PEXA Group Limited (PXA) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the PEXA full year results announcement. [Operator Instructions] I would now like to hand the conference over to Lisa Newns-Smith, Investor Relations. Please go ahead.

Good morning, and thank you for joining us for PEXA's 2025 Full Year Results Briefing. I'm joined today by PEXA's CEO and Group Managing Director, Russell Cohen; and Interim CFO, Liz Warrell, who will discuss the group's performance over the past financial year. Before we begin, we acknowledge the traditional custodians of the land and pay our respects to elders, past and present. We are honored their enduring connection to country, culture and community. I'll hand over to Russell.

Good morning, everyone, and thank you for joining our FY '25 earnings call. I'm very pleased to be with you here today to share my first set of PEXA results with you all. Joining me this morning is our Interim Chief Financial Officer, Liz Warrell. Turning now to Page 3. I'll give you a quick overview of our agenda. We'll start with some reflections and my initial assessment of the PEXA Group business. I'll take you through the operational performance and some highlights from FY '25. I'll then hand over to Liz, who will walk you through the FY '25 financial results, after which, I'll provide an overview of our strategy and some focus areas for the coming year, and I'll close with our outlook and guidance, and we'd be happy to take your questions at the end. Turning now to Page 4. When I joined PEXA, I was asked often why PEXA. Why did you leave Grab, why did you leave Singapore, why did you relocate home to lead PEXA? And I'll kind of walk you through my process here and some of the learnings I've made. So I went about answering that question kind of methodically. My first month, I spent really getting to know the business, the team at PEXA, the technology, the partnerships and really understanding the economics of the business and the history of how e-Conveyancing came about in Australia. Secondly, I traveled to the U.K. I spent several weeks on the ground there with our teams who are driving our adoption in the U.K. market. I met with customers, I met with the Bank of England, I met with government, the land registry and a range of other stakeholders, and I came away with strong conviction about the potential of PEXA to improve the experience for buyers and sellers of property across the U.K. Third, I returned to Australia, and I had a broad set of conversations with our external stakeholders. I met our regulators, I met government, I met business partners, I met many investors and this helped me form an initial view of the business and where it is today and a few key attributes I wanted to summarize here on the page. PEXA and the whole group, we are incredibly privileged to operate a world-first piece of essential digital infrastructure. And by world first, it's worth pausing just to recognize that Australia is the only country to settle and lodge property digitally in real time. And that's a real -- it's a real feature to be proud of in our ecosystem, and I'm pleased for us to try and export that know-how and that IP internationally. We also have national coverage. We've reached nationwide jurisdictional coverage, which I'll talk more about today. And we serve about -- and we have about 90% market coverage in terms of digitization. And with this national coverage, it's done with a nationwide approach to access and pricing, very much aligned to our founding mission to the platform for all Australians. Another exciting attribute is the international opportunity, and this is taking an Australian platform, homegrown IP and exporting it to other markets, starting with the U.K. And we've seen encouraging progress with NatWest. Their commitment was announced in July, which we'll talk more about today. And underpinning this is PEXA's strong financials. We have a strong balance sheet, steadily improving cash flows, and this gives us the flexibility to pursue attractive growth opportunities across both new and exciting products and markets. Moving on to Slide 5. I'll show you a bit about the group financial snapshot. I'm pleased to share that PEXA delivered a solid uplift in operating performance for the year. Our revenue grew 16% with the prior period with revenue growth across each of our segments. We saw good operating leverage across the group, resulting in our group EBITDA margin expanding by 1.3% on a reported basis or almost 4% pro forma. NPATA of $41.1 million was down about 6% year-on-year and statutory NPAT and EPS fell to a loss of $76 million and $0.43 per share, respectively. As previously announced, these metrics were affected by nonoperating, nonrecurring significant items, mainly related to taxation and impairments, and Liz will share more on these details later on in her section. As a group, we had this stronger operating performance and a lower CapEx spend across the business did result in a sharp lift in free cash flows. And this, in turn, allowed us to repay about $53 million of net debt during the year with our balance sheet continuing to delever. You can see here on this page, our gearing improved year-on-year to about 1.8x. We will, as a group continue to pay down debt opportunistically and where it is the best use of our cash. Turning now to Page 6 to give you a bit of an overview of the Australian exchange, a business that was described to me as the jewel in the crown of PEXA Group. We operate national critical infrastructure. We're very proud of that designation and the accountability that, that demonstrates, and we continue to power millions of people in their homeownership journeys. FY '25 was a major focus where we tried to complete our national coverage. We expanded coverage in Western Australia, and we launched coverage in such states as Tasmania and in August in the Northern Territory. That completes full jurisdictional coverage for PEXA, which is pretty impressive after many years and the founding mission to be a platform for all Australians. And it puts us at about 90% market coverage in terms of digitization of the property ecosystem. We invested CapEx of about $34 million of the year in the exchange, including important ongoing investments in cybersecurity and resiliency, which is a theme that we'll -- you'll hear a number of times today. We delivered a number of new products and expanded existing offerings, including mobile signing for our practitioners and the expansion of digital lodgement capability, notably in Western Australia. In FY '25, we commenced our innovation and our investment into the area of anti-money laundering. The PEXA AML solution is in response to new AML requirements that the property sector will face, conveyances legal practitioners and real estate agents from the 1st of July 2026, and we are readying our AML backbone and the partnerships needed to help those parties comply and support law enforcement. Just stepping back and taking a top-down look at the exchange, we are the operators of a unique cash-generating business with healthy EBITDA margins. You can expect us to maintain those margins in the Australia Exchange around the same level as we invest in the platform to ensure it provides our customers with the highest possible levels of stability, security and ease of use. Moving on to Page 7. We'll talk about our International segment. So in FY '25, it was very much a year of laying solid foundations in the U.K. as we finalized preparations for the launch of our broader U.K. product offering this year. We received FCA approval, which is an important requirement for the build of our sale and purchase product and has enabled us to engage with lenders and conveyances with credibility and with a more complete product offering. The build of the sale and purchase product on the PEXA platform progressed through the FY '25 year, so the product suite is now launch ready, and we couldn't be more excited. We were also proud to see the U.K.'s first fully digital property transaction using the platform successfully completed. At present, the PEXA product suite in the U.K. can service about 70% of transactions, and we continue to build with a target of about 80% in this coming year. We completed the integration of Smoove, a business acquired in the prior year during this year, and saw it move to operating profitability in the second half. Significant progress also occurred in Optima Legal due to the refocusing of business priorities and the streamlining of some back-office processes. The Optima Legal and the Smoove businesses were primarily purchased to provide us with a foothold into the lender and conveyance market in the U.K. and to gain direct access to these customers for the eventual adoption of the PEXA platform. As we move towards the launch of our remortgage and our sale and purchase product suite in the next couple of months, we are leveraging our existing Optima Legal and Smoove relationships, and we can see a component of this go-to-market strategy coming to fruition, which is very pleasing. Reflecting on PEXA's U.K. journey today. As some of you know, my background is in international expansion, notably platform growth and operations at Grab most recently. So I feel quite confident to take these experiences of growth and expansion to help PEXA execute a winning adoption strategy in the U.K. One of my early impressions when I reviewed PEXA's U.K. investments to date is that the road has been long and for many of you and many of our investors, it has felt arduous. And we may have chosen a different framework at times to allocate capital. With all that said and noting that we still have a long road ahead to complete the national transformation, this is a journey that I think will be very rewarding. I feel we're now at a pivotal point whereby we have a product suite and an infrastructure platform ready for market. And with NatWest, a Tier 1 lender in the U.K. who has committed to an implementation program, it's tremendously exciting. While the total CapEx for the U.K. market has peaked, we will need to continue to invest in the coming years in both CapEx and OpEx to expand our sales team, onboard lenders and conveyances onto the platform and complete elements of the product build. This is a similar journey that PEXA Australia went on to achieve national coverage and widespread adoption. And while the construct and the regulatory environment is different between the 2 markets, a similar level of awareness and marketing is required by our customers. It's a long road to orchestrate a national transformation, but I'm pleased to share that we believe we are now making tangible progress. Moving on to Page 8, our Digital Solutions segment. I'm pleased to share that revenue growth -- revenue grew during the year as the business scaled primarily in our Insights businesses, which is the collective name for 2 of our assets, .id and Value Australia. The management team in digital solutions focused on containing losses, and you can see an uptick in EBITDA margin through the year. Focusing now on the 2 Insights businesses. I'm really happy to share that they demonstrated strong customer retention in FY '25 with sticky annuity-style contracted revenue. They established numerous new and interesting strategic partnerships and expanded the automated valuation model with banks and financial institutions as sold by Value Australia. As we had announced earlier, we are conducting a strategic review of our digital solutions assets to assess the fit within the broader group. There are some excellent businesses here with strong leadership and compelling technology. My job and my observation was to make sure that PEXA is the right custodian for these assets in the future such that they can thrive. We're considering a full range of options. We may consider divestment or, if necessary, further investment to maximize profitable long-term growth for some -- for shareholders. The process is underway, and we've engaged an external adviser to help us assess market views of these assets. As this strategic view has progressed, we've decided to withdraw from our majority investment in Land Insights. I'm now going to hand over to Liz, who will walk you through the financials in more detail.

Thanks, Russell. I'll start by turning to Page 10 to discuss our core operating results. As we indicated in our recent ASX announcement, we have made some minor changes to the presentation of our financials. When we talk to our core operating results, this will exclude all significant items, which we've detailed on the following page. We will also only report NPATA on a core basis going forward to show a cleaner view of the group's underlying results. A full reconciliation of the changes can be found in the appendix. Consistent with prior periods, we are also showing our variances on a pro forma basis, which assumes we owned Smoove for all of FY '24. As you can see from the page, the group delivered 16% revenue growth or 9% revenue growth on a pro forma basis, reflecting strength in all 3 of our operating segments. I will go into more detail in the revenue generated by our Exchange and International Operating segments later in the presentation. Details on our Digital Solutions business can be found in the appendix, but I'm pleased to report that Digital Solutions delivered a 22% uplift in revenue. Our outlook for FY '26 revenue is modest in the range of $405 million to $430 million, representing growth of 3% to 9%. Now moving to operating expenses. We maintained strong cost discipline through the year, with expenses rising just 2% on a pro forma basis, reflecting ongoing productivity and efficiency initiatives across the group. Pleasingly, this delivered a group EBITDA before associates of $134.4 million, up 23% on a pro forma basis and a group EBITDA margin before associates of 34.1%, up 4% on a pro forma basis. This led to a $2.1 million net operating profit after tax, $2.6 million lower than in FY '24 due to both higher amortization, which I'll take you through in subsequent pages and a $12 million increase in tax. This was driven by more profits being generated in Australia. Moving to the next page. We've laid out a reconciliation of our core to statutory results. As we announced earlier this month, the group results were impacted by a number of impairments in the second half in addition to those taken in the first half of FY '25. Other significant items in the period included integration costs for Smoove, restructuring costs for productivity programs in both Australia and the U.K., M&A costs and cost to pause the interoperability program. Lastly, we also incurred a $19 million charge related to the derecognition of deferred tax assets in Australia. These items resulted in the group's statutory loss after tax increasing to $76.1 million in FY '25, up from $18 million in FY '24. In FY '26, we expect core NPAT in the range of $5 million to $15 million. And going forward, we won't give guidance on significant items given their nonrecurring nature. So moving to Page 12. I'll talk you through some of the business highlights, starting with the exchange revenue and volume. For those who would like to view the full P&L for each business segment, they can be -- they are detailed in the appendix. The exchange delivered revenue growth of 7%, driven by our regulator approved price increases, overall market growth of 2%, including 3% growth in transfers and stronger product growth as we saw increased penetration during the period, particularly in WA and Queensland. We did see changing trends through the year. After a strong 7% year-over-year transfer market growth in the first half, the second half FY '25 market was impacted by weather events in Queensland and New South Wales as well as the May election falling 1% year-over-year. Conversely, we saw the opposite effect in refinances, with second half market growth up 17% as the cash rate fell versus the first half, which had contracted by 9% year-over-year. Now almost 2 months into FY '26, we are seeing modest growth in transfers and continued refinance growth. And looking into the remainder of the year, we expect more people to enter the market as the cash rate falls. But until we see a material uplift in new housing stock hitting the market, you can expect transfer growth in Australia to remain low single digit. Now turning to international revenue and volume on Page 13. Going forward, we will no longer report Optima and Smoove individually. As the businesses are now fully integrated, their P&L are less meaningful. Although for transparency, we have included further details in the appendix. Pleasingly, in the U.K., we are seeing the signs of the market recovery with sale and purchase market up almost 16% and Smoove seeing the corresponding revenue growth. Unfortunately, the remortgage market in the U.K. remained at all-time lows in FY '25, down a further 8% on FY '24. That being said, we are pleased to see Optima Legal regain market share through the year, with completion growth of 8.5% and growth in the average fee per completion of 14% due to a change in mix towards more complex cases and favorable FX movements. Conversely, Smoove remortgage completions dropped 14.5% due to the loss of a low-margin mandate, which combined with favorable FX movements, helped drive the average fee per completion up 9.4%. While we won't report these businesses separately ongoing, I can confirm that Smoove broke even on an EBITDA basis in late FY '25, and we continue to see reduced losses in Optima. As we look into FY '26, we are, of course, excited to have agreed implementation with NatWest. And while NatWest is anticipating to start transacting remortgages in the first half of calendar year '26, this will start with the existing NatWest remortgage completions, which are processed through Optima, which represent approximately 8% of Optima's volumes. Once NatWest are comfortably settled on the PEXA U.K. platform, we expect these volumes to increase into FY '27 and FY '28. So now I'll move on to costs and margins on Page 14. On a pro forma basis, costs grew just 2%. In FY '25, we continue to invest to scale and develop both International and our Digital Solutions segments, with the U.K. receiving its FCA license and now ready to launch our PEXA U.K. product suite in just a few weeks. Additionally, we continue to invest in cyber and resilience across all our segments, but especially in the exchange. Pleasingly, we were able to deliver $10.4 million in productivity and efficiency savings in the year. Approximately, $6.4 million of this is from FY '24 productivity programs with a further $4 million from new FY '25 initiatives, including creating synergies as we integrated Smoove into the PEXA U.K. group, some minor restructures in the exchange as well as optimization of cloud costs and other third-party spend. Our focus on productivity across the group will continue in FY '26. We have largely completed a restructure of our Australian operations, which is expected to deliver in-year benefits of circa $6 million. These benefits are critical to offsetting our cost headwinds in FY '26. These results have delivered a 34.1% group EBITDA margin for the year, up 4% on a pro forma basis. We also saw a 0.5% uplift in exchange margin to 55%. Our focus in FY '26 will be maintaining our group and Australian margins while we make targeted investments for growth. Given the possibility of additional costs in the U.K. where other lenders to start integration or onboarding, we have widened our guidance for our FY '26 group EBITDA margin to between 32% to 35%. Now I'll turn to Page 15 to discuss CapEx and depreciation and amortization. In the year, we saw CapEx fall from almost $69 million in FY '24 to $58 million in FY '25. The main drivers were a $6.3 million reduction in CapEx in international as a result of the benefits of the FY '24 productivity program as well as the initial build of the PEXA U.K. platform largely completed in the prior period. The spend in International in the year was largely related to the sale and purchase build, with the product now live and ready for launch in just a few weeks. While the bulk of the product in the U.K. is now built, in FY '26, we will continue to invest in the U.K. platform. As a result of our ongoing investment requirements, we expect operating cash outflows in FY '26 for our International segment to be in the range of $59 million to $63 million. If we were to invest at the high end of this range, we'd expect that would be as a result of additional costs for other lenders to start onboarding or integration. In the exchange, we saw CapEx fall $3.9 million, largely due to the pause of the interoperability program. In FY '25, we continue to progress exchange enhancements, including the at-scale transition of our customers to mobile signing as well as expanding our API offering. We also continued building out our product coverage, especially in Tasmania in the Northern Territory. In Digital Solutions, we saw a small reduction in CapEx to $3.4 million. The business invested in its leading automation valuation model for our customers as well as building out industry offerings for .id. As we look at our depreciation and amortization charges, these investments combined with the full year impact of last year's investments as well as acceleration of amortization of some software assets drove a 14% increase in our depreciation and amortization charges over the year, which is expected to moderate in FY '26. We see ample opportunity to invest in each segment, and we'll continue to do so in FY '26 to drive profitable long-term growth. This includes investing in the Digital Solutions segment to drive maximum shareholder value. We expect CapEx in FY '26 to be in the range of $60 million to $65 million with lower CapEx in international, but higher CapEx in the exchange. Now we'll look at our use of cash on Page 16. Through the year, cash generation was strong, enabling the group to repay a net $53 million in debt as well as complete an $18.9 million share buyback, all while continuing to invest in the business. As many of you would be aware, the buyback has been paused since May. It will remain paused while Russell continues to fine-tune his long-term strategy for the group. In the interim period, the group will continue to repay debt. Now turning to Page 17 and free cash flow generation. We saw free cash flow increase to $56 million, a 45.8% conversion, up from $38.5 million in FY '24, driven by the strong operating results we saw across all the group segments. These results led to the group's leverage falling to 1.8x and the group's times interest cover increasing to 6.7x as we continue to see the group's balance sheet strengthen. Our target leverage ratio is less than 2.5x net debt to EBITDA, and we anticipate staying comfortably within this range in FY '26. So with that, I'll now pass back to Russell to share more about our FY '26 strategy and outlook.

Great. Thank you, Liz. This page here serves to provide an overview of our short-term FY '26 strategy. We call it the strategy on a page, and we thought we'd show it to you today. When I joined PEXA, I reviewed our previously stated purpose of connecting people to place you can see there at the top part of this graphic. And I felt it was meaningful and appropriate and motivating to all of the PEXA Group. And so we retained that. However, what I felt was missing from the previous strategy were action points, which could make our daily activities more intentional, cohesive and drive execution against our strategy. And so with that, our FY '26 strategy centers on 3 objectives, which you can see here on the page. Firstly, to generate outstanding shareholder value; secondly, to deliver consistently excellent customer experiences; and third, to facilitate fulfilling employee journeys. And as with any good strategy, we also have 5 strategic pillars to guide our vision, which I'll briefly touch on here and then go into more detail on the next page. We will invest to enhance the exchange as both Liz and I have shared. This platform is at the very heart of our business. We'll make it stronger, we'll make it more modern and we'll help facilitate seamless transactions across the country. We will explore growth opportunities such as the AML solution to drive value for our customers and shareholders. We are laser-focused on executing on our U.K. strategy. Our hard work from the past in the U.K. diminishes in value if we do not drive lender and conveyancer adoption, and we are, like I said, laser-focused on this. We will focus on our core assets and avoid distractions. And as such, it was appropriate to conduct a strategic review of digital solutions, which I mentioned earlier. And our last pillar will drive the first 4. This is about deploying a range of things, from new technology for employees to build their products faster, new frameworks for customer service and automation across the group. Additionally, I've made some changes to our leadership team to ensure we're working together on the same set of goals focusing clearly on high-quality execution and leadership team cohesion. Krystle Kocik is now our Group Chief Product Officer, giving us a global platform strategy. Clare Gill is our Chief Regulatory and Corporate Affairs Officer, now combining our approach to regulations, government affairs and communications into one portfolio. Steve Braithwaite will lead our group strategy and new business team, aligning our group strategy with feasibility into new services and key partnerships to bring these to life. And Kylie Waldock will join us next month as our Chief Customer and Commercial Officer for Australia to strengthen our focus on critical customer and industry relationships in the Australian market across financial services and the legal, property and software industries. On the next page, I'll dig into what actions will be taken to achieve these objectives. Firstly, on the exchange enhancement, to improve our customer experience and enhance and protect the exchange, we have to invest in resilience and cybersecurity Importantly, we've mentioned before that the U.K. platform build is a group asset for PEXA. It's built using a more modern modular approach, and we'll be bringing elements of this modern platform back to the Australian exchange to modernize, build more resilience and have a unified platform strategy. IPART have commenced their review for the FY '26 pricing process. We are providing all necessary information to the IPART team to help them gain a thorough understanding of the way PEXA and our business works. We will continue to engage with them to drive a fair and reasonable outcome for our customers and shareholders. Next, on to growth. Keeping in mind one of our key growth objectives is to deliver outstanding shareholder value. I do see a number of opportunities to drive profitable growth over the coming years. We'll focus on AI adoption in select areas, including in the usage of software development, testing, prototyping, the way we do marketing for our customers and customer service. We'll deliver an AML backbone, as I mentioned earlier. We'll continue to investigate and study capital-light expansion into other international markets where PEXA's technology and our industry know-how can improve the transfer and lodgement experience for customers globally. Any new market entry will aim to be derisked with a series of partnerships, set in place prior to any material investment from PEXA. Third, the U.K. platform adoption is top of mind for all of us. Our key focus is ensuring that the implementation of NatWest onto our platform goes smoothly to facilitate the remortgage transactions in the first half of the '26 calendar year and the sale and purchase transactions to the end of the '26 calendar year. We're also working to bring on other lenders soon after NatWest goes live. As mentioned previously, we're building out our sales and marketing team in the U.K. in order to drive customer growth. And in addition, we'll be investing to further build the product as necessary. Lastly, on Digital Solutions, we expect the Digital Solutions strategic review to be completed by the end of this calendar year. Okay. The next slide is on our U.K. progress, and we received lots of feedback on what we like to call the traffic light page when it was in the H1 investor presentation back in February. We did want to share as much as we could to be transparent about our progress in the U.K. since that half year update. As you are aware, NatWest formerly committed to an implementation program, which we see as the most significant step in the engagement process, and we're really excited to get going. With the key terms agreed, we're working through a long form contract and the detailed technical project planning prior to NatWest going live on the platform. In the meantime, we're focused on onboarding as many conveyances as possible to provide more avenues for NatWest and other future lenders to transact on the PEXA platform. While our engagement with Tier 1 lenders other than NatWest is now commercial in confidence, I can confirm we're continuing to progress our engagements with other lenders. One of the stages on this page is the Bank of England testing stage. Following the Bank of England's completion of its own RTGS system upgrade, our previous challenge of sequencing a Bank of England testing slot long in advance is no longer a constraint. It gives us more flexibility around testing windows closer to the time of lender onboarding. So going forward, we'll actually conduct this Bank of England testing step after we receive written commitment from lenders as it is a natural part of the implementation and testing process. We are launching the U.K. platform product suite in the market in the next few weeks to conveyances, and we look forward to updating you on further progress at the half year. Page 22 provides a view of the economic outlook in Australia and the U.K. This provides a view of our short-term expectations of the economy and the environments in which we operate and informs our modeling and our forecasts for both transfers and refinances. On to Page 23, here is our guidance for the FY '26 year. Liz has touched on a number of guidance points in our earlier pages, and this page shows all the metrics we're guiding to in one place. The guidance on this page excludes impacts from significant items which may arise in FY '26, including outcomes from the strategic review of digital solutions. You'll note we are forecasting modest revenue growth as the U.K. comes on board. Looking at margins, we will be focused on maintaining margins in the Australia Exchange and the group in the FY '26 year, while our operating expenses tick up to support adoption in the U.K. While we have detailed budgets in place for our go-to-market teams in the U.K., if the returns make sense, we will invest where needed to accelerate U.K. adoption. We are driven to make the U.K. happen for PEXA. We'll do it in an efficient and intentional way. We expect these results to deliver a core operating NPAT for the group of between $5 million and $15 million in FY '26. Group CapEx is expected to be between $60 million and $65 million, up from the $58 million spent last year. We are guiding to a modest increase in cash outflows in the U.K. in the year. FY '26 is a critical year for our U.K. business, and we are laser-focused on executing on our strategy. In all aspects of our business and in all markets, we'll take a thoughtful and intentional approach to capital allocation as we focus on delivering long-term value creation for our shareholders. With that, Liz and I would now be happy to take your questions.

[Operator Instructions] The first question today comes from Ed Henning from CLSA.

I've got a couple of questions. Firstly, you said you're looking to bring on other lenders after that NatWest goes live. I just wanted to clarify there, obviously, you're still talking to other lenders, and hopefully, you get a commitment before that. But it just means when they actually start transacting, is that what you were talking about after NatWest?

Yes. Thanks, Ed. Yes, that's pretty much it. Obviously, we're engaged with a range of lenders, big and small. And our goal is that they are a fast follow to the NatWest onboarding. And yes, we remain engaged with many of them. I met some of them when I was there in May, and our teams are both engaged with bringing NatWest on smoothly next year and then talking to other lenders as a fast follow.

And just to follow on with that, obviously, meeting with a number of the banks in the U.K. and figuring out the problems there. You talked earlier, you walked away with some confidence that PEXA can provide a solution from when you first went in and initially saw the product and now going through it more. Do you have more confidence that you can deliver that solution for the U.K. banks?

Yes, we do. Thanks, Ed. Yes, we do. Look, the home buying and selling process in the U.K. is notoriously broken. That hasn't changed. Our technology and the learnings we've had with both Optima and Smoove and engaging with the lenders and in particular, learning from NatWest and what they'd like to achieve to improve their customer experience confirms for us that PEXA can add value, can have an impact. And at the end of the day, the lenders that sign up and onboard with PEXA will be able to offer their end customers a much better experience.

And then just my second one, just on the U.K. cost step-up, which I understand around the engagement and getting onboard both lenders and conveyances. If we think about it going forward, should it continue to step up even before revenue comes through in the outer years or it will more match -- it's kind of stepped up now and then it will more match as revenue come through in the outer years?

Thanks, Ed. So absolutely, we'll have that -- the cost will come before the revenue in FY '26. I think as we look into FY '27, we still will see the costs step up, probably slightly more ahead of the revenue. And that's as we onboard, make sure we've got operations set up and also continue to invest in that sales and marketing.

The next question comes from Annabel Li from Goldman Sachs.

Just 2 for me, please. First one on NatWest. With this coming to market soon, can you talk a bit about how you're thinking about monetization and how it compares to the domestic exchange business?

Thanks for the question. So when we think about monetization, as we've said, NatWest will start with their Optima flow. Now that is about 8% of Optima's current volumes. So it will be a transition over really FY '26, '27 and '28 as we pick up more of their flows. Consistent -- reasonably consistent, I think, with what you would have seen in the early days of PEXA in Australia.

Yes. And just in terms of the monetization and pricing, like how does that -- how should we think about that compared to what you kind of charge in Australia?

Yes. Unfortunately, our pricing is still commercial in confidence at the moment. We'll look forward to being able to share that in due course. But you can think of it as a similar structure as what we've got in Australia. So reasonably aligned in how we'll think about it. But hopefully, we'll be able to give more guidance once it's no longer commercially sensitive.

Perfect. And just my second question on exchange margins. Can you just talk about a little bit more about the -- what drove the sequential decline in the second half, just considering some of the productivity benefits that were put in place earlier in the year? And should we be taking that as the current '26 run rate?

No, that -- the decline in the second half is just due to the normal seasonality effect. So you can really model that year-over-year. It's reasonably consistent.

The next question comes from Josh Kannourakis from Barrenjoey.

My first one is just on the Australian exchange platform. And Russell, you mentioned talking about a modernization strategy and moving towards a broader unified platform strategy across the business. Can you just talk a little bit about both some of the required investment there, but also some of the maybe medium-term opportunity as you sort of unify into one single platform across the markets?

Yes. Great. Thanks, Josh. So you're right. The Australia exchange, which is going on 10 years now is really a monolithic software code. I mean it was modern at the time it was built, but over time, it's been eclipsed by more modern software architectures, which is what PEXA in the U.K. was built on. So we will bring back different components. So to bring that to life and what that might mean for customers in Australia is the product that we might -- the product that we build for AML and some other future experiences for customers will be on the more modern architecture. It's modular, which means we can build it faster. We can test it faster. We can spot defects faster. It will run on a similar kind of infrastructure and code base. So we see a number of operating and software development efficiencies there. It also potentially could help streamline some of our vendor spend as well. So we see a number of opportunities, both faster go-to-market and better cost efficiency as well as greater resiliency just from being more modern architecture.

Got it. But in terms of, I guess, the core Aussie exchange, there's no plans to sort of refit that in the near future?

No, no. I mean it will be gradual. Different modules may become more modernized. You could imagine, there's an identity module. There's a payment routing module. We are investing in new payment interfaces with a number of the banks to try and make those more real time. So we're going to go bit by bit. Keeping in mind, obviously, the Australia Exchange has to work like running water being a piece of national critical infrastructure. Nothing we do will shake that resilience. But yes, my goal over the coming years is to modernize that Australian Exchange such that we have one global platform.

Got it. That's great. My second question is just on the AML opportunity and how you see that. I know it's very early days, but obviously, you guys are extremely well positioned to deliver on that. Like can we just talk a little bit -- maybe a little bit more color about how you see the opportunity, what you know at the moment, how you'd frame that opportunity? And what sort of -- what we should sort of expect in terms of news flow on that over the next sort of 12 to 18 months?

Yes. So you're right, it is early. AUSTRAC, which is leading the country around its readiness for implementation in July next year has just recently released sort of final guidelines for lawyers, practitioners, the real estate industry. So those rules are still kind of being absorbed. But from PEXA's perspective, you're right, we think we're well positioned to guide our customers today in meeting their AML obligations but also providing them with a technology solution that also helps them handle costs. We saw and we've observed and studied the implementation of AML in both the U.K. and New Zealand and noted that it was quite expensive on the legal and the practitioner industry, the vast majority of which are small businesses. So we think we can provide a very cost-effective and seamless technology solution to them. We're also working with a range of partners that have experience in let's say, high-quality international databases to meet AML compliance checks. So we will share more with the market when we're ready, both in terms of product and pricing, and how that experience will be used by our customers. But yes, we think we're well positioned to not only guide the industry, but provide our customers with a very cost-effective and easy solution.

The next question comes from Elizabeth Miliatis from Macquarie.

The first one is just around conversations with Tier 1 lenders, and I'm conscious that they are commercial in confidence. But just broadly, on a pre basis and a post basis versus your NatWest announcement, how those discussions evolved? Are they broadly the same? Or are they a bit more keen to engage with you and working with you guys to get on the platform?

Yes. Thank you. So look, they are commercial in confidence. We're very focused on an on-time and excellent implementation of NatWest. We still engage with a number of lenders. Some have reached out following the NatWest announcement, curious about timing and how they may work with PEXA. So we're not in a position to give sort of definitive like who's more excited and who's not. We'll share that when -- with the market when we're ready. We're really focused on NatWest right now.

Okay. Got it. And just around the PEXA exchange margin, if you could just give some color on how that margin might evolve in the next maybe 1, 2, 3 years as you keep pushing up your market share and you have a bit more productivity benefits come through? Yes, any color there would be great.

Yes. Thanks, Liz. As we said, look, next year, we're targeting a stable exchange margin, and that's really on the back of -- we've got a very stable market here in Australia. We'll continue to eke up the penetration. But as we've said previously, the market penetration, we see capping out probably at about 94%. So it will just be a slow creep up over the next few years there. But when we -- really beyond FY '26 at the moment, probably too early to talk and guide to that margin, especially in light of the IPART pricing review. So we'll wait and see what the results of that are.

The next question comes from Tharan Jeyathasan from JPMorgan.

My first question is just on your revenue guidance for '26. I noticed at the midpoint, it's 5.5% revenue growth. Just want to understand what your assumptions are in that guidance. You already have about 2% contribution from your CPI increase this calendar year. So if you could just provide some color perhaps by division and various assumptions that's underpinning that guidance, please?

Yes. So look, to give you a bit more color, as I said, we're really looking -- we expect to see probably modest market growth in Australia, reasonably kind of consistent with what we've seen this year. And then as we look to international as well, again, that market, we've certainly seen improvements this year in the sale and purchase market, which is great. And we're hoping that the remortgage market will start to strengthen. We have seen some early signs of some improvement in the remortgage market. But that remortgage market has been stubbornly low for a long time. So we're certainly not counting on that at the moment. So really, we'll have modest price increases with CPI across the business and modest market growth.

Is there -- are you assuming anything for benefits to transaction volumes from a declining interest rate environment in Australia? Or are you kind of assuming kind of flat volumes from what you've seen this year?

No, we'll see some benefit from that, especially in our refinance volumes.

Okay. My second question is just around your engagement with conveyances. So pleasing to see that you're in beta testing with conveyances. But one of the challenges that we've spoken about in the past years around what your kind of fee structure would be with these guys. Conveyances make a lot of money on interest income on cash held in trust. So just would be interested in any color you could provide on how you would -- how you're thinking about this conversation with conveyances.

Yes. Thanks for the question. And look, it is certainly a key conversation that we are having with conveyances. Unfortunately, at the moment, it is still commercial in confidence, those conversations. So we can't share further details at this point in time.

Okay. So maybe just one last question. I think your predecessor noted the cash-only market as a key opportunity and FDA approval was the kind of last hurdle before you were able to access that market. So given that you've now achieved FDA approval, do you have any updates on progressing with the cash-only market in the U.K.?

So really, with that market, the key will be signing the conveyances and getting them onboarded. So that's certainly a market that we will be targeting as we onboard those conveyances.

Yes. So the launch of -- Tharan, sorry, the launch of the sale and purchase proposition to the U.K. market next month is very much targeted at conveyances to come onboard and begin transacting for the cash purchases just to get familiar with the technology to go through their onboarding due diligence. So we are targeting that market. We think that will be really interesting and give people exposure to the PEXA technology and how it will improve their own conveyancing or property client service. They'll be able to focus on servicing their clients in a seamless process. It also provide additional security in terms of funds transfer. And so that's kind of our value proposition right now to conveyances. There's also potential in insurance saving for them or a PI insurance saving that we're still working through.

Okay. That's helpful. So could we expect any revenue from cash-only transactions in '26 or '27?

Look, when we're ready to give an update on that, we will. We're still testing a value prop with conveyances and the national roadshow begins next month.

[Operator Instructions] The next question comes from Christian Waked from Jarden Group.

First question on CapEx. I understand that international CapEx will step down a little bit. Now that you've built up most of the S&P platform. I guess, how would it look after you scale the platform to 80%? And post that, what do you think the CapEx would be to scale up to 90% and when you onboard subsequent lenders as well?

Thanks for the question, Christian. Look, as we haven't guided clearly past FY '26 at this stage. But certainly, as you'd expect and consistent with what we've done in Australia, we continue to always invest in the platform, both for product expansion as well as enhancements for our customers. And that we would expect to continue for international. Of course, the international build is on much more modern technology. And so it is quite efficient as we're building out there.

Okay. One more question. Just to understand a bit more color on your go-to-market for sales to try and onboard conveyances into '26, how that looks like? And would you look to add S&P capabilities to Optima?

Thanks for that. So look, S&P capabilities for Optima is something we look at later. Really at the moment, the strategic rationale for us buying Optima was to get customers on via their remortgage existing capabilities, and that's really playing out at the moment.

The next question comes from Kieren Chidgey from UBS.

Russell and Liz, just may be keen to get your views on sort of longer-term market share ambitions in the U.K. from previous management, we had sort of targets or ambitions, I should say, around both sale and purchase and remortgage market. Are they still valid? Just keen on your views now you're in the seat around achieving those goals?

Yes. Thank you, Kieren. So look, I mean, we're aiming high. We're focused on a national transformation of the property market in the U.K., similar to the journey we've been on in Australia. We don't have a timeline for specific market share targets. I know some of those numbers have been thrown out in the past by prior management. My goal right now is a seamless implementation with NatWest to make sure they have a fantastic experience, and they can pass it through to their customers, and then onboarding other lenders and conveyances. And we think naturally, those network effects will build over time and the proposition will be really compelling like it has been in Australia.

Okay. And just to be clear on the '26 sort of outlook, particularly around the EBITDA margin and the cost step-up you're talking about in the U.K. What is actually being baked in, in terms of lender onboarding? Is it just NatWest? Or is there actually some allowance in there for other lenders coming on through the course of the year? And if not, should we see a potential risk of higher costs if you're successful, which is long-term positive in attracting other Tier 1 lenders through the course of the year?

Yes. Look, as we said, if we did end up at the high end of that cash outflow range for international, that would be on the back of us signing or implementing and onboarding other lenders. So we will -- we're certainly confident at the moment that we will end up within that range, we have advised.

Okay. And final question, just on the conveyances. Can you just give us a broader update on where you are with engagement? How many conveyances have signed up already? And also what's baked in, in '26 in terms of OpEx spend in terms of attracting and marketing to conveyances?

Yes, Kieren, it's pretty early. We're beginning the roadshow, like I said, next month to go national in a number of cities across the U.K. to take our value prop to conveyances. So it's a bit early for us to give numbers. We have put in sales and marketing spend, obviously, for these events and the training and the onboarding and all the processes we need to get through to make sure the conveyances can get onboard and begin using the technology. So when we have some more news and some metrics and some numbers on that, we'll share probably the half year.

Right. And is there any wind back in your technology costs to pivot more into sort of the marketing and sales side of things in '26? Or would that more likely come in '27, just given you're saying NatWest won't really go live towards the end of '26 on sale and purchase?

Yes. So let me think about our technology costs. As we said, we still continue to invest in the platform in the U.K., both for future expansion, enhancements for our customers and the like. But as we said, that platform, we are also bringing back modules of that back into the Australian business as well. So we will continue to invest there. It will decrease, but we will continue to invest.

That does conclude the time for today's Q&A session. I'll now hand the conference back to Russell for any closing remarks.

Thank you. So we appreciate your attendance today and for all your questions and your engagement. A special thanks to our shareholders, customers and all my fellow PEXArian's around the world, without whom we would not have been able to generate such solid operating results over the last year. It's been a pleasure to discuss our FY '25 results with you, share our FY '26 plans, and we look forward to engaging with you all in the future. Thank you so much for joining.