74Software (74SW) H1 2024 earnings summary

Executive summary

• H1 2024 revenue reached €148.7 million, up 1.9% organically and 2.2% in total year-over-year, with strong subscription momentum and performance in line with annual targets.

• Subscription revenue grew 18.0% organically to €93.2 million, now 63% of total revenue, and ARR rose 7.2% to €229.9 million.

• Operating profit was €17.1 million (11.5% margin), stable versus H1 2023; net profit was €2.8 million (€0.13/share), down from €3.7 million (€0.17/share) in H1 2023.

• Customer satisfaction improved, with NPS rising to 51 from 42 at end-June 2023.

• Sopra Banking Software acquisition is on track for Q3 2024 completion, with regulatory approvals nearly complete and rights issue planned.

Financial highlights

• Free cash flow was €6.7 million, down from €16.5 million in H1 2023, with full-year improvement expected.

• Cash and equivalents at €16.9 million; net debt at €70.8 million as of June 30, 2024.

• Gross margin stable at 70.5%; recurring revenue at 86% of total.

• Net debt/EBITDA ratio at 1.14 and net debt/equity at 0.20, both within covenant limits.

• International revenue accounted for 72% of total, up from 69% in H1 2023.

Outlook and guidance

• 2024 organic revenue growth expected between 1% and 3%, with profit on operating activity targeted at around 20% of revenue.

• Guidance for the combined entity with Sopra Banking Software will be provided at the rights issue launch.

• Free cash flow expected to normalize and improve versus 2023 as DSOs recover.