Entertainment Rewards Ltd reported a 12.7% increase in operating revenue for FY2025, driven by growth in key segments, but posted a wider net loss of $9.7 million amid higher expenses and a major convertible loan amendment.
- Operating revenue rose 12.7% to $18.7 million in FY2025
- Underlying EBITDA loss widened to $6.8 million from $4.5 million
- Net loss after tax increased to $9.7 million
- Convertible loan of $22.5 million reclassified from debt to equity
- Additional $3 million loan facility secured post year-end
Revenue Growth Amid Strategic Investment
Entertainment Rewards Ltd (ASX – EAT) delivered a 12.7% increase in operating revenue for the financial year ended 30 June 2025, reaching $18.7 million. This growth was primarily driven by strong performances in its Seamless Rewards fees, gift card sales, enterprise sales, and fee income from paid advertising and travel booking. Membership sales rebounded with an 11.9% increase, reversing the prior year’s decline.
Despite this top-line improvement, the company’s underlying EBITDA loss widened to $6.8 million, up from $4.5 million in FY2024. Management attributed the increased loss to deliberate investments in expanding the team and ramping up marketing efforts to support the revenue pivot strategy. The timing of revenue recognition, especially for enterprise contracts, also contributed to the lag in capturing full sales benefits within the year.
Widening Net Loss and Expense Pressures
The net loss after tax grew to $9.7 million, compared to $7.6 million in the previous year. Operating expenses rose notably, with employee costs and marketing spend increasing as the company sought to accelerate growth. Depreciation and amortisation charges also increased, reflecting ongoing investments in technology platforms.
No dividends were declared for FY2025, consistent with the company’s focus on reinvesting cash flow to support its transformation and growth initiatives.
Convertible Loan Amendment and Balance Sheet Impact
A significant highlight was the amendment of a $22.5 million convertible loan agreement with Suzerain Investment Holdings Ltd. The amendment, effective 31 December 2024, shifted the conversion option from the lender to the company, fixed the conversion price at 2.2 cents per share, reduced the interest rate to zero, and extended repayment terms to 31 December 2026, subject to shareholder approval.
This restructuring led to the reclassification of the convertible loan from a financial liability to equity on the balance sheet, easing interest burdens and improving financial flexibility. Additionally, the company secured a $3 million increase in its loan facility post year-end, further bolstering liquidity.
Going Concern and Future Outlook
Entertainment Rewards continues to operate with net liabilities and a net current asset deficiency, reflecting the ongoing challenges of its transformation phase. The directors acknowledge material uncertainty regarding the company’s ability to continue as a going concern but express confidence in ongoing financial support from major shareholders and disciplined cost management.
Looking ahead, the company expects the revenue benefits from increased memberships and enterprise contracts to be more fully realised in FY2026, alongside continued investment in brand awareness and customer acquisition.
Executive Incentives and Governance
The year also saw the implementation of share-based payment schemes, including a Loan Funded Share Scheme for Chairman Dean Palmer and the vesting of performance rights for key executives. These incentives align management interests with shareholder value creation during the company’s growth phase.
Bottom Line?
Entertainment Rewards’ FY2025 results underscore a pivotal growth phase, but the path to profitability hinges on execution and shareholder backing amid ongoing financial pressures.
Questions in the middle?
- Will shareholder approval be secured for the extended loan repayment terms in 2026?
- How quickly will the increased membership and enterprise sales translate into positive cash flow?
- What are the risks if financial support from major shareholders diminishes?