Planisware SAS (PLNW) Earnings Call Transcript & Summary

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" BofA Securities, Research Division

" Citigroup Inc., Research Division

" BNP Paribas Exane, Research Division

Good day, and thank you for standing by. Welcome to the Planisware H1 2025 Results Webcast and Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.  I would now like to hand the conference over to your first speaker today, Loic Sautour, CEO.  Please go ahead.

Thank you. Good morning, and thank you, everyone, for joining us today on our call on H1 2025 results of Planisware. This is Loic Sautour speaking. And as usual, I will share this presentation with Stéphanie Pardo, our CFO.  I would like to start with the key messages of this publication. H1 revenue amounted to EUR 95.8 million, up by 10.6% in current currency. In constant currency, H1 revenue grew by 11%, which is plus EUR 9.1 million, with a growth of 8.1% in Q2 after a growth of 14.3% in Q1. Revenue growth was fully generated by our recurring business lines that have continued to deliver solid performance, particularly with existing clients and with the continued success of the group's SaaS model, which has been up by 17.4% in constant currencies.  Now in recent months, global macroeconomic uncertainties intensified across our key markets, and we've noticed increased cautiousness from our customers. It has a tangible impact on delayed customer decision-making and we thus observed longer decision-making cycle that are weighing on our commercial momentum and revenue growth, primarily in our nonrecurring activities and with new logos.  Now despite the softer revenue growth trajectory, Planisware achieved a significant improvement in profitability in H1 2025. Our ongoing focus on operational efficiency and disciplined resource allocation enabled us to enhance margins and maintain best-in-class cash conversion rate, further strengthening the group foundation for the future.  In light of these dynamics and a more moderate growth outlook for the remainder of 2025, we have prudently revised our 2025 revenue objective to circa 10%. We now target an adjusted EBITDA margin of 36%, up from 35% previously. This adjustment reflects our commitment to navigating the current environment with discipline while safeguarding profitability and preserving our ability to invest in long-term growth. As always, Planisware remains focused on supporting our customers' strategic priorities and on reinforcing our leadership in project and portfolio management solution even in the face of heightened economic headwind.  On this slide, I would like to comment our recent commercial dynamic and performance. We still have had a robust commercial delivery in Q2 2025, securing new logos as we are showcasing some notable ones on this view. It's important to note that most of these wins were gained as part of competitive tenders for which we exhibited a very strong performance against our direct competitors and where, in some cases, we even replaced this competitive offering by providing a more modern, comprehensive, and specialized solution, clearly aligning with the client-specific needs. With a sustained competitive win rate, our commercial focus now is not specifically winning against the competition, but clearly, it's winning against time.  Beyond the Q2 signature, our commercial pipeline continues to expand, supported by a high volume of strategic engagement with both existing customers and new prospects, underscoring the strength and relevance of our competitive value proposition. We consider this as a testament to the strong demand for our solutions and their sustained business impact, providing encouraging midterm visibility for renewed momentum once market conditions stabilize.  Now let's have a look at the evolution of our revenue mix trending towards more and more recurrence. In H1 2025, recurring revenue made of our SaaS model and maintenance of perpetual licenses represented 92% of total revenue, 400 basis points higher than a year ago and 650 basis points higher than 2 years ago. The SaaS model itself represents now 82% of our total revenue, while it was 78% in H1 2024 and 74% in H1 2023, and posted a healthy growth rate of 17.4% over the semester. It is worth mentioning that this evolution also has a significant positive effect on profitability, in particular, thanks to the growth of the SaaS and hosting line, which is the most profitable stream of our revenue.  As for the nonrecurring part, it is significantly decreasing, and in particular, perpetual licenses. Despite several license expansions and upgrades sold in H1, it represented only 2% of H1 group revenue, slightly less than the level usually achieved in a given first semester. As far as reporting is concerned, the revenue evolution decline seems even sharper as it compares to a particularly strong demand in H1 last year when perpetual licenses represented 5% of total revenue.  Concerning the revenue performance by geography, every single one of them have contributed to Planisware's growth in H1. North America, representing 43% of total revenue in H1 2025, is the main contributor to this semester's revenue growth with plus 12% in constant currencies. Growth was quite steady in Q2 compared to Q1 and was driven by a higher portion of new logos than for the rest of the group. You may remember that a year ago, I mentioned that this was in North America that we started to face elongated customer decision-making processes, and this is mechanically impacting now the level of upselling with existing customers.  As for Europe, by contrast, it showed a significant slowdown in Q2 compared to Q1. All in all, it grew by 8.6% over the semester and represented 48% of group revenue. The performances were contrasted across countries. In particular, France recovered from its 2024 low points when it started to suffer from elongated sales cycles. This recovery in France was compensated by softer performance in the U.K. and more significantly, in Germany, which faced a tough situation in auto and a very high base effect from Q2 2024, which had a strong growth in perpetual licenses.  The growth in APAC and Rest of the World of 20.4% resulted from a continued strong commercial momentum in Singapore and in the Middle East, although it is on a smaller base.  Regarding the revenue evolution by pillar, the situation was even more contrasted with revenue growth quite concentrated in project control and Engineering, a pillar in which we support production teams in industries with sophisticated products, plants, and infrastructure such as aerospace, defense, energy and utilities, manufacturing and engineering, and life science. While still a recent pillar for Planisware, it represented 23% of H1 2025 total revenue and was the main contributor to revenue growth supported by the successful rollout of offerings in North America, PC grew by 38.8%.  Then 1/4 of H1 revenue growth came from product development and innovation, our historical pillar, which drives R&D and product development teams with a focus on companies in the life science, manufacturing and engineering, automotive design, and fast-moving consumer goods sector. In H1 2025, it remains Planisware's principal pillar with 53% of total revenue and grew by 6.9%, resulting from both new customers win and the expansion of our offerings to existing customers.  The IT governance and digital transformation pillar, which helps IT teams across all sectors to develop comprehensive solutions to automate IT portfolio management, to accelerate digital transformation, and to simplify IT architecture. This pillar represented 17% of this semester group revenue and grew by 5.1% on the back of a strong growth delivered in H1 2024, back then of plus 27.3%, fueled by continuous cross-sell to Planisware clients needing to accelerate their digital transformation.  Finally, Project business automation, the most recent pillar of Planisware supporting companies in all industries that seek to increase their revenue-based projects and enhance their operating results through automated processes, slightly contributed to the group revenue growth with 2.7% year-on-year and represented 7% of H1 2025 total revenue.  I will now leave the floor to Stéphanie to detail the financial aspects of the past semester.

Thank you, Loic, and good morning to all. As usual, I will start the presentation with the building block of our growth. Total reported revenue reached EUR 95.8 million in H1, up by EUR 9.1 million year-on-year and representing a reported growth of plus 10.6%. This reported growth encompasses a negative FX effect for EUR 0.4 million, mostly related to the depreciation of the euro versus the U.S. dollar and partially compensated by the appreciation of the Japanese yen and the British pound versus the euro. In order to reflect the underlying performance of the company independently from the exchange rate fluctuation, I will now focus my comments on revenue evolution in constant currencies, which means applying H1 '24 average exchange rate to H1 '25 revenue figures.  So in constant currency, total revenue growth reached EUR 9.5 million or plus 11% over the semester. It encompasses a significant deceleration in Q2 with 8.1% growth in constant currency, mostly in Europe, as already commented by Loic. As expected, the key driver of this performance was our SaaS model, which represented 82% of the total revenue and grew by EUR 11.7 million or plus 17.4%, fueled by new customer wins as well as continued expansion with our large installed base. The SaaS model is made of SaaS and hosting revenue, up by 18.1% and evolutive subscription support up by 16.4% together.  Still in the recurring part of our revenue profile, we have maintenance activity on perpetual licenses, which is a legacy from the former business model of before the SaaS transformation years ago. This activity reported a decent growth of plus 5.2% over the semester, steadily in Q1 and Q2. This growth for this revenue line was related to the strong demand for licenses we have in the start of 2024 for customers with specific on-premise needs, in particular, in the defense industry.  I now move to the nonrecurring part of our revenue, which represented only 8% of the total revenue in H1 and decreased by 27.5%. Despite several expansions and upgrades to customers with specific on-premise needs, the 52.2% year-on-year decrease in perpetual licenses is imputable as already explained to a particular strong H1 2024 comparison base.  Finally, implementation performance structurally under pressure due to continuous focus on plan is to deliver shorter implementation and faster delivery to customers, also suffered in H1 2025 from the lack of new logos in nature since H2 2024. The combination of the 2 resulted in a minus 10.4% revenue decrease.  Turning to gross profit. I'm proud of the continued disciplined approach to expenses implemented in the group with the 190 basis points of gross margin improvement posted last semester, leading to a 73.2% of revenue. This strong performance is consistent with progress made in the last semester and driven by the business mix evolution, combined with a continued strict monitoring costs and further operational efficiency gains.  The next slide presents the repetition of expenses, which is very much consistent with the one observed in the past. At 12% of revenue, R&D expenses consisting primarily of staff expenses directly associated with R&D teams, as well as amortization and capitalized cost development costs, and the benefits from the French tax research credit are reflecting well the group ambition for continuous product development and leadership. Representing 18% of revenue, sales and marketing expenses increased by EUR 1.9 million or plus 12.5% compared to EUR 15.5 million in H1 '24. This increase is led in particular by the increase in employee costs in the sales force and marketing team, which concentrated most of our recent hiring efforts. Sales and marketing expenses are expected to continue to increase in the future as Planisware plans to expand its domestic and international selling and marketing activities.  Finally, at 15% of the revenue in H1 2025, G&A reached EUR 14.3 million, up by EUR 2.4 million or plus 19.6% compared to H1 '24. The 2/3 of this increase was related to employee costs engaged to support the growth of our business, the strengthening of our global support functions, and the international expansion of the group. The remaining 1/3 was related to foreign exchange effects on operating assets and liabilities, and also to the share-based compensation expenses accounting on a significantly higher price in H1 '25 than in H1 '24, partially pre-IPO. Net from these 2 effects, G&A was stable year-on-year as a percentage of the revenue.  Looking forward, Planisware expects that as the company continues to scale up, G&A will slightly decrease as a percentage of the revenue. As a result of the gross margin improvement and consistent OpEx level, adjusted EBITDA reached EUR 34.3 million, up to 18.1% in H1 versus H1 2024. It represents an improvement of 230 basis points in H1 '25 compared to H1 '24, consistent with the improvement posted in H1 '24. The increase in adjusted EBITDA reflects the transition of our revenue growth into profit as the business is fueled by the addition of new customers, a positive mix effect and further operational efficiencies and employee-related costs, representing 35.8% of the revenue in H1 -- the H1 '25 margin was higher than the objective of circa 35% for 2025 despite the usual seasonality, implying a higher margin in H2 compared to H1. It provides comfort towards the raised objective of circa 36% of adjusted EBITDA.  Moving to the cash generation now with adjusted FCF reaching EUR 32.9 million. It represented a cash conversion rate of 95.9%. This conversion level, even if it's quite strong, it was a bit lower than the one usually recorded in H1 due to delays in collection of some invoices and earlier payment of social security contribution in France than in H1 2024. Nevertheless, it do not question the yearly objective of 80% level that the group considers being the normative cash conversion rate for the coming years.  Looking at the detail on the conversion of EBITDA into STF, change in working capital was quite positive by EUR 8.3 million, consistent with the usual seasonality in H1 and the SaaS solution cash collection at the beginning of the year. Capital expenditure amounted to EUR 2.4 million, representing 2.5% of the revenue compared to 2.4% in H1 '24. This is perfectly in line with the usual circa 3% level targeted over the year. Finally, tax paid increase in H1 '24 '25 reflects a significant increase of the taxable profit.  I will finish my presentation with the net cash position evolution driven by the cash generation that I just commented, coupled with the payment in June of a dividend of 2024 results. The net cash position reached EUR 182 million at the end of the semester, 16.4% higher than 2 months earlier. I remind you that except lease liabilities related to offices and data center facilities, which amounted to EUR 17.9 million, and small amount of bank overdrafts, Planisware does not have any financial debt.  Thank you for your attention. I now give the mid back to Loic to conclude.

Thank you, Stéphanie. Well, before we move on to your questions, let me close with a few thoughts on our updated outlook for the year. As you heard, we continue seeing further elongation of sales cycles. This trend is delaying the ramp-up of new contracts and reflects a more cautious tone across our markets. We believe this is largely cyclical and linked to the broader macroeconomic uncertainties. Clearly, it's not structural. In light of these dynamics, we've adjusted our full-year revenue growth objective to circa 10% versus our prior expectation of mid- to 80s. At the same time, we are raising our adjusted EBITDA margin target to approximately 36%, up from 35%. This reflects the strength of our operating model and our continued focus on disciplined execution.  Even in a more moderate growth environment, we are managing to deliver improved profitability while staying firmly committed to investing in long-term innovation and commercial reach. We also, as Stéphanie mentioned, reaffirm our free cash flow conversion target of around 80%, which we continue to view as a structural level for our business over the cycle. We remain confident in the resilience of our model, in the strength of our client relationships, in the robustness and agility of our platform, and in our ability to resume growth momentum as market conditions stabilize.  Thank you. That concludes our presentation. We now welcome your questions.

[Operator Instructions] And your first question today comes from the line of Frederic Boulan from Bank of America.

First of all, on the revenue side, so at the Q1, you were still expecting a recovery in the second half on easier comps. Can you spend a bit more time on what specifically is happening with customers' discussions? I mean if I understand well, it's more about the pipeline is there, but it's more longer delays in pulling the trigger on some deals, but it would be interesting to understand a little bit more specifically what you've seen, which has changed. And this implies a fairly bearish growth, especially in facing easier comp in Q4.  Secondly, on the revenue side, so if you can maybe step back a little bit and discuss how you see growth in the kind of mid- to long-term. So you reais this year, but it would be great to understand how you think about your long-term ambitions and phasing versus your kind of previous long-term guide. And maybe same thing on the margin side. I mean, we have a very strong delivery on the gross margin side, a higher base for '25. Is this a little bit one-off in nature? Or is it sustainable improvement that you can further enhance in the coming years?

Yes. Thank you for the question. Well, in terms of -- for the revenue side for H2, so as we commented, timing is everything now. And what we've noticed is that -- and that's why we want to be more cautious is that at the end of H1, usually across the summer, that's where we expect a lot of signatures, and the delays are still there. So that's why we took this more cautious approach, which reflects on H2 because it's not like the opportunities are going away. It's that they are here, but there is so much focus on some other things that there is a delay in starting those -- especially new projects that are with Planisware. So it's primarily a timing issue, and that's why we have that question on H2.  Your question about margin. So the -- maybe I'll come back to the visibility on H2. The visibility on H2 that we have and for actually per H2 and for the other year, we need to wait a little bit about what will be the new normal in terms of timing. And we need to have that clarity in order to give some further outlook after this year. What we know for a fact though, is that our revenue is highly recurring. The recurring portion of our revenue is actually growing very strongly. And so that gives us some confidence and visibility in the future.  Now back to the comment on margin, actually, it's linked to the revenue mix that we have as well. In our revenue, SaaS and hosting is the most line of our revenue. So the margin improvement is also attributed to the fact that the fastest-growing line of our revenue is the one with the higher margin. So that's point number one. Now point number two is also that we are piloting. We are piloting how we hire in order to adapt that to our revenue growth. Still, we are eying on the long term, and that's why we have continued to hire because we're really looking for the long term.