EML Payments (ASX:EML) outlined progress on its “EML 2.0” transformation during its H1 FY2026 results call, while acknowledging near-term revenue pressure from lower interest rates and the tail end of customer terminations from the prior year. Executive Chairman Anthony Hynes said FY2026 is intended to be the final year of the company’s restructuring program, with the focus shifting toward laying foundations for “sustainable double-digit growth” in future years.
Transformation focus and guidance update
Hynes said the group has completed “a significant body of work” in the first half, including management refreshes across the organization, process reengineering, and standardizing internal tooling. He pointed to the Global Operations Center as an example of efficiency gains, describing it as a way to “recycle expenditure into commercial functions” to support growth.
H1 FY2026 financial performance
For the half, EML reported revenue of AUD 108.4 million, down 6% on the prior corresponding period. Customer revenue excluding interest income fell 4% to AUD 79.4 million, with management noting that customer losses in H2 FY2024 had weighed on customer revenue growth, though program run-off is “almost complete.” Interest income was also lower, reflecting central bank rate cuts.
Underlying EBITDA declined 16% to AUD 28 million. Management attributed the decline largely to the impact of one-off, non-recurring income in H1 FY2025 and the impact of terminating clients in 2024. Overheads were described as “well managed,” with Hynes noting quarter-on-quarter improvement and a better run rate compared to H2 FY2025.
New CFO Stuart Will, who joined on December 1, said net overheads of AUD 53.1 million were consistent with the comparative period. He said leadership-led simplification allowed reinvestment into commercial and sales capability.
Regional performance: Europe pressured, APAC grows, North America mixed
Will said customer revenue declined 4% overall, “primarily by Europe,” partially offset by growth in Australia and North America.
- Europe: Gross debit volume (GDV) increased 5% to AUD 3.4 billion, but total revenue declined 12% to AUD 60.1 million. The drop was driven by a 13% reduction in customer revenue tied to terminated customers and a 10% decline in interest revenue. Excluding terminated customers, existing customer revenue grew 5%. Net overheads rose 11% to AUD 31.6 million, driven by higher irrecoverable VAT and increased corporate cost allocations following the move to a global operating model.
- Asia-Pacific: Customer revenue increased 10%, driven largely by a 5% increase in active human capital management (HCM) benefit accounts, helping offset an 18% decline in interest revenue. GDV increased 13%. Net overheads rose 5% to support EML 2.0 investment, with gross profit and EBITDA margins described as broadly in line with the prior period.
- North America: GDV declined 6%, mainly due to lower VAN volumes (described as high volume, low yield but high margin). Customer revenue rose 1%, which management said improved revenue yield and supported stable gross profit dollars and margins. Net overheads increased 13%, driven by higher irrecoverable GST in Canada and targeted professional fees.
Float and cash: rate headwinds and one-off outflows
Will said interest income decreased 11% to AUD 29 million due to lower cash rates, partially offset by higher bond reinvestment returns. Float balances rose 5% to AUD 2.6 billion, while the annualized yield fell to 3.1% from 3.7% in the prior period (excluding non-interest-bearing float). The exit yield at December 31, 2025 was 2.8%. Will said EML expects less volatility in the period ahead than it experienced over the prior 12 months.
Cash decreased AUD 11.5 million over the half. Will attributed the movement to:
- AUD 40.9 million outflow to provisionally settle the class action
- AUD 13.3 million in repayments to the PFS liquidator
- AUD 4.4 million in capex, principally for Project Arlo
Those outflows were funded by a debt drawdown, which Will stated as AUD 44 billion during the call. Excluding one-offs, underlying operating cash flow was AUD 22.2 million, representing a 79% EBITDA-to-cash conversion ratio. Will said improving cash conversion remains a focus, and management expects a final loan repayment to the PFS liquidator of approximately AUD 6.6 million in the second half, alongside continued Arlo capex.
Pipeline momentum, product development, and Project Arlo milestones
Hynes emphasized commercial rebuilding, noting the commercial function was “virtually nonexistent” at the start of the prior calendar year. He said the overall pipeline had grown to AUD 102 million (forecast annualized revenue), with close to AUD 24 million of new program revenue secured. Conversion was tracking at 51%, though he cautioned the sample size is still small and the rate may moderate as activity increases.
Of secured programs, Hynes said AUD 10.3 million had launched and was active, with a further AUD 13.5 million expected to launch over the remainder of the financial year. He also noted frustration with lags between signing and activation, driven by internal processes, partners, or client-side timing, and said the company is focused on optimizing onboarding. He said Europe has underperformed commercially and that new leadership will be added there, while North America has benefited from a strong team execution.
On product development, Hynes highlighted mobility as the first major initiative, aimed at digitizing vehicle and corporate expense management. He said EML is finalizing partnerships, including with an “emerging global leader in fuel retailing technology integrations,” and expects to launch an MVP by mid-year, with co-design discussions underway.
For Project Arlo, EML’s single global platform intended to replace three regional systems, Hynes described a build approach focused on core intellectual property (presentation and business logic layers) while procuring commoditized components such as KYB and transaction monitoring on a SaaS basis. He reiterated a goal of reducing current IT/ICT spend from roughly AUD 30 million to AUD 20 million and driving additional savings through digitization and automation.
Management said Arlo’s core build is expected to be complete around the end of calendar 2026. Hynes said Arlo will be stood up in the UK by the end of the financial year, with subsequent deployments in other regions later in the year, and that migration planning is underway with progressive activity through 2026 and 2027 and likely into the first half of 2028, subject to client engagement.
Looking to the second half, Hynes said EML is targeting a pipeline of about AUD 125 million by year-end, aims to improve onboarding speed, and expects the mobility project to be in MVP test mode by June. He also said the Global Operations Center in Sofia will continue to expand and that the company is exploring “agentic AI” across operations.
About EML Payments (ASX:EML)
EML Payments Limited provides payment solutions platform in Australia, Europe, and North America. It operates in three segments: General Purpose Reloadable, Gift and Incentives, and Digital Payments. The General Purpose Reloadable segment offers reloadable cards to various industries, such as government, salary packaging, gaming, and digital banking. This segment also provides issuance, processing, and program management services. The Gift and Incentives segment provides single load gift cards for shopping malls and incentive programs.
