Annual Report 2022 Tyro Payments Limited ABN 49 103 575 042 ABOUT THIS REPORT HIGHLIGHTS CHAIR'S LETTER CEO | MANAGING DIRECTOR’S REPORT (Incorporating the Operating and Financial Review) Financial Performance Financial Position Looking Ahead Dedicated Tyros PROFILES Board of Directors Executive Leadership Team 5 YEAR TRACK RECORD SUSTAINABILITY DIRECTORS’ REPORT REMUNERATION REPORT Letter from the Chair of the People Committee Audited Remuneration Report AUDITOR’S INDEPENDENCE DECLARATION FINANCIAL REPORT ADDITIONAL INFORMATION Shareholder Information Corporate Directory 6 8 10 15 20 33 34 35 36 37 42 47 49 57 69 70 74 104 107 167 168 171 4 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022 ‘Setting businesses free to get on with business by simplifying payments and commerce’ 5 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022 About this Report Reporting approach We are pleased to present our 2022 annual reporting suite to our Shareholders and other stakeholders, which, for the first time has been prepared with reference to integrated reporting frameworks. This reporting suite provides a consolidated review of our financial, economic, social and environmental performance on matters material to our strategy and our ability to create and sustain value into the future. 2022 Annual reporting suite Our 2022 Annual Report should be read in conjunction with the other reports that comprise our 2022 annual reporting suite. They are available at Tyro’s Investor Centre. • Media Release: https://investors.tyro.com/ investor-centre/?page=results-centre • Corporate Governance Statement: https://investors.tyro.com/investor- centre/?page=corporate-governance Investor Presentation: https://investors.tyro. com/investor-centre/?page=results-centre • Sustainability Report: https://investors.tyro. com/investor-centre/?page=sustainability • 6 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022 Some parts of this Annual Report include information regarding Tyro’s strategy and include forward looking statements about Tyro and the environment in which it operates that involve risks and uncertainties. Actual results and the timing of certain events may differ materially from future results expressed or implied by the forward-looking statements contained in this report. All amounts contained in this report are stated in Australian dollars (AUD) except where indicated. Non-IFRS measures such as Earnings before Interest, Depreciation and Amortisation (EBITDA) have been included in this report as Tyro believes they provide useful information to stakeholders to assist in understanding the Group’s performance. Non-IFRS measures should not be viewed in isolation or considered as substitutes for measures reported in accordance with Australian Accounting Standards and IFRS. 2022 Financial Report The Financial Report and Notes set out on pages 107 to 154 are prepared in accordance with the Corporations Act 2001, including complying with Australian Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements. The remuneration disclosures set out in the Directors’ Report comply with Accounting Standard AASB 124 Related Party Disclosures and the Corporations Regulations 2001 and the financial statements and notes also comply with International Financial Reporting Standards (IFRS) as disclosed in the Financial Report. Scope and boundaries The contents of this report relate to Tyro Payments Limited (Tyro or the Company) and its subsidiaries (the Group) for the 2022 financial year. This report covers the Group’s performance for the year ended 30 June 2022, compared to the prior year ended 30 June 2021 and the matters included address material issues for the Group. The process Tyro utilised in determining and applying materiality is included in the Notes to the Financial Report. References to H1 FY22, refer to the six months ended 31 December 2021. References to H2 FY22, refer to the six months ended 30 June 2022. 7 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022 Highlights TRANSACTION VALUE $34.2 BILLION UP 34% EBITDA $10.7M Launch of Tyro Go Card Reader RECORD LOAN ORIGINATIONS $99.1 MILLION UP 283% Launch of Web Banking LIFT IN NPS +34 (FY21: +21) NEW APPLICATION NUMBERS 14,777 applications 8 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022 GROSS PROFIT (NORMALISED) $148.5 MILLION UP 24% MERCHANT NUMBERS 63,770 UP 10% New Tyro Health Business Launched EXCLUSIVE TELSTRA PARTNERSHIP +4,500 new merchant leads 88.6% OPERATING LEVERAGE ACHIEVED IN Q4 FY22 LOW TRANSACTION VALUE CHURN 9.2% (FY21: 8.7%) TYRO CONNECT GROWING STRONGLY 2.2 MILLION TRANSACTIONS PROCESSED THROUGH THE PLATFORM IN FY22 BENDIGO TRANSACTION VALUE AHEAD OF ESTIMATES $5.2 BILLION 9 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022 Chair's Letter 10 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022CHAIR’S LETTER r a e D l s r e d o h e r a h S In my letter to you last year, I said that although FY21 proved to be another year of challenges for Tyro, it presented new opportunities for the way in which we conduct business and the products we offer to our merchants. I also mentioned that it was going to be very difficult to predict when we will return to a more normal trading environment and FY22 has proven to be a challenging and volatile business environment. For the first four months of FY22, we again experienced significant Covid-related lockdowns in New South Wales, ACT and Victoria which continued to impact our transaction value and path to profitability. In early 2022, the world saw a material uptick in inflation driven by global supply chain issues with central banks hiking interest rates at the fastest pace in over 30 years. Although these significant challenges have and will continue to affect the business environment in which we operate, Tyro continues to have a strong customer base and payments capability. In November 2021, as bond yields and interest rates started to increase - many investors changed focus from revenue growth to a free cash flow valuation perspective. This shift in valuation dynamics has had a significant impact on Tyro’s share price which started FY22 at $3.76 a share and finished the year at $0.60 a share. We acknowledge the concern from shareholders about this drop in share price. The Board has worked with the management team to adopt strategies to fast track our path to profitability and free cash flow without impacting our future growth profile. Robbie will provide more details in his report on Tyro’s strategy going forward. Tyro now operates on a much larger scale compared to when we listed in December 2019. We have grown annual transaction value from $17.5 billion as recorded in FY19 to $34.2 billion for FY22. This equates to an annualised constant growth rate of 25% over the 3-year period notwithstanding the significant disruption of Covid on our business for most of that time. We have increased our merchants from 29,000 at IPO to just over 63,700 at 30 June 2022, operating over 109,000 terminals, reinforcing our position as Australia’s 5th largest merchant acquirer by terminal numbers. This increased scale has translated to Tyro generating positive EBITDA and nearing positive free cash flow. Our merchant retention metrics remained strong in FY22 notwithstanding the challenges of the terminal incident in early 2021. To date, $5.0 million has been paid to merchants under the remediation scheme (this was fully accrued for in FY21). Furthermore, our defence of the class action continues to progress. The $668 billion Australian payments industry is an ever-changing environment in which we are well positioned to accelerate our growth and capture a much larger market share. As we look to capitalise on the opportunity in front of us, we are seeing a greater appetite from micro and small businesses to adopt new payment technology and digital payments. With our new products and technology, the Board remains optimistic about Tyro’s future as we focus on top line growth, our margins and operating expenses. We are now at the point where we must show strong operating leverage in the business. Our Reporting Framework and Sustainability Consistent with best practice, we have adopted a new disclosure format for our Annual Reporting suite of documents. In our Sustainability Report, we have highlighted how we create value for all our stakeholders including enhanced disclosure on the use of all our Capitals. This report provides a consolidated review of our financial, economic, social and environmental performance on matters material to our strategy and our ability to create and sustain value into the future. We are committed to building a sustainable business that has a strong social conscience and we are focussed on delivering solutions that create a sustainable future for all our stakeholders. From an environmental perspective, we are focussed on reducing Tyro’s impact on climate change and whilst we are not an intensive emitter of carbon dioxide, this year we will become a ‘Net Zero’ carbon neutral business by signing up to the Climate Active Australia initiative and developing our first formal emissions inventory, including the purchase of carbon offsets to achieve Net Zero. We are also focussed on assisting our merchants to understand their own impact on climate change and developing ideas on how we can assist them in their journey to become carbon neutral. This is just the start of our move to a more comprehensive and more transparent review of our business which we will build on in FY23 and beyond. 11 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022CHAIR’S LETTER The Tyro Board and CEO Hamish Corlett decided to step down from the Board in November 2021. I would like to thank Hamish for his significant contribution to Tyro and the expert global payments knowledge he brought to the Board. As part of our Board renewal programme, we appointed two new members to the Board in January 2022. Claire Hatton and Shefali Roy were appointed Non-executive Directors with effect from 5 January 2022. Based in Sydney and with extensive career experience spanning senior executive and country leadership roles in technology and travel businesses in Australia, Asia and the UK, Claire brings extensive commercial leadership experience to Tyro. Shefali has extensive C-Suite / senior leadership roles in operations, compliance and regulatory affairs at global multinational companies and brings a wealth of technology expertise and knowledge to the Board. Robbie Cooke announced in June 2022 that he will be leaving Tyro to pursue other career opportunities. The Board commenced an executive search process canvassing both internal and external candidates to identify a suitable CEO successor and Robbie has committed to work with Tyro’s Board to ensure a smooth transition. Financial Position Given the results for FY22, the Group has continued to maintain a strong balance sheet throughout the year and the Board regularly reviews Tyro’s capital structure. Tyro is debt free and as at 30 June 2022, we had $122.8 million in cash available to support our future growth plans and path to profitability. Total capital held at 30 June 2022 was $72 million with a total capital ratio of 39% (FY21: $84 million with a capital ratio of 73%). Tyro currently holds sufficient capital to meet its internal targets above APRA’s prudential capital requirements and the Board does not believe that we will need to raise any additional capital until we reach a positive free cash flow. People, Culture and Diversity At Tyro, we embrace a workplace that is safe, inclusive and welcoming for all our employees. We recognise that our merchants and the community in which we operate are diverse and multi-cultural, and we are committed to ensuring that our team reflects this diverse community. In FY22, we introduced our first ever cultural diversity survey to better understand ourselves and how our broad-based diversity compares to the community in which we operate. We have initially looked at the cultural diversity of our Board and Executive Leadership Team and will implement initiatives in FY23 across our entire team. The learnings from these initiatives will guide our thinking and setting targets for broad-based diversity rather than only being focussed on gender diversity. We have also made good progress on the gender diversity targets we set in the prior year. We target representation of women at Tyro across our leadership teams and across the broader team on a 40:40:20 approach with at least 40% women, 40% men, with the remaining 20% unspecified to allow for flexibility and to recognise that gender is non-binary. 12 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022CHAIR’S LETTER Looking forward to FY23 In FY22, we undertook a detailed review of Tyro and the payments industry as a whole in Australia and refined our strategy for the next period ahead. We have three key strategic priorities for FY23, being: • the roll-out of our new Tyro Go card reader to accelerate our growth into the Micro and SME segments of the market and to provide merchants with an alternative form factor that meets their business needs; • the roll-out of our new Tyro Pro android-based terminal that will support open-source software and enhanced integration with POS providers; and • the digitisation of our merchant onboarding process and merchant support to enhance our customer service and improve the onboarding experience for merchants. Our results for FY22 and the strategic plan we have put in place for FY23 positions us well on our journey to profitability and positive free cash flow. This next year should see us make progress in achieving those goals. The Board and management will continue to focus on finding areas of operating expenses which we can rationalise without impacting our strong growth profile. Thank you Despite the challenging year and the significant decline in our market value – we believe the company can deliver value for all our stakeholders. We would like to thank our shareholders for your support. I would like to thank our CEO, Robbie Cooke, for his leadership of Tyro over the last 4 years and for leading us through the IPO. Robbie will be leaving us on 31 December 2022 and we wish him success in his future career. Also, our thanks to our dedicated staff for their work and commitment. Finally, I would like to thank all our merchants, partners and other stakeholders for their support and engagement over the past twelve-months and we look forward to working with you all in FY23. I also look forward to seeing all our shareholders at our Annual General Meeting on 24 November 2022 which will be held in-person for the first time in 3 years. Sincerely, David Thodey Chair 29 August 2022 R E T T E L ’ S R I A H C 13 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022 14 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022 CEO | Managing Director’s Report (Incorporating the Operating and Financial Review) 15 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022 I have always been inspired by the tenacity and courage of the founding Tyro team that back in 2003 challenged the status quo by building a truly unique Australian payment business. The impetus then was to build a payments solution that better served Australia’s SMEs and that ambition remains a core part of Tyro’s DNA today. We continue to work with some amazing businesses, are genuinely inspired by their success and gain immense satisfaction in assisting them grow and thrive. This is the essence of Tyro and what drives us as a team. There is no denying it has been a challenging year for our business. Covid lockdowns impacted our performance in the first half exacerbated by increased wage costs fuelled by tech talent shortages. In the second half the shift in investment appetite for tech and payments companies globally saw the market’s focus move away from strong revenue growth companies to a preference for those delivering positive EBITDA and cashflow. For Tyro, these challenges had to be navigated whilst still bedding in the not as yet earnings accretive Medipass acquisition and conducting the Bendigo Bank Alliance migration. Against that backdrop and at a high level we delivered transaction value of $34.2 billion (up 34% on FY21) with more than 63,500 merchants (up 10% on FY21) trusting us with their payments needs. We lifted revenue 36% to a $326.1 million and we lifted normalised gross profit 24% to $148.5 million. We delivered a normalised EBITDA outcome for FY22 of $10.7 million down from FY21’s $14.2 million, reflecting $4.7 million in additional costs from the Medipass operation (pre any revenue uplift from integration with the Tyro Health platform) and the absence of $4.5 million in JobKeeper benefits received in FY21. We put initiatives in place in the second half of the year, which started contributing in the last quarter of FY22, to continue driving revenue performance whilst focusing on reducing headcount (see chart 1 below) and holding operating costs flat. These actions produced an improved operating margin in the Q4 (see chart 2 below) which is expected to further improve into FY23 (discussed further in this Report). Chart 1 - Employee Headcount Chart 2 - Operating Expenses Compared to Gross Profit (FY17 to FY22) 630 625 620 615 610 605 600 t n u o c d a e H t n e n a m r e P 160 140 120 100 80 60 40 20 0 t n u o c d a e H s r o t c a r t n o C 116.4% 114.2% 110.3% 104.7% 92.8% 88.2% 95.9% 97.5% 88.6% 85% ~$175m to ~$181m $148.5m $119.7m $93.5m $83.3m $69.1m $56.0m $68.1m $43.6m $36.9m Mar 2022 Apr 2022 May 2022 Jun 2022 Jul 2022 Aug 2022 FY17 FY18 FY19 FY20 FY21 FY22 H1 FY22 Q3 FY22 Q4 FY22 FY231 Permanent Contractors Operating Expenses to Gross Profit Margin Before discussing our financial performance for the year in more detail, I would like to spend some time focussing on the environment Tyro operates in and the shifts we have made in FY22 to enhance future outcomes for our merchants and shareholders alike. “There is no denying it has been a challenging year for our business. Covid lockdowns impacted our performance in the first half exacerbated by increased wage costs fuelled by tech talent shortages...” 16 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022CEO | MANAGING DIRECTOR’S REPORT • Medipass acquisition and our existing health business to create a class leading health payments and claiming business in Australia; refining our approach to the servicing of micro merchants. Previously, we did not differentiate between micro, small, medium and large merchants. Given the scale of our portfolio of merchants now, it is seen as an opportune time to have a separate strategy for our different size of merchants to ensure we provide the right product and service to them subject to their needs; • entering the trades, services and • accommodation verticals underwritten by industry relevant features and products; launching new payments devices, including the Tyro Go reader and our new android-based Tyro Pro terminal; • digitising our merchant onboarding and servicing capabilities; • expanding our merchant acquisition footprint through new partnerships and alliances; • providing a unified commerce offering to merchants, including card-present and eCommerce payments, banking and data insights; and • expanding our portfolio of banking products and leveraging our valuable banking licence. The Payments Landscape and Competition We operate in one of the most competitive industries globally – the landscape today is as competitive as it was 5 years ago. From the entry of new international and domestic merchant acquirers, the establishment of new players, new investment in payment tech by the big four banks and new payment types emerging such as BNPL, QR code payments and the NPP, competition is ever present to Tyro. Despite this environment, Tyro has over the last 5 years continued to capture segment share with 7x the card-present system growth and our segment share of total card- present payments reaching 5.1% at 30 June 2022 and segment share for SMEs in health, hospitality and retail estimated at 19.2%. Strategy The strategy articulated in our Prospectus in 2019 has seen Tyro’s transaction value doubling in the space of 4 years. Given the passage of time and the dynamic nature of the industry we saw FY22 as an opportune time to reassess our strategic plan. In the year we undertook a comprehensive review process with our management team and the Board to evaluate our past strategy and define a refined strategic plan for the next 3-years. Some of the key strategic priorities we have identified are: • a continued focus on the needs and wants of the Australian SME segment with our differentiated offering leveraging our proprietary technology; • stepping up our concentration on the health vertical through the combination of our TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022 17 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022CEO | MANAGING DIRECTOR’S REPORT Tyro Health Business Tyro’s new Tyro Health business unit was launched on 1 July 2022 and brings together all our health offerings under the one leadership team - this includes the Medipass digital platform as well as Tyro’s existing health specific claiming offerings on our EFTPOS terminal. This combined team of 60 has deep health industry expertise, covering sales, support, marketing, engineering and product development. This Medipass and Tyro combination provides Tyro’s health merchants greater claiming and payment capabilities extending beyond Tyro’s existing terminal-based claiming to facilitate a range of new experiences such as telehealth, in-home and online claiming and payments. In addition, our digital capability integrates a range of state and federal based compensatory funders to enable digital claiming with merchants. Tyro’s health business now integrates with 77 health specific third-party software vendors and supports approximately 13,989 active healthcare merchants across all healthcare professions including allied health, GPs, specialists and hospitals. FY22 saw Tyro Health integrate new insurers and schemes, including WorkSafe Victoria, Comcare and nib. Tyro Health customers can now use Tyro’s offerings to raise digital claims through to these insurers and schemes. In addition, our EFTPOS terminals can now be accessed from Medipass, enabling merchants to access all of Tyro’s functionality from the one portal. Tyro Health will be launching our integration to Medicare ECLIPSE in early FY23, which will enable us to dramatically increase our offering to medical specialists and GPs. “Tyro Health will be launching our integration to Medicare ECLIPSE in early FY23, which will enable us to dramatically increase our offering to medical specialists and GPs.” 18 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022CEO | MANAGING DIRECTOR’S REPORT New Products and Development of Features In May 2022, we rolled-out our new Tyro Go mobile payments reader to merchants with over 336 readers already in use at 30 June 2022. Tyro Go connects wirelessly to the merchant’s smart phone or tablet and will complement our current terminal offering by: • • • providing a more appropriate solution for micro merchants; facilitating our entry into the trades and services verticals with a fit for purpose mobile payment terminal device; and providing a ‘queue buster’ for high volume retail and hospitality merchants who require a terminal for floor staff. In early 2023, we will launch our new Tyro Pro android-based terminal to merchants. The Tyro Pro terminal will offer a best-in-class experience for our merchants supporting Android apps under the Android 10 protocol. This new platform will unlock the full potential of digital commerce in-store for merchants. We will progressively roll-out these new terminals and new features to our merchants as our existing fleet is retired. We will continue to drive our expansion into eCommerce and other payment types within our current merchant base through our unified payments solutions and build up features relevant to our current and targeted merchant base across our key verticals. Additionally, our online growth strategy will focus on larger merchants, ISVs (independent software vendors) and POS (point of sale) partners where we see many opportunities to drive unified payments through the use of integrated technologies and third-party partnership capabilities. Banking After the impact of Covid on lending in FY20 and FY21, we saw a lift in interest in our merchant cash advance lending product in FY22 writing close to $100 million in new loan originations (FY21 $25.8 million in originations). Tyro was also one of the first non-major banks to become an active data holder under the Consumer Data Right or Open Banking in June 2021. Open Banking seeks to provide a safe and secure way for customers to share their data between accredited organisations to enable: • • • easier comparison of financial products and providers; a single view of accounts across banks; and streamlined application processes. For Tyro, the first phase of Open Banking data sharing is now available to merchants who opt-in and are sole traders in relation to their Tyro bank account and/or Tyro term deposit account and includes information like transaction details and account balances and details. 19 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022CEO | MANAGING DIRECTOR’S REPORT l i a c n a n F i e c n a m r o f r e P After a muted start to FY22 with Covid induced lockdowns impacting our merchants in New South Wales, ACT and Victoria between July 2021 to October 2021, we experienced a bounce back for the remainder of the financial year delivering transaction value of $34.2 billion (FY21 $25.5 billion) with more than 63,500 merchants trusting Tyro with their payments needs. The strategic importance of our alliance with Bendigo Bank is clear in our result. The alliance performed ahead of our forecast when announcing the partnership back in October 2020, adding $5.2 billion in transactions to our FY22 performance. We lifted revenue 36% to $326.1 million and we lifted normalised gross profit 24% to $148.5 million. The 4th quarter of FY22 gives a better line of sight of our performance without the impact of Covid from an operating margin and a merchant acquiring fee perspective. We implemented a price increase in March 2022 after not passing on scheme and interchange fee increases incurred in H1 FY22 to assist our merchants impacted by the lockdowns and we also implemented operating cost saving initiatives whist maintaining investment in those projects expected to deliver meaningful growth in the coming years. The table on the next page (table 1) best summarises the significant steps we have taken over the 4th quarter of FY22 to improve our operating leverage and move Tyro to profitability and positive free cash flow. The Covid lockdowns did impact our profitability in the year. We lost an estimated $1.3 billion in transaction value in New South Wales alone between July and October 2021 from the lockdowns. Using our current margins, this translated to lost EBITDA of approximately $4.5 million to $5.0 million. Our FY22 performance was further impacted by the absence of the $4.5 million in JobKeeper received in FY21 and carrying the first time costs of our Medipass operation. Against this backdrop we delivered a normalised EBITDA result for FY22 of $10.7 million (FY21 $14.2 million). “The strategic importance of our alliance with Bendigo Bank is clear in our result. The alliance performed ahead of our forecast when announcing the partnership back in October 2020, adding $5.2 billion in transactions to our FY22 performance.” 20 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022CEO | MANAGING DIRECTOR’S REPORT Table 1: Q4 FY22 Performance Transaction value Payments gross profit Banking gross profit Corporate gross profit Total gross profit H1 FY22 $’000 Q3 FY22 $’000 Q4 FY22 $’000 15,826,286 8,652,378 9,718,789 64,962 35,788 40,731 2,434 667 584 502 2,212 623 68,063 36,874 43,566 Operating Leverage 95.9% 97.5% 88.6% Merchant Service Fee (MSF)1 as a proportion of transaction value 80.8bps Net Merchant Acquiring Fee1 (MAF) as a proportion of transaction value 32.2bps Payments Gross Profit Margin1 as a proportion of transaction value 41.3bps 82.7bps 32.6bps 42.0bps 85.1bps 33.9bps 42.8bps Operating leverage (operating costs as a % of gross profit) 95.9% 97.5% 88.6% 1 Based on Tyro Core Payments Business including Medipass Statutory net loss after tax was $29.6 million after accounting for $11.2 million in amortisation of the intangible asset recognised on the completion of the Bendigo Alliance. Furthermore, statutory net loss includes $4.7 million in transitional costs associated with moving the Bendigo merchants to the Tyro platform and $3.6 million in losses from our investments in me&u and Paypa Plane. Excluding the impact of these costs, net profit before tax on a normalised basis was a loss of $16.1 million (FY21 $9.8 million). Below follows a more detailed analysis of our financial performance on a Group and segmental basis. Group Highlights: Overall financial highlights for the Group in the 2022 financial year include: • 34% increase in transaction value to $34.2 billion (FY21: $25.5 billion). • 10% growth in merchant numbers to 63,770 merchants (FY21: 58,186 merchants). • 283% increase in loan originations to a record of $99.1 million (FY21: $25.8 million). • 24% increase in normalised gross profit to $148.5 million (FY21: $119.7 million). • 25% decrease in EBITDA to $10.7 million (FY21: $14.2 million) – FY21 had the benefit of $4.5 million in JobKeeper with no such benefit in FY22. • Well positioned balance sheet with $71.7 million in total capital and a capital ratio of 39% (FY21: $83.7 million and 73%). 21 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022CEO | MANAGING DIRECTOR’S REPORT Table 2: Summary Financial Performance Transaction value Payments revenue and income1 Lending income JobKeeper receipts Other revenue and income Total revenue1 Payments direct expenses1 Interest expenses on deposits Total direct expenses1 Gross profit1 Operating expenses1: FY22 $’000 FY21 $’000 34,197,453 25,453,507 318,847 230,204 5,504 - 1,792 3,222 4,484 1,594 326,143 239,505 (177,366) (119,392) (274) (379) (177,640) (119,771) 148,503 119,734 Employee benefits expense (excl. share-based payments)1 (92,628) (75,365) Contractor and consulting expenses1 Communications, hosting and licensing costs Administrative expenses1 Marketing expenses Lending and non-lending losses1 Total operating expenses1 EBITDA1,2 Share-based payments expense (13,826) (14,321) (10,414) (5,532) (1,115) (7,192) (9,896) (6,181) (5,419) (1,515) (137,836) (105,568) 10,667 (5,199) 14,166 (9,342) Costs associated with the terminal connectivity issue 300 (13,285) Amortisation of Bendigo Alliance intangible asset Bendigo Alliance gross profit share Bendigo Alliance transitional costs Mergers and acquisition costs Other one-off costs Share of loss from associates Depreciation and amortisation Statutory EBIT Net interest expense Statutory loss before tax Income tax expense Statutory loss after tax (11,176) 8,490 (4,669) (698) 698 - - (4,681) (409) (3,558) (331) (1,119) (20,505) (14,666) (26,059) (29,258) (3,558) (517) (29,617) (29,775) - (48) (29,617) (29,823) CHANGE % 34.4% 38.5% 70.8% 100.0% 12.5% 36.2% 48.6% 27.7% 48.3% 24.0% 22.9% 92.2% 44.7% 68.5% 2.1% 26.4% 30.6% 24.7% 44.3% 102.3% 1,501.1% 1,116.3% - 100.0% 23.6% 217.9% 39.8% 10.9% 588.2% 0.5% 100.0% 0.7% p p p q p p p q p p p p p p p q p q q q p p p q p p p p p p q p 1 Normalisation adjustments relate to the transition of Bendigo merchants to the Tyro platform. Refer to page 14 of the Tyro FY22 Investor Presentation for a reconciliation of statutory to normalised results. 2 Tyro uses EBITDA as a non-IFRS measure of business performance, which excludes the non-cash impact of share-based payments expense, share of losses from associates, expenses associated with the terminal connectivity issue and the IPO and other significant one- off costs. Refer to page 14 of the Tyro FY22 Investor Presentation for a reconciliation of statutory to normalised results. 22 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022CEO | MANAGING DIRECTOR’S REPORT Reconciliation to normalised net loss before tax Statutory net loss before tax Add back Share-based payments expense relating to IPO Costs associated with the terminal connectivity issue Amortisation of Bendigo Alliance intangible asset Bendigo Alliance gross profit share Bendigo Alliance transitional costs Interest cost on Bendigo Alliance Mergers and acquisition costs Other one-off costs Share of loss from associates FY22 $’000 FY21 $’000 (29,617) (29,775) p - (300) 11,176 (8,490) 4,669 2,534 - 409 3,558 563 q 13,285 q 698 p (698) p - p - p 4,681 q 331 p 1,119 p Normalised net loss before tax (16,061) (9,796) q CHANGE % 0.5% 100.0% 102.3% 1,501.1% 1,116.3% - - 100.0% 23.6% 217.9% 64.0% 23 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022CEO | MANAGING DIRECTOR’S REPORT e c n a m r o f r e P l i i a c n a n F d e t n e m g e S Payments Business Table 3: Payments Summary Financial Performance Transaction value Payments revenue and income FY22 $’000 FY21 $’000 34,197,453 25,453,507 p 318,848 230,204 p CHANGE % 34.4% 38.5% Payments direct expenses (177,367) (119,392) p 48.6% Gross profit 141,481 110,812 p 27.7% Merchant Service Fee (MSF) as a % of transaction value 82.5bps 80.7bps p Net Merchant Acquiring Fee (MAF) as a % of transaction value 32.8bps 34.7bps q Payments Gross Profit Margin as a % of transaction value 41.9bps 43.8bps q 1.8 bps 1.9 bps 1.9 bps 24 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022CEO | MANAGING DIRECTOR’S REPORT Highlights After experiencing another year impacted by Covid lockdowns our payments business nonetheless produced the key highlights and performance metrics for FY22 below: • $34.2 billion (FY21: $25.5 billion) in transactions processed by Tyro merchants – a 34.4% lift. • eCommerce transaction value continued to grow generating $519.9 million in transaction value – a lift of 639.7% (FY21: $70.3 million). • A 10% growth in merchants choosing Tyro as their payments solution with 63,770 merchants in our ecosystem. Of note, Tyro core payments business excluding Bendigo grew its merchant base to 46,376 merchants – a lift of 17% (FY21: 39,696). • Payments gross profit at $141.5 million (FY21: $110.8 million) – up 27.7%. • Our Bendigo Bank Alliance generated transaction value of $5.2 billion. • Our new health business which incorporates Medipass (acquired in May 2021) added 2,263 new merchants through the year finishing the year with 12,463 merchants generating transaction value of $3.3 billion (FY21: 2.8 billion) – with an additional 1,526 health providers exclusively using our health claiming solutions. • We strengthened our position as Australia’s 5th largest merchant acquiring bank by terminal count – 109,248 terminals up 4.2% (FY21: 104,827). • Our retention metrics were maintained with our merchant churn rate at 10.5% (FY21: 11.3%) and transaction value churn rate of 9.2% (FY21: 8.7%). • We entered into an exclusive partnership to provide merchant acquiring services to Telstra’s business customers through over 350 Telstra retail stores and Telstra Business Technology Centres, as well as online. This new acquisition pipeline for Tyro has performed above our expectations and will prove to be a strong application channel going forward. • We launched our ‘Tyro Go’ mobile card reader in May 2022 – this new terminal type aims to open our path into the trades and services vertical as well as better serve the micro segment. • ‘Tyro Connect’ continues to grow with 2,188,189 transactions processed via the platform (FY21: 695,000) • 348 point of sale system integrations – up from 322 in FY21. • Prompted brand awareness of 19% (FY21: 20%). Performance Review FY22 can be summarised as the tale of two halves for our Payments business. The first half result was impacted by Covid induced lockdowns in NSW and ACT resulting in negative transaction value growth of 9.4% for H1 FY22 for those jurisdictions. Excluding those regions, the balance of Tyro’s core payments business generated transaction value growth of 23.1% in H1 FY22. We lost an estimated $1.3 billion in transaction value in New South Wales alone between July and October 2021. As we moved out of lockdowns in October 2021, we returned to our more typical transaction value growth rates for our Tyro core portfolio and ended the second half of FY22 with growth of 21.4% with NSW and ACT returning to their historical growth profiles. Our new Bendigo portfolio of merchants performed ahead of our expectation with a total transaction value contribution for FY22 of $5.2 billion, 4.5% ahead of our estimates when we announced the Alliance with Bendigo. 25 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022CEO | MANAGING DIRECTOR’S REPORT Chart 3: Transaction Value Growth (FY16 - FY22) $20b $18b $16b $14b $12b $10b $8b $6b $4b $2b $b 26.3% 26.0% 26.4% 23.5% 31.0% 34.4% 15.1% 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.00% FY16 FY17 FY18 FY19 FY20 FY21 FY22 H1 H2 Annual Growth The transaction value performance for the year was driven by our merchant acquisition success and the outperformance of our Hospitality and Retail verticals as consumers embraced life without lockdowns. On the merchant acquisition front, our core Tyro portfolio added 12,908 new merchant applications, with Bendigo contributing a further 1,869 merchant applications equating to an average run-rate of close to 1,250 merchants per month – precisely on target with our merchant growth ambitions. At 30 June 2022, we finished the year with a total of 63,770 merchants, up 9.6% on FY21. Our Tyro core portfolio had 46,376 merchants (FY21: 39,696) and our Bendigo portfolio had 17,394 merchants (FY21: 18,490). Another positive indicator for our business is the stability of our merchant retention metrics which remain low when considering for the segments we serve, with transaction value churn remaining slightly up at 9.2% (FY21: 8.7%) and merchant number churn decreasing 80 basis points to 10.5% (FY21: 11.3%). The chart below (chart 4) shows the strong merchant acquisition over FY22 compared to FY21. Chart 4: Monthly Merchant Acquisition 1,600 1,400 1,200 1,000 800 600 400 200 0 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun FY22 FY21 26 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022CEO | MANAGING DIRECTOR’S REPORT The second element of our strong transaction value growth was the outperformance of our hospitality and retails verticals. The concept of ‘revenge spending’ was evident as lockdowns ended and consumers embraced spending at hospitality and retail venues. Our hospitality vertical delivered $13.4 billion in transaction value for FY22, a lift of 18.6% (FY21: $11.3 billion). However, looking at the second half of FY22, hospitality delivered growth of 30.6%. Our retail vertical delivered $9.8 billion in transaction value, a lift of 12.6% with the second half delivering growth of 5.5%. Our new health business, Tyro Health, ended FY22 with 13,989 active merchants (which includes merchants with unique settlement arrangements), an increase of 29% (FY21: 10,791). We have also adopted a new ‘total locations’ reporting metric for our health business. Reporting total locations enables us to offer a holistic view of all customers of Tyro Health products, whilst factoring in the complexity that comes with the health industry. Tyro Health ended FY22 with 16,917 active locations across Australia using Tyro Health offerings, an increase of 31% (FY21: 12,922) with 28% of these locations actively using Tyro Health’s digital offering, up from 19% in FY21. Chart 5: FY22 Transaction Value by Vertical (excludes transaction value from Bendigo) $8b $7b $6b $5b $4b $3b $2b $1b $b l e u a V n o i t c a s n a r T $7.6b 30.6% $5.8b $5.0b $4.8b 8.7% $1.6b $1.7b 5.5% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.00% 2 H o t 1 H h t w o r G 14.0% $1.2b $1.3b Health Retail Hospitality Other H2 FY21 H2 FY22 Growth H1 FY22 to H2 FY22 From a geographical standpoint, all states and territories outside of New South Wales delivered growth for our Tyro core business in FY22, averaging growth of between 10% to 23% per state or territory. As can be seen from Table 4 below, New South Wales delivered growth of 4.7%, while Victoria which was the state most impacted by lockdowns in FY21 delivered the strongest growth in FY22 of 22.6%. 27 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022CEO | MANAGING DIRECTOR’S REPORT Table 4: Transaction Value by State and Territory (excludes transaction value from Bendigo) TRANSACTION VALUE PERFORMANCE FY22 $’MILLION FY21 $’MILLION GROWTH RATE % PROPORTION OF TOTAL TV % NSW Victoria Queensland Western Australia South Australia Tasmania ACT NT 9,940 6,630 6,707 3,000 1,200 550 650 300 9,471 5,132 5,553 2,523 1,061 496 581 213 4.7% 22.6% 17.2% 15.9% 11.6% 9.8% 10.6% 29.0% 34% 23% 23% 11% 4% 2% 2% 1% Off the back of the transaction value growth, our Payments business generated a 38.5% lift in revenue to $318.8 million (FY21: $230.2 million) and a 27.7% lift in gross profit to $141.5 million (FY21: $110.8 million). Our net Merchant Acquiring Fee (MAF) margin was negatively impacted in the first three-quarters of FY22 as we deferred our usual annual merchant pricing adjustments which was scheduled to have taken place in H1 FY22. The deferral being made to assist merchants during the heightened Covid lockdowns in the first half of FY22. We passed on a 2-basis point price increase for the last quarter of FY22 which brought our margins back in line with FY21 margins. Chart 6 below provides an analysis of our margins over FY22 for the Group payments business compared to historical margins. As can be seen, our margins have returned to historical averages after passing on the 2-basis point price increase in Q4 FY22. Furthermore, we did not provide any terminal rental relief in H2 FY22 which assisted our Payments gross profit margin. The run-rate from Q4 is the first ‘clean’ period we have seen in 3 years not impacted by Covid and gives us a clear pathway to driving operating leverage from these margin levels. Chart 6: Tyro Core Payments Business Margins as a proportion of Transaction Value (bps) 91.2 87.5 79.7 81.6 80.8 42.3 31.3 43.4 33.0 44.8 36.0 42.9 33.5 41.3 32.2 84.0 42.4 33.3 100.0 95.0 90.0 85.0 80.0 75.0 70.0 65.0 60.0 55.0 50.0 45.0 40.0 35.0 30.0 25.0 20.0 15.0 10.0 5.0 - H1 FY20 H2 FY20 H1 FY21 H2 FY21 H1 FY22 H2 FY22 MSF Net MAF Margin Payments Gross Profit Margin Our Bendigo alliance is performing ahead of our expectations and the strategic importance of the alliance is clear in our result. This saw the alliance add $5.2 billion in transactions to our performance in the year and a gross profit contribution, after allowing for Bendigo Bank’s gross profit share, of $20.1 million. 28 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022CEO | MANAGING DIRECTOR’S REPORT 29 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022CEO | MANAGING DIRECTOR’S REPORT Banking Business Table 5: Banking Summary Financial Performance Loan originations Interest income Fair value gain on loans Interest expense on deposits FY22 $’000 99,071 4,877 627 (274) FY21 $’000 CHANGE % 25,843 p 283.4% 1,952 p 149.8% 1,270 q (379) p 50.6% 27.7% Gross profit 5,230 2,843 p 84.0% Gross profit as a % of revenue Lending loss rate as a % of originations 95.0% 0.6% 88.2% p 2.7% p 6.8 pts 2.1 pts Highlights Our banking business produced the key highlights and performance metrics for FY22 below: • Close to $100 million in total originations with $12.7 million achieved in June 2022 alone – up 283.4% (FY21: $25.8 million) • Maximum single advance increased to $350,000 from the previous maximum of $120,000 • Average loan drawdown of $47,100 – up from $35,500 in FY21 • $39.5 million of loans carried on the balance sheet at 30 June 2022 compared to $15.4 million at 30 June 2021. • Interest income of $4.9 million (FY21: $2.0 million) at an effective yield of 20% • Low loss to origination rate achieved in FY22 of 0.6% (FY21: 2.8%). • Deposit balances of $83.3 million (FY21: $75.5 million) from over 5,000 active accounts Performance Review Our merchant cash advance (MCA) loan product returned to record growth in the year with $99.1 million in new originations (FY21: $25.8 million). The features of our MCA were improved in the year to allow advances up to a maximum of $350,000 (previous maximum $120,000) together with an improved automated approval process through the Tyro app. The increase in originations has seen lending income from the MCA increase 149.8% in FY22 to $5.5 million. $4.9 million of revenue was generated from interest on the MCA and a further $0.6 million recorded in revenue as a fair value gain on the loans at 30 June 2022. At 30 June 2022, loans of $39.5 million were carried on the balance sheet compared to $15.4 million at 30 June 2021 with an average loan origination amount in the period of $47,100 compared to $35,500 in the pcp. 30 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022CEO | MANAGING DIRECTOR’S REPORT Our credit risk was well managed through the year with our loan loss to origination rate being the lowest annual rate since we launched our MCA product. Total losses of only $0.6 million were booked for the year compared to $0.7 million in FY21 resulting in a loan loss to origination rate of 0.61% (FY21: 2.79%). Tyro’s Bank Account continued to see encouraging uptake. This fee-free and interest paying business transaction deposit account had 5,097 active accounts in existence at 30 June 2022, representing a 10.7% increase on the prior year (FY21: 4,603 active accounts). Total deposits held by the Group on the Tyro Bank Account amounted to $79.2 million compared to $72.5 million at 30 June 2021. The Group’s term deposit product continues to offer merchants an attractive interest rate with total term deposits of $4.1 million on the balance sheet at 30 June 2022, up $1 million from 12 months ago. Gross profit of $5.2 million from Tyro’s banking business was up 84.0% (FY21: $2.8 million) on a 95.0% gross profit margin. This performance reflects the increased interest generated from MCA loan product together with lower interest expense on business deposit accounts and term deposit accounts. Our banking business still only represents less than 5% of our total Group gross profit, but the results from FY22 show the potential of this business and the value that our banking licence brings to Tyro through the provision of capital in the form of deposits to fund the growth in our loan book. Not many other unsecuritised lenders in Australia are in this envious position. Chart 7: Loan Originations (FY16 to FY22) s n o i t a n g i r i O n a o L $120m $100m $80m $60m $40m $20m - FY16 FY17 FY18 FY19 FY20 FY21 FY22 Chart 8 - Annual Loan Loss to Originations Rate (FY17 to FY22) $1,200,000 $1,000,000 s e s s o L g n d n e L i $800,000 $600,000 $400,000 $200,000 - 3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% FY17 FY18 FY19 FY20 FY21 FY22 Lending Losses Loss to Origination Rate e t a R n o i t a n g i r i O o t s s o L 31 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022CEO | MANAGING DIRECTOR’S REPORT Group EBITDA Chart 9 - Operating Expenses Compared to normalised Gross Profit (FY17 to FY22) 116.4% 114.2% 110.3% 104.7% 92.8% 88.2% 95.9% 97.5% 88.6% 85% ~$175m to ~$181m $148.5m $119.7m $93.5m $83.3m $69.1m $56.0m $68.1m $43.6m $36.9m FY17 FY18 FY19 FY20 FY21 FY22 H1 FY22 Q3 FY22 Q4 FY22 FY231 1 Refer to Page 34 for information on forward-looking statements Operating Expenses to Gross Profit Margin A positive EBITDA result of $10.7 million was achieved for the year and, whilst lower than the $14.2 million generated in FY21, reflected continuing investment in growth initiatives including the recently announced exclusive partnership with Telstra, tech wage pressures and first-time costs associated with the Medipass operation. As mentioned our EBITDA performance was also impacted by the estimated absence of $1.3 billion in transaction value in NSW alone between July and October 2021 from Covid lockdowns, translating to lost EBITDA of approximately $4.5 million to $5.0 million coupled with not receiving JobKeeper in FY22 ($4.5 million in FY21). Group net loss after tax Our statutory EBIT loss for the reporting period was $26.1 million (FY21: loss of $29.3 million). Depreciation and amortisation was up 106.2% at $31.7 million (FY21: $15.4 million) reflecting amortisation of $11.2 million on the accounting treatment of the Bendigo alliance (FY21: $0.7 million). Excluding the Bendigo amortisation charge, depreciation and amortisation was up 39.8% reflecting new terminal purchases to meet the growth in merchant numbers (including terminals required for the Bendigo Bank Alliance). On a normalised basis, excluding the impact of one-off project costs incurred as part of the Bendigo alliance, our EBIT loss was $15.0 million (FY21: $9.3 million). Net loss after tax on a statutory basis for FY22 was level with the prior year at $29.6 million (FY21: $29.8 million). On a normalised basis, net loss before tax was $16.1 million (FY21: $9.8 million). No tax benefit was recognised in FY22 or FY21. At 30 June 2022 we have $47.6 million in recognised and unrecognised tax losses available for probable future use. 32 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022CEO | MANAGING DIRECTOR’S REPORT n o i t i s o P l i a c n a n F i The Group is also well capitalised with a total capital ratio of 39%. The movement in the ratio from 73% at 30 June 2021 reflects the recognition of right of use assets of $33 million and office fit outs of $10 million, an increase in the lending book and losses for the year (before share-based payments expense). The total capital ratio remains well above APRA Prudential Capital Requirements. With cash and financial investments of $122.8 million (30 June 2021: $172.8 million) Tyro has sufficient liquidity in place to continue to fund its strategy. The movement in cash of $50.0 million is reflective principally of the $24.1 million increase in loan balances at 30 June 2022 offset by $7.8 million in customer deposits held. Furthermore, the Group had terminal purchases of $14.0 million in the year, $5.0 million in merchant remediation payments and an investment of $10.2 million relating to our new HQ. At 30 June 2022, Tyro had total assets of $410.1 million of which 30.0% related to cash and financial investments. 40.0% of our total assets relate primarily to intangible assets recognised for customer contracts on the Bendigo Alliance and the right of use asset recognised on our new office lease. The remaining 30% of total assets is made of customer loans held at year end, property plant and equipment and deferred tax assets. Tyro had total liabilities of $250.5 million of which 33.3% related to the merchant bank account deposits, with the remainder relating to commissions payable to Bendigo under the alliance agreement, trade and other liabilities, lease liabilities and provisions. The Group’s total assets exceeded its total liabilities by $159.6 million. 33 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022CEO | MANAGING DIRECTOR’S REPORT d a e h A g n k o o L i Tyro has had a strong start to the first half FY23 with transaction values year-to-date 26 August 2022 lifting 57% on the same period last year to $6.3 billion. Our eCommerce transactions continued to grow strongly albeit from a small base, recording $40.6 million, up 16% on the same period last year. Our payments business for July 2022 on a normalised basis (post Bendigo gross profit share), generated a gross profit of $14.1 million an increase of 46%. In our banking business, loan originations in the first 8 weeks of the financial year totalled $19.6 million up 91% on the same period last year. Finally, EBITDA for July 2022 came in at $2.2 million at an operating leverage of 86%. We have remained focussed on reducing employee head count with a ~30 headcount reduction in both permanent and contractor positions from May 2022 as shown in chart 1 and will continue to focus on customer growth and margin improvement into FY23. For the first time, Tyro has provided its earnings guidance range for FY23 as set out in table 6 below5. The Group is targeting to be positive free cash flow4 exiting FY23 (after all operating expenses and capital expenditure) and based on the financial position at 30 June 2022, Tyro’s cash and financial investments are expected to be sufficient to support the Group through to positive free cash flow. Table 6: FY23 Guidance5 Transaction Value Gross Profit1 (after Bendigo commission) Operating Leverage2 Chart 10 - Transaction Value Growth H1 FY23 70% 65% 60% 55% 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0 70% 46% 43% 43% 39% 41% 35% 34% 27% Jan 2022 Feb 2022 Mar 2022 Apr 2022 May 2022 Jun 2022 FY22 Jul 2022 MTD Aug 2022 FY23(F) GUIDANCE RANGE $40 billion $175 million $42 billion $181 million to to ~85% EBITDA3 (before share-based payments) $23 million to $29 million EBITDA margin at midpoint ~15% 1 Gross profit is stated as normalised gross profit, namely adjusted for Bendigo Alliance support fees associated with transition of Bendigo merchants to the Tyro platform. Bendigo gross profit share is not deducted from statutory gross profit but deducted to calculate normalised gross profit. 2 Operating leverage assumes lending losses of $1.5 million in FY23 and is measured as operating costs (including lending and non-lending losses) divided by gross profit (after Bendigo commission). 3 4 5 Tyro uses EBITDA as a non-IFRS measure of business performance, which excludes the non-cash impact of share-based payments expense, share of losses from associates, and other significant one-off costs. Free cash flow is calculated before changes in banking funds and timing differences relating to net scheme receivables. It is calculated as EBITDA before share based payments adjusted for non-cash items in Tyro’s working capital movements, statutory adjustments (including rent payments) and capital expenditure including internally generated intangibles. Terminal capital expenditure includes both new and replacement terminals. Forward-Looking Statements - Tyro’s financial expectations and guidance included in this announcement are subject to there being no material deterioration in market or macroeconomic conditions, and are based on a number of key assumptions which may not prove to be correct, or which may change over time, including no lockdowns, no material changes to current business plan and no material change in the regulatory environment. During the ordinary course of business, the Group is exposed to credit risk, operational risk, market risk and liquidity risk. For details on the management of these risks, please refer to the Annual Report including the Financial Report for the year ended 30 June 2022. Certain statements contained in this announcement are forward-looking statements or statements about future matters, including indications and expectations of, and guidance and outlook on, the future earnings, financial position and/or performance of Tyro. These statements are based on information available as at the date of this announcement, and involve known and unknown risks and uncertainties and other factors (many of which are beyond the control of Tyro). No representation is made or guarantee given that the occurrence of any of the events expressed or implied in these statements will actually occur. Actual future events may vary from these forward-looking statements and it is cautioned that undue reliance should not be placed on any forward-looking statement. 34 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022CEO | MANAGING DIRECTOR’S REPORT s o r y T d e t a c d e D i Finally, I would like to thank the entire Tyro team for all their efforts in the year in building out a stronger and more resilient business. I look forward to seeing the team execute on our new strategy from FY23 onwards and writing the next chapter of Tyro’s success. Our new teamwork value of ‘Win Together’ summarises Tyro best, “We are a united team. With growth mindsets and without ego, we embrace diversity to collaborate, innovate, and accelerate”. Sincerely, Robbie Cooke CEO | Managing Director 29 August 2022 “We are a united team. With growth mindsets and without ego, we embrace diversity to collaborate, innovate, and accelerate.” 35 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022CEO | MANAGING DIRECTOR’S REPORT Profiles 36 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022 f o d r a o B s r o t c e r i D DAVID THODEY AO CHAIR OF THE BOARD Independent non-executive Director since November 2018 and Chair since October 2019. Other Tyro Responsibilities: • Member of the Audit Committee. • Member of the People Committee. Relevant other Directorships held in the past three years: • Chair of Xero Limited, a leading New Zealand based cloud-based accounting software platform for small and medium sized businesses. • Non-executive director of Ramsay Health Care, a global hospital group. • Former Chair of the Commonwealth Scientific and Industrial Research Organisation (November 2015 to 2021). • Former non-executive director of Vodafone plc, a global telecommunications company (September 2019 to July 2020). Career: David is a business leader with more than 40 years experience in the technology and telecommunication industries. He has a track record of creating brand and shareholder value, and has been successfully involved in innovation across a wide range of sectors. David had a successful executive career as CEO of Telstra, Australia’s leading telecommunications and information services company from 2009 to 2015. He began his career at IBM, where he spent more than 22 years and held several Asia Pacific senior executive positions including Chief Executive Officer of IBM Australia and New Zealand. In 2017, David was made an Officer (AO) in the General Division of the Order of Australia for his service to business and the promotion of ethical leadership and workplace diversity. Qualifications: David holds a Bachelor of Arts in Anthropology and English from Victoria University, Wellington, New Zealand, attended the Kellogg School of Management postgraduate General Management Program at Northwestern University in Chicago, USA, and was awarded an Honorary Doctorate in Science and Technology from Deakin University in 2016 and an Honorary Doctorate of Business from University of Technology Sydney in 2018. 37 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022PROFILES ROBBIE COOKE CEO | MANAGING DIRECTOR CEO since March 2018 and Managing Director since October 2019. DAVID FITE NON-EXECUTIVE DIRECTOR Independent non-executive Director since July 2018. Other Tyro Responsibilities: • Member of the Audit Committee. • Member of the Risk Committee. Relevant other Directorships held in the past three years: • Director of Judo Capital Holdings Ltd and Judo Bank Pty Ltd, an SME challenger bank. Director of Evari Technologies Pty Ltd and Evari Services Pty Ltd, entities which own or help develop software for the insurance industry. Director of Marsello Ltd, a company that makes intelligent marketing accessible and easy for multichannel retailers. Director of MYOB Group Co Pty Ltd, a provider of accounting, tax and business services. • • • Career: Robbie has led as CEO | Managing Director three ASX listed companies in a business career spanning more than 30 years. He has traversed scale-ups, listings and significant M&A actions in technology enabled businesses delivering significant shareholder value. This included 7 years running Australia’s leading online travel company Wotif.com, taking the business through scale-up from start-up mode, achieving a circa fivefold increase in profits and a successful IPO in 2006. He operated the lotteries, race wagering and sports betting conglomerate Tatts Group for 5 years until its merger with Tabcorp in March 2018. Qualifications: Robbie holds a Bachelor of Laws (Honours) from the University of Queensland Law School, a Bachelor of Commerce from the University of Queensland and a Graduate Diploma in Company Secretarial Practice from the Governance Institute of Australia. Robbie is a member of the Australian Institute of Company Directors, an associate of the Governance Institute of Australia and a solicitor of the Supreme Court of Queensland. Career: David has over 30 years experience in the financial services industry. David has held various roles at Westpac Banking Corporation, including Treasurer, Assistant Chief Financial Officer and the Group Executive responsible for all retail and business banking products in Australia. David has also worked at Japan’s Shinsei Bank (formerly known as The Long- Term Credit Bank of Japan) as Senior Corporate Executive Officer, Chief Financial Officer and a member of its Board. David is also an active investor in various credit, financial services and technology businesses. Qualifications: David holds a Bachelor of Arts in Government (Magna Cum Laude) from Harvard College, and a Master of Business Administration and Masters in Economics from Stanford University. 38 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022PROFILES CLAIRE HATTON NON-EXECUTIVE DIRECTOR Independent non-executive Director since January 2022. Other Tyro Responsibilities: • Member of the Audit Committee. • Member of the People Committee. Relevant other Directorships held in the past three years: • Non-executive Director of Lifestyle Communities Ltd (ASX: LIC). • Non-executive Director of Australian • • Pacific Travel Group Pty Ltd. Director and Co-founder of Full Potential Labs Pty Ltd. Former non-executive Director of 3P Learning Ltd (ASX: 3PL) (May 2014 to September 2021). ALIZA KNOX NON-EXECUTIVE DIRECTOR Independent non-executive Director since April 2021. Other Tyro Responsibilities: • Member of the People Committee. • Member of the Risk Committee. Relevant other Directorships held in the past three years: • Non-executive Director of Healthway • Medical Group Limited in Singapore. Former non-executive Director of Scentre Group Limited (May 2015 to April 2020). Career: Claire has extensive career experience spanning senior executive and country leadership roles in technology and travel businesses in Australia, Asia and the UK. Claire spent 7 years on the Google Australia commercial leadership team before transitioning into a portfolio career and non-executive roles. She is currently a non-executive Director of Australian Pacific Travel Group and Lifestyle Communities Ltd, a Director and co-founder of Full Potential Labs, and co-host of the innovation-focussed ‘Don’t Stop Us Now’ podcast. Qualifications: Claire holds a Bachelor of Science Honours degree specialising in Marketing from Cardiff University and an MBA from IMD, Switzerland. Career: Aliza has more than four decades of broad international marketing and management experience in the financial services and technology sectors having held senior executive roles internationally at Boston Consulting Group, Charles Schwab, Visa International, Twitter and Google. Her previous roles include Head of APAC for Cloudflare, Chief Operating Officer at Unlockd, Vice President, Asia Pacific at Twitter, Managing Director of Commerce and Online Sales & Operations for Asia Pacific at Google Asia Pacific, Senior Vice President, Commercial Solutions and Global Product Platforms at Visa International, and Senior Vice President, International Wireless and Global Expansion Asian Focus at Charles Schwab Corporation. Aliza was also named IT Woman of the Year (Asia) in 2020 and to the Top 100 Women in Tech in Singapore in 2021. Qualifications: Aliza holds an MBA in Marketing (Honors) from New York University-Leonard N. Stern, School of Business, and a B.A., Applied Mathematics and Economics (Magna Cum Laude) from Brown University. 39 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022PROFILES Career: Fiona has over 25 years experience in a variety of industries, for companies ranging from start-ups to large public companies and not-for-profits. Fiona has served on various boards including MYOB, StatePlus and the commercialisation office of The University of Adelaide, Adelaide Research and Innovation. She was a strategy consultant for the Boston Consulting Group in the US and Australia, and was also a partner in an Australian venture capital fund focussed on technology start-ups. Qualifications: Fiona holds an Honours degree in Engineering from The University of Adelaide and a Master of Business Administration from the Harvard Business School. Fiona is a Fellow of The Australian Institute of Company Directors. FIONA PAK-POY NON-EXECUTIVE DIRECTOR Independent non-executive Director since September 2019. Other Tyro Responsibilities: • • Member of the Audit Committee. Chair of the People Committee. Relevant other Directorships held in the past three years: • Non-executive Director and Chair of the Audit and Risk Committee of ASX- listed Booktopia, Australia’s largest online book seller. • Non-executive Director of HMC Capital Partners No 1 Pty Ltd, HMC Capital Partners No 2 Pty Ltd, HMC Capital Partners No 3 Pty Ltd, all subsidiaries of Home Consortium Limited (trading as HMC Capital, ASX: HMC). • Non-executive Director of Kain • • • • Lawyers. Former non-executive Director of ASX-listed iSentia Limited, a media intelligence and data technology company. Former Director of the Sydney School of Entrepreneurship. Former non-executive Director of Novotech Aus HoldCo, Asia- Pacific’s leading contract research organisation (CRO) providing clinical research solutions world-wide. Former non-executive Director of MYOB Group Limited prior to their buyout by KKR in April 2019 (January 2017 to April 2019). 40 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022PROFILES PAUL RICKARD NON-EXECUTIVE DIRECTOR Independent non-executive Director since August 2009. Other Tyro Responsibilities: Chair of the Risk Committee. • Chair of the Audit Committee. • Relevant other Directorships held in the past three years: • Non-executive Director of PEXA Group Ltd (ASX: PXA). • Non-executive Director of WCM Global Growth Ltd (ASX: WQG). • Non-executive Director of Russh • Media Pty Ltd. Director of Switzer Financial Group Pty Ltd. • Non-executive Director of Titan Platform Pty Ltd. Career: Paul was the founding Managing Director of CommSec, which he led from 1994 to 2002, and was Chairman until 2009. After a 20 year career with Commonwealth Bank finishing in the role of Executive General Manager Payments & Business Technology, Paul left in 2009 to team up with Peter Switzer and co-founded the Switzer Super Report, a subscription-based newsletter for the trustees of self-managed super funds. An expert in investment and superannuation, Paul is a regular commentator on TV, radio and online and also oversees editorial development at Switzer Financial Group Pty Ltd. In 2005, Paul was named ‘Stockbroker of the Year’ and admitted to the Industry Hall of Fame of the Australian Stockbrokers Foundation. Qualifications: Paul holds a Bachelor of Science degree in Mathematics and Computer Science from the University of Sydney. SHEFALI ROY NON-EXECUTIVE DIRECTOR Independent non-executive Director since January 2022. Other Tyro Responsibilities: • Member of the Risk Committee. • Member of the People Committee. Relevant other Directorships held in the past three years: • Director of Ada’s List, a UK based network and community for women in technology. Former Director of the Maker Foundation, originators of the DAI stable coin (April 2020 to July 2021). • Career: Shefali is a Founding Partner of First Look, a London based venture fund investing in women and diverse entrepreneurs building technology in finance, health, work, and real estate. Until September 2020, Shefali was the COO and CCO at TrueLayer headquartered in the U.K. Prior to that she held C-Suite/senior leadership roles in operations, compliance and regulatory affairs at Stripe, Apple, Christies and Goldman Sachs. Shefali is an Associate Fellow at Said Business School, Oxford and lectures on start- ups, organisational behaviour and leadership, fintech and defi. She holds strategic advisory positions at the Barefoot College, and Nye Health, and her interests lie at the intersection of economics, technology and ethics. Qualifications: Shefali holds an Associate Diploma of Law, a BBus in Economics and Finance and an MA in Communications from RMIT, an MSc in Economic History from the London School of Economics, and an Executive MBA from Said Business School, Oxford University. She is also an Associate Fellow at Said Business School, Oxford University. 41 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022PROFILES e v i t u c e x E i m a e T p h s r e d a e L ROBBIE COOKE CEO | MANAGING DIRECTOR PRAV PALA CHIEF FINANCIAL OFFICER Robbie joined Tyro in March 2018 as Chief Executive Officer and was appointed as Managing Director in October 2019. Robbie has led as CEO | Managing Director three ASX listed companies in a business career spanning more than 30 years. He has traversed scale-ups, listings and significant M&A actions in technology enabled businesses delivering significant shareholder value. This included 7 years running Australia's leading online travel company Wotif. com, taking the business through scale- up from start-up mode, achieving a circa five fold increase in profits and a successful IPO in 2006. He operated the lotteries, race wagering and sports betting conglomerate Tatts Group for 5 years until its merger with Tabcorp in March 2018. Robbie holds a Bachelor of Laws (Honours) from the University of Queensland Law School, a Bachelor of Commerce from the University of Queensland and a Graduate Diploma in Company Secretarial Practice from the Governance Institute of Australia. Robbie is a member of the Australian Institute of Company Directors, an associate of the Governance Institute of Australia and a solicitor of the Supreme Court of Queensland. Praveenesh (Prav) joined Tyro in 2014 in the role of Chief Financial Officer. Prav has over 20 years experience gained in professional consulting, property funds management, financial services and the payments industry. Since starting his career at PricewaterhouseCoopers, Prav has held several senior positions at QBE Insurance Group, Westfield Group, Domaine Mirvac Funds Management and ING Direct Australia, and has managed large integration and strategic finance related projects. Prav holds a Bachelor of Commerce (Merit) from the University of New South Wales. He is a qualified CPA and member of the CFA Institute. MONICA APPLEBY CHIEF PEOPLE, CULTURE AND COMMUNICATIONS OFFICER Monica joined Tyro in 2020 as Head of Corporate Communications ahead of being appointed as Chief People, Culture and Communications Officer. Monica is passionate about creating high performing teams and developing a thriving culture of engagement and growth that drives business outcomes. Monica has over 18 years experience in strategic communications, change management and business transformation, specialising in financial services and technology, having previously held roles at KMPG, Deloitte and Tabcorp. Monica holds commerce, law and change management qualifications. 42 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022PROFILES JAIRAN AMIGH COMPANY SECRETARY AND SPECIAL COUNSEL Jairan (Jay) was appointed as Company Secretary on 20 February 2020. Jay holds Bachelors of Laws (Honours) and Commerce from the University of Queensland and has over 30 years in legal practice focusing on financial services and corporate governance. ROBIN GEORGE ACTING CHIEF MARKETING OFFICER With a passion for Fintech and brand building, Robin joined Tyro in December of 2018 and brings more than 20 years of marketing experience to the business, with over a decade in financial services. Robin has a well-rounded marketing background having worked in both creative agencies and client-side roles in the UK and Australia, across a broad range of marketing disciplines - customer and relationship marketing, digital marketing and brand marketing and communications. Robin holds a Bachelor of Business degree majoring in Marketing and Economics from QUT and a post graduate certificate in Integrated Marketing Communications. JONATHAN DAVEY CEO - TYRO HEALTH Jon joined Tyro in May 2021 in the role of CEO - Medipass after Tyro acquired Medipass and more recently as CEO of the newly formed Tyro Health business. Jon’s expertise is in leading businesses through the changes necessary to succeed in a digital world. Prior to joining Medipass, Jon was accountable for Digital, Innovation and Customer Experience at National Australia Bank. He is the founder of National Australia Bank’s Innovation and Corporate Venture Capital teams. Jon has over 25 years experience in corporate, consulting and start-up businesses. He has worked with leading Australian and International companies and is the co-founder of a technology start-up. He is a member of the Technology and Innovation Advisory Board for the Australian Institute of Company Directors. STEVEN CHAPMAN CHIEF RISK OFFICER JOSH COUPLAND CHIEF STRATEGY OFFICER Steve is a Chartered Global Management Accountant (CGMA) and Certified Information Systems Auditor (CISA). He joined Tyro in March 2019 and was appointed as Chief Risk Officer on 10 June 2021 leading the Tyro Risk and Compliance function. Prior to this role, Steve led the Internal Audit function. After graduating from the University of Glasgow, Steve began his career in project management for a large UK utility firm before moving into audit and risk roles. Steve moved to Australia 11 years ago with his family and has since worked for Woolworths, IAG and QBE. Josh leads Tyro’s corporate strategy function. Prior to joining Tyro in early 2018, Josh built a successful consulting career at Monitor Deloitte in the UK, working with clients across multiple industries including financial services. He has over 11 years of experience leading teams on projects spanning corporate strategy, M&A, and business transformation. Josh holds a BSc in Business and Financial Economics from the University of Leeds. 43 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022PROFILES PAUL KEEN CHIEF TECHNOLOGY OFFICER GEORGE MERVITZ HEAD OF INTERNAL AUDIT GIOVANNI RIZZO CHIEF OF INVESTOR RELATIONS Paul joined Tyro in August 2022 in the role of Chief Technology Officer. Paul has over 20 years experience in leading engineering teams in large ASX listed companies. Prior to joining Tyro, Paul was Vice President of Engineering for Nuix, leading Nuix’s engineering teams and related activities. Paul’s previous roles included Head of Group Architecture and Engineering at Qantas, Chief Technology Officer at Airtasker and Chief Information Officer at Dick Smith Electronics. Prior to these experiences, Paul was a General Manager in Salmat’s Software Development team and a General Manager of Technology and Development at RedBalloon. Paul holds a Master of Business Administration from Macquarie University (Macquarie Graduate School of Business). George joined Tyro in August 2021 and prior to his Head of Internal Audit role he held various senior leader roles at IAG which included widespread commercial, audit and project responsibilities. He spent almost 4 years supporting IAG’s Asia division in uplifting governance and maturing internal control environments. George is a multi-skilled senior South African qualified Chartered Accountant (CA(SA)) with extensive experience in professional services and corporate financial services. George has a Big 4 consulting background, having worked at both PricewaterhouseCoopers (South Africa) and EY (Cayman Islands). Giovanni joined Tyro in late 2020 where he established the Investor Relations function. Giovanni is a qualified Chartered Accountant (CA) and a member of Chartered Accountants Australia and New Zealand with over 20 years professional experience working in South Africa, Canada, and Australia. Prior to joining Tyro, Giovanni worked at PricewaterhouseCoopers before moving into Investor Relations in 2013 as Head of Investor Relations at Tatts Group Limited. Giovanni is also a non-executive Director and Chair of the Audit Committee of ASX listed Jumbo Interactive Limited. Giovanni holds a Bachelor of Commerce (Honours) and a Higher Diploma in the Theory of Accounting from the University of Johannesburg. 44 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022PROFILES JOSH WALTHER CHIEF CUSTOMER OFFICER SAMI WILSON GENERAL COUNSEL BRONWYN YAM CHIEF PRODUCT OFFICER Sami is Tyro’s General Counsel and joined Tyro in 2018 to establish the in-house legal function. Sami has over 12 years legal experience in a diverse range of areas, including advising ASX listed entities on corporate law and M&A and working on private equity, venture capital and banking and finance transactions. Before he joined us, Sami was a Senior Associate at Herbert Smith Freehills. Sami holds a Bachelor of Laws (Honours) from the University of Melbourne and a Bachelor of Commerce from the University of Adelaide. Sami is admitted as a solicitor of the Supreme Courts of New South Wales and South Australia. Josh joined Tyro in 2017 in the role of Director of Sales, becoming Chief Customer Officer in 2018. Josh has more than 20 years experience in financial services and management consulting with ING Direct, Aussie Home Loans, KPMG Consulting and Arthur Andersen Business Consulting. He has extensive experience delivering sales growth and customer experiences for financial services businesses across multiple distribution formats including direct, digital and partnerships. In his eight years at ING Direct, Josh’s leadership in growing and developing consumer sales and service channels culminated in him being awarded Australian Customer Experience Executive of the Year and his team awarded Best Contact Centre in Australia. Josh holds a Bachelor of Business (Honours – First Class) from the University of Technology, Sydney and completed the Stanford University Executive Program for Growing Companies in 2019. Bronwyn joined Tyro in 2017 and is our Chief Product Officer. Bronwyn has over 25 years experience in financial services and consulting. She has extensive experience in challenging the status quo and delivering innovative processes and solutions. Bronwyn has a passion for driving transformational change in organisations and teams leveraging on technology and disruptive thinking to deliver desired customer outcomes. Prior to joining Tyro, Bronwyn held several senior roles in strategy, lending and payments within Commonwealth Bank of Australia since 2005. Bronwyn also had a consulting career with Arthur Andersen Business Consulting in the US and across Asia, working with clients from multiple industries from manufacturing to financial services. Bronwyn holds a Bachelors of Arts, Business Economics from the University of California, Los Angeles (UCLA) and a Masters of Business Administration from the Hong Kong University of Science and Technology (HKUST). 45 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022PROFILES 46 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022 5 Year Track Record FY18 FY19 FY20 FY21 FY22 Transaction value 13,359,608 17,496,322 20,131,045 25,453,507 34,197,453 Transaction value annual growth 26.0% 31.0% 15.1% 26.4% 34.4% Total revenue (normalised) 148,231 189,770 210,675 239,505 326,143 Total revenue annual growth 22.9% 28.0% 11.0% 13.7% 36.2% Direct expenses (79,163) (106,510) (117,200) (119,771) (177,640) Gross profit (normalised)1 Gross profit annual growth 69,068 83,260 93,475 119,734 148,503 23.3% 20.5% 12.3% 28.1% 24.0% Operating expenses (normalised) (78,890) (91,871) (97,847) (105,568) (137,836) EBITDA2 Share-based payments expense Depreciation & Amortisation (9,822) (1,411) (7,064) (8,611) (3,788) (7,864) (4,372) (10,896) 14,166 (8,779) 10,667 (5,199) (12,524) (14,666) (20,505) EBIT (normalised)3 (18,297) (20,263) (27,792) (9,279) (15,037) Net interest cost (normalised) - - (535) (517) (1,024) Loss before tax (normalised) 3 (18,297) (20,263) (28,327) (9,796) (16,061) Adjustments to normalised earnings Amortisation of Bendigo Alliance intangible asset Bendigo Alliance gross profit share Interest cost on Bendigo Alliance Bendigo Alliance transitional expenses Costs associated with the connectivity issue IPO expenses and other Share of loss from associates Mergers and acquisition costs - - - - - - - - - - - - - - - - - - - - - (9,730) - - (698) 698 - - (13,285) (894) (1,119) (4,681) Loss before income tax (statutory) (18,297) (20,263) (38,057) (29,775) Loss after income tax (statutory) (17,146) (18,439) (38,057) (29,823) Cash, cash equivalents and investments 84,251 68,758 188,324 172,780 (11,176) 8,490 (2,534) (4,669) 300 (409) (3,558) - (29,617) (29,617) 122,768 Cash flows from operating activities (12,799) (13,931) 8,194 11,043 (25,319) 1 2 3 Normalised gross profit is adjusted for Bendigo support fees of $2.3 million associated with transition of Bendigo merchants to the Tyro platform and the Bendigo gross profit share of $8.5 million not deducted from statutory gross profit but deducted to calculate normalised gross profit. Refer to page 14 of the Tyro FY22 Investor Presentation for a reconciliation of statutory to normalised results. Tyro uses EBITDA as a non-IFRS measure of business performance, which excludes the non-cash impact of share-based payments expense, share of losses from associates, expenses associated with the terminal connectivity issue and the IPO and other significant one-off costs. Refer to page 14 of the Tyro FY22 Investor Presentation for a reconciliation of statutory to normalised results. EBIT and normalised net loss before tax excludes expenses associated with the IPO including the share-based payments expense relating to Liquidity Event Performance Rights that vested as a result of the IPO, the non-cash accounting impact of the Bendigo Alliance, expenses associated with the terminal connectivity issue and significant one-off expenses. Refer to page 14 of the Tyro FY22 Investor Presentation for a reconciliation of statutory to normalised results.. 47 TYRO PAYMENTS LIMITED - ANNUAL REPORT 20225 YEAR TRACK RECORD 48 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022 Sustainability 49 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022 y t i l i i b a n a t s u S Sustainability is not only about our relationship with our merchants - it is also about our responsibility to the environment, social issues, equity, engagement with the community, good governance and ethical standards. Following on from our first Sustainability Report released in FY21, we have evolved our reporting and have adopted a new disclosure format for our annual report suite to highlight how we create value for all our stakeholders including enhanced disclosure on the use of our Capitals and providing a consolidated review of our financial, economic, social and environmental performance on matters material to our strategy and our ability to create and sustain value into the future. More details of this disclosure can be found in our comprehensive Sustainability Report. This is just the start of our move to a more comprehensive and more transparent review of our business which we will build on in FY23 and beyond. To view our 2022 Sustainability Report please refer to: https://investors.tyro.com/ investor-centre/?page=sustainability 50 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022SUSTAINABILITY “We are proud of our open, inclusive, and collaborative culture which has at its foundation our guiding values.” Our People and Culture Our people are at the core of who we are. We have a strong emphasis on recruiting and retaining top talent that enhances our strong values-driven culture. The accumulation of our collective experience, shared values, and individual skills has allowed Tyro to deliver industry-leading products and solutions. Our Values We are proud of our open, inclusive and collaborative culture which has, at its foundation our guiding values. We foster a high performance, values-driven culture and our most recent employee survey showed that 71% of our team members are proud to work at Tyro and 78% would recommend it as a great place to work. We recently introduced a new teamwork value at Tyro to complement and enhance our existing values. Our new value: “Win together - We are a united team. With growth mindsets and without ego, we embrace diversity to collaborate, innovate, and accelerate” Diversity and Inclusion Tyro’s workforce has grown and diversified as our merchants, products and services have expanded. Our team members speak 53 languages and have an average age of 35. Our Executive Leadership Team (XLT) is 21% female while 12.5% of our senior managers are female and 49% of our other managers are female. We ended FY22 with 15% more people than the prior year reflecting organic head count growth to better service our merchants. In total we have 612 team members. As part of our commitment to diversity, we initiated a new cultural and ethnicity diversity survey in FY22. We surveyed our Board of Directors and Executive Leadership Team to obtain an understanding and acknowledgment of our cultural differences. We will be rolling this survey out to all our team members in FY23. The purpose of this survey is to collect data about where our people come from, what groups they identify with, and what languages they speak which will assist us to dispel negative stereotypes and personal biases about different groups and setting meaningful social targets to increase representation of currently under-represented groups. TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022 51 51 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022SUSTAINABILITY Professional Development and Tyro Graduate Program We introduced LinkedIn Learning for all our employees, offering free access to over 8,000 learning courses and every member of our team is supported with bespoke training that builds their career in line with their development plan. Our links to Australian Institute of Management and our customised Tyro Leader Program means that all our managers have the opportunity to excel. We launched our Tech Graduate Program in June 2021 with 12 graduates and 4 interns joining over the course of the year. This initiative is a win-win for both our grads and Tyro. We benefit from great new energy and ideas and the opportunity to help grow the careers of some young technologists, all the while attracting top talent to our team. Below is a summary of our diversity outcomes achieved in FY22 against our targets. MEASURE OF SUCCESS FY22 OUTCOME TARGET Representation of gender groups. Our overall Tyro team has a gender balance of 36% female, 62% male and 2% undisclosed/other. A gender balance of 40:40:20 achieved across the whole of Tyro with a balance of 40% female, 40% male and 20% non-binary to be achieved by 30 June 2023. Gender balance for Directors. Our Board has a gender balance of 57% female and 43% male. A gender balance of 40:40:20 to be achieved by 30 June 2022. Elimination of gender pay gaps. A salary review and benchmarking exercise was conducted across the whole business in January 2022 as part of the fixed remuneration review for Tyro. Any gender pay gaps were addressed as part of this review. Remuneration equity across all genders. Launching Tyro’s own LGBTQIA+ advocacy network, Tyro Pride. In FY22, Tyro Pride was officially launched. Ensure Tyro is a leading employer for the LGBTQIA+ community. Completed Tyro’s inaugural submission to the Australian Workplace Equality Index (AWEI) for FY22. Received data to benchmark ourselves against other organisations. Ensure Tyro is a leading employer for Workplace Equality. The long-term success of Tyro is closely inter-related to the success of the communities in which we TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022 Y T I L I I B A N A T S U S 52 52 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022SUSTAINABILITY Our Community operate. Positive relationships with the community allow us to build trust and long-term sustainability of our operations. Donations are not included in the merchant’s daily settlement, they are kept separate and settled directly with the charities. Our employees want to give back, so we make it easy for them. Our team members proactively engage with their local communities through organising fundraising events, assisting in community projects and donating their expertise where needed by communities important to them. We offer our team the support and resources they may need to assist in these proactive initiatives including the ability to take a paid volunteer day annually. Although we are still a relatively small company that is not generating profits, we are actively looking at ways in which we can make corporate charitable contributions and become involved in corporate social responsible projects. Current projects that we are actively looking at include how we can use our payments expertise to roll-out new payments methods to charitable organisations. An example of a charity that we are currently working with is Jeans for Genes (discussed below). Tyro also actively contributes to public policy debates and industry reviews to improve the payments system in Australia and customer outcomes from those reviews. Sheep Dog We have developed charitable donation functionality for our merchants which allows cardholders to make donations to charities at participating Tyro merchants. In FY22, our merchants raised over $50,000 for their selected charities through utilising this technology. Jeans for Genes Jeans for Genes is one of Australia’s oldest and most beloved charity days supporting vital research to find treatments and cures for children’s genetic diseases like cancer, cystic fibrosis, and life-threatening metabolic disorders. The Children’s Medical Research Institute (CMRI) relies on the money raised by Jeans for Genes Day, and other community fundraising, to keep its labs open and, for nearly 27 years, Australians have seen the streets awash with denim, with volunteers out in force to sell merchandise and collect donations. Recognising that charities have been hard hit by the COVID-19 pandemic, Tyro has again worked with the CMRI by providing 50 terminals at no upfront cost. Furthermore, more than 30 of our dedicated Tyros volunteered their time on 5 August to assist with fundraising for such an amazing cause. The Environment Limiting our environmental impact is part of our social license granted to us by our merchants and their customers. Although we have a limited emissions inventory, we recognise that a business’s impact on the environment is a concern to all our stakeholders. In 2021, the Board adopted Tyro’s first Sustainability Framework which included the management of environmental risks and opportunities. We established a sustainability champions group to further implement environmental change across Tyro. The sustainability working group raises awareness, identifies strategic sustainable initiatives and focuses its efforts on reducing Tyro’s carbon footprint. We are committed to reducing our carbon inventory to achieve ‘Net Zero’. In FY22 we signed on to Climate Active Australia and are currently undertaking our accreditation process to achieve ‘Net Zero’. As part of this accreditation, we will acquire 4,250 tCO2e carbon offsets in FY23 for those emissions that cannot yet be reduced in order to obtain our status as a carbon neutral company. Ultimately, our strategy will see us target ‘Net Zero’ without the need to acquire carbon offsets. Further details on climate change risk mitigation and progress against targets can be found within our 2022 Sustainability Report. To view the 2022 Sustainability Report please refer to: https://investors.tyro.com/ investor-centre/?page=sustainability A merchant can configure a different charity per location and enable the feature per terminal. TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022 53 53 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022SUSTAINABILITY s o r y T r u o m o r f s e i r o t S “…having joined the team fairly recently, I am really enjoying working here at Tyro. Tyros are friendly and approachable from the get-go, and despite feeling this workplace is too good to be true, 8 months in, our leaders and staff alike remain approachable, supportive and keen to work together to solve a common challenge for our customers’ benefit. I particularly appreciate how accessible and approachable our CEO is, providing updates to all staff regularly and consistently encouraging us to speak up about ideas and pain points. Finally, the passion and commitment of our people as well as regular in-office activities really makes working here meaningful and fun….” Debbie Rowlands TYRO KNOWLEDGE MANAGER Y T I L I I B A N A T S U S 54 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022 “…Tyro stands out to me as an employer for two reasons: the flexibility, which is essential to me as a father of two children. Second, Tyro always makes an effort to promote from within for most open positions, and I serve as an example because I took on additional responsibilities within a year of starting my job. During the FY22, we optimised the Lending Credit Risk Policy to meet the needs of our merchants and to remain competitive in the market. As a result, our lending portfolio has grown significantly surpassing all previous records, and losses remained below acceptable limits…” Sabbir Mohammed TYRO HEAD OF CREDIT Y T I L I I B A N A T S U S 55 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022 56 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022 Directors’ Report 57 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022 t r o p e R ’ s r o t c e r i D The Directors present their report together with the Financial Report of the consolidated entity (referred to hereafter as the Group or Tyro) consisting of Tyro Payments Limited and the entities it controlled at the end of, or during, the year ended 30 June 2022 (FY22). 58 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022DIRECTORS’ REPORT 1. 2022 Corporate Governance Statement The Group’s governance arrangements and practices as compared to the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations (4th Edition) are set out in our Corporate Governance Statement. The Group must also comply with its constitution, the Corporations Act 2001 (Cth), the ASX Listing Rules, the Banking Act 1959 (Cth), including the Banking Executive Accountability Regime (BEAR) (contained in Part IIAA of the Banking Act 1959) amongst other laws, and, as an Authorised Deposit taking Institution (ADI), with governance requirements prescribed by the Australian Prudential Regulation Authority (APRA) under Prudential Standard CPS 510 Governance and other applicable published APRA Prudential Standards. Information about the Group’s corporate governance policies and practices can be found in the 2022 Corporate Governance Statement available at: https://investors.tyro.com/investor-centre/?page=corporate-governance. 2. Pillar 3 information The Group provides information required by APRA prudential standard APS 330 Public Disclosure in the Regulatory Disclosures section at: https://investors.tyro.com/investor-centre/?page=regulatory-disclosure. 3. Directors The following persons held office as Directors of the Company during the financial year and up to the date of this Report (unless otherwise stated): David Thodey AO Chair & Non-executive Director Independent Robbie Cooke CEO | Managing Director Executive Hamish Corlett Non-executive Director Independent Resigned 3 November 2021 David Fite Non-executive Director Independent Claire Hatton Non-executive Director Independent Appointed 5 January 2022 Aliza Knox Non-executive Director Independent Fiona Pak-Poy Non-executive Director Independent Paul Rickard Non-executive Director Independent Shefali Roy Non-executive Director Independent Appointed 5 January 2022 Details, including term of office, qualifications, experience and information on other directorships held by Directors, can be found on pages 37 to 41 of the Annual Report. 4. Company Secretary Jairan (Jay) Amigh was appointed as Company Secretary on 20 February 2020. Jay holds Bachelors of Law and Commerce and has over 30 years in legal practice focusing on financial services and corporate governance. 59 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022DIRECTORS’ REPORT 5. Meetings of Directors The number of meetings of the Company’s Directors (including meetings of Committees of Directors) and the number of meetings attended by each Director during the financial year were: BOARD OF DIRECTOR MEETINGS AUDIT COMMITTEE MEETINGS RISK COMMITTEE MEETINGS PEOPLE COMMITTEE MEETINGS David Thodey Robbie Cooke1 Hamish Corlett David Fite Claire Hatton2 Aliza Knox Fiona Pak-Poy Paul Rickard Shefali Roy3 A 15 15 5 15 9 15 15 15 9 B 15 15 5 15 8 15 15 15 9 A 4 B 4 nm nm 1 3 3 1 3 3 nm nm 5 5 5 5 nm nm A nm nm nm 6 nm 6 nm 6 3 B nm nm nm 6 nm 6 nm 6 3 A 8 nm 4 nm 3 8 8 nm 3 B 8 nm 4 nm 3 8 8 nm 3 A Number of meetings during the year while the Director was a member of the Board or Committee. B Number of meetings attended by the Director as a member during the year. nm Not a member of the relevant Committee. 1 The CEO | Managing Director is not a Non-executive Director. Robbie was invited by the Board to attend the Risk Committee, Audit Committee and People Committee meetings (or part thereof). 2 Claire Hatton was appointed to the Board, Audit Committee and People Committee on 5 January 2022 and attended meetings from that date. 3 Shefali Roy was appointed to the Board, People Committee and Risk Committee on 5 January 2022 and attended meetings from that date. In addition to the Board and Committee meeting attendances noted above, a number of Directors participated in other Committees established for special purposes. At the date of this report, the Company has an Audit Committee, Risk Committee and People Committee. The members of each Committee are as follows: AUDIT COMMITTEE RISK COMMITTEE PEOPLE COMMITTEE Paul Rickard (Chair) Paul Rickard (Chair) Fiona Pak-Poy (Chair) David Fite Claire Hatton Fiona Pak-Poy David Thodey David Fite Aliza Knox Shefali Roy Claire Hatton Aliza Knox Shefali Roy David Thodey 60 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022DIRECTORS’ REPORT 6. Directors interest in securities The relevant interest of each Director in securities of the Company at the date of this Directors’ Report is as follows: DIRECTOR1 David Thodey Robbie Cooke David Fite Claire Hatton Aliza Knox Fiona Pak-Poy Paul Rickard Shefali Roy RELEVANT INTEREST IN ORDINARY SHARES OPTIONS OVER ORDINARY SHARES RIGHTS OVER ORDINARY SHARES 1,056,996 990,996 16,593,861 14,583 - 106,420 2,126,740 - 82,287 5,504,530 158,144 - - 83,000 201,231 - 59,367 1,223,587 35,620 - - 76,857 46,723 - 1 Includes shares held by entities controlled by Directors 7. Operating and Financial Review Refer to the CEO | Managing Director’s Report on pages 15 to 35 of the Annual Report, which forms part of this Directors’ Report for details of Tyro’s principal activities, business strategies and financial performance and position for the year ended 30 June 2022. 8. Material risks to business strategies and prospects for future financial years The potential risks that could adversely affect the Group’s achievement of its business strategies and financial prospects in future years are described below. This section does not purport to list every risk that may be associated with the Group’s business now or in the future. There is no guarantee or assurance that the importance of these risks will not change, or other risks emerge. While the Group aims to manage risks in order to avoid adverse impacts on its financial and reputational standing, some risks are outside the control of the Group. The management and oversight of risk is ultimately overseen by our Board and Risk Committee. We have an integrated Risk Management Framework in place to identify, assess, manage and report risks on a consistent basis. This framework has been developed to accord with the tolerance levels set out in our Risk Appetite Statement. 61 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022DIRECTORS’ REPORT GROUP’S RISK MANAGEMENT FRAMEWORK OUR PURPOSE HOW MUCH RISK WE TAKE HOW WE DEFINE RISK WHAT RISK WE TAKE Our Strategy Risk Appetite Statement Risk Management Strategy 1. Strategic Risk Management FINANCIAL RISK MANAGEMENT NON-FINANCIAL RISK MANAGEMENT 2. Credit Risk Framework 3. Liquidity Risk Management Framework 4. Market and Investment Risk Management Framework 5. Operational Risk Management Framework 6. Compliance Risk Management Framework 7. Customer and Conduct Risk Management I R S K C U L T U R E HOW WE ASSURE OURSELVES Clear business procedures aligned to policies, risk and compliance self-assessment, control assurance program, staff training, testing adherence to policy, analysing incidents, reporting, risks/issues/breach identification and management, credit decisioning, hindsight review, profiling, stress testing, audits HOW WE GOVERN RISK BOARD, BOARD RISK COMMITTEE, BOARD AUDIT COMMITTEE EXECUTIVE RISK COMMITTEE BUSINESS UNIT RISK MANAGEMENT To help ensure we operate within the defined risk appetite set by the Board, our approach to managing our risk is underpinned by a ‘three lines’ of defence model: • First Line of Defence: Business managers are responsible for the identification and management of risk as part of their day-to-day responsibilities; • Second Line of Defence: The Risk team is accountable for providing risk advice, oversight and challenge to the business. They maintain the Risk Management Framework and report to Board on the risk appetite, risk profiles, frameworks, policies and other risk management tools to guide the business; and • Third Line of Defence: Internal Audit is accountable for independently assuring that the Risk Management Framework is operating effectively and our risk management practices are appropriate in the context of statutory and regulatory obligations. 62 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022DIRECTORS’ REPORT KEY AREAS OF POTENTIAL RISK MITIGATION STRATEGIES AND ACTIVITIES Talent Ability to attract, develop and retain talent to deliver on strategy. • Attraction and retention strategies, including competitive monetary and non- monetary benefits and flexible work policies. • Culture and remuneration frameworks ensure employees are clear on expectations and accountabilities and demonstrate risk behaviours that lead to appropriate outcomes. Introduction of new resourcing options to ensure we have access to an expanded talent pool. • Project delivery Ability to deliver new products and innovations that meet customers’ needs. • Project governance structures and policies. • Prioritisation process to identify which are most important and urgent and allocate resources accordingly. • Project managers in place to plan, execute and control delivery. • Regular monitoring and reporting to identify and mitigate issues that arise. Technology failure Failure or disruption of our technology platform, resulting in disruption to merchants’ businesses, leading to customer churn, loss of data, and/or reputational damage. • Tyro relies on established technology partners who deploy high availability services and tools. • Regular monitoring of platform and database performance. • Business continuity, disaster recovery, and crisis management plans in place and tested regularly. Regulatory and compliance Ability to manage regulatory and compliance risk that may impact Tyro’s products, reputation and/or financial returns. • Dedicated Compliance team who monitor and provide input on any emerging changes to legislation, regulations and/or industry codes, and assess potential business impacts. • Compliance frameworks, policies and training are provided for all employees, Capital management and access The risk that our performance falls short of expectations resulting in negative shareholder/ market sentiment, increasing the cost of capital and/or impacting access to capital. Cybersecurity Security controls and processes are insufficient, leading to a breach and resulting in loss of system functionality or data, business disruption, customer churn and/or reputational damage. supported by internal and external audits. • Risk and controls self-assessment process used to identify, evaluate, and manage compliance risks and develop associated controls. • Proactive and regular dialogue with regulators and industry bodies. • Defined capital risk indicators set in the Group Risk Appetite Statement. • Capital ratio operating targets are regularly reviewed in the context of the external economic and regulatory outlook with the objective of maintaining balance sheet strength. • Security team provide oversight of critical cyber-control activities to defend against the evolving threat environment. • Proactive tools and processes provide enhanced detection and monitoring capabilities, secure configuration, vulnerability management and strong authentication methods. Increased supplier monitoring to understand and mitigate any weaknesses in their cyber defence and resilience capabilities. • • Security and awareness programs for all employees and annual cybersecurity scenario exercise with the Executive team and Board. Business resilience Ability to withstand and adapt to disruptions that may impact business operations, people, and/or assets. • Business Continuity & Technology Disaster Recovery plans and testing in place for critical systems and processes. • Key supplier governance, selection and monitoring processes enable us to identify and manage the risk of third-party disruptions. • Crisis management exercises with the Executive Leadership team and Board. Third Party Failure to choose and manage third-party suppliers effectively, resulting in loss of system functionality or data, business disruption, customer churn and/or reputational damage. • Tyro is committed to obtaining goods and services in a transparent, ethical, and competitive manner, consistent with our risk profile and policies. • Suppliers are assessed to identify and mitigate modern slavery risks and issues. • Contract owners maintain in-life relationship management to ensure compliance with contractual obligations, performance requirements, business resilience and security assurance. Credit and fraud risk Losses from failure of counterparties to meet their financial obligations to Tyro. • Defined credit risk and fraud risk indicators set in the Group Risk Appetite Statement. • Tyro’s credit risk management framework and policies outline the core values which govern credit risk-taking activities and reflect the priorities established by the Board. • Regular monitoring of credit quality, arrears, policy exceptions and policy breaches. • Established provisions for credit impairment based on current information and our expectations. 63 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022DIRECTORS’ REPORT KEY AREAS OF POTENTIAL RISK MITIGATION STRATEGIES AND ACTIVITIES Market Risk Losses from unexpected changes in market rates and prices. • Defined market risk indicators set in the Group Risk Appetite Statement. • Tyro’s market risk policy outlines how Tyro will manage market risks particular to our business. • Tyro’s Asset and Liability Committee provides oversight and management within the Board set risk appetite limits. Liquidity Risk Ability to meet financial obligations as they fall due. Pandemic Ability to manage Tyro’s potential financial, operational, and people risks from COVID-19. • Defined liquidity risk indicators set in the Group Risk Appetite Statement. • Tyro’s liquidity risk framework and policies outline the necessary component functions to carry out effective liquidity management from identification through to a liquidity crisis management. • Forecasting of future capital requirements and available capital resources to manage the business to our required levels of regulatory capital, target adequacy levels and internal capital triggers, over a forecast period. • Regular oversight and monitoring of financial and operational impacts by Executive Leadership team and Board. • Ongoing support of customers experiencing financial hardship. • Proven ability to work remotely through the use of technology. • Processes in place to ensure employees have a safe and effective working environment. Competition and disruption New competitors or technologies that impact Tyro’s ability to drive customer growth and deliver on our strategy. • Tyro’s strategy actively aims to address competition risk. • Processes in place for monitoring and responding to competitor and market activity. • Development of strategic partnerships and acquisitions in companies that drive new technology. Environmental and social risks Ability to recognise and address environmental, social or corporate governance (ESG) issues. • Tyro’s approach to sustainability and climate change risk is managed through our Sustainability Framework with priority targets set by the Board. • Regular review and oversight of ESG initiatives and risks by our Executive Leadership team. ‘Net-zero’ carbon emissions, diversity, and inclusion target commitments. • Concentration risk Reliance on a limited number of products, industry verticals and geographical regions to drive growth. • Focus on promoting value-adding services to existing customers: merchant cash advance, transaction account, term deposit account and Tyro Connect. • Growth of our Health business through the acquisition of Medipass and a simple, unified solution for payments and claiming. • Expansion into new verticals with a fit for purpose mobile payment terminal device. Geopolitical Geopolitical issues and tension could threaten the Australian economy and destabilise supply chains, disrupting operations and impact our business and growth strategy. • The Board monitors conditions and maintains provisions and capital for a range • of potential economic scenarios. Investment in expanding and updating our terminal offering to mitigate potential hardware supply issues. • Monitoring and ensuring sufficient hardware stock levels to meet customer demand. Economic environment Significantly weakened global conditions could harm our business and financial position. Digital adoption Ability to respond to customers’ demand for simple and innovative digital services and products. Machine learning and Artificial Intelligence Ability to manage risks and opportunities from Artificial Intelligence and machine learning related products and features, leading to reputational, regulatory and/or financial impacts. • Regular financial oversight and monitoring across markets. • Detailed financial analysis, scenario modelling and stress testing for a range of economic scenarios. • Acceleration of our digital strategy. • Investing in technology and digital platforms to help drive efficiency and improve customer experience. • Investing in our products and technology to leverage Artificial Intelligence and machine learning. 64 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022DIRECTORS’ REPORT 9. Environmental regulation Although our operations are not subject to any particular and significant environmental regulation under any law of the Commonwealth of Australia or any of its states or territories, we still acknowledge that by working with over 63,700 merchants across Australia, we are committed to delivering our solutions in a manner that aims to create a sustainable future for all our stakeholders. This includes our shareholders, our people, our merchants, the community in which we operate, our suppliers and business partners and regulatory bodies. Further details on climate change risk mitigation and progress against targets can be found within our 2022 Sustainability Report. To view the 2022 Sustainability Report please refer to: https://investors.tyro.com/investor- centre/?page=sustainability 10. Dividends No dividends were paid to shareholders or otherwise recommended or declared for payment during the year. 11. Share-based payments Details of share-based payments are disclosed in our Remuneration Report on pages 69 to 103 and in Note 14 of the Financial Report. 12. Additional information indemnities and insurance Clause 54 of the Company’s Constitution provides that every person who is or has been a Director or Secretary of the Group must be indemnified by the Company, to the extent permitted by law, against: • • liabilities incurred by the person as an officer of the Company or a subsidiary; and for legal costs incurred by the person in defending any proceedings which relate to a liability incurred by that person as an officer of the Company. The Company has executed Deeds of Indemnity, Insurance and Access, consistent with this Clause, in favour of all current Directors of the Company, the Company Secretary who is named in this Directors’ Report and the Company’s current Chief Financial Officer. The Company has also entered into equivalent Deeds of Indemnity with former Directors and Secretaries of the Company, in accordance with the Company’s previous Constitution. Each Deed indemnifies those persons for the full amount of all such liabilities including costs and expenses, subject to their terms. For the year ended 30 June 2022, no amounts have been paid pursuant to indemnities (FY21: Nil). The Company’s Constitution also allows the Company to pay insurance premiums for contracts insuring the current and former Directors and Secretaries of the Company in relation to any such liabilities and legal costs. During or since the end of the financial year, the Company has paid the premium in respect of contracts insuring each of the Directors and the Secretary named in this Directors’ Report, the former Directors, and the officers of the Company as permitted by the Corporations Act 2001. The class of officers insured by the policy includes all officers of the Company. The terms of the contracts of insurance prohibit the disclosure of the nature of the liabilities insured against and the amount of the premium. As at the date of this report, no amounts have been claimed or paid in respect of these insurance contracts other than the premium referred to above. To the extent permitted by law, the Company has agreed to indemnify its auditors, Ernst & Young, as part of the terms of its audit engagement agreement against claims by third parties and resulting liabilities, losses, damages, costs and expenses arising from the audit (for an unspecified amount). This indemnity does not extend to matters finally determined to have arisen from Ernst & Young’s negligent, wrongful or wilful acts or omissions. 65 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022DIRECTORS’ REPORT 13. Proceedings on behalf of the Group In relation to the terminal outage incident in January 2021, a class action proceeding was filed against Tyro in October 2021 in the Federal Court of Australia on behalf of customers impacted by the terminal outage incident. The class action is the subject of Tyro’s previous ASX announcement on 20 October 2021. The class action alleges that Tyro engaged in misleading and deceptive conduct, contravened certain statutory guarantees and breached certain contractual warranties. The claim seeks compensation and damages from Tyro. Tyro denies the allegations and is defending the proceedings. It is currently not possible to reliably determine the ultimate impact on the Group of the claims raised in this proceeding and accordingly no provision has been recognised. No other proceedings have been brought or intervened in on behalf of the Group with leave of the Court under Section 237 of the Corporations Act 2001. 14. Non-audit services The Group may decide to employ its auditor on assignments additional to their statutory audit duties where the auditor’s expertise and experience with the Group is important. The Board has considered the position and, in accordance with the advice received from the Audit Committee, is satisfied that the provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The Directors are satisfied that the provision of non-audit services by the auditor, as set out below, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons: • all non-audit services have been reviewed by the Audit Committee to ensure they do not impact the impartiality and objectivity of the auditor; and • none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants, including reviewing or auditing the auditor’s own work, acting in a management or a decision-making capacity for the Group, acting as advocate for the Group or jointly sharing economic risk and rewards. The non-audit services paid to the auditors (Ernst & Young) was for services relating to tax compliance amounting to $17,000. Details of the audit and non-audit fees paid or payable for services provided by the auditors are detailed in Note 24 of the Financial Report. 15. Auditor’s independence A copy of the auditor’s independence declaration as required under Section 307C of the Corporations Act 2001 is set out on page 105 and forms part of the Directors’ Report for the financial year ended 30 June 2022. 16. Rounding of amounts The Group is of a kind referred to in Legislative Instrument 2016/191, issued by the Australian Securities and Investments Commission, relating to the ‘rounding off’ of amounts in the Directors’ Report. Amounts in the Directors’ Report have been rounded off in accordance with that Legislative Instrument to the nearest thousand dollars, or in certain cases, to the nearest dollar. This Directors’ Report is made in accordance with a resolution of the Directors. 66 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022DIRECTORS’ REPORT 17. Significant events after the end of the financial year In the opinion of the Directors, there have been no matters or circumstances which have arisen between 30 June 2022 and the date of this report that have significantly affected or may significantly affect the operations of the Group, the result of those operations or the state of affairs of the Group in subsequent financial years. 18. Remuneration Report The Group's Remuneration Report which forms part of the Directors' Report can be found on page 69 to 103 of this Annual Report. ______________________ David Thodey AO Chair Sydney, 29 August 2022 ______________________ Robbie Cooke CEO | Managing Director 67 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022DIRECTORS’ REPORT 68 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022 Remuneration Report 69 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022 e e t t i l m m o C e p o e P e h t f o r i a h C e h t m o r f r e t t e L 70 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022REMUNERATION REPORT Dear Shareholders, On behalf of the Board, I am pleased to present our Remuneration Report for the financial year ended 30 June 2022. The past three years have certainly presented us with numerous challenges. From the devastating impact of the COVID-19 pandemic to the terminal outage we experienced in January 2021 to the significant macro-economic climate that we find ourselves in, including inflationary pressure and rising interest rates that is impacting all tech stocks across the globe, our Tyro team has truly been tested in most challenging business conditions. I am pleased to report that through all these challenges, our team at Tyro continues to deliver quality service and products to our existing and new merchants. This is evidenced in the growth delivered for the year as highlighted in our Annual Report. Transaction values are up 34% for the year, normalised gross profit is up 24%, and over 14,000 new merchants were added to our portfolio. This growth speaks to the significant contribution that every Tyro has made in FY22. I would like to thank all Tyros for their dedication, teamwork and commitment to put our customers first. Outside of our financial and operational performance, our Tyro team has also been working on prioritising cultural, gender and social equity, addressing the impact of climate change on our business, and focussing on the demand for talent. As part of this work, I am proud to announce that Tyro has adopted a new team value in FY22 which we call our ‘Win Together’ value. This new value supports our existing values of ‘Be Good’, ‘Wow the Customer’, ‘Commit to Greatness’ and ‘Stay Hungry’ and recognises that to achieve our mission and vision, we can only do so by being a united team with a growth mindset that embraces diversity, enabling us to collaborate, innovate, and accelerate. "This growth speaks to the immense contribution that every Tyro has made in FY22." Changes to remuneration in FY22 In FY22, the Board has made a number of remuneration decisions to better align remuneration with shareholder wealth creation whilst placing a greater focus on linking remuneration to performance and retention. The changes made to the remuneration framework were as follows: • With the rapid acceleration seen in the demand for talent in FY22 and related increased remuneration requirements, we refreshed our market data for impacted roles. Our remuneration strategy is to provide fixed annual remuneration (comprised of base salary and superannuation) between the 50th and 75th percentile, with technology roles necessarily skewed to the higher end of the range. This refreshed data was used as part of our annual remuneration review with increases to fixed remuneration provided in January 2022. • To further attract and retain talent, we • introduced a long-term retention incentive plan in the form of service rights for all our team members (excluding the Executive KMP and XLT). These service rights vest equally over a 3-year period with the vesting condition being that the employee remains employed by Tyro at each vesting date. In FY21, our STI plan for Executive KMP and the XLT was delivered 75% in cash and 25% in equity (Service Rights) that vest in 4 years with no performance hurdle but subject to clawback provisions and irrespective of continuous service. For all other employees the STI award was delivered 25% cash and 75% in service rights vesting in equal tranches over a 3-year period with a 24-month holding lock post vesting of each tranche irrespective of continuous service. Through engagement with our team, we have refined the plan for FY22 for all employees other than Executive KMP and XLT to allow for 33% of the award to be paid in cash with the remaining 67% issued as service rights that vest equally monthly over a 12-month period from the grant date with the vesting condition being that the employee remain employed by Tyro through the 12-month period. Furthermore, we removed the 24-month holding lock from the award. The objective of these refinements is to improve the value of the award for employees over the short-term while still ensuring that an element of retention is built into the award. 71 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022REMUNERATION REPORT Changes to remuneration in FY22 (continued) • A further refinement we made to our FY22 STI plan was to amend the weighting of the component parts that make up the award. The financial component which previously amounted to 60% of the total award was reduced to 50% in FY22 and the customer satisfaction metric (measured using Net Promoter Score (NPS) and merchant uptake of multiple products) was increased to 20% from 10% in FY21. This change was made to enhance both the Board and management’s emphasis placed on our value to ‘Wow the Customer’. • Following engagement with stakeholders on the FY22 LTI Plan, the Board has refined the FY23 LTI Plan by amending the financial performance hurdles applicable to vesting for the plan. 50% of the plan award will now vest based on the achievement of a statutory EBITDA performance hurdle in FY25 while a new performance hurdle representing the remaining 50% of the plan award has been added based on the achievement of a TSR ranking relative to the XTX index at 30 June 2025. This change has been made to better align our LTI Plan with shareholder wealth creation of the medium to long term. Evolving our way of working We introduced numerous Company defining initiatives in FY22 to better support our team, to retain and attract the very best talent and to build on our high-performing culture. • We moved into our new offices in Sydney in April 2022. This move was necessitated by our previous lease coming to an end at the close of 2021. Our new Sydney HQ has been designed with flexibility in mind and to enable team members to do their best work, whatever their day may involve, be that focussed work, meetings, attending company-wide all hands sessions we call Mindshares, catching up with fellow Tyros over lunch, a game of table tennis, or Friday drinks. The energy that this move has brought back into our team, after the extended lockdowns that all Tyros endured over Covid, has been refreshing to see. We want to create an even greater place to work and grow where our strategy, purpose and values are ‘alive’, with all Tyros empowered to deliver their best work and drive amazing outcomes for Tyro. • We also introduced a new ‘Way of Work’ in late April 2022. We have adopted a ‘remote- friendly’ (rather than ‘remote-first’) business model for employees, and we recognise that flexibility is about more than just remote working. Employees can now choose when they want to come into the office, and we have empowered our senior leaders and our teams to develop a model that best fits their needs. • We are very pleased to also have officially launched our Tech Graduate Program in June 2021 with 12 graduates and 4 interns joining over the course of the year. This initiative is a win-win for both our grads and Tyro. We benefit from great new energy and ideas and the opportunity to help grow the careers of some young technologists, all the while attracting top talent to our team. "We are confident that we have developed a robust and fit for purpose remuneration framework that serves Tyro well." 72 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022REMUNERATION REPORT Looking ahead to FY23 We are committed as a Board to continuously reviewing the effectiveness of our remuneration framework and always welcome your feedback on our Remuneration Report. We are confident that we have developed a robust and fit for purpose remuneration framework that serves Tyro well. It appropriately balances fixed annual remuneration for all Tyros to reward core performance, has a STI that underpins the achievement of financial and operating targets, and a LTI that is focussed on delivering long term shareholder wealth creation. I look forward to presenting our Remuneration Report to you at the Tyro Annual General Meeting to be held on 24 November 2022. Yours sincerely, ______________________ Fiona Pak-Poy Chair - People Committee Remuneration outcomes for FY22 With respect to the annual salary reviews conducted in January 2022 and our stated strategy to provide fixed annual remuneration (comprised of base salary and superannuation) between the 50th and 75th percentile (based on independent benchmark data), with technology roles skewed to the higher end of the range, we provided our team with an overall average remuneration increase of 4.3% (excluding the Executive KMP and XLT). Executive KMP and XLT were provided with an average increase of 8%. The overall FY22 STI outcome came in at 46% (FY21: 89%) of target with a total STI of $4.9 million paid to employees. Of this, $2.1 million will be paid in cash with the remaining $2.8 million to be issued as service rights. The FY22 LTI Plan was made available to 77 employees made up of Executive KMP, the XLT and key employees identified by the CEO and the Board. Performance Rights were granted in February 2022 to these employees with vesting based on the achievement of a defined range of statutory EBITDA outcomes in FY24 – this plan is not due to be tested until FY24 and as such no vesting has occurred. No vesting has taken place on the FY19, FY20 or FY21 LTI plans as the performance hurdles for vesting were not met in FY22. These will be retested in FY23 again. Non-executive Director fees for FY22 Since listing on the ASX in 2019 no changes were made to Non-executive Director fees until FY22. In FY21, the Board undertook a review of Non-executive Directors’ fees and received independent advice from external consultants, which highlighted that our Non-executive Directors’ fees had fallen below market peers. In order to ensure that Tyro remains able to attract and retain directors of appropriate skill and experience, the Board resolved to make an increase in base Non-executive Directors’ fees that would commence in FY22 of 29.6%, which along with the fees for our two additional Non- executive Directors appointed during FY22, the total fees are still well within the Non-executive Director fee pool of $1.4 million approved in 2019. The Chair fees have not changed from the prior year. 73 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022REMUNERATION REPORT t r o p e R d e t i d u A n o i t a r e n u m e R This Report forms part of the Directors’ Report and sets out the remuneration arrangements of the Group for the year ended 30 June 2022 and is prepared in accordance with Section 300A of the Corporations Act. The information has been audited as required by Section 308(3C) of the Corporations Act 2001. The report details the remuneration arrangements for Tyro’s Key Management Personnel (KMP). KMP are those persons having authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly, including all Directors. References in this report to Executives refers only to those executives who are KMP, as outlined in section 1 below for FY22. 74 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022REMUNERATION REPORT REMUNERATION REPORT 2022 1. Who is covered in this Report 2. Remuneration governance 3. Remuneration framework 4. Key remuneration components for Executive KMP 5. Tyro’s FY22 performance and link to remuneration 6. FY22 Executive KMP remuneration outcomes 7. Statutory Executive KMP Remuneration 8. Non-executive Director Remuneration 9. Summary of Options and Rights under issue 10. Summary of Shares held by Non-executive Directors and Executive KMP 11. Other information 76 76 78 86 88 91 93 94 96 101 103 75 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022REMUNERATION REPORT 1. Who is covered in this Report The Company’s KMP covered in this report are Tyro’s Non-executive Directors, Chief Executive Officer (CEO) | Managing Director, Chief Financial Officer (CFO) and Chief Risk Officer (CRO). Details of KMP who are Non-executive Directors, including changes made during the reporting period, are provided in the table below: NON-EXECUTIVE DIRECTORS David Thodey AO Chair, Non-executive Director David Fite Non-executive Director Claire Hatton Non-executive Director (commenced as KMP from 5 January 2022) Aliza Knox Non-executive Director Fiona Pak-Poy Non-executive Director Paul Rickard Shefali Roy Non-executive Director Non-executive Director (commenced as KMP from 5 January 2022) FORMER NON-EXECUTIVE DIRECTORS Hamish Corlett Non-executive Director (ceased as KMP from 3 November 2021) Details of KMP who are Executives, including changes made during the reporting period, are provided in the table below: EXECUTIVE KMP Robert (Robbie) Cooke CEO | Managing Director Praveenesh (Prav) Pala Chief Financial Officer Steven Chapman Chief Risk Officer There have been no changes in KMP since the end of the reporting period. 2. Remuneration governance Tyro’s remuneration governance and framework is overseen by the People Committee (the Committee) as a formal committee of the Board. The Committee consists of five Non-executive Directors, with one performing the role of Chair. This Committee provides Tyro with a robust governance framework to ensure remuneration policies, practices and outcomes are reasonable and consistent with shareholder expectations. The diagram below provides an overview of this framework. The Committee considers matters relating to the remuneration of KMP as well as the remuneration policies of the Group generally. This includes reviewing and recommending to the Board, the remuneration of the Chair and Non- executive Directors, Executive KMP and other direct reports to the CEO. The principal responsibilities of the Committee are outlined in the People Committee Charter, available on the corporate governance page of the Group’s website: https://investors.tyro.com/investor-centre/?page=corporate- governance. Under the Committee Charter, the majority of Committee members must be independent non- executive directors and the Chair of the Committee must be an independent non-executive director. Currently, all members of the Committee (including the Chair of the Committee) are independent non-executive directors. Details of members of the Committee and their background are included in the Directors’ Report on pages 57 to 67. The following diagram represents the Group’s remuneration decision-making structure. 76 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022REMUNERATION REPORT BOARD • Review and approve Tyro’s remuneration policy and framework. • Review and approve remuneration outcomes for Senior Executives, and other employees as required by the law and exercise discretion to targets and the award of incentives • Review Non-executive Director fee pool and make recommendations for Non-executive Director fees. PEOPLE COMMITTEE The Committee assists the Board with remuneration matters by providing objective oversight and making recommendations to the Board in relation to: • Tyro’s remuneration policy and framework; • the remuneration of the CEO | Managing Director, other senior executives and others as required by the law; and • the process for allocating any pool of Directors fees approved by shareholders SHAREHOLDERS Feedback received through shareholder votes on the Remuneration Report at the AGM and consultation with key stakeholders MANAGEMENT TEAM • Present proposals on remuneration outcomes Implementing remuneration policies • REMUNERATION CONSULTANTS External and independent remuneration advice and information 2.1 Use of remuneration advisors The People Committee engages independent remuneration advisors on an as needs basis to provide information regarding market dynamics, trends and regulatory developments, specifically those impacting financial services companies. The People Committee and the Board consider this information along with other market insights to determine what would be the most appropriate recommendations to make for Tyro regarding remuneration. In FY22, KPMG was engaged to provide benchmarking data for Non-executive Directors, Executive KMP and the executive leadership team (XLT) for the purposes of informing the People Committee of the current market positioning of Non-executive Directors, KMP and the XLT against Tyro’s benchmarking peers. KPMG was paid $64,900 for the benchmarking review and the review of the existing remuneration framework’s compliance with Banking Executive Accountability Regime (BEAR). Godfrey Remuneration Group was also engaged in FY22 relating to services for providing remuneration data for Executives. Godfrey Remuneration Group was paid $16,500 for these services. The Board is satisfied that no remuneration recommendations (as defined in the Corporations Act 2001) were provided by KPMG, Godfrey Remuneration Group or any other external remuneration advisors during FY22. 2.2 Remuneration Report approval at 2021 Annual General Meeting (AGM) The Company received a vote of 90% in favour of the adoption of the 2021 remuneration report at the 2021 AGM (85% vote in favour at the 2020 AGM). 77 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022REMUNERATION REPORT 3. Remuneration framework 3.1 Approach to remuneration Our approach to remuneration is summarised in the following table with a detailed analysis of each component of Tyro’s Remuneration Framework provided in Sections 3.2 to 3.5 of this Report. TYRO’S PURPOSE - SETTING BUSINESSES FREE TO GET ON WITH BUSINESS BY SIMPLIFYING PAYMENTS AND COMMERCE Strategy Grow merchant share in existing core verticals Enter new core verticals Drive expansion into eCommerce + other payment types Cross-sell and drive growth in lending and other value- adding services Remuneration Principles Tyro Connect M&A and other strategic partnerships Align reward with strategic objectives. Our remuneration framework aligns both the short-term and long-term rewards of employees and Executives with Tyro’s strategic goals and core values and linking variable pay outcomes to both Group and individual performance. Attract, motivate and retain a highly skilled team. Our most important competitive advantage is our people and our values-driven approach to ‘wowing’ the customer. To attract and retain our talented team, we target remuneration at levels that ensure we can access the limited and competitive talent pool to drive our business forward. Our approach to remuneration also motivates team members to drive overall customer satisfaction and perform well in all market conditions and economic cycles. Incentivise and reward high performance that delivers sustainable long-term value creation and reflects the interests of our shareholders as the owners of our business. We aim to generate strong alignment between our Team and Executive’s reward and shareholder outcomes through the structure of our short-term incentive plan and long-term incentive plan. It is critical that our Team and Executives have an ownership mindset that enhances Tyro’s long-term value, rather than focusing on short-term gains. Be transparent, easy to understand. Be transparent, easy to understand and deliver remuneration outcomes that meet team member and external stakeholder expectations. Promoting gender pay equality. We are committed to equal pay for equal work and have recently introduced policies to review our gender pay equality on an annual basis. Each year we also complete the Workplace Gender Equality Agency gender equality program reporting. The findings from this annual report help us tailor our approach to ensure we’re achieving pay parity. 78 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022REMUNERATION REPORT Remuneration Overview COMPONENT ALIGNMENT TO PERFORMANCE ALIGNMENT TO STRATEGY Fixed Annual Remuneration (FAR) Consisting of: • Base salary • Superannuation • Set at a market competitive level in relation to the scope, complexity, capabilities and individual performance in the role. • Targeted at the 50th to 75th percentile of relevant external peer group. • Provides recognition for day-to-day, operational activities in the role. • Set to attract, retain and engage the best people to design and lead the delivery of our strategy. • Annual pay reviews occur in December each year with remuneration changes effective from 1 January. Short-Term Incentive Plan (STI) At risk component set as a percentage of FAR granted in a mix of cash and service rights to all employees Long-Term Incentive Plan (LTI) At risk component set as a percentage of FAR and granted in the form of performance rights annually to participating executives Performance assessed against: • Financial measures (target 50%). • Customer metrics (target 40%). • Individual KPI achievement (target 10%). • Linked to Tyro’s key strategic priorities. • The 25% of the award that is deferred into equity supports Executives’ alignment with shareholder interests, as well as Executive retention. • Performance assessed against • Targeting profitability and shareholder financial measures (target 100%) • 50% of the LTI award is subject to the satisfaction of an EBITDA hurdle with the vesting percentage determined by reference to Tyro’s statutory EBITDA (before share-based payments) 3-year CAGR to FY25. • 50% of each participant’s total LTI entitlement will be subject to satisfaction of a relative TSR hurdle with the vesting percentage determined by reference to Tyro’s relative TSR ranking relative to the TSR for the XTX index. wealth creation through EBITDA growth and outperformance of TSR. • The three-year vesting period encourages consideration of long- term decision making and value creation, as well as operating as a retention tool. • With a significant portion of potential remuneration based on equity, the Board provides alignment between the interests of Executives with shareholders. 3.2 Remuneration benchmarking and review In order to meet our commitment of ensuring remuneration is market-competitive together with attracting world class talent, we adopt a benchmarking approach to setting remuneration levels for our Non-executive Directors, Executive KMP and Executive Leadership Team. As a technology company with a banking licence, we do not have any direct ASX-listed peers of a similar size. As such, we use two comparator groups. The first comparator group is based on the market capitalisation of ASX listed companies with ASX rankings within a range of 20 above and 20 below (40 companies in total) that of Tyro at the time of benchmarking (excluding REITs and secondary ASX listings). The second comparator group, used to validate the primary market capitalisation peer group, was based on financial services companies in the ASX300, and companies in the ASX 300 Diversified Financials Index, excluding those that are above a market capitalisation of $5.0 billion and below that of $0.5 billion (excluding REITs, insurance companies, income trusts and secondary ASX listings). This group consists of 31 companies against which our remuneration is benchmarked. We will take into account the fall in our market capitalisation over the past 6 months as part of the benchmarking review we undertake in FY23 acknowledging that many of the companies against whom we benchmark have experienced similar falls in market capitalisation. 79 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022REMUNERATION REPORT 3.3 Design of FY22 STI Plan The FY22 STI Plan is designed to reward for the achievement of annual goals set in line with Tyro’s strategy and reflecting key growth drivers to deliver returns for shareholders. The Plan provides the STI framework for the CEO, Executive KMP and XLT members and employees of the Group. There were two changes to the FY22 STI design with the performance measures changing relating to the amendment of the weighting of the financial measure from 60% to 50% and the increase of the customer satisfactions measure increasing in weighting from 10% to 20%. A second change was made for all employees other than Executive KMP and XLT to allow for 33% of the award to be paid in cash with the remaining 67% issued as service rights that vest equally monthly over a 12-month period from the grant date. The number of employees who will participate in the STI for FY22 is 571 (FY21: 406). In terms of the Executive KMP and XLT, the CEO has a target STI potential of 50% of FAR. Excluding the CEO, a target STI potential of between 35% to 50% of Executive KMP FAR is available as an STI. All other XLT and other qualifying employees are allocated a potential target incentive amount of between 15% and 55% of FAR. The STI award for Executive KMP and the XLT is delivered 75% in cash and 25% in equity (Service Rights) that vest in 4-years with no performance hurdle but subject to malus and clawback provisions and irrespective of continuous service. For all other employees, the STI award is delivered 33% cash and 67% in equity (Service Rights) vesting in equal tranches over a 12-month period with no holding lock post vesting of each tranche irrespective of continuous service. An analysis of how the FY22 STI is calculated, specifically how the financial incentive pool is created, and the measures and weighting applied to financial performance outcomes and customer performance outcomes is set out below. 3.3.1 Financial performance targets for FY22 – 50% of target STI: FINANCIAL PERFORMANCE MEASURES Normalised gross profit growth WEIGHTING AT TARGET WEIGHTING AT MAXIMUM TARGET 50% 100% $156.4 million normalised gross profit for FY22 RATIONALE FOR METRIC • Key indicator of financial performance. • Ensures continued focus on growth. • Balances growth in transaction value with generating new business at profitable margins. CALCULATION OF FINANCIAL INCENTIVE POOL GROSS PROFIT MEASURE x COST CONTROL MEASURE = FINANCIAL PERFORMANCE POOL I T S N A G A H T W O R G T F O R P S S O R G I . I I N O L L M 7 9 1 1 $ F O T F O R P S S O R G 1 2 Y F I Gross profit more than $171.1 million - Pool formed of 6.4% of FY22 gross profit capped. Gross profit of between $157.4 million to $169.9 million - Pool formed of between 3.6% to 6.2% of FY22 gross profit. On Target gross profit - $156.4 million - Pool formed of 3.4% of FY22 gross profit. Gross profit of between $142.5 million to $155.1 million - Pool formed of between 0.7% to 3.2% of FY22 gross profit. Gross profit less than $141.4 million - No financial incentive pool formed. Margin adjustment factor (either upwards or downwards) – operating expense control Financial Performance Incentive Pool Created 80 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022REMUNERATION REPORT 3.3.2 Customer Performance Targets for FY22 - 40% of target STI: CUSTOMER PERFORMANCE MEASURES Transaction value churn Merchant number churn Customer satisfaction Customer satisfaction WEIGHTING AT TARGET WEIGHTING AT MAXIMUM TARGET RATIONALE FOR METRIC 5% 10% 8% or less churn • Key indicator of merchant retention focussing on retention of large merchants. • Aligns to all our Group values. 5% 10% 10% or less churn • Key indicator of merchant retention focussing on retention of all merchants. • Aligns to all our Group values. 10% 20% NPS of 43 or greater • Key indicator of merchant satisfaction. • Aligns to all our Group values. 10% 20% 30% or more of merchants signing on for two or more Tyro products Average of 1,300 new merchant applications per month for FY22 • Growth in value adding products. • Aligns to ‘Wow(ing) the Customer’ value. • Key indicator of winning new business. • Aligns to ‘Stay Hungry’ value. Merchant applications 10% 20% 3.3.3 Individual Key Performance Indicators for FY22 - 10% of target STI: Individual KPIs are set at the start of each financial year for each team member and focus on providing a measure of individual performance together with placing emphasis on the achievement of individual goals, the development of team members skills and expertise and challenging team members to achieve at their highest level. These KPIs are reviewed annually and form the basis of the evaluation of an individual’s achievement against the 10% target. For FY22, the average achievement for all employees came out at 75%. 3.3.4 Use of discretion: Grant of an STI is at the discretion of the Board and is assessed following the conclusion of the relevant financial year. Whether an STI is granted will depend on satisfaction of various criteria, including individual performance against key performance indicators, customer performance outcomes and financial performance outcomes, as determined by the Board. The Board retains the full discretion in relation to revising STI targets where material changes have occurred during the year. Furthermore, all equity granted in relation to STI awards to Executive KMP and XLT are subject to malus and clawback provisions and the Board has the discretion to adjust, lapse/forfeit, or require repayment of an award under the terms of the Group’s malus and clawback policy. 81 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022REMUNERATION REPORT 3.3.5 The key terms of the Service Rights relating to the FY22 STI are set out below: TERMS Administration Eligibility Grant date Expiry Vesting dates Exercise Rights DESCRIPTION The plan is administered by the Board (or the Board’s delegate). Full-time and part-time employees of the Company are eligible to receive awards under the STI Plan. The Board will select eligible employees to whom awards are to be granted from time to time. The date specified as the grant date in each participant’s offer document. Service rights issued under the plan will lapse 10 years after the date on which the relevant right vests. For Executive KMP and the XLT, vesting takes place 4 years (irrespective of continuous service) after grant with no performance hurdle and no holding lock post vesting. For all other employees vesting takes place in equal tranches over a 12-month period (irrespective of continuous service) with no holding lock post vesting. Following satisfaction of the vesting condition on each vesting date, the relevant number of Service Rights may be exercised at nil consideration. Each service right granted entitles the holder to one share on exercise. Shares resulting from an exercise of service rights rank equally with other shares, and shareholders are entitled to the same dividend and voting rights specified in our constitution. Holding lock period None. Clawback provisions Amendments Other terms Incentives may be clawed back where there has been a material misrepresentation of the financial outcomes on which the payment had been assessed and/or the participant’s actions have been found to be fraudulent, dishonest or in breach of the Group’s Code of Conduct (e.g. misconduct). The Board may amend the terms of the plan without consent of the participants if the amendment does not reduce the rights of the participants. The rules of the plan include other terms relating to the administration, transfer, termination and variation of the plan. 82 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022REMUNERATION REPORT 3.4 Design of FY22 LTI Plan The FY22 LTI is designed to reward participants for their contributions towards achieving the Group’s strategic priorities orientated around delivering long term sustainable shareholder value creation. The FY22 LTI Plan is open to the CEO, Executive KMP, Executive Leadership Team (XLT) and other nominated employees of Tyro and has been fulfilled via an issuance of performance rights. For FY22, there were 77 participants invited to participate in the plan (FY21: 43 participants). There were no changes to the design of the plan in FY22, however the performance measures in place were amended from FY21 to focus on long-term shareholder wealth creation centred on an EBITDA profitability measure rather than gross profit and revenue measures as used in prior years as Tyro moves to profitability. 3.4.1 Determination of the number of rights awarded under the LTI plan: The number of performance rights to be issued to each participant will be determined by reference to: • the volume weighted average price (VWAP) of Tyro shares traded in the 10 trading days commencing on the day following the announcement of Tyro’s FY21 full year result; and • each participant’s prescribed LTI entitlement that falls within the participant’s Total Remuneration Opportunity (TRO) as approved under the remuneration framework. For FY22, the maximum LTI potential is 64.5% of the CEOs Fixed Annual Remuneration (FAR), between 40% and 50% for the Executive KMP and a maximum LTI potential of between 15% to 40% for the XLT. Any other nominated employees have been allocated a maximum LTI potential of between 7.5% to 20% of their FAR in FY22. In FY22, the number of performance rights that will qualify for exercise will depend on the vesting percentage determined by reference to Tyro’s FY24 statutory EBITDA (which excludes share-based payment expenses). TARGET FY22 LTI (% OF PARTICIPANT FAR) ÷ VWAP OF TYRO SHARES 10-DAYS COMMENCING ON 27 AUGUST 2021 = NUMBER OF PERFORMANCE RIGHTS ALLOCATED 3.4.2 Performance hurdle applicable to FY22 LTI plan The number of performance rights that will qualify for exercise will depend on the vesting percentage determined by reference to Tyro’s FY24 statutory EBITDA (which excludes share-based payment expenses) as specified below. STATUTORY EBITDA OUTCOME VESTING PERCENTAGE Below $49.0 million $49.0 million $54.5 million $59.9 million $65.4 million and over 0% 70% 80% 90% 100% In addition to the performance hurdle, employees who participate in the FY22 LTI must remain employed by Tyro at the vesting date in order for the Performance Rights to vest. 83 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022REMUNERATION REPORT 3.4.3 The key terms of the Performance Rights relating to the FY22 LTI plan are set out below: TERMS DESCRIPTION Administration The plan is administered by the Board (or the Board’s delegate). Eligibility Eligible participants are Directors, Executive KMP, the XLT as well as other nominated employees of the Group. Grant date The date specified as the grant date in each participant’s offer document. Exercise price Nil Vesting dates Subject to satisfying the Performance Hurdle, the Performance Rights vest in one tranche 3 years following the Effective Date. Vesting condition The holder of the rights must be employed by Tyro on the date of vesting and the number of Performance Rights that qualify for exercise will depend on satisfaction of the performance hurdles set out above. Exercise Rights Once a FY22 LTI Performance Right has vested and subject to the Plan Rules, participants will be allocated with that number of fully paid Tyro Shares that corresponds to the relevant ‘Vesting Percentage’ multiplied by the number of FY22 LTI Performance Rights granted to participants. Each Performance Right granted entitles the holder to one share on exercise. Shares resulting from an exercise of Performance Rights rank equally with other shares, and shareholders are entitled to the same dividend and voting rights specified in our constitution. Holding lock period Any Vested Shares issued to participants following the vesting of the FY22 Performance Rights, will remain subject to a 12-month holding lock, commencing on the date that the Vested Shares are issued. During the Holding Lock Period, the Vested Shares cannot be transferred, sold, encumbered or otherwise dealt with. Clawback provisions The Performance Rights to be subject to forfeiture prior to vesting and thereafter any shares issued will be subject to claw back for up to a further 2-year period following the expiry of the ‘holding lock (i.e. awards can be forfeited up to 6 years from the Grant Date). Amendments Other terms The Board may amend the terms of the plan without consent of the participants if the amendment does not reduce the rights of the participants. The rules of the plan include other terms relating to the administration, transfer, termination and variation of the plan. 84 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022REMUNERATION REPORT 3.5 Design of FY23 LTI Plan Following engagement with stakeholders on the FY22 LTI Plan, the Board has refined the FY23 LTI Plan by amending the financial performance hurdles applicable to vesting for the plan. 50% of the plan award will now vest based on the achievement of a statutory EBITDA performance hurdle in FY25 while a new performance hurdle representing the remaining 50% of the plan award has been added based on the achievement of a TSR ranking relative to the XTX index at 30 June 2025. This change has been made to better align our LTI Plan with shareholder wealth creation of the medium to long term. The number of Performance Rights that qualify for exercise will depend on satisfaction of the following performance hurdles: EBITDA hurdle (50% of the Award) 50% of a participant’s total LTI entitlement will be subject to satisfaction of an EBITDA hurdle with the vesting percentage determined by reference to Tyro’s statutory EBITDA (before share-based payments) 3-year CAGR to FY25 as specified below: STATUTORY EBITDA (BEFORE SHARE-BASED PAYMENTS) 3-YEAR CAGR TO FY25 PERCENTAGE OF AWARDS VESTING Below 20% At 20% Above 20% and below 60% At or above 60% 0% 50% Pro-rata (50% to 99%) 100% Total Shareholder Return (TSR) (50% of the Award) 50% of each participant’s total LTI entitlement will be subject to satisfaction of a relative TSR hurdle with the vesting percentage determined by reference to Tyro’s relative TSR ranking relative to the TSR for the XTX index at 30 June 2025 as specified below: TSR PERCENTILE RANKING Below 50th Percentile At 50th Percentile PERCENTAGE OF AWARDS VESTING 0% 50% Above 50th and below 75th Percentile Pro-rata (50% to 99%) At or above 75th Percentile 100% 85 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022REMUNERATION REPORT 4. Key remuneration components for Executive KMP The charts below show the remuneration mix and total remuneration opportunity (TRO) for Executive KMP at target opportunity for FY22 and at maximum opportunity for FY22, comprising FAR, STI cash, STI deferred and LTI granted. CEO | Managing Director CFO CRO t e g r a T m u m i x a M 30% 23% 47% 25% 38% 37% 25% 25% 23% 33% 23% 50% 20% 57% 21% 44% 26% 53% Fixed Annual Remuneration STI LTI EXECUTIVE KMP FAR STI AT TARGET LTI AT TARGET TRO AT TARGET STI AT MAXIMUM LTI AT MAXIMUM TOTAL AT MAXIMUM FAR Robbie Cooke $990,000 $495,000 $638,500 $2,123,500 $990,000 $960,000 $638,500 $2,588,500 Prav Pala $610,000 $305,000 $305,000 $1,220,000 $610,000 $457,500 $305,000 $1,372,500 Steve Chapman $380,000 $133,000 $152,000 $665,000 $380,000 $190,000 $152,000 $722,000 Variable remuneration (comprising STI and LTI at target amounts) accounts for the majority of the total remuneration mix for the CEO | Managing Director and CFO. The actual remuneration mix will vary based on Tyro’s performance and individual performance each year. 86 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022REMUNERATION REPORT 4.1 Executive KMP remuneration time horizon Fixed Remuneration STI – cash STI – deferred service rights LTI – performance rights YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6 Date granted Vesting date End of holding lock period 4.2 Changes to Executive KMP remuneration for FY22 Robbie Cooke did not receive an increase to his FAR for FY22 and no changes were made to his STI or LTI arrangements. The remuneration arrangements for Robbie Cooke’s successor as CEO will be disclosed to the market as part of the announcement on the appointment of the CEO. The CFO’s FAR increased to $610,000 in FY22 (FY21: $520,000). His STI and LTI allocations as a proportion of FAR did not change. Our CRO was granted a 5.6% increase to his FAR for FY22 to $380,000 (FY21: $360,000) with no change to his STI and LTI allocations. 4.3 Contracts of employment The employment conditions of the KMP (excluding Non-executive Directors) are provided in the table below. All KMP are employed under contracts of no fixed duration. EXECUTIVE KMP CONTRACT TERM NOTICE PERIOD TERMINATION PAYMENT Robbie Cooke No fixed duration 6 months Prav Pala No fixed duration 9 months Steve Chapman No fixed duration 6 months Combination of notice and payment in lieu, totalling no less than 6 months. Combination of notice and payment in lieu, totalling no less than 9 months. Combination of notice and payment in lieu, totalling no less than 6 months. In the event of serious misconduct, Tyro may terminate employment at any time without notice or a termination payment being made. Any options or rights not vested before the date of termination will lapse. Robbie Cooke is subject to a post-employment restraint period of 12 months, Prav Pala is subject to a post- employment restraint period of 9 months, and Steven Chapman is subject to a post-employment restraint period of 6 months subject to all usual legal requirements. 87 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022REMUNERATION REPORT 5. Tyro’s FY22 performance and link to remuneration One of the key principles of Tyro’s remuneration framework is to align Executive KMP, the XLT and employee remuneration outcomes with financial and customer performance. This section provides a summary of Tyro’s performance outcomes for FY22 and the link to remuneration. 5.1 Financial performance outcomes FINANCIAL MEASURE FY18 FY19 FY20 FY21 5-YEAR CAGR FY22 Transaction value $13.4 billion $17.5 billion $20.1 billion $25.5 billion $34.2 billion 26.4% Gross profit (normalised) $69.1 million $83.3 million $93.5 million $119.7 million $148.5 million 21.5% EBITDA (normalised1) ($9.8 million) ($8.6 million) ($4.4 million) $14.2 million $10.7 million N/M EBITDA (statutory1) ($9.8 million) ($8.6 million) ($4.4 million) ($3.1 million) $14.4 million N/M Free cash flow2 ($12.4 million) ($13.8 million) ($24.0 million) ($3.3 million) ($7.3 million) N/M 1. Tyro uses EBITDA as a non-IFRS measure of business performance, which excludes the non-cash impact of share-based payments expense, share of losses from associates, expenses associated with the terminal connectivity issue and the IPO and other significant one- off costs. Refer to the page 14 of the FY22 Investor Presentation for a reconciliation of statutory to normalised results. 2. Free cash flow is calculated before changes in banking funds and timing differences relating to net scheme receivables. It is calculated as EBITDA before share-based payments adjusted for non-cash items in Tyro’s working capital movements, statutory adjustments (including rent payments) and capital expenditure including internally generated intangibles. Terminal capital expenditure includes both new and replacement terminals. Financial performance outcomes linked to FY22 STI - Financial component representing 50% of total STI: The actual result for FY22 was the achievement of 28.9% gross profit growth from FY21 (excluding JobKeeper benefits received in FY21) and an operating margin adjustment factor of 0.99 resulting in 50.4% of the target being achieved. The margin adjustment factor relates to the decreased operating margin of 92% achieved in FY22 compared to 90% in FY21 (before lending and non-lending losses and the JobKeeper benefit received in FY21). FY22 $’000 FY21 $’000 GROWTH Gross profit (normalised) 148,503 119,734 24.0% Less: JobKeeper benefit - (4.484) - Adjusted gross profit for STI calculation 148,503 115,250 28.9% Operating Expenses (normalised) (137,836) (105,568) 30.6% Operating margin adjustment factor 0.99x 1.18x STI financial component outcome 50.4% 117.0% COMMENTARY Gross profit growth was driven by a 34.2% increase in transaction value and a 10% increase in merchant count. The JobKeeper benefits for FY21 have been excluded from gross profit for FY21 as this was excluded from the STI calculation for FY21. No benefit was received in FY22. 28.9% growth achieved resulting in 51% of financial STI component at target becoming available. The increase in operating expenses reflects higher headcount and wage inflation together with higher administration costs. Normalised operating leverage for FY22 amounted to 92.8% compared to operating leverage for FY21 (before JobKeeper) of 91.6% 88 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022REMUNERATION REPORT 5.2 Customer performance outcomes CUSTOMER MEASURE Transaction value churn (%) FY18 - FY19 9.3% FY20 8.0% FY21 8.7% FY22 9.2% Merchant count churn (%) 13.0% 11.7% 11.7% 11.3% 10.5% Net Promoter Score (#) Merchants accepting two or more Tyro products (#) - - 37 - 43 - 21 15% 34 14% Merchant applications (#) 8,041 10,218 10,547 11,813 14,777 Customer performance outcomes linked to FY22 STI - Customer component metrics representing 40% of total STI: FY22 TARGET FY22 ACHIEVEMENT BELOW THRESH- OLD THRESH- OLD TARGET MAXI- MUM STI OUTCOME Transaction value churn (%) 8.0% 9.2% Merchant count churn (%) 10.0% 10.5% Net Promoter Score (#) NPS of 43 NPS of 34 Merchants accepting two or more Tyro products Merchant applications (#) 30% 14% Ave. of 1,300 p/m Ave. of 1,231 p/m % OF MAX % OF TAR- GET 74% 40% 74% 40% 0% 0% 0% 0% 65% 35% 5.3 CEO | Managing Director Key Performance Indicators Under the FY22 STI Plan, Executive KMP and the XLT are required to individually achieve against a balanced scorecard that comprises a mixture of financial and non-financial key performance indicators (KPIs). These KPIs represent 10% of the total STI. The Board performed an assessment of Robbie Cooke’s individual KPIs for FY22 with the results of his assessment reflected in his total FY22 STI outcome. 89 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022REMUNERATION REPORT 90 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022REMUNERATION REPORT 6. FY22 Executive KMP remuneration outcomes FY22 STI outcomes 6.1 The following table provides the FY22 STI outcomes awarded to Executive KMP. Under the FY22 STI plan 75% of the award is made in non-restricted cash and 25% of the awarded STI is provided in equity in the form of Service Rights, with vesting occurring 4-years from grant. EXECUTIVE KMP ACTUAL STI AWARDED $ CASH $ DEFERRED – TO BE ISSUED AS SERVICE RIGHTS STI AT TARGET STI ACHIEVED AS A % OF TARGET STI ACHIEVED AS A % OF MAX- IMUM $ $ Robbie Cooke 236,860 177,645 59,215 495,000 Prav Pala 164,244 123,183 41,061 305,000 Steve Chapman 70,291 52,718 17,573 133,000 % 48% 54% 53% % 25% 36% 37% FY22 LTI outcomes 6.2 The following table provides the FY22 LTI outcomes awarded to Executive KMP. Under the FY22 LTI plan, Performance Rights are granted in the year with vesting to take place 3-years from grant subject to performance conditions being met. EXECUTIVE KMP Robbie Cooke Prav Pala Steve Chapman NUMBER OF PER- FORMANCE RIGHTS GRANTED FAIR VALUE OF PER- FORMANCE RIGHTS GRANTED FAIR VALUE AT GRANT DATE 164,575 $638,500 75,387 29,657 $290,000 $108,000 $3.86 $3.86 $3.86 GRANT DATE 1 Mar 2022 1 Mar 2022 1 Mar 2022 AS A % OF TOTAL REMUNERATION1 N/A 35.2% 23.9% 1 Based on total statutory remuneration as reported on page 93. 91 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022REMUNERATION REPORT Legacy LTI Plan outcomes 6.3 Since the Group’s adoption of performance based long term incentives in 2019, there have been five awards made under the LTI Plan to Executive KMP and other nominated employees, with two awards tested. The table below sets out the details of performance rights issued over the last five financial years and the outcome of testing of those awards if testing dates have been reached. DETAILS FY19 AWARD FY20 AWARD FY21 AWARD FY22 AWARD LTI AWARD MEDIPASS AWARD Instrument Options Options Rights Rights Rights Grant date 1 May 2019 1 Oct 2019 1 Feb 2021 1 Jul 2021 1 Mar 2022 Test date 1 May 2022 1 Oct 2021 1 Sep 2023 30 Jun 2026 1 Sep 2024 Vesting date Vesting hurdle(s) Test result 1 2 4 5 1 Sep 2023 30 Jun 2026 1 Sep 2024 6 7 8 Performance hurdles not met3 Performance hurdles not met3 Not due for testing Not due for testing Not due for testing 1 FY19 LTI options vest in equal tranches of 25%, commencing on 1 May 2021. 2 Options granted in respect of FY19 must satisfy two performance hurdles to qualify for exercise: • • 25% compound gross revenue growth from 1 July 2018 to end of financial year of testing; and a positive Net Profit result (before tax and share-based expenses) for financial year of testing. 3 If a tranche does not satisfy both performance criteria on the relevant testing date, the tranche will be retested at the next testing date (if any). 4 FY20 LTI options vest in equal tranches of 25%, commencing on 1 October 2021. 5 Options granted in respect of FY20 must satisfy two performance hurdles to qualify for exercise: • • 20% compound gross revenue growth from 1 July 2019 to end of financial year of testing; and a positive Net Profit result (before tax and share-based expenses) for financial year of testing. 6 7 The FY21 performance rights will vest subject to passing a ‘Gateway’ and then satisfying a prescribed ‘Performance Hurdle’, and will vest in one tranche 3 years following the effective date of the plan. The ‘Gateway’ that must be passed prior to testing the performance hurdle is defined as Tyro reporting a positive EBITDA (before share-based payments) result for the financial year immediately preceding the vesting date, namely FY23. If the ‘Gateway’ is passed, the number of performance rights that qualify for exercise will depend on the vesting percentage determined by reference Tyro’s compound gross profit growth rate during the vesting period (Performance Hurdle). The number of Medipass Performance Rights that will vest will be determined by reference to the EBITDA (as set out in Tyro’s audited financial statements) for the combined Medipass and Tyro Health businesses in respect of the financial year ended 30 June 2026. 8 Refer to page 83 for a summary of the FY22 LTI vesting performance hurdles. The FY19 performance options were tested on 1 May 2022 as part of testing for the second vesting date. The compound gross revenue for the period 1 July 2018 to 30 June 2021 was 12.8% and a net loss before tax and share- based payments of $20.4 million was recorded resulting in the performance hurdles not being achieved. The FY19 options will be retested on 1 May 2023. The FY20 performance options were tested on 1 October 2021 as part of testing for the first vesting date. The compound gross revenue for the period 1 July 2019 to 30 June 2021 was 13.2% and a net loss before tax and share- based payments of $20.4 million was recorded resulting is the performance hurdles not being achieved. The FY20 options will be retested on 1 Oct 2022. 92 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022REMUNERATION REPORT 7. Statutory Executive KMP Remuneration The following table provides the statutory remuneration outcomes for Executive KMP for FY22 and FY21 and is prepared in accordance with Australian Accounting Standards. The statutory remuneration outcomes disclosed in this table differs from the Executive KMPs’ FY22 Total Remuneration Opportunity (TRO) and the elements of the remuneration framework outlined in Section 4 of this Report. Differences arise mainly due to the accounting treatment of long-term benefits (which include annual leave and long service leave) and share-based payments (performance rights, LEPRs, remuneration sacrifice rights and option plans). Disclosures include an accounting value for current year rights and all unvested option plan awards. The Accounting Standards require remuneration in the form of equity awards to be expensed (and therefore included as remuneration) over the performance period of the option plan even though an Executive KMP may not realise any benefit from that award. CASH SALARY $ SUPER ANNUATION $ NAME NON- MONETARY BENEFITS $ CASH STI AWARD $ LONG SERVICE LEAVE $ OPTIONS9 $ RIGHTS2 $ TOTAL $ PERFOR- MANCE BASED EQUITY COMPO- NENT $ EXECUTIVE KMP Robbie Cooke FY22 970,954 23,568 - 177,645 FY21 906,290 21,694 34,6933 332,161 - - (760,912)1 (172,588)1,4 238,667 N/A 497,512 379,865 2,172,215 55.7% Prav Pala FY22 573,932 23,568 FY21 453,525 21,694 Steve Chapman6 FY22 360,000 23,568 FY21 28,615 1,808 Angela Green8 FY22 - - FY21 389,4248 21,694 Total FY22 1,904,886 70,704 - - - - - - - 123,183 55,450 5,422 132,6775 914,232 15.1% 175,443 39,916 146,738 246,983 1,084,299 52.5% 52,718 38,237 - - - - - - (1,420) 42,9797 477,845 8.7% 35,971 38,935 143,566 n/a - - - - 2,768 76,184 490,070 16.1% 353,546 55,450 (756,910) 3,068 1,630,744 FY21 1,777,854 66,890 34,693 545,841 39,916 682,989 741,967 3,890,150 1 Under accounting rules, any unvested share-based instruments of the CEO | Managing Director are deemed forfeited as a result of resignation. Changes to this treatment, if any, will be reflected in next year’s Remuneration Report. 2 Rights relate to the Remuneration Sacrifice Rights Plan, the LEPR Plan and the Service Rights awarded in FY21 and FY22 under the STI Plan. These rights are classified as long term due to the terms of each respective Plan. 3 Non-monetary benefits for Robbie Cooke in FY21 relate to an allowance claimable to a maximum of $50,000 annually for reimbursement of personal travel expenses. 4 5 Included in the FY22 cost of Rights awarded to Robbie Cooke, is an amount of $59,215 relating to the FY22 STI incentive and an amount of $26,025 relating to the amortised accounting cost of the FY21 STI incentive. Included in the FY22 cost of Rights awarded to Prav Pala, is an amount of $41,061 relating to the FY22 STI incentive and an amount of $13,746 relating to the amortised accounting cost of the FY21 STI incentive. 6 Steven Chapman commenced as KMP effective 11 June 2021. Pro rata Fixed Remuneration figures provided from 1 June 2021 to 30 June 2021. The STI, Options and Rights figures represent the full FY21 charges. 7 Included in the FY22 cost of Rights awarded to Steve Chapman, is an amount of $17,573 relating to the FY22 STI incentive and an amount of $2,996 relating to the amortised accounting cost of the FY21 STI incentive. 8 Angela Green ceased employment with the Company effective 10 June 2021. Included in her cash salary for FY21 is an amount of $22,038 relating to 1 months’ notice payment received. 9 The negative accounting value of options for FY22 relates to management’s judgement that the FY19 LTI Option Plan only has a certain percentage probability of vesting. As such, a proportion of the prior year share-based payments expense for these options have been reversed. 93 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022REMUNERATION REPORT 8. Non-executive Director Remuneration Non-executive Directors receive a base fee, and where applicable, an additional fee in recognition of the higher workload and extra responsibilities resulting from Board Committee participation. Fees are based on peer market benchmarks and reviewed annually. Non-executive Directors do not receive incentive payments, and following Tyro’s listing on the ASX on 6 December 2019, they are no longer entitled to participate in any Tyro employee or Executive equity plans other than the remuneration sacrifice rights plan. They receive no non-monetary benefits and do not participate in any retirement benefit scheme, other than statutory superannuation contributions. Under the ASX Listing Rules, the total amount or value of remuneration paid to Non-executive Directors in any year may not exceed the amount approved by shareholders at the Company’s general meeting. This amount has been fixed at $1,400,000 per annum, as approved by shareholders at Tyro’s 2019 annual general meeting. As at the date of this report, the Non-executive Director base fee agreed to be paid by us is $140,000 effective from 1 July 2021 (FY21: $108,000) per annum before superannuation contributions. Non-executive Directors are also paid additional base fees for the following roles: • Chair of the Board: $70,000 per annum (for total remuneration of $210,000 per annum); and • Chair of a Board Committee: $20,000 per Committee Chair (for total remuneration of $160,000 per annum), not payable if the Committee Chair is also the Board Chair. Other than the Chair of a Board Committee, Non-executive Directors are not paid an additional fee for being a member of a Board Committee. In addition to the remuneration above, the Company will contribute statutory superannuation to a complying superannuation fund. Remuneration is reviewed annually and any increase to it will be at the discretion of the Board but will not exceed the aggregate amount approved by Shareholders. The table below outlines the statutory remuneration paid to Non-executive Directors in FY22 in accordance with Australian Accounting Standards. 94 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022REMUNERATION REPORT Claire Hatton4 FY22 68,889 6,889 CASH FEES $ SUPERANNUA- TION $ OPTIONS5 $ RIGHTS1 $ TOTAL $ PERFOR- MANCE BASED EQUITY COM- PONENT % NAME NON-EXECUTIVE DIRECTOR David Thodey FY22 231,000 FY21 Hamish Corlett2 FY22 David Fite FY21 FY22 FY21 Aliza Knox3 FY21 FY22 FY21 Fiona Pak-Poy FY22 FY21 Shefali Roy4 Total FY21 FY22 FY21 FY22 FY21 - 3.8% - 3.9% - 7.7% - - - - - - - - - - - (5,368) - 225,632 7,691 197,100 204,791 (16,751) 46,663 29,912 4,752 118,260 123,012 140,000 14,000 (4,457) - 149,543 - - 9,829 118,260 128,089 - - 161,273 16,127 23,349 - - 76,667 68,889 - - - - 9,000 7,283 6,889 - - - - - - - - - 75,778 - 177,400 23,349 8,911 159,998 168,909 5.3% - 118,260 118,260 (7,886) 90,000 181,114 - - 11,234 78,110 173,294 6.5% - - - - 75,778 - - - 760,051 52,905 (25,551) 296,661 1,084,066 100,016 7,283 33,506 629,990 770,795 Paul Rickard FY22 90,000 1 Included in rights for FY22 are the fees Non-executive Directors have salary sacrificed and issued as service rights. 2 Hamish Corlett stepped down from the Board on 3 November 2021. Remuneration details are provided for the period 1 July 2021 to 3 November 2021. 3 Aliza Knox was appointed to the Board on 21 April 2021. The FY21 data in the table above reflects the Non-executive Director fees received from that date. Included in the FY22 fees is the cash amount earned in FY21 and only paid in FY22. 4 Claire Hatton and Shefali Roy were appointed as Non-executive Directors on 5 January 2022. The FY22 data in the table above reflects the Non-executive Director fees received from that date. 5 The negative accounting value of options for FY22 relates to management’s judgement that the FY19 LTI Option Plan only has a certain percentage probability of vesting. As such, a proportion of the prior year share-based payments expense for these options have been reversed. 95 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022REMUNERATION REPORT 9. Summary of Options and Rights under issue Rights 9.1 Unissued shares in Tyro held under STI service rights plans, LTI service rights plans, LTI performance rights plans, the Liquidity Event Performance Rights plan and remuneration sacrifice rights plans at the date of this report are shown in the table below: AWARD TYPE Remuneration sacrifice rights in respect of FY18 Executive STI Plan Remuneration sacrifice rights in respect of FY19 Director Fees Remuneration sacrifice rights in respect of FY19 Executive STI Plan Remuneration sacrifice rights in respect of FY20 Director Fees Remuneration sacrifice rights in respect of FY21 Director Fees Remuneration sacrifice rights in respect of FY22 Director Fees GRANT DATE 18 Apr 2019 EXPIRY DATE EXER- CISE PRICE % VEST- ED % EXER- CISED NUMBER HELD AS RIGHTS n/a n/a 100% 100% 5 Sep 2018 n/a n/a 100% 100% 16 Oct 2019 n/a n/a 100% 100% 16 Oct 2019 n/a n/a 85% 85% 27 Oct 2020 n/a n/a 100% 0% 231,971 3 Nov 2021 n/a n/a 100% 0% 76,460 Nil Nil Nil Nil Liquidity Event Performance Rights 9 May to 6 Aug 2019 FY20 STI service rights 14 Dec 2020 FY21 LTI performance rights 5 Feb 2021 FY21 STI service rights 2 Sep 2021 FY22 LTI performance rights 1 Mar 2022 Medipass service rights 1 Jul 2021 Medipass performance rights 1 Jul 2021 FY22 LTI service rights 1 Feb 2022 1 1 2 1 2 1 2 1 n/a n/a n/a n/a n/a n/a n/a n/a 100% 80% 800,000 79% 42% 0% 0% 0% 0% 0% 8% 0% 0% 0% 0% 0% 1% 287,985 647,834 802,227 1,041,406 1,008,597 1,008,597 2,959,630 1 2 10 years after relevant vesting date FY21, FY22 and Medipass LTI performance rights expire immediately after vesting date should the performance hurdles not be met. Should the performance hurdles be met on vesting date, then shares are issued to plan participants without the requirement to exercise. 96 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022REMUNERATION REPORT Rights held by Non-executive Directors BALANCE AT START OF YEAR GRANTED AS COMPENSA- TION1 EXERCISED FORFEITED BALANCE AT END OF YEAR VESTED AND EXERCIS- ABLE UNVESTED NAME NON-EXECUTIVE DIRECTOR David Thodey FY22 - 59,367 - FY21 131,905 - (131,905) Hamish Corlett2 FY22 - 47,647 - David Fite FY21 FY22 FY21 Claire Hatton FY22 Aliza Knox FY21 FY22 FY21 Fiona Pak-Poy FY22 89,658 - (89,658) - 35,620 - 89,658 - - - - - - - - - - 76,857 (89,658) - - - - - FY21 73,692 - (73,692) Paul Rickard FY22 - 46,723 - Shefali Roy FY21 FY22 FY21 61,432 - - - - - (61,432) - - - - - - - - - - - - - - - - - - 59,367 59,367 - - - - 47,647 35,620 12,027 - - 35,620 35,620 - - - - - - - - - - - - - - - - - 76,857 35,620 41,237 - - - 46,723 23,527 23,196 - - - - - - - - - 1 Rights granted as compensation in FY22 relate to director fees sacrificed in FY21 and FY22 2 Hamish Corlett stepped down from the Board on 3 November 2021. Details are provided for the period 1 July 2021 to 3 November 2021. Rights held by Executive KMP NAME EXECUTIVE KMP BALANCE AT START OF YEAR GRANTED AS COM- PENSATION1 EXERCISED FORFEITED BALANCE AT END OF YEAR VESTED AND EXERCIS- ABLE UNVESTED Robbie Cooke FY22 1,430,476 193,111 (400,000) FY21 1,200,000 230,476 - Prav Pala FY22 244,456 90,459 (190,437) FY21 333,333 77,790 (166,667) Steve Chapman1 FY22 19,469 32,942 (3,926) FY21 Angela Green2 FY22 - - 22,187 (2,718) - - - - - - - - - FY21 200,000 62,626 (107,671) (154,955) 1,223,587 857,728 365,859 1,430,476 826,240 604,236 144,478 - 144,478 244,456 10,805 233,651 48,485 19,469 - 48,485 302 19,167 - - - - - - 1 Steve Chapman commenced as KMP effective 11 June 2021. Details of his rights prior to the commencement as KMP are included in this table. 2 Angela Green ceased employment with the Company effective 10 June 2021. All remaining rights were forfeited from that date. 97 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022REMUNERATION REPORT 9.2 Options Unissued ordinary shares in Tyro held under option plans at the date of this report are shown in the table below: AWARD TYPE GRANT DATE EXPIRY DATE Options exercisable between $0.375 to $1.76 expiring between 17 October 2020 and 22 July 2024 Between 18 Oct 2013 to 19 Dec 2018 Between 17 Oct 2020 to 22 Jul 2024 EXER- CISE PRICE $0.375 to $1.76 % VEST- ED % EXER- CISED NUMBER HELD AS OPTIONS 91% 49% 9,264,774 Options exercisable at Nil expiring between 30 December 2024 and 25 June 2025 31 Dec 2018 to 26 Jun 2019 Between 30 Dec 2024 and 25 Jun 2025 Nil 54% 30% 1,145,376 Options exercisable at Nil expiring on 31 August 2025 1 Sep 2019 31 Aug 2025 Nil 33% 21% 683,623 Options exercisable at $1.50 expiring on 30 April 2026 1 May and 6 Aug 2019 30 Apr 2026 $1.50 0% 0% 4,895,120 Options exercisable at $1.79 expiring on 30 September 2026 1 Oct 2019 30 Sep 2026 $1.79 0% 0% 5,584,832 98 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022REMUNERATION REPORT Options held by Non-executive Directors NAME NON-EXECUTIVE DIRECTOR BALANCE AT START OF YEAR GRANTED AS COM- PENSATION EXERCISED FORFEITED BALANCE AT END OF YEAR VESTED AND EXERCIS- ABLE UNVESTED David Thodey FY22 82,286 FY21 82,286 Hamish Corlett1 FY22 68,000 FY21 68,000 David Fite FY22 158,144 FY21 2,919,318 Claire Hatton FY22 Aliza Knox FY21 FY22 FY21 - - - - Fiona Pak-Poy FY22 83,000 FY21 83,000 Paul Rickard FY22 229,400 Shefali Roy FY21 253,940 FY22 FY21 - - - - - - - - - - - - - - - - - - - - - - - (2,761,174) - - - - - - (28,169) (24,540) - - - - 82,286 82,286 (68,000) - 68,000 8,571 5,714 - - 73,715 76,572 - 68,000 - - - - - - - - - - - - - 158,144 75,679 82,465 158,144 57,822 100,322 - - - - 83,000 83,000 - - - - - - - - - - 83,000 83,000 201,231 91,378 109,853 229,400 106,682 122,718 - - - - - - 1 Hamish Corlett stepped down from the Board on 3 November 2021. Details are provided for the period 1 July 2021 to 3 November 2021. Options held by Executive KMP BALANCE AT START OF YEAR GRANTED AS COMPENSA- TION EXERCISED FORFEITED BALANCE AT END OF YEAR VESTED AND EXERCIS- ABLE UNVESTED NAME EXECUTIVE KMP Robbie Cooke FY22 5,504,530 FY21 5,504,530 Prav Pala FY22 1,808,186 FY21 2,033,739 Steve Chapman1 FY22 342,334 FY21 342,334 Angela Green2 FY22 - FY21 494,044 - - - - - - - - - - (194,700) (225,553) - - - - - 5,504,530 1,743,720 3,760,810 - - - - - - (494,044) 5,504,530 1,303,894 4,200,636 1,613,486 390,805 1,222,681 1,808,186 492,644 1,315,542 342,334 342,334 - - - - - - 342,334 342,334 - - 1 Steve Chapman commenced as KMP effective 11 June 2021. Details of his rights prior to the commencement as KMP are included in this table. 2 Angela Green ceased employment with the Company effective 10 June 2021. All remaining rights were forfeited from that date. 99 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022REMUNERATION REPORT 9.3 Equity grants to Executive KMP This section sets out the required statutory disclosures of equity grants for Tyro’s Executive KMP. NUMBER OF OPTIONS/ RIGHTS GRANTED VEST- ING DATE EXERCISE PRICE VALUE OF OPTIONS/ RIGHTS AT GRANT DATE VESTED % VESTED (NUMBER) GRANT DATE Robbie Cooke 19 Dec 2018 1,818,180 1 May 2019 1,567,813 26 Jun 2019 1,200,000 26 Jun 2019 380,952 1 Oct 2019 1,737,585 2 Sep 2020 1 Feb 2021 2 Sep 2021 1 Mar 2022 Prav Pala 10 Oct 2014 6 Oct 2015 2 Nov 2016 62,975 167,501 28,536 164,575 211,268 166,129 141,403 1 Feb 2018 250,000 31 Dec 2018 1 May 2019 71,428 634,681 9 May 2019 500,000 1 Oct 2019 558,830 2 Sep 2020 1 Feb 2021 2 Sep 2021 1 Mar 2022 Steve Chapman10 1 May 2019 1 Oct 2019 2 Sep 2020 1 Feb 2021 2 Sep 2021 1 Mar 2022 25,930 51,860 15,072 75,387 181,337 160,997 7,246 14,941 3,285 29,657 1 2 3 4 5 6 7 8 9 1 1 1 1 4 2 3 5 6 7 8 9 2 5 6 7 8 9 $1.76 $1.50 Nil Nil $475,159 81.7% 1,515,150 $488,235 0.0% Nil $1,320,000 100.0% 1,200,000 $419,047 60.0% 228,570 $1.79 $816,231 0.0% Nil Nil Nil Nil Nil $0.45 $0.60 $1.49 $1.76 Nil $209,077 87.5% 55,104 $556,104 $108,437 $279,778 0.0% 0.0% 0.0% Nil Nil Nil $31,211 100.0% $26,479 100.0% $39,580 100.0% 211,268 166,129 141,403 $59,492 86.7% 216,664 $74,999 60.0% 42,856 $1.50 $197,647 0.0% Nil Nil $550,000 100.0% 500,000 $1.79 $262,510 0.0% Nil $86,088 87.5% 22,690 Nil Nil Nil Nil $163,359 $57,274 $128,158 $1.50 $1.79 $197,647 $262,510 0.0% 0.0% 0.0% 0.0% 0.0% Nil Nil Nil Nil Nil Nil Nil Nil Nil $24,057 87.5% 6,342 $47,064 $12,483 $50,417 0.0% 0.0% 0.0% Nil Nil Nil VALUE OF OPTIONS/ RIGHTS EXERCISED DURING THE REPORTING PERIOD FOR- FEITED/ LAPSED % Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil - - - - - - - - - - $26,479 - - - - - - - - - - - - $21,050 - - - 100 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022REMUNERATION REPORT NUMBER OF OPTIONS/ RIGHTS GRANTED VEST- ING DATE EXERCISE PRICE VALUE OF OPTIONS/ RIGHTS AT GRANT DATE VESTED % VESTED (NUMBER) GRANT DATE Angela Green11 VALUE OF OPTIONS/ RIGHTS EXERCISED DURING THE REPORTING PERIOD FOR- FEITED/ LAPSED % 6 Aug 2019 300,000 6 Aug 2019 1 Oct 2019 2 Sep 2020 1 Feb 2021 39,607 454,437 20,453 42,173 3 2 5 6 7 Nil $330,000 66.7% 200,000 33.3% $1.50 $1.79 Nil Nil $12,334 $213,472 0.0% 0.0% Nil 100.0% Nil 100.0% $67,906 37.5% 7,671 62.5% $132,845 0.0% Nil 100.0% - - - - - 1 Options granted vest monthly in equal tranches over a period of 5 years and are not subject to any performance conditions. 2 Options granted vest annually in equal 25% tranches over a period of four years, commencing 24 months after the grant date and subject to the following performance conditions: (i) 25% compound gross revenue growth per annum; and (ii) a positive net profit result (before tax and share-based expenses). If a tranche does not satisfy both performance criteria on the relevant testing date, the tranche will be retested at the next testing date (if any). 3 Vesting will occur in three equal tranches, as follows: one third on the date of the liquidity event (Initial Vesting Date); one third on the date that is 12 months after the Initial Vesting Date; and one third on the date that is 24 months after the Initial Vesting Date. 4 Options granted vest annually in equal 20% tranches over a period of five years, commencing 12 months after the grant date and are not subject to any performance conditions. 5 Options granted vest annually in equal 25% tranches over a period of four years, commencing 24 months after the grant date and subject to the following performance conditions: (i) 20% compound gross revenue growth per annum; and (ii) a positive net profit result (before tax and share-based expenses). If a tranche does not satisfy both performance criteria on the relevant testing date, the tranche will be retested at the next testing date (if any). 6 Vesting occurs equally on a monthly basis over a 24-month period from the Initial Vesting Date. 7 Subject to passing the ‘Gateway’ and satisfying the Performance Hurdle, the Performance Rights vest in one tranche 3 years following the Effective Date. 8 Vesting takes place 4-years (irrespective of continuous service) after grant with no performance hurdle. 9 Subject to satisfying the Performance Hurdle, the Performance Rights vest in one tranche 3 years following the Effective Date. 10 Steven Chapman commenced as KMP effective 11 June 2021. Details of his options prior to the commencement as KMP are included in this table. 11 Angela Green ceased employment with the Company effective 10 June 2021. All remaining options were forfeited from that date. 10. Summary of Shares held by Non-executive Directors and Executive KMP The number of ordinary shares held in Tyro at 30 June 2022 by each KMP, including their personally related parties, is set out below: NAME NON-EXECUTIVE DIRECTOR David Thodey FY22 FY21 Hamish Corlett1,2 FY22 FY21 BALANCE AT START OF YEAR RECEIVED DURING THE YEAR ON EXERCISE OF OPTIONS/RIGHTS OTHER CHANGES DURING THE YEAR BALANCE AT END OF YEAR 990,996 859,091 1,203,921 1,114,263 - 131,905 - 89,658 66,000 1,056,996 - - - 990,996 1,203,921 1,203,921 101 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022REMUNERATION REPORT NAME David Fite BALANCE AT START OF YEAR RECEIVED DURING THE YEAR ON EXERCISE OF OPTIONS/RIGHTS OTHER CHANGES DURING THE YEAR BALANCE AT END OF YEAR FY22 FY21 18,593,861 18,547,995 - (2,000,000) 16,593,861 2,850,832 (2,804,966) 18,593,861 Claire Hatton FY22 Aliza Knox FY21 FY22 FY21 Fiona Pak-Poy FY22 FY21 Paul Rickard FY22 Shefali Roy FY21 FY22 FY21 - - - - 106,420 32,728 2,098,571 2,319,660 - - - - - - - 73,692 28,169 85,972 - - 14,583 14,583 - - - - - - (307,061) - - - - - 106,420 106,420 2,126,740 2,098,571 - - 1 Shares indicated in the table are beneficially held by Hamish Corlett. Hamish Corlett also has a relevant interest in TDM Growth Partners Pty Ltd and other associated entities who have a total interest in Tyro of 23,853,855 ordinary shares. 2 Hamish Corlett stepped down from the Board on 3 November 2021. Details are provided for the period 1 July 2021 to 3 November 2021. NAME EXECUTIVE KMP Robbie Cooke FY22 Prav Pala FY21 FY22 FY21 Steve Chapman1 FY22 FY21 BALANCE AT START OF YEAR RECEIVED DURING THE YEAR ON EXERCISE OF OPTIONS/RIGHTS OTHER CHANGES DURING THE YEAR BALANCE AT END OF YEAR 491,936 491,936 664,882 272,662 8,678 5,658 400,000 136,565 1,028,501 - 347,922 392,220 2,114 3,020 - (359,178) - 6,040 - 491,936 653,626 664,882 16,832 8.678 1 Steven Chapman commenced as KMP effective 11 June 2021. Details of his options prior to the commencement as KMP are included in this table. 102 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022REMUNERATION REPORT 11. Other information No loans have been granted to any KMP. There were no transactions during the reporting period involving an equity instrument to KMP or related parties, other than those disclosed in this Remuneration Report. 103 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022REMUNERATION REPORT s ’ r o t i d u A n o i t a r a c e D l e c n e d n e p e d n I TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022 104 Ernst & Young 200 George Street Sydney NSW 2000 Australia GPO Box 2646 Sydney NSW 2001 Tel: +61 2 9248 5555 Fax: +61 2 9248 5959 ey.com/au Auditor’s Independence Declaration to the Directors of Tyro Payments Limited As lead auditor for the audit of the financial report of Tyro Payments Limited for the financial year ended 30 June 2022, I declare to the best of my knowledge and belief, there have been: a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; b) no contraventions of any applicable code of professional conduct in relation to the audit; and c) no non-audit services provided that contravene any applicable code of professional conduct in relation to the audit. This declaration is in respect of Tyro Payments Limited and the entities it controlled during the financial year. Ernst & Young Michael Byrne Partner 29 August 2022 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022 105 106 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022 Financial Report 107 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022 FINANCIAL STATEMENTS Statement of Comprehensive Income Statement of Financial Position Statement of Cash Flows Statement of Changes in Equity NOTES TO THE FINANCIAL STATEMENTS 1. General information and statement of accounting policies 2. Revenue and expenses 3. Segment reporting 4. Income tax 5. Cash and cash equivalents 6. Due from other financial institutions 7. Trade and other receivables 8. Loans 9. Leases 10. Financial investments 11. Investment in associates 12. Property, plant and equipment 13. Intangible assets and goodwill 14. Share based payments 15. Deposits 16. Trade payables and other liabilities 17. Current and non-current provisions 18. Contributed equity and reserves 19. Financial risk management objectives, policies and processes 20. Commitments and contingencies 21. Acquisition of subsidiary 22. List of subsidiaries 23. Earnings per share 24. Auditor’s remuneration 25. Related party disclosures 26. Parent entity disclosures 27. Matters subsequent to the end of the financial year 28. Contingent liabilities DIRECTORS’ DECLARATION 111 111 112 113 114 115 115 125 126 127 128 129 130 130 131 132 133 134 135 136 140 140 141 141 143 150 151 152 153 153 154 155 155 155 156 INDEPENDENT AUDIT REPORT TO THE MEMBERS OF TYRO PAYMENTS LIMITED 157 108 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022FINANCIAL REPORT 109 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022FINANCIAL REPORT Financial Statements Statement of Comprehensive Income FOR THE YEAR ENDED 30 JUNE 2022 Fees and terminal rental income Interest income on loans Fair value gain on loans Interest income on cash and deposits Interest income on assets at FVOCI Sale of terminal accessories Other revenue and income Total revenue Interchange, integration and support fees Interest expense on deposits Terminal accessories Total direct expenses Gross profit Employee benefits expense (excluding share-based expense) Share-based payments expense Communication, hosting and licencing costs Administrative expenses Contractor and consulting expenses Marketing expenses Depreciation and amortisation Lending and non-lending losses Lease interest expense Total operating expenses Share of loss from associates Initial Public Offering (IPO) expenses Loss before tax expense Income tax expense Loss for the year Other comprehensive income/(loss) FVOCI reserve – revaluation (loss)/gain, net of tax Total comprehensive loss for the year NOTE 2 2 2 2 2 9, 12, 13 2 11 4 2022 $000 317,699 4,877 627 170 583 1,148 1,039 326,143 (169,824) (274) (1,366) 2021 $000 228,069 1,952 1,270 394 557 1,152 5,128 238,522 (117,371) (379) (1,323) (171,464) (119,073) 154,679 (92,628) (5,199) (14,321) (12,978) (13,726) (5,532) (31,681) (1,115) (3,558) (180,738) (3,558) - (29,617) - 119,449 (76,174) (9,342) (9,896) (13,007) (7,192) (5,419) (15,364) (10,863) (517) (147,774) (1,119) (331) (29,775) (48) (29,617) (29,823) (1,008) 105 (30,625) (29,718) CENTS CENTS Earnings per share for loss attributable to the Ordinary Equity Holders of Tyro Payments Limited Basic loss per share Diluted loss per share 23 23 (5.74) (5.74) (5.90) (5.90) The above Statement of Comprehensive Income should be read in conjunction with the accompanying Notes. 110 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022FINANCIAL REPORT Statement of Financial Position AS AT 30 JUNE 2022 Assets Current assets Cash and cash equivalents Due from other financial institutions Trade and other receivables Loans Prepayments Financial investments Inventories Total current assets Non-current assets Loans Financial investments Investment in associates Property, plant and equipment Right of use assets Intangible assets and goodwill Deferred tax assets Total non-current assets Total assets Liabilities Deposits Trade payables and other liabilities Lease liabilities Provisions Total current liabilities Non-current liabilities Other liabilities Lease liabilities Provisions Total non-current liabilities Total liabilities Net assets Equity Contributed equity Reserves Accumulated losses Total equity NOTE 2022 $000 2021 $000 5 6 7 8 10 8 10 11 12 9 13 4 15 16 9 17 16 9 17 18 18 18 36,885 14,698 22,704 34,262 3,643 10,474 388 84,521 19,191 17,095 14,378 3,337 21,618 128 123,054 160,268 5,242 62,221 1,942 41,452 31,158 132,033 12,986 287,034 410,088 83,273 37,425 1,897 10,532 1,009 47,450 4,998 26,027 1,654 140,867 12,986 234,991 395,259 75,481 29,215 2,812 15,382 133,127 122,890 83,553 32,096 1,712 117,361 250,488 159,600 278,798 47,085 90,478 - 1,227 91,705 214,595 180,664 274,436 40,827 (166,283) (134,599) 159,600 180,664 The above Statement of Financial Position should be read in conjunction with the accompanying Notes. 111 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022FINANCIAL REPORT Statement of Cash Flows For the year ended 30 June 2022 Cash flows from operating activities Fees and terminal rental income received Interchange, integration and support fees paid Interest received Interest paid Other income received1 Payments to employees and contractors Terminals purchased Communication, hosting and licencing costs paid Other operating expenses paid Payments for terminal remediation Movement in net scheme and other receivables Net cash flows from operating activities excluding loans and deposits Movement in loans Movement in deposits Net cash flows from operating activities Cash flows from investing activities Movement in term deposit investments Proceeds on maturity Movement in financial investments Purchases Proceeds Movement in equity investments Investments in associates Purchase of property, plant and equipment (excluding terminals) Proceeds received from sale of property, plant and equipment (excluding terminals) Payments for recognised intangible assets Payments received from sublease Net cash used in investing activities Cash flows from financing activities Proceeds from exercise of share options Payments of the principal portion of leases Net cash flows from financing activities NOTE 2022 $000 2021 $000 315,579 (175,919) 5,585 (581) 1,827 (99,067) (13,966) (14,321) (21,395) (5,041) (1,722) (9,021) (24,090) 7,792 (25,319) 227,920 (117,800) 3,018 (415) 6,069 (76,592) (16,360) (9,896) (19,272) - (7,650) (10,978) (2,918) 24,939 11,043 5,000 5,028 (33,072) 28,500 (501) (13,858) 166 (11,883) 8,951 (2,491) (1,205) - (10,497) (28,076) - 376 (24,262) (29,300) 4,362 (2,788) 1,574 4,059 (5,069) (1,010) Net movement in cash and cash equivalents Effect of foreign exchange rates on cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year 1 FY21 included JobKeeper receipts of $4,483,500 (FY22: nil). (48,007) (19,267) 371 84,521 5 36,885 27 103,761 84,521 The above Statement of Cash Flows should be read in conjunction with the accompanying Notes. 112 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022FINANCIAL REPORT Statement of Changes in Equity For the year ended 30 June 2022 CON- TRIBUTED EQUITY FVOCI RE- SERVE NOTE SHARE- BASED PAYMENTS RESERVE GENERAL RESERVE FOR CREDIT LOSSES ACCU- MULATED LOSSES $000 $000 $000 $000 $000 TOTAL $000 At 1 July 2020 Loss for the year Other comprehensive income Deferred tax on equity movements Total comprehensive income/(loss) Issue of ordinary shares Share-based payments Transfer to general reserve for credit losses 265,763 - - - - 8,673 - - 3 - 185 (80) 105 - - - 26,371 2,103 (104,521) 189,719 (29,823) (29,823) - - 185 (80) (29,823) (29,718) - - - - - 11,990 - - - - - - - 255 (255) At 30 June 2021 274,436 108 38,361 2,358 (134,599) 180,664 At 1 July 2021 274,436 108 38,361 2,358 (134,599) 180,664 Loss for the year Other comprehensive loss Total comprehensive loss Issue of ordinary shares Issue of share capital – from options and rights exercised Share-based payments Transfer to general reserve for credit losses Transfer from FVOCI reserve - - - - 4,362 - - - - (1,008) (1,008) - - - - 211 - - - - - 5,199 - - - - - - - - 1,856 (1,856) - (211) (29,617) (29,617) - (1,008) (29,617) (30,625) At 30 June 2022 18 278,798 (689) 43,560 4,214 (166,283) 159,600 The above Statement of Changes in Equity should be read in conjunction with the accompanying Notes. 113 - - - - - 8,673 11,990 - - 4,362 5,199 - - TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022FINANCIAL REPORT Notes to the financial statements FOR THE YEAR ENDED 30 JUNE 2022 1. General information and statement of accounting policies The financial report of the Group was authorised for issue in accordance with a resolution of the Directors on 29 August 2022. The Group is listed on the Australian Securities Exchange (ASX), registered and domiciled in Australia. The nature of the operations and principal activities of the Group are described in the Directors’ Report. The financial report includes the consolidated financial statements of Tyro Payments Limited and its controlled entities (together referred to as the Group). The significant policies which have been adopted in the preparation of this financial report are set out below. (a) Basis of preparation The financial report is a general purpose financial report, which has been prepared in accordance with Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board and International Financial Reporting Standards (IFRS) and Interpretations as issued by the International Accounting Standards Board (IASB). The financial report has also been prepared on a historical cost basis, except for loans and financial investments which have been measured at fair value. A number of new accounting standards and amendments have been issued but are not yet effective, none of which have been early adopted by the Group in this financial report. These new standards and amendments, when applied in future periods, are not expected to have a material impact on the financial position or performance of the Group. Similar categories of income and expenses have been grouped together. Prior year comparative information for these amounts, where necessary, has been reclassified to achieve consistency in disclosure with current financial year amounts and other disclosures. The financial report is presented in Australian dollars and all values are rounded to the nearest thousand dollars. (b) Going concern The Directors consider the Group able to pay their debts as and when they fall due, and therefore the Group are able to continue as a going concern. (c) Significant accounting judgements, estimates and assumptions In applying the Group’s accounting policies, Management continually evaluates judgements, estimates and assumptions based on experience and other factors, including expectations of future events that may have an impact on the Group. All judgements, estimates and assumptions made are believed to be reasonable based on the most current set of circumstances available to Management. Actual results may differ from judgements, estimates and assumptions. Significant judgements, estimates and assumptions made by Management in the preparation of these financial statements are outlined as follows: Share-based payments transactions - The Group recognises the cost of equity-settled transactions with employees (including Key Management Personnel) and other stakeholders by reference to the fair value of the equity instruments at the date on which they are granted. The valuation assumptions are detailed in Note 14. The equity-settled instruments are expensed using a linear or graded probability of vesting approach, depending on terms of the equity instrument. Classification and valuation of investments -The Group classifies its investments in floating rate notes (FRNs) and equity securities where it does not exercise significant influence or control as Financial Investments – at FVOCI, with movements in fair value recognised directly in equity. The fair value of listed shares has been determined by reference to published price quotations in an active market. Where no active market exists for a particular asset, the Group uses a valuation technique to arrive at the fair value. The Group prioritises the use of observable market inputs in the valuation of Level 3 fair valued investments and considers all reasonable sources of alternative information when incorporating unobservable inputs. Further details are as disclosed in the footnotes. The equity investment in Medipass is deemed to be a business combination and is accounted for using the acquisition method of accounting. See Note 21 for further details. Investments in associated companies are accounted for using the equity method of accounting less impairment losses. See Note 1(m) for further details. 114 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022FINANCIAL REPORT 1. General information and statement of accounting policies (continued) (c) Significant accounting judgements, estimates and assumptions (continued) Valuation of loans – The Group’s lending product differs from a conventional lending asset that accrues interest over time. Under the Group’s current terms, a merchant borrows a loan amount plus an upfront fee. The total loan plus fee amount does not change regardless of early or late repayment. As such, the product fails the “solely payments of principal and interest test” under IFRS 9 “Financial Instruments” and is therefore measured at fair value through the Statement of Comprehensive Income. The fair value of loans has been estimated using a valuation technique that converts forecasted cash flows to a present value amount (discounted cash flow method). The forecasted cash flows are actuarially determined using predictive models based partly on evidenced historical performance and expected repayment profiles including an adjustment for loans to customers impacted by COVID-19. Inputs into the valuation model are detailed in the footnotes. Capitalisation of internally generated software - An intangible asset arising from development expenditure on an internal project is recognised by the Group only when the following can be demonstrated: • • • • • the technical feasibility of completing the intangible asset so that it will be available for use or sale; its intention to complete and its ability to use or sell the asset; how the asset will generate probable future economic benefits; availability of resources to complete the development; and the ability to measure reliably the expenditure attributable to the intangible asset during its development. The Group commences amortising internally generated software projects from the point the asset is ready for use. Impairment for intangibles - The Group determines whether goodwill, and other identifiable intangible assets with indefinite useful lives are impaired at least on an annual basis. Other intangible assets are reviewed at least annually to determine whether any indicators of impairment exist, and if necessary an impairment analysis is performed. Impairment testing requires an estimation of the recoverable amount of the cash generating units to which the goodwill and other intangible assets with indefinite useful lives are allocated. Refer to Note 13 (b) for the key assumptions used. Estimation of useful lives of assets - The estimation of the useful lives of assets has been primarily based on historical experience. In addition, the condition of the assets is assessed at least once per year and considered against their remaining useful lives. Adjustments to useful lives are made when considered necessary. Depreciation charges for property, plant and equipment are included in the footnotes for amortisation of intangible assets with finite useful lives. In assessing whether the useful life of an intangible asset is finite or indefinite, Management use judgement in determining the period over which expected future benefits will be generated, also factoring in the market that the Group operates in and the longer term strategy for the Group. An impairment assessment is conducted and reviewed by Management at least annually as to whether indicators of impairment such as technical obsolescence exist. Remediation provision - Determining the amount of provisioning required in respect of customer-related refunds requires the exercise of significant judgement. This includes forming a view on a number of different estimates, including number of impacted customers, average compensation per customer and the associated costs required to complete the remediation activities. The appropriateness of underlying assumptions is reviewed on a regular basis against actual experience and other available evidence, and adjustments are made to the provision where required. Long service leave - Entitlements that arise in respect of non-current long service leave have been measured at their present values of expected future payments. Long service leave is calculated based on assumptions and estimates of when employees will take leave and the prevailing wage rates at the time the leave will be taken. Long service leave also requires a prediction of the number of employees that will achieve entitlement to long service leave. Taxation - Provisions for taxation require significant judgement with respect to outcomes that are uncertain. Deferred tax assets are recognised for deductible temporary differences and carried forward tax losses after consideration of: • • • implications of COVID-19 on current year results and future forecasts; likelihood of availability of future profits, including stress testing of forecasts, for utilisation of deferred tax assets; and outcome of Continuity of Ownership Testing (and where applicable, the Similar Business Test) to support the recognition of any carried forward tax losses. Management does not recognise deferred tax assets where utilisation is not considered probable. Tyro-Bendigo Alliance The Alliance has been agreed for a ten year period starting in June 2021. The trail commission payable on the existing customer network and future rollouts includes a guaranteed component for the first four years. An additional variable amount is payable based on revenue achieved. The trail commission payable was initially measured at fair value in accordance with AASB 13 Fair Value Measurement and is remeasured in subsequent periods to reflect actual and revised estimates of future revenue. Key assumptions in respect of estimating the valuation of the trail commission payable included: • • • discount rates derived from similar observed rates for comparable assets that are traded in the market; the merchant churn rate; and probability weighted forecasts considering a high, mid and low forecast estimate prepared by management and approved by the Board. 115 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022FINANCIAL REPORT 1. General information and statement of accounting policies (continued) (c) Significant accounting judgements, estimates and assumptions (continued) Tyro-Bendigo Alliance (continued) The associated intangible assets was recognised in accordance with AASB 138 Intangible Assets. They are carried at cost less any accumulated amortisation and any accumulated impairment losses and are reviewed annually for any indicator of impairments in accordance with AASB 136 Impairment of Assets. The useful life of the acquired intangible assets is judgmental and reviewed annually by management with adjustments made where deemed necessary. (d) Basis of consolidation (i) Business combinations The Group accounts for business combinations using the acquisition method when the acquired set of activities and assets meets the definition of a business and control is transferred to the Group. In determining whether a particular set of activities and assets is a business, the Group assesses whether the set of assets and activities acquired includes, at a minimum, an input and substantive process and whether the acquired set has the ability to produce outputs. The Group has an option to apply a ‘concentration test’ that permits a simplified assessment of whether an acquired set of activities and assets is not a business. The optional concentration test is met if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets. The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. Any goodwill that arises is tested annually for impairment (see Note 1(p)). Any gain on a bargain purchase is recognised in profit or loss immediately. Transaction costs are expensed as incurred, except if related to the issue of debt or equity securities. The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in profit or loss. Any contingent consideration is measured at fair value at the date of acquisition and subsequent changes in the fair value of the contingent consideration are recognised in profit or loss. If share-based payment awards (replacement awards) are required to be exchanged for awards held by the acquiree’s employees (acquiree’s awards), then all or a portion of the amount of the acquirer’s replacement awards is included in measuring the consideration transferred in the business combination. This determination is based on the market-based measure of the replacement awards compared with the market-based measure of the acquiree’s awards and the extent to which the replacement awards relate to pre-combination services. (ii) Subsidiaries Subsidiaries are entities controlled by the Company. The Company ‘controls’ an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases. (iii) Transactions eliminated on consolidation Intra-group balances and transactions, and any unrealised income and expenses (except for foreign currency transaction gains or losses) arising from intra-group transactions, are eliminated. Unrealised gains arising from transactions with equity- accounted investees are eliminated against the investment to the extent of the Group’s interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment. 116 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022FINANCIAL REPORT 1. General information and statement of accounting policies (continued) (e) Current and non-current classification The Group presents assets and liabilities in the statement of financial position based on current and non-current classification. An asset is current when it is: • • • or • expected to be realised or intended to be sold or consumed in the normal operating cycle; held primarily for the purpose of trading; expected to be realised within twelve months after the reporting period; cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period. All other assets are classified as non-current. A liability is current when: • • • or • it is expected to be settled in the normal operating cycle; it is held primarily for the purpose of trading; it is due to be settled within twelve months after the reporting period; there is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period. The terms of the liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification. The Group classifies all other liabilities as non-current. Deferred tax assets and liabilities are classified as non-current assets and liabilities. (f) Cash and cash equivalents Cash and cash equivalents comprise cash balances, call deposits and term deposits with an original maturity of three months or less from the date of acquisition. (g) Due from other financial institutions Includes term deposits with maturities greater than three months from the date of acquisition, and term deposits pledged to counterparties as collateral. These are initially measured at fair value and subsequently measured at amortised cost less allowance for expected credit losses, using the effective interest method. (h) Trade and other receivables Trade receivables, which generally have 30-day terms, are recognised initially at fair value, and subsequently measured at amortised cost using the effective interest method, less an allowance for expected credit losses (ECL). Collectability of trade receivables is reviewed on an ongoing basis. Debts that are known to be uncollectible are written off when identified. The Group has applied the simplified approach to calculate ECL for trade receivables where a loss allowance is based on lifetime ECL at each reporting date. An impairment analysis is performed at each reporting date using a provision matrix to measure expected credit losses. The provision rates are based on days past due for groupings of various customer segments with similar loss patterns (i.e. by customer type). The calculation reflects the probability-weighted outcome, the time value of money and reasonable and supportable information that is available at the reporting date about past events, current conditions and forecasts of future economic conditions. (i) Loans Loans to merchants are classified and measured at fair value with changes in the fair value being recognised in the Statement of Comprehensive Income. The loans are unsecured with an upfront (“unearned”) fee charged to the merchant. As the merchant receives daily settlements, a percentage is taken towards loan repayments. The loan repayment includes a portion which recognises the unearned fee in the Statement of Comprehensive Income as interest income. When the loan is uncollectible, it is written-off. Such write-offs of loans occur after all the necessary assessments for write-off procedures have been completed and the amount of the loss has been determined. Loan write-offs are disclosed as lending losses in the Statement of Comprehensive Income. Subsequent recoveries are recognised against these write-offs. Over the reporting period, specific requests for the loans to be put on a “repayment holiday” due to hardship were assessed on a case-by-case basis. Where appropriate, these loans may have qualified for, and were provided, a repayment holiday for an initial period of up to three months. Further extension requests are assessed on a case-by-case basis. The agreed revised repayment schedule of these loans is reflected in the fair value calculation. 117 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022FINANCIAL REPORT 1. General information and statement of accounting policies (continued) (j) Prepayments Prepayments are recognised for amounts paid whereby goods have not transferred ownership to the Group or where services have not yet been provided. Upon receipt of goods or the service the corresponding asset is recognised in the Statement of Financial Position or the expense is recognised in the Statement of Comprehensive Income. (k) Inventories (i) Cost and valuation The costs of purchasing inventories comprise the purchase price, import duties and other taxes (other than those subsequently recoverable by the Group from the taxing authorities), and transport, handling and other costs directly attributable to the acquisition of finished goods, materials and services. Trade discounts, rebates and other similar items are deducted in determining the costs of purchase. Inventories are subsequently held at the lower of cost and their net realisable value. Impairment is assessed at least on an annual basis. Inventories are derecognised when the rights to benefits are transferred to a third party. (ii) Impairment Management makes assessments of the net realisable value of inventory at least on an annual basis. The cost of inventory may not be recoverable where the inventory is damaged, wholly or partially obsolete, or if selling prices have declined. In accordance with AASB 102 Inventories, where the cost of inventory exceeds the net realisable value, inventory is written down to their net realisable value. Net realisable value is an estimate, based on the most reliable evidence at the time, of the amount the inventories are expected to realise. (l) Financial investments Recognition and initial measurement The classification of financial investments at initial recognition depends on the financial asset’s contractual cash flow The classification of financial investments at initial recognition depends on the financial asset’s contractual cash flow characteristics and the Group’s business model for managing them. The Group initially measures financial assets held at amortised cost or debt instruments held at fair value through other comprehensive income at its fair value plus transaction costs. In order for a debt investment to be classified and measured at amortised cost or fair value through other comprehensive income (OCI), it needs to give rise to cash flows that are ‘solely payments of principal and interest (SPPI)’ on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level. Financial assets with cash flows that are not SPPI are classified and measured at fair value through profit or loss, irrespective of the business model. Financial assets at fair value through profit or loss are carried in the statement of financial position at fair value with net changes in fair value recognised in the statement of profit or loss. The Group’s business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both. Financial investments classified and measured at fair value through OCI are held within a business model with the objective of both holding to collect contractual cash flows and selling. Subsequent measurement For debt investments at fair value through OCI, interest income, foreign exchange revaluation and impairment losses or reversals are recognised in the Statement of Comprehensive Income. The remaining fair value changes are recognised in OCI. Upon derecognition, the cumulative fair value change recognised in OCI is recycled to profit or loss. For equity investments at fair value through OCI, the Group can elect to classify irrevocably its equity investments as equity instruments designated at fair value through OCI at initial recognition. Gains and losses on these financial assets are never recycled to profit or loss. Equity instruments designated at fair value through OCI are not subject to impairment assessment. The Group elected to classify irrevocably its non-listed equity investments under this category. Purchase and sale of investments are recognised on trade date - the date on which the Group becomes party to the contractual provisions of the investment. (m) Investment in associates Associated companies are entities over which the Group has significant influence, but not control, generally accompanied by a shareholding giving rise to significant but not controlling voting rights. Investments in associated companies are accounted for in the consolidated financial statement using the equity method of accounting less impairment losses, if any. Investments in associated companies are initially recognised at cost. The cost of an acquisition is measured at the fair value of the assets given, equity instruments issued or liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Goodwill on associated companies represents the excess of the cost of acquisition of the associate over the Group’s share of the fair value of the identifiable net assets of the associate and is included in the carrying amount of the investments. 118 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022FINANCIAL REPORT 1. General information and statement of accounting policies (continued) (n) Property, plant and equipment (i) Cost Property, plant and equipment are measured at cost less accumulated depreciation and any impairment in value. The Group recognises in the carrying amount of an item of property, plant and equipment the cost of replacing parts when the cost is incurred, and the recognition criteria are met. When each major inspection is performed, its cost is recognised in the carrying amount of the item of property, plant or equipment, as a replacement, provided that the recognition criteria are satisfied. (ii) Depreciation Depreciation is provided on a straight-line basis over the estimated useful life of each specific item of property, plant and equipment. Estimated useful lives are as follows: PLANT AND EQUIPMENT: Terminals Furniture and office equipment Computer equipment Leasehold improvements 2022 3 years 5 years 4 years 2021 3 years 5 years 4 years Remaining term of lease Remaining term of lease The assets’ residual values, remaining useful lives and depreciation methods are reassessed and adjusted, if appropriate at each reporting date. Impairment (iii) Management identify applicable impairment indicators in accordance with AASB 136 Impairment of Assets. The carrying values of plant and equipment are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. If any such indication exists and where the carrying values exceed the estimated recoverable amount, the assets are written down to their recoverable amount. The recoverable amount of plant and equipment is the greater of fair value less costs of disposal and its value in use. (iv) Derecognition and disposal An item of property, plant and equipment is derecognised on disposal or when no future economic benefits are expected to arise from continued use of the asset. Gains and losses on disposals are calculated as the difference between the net disposal proceeds and the asset’s carrying amount and are included in the Statement of Comprehensive Income in the year the asset is derecognised. (o) Leases The Group assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. (i) Group as a lessee The Group applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The Group recognises lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets. Right-of-use assets The Group recognises right-of-use assets at the commencement date of the lease (i.e. the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any re-measurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, lease payments made at or before the commencement date less any lease incentives received and an estimate of costs to be incurred by the lessee in dismantling and removing the underlying asset, restoring the site on which it is located or restoring the underlying asset to the condition required by the terms and conditions of the lease. Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets. (ii) Lease liabilities At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for terminating the lease, if the lease term reflects the Group exercising the option to terminate. Variable lease payments that do not depend on an index or a rate are recognised as expenses in the period in which the event or condition that triggers the payment occurs. 119 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022FINANCIAL REPORT 1. General information and statement of accounting policies (continued) (o) Leases (continued) (ii) Lease liabilities (continued) In calculating the present value of lease payments, the Group uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments (e.g. changes to future payments resulting from a change in an index or rate used to determine such lease payments) or a change in the assessment of an option to purchase the underlying asset. (iii) Short-term leases and leases of low-value assets The Group applies the short-term lease recognition exemption to its short-term leases of equipment (i.e. those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of office equipment that are considered to be low value. Lease payments on short-term leases and leases of low value assets are recognised as an expense on a straight-line basis over the lease term. (iv) Group as a lessor Leases in which the Group does not transfer substantially all the risks and rewards incidental to ownership of an asset are classified as operating leases. Rental income arising is accounted for on a straight-line basis over the lease term and is included in revenue in the Statement of Comprehensive Income due to its operating nature. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same basis as rental income. Contingent rents are recognised as revenue in the period in which they are earned. (p) Intangible assets and goodwill (i) Software The Group continues to make significant investments in various projects to develop new products and enhance existing products’ capabilities. For certain projects, it is more probable that future economic benefits from the assets arising from the projects will flow to the Group and their expenditure can be measured reliably with enhancements in the Group’s data governance, system and reporting. Therefore, software development costs for those projects are recognised as intangible assets in the Statement of Financial Position in accordance with AASB 138 Intangible Assets. Following initial recognition of the development expenditure as an asset, the intangible asset is carried at its cost less any accumulated amortisation and any accumulated impairment losses. Each development project will then be reviewed annually for any indicator of impairments in accordance with AASB 136 Impairment of Assets. Acquired intangibles as part of the Medipass acquisition was valued using the replacement cost technique. This technique estimates the Fair Value as all costs necessary to construct a similar asset of equivalent utility at prices applicable at the time of reconstruction (ii) Customer contracts and relationships The customer contracts were acquired as part of the Tyro-Bendigo Alliance and Medipass acquisitions. They are recognised at their fair value at the date of acquisition and are subsequently amortised on a straight-line based on the timing of projected cash flows of the contracts over their estimated useful lives. The useful life of finite intangible assets is judgmental and reviewed annually by management with adjustments made where deemed necessary. The following method is used in the calculation of amortisation: INTANGIBLE ASSET Internally generated software Customer relationships (iii) Goodwill AMORTISATION METHOD Straight line Straight line USEFUL LIFE Finite (3 - 5 years) Finite (7 - 10 years) Goodwill on acquisition is initially measured at cost being the excess of the cost of the business combination over the Group’s interest in the net fair value of the identifiable assets and liabilities. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is not amortised and is tested annually for impairment. Goodwill is reviewed for impairment annually, or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. Impairment is determined by assessing the recoverable amount of the cash-generating unit to which the goodwill relates. Where the recoverable amount of the cash-generating unit is less than the carrying amount, an impairment loss is recognised. 120 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022FINANCIAL REPORT 1. General information and statement of accounting policies (continued) (q) Deferred tax asset Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date (Note 4). (r) Deposits from customers Deposits from customers are initially recognised at fair value. Subsequent to initial recognition, these liabilities are measured at amortised cost. Interest expense on deposits is recognised in the Statement of Comprehensive Income using the effective interest method. (s) Trade and other payables Merchant payables arise when the Group has received monies from the relevant schemes and financial institutions that have not yet been settled with the merchant. Payables to merchants are only recognised to the extent that a liability arises. This liability arises when the proceeds have been paid by the schemes and financial institutions and received by the Group. Liabilities for trade and other payables are carried at cost, which is the fair value of the consideration to be paid in the future for goods and services received, whether or not billed to the Group. Commissions payable to Bendigo Bank The trail commission payable on the existing customer network and future rollouts includes an amount guaranteed by the Group and an additional variable amount based on revenue achieved. The trail commission payable is initially measured at fair value in accordance with AASB 13 Fair Value Measurement and remeasured in subsequent periods to reflect actual and revised estimates of future revenue. The key assumptions used in estimating the valuation of the trail commission payable can be found in Note 1(c). (t) Provisions and contingencies Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event and it is probable that an outflow of resources embodying economic benefits may be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. If the impact of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost. Contingent liabilities are not recognised in the Statement of Financial Position but are disclosed in the relevant notes to the financial statements. They may arise from uncertainty as to the existence of a liability or represent an existing liability in respect of which settlement is not probable or the amount cannot be reliably measured. Only when settlement becomes probable will a liability be recognised. Management evaluates the risk of such transactions and estimates its potential loss from chargebacks based primarily on historical experience and other relevant factors. A provision is recognised in the general reserve for credit losses for merchant losses necessary to absorb chargebacks and other losses for merchant transactions that have been previously processed and on which revenues have been recorded. (u) Contributed equity Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are accounted in contributed equity as a deduction, net of tax, from the proceeds of issue. (v) General reserve for credit losses The Group appropriates for estimated future credit losses from chargebacks, with a general reserve for credit losses. The Group estimates the reserve by using a multiple of historical losses over a rolling 120 day period of transaction values. The general reserve for credit losses is then allocated as a separate reserve within equity. The Group also appropriates for estimated future credit losses from loans to ensure the Group has sufficient capital to cover credit losses estimated to arise over the full life of the loans as required by APRA Prudential Standard APS 220 Credit Quality. The methodology and assumptions used for estimating the general reserve for credit losses required are reviewed regularly. 121 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022FINANCIAL REPORT 1. General information and statement of accounting policies (continued) (w) Revenue recognition Revenue from contracts with customers is recognised in accordance with AASB 15 which introduced a single, principle-based five step recognition and measurement model. The five steps are: Identify the contract with a customer; Identify separate performance obligations in the contract; 1. 2. 3. Determine the transaction price; 4. Allocate the transaction price to each performance obligations identified in Step 2; and 5. Recognise revenue when a performance obligation is satisfied. The Group’s fee income from contracts with customers is derived primarily from the following sources: • merchant service fee income is generated from merchant customers for credit, debit and charge card acquiring services. Fees are charged to merchants depending on the type of transaction being performed based on a percentage of transaction value or on a fixed amount per transaction. Fees related to payment transactions are recognised at the time transactions are processed. Related interchange fees, which are collected from merchants and paid to credit institutions are recognised as an expense instead of netting-off against merchant service fee income in the Statement of Comprehensive Income; and revenue from Dynamic Currency Conversion transactions generated from merchants is calculated based on the individual value of the transactions and is recognised once the transaction has been processed. • Terminal rental income generated from operating leases with merchants is recognised progressively based on a fixed monthly rental on terminals. There is no minimum rental period for merchants. Interest income is recognised in the Statement of Comprehensive Income in accordance with AASB 9 using the effective interest method. The effective interest method measures the amortised cost of a financial asset and allocates the interest income over the relevant period using the effective interest which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset. (x) Employee benefits Provision is made for employee benefits accumulated as a result of employees rendering services up to the reporting date. These benefits include wages and salaries, annual leave and long service leave. Entitlements arising in respect of salaries and wages, annual leave and other employee benefits that are expected to be settled within one year have been measured at their nominal amounts. Employees are entitled to 20 days annual leave each year. Entitlements that arise in respect of long service leave which are expected to be settled more than 12 months after the reporting date have been measured at their present values of expected future payments. Long service leave is calculated based on assumptions and estimates of when employees will take leave and the prevailing wage rates at the time the leave will be taken. Long service leave liability also requires a prediction of the number of employees that will achieve entitlement to long service leave. Expected future payments are discounted using market yields at the reporting date on high quality corporate bonds with terms to maturity and currencies that match as closely as possible to the estimated future cash outflows. No provision has been made for sick leave as all sick leave is non-vesting and the average sick leave to be taken in the future by all employees at the reporting date is estimated to be less than the annual entitlement for sick leave. (y) Share-based payment transactions Share-based compensation benefits are provided to employees (including Key Management Personnel) via the employee share option plans, short term incentive plans and long term incentive plans, whereby employees render services in exchange for rights over the Company’s shares, as well as other stakeholders under contractual arrangements. The cost of these equity- settled transactions is measured by reference to the fair value of the equity instruments at the date at which they are granted. The fair value of any options issuance is determined using the Black-Scholes option valuation model. The cost of equity-settled transactions is recognised, together with any corresponding increase in equity, over the period in which the employees or stakeholders become fully entitled to the award (the vesting period). The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects the extent to which the vesting period has expired and the number of awards that, in the opinion of the Directors of the Company, will ultimately vest. This opinion is based on the best available information at the reporting date. No adjustment is made for the likelihood of performance conditions being met as the effect of these conditions is included in the determination of fair value at grant date. No expense is recognised for awards that do not ultimately vest. Details of the types of share-based payments and their respective terms and vesting conditions are disclosed in Note 14. The Company also has share-based compensation benefits in the form of rights which are tied to performance conditions, as well as restricted stock units (RSUs) which relate to remuneration sacrifice rights. The policy treatment is consistent with that for share options via the Employee Share Option Plan 122 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022FINANCIAL REPORT 1. (z) General information and statement of accounting policies (continued) Income taxes Current tax assets and liabilities for the current and prior years are measured at the amount expected to be recovered from or paid to the taxation authority. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date. Current income tax relating to items recognised directly in equity is recognised in equity and not in the Statement of Comprehensive Income. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate. (aa) SaaS arrangements SaaS arrangements are service contracts providing the Group with the right to access the cloud provider’s application software over the contract period. As such the Group does not receive a software intangible asset at the contract commencement date. A right to receive future access to the supplier’s software does not, at the contract commencement date, give the Group the power to obtain the future economic benefits flowing from the software itself and to restrict others’ access to those benefits. The following outlines the accounting treatment of costs incurred in relation to SaaS arrangements: ACCOUNTING TREATMENT COST Non-distinct costs: Recognised as an operating expense over the term of the service contract. Distinct costs: Recognised as an operating expense as the service is received. • Fee for use of application software (licence fee) • Customisation costs • Configuration costs • Data conversion and migration costs • Testing cost • Training costs Costs incurred for the development of software code that enhances or modifies, or creates additional capability to, existing on-premise systems and meets the definition of and recognition criteria for an intangible asset are recognised as intangible computer software assets. (ab) Goods and Services Tax (GST) Revenues, expenses, assets and liabilities are recognised net of the amount of GST except for the following: • when the GST incurred on the purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and • trade receivables and trade payables are stated with the amount of GST included. The net amount of GST recoverable from or payable to the taxation authority is included as part of other receivables or other payables in the Statement of Financial Position. Commitments and contingencies are disclosed net of the amount of GST. Cash flows are disclosed net of the amount of GST (unless stated otherwise) in the Statement of Cash Flows and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority is classified as part of operating cash flows. (ac) Foreign currency translation Transactions in foreign currencies are initially recorded in the functional currency by applying the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the spot rate of exchange ruling at the reporting date. Non-monetary assets and liabilities are translated at their historic rates of exchange at their respective transaction dates. (ad) De-recognition of assets and liabilities Assets and liabilities are de-recognised from the Statement of Financial Position upon sale, maturity or settlement. The Group de-recognises scheme receivables against associated merchant payables as the risks and rewards are passed through in line with contractual obligations. 123 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022FINANCIAL REPORT 2. Revenue and expenses The loss before tax expense has been arrived at after accounting for the following items: Fees and terminal rental income Merchant service fee Terminal rental income Other fee income Other revenue and income Jobkeeper receipts Other income Interchange, integration and support fees Interchange and scheme fees Integration, support and other fees Employee benefits expense (excluding share-based payments) Wages, salaries and incentives Superannuation Other employee benefits expense Administrative expenses Terminal management and logistics Professional services Insurance Travel and entertainment Other administrative expenses Lending and non-lending losses Lending losses Non-lending losses Terminal outage incident1 Impairment of intangible assets 1 For further information on the terminal outage incident see Note 17. 2022 $000 2021 $000 283,633 205,542 31,809 2,257 21,320 1,207 317,699 228,069 - 1,039 1,039 (155,252) (14,572) (169,824) (79,431) (7,180) (6,017) (92,628) (4,065) (1,381) (1,697) (1,009) (4,826) 4,484 644 5,128 (108,014) (9,357) (117,371) (64,914) (5,636) (5,624) (76,174) (3,981) (2,593) (1,597) (423) (4,413) (12,978) (13,007) (600) (515) - - (722) (516) (9,348) (277) (1,115) (10,863) 124 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022FINANCIAL REPORT 3. Segment reporting (a) Description of segments and principal activities For management purposes, the Group is organised into two operating segments, comprising Payments and Banking. Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker, which is the CEO and Managing Director. The Group operates in one geographical segment being Australia. The corporate and other segment, which is not considered an operating segment of the Group, is used to reconcile the total segment results back to the consolidated results. It consists of other income and costs that fall outside the day-to-day operations of the Group. These include the Group’s Head Office, all employee benefits expenses and other operating expenses, all of which are recorded below Gross Profit. The Group’s reportable segments under AASB 8 Operating Segments are as follows: REPORTABLE SEGMENT Payments PRINCIPAL ACTIVITIES Acquires electronic payment transactions from merchants. Revenue is primarily earned from fees charged for processing acquired transactions. Revenue is also earned from other fee income, terminal rental income and sales of terminal accessories. Direct expenses include scheme and interchange fees, integration, support and other fees and cost of terminal accessories sold. Banking Complementary banking services to merchants. Revenue is earned from fees charged on loans to merchants. Interest expense is incurred on merchant deposits. (b) Revenue and gross profit by segment 2022 Revenue Gross profit 2021 Revenue Gross profit Reconciliation of gross profit to loss before tax: Gross profit Operating expenses (excl. depreciation and amortisation, share of loss from associates and net interest expense) Depreciation and amortisation Share of losses on investment in associates Lease interest expense IPO expenses Loss before tax PAYMENTS1 $000 BANKING2 $000 CORPORATE AND OTHER3 $000 318,847 147,657 229,222 110,528 5,504 5,230 3,222 2,843 1,792 1,792 6,078 6,078 2022 $000 154,679 (145,499) (31,681) (3,558) (3,558) - TOTAL $000 326,143 154,679 238,522 119,449 2021 $000 119,449 (131,893) (15,364) (1,119) (517) (331) (29,617) (29,775) 1 Gross profit of the Payments segment is payments revenue and income less direct expenses. 2 Gross profit of the Banking segment is income from merchant lending adjusted for the fair value movement on loans and interest expense on merchant deposits. 3 Gross profit of Corporate and other includes income from investments and other revenue and income. 125 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022FINANCIAL REPORT 3. Segment reporting (continued) (c) Assets and liabilities by segment PAYMENTS $000 BANKING $000 CORPORATE AND OTHER $000 2022 Segment assets Segment liabilities 2021 Segment assets Segment liabilities 4. Income tax (a) Income tax expense: 216,972 97,714 234,848 104,525 71,556 83,273 35,955 75,481 Major components of income tax expense for the period ended 30 June 2022: Current income tax Current income tax charge Deferred income tax Relating to origination and reversal of temporary differences Derecognition of DTA on temporary difference Derecognition of previously recognised R&D tax credits & tax losses Income tax expense in the statement of comprehensive income Amount reported directly in other comprehensive income and equity Deferred tax on unrealised gain on financial investment – FVOCI Income tax (expense)/benefit reported in equity (b) Reconciliation of income tax expense and prima facie tax: Operating loss before tax At the statutory income tax rate of 30% Share-based payment remuneration Entertainment expenses Share of losses from associates Amortisation of intangible asset Tax effect of current year losses for which no deferred tax asset is recognised Total income tax expense 121,560 69,501 124,456 34,589 2022 $000 - 2,703 (2,703) - - - - 2022 $000 (29,617) 8,885 (1,560) (83) (1,067) (596) (5,579) - TOTAL $000 410,088 250,488 395,259 214,595 2021 $000 - 1,883 (518) (1,413) (48) (80) (80) 2021 $000 (29,775) 8,932 (2,803) (36) (336) - (5,805) (48) 126 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022FINANCIAL REPORT 4. Income tax (continued) (c) Deferred income tax assets and liabilities: 2022 2021 STATEMENT OF FINANCIAL POSITION $000 STATEMENT OF COM- PREHENSIVE INCOME $000 OTHER COM- PRE-HENSIVE INCOME AND EQUITY $000 STATEMENT OF FINANCIAL POSITION $000 STATEMENT OF COM- PREHENSIVE INCOME $000 OTHER COM- PRE-HENSIVE INCOME AND EQUITY $000 ACQUIRED IN BUSINESS COM-BINA- TIONS $000 Deferred tax assets and liabilities Fixed assets Provisions & accruals Other R&D credits Tax losses Right-of-use assets Prepayments Financial investments Other Intangible Assets Total 5,258 6,999 518 - - 851 - 95 (735) 12,986 423 1,519 (1,882) - - 504 - (699) 135 - - - - - - - - - - - 4,835 5,480 2,400 - - 347 - 794 (870) 12,986 (723) 3,387 (1,448) (274) (1,910) 631 104 185 - (48) - - - - - - - (80) - (80) - - - - - - - - (870) (870) Net deferred tax assets relate to temporary differences up to $12,986,000 (tax effected) as at 30 June 2022. In addition, approximately $34,623,000 (tax effected) of unused tax losses, credits and temporary differences have not been recognised as an asset at balance date. 5. Cash and cash equivalents Deposits at call Short term deposits 2022 $000 36,885 - 36,885 2021 $000 69,521 15,000 84,521 127 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022FINANCIAL REPORT 5. Cash and cash equivalents (continued) Reconciliation of loss after tax to net cash flows used in operations Loss for the year Adjustments for: Depreciation and amortisation Share-based payments expense Fair value gain on loans Share of losses from associates Lending losses Lease interest expense Deferred tax expense Other Changes in assets and liabilities: Increase in loans1 Purchase of terminals Increase in trade and other receivables and other assets Increase in term deposits held as collateral Increase in deposits Increase in trade payables and other liabilities Increase in deferred tax balances (Decrease)/increase in provisions Net cash (used in)/flow from operating activities 1 Movement in loans balances excludes adjustments for write offs and fair value adjustments. 6. Due from other financial institutions Term deposits Deposits pledged as collateral 2022 $000 2021 $000 (29,617) (29,823) 31,681 5,199 (627) 3,558 600 3,497 - 131 (24,090) (14,779) (5,531) (507) 7,792 2,287 - (4,913) (25,319) 2022 $000 - 14,698 14,698 15,364 9,342 (1,270) 1,119 722 517 48 1,089 (2,918) (16,360) (3,216) (5,762) 24,938 5,409 998 10,846 11,043 2021 $000 5,000 14,191 19,191 Includes term deposits with maturities greater than three months from the date of acquisition and deposits pledged to counterparties as collateral. Refer to Note 20 for details of deposits pledged as collateral. 128 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022FINANCIAL REPORT 7. Trade and other receivables Scheme and other receivables Merchant acquiring fees Expected credit loss provision 2022 $000 13,206 9,536 (38) 22,704 2021 $000 10,121 7,033 (59) 17,095 Scheme receivables are presented net of merchant payables in line with the Group’s accounting policy disclosed in Note 1. The Group’s ageing of trade and other receivables are as follows: Carrying value 2022 Carrying value 2021 8. Loans Current Loans (net of unearned fees) Non-current Loans (net of unearned fees) TOTAL $000 CURRENT $000 1-30 DAYS $000 31-60 DAYS $000 61-90 DAYS $000 >90 DAYS $000 IMPAIRMENT $000 22,704 22,724 17,095 16,935 18 11 - - - 52 - 156 (38) (59) 2022 $000 2021 $000 34,262 14,378 5,242 39,504 1,009 15,387 Income from loans comprises interest income of $4,876,914 (2021: $1,952,190), fair value gain of $627,295 (2021: gain of $1,269,623) and net lending loss of $599,760 (2021: net lending loss of $721,673). 129 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022FINANCIAL REPORT 9. Leases (a) Group as lessee – property lease The Group entered into an agreement for a lease at 55 Market Street to January 2031, with an option to renew for a further 5 years. In 2022 the Group has recognised a non-cash right-of-use asset for $33,578,000 (2021: $33,000) and a lease liability for $33,041,000 (2021: $33,000). The Group had total cash outflow for leases of $2,849,000 in 2022 (FY21: $5,069,000). Set out below are the carrying amounts of the Group’s right-of-use assets and lease liabilities in the Statement of Financial Position and the movements during the period: RIGHT-OF-USE ASSETS $000 LEASE LIABILITIES $000 As at 1 July 2020 Additions Depreciation expense Interest expense Payments As at 30 June 2021 As at 1 July 2021 Additions Depreciation expense Interest expense Payments Derecognition of short term leases As at 30 June 2022 Lease liabilities – Maturity analysis Contractual undiscounted cash flows Within one year After one year but not more than five years More than five years Total undiscounted lease liabilities The amounts recognised in the Statement of Comprehensive Income are as follows: Depreciation expense of right-of-use assets Interest expense on lease liabilities Income from sub-leasing right-of-use assets Total amount recognised in the Statement of Comprehensive Income 4,528 33 (2,907) - - 1,654 1,654 33,578 (4,051) - - (23) 31,158 2022 $000 1,897 19,076 20,671 41,644 2022 $000 (4,051) (1,013) - (5,064) 7,483 33 - 365 (5,069) 2,812 2,812 33,041 - 1,013 (2,849) (24) 33,993 2021 $000 2,872 - - 2,872 2021 $000 (2,907) (365) 57 (3,215) 130 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022FINANCIAL REPORT 9. Leases (continued) (b) Group as lessor – sublease arrangement The arrangement related to the sublease of Level 5 of the 155 Clarence Street lease. In prior year the lessee was adversely impacted by COVID-19 and the lease was terminated. As the lessee was unable to repay the rent, Management took the decision to write off this amount. Lease income recognised in the Statement of Comprehensive Income are as follows: Loss on investment in sublease Income from net investment in sublease Total amount recognised in profit and loss 10. Financial investments Current Convertible note in meandu Australia Holdings Pty Ltd Floating rate notes Non-current Floating rate notes 2022 $000 - - - 2022 $000 1,510 8,964 10,474 2022 $000 62,221 62,221 2021 $000 (842) 57 (785) 2021 $000 - 21,618 21,618 2021 $000 47,450 47,450 Floating rate notes have been classified between current and non-current based on maturity date. The FRNs are held as available for sale instruments for liquidity purposes and qualify as eligible collateral for repurchase agreements with the Reserve Bank of Australia. The Group invested in a convertible note in meandu Australia Holdings Pty Ltd (me&u) in March 2022. The convertible note has a maturity date of 30 September 2022. The convertible note may convert into shares in me&u and accrues 8% interest. 131 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022FINANCIAL REPORT 11. Investment in associates Investment in associates Axis IP Pty Ltd meandu Australia Holdings Pty Ltd 2022 $000 1,482 460 1,942 2021 $000 1,666 3,332 4,998 Investment in associates are recognised at cost using the equity accounting method. The carrying amounts of the investment in associates are increased or decreased by the Group’s share of meandu Australia Holdings Pty Ltd.’s (me&u) and Axis IP Pty Ltd.’s (Paypa Plane) net assets after acquisition date. me&u is a leading hospitality in-venue food ordering and payments app in which Tyro has a 14.4% equity investment. Paypa Plane is a payments technology business transforming scheduled payments, in which Tyro took a 20.0% shareholding in December 2020. In November 2021, the Group invested a further $501,000 in Paypa Plane, increasing the ownership from 20.0% to 21.3%. Tyro’s ownership subsequently reduced to 17.1% in February 2022 after Paypa Plane had an additional equity raising round in which Tyro did not participate. The following table summarises the financial information and results of meandu Australia Holdings Pty Ltd and Axis IP Pty Ltd. Percentage ownership interest Non-current assets Current assets Non-current liabilities Current liabilities Net Assets (100%) Group share of net assets Carrying amount of interest in associate1 Revenue Loss from continuing operations Total comprehensive loss Group's share of total comprehensive loss2 INVESTMENT IN MEANDU AUSTRALIA HOLDINGS PTY LTD INVESTMENT IN AXIS IP PTY LTD 2022 $000 14.4% 1,372 48,009 - (58,474) (9,093) (1,313) 460 7,734 (20,163) (20,163) (2,872) 2021 $000 16.0% 76 5,743 (48) (2,489) 3,282 526 3,332 3,206 (5,580) (5,580) (895) 2022 $000 17.1% 2,038 1,324 (25) (497) 2,840 485 1,482 144 (6,535) (6,535) (686) 2021 $000 20.0% 690 637 (283) - 1,044 209 1,666 269 (1,120) (1,120) (224) 1 The difference between the carrying value of investments and the Group’s share of net assets relates to intangible assets and goodwill not recognised on the balance sheet of meandu Australia Holdings Pty Ltd and Axis IP Pty Ltd. 2 A total loss on investment of $3,558,173 (FY21: $1,119,442) has been recognised in the Statement of Comprehensive Income in the year. 132 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022FINANCIAL REPORT 12. Property, plant and equipment Reconciliation of net carrying amounts at the beginning and end of the year for the Group is as below: Year ended 30 June 2022 At 30 June 2021 net of accumulated depreciation and impairment Additions Disposals Depreciation for the year At 30 June 2022 net of accumulated depreciation and impairment At 30 June 2021 Cost Accumulated depreciation and impairment Net carrying amount At 30 June 2022 Cost Accumulated depreciation and impairment Net carrying amount Year ended 30 June 2021 At 30 June 2020 net of accumulated depreciation and impairment Additions Acquisitions through business combination Disposals Depreciation for the year At 30 June 2021 net of accumulated depreciation and impairment At 30 June 2020 Cost Accumulated depreciation and impairment Net carrying amount At 30 June 2021 Cost Accumulated depreciation and impairment Net carrying amount TERMINALS $000 FURNITURE AND OFFICE EQUIPMENT $000 COMPUTER EQUIPMENT $000 LEASEHOLD IMPROVE- MENTS $000 TOTAL $000 23,000 545 1,942 540 26,027 14,779 (57) (9,813) 27,909 59,610 (36,610) 23,000 74,033 (46,124) 27,909 2 (10) (198) 339 2,771 (2,226) 545 2,756 (2,417) 339 2,505 (173) (1,076) 3,198 9,955 (8,013) 1,942 11,873 (8,675) 10,214 - (748) 10,006 4,817 (4,277) 540 10,213 (207) 27,500 (240) (11,835) 41,452 77,153 (51,126) 26,027 98,875 (57,423) 3,198 10,006 41,452 12,863 799 2,060 1,544 17,266 18,266 - (67) (8,062) 23,000 42,543 (29,680) 12,863 59,610 (36,610) 23,000 24 29 - (307) 545 2,708 (1,909) 799 2,771 (2,226) 545 1,122 9 - (1,249) 1,942 8,758 (6,698) 2,060 9,955 (8,013) 1,942 - - - 19,412 38 (67) (1,004) (10,622) 540 26,027 4,817 (3,273) 1,544 4,817 (4,277) 58,826 (41,560) 17,266 77,153 (51,126) 540 26,027 133 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022FINANCIAL REPORT 13. Intangible assets and goodwill (a) Intangible assets Reconciliation of net carrying amounts at the beginning and end of the year for the Group is as below: Year ended 30 June 2022 At 30 June 2021 net of accumulated amortisation and impairment Additions Amortisation for the year At 30 June 2022 net of accumulated amortisation and impairment At 30 June 2021 Cost Accumulated amortisation and impairment Net carrying amount At 30 June 2022 Cost Accumulated amortisation and impairment SOFTWARE $000 CUSTOMER RELATION- SHIPS $000 GOODWILL $000 TOTAL $000 13,304 6,961 (4,116) 16,149 14,613 (1,309) 13,304 21,574 (5,425) 113,876 13,687 140,867 - (11,679) 102,197 114,912 (1,036) 113,876 114,912 (12,715) - - 6,961 (15,795) 13,687 132,033 13,687 - 143,212 (2,345) 13,687 140,867 13,687 - 150,173 (18,140) Net carrying amount 16,149 102,197 13,687 132,033 Year ended 30 June 2021 At 30 June 2020 net of accumulated amortisation and impairment Additions Acquisitions through business combinations Impairment expense Amortisation for the year 5,170 3,762 5,500 (277) (851) 197 111,763 2,900 - (984) - - 13,687 - - 5,367 115,525 22,087 (277) (1,835) At 30 June 2021 net of accumulated amortisation and impairment 13,304 113,876 13,687 140,867 At 30 June 2020 Cost Accumulated amortisation and impairment Net carrying amount At 30 June 2021 Cost Accumulated amortisation and impairment 5,350 (180) 5,170 14,613 (1,309) 250 (53) 197 - - - 5,600 (233) 5,367 114,912 (1,036) 13,687 - 143,212 (2,345) Net carrying amount 13,304 113,876 13,687 140,867 134 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022FINANCIAL REPORT 13. Intangible assets and goodwill (continued) (b) Goodwill i) Allocation of goodwill The Group has allocated goodwill acquired through business combinations to the Tyro Health Cash Generating Unit (“CGU”). As the only CGU with non-amortising intangible asset, the Group determined the Tyro Health CGU to be the only CGU subject to an annual impairment test. The Group performed its annual impairment test in June 2022. Goodwill Total allocation of goodwill TYRO HEALTH CGU 2022 $000 13,687 13,687 2021 $000 13,687 13,687 The recoverable amount of the CGU is determined based on “Value-In-Use” calculations using discounted cash flow projections based on financial budgets and forecasts covering a five-year period with an estimated terminal growth rate. The cash flows are discounted using a pre-tax discount rate reflecting an estimate of the weighted cost of capital (WACC). The Group determined that the carrying amount does not exceed the recoverable amount. No impairment of goodwill at 30 June 2022 has been recorded. ii) Key assumptions and sensitivity The cash flow projections which are used in determining any impairment require management to make significant estimates and judgements. Each of the assumptions is subject to significant judgement about future economic conditions and the ongoing development of industries in which the CGUs operate. Forecasted cashflows are risk-adjusted allowing for estimated changes in the business and the competitive trading environment. Cash flow projections during the forecast period are based on forecast revenue growth arising from increasing total transactions volumes for Tyro Health. Forecast increases in gross margin and operating costs have been included to support the forecast growth in volumes. The pre-tax discount rate applied to the cash flow projections was 8.8% which reflects current market assessment of the time value of money and the risks specific to the relevant segments in which the CGU operates. Terminal growth rate is 3.6% consistent with industry forecasts specific to the CGU. The Group has completed sensitivity analysis over the Tyro Health CGU. The recoverable amount of the Tyro Health CGU is in excess of the carrying amounts in the respective CGUs. Any reasonable adverse change in key assumptions will not lead to an impairment. 14. Share based payments The Group provides benefits to employees (including Key Management Personnel (KMP)) from time to time including share- based payments as remuneration for service. Additionally, the Company provides share-based payments to other stakeholders as part of contractual agreements. (a) Employee Share Option Plan The Employee Share Option Plan (ESOP) was established to grant options over ordinary shares in the Company to employees or Directors who provide services to the Company. Options granted pursuant to the ESOP may be exercised, in whole or part, subject to vesting terms and conditions as indicated below: TYPE OF OPTION VESTING TERMS AND CONDITIONS Monthly linear vesting schedule Options granted will vest in proportion to the time that passes linearly during the vesting schedule, subject to maintaining continuous status as an employee or Director with the Company during the vesting period. The options generally vest in equal amounts each month over the vesting period. Annual linear vesting schedule Options vest similarly to the monthly linear vesting schedule; except they vest in equal amounts annually over the vesting period. Performance linear vesting schedule Options vest in equal amounts annually over the vesting period and are also subject to performance criteria. 135 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022FINANCIAL REPORT 14. Share based payments (continued) (a) Employee Share Option Plan (continued) All option grants and any shares issued on the exercise of those options must be held for a minimum period commencing on the date on which the options are granted and continuing until the earlier of: • the date which is 3 years after the date on which options are granted; or • the date on which the participant ceases employment with the Company. Other relevant terms and conditions applicable to options granted under the ESOP include: • • • • • the term of each option grant ranges primarily between 6 – 7 years from the date of grant or such shorter term as provided in the ESOP or grant letter; each option entitles the holder to one ordinary fully paid share; all awards granted under the ESOP are equity-settled; a 2-year holding lock applies to those options with annual linear or performance linear vesting schedules. For annual linear options, the lock period applies following the relevant vesting date, and for performance linear options the lock period applies from exercise date. During this period the shares issued cannot be transferred, sold, encumbered or otherwise dealt with; and under the ESOP rules and subject to any requirements under law or the ASX listing rules, the Board, at its discretion, may determine that options held by an employee or Director do not lapse on cessation of employment or Directorship and that the relevant holder of options has additional time to exercise their options. (b) Fair value of options under the ESOP The fair value of each option is estimated on the date of grant using the Black-Scholes option valuation model. A zero-dividend policy assumption is used for valuing all option grants. This is in line with the Company’s capital management policy and growth strategy. Expected volatility used is the historical volatility of the Company’s estimated peer group. The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may not necessarily be the actual outcome. There were 4,310,080 options exercised during the period ended 30 June 2022 (2021: 5,166,415). The weighted average remaining contractual life for share options outstanding as at 30 June 2022 was 4 years (2021: 4 years). The following table summarises further details of the Company’s share options outstanding at 30 June 2022: RANGE OF EXERCISE PRICES CONTRACTUAL LIFE VESTING CONDITIONS NUMBER OF OUTSTANDING OPTIONS 179 cents 176 cents 7 years 4 year annual vesting, plus performance criteria JUN 2022 5,584,832 JUN 2021 6,647,422 6 years or less 5 year monthly linear vesting 5,214,675 6,830,283 162 cents to 176 cents 7 years or less No vesting in first 6 months of 5 year monthly linear vesting period 161,181 591,495 162 cents 150 cents 7 years or less 5 year monthly linear vesting 40,000 70,678 7 years 4 year annual vesting, plus performance criteria 4,895,120 5,762,443 37.5 cents to 149 cents 7 years or less 5 year monthly linear vesting 3,948,918 6,749,286 0 cents Total 6 years 5 year annual linear vesting 1,919,848 2,703,886 21,764,574 29,355,493 136 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022FINANCIAL REPORT 14. Share based payments (continued) (b) Fair value of options under the ESOP (continued) The following table illustrates the number and weighted average exercise prices (WAEP) in cents and movements of share options during the year: Monthly linear and annual linear vesting Opening Granted Exercised Forfeited or expired Closing Of which: Exercisable at the end of the year Performance based vesting Opening Granted Exercised Forfeited or expired Closing Of which: Exercisable at the end of the year Total outstanding at the end of the year Total exercisable at the end of the year JUN 2022 NUMBER 16,945,628 - (4,310,080) (1,350,926) 11,284,622 9,332,889 JUNE 2022 WAEP (CENTS) 119 - 70 119 126 108 JUNE 2021 NUMBER 23,081,551 - (5,166,415) (969,508) 16,945,628 12,689,820 12,409,865 165 13,894,547 - - (1,929,913) 10,479,952 - 21,764,574 9,332,889 - - 166 165 - - - (1,484,682) 12,409,865 - 29,355,493 12,689,820 JUN 2021 WAEP (CENTS) 107 - 74 73 119 110 166 - - 171 165 - 137 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022FINANCIAL REPORT 14. Share based payments (continued) (c) Performance rights, service rights, remuneration sacrifice rights and rights to shares under other contractual arrangements During the period, the Company granted 7,230,128 service and performance rights as part of the short and long term incentive arrangements and 308,431 remuneration sacrifice rights as part of an equity incentive arrangement. The following model inputs were used in the Black-Scholes valuation model to determine the fair value: Grant date: Vesting period FY22 LTI PERFORMANCE RIGHTS Mar-22 FY22 SERVICE RIGHTS (GENERAL TEAM RETENTION) Feb-22 FY21 SERVICE RIGHTS (GENERAL TEAM STI) Sep-21 2.5 years Annual vesting over 3 years in 3 equal tranches Annual vesting over 3 years in 3 equal tranches Expiry date Employment conditions apply Employment conditions apply Employment conditions apply Share price at grant date ($)1 Dividend yield (%) Expected volatility (%) Risk-free interest rate (%) Grant date: Vesting period $1.70 0% N/A N/A $2.24 0% N/A N/A $3.80 0% N/A N/A FY21 SERVICE RIGHTS (XLT STI) FY22 SERVICE RIGHTS (JULY 21) FY21 MEDIPASS SERVICE RIGHTS Sep-21 Jul-21 4 years Annual vesting over 3 years in 3 equal tranches Jul-21 31 May 2026 Expiry date Employment conditions apply Employment conditions apply Employment conditions apply Share price at grant date ($)1 Dividend yield (%) Expected volatility (%) Risk-free interest rate (%) $3.80 0% N/A N/A $2.24 0% N/A N/A $3.76 0% N/A N/A Grant date: Vesting period FY21 MEDIPASS PERFORMANCE RIGHTS Jul-21 5 years FY21 DIRECTOR RSU Oct-202 FY22 DIRECTOR RSU Nov-21 Target conversion date – post publication of full-year results Target conversion date – post publication of full-year results Expiry date Employment conditions apply Employment conditions apply Employment conditions apply Share price at grant date ($)1 Dividend yield (%) Expected volatility (%) Risk-free interest rate (%) $3.76 0% N/A N/A $3.32 0% N/A N/A $3.88 0% N/A N/A 1 The Company considers the listed share price near grant date, when determining fair value. 2 The FY21 Director RSU were granted during the year ended 30 June 2021 and were issued during the year ended 30 June 2022 138 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022FINANCIAL REPORT 14. Share based payments (continued) (c) Performance rights, service rights, remuneration sacrifice rights and rights to shares under other contractual arrangements (continued) Opening Granted Exercised Forfeited or expired Closing Exercisable at the end of the year 15. Deposits Deposits1 Term deposits JUN 2022 NUMBER 5,412,550 7,538,559 (1,571,915) (1,843,447) 9,535,747 1,363,456 JUN 2022 WAEP (CENTS) JUN 2021 NUMBER JUN 2021 WAEP (CENTS) - - - - - - 6,485,940 1,565,864 (2,031,510) (607,744) 5,412,550 1,356,092 - - - - - - 2022 $000 79,204 4,069 83,273 2021 $000 72,470 3,011 75,481 1 The deposits are at call, earn daily interest with rates that increase for every dollar held for longer than 30 days, 60 days and 90 days, and are guaranteed by the Australian Government up to $250,000 per customer. 16. Trade payables and other liabilities Current Accounts payable Scheme fees, commissions, incentives and other accruals Commissions payable to Bendigo Bank Clearing account and other liabilities Non-current Commissions payable to Bendigo Bank 2022 $000 6,370 15,701 9,228 6,126 2021 $000 3,993 11,101 11,795 2,326 37,425 29,215 83,553 83,553 90,478 90,478 139 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022FINANCIAL REPORT 17. Current and non-current provisions Balance at 1 July 2021 Amounts provided/(utilised) during the period Balance at 30 June 2022 Current Non-current Balance at 30 June 2022 ANNUAL LEAVE LONG SERVICE LEAVE MAKE GOOD PROVISION OTHER PROVISION $000 4,916 681 5,597 5,597 - 5,597 $000 1,603 263 1,866 702 1,164 1,866 $000 853 (305) 548 - 548 548 $000 9,237 (5,004) 4,233 4,233 - 4,233 TOTAL $000 16,609 (4,365) 12,244 10,532 1,712 12,244 The make good provision is for the costs of restoring the office space at 55 Market Street to its original condition at the conclusion of the lease. Tyro has utilised and released the Make Good provision for 155 Clarence Street during the period. In the prior year, the Group raised a provision for remediation of the terminal outage incident in January 2021. Settlement offers have been made to impacted customers. Compensation payments are either in discussion or have been made to those customers where they have registered. Tyro continues to encourage customers to register or contact Tyro where they may have been impacted by the January incident. Total payments for remediation during the year totalled $5,041,000. The remaining provision at 30 June 2022 was $3,967,000 (30 June 2021: $9,008,000). 18. Contributed equity and reserves (i) Movement in ordinary shares on issue At 1 July 2020 Share options and rights exercised Shares issued in consideration for acquisition of Medipass Equity instruments issued in consideration for acquisition of Medipass1 At 30 June 2021 At 1 July 2021 Share options and rights exercised At 30 June 2022 NUMBER OF SHARES 499,496,171 9,822,925 1,220,694 1,132,632 511,672,422 511,672,422 5,881,995 517,554,417 $000 265,763 4,059 4,614 - 274,436 274,436 4,362 278,798 1 1,132,632 of the shares issued to Medipass shareholders have been accounted for as options and recognised through the share-based payments reserve. See Note 21 for further details. Terms and conditions of contributed equity Ordinary shares have the right to receive dividends when declared and in the event of winding up of the Company to participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on ordinary shares held. Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the Company. All issued share capital is paid up in full. (ii) FVOCI reserve Balance at the beginning of the year Deferred tax on equity movements Revaluation (loss)/gain, net of tax Transfer to accumulated losses Balance at the end of the year 2022 $000 108 - (1,008) 211 (689) 2021 $000 3 (80) 185 - 108 140 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022FINANCIAL REPORT 18. Contributed equity and reserves (continued) (iii) Share-based payments reserve Balance at the beginning of the year Deferred tax on equity movements Equity instruments issued in consideration for acquisition of Medipass Balance at the end of the year 2022 $000 38,361 5,199 - 43,560 2021 $000 26,371 9,342 2,648 38,361 The share-based payments reserve is used to record the value of share-based payments or benefits provided to any Directors, employees as part of their remuneration or compensation, and share-based payments provided to other stakeholders as part of contractual agreements. (iv) General reserve for credit losses Balance at the beginning of the year Deferred tax on equity movements Appropriation for chargeback losses Appropriation for lending losses Balance at the end of the year Total reserves at 30 June 2022 2022 $000 2,358 567 1,289 4,214 47,085 2021 $000 2,103 (12) 267 2,358 40,827 The general reserve for credit losses has been created to satisfy APRA’s prudential standards for authorised deposit-taking institutions (ADIs) as described in Note 1(v). The Group applies an internal methodology to estimate the credit risk of its merchant customers and the maximum losses based upon a number of assumptions concerning the performance of merchants in relation to the Group’s credit risk grading system and actual experience. (v) Accumulated losses Balance at the beginning of the year Deferred tax on equity movements Transfer to general reserve for credit losses Transfer from FVOCI reserve Balance at the end of the year 2022 $000 (134,599) (29,617) (1,856) (211) 2021 $000 (104,521) (29,823) (255) - (166,283) (134,599) 141 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022FINANCIAL REPORT 19. Financial risk management objectives, policies and processes The Group’s principal financial instruments include cash and cash equivalents, deposits due from other financial institutions, trade and other receivables, loans, net investment in sublease, financial investments, deposits, lease liabilities, trade payables and other liabilities. (i) Risk management The Board has responsibility for setting the Group’s strategy and the Risk Management Framework (RMF). The RMF includes the Risk Management Strategy (RMS), the Risk Appetite Statement (RAS) and the Internal Capital Adequacy Assessment Process (ICAAP). The RMS supports the Group in achieving its strategic priorities by clearly articulating the approach to managing risks aligned with the material risk types that are consistent with the RAS. The CEO and Management team are responsible for implementing the RMS, and for developing policies, controls, processes and procedures for identifying and managing risk. Various management committees, including the Executive Risk Committee (ERC), the Pricing Committee (PriceCo) and the Asset and Liability Management Committee (ALCO), ensure appropriate execution of the RMS is applied to the day-to-day operations and regularly report to the Board Risk Committee (BRC). (ii) Risk controls Risks are identified, managed and controlled through the Risk and Control Self-Assessment (RCSA) process. The RCSA is an assessment of key risks and controls which enable the business to understand its operational risk environment and facilitate decision-making, prioritisation, allocation of resources and effective governance. Business risks are controlled within tolerance levels approved by the Board through the RAS. (iii) Internal audit The Group has an independent and adequately resourced Internal Audit function. The Internal Audit function provides independent assurance to the Board on the adequacy and effectiveness of the control environment and risk framework. (iv) Credit risk Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Group is exposed to credit risk from its operating activities (primarily trade receivables) and from its lending and investing activities, including deposits with banks and financial institutions, foreign exchange transactions and financial investments in floating rate notes. The maximum exposure to credit risk is represented by the carrying amounts of the financial assets at the reporting date. The Group’s credit risk management framework outlines the core values which govern its credit risk-taking activities and reflect the priorities established by the Board. The framework is used to develop underwriting standards and credit procedures which define the operating processes. Ongoing monitoring, reporting and review allows the Group to identify changes in credit quality at the client and portfolio levels and to take corrective actions in a timely manner. Credit losses from chargebacks In addition, the Group is subject to the risk of credit card losses via chargebacks. The maximum period the Group is potentially liable for such chargebacks is up to 120 days after the latter of the transaction date or the expected delivery date. The Group manages credit risk associated with its merchant portfolio both at an individual and a portfolio level. It is the Group’s policy that all merchants are subject to credit verification procedures including an assessment of their independent credit rating, past behaviour and an overview of trading history. As part of equity, a General Reserve for Credit Losses (GRCL) is maintained to cover losses due to uncollectible chargebacks that have not been specifically identified. The reserve is calculated based on estimated future credit losses as described in Note 1(v). The Group does not hold any credit derivatives or collateral to offset its credit exposure. The Group’s exposure to bad debts from chargebacks is not significant at the reporting date. Credit losses from loans The Group is also subject to the risk of credit losses from its unsecured loan product and loan product operating under the Government SME guarantee scheme. The Group manages this risk in accordance with the Board approved Lending Credit Risk Policy. Responsibility for monitoring and management of this risk is delegated to the Chief Risk Officer (CRO). The CRO is also responsible for ensuring the Lending Credit Risk Policy is reviewed regularly and submitted to the BRC for endorsement and approval by the Board. To manage the risk of credit losses, various underwriting criteria are in place before a loan can be offered. A merchant must satisfy the onboarding requirements to be eligible for a loan offer, as well as providing a personal guarantee. Tyro only offers loans to merchants with a Tyro EFTPOS terminal. The Group maintains a GRCL to also cover credit losses estimated but not certain to arise over the full life of the loans as described in Note 1(v). 142 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022FINANCIAL REPORT 19. Financial risk management objectives, policies and processes (continued) (iv) Credit risk (continued) This table summarises the Group’s credit risk exposures as at reporting date: 30 JUNE 2022 STANDARD & POORS CREDIT RATING1 CASH AND CASH EQUIVALENTS DUE FROM OTHER FINANCIAL INSTITUTIONS TRADE AND OTHER RECEIVABLES AAA AA AA- A+ A A- BBB+ unrated $000 28,615 - 8,241 - - - - 29 $000 - - 14,698 - - - - - 36,885 14,698 $000 308 - 3,795 776 132 - 359 17,334 22,704 30 JUNE 2021 STANDARD & POORS CREDIT RATING1 CASH AND CASH EQUIVALENTS DUE FROM OTHER FINANCIAL INSTITUTIONS TRADE AND OTHER RECEIVABLES AAA AA AA- A+ A A- BBB+ unrated $000 39,857 - 44,664 - - - - - $000 - - 19,191 - - - - - $000 379 - 9,852 5,815 92 - 234 723 84,521 19,191 17,095 1 2 Long-term credit rating Includes loans issued under the Government SME guarantee scheme of $38,643 (FY21: 251,000). (v) Operational risk LOANS2 $000 - - - - - - - 39,504 39,504 LOANS2 $000 - - - - - - - 15,387 15,387 Operational risk is the risk that arises from inadequate or failed internal processes and systems, human error or misconduct, or from external events. It includes, amongst other things, fraud, technology risk, model risk and outsourcing risk. The BRC is responsible for monitoring the operational risk profile, the performance of operational risk controls, and the development and ongoing review of operational risk policies. 143 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022FINANCIAL REPORT 19. Financial risk management objectives, policies and processes (continued) (vi) Market risk Market risk is the potential loss of value or potential reduction in expected earnings resulting from movements in interest rates and foreign exchange rates. The Group’s balance sheet activities expose the profit and loss to earnings volatility. Ultimately, the aim of managing market risks is to stabilise earnings. Market prices comprise four types of risk: interest rate risk, foreign currency risk, commodity price risk and other price risk, such as equity price risk. The Group does not engage in financial market trading activities nor assume any foreign exchange, interest rate or other derivative positions and does not have a trading book. The Group does not undertake any hedging around the values of its financial instruments as any risk of loss is considered insignificant to the operations of the Group at this stage. Any floating rate notes that the Group holds are for investment or liquidity purposes and held in the normal course of business in line with investment and liquidity guidelines. Each component of market risk is detailed below as follows: (i) Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group has exposure to interest rate risk primarily on its variable interest-bearing cash and cash equivalent balances, term deposits, floating rate notes, loans and variable deposits (bank accounts for businesses). Interest rate sensitivity analysis The following demonstrates the sensitivity to a reasonably possible change in interest rates. With all other variables held constant, the profit is affected as follows: An increase of 200 basis points for 12 months in the general cash rate (assuming other factors remain constant) will increase the Group’s profit and increase equity by $1,580,021 (2021: $2,253,724). A decrease of 100 basis points in the general cash rate decrease the Group’s profit and decrease equity by $790,010 (2021: $1,126,862). The following table shows the Group’s financial assets and liabilities on which the interest rate sensitivity analysis has been performed. 30 JUNE 2022 Financial assets VARIABLE INTEREST RATE < 3 MONTHS FIXED INTEREST RATE 3 TO 12 MONTHS $000 $000 $000 Cash and cash equivalents 36,885 - - - 71,185 - - 12,791 1,887 21,530 - 1,510 (79,204) (4,069) > 1 YEAR $000 - - - 20 - 12,732 5,242 - - - - - - TOTAL $000 36,885 12,811 1,887 39,504 71,185 1,510 (83,273) VARIABLE INTEREST RATE < 3 MONTHS FIXED INTEREST RATE 3 TO 12 MONTHS > 1 YEAR TOTAL $000 $000 $000 $000 $000 Cash and cash equivalents 69,521 15,000 Due from other financial institutions USD term deposit Loans Floating rate notes Convertible note in meandu Australia Holdings Pty Ltd Financial liabilities Deposits 30 JUNE 2021 Financial assets Due from other financial institutions USD term deposit Loans Floating rate notes Financial liabilities Deposits - - - 69,068 8,471 1,729 8,978 - - 2,991 - 5,400 - (72,470) (2,961) (50) - 6,000 - 1,009 - - 84,521 17,462 1,729 15,387 69,068 (75,481) 144 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022FINANCIAL REPORT 19. Financial risk management objectives, policies and processes (continued) (vi) Market risk (continued) (ii) Foreign currency risk Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Group is not exposed to foreign currency risk in the settlement of merchant transactions as all monies received and paid are in Australian dollars. The Group’s settlement of fees with card schemes and the purchases of terminals from foreign suppliers are transacted in foreign currencies at the exchange rate prevailing at the transaction date. At the reporting date the Group has US Dollar, Euro and British Pound Sterling exposures. Foreign currency sensitivity analysis The following demonstrates the sensitivity to a reasonably possible change in the US dollar and Euro exchange rates, with all other variables held constant: Group An appreciation of 15% of the US dollar and Euro compared to the Australian dollar (assuming other factors remain constant), will increase the Group’s profit and increase equity by $245,656 (2021: $67,527). A depreciation of 15% of the US dollar and Euro compared to the Australian dollar will reduce the Group’s profit and reduce equity by $181,572 (2021: $49,911). The following table shows the financial assets and liabilities on which the foreign currency sensitivity analysis has been performed: USD term deposit Trade payables Trade payables Trade payables (iii) Other price risk USD EUR USD GBP AUD 2022 $000 1,887 (2,862) (412) (6) AUD 2021 $000 1,729 (2,106) (6) - Other price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market conditions (other than those arising from interest rate risk or foreign currency risk), for example from changes in equity prices and commodity prices. (vii) Capital Management The Group’s capital management objectives are to: • maintain a sufficient level of capital above the regulatory minimum to provide a buffer against losses arising from unanticipated events, and allow the Group to continue as a going concern; and • ensure that capital management is closely aligned with the Group’s business and strategic objectives. The Group manages capital adequacy according to the framework set out by the APRA Prudential Standards. APRA determines minimum prudential capital ratios that must be held by all ADIs. Accordingly, the Group is required to maintain a minimum prudential capital ratio on a Level 1 basis as determined by APRA. The Board considers the Group’s strategy, financial performance objectives, and other factors relating to the efficient management of capital in setting target ratios of capital above the regulatory required levels. These processes are formalised within the Group’s ICAAP. The Group operates under the specific capital requirements set by APRA. The Group has satisfied its minimum capital requirements throughout the 2022 financial year in the form of Tier 1 Capital which is the highest quality component of capital. 145 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022FINANCIAL REPORT 19. Financial risk management objectives, policies and processes (continued) (vii) Capital Management (continued) Capital Adequacy Tier 1 Capital Common Equity Tier 1 Capital Contributed capital Accumulated losses & reserves Regulatory adjustments to Common Equity Tier 1 Capital Deferred tax assets in excess of deferred tax liabilities Capitalised expenses Goodwill and other intangible assets Other adjustments Common Equity Tier 1 Capital Additional Tier 1 Capital Total Tier 1 Capital Tier 2 Capital General reserve for credit losses1 Total Tier 2 Capital Total Capital Total risk weighted assets Risk-based capital ratios Common Equity Tier 1 Tier 1 Total Capital ratio 2022 $000 2021 $000 278,798 (124,672) 154,126 (13,721) (12,974) (55,361) (2,542) (84,598) 69,528 - 274,436 (96,127) 178,309 (13,856) (7,800) (69,234) (4,999) (95,889) 82,420 - 69,528 82,420 2,123 2,123 71,651 185,613 % 37 37 39 1,273 1,273 83,693 115,357 % 71 71 73 1 Standardised approach (to a maximum of 1.25% of total credit risk weighted assets). (viii) Liquidity risk The Group’s liquidity risk is the risk that the Group will have insufficient liquidity to meet its obligations as they fall due. This could potentially arise as a result of mismatched cash flows. The Group manages this risk by the Board approved liquidity framework. Responsibility for liquidity management is delegated to the Chief Financial Officer (CFO) and Chief Executive Officer (CEO). The CFO manages liquidity on a daily basis and submits regular reports to ALCO, and to the BRC at the seating of the BRC. The CFO is also responsible for monitoring and managing capital planning. The capital plan outlines triggers for additional funding should liquidity be required. The CRO provides oversight of the business’ adherence with the Liquidity Risk framework and reports to the BRC. The liquidity risk management framework models the Group’s ability to fund under both normal conditions and periods of stress. The capital plan and liquidity management are reviewed at least annually. At the reporting date, the Board of Directors determined that there was sufficient cash available to meet its financial liabilities and anticipated expenditure. Maturity analysis Amounts in the table below are based on the Group’s contractual undiscounted cash flows for the remaining contractual maturities. 146 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022FINANCIAL REPORT 19. Financial risk management objectives, policies and processes (continued) (viii) Liquidity risk (continued) Financial liabilities CONTRACTUAL CASH FLOWS AS AT 30 JUNE 2022 < 3 MONTHS 3 TO 6 MONTHS >6 TO 12 MONTHS >1 TO 5 YEARS >5 YEARS TOTAL $000 $000 $000 $000 $000 Variable rate deposits Term deposits Lease liabilities (79,204) (4,069) - - - - Commissions payable to Bendigo Bank (2,273) (2,360) Trade payables and other liabilities (28,009) - - - (1,897) (4,783) - - - - - (79,204) (4,069) (19,076) (20,671) (41,644) (42,598) (51,920) (103,934) - - (28,009) AS AT 30 JUNE 2021 Variable rate deposits Term deposits Lease liabilities Commissions payable to Bendigo Bank Trade payables and other liabilities (113,555) (2,360) (6,680) (61,674) (72,591) (256,860) (72,470) (3,011) (1,286) (2,043) (17,215) - - (1,286) (2,058) - - - (300) - - - - - - (72,470) (3,011) (2,872) (7,899) (42,350) (63,343) (117,693) - - - (17,215) (96,025) (3,344) (8,199) (42,350) (63,343) (213,261) Amounts falling due after greater than 5 years include variable component of commissions payable to Bendigo and Adelaide Bank under the Tyro-Bendigo Alliance. (ix) Fair values The Group uses various methods in estimating the fair value of a financial instrument. The methods comprise: Level 1 The fair value is calculated using quoted prices in active markets. Level 2 The fair value is estimated using inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices). Level 3 The fair value is estimated using inputs for the asset or liability that are not based on observable market data. Quoted market price represents the fair value determined based on quoted prices in active markets as at the reporting date without any deduction for transaction costs. The table below shows the Group’s financial assets that are measured at fair value, or where not measured at fair value, their fair value equivalent. Management has assessed that for other financial assets and liabilities not disclosed in the table below, due to their short-term maturity or repricing profile, the carrying amount is an approximation of fair value. 30 JUNE 2022 ($000) 30 JUNE 2021 ($000) FINANCIAL ASSETS Floating rate notes Loans Convertible note in meandu Australia Holdings Pty Ltd LEVEL 1 LEVEL 2 LEVEL 3 71,185 - - 71,185 - - - - TOTAL 71,185 LEVEL 1 69,068 - 39,504 39,504 1,510 1,510 - - 41,014 112,199 69,068 LEVEL 2 LEVEL 3 TOTAL - - - - - 69,068 15,387 15,387 - - 15,387 84,455 147 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022FINANCIAL REPORT 19. Financial risk management objectives, policies and processes (continued) (ix) Fair values (continued) Floating rate notes The floating rate notes invested in by the Group have a short-term repricing profile and are of high credit quality. The fair value of these floating rate notes is obtained from an independent third-party pricing service that uses tradeable prices and quotes from active markets. Loans Loans are included in Level 3 due to one or more of the significant inputs used in determining the fair value being based on unobservable inputs. To determine the fair value, an income valuation approach is used. This technique converts forecasted cash flows to a present value amount (also known as a discounted cash flow method). Forecast cash flows are actuarially determined using predictive models based partly on evidenced historical performance and expected repayment profiles. The fair value model will be periodically reviewed, tested and refined as needed. The fair value of loans requires estimation of: • the expected future cash flows; • the expected timing of receipt of those cash flows; and • discount rates derived from similar observed rates for comparable assets that are traded in the market. The main inputs used in measuring the fair value of loans are as follows: • • • • • loan balance – accepted principal and fee, outstanding principal and fee, and date of acceptance; annual settlement amount – forecasted total annual settlements for loan customers; current repayment percentage – percentage of daily settlements through the loan customers’ terminals that go towards loan repayments; historical default and recovery information; and discount rates – market benchmarked discount rate which allows for a market level of default risk. The unobservable pricing inputs which determine fair value are based on: • • • • the pricing of loans including adjustments for credit risk, with the risk adjustments ranging between 35% and 37%; historical data with respect to behavioural repayment patterns – generally ranging between 3 to 12 months; default experience for loans deemed uncollectable and which are valued at $nil; and an estimate for the deterioration in credit risk of merchants as a result of COVID-19. These inputs directly affect the fair value of the loans. A sensitivity of a change of 10% in the value ascribed to credit risk for loans to merchants that are either not trading completely, or are on repayment holidays, will have an impact of between negative $46,628 and positive $46,628 to profit and loss. Equity investments At the reporting date, the Group held unlisted equity instruments in meandu Australia Holdings Pty Ltd and Axis IP Pty Ltd and 100% of the share capital of Medipass which was acquired on 31 May 2021. meandu Australia Holdings Pty Ltd and Axis IP Pty Ltd are valued using the equity accounting method as noted in Note 11. Transfer between categories There were no transfers between Level 1, Level 2 or Level 3 during the financial year. 148 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022FINANCIAL REPORT 20. Commitments and contingencies (a) Commitments relating to BECS The Group pays merchants through the Bulk Electronic Clearing System (BECS). As a result of BECS intra-day settlements which went live in November 2013, all merchant settlements committed are processed on the same day. (b) Contingent Liabilities arising from commitments Contingent liabilities arising from commitments are secured by way of standby letters of credit or bank guarantees as follows: Contingent liabilities - secured (i) Irrevocable standby letters of credit in favour of: Mastercard International Visa International (ii) Bank Guarantees in favour of: UIR Australia (lessor of 155 Clarence Street, Sydney) Premium Custody Services (lessor of 1.15/14-16 Lexington Drive, Bella Vista) Bendigo and Adelaide Bank Limited - Alliance Agreement Bendigo and Adelaide Bank Limited to guarantee the Bendigo office Leader Autainvest II Pty Ltd (guarantee to secure the obligation under the lease of 55 Market Street, Sydney) 2022 $000 2021 $000 3,287 524 3,811 - 13 6,000 7 4,867 3,129 524 3,653 4,525 13 6,000 - - 10,887 10,538 The Group has provided irrevocable standby letters of credit of $3,811,066 (2021: $3,653,183) secured through fixed charges over term deposits with the Commonwealth Bank of Australia and Westpac Banking Corporation, to Mastercard International and Visa International. These are one-year arrangements that are subject to automatic renewal on a yearly basis. Mastercard International and Visa International, at their discretion, may increase the required amounts of the standby letters of credit upon written request to the Group. The required amounts of the standby letters of credit are dependent on Mastercard International’s and Visa International’s view of their risk exposure to the Group. A bank guarantee in favour of UIR Australia was held with Westpac Banking Corporation in relation to the lease arrangement for the 155 Clarence Street office premises. The amount was refunded on completion of the make good. A bank guarantee in favour of Leader Autainvest II Pty Ltd is held with Westpac Banking Corporation in relation to the lease arrangement for the 55 Market Street office premises. The amount represents 6 months rent, outgoings and GST and is refundable on expiry of the lease agreement, subject to satisfactory vacation of the leased premises. A bank guarantee in favour of Bendigo and Adelaide Bank Limited is held with Westpac Banking Corporation to mitigate the default risk created by Bendigo settling funds to Alliance merchants that hold a settlement account with Bendigo ahead of funds receipt from Tyro. 149 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022FINANCIAL REPORT 20. Commitments and contingencies (continued) (c) Commitments relating to Tyro – Bendigo Bank Alliance In October 2020, the Group announced an alliance with Bendigo and Adelaide Bank Limited (Bendigo Bank) for merchant acquiring services (Alliance). As part of the Alliance, Bendigo Bank agreed to transfer existing and refer potential customers to the Group for the provision of a co-branded merchant acquiring service and receive upfront consideration and commission from existing and newly referred Bendigo Bank business customers who use the Group’s merchant acquiring services. The present value of commitments arising from the commission payable on existing customer network and future rollouts includes an amount guaranteed by the Group and an additional variable amount based on revenue achieved as follows: Guaranteed amount Variable amount 2022 $000 28,108 64,673 92,781 2021 $000 39,183 63,090 102,273 Key assumptions in respect of estimating the variable amount can be found in Note 1(c). 21. Acquisition of subsidiary Acquisitions for the year ended 30 June 2022 There were no acquisitions for the year ended 30 June 2022. Acquisitions for the year ended 30 June 2021 On 31 May 2021, the Company acquired a 100% ownership interest in Medipass, a Melbourne-based digital health payments business. Included in the identifiable assets and liabilities acquired at the date of acquisition of Medipass are inputs (a software platform, customer contracts, customer relationships), production processes and an organised workforce. The Company has determined that together the acquired inputs and processes significantly contribute to the ability to create revenue. The Company has concluded that the acquired set is a business. The acquisition of Medipass adds an innovative cardless digital healthcare claiming and payment platform, that seamlessly links practitioners, funders and patients. Medipass’ digital health payments platform will be integrated with the Company’s card-present health solution to provide a unified health payment offering that delivers both card-present and card-not-present transactions. The acquisition will provide the Company’s health merchants greater claiming and payment capabilities extending beyond the Company’s private health insurer and Medicare Easyclaim options to include a range of State and Federal based compensatory funders. For one-month trading in 2021, Medipass contributed reported revenue of $222,278 and a net loss of $131,162 to the Group’s results. The following summarises the major classes of consideration transferred, the recognised amounts of assets acquired, liabilities assumed, and the goodwill recognised at the acquisition date: (a) Consideration transferred Cash Share capital issued (1,220,694 ordinary shares) Equity instruments (1,132,632 share options) Total consideration transferred 2021 $000 13,541 4,614 2,648 20,803 As part of the transaction, a non-recourse loan totalling $1,675,138 was made to Medipass option holders to allow them to exercise their options prior to the completion of the deal. The Tyro shares that were issued in exchange for these shares are being held in escrow with a holding lock period of 1-3 years and will be issued only on repayment of the loan. These shares have been treated as share options in Tyro’s equity reserves. They have been valued using the Black-Scholes method and recognised in the Share-Based Payment Reserve. For further detail on how Tyro values its share options, see Note 1(c) and Note 14. Equity instruments issued The fair value of ordinary shares issued was based on the listed share price of the Company at 31 May 2021 of $3.78 per share. 150 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022FINANCIAL REPORT 21. Acquisition of subsidiary (continued) (b) Acquisition costs The Company incurred acquisition-related costs of $1,136,364 on legal fees and due diligence costs. These costs were included in ‘administrative expenses’ in FY21. (c) Identifiable assets acquired and liabilities assumed The following table summarises the recognised amounts of assets acquired, and liabilities assumed at the date of acquisition. Cash and cash equivalents Trade receivables Prepayments and other debtors Software - Medipass platform Customer relationships Property, plant and equipment Loans and borrowings Deferred tax liabilities Trade and other payables Total identifiable net assets acquired 2021 $000 171 126 242 5,500 2,900 38 (113) (870) (878) 7,116 The valuation techniques used for measuring the fair value of material assets acquired were as follows: ASSETS ACQUIRED VALUATION TECHNIQUE DESCRIPTION Software Replacement cost Customer relationships Multi-excess earnings method Estimates the Fair Value of all costs necessary to construct a similar asset of equivalent utility at prices applicable at the time of reconstruction. Estimates Fair Value based on the present value of the cash flows derived from the intangible asset adjusted for charges relating to the supporting assets used to derive that income. This return on assets is deducted as a contributory asset (CAC) in the discounted cash flow model. (d) Goodwill Goodwill arising from the acquisition has been recognised as follows. Consideration transferred Fair value of identifiable assets Goodwill None of the goodwill recognised is expected to be deductible for tax purposes. 2021 $000 20,803 7,116 13,687 22. List of subsidiaries Parent entity Tyro Payments Limited Subsidiaries Medipass Solutions Pty Ltd Medipass Solutions Limited Tyro Payments (Ben Alliance) Pty Ltd PRINCIPAL PLACE OF BUSINESS OWNERSHIP INTEREST 2022 2021 Australia Australia United Kingdom Australia 100% 100% 100% 100% 100% 100% 151 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022FINANCIAL REPORT 23. Earnings per share Basic loss per share shows the loss attributable to each ordinary share. It is calculated as the net loss attributable to ordinary shareholders divided by the weighted average number of ordinary shares in each year. Diluted loss per share shows the loss attributable to each ordinary share if all the dilutive potential ordinary shares had been ordinary shares. There are no discontinued operations of the Group. Earnings Net loss attributable to ordinary shareholders used to calculate basic and diluted earnings per share 2022 $000 (29,617) 2022 NUMBER 2021 $000 (29,823) 2021 NUMBER Weighted average number of ordinary shares used in calculating basic earnings per share 515,660,709 505,773,888 Weighted average number of potentially dilutive ordinary shares 542,333,850 531,633,132 Basic Diluted Diluted EPS is consistent with basic EPS due to the Group currently generating negative earnings. 24. Auditor’s remuneration Fees in respect of the role of the appointed auditor Audit and review of the financial reports1 Fees for assurance services required by legislation to be performed by the auditor Discretionary fees for other assurance related services Other assurance and agreed-upon-procedures services Fees for other non-assurance services Tax compliance Other assistance and services 2022 CENTS (5.74) (5.74) 2021 CENTS (5.90) (5.90) 2022 $000 415 - - 17 - 432 2021 $000 425 38 14 7 484 1 This includes fees in the capacity as the appointed auditor under APRA’s APS 310 Audit and Audit Related Matters. The Directors are satisfied that the provision of non-audit services, during the year, by the auditor (or by another person or firm on the auditor’s behalf) is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The Directors are of the opinion that the services disclosed above do not compromise the external auditor’s independence for the following reasons: • all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of the auditor; and • none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional & Ethical Standards Board, including reviewing or auditing the auditor’s own work, acting in a management or decision-making capacity for the Group, acting as an advocate for the Group or jointly sharing economic risks and rewards. 152 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022FINANCIAL REPORT 25. Related party disclosures Compensation of Key Management Personnel The amounts disclosed in the table are the amounts recognised as an expense during the reporting period related to the following Key Management Personnel. DIRECTORS David Thodey Robbie Cooke1 TITLE Chair and Non-executive Director Chief Executive Officer and Managing Director Hamish Corlett2 Non-executive Director David Fite Claire Hatton Aliza Knox Non-executive Director Non-executive Director Non-executive Director Fiona Pak-Poy Non-executive Director Paul Rickard Shefali Roy EXECUTIVES Robbie Cooke1 Steve Chapman Praveenesh Pala Non-executive Director Non-executive Director TITLE Chief Executive Officer and Managing Director Chief Risk Officer Chief Financial Officer 1 Resigned as Chief Executive Officer and Managing Director on 29 June 2022 effective 29 December 2022 2 Retired as Non-executive Director on 3 November 2021 Compensation of Key Management Personnel Short-term benefits Long-term benefits (long service leave) Post-employment benefits (superannuation) Share-based payments Total APPOINTED 16 November 2018 18 October 2019 18 April 2019 3 July 2018 5 January 2022 21 April 2021 4 September 2019 28 August 2009 5 January 2022 APPOINTED 23 March 2018 11 June 2021 20 October 2014 2022 $000 3,018 55 124 (483)1 2,714 2021 $000 2,458 40 74 2,355 4,927 1 The negative accounting value mainly relates to management’s judgement that the FY19 LTI Option Plan only has a certain percentage probability of vesting. As such, a proportion of the prior year share-based payments expense for these options have been reversed. Interests held by Key Management Personnel Share options and rights held by Key Management Personnel to purchase ordinary shares have the following expiry dates and exercise prices. ISSUE YEAR EXPIRY YEAR EXERCISE PRICE ($) 2022 NUMBER OUTSTANDING 2021 NUMBER OUTSTANDING FY14/15 FY15/16 FY16/17 FY17/18 FY18/19 FY18/19 FY18/19 FY18/19 FY19/20 FY20/21 FY20/21 FY21/22 FY21/22 FY21/22 FY22/23 FY23/24 FY23/24 FY24/25 FY24/25 FY25/26 FY28/29 FY26/27 No expiry date FY32/33 No expiry date FY33/34 $0.450 $0.600 $1.490 $1.760 $0.000 $1.760 $1.500 $0.000 $1.790 $0.000 $0.000 $0.000 $0.000 - 21,505 159,401 375,000 480,953 1,818,180 2,618,131 800,000 2,540,412 234,302 76,192 535,833 46,893 During the year, 582,726 rights were granted to Key Management Personnel (2021: 393,079). 28,169 187,634 159,401 375,000 480,953 1,818,180 2,686,131 966,666 2,540,412 234,302 93,433 - - 153 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022FINANCIAL REPORT 26. Parent entity disclosures As at, and throughout the financial year ended 30 June 2022, the parent entity of the Group was Tyro Payments Limited. Result of parent entity Loss for the year Other comprehensive loss Total comprehensive loss for the year Financial position of parent entity at year end Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Net assets Total equity of parent entity comprising of: Contributed equity Reserves Accumulated losses Total equity 2022 $000 2021 $000 (28,197) (1,008) (29,690) 105 (29,205) (29,585) 122,152 288,846 410,998 132,484 117,361 249,845 161,153 278,798 47,085 159,989 234,543 394,532 122,098 91,637 213,735 180,797 274,436 40,827 (164,370) (134,466) 161,153 180,797 27. Matters subsequent to the end of the financial year In the opinion of the Directors, there have been no matters or circumstances which have arisen between 30 June 2022 and the date of this report that have significantly affected or may significantly affect the operations of the Group, the result of those operations or the state of affairs of the Group in subsequent financial years. 28. Contingent liabilities In relation to the terminal outage incident in January 2021, a class action proceeding was filed against Tyro in October 2021 in the Federal Court of Australia on behalf of customers impacted by the terminal outage incident. The class action is the subject of Tyro’s previous ASX announcement on 20 October 2021. The class action alleges that Tyro engaged in misleading and deceptive conduct, contravened certain statutory guarantees and breached certain contractual warranties. The claim seeks compensation and damages from Tyro. Tyro denies the allegations and is defending the proceedings. It is currently not possible to reliably determine the ultimate impact on the Group of the claims raised in this proceeding and accordingly no provision has been recognised. 154 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022FINANCIAL REPORT Directors’ Declaration In the opinion of the Directors: (a) the Consolidated Financial Statements and Notes of the Group set out on pages 107 to 157 are in accordance with the Corporations Act 2001, including: (i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and (ii) giving a true and fair view of the Group’s financial position as at 30 June 2022 and of its performance for the financial year ended on that date; and (b) there are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due and payable. (c) the remuneration disclosures set out in the Directors’ Report comply with Accounting Standard AASB 124 Related Party Disclosures and the Corporations Regulations 2001; and (d) the Financial Statements and Notes also comply with International Financial Reporting Standards as disclosed in the Financial Statements. The Directors have been given the declarations by the CEO | Managing Director and Chief Financial Officer required by Section 295A of the Corporations Act 2001. The declaration is made in accordance with a resolution of the Directors. ______________________ David Thodey AO Chair Sydney, 29 August 2022 ______________________ Robbie Cooke CEO | Managing Director 155 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022FINANCIAL REPORT Independent audit report to the members of Tyro Payments Limited Ernst & Young 200 George Street Sydney NSW 2000 Australia GPO Box 2646 Sydney NSW 2001 Tel: +61 2 9248 5555 Fax: +61 2 9248 5959 ey.com/au Independent auditor’s report to the members of Tyro Payments Limited Report on the audit of the financial report Opinion We have audited the financial report of Tyro Payments Limited (the Company) and its subsidiaries (collectively the Group), which comprises the consolidated statement of financial position as at 30 June 2022, the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, notes to the financial statements, including a summary of significant accounting policies, and the directors’ declaration. In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: a. Giving a true and fair view of the consolidated financial position of the Group as at 30 June 2022 and of its consolidated financial performance for the year ended on that date; and b. Complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial report of the current year. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context. We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the financial report section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial report. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial report. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 156 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022FINANCIAL REPORT Page 2 Valuation of contingent consideration Why significant How our audit addressed the key audit matter As detailed in Note 1(c) of the financial report, the Group has a long-term merchant acquiring alliance with Bendigo and Adelaide Bank Limited. The consideration under the alliance contract included a contingent component based on future revenue that is recorded as a liability. The contingent consideration is required to be re-measured at each reporting date to reflect the Group’s estimate of the amount of further consideration it expects to pay. Given the value of the contingent consideration liability recorded and the judgement involved in measuring the liability, this was considered to be a key audit matter. Our audit procedures included the following: • Read the purchase agreements to obtain an understanding of the key terms. • Evaluated, with the involvement of our valuation experts, the methodology used by the Group to determine the value of the contingent consideration at reporting date, the underlying assumptions and estimates applied, and the mathematical accuracy of the supporting calculations. • We considered the consistency of judgements and assumptions made with respect to other accounting estimates and models. • Evaluated the financial performance of the alliance against forecasts on which the valuation of the contingent consideration is based. • Assessed the adequacy of the related disclosures within the financial report regarding the contingent consideration. Remediation provisions Why significant How our audit addressed the key audit matter As detailed in Note 17, during the financial year, the Group has recorded and made disclosures in relation to matters requiring merchant remediation in connection with a terminal outage incident in January 2021 that affected some of the Group’s EFTPOS terminal fleet held by merchants. This was a key audit matter due to the significant judgment required to determine a reliable estimate of the provision. Key areas of judgment included: Our audit procedures included the following: • We developed an understanding of the Group’s processes for identifying potential merchant-related remediation obligations. • We held discussions with management, reviewed Board of Directors and Board committee minutes, reviewed correspondence with merchants and attended Board Audit Committee and Board Risk Committee meetings. • We discussed ongoing and potential legal matters with management, including General Counsel, and obtained external legal confirmations. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 157 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022FINANCIAL REPORT Page 3 Why significant How our audit addressed the key audit matter • The decision as to whether to recognise a provision and/or disclose a contingent liability, including whether sufficient information existed to allow a provision to be reliably measured; and • Assumptions used to estimate the merchant related remediation payments, including how many merchants will claim compensation and average compensation amounts. • We assessed key assumptions used to estimate the merchant-related remediation amounts, including testing of compensation experience to date. • Tested the mathematical accuracy of the provision calculations made. • For those matters where the Group determined that a sufficiently reliable estimate of the amount of the obligation could not be made and for which no provisions have been recognised, we assessed the appropriateness of this conclusion and any related contingent liability disclosure. • We considered the existence of any economic benefits that would require disclosure as contingent assets. • We considered the adequacy of the disclosures within the financial report related to the provision. Recoverability of deferred tax assets Why significant How our audit addressed the key audit matter The financial statements include $13.0 million of deferred tax assets. The assessment of their recoverability was subject to significant judgements made by the Group in forecasting future taxable profits and determining the availability and expected timing of utilising the deferred tax assets against future taxable income in accordance with tax legislation. The judgements involve expected business growth which is dependent upon market and economic conditions and the ability of the Group to generate sufficient future taxable profits. Accordingly, this was considered to be a key audit matter. Our audit procedures included the following: • Assessed the mathematical accuracy of the Group’s deferred tax asset utilisation model. • Agreed the amount of unused tax benefits carried forward as deferred tax assets to prior period lodged income tax returns. • Evaluated the Group’s assumptions and estimates in relation to the likelihood of generating sufficient future taxable income based on most recent Board approved forecasts, prepared by the Group, principally by performing sensitivity analyses and evaluating and testing the key assumptions used to determine the amounts recognised. • Considered the consistency of judgements and assumptions made with respect to other accounting estimates and models. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 158 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022FINANCIAL REPORT Page 4 Why significant How our audit addressed the key audit matter Disclosures relating to deferred tax assets are set out in in Notes 1(c) and 4. • Assessed the historical accuracy of the Group’s previous future taxable profit forecasts by comparing to actual outcomes. • Involved our taxation specialists in reviewing the Group’s assessment of their ability to utilise carry forward tax losses in accordance with income tax legislation. Revenue recognition – merchant service fees Why significant How our audit addressed the key audit matter As detailed in Note 2 of the financial report, the Group generated $283.6 million in revenue from merchant service fees for the year ended 30 June 2022. Given the importance of revenue to the users of the financial report, specifically as a key performance indicator for the Group and a key metric for senior management of the Group, this was considered to be a key audit matter. Our audit procedures included the following: • Evaluated the Group’s revenue accounting and assessed whether the Group’s accounting policies complied with the requirements of Australian Accounting Standards. • Assessed the operating effectiveness of key controls over the recording of revenue. • For a sample of merchant service fee revenue transactions, we obtained supporting evidence such as customer contracts and transaction records to support the timing and value of revenue recognised. • Analysed accounting entries impacting revenue that did not arise from the system- generated reporting of underlying transactions. IT systems and controls over financial reporting Why significant How our audit addressed the key audit matter The Group’s operations and financial reporting systems are heavily dependent on IT systems, including automated accounting procedures and IT dependent manual controls. The Group’s controls over IT systems include: • The framework of governance over IT systems; • Controls over program development and changes; Our procedures included evaluating and testing the design and operating effectiveness of certain controls over the continued integrity of the IT systems that are relevant to financial reporting. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 159 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022FINANCIAL REPORT Page 5 • Controls over access to programs, data and IT operations; and • Governance over generic and privileged user accounts. Given the reliance on the IT systems in the financial reporting process, we considered this to be a key audit matter. We also carried out specific tests, on a sample basis, of system functionality that was key to our audit approach in order to assess the accuracy of certain system calculations, the generation of certain reports and the operation of certain system enforced access controls. Where we noted design or operating effectiveness matters relating to IT system controls relevant to our audit, we performed alternative audit procedures. We also considered mitigating controls in order to respond to the impact on our overall audit approach. Carrying value of goodwill Why significant How our audit addressed the key audit matter As detailed in Note 13, the Group recorded $13.7 million in goodwill as at 30 June 2022. Goodwill is tested annually for impairment and requires the Group to estimate the recoverable amount of the relevant cash-generating unit (CGU) to be determined. The key inputs and judgements involved in the impairment assessment includes: • Determination of CGUs; • Discount rates, terminal growth rates and revenue and expense assumptions used in the discounted cashflow models; and • Considering the sensitivity of the impairment assessment to reasonable possible changes in key assumptions. Given the high degree of judgement and complexity in assessing the carrying value of goodwill, we considered this to be a key audit matter. Our audit procedures included the following: • Assessed the Group’s determination of CGUs used in the impairment model, based on our understanding of the nature of the Group’s business and the economic environment in which it operates. • Understood and evaluated the Group’s process for performing goodwill impairment assessments and the determination of any asset impairment outcomes. • We involved our valuation specialists to assist in assessing the appropriateness of the impairment models including key inputs into the models such as the discount rates and growth rates. • We tested the mathematical accuracy of the impairment models. • We assessed whether cash flow forecasts incorporated in the impairment assessment were consistent with Board approved forecasts. • We assessed the Group’s sensitivity analysis and evaluated whether any reasonably foreseeable change in assumptions could lead to an impairment. • We assessed the adequacy of the disclosures in Note 13 to the financial report. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 160 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022FINANCIAL REPORT Page 6 Information other than the financial report and auditor’s report thereon The directors are responsible for the other information. The other information comprises the information included in the Group’s 2022 annual report, but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon, with the exception of the Remuneration Report and our related assurance opinion. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the directors for the financial report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: ► Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. ► Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 161 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022FINANCIAL REPORT Page 7 ► Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. ► Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. ► Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. ► Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion. We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied. From the matters communicated to the directors, we determine those matters that were of most significance in the audit of the financial report of the current year and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on the audit of the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 69 to 103 of the directors’ report for the year ended 30 June 2022. In our opinion, the Remuneration Report of Tyro Payments Limited for the year ended 30 June 2022, complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 162 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022FINANCIAL REPORT Page 8 responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Ernst & Young Michael Byrne Partner Sydney 29 August 2022 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 163 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022FINANCIAL REPORT 164 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022 165 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022 166 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022 Additional Information 167 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022 l r e d o h e r a h S n o i t a m r o f n I The shareholder information set out below is based on the information recorded in the Tyro Payments Limited share register as at 15 August 2022. Ordinary Shares Tyro has on issue 517,960,449 fully paid ordinary shares. Voting Rights The voting rights attaching to each class of equity securities are set out below: a. Ordinary shares – On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote. b. Options and rights – No voting rights. Substantial Shareholders The following is a summary of the current substantial shareholders pursuant to notices lodged with the ASX in accordance with section 671B of the Corporations Act: NAME DATE OF INTEREST NUMBER OF ORDINARY SHARES1 % OF ISSUED CAPITAL2 Grockco Pty Ltd FIL Limited 6 Dec 2019 17 Dec 2021 69,119,528 30,720,474 13.72% 5.96% 1. As disclosed in the last notice lodged with the ASX by the substantial shareholder. 2. The percentage set out in the notice lodged with the ASX is based on the total issued share capital of Tyro at the date of interest. On Market Buy-Back There is no current on-market buy-back in respect of Tyro’s ordinary shares. Distribution of Securities Held Analysis of number of ordinary shareholders by size of holding: RANGE ORDINARY SHARES1 % NO. OF HOLDERS 100,001 and Over 395,728,563 77,953,436 21,076,483 19,572,955 3,629,012 76.40 15.05 4.07 3.78 0.70 272 2,920 2,789 7,508 7,321 % 1.31 14.03 13.40 36.08 35.18 10,001 to 100,000 5,001 to 10,000 1,001 to 5,000 1 to 1,000 Total 517,960,449 100.00 20,810 100.00 Unmarketable Parcels 0 0.00 0 0.00 1. Ordinary shares include shares offered to employees under the Company’s incentive arrangements. There were no holders of less than a marketable parcel of ordinary shares. 168 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022ADDITIONAL INFORMATION Top 20 Largest Shareholders The names of the 20 largest quoted equity security holders as they appear on the Tyro share register are listed below: NAME 1 CBC CO PTY LIMITED 2 J P MORGAN NOMINEES AUSTRALIA PTY LIMITED 3 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED 4 CITICORP NOMINEES PTY LIMITED 5 MS DANITA RAE LOWES 6 INVIA CUSTODIAN PTY LIMITED 7 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2 8 NATIONAL NOMINEES LIMITED 9 HANS-JOSEF JOST STOLLMANN 10 DYNAMIC SUPPLIES INVESTMENTS PTY LTD 11 PACIFIC CUSTODIANS PTY LIMITED 12 BNP PARIBAS NOMINEES PTY LTD 13 JASGO NOMINEES PTY LTD 14 BNP PARIBAS NOMS PTY LTD 15 JH 7 PROPERTIES PTY LTD 16 SOPHIA-KONSTANTINA FIONA STOLLMANN 17 UBS NOMINEES PTY LTD 18 DROP KNEE INVESTMENTS PTY LTD 19 SINALUNGA PTY LTD 20 EUCLID CAPITAL PARTNERS LLC NUMBER OF SHARES % OF TOTAL SHARES 64,719,528 59,355,497 35,189,198 30,228,840 19,028,582 17,500,000 15,211,613 13,654,093 10,659,442 8,600,000 6,224,377 6,002,721 5,060,726 3,470,012 3,272,728 3,261,237 3,118,150 2,568,174 2,482,978 2,425,000 12.50 11.46 6.79 5.84 3.67 3.38 2.94 2.64 2.06 1.66 1.20 1.16 0.98 0.67 0.63 0.63 0.60 0.50 0.48 0.47 Total 312,032,896 60.26 169 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022ADDITIONAL INFORMATION Domicile of Ordinary Shareholders1 DOMICILE Australia Australia Capital Territory New South Wales Northern Territory Queensland South Australia Tasmania Victoria Western Australia Overseas Total 1 As at 31 July 2022. NUMBER OF SHARES % NUMBER OF HOLDERS 516,306,006 2,516,556 362,595,252 406,373 32,789,953 9,195,329 1,158,824 93,594,807 14,048,912 1,624,795 99.69 0.49 70.01 0.08 6.33 1.78 0.22 18.07 2.71 0.31 20,473 350 9,590 88 3,065 1,247 233 4,567 1,333 185 % 99.11 1.69 46.42 0.43 14.84 6.04 1.13 22.11 6.45 0.89 517,930,801 100.00 20,658 100.00 Unquoted Equity Securities Performance rights in respect of ordinary shares issued under the Tyro STI and LTI Rights Plans, the Tyro Remuneration Sacrifice Rights Plan and the Liquidity Event Performance Rights Plan Options in respect of ordinary shares issued under the Tyro Options Plans NUMBER ON ISSUE 8,849,345 21,659,439 Go Online to Manage Your Shareholding Online share registry facility Tyro offers shareholders the use of an online share registry facility through www.linkmarketservices.com.au or https://investorcentre.linkmarketservices.com.au/ to conduct standard shareholding enquiries and transactions, including: lodge or update banking details; • update registered address; • • notify Tax File Number / Australian Business Number; • check current and previous shareholding balances; and • appoint a proxy to vote at the Annual General Meeting. 170 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022ADDITIONAL INFORMATION y r o t c e r i D e t a r o p r o C Directors David Thodey AO - Chair of the Board Robbie Cooke – CEO | Managing Director Special Counsel and Company Secretary Jairan Amigh David Fite – Non-executive Director email: jamigh@tyro.com Claire Hatton – Non-executive Director Aliza Knox – Non-executive Director Fiona Pak-Poy – Non-executive Director & Chair of People Committee Shefali Roy - Non-executive Director Paul Rickard – Non-executive Director & Chair of Audit Committee and Risk Committee Registered and Principal Administrative Office in Australia Tyro Payments Limited 18/55 Market Street Sydney, NSW, 2000, Australia Telephone: 1300 966 639 ABN: 49 103 575 042 Website Address www.tyro.com https://investors.tyro.com/investor-centre/ Australian Securities Exchange (ASX) Listing Tyro Payments Limited shares are listed on the ASX under the code TYR. Director Profiles Refer to profiles on pages 37 to 41. Executive Leadership Team Refer to profiles on pages 42 to 45. Investor Relations Giovanni Rizzo email: grizzo@tyro.com Media Monica Appleby email: mappleby@tyro.com Auditor E&Y Australia 200 George Street Sydney, NSW, 2000, Australia Share Registry Link Market Services Pty Limited Level 12, 680 George Street Sydney, NSW, 2000, Australia email: registrars@linkmarketservices.com.au Telephone within Australia: 1300 554 474 Telephone outside Australia: +61 1300 554 474 Fax: +61 2 9287 0303 To maintain or update your details online and enjoy full access to all your holdings and other valuable information, simply visit https:// investorcentre.linkmarketservices.com.au. Tyro ASX Announcements Details of all announcements released by Tyro Payments Limited can be found on our Investors page at https://investors.tyro.com/ investor-centre/ 171 TYRO PAYMENTS LIMITED - ANNUAL REPORT 2022ADDITIONAL INFORMATION www.tyro.com
Continue reading text version or see original annual report in PDF format above