Bravura’s Outlook Scarred By Customer Exits

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This story features BRAVURA SOLUTIONS LIMITED, and other companies.
For more info SHARE ANALYSIS: BVS
The company is included in ASX300, ALL-ORDS and ALL-TECH

Shares in Bravura Solutions encountered selling pressure following the release of forecasts-beating FY25 financials. What happened?

-Bravura Solutions’ FY25 performance and guidance exceed expectations
-Growth outlook and client attrition concerns trigger sell-off
-Brokers downgrade, but Shaw and Partners retains positive stance 

By Mark Woodruff

After Bravura Solutions’ ((BVS)) FY25 result release in mid-August, the company’s share price fell sharply. Analysts remain divided on whether the reaction was justified.

The stock dropped to $1.91 from $2.42 prior to results, then rebounded to around $2.30 before easing back to about $2.00 in a market looking for direction in early September.

At face value, consensus forecasts for FY25 were surpassed, with revenue of $258.7m beating expectations by 3%, earnings (EBITDA) of $50.5m ahead by 13%, and cash earnings of $43.8m exceeding by 11%.

Underlying profit was $245.4m, a rise of $15.6m from FY24.

FY26 guidance implies around 15% growth versus FY25.

So far so good, but why did Wilsons and Macquarie cut their respective 12-month price targets by over -30% and downgrade their ratings to Hold or equivalent?

Let’s first examine the Bravura business

Founded in Australia, Bravura holds a strong position in the Australian and New Zealand market, particularly in superannuation and investment platforms. It has also expanded significantly into the United Kingdom and Europe, where its transfer agency and wealth platforms are used by major financial institutions.

The company now supports a client base with offices across Asia-Pacific (APAC) and Europe, the Middle East and Africa (EMEA), alongside a growing presence in North America.

At its core, Bravura generates revenue through software licensing (including cloud-based subscriptions) and related services for the financial sector.

The business model centres on long-term contracts, yielding recurring income, alongside one-off fees for new software licenses and implementation projects. This allows for the delivery of continuous value through updates and support while also earning upfront fees for deploying the company’s solutions.

Underlying revenue from customers in FY25 was $256.8m, representing 3.1% year-on-year growth (0.7% at constant currency). Of the $256.8m in revenue, $154.3m is recurring in nature.

Recurring revenue is comprised of reported Support, Maintenance, and Hosting revenue plus a portion of Licence Fees that are recurring, less one-off support billed on a time and materials basis.

Growth here represents the impact of growth in volumes, client expansion, pricing, and new clients.

The balance of revenue derives from non-recurring project and license fees tied to new client wins or upgrades.

Overall, management aims to be a trusted technology partner, powering critical back-office operations for clients, and helping them achieve efficiency, compliance, and better service outcomes in wealth management and funds administration.

Views of FY25 and beyond by Wilsons and Macquarie

While acknowledging the positive impact from the annualisation of previously announced cost-out programs, Wilsons now has lower confidence in the revenue pipeline and the timing of a return to growth.

On balance, the analysts see FY26 as lacking clear catalysts, with limited visibility on a CEO appointment and broader board leadership and composition. Management expects its CEO search will bear fruit prior to the AGM.

On results day, the Chairman stated he will be stepping down at the FY25 AGM.

Macquarie points to customer attrition as a drag on FY26.

Of the three customer exits disclosed in November 2022, one will complete its migration to a Business Process Outsourcing (BPO) by January 1, 2026. This means movement of technology and operational processes (such as administration, support, or back-office functions) to an external service provider that offers bundled technology plus operations, instead of continuing with Bravura’s software and services.

This client contributed $10m of revenue in FY25 across professional services, support, maintenance, and hosting.

Another of the three customers remains with Bravura, while the third has already transitioned away, highlights the broker.

There is a further -$6.5m impact of exits during FY25, notes Macquarie. On a combined basis, the client exits/reductions impact equates to an around -4.5% headwind against total revenue in FY26.

Both client attrition risk and a lesser growth contribution due to cost out has caused this broker to cut its long-term growth forecast to -1.5% below the terminal rate from 1.0% above.

Capital management

At financial year’s end, Bravura had $58.7m of cash and no debt. Guidance is for FY26 PPE capex of between -$2-3m. PPE refers to spending on physical, tangible fixed assets to separate how much is being spent on physical assets versus capitalised software or other intangibles.

The board declared a final dividend of 2.92 cents and a special dividend of 1.79 cents, relating to the net profit after tax distribution of the perpetual licence sale to Fidelity.

The dividends will be unfranked, and the Dividend Reinvestment Scheme remains suspended.

The dividend policy moving forward is of at least 50% of underlying net profits.

FY25 achievements

Management highlights key milestones during FY25 relating to Midwinter Digital Advice solutions, Sonata Alta, and Orchestrator. Development of workplace pensions, employer engagement, and annuity functionality in the UK were also cited.

The financial planning and digital advice platform Midwinter, marketed as AdviceOS, is a cloud-based software (from the Midwinter acquisition) supporting financial advisors and wealth managers in Australia.

This platform provides tools for client onboarding, financial modeling, retirement projections, product comparison, compliance, and workflow management. Midwinter’s digital advice capabilities also enable institutions and super funds to offer online, self-directed advice journeys to their end-customers, complementing Bravura’s core wealth platforms.

Bravura’s flagship wealth management product Sonata accounts for almost half of total revenue and is a key focus for investment in the business. This next-generation wealth management and life insurance administration platform is used by major institutions to manage products like superannuation (pension funds), investments, and insurance policies.

Cloud-native platform Sonata Alta is an extension of Sonata, which is offered in a business-process-as-a-service model, which delivers predefined service outcomes, real-time processing, and scalable infrastructure for superannuation and retirement fund providers.

Orchestrator is a workflow automation and integration tool, designed to sit alongside Bravura’s core platforms (like Sonata, Garradin, Rufus, etc.) and help streamline business processes across multiple, fragmented systems.

Competition

Bravura contends with a variety of competing financial software providers.

In the financial advice technology space, for example, Bravura’s Midwinter AdviceOS competes with Iress’s ((IRE)) Xplan (widely used by financial planners in Australia) and other advisor software platforms.

In the core insurance and pensions software arena, global vendors like Swiss-based global software provider Temenos and US-based Fidelity National Information Services, Inc, offer banking/insurance systems that can overlap with Bravura’s life insurance modules.

Niche fintech firms and newer cloud-native startups are also emerging in areas like superannuation administration and fund messaging, which are specialised systems and standards used to transmit data and instructions securely.

Outlook

Following FY25 results, Macquarie lowered its target to $2.20 from $3.07 and has downgraded to Neutral from Outperform.

In contrast, Shaw and Partners has keet its $2.90 target and Buy rating. This broker stands out with a much more positive outlook for the company.

Days after the FY25 release, Shaw raised its FY26, FY27, and FY28 cash earnings (EBITDA) forecasts by 23%, 19%, and 15%, respectively, citing management’s sustained focus on operational efficiency.

Outside of these two daily covered brokers in the FNArena database, Wilsons lowered its target to $2.10 from $3.17 and downgraded to Market Weight from Overweight.

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