hSenid Business Solutions (HBS.N0000) Q4 2026 earnings summary

Executive summary

• FY 2026 saw transformational growth with revenue up 13% year-over-year to LKR 2,058 million, gross profit up 24%, and a shift to high-quality, predictable recurring revenues, now 74%-77% of total revenue.

• Gross profit margin expanded by 4.2 percentage points to 50%, and normalized EBITDA improved from a LKR 120 million loss to a LKR 200 million profit, delivering a 10% margin.

• Free cash flow turned positive at LKR 53 million, a LKR 384 million improvement year-over-year, with a 3% margin.

• Exit ARR reached USD 5.5 million, up 32% year-over-year, with strong capital efficiency (GTM efficiency ratio at 98%).

• Q4 revenue was LKR 522.2 million, up 4.5% year-over-year, with cloud subscription revenues growing 38% year-over-year.

Financial highlights

• Gross profit for the year reached LKR 1,020 million, up 24% year-over-year, with gross margin at 50%.

• Normalized EBITDA margin was 10%, up from -7% YoY.

• Net loss narrowed to LKR 37 million, mainly due to non-cash deferred tax asset unwinding.

• Free cash flow margin at 3% for FY 2026.

• Q4 net loss was LKR 8 million.

Outlook and guidance

• Priorities for FY 2027 include accelerating new deal momentum, leveraging AI product capabilities, and driving sustained profitable growth.

• Targeting recurring revenue to reach 85% of total revenue and free cash flow margins of 15%-20% in the medium term.

• Margin upliftment expected, aiming for software industry benchmarks (gross margins in the 60%-70% range).

• Confidence in delivering sustained long-term value through ARR growth and operational scalability.

• Focus on cloud migration and expansion in APAC and MEA regions, leveraging AI-driven product enhancements.