Microlise H1 Revenue Declines 10% on Hardware Sales Slump, Recurring Revenue Grows

Microlise Group, a UK-based transport software specialist, announced a 10% year-on-year decline in revenue for the first half of its fiscal year, driven by a slowdown in hardware sales. The company reported total revenue of £39.50 million, attributing the drop to lower sales to original equipment manufacturers (OEMs) and reduced non-recurring hardware deals.

Profitability Recovers Amid Top-Line Pressure

According to the company's report, the revenue shortfall was influenced by component shortages and issues with project timing. Despite the top-line weakness, Microlise demonstrated a significant improvement in profitability. Its adjusted EBITDA margin recovered to 13.2%, a substantial increase from 5.2% in the second half of fiscal 2025.

This margin expansion follows restructuring and cost-efficiency initiatives the company implemented in the previous fiscal year. For the first half, Microlise posted an adjusted EBITDA of £5.20 million.

Recurring Revenue Signals Core Business Strength

A key positive for the company was the performance of its core software business. Direct Customer Annual Recurring Revenue (ARR), a critical metric for software-as-a-service (SaaS) companies, grew by 12%. Microlise stated this growth was supported by strong customer renewals, expansion within existing accounts, and the acquisition of new customers.

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This growth in recurring revenue suggests underlying health in its primary subscription-based services, which are often viewed by investors as more predictable and valuable than one-time hardware sales.

Outlook for FY2026 and Beyond

Looking ahead, Microlise confirmed it expects its full-year adjusted EBITDA for fiscal 2026 to align with market expectations, which range from £10 million to £11.1 million. However, the company cautioned that ongoing component shortages could still affect the timing of some OEM hardware deliveries in the fourth quarter.

Microlise anticipates a return to stronger growth in fiscal year 2027, projecting that the continued expansion of its Direct Customer ARR will be the primary driver.