Good morning and good afternoon, everyone. This is Omar Maher from EFG Hermes. I'd like to welcome everyone to HPS's first half 2025 results conference call. I'm pleased to be joined by Mr. Abdeslam Alaoui Smaili, Chief Executive Officer of HPS, and Mr. Brahim Berrada, HPS's Managing Director. As always, the conference call will begin with a discussion of the key highlights of the period, and this will be followed by a Q&A session. I will now hand the call over to Mr. Smaili to begin the presentation. Thank you.
Thank you. Good morning, good afternoon to all. Welcome to this presentation of our first half results. We will start with some key highlights on what happened in this first half. We will then go through what are the elements that enable us to build a forecast, the visibility, and how we are confident on the year-end execution. Beyond the year-end, how are we placed, how are we positioned regarding our Accelerate program? First of all, this first half has confirmed our continuous growth with the adjusted revenue of a bit more than 25%. With the currency and with the dollar effect, we have ended up with + 16% growth. The backlog, that is really what has been an important factor this year, has increased significantly in H1, with a 46% increase by the end of June. Some sales have been shifted from H1 to H2 and still continuing.
We have ended up with a backlog, confirmed orders that we have to deliver at the earliest, with an increase of more than 80% by the end of August. This is most probably the highest backlog that we have ever had, resulting from very, very strong sales effort and also sales demand, demand of our products. The EBITDA has been impacted by the foreign exchange drop of the dollar mainly. At the same time, we have expected a drop of our EBITDA, of our margins, because of our SaaS transition on which we are getting out. All our efforts on all the past quarters start to give results, and we will see how this is impacting our year-end results. Our net profit has also been impacted by this currency exposure, and we will work on this in the future to minimize these risks.
Most importantly, our guidance for year-end is confirmed. All this margin impact was due in one hand to the SaaS transition and unfortunately in this H1, to this currency impact. At the end of the day and for our year-end guidance, we confirm our 20% revenue growth and 30% growth on our EBITDA. What I want to say here is that the effort of our SaaS transition that is giving, that starts to give the result we have been expecting a bit earlier than planned. This is something that was totally expected, where we have been a little bit more or less exposed on this currency on which we need to have the proper mechanism. Our confidence is confirmed on the capacity of HPS to grow and also to execute on the Accelerate program.
This has been confirmed with the sales that have been able to be executed on this H1 and a little bit of the month of July and August. We have been reaching a very high total commercial value of the project or of the sales that we have done all around the world with a specific or with a very strong presence in Asia-Pacific. This is something that was executed perfectly in Australia, in Southeast Asia. That enables us to really have a very strong presence, confirming that the choices we have made in terms of technology are right. Our technology is today far ahead compared to competition, and we have been able to get the confidence of the largest players in this part of the world with a very high level of demand that has required from us to enhance our operations to meet this level of demand.
It is important to state that because those investments that have been made will be made once and will be used multiple times. Our processing operations have started in Australia, and we are moving more customers. Our operations in Singapore have now reached a maturity, enabling us to get more tier one bank in this region. This is very, very promising for our future with, on one hand, the confidence of the customers and, on the other hand, this superior technology that we are able to deploy in this region. This backlog or these sales that have been absolutely positive on this year generate a backlog. The backlog is, in other words, what has been sold and not yet delivered. This is a potential, not a potential revenue, but a revenue that we need to execute.
We see that by August 2025, we have a backlog of more than 80% bigger than last year. Our challenge now is to make sure that we deliver as fast as possible in the best conditions to continue our Accelerate path to reach the figures that we have shared with the market previously. On one hand, we have the growth that is confirmed. On the second hand, we have a margin that was expected to be a little bit less than usual. An unfortunate geopolitical event or a backhaul economic event on this currency on which we need to work. At the same time, this phenomena has stopped on the H2.
This backlog that is the sales that are confirmed, ordered, that on which we are executing, enables us to confirm that not only the year-end guidance that was shared previously is confirmed, but also that we are absolutely straight on our Accelerate objectives that have been shared earlier, which is our multi-year plan. One point that is important that will enable us on this H2 to catch up on our margin, the growth has no issue. The issue that we had was this SaaS transition that was a bit more active or had more impact on our figures. On the H2, because of these two large on-premises contracts that we have, where we will be able to have an accelerated recognition of revenue because of the license part, the mix of the SaaS and the on-premises will enable us to have a landing by the end of 2025.
That will be where we expect it to be. Our projections have been confirmed and will be confirmed by the end of the month. Next, please. To come back to a more global picture, we have focused on our core business by divesting our testing activity that was not growing the way we want it to be and enabling us also to make sure that we concentrate on our core business, that is the payment. From a figure point of view, this will help us be a little bit more profitable because the testing not only was not growing but was not at the same level of margin. The second hand, our SaaS transition continues. We have more and more customers boarded, more and more customers boarded on platform on which we have invested. In Canada and the U.S., we have new customers.
On our operations in Australia, we have new customers. This SaaS will be generating more and more margin because the investment that was done is to be done once and not for each and every customer we have. The growth that we are seeing now is not only on the revenue but also on the margins. In the short term, because of our mix between SaaS and on-premises, that will enable us to accelerate our margin growth. At the same time, we have the SaaS, which enables us to have a much longer view, a much deeper view on our future. To reconfirm our guidance for the end, we will be landing at December 2025 with a growth of 20% in revenue, which will take us around MAD 1.5 billion, a bit more than MAD 1.5 billion.
An EBITDA that should be around MAD 290 million-MAD 300 million, and with a net that will also be growing. We don't have the final figures for the net, but it should be also around two-digit growth compared to the one that we had last year. Very comfortable landing due to this SaaS and on-prem. This is really an important mix that will enable us to finish this year on where we were supposed to be. We have these big customers that we have big contracts that will accelerate our growth. We have also had a look, a very disciplined look to our costs. We are looking at mechanisms to minimize the effect of the foreign exchange, the foreign currency exchange that has hit us this year. This year, 2025 is what we have seen.
Our growth will continue for the Accelerate program and making sure that we end up with not only the non-organic, but still the organic will continue to grow between 12%- 17% in the coming years. We are quite confident on what we are doing. Figures are here to show it. Our sales efforts are giving very, very interesting results, getting more market share in very, very competitive economies, showing that our choices from a technological point, but also from a sales strategy, from a partnership strategy, seem to be positive and seem to be relevant at this time. Thank you. I will leave the floor to Brahim to get into the details and how we are doing all this, what are the situations from where we are at the end of H1, and how this confidence should be there for the end of the year. Thank you.
Thank you, Abdeslam. Good morning or good afternoon again to everyone. After this introduction, I will take you through the financial and operational review in more detail before opening the Q&A session. On the large picture of this H1, we reported the revenue reached MAD 672 million, up 16.4% year- on- year. By activity, we continue to have an increase of our core business. The payment increased by nearly 20%, with switching group by 12%. Testing declined by 19%. We continue to have a decline year- after- year, and we will explain the impact of divestment from this activity on HPS. The EBITDA stood at MAD 70 million, representing a margin of 10.4%. What is important to highlight here is that even with the FX impact, the EBITDA is fully aligned with our H1 forecast.
This, thanks to a strict cost control, allows us to absorb this exceptional headwind of the FX. The impact of SaaS was totally planned and budgeted in our forecast for the H1 and has been shared with you last year at the end of 2024 when we explained the impact of the SaaS transition on our figures for the next coming years. Most important is the backlog. As explained by Abdeslam, this backlog reached a record level. It is a level that HPS never achieved in the past of MAD 1.3 billion, representing a growth by 46% compared to the beginning of the year. At the end of August, this amount grows more than this, by 85%. This gives us a very strong visibility and confidence on H2 and beyond.
Moving into more detailed data on the business and the revenue, on a pro forma basis, the group revenue decreased by 7.4%, entirely explained by the foreign exchange headwinds, mainly due to the U.S. dollar's depreciation of 10.7%. If we exclude this FX impact, the picture is much clearer. First, the payment activity increased slightly. This is totally planned due to the SaaS transition. As explained last year, we were expecting in 2025, the full year in impact of the SaaS transition of minus MAD 80 million on revenue compared to on-prem projects. This level that we achieved on the payment is very close to our forecast for H1. The main impact is this SaaS transition in the figures. The switching continues to grow in line with the expectations. It is supported by the increase in volumes in Morocco. We will have more detail on this later.
CR2 is below the plan, mainly due to delays in signing new contracts, but should recover in H2. We will see the detail later also. Overall, at constant FX, revenue is stable and very close to our H1 forecast. I'm talking about the total revenue for H1 with the variance explained by the SaaS transition and the CR2 timing effects. When we have a look on the detail of the payment activity, we have the project delivery revenue that is declining by 11%. This is exclusively almost on the delivering because we are delivering large SaaS contracts signed in 2023, 2024. These projects do not recognize license during the bid phase, in the opposite of the on-premises contracts. This is the main impact of the decline of the project delivery revenue. Meanwhile, very large on-premises wins in Asia-Pacific were signed at the end of H1 and early H2.
They had no impact on H1 because the delivery lifted in the backlog. This will be delivered starting on H2. SaaS revenue increased by 20% as existing large customers that we signed in 2023 and 2024 progressively migrate more of their transaction volumes on our platform. Upselling decreased by 15% due to an exceptionally high base in H1 2024. Regarding CR2, we clearly have here a result that reflects timing effects and not structural weakness. Revenue declined by 15% year- on- year at constant FX. This is mainly due to delayed contract signatures. We have different prospects that were expected to be signed in H1 that have been delayed and should be achieved in H2. Unlike HPS, CR2 recognized the revenue of the license upfront at signature, which made a comparison with H1 2024 very unfavorable.
EBITDA moved from small profit last year to loss of MAD 2.7 million despite a strict cost control. This is due to the gap on the revenue due to the delay on the contract signature. Looking ahead, these postponed deals are expected to be closed in H2, which should restore CR2 profitability by year-end and confirm the guidance that we gave you at the beginning of 2025. Regarding switching, it continues to deliver strong growth by up to 12% compared to last year. This is driven by strong volume expansions. We have the ATM withdrawals that grow by 15% for the first half and the payment transactions that grow by 25% on the same period. What is important also to highlight is that Morocco today remains very underpenetrated in cards and merchant acceptance. This is something that is leaving significant room for growth in the future.
Additionally, in the context of 2025, the authorities have revoked CMI rights to act as an acquirer. It was the largest one in Morocco with the Quasi monopoly. This has opened opportunity to have new players that will accelerate competition and innovation. This is something that started in H2 2025. We believe that switching is a structural growth engine for HPS with very long-term opportunities for the group in the coming years. Finally, on the testing, the testing declined by 19% as showed in the beginning. This is reflecting the continued lack of new opportunities. The profitability was negative in H1 2025, confirming that this activity is structurally low profit and impacts the group performance. In line with our Accelerate strategy, as explained by Abdeslam , we announced in September the divestment of this activity. This should be finalized by the end of this year.
This decision will, of course, let HPS focus on its core business, the payment, but also will have a positive mechanical impact on HPS figures where the reported growth and margin will increase mechanically after the divestment. If we look again to the large picture, but this time at adjusted figures, excluding FX impact, we have reached revenue at MAD 725 million, stable on a pro forma basis compared to last year, but with an increase of 26% for the reported figures. The EBITDA reached MAD 109 million with a margin of 15%, also stable year- on- year. The backlog reestimated without the FX impact at MAD 1.3 billion, up nearly 50% compared to December 2024. This adjusted view clearly shows the resilience of our business model when FX is neutralized.
Even with the FX impact, we have been able, thanks to strict cost control, to absorb the FX impact on the HPS figures for the first half. This bridge explains the movement from H1 last year to pro forma to the H1 2025. The main impact is on the right. It is the FX impact that impacted the revenue by more than MAD 50 million. When the other activity or the activities, we see that aligned with our guidance and budget, the payment increased slightly due to the SaaS transition. The switching continued to grow at the same pace as the past year. We have this decline in CR2 that is due to the project signature delay that should be recovered in H2. I propose now to move to the EBITDA analysis and the cash flow.
The EBITDA reached MAD 70 million, which is, in terms of amounts, fully aligned with our H1 forecast. The margin pressure in H1 came mainly from the SaaS transition. This is a temporary effect, and this is fully planned and budgeted in our figures. The exceptional impact of FX of MAD 40 million on the EBITDA was not, of course, expected, but has been absorbed by the cost control. We kept the EBITDA at the level that we were expecting in our plan. Looking at cost in more detail, we have first the HR expenses that decreased, mainly due to a strong effort that we've made to replace some external resources that were expensive by new hiring, improving our efficiency on this. Even with the growth on the headcounts, we have been able to reduce, excluding FX impact, the HR cost globally by 5%.
On the other side, we have the external costs that increased, driven mainly by the cloud hosting expenses to support our SaaS growth for the large project that we are deploying. The higher cost also for traveling expenses, for example, to deploy a major project in far regions like Canada, Australia, etc. The opening of the new offices in the previous year, like Canada, India, Australia, also impacted the external growth. Overall, the growth of the cost reflects more the strategic investment to scale SaaS and to expand globally while we maintain a strict discipline on the spending for the orders. This made it possible to maintain the cost more or less at the same level as last year.
This is visible on the EBITDA bridge, where we see that moving from the EBITDA last year to this year at the adjusted level, excluding FX, we see that HR cost, sales marketing, but also CR2 cost has positively impacted the EBITDA thanks to all the effort that we made to control the growth of this cost. The external cost contributes negatively to the EBITDA because of the investment to scale SaaS and to expand globally HPS worldwide. The EBITDA without FX impact remains stable compared to last year, aligned with our figures or budget. FX had an impact of MAD 40 million on the EBITDA to reach MAD 70 million at the end of H1. On the cash flow, we have achieved the first half with a very strong operating cash flow at + MAD 100 million, thanks to optimal working capital management.
We have SaaS that is beginning to generate positive cash flow while financing cash flow is linked to debt repayment. What is important here is really that SaaS is moving from a build phase to a run phase with more cash, more EBITDA, and more margin for HPS. At the end of June, we have reached a cash position at MAD 280 million, up 37% compared to last year's end, confirming very strong financial flexibility. This concludes the review of the first half financials. I propose to have a look at the forecast for the second half and to see what are the main drivers that allow us to confirm the guidance that Abdeslam shared with you in the beginning. The main driver of our guidance and for the forecast is driven by several strong levers.
The first one is the deployment of the record backlog that we have at the end of June. This backlog also has been reinforced between June and August by new contracts. We have at the end of August a backlog that is unprecedented compared to the past. That is 85% more compared to the beginning of the year. This is the first lever that gives us very exceptional visibility and confidence on our capacity to deliver revenue growth in the coming months and in the coming years. The second lever is the large on-premises contracts signed in H1 and beginning of H2 that will start or that will enter the delivery phase. As you know, this on-premises project, in the opposite of SaaS project, will generate strong license revenue with a very strong EBITDA margin compared to the SaaS revenue.
This is a near-term impact on the growth and on the margin. Third point is the SaaS projects that were signed in 2023, 2024, very large contracts that are moving from the build to run and that will begin to contribute positively to margin. Fourth point is CR2 Ltd. that is expected also to recover with delayed deals in H1 that we expect to close in H2. Finally, with cost discipline that will continue and ensuring the backlog into revenue and EBITDA will make possible this rebound that we expect in H2. The main driver for revenue will be this backlog recognition. If we have a look to the past, historically, and for each half, HPS has converted between 60%- 76% of its opening backlog into revenue within the following six months, with an average during these five years of 68%.
This consistent track record provides a solid basis for our revenue expectations in the second half of 2025. Let's have a look now at this conversion that we expect in the second half. We have assumed that in the second half, the backlog conversion rate will be 60%, which is the lower value that we have in the last five years. This assumption is deliberately conservative. Historically, we have converted between 60%- 76% with an average of 68%. By taking the lowest of the range, we are building prudence into our forecast. This 60% conversion of the backlog should generate in the second half a revenue for H1 standalone without CR2, a revenue that should be around MAD 680 million. On top of this, we have CR2. We shared in the beginning of the year the forecast and the expectation of growth for CR2.
We believe that we should be close to this. We expect to have a revenue for the second half comprised between MAD 170 million- MAD 180 million. Additionally to what we achieved in the first half, we should be able to provide at the end of the year revenue growth that would be 20%+ compared to 2024. Now that the revenue is secured, we have the EBITDA. Again, on the EBITDA, we expect a very strong rebound in the second half. This is based on four clear levels. The first one is the backlog mix that has shifted. We have more on-premises projects that include license revenue and with more EBITDA accuracy.
Meaning that if we compare the backlog at the beginning of H2 to the backlog that we had at the beginning of H1 of 2025 and the backlog that we have in 2024, that was exclusively composed by SaaS projects, now the majority is on-premises projects that will provide near-term growth on revenue and near-term also positive impact on the EBITDA. The third point is the large SaaS projects that were signed in the last years, 2023, 2024, that are now ramping up, moving from build to run and beginning to deliver recurring EBITDA contribution, which was not the case in H1 where we were more on costs because we were building the platforms and not generating run revenue from these customers.
Now we are moving to a phase where the costs are behind us and we have the SaaS revenue that is starting to generate EBITDA on HPS. Finally, the last point is our historical experience when the business was mainly on-premises. For example, between 2018 and 2020, that shows that EBITDA margin was comprised between 22%- 25%. We believe that having an H2 that will deliver 25% is very consistent with this historical data. Of course, in addition to these levels, we have also forecasted our cost line by line. This is something that gives us some more precise view on the profitability on the second half. Based on all these elements, we expect that H2 EBITDA will triple compared to H1 with a margin that should be around 25% for H2.
To conclude, we can affirm that HPS has entered the second half of 2025 with unprecedented commercial momentum and the backlog at record levels. This is something that gives us exceptional visibility and confidence on expected growth. It's something that has never been achieved in terms of backlog. We believe that this gives us a strong or solid foundation for what we confirm in terms of guidance for H2. The second point is the SaaS transition that is nearly behind. As explained by Abdeslam , the build phase of our infrastructures is mainly achieved and the large-scale SaaS contracts are ramping up, moving into profitability. On the other side, the recent major on-premises wins with tier-one banks are set to deliver strong near-term EBITDA in H2, but also beyond in 2026. We have the last point, the divestment of testing.
We will focus on payment, but also that will mechanically improve the growth and the margin of HPS. To resume, our guidance is grounded in a record backlog, a conservative assumption if we look to the backlog conversion and line by line cost forecasting. This is why today we can reaffirm that the full-year objectives are maintained. Revenue growth above 20% and EBITDA growth above 30%. Thank you for your attention. I propose now to open the Q&A session.
Thank you very much for the presentation. We'll move to the Q&A. If anyone would like to ask any questions, you can either use the raise hand function to ask your question verbally, or you can simply put your question in writing in the Q&A box. Take the first question from.
Yeah, I think that the—
Sorry, go ahead, Brian.
Yeah, I think that there is the first one from Dan.
Yes.
Dan is asking that on the previous earning calls, you have revenue growth guidance comprised between 20%- 30%. Is the new 20% guidance lower than the original due to FX or are there additional factors? Yes, Dan. Yep.
Yeah, sorry. I think Dan is connected to the audio as well.
Okay. Okay.
Yeah, I just wanted to ask that question and also get a bit more clarity on some of the OpEx movements. I think you flagged nicely that there were charges. There was a spike in external charges. When I look at the financial report, there also seems to be a big spike in personnel charges. I just wanted to understand what explains this and when you expect that to normalize.
Yeah. Okay. Yep. Perhaps I will answer by the second one, Dan. It would be quicker. On the HR, you mentioned the spike on the reported figures because you are comparing not the same base. You are comparing H1 2024, where we don't have CR2 in the scope, compared to H1 2025, where we have CR2 in the scope. In the presentation on the EBITDA analysis, we tried to show the figures on the same basis. We see that on HPS standalone, the HR cost declined by 5% globally. I hope that this answers your question. On the first one, you're right. The guidance that we shared with you at the beginning of the year was a guidance for growth revenue comprised between 20%- 30%. We maintain this guidance, meaning that we believe that the growth revenue should exceed 20%.
Yes, we are more conservative, remaining at the lower range of this guidance because of the FX impact. The FX impact impacted our revenue globally on the H1 by, if I'm not wrong, more or less 7% or 8%. Based on the same FX rates, we don't believe that in H2 we will recover the U.S. dollars. We believe that we still have an impact on the revenue. This is why, including the impact, we believe that the growth should be at 20%+ in terms of growth.
Thank you. That's helpful. Just one last question on the divestment of the testing business. If you could share either the valuation or the multiple to which you have agreed to sell it. I noticed there is quite a chunky intersegment component between the revenue you report on the ACPQu alife in your annual report and the testing revenue you report. I'm just curious to know what that intersegment is and how it will evolve when it becomes payable to a third party.
Okay. ACPQu alife is the legal entity that is running the testing activity, but also that is running some payments activities in Europe. We have two activities in this entity. We are divesting not from ACPQualife, but we are divesting from testing, meaning that ACPQualife in France will sell the testing activity to another company. The value is not disclosed, but it's not really the objective of this divestment. It's not important. The most important is really the impact that will have this divestment on HPS. The first one is to have all HPS management, all HPS team focusing on the core business, which is the payments, with much more higher growth and much more higher margin and profit compared to the test that was lowering our growth and lowering our profit due to their low profile margin. This is the main impact of divesting.
This is something that is very positive on HPS activities in the future.
I appreciate the seeds are quite small, Brahim. Do you have an intended use for them? Is it going? Do you intend to use the cash to deleverage the balance sheet or pay down some of the debt that was undertaken for the CR2 acquisition?
No, not really, no.
No.
Perhaps I will move to other questions just to give also the opportunity to others. We can come back if something is not clear. We have the first one from Hicham, BMCE, asking why we didn't release a profit warning. My answer will be simple. The guidance of HPS for 2025 has not changed. We have shared with the market guidance for 2025. We knew that we have a drop in revenue and EBITDA on H1, and it's something that was shared with the market during the presentation of 2024, where we explained with exact figures what will be the impact on the revenue on 2025. Perhaps we didn't give precise guidance for H1, but we gave guidance for full year 2025, and this guidance didn't change.
We believe that because of that, we don't need to raise a profit warning, but more explaining what happened in H1 and what is expected for H2. Second one from Hicham. If the vision and the guidance, or not the guidance, but the vision is oriented to SaaS, why did we sign the last two contracts on-prem? Perhaps, and I will let also Abdeslam react on this, but our vision and strategy is not to convert or to kill our on-prem offer to move full SaaS. It is really to add SaaS on our revenue and on our profile. SaaS is definitely a business or a way of business model that is more profitable for HPS on a long-term view or mid-term and long-term view and with more predictability.
Clearly, we have in our strategy and in our objectives to accelerate the SaaS transition and to accelerate the SaaS business in HPS. We are not a company that can impose to its customer to have only one business model. I don't think that in our industry, we have companies that can impose to a bank to choose only SaaS or only on-prem. We believe that the right strategy for HPS is really to maintain both, to be the right partner of customers, and to be able to offer any kind of business model that the customer needs. This is why we will not refuse any opportunity, even if it's on-prem. The mix on-prem and SaaS will also help HPS to absorb the SaaS transition impacts on our EBITDA and revenue. We will continue to accelerate SaaS to increase our profitability and margin in the future.
Abdeslam, I don't know if you want to add something.
I just want to add something. Like Brian said, we do not have the chance to force the customer to go SaaS or on-prem. It is their choice. It's not ours. Now, should we not go on-prem? I think it would be a mistake because, one, it is a significant number of dollars that we are talking about. These are tier one banks that for strategic reasons would like to control their payment factories in-house. It is also an opportunity for us that if ever those customers would like to change the model, once we are inside with a superior technology, knowing that we can also offer a SaaS transition, that will be an edge that we don't want to lose. On one hand, it is money that we are able to take.
The second, it gets us an edge compared to competition to be inside if ever those customers would like to change to SaaS in the future.
I will take the last one from Hicham, asking if the last contract has been signed by HPS or CR2. I suppose that you are mentioning the contract that we signed with tier-one banks in Asia-Pacific. It's HPS contracts. We have also some opportunities that combine both offers of HPS and CR2 in the same platform. In this case, it can be HPS or CR2 contracts. It will depend. To answer your question directly, the last contract was an HPS contract, so on PowerCARD. I will take the next one from Ali. We are nearly at the end of Q3 2025. Can you comment on trends you are seeing so far as we get some confidence in the guidance? Ali, I think that the guidance or the confidence that we have in the guidance is strong, mainly due to the explanation that I shared about the backlog level.
We have a backlog that needs to be delivered. We took a very conservative assumption compared to what we have in the past. We have a backlog where the mix changed. Just to try to explain what I want to share is that for the same contract, if you make a progress on the SaaS projects of 50%, the revenue that you will recognize from the backlog will be much lower than another one of the same size that will have license that will come also through the revenue at the same time of the delivery of the services. Yes, the confidence of delivering what we said is strong. I think that the main indicators that are used in our business to give confidence on the future are the sales that we've made. The total contract value that we signed last year, this year. You saw the graph.
Even last year, it was a record compared to the history of HPS. We are on the same trend in 2025, which is exceptional. We believe that is strongly supported by the technology of HPS and the V4. This is the first indicator that should give confidence to the market. We do not have a dropping activity. We are selling more. The other one is the backlog. We are selling more and we are more to deliver and to recognize in our revenue. I think that the confidence is here. Of course, we can face some issues or some difficulty due to geopolitical issues of delivery. We can face some delays, etc. The reality is that all these amounts that are in the backlog will be recognized in the revenue by end 2025 or by beginning 2026. Yes, we strongly believe in what we share.
We will progressively share the figures on Q3 and at the end of the year to discuss this when it will be achieved. Next one from Youssef. Can you precise the contribution of the last on-prem contract signed in Asia on the revenue and EBITDA on H2 2025? The rest of the question is, why did we choose on-prem? I think that part of the question has been answered. It's not a choice of HPS. It's a choice of the customer at the end. On HPS side, we decided to not kill the on-prem business model. It's two business models that we maintain in parallel that give us long-term view and long-term visibility on profit and revenue. On the other side, near-term EBITDA and revenue contribution from on-prem projects. On the contribution of these two contracts, I don't have, to be honest, the exact figures.
The forecast has been made by the financial team in detail contract per contract. I imagine that is quite, it's important. Just to give you perhaps some color on the size of the backlog, even if the contribution is high, the delivery of the projects will be minor compared to the size of the project. Meaning that the rest that should be recognized in 2026, 2027 is much bigger than compared to what we will recognize in 2025.
Brahim, just to add on this, the majority of the revenue will be on the next years. For this year, we are delivering what we need to deliver, also what we can deliver, what the customer can absorb. This is what we have accounted for in our forecast. If we have better performances, and for this, it's on both sides, it will only be a positive impact on our revenue.
Okay. We have perhaps two questions that are similar. What is the added value of the testing sell or what is the price? It's not disclosed, but as explained, the price is not huge. The main objective was really to let HPS focus on its core business. No, we should not expect a big value of the sell on HPS figures. Next one from Lamiae. What explains the delay in contract signatures for CR2 in H1? Should we expect a full catch-up in H2 2025? Abdeslam, do you want to take this one? Perhaps you have more information on the CR2 business.
Yeah. The shift is due to many reasons. More analysis from the customer side, more of a link to other projects. As you know, what we do in CR2 is digital banking, is channel management. What this software is doing is connecting all the components of the bank with the channels to deliver the service to the end customers. These are products that require a lot of integration. Sometimes, we have to delay because other components globally of the information system of the bank need to be aligned. This is one reason why sometimes we have to shift. This is not typical to CR2 in all these projects, sometimes we have some shifts. Question, are we going to recover? Somehow, yes, because those projects have not been canceled by the project and we have not lost against competition. Would it be totally catch-up?
This is a question before the year-end. We don't have a full certitude on that. At the same time, other prospects, other deals are maturing on the pipeline. We believe that on figure-wise, we should be ending with where we were supposed to end from a forecast perspective. It may not be the exact customers, but from a number perspective, we should be landing where we were supposed to land on the CR2 sales effort.
Okay. We have a question from Youssef asking or saying that today SaaS represents 74% of the revenue and when this business will start to drive or to generate margins. Youssef, I think that the 74% that you shared is wrong today by memory. I will let perhaps Aziz correct. SaaS revenue is around between 20%- 25% of the revenue when it should generate EBITDA margin. It started. Even in the past, with the initial contract that we signed, and I remind you that we signed our first SaaS contract in 2018 or 2017 with Société Générale, we were in a phase with very, very profitable contracts. The main impact that we had in the last years, starting in 2023, is that we signed new projects, new contracts at a very large size.
This contract imposed to HPS to upgrade all its investments on SaaS in terms of infrastructures, in terms of security, in terms of compliance. We signed with the tier one banks worldwide with different and much more higher exigences or requirements in terms of investments. We went through a phase where the size of the investment on this project and the revenue that we get from these customers on the build phase was not balanced. We were suffering during this phase from engaging a lot of expenses but generating low revenue. This is something that was a strategic decision of HPS. It was not something that we have discovered. It was a deliberate choice, a strategic choice to be able to get these customers on HPS SaaS revenue and bringing to HPS a very large revenue and very large EBITDA margins.
These customers start to deliver SaaS revenue, not totally deployed. The revenue will continue to grow massively. Today, these contracts start to generate EBITDA positive figures on HPS, not yet on the final level that we expect. This is something that will come soon. It will accelerate quickly on H2, also on 2026.
Brahim, could we perhaps take an audio question?
Yeah, of course.
I see Ali Alnasser has a follow-up question.
Hi, Brahim.
Hi, Ali.
Thanks for the call. Just wanted to appreciate the amounts are minimal for the testing, in terms of the proceeds. Can you elaborate on the impact of the deconsolidation and disposal of that business on your EBITDA or EBIT? Was the business loss-making?
Yeah.
It would just be helpful to know, also maybe just whether that comes into the guidance in 2025, where you think it's more of a 2026.
No, no. It will be more 2026 impact. The divestment should be achieved by the end of November, perhaps with some delays. As you know, in France, the regulation is very strict. When you divest or when you sell a business, you have to inform all your employees that will be transferred to this new buyer, and they have two months to decide if they want to make a counter offer to buy the activity themselves or not. We have these two months of delay that we have to wait and perhaps a couple of weeks in terms of admin work. We don't think that we will have the impact in 2025. If it's achieved before the end of the year, for example, by the end of November, we will have one month of revenue impact.
Not a big impact, but we will explain it at this time and the impact on the guidance. It should not be. The impact will be full on 2026. To give, I will say, a large picture, today, the testing activity represents more or less 7% of The total revenue, and this 7% in the past, so till 2023, 2024, the margin was close to zero. This year, the margin of this first half, the margin was - 3% or - 4%. Meaning that we will remove.
On a net income basis or?
On the EBIT.
On the EBIT, okay.
Right. The EBIT on the testing is equivalent to the EBITDA because they don't have any amortization.
Fair. Fair.
Okay.
Okay, that's really helpful.
Okay.
Thanks. Just in terms of looking beyond the second half, like you know your guidance had some really strong EBITDA growth. Half and half, I think you said the tripling. If I read the.
Tripling, yeah.
Release, yeah.
Exactly.
The guidance on full year is 30% EBITDA growth. Now, looking into like 2026, I don't know how much kind of direction you provide. I know you guys have the Accelerate program and you have kind of a long-term vision. Do you expect revenue just maybe directionally, do you expect revenue growth in 2026 to be at the same level as 2025 like from your point of view? Will there be an acceleration because you're now in a recognition mode and you've won some new contracts that are on-prem?
Okay, to be honest.
On a constant currency basis, I mean.
Of course, yeah. It's perhaps too early to answer to your question. What is sure is that the guidance that we gave for Accelerate, meaning on growth excluding any external growth, we gave a guidance of a yearly growth comprised between 12%- 17%. 2026 should be at least at this level. This will be supported by the backlog of the end of the year. The backlog that you have at the end of June today, the forecast of this backlog shows that the backlog should increase by $100 million more by the end of 2025 if we do not sell any new project by this date. This means that we will start 2026 with the backlog reinforced compared to June. The growth in 2026 will be supported by the deployment of this backlog. We do not have any big concern regarding 2026.
We should be in a year with a strong growth again as we achieved in this year.
Sure. Okay. Great. The last question is just on net income. I know that net income is impacted by a few kind of one-offs, but you're loss-making for the first half. Do you have any indication on what that might look like in the second half or the full year?
Yes, we should have on the full year two-digit growth on the net profit compared to last year. This is, of course, based on the assumption that the FX or the currency will not drop more than what we have at the end of June.
Clear.
Yeah. The assumptions.
Because your income last year was MAD 75 million, right?
Yeah, roughly. Yeah.
You're expecting, just to be clear, you're expecting for 2025 kind of a low maybe a double-digit growth?
Yeah, double-digit growth minimum, yeah.
Okay. That's quite substantial because that means you have to basically quadruple your net income in the second half.
Yeah. Yeah. In fact, it's a direct impact. I mean, today, if you look to the profile of HPS, we have cost that has been engaged. We have people, we have hosting, we have, etc. All what you will add on revenue will not drag the same amount in terms of cost. The revenue that will be moving from the backlog or all the amounts that will move from the backlog to the revenue will generate high EBITDA because all the investments and all the costs are already there. Of course, we will hire more people to be able to deliver, but the rest of the costs are not so big. The real challenge is really to deliver this revenue. This revenue will go into the EBITDA. If we do not have a currency impact, the financial results for the second half are already known.
We have the debt cost and that's all. If you look, we have the debt and we have also the goodwill amortization that is fixed. These two are known. This year, we took in addition to this more or less MAD 25 million or MAD 30 million more on the impact on the net.
Yeah. Fair enough. Just confirming, you think at least low double-digit net income growth for the year?
Yeah.
Yeah, that's fair.
Exactly.
Just wanted to ask you one last question on the hedging. I mean, on just the dollar situation, which if you think, you know, Fed is starting to cut rates, I don't know, maybe dollar goes up, maybe it goes down. I don't know. It seems that it has an impact on your business, at least on a reported basis. Is there any intention to maybe start to hedge out some of that exposure given the?
We entered into contact with some specialists on this that work with different companies worldwide or here also. Today, they don't have the, I would say, the miracle to absorb this impact on HPS. We are working on this internally. One of the ways that we are thinking at is to start to diversify the currency of HPS contracts. Today, we are mainly in USD and euro. The reality is that a lot of today, still a lot of currency are linked to the US dollar. Perhaps with the variation that is a little bit less, the impact will be the same, more or less. We are working on this to see how we can minimize the impact. Because we have a lot of assets that are at the end of a period in currency, we have bank accounts first. This one has a direct impact on the financial profits.
We have all the work in progress on all the projects. When we have a project of $100 in the work in progress, meaning that at the end of the period, it will be reevaluated with the new currency and we'll lose 10% even if we do not deliver nothing on this project. It's just a matter of.
Yeah, just in terms of.
At what value you will recommend?
Yeah, absolutely. Okay, clear. Thanks, guys.
Okay, you're welcome. Thanks, Ali.
Thanks, everyone. Take care. Bye.
Perhaps Omar, I will come back to the Q&A in the chat or do it someone else?
We have another verbal question from Jalal Houti . Jalal, can you hear us?
Yes.
Jalal?
The question is, I sent it to my WhatsApp. I'm sorry. The question is, provided the large drop in the price today, is it possible that the founders might?
Excuse me, we cannot hear you well.
Okay. Provided the large drop today in the price, is it possible that at one point the founders might step in to buy more shares? What do you think? Do you think this drop is justified? Do you think that the current price reflects the value of the stock? Thank you.
Okay. So the drop, is it justified on, I would say, our internal view is no. Absolutely not. I mean, if you invest for short term, meaning that you buy today to sell tomorrow, yeah, why not? If you look at the business globally of HPS, we are since a couple of years building something that is unprecedented in the market. We are building a company and a business that is sold to tier-one banks. When I say tier-one banks, it's not banks that you will find everywhere. It's really, today, we have perhaps 12% or 13% of the top 100 banks worldwide share market, which is huge. We are selling a technology that is ahead of all what we have in the market. We have a confidence of this tier-one bank to have all their business on HPS platform on SaaS. We are building something that is extremely strong.
Of course, all this is not without a cost. We have to invest to be able to achieve this and to deliver this. All this transition has been shared, has been explained as much as we can explain how this transition will impact, etc. We have explained that the margin will drop, that we will have impact during two, three years, and this will be recovered because of the business model. This is something that was clear. Today, the main indicator that can be followed during this phase by the investors to see if the vision of HPS is correct or not is not the net profit or the EBITDA because this has been announced that it will be dropping, that it will drop. Of course, it can drop at 20%. It can drop at 100. The intention of the vision was that it will drop.
The main indicator that can be followed by people that want to know what is the value of HPS is really what are we able to achieve in terms of consolidating and in terms of securing future revenue and growth of HPS. This is something I think with all what we achieved this year, last year, we show that we have been able to secure on our SaaS revenue a strong backlog that will be recognized over the coming years in terms of recurring revenue that is extremely huge. Last year, we announced that the total annual backlog of the SaaS is around more than MAD 20 million/ year, if I'm not wrong. This will continue. This revenue is with the high margin.
To be honest, and taking into consideration all the studies that have been made by specialists in the world about the technology of HPS, showing that HPS is ahead of all other players in the world, including the biggest one that you can know, to be honest, for someone that is investing on the future, yeah, I think that the drop is not justified. If you are investing on something and you wait or you are expecting to have dividends at the end of the year or you're expecting a growth of 20% by the end of the year, yes, it's not the right company to invest in. I think that it was another question about existing shareholders to buy shares. I will perhaps let also Abdeslam react on this.
Today, as you know, we can be in a position where we have sensitive information that is not known by the markets that can be considered as or we can be considered as restricted. We prefer to not react to the market when we have this kind of drop because we don't want to be in a position where in the next month, someone will come and say, you have got benefit from this drop, knowing this and this. I don't think that we are in a position to do this. Abdeslam, I don't know if you want to complete.
I think you said it well. On the first point, I think HPS is a mid-term and long-term investment, at least at this phase of the construction of the future of HPS. We are almost there. As we have seen, the change in the margin starts to be visible. We passed a few quarters where we had to invest a little bit more heavily than we used to do. Now we are getting out of it, and we should be back to our normative margins very soon. On the second question, Serhati, each time we have been able to do it, we have done it as founders. As Brahim said, there are some periods where we are restricted. You know the founders of HPS are doing everything by the book and making sure that we stick to our values of integrity and ethics.
We will never commit or go into some gray area where we could be getting some unethical actions. As soon as our restrictions are lifted by our deontologue, we will make sure to get our part of the cake.
Okay. Perhaps I will come back to the question in the chat. I will start for the first one, Dan asking if we have any potential switch to IFRS reporting given CR2 is now incorporated and reports. No, not at this stage, Dan. We have to be able to achieve this, a lot of work to do to align or to analyze all our contracts, the impact, etc. It's not yet in the plan. Question from Hicham. Can we expect a new acquisition 2025-2026? If yes, which activities? Yes, we are still working on the M&A stream. It's not something that is close. Today, we are discussing with different targets. The majority of them is not with the objective to increase our business by acquiring existing business, but it's more on the technology and on opening the new opportunities with some targets that we are discussing with.
The size is not supposed to be big, but the impact can be important if it's achieved. Next one. Did CR2 will maintain, from Hicham, maintain its payments offer or shall we combine with HPS ? And what are the timelines? Abdeslam, do you want to take this one?
Sorry, Brahim. Which one are you asking?
We have a question from Hichem about the technology of CR2. The question is, shall we maintain this technology or not?
Yes, of course. Hicham, we are in the middle of our integration between the two products. The two products will be sold as one integrated product. At the same time, we will also continue selling BankWorld on its own and PowerCARD on its own. There is a single platform that will be provided. Like PowerCARD, where we have these modules or these verticals on the issuing, on the acquiring, on the switching, etc., we have BankWorld as a pillar. One point that is also important to share with the investors is that we have integrated BankWorld in our SaaS offer. In the past, we were offering only PowerCARD, so the payment side of HPS on SaaS. Since our transaction, we have integrated BankWorld on SaaS.
We have our first customers going live, went live a couple of days ago or will go live these days in the Caribbean, where our technical operations will also service the BankWorld from the data center in Morocco. To summarize, there is an integration. At the same time, we have independent products that can be sold on their own without always being integrated. The SaaS has been enriched with the BankWorld offer. The first customer went live a couple of days ago or will go live in a few days in the Caribbean region.
Okay. Thank you, Abdeslam. As if you are here, we have a question from El Mehdi asking for a breakdown of the backlog. I don't know if you have the information. I don't have it in front of me.
Yeah, sure. Just to answer, perhaps starting by reminding what the backlog is including. In fact, in the backlog, we have all the one-off revenues coming from our projects, the on-premises one and the SaaS one for all these one-off revenues, including license and professional services. In the backlog, we have all what we sold but not yet recognized in our revenues. For the upselling, it's the same. It's including all what we sold to the customers on our upselling activities but not yet recognized in our revenues. For all the parts of the recurring revenues, including maintenance, run activities, for the SaaS, the switching activity also. We are taking our backlog one year of revenues. Once that's done, reminding what the backlog is including.
For the figures, in our backlog today, we have 23% of our total backlog is for the projects, 11% for upselling, 26% for the run activities of the SaaS revenues, the recurring ones. For the switching activity, it's 6%. For the maintenance, it's about 20%. The remaining part is for the CR2 activity, which is also 11% as recurring revenues and 3% for non-recurring revenues for the one-off parts for the CR2 revenues.
Thank you, Aziz.
I don't know if it's clear, Mehdi. Please, if there is any clarification or additional information that is needed.
Okay. I think that the question of Hicham about the impact of testing sale is already answered. We have another one of Eranjan on the M&A strategy. I think we answered to this. If it's not exactly what you expect, please raise it again or re-ask the question. The next one is from Imane. Have you any visibility on the foreign exchange impact on H2? No, of course not. We do not know what the foreign exchange will move in H2. The assumption that we took for H2 guidance is based on the fact that the FX or the currencies remain stable compared to the end of H1, meaning no additional impact compared to H1.
If it's the case, the impact on the revenue or the figures of HPS will be zero because all the impacts at the level of the end of June is already incorporated in the figures. Meaning that if we recognize the revenue from the backlog at this level, it has already been impacted in the provision that we've made. The same if we recover or if we receive payments from customers, it's already impacted, etc. If the currency does not change compared to the end of H1, no impact on the financial results compared to H1. We will have the same impact as H1, no additional more impact. How confident are you about 2027 targets? Are you still on track? Yeah, of course, yeah. The 2027 targets remain very strong.
Yes, we believe that thanks to all what we've done and all what we achieved in terms of sales, in terms of fueling the backlog, should contribute very strongly to our 2027 targets. We still have a part of the objective that is linked to M&A that needs to be achieved. At the large or on the big picture, yeah, we should be on track to achieve this. Next one from El Mehdi. How do you intend to allocate the proceeds from the sale of testing business? Mehdi, I'm not sure to understand the question. I don't know Abdeslam or Aziz if you capture the point.
No, I think what is meant is the use of proceeds of the sale of the asset itself.
Okay. Okay. Okay.
You mean the cash?
Yes. Yes.
Yes.
Okay. It will be reinvested in the normal business, meaning that it will fuel the cash position of HPS. We do not have intent to make any acceleration of debt reimbursements thanks to testing selling. It can be a decision based on our existing cash position but not linked to the testing divestments. Okay. Mehdi, do you expect the same level of financial expense in H2? I think that I answered about the FX impact. In the financial expense, we have two things. We have the impact of the FX and we have the cost of the debt. I think that by memory, the financial expenses in H1 was around $40 million, if I'm not wrong. Guys, just correct me if I don't have the figures in front of me. On the.
It's okay.
Yeah. On the 40, we have 15 that is the debt. This one will be reconducted because it's just one half. If the currency is stable, the rest of the financial expenses should not move. We should remain at the same level. What corporate tax rates do you expect for the fiscal year 2025? Aziz, do you have the answer on that?
In fact, yes. As you know, on our consolidated figures, it's a mix between all our tax rates that we've had in our subsidiaries and affiliates. You know also that in Morocco, we are, in fact, using the high rates for the big groups so that we have to pay because we are, in fact, more than MAD 100 million of income. For that, we are, in fact, adding 1% per year to achieve 35% by 2027. To answer the question, it would be the same as the one that we have in 2024 with a small increase to take into consideration this 1% addition that we should have.
Thank you, Aziz. The last one that we have on the chat is Mehdi about the breakdown of 2027 revenues. Are we still on track to achieve 2027 revenue breakdown, meaning 60% recurring, 15% non-recurring, and 25% stable or regular? I don't have the exact answer, meaning that we do not update the exact figure based on the final or the last achievements that we had in the last month. What is sure is that the achievements that we've made on SaaS will contribute to achieve this figure. We believe that we should not be far with SaaS that will contribute strongly to the breakdown in the breakdown of the revenue. Of course, the on-prem big project that we sold will also contribute by filling the maintenance, which is also a recurring revenue.
To complete this, we have the switching that continues to grow at rates comprised between 12%- 15% every year. This can be accelerated in the coming years thanks to the acquiring market that is now open to new players that can accelerate the acceptance of digital payments and can make the switching stronger than what we had in the past. We are working hard to increase the recurring in the breakdown. We should not be far by the end of 2027 of the objectives.
Yes. Brahim, just to add, those tier-one banks contribute significantly on the stable revenue because their size of changes is much, much bigger than the size of changes of the tier-two or tier-three banks. A tier-one bank change could be or is usually the size of a project of a tier-two or tier-three bank. This is important to know. The recurring will continue its growth, but the stable part will be growing significantly because of those banks.
On the chats, no more questions. Omar, I don't know if there is someone raising hands.
No. No questions. No verbal questions.
There is one that's just been added. Is the FX impact linked primarily to the debt or to other companies? Brahim or Aziz?
No, no. The impact is on different levels. First, we have the impacts on all what we have in our accounts that is in currency. I will try to explain. When you sign a project that you have to deliver, let's take an example of a project of $100 and you delivered at the end of the period 50%. You will have in your accounts on the P&L 50% of this $100 as work in progress because it's not yet fully delivered. This 50% is in U.S. dollars, so you have $50 in your P&L. At the beginning of the year, this $50 was at MAD 10 , the dollar was accounted in our account at MAD 500. At the end of the period, if the dollar is at 9, it will be accounted at MAD 150, meaning that we will lose MAD 50 just due to the change in the currency.
This is the first impact. The second one, we also invoice a lot of revenue to our customers. For example, the maintenance, the upselling, the SaaS, etc. When you have $10 at the beginning of the period and you are selling or you are invoicing MAD 100 of maintenance to a customer, if you invoice it in January, the $100 would be MAD 1,000. If you invoice it in June, it will be MAD 900. All these invoices that we raised during the full period have been reestimated at the initial value of the currencies. We have estimated the impact that we lost on the currency variation. We have also all the other assets. For example, we have different bank accounts in the different countries where HPS is present. We are office in Dubai, so we have accounts in Dubai, in USD, in ID.
We are present in Australia with accounts in Australian dollars, etc. When you have $1 million in this account, in the beginning of the year, it has a value. In June, it will have another value because it will be reestimated. Even if you don't lose any cents on this account, the value in our Moroccan accounts will be different. We have to recognize this difference into the financial provision that we have in the figures. I think that is the main impact that we have.
All right. Thank you. That's all the questions that we have for today. Would you like to make any concluding remarks before we wrap up?
Of course. I would like to thank everyone for your presence, for your questions also. I hope that everything was clear. We remain at your disposal if you want one-to-one chats or one-to-one meetings to go deeper into detail and to explain the H1, but also the vision and the focus that we have on H2 and beyond. Thank you very much.
Thank you. Thank you very much, Brahim, Abdeslam, and the entire management team. Thank you, everyone, for your participation today. This concludes the call. Have a great day. Thank you.
Thank you.