74Software (74SW) Q3 2024 TU earnings summary

Executive summary

• Q3 2024 revenue reached €112.4m, up 14.9% organically and 62.1% overall, driven by Axway and the first month of SBS consolidation.

• Nine-month revenue totaled €261.1m, up 7.1% organically and 21.5% overall, with strong contributions from both brands.

• The integration of Axway and SBS began in September, forming a new group with a focus on leveraging synergies and maintaining strong brand identities.

• The parent entity will centralize corporate functions for both brands and is set to be renamed 74Software, with Axway and SBS brands retained for market recognition.

• Axway was named a leader in Gartner Magic Quadrant for API Management for the 9th time.

Financial highlights

• Q3 2024 organic revenue growth was 14.9%, with total revenue of €112.4m; SBS contributed €34.3m for one month.

• Nine-month revenue reached €261.1m, up 7.1% organically and 21.5% overall.

• Axway's Annual Recurring Revenue (ARR) at end-September was €235.3m, up 9.4% year-over-year.

• Net debt increased to €236m post-acquisition, with cash position at €62.1m at September 30, 2024.

• New €200m credit facilities secured to partially finance the SBS acquisition.

Outlook and guidance

• Full-year 2024 revenue target reaffirmed at approximately €460m, with operating margin expected between 13% and 17%.

• Combined group targets €700m revenue for 2025, with 14%-16% profit on operating activities.

• Leverage ratio expected to fall below 2x by end of 2025, with a long-term goal of below 1x by 2027.

• Organic growth guidance for the group is 2%-4% annually.

• Both Axway and SBS have Q4 pipelines sufficient to meet guidance, with no major disruptions expected.