Restructuring dampens Earthport revenues

Source: Earthport

Earthport (AIM: EPO.L), the leading payment network for cross-border payments, is pleased to provide an unaudited trading update for the six month period ended 31 December 2015 ("H1 FY16").

Financial and Transactional Highlights

o Revenues expected to be in excess of £10.5 million

§ An increase of 18% compared to H1 FY15

§ Revenue growth would be higher without the impact of restructuring certain business lines as detailed below.

o Transactional revenues comprised more than 85% of total revenue

o Gross margin remained consistent at approximately 75%

o Cash balance at period end was over £24 million following accelerated investments in regional expansion and product development described below

o Monetary value of transactions processed increased more than 60% from H1 FY15

§ Year-end run-rate in excess of $11 billion and growing

o Transaction volume increased more than 70% from H1 FY15

· Market Position and Strategic Progress

o The Earthport Payment Network recognised as a unique and credible solution for resolving the inefficiencies and short-comings of the traditional cross-border payments model

o Client growth and accelerating adoption has been achieved across all market segments:

§ 6 of the top 25 global Banks

§ 9 of the top traditional and emerging Money Transfer Organisation's

§ 7 of the key "challenger" international payment companies

§ Processing payments for some of the fastest growing and leading ecommerce and shared economy companies

o Continued focus on expansion of the Earthport Payments Network with the successful establishment of new network partnerships in major Asian and Caribbean markets

o Executed payments across 182 destination countries, in 54 currencies

· Distributed Ledger ("DL") Strategy

o Earthport has a uniquely strong competitive advantage in realising the potential of DL for cross-border payments:

§ Earthport provides the first and the only solution to solve the compliance challenges of utilising DL technology for cross-border payments. This solution bridges existing cross-border payments methods and emerging DL offerings, accessed via a single API with full compliance capability:

§ Earthport Ripple gateway partnership announced August 2015

§ Earthport Distributed Ledger Hub for multiple ledgers announced January 2016. This has been designed to provide full connectivity to additional DL's as they emerge, all available via a single Earthport API

o This supports Earthport's core product capability and aligns directly with our mission to provide access to as many countries, currencies, accounts and payment types as possible through a single API. "Future Proofing" payments for our clients

· Pipeline of Customers Growing on Multiple Fronts

o Size and volume of prospective new business is growing across all regions

o While Bank clients continue to be the core focus of the Earthport commercial strategy - the credibility and strategic position of the platform is increasingly attracting clients from multiple sectors and geographies that have the potential to scale faster

§ Ecommerce and Shared Economy marketplaces

§ Networks of Post Offices

o Significant opportunities continue to unfold in new geographies across Asia and the Middle East

§ Expect accelerating revenue growth from Non-European and Non-US clients

· Enhancing the Management Team and Board of Directors

o The Management Team and the Board benefited from two additions:

§ Peter Klein, former Head of FX Brokerage at Bank of America, joined Earthport as Global Head of FX, in charge of all FX products across the Earthport Group

§ Simon Adamiyatt, Earthport Chief Financial Officer, was elected to the Board of Directors
· Status of Restructuring Initiatives

o Prioritised resource and capital deployment to benefit from the Company's market position given scale and scope of available opportunities

o Earthport has instituted a plan of focused selection of customer and product initiatives based on value and scalability of each opportunity:

§ Certain non-core businesses were modified, thus resulting in some foregone short-term revenues in favour of more scalable prospective opportunities

§ De-emphasised businesses include some traditional FX activities as well as activities focused on individual clients

§ Enhanced focus areas include expansion into Asia and certain specific large opportunities in India and the Middle East-Asia corridors, details of which will be shared as they progress

Summary:

Market recognition of the Earthport brand and broad acceptance of the model is accelerating, as evidenced by the increased demand for its services within key segments and across regions. Growing transaction volumes, both from existing clients and from newly implemented customers, demonstrate the strength of the product. The Company's capacity to successfully process and sustain this growth is a testament to the business' scalability.

Earthport will continue to invest in expanding its geographic footprint and product development in order to maximise medium and long-term success. Earthport's management will share more details of the Company's strategy following the release of the full H1 FY16 results in March.

Hank Uberoi, CEO Earthport plc commented: "We are pleased with the acceptance of the Earthport Payment Network as a valuable and truly innovative solution in the massive cross-border payments market. Our proven product offering - further strengthened by our recent Distributed Ledger initiatives - world-class clients and our experienced leadership team, has placed us in a unique position in the world of cross-border payments. We are strongly focused on the medium and long-term prospects for Earthport which we believe are very significant."

Comments: (0)