Thread by @viceroyresearch

Viceroy’s report on Tyro is now live.

Over the last week, our research suggests $TYR has “bricked” (verb: to turn into a brick) ~50% of its terminals across the country, far more than numbers suggested by the company. $TYR #thread 1/n

viceroyresearch.org/2021/01/14/tyr…

It seems that @Tyro has no idea & no way to know how many of its terminals are functional. Viceroy’s extensive channel checks confirmed many customers had bricked terminals & received no communications from $TYR unless prompted. 2/n

Tyro have announced that the recall will be conducted by Amtek, a company with only 250 employees on the job in only 3 states, collecting (allegedly) 2,000 machines a day. Even if @Tyro’s assumption of only 30% bricked machines, collection alone would take 10 days. $TYR 3/n

$TYR is the most underwhelming fintech in the ASX, and more closely resembles a bank. Its major revenue driving activity is simply providing merchant terminals – which have remained largely unchanged for a decade – to SMEs 4/n

$TYR does not have its own hardware: all terminals are 3rd party from Worldline. We have found no other instances of Worldline terminals being bricked recently (including ANZ now), so we understand the issue lies with Tyro. 5/n

Viceroy spend 5 days conducting channel checks into Tyro customers. Here are our key findings $TYR 6/n

Tyro is still free cash flow negative and increasingly loss making, despite its revenue growth. The table below illustrates our cash flow adjustments which we believe more accurately reflect the business’ operational cash flows. $TYR 7/n

We take issue with many sell-side “DCF” valuations on Tyro, which would require the largest amount of financial gymnastics we’ve ever seen to justify a >$2b valuation. There is simply no cash flow to discount for the foreseeable future. $TYR 8/n

Viceroy does not believe Tyro’s revenue stream is particularly valuable either. The antiquated model of merchant terminals provided by Tyro is so unappealing, Bendigo & Adelaide bank effectively handed over their merchant acquiring business to $TYR 9/n

bendigobank.com.au/media-centre/b…

Tyro’s IP does not seem particularly valuable and has very little moat in an industry where innovative players are coming in hot. If anything, Tyro should be valued more like a bank than a fintech business. $TYR 10/n

Finally, Tyro has proved it does not deserve recognition for being any more dependable than other payment terminal providers. In fact, it has proved the opposite. $TYR 11/n

We believe Tyro presents significant downside with no real catalyst to make a jump into profitability and overhanging fear of litigation. Recent events have likely set Tyro back years in marketing and sales, and shareholders must be prepared to bear the cost. $TYR 12/12 #end