If there's one phrase I've come to fear as an investor, it's "strategic review".

You'll never hear that in any positive context.

And given shares in Bravura are down 52% today, it seems that heuristic is holding true.

Man, the magnitude of that fall really is amazing -- we're not talking a unprofitable, cash burning nanocap meme stock -- this was (prior to today) a >$300m market cap company doing a quarter of a billion revenue, CF +'ve, zero debt and even paid a dividend.

Today's announcement is here in all its gory detail, but the key points are:

• FY23 Revenue expected to "increase modestly" from FY22, but...
• Operating costs to increase 16-20%
• FY23 NPAT to be between -$5m and zero (last year it was $25m!)

Basically, the new CEO is looking reconfigure the entire business. This could well be the result of underinvestment in prior years, which might explain why the fundamentals looked so strong (they were doing 15% net margins a couple years back). Indeed, that's what had attracted me to the business, which had long displayed high margin growth.

Thankfully, as you'll see in my SM portfolio, I sold out at the start of this year at $1.66 (taking a 34% loss at the time!). My reasoning at the time is here.

Looks like we dodged a bullet @BoredSaint ?

It wasnt a great year for financial software developer Bravura. Revenue was down 11% to $243m and NPAT was 19% weaker at $32.3m.

Professional services work (implementations and upgrades etc) in all segments was impacted by covid, but underneath this the contracted recurring revenue was up 15% and 84% of revenue was recurring in nature

The balance sheet remains strong with over $73m in cash, there was good cash conversion and the company is forecasting mid-teens growth for Net Profit in FY22.

Bravura is having to bed down some acquisitions and is spending big on R&D to build out it's offering, and follow a more targeted "microservices" product set. 

But it also has a backlog of services work that should pick up now economies are opening in places like the UK.

Given it has very favourable economics and high profitability (even in a bad year they declared a record 6cps final dividend), as well as a good history of growth, it's hard to spot anything too dire in these results. 

If the business can resume some good revenue momentum the current PE of 22 doesnt seem too onerous. Especially with a 2.5% dividend yield.

That being said, it's a tough competitive environment and customers operate in a cyclical industry -- any continued stall in growth wont be treated kindly by the market.

I'm maintaining my small holding for now.

It was a tough half for Bravura, with revenue down 14% and Net profit 54%.

Lower UK project work due to covid was blamed, and the result was broadly within guidance.

This is another one where you have to try and look through the covid anomoly. If it is a genuine one-off speed bump before growth resumes at its previous levels, then I think shares are really attractive.

This is a healthily profitable business with a strong balance sheet and a high degree of contracted recurring revenue. There's a big addressable market and demonstrated growth (on average). The economics are really nice at scale.

The largest segment, Wealth Management, saw a 17% lift in contracted revenue. And there seem to remain good industry tailwinds.

The company is guiding for a 10% lift in revenue from the first to second half (so around $241m in total for FY21, or ~10% lower than FY20), with NPAT between $32-35m (a 17% drop). So it could be some time before we will see any tangible return to growth. I think it could take until FY23 before revenues completely recover. But from there i'd like to think 10-15% sales growth is achievable.

This is however a competitive industry, and there are plenty of other good solutions available to users. The moats for Bravura aren't massive, so execution will be key.

Bravura has signed a 7 year contract with Award Super (previously First State) -- Australia's second largest super fund that manages ~$130b in funds and has >1 million members. Bravura will provide an "integrated ecosystem" of its products, underpinned by Sonata Alta.

No financials were provided, though clearly this is a material win. Certainly good news.

Although implementation work has started, it hasnt changed the outlook for a flat 2021 NPAT. Moreover, the second wave of UK lockdowns and stalling Brexit negotiations is slowing the progress of sales, and the FY21 result will be significantly weighted to the second half.

The market remains unimpressed and shares continue to drift back towards the March lows. Should BVS resume growth in subsequent years -- even relatively modest growth -- I think shares remain a good long term opportunity.

Announcement here

I need to do more work on this, but from what i've read so far Bravura seems like an interesting opportunity. Encouraged to see some support from some of our experienced members too.

A provider of software to the finance industry, with about 2/3rds of revenues coming from Wealth Management and the rest from Funds administration.

A high margin, scalable business with high customer retention and recurring revenues (77% of total). Also some good regulatory drivers and a rock solid balance sheet.

Historical growth in sales has been strong, about 12% per year on average since FY15, with EBITDA growth up around 27%pa over the same period. 

That being said, revenues grew only 6% in FY20 and profit was 10% higher on a per share basis. And covid-19 seems to have caused an extension in the sales cycle.

These do not appear to be structural issues, and with shares on a PE of roughly 21, with a 3% yield, it seems attractively priced if the group can sustain anything near low double digit growth.