Aptitude Software Group H1 2025 Earnings Call Transcript

Quartr
Provided by Quartr
August 6, 2025

Key Takeaways

  • Positive Sentiment: Structural transformation to an AI SaaS, partner-first model is on track to complete by year-end, enabling six-to-twelve-week product release cycles that accelerate delivery and efficiency.
  • Positive Sentiment: Annual recurring revenue grew 3% year-on-year to £49.8 million, driven by a 13% increase in AI offerings and a 101% net retention rate despite elevated churn.
  • Positive Sentiment: Recurring revenue mix improved to 82% (from 78%) and adjusted operating margin rose to 15% (up 3 percentage points), reflecting tighter cost control and a shift toward higher-margin SaaS.
  • Negative Sentiment: Macroeconomic headwinds, deal timing shifts and adverse foreign exchange movements are exerting downward pressure on revenue, although full-year profit expectations remain intact.
  • Positive Sentiment: Finapse momentum continues with four new finance clients in H1 and partner-sourced ARR growing from 10% to 30% in 2024, targeting 45% in 2025, fueling pipeline and market traction.
AI Generated. May Contain Errors.
Earnings Conference Call
Aptitude Software Group H1 2025
00:00 / 00:00

There are 2 speakers on the call.

Operator

welcome to our h one twenty twenty five results presentation. So today, I'm gonna begin with a brief executive summary, and then I'm gonna hand over to Simon, our commercial finance director, to take you through the financial highlights. After that, it will come back to me, and I'll be walking you through the progress that we've made in our business across the half. So if you wanna move to the next slide. Perfect.

Operator

Thank you. So in h one, we continued to deliver against our strategy, transforming Aptitude from an on premise to an AI SaaS business model. And the structural changes that we've made as part of that over the past eighteen months are now showing up in our numbers, customer satisfaction, and also business progress. As an example of business progress, Finapse continues to gain momentum, contributing more significantly to pipeline and market traction. As an example, we added four new finance clients in the half, bringing the total to nine alongside several of the new logo wins and expansion deals across our existing client base.

Operator

In addition to that, our partner model is also starting to scale, streamline to focus on a small number of key partners, which is also helping us reach Tier two and three opportunities. And while macroeconomic headwinds, deal timing shifts and adverse foreign exchange movements have created downward pressure on revenue, we remain on track to meet full year profit expectations. So I'm now going

Speaker 1

to hand over to Simon to take you through the financials for the half year. Yeah. Thank you, Alex. So if we go to the next slide. Thank you.

Speaker 1

So starting with one of the key metrics for Aptitude, annual recurring revenue, which at 06/30/2025, grew 3% year on year to GBP 49,800,000.0. And this growth was underpinned by success within our AI Autonomous Finance offering, consisting of Ah and Finapse, which grew by 13% in the twelve month period. Combined with this, the existing client base performed well with upsells in H1 twenty five, such as HCSC, complementing the H2 twenty twenty four sales at the likes of Macquarie and Chubb, to drive a net retention rate for the twelve months to thirty June twenty twenty five of 101%. This coming despite the continued elevated level of churn, which we do expect to reduce in future periods. We continue to benefit from a strong balance sheet with cash as of 06/30/2025 of GBP 23,700,000.0 and net cash of GBP 17,100,000.0.

Speaker 1

This enabling us to continue to provide shareholders with returns through consistent dividends as well as the share buyback program, with shares to the value of £6,300,000 having been purchased up to 06/30/2025. We'll go to the next slide, please. So this slide looks at the profit and loss accounts, where total revenues were 7% lower half on half at GBP 32,800,000.0, with the majority of this reduction being within nonrecurring implementation revenues as we move further toward a partner first implementation model. And as a result of this, we continue to see improvements within our revenue mix, with 82% of revenues in H1 twenty twenty five being recurring. This is compared to 78% in H1 twenty twenty four, thus providing us with increased revenue visibility.

Speaker 1

And this improved revenue mix, in combination with cost reductions generated as part of the business model transformation, have resulted in an improvement in profitability year on year with adjusted operating profit of GBP 4,900,000.0 in H1 twenty twenty five. This represents a margin of 15%, an improvement of three percentage points year on year, with our focus being on continued improvement to increase this into the 20s over the medium term. And looking ahead for the 2025 full year numbers, we are seeing some downward pressure on revenue due to adverse foreign exchange movements combined with macroeconomic related deal deferrals. But despite these factors, as Alex set out at the start of the presentation, we remain on track to achieve profit expectations as we benefit from our improved revenue mix and the tight control of the cost base demonstrated by the business model transformation, as previously mentioned. I'll now hand back to Alex to talk through the progress made across the half.

Operator

Thank you, Simon. So as Simon has presented, the improvements in our financial performance are being driven by three key factors. So that's the structural change across the business, that's the accelerating growth of our AI led autonomous finance offering, and also combined with improved client satisfaction. So now what I want to do is take a few minutes to walk you through each, starting with the business transition. So if we can move to the business transition slide.

Operator

Perfect. And then just one more. Perfect. That's great. Okay.

Operator

So I guess since we we last spoke, you know, we have made absolute and, obviously, myself and and the team have made real progress in our business transition. So I think it's important to take a a step back to to provide a a bit of context. So in March 2024, we kicked off a fundamental transformation of of Aptitude, and we ultimately set out to to move from a a compliance heavy services led software vendor to an AI SaaS cloud partner first platform business. And at the heart of that shift is finance, which is both our growth engine and also the strategic foundation for our future product portfolio. By March 2025, we're around halfway through that transition.

Operator

And today, we've made significant progress and expect to be materially complete by the end of the year. And over the past few months since March, we've been very busy with a focus on two major areas. The first has been embedding the new product operating model across the full portfolio. And as I explained in March, we began with finance in e Suite in November, and now the rest have now followed. And then the second, we have been in the process of redesigning our services organization around a fully partner led model, again, moving away from direct services to partners.

Operator

There's still also important work to do, to complete the the transition across the remainder of the year. And as a couple of examples, this week, we optimized our cloud operations team. In q three and q four, we'll be rolling out the new services model to support and enable our partners more effectively. And we're also continuing to tighten our our go to market execution, especially in marketing and and also partner enablement. But I think it's really important to say that these are not just structural fixes.

Operator

They're delivering real results. So if we take finance as an example, we optimize the product and engineering team in November and yet accelerated delivery. So features that used to take twelve to eighteen months are now shipping in just six to twelve weeks. And we expect to see similar results across the rest of the product portfolio following the broader rollout of the new operating model. And I think just to say, I think, please don't underestimate, you know, the amount of change, amount of cultural change, effort, and work that has gone into transforming our business.

Operator

And importantly, we are going to be ending up at the end of this financial year with a much better business than when we entered this transitional phase. So now what I want to do is talk a little bit more about our AI autonomous offering, which is finance. So if you want to move to the next slide. Yeah. Perfect.

Operator

So look. I know that I've spoken about what finance is multiple times, but I think it's really important to come back to it. The work that we've done through because of the work that we've done through the 2024 relaunch combined with, again, all the work that we've done with the customers and and partners, obviously, since the relaunch of Finapse in 2024, I believe has brought Finapse to life in a very real and tangible way. So FinApps is the AI native nervous system of the enterprise. It basically connects, fragment fragmented data systems.

Operator

It applies real time finance logic, and supports intelligent workflows. And what that does essentially is enable finance and operations to move faster with confidence. I think it's also important to highlight that it doesn't replace an ERP, a data lake, or a CRM. It works alongside them. So Finapse ingests data from those types of systems.

Operator

It enriches it with real time sub ledger logic, automation, and embedded AI. And then that unlocks tangible business outcomes. As examples, it supports a continuous close and real time reporting, and that's important because it helps finance and operations shift from being reactive to real time. It also supports automated reconciliations, and that helps in turn to reduce manual effort. It also supports predictive insights such as surfacing live margin cap sorry, live margins, cash, and customer health data.

Operator

And it also importantly supports, improved collaboration across an organization because basically what it does is it links finance with sales and operations on one real time source of performance truth. But now to the AI question because it is an important one. The rise of AI doesn't reduce the need for finance. It makes finance essential. AI needs structured finance quality data, embedded rules, and clear lineage to be effective.

Operator

And that's exactly what FinApps provides. And in highly regulated industries, that foundation is critical. And FinApps is built with compliance, control, and auditability at its core, shaped by years of experience with global banks, insurers and also telcos. And it's not something easy that others can replicate. So finance isn't disrupted by AI.

Operator

It enables it, helping it to power the next generation of intelligence finance. But where does finance play, and why do we win? So if want to move to the next slide. Perfect. So what makes this opportunity so compelling is its broad relevance across all industries and regions.

Operator

Every organization is under pressure to modernize finance, to move faster, and to sweat or realize the the the asset that is that that is AI's potential. And Aptitude has a strong track track record of supporting complex regulated industries from global banks to telcos and to tech giants, which gives us a unique edge in environments where control and scale matter. And with 74% of finance leaders planning to adopt AI and low code tools according to a piece of Deloitte research over the next two years, Finapse is built for this moment. It's designed for sectors that we already know deeply, but importantly, its composable AI native architecture also opened doors into new regulated markets like health care, energy, pharma. And that's also where partners play a key role because partners will help to expand our reach into those net new sectors.

Operator

So Finapse is the AI native finance grade layer that traditional ERPs can't deliver, and we're already proving it. Pay by phone achieved finance transformation in just six weeks, not years. T Mobile, they're processing currently a 150,000,000 journal lines in an hour. And at the beginning of next year, we'll be processing 400,000,000 journal lines in a three hour window, enabling real time visibility at scale. And then Chubb is rolling out finance as its global sub ledger, and which will provide a, obviously, a key foundation for its finance modernization program to support automation and control across the enterprise.

Operator

But what sets us apart? Again, we don't compete with the ERP. We complement it. And we don't ask clients to rip and replace. We help them modernize what they have.

Operator

And we do that at speed, so in weeks, months, not years, with simplicity and at scale. And our partner first strategy is a force multiplier, enabling resell, delivery, and scaled go to market execution, sorry, globally. And that combination, which is a differentiated platform, a global need, and a growing ecosystem of partners is what gives us a right to win and a scalable path to growth. So now what I wanna do is talk through some of the Finapse momentum and partner acceleration. So if we move to the next slide, that'd be great.

Operator

Thank you. So Finapse continues to gain traction despite macroeconomic pressure and deal timing shift. In h one, we secured £7,400,000 in total contract value across four finance wins, including a health care insurer, HCSC, another KPMG managed services deal, which is an Australian payments provider, and a global parking payments organization, which is, obviously, pay by phone. So these bring the total number of finance clients to nine since its relaunch in 2024. It's also important to add that with these new clients, we also create opportunities with FinApps to expand over time, selling additional modules and unlocking more value as their use of the platform grows.

Operator

Momentum is also building in the partner channel. As we talked through in March, we moved to a 100%, partner led model. Again, that means exiting direct services and fully aligning to a scalable high margin SaaS organization. And that pivot is still early, but it's already showing results. As examples, 70% of our h two and 2026 pipeline is partner involved and partner sourced annual recurring revenue has grown from 10% in 2023 to 30% in full year of 2024, and we're on track to hit our target of 45% in 2025 with a longer term goal of 80% of annual recurring revenue sourced by partners by 2027.

Operator

And we're also seeing increased investment from our partners like KPMG, who view finance transformation as a priority across their client base. And and I would say that's combined then with growing engagement from Microsoft, Deloitte, Avanade, and HSO as some examples, all of whom are enabling their teams to sell, to deliver, and build finance specific capability across and within their organizations. But now let's talk about our wider product portfolio and existing client base. So if we move to the next slide, that'd be great. Thank you.

Operator

So what continues to underpin Aptitude's strength is our ability and and also, I think our ability to scale finance is the combination of our established product portfolio also our strong base of over 100 high value clients. In h '1, we saw momentum across both existing clients and net new wins. So from an expansion uplift and renewal perspective, we secured a finance win at HCSC, which is a long standing aptitude client. We also, experienced some ex expansions across e Suite and A Rev with RMG and Axon as examples. And we also had key renewals delivered at HSBC, CAA, Specsavers, and Intuit as examples.

Operator

In addition to that, we also closed net new wins across our portfolio. So we had a revenue management win with pack size, a partner led e suite deal, and a new KPMG managed services deal combined with Asure to support the delivery and enablement and implementation readiness to support future clients being onboarded to the managed service. Churn across legacy products remained within expected levels and was offset by improvements in how we manage and support our clients, and we expect to see churn reduce from 2026 onwards. And to give some examples of the improvements across the organization that fed into improving customer satisfaction, And if we take account management, as the example, we have made meaningful changes to the way that we engage with our existing customers. As an example, we have seven new account managers hired to increase coverage.

Operator

We have structured account planning to proactively identify expansion opportunities, and we also have stronger integration between account management and the wider organizational functions. I think it's also important to highlight that it's not just the changes to the account management team that are helping to positively impact, customer satisfaction. They also reflect a wider shift in how we support and engage clients across Aptitude because every function from product and engineering to professional services and marketing is being reshaped to improve the overall client experience and long term value delivery. And then looking ahead, Apps remains central to our long term retention and expansion strategy. And we're enabling this through using Fine Apps to modernize and consolidate existing products.

Operator

We're offering modular upgrades for phased adoption, and we're also executing, our Ah migration plan where we have a target to migrate one third of the Ah base by the 2027, supported by a structured transition plan to finance. And to date, three clients have successfully migrated with 12 more targeted across 2025, 2026 and also 2027. And as this strategy matures, we expect continued improvement in net retention driven by better product cohesion and a stronger client experience leading to improved upsell and cross sell activity. So to close, h one if we move to the next slide, that'd be great. Thank you.

Operator

So in h one twenty twenty five, that has a that has been a period of focused execution. We've made strong progress across our business transition with improving margins, growing recurring revenue and tighter cost control. Finapse is scaling, our partner led model is gaining traction, and profitability is improving despite macroeconomic pressure. We are building a modern AI SaaS first business with the operational discipline and foundations to scale. So thank you very much for your time today.

Operator

K. So I think just just to close, obviously, thank you very much for for joining our presentation today. You know, we believe that we've made solid progress in the first half strategically, but also operationally. Finance is gaining traction. Our partner led model is scaling.

Operator

And, obviously, as you've heard today, the transformation is is is well underway and will be near completion by the end of this year. And therefore, we are entering the second half with focus and confidence. So thank you very much for your time today.

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