The Australian tech sector is still relatively immature compared to the much larger US tech market. However, a broad range of interesting ASX tech shares is now emerging.
Here are 2 ASX tech shares that I think have strong long-term growth potential, and both of which have a fast-growing international focus.
Bravura Solutions Ltd (ASX: BVS)
Bravura is a locally-based fintech company that provides mission-critical enterprise software solutions to both the wealth management and funds administration industry.
The company has 2 operating segments: wealth management and funds administration. These divisions are supported by software solutions for a range of financial products such as superannuation, life insurance, investment products, and portfolio administration.
Bravura's portfolio of offerings has been further diversified by 2 recent acquisitions in late 2019: financial planning services software provider Midwinter and software company FinoComp. Midwinter's tools enable financial advisers to provide more comprehensive face-to-face consultations, while FinoComp adds further software functionality to Bravura's extensive product range and provides more cross-selling opportunities.
Recurring revenue is high due to the long-term nature of Bravura's client contracts. In 1H20, recurring revenue increased significantly by 17% to 78% of total revenue, as a growing number of new clients broadened their use of functionality. This high level of recurring revenue provides more predictable future earnings growth and cash flow expectations.
Bravura has also pleasingly not seen a material drop-off in demand during the coronavirus pandemic. The company recently confirmed that its earnings guidance for FY 2020 remains unchanged, expecting net profit after tax growth in the mid-teens excluding the benefits of the 2 recent acquisitions.
I believe Bravura is well-positioned to continue to achieve above-average market growth for a number of years to come, driven by its broadening product set and market-leading position.
Nearmap Ltd (ASX: NEA)
Nearmap is a fast-growing Australian aerial imagery and specialist location data company. It provides geospatial map technology for enterprise and government customers across Australia, New Zealand, the US, and Canada.
The company has seen a downward trend in its share price since mid-2019 due to a number of issues including the loss of a major contract. However, the company now appears to have essentially sorted those issues out and looks to be on track with its expansion plans.
According to a market update in late April, the company pleasingly revealed that its regular sales and activities hadn't been significantly impacted by the coronavirus crisis.
Nearmap continues to deploy cost management initiatives in order to maintain a strong balance sheet and maximise flexibility without the need to raise additional capital. This includes a 30% reduction in operating and capital costs, and it has the goal of becoming cash flow breakeven by the end of FY 2020. Importantly, this cost reduction is not expected to impact its product expansion strategies.
With regard to its FY 2020 guidance, Nearmap appears to be still on track to obtain annualised contract value in the range of $102 million to $110 million in FY 2020.
