Tyro Payments has reported its first profit since listing on the ASX in 2019 and sent a message to its suitors that the company is starting to show its long-term earnings potential and will not be sold at a price that undervalues the business. Tyro reported strong growth in the value of transactions going through its terminals – up 37 per cent to A$21.7 billion, compared with the previous corresponding period. The big increase was due, in part, to price inflation and the ending of COVID lockdowns. Revenue rose 48 per cent to $220.6 million. Net profit of $1.1 million was a turnaround from a loss of $18.1 million in the previous corresponding period. Tyro also reported that it produced free cash flow, but this is arguable. The financial statement shows net cash of $1.5 million used in operating activities. Excluding the banking division, cash flow was negative $6.6 million. The standard definition of free cash flow is operating cash flow minus capital expenditure but Tyro has come up with its own exotic formulation: EBITDA before share based payments, adjusted for non-cash items in its capital movements, statutory adjustments and capital expenditure, excluding internally generated intangibles. The company says it is growing share. While total Australian card payments have grown at a compound annual rate of 4.8 per cent over the past five years, Tyro’s transaction value has grown 27.6 per cent a year over that period. The number of merchant customers grew 9 per cent to 66,884. In the banking division, loan originations were up 101 per cent to $72.7 million. Only 10 per cent of its merchant base is activated for banking and Tyro sees this as a big opportunity. Speaking at an investor briefing yesterday, Tyro chair Fiona Pak-Poy said the company is still engaging with suitor Potentia Capital Management. Potentia, which is leading a consortium that includes HarbourVest Partners, MLC Investments Ltd and the Construction and Building Unions Superannuation Fund, first approached Tyro in September last year with an unsolicited, non-binding and indicative proposal that valued the company at $1.27 a share. Tyro rejected the offer as opportunistic. Throughout 2020 and 2021, Tyro shares traded in a range between $3 and $4 a share but fell to a low of 60 cents in June last year before recovering to around $1.40 at the end of the year. Potentia came back with a revised bid of $1.60 a share and the parties entered into discussions. The talks ended in December with the Tyro board saying the revised offer also significantly undervalued the company. Tyro was also in talks with Westpac about a bid but Westpac walked away. Late in January the Tyro board agreed to give Potentia a period of due diligence. Yesterday, Pak-Poy said: “Tyro is open to considering any offer that reflects value for shareholders. We are still engaging with Potentia, although there is no certainty that another offer will eventuate. “The board will only consider offers that represent value. These results are an indication that Tyro is delivering on its strategy and has good growth prospects.” Tyro chief executive Jon