Good evening, good afternoon, good morning, wherever you are in the world. Thank you for joining us for this 74Software first half results presentation. I'd like to remind everyone that, as usual, the forward-looking forecasts and discussions we'll have here today or highlight in the presentation are subject to the usual risk and uncertainties that we outline clearly in our universal registration document filed with the AMF. I'd also like to make a more broader point. As usual, for those of you that have heard me speak for a while, our business is subject to seasonality, and so the first quarter, first half, these are good feelings about how we're going for the year, but we still have a lot to do to make the year. When we talk and we look out at our business, we're normally looking at the full-year forecast.
I'm really pleased how the first half of 2026 has started, and we're going to go through and detail that today. I'll go ahead and start us off with the highlights and our progress and our strategy of building out 74Software. I'll turn it over to Éric Bierry to cover the operational execution of both brands and the overall 74 business, and he'll also highlight a few things on our AI journey. Tobias Unger will join us and go through in a lot more detail on the financial results, and I'll close it up and give our closing remarks and open it up for Q&A as well as our guidance. With that, I'll go ahead and jump in. For the first half, as you saw in the press release, we're really pleased about how we launched the year.
It continues following a very strong Q1, and we rolled out into Q2 in a similar fashion. Overall, our top-line revenue improved organically 8.6%, but personally, I'm even prouder to see that both brands are contributing to that growth. The teams inside both Axway and SBS have just done a fantastic job at launching the year well and really going after it to give us the stability that we can now look out at the full year and have great visibility in how we're going to land for the year. This strong revenue growth has also resulted in a nice first half margin, improving from 12% in the first half up to 15.2%.
You're seeing as we're able to grow the top line, we're able to grow the margin as well through continuing to manage and follow our costs, and really challenge that our investments and our expense lines are where we want them to be to help us grow our business, but also meet our strategic priorities. With this good first half and the analysis and the visibility into the pipeline and how the business is trending, we raised our guidance in this press release as well. Not significantly, we raised a percentage on both top-line revenue and margin, but we are confident enough in how the year will land that we did that, and we'll go through it in the figures in greater detail towards the end of the presentation.
As we built out 74Software, we've faced this wave of the AI wave we're all experiencing now, I'm really happy as CEO at the portfolio we have and the characteristics of both Axway and SBS. Axway, as you may know, is providing a trusted data flow integration, trusted data flow movement, and is a very secure environment. SBS is supporting regulated banking and high available critical workflows, as well as many other use cases. All of these are at the core and the heart of the business of our customers, and these customers are often in regulated industries and have very critical data movement or data requirements to run their business that we're a part of.
That means that our businesses are there in this new environment as a foundational product, helping our customers address where they want to go in this new world. That's a great place to be. Most of the products, if not almost all of our products across the two brands, play in this world, and as a CEO, it gives me a lot of comfort that we're here for the long term. Going a little deeper on this, Axway you could think about as a trusted integration and control layer horizontally for many different industries, whereas SBS is a trusted execution layer for the banking industry. If you look at both brands and going deeper into the portfolio of both brands, there's very common shared attributes. We're offering with mission-critical software for our customers.
This mission-critical software gets deeply embedded in the customer's installed systems and base to run their business. We're able to grow with our go-to-market model, continually increasing our recurring revenue base, which is critical for the long term of 74Software. Our customer relationships, as we've talked about before, aren't for several years, it's often for several decades, or even longer. We plan to be with our customers over the long term, and our customers are often in these regulated and high-trust environments where it's very complex to trust a vendor to get a vendor in, but once they're in, it's also significant cost and barriers for replacement of what we're doing. All of that has helped build out what 74Software is. When you look at Axway and SBS, they have those shared attributes I just talked about.
In our M&A strategy, the future brands that we may welcome or future products that we welcome into Axway or SBS are going to have these similar characteristics. At the group level, 74Software is going to bring a group-level discipline and also group-level capital allocation or help with the strategy, help with M&A, bring technology platforms and operating standards that hopefully we could deliver this G&A or functional service at a lower cost, but still at a good level that we could let the brands and the product lines really focus on being closer to their customer, worried about the product roadmaps, worried about driving a profitable growing business. With that, we think it gives us the best chance for success, and we're really happy with really the two years that we've been together now that we've evolved in this way.
We've really built a nice group of general managers that are driving their product lines and really taking ownership, accountability, and pride in everything they do, and the results are showing that. I couldn't be more pleased with where we're at, and we still have some work to do as we go forward. We know what to do, and I believe we have the management team that will drive us there. With that, I'm going to ask Éric Bierry to take over and make some comments about the first half operations.
Thank you, Patrick.
Yep.
Let's start with the Axway brand, and I should say we can see a very strong execution performance over H1 for the Axway brand. Combining, I would say, a double-digit organic growth for revenue, for product revenue, and for the ARR. I'm going to come back later around the ARR for the two brands, by the way. This is mainly explainable by two factors. The first one is the modernization of Amplify, federating API and AI platform, which is allowing our MFT and B2B clients to augment by the ability to use iPaaS on one side and also to keep and take control and orchestration on MCP servers and AI agents. The second is linked to our large base clients, which are augmenting and driving expansion in the way we are driving renewal of the different contracts.
That's the way we can explain that very strong H1 performance. On the SBS side, there is a robust growth on revenue, but mainly on the product revenue and the ARR. It has been driven by, I would say, three main factors. One is the integrated product, meaning core banking, integrated core banking, especially in Africa. We did win 11 new logo, which is really a good performance. Also we see the benefit of the Digital Banking Engagement Platform, so what we call the SBP Digital Banking Suite, where we did close three new clients, so giving us being above 13 client for this new offering we launched last year. The third one is linked to our financing activity within the U.K., which is delivering a very interesting growth and preparing the future.
When we are looking at the ARR, what is very important is first, there is that continued and predictable growth of our ARR across the two brands. Inside each brands, we can see that there is a double-digit growth, which is not linked only to one product line, but really linked to the very critical product, which are making our reputation first, but also where we took decision in the past two years to invest and to launch to the market. This is really important. We are tracking that with a lot of discipline, and it's the way we see healthy future and predictability for the two brands in the future.
If you are looking at where we did manage to, I would say, deliver that performance in H1, I would keep first the strong positioning of our products, which are making our reputation, as I said, first with MFT and B2B, where the renewal are making a difference because, as I said, this is an opportunity to augment the positioning with the iPaaS and to introduce, and reason why you can see that we did close 48 Fusions, until now, and very critical because Fusion is bringing that iPaaS capability on one side, but also is bringing the capability to manage the AI governance by controlling and orchestrating all the AI activity, I would say, covering agent and MCP servers.
This is one of the biggest reason today we are trusting the way we are scaling both the new platform, but leveraging and augmenting our existing, I would say, strong position within the market. On SBS side, as I said, the SBS Core Amplitude is really driving a large part of the growth, but also having a new win in open banking with Vero and the three new signature on the Digital Banking Suite is making a difference and again, scaling newer platform, augmenting our existing presence, and augmenting the different products, which are making us very sticky with our clients on the long term. The last message I would like to give on this slide is the discipline, investment, and execution.
We have been able to really drive additional investment around the Amplify AI Gateway in Amplify Fusion by being very selective in the capital allocation to ensure that that positioning and the window we see within the market on AI governance for the next three, five years is critical for Axway. We need to be ready to be on time within that window, and I'm going to come back later regarding this AI opportunity. On SBS side, you will know that two years ago, we did engage ourself in a five years improvement program within the margin, and that discipline is showing that we are on track within that plan. There are still years to go and I would say improvement to come, but it was important for us to see that after two years we're on track within that improvement plan. Looking at AI.
Some of you may remember this slide. We did show that already in February, but our maturity, I would say with four months more, did augment and it was very important for us to continue to invest and to continue to position the company and to see our ability to, I would say, resist first to that AI wave, but take opportunity within that AI wave for the future. Let me start with the external view of the AI. As Patrick said at the beginning, more than 85% of our total revenue is within clients in regulated industry. These clients in the regulated industry are having regulators, of course, but they need to have deterministic results.
Meaning that the way they are looking at AI is critical for them in terms of preparing the future, but also they are very cautious in the speed they may want to adopt. Let me take a first example with AI Gateway. Several clients on Axway side following the Amplify Fusion signature, did adopt our AI Gateway, but they did adopt it in trying to anticipate the way they will be governing and they will be controlling the different AI flows in the future in the company. They want to take time. They know that they need to be ready. They want a trusted partner like us anticipating and preparing the future. At the opposite, they don't want to be a victim of hallucination in the way they're going to drive their clients and as a consequence, their reputation.
We are starting and we are listening, especially within that first implementation, what are the real needs from our clients and to drive our future investment in the roadmap, but securing also that we are the right speed within the client and the business adoption. Securing also that we are really investing where our client are expecting to be supported and protected by us. When I'm looking at the SBS side, I should say there is the same pattern. First, because banking industry is fully regulated. We launched the SBS AI Foundation to the market earlier this month with the first client, I should say it's a beta client.
As I said, for Fusion, it's important for us to have this first client and to gather all the feedback and to understand if the several use cases we are giving to this client in the U.K. are really delivering first the business outcome this client should be expecting and to measure them. In parallel to make sure that we are delivering all the control, all the security and all the compliance at any point in time to be able to drive explainability within the AI usage.
That's where we are today, and we consider that we are having, as a group, a unique position to combine on one side that control plane, which is going to drive a full compliance, a full control and governance within the AI flows and within the banking sector to bring as an addition that business knowledge on banking, which is driving an addition compliance and especially to be in line with regulators' expectation. From an internal use of AI, I know that everyone is trying to understand what are the gain or are we able to deploy this technology and change our pricing model, potentially in the future.
Where we are today after four months, we did deploy within small first teams, especially on the new development, all of this technology to have a first result within these teams where we are doing our new development for the future, and we are able to accelerate as a first result after four months by 25% the speed. Our ability to deliver faster, especially new product and like Fusion, I was just explaining just before. We are a portfolio company with a lot of different products, so we are experimenting and deploying and starting to measure across the world portfolio what is the real productivity and what is the real ability for us to accelerate our different roadmap, which is first our top priority. There is still work to do. We know that the journey is continuing.
Each month, each three months we are progressing and we are really planning to deploy across the two different brands completely that different methods and approach and tooling to make sure first that we have a consistent way to deliver in the future our different product leveraging AI. As a reminder, we are delivering this product for regulated industry. We need to be sure that the way we are anticipating and deploying this different tooling is fully secured for our clients. That's where we are at the moment. Each new request, each new problem is today looked with first an AI lens to see if we are able to take benefits of all of these different technology. The two brands and the group itself is fully engaged now in completely deploying all of this. Time to give the floor to you, Tobias.
Thank you. On the financial results, Patrick already introduced the presentation by saying that seasonality plays a big role in our business. For those who have been following us for a while and have heard me talk about this before, I used to say we make all the profits in the second half and all the cash flow in the first half. This year, this is certainly not the case, and I'll explain to you later why. We've had record revenues in the first half, as mentioned already, despite some FX headwinds. On an organic basis, we grew 8.6% in both brands. Strong growth, Axway with almost 12%, SBS with 6% almost. That is despite a continuous reduction on service revenues on the SBS side. On the product side, the growth was almost 9%.
That has translated in a very good margin as well since some of the growth was obviously led by customer-managed subscriptions and licenses, and therefore, that came with a high margin and dropped to the bottom line. We managed to increase the profit on operating activities significantly and very happy with that result in the first half. In terms of cash flow, as I mentioned, it is a different story from last year, where we had a very strong cash flow in the first half of the year. This year, we are expecting good cash flow in the second half of the year as well, where last year we had to guide that the cash flow in the second half year was fairly limited.
Most of that or all of that change is driven by changes in net working capital, which are linked to signing a lot of customer-managed deals that I already mentioned and some other factors that I will go into in detail. The leverage ratio is now well below 1.5x , which helps us with our interest costs going forward. We are happy about that as well. The earnings per share are obviously up very strongly based on this result. On this slide, I will not dwell very long. The one point that I wanted to make is on the operating leverage. I think I made that at the end of the year already. You can see, every line below revenue grew stronger than revenue.
We do see the nice operating leverage, it is supported by reductions in cost and reductions in expenses on many items as well. I would call out the share-based expenses, which we have explained in the press release that last year we had one-off increase of Social Security contributions, therefore, this fell away this year, so we have less. The second one to call out is the other operating income and expenses, where this year it is largely attributable to some project expenses on the integration project that is still ongoing on the IT side. Whilst last year included quite a significant portion of restructuring costs, which we did not have in the first half of this year. Finally, the income tax expense is of course higher given the profitability is higher as well, but the ETR dropped slightly from last year to 20%.
I already mentioned everything on this slide, I will just move on to the next one to talk about where the growth came from in terms of the revenue types. Maintenance is down as we have talked about continuously. We are continuously transforming maintenance revenues into subscriptions, especially on the Axway side. That was a planned reduction. We did have a little bit of churn on the SBS side from a large tier 1 program that has come to an end and was renewed at a lower rate this year. That you will see in the SBS results. Very pleased on both brands that the customer managed subscriptions are up strongly as well as the own managed subscriptions. Licenses is maybe a bit of an oddity that it is up so strongly in the first half of the year.
This is really coming from an end-of-life product on the Axway side, where customers were not ready to move off the products and ask us for extended support, and therefore we were able to sell new licenses for a product that is not really available for sale anymore. In Axway, there's very few products available for sale on the license model anymore, as you know. In terms of the revenue breakdown, you can continue to see the trend on the maintenance revenues on the Axway side dropping fairly significantly. We predict that we will have another couple of years of strong transformation activities. By that time, most of the maintenance revenues should be transformed or will be here to tail off in the future. On the SBS side, the service revenue is now down to 24% by one percentage point versus last year.
The customer managed grew quite strongly in terms of share of revenues because of upfront recognitions of some revenues. It's very selective on the SBS side. We're not doing this at scale. It's linked to a few deals. It's not something that we do at scale with all the customers. In terms of the margin, we had a very good development on the gross margin coming from nice product mix in terms of high-margin licenses and customer managed subscriptions. On the cost side, we are down in terms of R&D percentage, we're down in terms of sales and marketing percentage, and therefore, the brand contribution has increased significantly by almost five percentage points. In terms of G&A, we had an increase in G&A. Some of that is linked to the continuing build-out of the corporate functions, chapter functions that Patrick was mentioning before.
Some of it is also linked because we had such a good H1, we had increased bonus accruals, and we have some seasonality in there as well, which will balance out over the year. We're not predicting to be at 10% of revenue by the end of the year on that line. Those are the contributors to the profit on operating activities increase. When we look at the brands, the two things to briefly talk about is the gross margin. Again, on Axway, as I mentioned already, high margin lines from customer managed subscriptions and licenses drove the gross margin increase, but also nice increase on the services side, even though that's a very small contributor to our profits. On the R&D side, both brands have been able to reduce the expenses in absolute amount as well as in percentage amounts of the revenue.
On the Axway side, we didn't capitalize any R&D in the first half of the year. On the SBS side, we had a net effect from capitalizations of EUR 6.7 million, and therefore, if you look at the footnote, you can see that the gross expenses reduced quite a bit and contributed to a 2.6% of revenue reduction. On the SBS side, the gross margin was a little bit weaker this year in the first half, which is related to, on one hand, we had good growth on the owned managed subscriptions, which are lower margin, as you know. We also had some, I would call them almost exceptional costs or extraordinary costs, as we had to invest in a new product head version that will benefit us in the future where customer migrations towards that head version should help us for the future.
On the cash flow statement on this page, I will not dwell very long. Just one point on the financing cash flow, as you know, we have refinanced our debt in April. That had a very small effect on the cash flow as we more or less refinanced the same amount that we had outstanding before. As you know, and as you've read before, we're very happy with that refinancing where we cleaned up all of our bank facilities and where we were able to get better terms in terms of the way leverage ratio is calculated, where we have a good combination of interest costs and so on. That has helped us to reduce our interest cost as well. Looking at or explaining the unlevered free cash flow drop, I wanted to go into a bit more detail, given it's something to look at.
We did have a negative effect from factoring this year of about EUR 19 million compared to last year that is. It's not the absolute effect this year, but it's the comparison of last year's first half cash flow to this year's first half cash flow. We had a reduction in factoring last year as it was a first-time introduction. We had a big benefit in the first half. This year, as we reduced it from the amount we had at the end of 2025, we had a negative effect. That together amounted to EUR 19 million. The second effect is other, I called it other net working capital movements, but I was calling out seasonality already. There is this year quite a significant shift of some customer collections to the second half of the year.
Most of that is stemming from the fact that we migrated or transformed maintenance revenues into subscriptions revenues that were maybe signed in the second half of the year. A maintenance contract is always invoiced at the beginning of the year, but the subscription is invoiced whenever it's signed on an annual basis going forward. Therefore, you have a lot more invoices in the second half of the year from those new subscriptions that were closed in the last few years in the second half of the year. The other element is also that at the end of 2024, we had a lot of receivables on the balance sheet.
During the transaction and shortly after the transaction in 2024, we did a lot of billing, but we didn't collect all of that cash towards the end of the year. Therefore, that was collected in 2025. We didn't have that beneficial effect this year. If you look at our DSO on the billed, i.e., on the trade receivables, on the billed receivables, it's actually down by eight days versus end of last year. It's also lower than at the end of last first half in 2025. We don't have a collections issue. It's really a billing timing topic. On the unbilled DSO, of course, we are increasing every quarter, every half year, since we're migrating so many licenses to subscriptions. We continue to have an increase in the unbilled DSO on the balance sheet.
It's now a EUR 222 million balance on the balance sheet, which is invoices that will be billed in the future but hasn't been billed. That's quite a nice backlog of bills for the future. In terms of the other operating improvements, excluding the net working capital, as you can see, we improved both on Axway and SBS. On SBS, of course, due to the cost reductions and margin improvement by EUR 20 million. On the Axway side, strong profitability already, but which was further improved, EUR 7 million on the Axway side as well. I hope that helps to explain the drop of the unlevered free cash flow, and, as I said, this year will certainly have some free cash flow in the second half of the year as well.
On the last slide, the only point to make or that I haven't made yet, the net debt, the absolute amount is now at EUR 181 million. The cash generation in the first half, we have used to reduce that debt by about EUR 10 million-EUR 12 million, but we have actually spent EUR 14 million on repurchasing shares for our LTI program, as we announced at the beginning of the year. We have announced that we would purchase up to 800,000 shares this year. We have purchased roughly 450,000 shares already, we still have an allowance to purchase quite a bit more in the second half of the year. I think that was it, I'll hand back to Patrick.
Thanks, Tobias. Let me close up our remarks, and we'll open it up in a minute for Q&A. With the really great performance from both teams in SBS and Axway, as we've talked about, we've had a fantastic first half, and we're looking out for the full year and see this momentum continue. We're taking the opportunity to raise our guidance, which on the revenue side was 3%-5% organic revenue growth. We're raising that to 4%-6%. On the margin on operating activities, moving from 15%-17% to 16%-18%. We're able to do that at this point as we're seeing the midpoint of that raised guidance clearly, and we see some upside potential that will either show up or help us mitigate any surprises we may see in the second half.
Obviously, with that revenue guidance being at 4%-6% for the full year, we expect the average to be below for the second half what it was in the first half. At this point in the year, that's the pipeline, that's the visibility we have, especially on our large deals, and we're quite comfortable with where we're at. For me as CEO of the group, moving the seasonality effect, because if you remember following especially the Axway story, but even a little bit on the SBS side, we always had this hockey stick coming in Q4. Q4 was such an important quarter to us that it could be a surprise at the last minute.
We continue to look for opportunities to pull the deals that have been worked for months into the first half, this gives us the stability, as Tobias had covered, of balancing out our revenue over the year, and it gives us the ability to forecast and be a little bit more stable throughout the year. I'm really pleased with the first half performance. The full year guidance looks good for us. We're staying a little conservative on the unlevered free cash flow as Toby went into detail on keeping our guidance where it is. If anything changes in that, we'll mention it in Q3. When you look out a little bit more on the midterm, we're keeping our 2028 ambition.
Obviously, this is a conservative revenue approach, but we have no visibility at this point in the next couple years that would change the acceleration to close to or over EUR 800 million, and we're targeting to get closer to EUR 1 billion, including our M&A approach. The strong financial results really are allowing us now to start looking at M&A a bit more seriously because we'll have the financial power and the debt capacity to look at the next opportunities we see in the market. If you've followed us for a while, we're going to look for the right opportunities and not rush and make commitments on spending money that could end up being disastrous if we do the wrong M&A. Our margin on operating activities we're keeping at 20%, as well as the 16% unlevered free cash flow of revenue.
Overall, I'm quite pleased with where we're at. If you've been with us since we brought together the two businesses and formed 74Software, at that time, we talked about how we saw the evolution and the disciplined approach year after year in building a stronger company globally. I'm really pleased with both teams and their progression on this. We're either at or ahead of where we expected to be at this time. We're doing it with a very nice organic growth. With the organic growth, it's allowing us margin expansion, as well as being very disciplined in how we spend and allocate our expenses. That will allow us to continue to either de-lever or to buy back shares or to go into the M&A market.
As we're continuing to build out both businesses in the discipline, we're able to get greater and greater visibility into the revenue forecast, their pipeline, how we could grow with our accounts. We're looking to continue to build out the recurring revenue within our products. We've brought down the service revenue to where it should be for both brands. We're not expecting as much dramatic movement on services this year, and we continue to look to be relevant for enterprise-based customers with our mission-critical software. With that, I'll go ahead and open up the line for Q&A. Alicia, if you could tell us if we have any callers.
Thank you. This is the conference operator. We will now begin the question-and-answer session. Anyone who wishes to ask a question via phone may press star and one on their touchtone telephone. Alternatively, please send written questions through the webcast platform.
At this point, I'm not sure if we have any callers on the line, but I see one coming through the platform. The question is regarding our AI gateway capabilities and the evolution of that in growing our ARR, and do we think it's going to accelerate with the AI gateway capabilities we're introducing, but we could broaden it even further and talk about the SBS approach and their meeting and growing with their customers and their AI needs. Maybe I'll give that question over to Éric. Éric, what do you
I think we will see a growth and we think this will be a long-term growth. The critical question we are having at the moment is the speed of adoption from our clients. We are convinced that we are on the spot on this topic. We are looking at the different feedback, and this offering are, by the way, only subscription-based, this will be subscription, and this will generate ARR. The speed for this ARR is something we need to look at, and we see that this regulated market industry, they will take time, allowing us, by the way, to listen and to be able to deliver really the expected capabilities.
I think it's really critical there what Éric said, and he mentioned it in his presentation. On the regulated industries, they're not going to be market leaders. They may test the capabilities, they may want to use them, make sure their partner really has a plan, but they're not going to go out there and be launching it into production really anytime soon. It's going to come quarter after quarter, you're going to see a nice slow evolution of the ARR. We've just had another question come in. What is our M&A strategy and what's our priority? Over the first couple years of coming together, we really wanted to ensure we didn't have any operational hiccups. We had to pay down our debt, which was a commitment to the banks to fund our activity.
We were in the market looking, learning what's out there, learning the activity, but we weren't going too deep. Now we're starting to get involved in going into deeper analysis of companies that we're seeing, having the first meetings, going into sometimes due diligence to understand more and more what's inside the company. With regards to M&A strategy, I did present in my section of the presentation, if you remember, we had the Axway box, we had the SBS box, and then we had a third box, a unnamed box. I'm not sure we would actually buy and go into a third standalone brand at this time. We have to build up the management strength and capabilities of an M&A engine to do that.
We could consider if there's a product in our portfolio that may fit better with another product that's in the market to create a third leg. That's one option. For example, there's specialized finance of the wholesale auto financing market. That could be an opportunity. Or taking the AFAH product, the accounting integration product, and coupling it with another accounting integration product to create its own standalone brand. Short of that, our priority would be finding something where we're strong. In the integrated banking solutions, core banking solutions, adding value on top with various capabilities that we've built that are applicable to multiple core banking systems, or going into the MFT space or where we're building out the fusion capabilities and really strengthening that market for us. That would be our priorities.
There's a lot in the market, and we're seeing a lot of good activity, but we still think a lot of it's overpriced and a lot of the pricing needs to come down. Okay. A question from Derek Marcon. What's your moat in the AI agent orchestration platform against the larger vendors like ServiceNow, Salesforce, et cetera? We have a lot of good moats. I'd say maybe the primary one from my standpoint is our customer relationship and the trust they have with us around our core activity that we're providing for them. Maybe Éric, if you have any other thoughts on how to answer that.
Just following what you said, Patrick. We are coming from the API orchestration. When we are federating API and AI orchestration, first we are in a position with our existing client to expand the B2B and the MFT with the iPaaS first, then to bring that control plane layer. For us first, because it's the regulated industry, the trust is making a critical difference. I think that move is positioning us and differentiating us completely differently, I would say. That's the positioning, which is the first way and which is going to give us a positive reference and good reputation to the market. I'm insisting the security and the compliance within that space is going to make the difference.
If I'm adding the banking capabilities within that very specific market, of course, we will be able to bring that business domain on banking know-how to follow the regulation. That combination is even stronger in the way we are looking at the positioning to the market.
Another question. Have we seen any deals that slipped at the end of the first half due to customer hesitation to invest and then certain economic environment? I have my opinion from the couple sales people I've talked about on this, and I'll also invite Éric if he has any opinions on it as well. From my perspective, what I've seen is with this uncertain environment, most of our enterprise-level customers have gone into the year with a budget, and plans and projects are ongoing. Because of this uncertain environment, being nervous about what could happen in the second half of the year, they've wanted to get the project engaged, signed, and going, and not wait to see if there's a bigger disruption in the second half.
It's maybe one of the minor explanations of why the first half, especially on the Axway business as a lot of transactional volume, is improved. The second half forecast we have is a little less muted. Éric, I don't know if you've heard anything else.
Just to add one small thing. We are really in the core business and the heart of the operation of our clients. Meaning that, as you said, when they are engaging modernization, when they are engaging investment around digital, because it's still the case, especially within the FSI, but also the healthcare industry, they do not reduce their willingness to move. Maybe there are some services or consulting activities which may be impacted or at least being delayed by that uncertainty. We do not see that big willingness to postpone that decision when we are talking about the core of their business.
Okay, the next question we have, and maybe I'll toss it to Tobias. Why are we not changing our unlevered free cash flow guidance when we're increasing our revenue and our profitability guidance for the year at this time? If we want to call out any specific headwinds.
It's fairly clear. The over-performance on the growth, a lot of it comes from customer-managed deals with upfront recognition of revenue. If anything, this is a headwind on our free cash flow as a percentage of sales. Customer-managed deals have a very low cash conversion compared to other types of revenues, right? That's why we didn't change the guidance. If anything, we'll have a headwind because of the higher growth.
Okay. Next question that's come in. How looks the pipeline entering the second half of 2026, especially in the context of the deals you successfully pulled forward in the first half? I'd say we pulled forward deals, that's an assumption there. Our deal cycles are six to nine months on the Axway side, as we've talked about. On SBS, they're quite a bit longer.
12- 18 months.
12-1 8 months. We normally have deals in the pipeline that take a while to close, and they were able to come in and close in the first half. When we look at the second half pipeline, we have the pipeline to do the guidance that we've given, and the deals are advanced enough in this stage to do that. A lot of the deals, as Éric's talked about in the past for SBS, create revenue in the future years. On the Axway side, a lot of the larger contracts that were signed in the first half were customer managed, as Tobias has been covering. When we look at the second half pipeline, I'm really excited to see that we talked about, I believe it was 48 Fusion contracts that were signed. For the year, the acceleration should continue.
A lot of the pipeline is in the newer products as a lot of the larger deals that were in the pipe for a while were able to close in the first half. We're going to see hopefully that Fusion number more than doubling in the second half and the revenue landing where we're expecting it to land. I believe we have a phone question, Operator?
Yes. Phone question is from Bharath N., Cantor.
Hi. Thank you for taking my question. I hope you can hear me.
Yes, we can hear you fine.
Thanks. The specialized products ARR seems to have slowed a little bit at 1.3% at H1 from 2% in Q1. It's, I think, to do with the U.S. federal government demand that you talked about. Is there any further color you can provide? Is this a temporary kind of pause, or is this more structural given the current U.S. administration's approach to federal spending? That's the first question, please.
Yes, you hit it correctly. The specialized product on the Axway business, the ARR, was impacted by the cutback by the U.S. government spending that really hit that product line, and the ARR growth. Is there anything else I'm missing, Tobias?
As you can see, this product line hasn't really grown for the last quarters in any significant way, you shouldn't expect much more than that in the future either.
Yeah. A lot of the impact of the U.S. government's pullback, we've already have seen in the numbers, and it shouldn't drop any much further from.
It's been fairly flat for the last two years.
Okay. I might have missed this while I was trying to dial in. Just looking at the ARR data for SBS customer-managed ARR, that's grown significantly at EUR 13 million increase in six months. Is that kind of trajectory sustainable in H2, and what does the pipeline of signings look like in the customer-managed side of things?
First, it has been linked not to a strategy which has been deployed and rolled out across the portfolio, but we did experiment, especially three different deals, with a large extension of the scope for these groups. By the way, it was groups and not a single entity. In that context, as some of the new features and some new module we were proposing in subscription, the client did accept in each case to move into a subscription model, allowing us to stop perpetual license and also to redesign a new contractual approach. The previous one was ready for more than 10 years. It has been taken as an opportunity to generate more value for the client and for us, and it has been based really on these few cases.
This is the way, because the percentage is high, but the absolute value is not so high if I'm comparing with Axway. Second, there are a lot of unmanaged activities within SBS. Meaning that the scope of activities where we could be triggering that conversion is limited to two big segments. One is the on-prem, mainly in Africa, and it's where we did experiment that transformation. Second, it's linked to large tier 1 clients. This tier 1 client, as you may know, especially in continental Europe, they are not very keen to accept to move to subscription when they do have perpetual license already, and even in the way we drive the evolution. We did not take the decision to aggressively impact our tier 1 accounts in forcing that move.
To answer to the second part of your question, we do have two or three opportunities where there is room for transforming in adding more scope and then transforming the existing contract. But at the end, if we are able to extend the scope, even without driving the subscription migration, I would prefer to secure the deal in H2 rather than just forcing to transform the deal and then having the risk to postpone to H1 next year. It's only linked to a few opportunities in the pipeline, and it's not, I would say, a dedicated strategy to address the full market with a single methodology.
Maybe I'll add to it, if you've been following a bit this story for a while, when we did this subscription program with Axway, we put boundaries around it where we needed to have something that would drive the discussion that would open the door for the subscription. Whether it was increased usage, additional products, or something that could add quite a lot of value. The SBS team is learning a lot from the journey that Axway's been on how to add value when they do these and make sure we're adding value. Otherwise, there's not the big reason to do something. Not with the SBS client base, as Éric was saying. A lot of them have licenses, and the move to subscription is really not interesting at this time. It'll be piecemeal, but it's there.
It won't grow like it did in the Axway side.
Understood. Very helpful color. Thank you. Just one more from me, if I may. Can you elaborate on the specific measures that you are evaluating to improve trading liquidity? Does that include secondary listing or free float increase or anything like that? Any timeline for this sort of decision? Thank you.
Well, obviously, our first priority is operating performance. If we perform, hopefully we continue to draw in interest into our stock and our story. Maybe, Tobias, if you want to go into some of the financial mechanisms we're trying.
Sure. I think it was worthwhile pointing out that we have increased the liquidity quite significantly over the last 12-1 8 months. Now part of that is we have spent a significant amount of time with new investors and with on roadshows in new countries. Our shareholder base historically has been very French-centric, we have started much more also to look at the U.K., at the U.S., Germany in terms of roadshows. I think that has helped to just get the name out. I think the name is an interesting one for investors also due to the scarcity value of a software company in Europe.
Of course, we have, as you can see in our disclosure, our shareholder base, there is a number of large shareholders that have been in the stock for a long time, not just the Sopra GMT and Sopra shareholders, but also other institutional investors. We do think over time we will have a more balanced or a more diversified shareholder base, and we welcome that opportunity to really also animate the trading liquidity and the free float in the stock. Absolutely.
We're always welcome to support our larger investors if they need our help in moving their shares and helping us animate the free float. Another point in our story, we never used in the past, equity in M&A. That's now something that is an open topic and discussed with the board, that if we find the right M&A opportunity, that makes sense to look at equity as part of the payment, that's available to us now. That's another way we could look at doing it. It's something on our mind constantly, but we're not going to force something.
Of course, as the CFO, I have to add, we would only do that if it's accretive to our shareholders and if the value of our stock is attractive enough for it to make sense.
Yeah.
Absolutely. Thank you. That's very helpful color. Thank you.
Another question. Are we seeing small local core banking vendors losing momentum as pointed out yesterday by Temenos in their call? Maybe you know the market quite well, I hope, Éric. Maybe you take that one.
Thank you for this question . I was not part of the call, so I don't know what has been explained by Temenos. What's clear is first, the IBS league table is considering first the players with the ability to deploy over four continents, which is not our case. That's the first statement. It's very difficult to compare that kind of momentum. The second is we took a conscious decision to stay very focused within the different markets where we are able to take a leadership. Of course, France, the Benelux region, the U.K., and historically, I would say the French-speaking area in Africa, even if today we are deploying also within the English-speaking part of Africa.
That decision to stay very concentrated in leveraging as much as possible our investment, but also the investment from our clients in augmenting their capabilities and then cross-selling other products from our portfolio has been our strategy. Until now, this is well received by the market, and we are still signing new logo. I think the pipeline at least is showing that we are still on track within that strategy. Our ability to go to Asia or to go with partner in Latin America or in the U.S. in the core banking sector, today it's not for us. It would require a large investment, and we are in a situation today where we do see our ability to drive predictable growth for the next years.
We do consider that that focus is making a difference, and at least for our long-term clients, they see the value in our ability to augment progressively from one-stop shop for the tier 3, 4 banks, up to the ability to do best of breed based upon our different products for the tier 2 and tier 1. That's where we are.
Okay. Thank you, Éric. There appears to be no more questions, we want to thank everyone for dialing in. We're at the top of the hour, or at the one-hour mark, we'll go ahead and close the call here, and we look forward to seeing some of you on the roadshow or speaking with you over the next months. Thank you all for joining.
Thank you.