EML Payments Limited (ASX:EML)

Earnings Call: H2 2021

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Aug 17, 2021

Thank you very much. Good morning and welcome to the AML Payments Limited results call for the 2021 financial year. I'm Tom Cregan, Managing Director of AML Payments, and I'm joined today by Rob Shaw, our Chief Financial Officer. On today's call, we will reverse the order that we've historically used and have Rob lead off with our financial results and FY 'twenty two guidance before I go through a business update and then we can open it up for questions. The 2020 Financial year going back 1 year was a strong year for us before the impacts of COVID in the Q4 took the wind out of our sales in terms of our statutory results, albeit we still grew EBITDA in excess of 30%. The 2021 financial year unfortunately has some parallels to that Despite continuing impacts from COVID-nineteen in different parts of our business, particularly in the gift and incentives segment with most shopping malls closed in Europe and North America from really the middle of December onwards until mid April and into late May into June in some cases. On an underlying basis, the company met or exceeded the guidance that we had in market, including a GDV of $19,700,000,000 an increase of 42% on the prior year. And at the top end of our guidance range, a beat on revenue of 194.2 $1,000,000 versus the guidance range of $190,000,000 to $190,000,000 underlying EBITDA of 53,500,000 at the top end of guidance range of $50,000,000 to $54,000,000 and underlying operating cash flows of $46,700,000 or a conversion rate of 87%, also in the top half of our guidance range. In an operational sense, We had a number of highlights, which we'll discuss in more detail later in the deck. And in a strategic sense, we launched Project Accelerator and we'll talk about those outcomes later in the deck as well. For the shareholders, we know on May 13, May 14, we received notification and the Central Bank of Ireland in what they referred to as a minded to letter in relation to concerns they have with respect to regulatory and compliance practices. I mean as a leader in this industry, we take our regulatory and compliance obligations extremely seriously. And indeed, we believe that it's our commitment and our investment in that area that has kind of established the foundation for growth that we've enjoyed in the last 9 years. Our commitment to best practice in that area is unwavering. That's what we've communicated to the Central Bank and we're actively engaged with the Central Bank on our remediation program, which we are looking to sustainably complete by the end of the 20 21 calendar year, with remaining items to be completed by the end of March 2021. It's important to note In the ensuing audit from our European business, there has been no evidence brought to our attention of money laundering or counterterrorism finance activities being evident, nor any filings with respect to capital adequacy, solvency or the safeguarding of consumer funds. The financial impact of our response to the Mine or 2 letter in terms of legal advice, advisory costs and the potential for an enforcement action is $11,400,000 which reduced our statutory or reported EBITDA to $42,200,000 also an increase of 30% up on the prior year, but a lot less than the 60% it would be on an underlying basis. We're not splitting out, sure we'll get a question on this today, but we're not splitting out that $11,400,000 into its constituent parts, particularly in relation to What we are looking for in terms of what we've accrued or what we've budgeted for in terms of potential fines, you would understand that would make no sense for us to put that in the marketplace. But it is our assessment of that is within the 11.4. We understand that these types of events create uncertainty for the company, they create uncertainty for shareholders. And what we will endeavor to do today is to provide you with as much information as possible to help address that. What we cannot do and we haven't done since May is to get into a running commentary on our dialogue with the Central Bank of Ireland or to speculate on a certain outcome. Our focus is on the remediation project and we're well underway with this as you'd expect given, as I said, the dates that I mentioned before. I'd also make the point that whilst these events are disruptive to the business, we are approaching it from a perspective that the changes that we put into place will be beneficial and allow us to continue to be a leader in the prepaid space in Europe in years to come. And with that, I'll hand over to Rob and he can take us through the financials. Thanks, Tom, and good morning, everyone. We'll take to the financial results review, so we're starting on Slide 7 of the pack. As Tom outlined today, we reported a really strong set of results 2021 financial year, delivering a record for all key measures, including GDV, revenue, EBITDA and NPAT. I'll talk more about our balance sheet and cash flow shortly, but we've also reported a strong cash flow numbers with underlying cash inflows of 46,700,000 at the operating level or an 87% conversion of EBITDA, underlying EBITDA. We've used the same operating measures Some time now and on all key operating measures, these are record results. We've achieved this strong result despite some challenges, including the regulatory matter involving the Central Bank of Ireland and our PFS Card Services business in Ireland. Remediation, advisory and other costs relating to this matter that results in a material impact to the group in the year. So to assist investors understand the operating performance of the company, We've presented both our underlying measure, which excludes $11,400,000 of expenses relating to this matter, alongside It's a lot more usual EBITDA definition we presented for a number of years. On a preferred EBITDA measure, which includes the cost CBI matter, it was $42,200,000 up for 30% on FY 2020. So throughout these results, there are a couple of things to bear in mind. PFS we acquired on 31st March 2020 is consolidated into the financial results for the full 12 months of the FY 2021 year as opposed to being consolidated for 3 months of FY 2020. PFS is just one of 6 acquisitions we have made since 2012, Centennial acquisition is expected to close in the next 45 days. Our financial statements are impacted by AASB III acquisition accounting, a number of non cash items in that. And so as a result, we've disclosed information excluding the non cash impacts of AASB III in this presentation. Looking at Slide 8 now, the segment performance. There are some key takeaways I'd like to highlight here. Starting with our general purpose reloadable segment, I'd like to reiterate that this is our largest segment in terms of gross debit volume at €9,700,000,000 of GDV. It generates revenues of $113,600,000 in FY 2021. It's the largest segment in terms of revenue and gross profit and our fastest growing segment with both with strong acquisitive growth and organic growth. So firstly, PFS. It performed well in most of its key Particularly the UK government verticals with local council welfare management. During the year, they also launched the Aspen program for the UK Home Office, the Jersey stimulus program amongst others and they were both done on our new trace processing platform. Existing programs in France and Spain also continued to performed strongly and PFS grew 20% over the prior comparative period. And that's sort of including a period prior to our acquisition just gives investors flavor of its growth rate. PFS did see a direct financial impact from the CBI matter through lost establishment income in May June, just somewhere north of $1,000,000 of lost revenue in that period. Organic growth in the non PFS remainder of the GPR segment was also strong. We had growth of approximately 34% over the PCP. The transition of salary packaging programs in Australia competitor is completed and we closed the year with over 320,000 benefit accounts live at the end of June And that will annualize through into high revenues in FY 2022. Our gaming winnings disbursement programs grew strongly in all markets with GDV up 53 in the period, and we expect to see further gaming disbursement programs launch in FY 2022, and that will support continued growth in this vertical. In the gifts and incentives segment, we saw a clear impact from the due to footfalling up in the malls, translating to lower GDP. Conditions varied throughout the year and from country to country as different markets experienced lockdowns and social distancing at different times. We saw trading conditions deteriorate in the kind of key period for the annual result in that early to mid December period as Canadian and European lockdowns became more severe. Although in FY 2021, we're down about $100,000,000 of GDV against FY 2020, don't forget In FY 2020, we're also impacted by COVID restrictions as well. So comparing to the pre COVID run rates, it's actually a more significant drop than that. We are seeing now much more positive signs in load volumes coming through in June July, With evidence of improved trading performance in North America and Europe, not all malls are back to pre COVID volumes on a like for like, but across the portfolio, We saw gift incentive volumes were about 18% up in June and 27% up in July and up over the FY 2019 year as well. So we saw some pretty strong improvements in conditions and we hope they'll continue through the remainder of the FY 2022 year. It's impossible to accurately quantify the impact of COVID on the segment, but we'd estimate it's several $100,000,000 of GDP. Although volumes were down in FY 2021, which were attributing to lower footfall in the malls, it was somewhat offset by higher breakage rates, particularly in North America, And we recognized an additional $11,100,000 of revenue and profit to do with COVID breakage. This is reflected in the revenue yield, which increased to 6.35 basis points in the year, up from 5.81 in the prior period. The impact of the $11,100,000 of additional breakage rates, high breakage rates is about 100 basis points on the yield. So stripping this out, you can see the decline in the segment yield that we forecasted driven by higher volumes of incentive programs, which is a much bigger market, but at lower revenue conversion rates. We did see during the year continued sustained growth or the non mall programs and they made up 44% of the segment GDV in the year. Incentives programs were up 11% With the new programs launching with new programs launching and often taking advantage of our digital solutions for employee engagement, customer engagement, marketing programs and the like. We expect to see continued growth in this segment with the FY 2021 program launches delivering growth in FY 2022 alongside a stronger retail environment in the FY 2022 year. In the Van segment, it was relatively flat volumes and I'd describe it as a steady state, though a customer mix shift improved GP margins segment on a slightly lower revenue base. And in April, we announced the acquisition of Centennial. Tom will give an update on that in his remarks shortly. Centennial is a leading open banking and account to account payments provider and we think it will bring approximately $90,000,000,000 of annualized volumes. And so it's going to be consolidated into the Vans segment. And as a result of that consolidation to Vans, we're going to rename the Vans segment Digital Payments in FY 2022, which reflects the broader product offerings that, that segment will provide. Moving on to Slide 10, the year delivered record revenues were up 60% to 194,200,000 This is excluding $2,000,000 of non cash amortization of AASB III fair value uplift on a bond portfolio that we acquired. The majority of our revenues are generated from recurring revenue streams in the GPR segment. The GPR segment accounts for about 58% of group revenues in the year, with PFS contributing $78,300,000 for its full 12 months of consolidation, which was up from 15,600,000 in FY 2020. Organic growth was also strong at 34% for the year. Revenue yield in GPR The Gift and Incentives segment contributed 36% to group revenues and in the year we made about 19% from breakage. So that's well down on the PCP despite the higher breakage rates that we saw in this year. We flagged previously, we spent a significant amount of time evaluating With our 3rd party statisticians in North America, our North American sponsored banks, evidence of low redemptions on our gift and incentive mall programs. We've attributed this to the lockdown, social distancing and the impacts of that on lower foot traffic in the malls and that consequently reduced card spend over the 12 to 18 month period post activation of the cards through the pandemic. That's translated into higher breakage rates. We continue to be conservative, and we're doing this in conjunction with 3rd party statisticians and banks who both review the data alongside us. Globally, Central Bank interest rates on the cardholder slope we manage have been a headwind across all the segments As we continue to see low interest rates in the UK, Australia and North America and we see negative interest rates in the Eurozone And we see banks, the banks that we deal with and we leave our float with, keen to pass that through. And so we've incurred net negative interest rates on our European float balances in the year and that increased in the second half Yes. Our global treasury team worked hard to minimize the impact through term deposits or government backed bond investments, but it is a cost. And whilst we're optimistic rates will rise in the FY2023 and beyond periods in some of our jurisdictions, we held a total float of $2,100,000,000 So it is a cost to our business. We would benefit, of course, if we were to see rising interest rates in future years, we'd be a beneficiary of that. Looking on Slide 11. At a headline level, gross profit rose to $130,400,000 Margin Slightly lower at 67% due to segment mix towards GPR and the dilutive impact of consolidating PFS. We also saw impacts on that of negative interest rates and the increased cost of those negative interest rates in the second half. And then we saw the impacts of lower establishment revenue in May June due to the CBI matter in the PFS business. PFS will be a lower margin business until we can move their payment processing and in source their payment processing and as well as it's bringing its faster payment connections directly to the Bank of England, they pushed down the gross profit margins for that business. Those were 2 gross profit synergies we identified in our acquisition thesis. So an up quick update on those. The direct connection to fastest payments became fully online this month. We expect savings of approximately £500,000 in FY 2022, which will impact the GP margins improve the GP margins. And the project to bring processing in house remains on track. As I said earlier, we launched the home office program on the trace platform. We also launched Jersey stimulus program on the TRACE platform. So you'll see more programs launch onto that TRACE platform in FY 2022 and there's a target completion date of the end of FY 2023 for that project. We continue to regard cash overheads as a percentage Revenue as a key metric of operating performance. So in the period, the employee cost, potential revenue was 28%. It was down from 32% in last year. The majority of the decrease over the prior period relates to the acquisition of PFS being consolidated year and scale synergies in relation to that coming in. Employment related expenses make up 70% of group cash overheads, and that's reflective of nature of our business model. Employment costs included in accrual for short term incentive Given the strong results in most business units, that wasn't there last year due to COVID. We flagged increased investment in new roles including at PFS and we saw this eventuate through into the results, although the timing of recruitment has been challenging, particularly given strong competition in the labor market in Europe, our European operations. We saw increased cost overhead such as insurance, internal and external audit fees and IT costs, and we'd expect that to continue through into FY 2022. We previously estimated $76,000,000 to $80,000,000 of overhead costs back in February, so we came in at the lower end of that range, excluding the costs associated for the CBI matter. Costs of the CBI matter include those incurred in the year of about €1,500,000 and provision for just under €10,000,000 of costs, which we expect to incur in the future period, predominantly FY 2022, to bring the matter to a resolution. Examples of those costs including those relating professional advisory fees and remediation activities. On Slide 13, the outcome of all this is EBITDA of CAD 53,500,000 for the year continues our track record of strong growth, which translates to a 5 year cumulative annual growth rate of 65 On a reported basis, our EBITDA still grew at 30% over the PCP to 42,400,000 We'd estimate we incurred an FX headwind of about $3,000,000 against the basket of currency rates we saw in the prior year, that's due to the strength of the U. S. Dollar. Again, most of our currency impacts are against GDP, euro and USD in particular. Nevertheless, the underlying EBITDA towards the top end of the guidance we provided in February, which was 50% to 54%, so 53.5% is a good result. On Slide 14, we reconcile between EBITDA and MPLA, there's a couple of points to mention. Depreciation and amortization of €29,800,000 At the statutory level, 68% of that relates to amortization of acquired intangibles. So that's fair value uplift that We do when we buy business. The business as usual end of that, therefore, is €9,600,000 which included in the NPA and you'll see that on the bridge. And this was offset by about $11,500,000 of internally developed software in the year as we continue to invest in the business. It's pleasing to see it was investing slightly higher than the amortization rates. Share based payments relate to executive stiff and senior leadership LTIP, Long term incentive plans and the full amount of €5,000,000 is included in the end per day number. Finance costs include costs relating to the group's indicated debt agreement and vendor loan notes. Other expenses and monthly unrealized foreign exchange on the translation of foreign currency balance sheet items. When we did restated the acquisition balance sheet and we'll discuss that in more detail shortly, one of the results was that the contingent consideration, the earn out the PFS business was reduced to nil on acquisition. At 30 June, we had to reanalyze the expected performance and that resulted in an estimated earn out liability against The predetermined targets we agreed in March 2020, that's come up slightly from 0. We had a tax expense in the year of $6,400,000 excluding the R and D recovery and we've used all of our European tax losses We started to utilize losses in the U. S. And in Australia. If you follow the statutory profit line below the chart, you'll see the full reconciliation to EBITDA and NPAT as well. But Given the significant impact of non cash acquisition accounting, we continue to believe that non statutory measures give a better reflection of our operating performance, Particularly evident when you compare the NPAT loss of GBP 28,700,000 to the statutory operating cash inflows of GBP 48,800,000. That's why we think Non statutory measures give a better indication. Looking at the balance sheet on Slide 15, there's a few things to highlight. We split our cardholder assets €1,71,000,000 and liability to cardholders of the same amount. These are the amounts held on behalf of our customers and a direct offset by the liabilities to the same cardholders. On 30 July, we announced to identify various irregularities with respect to length Time accounts are being safeguarded prior to our acquisition and PFS. As a result, we've injected $28,200,000 into the Card Oil float following year end. Whilst this is a cash outflow now, it will be released back to the Group in cash and revenue in the periods from FY 2022 to FY 20 28. The restatements discussed on the next slide and as previously announced, the adjustment relates to the pre acquisition period and has resulted in a correction to the acquisition balance sheet. The impacts of this to the contingent consideration, which is reduced by $63,700,000 in the acquisition balance sheet to nil, The customer contract intangible assets increased by $15,900,000 and liabilities to stored value account holders increased by $28,200,000 with the balance moving through Goodwill. We ended the year with surplus cash of total cash balances of 141,200,000 And no secured debt drawn down from our group syndicated debt facility, which is established in connection with the Centennial acquisition at the ship. Our business is a cash generative and we're also holding a contract asset or a breakage accrual asset of 26,600,000 with £16,400,000 expected to convert to cash over the next 12 months. The group's funded a premium on purchasing bond investments. These are what the European It deems as 0 risk investments, so the very low risk government backed assets where we invest cardholder funds, but the group receives the economic returns. We have a policy of not actively trading the bonds and we hold them through to maturity. So this is more than $5,800,000 of group cash, which will convert back in future periods. The bonds are an important part of our treasury policy to offset low or negative central bank interest rates on the cardholder float. But Yes, the premium has been increasing, as you'll be aware, due to the extremely low interest rates in the European market on euro deposits in particular. As discussed earlier, we have provisions of $10,800,000 to fund the expected future costs of the 2 PFS regulatory matters. So moving on to the cash flow on Slide 17, the business continued to generate significant operating cash inflows with new record Underlying cash inflow of $46,700,000 in the year, that's 87% of the underlying EBITDA result, Slightly below our guidance in February due to the timing of breakage receipts and remittances of customer share, alongside improvements in gifted incentive volumes in quarter 4, driving up the working capital reinvestment into the contract asset line. We continue to invest in internally generated software development And we capitalized $11,500,000 of CapEx relating to building the technology is going to drive the group's growth in future periods. So As we've mentioned previously, investors should expect this to increase in FY 2022 as some of the accelerated projects move from the design phase into more of the build phase. You'll see that fall through into that line. We've made 2 Finlab investments in the FY 2021 year, which we announced previously, Interchex and Hydrogen, which total was dollars 7,000,000 in the period. So moving on to Slide 18 now and looking at our guidance for the next financial year. There are a number of moving parts and investors should appreciate this drives the guidance range for the year, which we intend to tighten in a future period. We expect to close the Centennial acquisition at the end of next month in September and consolidated for 9 months in FY 2022. This is subject to regulatory approval by the French regulator, the ACPR, and we're expecting to assess it in early September, which triggers the end of month completion. So our FY 2022 guidance on key metrics is as follows: Group gross debit volume of $93,000,000,000 to $100,000,000,000 including $24,000,000,000 to $27,000,000,000 from prepaid $69,000,000,000 to $74,000,000,000 of volume coming from accounts for account payments from Centennial business, dollars 220,000,000 to $255,000,000 of revenue, including $10,000,000 to $15,000,000 from Centennial and EBITDA $55,000,000 to $65,000,000 result at the underlying, including breakeven to $3,000,000 loss from Centennial. So we're going to be investing to drive growth in that business in line with our acquisition strategy and operating cash flow in the 80% to 90% range conversion of EBITDA. It would not be our preference to give guidance now. We typically provide guidance in November. When we have more information, we've got some of the start of the year, the results from the start of the year to use. We've chosen to provide guidance earlier than usual for a few reasons. It does drive an increased range at this point in time. So firstly, the consensus numbers haven't been updated by the analysts since the CBI investigation in May. So we felt it would help investors understand But the additional European overhead cost is a one off step up in spend in FY 2022, but it's not a change in the growth rate assumptions to the increased overhead base in future It's a one off step up is the important piece to note. Secondly, we want to provide some information as to our plans for the Centennial business, which is to increase the spend on sales and marketing earlier and back the management team in that business to deliver strong revenue growth expectations for that business. And so we're forecasting somewhere between a breakeven to a $3,000,000 loss in that business and that's going to drive revenue growth in the future period, which is slightly different to the consensus. There's a few assumptions in our guidance as well we should think about. The reopening of European and North American economies is already apparent in the GDV we've seen in the early part of FY 2022. We're only 6 weeks in, but we've seen that already. It's a key assumption though that trading conditions continue to improve and we do not see significant lockdowns in FY 2022 in those key European and North American markets. Our Australian business is not materially exposed to the gifts and incentives segment and the Australian results have not been materially impacted by the recent Australian lockdown. We do expect to see a higher cost base driven by the requirement to add roles in Europe in connection with the CBI's Expectations, expect to see higher insurance costs and we've expanded the scope for our internal audit function alongside higher external audit fees given the complexity of the business. We're forecasting overheads of between €85,000,000 to €92,000,000 excluding Centennial and €97,000,000 to 106 including the Centennial business. There are also key assumptions with respect to Ireland. Firstly, that the provisions we've taken up in the FY 2021 year sufficient to cover the actual costs that we're going to incur in FY 2022 and also that the remediation plan we've outlined for the CBA is completed on schedule, which is predominantly by December 2021, but does not extend beyond March 2022. We haven't forecast any material change in Central Bank interest rates or foreign exchange rates in this guidance as well. So that could also impact The eventual outcome. So with that, I'll hand back to Tom to take you through the business update. Thanks, Rob. I'll try and speak through some of these slides in the interest of time, so we can then get into questions. The first page of the business update, you'll see a number of highlights there, but I would call out the launch of Project Accelerator, Certainly, the acquisition of Centennial as we push into open banking and account to account payments. As Rob mentioned before, becoming a member of Faster Payments in the UK with our first transaction to be processed next week. As shareholders will recall, when we acquired the FS, there are a number of projects underway to drive kind of long term earnings creation, including the launch of the Aspen card for the home office in the U. K, which went live launch of the Avios multi currency card program, which also went live during the year, becoming a member of Faster Payments, which we were approved during the financial year. And then as I said, 1st transaction next week and the launch of TRACE which Rob mentioned before. So that came online and was certified during the year. It has managed volume for several new programs. It will also manage the volume for the Northern Ireland stimulus program, but circa 5% of existing volumes have been converted over at this point. So as Rob mentioned before, that was a 3 year synergy target to get rid of $6,000,000 plus in external processing costs. So that conversion process will now kind of become more in earnest over the next kind of 24 months. And in between that, as I mentioned before, we managed the impact of COVID and and Brexit to the team, particularly in Europe and our group execs that certainly had their hands full in 2021. On the following slide, you'll note a brief update on the Centennial acquisition. It is a growth investment for us. Clearly, the earn out consideration is based on revenue growth 3 years out. So the earn out period, I think, finishes December of 2023 and that earn out target was 27,000,000 euros of revenue which would correspond to roughly €15,000,000 of EBITDA depending on how much we would reinvest into growth. Our shareholders have become familiar, I think, with our competitors in the prepaid space over time, But they should certainly become more familiar with names that we compete within the open banking space such as Modular, Tink, Trustly, Plaid, Trulayer as other early movers in the open banking space and pay attention to the valuations that those companies are receiving, the kind of particularly they're being acquired. And look at that relative to what we've paid for Centennial and where we think that will be in kind of the out years. Moving to the business development slide, I think we had a pretty good year in terms of business development. We signed 121 contracts, so it's a pretty good cadence in my view of 2 contracts a week. Importantly, 85 of those we now have GPR segment. So that's where we are focused on driving that growth from. We've put out of 144 programs in the year, 21 of which were signed in FY 2020. So that will give you an idea of just the lag that exists between signing contracts and the implementation of those programs. And that lag exists for a raft of reasons. By and large, we'll sign a contract with a customer. That customer will then have their own development work to do to integrate to our platform. They've got their own launch timeframes, which would include how and when they intend to market and promote their programs. You've got scheme approvals with Mastercard and Visa to achieve and regulatory approvals prior to programs being launched. So there's a process there that every contract design goes through. So put it another way, we implemented 123 programs that were signed in FY 2020. So and then we start the year with roughly 100 programs that are in various stages of implementation and will drive GED in the out years as those programs scale. And that's just the nature of pipeline management. We will always have new business expectations in our pipeline, contracts being signed that will be implemented 6 months post and you have a program being implemented that was signed 6 months earlier. So that's just the nature of how the pipeline will work. In the pipeline since we have seen continued momentum, we slightly increased the GDV that we would see at maturity. We're noting that our historical win rate is 40%. I think we went through that on our half year call. We haven't reassessed, but that 40% is higher. I don't think it is. So I think between February and now our win rate is similar to where it was. I'd make a point at this point that we're yet to see any customer deflections in the wake of the CBI matter, which is pleasing. But we haven't launched new programs in Europe in the last 12 weeks As we focus on those remediation efforts and we're in discussion with the CBI around that, we haven't seen any of those customers exit. We haven't seen any kind of contagion impact, if I can call it that, from existing clients with programs and market, which is very positive. But we've not modified our pipeline data to take the CBI matter into account. So the triangle on the right hand side of the pipeline is as it stands. We haven't kind of sensitize that to the CBI. But as I said before in May, I think at a previous investor conference, continued uncertainty with respect to sign new programs or implement new programs could ultimately impact pipeline and future growth rates. And that's just logical to assume. And so that's obviously something that we're discussing pretty closely with the Central Bank. So that uncertainty can be removed and customers and programs have certainty about being launched. Moving to the following slide, you'll see a number of callouts in the government and NGO space, which is certainly no doubt that would have been a key part of PFS's business is government, not only in the U. K, but in other countries, Finland and others. The Jersey stimulus program was a pretty small program. It was a £100 gift card to 100,000 residents. So was $10,000,000 but importantly ran on TRACE and had a couple of the TRACE processor has certain controls on it that enable that spend to be pretty to be locked down to the island of Jersey. That the success of that, I think even though that pretty small program of £10,000,000 certainly positioned us well to win the Northern Ireland program, which is 150 £1,000,000 I think cards go out at a rate of a couple of 100,000 a week, committing to the middle of September. There's 1,400,000 ish cards that will go out over the in ensuing weeks. So it's roughly £150,000,000 or £273,000,000 kind of a talent exchange rates. And I'll tell you it's early days as European economies reemerge from lockdown that we are working on other opportunities as we speak with other countries. So I think the success of the Northern Ireland stimulus program hopefully builds confidence in that kind of program for other governments to look at. Moving to the next slide, you'll see some of the key program launches for the year, including Avios, which I mentioned before, the Lobon and in the buy now pay later space in the UK and Australia, which people would be familiar with. And Zela, which you may be familiar with, just looking at advertising on TV. But Zela completed a large private raise recently and is targeting the merchant POS markets are kind of competing with the likes of Tyrode. So a merchant gets a POS terminal, has our payment card attached to that. So if debit, credit transactions occur, the proceeds from those transactions are cleared in real time to our card, providing the merchant with immediate access to cash flow versus the settlement through a bank that would occur at the end of the day or on the following Monday. Moving to the following slide, we look at some of the key launches. Rob mentioned the completion of the Cell Pack program, The launch of a gaming program with Paddy Power in Ireland and our launch with Zinneth, a large marketing and media agency in Australia with a history of offering prepaid card programs. And some of the ones on the right hand side that we're pretty optimistic about. So, Terry Hub is a company we're working with for the pubs and clubs solution in Australia, which is a kind of a compliance payment, loyalty solution. Raise.com has kiosks in Walmart stores in the U. S. That will enable you to convert the balances on various closed loop gift cards onto a new open loop gift card. And we think the GDP potential there is pretty significant. And a company called N32, which also operates thousands of kiosks in the U. S. And our cards could be used for a variety of things. In one hand, they're a gaming machine, so they can be used for gaming payouts, but they're also lottery terminals. So there's discussions with different state governments in the U. S. For lottery payouts And in some states they're used for welfare payments as well food stamps and other things like that. So we're pretty bullish that But when that program goes live, it over the years can evolve into a pretty broad based the payment distribution. Investors would also be familiar with debt makers, I think, given recent media activity and we're working with them to launch a gaming program in Australia as well as the U. S. The following slides, we've provided some additional details relation to the CBI matters, some of which I made in my introductory comments. What I would say is that we are in regular contact with the bank. Those meetings are not adversarial. They're completely aware of the remediation efforts that are underway and communication is ringing up. So that's positive And I think working in the right direction. I think it's also worth noting that when we acquired the PFS business Our investor deck at the time, so I'm going back to November 2019, called out various compliance filings the firm had incurred in the past. And at our AGM in the same year, we were clear that we would work to bring the compliance function up to the standard that we used to in our other businesses. And what investors should be mindful of is that That work commenced post acquisition. So we recruited new heads of risk into our team. We onboarded new KYB, KYC suppliers. Obviously, those things are going to be there's an IT integration process to buy that kit and buy that software and then have it integrated. We implemented the new risk assessment tool. We last year licensed a enterprise grade transaction monitoring system called Predator, which a lot of large banks use, it's a system from GBG. All of those things have gone live. We increased our resources in our compliance function from 22 at the start of last year to 45. And these things happened before receipt of the MIBDA II letter. So they were investments and activities that we were undertaking to bring the PFS business and their compliance functions up to the kind of level that we would expect to see that in other regions. But clearly, we've got more work to do and that's where the remediation The program is focused on particularly governance and the incorporation of the Board of PCSIL, which is the European regulated entity. It really is PCSIL that the CBI regulates. And as far as they are concerned, PCSIL is EML, right? The fact that PCSIL is part of a global business is fine, But I expect PCSIL to have a board with independent directors that manages risk and directors and resources that are local and are part of what they call the hearts and minds strategy along with people in defined PCF functions, which are kind of control functions because the Irish government have a very similar system to the bank executive accountability regime in Australia. It's called SEER, senior executive accountability regime that comes into place late this year, kind of October, November timeframe. There was a clear with our hearts and minds strategy, there's a clear preference for directors to be independent, to be Irish and for the PCF functions to be in country. But I think that's novel. I don't think we will see that in other markets as well. If we've got a branch license in Spain, for example, I think it's Centennial has a license in France. I think that that's the way that most of these entities will go, right, which is the European Banking Association just to divert for a second has brought in a rule at the end of this year that effectively says branch licenses and entities I've got to be resourced to locally manage those the kind of risk and compliance function. So I don't think what we're seeing in Ireland is unique in terms of how other regulators will expect resourcing and roles to be local and independent directors to be in country. As shareholders will remember, when we acquired PFS, That was originally for $425,000,000 along with a £55,000,000 earn out, call that $100,000,000 to 110 A1000000 earn out. We subsequently renegotiated the price down by A170,000,000 given COVID related uncertainties, which certainly resulted in a strong balance sheet with cash reserves to trade through economic uncertainties. The result of the costs incurred and accrued as part of the remediation plan, which has gone through the PFS P and L statement, has seen us adjust the contingent consideration down. And our assessment today and this assessment is very detailed is that the likely earned average in the region of about £8,000,000 now. So, £15,000,000 to £16,000,000 down from the maximum of £100,000,000 to 110,000,000 Moving on to our strategy slides, some of those you'd be familiar with from previous presentations. I'll skip through the slide on our platform capabilities because as I've said before, our platform is our product. At the end of the day, that's how customers integrate with us. That's how they offer their programs to their customers. It's highly developed. We continue to invest in it. The more features and functionality it has, the broader our opportunity will be. The following slide in terms of Accelerator Rob has mentioned a couple of these particularly Centennial Ladders, but we have undertaken the work to integrate to the Visa network that was one of the key projects, so that we are able to support the same product, be it a gift, be it CPR, They're physical, they're tokenized, they're digital on both networks, which just gives our consumers choice and puts us in the payment flow of programs that have predefined Visa as we have seen, which ultimately should increase our market opportunity. EML Connect launched, which allows customers to integrate through our APIs. Trace, we mentioned before, the Finlayson investments we mentioned before. So We made a fair bit of progress in that. On the following slide there, we talked about what we're doing to drive new business through the use of data as digital payments grow. The decision makers are not necessarily CEOs and senior managers, but software engineers. They were looking at how easy it is to develop a solution, integrate onto a platform and use our APIs. And then increasingly, they are making the recommendation as to which suppliers to use. So you've got The traditional sales channel that we have today, which is direct selling through our business development execs to prospective customers And you've got a whole other subset of programs that you may not see because they're being driven by IP software engineers Inverted Commerce, we are road testing different platforms and different providers and then recommending that to their management team as to which one to use. On this page, we've got we call that Devhub, which launches in September. The Devhub is a fully exposed open access API platform, which allows those same software developers and engineers to access, develop, test, documents, pull up documentation in one place, which we think will catch up some ground relative to competitors. It's often called the sandbox environment as well. So sometimes the terminology is You might see it referred to as that, but so that goes live in September. We relaunched our website in September. So a prospect can move from our website to our dead hub and we can increase our sales conversion from our website, which isn't where it needs to be, but that's pretty small. So there's an opportunity for us. And we then implemented HubSpot and ZoomInfo, which allow us to track prospects interactions with us and who that prospect is and understand that customer in more detail. So that's about getting more insight into the Companies and the prospects that are looking at our website, looking at our development environment and then allowing us to kind of reach out productively. All of that at the end of the day is about us selling digitally as well as strategically. So it's all about again just increasing our pipeline, increasing our close rates and ultimately organic revenue growth, which was the driver for Accelerator. I won't go through the next two slides on FinLabs because you can read that at your leisure. Following that, we've got slides on Centennial and just Open Banking. I'll probably skip through those as well and you can read those through in your own time. But I think it's worth looking at the use cases. I mean, open banking can be demystified. It's really real time bank payments between a consumer and a merchant. It's that simple, whether that be in country or cross border. So therefore, it's an alternative for merchants to look at ways of getting money in other than through credit or debit card, which obviously has high interchange cost for them. And for the consumer, it's for those consumers who don't have or don't choose to use debit, credit or buy now, pay later or other facilities, right? But that's what it is in a nutshell. It's very easy, I think, for investors to look at the kind of use cases because that gives you an idea of why we're excited about it and why we think there's a really strong fit between Open Banking and our GPR segment. For example, On Slide 39, I think you'll see the gaming payout program. So investors will be familiar with that. We've been running those programs for quite some time, which allows a customer when funds are won to access the winnings from a gaming wallet to a card. This now allows us to facilitate the money in as well to that gaming wallet, which again when turned over, so when spent, then allows the winnings again to be withdrawn from our cut. So Today, we're on the money outflow. The potential with open banking is to get onto the money in flow as well, which increases our opportunity, adds more value to our customer. And increasingly, we think those customers will look for one supplier to do the multi functions as opposed to having 2 vendors for each different for each different solution. The following slide, you look at things like bill payments and subscription payments, which is a significant opportunity in Europe. Most of us know the frustration of signing up a DD authorization, only to find It's bloody hard to cancel that same DD authorization going forward. But Open Banking really puts the customer in charge of recurring payments. So we think subscription payments and bill payments will become a big driver of growth in Open Banking. And the following slide, we look at things like earned wage access, which we really do think will be one of the biggest Transformations we see, there's a myriad of companies in the space working on that. We're engaged in multiple discussions with people in that space. And today, we could provide a card payout for customers who are drawing part of their salary onto it. But with open banking, we can obviously facilitate payments in and payments out, be that to their card or their bank account. So Those opportunities that we're working on live and the following slide is really just the fact that we'll be integrating the newer paid platform to TRACE. And then the intent is to kind of multi instance that platform. So that in the course of the next 12 to 18 months, all of our regions will have trace operation limit as our preferred GPR platform with open banking capabilities. And that was really But that's the gist of that project. The Centennial, I mean, I think there'll be Questions for investors on Centennial. I think our thinking on this I know markets are short term in their thinking of their expectations. But if you look at the I think our communication has been pretty clear about the timing and where we see that really benefiting the amount in terms of growth. I think the recent revenue multiple for Tink, which was acquired recently in Europe was 50 times. So we which obviously we didn't pay for Centennial. So we see that as a long term growth asset, but we're not going to manage it with short term thinking. So If it means we're investing $2,000,000 of the sales and marketing, which we're electing to do this year, then that's what we're going to do because This is at about next month or 3 months from now. It's about 3 years from now. That I want to make that point clear that it's not we don't look at that as a short term asset at all. Finally, the last one, I think we've had some questions from investors, which is good in the last 6 to 12 months on ESG and particularly people, what it's like, things like engagement rates and so forth. So We'll include these more now as kind of outstanding items. In all honesty, we should change the priorities of these slides and put this number 1 because the I've run this business for 9 years, but we've got A dedicated team who take it really personally when challenges are thrown their way. And in the last 18 months, I think we've had our fair share of those challenges. But what I'm confident in is that the team that runs the business is pretty battle tested right? And that might sound a bit corny, but you see the capabilities of people when times are tough, not when times are good. And I think that the challenges that we have overcome, be that Brexit, be that COVID, and we now look at the CBI, but ultimately that's just another challenge that will be overcome. As I said, the rubber hits the road when people are working and managing those challenges as well as their core role. So I'm certainly grateful for the team that I run and for their work ethic and commitment because it enables to provide these results that we have today. And with that operator, I'll open up for questions. Thank Your first question comes from Steven Kwok of KBW. Please state your question. Hey, guys. The first one I had was around the CDI regulatory matter. I guess like as we think about it, what are the next That we should be looking out for. And then secondly, are there any constraints around capital or investments that you can make under the proposed matter? Thanks. Yes. Thanks, Stephen. Now there's no constraints around capital or investment. So there are no constraints there. I think the things that investors will be looking for in relation to the CPI, they'll be pleased to Here that obviously the remediation plan is in place and the CBI is comfortable obviously with us saying that we're actively engaged in that process. We communicate all this wording, proposed wording to them in advance. Obviously, I think that what investors will be looking for is certainty around the ability to onboard new business. We are in discussion with them. I mean part of the response to us is look, The firm will continue to grow organically and through new programs and what have you. But We're working on kind of what that growth what number that growth might look like during the remediation period. And bear in mind that the remediation period would substantially finish by the end of December, which is why we're putting that timeframe in place. So I think investors will be pleased to see that it's not adversarial and that it's being worked through. And I think the comfort factor they'll be looking for is when the kind of pipeline of business that's been pre submitted starts to kind of starts to be implemented. When that is, I can't really speculate on that in terms of specific timing, but I can tell you that it's something that is we're in regular conversation with them about. Got it. And just my follow-up question is just as we think ahead on the TFSI acquisition, there's no changes around the long term Synergies, right? It's just that it could take a little bit more time given what's going on, but nothing has changed from a longer term perspective? No, correct. I mean the faster payments piece, I Obviously remember when that was meant to go live. I think it was meant to go live earlier in the calendar year kind of January timeframe. But the Bank of England only has one slot per month for companies to go live on the network. So you've got a that's managed by the BOE. So you've got a bunch of Companies that want to become direct members and you've only got a certain number of slots to get positioned into. So the fact that's now live tomorrow is a good thing. That means that there's a synergy saving for our business. And then I think we pay something like 20p per Transaction have come down to 2p. So that was a $800,000 annualized Aussie synergy that we announced when we did the deal. Centennial also outsources its faster payments access as well. So part of that project between now and when we close that deal is to try and we'll become the provider of faster payments for Centennial. So there should be some kind of uplift there too we're out in terms of synergies. And then on TRACE, the synergy saving was AUD 6,000,000 there kind of by the end of year 3. And I think we'll get there. We've had 1 year effectively of getting TRACE certified by the schemes, bringing volume across. Obviously, no one you don't do that gung ho. I mean, you bring programs on And you load balance and you test and then you kind of build it out from there. So most of the volume is in new business that's going on it. And then over the course of the next couple of years, we'll start to migrate our kind of existing programs across to it. And that's when you start to see the synergy benefits going to flow through, which helped the overall number, but they also helped the gross margin number because when you take $6,000,000 of Aussie out of processing costs away and $800,000,000 of faster payments away and you put that onto the PFS business, the gross margin excluding negative interest rate, the gross margin doesn't look much different to what our other businesses do. Great. Thanks for taking my questions. No problem. Thanks. Your next question comes from Elijah Mayer of CLSA. Please state your question. Good morning, guys. Thanks for the question. Just a quick one on the Centennial And Nilke, just with the increased marketing spend that you guys sort of called out, is that required to reach the previous revenue and GTV Expectations or have those expectations been rebased or changed? When we bought the business, Part of the SBI was for us to invest $5,000,000 over 3 years to kind of grow the business rather than part of why they wanted to be part of a bigger group was to have access to capital to enable them to expand because it's a private business that they're trying to run But the thing on the smell of an oily rag, right, because as they had generated EBITDA, they reinvested that EBITDA into growth. So we always had a commitment to make that investment. I don't think it's necessarily linked really to the earn out and then the earn out based on what we negotiated in in the SBA. But I think we said back in I think we said when we announced the deal that If you took €27,000,000 as the kind of incremental revenue number on which the earn out is based, which is €40 odd,000,000 And that number at the end of the day is €20,000,000 that it means you're not paying that earnout. So at the end of the day, then becomes a $70,000,000 deal with a pretty low multiple on it, but still generating a fair chunk of incremental revenue. So that $2,000,000 of sales and marketing investment won't be the difference that gets into a $27,000,000 revenue line. But it would be stupid for us not to invest in it. I mean, if you look at give you an idea, a company like Neopay has 3 or 4 salespeople and then we've got people in Europe on our side that are on the business front as well. The private companies that they'd be competing with that are PE owned, Companies like GoCardless have 100 people just in the UK, right, because they're raising money at at valuations that support it. So if you can raise $80,000,000,000 on a $1,000,000,000 valuation and you don't have to worry about profit, you don't have to worry about return, then you can hire 100 salespeople. And some of those companies that I mentioned before have pretty sizable sales and marketing it would just be counterintuitive for us to buy it as a growth asset and just expect it to happen by itself magically. And in 3 years' time, Lo and behold, euros 27,000,000 falls out of the sky. I mean, we're going to have to run it. We're going to have to invest in it. That's actually $2,000,000 and the other $3,000,000 that we'll invest over the next few years. That might be the difference between them getting $27,000,000 of euros of revenues, but it's silly for us not to invest in it. We've got a balance sheet that enables us to do that. It's a long term growth asset. We need to treat it that way. Yes, understood. And just the second one, if I could. Just on PFS And following on from the previous question, in terms of the long term perspective of that acquisition, in FY 2021, the revenue was around 78,000,000 Pre COVID, the guidance of acquisition was $84,000,000 Is that shortfall, can that purely be attributable to the COVID impact and CBI, Matt, or is there any sort of change in the underlying business from your expectations at acquisition time? I think most of the I think CBI, the thing that was probably the most immediate impact. So, I'm not seeing COVID a year ago was multi currency travel cards, right, because that was 10% of the volume. So that was in their numbers when we bought the business because it was obviously historical in the year prior. And then when COVID came along, lockdowns, no travel, then you don't we got 0 from that that 10% was effectively nothing. So in FY 2021, it's very seasonal. I mean clearly it's most of it's now, right, July, August, September during the kind of European holidays. And we're seeing that now actually. So I think July was the record month But for PFS in terms of volumes, August will surpass that. And so you're seeing some of that seasonal volume come back, which is pretty pleasing. But By and large, I think the rest of the business, if you took away multi currency, by and large, most of the business is performing pretty well. On the CVI, the impact was more I think Rob mentioned at the start of the call, dollars 1,000,000 of revenues. These are set up fees and programs that are signed where we've just had to wind back reverse basically the setup fee and then when the program launches, you'll re charge it, right? Because if you can't provide certainty for customers to when to when launch when the launch date is, we didn't think it was right to be charging charging and sitting on it and not being able to give uncertainty. But hopefully when we get that certainty, then that amount will be recharged. That was probably the immediate impact to the year as well as just programs that would have launched in that last month. So, I don't think the CDI had an impact really other than $1,000,000 directly on revenue in the group. It was probably more COVID related in those particular segments. Excellent. Thanks. That's helpful. I'll leave it there. Your next question comes from Gary Cherif of RBC. Please go ahead. Good morning, Tom and Rob. A few quick questions. Firstly, the GP margins. FY 'twenty three and 'twenty four, can you maybe just give us a range on how we should think about it and what specifically could drive The improvement in GMs, I guess that's question number 1. The second question about the ongoing permanent compliance costs, Can we be a little bit more specific on what we should assume? Is it $5,000,000 to $10,000,000 incremental cost Going forward in terms of systems, processes, controls? And I guess the final question is in relation to Open Banking, big market in its infancy, I guess very competitive, certainly will be. Interested to know why you think Neulpay will win and maybe if you are able to Frame up who the other competitors are out there in the market that you see as being dealt with competitors? Yes. John, I think. Well, let me answer, I can I'll take this one, Robert, and then I'll hand the next to you, so I'll probably answer that Gary in the so I'll answer that in terms of the compliance cost And I'll answer it in a kind of a roundabout way that if you looked at consensus for because the ongoing cost in relation to headcounts and so forth which aren't one time will flow into the what they do flow into the EBITDA guidance. And so I think if you looked at where we're at, I think, analysts' consensus was 72, insurance bill went up $1,100,000 courtesy of Listed class actions, so when you've got a couple of firms who are trolling around for litigation funding, Unsurprisingly, your insurer gets a bit nervous about that. So you got a $1,000,000 higher insurance bill off the bat that would have otherwise been in our numbers. You've got increased legal costs that you've got to accrue for along the same lines because you just got to make the assumption that you're going to have to accrue and you're going to have a higher legal cost bill as you've had in years gone by. The remediation incremental headcount in Europe will be somewhere in around the $3,500,000 on an annualized or in this year. And then that will grow in the following year because we won't obviously have all those people on the payroll for a 12 month period, but that'll be the kind of the ballpark number. So if you work back, 72 gets you to 71 on insurance, gets you to 70. If you've got higher legal costs, you're now kind of 66% by looking at higher headcount costs in Europe on remediation. And The delta of the guidance is really because of uncertainty about the ability to onboard new business and when that will happen. And so you just got to build in a conservative buffer of what that might be. And we also had the benefit last year, obviously, dollars 11,100,000 worth of higher breakage for COVID and we were $100,000,000 less in GBV. So if you took malls business and You kind of added a normal take rate on that and our normal gross margin that $100,000,000 of GDV is worth 6,000,000 ish in EBITDA. So you've got there's obviously a delta between 11.1 and that 6. So we expect volumes to recover this year and certainly in the 1st couple of months that looks pretty positive. But you've got something to outgrow there right on the breakage front. And then you've got those costs. So I think that's the number, okay, we could see that kind of panning out. So hopefully that answers a couple of questions there around just elevated costs as a result of the matter that aren't one time. So the $11,400,000 that we accrued, we certainly consider that one time around legal and advisory and consulting and whatever the rest will just flow through the P and L as normal. On the newer pay piece, yes, I mean, it's I think the thing that attracted us to it in the first place was Like us, they're a payments company. So when you look at a lot of those companies I mentioned before, they're not necessarily payment Companies there focused on different elements within the industry. So Trustly, for example, which was due to IPO in April and that IPO was put on hold because of some regulatory concerns I think that the Swedish regulator had. But nothing that we're going public at €8,000,000,000 valuation. A big chunk of their revenues comes from customer validation. So if I'm in the U. S, if I'm in a Spotify, Netflix, if I'm a subscription company, They'll be paid a fee to validate that Gary Sheriff is in fact Gary Sheriff and you almost use it as a KYC tool, right, because they've got access to identify that you have a bank account, there's money in the bank account, there's cash coming into the bank account, you would have had to have 100 point ID to get a bank account in the 1st place. So being used as a kind of de facto KYC tool, Newerpay is a payments business. So there'll be numerous, numerous companies that are in that space. I think it's so big There's room for many of them. Newerpay's piece and expertise is really on the payment side. So when you Look at their customers in the wake of the deal, some of our investors actually ranked some of the largest customers, is RoyalPay and Elavon and CyberSource, which Visa owns. I mean, these are some of the largest payment companies in the world. And their feedback was really great engineering, really shitty marketing. There was a quote that came back from a customer. So we looked at that, so that's the kind of business we want because we want you don't want it the other way around, great marketing, for engineering. So the fact that they're an enterprise grade business carrying that much volume today builds a lot of credibility with banks and builds a lot of credibility with merchants. So we think that that's why they'll be successful. Are they the only one that's going to be successful? No. I mean it's It's going to be an immense market, so there'll be many players in there. We've got to be smart in how we complete because like I mentioned before, GoCardless, TrueLayer, Modular, Tink just got bought recently. Trustly still and then most of them are private, right? And so they're living in private equity land where you can just keep raising money at a higher valuation. And I think, go Carlos' valuation was $1,000,000,000 I think that they raised the money on and Don't quote me on it, but I think their revenue was that was maybe 2 or 3 times what 4 times maybe what Centennial was, but the valuation was 15 times what Centennial is. So these things are valued differently in private land. Obviously, we're not going to buy a subsidiary or hire 100 salespeople. So we can't compete. We're just going to compete smarter, which is cross selling You are paying to the E and L customer network and vice versa, where we've got our programs cross selling it into their network, increasing that investment in Sales and marketing, we've got to do it in a smart way is how I would say. But I think They've got pedigree and they've got expertise in payments and I think that will bring a lot of credibility and trust to consumers, which ended to consumers and to merchants, right? If you're a merchant, it's doing $1,000,000,000 a year of payments and I'm making a choice between different providers that can provide me with an open banking solution. You'd like to think that the company that I mean they're doing €5,000,000,000 a month. So you'd like to think that the company doing €60,000,000,000 a year of payments It has a fair bit of credibility going forward, Nyn. Understood. And the last one was just the GP margins for 2023 2024 to range or how we should think about it? Rob, do you want to take it? Yes. I'm taking that one. I mean, I think there's a few things impacting our margin right now that Yes, negative interest is a big one in Europe. It's many 1,000,000 of dollars of negative interest we're incurring on the float. I think by the time you look out to 2023, 2024, you're starting to actually see interest rates inflationary pressures in Europe drive up those negative interest rates. So that's going to be an immediate Benefit to our margins. I wouldn't go and anticipate 3% interest rates in Europe. I'd love it if it happens because we make a lot of money out of that. But I'd certainly see The negative interest rate starting to unwind over that FY 'twenty three, FY 'twenty four kind of period. You'll see processing come in house, that's dollars 5,000,000 or $6,000,000 of GP savings on the historical run rate. So going forward a few years, you have a benefit of that coming into 2023, 2024. And then you've got faster processing. So those items alone A kind of worth 5% increase in GP over sort of that elongated sort of 2 or 3 year horizon. So you should be thinking about margins into the low 70s for EML when you're looking for that 3 year out period. That's pretty good. I mean, if you compare that to our competitors, if you look at Marquette's GP margins, Marquette is sub 40%. So our GP margins are typically very strong With our business funnel. So that just gives you a bit of a flavor. I don't want to put an exact range on that. We'll obviously do that in future periods, but just to give you a flavor as to where margins are heading in future periods. Yes. No, that's perfect. Thank you, Bo. That's exactly what I was looking for. Thank you. I think, Gary, that was a key point to make today because The margin number is down, right? And most people attribute gross lower gross margin to kind of price compression, competitive tension, things like that that are driving it down and typically margins are going to go one way. But in our case, the bulk of the gross margin is negative interest rates. We can't do anything about in Europe other than and then try to re charge it onto our customers, right, which is an option for us. But you would want to do that without really understanding what your competitors were doing or you effectively try to force your customers into paying you smaller amounts more frequently, roughly you're not holding kind of large balances. But again, when you look at gross margin to gross margin and we've got $1,000,000 of that which would be 100% margin being delayed establishment fees in the UK sorry, in Europe and negative interest rates, they're the biggest driver of it. So it's not competitive tension or price tension or anything like that. It's they're the 2 biggest drivers, the kind of non BAU, if I can call them that. So I think they hope for a change in future periods. Your next question is from Tim Plumb of UBS. Please go ahead. Hi, guys. I'll just ask 2 questions, if that's all right. Tom, just in relation to the PFS business, I think in the past, you've noticed 20 percent growth Right for the PFS business. Can you maybe talk a little bit about the organic growth rate that you experienced in that last quarter, Particularly when you weren't onboarding any new customers and what sort of organic growth rate you managed to kind of get out in that last quarter? So we measure that in terms of kind of what we call e money that was issued, right? So that's so for Europe, I think in the last quarter, it was 14%. I would think it would be at least that for this current quarter as well because as I said before, the July numbers were up pretty, pretty sizably on the average of kind of the last quarter and August is certainly tracking that way too because of economic recovery in Europe and just more spend as well as recovery in travel cards and some of those programs. So I think it's probably similar this quarter and that's without new business. So without even without onboarding new customers, which I said we haven't done for 12 weeks, but the underlying spend and revenue is still growing. So that's a positive thing and that goes I think to the growth that our customers are having in their markets. So that's going to be good. But clearly trying to bring on more customers and sign more just requires a bit more certainty. In the pipeline, I mean, 2 of our biggest opportunities there are not programs that are kind of ready to be signed yet anyway. So we've got some big opportunities in the pipeline that are not yet at contract signing stage. Therefore, the fact that we're not on boarding doesn't really present a challenge to those programs, but It does for ones that we've signed and they're waiting on we're waiting to get implemented. But we've got to manage this carefully with the Central Bank. We've got a remediation plan that we're working on. Yes, that's underway and they're seeing that. And when they see that and they see steps being taken, then we'll start putting more business through to be approved. But it would be a bit time deaf, I think, of us to be working on a remediation plan in the early days and just be submitting new business application after new business after new business because I think that's how you're listening. We want you to focus synergies on the remediation process. So it's just a balancing act that we're working through. But absent launching new programs, I think 14% was the number for last quarter and I think it'd be at least that for the Q1 of this year. Got it. And the second question is just about the pipeline that you mentioned. So, big uplift in terms of that pipeline Despite the fact that you've had some large wins in there, I think you mentioned 2.7 bill of GDV at maturity and you'd flagged a continuation of that 40% win rate, which would kind of imply that you've gone through about $6,800,000,000 of the old pipeline, which has been being replenished and then increased by the 2.5 bill. So are you able to talk a little bit about those new opportunities that have come back into that sales pipeline and particularly the uplift the kind of $8,000,000,000 to $10,500,000,000 Is that some of the opportunities from Centennial or Vans that are driving a big component of that uplift? Or is Is that more heavily skewed towards the GPR business? It's that's virtually all GPR. So It will sound a bit counterintuitive that even though we haven't launched new programs for 12 weeks in Europe that we would still be signing up new business, but we are because I think that those customers kind of expect that it'll just be resolved in time. So we're still kind of involved in a significant number of new business discussions. I mean, our pipeline, I think we talked in February that our win rate was about 40%. I think it's still in that magnitude. So you've got to look at the $10,800,000 and apply a win rate to that because you're not going to win 3 13 deals. So You're always going to sensitize that in kind of future volume. So, I think we guided on the prepaid side for GDV to go from almost 20 to go to 24 to 27 somewhere in that ballpark. So within that, you'll have existing growth from the programs we've got and then obviously DDB from the programs that have just been implemented as well as GDP from programs that are soon to be implemented. So we've always got that kind of transition. Within that $10,000,000 within that sort of $10,500,000,000 I mean there's $2,000,000,000 opportunities in it. So The reason that number grows is not necessarily the number of deals increases, it's just the size of those prospects increase. So that leaves that, but people should still sensitize that to a win rate basis, Rob. It's not We said in February May, it'd be nice to win 100%, but that's not how we're winning 40%. So you've got we've always got to sensitize that pipeline with the win rate number. Got it. Thanks guys. Your next question is from Ross Barrows of Wilson. Please go ahead. Yes, Greg. Thank you. Just one question for me. Good morning. Just on PFS, look, you just mentioned before, it's kind of an extension question. You mentioned before that you wouldn't apply to the regulators for new programs under the current Conditions. But just to get a bit granular on that, are you still able to develop new programs, work with new and prospective customers, Get it to a point where you're obviously evolving the program so that when the restrictions are lifted, then they can be launched as quickly as Just want to make sure we'll get some clarity around the ability to continue to do it in a non public way or I guess privately with your customers, but not I guess putting that to the regulator? Yes, the answer is yes. We're working on programs, working with customers, nothing's changed from that perspective. So all that is still occurring. And then as I said, once we've got a little bit further into the Remediation plan and the CBI is kind of confident that the dates on that will be met. Then our intention is to start resubmitting applications. One thing that people should know and I can't talk, I don't know whether the FCA is the same, so Rob might know. But we didn't I mentioned at the start of the call that the sales time lag of getting contracts signed and then having them launch in market because your customer has development work to do and you've got regulatory approvals to do. I think under the CBI rules, they've got 90 days to approve or deny applications anyway, right? So customers are aware of that because they know that there's a 90 day period for the Central Bank to approve new business. Again, I can't remember what the one is in the UK. So we're basically 90 days in, right? We're 12 weeks from where we were. So if we just keep submitting new applications, all that will happen is the pool of those applications will just balloon. So there are applications already with the CBI. We're obviously signing new business. And then the intent absolutely is to submit new business programs for approval for sure. There's nothing nothing can stop us doing that. That's right. Thank you. Your next question is from William Cunting of Carter Varr Securities. Please go ahead. Hi, Tom, Rob. Thanks for the additional color. Just I'm conscious of time, so I'll just keep it quick. Firstly, could you provide maybe just a little bit more color around what you're seeing in terms of competition, specifically maybe in the high growth areas, sort of U. Gaming and also in the digital banking spaces, just whether there's been a sort of an uplift in competition there or whether you're seeing any sort of pressure there? I think in the gaming space, there was us in the U. S. And there was Sightline who were but predominantly their business model. And I think they've continued to progress that pretty well. In digital banking, I don't think we've seen any new kind of entrance change the kind of competitive dynamics. So I think it's still the same customer, the same competitive dynamic and I think it's really changed much for us. Yes. Okay, great. Thanks for that. And then just on the additional sort of compliance governance and controls associated with CBI, Obviously, you guys have a lot in the back end in terms of the security and the governance of the business. But does any of that work push you into Any sort of higher tiers, which would give you access to any sort of other business opportunities? Or is it all just sort of just totally related to the CBI? Can you say again, Matt? Just want to make sure I understand that question. Yes. Just whether the any of the compliance frameworks and the governance that you guys Putting in gives you any benefit in terms of extra customers or any other segments that you could now go after that maybe were not available beforehand? Yes. Okay. No, I don't think so. No, it's so when you look at some of those resources and the cost of some of those resources. Our view is you want to automate those things as much as possible, right? So hence, predator and the kind of KYB tools going in and what have you. But part of that cost base is having our needs on the board of that business, right? I mean, they're going to be paid much like a director of the AML Group is going to be paid because as I said before, the Central Bank sees those directors as BML for want of a better word. So you're now paying for roles that historically you wouldn't have you wouldn't have paid for. So if you look at that business 12 months ago, PCSOL had a board, Most of them were the founders, right. So you had Valerie Moran, you had Noel Moran, You had Lee Britain and I think there might have been 1 independent It was paid. I'm not even sure it was paid. So you had 4 directors and so that made all the regulatory requirements, but they were unpaid. Fast forward to now, where there's a real preference for both executive but independent directors and for those directors to be paid akin to what they'll be paid for another director's role. So you've got the same 4 roles. There are different 4 people, but that might be costing you $500 a year, right? Because if you're paying €50,000, €60,000 you got 100 plus grand per directness. So you've got part of that is the cost. The cost isn't really in IT remediation or IT investment or other things like that. And then I think the CBI and most regulators would look at our size and just believe that The resources have got to be the right size, I guess, for not only where you are today, but where you think the business is going to go in 1 and 2 and 3 years' time. So part of the costs are driven by increased resources that you're going to put into specific areas. So It's largely, I would say, largely governance and resourcing and documentation and methodology and that's where A lot of the spend is going to be a lot of the resources will be. Right. Okay. That makes sense. Those are my 2. Thank you very much. Thanks, Ben. Your next question is from Ron Shamgar of Tayman. Please go ahead. Yes. Hey, Rob. Hey, Tom. Hi, Rob. Just a couple of quick ones. Just on the business pipeline, that 10,000,000,000 Is that how much of that includes sort of potential Visa scheme programs or it doesn't include any Visa program. I don't know the answer to that off the top of my head, so I'd have to look into that. But When we look at the pipeline, I'd look at it just in a general sense. So I haven't taken the time to split it out. So I might have to get back to you, Emma. Okay. It's more of a question in terms of with you guys launching on the Visa network, does that potentially sort of double the size of the Opportunity for new business? I'll see what you mean. Look, I don't know about double, but I think we're At the moment, there'll be a lot of that business that we don't see. So if a customer if a Company, I mean, the reason for building the Visa integration was a year ago, we said that you've got Visa and Mastercard have an arms race for want of a better word. And they will incentivize through various means companies to choose one scheme over the other. And historically, for us up until probably a year ago, the customers are pretty agnostic. So we would be talking to a company, it wouldn't matter what industry they're in. And Visa and Mastercard, they saw us as quite constitutable, right? So they're like, I'm not really that fast one way or another. But go forward, times have changed and you do have the schemes competing upstream. So by the time a company comes to you, they've already decided to Visa or Mastercard or other that we're going to go with. So I would just say that there would have been a lot of business that never came our way because we were never even capable. If a company in Australia had chosen Visa and we're in discussion with Visa, Visa would send that to the companies in the region who process for Visa and that would have been us. So I can't say double, but I can say that we would never have even been called in a lot of those in one of those cases. So it can only be upside for us, which is why we're doing it. I think the pool can only logically get bigger. I don't think it doubles, but it can only get bigger. Okay. And then in terms of operating EBITDA Margins this year was 27%. If we take the top end of the guidance range for next year, It's 25.5 percent EBITDA margin. If we excluded sort of the revenue from Centennial, you're still at 27% EBITDA margin. So the question is, when does sort of operating leverage kick in with DML? I mean, If you're adding sort of say $50,000,000 of revenue a year and you get to say $400,000,000 revenue in 3 years from now, is this Sort of a 30% EBITDA margin business, can you get to 35%, but when does operating leverage really kick in? Yes, that's a good question. I mean, I think we've made we haven't made that an easy thing for That's for investors to understand because of the impacts of acquisition, right. So we had EML gross margins pre PFS of I think roughly 75%. And we had EBITDA margins that were in that same kind of 30% range. You then acquire something like PFS and those margins in the high 50s, right? So it changes the gross margin mix, Changes EBITDA, percentage mix, you're growing in an absolute sense revenue and EBITDA and cash flow, but You're buying businesses with different margin footprints. And so it takes time, but that's just kind of wash through. Centennial the same, right, because you've got revenue, but no real EBITDA accretion that we'll see in FY 2022. So it's a good question. I don't think we've made it easy for people to understand. My view is this is my personal view is that if you look at the companies that are really highly rated globally. Companies in payments are looking at the Adyen's and the Stripes and some of these companies. They're much more a solution in a box, right? So I mean, AdGen is AdGen and you can set up your The e commerce platform and MP processing such not it's a simpler business, which is why I'd say, but I mean nothing there EBITDA margins are in the 40s, right, because of just the change of business. I would love our EBITDA margins to get to the 40s. I think that at least mid-30s, but somewhere in that mid-30s to 40s. But in order to do that, We've got to let some of these acquisitions flow through and some of that takes time. So as Rob said before, if you took if you fast forwarded 2 years and You take out $6,000,000 of processing costs and $1,000,000 of faster payments and $2,000,000 $3,000,000 of negative interest rates. But those things make a big difference to gross margins and make a big difference to EBITDA margins. But we're going to be judged on that rightly so. I mean that's these companies should be built up to scale. So I think 35%, 40% would be aspirational and I think mid-30s is where it should get to right now. However, the year that is, I think we're just going to do a bit more analysis on that and look at how those big ticket items in the next couple of years will kind of affect it. Yes. Okay. And just last one, I saw New South Wales Transit Well, the logo, but did you guys actually sign the deal or is it still a pilot So I don't think we've made any public commentary on it, but I think the I think the actual consumer response and so on was pretty was really good. So I think it was is very positive. So I can't say at this point that there's any commitment to necessarily expand that. We've obviously put out but we put ourselves in the best position if it does get expanded. Although I think in your neck of the woods, nothing No trains or buses anyway at the moment, is it? Yes. Okay. Thanks. We have reached the end of the question and answer session. I'll now hand back to Mr. Kriegen for closing remarks. Thanks, operator. Yes, thanks everyone for attending. Obviously, this was a longer call than we would normally have, but A lot of moving parts there and I think we've always been one for trying to be as transparent as possible. So some of these things have flow on effects, if you like. So obviously, the CBI is an important matter that we need to communicate as best we can to shareholders and then that obviously flows through to The cost that we've incurred which flows through to how to adjust future earn out periods which are close through to goodwill. So there's a number of kind of cascading events here. We just wanted to do as good a job we could to communicate that. I think the message from me is that the underlying business last year performed Strongly it performed as we expected it to, which we are pretty proud of. And I think, obviously, that The receipt of the mine at the letter was a pretty big disruptive event for us And it's something we're spending a lot of time on. I would say that the early trading in FY 2022 is pretty promising. I think we're seeing recovery In gift, the incentive as markets open 1st couple of weeks of August are pretty decent. So I think that our guidance range is really driven by a need to kind of corrected the differences I think between analysts' consensus and what our numbers are, but I would make the point that it's 1 month into the year. So we'll people would expect us to provide a wide range rather than not and then be in a position where that gets missed and penalized in the market down the track. I think people should just accept that for what it is and we'll provide more color on that in November when we've got the benefit of of 4 months trading behind us and a bit more clarity of how some of these other events are going. So They're the missions I'd leave you with and with that operator, I'll leave you. Thank you very much for holding the call today.

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