Putting aside G&I and VANs, I will focus on the GPR segment. The reality is that for Eml to rerate then this will have to come from the GRP segment & we will need to an acceleration in revenue growth.

Over the past couple of years the GRP revenue has grown organically and fromacquisition. We know from the last update the 'EML of old' GPR revenues grew16% QoQ & the PFS grew revenues 24% QoQ. Now it’s a mugs game here to putsome assumptions in for how the FY will transpire but my base case is 5-10% QoQgrowth and anything above 20% is (rocket emoji) stuff. At 10% QoQ GPR growththat should equate to ~$120m Rev from this segment alone for the FY21.

Breakdown

FY19 - $23.9m Revenue GPR
FY20 - $41.9m Revenue GPR
Q1FY21 - $26.3m Revenue GPR
Est FY21 -$120m Revenue GPR (w/ 10% QoQ growth)

Now how will revenues in this segment accelerate? This is the primary focus of the internal and external investments EML have been making- $10-15m in internal product R&D + FinLabs investments (2investments so far that we know of) - so this is the key to revenues here having a snowball effect. We are 6+ months into the acceleration project and really need to see some concrete evidence or news that it is working.

Tl;dr: need to see GPR revenue growth and results from product innovation in upcoming H1 results 

EML is a payments technology company, that provides customised paymentsolutions to their B2B clients. Not a one trick pony gift card company, and Ithink that will be evident in the future period as the wider company grows andthe Mall gift card sector 'potentially' shrinks. There is a bit of amisconception out there with what EML does and I think it can be simply puthere;

• EML enter into multiyear contracts with customers to provided tailored solutions to improve their customers customers' experience. EML continually improve their technology and product offering and therefore once a customer is captured the churn of these customers is relatively low.
  • This is why payments companies capture a niche in the payment market 
  • This is also why if payment companies fail to innovate, then they can potentially face losing customers - hence the benefit of R&D and Project Accelerator 
  • This is why EML may be able to carve out niches in the LT, through customised/integrated solutions.

Now to the results

The Good:

• EML have done an amazing job at managing what is in their control. You can't really fault them here. Once you put the COVID impact aside, the PFS renegotiation/product development/resource allocation have all been awesome - hopefully we see this pay off in the future.
• Growth in new customers and new verticals is positive and I think this may be underappreciated in the market right now.
  • Incentive programs launched:
    • 10 incentive partener contract on PAYS tech
  • GPR programs launched
    • 2 dozen contracts in Banking, Control Pay, Disbursements & Salary
    • Focus here on Sezzle and Laybuy being guided into multiple regions with EML as a processor.
      • I didn’t appreciate the single touch point focus here, but to be able to onboard a customer once and into EMLs 3 regional processors would be very nice
  • VANS
  • AU Business (smallest business) (aus-biz)
    • 4 dozen opportunities being worked on in pipeline
• July run rate of GDV - there are a few different ways to model this out and I'll try do it simply in aggregation. Note that this is using the July run rate and factoring in no growth from new business / change in revenue mix / impacts from further lockdowns. Basically, I think we can assume 55m EBITDA for FY21 as a baseline scenario. This would equate to ~$40 in underlying cash inflo

Option 1 - Total Business Aggregation ($m)

July GDV Performance

July GDV Annualised

GI

$72.00 

$864.00 

GPR

$835.00 

$10,020.00 

VANS

$727.00 

$8,724.00 

Total

$1,634.00 

$19,608.00 

GDV to Rev

90 bps

Total Revenue

$176.47 

GP Margin

70.00%

GP

$123.53 

Less Overheads

$68.00 

Underlying EBITDA

$55.53 

Underlying Cash Inflow - 70%

$38.87 

The Bad:

EBITDA margins in H2Fy22 had fallen to 21%, with the COVID & PFS impacts on the numbers I wouldreally prefer to wait for a clean set of numbers to see this wash through thefinancials. My baseline EBITDA margins for the business remains at 30%.

The Ugly:

Let's face it theimpact on the malls sector was huge. I found some comments suggestion thatMalls GDV was on track to do 1.1b seldom - the G&I segment's actual FY20performance was $1.175b. My assumption here is that maybe $250m in GDV wasimpacted which converts to

• $15m revenue
• $12m GP

The flip side tothis is that 

• As the G&I segment rebases, which will rebase the entire groups financials, then to call EML a gift card business will become very inaccurate
• $1.175 was the total G&I GDV for FY20 and in July EML generated $72m in G&I (annual $860m) without considering any seasonal effects.