EML Payments to Target Revenue Conversion After FY26 Earnings Slide

EML Payments (ASX: EML) is shifting its EML2.0 program from restructuring to commercial execution after FY26 underlying revenue fell 6% to $206.8 million and underlying EBITDA declined 18% to $48.3m.

Customer revenue fell 4% to $150.0m as previously exited programs rolled off and foreign exchange reduced revenue by $1.6m, while interest revenue dropped 11% to $56.7m as global central bank rates declined.

The statutory net loss narrowed to $19.7m from $53.0m, while year-end cash fell 36% to $37.8m after significant outflows associated with legacy matters, Project Arlo, restructuring, and investment activity.

EML has guided to underlying EBITDA of $50m to $54m for FY27 as it works to convert a $109m new-program pipeline, improve contract activation, and advance Project Arlo.

Pipeline Revenue Test

The new-program pipeline had reached $109m by August, with about $50m in client tender or final decision phases and management targeting about $150m by June 2027.

Contracts won since 1 July 2025 represented $15.8m of forecast annualised revenue—of which $7.2m had launched and $8.5m remained to launch, including $6.3m expected to start within 60 days.

Renewals remained strong even as new-program revenue conversion lagged, with nine top-30 contracts extended during FY26 including three top-five customers, despite softer second-half trading in northern hemisphere gift, incentive, and government programs.

“Our plan for FY27 is squarely on revenue conversion for new programs, getting more from the core through continued improvement in our relationship management, and the deployment of our new global technology platform, Arlo,” executive chair Anthony Hynes said.

“Our team continues to approach the EML2.0 transformation agenda with energy, passion, and commitment, and we are more capable today than at any point in this transformation.”

Arlo Deployment Phase

Project Arlo has entered initial customer testing in the United Kingdom as EML moves from platform build into staged deployment and migration across its regions.

Forecast build and implementation investment has increased to about $34m from $20m, with EML expecting annualised overhead savings of at least $12m after full deployment and non-recurring Arlo expenditure of about $15.7m in FY27, $2.4m in FY28, and $1.0m in financial year 2029.

EML plans to advance UK migration during FY27 and deploy Arlo in Asia Pacific late in the year, while new clients are expected to begin onboarding directly to the platform.

Its GlobalOps Centre in Sofia reached 31 full-time-equivalent roles by year-end and was delivering a 35% like-for-like role saving as the global operating model continued to centralise functions.

Product expansion is running alongside the platform work, with EML investing $7m for a 28% interest in Tendren as the partners develop a digital-first mobility payments solution targeted for full commercial launch around mid-2027.

Cash Generation Outlook

Underlying EBITDA of $48.3m converted to underlying operating cash flow of $47.8m, but class action, one-off and Project Arlo cash payments of $74.3m contributed to a net operating cash outflow of $26.5m.

The group recorded $24.1m of net investing outflows including capitalised development expenditure, the Tendren investment, and a loan to a key client, while a $54m debt drawdown helped fund legacy and investment requirements.

EML expects pro forma free cash flow of $30m to $35m in FY28 as the bulk of Arlo, transformation, and legacy remediation expenditure falls away.

Regional performance remained mixed, with North America underlying EBITDA rising 74% to $7.1m, while Asia Pacific EBITDA fell 19% to $10.4m and Europe EBITDA dropped 22% to $35.7m as program run-offs, softer customer trading, and lower interest revenue outweighed cost reductions.