PEXA Group Limited (PXA) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the PEXA Group Limited first half '26 results announcement. [Operator Instructions] I would now like to hand the conference over to Ms. Lisa Newns-Smith, Investor Relations. Please go ahead.

Good morning, and thank you for joining us for PEXA's 2026 half 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 for the 6 months to 31 December 2025. At the end of the presentation, we'll open up to questions. Before we begin, we acknowledge the traditional custodians of the land on which we meet today and pay our respects to elders past and present. I'll now hand over to Russell.

Good morning, everyone, and thank you for joining us today. We'll start on Page 3 of the presentation, where you'll see the agenda for this morning. I'll begin by taking you through our first half of '26 highlights, including an overview of our operational performance across each of our business segments. Following that, I'll hand over to Liz, who will walk you through our financial results for the half in more detail. We'll then return for some concluding remarks and share our outlook for the remainder of the year. At the end of the presentation, we'd be very happy to take your questions. Turning now to Page 4. We delivered an exceptionally strong first half, recording double-digit half year revenue growth driven by robust growth in transactions across the platform. In addition, we continue to tightly manage expenses, introducing further efficiency measures and rightsizing our Australian business. The combination of strong revenue growth and disciplined cost management has enabled us to uplift our FY '26 EBITDA margin guidance. In the U.K., we remain firmly on track to deliver against our strategic and operational objectives. The NatWest implementation originally scheduled for completion by the end of Q4 is now expected to be finalized slightly ahead of schedule in April. We formally launched our U.K. product suite to the conveyancing market in September and October through a series of national roadshows. Encouragingly, we are also seeing macro and regulatory tailwinds emerge in the U.K. There is renewed engagement across the industry and government to address long-standing inefficiencies in the U.K. home buying and selling process. Here in Australia, we noted the release of 2 independently authored interoperability reports commissioned by ARNECC, the cost-benefit analysis and the functional requirements review. Taken together, we believe the findings suggests that the objectives of the interoperability program as originally conceived, can no longer be delivered in their initial form, and we believe there is no better solution than the established national network that has and continues to serve Australia so well. Lastly, we continue to execute against our strategic priorities. We recently completed the strategic review of our Digital Solutions segment and made the decision to exit our majority-owned businesses and several minority stakes. We also recently launched our AML solution, PEXA Clear, ahead of the 1 July 2026 compliance deadline, supporting customers as the regulatory requirements evolve. At the same time, we've continued to explore expansion into additional markets, particularly in New Zealand. Moving now to our financial snapshot on Page 5. Please note that the first half of '25 comparatives have been restated to exclude discontinued operations from the Digital Solutions segment. The figures presented here reflect continuing operations, which we believe provide a clearer view of the underlying performance of the group. From a financial perspective, we are very pleased to have delivered strong results in the first half of FY '26. Revenue increased by 10% versus the first half of FY '25, while EBITDA grew by 19%. Importantly, our EBITDA margin expanded by more than 3 percentage points from 36.8% to 39.9%, reflecting the disciplined cost measures implemented during the period. Our net profit after tax adjusted for acquired amortization rose by 33%, excluding significant and nonrecurring items associated with the exit of our Digital Solutions segment. Liz will take you through those items in more detail shortly. We delivered positive statutory NPAT from continuing operations of $15.4 million and earnings per share of $0.087. Our Australian exchange, truly the jewel in the crown of the PEXA Group continues to demonstrate strong cash generation. This incredible asset supported a 25% increase in group free cash flow compared to the first half of '25. During the half, we strengthened our balance sheet through debt repayments, reducing our net debt-to-EBITDA ratio from 2x to 1.4x, further enhancing our financial flexibility. Overall, this represents a very strong core result for the half and sets a strong foundation for the remainder of FY '26. Moving on to Page 6. I'll speak now to our individual business segments, starting with Australia. Margin strength in Australia was two-pronged, driven by record transaction volumes and cost discipline. We saw exceptionally strong market growth driving our revenue during the half. On the 19th of December 2025, an all day -- an all-time daily transaction record was set with 41,000 transactions processed and $15.1 billion in settlement value, beating a previous high from 2024 by 14%. In fact, 5 out of the 10 days with the highest daily settlement value in PEXA's history occurred in December of 2025. We are particularly pleased with the performance of our tech platforms and our teams in these times of heightened volumes. Moving on to costs. We were very focused on optimizing our costs during the period and streamlining our operations. Pleasingly, this delivered EBITDA growth over and above our revenue growth while maintaining high levels of customer satisfaction. We spent $17 million in CapEx in Australia in the half, including improvements to the platform infrastructure, building out our AML product ahead of the 1st of July 26 compliance deadline, initiating coverage in Northern Territory in August of '25 and expanding our coverage in Western Australia and Tasmania. We continue to invest in our Australia exchange, and I'll speak to how we see the exchange evolving very shortly. We also continued our regulatory engagement in the half, including working with IPART regarding their ongoing pricing review and preparing for the potential outcomes. We attended the New South Wales Upper House Select Committee on Competition Reforms and Electronic Conveyancing to answer questions about the paused interoperability program. Turning to Page 7. Let's talk a little about the interoperability program as it currently stands. After 5 years and a significant investment from many parties, the program remains paused with no implementable outcome. As I noted earlier, 2 independently authored interoperability reports commissioned by ARNECC were released in December, the cost benefit analysis and a functional requirements review. When read together, in our view, we believe the reports confirm our long-held position that there is no compelling case to continue with interoperability. We encourage state and territory governments to help our industry and our focus on protecting and maintaining the integrity and high service levels of our national e-conveyancing system. The functional requirement review states, and I quote, "There is no guarantee that successful implementation of an interoperable system will result in an increase in competition." The same report also states that and I quote, "The implementation project will be technically complex, the resulting system will not be elegant and there will be a need for initial and ongoing regulatory oversight." Taken together, we believe the findings of these reports are significant. In our opinion, an interoperability program cannot deliver what was originally promised, nor does it fulfill ARNECC's own key guiding principles for interoperability as endorsed in November of '23. More broadly, any interoperability model of this nature risks reducing the incentive to innovate and may even remove innovations already in place through the loss of functional equivalents. Most importantly, we believe the risk to consumers are too high to justify pursuing further structural change. During workshops conducted with the 4 major financial institutions in Australia in creating the functional requirements review, the potential for a reduction in workspace functionality was identified by the authors of the report, potentially leading to a 5% to 10% drop in successful on-day settlement. As operators of a technology business, it would be highly unusual to release a product, knowing it would result in worse customer experience. The cost benefit analysis indicates that the maximum projected financial benefit of interoperability may be just $16 million over 20 years. By comparison, PEXA's digitization has delivered $2.4 billion in productivity savings over the past decade alone, according to a recent economic impact report. Against that backdrop, from our perspective, there is no better option than the secure, safe, cost-effective, reliable and innovative national network we have today. Our focus at PEXA now is firmly forward-looking. We are concentrating fully on serving our customers, continuing to innovate and ensuring the ongoing strength and resilience of the platform. We also plan to work with our regulator and policymakers on a program of regulatory uplift to ensure that there is appropriate regulation and the right regulatory framework to ensure the best customer and consumer outcomes. So let's move on to Page 8 to talk about the ongoing evolution of our Australian exchange. The exchange in Australia is national critical infrastructure and a powerful example of Australian innovation, something we should all be very proud of. It underpins a secure and efficient transfer of property across the country and plays a vital role in the digitization of the broader economy. In the current state, as you can see on the left, our exchange comprises of siloed, vertically integrated products that have been locally optimized over time. While this has served us well, the next phase of our evolution is focused on greater platform harmonization and scalability. Our new Chief Product and Technology Officer, Pete Bonney, has hit the ground running. He is working closely with our product and technology teams to evolve our systems toward more common platforms, leveraging our global intellectual property to accelerate our operations and support faster, more efficient product development, utilizing a range of AI tools. This approach will allow us to stay flexible and nimble, remain compliant with regional regulatory requirements and above all, continue to meet and exceed our customers' needs and service level expectations. There is, of course, a great deal of discussion at the moment about artificial intelligence. We continue to leverage a range of AI tools across our organization from ChatGPT access for all employees to developer productivity acceleration in our tech teams. We at PEXA see AI as a workflow productivity enhancer that improves efficiency and decision quality. We also see promise in the way AI can drive next-generation automation and efficiencies for our customers. At PEXA, we've transformed an industry through digitization of property lodgement and settlement, and we'll continue to innovate in line with the next wave of technology. Turning now to Page 9. We'll move on to our International segment. Our international performance in the first half of '26 reflects recovering market conditions in the U.K. During the half, we saw growth in both sale and purchase and remortgage completion volumes. Pleasingly, revenue growth outpaced the increase in operating expenditure, resulting in improved EBITDA margins for the segment. Importantly, the NatWest implementation for remortgages commenced during the period and remains on track for completion in the fourth quarter of '26, with sale and purchase to follow. This is a significant milestone and an important proof point as we continue to scale in the U.K. Our engagement with Tier 1 lenders has accelerated following NatWest's commitment to an implementation program, and we continue to make steady progress in this area. The demand for U.K. lender platform workshops is high, and we've added resources to our U.K. team to meet this demand. We formally launched our U.K. product suite to the conveyancing market in the first quarter of FY '26 and have seen strong engagement since that time. Our focus is now firmly on driving adoption, which we expect to accelerate for conveyances as additional lenders come on board and the network effect builds. Beyond operational performance, we've actively contributed to the U.K. reform discussions, including formal submissions and parliamentary engagement and were recently selected to participate in the Bank of England's 2026 Synchronization Lab to demonstrate how synchronized settlement and title lodgement can improve the property transaction process in the U.K. These reform discussions indicate a growing policy focus on improving the home buying and selling experience, a direction that strongly aligns with PEXA's capabilities and our mission. Turning to Page 10. The slide shows how impactful PEXA solution can be for lenders and conveyances in the U.K. PEXA operates between the instruction to the conveyancer and the settlement and lodgement part of the property transaction journey. The current process today is a bit of a black box. It's highly manual. It's operationally complex. It can lack visibility, and you've got several thousand conveyances filling the same forms in different ways. You have banks and conveyances sending confidential data in CSV and Excel format by e-mail on disparate systems to complete their reconciliations each day. You can imagine the impact the system -- this type of system has on banks, conveyancers and buyers and sellers. On the other hand, PEXA's solution in the U.K. brings with it transparency, collaboration, automation, security and efficiencies, which can dramatically change the experience of all parties in the property transaction journey. If you are a PEXA implemented lender in the U.K., you could be more confident in the settlement of your transactions and know what's in the pipeline. You could experience lower operational costs and reduced errors in processing. You can enjoy enhanced asset security and drastically improve your customers' outcomes to settle on the day as planned. If you're a PEXA implemented conveyancer, you can enjoy faster completions, less admin and manual tasks in your practice, reduced risk through automation, which has confirmed to us by a U.K. insurance broker can lower insurance premiums for conveyances by up to 40%. Through adoption of PEXA's platform, we can help drive better outcomes for lenders and conveyances as well as their customers. I'll now hand over to Liz for a review of our financial results.

Thanks, Russell. We'll start on Page 12 with our core operating results. As Russell mentioned, our Digital Solutions segment has been classified as held for sale, and their current and comparative results, inclusive of the related impairment have been presented as discontinued operations. The remaining digital solutions products, which were adjacent to the exchange and complement our strategic direction have been integrated into the Exchange segment, which has been renamed Australia. When we talk to our core operating results, we will exclude all discontinued operations and significant items, which we have detailed on the following page, and all variances referred to are versus first half 2025. Looking at this page, as Russell mentioned earlier, our revenue grew 10% with strong revenue growth in both business segments. During the half, we made changes to our operating model in Australia, rightsizing the business. As a result of these changes as well as the ongoing productivity and efficiency initiatives, our costs were well controlled, enabling the group to continue to invest in our International segment for growth, while containing expense growth to just 3% for the group. Pleasingly, this resulted in group EBITDA of $85.8 million for the half, up by 19% and a group EBITDA margin of 39.9%, up just over 3%. This led to a $20.8 million core net profit after tax, up from $10.9 million in the first half of 2025, an increase of over 90%. Turning to Page 13. We have detailed our reconciliation of our core to statutory results. As expected, significant items in the half were well below prior periods contained to $7.7 million, driven by redundancy and restructuring costs following our operating model changes in Australia and the divestment of Digital Solutions. Importantly, the operating model changes are estimated to deliver more than $10 million in annual cash savings to the group with $4.7 million delivered in savings in the half. Depreciation and amortization costs in the half were $19.9 million, up 3%, driven by amortization of both new first half '26 assets as well as new FY '25 assets. Net finance expenses were lower this half due to the lower interest rates and $25 million in debt repayments in the period. Tax in the half on core operations was $16.6 million, up $4.3 million on first half '25 due to the strong operational performance in Australia. Discontinued operations from our Digital Solutions segment made a loss after tax of $29.6 million in the half, largely as a result of impairments taken against these assets. The decision to exit our Digital Solutions segment, along with the strong operating results in the half has driven an uplift in our FY '26 core operating guidance, which Russell will speak to later in the presentation. Moving on to Page 14. I'll talk you through some of the financial highlights, starting with revenue and volume in Australia. Revenue growth of 10% in our Australian business segment was driven by record transaction volumes, as Russell mentioned earlier. Relative interest rate stability and government support such as the 5% deposit scheme for first home buyers helped stimulate activity among eligible buyers, driving transfer growth of 7%. Refinance transactions were also strong, up 14%, reflecting increased lender competition with double-digit growth in all states and territories bar one. And lastly, we also put through our regulator approved price increase of 2.4% from 1st of July 2025. Looking at the second half, with almost 2 months down, we are seeing signs of transfer and refinance growth moderating to more traditional growth rates with the impacts from the recent cash rate increase likely to be felt in the coming months. Now we will turn to international revenue and volume on Page 15. Pleasingly, the U.K. market continued to show signs of recovery with the sale and purchase market up almost 4% and the remortgage market up almost 30% after declining since 2022. Growth in the half was impacted by the loss of a low-margin search contract with the lower revenue impact largely offset within cost of sales. Conversely, the business enjoyed a $1.5 million tailwind from foreign exchange movements in the half. Excluding these impacts, higher average fees and market growth in the period drove international revenues up almost 14% and gross margin up 20%. Our market penetration was broadly flat for sale and purchase over the period, while it fell marginally for remortgages. And for those who would like more details, we have included the Smoove and Optima splits in the appendix at Page 30. Turning to Page 16. We have received a number of questions on how our U.K. pricing is structured and how that translates into revenue over time. This page sets out our transaction types and the total revenue PEXA earns per transaction. In the U.K., a transaction can either be one-sided or 2-sided. A one-sided transaction means only the purchaser side is on the PEXA platform. A 2-sided transaction means both the purchasers and sellers' conveyancers are on the platform. Importantly, the outgoing lender is not currently a participant in the digital workflow. So we do not earn fees from them today, but instead see this as a future opportunity. Starting with a one-sided purchase with a mortgage. In this scenario, the purchaser's conveyancer and the incoming lender are on the platform. We charge GBP 100 to the purchaser's conveyancer and GBP 25 to the incoming lender, generating GBP 125 per transaction. For 2-sided sale and purchase with the mortgage, the seller's conveyancer is also on the platform and is charged GBP 45. This brings total revenue for this transaction to GBP 170. For a one-sided cash purchase, there is no lender involved and the workload is lower. In this case, we charge the purchaser's conveyancer GBP 75, which is the total revenue for that transaction. If it is a 2-sided cash transaction, we add the seller's conveyancer at GBP 45, bringing total revenue to GBP 120. Turning to a remortgage. This structure effectively mirrors a one-sided transaction with no transfer of title. We charge GBP 45 to the conveyancer and GBP 25 to the incoming lender, generating GBP 70 per transaction. In response to these fees, we are in the process of agreeing changes to the Optima fees, but we won't share the details on this until it's finalized. Finally, a transfer of equity occurs when a party is added to or removed from the title as part of a remortgage. Because this involves both remortgage and title documentation, the total revenue per transaction is GBP 125. Overall, our pricing reflects the relative value delivered and work performed in each transaction type and scales as more participants join the platform. Now moving on to our costs on Page 17. As I've mentioned, our group operating costs grew by just 3% compared to our group revenue growth of 10%. As you can see from the waterfall chart on the left of the page, we continue to focus on driving efficiencies across the group. Our operating model changes early in the period delivered $4.7 million in savings in the half, putting us well on track to deliver over $10 million in annual savings from these changes. We also saw $3.7 million in efficiency benefits in international, mainly from lower go-to-market advisory costs and synergies from bringing together the 3 U.K. businesses in FY '25. We also maintained our investment in cyber and resilience, including expanding our real-time monitoring capabilities to support the continued reliability of the exchange. As we look into the second half, we do expect an uplift in international spend with new roles added early in the period to support lender workshops and sales. In Australia, we also expect an uplift in sales and marketing spend as we launch our new PEXA Clear product. Moving to cost of sales. During the period, Australia incurred new industry fees and incurred one-off costs to migrate mobile signing functionality, which combined with volume growth drove a 26% increase in cost of sales. As some investors may be aware, we have sought a judicial review in New South Wales to provide ourselves and our regulator clarity on our ability to pass through these industry fees in future periods, with an outcome expected in the second half. In the U.K., cost of sales decreased by $1.5 million in the period, predominantly reflecting the cessation of a low-margin search contract in late FY '25, which was partially offset by the impact of increased volumes in the period. These results delivered strong EBITDA growth in Australia, which was up 15% and in International, which was up 4% on a constant currency basis. Looking into second half '26, consistent with our normal seasonal trends, we are forecasting lower volumes and revenues, and combined with an increase in expenses in both Australia and International, we anticipate lower margins with the full year '26 margin expected to be within our guidance range of 34% to 37%. Moving on to Page 18. We'll talk about free cash flow generation and CapEx for the group. Following our strong operating performance, we saw free cash flow increase to $40.2 million for the half, a 49.9% conversion and up from $32.2 million in first half '25. On the right-hand side of the page, you can see the breakdown of our CapEx spend by business segment. Capital expenditure in Australia for the period was broadly aligned with first half '25, reflecting operational efficiencies and the mix of build and maintenance work in the period as well as investment in new products. Spend in the half increased in exchange enhancement as the work on the evolution of the exchange started with the platform infrastructure build. We also saw an increase in other spend, which includes spend on our new AML product, PEXA Clear. These increases were offset by lower spend in API and other integrations. International CapEx decreased by $1.6 million to $8.6 million compared to first half 2025, reflecting the sale and purchase build largely being completed in FY '25. We have reduced our FY '26 CapEx guidance to $50 million to $55 million to reflect discontinued operations as well as disciplined cost allocation and improved operational efficiencies. Turning to Page 19. We'll now discuss capital management. The Board has decided not to recommence the buyback program at this time, and we will use our cash flows to reinvest in our existing business, pay down debt and invest for growth. During the first half of FY '26, the group repaid $25 million in debt, reducing our leverage ratio to just 1.4x, well below our target leverage ratio of 2.5x net debt to EBITDA and further strengthening our balance sheet. We continue to take a disciplined approach to exploring business expansion opportunities, following our 3 key criteria for new market entry as set out on the page. With that, I'll now pass back to Russell to take us through the conclusion and outlook.

Thank you, Liz. Turning now to Page 21. I'll briefly recap the highlights from the first half of '26. We were pleased to deliver robust performance during the half, underpinned by record transaction volumes and targeted cost management. This combination of top line growth and operational focus has strengthened the quality of our earnings and positioned us well for the remainder of the year. In Australia, we formed a view on the information regarding the paused interoperability program provided by ARNECC through the release of the cost benefit analysis and the functional requirements review. As shared earlier, we believe these reports provide an important direction for the industry. At the same time, we've been engaging constructively with IPART and preparing for the outcome of its review. In the U.K., execution continues to progress well. The NatWest Remortgage implementation remains on track for delivery in the fourth quarter of '26 with sale and purchase to follow, and we're seeing encouraging momentum in engagement from both lenders and conveyancers as we work to expand our footprint in the market. Following the completion of our strategic review of the Digital Solutions segment, we are now firmly focused on our core strengths. We've streamlined the portfolio and are positioning the business both operationally and strategically for sustainable growth as we move forward. Moving on to the next page and looking ahead to the second half of FY '26, our priorities are clear and firmly aligned to disciplined execution and sustainable growth. In Australia, our focus remains on maintaining margin discipline while continuing to invest in the evolution of the exchange. We continue to prepare for the outcome of IPART'S pricing review with a draft determination expected in June and the final decision due in September. In parallel, we're focused on delivering and driving adoption of our AML solution, PEXA Clear, ensuring customers are well supported ahead of the upcoming compliance requirements. In the U.K., our immediate priority is the seamless delivery of the NatWest integration. Beyond that, we're working to expand the lender onboarding and scale our sales and marketing capability to accelerate adoption among U.K. conveyancers. At a group level, we'll continue to explore international expansion options, including New Zealand, while remaining disciplined in our capital allocation. And finally, our people. We could not achieve what we do without our teams in Australia and the U.K. PEXA's employees have navigated a prolonged period of change, and I'm incredibly proud of what everyone has achieved. I'm genuinely excited about what we'll continue to accomplish in the months and years ahead. To ensure our people remain engaged and appropriately incentivized, we are reframing our employee value proposition through a new share ownership scheme placing greater emphasis on long-term rewards and alignment. We remain committed to attracting, developing and retaining outstanding talent because great people deliver great outcomes for our customers and in turn for our shareholders. Turning now to our final page, I'll touch briefly on our core financial operating guidance. We recently uplifted our FY '26 guidance, reflecting the strong performance delivered in the first half and the actions we've taken to sharpen our strategic focus. Following the reclassification of the Digital Solutions segment to discontinued operations, revenue is now anticipated to be lower than previously forecasted, partially offset by our strong first half performance. This portfolio change, combined with our strong first half result has led to an increase in our expectations for group EBITDA margin and group core NPAT. We've also reduced our anticipated group capital expenditure, as Liz explained earlier. Our guidance in relation to international operating cash outflow remains unchanged, consistent with our planned investment profile and execution pathway in the U.K. We remain firmly focused on delivering profitable, sustainable growth underpinned by operational discipline, strong cash generation and targeted investment in high-return opportunities. Thank you, and we're now happy to take any questions you may have.

[Operator Instructions] Your first question comes from Elizabeth Miliatis with Macquarie.

First one is just around the guidance for the full year, $15 million to $25 million, and you've just reported $20 million, $21 million for the first half. Just curious why there's not greater conviction around upgrading? And then also, does that assume some material costs for onboarding of U.K. lenders? Is that why we haven't upgraded?

Yes. No, thanks, Liz, for your question. Look, we certainly have upgraded from where we were previously. And look, we do -- as we called out, we do expect to see that normal seasonal trend with revenue, which always drops in the second half of the year. And then we will see a bit of an uptick in expenses in Australia as we launch PEXA Clear, and also in the U.K. with new FTE. But look, we're certainly trending strongly on that guidance and probably closer to the top end.

Okay. Great. And then just on the Australian margin, obviously, the first half is typically stronger, but we were quite surprised at how much that ran, just particularly given the IPART review. What kind of seasonal -- and if we look back historically, we've had market share step up, so it's kind of hard to assess what market -- what margin should do seasonally. How should we think about that first half, second half change? And also, any costs for AML, would that get rolled into the Australian PEXA Exchange margin? Or will it be reported separately?

Yes. Thanks, Liz. Yes, AML will be rolled up into Australia. So that -- those costs are in there now, and will be part of that. And look, we won't separate those out unless they become a material cost, in which case we'd call them out as a driver. But in the second half, we are seeing just a bit of slowing in momentum, especially in the transfers in the first couple of months. So we expect that to come through and impact that second half revenue along with the seasonal drop, and then just a bit of an uptick as well, of course, as expenses, as I called out. So as we said previously, we are looking to really maintain margins in the exchange, and that same applies to Australia. We're looking to maintain those full year margins.

Okay. And just final one, and then I'll get back in the queue. Just any color on how things are progressing with lenders outside of NatWest? Any sort of insight would be much appreciated.

Thanks for your question, Liz. So we're not sharing specifics of any lender. We're engaged with multiple, like I mentioned, through workshops and explorations and various kind of sharing. So when we've got some news, we'll definitely share it with the market.

Your next question comes from Kieren Chidgey with UBS.

I might just start with the first question on the Australian regulatory review backdrop. As you mentioned, Russell, we've seen sort of, I guess, the interoperability reports released by ARNECC showing no real sort of economic imperative to go down that road. How do you think that might influence the IPART pricing review? And just that in combination with the margin you've printed in the Australian Exchange business, this half of 58%, sort of how you're thinking about the implications of positive potentially no interoperability, but would that potentially feed back into how IPART thinks about revenues, fees moving forward?

Thanks, Kieren. So look, I can't speculate on the IPART outcomes. We're continuing to engage very constructively with them, and sharing all the information that we have and answering all their questions. So there's a range of outcomes we're modeling. I can't kind of speculate on where they'll land. With respect to interoperability, though, look, we think the reports when read together are pretty clear. They're pretty thorough. Interoperability is not a formal policy yet, although it is a desire and has been a desire for the industry. But we think it will logically lead to the conclusion that we've reached, which is that there's no better platform solution for the Australian Property industry than the status quo today, and it could involve some regulatory uplift, which we're very comfortable around. How it impacts IPART, I can't speculate. IPART were clear in their initial terms of reference that they were looking at ELNO pricing, not just PEXA pricing. There are obviously 2 operating ELNOs today, albeit with very different market shares. So the landscape exists for another ELNO to -- or other ELNOs to build their network or their version of a better product. And I think IPART will take that into consideration as well. But that's kind of how we're viewing those 2 issues today.

All right. And sort of on a shorter-term perspective, sort of the ARNECC MOR draft consultation released sort of in the last week seems to suggest CPI-related fee increases for the 27 years. So is that your understanding now that whatever IPART is going to do won't take effect now until FY '28?

So yes, the draft MOR that we've seen that you've also read, does show that CPI increase from July 1 as per the kind of typical historical price adjustment. That is what we know for now. When IPART will reach a determination and ARNECC therefore, decision and how that may impact future years is still unknown. But all we have now is that the July 1 price increase for CPI, as we've done historically, will be implemented.

All right. Just a second question coming back to the earlier question on, I guess, the group costs and margin into second half. You've flagged higher costs in the U.K., I guess, being one of the drags in that group, EBITDA margin into second half. I'm just wondering how we should be thinking about at a high level, the U.K. cost base moving forward, just given we've got the NatWest Remo launch only sort of in April. Interested in your thoughts on sort of that second half cost base, how are you thinking about that into the '27 year, just given we'll have a full period of Remo volumes in '27 plus the launch of sale and purchase and potentially some other U.K. lenders there as well. But putting aside sort of new clients, how we should be thinking about the go forward on the U.K. cost base, given what you're implying in second half?

Yes. Thanks, Kieren. Look, there certainly is additional people being put on in the U.K. at the moment, really so that we can deal with that lender demand and the sales. So absolutely where we want to put the spend. How that flows into FY '27, absolutely, we'd still expect probably a bit of an uplift in those costs, but too early really to give forecast on that at the moment. We'll see how that plays out through the rest of the half, before we give any guidance at the full year.

Okay. But I mean, conceptually, the additional expansion of sale and purchase transactions in '27, does that sort of have a commensurate uplift in costs associated with it? Or do a lot of those sort of people and the work required to deliver that already exist within the cost base in second half of '26?

Yes. Most of that would already exist. So it's a pretty high -- it's a fixed cost business largely within PEXA U.K. So those volumes won't drive significant sort of cost uplifts there. You will see a bit of a cost uplift in Optima, depending on how their volumes go though because those costs are a lot more variable.

Okay. So it's more about additional lenders in the U.K. coming on in '27 that would be the key factor.

Yes. That is making the demand for sales because the sale process is quite cumbersome.

Yes. Just a final question. PEXA Clear, you flagged as sort of an area of cost uptick into the second half. My understanding was that product was due to launch, I think, around July '26. So how should we think about the revenue that will come off the back of that into next year?

Yes. So we have actually already launched PEXA Clear and all of our customers need to actually be compliant from 1st of July. So the launch will really happen this financial year. So that those customers are onboarded and ready to transact from the 1st of July. So certainly, you'll expect to see that revenue uplift next year, but there will be that -- those early sales and marketing costs that will come through in the second half.

Okay. And sorry, what -- just to be clear, what is the revenue associated with this?

So we haven't given guidance on that revenue, Kieren.

All right. Have fees been published?

Yes. There have been some fees published. on our website.

Yes. So Kieren, we've shared the transaction pricing model through various roadshows now with customers who may use the PEXA Clear solution from the 1st of July.

Okay. We will take a look at that.

Your next question comes from Tharan Jeyathasan with JPMorgan.

I just had a first question around your engagement with conveyancers in the U.K. It sounds like you've had some good progress there. But yes, just would be interested in any clarity -- any clarity around the progress you've made in terms of the number of conveyancers you signed up or what you view as a critical mass of conveyancers in the U.K. I'm particularly interested in the cash-only market, which I think you've said in the past represents a meaningful opportunity, but is dependent on a critical mass of conveyances. So yes, just how you're thinking about these 2 things, please?

Yes. Thanks for your question. So it's a big focus for us. Obviously, we had the roadshows launching a proposition to conveyancers around the U.K. in September and October of last year. So I think we did 6 events. They were very well attended, oversubscribed in some cases through England and Wales. So we had really great initial interest, good kind of industry engagement as well. So a number of people from across the industry speaking about the opportunities of digitization and the modernization for conveyancers and the opportunities to just run a more streamlined and digitized business with lower insurance costs. So suffice to say, we think the proposition is clear. We're now in the process of really kind of moving those conveyancers who've inquired and registered interest through our funnel. It's not a traditional sales funnel. It's got a bit of compliance overhead and registration around the funds transfer in particular, because we're FCA regulated. So we're not giving out numbers now, Tharan, in terms of who signed up and how many through the funnel, but we're working towards getting really a critical mass nationally such that when we're ready to go with S&P, those conveyancers will be ready. Some of those conveyancers, right now can do cash transactions. And so that -- it's really just very early stage. When we've got some substantive data on that adoption, we'll share, but we're still very much in the early phases.

Okay. Maybe just a second question around -- you've provided some clarity around what your fee structure looks like in the U.K., which is very helpful. Have you looked at what this implies for your target addressable market in the U.K.? I think prior estimates were around $550 million. So just interested in, if you have a view on if this still remains appropriate or maybe if you can provide some directional comments on where you think that sits today?

Yes. Look, we haven't given out an updated TAM. Really, as we've said previously, that total addressable market is really going to depend on the timing of the lenders and when we get those onboarded as well as the conveyancers. So yes, we haven't updated that.

Is there any rough comments you can provide? I mean, do you think it's -- because obviously, there's been inflation and growth in the size of the market. So just like any directional comments you can make?

Yes. Look, we'll update that at the appropriate time. But yes, we're certainly not giving out any directional comments on that at the moment.

Understand. And just maybe a final question around interoperability. It sounds like things are moving in a favorable direction perhaps. But just interested in any color around if there are any stakeholders still pushing for interoperability. I know there was a recommendation from the Senate Economic Reference Committee for the ACCC to get involved. So just interested if there were any updates on that. And if you have any updates on how Sympli or other stakeholders have responded to the 2 independent expert reports released by ARNECC, that you've spoken about today.

Yes. So thanks for your question. So look, it's still an open topic in terms of where it may go. While interoperability remains a policy of ARNECC, and a legislative priority for 2 state governments, it's not actual -- the recommendations and the reports are not a policy. So just to clarify that. In terms of who's still pushing for it, well, obviously, our competitor has been quite vocal on interoperability. And then the hearings in both the New South Wales Upper House as well as the Senate inquiry last year, there were a number of kind of voices that participated as witnesses who were advocating for interoperability as well as on the other side, there were others who didn't feel that it was appropriate for our market structure. That's our position. We've made a number of submissions and hopefully made our case to those committees publicly, to our investors, to our customers as to the risks of the program. And then obviously, these latest reports as published by ARNECC, and independently of kind of fit a lot of what we've said and pleasingly confirm a lot of the risks that we've raised and others have raised around resilience. I can't talk specifically for where Sympli stand in their current viewpoints. But for now, from PEXA's viewpoint, there's no better solution for Australian consumers and the industry players who use the technology every day than the status quo, which is the national e-conveyancing network that was originally conceived to serve all Australians, regardless of where they live, the same price point for the same set of transactions. And that's really what we're focused on.

I assume there hasn't been any additional comments from the ACCC on the subject?

No, not that we're aware.

Your next question comes from Josh Kannourakis from Barrenjoey.

A couple of questions from me. First one, just unpacking the guidance and investment a little bit more, is it possible to quantify what you're thinking about the step-up in costs related to Clear in the second half?

You're talking about PEXA Clear, Josh?

Yes, yes. Yes.

No, look, we were not going to give any guidance on that specifically. We will call it out, of course, at the year-end if it is material, but we're not expecting it to be a hugely material number in the second half. But it will be a bit of an uptick, though.

Got it. I guess maybe just help me a little bit more on that. I'm just trying to reconcile the cost savings that you obviously mentioned what you had in period, the annualized benefits within Australia coming through. I'd imagine from an OpEx perspective, ex -- if you're including that as well, it must be a pretty material step up or maybe cost base coming back. I'm just trying to reconcile that just for the Australian business. And then maybe second part of that, Liz, is just with the U.K., is there any sort of movement potentially in from costs that are being capitalized moving more so into the P&L line? And is that responsible for some of that uplift as well?

So look, in Australia, Josh, we will just see that a bit of an uptick, as we said. So absolutely, there will still be a few more benefits coming through Australia from the cost optimization program and the restructures. But as you saw, we did get a significant benefit in the first half, which was fantastic to see that realized as much of that as we could as early as we could. So we'll continue to see that. But yes, overall, a small uptick. But the PEXA Clear costs, it's not going to be a hugely significant cost in the second half, but it is one of the key drivers for that uplift. Yes. Looking at the U.K., no, there's not really a shift. I mean, we certainly -- as we said, we've seen the CapEx come down this half as we anticipated and have seen that those new roles start to drive the cost up, and that will come in more again in that second half as we've put on board quite a few more people early in this half, really to meet that lender demand.

Got it. And is there any context just to give on maybe just how many heads, like just to give a bit of context on scale of the business at the current headcount maybe versus where it was at the start of this half that we've just finished.

Yes. No, we're not giving that out, Josh.

Okay. That's fine. Just a second one, maybe for Russell. Just in terms of, obviously, there's been a big change and obviously, due focus on the platform and you've seen the best parts, Russell, the more model international stack. Can you maybe just talk a little bit more -- maybe flesh out a little bit more around some of the potential for those internal AI development initiatives? And maybe just what having a more modular international and core architecture can enable you for looking at potentially other international markets or other opportunities out there?

Yes. Thanks for your question. So it is an area of focus, and it has been for some time. I think we had shared a bit about that on our last roadshow. By the way, we're talking about technical development at PEXA, doing it a bit differently going forward. A lot of that was -- the genesis of that was building PEXA Go for the U.K., which was a modular architecture, different to the Australian architecture, which was built over 10 years ago. So on the Page 8 of our presentation today, there's a very simplistic picture on the right, which sort of shows that future technical development with PEXA, the aim is to have common infrastructure and core services, not separate by geography or asset class, common development environments for our teams who are writing code and releasing products as well as the APIs that people use to connect to our exchange style products being consistent across different kind of countries or businesses. So that's the ambition from a technical architecture perspective. The use of AI is kind of just spreading very, very quickly through software development and product development as a discipline. And like other companies, we are deploying those tools as are our vendor partners and a range of infrastructure partners we use. So we're just really kind of moving with the market on that front. So yes, hopefully, we'll be releasing products a lot faster, a lot quicker and therefore, being able to test a lot quicker and get customer feedback faster. So that's the ambition. And hopefully, that will just flow through into a better operating leverage in the way we build our tech.

Got it. And just sorry, on that last comment, just on the international piece, like does it actually enable potentially lower friction or lower capital requirements in terms of looking at new markets over time as well?

Yes. So look, that's an early hypothesis, Josh. When we have a good example, we'll be really happy to share, but that's kind of a hypothesis we've got as we think about how we might expand beyond Australia and the U.K. and property.

Your next question comes from Ed Henning with CLSA.

The first one, just a point of clarity. The investment in the U.K., did you say it was from lender workshops, sales and marketing for conveyancers and then also scaling lender onboarding?

Yes. Certainly, that's where in the costs, Ed, that's absolutely where we're seeing the uptick.

Okay. Perfect. The second one you mentioned in the call, you talked about review of Optima fees. Is this -- how should we think about this that fees potentially have to come down to fit in a PEXA fee, and the PEXA fees kind of you're subsidizing -- Optima subsidizing PEXA a little bit? Or how should we think about that?

So PEXA under the new structure will incur -- sorry, Optima will incur the PEXA fee. So those fees -- and there's also another kind of -- there's quite a few complex fees that over time, those bulk conveyances have introduced. So we're really looking at the moment and working with some of the lenders to how can we streamline those fees and change some of those fees, and really make them fit for purpose, for the future, both in being -- including the PEXA fee, but also other options there to future-proof the fees under a PEXA model.

Okay. And then can you just talk a little bit about synchronization? Obviously, you've been called for the BOE to look into that, but also there's another player looking at as well. Can you just talk about the risk of competition here? I know you guys already have a solution there, but how you think about that as the first one. And then also in the U.K., you're seeing a review of client money for conveyancers. Has that kind of fallen through and you're seeing more conveyancers now interested in the PEXA solution? Or are people still kind of a bit stand off until you get a solution in the market with NatWest actually transacting?

Okay. Thanks, Ed. So on synchronization, we are part of the Bank of England synchronization pilot, which is really exciting. It's the next evolution. So synchronization is in effect how the Delivery Versus Payment or the DVP process works in Australia, where both settlement and lodgement occurs simultaneously and removes the risk between kind of transaction completion and funds are moving. So we think it's a positive movement for really what PEXA does, which is that real-time settlement and lodgement. Whether there are -- we anticipate like any sandbox or any pilot, there will be a number of parties that participate. And so we don't see that participation or others involvement as a competitive risk because, again, we have a lot of depth in this area. We already have an existing integration with the Bank of England with PEXA Pay. That's a pretty differentiated scheme. We know how they work. They know how we work. We've passed a lot of the compliance, and we have a lot of that kind of, let's say, credibility in that area. So we're hopeful that this just fits in with a broader digitization across the property ecosystem in the U.K., which we think we will be a beneficiary. So that's that. On your second question, Ed, about conveyancers and client interest. Look, there is a broader reform that is being explored, and actually pushed by the current U.K. government around the change to client interest to be held by lawyers and conveyancers and there's a public consultation period. And we're just -- we're participating in that like anyone else. So again, we think this is broadly where the industry is going, and we think this is favorable for PEXA and the overall industry, such that conveyancers then kind of go on digitization journey and focus on serving their customers in a really kind of deep and authentic way like we see in Australia and interest on client is not going to make or break their business. And so we've seen that in a number of markets, and Australia is a good example. So we're hopeful, again, this is just another reform that will speak to improving the home buying and selling journey.

Just on that, so, Russell, I was talking about the reform era ends in -- the review ends in March. But have you seen any more interest from conveyancers, given that reform or because it's not finalized yet, you haven't really seen any increased inquiry from conveyancers is kind of where my question was going.

Yes, right. So look, that reform, you're right, it's still very much underway. So that reform itself is not really driving conveyancers to inquire about PEXA, more our marketing and awareness and events, and just the overall kind of NatWest impending launch is what's driving interest.

Okay. And then so just to round that off, given you haven't got NatWest up and running, are people kind of still waiting for to get NatWest transacting? Or are you starting to see people increasingly come into the funnel and getting approved and signed up to PEXA ahead of that?

Yes. So I mean we have good interest, and we have a number of conveyancers and lawyers moving through the funnel. We think that will materially increase once NatWest go live. It will be an important proof point. We can point to it. Customers will point to it. So yes, we think that proof point is needed to get the real kind of true big mainstream awareness. But again, interest right now is healthy, but we think the launch of NatWest will be a sea change.

Your next question comes from Annabel Li with Goldman Sachs.

I've just got a quick follow-up on PEXA Clear. Just interested in how you're thinking about the broader opportunity size and maybe how you would expect uptake to look like over the next year or 2 as that product scales?

Yes. So PEXA Clear for us is a really interesting new area for us to experiment and to work with customers on. It's very distinct and separate to the PEXA Exchange. That's the first thing to mention. It is the only AML solution, we believe, in the market today in Australia that's custom built for the Australian property industry, and for the unique compliance requirements of real estate agents and lawyers and conveyancers in the property transaction. So that's our differentiator. Our pricing is on a per transaction basis, also a differentiator, Annabel. And so yes, we're kind of commencing the real awareness, the national roadshow, working with industry groups now. You can see a bunch of our marketing online and helping lawyers and conveyancers and real estate agents sign up and get -- and reach their compliance milestone with AUSTRAC ahead of the 1st of July compliance. So that's kind of the value prop. There could down the road be a range of other services we may offer to those customer groupings. We're not really in a position to share yet. We're really focused on the execution and the adoption of PEXA Clear, again, to help our customers meet their compliance deadlines. So that's a little bit of how we're thinking about it, what we're doing to get awareness out there and why we think our product is differentiated.

And sorry, just are you able to quantify how big that opportunity size might be and maybe like market share ambitions there?

No, we're not sharing numbers like that right now, Annabel.

There are no further questions at this time. I'll now hand back to Mr. Cohen for closing remarks.

Okay. Thank you all for being with us today and for your thoughtful questions. I'd also like to extend a special thanks to our shareholders for your continued support to our customers for the trust you place in us, to our fellow PEXArians whose dedication and commitment make these strong operating results possible. We've appreciated the opportunity to share our first half performance with you, and we look forward to continuing the conversation in the months ahead. Thank you for joining.

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