Harmoney Corp Limited (HMY) Earnings Call Transcript & Summary

Hello, and welcome to Harmoney's First half '25 Results Presentation. I'm David Stevens, the CEO and Managing Director of Harmoney. With me today is Simon Ward, our CFO. Harmoney has produced a very strong profit result this half, which I'm really looking forward to sharing with you today. This result has been underpinned by the work we have done developing and launching Stellare 2.0 over the past 24 months. This has set us up to capitalize on the huge market opportunity we have in front of us, particularly as interest rates and market conditions begin to improve. One aspect that I'm most looking forward to for the first time is providing current year profit guidance as well as our profit target for next financial year. Now turning to Slide 2. Today, I'll begin with our first half '25 key highlights and our financial year '25 profit guidance and FY '26 target. Then I will remind you of Harmoney's key differentiators. I'll then hand over to Simon, who will take you through our financial results. Finally, I'll discuss our outlook and highlight the embedded value in our business before responding to your questions. [Operator Instructions]. We'll then endeavor to respond to your questions during the Q&A at the end. Now turning to Slide 3 and then on to Slide 4. To highlight our key achievements for the first half of '25, this half, we achieved a $2 million statutory net profit after tax, up from a $600,000 loss in the same period last year. This was primarily driven by our $2.3 million cash net profit after tax, which is up over 350% from the same period last year, driven by improvements across all our key metrics and our continued loan book growth. As a result, we delivered an annualized 13% cash return on equity for the half. Cash return on equity is our cash NPAT for the half over our average total equity in the half annualized. This result places us well on track for achieving our target 20% cash return on equity run rate in second half '25. Our loan book continued to grow, up 4% on PCP with Stellar 2.0 propelling 43% growth in Australian new customer lending. Our net interest margin on new lending during the half continued at 10%, raising the average NIM for the entire loan book back to 9% within our targeted 9% to 10% range. Our loan book credit performance continued to strengthen with credit losses down to 3.7% for the half from 4.2% in the same half last year. Our high levels of automation drove further efficiency gains with our cost-to-income ratio continuing to fall now down to 18%. With all these metrics heading in a positive direction, Harmoney is well capitalized for continued profitable loan book growth with total warehouse capacity over $900 million, $21 million in unrestricted cash, plus $7.5 million in undrawn corporate debt. Now turning to Slide 5. I'm really pleased to announce that for the first time, Harmoney is now in a position to provide the market with current year cash NPAT guidance as well as our cash NPAT target for next financial year. Our confidence to begin providing this guidance is driven by reaching the significant milestone of successfully rolling out our Stellare 2.0 platform in Australia, together with the performance and strength of our $783 million loan book. In financial year '25, we expect to deliver a cash NPAT of $5 million, up from $700,000 last year. We also remain well on track to achieve our previously stated target of reaching a 20% cash return on equity run rate in the second half of this financial year, having already achieved a 13% cash return on equity this half. To achieve this guidance, we expect to maintain our net interest margin within our targeted 9% to 10% range. In our next financial year, financial year '26, we are targeting a cash NPAT of over $10 million and a cash return on equity in excess of 25%. This will be underpinned by Stellar 2.0, delivering more prime customers in both markets and compounding loan book growth as increased new customers become satisfied existing customers returning to subsequent borrowing needs. We also continue to expect to maintain our net interest margin within our targeted 9% to 10% range through financial year '26. Now turning to Slide 6 and on to Slide 7. What sets Harmoney apart from others? We're Australia and New Zealand's largest 100% online consumer direct lender. We have a total market opportunity of $150 billion with our current market share less than 1%. So we have a huge total addressable market in front of us. Our algorithms partner with Google to attract prime, high-intent customers at low cost. And then our direct relationship with those customers and great customer experience sees them returning again and again for their next borrowing needs at near 0 acquisition costs. We use deep first-party data and AI models to deliver a prime loan book at a greater than 5% risk-adjusted income, that being our income after both funding costs and credit losses. We are funded by 3 of the big 4 Australian banks plus public securitizations. Our Stellare automation drives a low cost-to-income ratio of 18% and our cash return on equity this half is 13%, meaning we're well on track to achieving our targeted 20% cash return on equity run rate during the second half of this financial year. Just a quick reminder of our products on the right-hand side of the page. Our loans are up to $70,000 with an average new loan size of $18,000, which is disbursed to customers within minutes. We offer personalized rates based on borrowers' risk profile. We don't charge any fees other than a one-off establishment fee, and all our loans are fully compliant with applicable consumer legislation. Our loans are typically used for renovations, debt consolidation and helping people with life events such as travel, education and weddings. Now turning to Slide 8. To profitably build scale, it's clear that you need automation. For that, you need advanced automation and AI capability. And to do that successfully, you need more than just tech. You need massive amounts of quality first-party data. First-party data means that financial information is direct from the customer, not handpicked or prefiltered by a broker. We consistently attract over 10,000 new customer accounts each month. All of this data is used to continually train our AI models. This is a huge number of new customers for any business. This high volume of consumer financial data combined with 10 years of historic data, effectively supercharges training of our AI learning so we can optimize for sophisticated, highly efficient marketing with platforms such as Google, giving us the right customers at low cost and risk-adjusted income in excess of 5% gained through more accurate risk assessment of customers. This combination of data, AI and automation built into our technology platform that has been a core feature of Harmoney since our inception over 10 years ago. Now turning to Slide 9. The power of Stellare's machine learning goes far beyond assessing customers at the point of their loan application. It plays a significant role throughout the entire lifetime of our relationship with the customer. Harmoney is highly selective when it comes to audience targeting. We need to ensure our marketing spend is efficient and effective. This is where sophisticated customer acquisition models play a key role, and again, where huge amounts of first-party consumer data is key. When these models are used with powerful digital marketing platforms like Google, Microsoft Ads and Facebook, the result is highly targeted and cost-effective customer acquisition. What this means in practice is that we can acquire the right customers for the right price at scale. And critically, we can forecast this with a high level of reliability. Proof of our ability to target the right customer with the right product is reflected in our Google reviews and Shopper Approved scores with over 58,000 reviews and an average score of 4.8 out of 5. Moving to the second column. Naturally, we work hard to ensure we deliver a great customer experience so we can create annuity revenue as satisfied customers return with minimal customer acquisition cost. This experience is underpinned by our automated, simple and streamlined 100% online process. And in the third column, our ability to scale remains an important factor in the Harmoney model, and our continued investment in technology remains a key enabler. Already in this year, we have achieved a cost-to-income ratio of 18%, which is exceptional. The diagram at the bottom of the page shows how all these factors combine to support the lifetime value of a customer. Our customer acquisition model helps us to attract the right customers. Our application and loan experience is highly tuned to customer satisfaction, so customers return to Harmoney for their future needs. Based on our experience, this cycle is expected to lead to 140% in additional originations to the same customers at minimal customer acquisition cost. For example, on average, a customer taking out an initial $20,000 loan would return to Harmoney for an additional $28,000. So cumulative total borrowings of $48,000, and that's just our experience so far. Now turning to Slide 10. At Harmoney, we have an experienced and shareholder-aligned leadership team. We have deep fintech experience and have a large personal stake in the business with Board and management owning 30% of the business and in addition, a significant 10% long-term incentive share plan. The leadership team has long-term commitments to the business with an average tenure at Harmoney of over 7 years. We've included in our appendix Harmoney's shareholder composition showing the 30% Board and management ownership and further detail on substantial shareholders and the remaining shareholder makeup. Now turning to Slide 11. I'll hand over to our CFO, Simon Ward, who will take you through our financial results in more detail.

Thanks, David, and hello, everybody. Please turn to Slide 12, summarizing our key financial metrics for the half. I'll begin by going through each of these metrics briefly now before going into more detail on the following slides. As David has mentioned, we've had a very strong half with our cash NPAT up by 350% on the first half last year to $2.3 million. This was a consequence of improvements across pretty much every key metric, starting with our loan book, which continued its record of growing every half since Harmoney listed in 2020, now at $783 million. While the loan book is up 4% on the same half last year. Revenue grew 7% to $64 million, driven by both the loan book growth and by a higher average lending rate across the loan portfolio. Our net interest income percentage, also known as net interest margin or NIM, contracted 20 basis points from first half last year to 9%. But with new lending NIM continuing at over 10% through the first half of this year, we see our portfolio NIM continuing to head higher through the rest of the year. Risk-adjusted income, which is net interest income less incurred credit losses, improved 30 basis points to 5.3%, with lower credit losses more than offsetting the 20 basis point reduction in NIM just mentioned. Acquisition costs as a percentage of loan originations improved 10 basis points to 3.2% as origination growth resumed with Stellare 2 having a positive impact in Australia. Our cost-to-income ratio also continued to improve, down 300 basis points to an exceptional 18%. Our cost-to-income ratio includes all of our cash operating expenses as detailed in our profit and loss statement in the appendix. To align this ratio with cash NPAT and peer group ratios, noncash share-based payments and depreciation and amortization are now excluded. Had they been included, this ratio would still have been an exceptional improvement, dropping from 24% first half last year to 20% this half. In both cases, the improvement is driven by Harmoney's high levels of automation, enabling us to scale our loan book without having to scale operating costs, a leverage advantage that will continue to build as our book continues to grow. This half, we're reporting statutory net profit after tax of $2 million, up from a statutory loss in first half last year of $600,000. That improvement was primarily driven by the 350% increase in our cash NPAT to $2.2 million, up from a $500,000 profit first half last year, which is a combination of our growing book, growing revenue, improved risk-adjusted margin and improved cost-to-income ratio. On the next few slides, I'll now discuss each of these key performance metrics in more detail. So now turning to Slide 13, looking at our loan book and revenue. Following the rollout of Stellare 2.0 in Australia last year, we've begun to experience a reacceleration of our loan book growth with the total loan book up 4% on first half last year and Australia up 14%. The New Zealand loan book contracted 6% in local currency when compared to first half last year due to economic and market regulatory headwinds weighing in the second half of the financial year '24 and early this financial year. However, in the second quarter of this year, New Zealand originations increased by 14% on the prior quarter following a New Zealand platform update that we released in October '24, prompted by the government's repeal of overly prescriptive affordability regulations. With New Zealand inflation already comfortably back within the Reserve Bank's target range and the cash rate easing cycle well underway, we expect this to feed through to stronger economic conditions and demand in the New Zealand market. In addition, Stellare 2.0 will be rolled out in New Zealand through the second half of this financial year, and we expect it will have a positive impact there as it has in Australia. Moving on to revenue. Once again, revenue growth outstripped loan book growth with revenue growing 7% to $64 million on a higher loan book average interest rate as loans originated during lows in the interest rate cycle have been replaced with growth at higher lending rates, increasing the average lending rate to 16.8%. Now turning to Slide 14, looking at our lending margins. One of the Harmoney's key differentiators is the strength of our lending margins, underpinned by our proprietary AI-driven credit assessment models, which drive attractive pricing to prime borrowers alongside low credit losses with those low credit losses then unlocking competitive funding rates. As you can see on the chart on the top right, all 3 of the metrics driving our margins have trended positively over this half, with our loan book average lending rate increasing 40 basis points to 16.8%, our average funding rate falling 10 basis points to 8.1% and our credit losses reducing 30 basis points to 3.7%. As shown in the chart on the bottom right, this has increased our loan portfolio NIM to 9%. Importantly, our NIM includes all funding costs, including the cost of our corporate debt. On top of our improving NIM, reduced credit losses have increased our risk-adjusted margin, which is our net interest margin after credit losses, up to 5.3%. Now I just want to pause for a moment here to emphasize the distinction between net interest margin, which is the margin earned after funding costs are deducted and risk-adjusted margin, which is that net interest margin but after loan defaults are also deducted. When I look around the industry, many focus on only the NIM, not taking into account credit losses, which clearly misses a key part of the story. Our focus is on risk-adjusted margin, taking into account funding costs and credit losses. And with a risk-adjusted margin of 5.3%, we're a standout performer in the prime lending market. Next, turning to Slide 15, focusing on credit performance. Our consumer-direct model provides us with rich, deep consumer data, unfiltered by brokers and other intermediaries, which we use to train our AI credit models. This has enabled us to build a prime loan book of resilient borrowers with 72% employed in either professional, office or trade roles, 87% aged over 30 and nearly 40% of whom own their own home. Further demographic detail on the loan book is provided in the appendix to this presentation. As shown on the chart on the top right, credit losses in the half have continued to reduce, now down to 3.7%. This improvement is as we're now seeing minimal influence from our early Australian scorecard, which I talked about in our last few presentations, replaced over 2 years ago and now firmly in our rearview mirror. The New Zealand loan book has proven very resilient with losses not showing any adverse impact from the tighter economic conditions over the past 12 months, remaining stable at near historic lows. Again, with New Zealand inflation now back within the Reserve Bank target range and the official cash rate easing cycle well underway, we expect this to feed through to stronger economic conditions and to reduced pressure on household income. Finally, our 90-plus day arrears, which are a window into near-term future losses, remain low and stable at 64 basis points. Now turning to Slide 16, looking at our operating expenses. A key feature of Harmoney's business model has always been our Stellare platform and the high levels of automation that it provides, enabling us to scale our loan book without similarly scaling operating costs. This half, compared to the same half last year, our loan book has grown 4%, our revenues by 7%, while our operating costs have reduced by 9%. This has resulted in our cost-to-income ratio reducing from an already low 21% to an even lower 18%. Low operating costs, combined with a growing loan book and a widening risk-adjusted margin have delivered our sixth consecutive half of cash NPAT profitability, up 350% on the same half last year to $2.2 million, which equates to a 13% cash return on equity and puts us well on track to deliver our targeted 20% cash return on equity run rate during the second half of this financial year. Next, turning to Slide 17, which looks in more detail at our capital position. Harmoney has a well-diversified funding program with warehouses from 3 of the big 4 Australian banks as well as being an established capital markets issuer of asset-backed securities. As is typical with warehouse and asset-backed securitization funding arrangements, Harmoney's own money is also invested in its loan book. The strong credit quality of Harmoney's loan book means that we can be extremely capital efficient with borrowings supporting 96% of the current loan book and Harmoney providing the rest. That capital efficiency also means that Harmoney's existing accessible cash reserves of more than $30 million is sufficient to support loan book growth of over 50% to $1.2 billion without any need to raise equity. In addition to those existing cash reserves, Harmoney being profitable enables us to reinvest profits as our equity in further loan book growth, taking growth well beyond the $1.2 billion supported by existing cash reserves. This half was an example of just that with this half's loan book being entirely funded from this half's profits maintaining the same cash reserves -- enabling us to maintain the same cash reserves that we had at the start of the half. And with that, turning to Slide 18, I'll hand you back to David to take you through our outlook.

Thanks, Simon. Continuing now to outlook. Please turn to Slide 18 and then to Slide 19. Firstly, I'd like to give you an update on Stellare 2.0. At the beginning of this half, we moved 100% of our Australian new originations to Stellare 2.0. The graphic on the left illustrates the success story we're seeing from Stellare 2.0, which has been able to provide a 90% uplift in loan offers to new customers in the half, which has translated to a 43% uplift in dollars lent compared to the same period last year when traffic was directed to Stellare 1.0. This was achieved through advanced algorithms and rules in Stellare 2.0 to address segments of our customers that were underserved in the past. Previously, a customer applying for $5,000 was assessed in a similar way to someone applying for $70,000. This meant that for the same 10,000 people we get each month, Stellare 1 would have only given a loan offer to 650 people per month. Under Stellare 2.0, this has increased to 1,250 people per month, which is a 90% increase. We offered nearly double as many loans under $15,000 in the 6 months to 31 December '24 compared to the 6 months to 31 December '23. These are people who had good credits who would have likely been automatically declined in Stellare 1.0 because of its inflexibility. You may recall from our earlier presentations, this was an area that we expected Stellare 2.0 to better serve our customers. Alongside these underlying improvements, the team has deployed a beautiful new application flow, which is driving better customer retention throughout the application process and helps us collect more accurate financial data. Now turning to Slide 20. Harmoney is well positioned to capitalize on the capabilities of our new platform and into its next phase of growth. We have 4 main strategic priorities: our core platform; continued improvement in our conversion of applicants into customers; developing new opportunities; and increasing margin. Within the platform, our biggest immediate focus is bringing the power of Stellare 2.0 to our New Zealand customers. Importantly, we have always built the new platform with multiple countries in mind. So this isn't a huge piece of work and is already well advanced with our first New Zealand loans expected to be written next month on Stellare 2.0. By the end of this financial year, we expect to complete the New Zealand rollout and be able to fully retire Stellare 1.0, which will drive further costs out of the business. On conversion, the game changer has been the real-time visibility into every interaction our customers have with Harmoney and that data feeding back into our new product development. This has allowed us to release over 1,800x in the last 6 months, a mixture of small and big updates to increase conversion, and we'll continue that effort moving forward. However, there is also huge scope for an increased use of AI tools to personalize the application experience and the offers customers receive. Having Stellare 2.0 live enables us to much more easily bring new features to market, such as safely increasing our maximum loan size to $100,000 for high creditworthy applicants, which we'll be introducing later this half. In addition, we already collect most of the data we need to assess the customer for multiple products. So the next step is to employ the capabilities brought by Stellare 2.0 to expand the lending products we have available. And while it's too early to get into specifics at this stage, we also have some exciting new partnership opportunities that we're working on that will leverage the flexibility and capabilities of Stellare 2.0. The personalization that Stellare 2.0 affords us not only allows us to ensure more people get a great offer when they come to us, it also means that we can maintain both strong loan book growth and our target net interest margin of 9% to 10% through a new pricing optimization engine we are developing. We'll also continue developing increasingly sophisticated process automation, which will deliver even better customer experience at scale and with lower costs. Now turning to Slide 21. Next, I wanted to take a moment to highlight an important insight, which is a significant value that is embedded in Harmoney's existing loan book, which may not be well understood. You can see in the chart on the left that Harmoney's own equity in its loans on its balance sheet, plus its net cash being our cash less our corporate debt totals $50 million. Then on top of this, the expected risk-adjusted income from that loan book is at least an additional $70 million, with risk-adjusted income being the net income after deduction of funding costs and credit losses. This takes the total value embedded in just the existing loan book to at least $120 million. Importantly, the $70 million of risk-adjusted income is based on our realistic typical repayment experience with some borrowers paying off their loans ahead of schedule as we do not impose any fees or penalties on them doing so. If we calculate it based on the contracted repayment schedule, the embedded risk-adjusted income would be significantly higher than that $70 million. Then moving on to the right-hand side of the page, there is the additional value embedded in Harmoney's business model, our proprietary platform and processes. We have our proprietary highly automated customer acquisition and credit assessment engine in Stellare 2.0, which delivers over 10,000 new applicants creating an account every month with Harmoney. Our great customer experience then sees those customers returning again and again for their future borrowing needs at next to 0 additional cost for Harmoney due to our direct relationship with those customers. Our AI models attract prime borrowers at a net interest margin of 10% and a risk-adjusted margin greater than 5% and do all this at an 18% cost-to-income ratio. We also have an established and diversified funding program in place with warehouse funding in 3 of the bigger 4 Australian banks and an ABS program with existing total capacity over $900 million for immediate growth needs and the market confidence to expand beyond this when required. Now turning to Slide 22. And to wrap up, just a reminder from our earlier slide, in financial year '25, we expect to deliver a cash NPAT of $5 million. And in our next financial year, financial year '26, we're targeting a cash NPAT of over $10 million and a cash return on equity in excess of 25%. That concludes the results presentation for today. Now turning to Slide 23. We're about to move on to answering questions that have been raised during this presentation, but I'd like to first take the opportunity to remind you that Harmoney has set up Investor Hub, which is a dedicated platform for investors to learn more about us and engage directly with Harmoney's leadership team. I'd encourage you to sign up as this is where we regularly post new content, including videos accompanying our ASX announcements, interviews, research reports and webinars. If you think of any questions after today's presentation is completed, I'd encourage you to log in and ask those on our investor hub, where we'll endeavor to respond as quickly as we can.

We'll now turn to answering your questions. [Operator Instructions] Okay. We got our first question. On capital, you have given good comments on where the book can grow to $1.2 billion with current capital. As earnings come through, you forecast, would you now consider capital self-sustaining yes, great question, and absolutely. And that's a key point of the slide. We don't plan to raise any equity. And that's a good question for the next one. In order to maintain growth until the end of FY '26 targets, will you require an equity raise? The short answer is no. Obviously, if there was a strategic reason, maybe M&A or something like that, we'd consider it. But certainly, in our organic forecast through financial year, financial year '26 and beyond, we don't plan on raising any equity. Next question, similar themes around capital. Do you plan on issuing a dividend this or next financial year? There's currently no plans to issue dividends. We will obviously assess that as years go by. Obviously, if we got to a position where we had surplus cash or cash beyond what we saw growth for the business, we would look to dividends. And that's probably a good segue to the next question. With the share price trading below intrinsic value, would you consider a share buyback? I guess similar response to the dividend question. Obviously, we believe that the cash we have in the business we have better use of that cash in the business for right now. But obviously, to my earlier point, if we were in a position where we're spinning off high levels of cash and that was surplus, we'd look to potentially pay down corporate debt and potentially do a share buyback if the market conditions were right. Great to see the progress on lowering your cost-to-income ratios. Given the book mix at the moment, where would you consider mid-cycle risk-adjusted income moving to? Look, I think we've always had a target of sort of 5% to 6%. We're at 5.3% for the half. We're continuing to see some expansion there. So I think that will continue to grow and ideally grow at over 6% where we can. But we've obviously got to make sure we get the right balance between top line growth and margin. So we can't grow it forever. But obviously, you can see the returns that we're spinning off on just a 5.3% RAI. With interest rates coming down, will you look to accelerate growth and will this impact profitability? Good question. We do, obviously, expense all our customer acquisition costs upfront. So -- but we've factored that into our numbers that we've put out for financial year '25 and financial year '26. And we're expecting good top line growth in there as well. So we watch that. And obviously, if the demand is there at the right cost, we'll take it. But no, those -- our forecasts have all that factored in for the next 18 months. The improvement in credit losses are very impressive. Can we expect any further improvement? Do you have any data on returning Harmoney customers who are better credit risk? Are you tracking the default performance of customers approved by Stellare 2.0 but would have not been approved by Stellare 1.0? Great questions. There's quite a few questions in there, which I'll do my best to answer. Yes, look, they are impressive. We spent a few years ago, our first Australian scorecard, we took higher loss on, and that's very typical. I've been in the space for nearly 20 years. And whenever you start up a new product or a new jurisdiction, that's quite typical that we're well through that now, that scorecard that was closed down over 2 years ago and we're continuing to see improvement from that new scorecard. Stellare 2.0 arrears are lower than Stellare 1.0. So we're seeing the better performance already through that, and that's done on a cohort or vintage static loss basis if people are familiar with that. So we're looking at tracking the same months from when the loan was originated and comparing that, so you can get a like-for-like comparison. We have lots of data on returning customers. We know that returning customers are better credit risk. We've got 10 years of experience with that across both countries. So we continue to -- as we get more existing customers on the book, to your point, that lowers the credit risk. Next question. Are you forecasting any funding rate cuts to get to the $10 million FY '26 target? Not as such. We borrow off the swap rates already in Australia and New Zealand, and we typically borrow on the sort of 2- to 3-year rates anyway. So as much as they move, but no, I'm not in the game of trying to guess movements in interest rates. So we use those rates the best we can, and we are confident on those -- where those rates are now that we will achieve those targets. How do rate cuts flow to your NIM? Great question. There is a bit of a lag impact because 85% or so of our book is swapped -- the interest rate is swapped to a fixed rate. But certainly, it does flow. As I said to my last point, we do borrow off the 2- to 3-year swap rates. So some of those rate cuts are already built into those swap rates, but probably not that much to be fair. The Australian swap rates aren't that much lower than what the sort of cash rate is, but we -- that bounces around, obviously. And we're not -- just to be clear, it's not like our margins being impacted every month by what those swap rates are doing. As I said, when we lend money to a customer, we take swaps out, we fix it at that time. So it would only be new business that's impacted by that. So there's not much volatility at all in that. Do you anticipate a flat employee count moving forward, enabling further reductions in the 18% cost-to-income ratio? Yes, great question. And absolutely, we -- our management team and support team is fully staffed at the moment, and we don't plan on increasing or decreasing that. The only roles may be collection roles as the book gets bigger, but they're not significant cost roles. So yes, this is the whole point of the Harmoney business compared to other models. We are a platform business, first and foremost. We're not a business that requires more salespeople to go on the streets and knock on doors and do that sort of stuff. We are -- this business is being built off a platform to leverage it. So we will continue to drive that cost-to-income ratio down. How do you see the ongoing interest rate environment, and is it favorable to Harmoney? Yes, look, absolutely. We've been through a couple of years of significant increasing in interest rates, and that's obviously -- it's obviously hurt profitability. As interest rates fall, that is helpful to us. And also, as Simon mentioned in his note, and I did in the press release today as well, the New Zealand economy is -- interest rates are cut and they're starting to see growth again. So we're -- that -- the lower interest rates ultimately gives people more money in their pockets and that get people more encouraged to do home renovations and do things that use our products. So it's really -- yes, it's really positive for us. With the regulatory changes now implemented, what's your time line for returning to growth in New Zealand? Do you see New Zealand as an important market still? Or would Harmoney look to expand into bigger markets rather than try and grow in New Zealand? Yes, great question. Yes, look, the regulatory change is certainly helped by the new government here we went through in last September. No, look, New Zealand is still a big part of our business. Obviously, we haven't rolled Stellare 2.0 into New Zealand yet. That's significant for us. So that's going to happen, as I said, the first loans will be written next month. And by the end of the financial year, it should be fully rolled out. So we expect to see some benefit from that and the -- obviously, the regulatory changes that have gone through. New Zealand becomes a smaller and smaller part of the group as Australia, just pure by pure population size. So the Australian book is now 57% of the group. That percentage will continue to get larger, but that's not at the expense of the New Zealand book. We would expect that book to return to growth once we get the Stellare 2.0 rollout done and we get the focus back there. So we -- at this stage, we don't plan on moving any further than Australia and New Zealand. We feel there's huge opportunity just in those markets for our products. We don't need to achieve those numbers and a lot more that we've talked about in our guidance. We can absolutely do that in Australia and New Zealand many times over. With plans to lift your maximum loan size to $100,000, how much do you expect this to add to your lending growth rate? Look, it's not -- we're not scaling all the amounts up to $100,000. We're really using that for our top credits that come through. So it's not going to be going up by like a 30% or something like that or 40% because that's [indiscernible] because we're not scaling all the levels up. But we expect -- we have demand for those size loans for top credit quality customers, and we'll -- it's great to be able to offer that. It makes us as a company more appealing. But no, I'm not expecting that to be a material change to the business, but I do believe it's a value add that a lot of other lenders out there won't do. Could you please explain how to interpret the acquisition to originations ratio? I might get Simon to do that, so I can have a glass of water.

Yes. So this is a really important ratio for the way we do our marketing because we expense all of our acquisition costs upfront, unlike where people use intermediaries and the costs are amortized over the life of the loan. So we like to track how much we're spending on our acquisition compared to how much we are originating over a period. So the origination ratio is simply our cost of originations over the period over the total volume that we do originate. And it's a powerful metric for us because a lot of our originations, as we talked about before, are from existing customers who've enjoyed the experience the first time, and so they come back to us for another loan. And because they have that direct relationship with us, no intermediary in between, there are no acquisition costs or practically no acquisition costs associated with them coming back. So the more and more that, that builds, the better and better this ratio gets. And the more and more new customers we bring on, then the more and more returning customers we get coming back for further borrowing.

Great. Thanks, Simon. Any plans to expand funding capacity from corporate debt or warehouse financing? Yes. Look, as the book grows, we'll obviously continue to increase our warehouses or look to ABS deals. There is lots and lots of questions on it, everyone, which is great for the interest, but apologies for everyone, but I'll do my best. You mentioned increasing the maximum loan size to $100,000 in second half '25. What's driving this decision? What impact do you expect this to have on credit quality and margins? Are there any other product expansions being considered? If I sort of half covered off that, what's driving the decision? I think I've covered that. What impact do you expect to have on credit quality and margins? No impact on credit quality. Margins, we'd be -- potentially, there's a little bit more margin because we do more at that level if there's less sort of competition, but I wouldn't expect there to be a material change or much of a change on either of those 2. Are there any product expansion being considered? Absolutely. As I said on previous calls, our engineering product teams have been building this platform for the last 2 years. We didn't go out externally and do it. We've built it internally. A lot of those -- a big chunk of those resources once we've got New Zealand live and the migration done by the end of the financial year, a huge amount of resources free up for us. And they're going to be working on innovation, new products, adjustments to products, all that stuff, the really exciting innovative stuff that most businesses find really hard to get to. We're there in a few months' time. And that's super exciting for us to be able to really spend time on that space, which is hard to get to. But we feel we've done the hard yards, and we're now in a position to do that. Do your partnerships target new market segments or improved existing engagement with current customer base? Look, a combination of predominantly the latter, getting that conversion up, getting more products to customers that are there. We're not moving too far away on product development from our personal lending in a secured and unsecured space. But obviously, there will be product modifications and things like that, that come with it, but not a big leap into mortgages or something like that. Do you intend to keep marketing spend relatively stable, allow most growth through returning customers? Or do you intend pushing marketing spend upwards to drive more growth? Yes, great question. There's a combination of that. We want to make sure we deliver profitability growth. So there's a combination. We can go really hard on marketing, and that will obviously reduce profitability. As I said, we expense everything upfront. but we feel we've got the balance right. Obviously, as we put on more customers on book and Stellare 2.0 is a great example there, we're putting a lot more customers on book, even though the deal size is a little bit lower. It's great because with more customers on book, mean more returning and repeating customers. So there is a snowball effect. So as we get larger, those returning customers get -- the number get larger as well, and that creates great growth for us in coming periods because, as I mentioned before, there's no acquisition costs associated with finding those. Given the really strong return on equity you're guiding in FY '26, is this influenced by your corporate debt maturity of June '26? Do you have any early thoughts around paying down off of refinancing this debt? No, the return on equity assumes a corporate debt. So there's no benefit built in by that being repaid. That corporate debt is fairly common in this type of business. So whilst June '26 is a little while away, we potentially could look to pay it down. And again, we'll make a capital decision around buybacks, dividends, corporate debt and the like at the appropriate time. Given the strong origination growth seen more recently, the assumptions on loan book growth look somewhat conservative in your FY '26 guidance. We haven't given loan book growth for financial year '26. But we've obviously given profit guidance, so you can kind of maybe work backwards a little bit. We -- as I said, we'll take the growth if it's there, but we want to make sure we've got a very strong profitable business that's doing it efficiently. And we've got a lot -- as I said, Stellar 2.0 gives us a huge leap forward in terms of getting top line growth as well as bottom line growth. Okay. I think that's pretty much it where we're at to. So we're at 10 to the hour. On that point, I'd like to thank everyone for their attendance today and great questions. And we look forward to meeting with some of you over the coming period as we do our investor roadshow. And on that, I'll close the call. Thank you.