Good morning, and welcome to the Bravura Solutions Limited Full Year Results Call. Please note that this call is being recorded. All lines have been placed on listen-only mode at this time. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question at this time, please press star followed by the number one on your telephone pad. To withdraw your question, again, press star one. I would now like to turn today's call over to Andrew Russell, CEO of Bravura Solutions. Please go ahead.
Good morning. Thank you for joining us for the presentation of the Bravura Solutions Limited Full Year Results 2023. My name is Andrew Russell, and I am the CEO of Bravura Solutions. I'm joined today by Chief Financial Officer, Neil Montford, and Chief Strategy Officer, Justin Morgan. Today, I will present to the following agenda: FY 2023 results summary, financial results detail, key presentation takeaways, and then follow up with some Q&A. I will begin with our presentation headlines. Today's presentation will outline our FY 2023 performance and our progress in stabilizing and resetting Bravura. The key messages to our shareholders from today's presentation are simply these: Bravura Solutions remains a strong business with market-leading technology, world-class customers, and talented staff. With a new board and management in place, we are now in the process of rebuilding shareholder value using a solid product and customer base.
FY 2023 was a year of underperformance and great disappointment for our shareholders, and we acknowledge it will take time to rebuild trust. Similarly, it has created uncertainty and concern for our people and our customers, and over the next few months, we will communicate openly with all stakeholders to update you as we stabilize the company, restore it to profitability, and rebuild value. Following the AUD 80 million capital raise in March, the business is well capitalized. Furthermore, our cash burn has reduced in Q4 following tighter expense focus by management. Our results are above or in guidance communicated to the market at that time of the capital raise. We are now making progress on resetting the business, rightsizing our cost base and positioning Bravura to have a positive Cash EBITDA run rate by the end of FY 2024.
We have simplified our short-term executive incentives to align with this goal, and our long-term incentives are aligned with increasing shareholder value. We will present a three-year strategic plan in late October, which will outline our strategic pathway for improved earnings performance, profitability, and product and customer focus. We will also provide FY 2024 guidance at that time. Turning to our financial results, the business has delivered or exceeded market guidance given at the time of the capital raise this March. The headlines are: gross revenue, AUD 249.6 million ahead of guidance. Contracted recurring revenue, AUD 140.5 million. EBITDA, loss of AUD 8.1 million, which was in guidance. Adjusted net profit after tax, loss of AUD 23.1 million, in line to guidance.
Bravura reduced the cash burn in the second half of 2023 to deliver a strong net closing debt-free cash position of AUD 75.7 million at 30 June 2023. In summary, following the AUD 80 million capital raise in March, the business is well capitalized. Furthermore, our cash burn has reduced since then, and our results have met or exceeded guidance communicated to the market at that time of the capital raise. Turning to our organizational change program progress. We are now making progress on resetting the business, rightsizing our cost base and positioning Bravura to have a profitable run rate by the end of FY 2024. Bravura's cost base is too high. Employment costs are our biggest expense, and we are working through an organization change program with total expected annual savings of AUD 40 million.
The cost to achieve these savings are AUD 27.8 million, all of which will be completed by 30 June 2024, with full year realization of AUD 40 million in FY 2025. The cost out program has delivered AUD 2 million of savings in Q4 of FY 2023. This equates to AUD 25 million gross annualized expense reduction, which is over 60% of the total expected savings. We have taken an impairment charge of AUD 233.4 million in FY 2023 to account for the underperformance of the operating business units, and importantly, to ensure that the balance sheet reflects the fair value of the assets as the business transforms and grows in FY 2024 and beyond. Turning to the FY 2023 summary and progress. Our transformation program has already generated AUD 25 million in gross annualized expense reductions to rightsize the business.
Management has identified a further AUD 15 million in annual gross out savings in FY 2024 to be executed. The solutions mission has always been that software is at the heart of what we do. We must restore our focus on this and deliver to the vision going forward. We need to actively re-engage and listen to our customers' strategic requirements and operational pain points, as well as restore our world-class, quality first engineering and product consultancy competency. The Bravura product suite remains market leading and mission critical to the operational success of our customers. We will ensure that we capitalize on this strategic advantage and proactively industrialize our core product offerings, while at the same time growing our lifetime customer value.
Prime examples of what can be achieved when we get it right are illustrated by our recent success of migrating Aware's 1.1 million members onto our Sonata Alta platform, and our recent, in parallel success in migrating over 500,000 members onto our existing Sonata platforms. It has been a difficult year for our team. We thank all of them for their resilience, determination, and their ongoing commitment to deliver excellence and customer-focused outcomes in a change heavy environment. Bravura was named Large Employer of the Year at the Financial Times Adviser's Diversity in Finance Awards earlier this year. An important recognition, proving that a culture of inclusiveness and equality remains at the center of Bravura and its people. We are committed to maintaining a strong culture and desire to be a world-class technology business.
The team's priorities will be to ensure a simplification of our international operations and focus on quality, product, and technology delivery in FY 2024. Now turning to some detail of our financial results. Firstly, revenues. Contracted revenue, retention, recurring revenue has grown over the last three years. Contracted recurring revenue comprises revenues contracted for the contract term and typically includes maintenance, managed services, hosting, cloud, and SaaS. In FY 2024, we're anticipating a drop in license fee revenue, with other revenue flat. Further guidance will be provided in our three-year plan in October. Turning to EBITDA. Bravura's cost base is too high. Employment costs are our biggest expense, as we've said, and we have outlined we are working through an organization change program. The EBITDA impacts have been driven by an increased headcount as a result of meeting customer obligations and anticipated wins in pipeline that did not materialize.
Increase in overhead costs and costs associated with cloud migration. Our employee expenses have peaked, and run rate operating expenses are now trending to driving Bravura back to profitability. You see from the charts our expenses peaked in Q2, and the decrease in is highlighted on the Q4 monthly breakdown that reflects the AUD 2 million in annualized savings in FY 2023, which have a AUD 25 million annualized run rate heading into FY 2024. The two preliminary July employment expenses are continuing the trend. As we have mentioned throughout the presentation, the organizational change program is underway to reduce our cost base and return the business to profitability. In aggregate, we have identified a gross AUD 40 million in annualized cost out opportunities. Now, to be clear, AUD 25 million has already been realized through organizational realignment in FY 2023.
A further gross AUD 15 million of annualized cost out opportunities have been identified, and we are now executing to our plan in FY 2024, which includes capacity reduction, offshoring, and reducing our office footprint. We have included a provision of AUD 11.9 million in FY 2023 for costs to be incurred in FY 2024. Total program costs for FY 2024 are AUD 20 million to generate annual recurring run rate savings of AUD 15 million. Our operational change program is focused on returning the business to profitability. Our cash burn is reducing over the past quarter. Our FY 2024 change program can be funded now that we are well capitalized with over AUD 75 million in cash and debt-free.
Our plan is to ensure the business will return to positive run rate cash EBITDA by the end of FY 2024, with a forecast cash burn of AUD 30 million-AUD 35 million in FY 2024. Further detail on our FY 2023 financial performance, including operational results, cash flow, balance sheet, can be reviewed in the appendix of the results presentation deck. I would like to conclude with the FY 2023 results takeaways. Bravura remains a strong business with market-leading technology, world-class customers, and talented staff. With a new board and management in place, we're now in the process of rebuilding shareholder value. Our plan is to achieve a positive cash EBITDA run rate by the end of FY 2024 as a base for profitability in FY 2025.
We forecast that it will cost the business circa AUD 30-35 million to achieve our restructuring plan, but we are now well capitalized with over AUD 75 million in the bank. And finally, we will present a three-year strategic plan in late October, outlining the strategic and product roadmap for Bravura. We will also provide FY 2024 guidance at that time. So in closing, what to expect from here? Firstly, we are resetting the business and fast-tracking the organizational change program to get Bravura back to profitability and customer and product focused. Our three-year strategic plan is being developed. We intend to provide detail and insight on our customer product-focused operating structure, product roadmaps by market, and FY 2024 guidance following the first quarter of FY 2024 trading. 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 progress in October. I will now open for Q&A.
Thank you. At this time, I'd like to remind everyone, in order to ask a question, please press star, then the number one on your telephone keypad. Your first question comes from Bob Chen with JP Morgan. Your line is open.
Morning, guys. Just a couple of questions from me. I think just on the cost savings plan, I think you've identified another AUD 15 million to come through next year. Like, how should we think about how that's staged through 2024?
Hi, Bob, it's Neil. It is staged pretty much through the whole of 2024. There are certainly some aspects to that where the timing is uncertain, so property related and some of the people changes as well. But it's through the full year.
Okay, cool. And then just the comment earlier about how some of the contracts that was previously expected to end up materializing, like, what drove that? Did you lose that to a competitor, or are they being delayed? Like, can you give us a little bit more color on what happened there?
Hey, Bob, Justin here. The client contracts have moved further to the right. One, and generally, the decisions made by the client in relation to their own operating models.
Okay, so they haven't necessarily been lost. It's just been pushed along.
One, one has moved to the right. One will not be, will not be coming back.
Okay, cool. Thanks, guys.
Our next question comes from Olivier Coulon with E&P Financial Group. Your line is open.
Yeah. Hi, guys. Thanks for taking my question. Just on the cash expenses, so AUD 24 million of cash expenses in 2024, in terms of, you know, the one-off, is there any further cash expense to land in FY 2025 from the 20-20 million dollars that's actually going through the P&L in FY 2024?
Thanks, Olivier. It's Neil here, and it's g reat question. So, the cash in FY 2024 is AUD 24.2 million. Of that 24.2 million, well, I've got the numbers here. 4 million relates to cost expenses that were incurred in FY 2023, but the cash payment is going out in FY 2024.
Okay, but you think that by the time you get to the end of FY 2024, your cash and your P&L expenses on the program basically match out, do they?
At the end of that, including FY 2023, they all match out.
Yeah.
The total is AUD 27.8 across the two years.
Okay. I appreciate that. And just on... Can you comment on, you know, I guess, the stability of the employee base? You know, obviously over FY 2022, late 2022, and, you know, FY 2023, there was a lot of unwanted attrition, particularly, I guess, in, you know, the Indian office. You know, how are you seeing that? Is it a lot more stable?
So I'd say that the Indian office is certainly, it's certainly stable. I think there's still a degree of attrition across the worldwide. So the Indian office definitely improved. There's a degree of attrition across the rest of the organization. It's not excessive, but it's, I guess it's expected off the back of significant cost out program.
But just further on to that, Ollie, is that the business is internally looking forward to seeing the three-year strategic plan. They've seen the change as a positive thing over the past couple of months, and once again, we look forward to presenting that, not only to the market, but also internally to the team.
Yeah. No, appreciate that. And then, sorry, I may have misheard a bit. Did you say FY 2024, you expect relatively stable revenue apart from a small decline in license fees? Is that right?
That's, that's the statement we made, yes.
Yeah. Obviously we know that there's some roll-off of, you know, revenue from those clients in the UK. Is there any revenue growth to see from new clients or, you know, offsetting revenue is effectively just existing clients where you've got pretty good line of sight on, you know, their projects and what they're doing?
I'll take that, Ollie. Thanks. I guess our assumptions for the revenue growth next year are nothing to be added. So we've taken a conservative approach based on where the market perception is and the rebuilding that we're going through, and have already started. So we have made no assumptions of any new client wins in that expectation. And clearly, we are hopeful and we'll be working towards that, but we haven't made any assumptions at this point.
Yeah. Appreciate that. And then just a final one from me. So, leases, you know, are you terminating any leases, or you're just letting leases kind of run out?
So we have in Sydney reduced lease space, and that's coming through shortly. I guess it's both. We are considering and progressing on a number of other locations, and we expect to be terminating leases earlier or assigning leases, whatever makes the most commercial sense. So we're looking at all of our property currently.
Ollie, this is Andrew. Andrew here, again.
Yeah.
Just like other businesses in the marketplace, we're, you know, formulating our hybrid strategies as the world has changed and the use of office and the increase in use of technology to run an international business.
Yeah. So do you think, is there any scope for potentially, you know, more savings there than you've assumed, or you're pretty, you know, you've pretty well pegged it and what you need and the go-forward model on that?
Not at this stage, Ollie.
Yeah. Okay, thanks. I'll go back-
Once again, we're gonna provide more guidance at our strategy day at the end of October.
Yeah. Appreciate it. Thank you.
Our next question comes from Scott Hudson with MST. Your line is open.
Yeah. Good morning, gentlemen. A couple of quick questions. Could I just clarify your comments around returning to, I guess, profitability exit rate at the end of FY 2024? Is that at the EBITDA line?
Cash EBITDA line.
Okay, thank you. And then in relation to the, I guess, savings targets, I think you sort of highlighted AUD 40 million of annualized savings, but you made another comment about a AUD 15 million savings line. Could you sort of clarify what you meant in relation to that AUD 15 million?
Yeah. So the AUD 25 million is delivered at the right at the end of June. And then the expectation for further savings this year is AUD 15 million annualized. So the total of those two at the end of FY 2024 is it will leave with annualized gross cost savings of AUD 40 million.
Okay. So, can I just understand, sort of, stable revenue base exiting FY 2023 with AUD 25 million of annualized cost savings, and yet your, I guess, EBITDA for FY 2024 is still expected to be negative? Is... What am I, what am I missing?
There's significant costs to being incurred to achieve those cost savings. Which would include, in some cases, dual running costs around, property leases, potentially.
Okay. Understood. And then I guess-
Sorry, Scott, those will drop off obviously going into FY 2025.
Yeah. Understood. I guess there's obviously been a lot of change, both at sort of executive level and I guess across the broader organization. What feedback, if any, are you getting from your core client base?
Well, part of my role since I've been in interim capacity as well as now the permanent CEO is spending time with our clients in both regions. We've been explaining the change, and basically, the key message is that it's business as usual. Clearly, we understand the uncertainty that's happened over the period of the last 12 months. But now it's basically ensuring that we rebuild trust with them, and that's by doing what we're saying we're going to do. And one of those is being more customer-focused and working with them and their strategic plans on the software and the product development. And that's what we're intending to do across both regions.
Yeah. Thanks. And last one, I mean, have you, have you seen any negative impact on your pipeline of opportunities, given that, I guess, the turmoil at least the business has sort of gone through over the last, over the last year?
I haven't seen anything from the pipeline perspective. But understandably, we've got to show that we are back to being customer-focused. We've got a refreshed board, new chair, new CEO. First point of call is showing that we've got well capitalized now. We're executing to our plan, and the next stage will be coming back to the market with the three-year plan. In concert with that, I will continue to be engaging our customers and communicating with them as we develop value and restore value to, for, shareholders and for staff and customers alike.
Understood. Thanks a lot. Thank you.
Thank you.
Our next question is a follow-up from the line of Bob Chen from JP Morgan. Your line is open.
Just a quick one on how you guys are thinking about CapEx. I think previously there was an expectation it was sort of a defined program. Like, how is that sort of tracking, and do we expect that to come off further into the next couple of years?
The R&D CapEx?
Yes, that's right.
I would say that the CapEx is down slightly on where it has been, but we are looking carefully at what the CapEx should be going forward, and that will come out in the three-year strategy. So we need to be very clear on the key priorities and to focus on those, which I don't feel necessarily as an organization, we've done that well enough. So we'll be taking customer thoughts as well, into account and doing a full market discussion to ensure that we spend the CapEx appropriately, and it develops better products and solutions for our clients.
Just building on that, Bob, in our three-year strategy presentation, Investor Day session in late October, we'll be work around our product roadmap and how that aligns with our clients, et cetera. The two will sort of play into that session.
Okay, thanks.
Our next question is a follow-up from the line of Olivier Coulon with E&P Financial. Your line is open.
Yeah. Hi. Just on PPE CapEx, well down this year. You know, I just want to also clarify the... You said the cash EBITDA in the appendix, I'm pretty sure you said that's inclusive of leases, inclusive of capitalized development spend. And is it inclusive of capitalized PPE spend as well?
It does.
Yeah. There's a glossary on page 25.
Yeah.
The answer is yes.
Yeah. And just what did cause the reduction in PPE spend? I think normally, you know, you're kind of closer to AUD 5 million. Is that just, you know, you kind of stopped fitting out leased offices and, you know, and the like?
So, there's some of our hosting costs would be in there as well, in terms of the spend.
Yeah. All right. Thanks. Yeah, because I guess you're, you're kind of going to an outsource solution on most of that, aren't you?
Yes.
Yes. Okay. Thanks.
Seeing no further questions at this time, I would like to turn the call back over to Andrew Russell, CEO of Bravura Solutions, for closing remarks.
Thank you. Thank you, everybody, for your interest in Bravura and the questions this morning. I look forward to updating you on our progress in October. All the best.
This concludes today's conference call. Thank you for joining us. You may now disconnect.