Qoria Limited (QOR.AX) Q2 FY2026 Earnings Call Transcript & Summary

Good morning, everyone, and welcome to our December quarter for 2025 for the quarter 2 of financial year 2026 webinar on our December quarter results. Tim will kick off as usual. And I'll step in on the financial slides, and then we'll go to question as usual. Tim, over to you.

Right. Thanks. I see there's a few people in the waiting room. They're coming now. Okay, great. All right. Cool. Thanks, Ben. Thanks everyone for joining us. The December quarter isn't the -- typically the highest selling period for us for a lot of our business, particularly northern hemisphere part of our business. It's really about focusing on execution and delivering good, services to customers; getting -- in particular, in the U.S., getting kids back to school and getting their devices protected. But it is a big period, the December half and the December quarter in particular for Australia, New Zealand and our Qustodio business. And you'll see that reflected in the numbers that we're about to show you. Very pleasing results actually. In fact, it was the best sales December quarter we've ever had in our history. And from a guidance perspective, we're really pleased that we've hit all our guidance numbers and are very confident for our guidance for the rest of the year. So look, I'll quickly run through the highlights, then I'll go through the meat of the presentation, then I'll hand over to Ben to talk through the numbers, and then we'll answer questions at the end. So yes, we made some massive milestones, massive milestones actually achieved in the December quarter. We were, of course, buffeted by the FX movements, the Australia, U.S. and euro. But if we forget that, let's make some celebrations. Firstly, we passed USD 100 million of ARR, which is a substantial achievement. And in constant currency terms, that meant AUD 154 million in ARR. We're reporting $149 million of ARR at the end of the calendar year. We also passed through 20% of the students are on our platform in the U.S. That is an amazing number; 20% of our students. Essentially all of those students are organic, and we entered that market in 2018. That is an amazing achievement. We've also passed through 30 million kids are protected by our platform, substantially more kids on our platform than there are Australians on earth. They are achievements that we should celebrate. Now from financial results, we added $5.1 million of net ARR. That is a great result. Over $4 million in the education business was an outstanding result, again, given it's not the key part of the selling part of the season and over $2 million in Qustodio. Qustodio is an absolute flyer, growing now at an annualized rate greater than 34%. So our top line is growing better this time of the year than what we were doing last year. And last year, you'll recall, we hit the ball out of the park for the financial year. Cash receipts $79 million, 20% up on PCP on the same half last year. So a great result on guidance, and we're expecting that to continue comfortably actually for the financial year. Free cash flow positive, up 46% for the half. And then probably also really another big highlight, right? Obviously, key to our financial is the North America K-12 business, and our pipeline is on fire, nearly $40 million in pipe, $14 million on a weighted basis, which is 30% up on the record pipe of last year. So the stage is set for a fantastic end to the financial year. Reiterating guidance, and we think, if anything, there's upside in particular on our ARR. So let's go through some of the numbers. 32,000 schools, that hasn't changed; 30 million kids in the platform, 9 million parents using our tools is up; more than 100 countries accessing our products. As I said, $154 million, I think I said on a constant currency basis, but we ended the half with $140 million -- $149 million of ARR, growing at 20%. Again, that is -- it would have been much higher than 19%, but for the FX. Free cash flow positive for the half. And for the year, we're expecting free cash flow breakeven or better. So again, I'll let Ben talk more to that. And again, a big highlight is that $14 million of weighted pipeline, which sets us up for a fantastic crack in the second half of the financial year. Matter of fact, a big chunk of our team are in the U.K. right now because there's a big sales event which is called the [indiscernible] end of January per year. So all parts of the business are going extremely well. These numbers here are in local currency. U.S. K-12, 30%; Qustodio, on the last 12-month basis, is 27%, but based on the first half this financial year, over 30%. That business is flying. Australia, New Zealand growing at north of 30%. Now the U.K. is still a little bit retarded, let's say, because they haven't got access to all the products, but that's literally happening now. We're launching at that some substantial integration, filter and monitoring by the end of this quarter. The Qoria filtering technology will be valid in the U.K. and more and more stuff to come. I'll talk more about that in coming months, but you'll see the U.K. really a step change in growth in the U.K. in the next 12 months. Very exciting what's happening over there. Things at SaaS, they haven't really changed. I guess, if I could highlight anything, gross margins are over 90%. Again, that excludes acquisition cost, but that compares with most -- whether most SaaS businesses report. So our margin -- our gross margin is incredibly strong. And as we are now maturing and integrating our businesses and our costs are stabilizing, that's what's delivering the operating leverage in the business. And our marketing efficiency, particularly in Qustodio, where we're generating return on investments of anywhere between 300% and 400%. It is expensive to put money into Qustodio because it does drop straight through our P&L, but it is really important because for every dollar we invest in that Qustodio business, we're getting $3 or $4 back in short order is the right place to be investing our money. Okay. So this is a waterfall of the contributors to our growth. K-12, new customers, new logos are still the engine room in our business. We're getting better and better and better at cross-selling, and we delivered $1.5 million of cross-sell. I think cross-sell is now, over the half, it's -- could be -- 30-plus percent of our new ARR is from cross-sell to existing customers. Last year, it was just over 23%. So we're definitely getting -- with more products to sell, we're getting better at [indiscernible] existing customers. Qustodio, as you see there, $2.1 million, so nearly added $5 million of ARR for the financial year together. But of course, a big chunk of hit there with the FX movement. Now of course, there is a cost impact of that as well, which, again, I'll let Ben talk about, but in round numbers, it was around about $3 million of improvement in our costs from the FX movements. Sorry. Bear with me. I just lost my screen. Okay. So K-12, what's the -- I mean, a big net add for the quarter of $3 million, $4.6 million gross. That is -- it's not quite a record for K-12 but it was a little bit surprising how well it came in. This time of the year, it's hard to predict what sales are because it isn't the biggest selling period, but we had some outstanding results again, particularly in the U.K., they're really delivering in that quarter. Average revenue per student continues to go up. Average sales price, as you'd expect, as we're kind of getting into the selling season that's picking up. But the real highlight in the education business is the building of the pipe into the second half of the financial year, nearly $40 million of deals in that pipeline and 30% growth in the way that pipe is remarkable. Qustodio, all indicators in this business are going the right way. So the first half, again, 34% annualized growth. I'll draw your attention to the chart at the bottom, the yellow column being the most recent result of this financial year's results. And you see not only net ARR growth, that's substantial, but you're seeing subscriber growth. For -- prior to this year, for the last 2 years, most of our ARR growth in the Qustodio business has become -- has come through price optimization. But now that we've delivered price increases, feature enhancements and a little bit of investment, we're talking literally $4 million of extra investment over the year in that business. We're now seeing that turning into substantial lifts in ARR subscriber numbers and at really good return on investments. Our average order value and our cost to acquire customers essentially breakeven. And so it's not burning cash to grow that business. But of course, the way the accounting works is to acquire a customer to take that to the P&L immediately and then you take the revenue over the life of that customer. So that is a good business. And we're carefully investing in that business to make sure that we hit our guidance but do not miss the opportunity of the financials. The unit economics of that business are tremendous. So cash flow is up 20% for the half. We're expecting that and more for the second half. We're feeling really comfortable with our inflows. Again, I'll let Ben talk more about that, but you see quite clearly in the charts here, the cycles that our businesses go through, but we're stepping up every quarter, every year. Operating leverage. I guess I can highlight some things that are important. You'll see it through our 4C and you see it on the slide. One, as we've been telling the market for some time now, at the beginning of the financial year, through our budgeting cycle, we make investments. The bets we've made this year is -- the main one we've made this year, 2 of them, sorry, is to put more money into Qustodio marketing, around about $4 million, and to invest in building out the engineering team in Sri Lanka. Those investments were being made now in this first half year to deliver results going forward. And so you've seen a lift in our costs and, of course, pay rises, which you [ deal ] in that October period. So you've seen that lift, but as we have also gone to the market on our ARR and revenue is expected to be at least 20% higher than last year. And so that can be easily accommodated. Those modest increase in costs can be -- and bets that we make going to be easily accommodated in ARR and revenue growth. Now on the bottom chart on the right-hand side, what we've done there for comparison purposes is to show our year-to-date result for net ARR versus cash costs. So essentially, it's a run rate view of our business on a constant currency basis, so using our FX rates at 30 June. As you should see, these investments that we've made in Sri Lanka and Qustodio marketing are comfortably covered by the growth in revenue in our business. So again, leverages in our business is growing. Gross margins are great. We also have flexibility in these bets that we make, particularly around marketing costs. So we can optimize our expenditure to make sure we hit guidance, and at the moment, we're feeling very comfortable with our growth and our guidance, particularly our cash flow and balance sheet, which, again, I'll let Ben talk about later. Now I know there's going to be a lot of questions about balance sheet and finances. But I do think it's important, if I could just steal 5 or so minutes of people's time to talk about AI. There's been a lot of chatter we've seen recently about the impact of AI and what that might mean for SaaS businesses and Software-as-a-Service type of businesses. What I'm going to do now is quickly talk about the investments we're making in our business to take advantage of AI for internal costs, but also deliver value for customers, but also talk about what's the broader implications for businesses like ours with the advent of agentic and generative AI. So firstly, a quick, I think, focus on us. There's really 3 areas of investments in our business with AI. One is enhancing offerings, adding -- essentially adding AI features to our products that customers may enjoy. And we've been talking about this for a while, and it's generating now literally millions of dollars of revenue in our business. We were the first in the kind of mainstream filtering provider space to provide real-time content to web filtering. We can now intercept the kids website, look at the images that they're looking at, look at the videos that they're looking at and blur them if there's inappropriate content. And we can also now look at the text, every single line of text, hidden or otherwise, and make a determination about whether that should be shown to a child because -- or not. And in particular, that stuff is focused on our content, of course, but also kids who are brilliant at finding their ways around filtering technologies using technologies like VPNs and proxies. So we can now scan in real time these pages without the kids noticing and make those determinations. There's a whole host of other things that we're doing behind the scenes with categorization and classification, and there was also some really cool things that we're doing with automations and AI chatbots and let's call it AI agents that can help you with your navigation and your journey of using our products. And we'll talk more about that in the second half of the year, but big investments made -- we're making there and not -- these things are actually delivering real contributions to our business today. Constant work across the business. We're all getting better and better at integrating AI into our day-to-day activities and of course, all of our vendors of various customer relationship management type systems are adding AI features in there. And that's -- so we highlight here about $2 million of reduced support costs, and we've reduced the amount of workload and our human moderators for our monitoring product by that 30% with tons more to go. We -- I won't go into the details, but there's literally millions more dollars of savings that we're expecting out of that customer support and human moderation by the end of this calendar year. And then going to this question that I keep hearing about can people code in their basements and then replicate the sort of features that you offer. Now we're doing that internally. Product development teams globally are now -- are being expected to use wipe coding and AI tools to not only prototype, but to be able to build alpha-ready products that customers can use and then move into the development -- proper development cycle, production cycle, they call it. So we do that today. And it's something like, I think 90% of our -- 88% of our teams are now using generative AI in their day-to-day activity. We've saved 15 FTEs, 15 roles, engineering roles in our business, and these are expensive resources, $120,000 to $200,000 resources, 15 of them have been effectively saved through the use of these tools. And it's not just at the grassroots, even people like myself are using AI to build applications in this business now. So that's now running right in our business. Okay. So what is the impact of AI going to be on SaaS businesses? Unquestionably, the ability to code is accelerating, ability to take an idea from an idea, put something in front of a customer and turn it into a feature that's being used by customers has moved incredibly quickly from taking 9 months to a year to get a feature out the door 3, 4 years ago to 3 or 4 months. We're actually now doing that. We've actually got a feature that shipped a couple of weeks ago that took less than 3 months to deliver. Now does that mean that people can start by coding their way and competing with big companies? Well, what Bain and company say is that with the right playbook, which includes deep AI integration, strong data moats and leadership of standards incumbents can shape and not just survive the next wave of SaaS. Now let me go in a bit more detail what that means. There's a number of references here to third parties that have been investigating this question about what is the impact of AI going to be on dedicated SaaS businesses. The one thing that I draw your attention to is we don't sell really just software. What we're doing is selling mitigation of risk. A customer -- I mean a private school in Australia, they might be spending $20,000 a year with us to make sure that kids are not watching pornography at school or making sure that they're complying with their obligations around safeguarding and privacy. What school is going to entrust that to a backyard provider who may be half the price? They're not going to do it. What's really important to understand in enterprise platforms, particularly in markets which are high trust and heavily regulated like we operate in, there is a transfer of risk inherent in that process, which is really what we're selling plus, of course, the features. Now according to Andreessen Horowitz, durable moats come from restricted proprietary regulatory sensitive dynamic data sets, not the model. So yes, there is a lot of data everywhere, and you can build AI tools that leverage that data. But if you think around a business like ours, we have access to very unique data. We -- in fact, we're the only one really globally that has the ability to see what kids are doing at home and see what they're doing at school and bring all those contexts together. We also, through our acquisition of Octopus last year, we can now see through schools' other systems, attendance systems, academic records, teacher notes. We have more visibility across the data sets and schools than I think anybody in our space. The ability to bring all that together and add value decision-making of schools is a significant moat that is very, very hard to replicate. The third point [ best of ventures ] is that -- and you're seeing this across the Internet is that there is much more now focused on vertical integration. What was previously feature providers, little expense type management systems and project management systems that could apply to everybody, that world is collapsing, and now people are focusing on particular industry segments, which is a vertical integration and approach. We've been talking about this for 3 or 4 years about all those entry points and all those personas that we're trying to support inside the school. So we've been talking about vertical integration for a long time. Outcome-based pricing is where McKinsey sees this world going. So it's less about the subscription per user, subscription per service, but it's, are you delivering value. And again, we've been talking about this for a long time. How do we make sure that customers pay the minimal money, the money they're spending on our services, maybe $7 or $10 per student per year and how do we turn that? How do we prove the value that, that's driven to customers? So our, acquisition of Octopus was, in large part, to make sure we can deliver measurable outcomes in investment for schools, modest investments for schools making our technologies. And then final piece, and I think this isn't talked about enough, accelerating time to value is really important, and that can, of course, be done with great user interfaces, which can be vibe coded, but the complex type systems that we do, it also requires the addition of wrapped professional services, which is something that we do, in particular around professional development for moderation, safety leads and, of course, the online safety education and something that's unique in our business. So we've been thinking about this challenge of protection, building a moat around your business with the -- not just AI, but just the acceleration in software development for a long time. So if I can reiterate, Qoria operates in a high-trust safety, safety-critical environment, very regulated, subject to privacy policies, compliance obligations. And of course, we're dealing with human lives. This isn't an area that's naturally ripe for disruption by backyard coders. Customers are not purchasing software fixed, lowering their purchasing assurance, compliance accountability and professional services. The comment on the right-hand side is the key point I'd like to make. I think the SaaS businesses that are at risk are those single feature and undifferentiated workflow type businesses, those, particularly with low switching costs, and that is not our business model. The winners will be platforms with proprietary data which we have, regulatory drivers which we have, and a customer locking which we have because we are invested across the school stack and we have relationships with parents within these schools. So for businesses like ours, we see that AI is an accelerant and certainly not a threat. Look, that is a very quick overview. Happy to provide some dedicated sessions on this over time, and maybe I'll leave to the broker analysts who are on this call to see if they'd like to do that. That was very quick. Let me quickly hand over to Ben Jenkins.

Thanks, Tim. Good morning, again, everyone. Just jump to the next slide, please, Tim. Thank you. So as you can see on the page here, free cash flow for the quarter was just over negative $2 million, broadly in line with what we're expecting across the whole half when you consider the Q1 results and the Q2 together at just under $9 million positive. As we mentioned at the September quarterly, we've collected cash really well in the September quarter, and the collections over the half were in line, almost exactly in line with the guidance we provided at 20.2%, which is really pleasing. Something probably worth calling out here, it is called out on the next slide, but it is mentioned here, so worth talking to the other one-off costs. They are all related to acquisitions that we were looking at. Diligence costs, other bits and pieces. There was 3 different acquisitions across the half that we looked at in a significant amount of detail. And for various reasons, we have walked away from all 3 of those or being outbid on those. So they are genuinely one-off in nature and corporate costs related. Outside of that, I think jump to -- I've got control now. I can jump to the next slide myself. Going into a little bit of detail on the cost line across the board to talk to the investments that we've made in the business over the year. Most of that is done now. So I expect costs to be broadly flat across the half, if not down in some cases, particularly in relation to fixed other costs where you have some seasonality within that. And importantly, on cash collections, I think the most important -- and you can see this in the chart earlier in the deck where we comp the cash collections quarter-on-quarter over the last 3 years. Last year, we're -- receipts in the March quarter were only up 9%, and receipts in the June quarter were actually flat. They weren't up at all year-on-year. And so we're comping a very favorable period. And that's largely due to the runoff in multiyear cash upfront that happened last year. That's washed through. You can see that's washed through in our first half results and cash collections. But in the first half of the year, we're actually still comping at a much tougher period. So we're pretty confident that receipts will be comfortably over 20% for the second half of the year up year-on-year. And I guess the other data point that we can point to is, last year, if you look at the half 1, half 2 split, it was 60% receipts in the first half of the year, 40% in the second half of the year. A lot of people are probably going to that as the baseline. Again, due to the profile of the cash flows last year and the flat nature of it in the second half of the year, that's probably the wrong split to look to. If you look at FY '24, the split was actually 57% half 1, 43% half 2. I don't expect it to be that far to the right this year, but it will be somewhere in between those 2. And if you back through that, that gives you a number of comfortably above 20% in cash receipt growth for the second half of the year. On that basis, net debt is mentioned on the previous slide and all the cash on hand of $21 million. We're comfortable there's enough cash in the bank from now through to 30 June when we start collecting cash really strongly again in the July or the September quarter to see us through. So free cash flow for the full year should be broadly in line with guidance that we've provided before. So we would generate $9 million in the first half, we will see through a bunch of that in the second half and end up the year with a cash balance similar to what we started the year at, probably slightly lower, in line with what we've discussed in the previous quarterly updates. FX exposure, Tim spoke to this earlier. We've updated this slightly, a little bit more in the business related to U.S. dollars. So the sensitivity to the U.S. dollar is a little bit higher than what it has been. The other area where there's a little bit of impact is within the Qustodio business. The majority of their revenue is in U.S. dollars, whereas the majority of the cost is in the euro, and there's been a little bit of a disconnect there. So there's a little bit of cost related to that, that's captured in the sensitivity analysis earlier in the pack. On that basis, we can go to questions.

We'll let Laf in. [Operator Instructions].

Thank you for the detail you've given us on the free cash flow. Can I just dive into a little bit more on the cost side? So I can see that you're now more confident on the March and June cycling at least 20% up. Can you talk through the timing of some of the cost savings around AI? And I think from the last couple of quarters, you talked to it being first half heavy. Is that right? And can you just talk about the trajectory of the cost base going into FY '27?

Yes. I think the cost savings will really be an FY '27 story. I think FY '26, the cost base is fairly set now. So I'm not expecting any significant increase from here. And then through to FY '27, we're reasonably confident that we'll be able to keep cost flat. So not CPI increase, we should be able to offset any wage increases with savings within the business. So that will further extend that leverage. And if you forecast out the growth that we're expecting in the business in ARR, a lot of that comes through this half of the year, then you can see a path to fairly significant cash generation in FY '27.

Yes, sure. And can I just clarify for the second half, I mean I think Tim talked to some of the AI savings you have of $2 million in your presentation in savings. Is some of that coming in the second half? Or is that all really in FY '27?

Some of it is cost avoidance. So an example would be the moderation team, the moderation product is growing significantly, 25% to 30% year-on-year, yet we actually haven't grown that too much. So rather than having to put new human moderators on, we're able to deal with that through advancements in AI. Lindsay, you should be able to unmute now and ask your question.

Okay. Hopefully, that worked. Can you hear me?

Yes.

A couple of questions. First one on the U.K. So it looks like a pretty modest kind of quarter year-over-year, up 6%, something like that. I mean you've talked about that being soft until you can launch new products post-unification. So questions are, like, one, just remind us again where we are in the unification process? And then two, like once you can start cross-selling to the U.K., could you just talk about like where -- firstly, like where the big opportunities are, but then also where the early opportunities are because I think people are going to kind of want to see some runs on the board. So like where are you going to focus first? And then where is the opportunity in the U.K.?

Yes. Well, the sequence is to take our cloud filtering offering from the U.S. and integrate it with -- into the monitoring product. So you essentially have a cohesive monitor and cloud filter for our cloud-only customers in the U.K., and that's happening right now. The next step is to integrate our cloud filtering offering and monitoring offering with the in-line appliances. So the 4,000 smooth wall appliances, they are in schools and council schools and MATs across the U.K. And then the final piece is to extend that suite of features to the larger MATs, which are what's called a multi-tenant deployment. Essentially think about multiple corporations that are managed by a single MSP. So that's the final stage of the integration road map, which should be around about September kind of worst case end of this calendar year. So to answer your question more directly then, the objective of this year is really that existing customer journey; getting all of our customers acquainted with the future of our platform, the singular platform, new experience is being rebranded as Qoria. It's got brand-new user interfaces, much more modern and user-friendly interfaces, the same that the customers in the U.S. enjoy. So a big part of it this year is about bringing those customers on the journey, making sure that they're happy. It's going to reduce any churn that we have. So our kind of gross retention is going to improve this year in the U.K. and that gross retention, I think, has been 86% to 90% for the last year or 2 there. So that will improve. And it then gives us the opportunity in a cheaper way of selling things like parental controls and classroom management and data analytics and so on. So very much an existing logo story this year, graduating from the less complex to the more complex schools over time. And that's done deliberately for technical reasons, but also those bigger clients will appreciate that this product is tested in the field before they move to it. And then, yes, in '27 for us is then accelerating new logos in the U.K. market, going up a lot of the business that Lightspeed has taken from us in the last 2 or 3 years.

Okay. Brilliant. And then I'll switch on to Qustodio. Like yes, pretty good quarter, 2.1%, I think is what you called out. I suppose my question would be was a little bit -- my number looks a little bit slower than Q1. I think traditionally, this has been like the strongest quarter for consumer, that kind of Q4 calendar year period. So one, could you just like remind us of the seasonality in the consumer business? And then, two, looks like there was a huge marketing spend in this quarter. It jumped up to like north of $4 million from $2 million something in Q1. Just wanted to confirm that marketing spend is seasonal as well, and we shouldn't expect $4 million a quarter going forward.

Do you want to tackle that one first, Tim?

Go ahead. Yes.

Yes, that's right. It's timing effectively and where it landed either side of 30 September. So if you take the spend over the whole half, average it, that's more what you'd expect in the second half of the year, but don't annualize the December quarter.

Yes, that's right. Yes. So for the half, they added just under $5 million of ARR and spent under $5 million of ARR. That's what we're told Victoria do. Grow within your -- the amount of money that you bill your customers. And if you need more money than that, talk to Ben Jenkins. That's really the message.

All right. And just -- maybe I'll sneak in like a third question. Just an update on the B2B2C part of the Qustodio business like you've kind of maybe scrapped that from the deck.

Yes, we've got around 200,000 accounts now connected through U.S. schools to U.S. homes. And that's now a customer base. And we're getting better and better actually. We don't talk much about that, but we probably should. We're getting better at signing on these schools and now proving to schools that there is efficacy, that there is benefits. There was material reductions in toxicity in schools who are bringing on those programs. I should present this to the market actually. It's pretty amazing. So we're now selling out more and more schools and getting better at connecting those accounts. Those schools that follow our marketing plan are typically 20% take up comfortably. We're still getting around 1% of those upgrades to pay product. But just again, to reiterate, we are still not marketing to that group of customers. We're not sending newsletters. We're not sending monthly e-mails or aggressive upgrade-now type, 3-months-off type things. We're not doing any of that. But that program is about to start. And this quarter, we're expecting to do marketing communications to those 200,000 parents. And we're also going to start doing some innovative pricing. So rather than annual plans, which is the only way Qustodio goes, it's all upfront annual plans. We're going to start to do monthly plans. So from low to high value plans, just to A/B test to see what that sort of market will handle. So yes, that's all -- that's the next stage of the journey, Lindsay, as we've now got a big enough customer base to start playing with how do we monetize it. So that's really the '26 story. So we can talk more about that in coming months.

Owen, you should be able to unmute and then ask your question.

Guys, can you hear me okay?

Yes.

Well done on the operating performance of the business. Just to kind of understand. ARR growth is 23%, call it, year-on-year. The weighted pipeline is up 29%. I think Qustodio is accelerating to over 30%. Can I just confirm, the guidance is 20%. Given your expectations, are you kind of tracking at this stage above that 20%?

Yes. Yes. Look, I mean, I'm feeling confident about that. If you spoke to our Head of North American sales, he will say he will kill that. But the risk in our businesses, as you know, is that so much of our North American sales are done in the last 2 weeks of June. So we don't really know for sure. But certainly, the trajectory -- the underlying trajectory of growth in this business is well north of 20%. Absolutely.

And just to kind of hit the nail on the head here because we're getting a few questions today. So net debt, $33 million; guidance is at or around $37 million, so $4 million for the second half. That includes interest costs, call it, $1 million a quarter. So $2 million for the core. The cost base is running it, if you look at the second and first quarter at around that $35 million per quarter all in. So annualize that for the look over the half year, $70 million for the second half. Looking at the cash receipts of last year around that $44-odd million, talking about around that growing at greater than 20%, that looks like it's about a negative $16 million or $15 million around that number of the $17 million between cash collections and cash outflows in the second half plus interest cost. Can you just kind of give us a bit more clarity? It sounds like the cash collection should be much higher than 20% in the second half to kind of get that. That's kind of where the questions are coming out today. We haven't really talked about that.

Yes, that's right. And I think we're comfortable to say that we think it will be comfortably higher than 20%. Again, point you to the half-on-half splits over the last couple of years, and last year is probably not the most appropriate one to use. It's not 60-40. We're comping a very friendly period from a cash collections perspective, as I mentioned earlier. And I think, reiterate the -- I guess, the guidance around in line. We're talking -- it should be there or sort of $2 million to $3 million within that level. So maybe a little bit more burn potentially. But again, going to Tim's point, it depends on North America. There's potential to outperform that. If we get sales through earlier in the period, we can invoice it, collect it, get a good cash receipt result in June. Maybe it spills over into July. But the pipeline is there. The business is coming, and the cash will come, whether it's across June or July. And yes, I think the big point to reiterate that you're touching on is that cash collections piece and having looked at it, I guess, over the last couple of years, not just last year.

If we run Owen's numbers, we're $21 million at the end of the half. And if we burned $17 million, including interest, we're -- was that what the formulas is?

Yes, yes.

Yes, yes. No, we'll be doing better than that.

And maybe another question is if revenue is running at $145 million constant currency there, what is the cash conversion ratio expected?

Yes. I think if you went back 2, 3 years, it was converting at 100% effectively. It won't be that high because of the fact that we've weaned ourselves off those multiyear cash upfront to a degree. If you look at last year, cash collections were about $109 million over opening ARR of $116 million. So I think if you -- our closing ARR is $145 million, it won't be $145 million, but it will be in that sort of, I guess, $5 million, $6 million, $7 million range of that number.

Good one. And last one, just the U.K., I guess, Lindsay was touching on it running at kind of 6% growth, growth running at 20%. I guess, is that the expectation if you end FY '27 for the U.K. Like if all the work you've been doing is the acceleration you're expecting, just talk us through what growth rate is expected to be sustainable maybe this calendar year and into next?

Yes. This calendar year, I think, 6-plus, hoping to get to closer to double digits, and then the year after, north of double digits comfortably.

There's no further questions, Tim. So if you want to wrap up, we can finish it up there.

Yes, cool. Well, thanks, everyone. Thanks for your support. Thanks for your attention, a big call. I feel like we have delivered clear guidance to the market about growth, cash flow collections, free cash flow, net debt on the balance sheet. So we're well set up now with the right balance sheet, the right team, the right strategy. Pipeline is good. So feeling very good about delivering all of that. And from 1 July, we never turned back, right. We start paying off debt and we are -- we're away. So feeling very good about our guidance for the year; very well set up; and looking forward to delivering. So we'll see you all next quarter. Thanks a lot.

Thanks, everyone.