Bravura Solutions Limited (BVS) Earnings Call Transcript & Summary

Well, thank you, Neil, and good afternoon. It has been another solid year for Bravura with robust performance reported across the business. I'd like to take this opportunity to share with you the progress we have made and why I believe Bravura is well positioned to continue its trajectory of sustainable growth. For the fourth consecutive year, Bravura's performance across key metrics exceeded that of the previous year. These strong results can be attributed to several key drivers including an enhanced and growing Bravura product suite, continued demand for professional services from existing clients and a solid base of long-term client contracts. This highlights the valuable relationships we build with our clients and the importance they place on our technology to run their business. We continue to strive towards our mission of developing innovative technology solutions that power the world's financial institutions. Both Wealth Management and Fund Administration delivered solid results for the year. Sonata continued to drive growth as well as additional project work from existing clients. Funds Administration also delivered growth following increased implementation and development work across its client base. The enhancement of our product ecosystem with our acquisitions of Midwinter and FinoComp further contributed to this growth. Despite the lengthening of sales cycle caused by the heightened uncertainty from COVID, sales opportunities in both segments continue to develop. Bravura's Wealth Management division achieved a sound financial result within the year, which was largely driven by the extended adoption of Sonata across global markets. The segment recorded revenue growth of 2% to AUD 180.4 million, while the division's EBITDA was down by 2% to AUD 52.9 million. In APAC, leading New Zealand outsourcer, Trustees Executors, extended its long-standing partnership with Bravura that will see them upgrade to our digital and managed cloud services solutions. Another key highlight is our ability to quickly deliver to our Australian superannuation clients the capacity to automate the bulk handling of early release requests arising from COVID-19 legislative changes. In the EMEA, Sonata continued to drive growth through project work from existing clients. Fidelity successfully completed their self-invested personal pension migration onto Sonata. Legal & General launched a workplace individual savings account on the solution. And Prudential reached in excess of GBP 19 billion worth of assets with their self-invested personal pension and PruFund on Sonata. This reinforces Sonata as a market-leading, agile business solution. Our Fund Administration division enjoyed strong results in FY '20 driven by license renewals and growth in professional services. The segment recorded revenue growth of 16% to AUD 93.8 million, while the division's EBITDA saw a 33% increase to reach AUD 43 million. Key divisional highlights include product enhancements that enabled greater digital self-service and operational efficiency for our clients as well as continued investment in the regulatory currency of our transfer agency software. We also made significant developments to our hosted services infrastructure in response to COVID, to strengthen performance, data security and disaster recovery capability. Our third-party administration clients also continued to grow their portfolios across our solutions. Bravura remains a leader in the fund administration market for its digital solutions and straight-through messaging capabilities. Amid COVID-19 market volatility, our award-winning STP engine, Babel, experienced a 40% increase in trading volumes in FY '20, demonstrating scalability and resilience. We're very pleased with the performance recorded in the segment and expect demand to continue as clients seek to enhance their digital capabilities. Amongst other sales, FinoComp signed a new contract with a new client, a U.K. investment platform, to implement a broader suite of microservices to replace their existing core platform technology. And Bravura continues to evaluate a healthy pipeline of acquisition opportunities while ensuring we leverage shareholder capital in the most efficient and value-maximizing way. Bravura ended the 2020 financial year with a net cash position of AUD 99.1 million, part of which was deployed into the acquisition of Delta Financial Systems. We remain well positioned to fund further growth opportunities, both organic and acquisitive, as they arise. Turning to acquisitions. In FY '20, Bravura also acquired 2 strategic market-leading businesses, Midwinter and FinoComp, boosting our technology capability and providing greater coverage of the financial services value chain. We have now successfully integrated the Midwinter organization into Bravura and are seeing significant interest from our existing clients in how Midwinter's software solutions can support their business. Its leading financial planning software, AdviceOS, powers back-office administration for financial advisers and drives online self-directed digital advice portals for superannuation funds in Australia. By providing Bravura with a competitive edge, the solution is attracting interest from the New Zealand advice market and positioning us to capitalize on changes in the Australian advice market. Bravura's product ecosystem has been further enhanced by our acquisition of FinoComp in October 2019. FinoComp has built a suite of highly flexible and registry-agnostic data analytics and performance reporting software that services some of the world's leading financial services companies. And we're seeing high demand in the U.K. for FinoComp's market-leading products as more wealth management providers transition to agile technology ecosystems that solve business challenges in a more cost-efficient way. As mentioned, FinoComp signed a new contract with a new client, a U.K. financial services provider, to implement a broader suite of microservices to replace an existing platform. We also recently announced the acquisition of U.K. software firm, Delta Financial. Delta's highly regarded products support the administration of self-invested personal pensions and small self-administered schemes, including the full range of complex client drawdowns options available under the pension freedoms legislation. Delta's technology currently supports the needs of more than 30 of the U.K.'s leading financial services companies. Our businesses have complementary products that together provide a compelling offering to support the mission-critical operations of wealth management firms in the U.K. I'd now like to take a moment to talk about the global COVID-19 endemic. Bravura's key focus during this time has been on the health and well-being of its people. As a technology-led organization, Bravura employees were able to transition to remote working smoothly. We maintain our ability to implement health and safety measures as required in the jurisdictions in which we operate. I'm also pleased to report that despite the global pandemic, operations have remained uninterrupted, and we have been able to continue supporting our clients during this time. We maintain confidence in our ability to provide our products and services remotely across all locations to enable operations to continue regardless of any lockdowns. We maintain a good pipeline of client implementation work, and client tenders for new sales have continued, albeit with a lengthening of the sales cycle particularly in the U.K. I'd now like to talk briefly about the market in which we operate and the drivers for growth in our business. Bravura's clients operate in the wealth management, life insurance and fund administration segments. Our clients in these segments face a growing set of challenges. The financial services industry is characterized by complex and continually changing regulatory requirements. And whilst 2020 saw a delay in new regulatory changes due to the COVID-19 pandemic, financial institutions still face the same pressures to meet customer demand and achieve operational efficiency. The onset of the COVID-19 pandemic has increased the importance financial institutions have placed on engaging more closely with their customers. Bravura has developed enhanced digital applications that allow our clients to meet this demand. Our technology platforms address the key issues faced by the world's financial institutions. I'd now like to spend a moment taking a closer look at Bravura's growth outlook. A healthy sales pipeline from existing and new clients and across multiple geographies presents a significant opportunity to grow our business. Our strategy continues to focus on the following drivers of growth. Firstly, extension of the Bravura product range. Bravura has invested over AUD 210 million in developing its flagship product, Sonata. Sonata is now well established and well regarded in the market as a product with rich functionality that can support a wide range of financial services products. In FY '20, we made some significant enhancements to the platform, which included improving its digital functionality, tax capabilities, legislative program and capacity to service diverse income streams. Now importantly, we also launched Sonata Alta, a flexible, best-of-breed operating model that capitalizes on the substantial benefits of cloud computing, artificial intelligence and automation. Powered by Sonata, Alta's agile cloud-based enterprise architecture supports machine learning and analytics, plug-and-play market services and intelligent automation. These are key tools for achieving digital-first customer experiences and exceptional operational efficiencies. The solution can be componentized in support of front, middle and back-office operations, providing clients with flexibility to value source the functionality they need to maximize differentiation, reduce cost to serve and improve customer outcomes. We continue to invest in the development of our existing product suite as well as we look to acquire organizations with new products that complement and enhance our offerings and expand our total addressable market. Looking at the second driver for growth, new geographies. There are a number of adjacent geographic markets that are currently demonstrating or likely to demonstrate in the near term market characteristics similar to the ones in which Bravura currently enjoys success, particularly in Continental Europe. While COVID-19 is making this more difficult, we continue to evaluate potential opportunities to move into new geographies through acquisition or to support the needs of existing clients seeking to expand into these regions. A third driver of the growth is our adjacent markets. We continue to explore a pipeline of acquisitive and organic growth opportunities in our current markets as well as those adjacent to us. We look for acquisitions that bring complementary technology that enhance our current offering as well as opening up new markets for Bravura. Fourthly, a fourth driver, product development. Our market-leading products have demonstrated that years of investment in development activity in collaboration with our clients has produced a world-class software solution that is delivering excellent shareholder returns. Bravura maintained a strong pipeline of development activities to meet the needs of both current and future clients across our products. In FY '20, an additional AUD 36 million of R&D was invested across Bravura's product ecosystem by Bravura and its clients, further differentiating us from the competition. A fifth driver of growth is a unified digital platform. The Bravura ecosystem of products can provide a unified, customer-centric platform that supports the administration and digital delivery of a wide range of financial products to our clients across front, middle and back-office teams. These include investment and wrap platforms, superannuation, pension and retirement products like, life insurance and private wealth. And a final driver is our continuous innovation. Our mission is to develop innovative technology solutions that power the world's financial institutions. This is why innovation is a driving force of Bravura. Our dedicated innovation labs and software engineers work to ensure our products keep pace with the global consumer and technology trends. In FY '20, we commenced deploying cloud computing and machine learning capabilities across Bravura's product suite. These competencies are proving essential in the current environment as end customers seek to digitally engage more than ever with the finances and financial service providers face additional pressures on tight margins. I'd now like to spend a moment to talk about our people. Bravura has over 1,400 employees located in 19 offices across 8 countries. We invest significantly in training and developing our team to enhance Bravura's product suite and meet our clients' evolving demands. 84% of the Bravura workforce are software engineers and consultants, highlighting the importance the organization places on developing innovative and modern technology solutions. Turning now to the outlook for FY '21. Bravura is well positioned to achieve sustainable growth in the years ahead, energized by our new Sonata Alta proposition and recent acquisitions. Now while there's been a lengthening of the sales cycle due to COVID-19, Bravura maintains a strong long-term sales pipeline including significant opportunities to attract new clients and increase technology spend amongst existing clients. We were particularly pleased to recently announce a new contract with Aware Super in Australia. Aware Super has selected Bravura to provide the technology to power its mission-critical operations which support the administration of the retirement savings of its members. Aware Super is implementing an integrated ecosystem of Bravura products underpinned by Sonata Alta. Sonata Alta provides a high degree of automation and straight-through processes. The integrated ecosystem encompasses Midwinter's AdviceOS, Babel SuperStream messaging and member and adviser digital offerings. Bravura's products will underpin Aware Super's provision of superannuation, income stream, unit trust and advice offerings. Bravura will also provide a dedicated Sonata Alta support team. Aware Super, who is previously called First State Super, is Australia's second-largest superannuation fund, managing nearly AUD 130 billion in retirement savings for more than 1 million members. Aware Super supports its members with superannuation, retirement, investments and advice. As noted at Bravura FY '20 results, while the new sales pipeline remains strong due to the wider impact of COVID-19, there is greater uncertainty in the timing of deal closures when compared to prior years. It is possible that FY '21 NPAT will be similar to FY '20. In October of 2020, we also flagged that the second wave U.K. lockdowns and stalling Brexit negotiations have increased uncertainty and are slowing the progress of pipeline opportunities in the U.K. As a result, Bravura expects FY '21 NPAT to be weighted approximately 80% for the second half of FY '21. In conclusion, the solid results delivered in FY '20 are a testament to the strength of our business and, more particularly, the hard work and immense dedication of our global Bravura team. I would like to thank all our people for their outstanding contributions. I look forward to continuing our work together as we remain firmly committed to growth. And lastly, on behalf of the Board, I would like to thank you all for your attendance today and for your continued support for Bravura as we continue delivering market-leading technology solutions that support the needs of current and future clients. Thank you.

Thank you, Tony. We will now turn to the formal business of the meeting. The Notice of the Meeting was lodged on the ASX on the 20th of October 2020, and the Notice of the Meeting contains resolutions which are to be voted on today and will be taken as read. Each resolution set out in the Notice of Meeting is to be considered as an ordinary resolution and to be approved by a simple majority of votes cast by the shareholders entitled to vote. The resolutions for consideration today may only be voted on by shareholders, proxy holders and shareholder company representatives. We will display the votes by both shareholders and proxies received prior to this meeting on the slides following discussion on each item of business. There will be an opportunity for shareholders to ask questions online through the virtual meeting website on each matter being put to shareholders. We will now move on to the items of business for this meeting as set out in the Notice of the Meeting. Item 1. The first item of formal business is to receive the Bravura Solutions financial report for the year ended 30th June 2020. Mr. Martinus from EY is available to take questions relevant to the conduct of the audit and the preparation and content of the independent audit report. Please direct any questions that you have of our auditor through me. There is a separate agenda item dealing with the remuneration report. If shareholders have questions in relation to the remuneration report, please save those until we come to that item of business. There will be no vote on this item, which is a discussion item only. Are there any questions on the Bravura Solutions financial statements, directors' report or the auditor's report? There are no questions, so we will move on. Item 2. The next item is resolution 1, the adoption of the remuneration report. The remuneration report to shareholders is contained on Page 28 to 46 of the 2020 annual report. Are there any questions on this item? There are no questions. The total valid proxies for this resolution are now in display on the presentation slide. As there are no further questions, we will move on to the next item. Item 3. The next item is resolution 2, the reelection of Ms. Alexa Henderson as a director. Details regarding this resolution are provided on Page 7 of the Notice of the Meeting. Are there any questions on this item? There are no questions on this item. The total valid proxies for this resolution are now on display on the presentation slide. As there are no further questions, we will move on to the next item. Item 4. The next item is resolution 3, the ratification of appointment of Ms. Libby Roy as a director. Details regarding this resolution are provided on Page 7 of the Notice of Meeting. Are there any questions on this item? There are no questions on this item. Total valid proxies for this resolution are now in display on the presentation slide. As there are no further questions, we will move to the next item. Item 5. The next item is resolution 4, which is approval for the granting of performance rights to Mr. Tony Klim, CEO. Details regarding this resolution are provided on Pages 7 to 12 of the Notice of the Meeting. Are there any questions on this item? There are no questions on this item. The total valid proxies for this resolution are now in display on the presentation slide. As there are no further questions, we will move to the next item. The next and final item is resolution 5, approval for the granting of performance rights to Mr. Martin Deda, CEO (sic) [ CFO ]. Details regarding this resolution are provided on Pages 7 to 12 of the Notice of the Meeting. Are there any questions on this item? There are no questions on this item. The total valid proxies for this resolution are now in display on the presentation slide. As there are no further questions, we will move to the next item. Thank you for considering these resolutions and for your questions. Now that the formal items of business have concluded, voting will close in 5 minutes. A timer at the top of the screen will count down to the close of voting. If you haven't already, please cast your votes now. [Voting]

Poll results will be released via the ASX as soon as possible.

We've now come to the part of the meeting where shareholders have the opportunity to ask questions regarding the company's operations and/or management. I will start with the questions that have been already provided in advance of the meeting. There are 2 questions. First question is, when will you have a rights issue? My answer is the company is currently well capitalized and has sufficient access to capital to fund its current investment opportunities. Accordingly, the company does not currently have any plans to raise additional equity capital. Second question, what are you doing to improve financial performance and shareholder return? My answer is potential customers in our operating regions are greatly in need of highly functional, highly automated and highly scalable technology solutions. Bravura has also had outstanding products that are highly regarded in the marketplace. We are focused on increasing sales at an appropriate margin while maintaining tight control of our costs, which in turn should drive strong financial performance and shareholder returns over the coming years. Are there any further questions from those attending online on this item? There are no further questions. As there are no further questions, we can now conclude our first online AGM. I now declare this AGM of Bravura Solutions closed, and I thank you attending and your support for the business.