PEXA Group Limited (PXA) Earnings Call Transcript & Summary

Good morning. I'm pleased to welcome you all to PEXA's results for the first 6 months ended 31 December 2022. In particular, I'd like to welcome any first-time shareholders who have joined us through the in-species distribution of Link's PEXA shareholding earlier this year. To begin, I respectfully [indiscernible] nation, who are the traditional owners of the land on which the PEXA Group is headquartered in Melbourne Stock lands and pay our respect to their elders, past and present. On Glenn King, PEXA's Group Managing Director and Chief Executive Officer. And joining me this morning is our Group Chief Financial Officer, Richard Moore. Today, we will cover PEXA's first-half business highlights and financial performance and provide some perspectives on the company's outlook going forward. At the end, we'll be happy to take any questions. So first, a recap on the PEXA Group. So, let's start with what PEXA Group is today. 2 years ago, before our listing on the ASX, we were a single brand operating in a single market with a single source of revenue, the very successful picture [indiscernible]. At the time of our IPO, we laid out a growth path in terms of becoming a leveraging or leveraging our IP and expertise to become an international leader in digital property settlements starting in the U.K. and also monetizing our real-time data [indiscernible] and identifying and incubating new business ventures across the property ecosystem. So today, when we now announce our results, we have multiple diverse revenue streams across 3 core areas of businesses, the PEXA Exchange, PEXA Digital Growth, which now represents the merger of PEXA Insights and [indiscernible] and our PEXA International Expansion. And as you'll see in our results today, we are well on the way in all 3 streams. We are now a rapidly evolving international platform business that seeks to redefine the property experience by leveraging our experience, intellectual property, technology, data and partnerships. The Australian property Exchange is the #1 property exchange platform in the country with resilient, efficient performance and continued growth potential. We have built all 3 streams. We are now a rapidly evolving international platform business that seeks to redefine the property experience by leveraging our experience, intellectual property, technology, data and partnerships. The Australian property Exchange is the #1 property exchange platform in the country with resilient, efficient performance and continued growth potential. We are building real momentum in PEXA's Digital Growth Services and Revenue. And our PEXA [indiscernible] technology platform is live in the U.K. and the acquisition of Optima Legal support our scale and future growth aspirations. So now I'm going to turn to Slide 6. So, slide 6 lays out our strategy clearly. It's to enhance the core PEXA exchange service in Australia, continue to expand through PEXA Digital Growth to provide innovative data insights, building deeper customer relationships across a broader group of stakeholders, expand through PEXA International into new Torrens title jurisdictions, like the U.K. and evolve that business by investing in our people, platform and brand to sustain an innovative culture and reputation trusted by stakeholders. All these strategic cores, all support the fulfillment of our purpose, which is connecting people to place and are delivered in accordance with our values, innovate for good, better together and make it happen and make account. Now turning to Slide 7. Over the first half of this financial year, we continued to do what we said we would, executing a clearly articulated strategy and delivering positive outcomes for all our stakeholders, including our customers in Australia and the U.K. The PEXA Exchange continues to perform well in a challenging Australian property market, make it happen and make it count. Now turning to Slide 7. Over the first-half of this financial year, we continued to do what we said we would. Executing a clearly articulated strategy and delivering positive outcomes for all our stakeholders, including our customers in Australia and the U.K. The PEXA Exchange continues to perform well in a challenging Australian property market, with transfer penetration increasing by 4 percentage points to 88%, supported by the growth in Queensland and the ACT. And we delivered an operating EBITDA margin of 52.4%, right in the middle of our FY '23 guidance range in Australia and the U.K. The PEXA Exchange continues to perform well in a challenging Australian property market, with transfer penetration increasing by 4 percentage points to 88%, supported by the growth in Queensland and the ACT. And we delivered an operating EBITDA margin of 52.4%, right in the middle of our FY '23 guidance range. With ongoing focus on expense management within the business and our strategy to diversify our revenue, is coming to fruition with 11% of our group revenue in December 2022 coming from our growth segments, PEXA Digital Growth and our international business. PEXA Digital Growth is building a solid platform for future performance, with organic revenue growth and recent investments in M&A, contributing to its long-term potential. And internationally, our expansion is progressing well, with 2 lenders now transacting on the PEXA U.K. platform and the transformative Optima acquisition completed and now being integrated. Slide 8 now provides a summary of the key financial metrics for the business, which Richard will go through in more detail shortly. But as [indiscernible] with the full year results last year, the Australian property market has entered a challenging phase in response to the Reserve Bank's round of interest rate rises. Nevertheless, our financial performance was resilient, reflecting both the strength of the PEXA Exchange, which despite the moderating housing market, actually delivered a modest increase in revenue and EBITDA margin compared to the second half of FY '22. And we also delivered growth of new revenue streams. In fact, revenue from outside of the Australian Exchange grew from near 0 in the first-half '22 to $5.8 million in the first half '23 and the movement in group NPAT and NPA reflects both the property market conditions and our commitment to continuing to invest profits to underpin future growth across the business. Notwithstanding the uncertainty in the property market, we are maintaining our FY '23 guidance of PEXA Exchange operating EBITDA margin in the range of 50% to 55%. So, now I'll move on to our business overview and performance in the first half '23. Turning to Slide 10. The PEXA Exchange remains the #1 trusted provider in the industry. The PEXA Exchange continues to grow, working with more than 9,800 practitioners and 160-plus financial institutions across 6 jurisdictions, and we offer a full range of property exchange transaction services. As previously stated, market share also increased with 88% of all property transfers nationally now completed via the Exchange. And likewise, refinanced transactions remain robust and was up 7% for the first-half, reflecting the shift in interest rates. With the majority of all property settlements now occurring on the PEXA Exchange, platform reliability and resilience are of critical importance and we at PEXA, continue to focus our efforts in this space and are pleased to note that we had a system [indiscernible] time of 100% in the call [indiscernible] for the period---with the majority of all property settlements now occurring on the PEXA Exchange, platform reliability and resilience are of critical importance. And we at PEXA continue to focus our efforts in this space, and are pleased to note that we had a system [indiscernible] time of 100% in the core [indiscernible] for the period. And this has resulted in positive Net Promoter and customer fiscals of both over 70, leading scores. Further to this, we have a road map to expand coverage in Western Australia and to enter the Tasmanian market, while [indiscernible] has just been mandated in Queensland. So, I can tell you, there is a lot of positive momentum ahead. And further to this, we have also continued to engage constructively with regulators on regulatory reform. And on key PEXA Exchange financial metrics for the period, our revenue was $135 million, up from the second-half of '22. Our operating EBITDA of $71 million was up from the second-half '22 and our EBITDA margin of 52.4% was in the middle of the guidance range, and that was due to our focus on efficiencies and only now continued investment in the exchange tick. So let me go to Slide 11, and we'll touch on a handful of headline figures showcasing the resilient volumes across first half '23. So, while total market volume shrank 12% from the first-half of FY '22, they were down just 3% from the second-half of FY '22, with refinances increasing compared to both prior periods. Now this is the important point is that PEXA Exchange platform delivers a full and diverse range of property exchange transactions and is not solely dependent on sale purchases nor on property prices. In fact, compensating for the market slowdown, the PEXA Exchange market penetration grew 3 percentage points to 88%, with all transaction types showing increasing penetration over the period. Within that movement, transfer penetration increased by 4 percentage points to 88%, helped by the strong growth in Queensland and the ACT, as you can see from the chart at the bottom of the slide. Now this is another important point as the PEXA Exchange platform delivers full property exchange transaction services across all Australian jurisdictions, except for Tasmania and Northern Territory, noting we're exploring the opportunities in these 2 locations. So overall, compared to the first-half of FY '22, we saw a 9% decrease in PEXA transactions to $1.92 million, as you see in the right-hand chart but compared to the most recent period, the second-half of FY '22 PEXA transactions ended up just 1% down with strong refinancing volumes mitigating decreases in transfers nationally. So, let me again say, the PEXA Exchange platform continues to demonstrate its resilient performance. So, now let me turn to Slide 12. As mentioned earlier, PEXA Insights and [indiscernible] expenditures were restructured in to PEXA Digital Growth to align new Australian growth initiatives and services. And the strategic intent and market opportunity for PEXA Digital Growth is clear this mitigating decreases in transfer nationally. So, let me again say the PEXA Exchange platform continues to demonstrate its resilient performance. So, now let me turn to Slide 12. As mentioned earlier, PEXA Insights and [indiscernible] were restructured into PEXA Digital Growth to align new Australian growth initiatives and services. And the strategic intent and market opportunity for PEXA digital growth is clear. Australia's $10 trillion housing market continues to be rapidly transformed by digital technology innovations like the PEXA Exchange has done over the past decade. And the [ operation ] of significant volumes of property data is generating opportunities for new consumer and business solutions that enhance property and land decision-making. PEXA's strategy is to pursue both organic and inorganic growth through strategic M&A and partnerships in customers, services and revenue pools associated with the property sector. It is about growth and in the past year, we made strategic investments in Landchecker and [indiscernible], acquired .id, took a 70% in the leading [ value ] of Australia, valuation service, entered into research partnerships with a university such as the Melbourne Business School. All these partnerships and investments are well on the way to integration. So today, PEXA, we now have several businesses and brands, providing new services to our 4 key customer segments of practitioners and agents, financial institutions, property developers and government. New services that enhance and improve the customer experience, as illustrated on the slide, such as Business Advantage, [ OpEx runway to integration ] So today, PEXA, we now have several businesses and brands providing new services to our 4 key customer segments of practitioners and agents, financial institutions, property developers and government. New services that enhance and improve the customer experience. As illustrated on the slide, such as Business Advantage, OPEX, Landchecker and .id. And yes, we invested $11 million in PEXA digital growth in the first-half of FY '23 for this growth. And PEXA Digital Growth has already now delivered organic revenue of $1.2 million in the first-half, up to 100% year-on-year and inorganic revenue of $2.8 million from the 3 months of .id performance. And in fact, the inorganic annual revenue run-rate will be at least $10 million this year. We are pleased with our progress for the first 6 months as we enter these new markets and related markets to support the diversification and growth of our customer base and revenue, taking into account ongoing regulatory and execution risk factors. So, if we turn to Slide 13, we can take a closer look at .id, one of PEXA Digital Growth's strategic acquisitions. Now .id brings more than 300 local governments into the PEXA Group's customer base, covering 80% of the Australian population, all delivering growth opportunities. The acquisition also brings an extremely capable team of geographers, housing analysts, forecasters, economists and software developments into the PEXA family, further deep in our talent base. It is a well-established and leading business, providing platform services across several related areas, including communities, housing, economic and population forecast. .id is an innovative business that allows PEXA to grow in new markets and services associated with property tech and insights. Now turning to Slide 14 across several related areas, including communities, housing, economic and population forecast. .id is an innovative business that allows PEXA to grow in new markets and services associated with property tech and insights. Now turning to Slide 14 in PEXA International. PEXA International continues to deliver, as planned, with solid progress on our U.K. expansion. After laying the groundwork in FY '22, our U.K. remortgage offering went live to lenders in the first half of FY '23. And exploratory work is continuing with 2 more financial institutions, it is underway. In total, 9 financial institutions have now successfully completed testing of PEXA Settlement Payment Scheme with more testing stocks to be made available this year towards launch in FY '24. And to support our growth in the U.K., late last year, we acquired leading remortgage processing and bulk [indiscernible] firm, Optima Legal. Optima Legal accounts for 6 of the 8 top U.K. leaders as clients. Integrating PEXA's Open Exchange Platform into Optima Legal systems will help us demonstrate the benefits of our PEXA [indiscernible] platform at scale. And this in turn should support the adoption of PEXA's platform in the U.K. market. The Optima Legal acquisition is now complete, and integration is progressing well, with the business expected top U.K. leaders as clients. Integrating PEXA's open Exchange Platform into Optima Legal systems will help us demonstrate the benefits of our PEXA [indiscernible] platform at scale. And this in turn should support the adoption of PEXA's platform in the U.K. market. The Optima Legal acquisition is now complete, and integration is progressing well, with the business expected top U.K. leaders as clients. Integrating PEXA's open Exchange Platform into Optima Legal systems will help us demonstrate the benefits of our PEXA [indiscernible] platform at scale. And this in turn should support the adoption of PEXA's platform in the U.K. market. The Optima Legal acquisition is now complete, and integration is progressing well, with the business expected to deliver revenue at an annual run-rate of more than AUD 20 million. We are making good progress in the U.K. and our continued momentum of progress will always be dependent on the execution, regulatory and risk requirements of the respective geographies and markets for which we have and will continue to work through. Now let me turn to Slide 15, and we'll just take a closer look at the strategic significance of the acquisition of the U.K. firm Optima Legal. Optima Legal is a high-volume remortgage process [indiscernible] firm headquartered in Leeds, that provides legal and mortgage services in the U.K. remortgage market. It is one of the largest remortgage processing firms in the U.K. with approximately 22% market share of the remortgage processing market. The U.K. [ banking ] industry can directly see banking industry clients with remortgage transactions. And the Optima Legal acquisition represents an exciting opportunity for us at PEXA to facilitate the [indiscernible] legal and mortgage services in the U.K. remortgage market. It is one of the largest mortgage processing firms in the U.K. with approximately 22% market share of the remortgage processing market. The U.K. [ banking ] industry can directly see banking industry clients with remortgage transactions. And the Optima Legal acquisition represents an exciting opportunity for us at PEXA to facilitate the adoption of the PEXA platform and its associated benefits for the U.K. market at scale, reducing investment risk through potential customer service uptake while also providing an alternative pathway for lenders to access PEXA. We are encouraged about the potential and the acquisition of Optima Legal. Now turning to Slide 16. Given the critical role played by PEXA in the economy, it is the important function of the PEXA platform and its associated benefits for the U.K. market at scale, reducing investment risk through potential customer service uptake while also providing an alternative pathway for lenders to access PEXA. We are encouraged about the potential and the acquisition of Optima Legal. Now turning to Slide 16. Given the critical role played by PEXA in the economy, it is important for the group to continue building and maintaining a culture of trust within the community. We truly believe that having an engaged team, being the PEXA team, translates to our highly satisfied customers and great business performance, and we at PEXA do this by delivering through our [ values the group to ] continue building and maintaining a culture of trust within the community. We truly believe that having an engaged team, being the PEXA team, translates to our highly satisfied customers and great business performance, and we at PEXA do this by delivering through our values of innovate for good, better together and make it happen and make it count. And we are proud of our strong employee engagement reflected in an engagement score of 76%. In fact, 94% of PEXA employees say they feel genuinely supported in the PEXA team, translates to our highly satisfied customers and great business performance, and we at PEXA do this by delivering through our values of innovate for good, better together and make it happen and make it count. And we are proud of our strong employee engagement, reflected in an engagement score of 76%. In fact, 94% of PEXA employees say they feel genuinely supported with flexible working, and we were the winner of the Employer of Choice Award at the Australian HR awards. We've also created a housing affordability agenda, including whitepapers with Longview. We granted funding for homes-for-homes and export adding consumer functionality into PEXA [indiscernible] that would allow home buyers and sellers to donate to homes-for-homes directly. We are passionate about what we can do in the housing affordability agenda, and we believe we can make a difference. And further this, we commenced our inaugural indigenous engagement strategy. We've also created a housing affordability agenda, including whitepapers with Longview. We granted funding for homes-for-homes and export adding consumer functionality into PEXA [indiscernible] that would allow home buyers and sellers to donate to homes-for-homes directly. We are passionate about what we can do in the housing affordability agenda, and we believe we can make a difference. And further this, we commenced our inaugural indigenous engagement strategy. This includes the formation of an IES working group and executive sponsors focused on creating education opportunities, employment pathways, procurement of functionality into PEXA [indiscernible] that would allow homebuyers and sellers to donate to home-for-homes directly. We are passionate about what we can do in the housing affordability agenda, and we believe we can make a difference. And further this, we commenced our inaugural indigency engagement strategy. This includes the formation of an IES working group and executive sponsors focused on creating education opportunities, employment pathways, procurement opportunities and community engagement. We also delivered an industry-leading FY '22 greenhouse gas emissions report, independent of formation of an IES working group and executive sponsors focused on creation education opportunities, employment pathways, procurement opportunities and community engagement. We also delivered an industry-leading FY '22 greenhouse gas emissions report independently certified by [ Penguin ] associates, and we are on track to achieve our targets in this space. Likewise, with the formation of an IES working group and executive sponsors focused on creating education opportunities, employment pathways, procurement opportunities and community engagement. We also delivered an industry-leading FY '22 greenhouse gas emissions report, independently certified by [ Penguin ] associates, and we are on track to achieve our targets in this space. Likewise, we have established a series of partnerships with leading organizations, including Melbourne University, Deakin University and the University of New South Wales for a range of purposes, including the exploration of privacy preservation and data analytic techniques as well as providing the employment pathways into data analytics and tech for Australia's top emerging talent into a leading tech company such as PEXA. We've also partnered with Women in Tech to further support and nurture diversity across the tech industry, working towards a future where there's a far greater female representation at all levels of tech. I can tell you; these are not only areas and things that we're proud of, but we also, in our view, been mandatory. Our PEXA people are committed to creating positive impact and it is our role PEXA to make sure that happens. Now I'm going to hand over to Richard, who's going to take us through our first-half '23 financial summary.

Thanks, Glenn. And it's great to be here today to talk through the financial results for PEXA in the first-half of FY '23. Before I start, I should say that we are reporting our financial information slightly differently from previous results, when we were still comparing to prospectus forecasts with pro forma adjustments. Now that we have revenue coming from the international and PEXA Digital Growth segments, we're showing a group P&L followed by 3 segment P&Ls instead of the exchange results down to EBITDA and all other costs below that line. All figures aligned to the segment note in the statutory accounts. Rest assured, all metrics such as PEXA Exchange EBITDA have been calculated in exactly the same manner as prior periods. The first-half '23 PEXA Group results can be seen on Slide 18. Group revenue was down 3% year-on-year to $140.9 million, a combination of exchange revenue being down $9.7 million, and international and PDG revenue being up $5.2 million year-on-year. Combined cost of goods sold and operating costs were up 27% year-on-year, reflecting the significant investment we continue to make in growth initiatives in the first-half of FY '23. That resulted in a decrease in PEXA Group operating EBITDA of 31% to $52.4 million. Group EBITDA, including one-off nonoperating costs was down $7.3 million year-on-year due to sizable IPO-related costs in the prior year and M&A-related consulting costs in the first half of FY '23. Accordingly, group NPAT of $4 million was down $5.7 million from last year and NPATA, which excludes the noncash amortization of acquired intangible assets was down $5.9 million to $23.5 million. I'll get into the drivers of each of these by segment over the next few pages. But I will say it's a solid start to FY '23 in a challenging Australian property market. The first-half '23 PEXA Exchange segment results can be seen on Slide 19. Exchange revenue was down 7% to $135.1 million, with market volumes down 12%, exchange penetration up 3% and net price-mix, up 2%. I'll explain those movements in more detail over the next few slides. It's worth noting that exchange revenue was actually up in the most recent half, the second-half of FY '22, reflecting the resilient nature of our platform revenues in Australia. With exchange COGS trending in line with revenue, exchange gross margins held steady at just under 88%. Exchange operating expenses were up 8% year-on-year, driven by headcount increases in the second half of FY '22 and inflationary impacts. Again, it's worth noting that the exchange operating expenses were actually 1% lower than the second-half of FY '22, reflecting strong cost control in the period given salary increases were implemented on the 1st of July 2022. This means exchange operating EBITDA was down $12 million or 15% from the first half of FY '22, but actually up $1 million or 1% from the second-half. Exchange EBITDA, including one-off items, was up $10 million or 17% due to the sizable IPO-related costs in the prior period. PEXA Exchange operating EBITDA was right in the middle of our 50% to 55% guided range at 52.4%, reflecting our focused cost control in the Exchange. And overall, it's a robust first half '23 financial results for our exchange. On Slide 20, we explain the key drivers of the Exchange revenue. It's a function of 3 things: market size, market penetration and price and Slide 2 explains the first 2 of those. The left-hand chart shows the total market volumes, which shrank 12% year-on-year, bringing [Technical Difficulty] EBITDA was right in the middle of our 50% to 55% guided range at 52.4%, reflecting our focused cost control in the exchange. And overall, it's a robust first half '23 financial results for our exchange. On Slide 20, we explain the key drivers of the exchange revenue. It's a function of 3 things: market size, market penetration and price. And Slide 20 explains the first 2 of those. The left-hand chart shows the total market volumes, which shrank 12% year-on-year in first-half '23, to 2.2 million transactions or billable events. Within that, we saw transfers drop 20% year-on-year, but refinance has actually increased by 7%. Compensating for that, the PEXA exchange market penetration grew by 3 percentage points to 88%. On the middle chart, we can see that by transaction type. We saw our transfer penetration grow from 84% to 88%, driven by improvements in both Queensland and ACT with penetrations in both of those states hitting 85% in the month of December. Refinance penetration was stable at 99% and the penetration of other transactions grew by 1 percentage point to 72%. Compensating for that, the PEXA exchange market penetration grew by 3 percentage points to 88%. On the middle chart, we can see that by transaction type. We saw our transfer penetration grew from 84% to 88%, driven by improvements in both Queensland and ACT with penetrations in both of those states hitting 85% in the month of December. Refinance penetration was stable at 99% and the penetration of other transactions grew by 1 percentage point to 72%. And combined, that delivered a 3-percentage point increase to 88% overall. Adding up to the 12% decline in the market means compared to the first-half of FY '22, we saw a 9% decrease in PEXA transactions to 1.92 million as seen in the right-hand chart. But overall, PEXA transactions actually ended up just 1 and [Technical Difficulty] combined that delivered a 3-percentage point increase to 88% overall. Adding up to the 12% decline in the market means compared to the first half of FY '22, we saw a 9% decrease in PEXA transactions to 1.92 million as seen in the right-hand chart. But overall, PEXA transactions actually ended up just 1% below the second-half of FY '22, with strong refinance volumes mitigating decreases in transfers nationally. On Slide 21, we then expand our volume and price determine revenue. The left-hand chart shows the PEXA volumes from the prior slide, down 9% year-on-year. We saw an average price increase to $70 driven by the annual CPI increase during the year of 5.1%, offset by a mix shift towards lower price refinances, which resulted in a total average price increasing by $1.60 or 2%. The 2% price increase and a 9% decline in volume resulted in a 7% decrease in PEXA Exchange revenue from $143.9 million in the first-half of FY '22 to $134.2 million in the first half of FY '23. And again, it's worth noting that the PEXA exchange revenue was up 1% in the second-half of FY '22, driven by 2% due to [indiscernible] market volumes, offset by a 1.5 percentage point increase in market penetration and a 1.5% increase in price, again, made up by the 5% CPI increase , offset by a higher proportion of refinancing transactions noted above. [Technical Difficulty] $3.9 million in the first half of FY '22 to $134.2 million in the first half of FY '23. And again, it's worth noting that the PEXA Exchange revenue was up 1% from the second half of FY '22, driven by 2% due to [indiscernible] market volumes, offset by a 1.5 percentage point increase in market penetration and a 1.5% increase in price, again, made up by the 5% CPI increase, offset by a higher proportion of refinancing transactions noted above. Slide 22 shows our operating expenses in the Exchange. We group our expenses into 3 categories: general and administration, sales and marketing and product design and development. Our general and admin costs, which cover our shared corporate teams, our Board and executive remuneration as well as professional fees and occupancy costs [Technical Difficulty] Slide 22 shows our operating expenses in the exchange. We group our expenses into 3 categories: general and administration, sales and marketing and product design and development. Our general and admin costs, which cover our shared corporate teams, our Board and executive remuneration as well as professional fees and occupancy costs increased by 15% in the first-half of FY '23 compared to the first-half of FY '22. This is driven by higher employee costs, which includes wage inflation, long-term incentive plan related costs, higher insurance premiums and advisory fees relating to regulatory environment changes. It's worth noting that the G&A spend is actually 6% lower than the second-half of FY '22, even after the salary increases that were implemented on the 1st of July 2022. With a focus on managing the cost base in the first-half and ongoing efficiency measures are in place for the second half of FY '23. Our sales and marketing spend in the first half held relatively flat to both previous periods with increased external events post COVID-19, offset by lower discretionary marketing spend. And finally, our product design and development OPEX increased by just 1% in the first half of '23 compared to the first half of '22 due to prudent cost management, offsetting salary increases and inflationary rises in contracts. You'll also see from the bottom chart that we capitalized a similar amount of product development spend, so total cash plans on product design and development was $26.6 million, up 10% from the first-half of '22, but down 1% on the second half of '22. Total development spend on the exchange equated to 19.7% of revenue, in line with our FY '23 guidance of circa 20%. The first-half '23 PEXA Digital Growth segment results can be seen on Slide 23. Revenue increased by more than 500% to $4 million, made up of $1.2 million organic revenue and $2.8 million inorganic. The organic revenue came from an increase in partnerships revenue alongside increased use of PDG's PEXA Plus and PEXA Tracker services and in total, increased by over 100% from the first-half of '22. The inorganic revenue was 3 months of .id revenue, equating to an annualized run-rate of $10 million per year. Operating expenses were up $9.4 million year-on-year, reflecting the increased level of investment in PDG and 3 months of .id operating expenses. This meant PDG operating EBITDA was down $6 million on the first-half of '22. PDG EBITDA, including one-off non-operating items, was down $8.2 million, reflecting the operating results noted above, plus the M&A-relating consulting and due diligence costs. The operating cash outflow of $11 million showed a slightly higher run-rate than our previous FY '23 guidance of circa $15 million for the full year, although it should be noted that this was for in [indiscernible] operating expenses. This meant PDG operating EBITDA was down $6 million on the first-half of '22. PDG EBITDA, including one-off non-operating items, was down $8.2 million, reflecting the operating results noted above, plus the M&A-relating consulting and due diligence costs. The operating cash outflow of $11 million showed a slightly higher run rate than our previous FY '23 guidance of circa $15 million for the full year, although it should be noted that this was for Insights only, not PDG, which includes what was PX Ventures. We have updated our FY '23 PDG guidance to a total investment before M&A [Technical Difficulty] one-off non-operating items, was down $8.2 million, reflecting the operating results noted above, plus the M&A-relating consulting and due diligence costs. The operating cash outflow of $11 million showed a slightly higher run rate than our previous FY '23 guidance of circa $15 million for the full year, although it should be noted that this was for Insights only, not PDG, which includes what was PX Ventures. We have updated our FY '23 PDG guidance to a total investment before M&A of $20 million to $25 million. The first half '23- PEXA international results can be seen on Slide 24. Revenue was $1.8 million, all inorganic from 1 month of revenue from Optima Legal. This equates to an annualized run rate of circa $20 million per year. As noted previously, we are not expecting any organic revenue in FY '23. Operating expenses were up $7.3 million year-on-year, reflecting the increased level of investment in international and 1 month of Optima Legal operating expenses. This meant international operating EBITDA was down $5.5 million on the first-half '22. EBITDA, including one-off non-operating items, was down $9.1 million, reflecting the operating result plus M&A-related consulting and due diligence costs from the Optima Legal acquisition. The operating cash outflow of $23 million in the first-half '23 was in line with our FY '23 full year guidance of circa $45 million, although we have updated our FY '23 into [Technical Difficulty] month of Optima Legal operating expenses. This meant international operating EBITDA was down $5.5 million on the first-half '22. EBITDA, including one-off non-operating items, was down $9.1 million, reflecting the operating result plus M&A-related consulting and due diligence costs from the Optima Legal acquisition. The operating cash flow outflow of $23 million in the first-half '23 was in line with our FY '23 full year guidance of circa $45 million, although we have updated our FY '23 international guidance to a total spend pre-M&A of $45 million to $50 million. The final financial Slide 25 shows our first-half '23 cash flow in 2 ways. The chart on the left shows the movement in our cash balance over the year and key drivers. We started 1823 with $75 million of cash. We generated a further $71 million of exchange EBITDA and spent $13 million in capitalized product development and a further $5 million of other exchange-related cash outflows. So, before investment in our growth initiatives, we would have had approximately $128 million of cash in the business. We invested $40 million in our international and digital growth businesses, meaning that we would have had a cash balance of $88 million before any M&A activities. And we then invested $50 million across the .id, Optima Legal and Value Australia investments. That resulted in an actual cash balance of $40 million on the 31st of December. The table on the right side of 25 shows the statutory cash flow. And you can see the consistent free cash flow before financing and tax of $18 million, which equates to a 42% free cash flow conversion. Before I close, I should add there are more details on the financials in the appendix. Now over to Glenn to run through our outlook and guidance.

Thanks, Richard. The resilience of the PEXA Exchange platform was evident in our performance in the face of tough property market conditions. Volumes in the first-half were down year-on-year, in line with guidance but only 1% below the second-half of FY '22, with higher refinancing volumes offsetting falls in transfers nationally. The property market continues to be supported by strong economic fundamentals, including high household savings, low levels of unemployment and increasing inward migration. However, it is fair to say that we will still see some risks on the downside as the full impact of the Reserve Bank Rate increases flow through. In terms of FY '23 outlook, I'm pleased to reaffirm that we expect the PEXA Exchange EBITDA margins to stay in the 50% to 55% range. We will continue to invest approximately 20% of exchange revenue in our PEXA Exchange technology. We also believe that non-PEXA exchange revenues will continue to represent a growing portion of the business with Optima Legal and .id expected to contribute more than AUD 15 million of revenue in the second-half. We will also invest approximately $45 million to $50 million in the international expansion and approximately $20 million to $25 million PEXA Digital Growth, excluding the cost of any M&A activity. We are engaging positively with several U.K. lenders and remain focused on bringing these additional lenders onto the PEXA [indiscernible] platform. The transformative Optima acquisition gives us the opportunity to explore how we can use an integrated offering to serve these lenders and the broader lender base that Optima supports. We expect the timing for onboarding further lenders may extend me on this financial year as we work through the best way to service broader lender base through our expanded offering. Now turning to Slide 28, enclosing, PEXA is continuing to execute on a clearly articulated strategy with short and long-term growth pathways, that deliver strong retune for customers in Australia and the U.K. So, summarizing our 4 strategic pillars [indiscernible] The resilient and reliable PEXA Exchange platform performed well in a challenging Australian property market. With a disciplined cost management resulting in lower PEXA Exchange OPEX with further work underway to drive efficiencies. We'll continue to extend the PEXA Digital Growth, and we are making good progress with emerging organic and inorganic revenue and new offers coming to market to tap into new value pools and customer segments and the recent acquisitions and investments are integrating well, and we continue to invest for growth. And our expansion in the U.K., the U.K. platform build and release has progressed positively and the Optima legal acquisition integration is progressing well, and we expect will support our PEXA U.K. in platform's outcome. And we'll continually evolve as a business, and we've had strong engagement with our people, and we're an employer of choice. We have built value community partnerships, particularly in the housing affordability space with Longview and strong commercial partnerships with [indiscernible] leaders. That concludes today's presentation. I want to thank everyone who listened and Rich and I will be very happy to answer any questions. Thank you.

[Operator Instructions] Your first question comes from Josh Kannourakis from Barrenjoey.

First one, just with regard to that U.K. target, obviously, taking a little bit more [indiscernible] clients. Can you just give us some context about the prior discussion around the 20% [indiscernible] volume. Do you think that's still achievable? How do you sort of think about where people should [indiscernible] that in terms of how fast the [indiscernible]?

A couple of points that I would state. The Optima Legal acquisition gives us access to 22% of the remortgage volume in the U.K. And one of the things that we've been clear about is actually getting access to the particular market potential. So, the second element of that is now with the Optima Legal acquisition, we will look to bring the PEXA platform into the Optima Legal proposition, that makes it easier for some of those banks that are already existing customers to take advantage of the PEXA Tech and the PEXA platform and the better experience. So, that work that is underway at the moment, and we'll have greater clarity of that in the second-half of the financial year. The second aspect, we're still working with financial institutions that are also customers of Optima Legal but also potential customers of the PEXA platform. So, the work that we're doing is ensuring that there's minimal disruption and an overlap between those 2. So, it's a coherent and consistent execution of our platform and our tech to improve those financial institution's outcomes. And that's similar work that we've been doing over the past couple of months, Josh. The third element though is we're also still working financial institutions in their own right. And as I said, we're exploring the progress with 2 particular financial institutions with the intent to see that we can get them on the platform. Certainly, we're going to get as many on as we can within this financial year. However, given the work we're doing with Optima Legal, some of that may progress to the second-half of this calendar year. And that we're working through as per the presentation that I shared earlier now.

No, that's really helpful. So basically, putting into the right [indiscernible] the first-half, I guess '24 to second-half this calendar year but we're not talking [indiscernible] stage based on [indiscernible].

We'll get certainly greater clarity Josh as we work through the second-half. But certainly, one of the things that---and for everyone listening, one of the things that we're seeing the Optima Legal acquisition does provide us with a number of interesting and exciting opportunities, both in terms of the existing customer base and the opportunity to help transform that in terms of a tech service, but we can certainly see a good pathway with the PEXA platform through Optima Legal on the remortgage element. But certainly, we'll be sharing more as we keep developing that strategy throughout the year.

Great. That's really helpful. And the second one on the [indiscernible]. Obviously, the [indiscernible] in digital, a little bit higher than what we're expecting. Can we talk a little bit about that, maybe just a little bit more color on what that's going into? How do you think of the return on the investment and just a little bit more context on the [indiscernible] and profile of the business in terms of profitability, et cetera?

Yes, I'll kick off first, Josh, and then Richard can add a little bit more on where some of the dollars are going. But the first thing, in terms of the PEXA Digital Growth, one of the things---and you'll appreciate this, one of the things that we've certainly seen is the progress we're making, has certainly been in accordance with our strategic intent, but some of the opportunities are emerging quite rapidly. So, if you take the .id as an example there, that acquisition will certainly generate solid revenue. But what we're also seeing is that acquisition gives us the opportunity to provide additional services to the existing local council customer base, but also start to grow into some of our existing customer bases within the PEXA Group. And you'll learn more of that as you require, as it is, if you take our Value Australia, which is not yet live in the market. But what we can see there that provides a potential new growth revenue opportunity in new markets that are accretive, but also additive to our existing segments. And that has required some additional tech element that we've been working on as we start to bring that to market. But I can certainly say everyone that we've done, and I can certainly see that the progress of the ones that we're doing will add to the broader group, not just in terms of the existing customer base, but also the growth of our revenue pools as we planned 12 months [indiscernible] ago. Richard, do you want to add any more?

Yes, I'd just add one thing, Glenn, and that's that the previous guidance was $15 million of spend for PEXA Insights for the year. And you really do have to add in whatever your estimate for PX Ventures would have been on top of that. But it's not unreasonable to think that, that would have been another $5 million, so potentially an annualized spend of $20 million, and we spent $11 million in the first-half. So, I don't think it's that far from expectations. It is quite a different entity now that we've combined the 2 and continue to invest for growth. So, in my mind, we've probably spent 11 against an expectation of 10 as opposed to it being particularly far away from what we expected to spend. But to Glenn's point, we're very confident that what we're investing in is going to grow returns in the future.

Richard, just to close off on that question though. I guess, the profile of the business in terms of when we see that turning from investment to cash flow positive or whatever. How are you guys currently thinking about that?

Yes. We've not given any guidance specifically on that, Josh. But certainly, as Glenn said, we've bought a profitable business in .id. We've got other inorganic opportunities in play. So, I certainly wouldn't be thinking that we're pushing out the date of profitability across ---that's the digital growth. I think that's a good opportunity for us in the not-too-distant future, but we haven't formally guided to what when that will be.

[indiscernible] profitability dimension, one of the other dimensions is also is ensuring that we start to diversify the broader revenue base and the customer base and that is something that we definitely will be moving on over these 12 months.

Your next question comes from Ed Henning from CLSA.

Just further following on the U.K., you've highlighted 9 lenders have tested. Can you just talk about their intent to sign up with you? And then also, again, you touched on today that the opportunity around Optima Legal, can you just talk about when that will be integrated, so then you can push forward with lenders using that combined Optima Legal PEXA platform? That's the first question.

Yes, probably, that's just working through. The first one I said is 9 [indiscernible] testing with the Bank of England, the PEXA Pay dimension of the PEXA proposition. And so, all those 9, some are already live, as you know, Hinkley [indiscernible] as an example, in Shawbrook. We're working with a couple more of those at the moment and exploring how we get them on the platform. So that's work-in-progress, as [indiscernible] in the presentation. The second element on the Optima Legal acquisition, there's 2 parts of it. The first parties we've now acquired and we're integrating that into the broader PEXA Group. And that includes things such as HR and finance and all those normal dimensions. The second part of it is also ensuring that we improve the performance of Optima Legal to existing customer base, and we're working through that at the moment. So, there's numerous dimensions in there that not only just lead to improved customer services but also help drive further efficiencies within that group in terms of performance. As we're doing that work, and we're doing that work now, we've also now had our tech teams do further exploratory work, both in terms of the Optima Legal tank and the PEXA Go Platform, which is the name we use in the U.K. to the PEXA exchange. We're just reading through how when we get that PEXA Go platform into the Optima Legal tech. What are the additional features that we'll be providing and what does that look like with existing finance institutions of the customers of Optima Legal. Now that work is still work-in-progress. What we are doing as well with that work, we're also engaging with some of the existing customers of Optima Legal to ensure that it's the right approach for them. And it's also something that they want to be part of to deliver a better customer service outcomes for them. Our intent is certainly to have that matched at least this half of the financial year. And our intent is to progress certainly in the second-half of this calendar year. But some of the timing is going to be dependent until we complete the exploratory work. But again, I would add that I was in the U.K. last week and the week before. And on any of these things, there's numerous dimensions but I am encouraged about the progress we've made and what the opportunity looks like.

That's helpful. And just to clarify on the Optima Legal, to get more lenders signed up, start to go and test with you, it's not conditional on having all that linked up. So even if ---because I mentioned it will take---be starting progress in the second half of the calendar this year, it won't be completed until next year sometime. You can still sign-up banks and potentially start down the path while not waiting for Optima Legal?

Yes, it's a great point. And there's none of these things aren't necessarily mutually exclusive. So, if you take existing customers on the Optima Legal, they're already using the Optima Legal process and tech. So, it's working through actually how does that tech integrate into the Optima Legal? Or what does it look like for the existing customer base, what's the benefit, et cetera, et cetera. So, there's a stream of activity there. The second point, as you find is that we've also got our pathways, which we're working through. I say if you don't want to use Optima Legal, what's the pathway for you to come on to the PEXA platform through that lens. The third element of that is, as I planned is we've got some more banking slots with the Bank of England later this calendar year. So, the intent is to have some more financial institutions to take up those banking slots. At this stage, and that's looking encouraging as well. What we need to do across all that is ensure that we've got an execution path that allows us to continually grow, improve the customer outcomes, grab some market share and coming back to Josh's earlier question, ensure that we get revenue but also ensure that it has the profitable dimension in the---certainly in the medium, long-term as we build out the exchange platform. So, there's numerous dimensions, but all numbers have been worked through.

Okay. No, that's helpful. And then just going back to the ones that are tested obviously, you've got another couple of you hopefully you get on; might be a little bit delayed. But then there are another 5 or so that have tested. Are there are positive signs from those that they want to sign up after testing through PEXA [indiscernible]?

Yes, it waxes and wanes, but it's still encouraging, I would say, I don't want to be over promising, obviously. They're still encouraging I don't want somebody say they don't want to do it at all. It comes down to timing on the work that they're doing on the tech, the work they're doing on the platform, how it fits in with what we've got in terms of capacity and capability as well. But the one thing I can certainly say, in the U.K. market, the consumer experience in terms of sale and purchase or sale and transfer and refinance or remortgage is sub-optimal. And we've done some further testing on that. So, the consumers just as an example, it takes about 24 weeks to get a sale and transfer done generally based on the research we've done; in Australia it's 8 weeks. So just on that aspect, you can see the consumers are suffering. So, there's no doubt that our PEXA platform, this is the general message we're getting will make a difference. But the art of us, not just pure science on it, is to ensure that we execute in a way the [indiscernible] people to get the benefit of it, but also we get the right momentum and pace and execute well. And certainly, that's what we're working on. That's why we're using multiple paths in.

That's great. And just one final question, if I can. You've given some good guidance on potential revenue of both the digital and the international business of some acquisitions coming in, and you've given us obviously some CapEx and OPEX spend guidance previously. Can you give us any more guidance around the cost of the acquisitions in with your spend that you're planning on the international business, the digital business, just to give us a feel of what we should be thinking about the EBIT and costs in the second half and beyond?

So both the .id and Optima Legal businesses are slightly EBITDA positive. So, we haven't formally broken out the OpEx on each of those, but you can clearly see the revenue in the month. We've given revenue guidance in terms of an annualized position. So, you can assume that both the businesses will contribute a small amount to the EBITDA line at this point in time. But it's been an earlier point, we are working with both businesses in terms of the long-term outlook. But I think for the rest of the year, there's a revenue number there, and you can assume that will slightly positively impact at an EBITDA line.

[indiscernible] about both those businesses to Rich's point, they're bringing revenue for a start is good is some positive dimensions on EBITDA. But it if you take on the .id really skilled base in terms of the broader insights and [indiscernible], it is bringing quite a bit I would suggest in the first 3 months to the broader group in Australia. That's the first point. So, it's in broader dimensions. In the Optima Legal, what they've done is besides giving us a revenue base and customer base, it also gives us the opportunity to appropriately get scale in terms of the operations dimension in the UK, whilst we've got revenue coming in as well. And also, does give us good access to a broader customer base and a talent base, too. So, there's newer strategic advantages of both. And that's certainly one aspect that we look at when we're doing the M&A; how it's is going to add relatively quickly to the group.

Your next question comes from Brendan Carrig from Macquarie.

So maybe just to clarify on the final question there. So is the way to think about the expenses across the sort of the nonexchange that you've got the investment guidance, which is OpEx and CapEx, which you sort of set up 55-45 split between those. And then in addition to that, you've given that revenue guidance and then the OpEx sounds like it's broadly [indiscernible] revenue may be slightly less.

I think that's fair. The only other thing I would say is that probably gets you to an operating EBITDA. Obviously, these are new businesses that we are integrating. So, there will be integration costs that will go in below that operating EBITDA line as a one-off spend. So, we will see the...

In the non-operating …

Yes, in non-operating expenses. So particularly with Optima. Obviously, it's a large business, 350-plus employees. There's a fair amount of integration that we'll need to do over the next 6 to 12 months to bring it into the group. So, there will be costs associated with that, which will sit below the line as a one-off integration cost.

Understood. And then just on the U.K., when you're getting those banks to sort of sign up to the testing, I guess, are you able to gauge the level of interest or desire to continue when you're allocating testing to some banks that could maybe go to others. I guess, obviously, sort of an ideal outcome when they're taking a limited amount of testing slots and then electing to not pursue any further progress on connecting to the full platform?

Yes. Brendan [indiscernible] is yes, we do gauge their interest. So, we're not just giving out slots. And just [indiscernible] testing for a [indiscernible], it gives an indication of interest, that's point one. The point I don't only want to be having the wrong impression. The ones that have signed up of the 9 and obviously, in reality, there's a couple already in our live. It's not that they're not interested at all. Quite the opposite. We got to work with them in terms of timing, what it looks like in terms of the platforms they've got available and some of them have their own tech platforms, some of them use other platforms as well. And so just what it looks like on that broad road map, combined with our road map as well. So no, we don't just give out; oh, here's a testing slot and give it to an organization that's got no intent. So, we do work that through pretty consistently and carefully and the local team do that. But the second point and these are the indications as well that certainly particularly trend this way. The existing customer base of Optima Legal, which is reaching the [indiscernible] 6 of the ages and these others as well, they're generally enthused and engaged about what an Optima legal PEXA proposition looks like for them to actually keep progressing because we've already got some [indiscernible] there with the Optima Legal part of the proposition. How can they progress and become rapid or early adopters of the PEXA proposition. And that's the work that we're going through at the moment. So, there's numerous ways that give [indiscernible] plan. But again, it's using multi paths I suppose, is best way as we keep growing that market. That's talking about refi. But the other question then...

Just on that point, is that why, I mean you maybe sort of walked away a little bit from that 20% target, but is it because of that Optima proposition now and so you go, well, we might have signed one major bank to get to that 20%, but actually, we've got access to 6 of the 8 and now we can go with a better proposition. And so, whilst it might take a little bit longer, we're more confident in being able to sign up a multiple of those [indiscernible]?

Exactly right Yes, that's a good summary. One of the elements you want to get that network effect. And so if you think of it from a broader bank perspective, how can you make that more seamless, I suppose? And that certainly is the path that we want to use in terms of the remortgage, that's a great summary. The second dimension already is actually what our approach to pursue the sale purchase or the sale and transfer element, which is an important part of the broader strategy. And we're working that through not just from the Optima Legal PEXA element was only to rewarding, but we're also looking at other paths into the sale and purchase dimension as well, more seamless, I suppose. And that certainly is the path that we want to use in terms of the remotes a great summary. The second dimension already is actually what's our approach to pursue the sell purchase or the sale and transfer element, which is an important part of the broader strategy. And we're working that through not just from the Optima Legal PEXA element, but any remortgage, but we're also looking at other paths into the sale and purchase dimension as well. So, you exactly are on the remortgage and it also opens halfway to the sales and purchase dimension.

Okay. And then one more, just on the domestic business, if I may. Sorry if I missed it, I was coming from another call, but the other penetration has seemed to sort of slow in terms of that penetration increase that we have been seeing and WA is slight to down-ish. So, anything to call out there? Or should we expect is the WA, I guess, stumbling blocks that we've been expecting for a little while going to be released soon and should other penetration continue to trend higher from you?

Yes, it's a good summary on that one. So, on the WA, one, Brendan, as many of the listeners will know we don't do all the transactions, the [indiscernible]. It's not all the transactions have been digitalized through the conveyancing process, both on the state revenue land titles and the PEXA proposition. The good news on that is that we've been working with the WA stakeholders, and we've got a road map forward as we progress that. That would certainly assist with the other dimension that you [indiscernible]. So that's probably the best answer on that. So, we should see some progress on that over this financial year and certainly the next financial year, but it does depend on the capacity category of the WA stakeholders as well.

WA and other correlated…Isn't the WA stabilization just on the transfer?

Yes, I can cover that. It is. So, the 80% that we talk about in WA is transfers, but everything that Glenn just said, absolutely applies to both those transfer transaction types that we can't do digitally at this point in time, but also some of those other transaction types that as you say, we're sort of plateauing in the low 70s. What I would say though is, as an [indiscernible], we are obliged over time to try and deliver 100% digital transaction types for all transactions in each state. So, we are working to that goal. We've just about got there in Victoria and New South Wales and South Australia, and we're working in the other jurisdictions to get there. So, it will take time, but it's absolutely the target.

Certainly with the Queensland Act mandate as well as [indiscernible].

Yes.

Your next question comes from Elizabeth Miliatis from Jarden.

The first one is just around the PEXA Exchange business and the cost base there. You had $1.5 million non-operating costs in the first-half. Just wondering what that related to?

It's just a combination of sort of one-off spend, normal sort of restructuring costs that you would see. I think, in any corporate business on our side, some one-off professional fees on items that we believe won't reoccur. But it's very hard for us to sort of forecast what that will be because by the very nature, those are non-operating one-off costs that we don't really foresee, but pretty standard, I think, with what you would see around predominantly restructuring related.

Okay. Got it. And just curious as to the decision to not strip the results to P&L this period.

Sorry, do you want to just repeat that is, to not strip them out to do you mean...

Yes.

I mean, obviously, we want to leave them in overall, which is why we do have an operating EBITDA and an EBITDA measure. We certainly do not want to go back to the days of having pro forma and statutory type P&Ls like we did around the IPO. So that's why they sit outside of operating EBITDA, but within the overall EBITDA of the group.

Okay. Got it. Cool. And then just a sort of similar follow-up question, just on the CapEx side of things. Within the exchange business, the total CapEx has sort of stepped up half-and-half [indiscernible]. If you could just give some color on what's really driven that?

Yes, there's a number of things. So, one is you can see the absolute spend within the technology space, it's 13 and bit. The other thing is we are investing really heavily in cyber at the moment, and we don't capture that as a product or development spend, obviously, but it is, there is a lot of investment going in there. And in general, just like any business, we've grown quite quickly in terms of heads. We buy a lot more technology for our teams, and that all gets capitalized as we bring it on board. So, it's a combination of growth of cyber and just the ongoing CapEx required to run a sizable business.

The other thing just to add to Rich's point on the tech spend, we're in the side of the dimension. We are doing a lot on the API just generally, a lot of our broad customer base on APIs into their broad systems. So, a lot of work over the past 6 months in particular, and that will continue on.

Okay. Got it. And then if you could just perhaps give some color on interoperability and where you see the industry tracking in the near term? Obviously, [ Anik ] put out a statement at the end of last year, which seems to be targeting still March this year for the first interoperable transaction. But in terms of how likely the industry is to actually achieve that and have an interoperable industry. How are you seeing that there and all the different things that need to be done to actually complete that process?

A couple of points on that one. The first thing obviously is the plan to put out dates and time lines of the targets and what they're expecting, and I'm sure they'll keep doing this. I think the thing that I would add from our side at the PEXA Group; we continuously work with all the regulatory reforms and bodies as per the requirements and only those aspects, we're on target with the requirements. But if you take interoperability, as an example, it's not just based on [indiscernible], it's based on---you've got the land registries, you got the state revenue offices, you've got reforms and bodies as per the requirements and only those aspects, we're on target with our requirements. And I think what is transpiring is that as we've seen over the past few years, it's complex. It's a complex system being the property sector. It's one of the largest if not largest sectors in terms of wealth and investments and assets for the Australian economy. And so, it's something you've got to do very, very cautiously and very, very carefully. And I think that's continually playing out, which PEXA whilst we're always actively involved and positive and professional on it, it's also been the message we've been clear about is we really sure we do it the right way for citizens of Australia and the broader economy, and we're going to take into account all the complexities of it. So that's probably the best way I can respond to at this stage.

We will now address your webcast questions. Your first webcast question asks, can you please talk through the events in your opinion, that will significantly derisk the U.K. investment case? When are they likely to occur? And secondly, are more acquisitions required to embed the exchange in the U.K.

So, on the first one on the events to derisk, I would suggest that the Optima Legal acquisition is an example of an event that would derisk it is an example of an event that would derisk it from something that we can control within our own right. Obviously, we've acquired, allows us now to look at a remortgage bulk and radar that has significant customer base and does a significant remortgage [indiscernible]. Then going back to, I think it was Brendan's question allows us to potentially [indiscernible] there to get the remortgage onto the broad platform. That's the first aspect. I think the second element, if I take just an example of an outside to [indiscernible]. should help derisk, there is the unfortunate experience of the consumers, the mortgage brokers in the U.K. market in terms of the property transaction experience. Those events certainly put increased pressure and transparency on transforming the sector in the U.K. And I still believe based on my recent visit to the U.K., and I'll be there quite frequently in terms of the property transaction experience, those events certainly help put increased pressure and transparency of transforming the sector in the U.K. And I still believe based on my recent visit to the U.K., and I'll be there quite frequently is that there's some good tailwinds there in terms of transforming the sector in the U.K. and PEXA and PEXA platform plays a good role in that positive translation [indiscernible]. sector in the U.K. So, it's an external event. That also partially came to fruition when we had the previous Prime Minister make some announcements out there that leads to some mortgage experience challenges that were detrimental to the broader industry. So that's the topic for that [indiscernible] consumer [indiscernible]. I think the third element that I will then just move on to is, do we need to do any other acquisitions to assist us in the entry in the U.K. A couple of our points there. We'll always look at what can we do in our own right, both in terms of the PEXA platform an area that we've got Optima Legal. So, we'll continue to do that and we do [indiscernible] those paths. However, if there's both commercial partnerships and M&A opportunities that further derisk out entry in the U.K. that makes sense strategically and also makes sense from an accretive perspective, in numerous dimensions and also known in the market is quite dynamic in the U.K. We will certainly look at those opportunities [indiscernible] and certainly take advantage of them and we'll take advantage of them, not just from a U.K. perspective, but also how they can add value in other markets, including the Australian market as well. And I believe that so far, we've shown that, but we'll certainly [indiscernible] we execute on what we're doing.

Your next question, could you please provide more detail around the $40 to $50 million of investment into PEXA Exchange in U.K.

Yes. I'll start off on it. Most of the---and then Richard a might add a couple of dimensions. Most of the investment in the U.K. is on the PEXA platform, that's a PEXA tech platform. So, a) we've got our own tech team working on the development of that platform; and b), we're also working with our core partners in the development and the implementation of that platform as well. So, most of the investment is on that platform. That platform has new risk dimensions, not only having the platform, which is looking very good. I mean having that platform but also ensuring that the connections are in place with bodies such as the Bank of England, HML and respective financial institutions. So that's the first point. The second point is the platform is up and running. So now that the platform is up and running and you have to ensure that you operationalize it and the operationalization of that platform comes down not just in terms of the processing dimension, but also the regulatory dimension and the cyber dimension and the security amongst others. So, there's investment on that dimension as well. The third aspect is we also have a team on the ground. So, give or take, the PEXA in its own right in the U.K. market has approximately about 40 to 45 professionals on the ground. And that team has a number of elements. Firstly, the executive team that are well credentialed in the U.K. market [indiscernible] in terms of financial services and the property sector but also, they bring specialist knowledge. So, some of that knowledge could lead to the development of the PEXA platform [indiscernible] fit for purpose for the banks but also regulatory risk dimensions as well. So, some of that investment also goes to that things. So that's predominantly ---it's actually saving our business, developing the business and then running the business. The only thing I would then add and Richard might put a bit more flavor on an element is the Optima Legal element of it. And what that does is firstly we have to ensure we got the relevant dimensions in terms of M&A, getting integration, costs associated with any of that, which you'd expect. But the other aspect of it is that we're looking at how can we appropriately utilize the Optima Legal acquisition in terms of efficiencies and scale? And what do the 2 entities or conform a potential merger perspective as well. And I think that gives a far better long-term run perspective.

Yes, I'll just add a couple of clarifying points on top of that. So, Optima Legal, theoretically should be broadly cash neutral in the year other than the integration work that we spoke about. So, the 45 to 50 million wasn't envisaged to include Optima Legal at this point. And to Glenn's point, there's 3 core areas of spend, the U.K. team that Glenn just articulated, that's nearly all expensed because they are our sales and marketing front-end team. There's the Australian-based PEXA team that are working to build the technology, and it's a combination of OpEx and CapEx within that. And then there's our build partner [indiscernible] and they're based in Australia and overseas, and that's predominantly CapEx. So the $45 million to $50 million, similar run-rate to the first half, which was $23 million, roughly 50% OpEx, 50% CapEx.

Our next webcast question asks, where are you at with exploring other prospective geographies, please?

Yes. Well, I'm not going to go into too much detail because I start to share too much of the strategy, except to say we are exploring other geographies. And we're evaluating those geographies, both in terms of potential in terms of financial elements, potential in terms of entry, the appetite; we've got different stakeholders. And also coming back to the earlier question, potential partners as well. So that exploration is certainly progressing and underway.

The next question asks, what is the expected capitalized costs in FY '23? And could we get a rough split between AU, U.K. data on this?

We haven't formally given a forecast, but I think you can see we've just talked about the $45 million to $50 million of spend overall in international. So you can expect half of that roughly to be capitalized. We've also talked about our $20 million to $25 million in PDG. Again, you can expect roughly half of that to be capitalized. And you can see the CapEx run-rate within the exchange from our cash flows. So, we expect that to continue at a similar rate into the second-half. So, if I do the math in my head, it's probably low 20s in international, low 10s in PDG and probably 15 to 20 in the exchange, something like that.

We have a final phone question from Ed Henning from CLSA.

Just given with your line of sight in the Australian volumes, can you just talk about the third quarter, how you see them at the moment? Are they significantly down? Or are they just down a little bit?

We're basically seeing very similar trends in the third quarter as we saw in the first half. So, we're continuing to see transfer volumes below last year's run rate at a similar level, and we're continuing to see refis ahead. Now we're not putting guidance for the second-half at this point in time. We have a reasonable line of sight to the end of the quarter. But at this point in time, it's just too early to tell whether the property cycle has bottomed out as some media commentators are suggesting it may have done. And it's also too early to see exactly how this large proportion of refis that we're expecting based on refis coming to fixed-term mortgages coming to an end. So, it's too early to see the impact that, that might have through the rest of the year. But broadly speaking, what we've seen in the first 2 months is very consistent with what we said in the first half.

Okay. That's helpful. And if I just push on luck with one last one. Previously, you talked about kind of an EBITDA level breakeven in '25; given the slight delay here, but then you've got potentially more confidence around Optima; does that see the breakeven point push out or hold steady? Or have you got more confidence now in that breakeven point with Optima in the suite of products?

Yes, we wouldn't be making a clear statement on that one, Ed, it's obviously too early given the work that we're doing in terms of integrating Optima, it absolutely increases our confidence on execution in the U.K. I think we've been pretty clear that given the slight delay here, but then you've got potentially more confidence around Optima. -- does that see the breakeven point push out or hold steady? Or have you got more confidence now in that breakeven point with Optima in the suite of products... Yes, we wouldn't be making a clear statement on that one. Ed, it's obviously too early given the work that we're doing in terms of integrating Optima, it absolutely increases our confidence on execution in the U.K. I think we've been pretty clear that's the core reason for the acquisition. But at this point, it would be too early to say how it moves in needle in terms of breakeven point.

That does conclude our questions. I'll now hand back to Glenn for closing remarks.

Thank you First, I just want to say thank you for all the questions. We do appreciate it, and we do appreciate the interest. And I also just want to say big thank you to everyone who listened to the presentation. We're certainly confident in terms of what we have done for the first-half, we believe in our business, and we also believe we're executing well, it's everything that we're committed to. So, thank you very much.

Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.