Good day and welcome to the Bravura Solutions First Half 24 Financial Results Conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star one again. For operator assistance throughout the call, please press star zero. And finally, I would like to advise all participants that this call is being recorded. Thank you. I'd now like to welcome Andrew Russell, Group Chief Executive Officer and Managing Director, to begin the conference. Andrew, over to you.
Good morning. Thank you for joining us for the presentation of the Bravura Solutions Limited FY 2024 first-half results. My name is Andrew Russell, and I am the Group Chief Executive Officer. I am joined today by our Chief Financial Officer, Neil Montford. Today I'll present to the following agenda: firstly, our results summary, then financial results detail, some key takeaways, and then followed with questions and answers. Today I will outline our performance and progress in resetting and energizing Bravura. The key messages to our shareholders are: we are making good progress on resetting the business, right-sizing our cost base, focusing on our clients and people, with the business now returning to profitability in the first half 2024 on a cash EBITDA performance basis ahead of forecast. There remains more work to do. However, our progress to date has delivered fast-paced organizational transformation.
Our forecast annualized FY 2024 gross cost out is AUD 40 million, which includes AUD 27 million delivered in the first half of 2024. Following the capital raised in March 2023, the business is well capitalized and stable. We have a closing cash balance at the 31st of December 2023 of AUD 88.3 million. At our AGM in November 2023, we outlined our four key strategic pillars as our areas of priority focus in FY 2024 and 2025. Our first pillar is to ensure that we align our business around our core. Consequently, we have now implemented our new operating business structure to align our business to our clients and products in EMEA and APAC. Finally, we are upgrading our full-year EBITDA guidance to AUD 18 million-AUD 22 million from AUD 10 million-AUD 15 million. Now turning to our financial results in detail.
The business is now stabilized, and we're executing to our strategic pillars. Our FY 2024 focus remains determined on rebuilding trust and shareholder value. The headlines are: gross revenue AUD 127 million, up 7.4% versus the first half 2023. Contracted recurring revenue AUD 73.4 million, up 10% versus the first half 2023. Earnings before interest, tax, depreciation, and amortization was AUD 7.9 million, and that was up AUD 11.5 million versus the first half 2023. An adjusted net profit after tax loss of AUD 1.7 million, which is up AUD 12.6 million compared to the first half 2023. And Bravura has a strong net closing debt-free cash position of AUD 88.3 million at the 31st of December 2023. In summary, the improved financial results are reflective of the ongoing execution of the organizational transformation strategy.
The cost to execute our transformation has been lower than expected, and our cash burn has been reduced with the business returning to profitability earlier than our forecast on a cash EBITDA performance basis. Further detail on our first-half financial performance, including operating results, balance sheet, and cash flow, can be reviewed in the appendix of the results presentation deck. We have four strategic building blocks for execution. The FY 2024 year is all about reset and energize. For Bravura to be successful, we believe we need to align around the core regions, products, and clients. Given that we are a market-leading technology, which is mission-critical to our clients' operations, we can accelerate our financial performance and grow by aligning with our existing clients as they execute to their strategic growth pathways. At the same time, we must build a quality software business.
That means we are data-driven and make good investment decisions to transition back to benchmark enterprise software product margins. In terms of aligning around the core, we have now implemented our new operating structure. We have made internal appointments for CEOs of EMEA and APAC who have end-to-end P&L accountability. Our new operating structure has been well received by both our clients and employees. It recognizes that although we will ensure to keep our global consistency, we are locally focused on clients and products in our two important, but different operating regions. We are rebuilding trust with our clients in EMEA and APAC. We are purposely and regularly re-engaging our clients to update them on the changes and improvements we're making as a business and seeking their feedback on how we can be better partners with them.
We are making good progress on resetting client focus and energizing the business, focusing on our people, right-sizing our cost base, and positioning Bravura to grow the cash EBITDA margin in the second half of 2024. It is important for clients that Bravura is a sustainable supplier. Our revenues have tracked to our forecast. Reducing our cost base has been fast-paced to right-size our operating expenses and reduce our cash burn. We want to reassure our clients that we are focused on creating value in terms of delivering world-class software as our priority. Partnership, collaboration, and satisfaction in the consistency of our delivery for mutual success are the values we will measure ourselves against. Given that Bravura's cost base was unsustainable, we have quickly identified opportunities to reduce costs through organizational realignment, external cost minimization, optimizing our operating model, and right-sizing to benchmark to other world-class technology peers.
Our transformation program has already generated AUD 25 million in gross annualized expense reductions in FY 2023. In the first half of 2024, we have executed an additional AUD 27 million in annualized gross savings. In the second half this year, we forecast realising an additional AUD 13 million in annualized gross savings. The revised FY 2024 organizational change program is tracking to deliver AUD 40 million in total annualized gross savings. Consequently, the ongoing organizational change program is tracking to deliver AUD 65 million total annualized gross savings, with total cost to achieve them of AUD 21.2 million. Undoubtedly, in FY 2025, we expect to continue our strategy of executing to our strategic pillars.
Consequently, we will be seeking to continue to improve our ways of working and optimizing our operating model, which will ensure an ongoing trend in cash EBITDA margin improvements in FY 2024 and 2025. Now turning to our guidance. Firstly, revenue. We are forecasting that our revenue will remain resilient and land around the same as FY 2023. There is no updated revenue guidance. In terms of profitability, our transformation program is now forecast to deliver AUD 40 million in gross cost out savings in FY 2024. Consequently, we wish to upgrade our full-year FY 2024 EBITDA guidance to AUD 18 million-AUD 22 million, and that's from AUD 10 million-AUD 15 million previously advised.
I would like to conclude today's update with the following takeaways. We are successfully executing in line with our strategic pillars for FY 2024 and FY 2025. The business is transforming at a fast pace, and we have realigned around our regions, products, and clients for better performance and accountability. The business is now stable and well capitalised, which allows us to formulate a capital management strategy in the second half of 2024.
Finally, the business has returned to profitability earlier than forecast and will deliver a growing cash EBITDA margin in FY 2024 and FY 2025. Thank you for your ongoing support and interest in Bravura Solutions. We have much to do, and I look forward to updating you on our execution progress and improving financial performance later in the year. I will now open for Q&A.
If you wish to ask a question, please press star followed by one on your telephone and wait for your name to be announced. That is star one if you wish to ask a question. Your first question comes to line of Oliver Collin of E&P Financial . Your line is open.
Yeah, hi guys. Congrats on what is an exceptionally strong result. Can you just give us an idea of how much of the annualized cost out that you're obviously not going to harvest this year goes into FY 2025, so the incremental benefit of that?
So just let me replay that, Ollie. So we've highlighted the.
So yeah, so you've taken out 27. You've taken out 27 in the first half, right?
Yes, we have.
You're taking out another 13. Obviously, it depends on when you took that cost out. If you took it out in November, you're going to have harvested a lot less than if you took it out in July. And then obviously, the 13 is going to be a function of when you take that out, right? So what do you actually expect of the $40 million annualized taken out this year? How much is harvested this year as in you get the benefit in the actual result versus how much annualizes into next year incrementally?
So if we look at the 27, and I think we've perhaps mentioned this before, but if you look at the 27, a significant amount of that came through in November. And then for the 13, we have some of that coming through in February, some comes through in March, and then some is June. So I'd say the second half is reasonably well spread. The first half's definitely towards the end of that first half.
Okay. No, that's perfect. Thanks. And just on, I guess, revenue, so it's a good job you've managed to take the cost out without impacting the revenue trajectory. I mean, fairly amazing, to be honest. But in terms of the drivers, how are you seeing those on a go-forward basis in the second half and beyond? Are you starting to get any wins on indexation, client renegotiation, cross-sell of modules, all of that?
To the final part of your question there, the answer is yes, we are. We're also seeing some headwinds in the professional services side of our business, and that's from customers that are winding down professional services off the back of their own performance and desire to maintain profitability. So we are definitely seeing increases across most of our contracts, but we're also seeing headwinds in the PS. And that's why we're guiding to last year's FY 2023 result, which was 24. Yeah, it's only 49.6.
Okay. And I mean, at the moment, you're quite significantly undershooting the $16 million. Are you still of capitalized development cost, CapEx, and leases, at least when you compare it to the first half outcome? Is that guidance still valid because it implies a very large uptick in the second half?
It is still valid. The AUD 16 million guidance, which is a bridge to cash EBITDA, includes AUD 2.2 million of revenue that is not cash accreted. So it's a license fee recognition in the first half that doesn't create any cash over a three to four-year period. So we've included that in our cash EBITDA bridge.
Yeah. Okay. Thanks.
The forecast is exactly on AUD 16 million, including that amount.
Your next question comes to line of Jules Cooper from Shaw and Partners Limited . Your line is open.
Thanks, guys, for taking the question. Look, absolutely remarkable turnaround in the performance of Bravura.
Sorry, Jules. We seem to have lost you. Looks like we've lost Jules.
Your next question comes to line of.
Come back to you later.
Apologies. Your next question comes to line of [Uncertain] from Macquarie. Your line is open.
Hey, guys. Congratulations on a great result. Just two for me. Maybe if we could just deep dive a bit more into the revenue. So the guidance for flat revenue implies second half will be slightly down on the first half. Is there any headwinds there that you're expecting that you didn't see in the first half?
Yeah. So just in the first, it's been some timing with revenue in the first half, and then the second half, we're seeing some headwinds in terms of slowdown in some professional services revenues with our EMEA customers as they look at their own businesses and cost out programs. That's why we're keeping revenue forecasts the same.
Yep. Okay. That makes sense. And then at the AGM, you're speaking to pushing price with contracts and that being a bit of a slow burn with the older contracts. Just wanted to see how you're progressing there.
If I understood your question, it was just a bit not clear just on the line. But if it's in terms of our contract process, yes, all of our contract renewals, as they come up, we're engaging with our clients and making sure that we're getting value for Bravura as well as value for them.
Okay. Great. Cool. Thank you. Congratulations on the great result.
Thank you.
As a reminder, if you wish to ask a question, please press star followed by one on your telephone and wait for your name to be announced. Your next question comes to line of Ross Barrows from Wilsons Advisory . Your line is open.
Yeah. Good morning. Thanks for taking the question. One is really a high-level one. So if you're able to just maybe share some insights just around how the customer base is responding to, I guess, your underlying operational improvement but also the incremental engagement that you're having with those clients.
Thanks, Ross. Firstly, I think that, as mentioned in the speech this morning, our clients have been very responsive and complimentary in terms of our new operating structures, which focuses on our two different markets and the different life stages that they're in, is the first point. Second point is we've made a very big consistent effort, particularly with our engagement, to really show that we want to be client-focused and we're listening to our clients in our particular regions. I think that that has been well received. We're not always going to agree, but we're certainly going to ensure that our software is delivering value and they understand that. From a product development perspective, we're trying to engage at all levels in both of our markets to work through what their strategic pathways are.
That's why we are very focused on aligning with our clients and growing with them over the next couple of years.
Okay. Thanks. The other one is just around just on the cash flow. So I think it was mentioned or referred to, I guess, a little bit before, but the payments for capitalized software development fell from AUD 8 million to AUD 1 million. So could you just talk about, A, that metric, but perhaps more broadly how you're approaching R&D? Because I think you were absolutely going to increase the focus there on making sure that anything that came out the other end of R&D was highly applicable and relevant to clients. So some comments around that, please.
We have three specific R&D projects. They're relatively small. They're very well controlled. So very much to your point, Ross, we are being very careful and precise in how we spend the R&D dollars. You've seen some of the history of the business where there was significant R&D, and we've written a lot of that off relatively recently. So it is controlled. There is a little bit more in the second half. So the annual budget is AUD 4 million. And to Andrew's point that he just made, we are actively engaging with clients to work out an appropriate way forward on our R&D to make sure that we're delivering what they're looking for rather than perhaps what we would love to develop internally that may not have a clear current market. So we're looking at what we can deliver quickly into our current customer base.
It feels like the 8 was probably too high, and the 1 has certainly been reined in, and reality might be somewhere in the middle over the coming years then?
Yes.
Okay. Thank you.
Your next question comes from line of Scott Hudson from MST. Your line is open.
Yeah. Morning, gentlemen. Apologies. I jumped on this a bit late. You've probably covered this already, but maybe could I just get an understanding on, I guess, what's changed relative from November to now in terms of, I guess, the cost outs and the operating performance of the business?
Thanks for your question, Andrew here. We're just progressing with the transformation strategy, and the business is under change at this point in time. We've been pleased with the progress that we've been making and the provisions that we've had for, in terms of the cost to get the cost out, has been lower. And obviously, that has the downstream implications of improved cash flow performance. So we are still very focused on delivering in this second half. Internally, we know that we're not out of the woods. We've got to get the business really humming. And that's a combination on operating under our new structures to be very client-focused but also to be people-focused because we've had quite a bit of change within the organization, and I commend our employees for their resilience. But we've got a clear pathway forward, which people are getting behind.
I feel that there's momentum in the business, and we're just going to continue executing in the second half.
I mean, there's clearly obviously getting some decent efficiency out of your workforce given you've managed to hold revenue steady despite, I guess, the lower cost front. I mean, are those sustainable efficiency gains that you're achieving?
At this point, we've outlined our revenue guidance, and we just see that to be around the same level as FY 2023. We're trying to become more efficient as a business and operating structures and having full P&L accountabilities in our two different markets because we've got different customer sets in different stages of the lifecycle of the products. And I think that that drives further efficiencies within the business. But this doesn't stop. We've just got to continue to get better, and that's the focus when we talk about our fourth pillar of building a quality business.
That's ranging from getting the right people in the right roles all the way through to metric reporting and having a culture within the organization that when we're outlining what we're going to invest in, we're expecting that it's going to be returning for our customers, our clients, as well as for shareholders. That's the culture that we're trying to breed through the organization.
Appreciate it. Thank you.
As a reminder, if you wish to ask a question, please press star followed by one on your telephone and wait for your name to be announced. Your next question comes to line of Tammy Kumar from Bridgeport Partners. Your line is open.
Hey. Thanks again, guys. Just as we look forward to learning more about the capital management strategy, is there anything you guys would share in terms of how one should think about either the approach around M&A go forward, the key areas that are being highlighted in your engagement with customers, and internally, I guess, also given this is a new management team at the top in terms of what deficiencies or areas of investment there might be on the product portfolio? How should we just think about that today whilst we obey the capital management strategy? Sorry about that.
That's all right. I like also to hear that our younger shareholders are interested in our call. I think all the buckets that you mentioned in terms of the capital management strategy, exactly the considerations and the work that management will be undertaking over the course of this next period so we can come back with a very coherent strategy that makes sense for where Bravura is and the opportunities that potentially lie to head for Bravura and then the overlay of getting the best return for shareholders given where our cash position is right now. We'll come back to the market once we understand all of that.
Thank you.
Comes to line of Sophia Owen from Macquarie. Your line is open.
Hi, guys. Sorry, just a follow-up from me. Maybe could you provide some more detail on the two different businesses? It appears a lot of the cost out is coming out of the wealth business. So yeah, maybe a bit more color there would be helpful.
Sorry, in terms of the two different businesses or the performance of the businesses?
Yeah. Just the cost out coming from the two of them and I guess what to expect from here.
It's a good question. I don't think we've got into any particular detail in terms of where the cost is coming out of. I probably don't have anything specific to add on there. The cost out program hasn't been business-specific before. It's been at a group level. It is now with the new structures that we've got in place. We're expecting to see more focus across those two businesses, but we've been driving it at a group level.
Great. Thank you.
As a reminder, if you wish to ask a question, please press star followed by one on your telephone and wait for your name to be announced. There are no further questions at this time, so I'd like to hand back to our presenters.
Thank you very much for making time this morning, and I look forward to coming back to the market later in the year. All the best.
That does conclude our conference for today. Thank you for participating in our [Uncertain]