Alfa reports strong H1 2024, uptick in full-year forecast

Alfa Financial Software Holdings PLC (Alfa), a global provider of asset finance software, has announced its half-year (H1) results for 2024, highlighting a period of strong sales momentum and increased expectations for full-year revenue.

The company, which develops software for blue-chip customers in the asset and automotive finance sectors, reported trading in line with expectations, with significant strategic progress across the business. At the end of the six-month period to June 30, 2024, Alfa achieved a record Total Contract Value (TCV) of £193 million, a 40% year-on-year increase, showcasing strong demand for its software solutions.

Key to this success has been the ongoing transition to a SaaS (Software as a Service) subscription model, which continues to accelerate. Subscription revenues grew by 18% year-on-year, while subscription TCV saw a 26% increase. This shift is improving Alfa’s revenue quality, with recurring subscription revenues now accounting for 35% of total income.

“We are pleased with performance during the first half of 2024, with trading in line with expectations and good strategic progress delivered across the business. We continue to invest in Alfa Systems 6 to increase our functional and technical lead over the competition, whilst continuing to deliver reliably for customers and converting and enhancing our order book.

“The transition to a SaaS subscription business is well underway and is leading to strong growth in high quality subscription revenues, resulting in increased revenue visibility and customer stickiness. Alfa is the go-to market leader in North American automotive finance software. We also have our first customer for the Total Originations product line which significantly expands the size of our addressable market. This demonstrates our ability to go deep into specific markets, gaining momentum as we win class leading customers. Consistent growth and delivery over the last five years shows that we have the right strategy and we are confident in the outlook for the business.”

Financial and strategic highlights

Financial performance:

• Revenue: Constant currency revenue remained stable compared to a strong H1 2023.
• Operating profit margin: 31% (H1 2023: 32%).
• Cash generation: Strong cash flow with 95% cash conversion, a robust balance sheet with £22 million in cash, and no bank debt.
• Special dividend: The company declared a special dividend of 4.2 pence per share, amounting to £12.4 million.

Sales momentum:

• TCV growth: Record TCV of £193 million, up 40% year-on-year.
• Pipeline: A strong late-stage pipeline with 11 prospects (up from 9 in H1 2023), with 8 already working under letters of engagement.
• New business wins: Two new customers signed in H1 2024.

Alfa also made significant strides in diversifying its customer base. The top five customers contributed 34% of revenue, down from 61% in 2019. The number of customers generating over £1 million in revenue increased from 7 in 2019 to 19 in the first half of 2024, reflecting improved customer diversity.

Investment in innovation

Alfa remains committed to innovation, having invested £18.8 million in product development during H1 2024. This investment supports Alfa Systems 6, the latest iteration of its flagship software, which has seen five out of six planned releases to date.

The company also reported continued growth in its workforce, with headcount increasing by 5% year-on-year with high staff retention (96%).

Full-year outlook

Looking ahead, Alfa expects to exceed its previous full-year revenue forecast, with the Board now anticipating an additional £1 million in revenue for FY 2024. The company’s record TCV and growing SaaS-based subscription revenues are driving strong momentum, particularly as the business prepares for a robust second half.