rickard, Aliza Knox, Shefali Roy and Steven Holmes. Joining me on stage also is Jon Davey, Tyro's CEO and Managing Director, who will be providing an update during this meeting. I'm also joined by our Company Secretary, Jay Amick; and our Chief Financial Officer, Emma Burke. Today, we're also joined by some of our leadership team and our audit partner from EY, Anita Kariappa. Please say hello to any of them if you get a chance. The order of today's meeting will be as follows. I will begin by providing a brief update on some of the key activities that the Board has engaged in over the last year before handing over to Jon Davey, who will provide a summary of Tyro's performance in FY '25 and an update on how the business has been tracking so far in FY '26. After this, we will turn to the formal business of the meeting. There are 4 items of business to be put to shareholders today, and there will be an opportunity for you to ask questions. For your reference, both the FY '25 annual report and the Notice of Meeting are available to download on Tyro's Investor Center. These were published on the 26th of August and the 22nd of October this year, respectively. I'll take these documents as read. will now ask our Company Secretary to run through some procedural matters before Jon and I give our updates.

Thanks, Fiona. Welcome, everyone. I'm going to talk about how you can vote today and how you can ask questions today. So for -- in terms of voting, for shareholders present in the room, you would have received a voting card when you registered and arrived today. Please use your voting card to record your votes and make sure you give them back to the registry team outside before you leave, so we record your votes. For online shareholders, you'll need to register online to vote and to receive your voting card. So to do that, just go to the bottom of the page that you're on now, and there is a box that says get a voting card. Please click that box. Then you'll need to provide your details, your shareholder number and your post code. If you're a proxy, instead, please use your proxy number that you were given by MUFG. Once you've entered those details, click the submit details and vote. you'll then be registered and your voting card will appear online. Please then use that online voting card to record your votes. You can submit full or partial votes. Just follow the instructions contained in the online meeting guide. You'll find that button as well if you press question. We'll try to answer all the questions that are asked today. But if there are several that are similar, we'll just group them together and answer in one go. If you have any trouble using the online facility today, there's a phone number on the web page for you to call or please have reference to the online meeting guide that you can access from that page or on our website. If there are any technical difficulties today and you're unable to participate, the Chair will assess the circumstances and make a decision there as to what steps we'll take next. But hopefully, all will go to plan, and I'll hand back to Fiona.

Thanks, Jay. So we can now turn to the first item of ordinary business, which is the tabling of the group's annual report for the 2025 financial year, incorporating the group's financial report, the directors' report and the auditor's report. These reports were lodged with the ASX and made available to shareholders on the 26th of August 2025. As the Corporations Act does not require a vote on these reports, they will be tabled but will not be subject to a resolution. I now table the annual report for the year ended 30th of June 2025, together with the related directors' report and the auditor's report. This year, our focus has remained firmly on executing against our strategic priorities and on delivering better outcomes for both our customers and our shareholders. For FY '25, we delivered gross profit growth of 4.4%. We improved our EBITDA margin to 28% from 26.4%, and we generated $17.8 million of net profit before tax. Importantly, in the second half of the financial year, we began to see some improving momentum in the underlying economic environment, and we're encouraged that this has started to translate into stronger growth in our core payments volumes. Jon will speak to this more in detail shortly in his address. From a Board perspective, we have remained highly engaged in supporting management as they continue to execute on our strategy and assess further opportunities to accelerate our progress. As you know, Tyro is a well-capitalized business with capital significantly above our regulatory minimums. We have been using this strength in pursuit of strategic transactions that would help us deliver on our strategic goals more rapidly. We're exploring opportunities across 3 categories. The first is building greater payment scale as the potential transaction with SmartPay would have offered. The second is acquiring payments capabilities or software in support of our omnichannel offering, much like Medipass has done for Tyro Health. In June, Jon Davey announced his intention to step down as CEO, and he'll be leaving the business at the end of next week. On behalf of the Board, I want to acknowledge Jon's very significant contribution to Tyro over his tenure. He has led the company through a period of transformation and strategic focus, positioning Tyro well for its next phase of growth. The Board has been deeply engaged in the process for finding a world-class leader to succeed Jon and to lead Tyro into the future. We were very pleased to announce on the 5th of November that Nigel Lee has been appointed as our new CEO and will be joining Tyro on the 12th of January 2026. In the brief period between Jon leaving and Nigel joining, Emma Burke, our CFO, will be taking on the CEO accountabilities. Nigel brings over 25 years of global leadership experience, including in Australia across payments and fintech with a strong record in scaling businesses, driving growth and executing successful digital and commercial transformations. He brings deep domain expertise across all aspects of our business, issuing, acquiring both software and hardware solutions. We are really extremely pleased to have such a high-caliber leader joining Tyro as Nigel, and I know he's equally excited to be returning to Sydney to take on this role. Nigel will be joining our highly experienced and diverse leadership team, one that brings together a powerful blend of technical and commercial expertise drawn from a wide range of industries. Before we welcome Nigel next year, we have the opportunity today to hear from Jon Davey as he delivers his final address as CEO. Jon will provide an overview of our FY '25 performance and speak further to the operational and financial progress that we've made over the past year. Over to you, Jon.

Thank you, Fiona. Good afternoon to everyone here in person and to those joining -- those of you that are joining virtually. Before I begin, I'd like to thank you, our shareholders, for the support you provide to our business. I'm pleased to have the opportunity today to provide an overview of our performance in FY '25 and share why I believe Tyro is well positioned to deliver strong outcomes for shareholders. Turning to the next slide. And before I share details on FY '25 performance, I wanted to share a snapshot of how our business performance has improved over the past 3 years. Our financial position today is fundamentally different with this change driven by a clear strategic focus, strong execution and greater financial and operational discipline. At the top line, gross profit has grown by a compound annual rate of 14%. At the same time, our total expenses have increased by a significantly lower rate at just 3.7%. As a result, our FY '25 EBITDA of $61.6 million has a 3-year CAGR of almost 80%. We've seen an increase in our EBITDA margin from just 7.2% to 28%. And from this improvement in our operating performance, we've moved from a loss of $16.1 million to a $17.7 million profit in FY '25. If we also reflect on the economic environment during this time, it's been crucial that we reshape the business to become more resilient. Our significantly improved operating efficiency has enabled us to perform and puts us in great shape for when economic headwinds recede as we would expect most top line growth to drop down through to EBITDA. Turning to the next slide and how we've delivered improved operating performance in FY '25. Gross profit increased by 4.4% to $220.1 million. This was driven by 3 key factors. Firstly, the flow-through impact of our pricing transformation work that took place in FY '24. Secondly, a 6.7% increase in banking gross profit, reflecting improved funding costs and the benefit of improvement in the credit quality of the loan portfolio. Finally, and to a lesser extent, the turning trend in payment volumes at Q4 FY '25, the point at which we started to see a marked improvement in transaction value. These results were accompanied by continued strong cost management, which allowed us to bring our operating efficiency, which measures operating expenses as a percentage of gross profit to 69% from 71% last year. This is a continuation of the improvement we've made over recent years. You will have seen in our FY '25 results presentation that in FY '22, when I joined the business, 92% of all gross profit was consumed by operating expenses. We're very pleased with how we've improved cost management, and we continue to balance investment and further cost efficiency. Combining the gross profit growth and improved operating efficiency, we saw a 10.6% increase in EBITDA to $61.6 million, representing an EBITDA margin of 28%. This performance was in line with the formal guidance we set for the year. Turning to the next slide. I'd like to share a brief update on how performance has been so far in FY '26. As disclosed at the full year, payment volumes in Q4 FY '24 '25 saw a significant improvement in annual growth rate. We also stated that Q1 was tracking even better, and we were pleased to see strong performance in Q1 with payment volumes in Tyro core verticals growing over 6% compared with Q1 FY '25. We've seen a good uptick in volumes in our core discretionary verticals, which has been supported by the strong new business growth we delivered last year and an improvement in the level of churn. Q2 has also continued to track well, though the critical part of Q2, the Black Friday and Christmas periods usually define how strong Q2 lands, so we'll be able to report on that with our half year results. We've been embedding a strong focus on cost discipline through the business in recent periods. And so far, in 2026, we're very pleased with our level of operating efficiency. With that in mind, we remain confident in delivering against the guidance we outlined in August. As a reminder, we expect to deliver normalized gross profit of between $230 million and $240 million and EBITDA margin of between 28.5% and 30%. As I prepare to leave Tyro, I do so firm in the belief that the business is well positioned to deliver strong outcomes for shareholders. This belief is based on 3 key factors. Firstly, Tyro is a significantly more profitable business. Secondly, there is an improved growth outlook, not only for payments but also in banking as we make great progress leveraging our new banking platform. And finally, Tyro is very well capitalized. We have a strong balance sheet and free cash flow generation. This gives us optionality as we look to accelerate our strategic priorities. I am enormously grateful to have served as the Chief Executive Officer of such a fantastic business and to have worked with such a passionate group of people. I know that Tyro will be in great hands with Nigel at the helm, with the excellent leadership team underneath him and with the hundreds of Tyros who show up every day to make payments the easy part of doing business. I'll now hand back to Fiona, who will take us through the formal items of business.

Thank you, Jon. Turning now to the formal business of the AGM. The items of business, which are contained in the detail in the notice of meeting provided to shareholders include 3 ordinary resolutions, each requiring more than 50% majority vote to pass by shareholders entitled to vote and voting. As we move through the voting for these resolutions, if you have any specific questions, we will endeavor to answer those as we address each resolution. After consideration of the above resolutions, we will move to general questions that shareholders may have of any Board member or for Jon and Jay. While no resolution is required in relation to the financial report, the directors' report and the auditor's report, I now invite shareholders and their proxies to comment on or ask any questions in relation to these reports or the group's business. Questions may also be asked of our auditors in relation to the conduct of the audit, the content of the audit report, the accounting policies adopted by the group and the independence of the auditor in carrying out the audit. Are there any comments or questions in relation to these matters? I will pause for approximately 10 seconds while I wait to see if there are any questions from the floor or from any online participants. No. Okay. So thank you. Moving on to the first resolution relating to the adoption of the remuneration report for FY '25 that can be now seen on the screen. As indicated, I intend to vote all undirected and discretionary proxy votes held by me in favor of this resolution. The group's remuneration report for the financial year ended 30th of June 2025, which forms part of the Tyro annual report is available on Tyro's website. The remuneration report outlines the group's remuneration strategy and practices together with the details of the specific remuneration arrangements that apply to key management personnel in accordance with the Corporations Act. As required by the Corporations Act, the Board presents a remuneration report to the shareholders for consideration and adoption by a nonbinding vote. A vote on the adoption of the remuneration report is advisory only and does not bind the directors or the company. While the vote is advisory, the Board will take the outcome of this vote and the discussion at the AGM into consideration when determining the group's approach to remuneration going forward. Are there any comments or questions in relation to the remuneration report? I'll wait for approximately 10 seconds to see if there are any questions from the floor or online. Jay, do we have any questions?

There's a general question, Martin? Or is there specific to that one? Thanks. Is that for now? Or should we do that in general questions?

Here we are. Which of the proxy advisers covered us this year? And were there any recommendations against this remuneration report or any other items on the agenda? Have there been any material protest votes and please disclose the proxies earlier to the ASX, along with the formal addresses before next year's AGM. So I don't have to ask questions like this one. Many other companies now do this, including Lynas earlier this morning as it allows for a more fully informed AGM debate and provides more timely disclosure to the market.

I don't believe that we are actually to require -- we are required to stipulate or dictate -- or sorry, disclose what the individual proxy reports are. We do meet all our requirements, and we act in the best interest of all shareholders. Any more questions, Jay?

Not on that topic, no.

Okay. All right. Thank you. So I'll now propose Resolution 2 as set out in the Notice of Meeting will be put to vote. I invite shareholders to cast their vote for this resolution, and I'll pause a further 10 seconds while voting takes place. Thank you. Based on the votes we've already received, more than 75% of the votes have been cast in favor of the adoption of the remuneration report. Moving to Item 3A relating to the retirement and rotation by reelection of a director, Mr. Paul Rickard, that can be now seen on your screens. On behalf of the Board, I intend to vote all undirected and discretionary proxy votes held by me in favor of this resolution. Clause 47A of the company's constitution provides that a director must retire from office no later than the longer of the third Annual General Meeting of the company or 3 years following the director's last appointment -- election or appointment. Additionally, ASX Listing Rule 14.4 provides that a director must not hold office without reelection past the third Annual General Meeting following the company's admission to the official list of the ASX or 3 years following the company's admission to the official list of the ASX, whichever is longer. I'll now ask Paul to share some information about his experience and suitability for reelection as a director.

Thank you, Fiona. Good afternoon. My name is Paul Rickard. I'm currently the Chair of the Audit Committee and a member of the Risk and Nominations Committee. I've had the privilege of serving as an independent Non-Executive Director of Tyro since 2009, bringing more than 35 years' experience in banking, financial services and business management. Earlier in my career, I founded Comsec before assuming responsibility for payments and business technology across the Commonwealth Bank. I'm currently a Non-Executive Director of ASX-listed PEXA Group and also WCM Global Growth Limited. As Chair of the Audit Committee and formerly the Risk Committee, I have focused on ensuring that Tyro is well governed, financially disciplined and optimizing its risk appetite. I've also championed the evolution of Tyro's banking business to leverage the relationships with our payments customers. It's been immensely rewarding to see Tyro evolve into a stronger, more profitable and well-governed business. I'm deeply committed to supporting its continued success and delivering value for our shareholders should I be reelected.

Thanks, Paul. Are there any questions in relation to the reelection of Paul Rickard as a Non-Executive Director of Tyro? I'll pause for about 10 seconds while I wait to see if any questions from the floor or online. That's 10 seconds. And there's a question online?

Okay. Yes. So no individual investor has shared any comments. Yes. So do you know why there was an 8% protest vote on the proxies against Paul's reelection? Is it an independence or a workload question? Did a proxy adviser recommend against Paul or have some holders decided to send a message for some reason? As I just said, no individual shareholder or investor has shared any comments. No other questions on that.

Thank you. Okay. So I'll now propose Resolution 3a as set out in the Notice of Meeting be put to a vote. I invite shareholders to cast their vote for this resolution, and I'll pause for a further 10 seconds while voting takes place. Moving to Item 3b relating to the retirement and rotation and reelection of a director, Claire Hatton, that can be seen on your screens now. On behalf of the Board, I intend to vote all undirected and discretionary proxy votes held by me in favor of this resolution. I'll ask Claire to share information about her experience and suitability for reelection as a director.

Thanks, Fiona. Good afternoon, everybody. My name is Claire Hatton. I'm currently Chair of the People Committee and a member of the Risk and Nominations Committee. Thank you for your continued support, firstly. I joined the Tyro Board in 2022, bringing more than 30 years of global leadership experience across technology, digital and travel, including senior roles with Google, Qantas, British Airways, among others. Along with my other ASX-listed nonexecutive role for Lifestyle Communities, I'm also Co-Founder of Full Potential Labs, where I help organizations navigate the opportunities of AI. As Chair of the People and Culture Committee, I've really focused on ensuring Tyro attracts and retains the talent needed to compete and innovate in this rapidly evolving payments landscape, including leading the Board search committee for our new CEO. I've also provided strategic oversight on technology transformation and customer experience, in particular, as we leverage our unique capabilities to create competitive advantage. Over the last 3 years, Tyro has strengthened its execution capability and sharpened its customer focus, which has been really fantastic to see. And with your support, I look forward to continuing to provide strategic and governance oversight as we build on this momentum.

Thanks, Claire. Are there any questions in relation to the reelection of Claire Hatton as a Non-Executive Director of Tyro? I'll pause for 10 seconds to see if there are any questions from the floor online.

That's 10 seconds. There are no questions online.

Thanks, Jay. So I'll now propose Resolution 3b as set out in the notice of meeting to be put to a vote. I invite shareholders to cast their vote for this resolution, and I'll pause for a further 10 seconds while voting takes place. Moving to Item 3C related to the retirement and rotation by reelection of a director, Shefali Roy, that can be now seen on your screen. On behalf of the Board, I intend to vote all undirected and discretionary proxy votes held by me in favor of this resolution. I will now ask Shefali to share some information about herself and experiences and suitability for reelection as a director.

Thank you, Fiona. Good afternoon, everybody. My name is Shefali Roy, and I am the Chair of the Risk Committee, and I also sit as a member of the People and Nominations Committee. I joined the Tyro Board in Jan of 2022 and I've drawn on more than 20 years of international experience in finance, compliance and governance, including senior roles at Stripe and Trulaire and Goldman Sachs and Apple. I also lead a family office called STR Capital, which invests in early-stage businesses in finance and AI. And earlier this year, we also launched a GRC SaaS platform called [Meeting AI ] that helps companies fulfill their compliance and risk obligations. All of that keeps me closely involved in emerging technologies, AI and regulation, all of which is highly relevant to the Tyro business. I'm proud to contribute to a company that's balancing innovation with sound risk management and strong governance. And should I be reelected, I look forward to continuing that work. Thank you, Fiona.

Thanks, Shefali. Are there any questions in relation to the reelection of Shefali Roy as a Non-Executive Director of Tyro? I'll pause for 10 seconds to see if there are any questions. So I will now propose Resolution 3C as set out in the notice of meeting to be put to a vote. I invite shareholders to cast their vote for this resolution, and I'll pause for a further 10 seconds while voting takes place. Moving on to Item 3D relating to the election of a director, Mr. Stephen Holmes, that can be seen on your screens. On behalf of the Board, I intend to vote all undirected and discretionary proxy votes held by me in favor of this resolution. I will now ask Stephen to share some information about his experience and suitability for reelection as a director.

Good afternoon. My name is Stephen Holmes. I'm a member of the People, Audit and Nominations Committees. I joined the Tyro Board earlier this year, bringing more than 2 decades of leadership experience in payments and fintech across global markets. My background includes roles as President and Chief Operating Officer of Xplore Technologies, CEO of Transaction Services Group, where I led international expansion, major growth initiatives, including mergers and acquisitions. To me, Tyro is a really exciting business with real momentum. And if I'm elected to the Board, I'm eager to apply my operational and strategic experience to help the company capture its next wave of growth. Thanks, Fiona.

Thanks, Steve. Are there any questions in relation to the reelection of Steven Holmes is Non-Executive Director?

On the floor, Fiona. We just wait for the mic.

[ Ron Shamgar ] from [ Tan Asset ] Management. We're a shareholder. My question to Stephen is just, obviously, you recently joined. You're the only member of the Board without any shares. Do you intend on buying shares post today's AGM?

Yes. I believe that there's already been disclosures made with respect to my participation in the shareholder scheme for directors.

The question is whether you're going to buy shares on market.

Buying shares -- I don't think you really need to comment on that, you can, if you like, Steve. But essentially, participating in the salary sacrifice is exactly the same as buying on market. You're using your real hard earned cash to buy shares in an availability that makes sense because there's -- you can't try to time the market for window black house, et cetera.