Saaspocalypse? Not Now!

Winter is supposed to be coming for software stocks. Every incumbent enterprise software business is being forced to answer the same question: will artificial intelligence make expensive, entrenched software obsolete? Bravura Solutions (ASX:BVS) has found a better answer than most. It keeps upgrading earnings.

Friday’s guidance update is on-brand for a business that has, under the current and prior management team, had a long stretch of under-promising and over-delivering. Bravura now expects the 2026 financial year’s cash earnings before interest, tax, depreciation and amortisation (Cash EBITDA) to be approximately $77m, well above the previous $69m to $73m range. That is roughly an 8% upgrade at the midpoint. Bravura doesn’t muck around with the numbers either: that Cash EBITDA number comes fully loaded with all capital expenditure and lease payments. Revenue is still expected to land inside the previous $280m to $285m range, while capex remains unchanged at about $4m.

The margin implication is the most interesting part of the update. With revenue guidance unchanged, Bravura’s full-year Cash EBITDA margin should be a bit over 27%. The second half looks stronger again, with an implied margin of around 30%. That is some turnaround (see here for some background) for a business that was losing money not many years ago.

Cost cutting has clearly helped. Bravura has spent the past few years removing excess cost and simplifying the business. But this update suggests the improvement has moved beyond the easy savings. In fact, while the second half should see about $3m more revenue than the first half, this new guidance implies it should see Cash EBITDA nearly $9m higher. The final quarter must have been particularly strong, implying an exit run-rate above the second half-year’s 30% margins.

The other notable part of the update is what did not change. Revenue guidance stayed in the same range despite a tougher currency assumption, with the average GBP/AUD exchange rate for the second half now assumed at 1.92 rather than the 1.95 assumed in the old guidance. For a business with a large UK earnings base, that is a revenue headwind. Management suggests this was overcome by strong demand for project services and stronger renewals (read: price uplifts).

Project work can be lumpy, and investors should not blindly capitalise every dollar of it on a high multiple. But in Bravura’s case, it is also a useful signal. Customers are spending money on existing systems. They are upgrading, modifying and extending them. That is not what customers do when preparing to throw the software in the bin and replace it with a cheaper AI-generated alternative.

This is the nuance missing from much of the Saaspocalypse debate. Bravura’s software sits at the heart of wealth management, life insurance and funds administration businesses. These are regulated, complex and high-trust environments. Switching systems is expensive, risky and disruptive. Many of the world’s leading financial institutions use Bravura systems to manage trillions of dollars. Those customers do not move to a new solution lightly, if they move at all.

Bravura still has plenty to prove. Revenue growth needs to be sustained, across both recurring and project work. But Friday’s upgrade is another important data point. The turnaround is no longer only about survival. It is becoming a story about world-class margins, solid cash generation and a sticky customer base that still values the software.

While stock has popped on the upgrade, the $2.30 per share price (as of writing) is still down more than 30% from the peak in October 2025. Next year’s growing free cashflow represents more than 7% of the market capitalisation, despite having a very healthy cash balance to either distribute to shareholders or use for accretive acquisitions.

The Saaspocalypse may arrive for some. Bravura just delivered another reminder that not all software businesses are built the same.

There are plenty of other software businesses on the Forager investment teams’ watch list. Subscribe to our monthly and quarterly reports to find out more about these potential opportunities.