74Software (74SW) H1 2024 earnings summary

Executive summary

• H1 2024 revenue reached €148.7 million, up 1.9% organically, with 18% subscription revenue growth and 7.2% ARR growth year-over-year.

• Subscription revenue now represents 63% of total revenue, reflecting a continued shift from license/maintenance to subscription models.

• Customer satisfaction improved, with NPS rising to 51 from 42, reflecting expanded survey scope and enhanced engagement.

• Strong performance in Americas, Germany, and APAC, driven by new customer wins and expansion in managed file transfer and API management.

• Sopra Banking Software acquisition is on track for Q3 2024 completion, expected to double revenue and diversify the business.

Financial highlights

• Operating profit reached €17.1 million (11.5% margin), stable versus H1 2023.

• Net profit was €2.8 million (€0.13/share), down from €3.7 million (€0.17/share) in H1 2023.

• Gross margin held steady at 70.5%.

• Free cash flow was €6.7 million, down from €16.5 million in H1 2023, with improvement expected in H2.

• Cash and equivalents at €16.9 million; net debt at €70.8 million as of June 30, 2024.

Outlook and guidance

• Full-year 2024 guidance: organic revenue growth of 1–3% and operating profit margin target of 20%.

• Confident in achieving guidance, supported by a robust pipeline and balanced mix of Customer Managed and Axway Managed contracts.

• Free cash flow expected to normalize and improve versus 2023 as DSOs recover.

• Mid-term ambition: profit on operating activities ≥20%, normalized FCF as % of revenue, and revenue >€500m (including M&A).