Tyro Payments Earnings: Continued Operating Leverage Improvements

No-moat Tyro’s fiscal 2024 results slightly exceeded expectations, with underlying EBITDA—its preferred profitability measure—growing by 32% from the prior year, beating our forecast by 4%. But the beat was lower-quality, driven primarily by higher-than-expected merchant fees, interest income, and corporate segment income. Transaction volume growth, both overall and on a per-merchant basis, as well as loan originations, fell below expectations, indicating that revenue-maximizing measures dampened volumes. Consequently, we lower our fair value estimate to AUD 1.60 per share from AUD 1.70. While we raise our revenue margin assumptions (merchant fees and interest), this is offset by our expectations for low-single-digit volume growth, indicating market share losses, contrasting with our prior expectation of high-single-digit growth.