GB Group's FY25 Earnings Miss Expectations Despite 1.9% Revenue Growth

GB Group reported FY 2025 results with revenue of £282.7m, up 1.9% from FY 2024, and net income of £8.63m, a significant improvement from a £48.6m loss in FY 2024. Profit margin rose to 3.1%, driven by lower expenses, but EPS missed estimates by 27%. The Identity segment contributed £159m of revenue, with General & Administrative costs being the largest operating expense. Shares are down 9.8% from last week.

GB Group (LON:GBG) released its full-year 2025 results, showcasing a significant improvement in financial performance. The company reported revenue of £282.7 million, a 1.9% increase from the previous year [1]. This growth was driven by the Identity segment, which contributed £159.0 million, or 56% of total revenue. The company's net income rose to £8.63 million, a substantial improvement from a £48.6 million loss in FY 2024 [1]. The profit margin improved to 3.1%, primarily due to lower expenses [1].

However, the company's earnings per share (EPS) missed analyst estimates by 27%, with EPS standing at £0.034 compared to the estimated £0.046 [1]. The primary driver behind this miss was the Identity segment, which experienced a 27% decline in EPS compared to FY 2024 [1]. The largest operating expense was General & Administrative costs, amounting to £126.0 million, or 67% of total expenses [1].

The company's shares have been impacted by these results, with shares down 9.8% from last week [1]. Looking ahead, GB Group expects revenue to grow at an average rate of 3.4% per annum over the next three years, compared to a 9.2% growth forecast for the Software industry in the United Kingdom [1].

During the earnings call, the company highlighted several key points. GB Group reported a 3% increase in revenue on a constant currency basis, with adjusted operating profit increasing by 9.5% [2]. The company's cash conversion remained strong at 91.3%, allowing it to reduce net debt by over £32 million year on year [2]. The launch of GBG Go, an identity orchestration platform, has already signed customers in key regions and built a strong pipeline, indicating positive market reception [2].

However, the company faced challenges in certain market sectors, with the fraud segment experiencing a 4% decline in revenue on a constant currency basis [2]. The Americas identity business showed flat performance, indicating ongoing challenges in this region despite operational improvements [2]. The company anticipates a similar level of exceptional costs in FY26 as it continues transformation initiatives, which may impact short-term profitability [2].

Despite these challenges, GB Group remains optimistic about its future growth prospects. The company expects growth to be second-half weighted in FY26, with management focused on building growth levers into the business [2]. The transition to a subscription model has seen little pushback, as it aligns with market standards [2]. GBG Go is priced with a platform fee and customization based on customer needs, ensuring a productive conversation around their requirements [2].

In conclusion, GB Group's FY 2025 results show significant improvement in financial performance, with revenue growth and improved profitability. However, the company faces challenges in certain market sectors and missed EPS estimates. The company's future growth prospects remain positive, with management focused on addressing these challenges and leveraging the significant market opportunity for digital identity verification and services.

References:
[1] https://finance.yahoo.com/news/gb-group-full-2025-earnings-051326672.html
[2] https://finance.yahoo.com/news/gb-group-plc-gbgpf-full-070101092.html