EML Payments: Restructuring Done, Growth Next — Can Mobility and Arlo Deliver Free Cash Flow?
FY26 marks the trough as EML shifts from cleanup to growth, guided by a new product and a platform overhaul.
EML.AX · Earnings Call · 2026-08-17
FY26: The Bottom, Clearly
EML Payments reported a year that missed expectations but, as Executive Chairman Anthony Hynes put it, “It's been an incredibly busy and important 12 months of EML as we passed the halfway point of EML 2.0” — Anthony Hynes, Executive Chairman · 2026-08-17. The transformation strategy, launched in November 2024, is now largely complete on the cost side, with overheads down 3% to $104.1 million and a 35% like-for-like saving from the new global operations center. Revenue declined 6% to $26.8 million, but excluding nonrecurring exits and FX, the portfolio grew 3.8%. Hynes stressed that “EML is a much stronger business today than it was a year ago” — Anthony Hynes, Executive Chairman · 2026-08-17, pointing to better leadership, renewed client relationships, and a pipeline that has nearly doubled to $109 million in annualized revenue.
The results were dragged by three headwinds: the nonrecurrence of $10.8 million from terminated programs, FX, and lower interest revenue. Interest revenue fell 11% to $56.7 million as central bank rates dropped. Soft trading in the Northern Hemisphere in the second half, particularly in two large European customers, compounded the pain. Yet the company sees FY26 as the trough. CFO Stuart Will noted that softer trading has stabilized and the business is positioned for a rebound.
Growth Levers: Mobility and Arlo
The most striking new theme is mobility. EML is building a digital-first global mobility solution that replaces legacy fuel cards. Hynes said, “We're building a digital-first global mobility solution that replaces legacy fuel cards with a state-of-the-art open loop offering.” — Anthony Hynes, Executive Chairman · 2026-08-17 The company has invested $7 million in Tendren, a mobility tech group, taking a 28% stake. The market is huge: global mobility payment volumes were $1 trillion in 2023 and are forecast to reach $2.1 trillion by 2033. This is a genuine pivot from the company's core gift and incentive business.
Meanwhile, Project Arlo, the single-platform overhaul, is advancing. Migration planning is underway, with U.K. migration to begin in FY27 and Australia deployment planned for the last quarter. The company expects $15.7 million in nonrecurring expenditure this year, but sees $12 million in annualized overhead savings once fully deployed. The combination of Arlo's efficiency gains and the mobility product's growth potential forms the backbone of the forward story.
Cash Flow and Guidance
The headline for FY27 is underlying EBITDA guidance of $50–54 million, up from $48.3 million. But the more compelling target is free cash flow. Hynes declared, “we forecast pro forma free cash flow of $30 million to $35 million in FY '28” — Anthony Hynes, Executive Chairman · 2026-08-17. This assumes the bulk of Arlo and legacy remediation costs fall away. The company's cash conversion has already improved, with operating cash flow of $47.8 million. Management expects no material net debt improvement in FY27, but the path to sustained cash generation is now visible.
The renewed focus on pipeline to contract is critical. The company cites a 35% conversion rate, but contract-to-implementation timing remains a bottleneck. Hynes admitted that delays with a key payment infrastructure partner in Australia are growing, and client readiness is a perpetual variable. Still, with 9 of the top 30 contracts renewed, including 3 of the top 5, the base seems stable.
Risks and Watch Items
The biggest near-term risk is execution slippage. The company has already seen some contract opportunities resized, and the partner issue in Australia could persist. Additionally, the mobility product is still in its early stages — F where net new revenues from Tendren and the platform are not yet material. The company's market cap of just over $100 million against a $2.2 billion stored float highlights the leverage to any acceleration.
For investors, the message is clear: FY26 was a year of cleanup; FY27 should show the first fruits. The cash conversion narrative, combined with the new product and platform, offers a credible path to a re-rating. But the company must first prove it can convert its pipeline into revenue and navigate the external dependencies that have plagued it in the past.