NAOS Emerging Opportunities Company Limited (NCC.AX) Earnings Call Transcript & Summary

[Audio Gap] FY '25, now we're moving into '26. thank you for everyone who's joined us today. If you do have any technical difficulties, please e-mail [email protected] and we'll get back to you as soon as we can. [Operator Instructions] as some of you would know, we generally get a CEO or an external presenter today, we've got the team from Urbanize joining us again to provide an update on that business, especially post that quite important announcement they did in partnership with National Australia Bank. So they'll be speaking for roughly 15 minutes after I provide a bit of an introduction. The disclaimer. As many of you would know, we do tend to talk about a number of stocks in the presentation, so please don't read this as financial advice. Please seek external advice that asserted to your own needs. And then finally, the acknowledgment of country. We would like to acknowledge the traditional owners of country throughout Australia and recognize their continued connection to land, water and communities. We pay our respect to the Aboriginal and Torres Strait Islander cultures and to elders past, present and future. So for those of you who don't know NAOS, this -- the next 2 slides probably give you a little bit of an understanding of what we do and how we go about it. But I think, first and foremost, we provide exposure to our investors, to emerging companies. You can see there, these businesses are generally between $50 million and $250 million in market capitalization, spread across a wide range of industries. So we like to generally focus on our circle of competence, they generally have quite a unique moat. So obviously, Urbanise as an example, has a unique moat and [indiscernible] software space that's quite hard to replicate in our opinion and they have strong shareholder alignment. So we like a lot of directors and executives to have a lot of the skin in the game like we do here at NAOS. So they're firmly aligned with all shareholders of the business. You can see there from time to time, we also do invest in private businesses with a view to exiting those over maybe a 3- to 4-year period. And you would know based on our quarterly investment report more recently, the NCC did recently invest -- exit 1 of its private investments which I can touch on later on. NAOS more generally, you can see there we have 6,000 shareholders or investors who we manage their funds on behalf of we have 3 listed investment companies and 1 private investment fund. We've been in operation now Rob and I have been here for almost 19 years. And most of -- to give you an idea, a lot of the directors and staff are some of the largest shareholders in the fund. So all of my investable funds are in all 3 of the NAOS's investment companies, ensuring strong alignment with all of our shareholders. But why we think we're a little bit different to our peers? And we can go through, obviously, a few trials and tribulations through this. A lot of our businesses, they are emerging. So you can see that the average earnings of our business is roughly $14 million before tax. So they are like -- we like to think the early stages of growth. We can go listed and private, we do hold investments for a long time. So for NAOS, across all 3 of our LICs, the average holding period is now over 6 years. So as Urbanise as an example, we'll probably be an investor for 4 or 5 years now. So we like that investment thesis to play out. And often, we find at the very end of that journey is often the share price that gets rerated significantly as it becomes more appropriate for larger investors to invest in some of these emerging companies. We are concentrated. So we generally have 15 core investments, albeit that has been expanded more recently, and we are active investors. So often, we will own a 15% or 20% position investment in our ownership profile in the business, and therefore, we may look at ways to, I suppose, add value for all shareholders, either through the appointment of an independent director or someone who's representing NAOS specifically. So touching on the performance. And after what it feels like a long, long time, it is pleasing to see that Q4 was much stronger for 2 of our LICs anyway. You can see there that NAC more specifically had an excellent Q4 registering performance of almost 25% for the quarter. NSC almost finished at 20% for the quarter. albeit NCC continues to struggle, unfortunately, investing in sort of, probably the smallest businesses in the stock market. I think more generally, 1 thing I do want to touch on, though, to give you some perspective, NSC now has registered at the end of July, it will be up over 30% for the last 5 months. NAC, I think, is up about 55% for calendar year '25. And it really does show you that finally some of these investments are bearing fruit, albeit we've been investors in them for a long time. So businesses such as Urbanise an example, COG Financial Services, we've seen go from $0.90 to I think it's over $1.80 today. MOVe Logistics more recently put out some reasonable commentary around their earnings for this year and hopefully next year. So we are seeing some of these businesses after many, many years of hard work. that is translating into better shareholder outcomes. But I think importantly, the point I want to get across today is we think this is only the beginning. We're at the beginning of this journey. We have made the mistake and we specifically made the mistake of selling things probably a little bit too early, and we won't be planning on making that mistake for a number of these core investments, which we think have a very long runway of growth ahead of them. And more generally, we're seeing appetite return to, I suppose, the emerging company space, the microcap space, especially as share -- as interest rates continue to fall, hopefully, appetite, risk-on appetite is returning for these more, I suppose, industrial-type businesses that we often invest in. And I'll give you some slides that does resonate with that comment. But I suppose, from a top-down more specifically, we're not macro experts, but I do think this does touch on a few key points and give some perspective for everyone. The ASX 200, if we go back to Q3, it was in free fall, did a complete reversal to finish at all-time highs at the end of Q4, the same for the S&P 500. So volatility continue to reign supreme and no onshore, I suppose, why the market fell in the first place and obviously what drove the short-term reversal. But 1 thing that did stay the same was that small caps continue to underperform, albeit they did register a gain for the financial year, which was driven predominantly in the last 2 months of the financial year. The macro backdrop continues to be quite unpredictable. I think that definitely hasn't changed and probably hasn't changed even over the past week. The RBA continues to cut rates, albeit maybe not as aggressively as what people external economists and what not think, albeit now it looks like there will be a rate cut at the next meeting, there's almost 100% chance. There's been a lot of talk about tariffs from the Trump administration. Obviously, they were extended by 90 days. And now we're currently going through a period of country-specific tariff levels. And I suppose most importantly from Australian perspective, inflation continues to ease, May CPI dropped to almost 2% year-on-year. And we are seeing from a lot of our investee companies that there is signs that inflation is very much under control. And I think there's probably some more structural themes that I can touch on -- that in our view anyway that we'll see inflation over the longer term go to lower levels. One thing that definitely didn't change throughout the year was the rise of passive flows, and I suppose the insatiable appetite for large liquid businesses that do provide us opposed consistency, and dividend income. Most of these 2 examples here, Telstra and Commonwealth Bank of Australia don't really grow their EPS and haven't -- I mean in the case of CBA, haven't grown their EPS for the last 5 years in a row, albeit the shares did reach record highs at the end of June or where we have seen significant reversals over July now into August. And obviously, that's made being a fund manager, whether it's small or large or in the middle, obviously, very hard when you've got a relative benchmark. It's being driven by some of these asset revaluations, but at the same time, we are big believers, it provides a significant opportunity when you do see a significant reversal like we are starting to see over the past 6 weeks. Inflation has obviously been the talk of town for the last sort of 2 to 3 years and has driven a lot of instability and I would say a lot of capital allocation away from small cap equities as interest rates increased and people looking for more stability and certainty in places like private credit and term deposits. But over the past 6 months, we've seen a significant reversal in CPI. We're now starting to see unemployment increase. Obviously, the last update on unemployment was quite a bit worse, I suppose, than what people have been expected, and we are seeing more and more, at least us anyway. I think when you look at company transcripts on earnings calls, we are seeing more signs, especially in the technology space that layoffs are starting to ramp up as businesses put technology to better use to create more efficiencies it is coming at the cost of certain jobs. So it will be interesting to see how unemployment plays out over the next 12 to 24 months, keeping in mind that unemployment is 1 of the most lagging indicators used by economists. So some of the thematics we saw across Q4, it does seem like a little while ago. But I think the consumer discretionary space continued to be under a lot of pressure. We saw 3 notable downgrades by the likes of Ascent Group, anyone who knows Platypus Shoes, that's Ascent Group. [ ADAS ] did obviously announce another downgrade that saw their shares fall by 27% in the last week of June. And Katmandu, I think that would almost be had to be the fifth or sixth downgrade in a row, unfortunately, for them. And just more, I suppose, stepping back really driven by a lack of appetite for consumers to spend and to pay full price. So it actually -- for a lot of these businesses, it wasn't revenue that underwhelmed that was the margin. So they've really been forced to more aggressive promotions to drive sales, but obviously, that comes at a cost. And that's what we've seen here from an earnings perspective. There was significant volatility in the energy markets. But interestingly, we didn't see any flow-on effect either to oil sensitive businesses or oil-producing stocks themselves as oil prices continue to trend down overall. One thing I think is worth touching on, though, is we are seeing bond yields across the globe continue to rise and from notable developed countries, which I will touch on, as I think that is touching on an interesting story. Asset prices, I'm sure many of you have paid some attention to both the gold price and Bitcoin price which both continue to move to record all-time highs, again, probably does tie in with that comment above, I would strongly argue that government bond yields and gold and Bitcoin are somewhat correlated and looking for similar events to occur. And then obviously, that last 1 that does get a mentioned by many businesses now is the effect from artificial intelligence, the impact of AI. We are seeing more and more businesses put this to work in early stages. Some businesses are probably a little bit more mature than others. But interestingly, we are seeing how it will play out from a, I suppose, an investors' point of view, from our perspective, it's about efficiencies, doing things smarter, being more efficient, being quicker. For technology businesses, that might mean they can charge their clients more. We're seeing margins start to improve as they take cost out. They also charge their clients more. As I said, we are seeing certain jobs being removed from certain businesses. And I think AI more generally, will have a profound impact on many of the businesses that we invest in, in how we value them and ultimately, what they can earn over the next 5 to 10 years. Just to finish off with a couple of charts before I pass on to the team at Urbanise. This is just a global 10-year yields for 3 notable countries being United States in blue, Japan, in Orange and the United Kingdom in gray. I think it's interesting that obviously is interest rates around the world, are either falling, have started to fall or definitely gone sideways, bond yields actually continue to rise and remain at elevated levels. And the specific raising in my view is probably, yes, the macro backdrop is quite unstable. But more specifically, the balance sheets of a number of these countries are not as healthy as what they were. And ultimately, if you're lending to a person or a corporation or even a government, depending on their financial position, if that financial position continues to deteriorate, you will ultimately want more interest, to protect yourself against any potential credit issues with that counterparty, and that's what we're seeing in these 3 countries specifically. And ultimately, what does that mean for investors? That ultimately means that these governments need to get their budgets under control, either through reduced spending or increase taxes. And that will have an effect on economic activity in the long term. And clearly, governments such as the truck government are making their own, I suppose, decisions on how that will play out. But ultimately, how it does play out will have a significant impact on economic activity around the world. And I think it's imperative that investors look at charts like this to understand what debt investors think may occur in the future. And just to highlight just how -- I suppose, how much of an issue this could be in the future. This looks at the interest payments of U.S. federal debt as a percentage of governance spending. Clearly, the Trump government has had a lot of commentary on this position. And obviously, they view things to play out a different way. But if you look at this specific piece of analysis by the Federal Bank of St. Louis. You can see here that depending on -- you can say, well, notably the interest rates or the interest cost of the U.S. federal government based on what people thought in 2020 and then in 2022 and now 2024. Clearly, interest costs are going to be significant for the U.S. government. And ultimately, that means less money to be spending on other programs that either make the government more efficient, generates more economic activity, or protects provides a safety net for the certain people in the population, it needs to come from somewhere. And ultimately, whatever decision needs to be made to reduce or to get this percentage to come down, will have an impact on certain businesses that we are able to invest in either domestically or even globally. So it is something definitely worth watching over the next 1, 2, 3, 4 years to see which way this chart continues to move, but hopefully does fall. And now just touching on Urbanise quickly. As many of you would know, we've been a shareholder in urbanized, I think, probably for maybe 4 or 5 years. More recently, the business did a deal with National Australia Bank partnership, which is, in our view, a landmark deal to see that really puts Urban eyes on the map. So it's a pleasure to have Simon Lee, who's the CEO and Executive Director of Urbanise and Darc Rasmussen who's the Nonexecutive Chairman, who we've known for some time is also a Director of Gentrack and Objective Corp. And I'll hand it over to them who they can touch on and provide a bit of an update as it's been a really exceptional quarter for Urbanise and then we'll take some questions specific to urbanize at the end of this short presentation. So thank you, guys.

Thank you, Seb. Good morning, everyone, and thank you for joining us. Almost 2 years ago, the Urbanise Board recognized that the commercial model in our industry was becoming increasingly challenging, shrinking margins and growing compliance requirements were making it difficult to fund the level of R&D required to maintain a modern cloud platform and service customers effectively, Seb, can we move to the next slide, my apologies. Super. Thank you very much. So the consideration for Simon, our CEO, and -- sorry, yes, that's fine. My apologies on the slide use there Seb. Yes, so the other consideration for Simon, our CEO and the Urbanise management team, was that we were increasingly getting requests and demands from customers for alternative options for banking. And our customers are always our primary and critical consideration. We knew that simply operating as a stand-alone software vendor would limit our ability to scale and deliver the innovation our customers need. This is particularly in light of our competitors' commercial relationships with other banks. So the Board and management launched a competitive process, engaging with actually, most of the major banks to explore partnerships or potentially multiple partnerships that could unlock capability and provide the right foundation for urbanize long-term growth. So our strategic assumptions going into this process were quite clear. Firstly, Strata managers are under increasing pressure, compliance and reporting obligations continue to grow, and many are still using actually legacy on-premise systems that absolutely limit their ability to scale. Secondly, owners and committees are demanding more. They expect frictionless payments, real-time access to information, digital-first services, just like they experienced in other industries. And thirdly, banks have a very strong incentive to invest in this sector. With over $10 billion in Strata deposits and over $20 billion in annual transactions, the Strata market offers stable funds with very high net interest margins that are nearly twice that of other deposit segments. Finally, banking and payment processes remain highly manual, creating inefficiencies and frustrations for customers. through the competitive process, we validated these assumptions. Banks, we spoke with Strata industry is highly attractive, stable funds, strong net interest income and predictable growth. This reinforced our belief that the right banking partner could reshape the economics of our business by, firstly, deeply integrating the banking systems with Strata workflows. Secondly, accelerating our capability for product development; and thirdly, creating a differentiated solution that legacy competitors that simply wouldn't be able to manage. So this is the context for why the NAB partnership is such a significant milestone for Urbanise. So moving to the next slide here. This shows the overall engagement with NAB, the funding arrangements that we've agreed with them to support the delivery and scale of the data and payment integration services or DPIS as we call it. Firstly, placement 1 has already delivered $8.8 million in funding, strengthening our balance sheet and supporting road map development tied to the NAB partnership. Secondly, we will also receive $4.6 million in year 1, $3.3 million of that upfront that was paid at signing to fund the DPIS build, and then another $1.3 million within 12 months that are tied to 3 key delivery milestones. Thirdly, from year 2 onwards, Urbanise will receive a fixed annual of $1.3 million and actually, more importantly, a variable platform fee that scales with customer adoption. This is where real revenue growth potential lies. Turning to the next slide. NAB will provide in total a minimum of $14.7 million in funding over the first 2 years, assuming the milestones are met. This funding structure is actually important because, number one, it gives us the capital to build and launch the solution without diverting resources from our core road map. Number two, it unlocks a predictable revenue base through the fixed annual fee. And thirdly, and most importantly, it aligns incentives through variable platform piece, which scale as customers about the platform. This ensures urbanized directly benefits from the success of the NAB partnership in the marketplace. And with that, I'll hand over to Simon, our CEO, to take you through the remaining slides where he'll outline how we'll attract and migrate customers.

Thanks, Darc. Slide 5 sets out how we'll actually attract customers to the NAB and Urbanise platform and then migrate them across. So on the left-hand side, you see the current state of the market as such. Many Strata managers still rely on outdated on-premise systems with limited upgrade parts the payment infrastructure hasn't evolved for decades and often for short of modern customer expectations. Banking and Strata software are mission-critical but without improvement managers struggle to address the cost and efficiency headwinds. Nearly 50% of their revenue is now consumed by wages and high staff turnover makes that even harder. Most Strata managers are individually owned with limited support, making it difficult to move from legacy to cloud platforms And today, there's little choice in banking solutions. Macquarie remains the dominant provider, and Urbanise is integrated with their platform. The banking and software support can be fragmented across multiple providers, which adds further risk and complexity. Smaller Strata managers are also resource-constrained making business transformations, particularly challenging. Because of all this, many Strata managers feel stuck but they are open to a better and easier alternative. So on the right-hand side is what the NAB and Urbanise partnership will offer. The next-generation cloud-based platform built specifically for Strata management, and through our map continuously evolving with joint NAB and Urbanise investment, deep banking and software integration that transforms how managers work, automating workflows end-to-end and reducing errors. And true banking choice for the first time with competitive pricing and a financial model that improves managers economics and protect margins. Finally, a premium digital experience for owners and residents seamless mobile-first interactions that build trust and enhance the manager's reputation. So our close relationship with NAB allows us to provide the tools and resourcing Strata managers need to move their banking with as little disruption as possible. And so our initial focus will be on our existing customers who already benefit from our cloud solution. And from 2026, they will have the option of new NAB banking solutions alongside Urbanise functionality. We will help Strata manager streamlined communications to owners. and update levy notices of payment details transition seamlessly. We're also working to reduce the effort required for managers to onboard with NAB. So really to capitalize on that partnership are high-level strategies to complete product development in 2026 and then ramp up the NAB and Urbanise solution initially with existing customers and then offering it to new ones. This 2-step approach attracting with a stronger value proposition and making migration easy and well supported, will drive strong adoption. Now that we've covered how we'll attract to migrate customers for the partnership, I will cover our recent results. On Slide 6, is the highlights from our recent quarterly and full year results for FY 2025. We achieved our goal of being cash flow positive for the full year following 4 consecutive positive quarters. Total revenue grew by 4.2% year-on-year to $13.1 million with quarter 4 delivering a 51% uplift compared to the prior period. Excluding the NAB partnership deal, we secured $930,000 in new annual recurring revenue, ARR, wins across 42 new contracts. License fees remain the backbone of our business. making up 91% of total revenue. Strata license fees were reported lower. But on a like-for-like basis, excluding Middle East revenue reallocation, they grew 5.8% year-on-year. As you can see, FM license fees grew 9.5% year-on-year. And we also began recognizing partnership-related revenue from the NAB agreement. We closed the year with over $15 million in cash, which gives us the resources to complete the NAB banking integration and rollout as well as providing us with the funds to accelerate our Strata go-to-market strategy. On the next slide, just in summary and looking ahead, our mini priority is clear, delivering the NAB banking integration on time. F '26 will be a transitional year for Urbanise, we'll be investing to complete the build and roll out. And because of this investment, we're expecting to be operating cash flow negative. However, from FY '27, we expect to return to operating cash flow positive as the partnership ramps up. We'll also focus on growing our customer base across both Strata and FM with a sharper sales approach and a stronger pipeline. The Board continues to evaluate strategic opportunities, whether broadening our product set or expanding into new geographies but only where it makes sense and adds value. To summarize, we closed FY '25 with over $50 million in cash. We have the resources, partnerships and road map in place to deliver. And we're well positioned to accelerate growth over the next 2 years. This is an exciting and pivotal time for us and the team at Urbanise. We're confident in the plan we've set out. That brings us to the end of today's presentation. We've covered the context behind the NAB partnership, how we'll attract and migrate customers and the strong financial position we're in to deliver.

Thank you, Simon, I understand, Seb, that there might be a little bit of time for any Q&A.?

Yes. [Operator Instructions] We did get to who e-mailed in prior. So I'll just read them out for you. And if you -- as -- as I said, we all presenters, if there's something that obviously is too sensitive given the timing you feel free, obviously, to pass and not answer the question.

But this 1 is from a general called Chris. You may have answered some of this already, but the first part is what is the wider strategy for increasing the take-up of clients on the Strata management platform. And then obviously, the second part of that is, can you elaborate on the progress of improving the onboarding all the migration of new clients to Urbanise.

Yes, I'll take this one. Look obviously the NAB partnership is important to attracting new customers. But in terms of our base business, it's still important for our go-to-market strategy to increase our sales achievements. Over the past 2 years, we've made quite a significant investment in our go-to-market strategy, includes our marketing and engagement with the [ SCA ] our outbound sales capability. And I think I'm pleased that our industry engagement has improved. We're seeing very strong brand awareness now where we go. People know the platform. And that has increased inbound interest, particularly in the small to medium-sized Strata Managers segment. So that's where really our success has been to date. Of course, we're not resting on that. And smaller to medium customers are a little bit more agile to adopt cloud native solutions like ours. Our next stage of growth is -- we've got our target list of customers they are larger often going to be more on-prem, Strata Managers. And we know that the sales process is going to be more complex there. So typically, you're going to be dealing with IT and finance departments, the sales cycles can be a bit longer. So we are investing in enterprise sales capacity and capability to address this. And that's going to be a little bit more technical on the sales resources, the deal building the way that we actually take customers through the journey of actually making that decision to buy the platform. So I think in terms of the migration part, that's actually quite linked to that as well. I mean migration is often a key barrier to making that decision to move it. It's time consuming for customers. It can be risky. So we've made quite a bit of progress over the last 2 years again with expanding our migration options. So we do offer full service migrations to more so the light touch migration that allows you to get live a lot quicker. We've also increased our capacity internally and externally, so we can rely on and provide customers with the resources required to get through the data cleansing, the configuration and helps with the onboarding. So also standardizing our implementations helped as well. So those are -- that's what we've been working on in terms of trying to expand that. And obviously, with the balance sheet we have, we have the resources to really deploy further into capacity and capability.

And a question from Philip Dodson, pretty specific this one. So are you managing to penetrate into Strata Managers links to the Steadfast Group? Not sure.

I mean, look, we probably don't look at the market that level of detail. We -- when we're looking at our target markets, we look at it by states, maybe we look at it as quite often by our competitors. So whether they are covered by Steadfast. I think Steadfast obviously is more on the insurance side. But inevitably, probably yes is the answer, Seb. But we look at our targeting quite differently.

Yes. And Laurie Smith asks, just can you elaborate on your main competitors?

Yes. Look, we have [ StrataMax ] who an on-prem offering, we have [ Property IQ ] which is associated with Macquarie Bank. [ Strataster ] owned by MRI, it's a big private equity software house -- so there's a mixture there of on-prem and cloud based. We certainly think of ourselves as 1 of the leading platforms out there. We continually invest in our product road map. We continue to engage with our customers in the development. That's broadly the -- and most of these competitors are Australian-based. That's generally the life and then with our competitors.

It might be worth adding 2 of the -- 2 of those 3 competitors are on-prem-based solutions, Windows-based solutions. And today, upwards of 50% to 60% of the market is operating on those systems. So there is a real industry transformation opportunity. I've worked across 21 different industries in my career. And repeatedly come across industries that say, yes well, we've been using this software for the past 20 years, there is no reason to change. And there isn't until there is. And this is what we've seen across so many industries. Most recently, with the global utilities industry with Gentrack where I'm on the Board and that industry was pretty much at a standstill 2, 3 years ago, and now it's in full thrown transformation globally. So these legacy solutions can hold out for so long until they can't anymore. And obviously, the pressures we could elaborate extensively on that, but there's a very strong tailwind in this industry for industry transformation.

And just last couple of questions from Peter. So the first 1 relates to, obviously, when you mentioned being operating cash flow positive in '27, would that correlate to becoming profitable as well, given, I don't think Peter quite answers, obviously, the DNA profile of the business. And then the second part of that would be what proportion of your revenue do you invest in R&D or product development?

Yes. I mean the goal is to be profitable. We as mentioned earlier, pretty pleasingly delivered a cash flow breakeven or positive cash flow in FY '25. The background to that is we've been very careful on cost disciplines. The objective is to maintain the recurring revenues and to drive up sales in our go-to market. The NAB partnership is part of that. So we have those very important variable fees that are driven by customer adoption of the partnership, but also we're focused on the go-to-market, as I mentioned. next year, sorry, FY '26, we're well into FY '26 in August, is our transitional year, and that's where, obviously, we're investing in sort of the platform and to the partnership. At the tail end of this year, as we are targeting that adoption, then we'll see, hopefully, the revenues come up and therefore FY '27 as we are targeting profitability. And in terms of the R&D historically, I'd have to come back on that 1 in terms of percentage. I don't think we disclose that to the market. It's -- look, next year, we'll certainly be investing a fair amount in R&D into this -- into the product. It will be -- it will be for a period of time. It won't be beyond that, it's sort of a onetime investment with some maintenance costs thereafter. So I think last FY '25 operating costs, which you'll see in a few weeks when we announce our full year results will probably not be indicative of what we spend in FY '26. But certainly, we expect the operating cost to come down in FY '27.

And I might just throw the last 1 in just to maybe give people some context. Can you just touch on maybe the size of the market, your share -- and what -- I suppose when Darc touches on, obviously, 60% still on-prem, what do you think -- I'm not looking for of what's achievable, but in your view, what's -- what your -- what the NAB and Urbanise product could really gain over time?

Yes. So I mean, there's 2 ways of looking at this. One is that there are a discrete number of properties in Australia under Strata management. Those numbers are about

2.2 million Strata titles in Australian and it's been growing at a steady rate, obviously with new builds. In terms of Strata titles that would have some form of software coverage because the Strata manager is responsible for looking after them. We estimate somewhere between 2.5 million and 2.6 million of those will be using software. Now we probably have about 1/3 of the Strata managers by number. where we're targeting to grow really is -- and we've got, I guess, the small -- a lot of small to medium, and we have also the largest Strata manager in Australia. So I guess the top and the tail, we're -- we are targeting what the lot in the industry will call the heartland, the medium size. And that's where a lot of the lots numbers are we're talking about Strata managers who are managing 7,000, 10,000 plus lots, and that's really the opportunity for Urbanise. A lot of that, as Darc had outlined earlier, covered by on-prem solutions. And to date, the migration and the effort required to transition still remains the biggest barrier to make in that decision. They want to make that decision. We tend to find with our leads and our opportunities, they don't sort of close or die, they tend to get deferred. And so what we see is Strata Managers putting off that decision until they can overcome that hurdle of migration and put the resources into it. And that's really where I think the NAB partnership helps us. We've got the understanding of how to do it. We've got the systems and the processes. We just need a little bit of resourcing and the right structure of the ecosystem between the partnership and ourselves to help managers move forward into a modern cloud-based ecosystem. So that really is our strategy.

And that segues then to the second part of market sizing, if you will, which is around the banking integration software. So on the 1 side, you've got the 3.2 million lots and how many of those can you capture? Were there software fees for that? On the other side, there is the banking integration software opportunity. We estimate that to be upwards of $50 million to $60 million a year. Right now, we've essentially got 0% of that. But we have about 30% of the Strata managers, so not only is there an opportunity to capture at least our fair share of that banking integration market. But not only that, the fact that now we're partnered with Australia's biggest and best business bank. The combination of the 2 should help us capture even more additional market share. So it is those 2 sides of things to consider when you look at the market.

Yes. And I think it's a good point you to the $7 million or $8 million of Strata recurring revenue you have from software includes 0 from NAB in theory to grow that sort of the banking revenue, your current client base provide you sort of ample opportunity to grow that into the short to medium term.

That's it. Luckily for you, that's all the questions that they've -- so if there are any more if anyone does have any questions, feel free to e-mail me and I can pass them on to the Urbanise team. But Darc and Simon, I really appreciate you taking the time and making the effort. I know given the time of the year and everything that you have on, I really do it, Rob and I really do appreciate you doing this and best of pipe for full year results. And obviously, for FY '26, it's going to be a pretty pivotal year for Urban if. So thank you again.

Thank you, Seb. And thank you all for your time today.

And now I'll just going to hand over to my colleague, Robert Miller, who's going to run through a number of updates from a number of our investee companies and probably a few pivotal slides here given some of the news that we saw over the last few months.

Thanks Sebastian, and obviously, thank Simon and Darc for taking the time to give us a very comprehensive update on the NAB partnership certainly. It was -- no doubt the shareholders here would have learned something there today. What is typically a quiet quarter, Q4, it's actually very busy. So although a quick round of the ground across some of the businesses we held across the NAOS portfolio. So firstly, Saunders. Taking civil and engineering business, it's been a core holding for quite some time. There was plenty of news flow out of that business during the quarter. So on the positives to start, we saw them with a contract, it was a reasonably quiet period of time for contract wins, but they did certainly win 1 with [indiscernible] gold mine, which is the Northern Star silver pit project. It's a second project and 1 with them. And for anyone who's got a keen eye, you can go and look at the Northern Star presentation from yesterday, and you can -- I think you can see these tanks being built in 1 of the photos they've put out. So -- they look pretty good to date, and hopefully that continues over time. The main bad news, I suppose, not bad, but negative, I suppose, was the announcement of the resignation of both Mark Benson during the quarter and also the downgrade in terms of the guidance for FY '25. Firstly, it's probably worth pointing out that under Mark's guidance here over the last 12 -- 10 years as CEO, he's done a remarkable job. He's turned this business from, no disrespect, from a sleepy contracting company into something that has multi-disciplined operations across a wide range of sectors and the EPS growth consistently over time has been remarkable. So -- the search is on the way at the moment for a new CEO, and we expect that to be finalized over the next coming months and Mark's in place there until the end of the year and hopefully, he has a role for the business longer than that going forward. With FY '25 and certainly it's been a performance lagger for the group, the NAOS Group, wide talking here is Saunders' performance. And if you look at what's occurred in FY '25, and certainly, it's been consistent across a lot of the contracting companies is there's been significant delays in the timing of project wins. And you certainly do see these periods of time with contractors and FY '25 was unfortunately that, particularly in the defense and resources sector where this has been a consistent message across a lot of peers as there's just been projects haven't disappeared. I mean anyone can read a paper and learn about what's happening in the defense space but they've just been pushed out to the right. And as a consequence, Saunders have seen their earnings downgrade for FY '25 and their margin profile is materially lower than what it was in FY '24. Why do we think this is probably the low point Well, firstly, they've made an acquisition subsequent to quarter's end, which we'll touch on, no doubt in a future presentation, but Aqua Metro is a water business that adds significant scale to the existing operations. And we think that is an excellent acquisition and done in a manner which is done very, very cost effectively as well and should be a great reward for shareholders going forward, all the Saunders business. But equally as well, we think the cost base for Saunders core has been adjusted appropriately now. And future work can't be delayed forever. So hopefully, in FY '26, we see the improvements once again kick in. Coming to AMA and this is a company for -- it's probably got -- I haven't seen the company with more shares on issue than AMA, and it probably speaks to the legacy issues they've had over time. There's been plenty of them. It's a business we've known for a long period of time, but I became an investor again once they've reset the balance sheet about 12 months ago. In the quarter, we saw a CEO departure of Mat Cooper, and he was replaced with who is an existing Non-Executive Director, Ray Robert Smith, who was previously at the business and has a strong and long history in the industry and with AMA specifically. Are the key parts that have occurred for AMA during the quarter were the renewal of their Suncorp insurance agreement with scope for growth there with the rollout of a number of new stores, which underpins EPS growth over the next couple of years? This -- the importance of this relationship between AMA and Suncorp probably can't be understated, publicly rating what's occurred in the past, it has been checked. But certainly, it seems to be very strong footing now. And it's both parties when this relationship is going strong. So we think they're both very important to each other, and it's great to see that, that risk has been somewhat derisked with respect to the future for that relationship. Also, the debt refinancing was complete and the issues that AMA have had in the past and still continue to have is the turnaround of AMA collision division, they've got 2 divisions in their main operating smash repair space. Capital S.M.A.R.T, which is going from strength to strength, generates about 11% EBITDA margins, whereas the AMA collision business is still loss-making at an EBITDA level. So the opportunity for improved margins in the AMA Collision division is very significant, and we think that is something that Ray Robert Smith will have a good handle on. And now that he's in the role of CEO. Next slide, please. Urbanise here, obviously, you've heard it from the horse's mouth. So I won't spend too much time here other than to say that it was great to see their contractual split with Colliers all resolved. And probably from a risk mitigation point of view, the fact that the NAB funds have been received in the bank and the balance sheet strength of Urbanise to then hopefully grow into a much bigger business over the next couple of years. It's a great starting position to be in, especially when you can think that the core business has a very low churn rate. So it's going to be a very exciting FY '26 and FY '27, hopefully, for Urbanise. MaxiPARTS, which has been a core holding for quite some period of time in the truck parts and distribution space. What I'd probably classifies what's occurred for them during the quarter was a lot of probably quick singles if we love a [indiscernible] analogy here. So what they've done is they've refinanced their debt. They've mopped up some minority interests. Importantly, they've renewed their relationship with FORCH, which is their German parent company for the distribution of the FORCH Australia products they do in Australia. And they've also opened a new store in Calgary, which opened in August and is up and running. So why quick singles are important for MaxiPARTS at the moment is if you look at their closest peer, they're not directly comparable, but they're pretty close is Supply Networks, on a PE of close to 40% generates a return on capital of about 35%. The market does like these businesses when they execute well and supply network certainly has a long track record of doing that. MaxiPARTS is starting to put some runs on the board with respect to incremental improvements over time. They've done some clean results over the last 12 to 24 months now, and we hope that, that continues, and the market is willing to reward such businesses once they do perform and they can execute consistently with organic growth and margin improvement, which we think MaxiPARTS is on that trajectory at the moment, which is great to see. And finally, one, we haven't really spoken about much in the past here is Brevera, a reasonably new holding. It has a long history, but to summarize it in 1 sentence, software company that focuses on the superannuation space and our wealth management space. It had -- it's been listed for quite some period of time, but had a recapitalization. And many has had numerous CEOs, I should say, over the last few years, recapitalization occurred in, I think, 2023. And what's occurred since then is the introduction of a significant shareholder group out of Canada called Pinetree who I wouldn't be overemphasizing this to say that there's probably no company on the ASX that has a stronger management of board with respect to industry experience and a track record of delivering in what they do in a certain area. So we think that they've come in material shareholders now they're probably spent over close to $70 million buying shares on market over the last couple of years. And there's been a significant direct to change over that period of time as well. Since that time, we've also seen the CEO resignation and also the Chairman selling stock during the quarter we counterpose that with the fact that the Pinetree Group out of Canada have been buying more shares on market over the last quarter as well. Why we think this is a business that has a lot of hallmarks that we look for. If you look at what's occurred with the CPS 230 standards for APRA, they have obviously regulate the superannuation industries in Australia, this software that Bravura provides to their customers, it's a highly regulated industry, and it's mission-critical for what their customers need and what their customers do. So being a software provider that is effectively a necessity and a positive necessity, it's a great spot to be for a company like [ Brevera ] to be. To date, under the Canadian -- the leadership of the Canadian team if I paraphrase it with that. It's been about margin improvement over the last couple of years, and certainly, the share price has adjusted accordingly, but it would be interesting to see over the next little while where the organic growth from a revenue point of view comes if they're able to deliver on that, and we think there's significant upside for this business. Finally, on COG, which again, a long-term holding for us speaking of director renewal, that has occurred earlier in the year. We've seen, as Seb said, the share price has reacted from going approximately $0.90 now back to close to $1.80. What we've been very pleased to see is these new directors have come in on the PSC insurance, if anyone was on that journey, they've been lucky to get circa 25% IRR over a 7-year journey with a business that went from $230-odd million to $2.3 billion over that period of time. They've got experience and they know what they're doing in this general broking space. And the simplification of the coal business has started basing we saw the equity stakes of CenterPoint Alliance and early pay divested during the quarter, and that cash can hopefully be redeployed into higher margin and higher return on capital areas closer to their core business, which is something that we I've been wanting to say for quite some period of time, and it's pleasing to see that, that's actually been executed upon to date. In terms of the quarterly, the Q3 was put out, and we've seen strong growth in the novated leasing industry generally, and COG was certainly a beneficiary of that in the finance broking aggregation space, subdued industry conditions do remain, but we do think with interest rate drops over the next little while, that should certainly spur activity. And we think that that's an underpinning tailwind for COG in that space, which is the market leader and the ability to grow from where they are today organically should be consistent, hopefully, over the next couple of years. So with that, I will hand it back to Sebastian.

Thanks, Rob. [indiscernible] before I take questions, just with a couple of slides on outlook as best I can. But I think just moving away from the stocks more generally. I think it's interesting to see, like, obviously, the last couple of years, as I said, has been pretty tough for us. clearly, the last 4 or 5 months has definitely picked up. A lot of what's driving that is, I think, really the macro backdrop, investor confidence, more of a risk-on mentality, just a structural change, I suppose, in investor dynamic. We're seeing economic activity in our view anyway, is on the improve, definitely in certain pockets. Obviously, our largest investment is very much related to building activity, if anyone follows building approvals and commencements, they are definitely on the rise. And many people think we're on the cusp of long-term structural change in that area that we'll see the significant number of new homes being built. Clearly, inflationary pressures have been on the dial for a while now, and we are seeing that play out across a number of our investments. Why is that important? It's important because it means margins can be under control and potentially even increase if you're paying less in rental increases. Interesting, I'm seeing a lot of property owners moving back to fixed cost increases away from CPI because of the general view on CPI over the next few years, lower wage increases, lower insurance costs, it all helps the bottom line. As I mentioned, the AI impact, we're seeing more and more businesses move pretty aggressively into AI, whether in truck parts, whether in technology, urbanize, whatever it means you can become more efficient, provide a better outcome and experience for your customer base. So in theory, you should be able to charge more and potentially increase margins by reducing certain costs. And then that final point is probably the 1 that has lagged is just workforce and investment availability, skilled labor shortages are real but we definitely say that we are seeing signs that they are easing in certain pockets. It's definitely not what it was 12 months ago. You are able to hire excellent people, albeit at significant cost, but it's not like they're not there bid in, hopefully, in the next 6 months' time, especially as a number of larger government-related jobs and work rolls off you will see more availability of skilled labor, hopefully, for a number of our businesses and the economy more generally. So what are we looking for Q1 of FY '26, I think Rob touched on a few of these already, but pleasing for us, July was pretty good. But August is obviously the money month for really the whole of FY '26 and from our perspective, these were the 5 that really interest us, I suppose. And the first 1 being Brevera, company has been pretty low on disclosure more recently gone through a significant amount of change, how essentially a controlling shareholder will be very interesting to see what update to provide on this strategy post the CEO's resignation, quite a polarizing stock, but in our view that a stock that can be highly valued by the market in a few years' time. COG Financial Services unbelievably gone from $0.90 to over $1.80 today with 2 new Board members and a simplification of strategy which is obviously something we were asking for a long time. Really interesting to see what those Board members come out with regarding their strategy, then move into insurance broking return on invested capital moving away from that lending business, something in the market obviously it's got a hold of how they implement that will be of interest and I suppose, on what time line. Saunders, making the largest acquisition to date, I suppose the strategic merit of that update on the projects related to defense. I'm sure many of you would notice that defense have announced the winner of the $10 billion [ free-gate ] program today. So it looks like the wheels and defense are moving once again. And then the last 2 there, we spoken about urbanized to death. But I think over the next 6 months, it will be very interesting to see what disclosure and progress they can make around their deal with NAB, what does the -- I suppose, what does the portal look like, the features that it has relative to a Macquarie portal as an example, go-to-market dates, the addressable market and the market structure in regards to some of those on-prem players that, in our view, will struggle to compete with the likes of Macquarie and Urbanise. And then finally, MaxiPARTS. As Rob mentioned, the first clean result in a few years, this business has made a number of acquisitions. It scaled, implemented new ERP now has a national network, an excellent customer base. It will be very interesting to see how they can deliver, hopefully, deliver on revenue growth, earnings growth and more importantly, cash generation. I think if they can string a few of these results together, it's not going to be a single-digit PE business for much longer. And this is just a slide. I'm not going to go through but this is a slide we put together probably -- must be 10 months ago now, and we like to hold ourselves accountable. But does look at some of the catalysts we called out 10 months ago, what's occurred, what hasn't occurred and obviously, what's been unsuccessful. The unsuccessful 1 stands out in red, and I've spoken about that to [indiscernible] over the last little while. But pleasingly, seeing a lot more green here, which is reasonably pleasing for us, even some that occurred in July from the likes of MOVe. And hopefully, we can tick off a few more of these going to August, especially the ones related to MXR as an example, and even Urbanise there. We should actually add that as another green line post their quarterly. So just to finish off before I run through the questions. [Operator Instructions] As you can see here, this looks at the dividend profile. I do want to touch on something quickly. As I'm sure a number of you I've answered quite a few questions for this webinar via e-mail, also over the phone. As many of you will know, I do talk to everyone, that does have a question, so feel free to contact me directly. But you would know, especially in the case of NAC and NSC more recently is the performance of all of the LICs or those 2 LICs specifically has improved. In the case of NAC pretty aggressively. Clearly, the discount to NTA has increased pretty significantly as the share price has lagged the movement in NTA. And what we are saying a lot of shareholders don't realize this, but we do have a dividend reinvestment plan. While we are calling this out, it's important because it allows our investors and shareholders, such as myself, to acquire shares with no cost. But more importantly, it allows us to acquire the shares with no dilutionary issues. So all the shares in the DRP for all LICs are acquired on market, if the shares that are trading at a discount to NTA. So if you look at NAC as an example, the NTA is closer to $0.70 and the share price, I think, said it was $0.50, it allows you to acquire more shares in theory at $0.50 when the dividend has been paid. So what we are telling a lot of our shareholders are just reminding the very least. If you are looking for a way to increase your shareholding, and we do go through the register every day, and we have seen a number of shareholders increase their shareholding more recently. And this is just another way to do it, household free with minimal cost or no cost, and we're not issuing any shares below NTA. So if you do want any further information, please send us an e-mail to Inquiries or just give the office line a call, and we'll do our very best to help you with that.

And then finally, I'll just touch on the questions. There have been a few questions. I'll try and I'll do my very best to answer all of these. Some of them might require a phone call. But let me do my best. So Roger asked a question what happened to BRI? Good question, Roger. So thankfully, nothing's happened to it. We just didn't mention in this presentation, reason being nothing has happened, I suppose. So we try to keep it pretty relevant. But what I would say, and I think you probably touched on it. Big River is obviously 1 off, 1 of our largest investment. And what I would say is, from a macro perspective, we are definitely seeing some really positive signs. So approvals have been increasing steadily. Building activity more generally is increasing. We're seeing lower interest rates. More importantly, the government intervention is really starting to help. So as I'm sure if you live in New South Wales. And as an example, the ability for apartments to be get approval at a state level outside of council is really helping and moving into larger activities such as Brisbane Olympics, we're starting to see more activity there. So with Big River's revenue base is north of 60% is associated with residential building, whether it's alterations, townhouses or actually stand-alone homes. We feel the next 3 years, hopefully, will be a bit of a purple patch for Big River. But more importantly, I think it's going into the Purple Patch is a much better business. They've got a better team focus on cost, focus on their products and their SKUs, which there should be higher margin, a simpler business, just a better-run business that can scale. Keeping in mind, this business went from $100 million in revenue to almost $0.5 billion pretty quickly. we feel like it can make the next step from sort of $40-odd million to close to $1 billion over time. Danny, I just -- I do have your question, if you don't mind, I will just e-mail you just given the length of the e-mail, if that's okay. A question from Nava. Just how is NSC performing given what occurred in February? Good question. Yes, I think obviously, looking back in hindsight it was pretty dark times in February, given what happened in -- or what happened to BSA. And thankfully, for NSC, the obviously, for us, NSC has had a positive month ever since then. I think by the time we got to July, all the losses associated with the BSA investment have been removed. So we've done pretty close to 30% from March to the end of July. And as I said at the start, we feel like momentum is with us, but more importantly, the businesses are performing very well. So as long as they continue to grow, hopefully, we'll see -- continue to see some margin improvement especially as more investors start to reenter the microcap space. Peter, you've got a few questions here. So again, I'll do my very best. But what are the moats of MaxiPARTS and AMA? Good question. So I think for MaxiPARTS, clearly, and I think you made a comment referring to SNL here. So for MaxiPARTS, it would be about 2 things. I would say, obviously, it's about the library or the catalog of parts, Maxis is very strong in U.S. truck parts and getting a lot stronger in Japanese truck parts. That's not something you can recreate overnight. You did have a comment on SNL and I will find it, but maybe I'll touch on it now. So the reason why Maxi and SNL are as comparable as you may think, is because SNL generates a lot of revenue from European truck parts, keeping in mind SNL generated that catalog probably 20 to 25 years ago. And if they're probably the 1 and only player in that space out of the OEMs. And even for someone like Maxi's that would be hard to replicate or be it more recently, a new player has entered the European trucks parts. So we think that's an interesting an interesting, I suppose, moat to monitor for SNL. And given the scale that Maxis have, it just gives them a big competitive advantage to a lot of their smaller peers. And I think that's why you've seen the market become a core SNL and MaxiPARTS. So AMA, in my view anyway, it's really about scale and providing -- Well, AMA has got the scale to deal with the likes of Suncorp. I think if you're a Suncorp, IAG or whatever it may be, given what's happened with insurance premiums, you want the ability to deal with a smash repair company who can give you consistency, it can give you scale. It could take on a significant amount of cars. And ultimately, it can give you the same result for your clients at a low price. In theory, AMA should be able to do that very well because of their scale. So if you think of their buying paint, if they're using certain technologies on cars, especially as cars become more sophisticated with sensors and all that sort of stuff and special multi-colored paints, there are not many people that can do that consistently at a fair price across Australia. And I think if you're IAG, Suncorp and whatnot, you need to deal with these certain players, especially in such a fragmented market such as smash repairs -- smash repairing companies. Good question from Trent. So COG has had a great run with the catalyst you mentioned. Do you see this -- do you see yourself that in business providing another catalyst with additional liquidity? Is there any positions we're providing liquidity could benefit the stock? Good question, Trent. Yes. So I think in regards to COG, I'd like to say that our catalysts are selling down was a -- or selling our position and Cameron was a catalyst. I think, ultimately, though, the catalyst was the 2 gentlemen going on the Board, regardless of what we do with our shares considering they've got such a great reputation given what occurred with PSC insurance. I think if we had a similar opportunity to do something with that with another 1 of our core investments where you could bring someone on or people on who had a lot -- an excellent track record in a similar space and being shareholder friendly, we would definitely do that. We're always having conversations and we're always looking at different opportunities, especially given what occurred with COG. But I think you raised a very good point. I think it's interesting, right, COG from an earnings perspective actually hasn't changed. It's just the multiple that's changed. And I think a lot of that can occur with many of our investments, whether it's MaxiPARTS. Obviously, we've seen something similar occur with Urbanise. Obviously, with Darc coming on more recently. Over the last 2 years, there's a number of other businesses we could deal with. I think it's finding the right partner at the right time and obviously microcaps are for everyone, as I'm sure you know. And then the last couple of questions in regards to -- from Peter. So the sale of MidCap, how do you value these private investments for NTA? So in regards to -- I think we've touched on this a few times. So in regards to all of our private investments, our investments in private businesses are based on the last arm's length transaction or our cost price. So we don't revalue investment up. without an arm's length transaction. So I think that's quite important, and I can get a [indiscernible] maybe to touch on this later with you, Peter, if you wish. So from our perspective, why do we invest in these private businesses. I think from our perspective, it probably gives us another edge. Sometimes the business is not ready to list, doesn't want to be listed for all the reasons that I've touched on over the years. And therefore, they may require capital 12 to 18 months out prior to listing because they want to scale, they need to get a few more runs on the board or whatever it may be. So it does allow us to allocate capital, hopefully, on much better terms than what we would get at an IPO. But at the same -- in the same sort of sentence, I want to say it's never going to be a very large part of our total investment, so it might be 5% to 10% as it always has been. But again, in businesses that we -- within our sort of core competence that we think take a lot of the boxes that all that we expect all our listed businesses to as well. And then Peter has got a comment on, given the payout ratios of the LICs, why you do so many companies that we invest in are not paying dividends? Is it easy to pass on dividends than having to sell shares to make a profit and gain franking credits? Are you confident in the NCC dividend? So yes, look, I probably wouldn't agree with the comment that a lot of our investments are not dividend paying. I think if you look at our largest investments, -- you look at your Big Rivers, your COGs, your MaxiPARTS, not Urbanise, they're dividend paying. I think even [ BBS ] was dividend paying for memory -- Yes. So actually, the majority of our investments actually do pay dividends, and that allows us to use the fracking credit. So as I've said time and time again, a lot of the dividends that we pay are actually covered by the investee companies themselves as opposed to us relying on gains. And the reasons we've been able to frank a lot of our dividends to date is because of the franking credits that we received because obviously, we haven't been paying tax given the poor performance. But obviously, as performance has improved that does that gives us more flexibility from a capital management standpoint, whether it's buybacks or not buybacks, which just so someone also mentioned, dividends, franking credits, all of those things. But we are very cognizant of ensuring the dividend profile of the Lex is well supported by the dividends that we received from our investments, such as MaxiPARTS as an example. As I said, Danny, I'll get back to your question at the end of this. If you don't mind, I might give you a call or send you an e-mail. But if you do have any other questions, as I said, feel free. I don't mind if people just e-mail me directly at [email protected], even give the office line a call, that's fine as well. Otherwise, hopefully, we look forward to providing you with a pretty reasonable update for the pivotal Q1. Thanks again for your support. And hopefully, happy investing through reporting season, and we'll see you at the end of October. So thanks again.