Why Is EML Payments Struggling to Turn $102 Million Pipeline Into Revenue?
EML Payments reports a 6% revenue decline and a net loss of $4 million in H1 FY26, while advancing its EML 2.0 restructuring and Project Arlo development.
- Revenue down 6% to $108.4 million in H1 FY26
- Underlying EBITDA falls 16% to $28 million
- Statutory net loss of $4 million versus prior profit
- Cash reduced by $11.5 million due to class action settlement and investments
- EML 2.0 restructuring on track for June 2026 completion
Financial Performance Highlights
EML Payments Limited (ASX: EML) has released its half-year results for the period ending 31 December 2025, revealing a challenging start to FY26. Revenue declined by 6% to $108.4 million compared to the prior corresponding period, while underlying EBITDA dropped 16% to $28 million. The company posted a statutory net loss after tax of $4 million, a significant reversal from the $9.5 million profit recorded in H1 FY25.
These results reflect a combination of factors including a run-off of clients lost under previous management, softer interest income, and timing delays in converting new contracts into revenue. Despite these headwinds, EML maintained tight control over overheads, achieving a quarter-on-quarter reduction in costs.
Operational and Strategic Developments
EML’s Executive Chairman Anthony Hynes highlighted the strong performance of the commercial team, noting that the new program pipeline stands at $102 million with conversion rates exceeding expectations. However, revenue realisation has lagged due to longer-than-anticipated delays between contract signing and system activation, driven by both client and operational factors. The company expects these delays to improve as process re-engineering efforts conclude in the coming quarter.
Significant investment continues in Project Arlo, EML’s new global payments platform, which is currently in deep build mode with migration planning underway. The first region for new customers is slated for deployment mid-year, supported by a fresh team of product managers focused on innovation.
Balance Sheet and Cash Flow
Cash reserves decreased by $11.5 million to $47.8 million, primarily due to a provisional class action settlement payment, repayment of an intercompany loan, and capital expenditure on Project Arlo. The group’s net current asset deficiency remains influenced by the classification of stored value account liabilities and the maturity profile of segregated funds invested in bonds.
EML has renegotiated and extended its debt facilities, now totaling $125 million, with covenants comfortably met as of 31 December 2025. The company’s balance sheet shows intangible assets of $109 million, reflecting ongoing investment in software and customer contracts.
Outlook and Guidance
EML has tightened its FY26 underlying EBITDA guidance to a range of $58 million to $60 million, down from the previous $58 million to $64 million. The company remains focused on completing its EML 2.0 restructuring by 30 June 2026, which aims to embed a unified operating model and strengthen management capabilities.
While near-term financials are pressured, the company’s strategic initiatives and pipeline position it for potential acceleration in FY27 and beyond, contingent on improved revenue realisation and operational efficiencies.
Bottom Line?
EML’s restructuring and platform investments set the stage for future growth, but near-term revenue delays and litigation costs temper optimism.
Questions in the middle?
- How quickly will EML convert its $102 million pipeline into revenue?
- What impact will Project Arlo have on operational efficiency and client retention?
- How might ongoing regulatory and litigation matters affect future cash flow?
