Earthport (AIM: EPO.L), the leading payment network for cross-border payments, is pleased to announce its final results for the year ended 30 June 2016.
• Revenues increased 18% to £22.8 million, within the range referenced at the Capital Markets Day held on 27 April 2016 (available at www.earthport.com/investors)
• Transactional revenues comprised approximately 91% of total revenue
• Adjusted gross margin of 70% resulting in adjusted gross profit of £15.9 million*
• Gross margin of 67.4% after impact of warrant charge, resulting in gross profit of £15.3 million
• Cash and cash equivalents at 30 June 2016 of £14.4 million and consistent with guidance at the Capital Markets Day
* Impacted by elevated transaction costs related to building resilience of the Earthport network.
Operational and Transactional Highlights
• Payment volume increased to more than $11 billion, 64% increase versus prior financial year
• Record number of transactions at 6.6 million, 89% increase versus prior financial year:
o June 2016 set a record for number of transactions in a single month - a run rate of 8.5M transactions
• Average revenue per transaction of £3.12
• Gaining traction with European-based global Banks:
o Experiencing increasing transaction volumes and multiple engagements with existing clients
o Large eCommerce provider now live in three markets and already a top five client by volume. Additional markets in discussion
• US Markets:
o Substantially completed integration of a current client’s core payment processing platform into Earthport's network. This is a top 10 global Bank
o Anticipated grant of state licensing in North America will accelerate growth in this sector
• Emerging Markets:
o Contracted with major Japanese Bank and Signed Memorandums of Understanding with major Banks in India, Indonesia and other markets
o Engaged with Regulators in multiple countries, expecting approvals in key Asian markets to originate 'out-bound' business
• Earthport subsidiary, Baydonhill, rebranded and relaunched as EarthportFX, aligning the business with Earthport's core model, and expanding its services to corporate clients
• Advancement of Distributed Ledger (“DL”) Strategy with Earthport executing the first cross-border transaction via DL by a major financial Institution on behalf of a large European Bank
• John B. McCoy, retired Chairman and CEO of Bank One (merged with JPMorgan Chase in 2004), joined the Board in February 2016
• Baydonhill Earnout - Amendment to CVR Deed
o On 19 October 2016 (see RNS 8882M), Earthport announced that an Amendment was agreed by Earthport and the CVR Committee regarding the contingent consideration in response to the impact of the February loss at Baydonhill ("Loss Incident"), as announced on 25 February 2016 (see RNS 1396Q), in accordance with the terms of the (“Original Agreement”). Both parties have agreed that, the aggregate free-cash-flow figure used to calculate the current CVR Entitlement will bear a partial impact of the £5 million Baydonhill loss resulting from the Loss Incident and the amended CVR Entitlement shall be a maximum of £2,295,400. As a result of the Amendment, approximately £700,000 in cash will be returned to Earthport from an escrow account established and funded for meeting its obligations under the Original Agreement.
• Strong Entry into FY17
o The Company is executing on its strategic plan and budget for FY17, and is tracking to expectations in key areas. During the first 3 months of FY17, Earthport achieved the following;
- Processed 2.3 million in Transactions, £2.9 billion in Payment Volume
- Number of transactions increased 91% over same period in FY16
- Payment Volume increased 110% over same period in FY16
o Total revenues increased 34% from the same period in FY16 with transactional revenues comprising 95% of total revenues
o Regional Revenue and New/Existing Clients Mix consistent with expectations and in line with FY16 mix
Hank Uberoi, CEO of Earthport, commented: “The changes in the payments landscape are picking up speed, driven by trade and business flows and the impact of regulations. Earthport is well positioned to act as a facilitator of change in the cross-border payment market.
We continue to develop the world’s leading cross-border payments platform; to provide our clients with access to a network that reaches any bank account, in any currency, through one connection with world-class compliance, resilience, trust and cost optimisation.
The investments made during FY16 have improved traction with key European and North American banks and business enterprises, with volume growth continuing into the first quarter with a healthy pipeline. We remain positive regarding the growth prospects for Earthport and believe we have the potential to build and hold a significant share of the multi-trillion dollar cross-border payments market.
We are committed to meeting market forecasts for the 2017 fiscal year and achieving our target of becoming cash flow positive during the fourth quarter of the financial year.”