REA Group Limited (REA.AX) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the REA Group Limited Full Year Results 2025 Conference Call. [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Alice Bennett, Head of Investor Relations. Please go ahead.

Good morning, and welcome, everyone. My name is Alice Bennett, Head of Investor Relations, and I'd like to thank you for joining REA Group's 2025 full year results presentation. Before we commence, I'd like to acknowledge the traditional owners of country throughout Australia and recognize the continuing connection to lands, waters and communities. We pay our respect to Aboriginal and Torres Strait Islander cultures and to elders past and present. So today, you'll hear from REA's CEO, Owen Wilson; and Janelle Hopkins, REA's CFO. Owen will talk to our overarching financial performance and strategic highlights for the full year. He'll then hand over to Janelle to talk to our financial results in more depth. And following this, we'll be happy to take your questions. With that, I will pass it to Owen to get us started.

Thanks, Alice. I'd like to welcome everyone this morning and also acknowledge the traditional owners of the land on which we're meeting and pay my respects to their elders past and present. This will be my last full year presentation and I'm delighted to share these results today. REA Group has delivered an excellent FY '25 result, underpinned by double-digit yield growth, deepening consumer engagement, and the superior value delivered to our customers. Turning to the results from core operations for the year. Revenue was $1.67 billion, an increase of 15%, and EBITDA excluding associates, was $969 million, an increase of 18%, and NPAT was $564 million, an increase of 23%. The Board has determined to pay a final dividend of $1.38 per share fully franked. Together with the interim dividend, this represents a total dividend of $2.48 per share, an increase of 31%. Before we move into our operational highlights, I'd like to touch on the market conditions we operated in this year demonstrating the health of the market and vendor confidence, listings remain broadly in line with a very strong prior year. New national buyer listings remained above the 7-year average, while quarterly growth rates reflected significantly varied comparables. I expect the chart on the left to reverse in FY '26, as we face strong comparatives in the first quarter and softer comparatives in the fourth. The chart on the right highlights the return to more normalized listing conditions in the last 2 years. The fluctuating listing volumes reflect the impact of the Royal Commission, the global pandemic, and successive interest rate hikes. The more normalized market conditions of FY '25 supported vendor confidence with buy listings up 1% on the prior year and just 1% below FY '18. The first interest rate cuts in 4 years accelerated buyer demand to reach peak levels in the second half. In May, we recorded the highest level of inquiry in over 3 years and inspection interactions also continued to increase. As interest rates fell, price momentum strengthened and extended across the country. National house prices finished FY '25 at a new peak around 5% higher than a year ago. In these positive conditions, we remain focused on the execution of our strategy, and we achieved some outstanding highlights. More people turn to our leading platform than ever before with a new Ipsos record of 12.7 million people visiting realestate.com.au in April. Our personalized owner experiences helped drive a 55% increase in seller leads and 4.5 million Australian properties are now tracked by their owner on our site. Customers continue to turn to our premium products to differentiate their listings with Premier+ in residential and Elite Plus in commercial, both achieving record depth penetration. In India, we recently announced the divestment of PropTiger, enabling greater focus on the core housing.com business. We also announced our exciting investment in Athena Home Loans, and we established our Cyber City innovation hub in India and centralized our support teams in the Philippines. We have a consistent strategy with 3 simple goals: providing personalized property experiences to engage the largest consumer audience, delivering leading products and services to drive superior value to our customers, and leveraging unparalleled data insights as we expand our core business and build next-generation marketplaces. Supporting our growth strategy, we have continued to acquire new capabilities, taking minority stakes in IMMERSIV, a 3D visualization platform and [indiscernible] an AI-powered search platform based in the U.K. REA has been investing in AI and machine learning models for over a decade, and our investment has significantly increased in recent years. AI is an enabler that is enhancing the execution of our strategy and accelerating delivery. There are clear opportunities to innovate the way we extract and use data, enhance our products and experiences and to improve operational efficiencies. This slide highlights just a few of the current use cases, some of which I'll refer to over the coming slides. Australians are property obsessed and on realestate.com.au, they can find more homes for sale than anywhere else. Australia's #1 addressing property was recognized as the sixth most valuable Australian brand in the 2025 Kantar Brandz ranking. Realestate.com.au delivered record FY '25 audiences, and we increased our lead over the nearest competitor with 12 million people visiting the platform on average each month. Over half of these visitors use our site only. This means there are more than 6.4 million potential property seekers that can't be reached on our nearest competitor's platform. The size and deep engagement of our audience underpins the value we deliver to our customers. This has consistently strengthened over time. And in the last 8 years, our unique monthly audience has more than doubled. Highlighting the strong consumer engagement, our business lead over the nearest competitor has also significantly increased. Our consumer strategy is centered on converting large-scale audience to members, and we are pleased to increase our active membership base by 12%. Our personalized property owner experiences nurture deep engagement and are key to driving quality seller leads. Owner experiences helped generate around half of all seller leads. Inspections are a pivotal moment in the property journey, and inspection interactions are a key measure of demand. In FY '25, we uplifted the inspection experience for both consumers and customers, resulting in a 253% increase in REA inspection registrations in the second half. In September, we launched our AI-driven next-generation listings initiative with the aspiration to set a new benchmark in property experiences globally. Since then, we've delivered some of the most impactful enhancements to the listing experience in many years, and there's still more to come. The initial release focused on improved agent branding and image enhancements. And since launch, we've seen a 112% increase in consumers viewing all the images within a listing. Sharing the property journey with others is often a key part of the experience, and our next-gen initiative has supported a 21% year-on-year increase in consumers sharing buy listings. This is a multiyear program of work, which will ultimately shift the listing experience from fixed to dynamic and highly personalized. The benefits are already emerging, but the end state of this initiative will drive even deeper consumer engagement. Our research platform, property.com.au, is the #3 Australian property website with 2.1 million people visiting on average each month. In FY '25, we launched multiple new experiences and features, including the first media partnerships on the platform, our first step towards monetization. Turning to customers. Record Premier+ penetration supported excellent yield growth in our core residential business. Powered by NextGen, Premier+ is the most comprehensive and highest performing listing product, delivering 20% more inquiries than a Premier listing and selling 12 days faster on average. As part of our commitment to delivering greater choice and flexibility, we introduced new options for Audience Maximizer in our FY '26 contract rollout. Starting at just $99 an Audience Maximizer add-on complements our core product offering, and customers have recognized this value with penetration more than doubling in the latest round of contracting. Our highest performance listing solution, Luxe, is proving to have broad market appeal and uptake continues to build traction, demonstrating the significant value offered to customers and their vendors, Luxe generates twice the number of views compared to a Premier+ listing. The value we provide to a vendor is undeniable and the cost of this is a fraction of the total cost of selling a property, which typically runs at about 2% to 3%, depending on where you are in the country. This slide highlights the rapid growth in national property prices over the last 5 years, alongside the average cost of advertising on REA relative to the property price. While average national property prices have grown by 8% CAGR since FY '20, REA's average take rate has remained relatively steady. And over the last 2 years, it is broadly in line with FY '20. Our range of subscription support customers to grow their business and is designed with choice and flexibility at the core. They range from the cost-effective basic offering through the Pro. Pro offers the most advanced solution for customers to elevate their brand to prospect and generate leads and to simplify their working day. We recently launched the new short-form social media style video called Agent Reals, which is exclusive to Pro customers. Located within an agent's profile, Reals provides customers with an impactful way of introducing themselves to potential sellers. Realcommercial.com.au is Australia's #1 place for commercial property. 1.9 million Australians visited the platform on average each month, which is a record 3x more people than the nearest competitor. Our top-tier commercial product, Elite Plus achieved record penetration. Supporting customers with more choice, we launched Elite Plus Unlimited in March, which offers unlimited days on site. This aligns to the longer transaction time lines we typically see in commercial campaigns. Turning to Financial Services. Improved market conditions throughout the year and strong brand activation supported an increase in submission volumes, which has flowed through to a pleasing increase in settlements. Continued investment in core broking platforms and product innovation delivered ongoing broker value and supported productivity, which increased 5% across the year. The finance experience on realestate.com.au was enhanced this year with more prominent placement and new features. This uplift supported a 46% increase in realestate.com.au generated broker leads. Turning to our Indian business. The Indian market is the world's fourth largest economy and is backed by strong fundamentals. The housing market is strong and digitization continues to accelerate. We have streamlined the business. We have a talented team in place to deliver on our app-first strategy and our new CEO, Praveen Sharma, commenced last month. Praveen brings 25 years of experience in technology, digital and advertising, including several years at Paytm and Google. On the right, you can see the depth of our business in India. Housing.com is well established in the 8 Tier 1 cities as well as 20 of the 30 larger Tier 2 cities. Our Indian business delivered strong revenue for the year, primarily driven by the Housing Edge platform. Last month, we entered into a binding agreement with an NSE listed business, Aurum PropTech to divest the PropTiger business in exchange for a 5.5% equity interest Aurum. This move streamlines our Indian operation and will enable an increased focus in our core housing.com business. We are firmly committed to our app-first strategy as we know this is the future of the Indian property experience. This focus continues to deliver strong results with Housing.com holding the lead in app downloads with a 56% share. We also remain focused on listing quality and information accuracy. Verified listings are a key component of maintaining and nurturing consumer trust and driving audience. New verified listings on Housing.com increased 58% year-on-year. Sustainability is embedded within REA strategic agenda, and we were pleased to make progress toward our goals in FY '25. The group's efforts were recognized with an increased MSCI ESG rating of AAA. And from a social perspective, we were very pleased with our record high employee engagement score of 89%. The Australian property market remains healthy, and we are continuing to invest and innovate. There are clear drivers of our continued growth in FY '26 and beyond. Our next-gen listing initiative will continue to drive increasing consumer engagement and value for customers. We've completed another successful round of recontracting for FY '26, supporting record adoption and growth in the penetration of our products. Our Financial Services business has strong momentum, fueled by investment, integration and a positive market. The recovery in the developer market is well underway to meet the shortfall in housing construction in recent years. As the market leader in this space, we are well placed to benefit from this recovery. We're excited by the opportunity in our streamlined Indian business, where our app-first strategy is extending the reach and quality of our audience. And as a business with technology at its core, we are deeply engaged in accelerating our products and experiences with AI. We're doing this while ensuring we have the right structures and talent in place to support speed and enhanced delivery. I'd like to share a few comments on the market as we look ahead. Strong underlying fundamentals and expectations of further interest rate cuts this calendar year, should continue to support buy demand and steady national house price growth. These conditions offer a great time to sell, and we expect vendors who feel confident in bringing their properties to market. Listings are notoriously hard to predict, and we are facing very strong comparables in the first quarter. The softer comparables in the second half, however, should see national listing volumes for the full year, broadly in line with the prior year, which would represent a healthy market. In this environment, REA Group is strongly positioned. Our NextGen listings initiative continues to roll out, enhancing the experience of consumers and their engagement with our platform. The value of our premium products will continue to underpin our future growth. As mentioned in our ASX announcement, we're in the very final stages of the appointment of our next CEO, and an announcement is expected soon. As you can understand, I cannot provide any further details today. REA's future is incredibly bright. And it's been an absolute pleasure to lead this business. When I sign off the last time, I now be leaving the group in the hands of a talented and committed executive leadership team and dedicated employees. Over to you, Janelle.

Thanks, Owen, and good morning, everyone. REA has delivered an excellent result with strong yield growth in most of our major businesses in a stable domestic market. From our core operations, revenue increased 15% to $1.67 billion. Operating expenses increased 12% to $704 million. EBITDA excluding the results from our associates was $969 million, up 18%, and the group delivered NPAT operations of $564 million, up 23%. The group results from core operations differ from reported statutory results with a number of one-off items excluded. On Slide 43, we provide a summary of the reconciliation between core and statutory results, with the biggest driver of the variance reflecting the sale of the group's investment in Property Group in the first half. Turning to our Australian residential business and trends in the market. Our residential business had another strong year with revenue growth of 16%, driven by double-digit yield growth and modest listings growth for both buy and rent. National buyer listings rounded to an increase of 1%, which reflects a tale of 2 halves. The first half saw listings up 5%, while listings in the second half declined by 4%, reflecting much tougher comps. Across the full year, Melbourne listings declined by 1% with Sydney and Brisbane up 2% and Perth increased 10%. Buy yield continues to be the main driver of our residential performance, up 14% for the year. Yield was driven by a 10% average Premier+ price rise, year-on-year growth in overall depth and Premier+ penetration, growth in add-ons, largely audience maximizer and Luxe and a 1% positive impact from the consolidation of Realtair. This was partly offset by a 1% drag from geo mix. Rent continues to perform well with year-on-year growth, largely consistent with our buy revenues. Rent revenue benefited from double-digit yield growth driven by an 8% price rise and increased depth and 4% growth in listings. The following slide shows both the penetration and mix of paid depth listings in the residential business. While it's very early days for Luxe, penetration is tracking in line with our expectations, and we continue to see Luxe take-up across properties of all values with properties less than $2 million, making up nearly half of Luxe listings. Commercial and Developer revenue increased 10% to $218 million. Commercial revenue increased by 16%, driven by an average 12% price rise, increased debt penetration and modestly higher listings. Developer revenues were up 5% from prior year, with the growth from increased project commencements, project profile duration and a price rise from 1 July tempered by more modest growth in display revenue. Other revenue was up 8% to $89 million, driven largely by campaign Agent, which benefited from increased customer numbers. This growth was partly offset by lower PropTech revenue with yields impacted by a competitive market and broadly flat media display revenues in a soft advertising market. Financial services revenue increased 10% to $81 million. Volume accelerated throughout the year, with settlements growth increasing from 6% in the first half to 14% in the second half. For the full year, submissions were up 15% and settlements increased by 10%. Revenue was also supported by increased penetration of higher-margin white label products, and we saw good growth in recruitment with the total network up 4% to 1,119 brokers. EBITDA growth for Financial Services increased an impressive 24%, and the full year EBITDA margin increased 400 basis points to 29%. This reflected strong revenue growth and the benefits of the investments we've made in the business over the last 3 years. REA India delivered 25% revenue growth. As the chart on the left-hand side shows, this was largely driven by revenue from adjacent services on housing edge, which increased 72% due to increased customer acquisition and usage and a price rise. Additional controls that we introduced progressively in the second half had the anticipated effect of slowing volumes and Housing Edge revenues declined 15% year-on-year in Q4. We would expect a reduction in volumes and revenues to continue into FY '26. Housing.com revenue was up 7%, with customer growth from stronger events and improved monetization in Tier 2 cities. However, we've also seen increased competition in pricing and packaging over the course of the year, which has impacted Housing.com's yields. PropTiger revenues declined by 17% to $14 million and was broadly EBITDA breakeven. As I mentioned earlier, we've entered into a binding agreement with Aurum PropTech to divest our PropTiger business, and the transaction is expected to close in Q1 FY '26. Slide 47 of the appendix provides a breakdown for FY '25 India results by segment. India operating costs increased 13%, largely driven by revenue-related costs attached to Housing Edge and to a lesser extent, higher marketing spend. This was partly offset by lower employee commissions and incentives. This delivered a 20% improvement in core India EBITDA loss to $28 million. Looking into FY '26, we expect EBITDA losses to widen, although remain below FY '23 peak losses, reflecting our expectation for the Q4 decline in Housing Edge volumes and revenues to continue into FY '26. On the next slide is our core operating jaws. In Australia, jaws were open 2%, with revenue growth of 14% and core operating cost growth of 12%. Australia operating cost growth reflected a number of key factors. The largest driver was employee costs, impacted by wage inflation, increased head count driven by investment in strategic initiatives and higher incentives given the strong performance for the year. This was followed by technology costs which increased double digit, driven by price rises and greater data usage, higher marketing costs, which were elevated in the first half with our consumer campaign launched during the Paris Olympics and COGS, which related to the strong growth in Audience Maximizer. Group jaws were opened by 3% with revenues growing 15% and OpEx by 12%. Moving to our strategic investments. Total losses from equity accounted investments for the year was $26 million, in line with the prior year. Move's contribution was a loss of $19 million, a $2 million improvement on the prior year. Move's revenue was up 1%. Macroeconomic conditions in the U.S. remain challenged, resulting in lower transaction volumes and a 9% decline in leads. However, this has been offset by revenue growth in Seller, New Home and Rentals. For more information on Move, please refer to the News Corp results release. Losses from other associates increased to $7 million from $5 million in the prior period, reflecting the new investment in Athena Home Loans, and increased investment in Arealytics. Over the last 5 years, REA has consistently invested to drive better consumer experiences and deliver more value to customers with Australian CapEx increasing from $73 million in FY '20 to $126 million in FY '25, a compound growth of over 14% per annum. In FY '25, this investment was focused on a number of new products and experiences across all lines of business. Some areas of spend included creating immersive consumer experiences through the Next Gen Listings program and investment in AI with GenAI Property Highlights and Natural Language Search. Investment in our subscription offerings, enhancing existing products such as Audience Maximizer and Luxe and bringing to market new products such as Amplify in the developer space. And as always, supporting platforms and technology to enable future growth and speed to market. CapEx to revenue was 8% in FY '25, and we anticipate a rate within our 7% to 9% target range in FY '26. FY '26 depreciation and amortization is expected to be in the range of $143 million to $152 million. Turning to our cash position. We ended the year with a strong closing cash balance of $429 million. The group delivered operating cash flows of $675 million. This, along with 278 net proceeds from the sale of PropertyGuru allowed us to continue to invest in the business organically and through M&A, deliver strong shareholder returns in the form of increased dividends and to pay down debt with the remaining $209 million of our external debt facilities repaid in December '24. Our balance sheet is incredibly healthy, providing flexibility for future growth ambitions should the right opportunities arise. Finally, on the FY '26 outlook. We expect national residential listing volumes to be broadly in line with last year's healthy market. Q1 listings are expected to be lower year-on-year due to very strong comparables. July listings were down 8% with Sydney decreasing by 5% and Melbourne by 9%. The group continues to target double-digit residential buy yield growth, including a 7% national average Premier+ price rise. We note that consistent with prior years, geo mix can be a positive or negative swing factor to our yield outcome. We're targeting positive operating jaws and anticipate high single-digit group operating cost growth, excluding PropTiger. This will be driven by continued strategic investment and COGS related to strong growth in Audience Maximizer. EBITDA losses in India will be impacted by lower expected Housing Edge revenues and associates losses are expected to modestly improve compared to the prior year. On a final note, after an excellent FY '25, we're excited about 2026. While comps will be more challenging, our strategy is clear, and we will continue to focus on enhancing our consumer experiences, delivering additional value for our customers and driving yield opportunities across all of our businesses. Our balance sheet provides substantial flexibility and we will, as always, remain focused on investing prudently across our Australian and Indian businesses to drive growth for FY '26 and beyond. I'll stop here. Operator, can we please open the lines for questions.

[Operator Instructions] Our first question is going to come from the line of Eric Choi with Barrenjoey.

And I'll keep it professional but good final results Owen. Just the first question on why REA is confident enough to provide double-digit yield growth so early. Like last year, you guys did 14% and you didn't guide to double-digit initially. This year, I thought the math was suggesting around about 12%, given you've got like 7% price, maybe you get 5% from other things like subscriptions and other debt. So that confidence in double digits does it suggest -- I guess, confidence that there's no geo mix headwind or maybe the uptake of your new sub packages are tracking better. Can I classify this question as 1b, which is still a pricing question, but there's a lot of concern around FY '27, in particular, and I don't share that view. So I just wanted to confirm double-digit yield and positive jaws remains the long-term target. And on '27 specifically, like if we think about all the bottom-up drivers, you haven't had a new product drop in a while, AMAX penetration could still lift. And if you look at that 7%, that's a low watermark based in the last 3 years. So logically, you put that all together, this kind of says there's no reason FY '27 can't be another double-digit year? And then cheekly, my second question, just on India, I have to ask about that given people are wondering how you're going to balance sort of audience growth and profitability. I think you guys were previously targeting 2x audience multiplier, but it's kind of dropped to 1 now. And so you're obviously guiding for higher India losses next year. Is that all Housing Edge? Or is there anything on extra marketing or reinvestment in there?

Thanks, Eric. A bit to unpack there. Look, in terms of the current year and why we've guided to double digit, it is because we are confident. We've got a 7% price rise that's embedded. We know we've got increased depth penetration. I talked about in the recontracting, we've over doubled and I say over the penetration in Audience Maximizer. Luxe is getting great traction. And we expect the penetration of Luxe to continue to tick up. We've always said that was a slow burn, and that is the case. But penetration will be higher in 2026 than it was in 2025. And you couple that as everything else is going on. We can't predict geo mix. But as we sit here today, we can't see any reason why it's going to be a significant drag or a significant plus. So we feel very confident in that guidance to double digit in '26. And then when you go out to '27 again, our long-term guidance hasn't changed. And we've always priced to value. We know we've got more value to deliver to customers and consumers. And therefore, we feel we're entitled to price accordingly. Also, we will continue our guidance positive jaws. It's what we always target. And I touched on some of the things that drive efficiencies within the organization, such as our Cyber City site. We've gone through 70 staff in Cyber City in June. We'll continue to expand our operation there. That is a lower cost environment for us to do things, but also with our new tech structure, that will increase flow and velocity through the organization. It means we can do more with the same cost. And so this sort of upward pressure on costs -- while we're increasing our investment just isn't there with these efficiencies. And of course, overlay that with AI, which is making kind of everything that we do more efficient. So very confident on positive jaws going forward and also that double-digit guidance. In India, the #1, I don't think that's just web. We can't measure app audiences in India. We are very confident that on the things we can measure, such as sessions and downloads, we are the clear #1 in app in India. And unfortunately, like we do in Australia, we can't combine app audience and web audience. So we're deliberately focused and unapologetically focused on app because that will be the future. We are hopeful at some stage in the coming years, we'll be able to measure independently app audience of us and the competitors to prove that we're ahead. And in terms of losses, what you're going to see there is primarily the Housing Edge product coming down. We've put some more controls in place to just derisk people who are using that, make sure we've got KYC in place, those sorts of things. It creates a bit of friction. It will deliberately bring down [indiscernible] but it still remains a healthy profitable revenue flow. And so we like it, but we expect that just to come down a bit in volume. Long term, though, our focus hasn't changed. We want to be #1 in India. It's the primary focus, and we feel confident with the renewed focus on Housing.com with the sale of PropTiger, plus the great new team we've got in place there. We're very excited.

Our next question will come from the line of Kane Hannan with Goldman.

Maybe just on yield again as well. Look, I appreciate, you obviously had that double-digit yield growth out there and reiterating it to Eric just then? But I mean, if I think about FY '27 with a new competitor making a lot of noise, the ACCC investigation and sort of where that gets to a new CEO running the business. I mean if you try to run this business for the long term, would it make sense to do a significant price increase into FY '27. And is that obviously reflecting the product drops that might be coming in the year ahead? And then just secondly, just audience momentum at property.com. I mean that's making some pretty serious inroads on the #2. Just talk about how the strategy for that portal is evolving. I suppose what optionality is giving you as competition potentially steps up over the next 12 months?

Look, thanks, Kane. Look, I'll reiterate around out beyond FY '26 pricing. We always price to value. And you can see that chart that we put in, in terms of the percentage of the cost to advertise on realestate.com.au as a percentage of the house price, it hasn't moved. I can tell you privately, we also look at the percentage of our take of the market schedule, and that's been pretty consistent over recent years as well, which shows that marketing schedules are increasing. We will continue to price to value. And we have plans to continually increase the value we give to customers and the value we give to consumers. We've got some great plans in the pipeline. I'm obviously not going to tell you what they are for competitive reasons. But that price to value is not going to change regardless of what the competition does. And so...

Just a reminder, we talk about yield growth, not price. So again, it can be made up of multiple things. If you think about Luxe, we've talked about Luxe, substantially higher price point, but it's super early days. And you can see it's just a very thin line on that penetration chart. We see that will give us long-term runway for yield growth into multiple years.

Yes. And if you think about early in '26 or '27 year, we're going to be sitting in a year, pick the number of cuts is at 50 basis points, 75, 100 basis points. In a lower rate environment, it just creates much more fertile ground as well. So we stick by that double-digit yield guidance and feel very confident about it.

And may be if you don't touch on the audience...

I'll just add to or to your second question. We're very, very pleased with how that's going. I mean we hit -- we quoted, I think, 2.1%. That's the average. We actually got to 2.7% at one stage. And we are making great ground on the #2 with that site. So at the moment, it has been a research site. We have been using it as a test site for certain things. Again, we have plans going forward and how we might monetize that and differentiate the experience. It gives us great optionality to have an audience like that. A reminder that the stats are quite compelling in the number of actual buyers, people are actively buying who go to that site. So it's a high-intent audience on property.com.au because it's a research site. So it creates great optionality. And that increase in audience is with very limited marketing. And if we start to market that brand, it will take off because it's such a great site. So I'll leave it there, but it does create an exciting optionality for us, and there are plans in place.

[Operator Instructions] Our next question will come from the line of Entcho Raykovski with E&P.

My first question is around the OpEx guidance into FY '26. I wonder if you can talk about whether you're assuming any sort of change in the competitive environment in 2016, setting that OpEx guidance I mean I know there's a lot of conjecture in the market as to what domain does, but do you assume any sort of step-up in domain marketing spend from current levels that you've had to factor in? And is there a risk that you may need to spend more once the CoStar acquisition completes. And as part of that answer, I wonder if you're able to quantify the extent to which the higher Amax penetration is driving higher costs through the higher COGS. If you can give us sort of a specific number, I think that would be helpful. And I might just wait for the answer to that one, and I've got a second one as well.

Thanks, Entcho. Look, we've known that domain change in ownership was coming -- we've known for a long time. I think you've heard me say we presented to our Board in the middle of last year around CoStar coming to the Australian market. We know their playbook. We know what they've done in the U.S. We know what they've done in the U.K. You can assume that our cost guidance absolutely has factored in their entry to the market and everything we think they might do, including a significant increase in marketing. So that's already factored into the cost guidance that we've given. And the way the mix of that cost guidance has been planned accordingly. So we feel confident we've got the right cost level, and we've got the right mix to respond to what we anticipate that they're going to do. In terms of the impact of Audience Maximizer uplift on cost, that is also a factor, particularly in Australia in that cost growth. If you strip out COGS, it does reduce that number significantly. But -- so COGS is a great cost. We'll take as much of that as we can. I don't know if you want to add anything specifically that to.

When we talk about the cost guidance, we've guided to high single digit for the group. It's high single digit for Australia and a little bit lower mid to high for India. If you back out that impact of COGS, probably some more around the mid- to high for Australia. So it is adding a few percent to the cost growth. But as Owen said, we're pretty pleased about that sort of cost growth because it's a healthy margin product.

Okay. Great. And so my second question, I mean, this has obviously -- this has been a topic of discussion with a lot of people. It's the ACCC investigation that's been in the press, and you've obviously had to issue a release on. Can you give us any color on what the scope is of that ACCC investigation. I'm asking because there's just so much conjecture around it. So I think additional color would be useful and how you think about the expected timing to resolution. And I mean, you've already spoken about the value which you deliver and it's not just price increases, but I mean, is there a risk that you need to be more mindful in the future not to increase prices, particularly aggressively.

This is not about prices. I mean putting your prices up, it's not illegal in Australia. And I remind everyone that all customers have got choice. This is not a compulsory purchase. You can purchase any level of product, any level of subscription and that's the fact. I'll reiterate my comments that with this review underway, we remain confident on our guidance to double digit. We price to value, and we're going to continue to do that. In terms of the details of the matter, look, I can't talk to the details. I don't think we're going to hear anything for a very long time. They don't have a set time frame in which to respond. We've given them everything they've asked for. So we'll just sit back and just wait for them to run their process now.

Great. And all the best for life after REA.

Thanks, Entcho. I think I might see you at some stage.

Next question will come from the line of Roger Samuel with Jefferies.

Just my first question is on your FY '26 guidance for the volume of listings. How do you frame your listings outlook? I mean, have you considered just in terms of the rate cuts and how many rate cuts are you expecting?

Look, in terms of that guidance, as I said, listings are very, very hard to predict. And so I can almost guarantee that I'll be wrong on what we said. So when we think about listings, we think about a few things. One is obviously rates. Look, our view is probably not as bullish on rate cuts as the rest of the market. We think it's probably 2, and anything north of that will be a bonus. We also look at things like demand. We have the most comprehensive view of demand in the country, both in terms of views of listing, sharing of listings, inquiries, interactions, demand is very, very strong at the moment. So when you got a high demand market, you've got rising prices and not crazy rises, but healthy house prices. It's very fertile ground for housing turnover. And so provided demand doesn't become too high and the stock drops, that can be an inhibitor of listings. It's a very, very healthy environment. Now we've just come out of a very healthy year. So we think it will probably be even slightly more healthy in '26 because of lower interest rate environment. But our best guidance is for flat. That's how we've come up with that flat guidance.

Okay. And also my second question is just on the chart on Slide 19, which is very helpful. The average cost to advertise on REA relative to the sale price is around 0.2%. Any sense of how much consumers are spending on the total marketing spend and that's relative to the sale price?

Yes. Look, again, it varies across the country. You took at average. We talk about sort of 0.8% to 1%, a little bit lower than that in some places, it's lower. So even at bigger number, even at sort of 60, 75 basis points as a percentage of the marketing schedule, that means we're pretty low. So on either of those measures, people talk about the runway in our business, that 20 basis points and sort of the 60, 75, 80 basis points on the marketing schedule means we've got a long runway. And particularly given we provide most of the value when you're selling in-house.

Next question comes from the line of Siraj Ahmed with Citi.

Just the first one, just in terms of next year's yield expectations Owen. Can you just talk through the recontracting. It sounds like based on the Amax penetration, most agents have sort of gone with the -- taking the Amax and the Luxe tier. Is that what's happened? So if that's the case, I mean, could next year's yield growth be similar to this year, 14%. I know there's a 3% headwind from the price increase, but you have more Amax penetration, more Luxe penetration?

Look, we've guided to double digit. It's a lower price than the prior year, but we're confident that the other impacts to yield will be good. As I said, Amax penetration has more than doubled. Now a lot of customers have taken that lower entry Amax level at the $99. But again, it's still good penetration. And it shows that customers do value the to value the product. Luxe penetration, as it will be slow burn, but we expect that to slowly uptick across the course of the year. Now whether we do any specials in the market at any point in the year, that's to be seen. So -- and then across all levels, we've seen small upticks in total depth as well. So it all adds up to that confidence in that double-digit yield. I won't give any more guidance than that because then there's other factors that we just can't predict like geo mix.

Got it. Second one, just thinking about '27 and beyond, right? I mean 2 parts to this. First thing, if you look at that sort of depth tiers, it's getting a bit busy, right, 5 of them right now. Should we be thinking that sort of compresses, maybe Luxe becomes an actual tier, not an add-on? And do you reckon this Next Gen listing experience starts getting monetized in a different way from '27? Or is that too early.

Look, in terms of the tiers, you're right, Luxe is an add-on. It's not a tier. I'm not going to speculate on what we might do there. We're always looking to simplify our products for customers. So if there's a view amongst the customers that simplification will be well received, then that's always an option for us. In terms of the Next Gen listings, the real monetization there comes through the deeper engagement and the more leads. So what we're finding with Next Gen, as I said, consumers are engaging with our listings more and more. And we are getting better attribution of our leads through to our customers, which obviously underpins value, which obviously underpins revenue growth. That's the way to think about Next Gen.

Our next question will come from the line of Nick Basile with CLSA.

Just two questions from me. The first one on the AI and the Next Gen listings and I guess how that might relate to your M&A strategy? Like how are you thinking about investing in AI, whether it be on your own balance sheet and free cash flow versus acquiring other businesses. I think you active recently? And then the second one is just on the Luxe listing product. You talked about the performance of the ad versus your other tiers. I think you made mention of some comments around the penetration in people with homes of less than $2 million. So just interested in I guess, how quickly that can scale to the rest of the customers on plans or those going to market?

Yes, on AI and M&A, I mean we have made a couple of investments in the last 12 months around this sort of capability with IMMERSIV and [ Judy ]. And we'll continue to look at whether we buy capability into the company or we've developed it organically. AI is being used in every part of the organization. I mean, literally, every part of the organization and particularly on the product side. So it is an enabler on so many fronts. And so whether we do it through M&A and not, it depends on the use case. On Luxe, the stat I mentioned that you get double the views on Luxe than you do on a Premier listing. So it's very compelling. Now it is an expensive product. It's about 90% more expensive than a Premier, but I think the performance and the proof points we've now got will back up that penetration increase. And you're right. The great thing about this because of the way it's priced, obviously, by the pricing the zones is that it stacks up at almost any price point, and it is being bought right across the spectrum. This is not a high-end expensive luxury product. It's for every type of list. If you want your property to stand out in your suburb, you buy Luxe because you are going to get double those views. So it's becoming a more compelling sell in the living room for an agent, and that's why we're pretty confident that penetration will tick up. But it will be a slow burn. It's expensive and there can be some pushback on that, but at the moment, those who are using it, I'm really pleased with the performance.

Our next question is going to come from the line of Tom Beadle with Jarden.

Just two questions from me. Just the first one, a follow-up from Siraj's question. Just I want to run some logic by you on yield. I see that chart on Slide 18 which shows that it looks like Amax contracts might be, say, 2.5 to 3x higher than FY '25. So if I look at your buy yield in FY '25 of 14%, that obviously includes a small amount of geo mix at 1%. So logically, yield growth was, say, 5 percentage points more than the pure price increase. So is it fair to assume that with this significant increase in Amax all plus a bit of Luxe, depth might be -- make a bigger contribution to yield growth in FY '26 than FY '25. Second question is just around Commercial and Developer. Just can you clarify what the price increases were for FY '26? And just -- how should we be thinking about developer in '26? Obviously, you mentioned Owen that the recovery is well underway there. We've hit an inflection point in project commencements, sorry. How might that flow through to developer revenues over the next year?

I'll take the yield one. So when we talk about the 14% yield, you're right, there was the 1% drag for geo mix, but there was also a 1% uplift from the combination of [indiscernible]. so 14% is the right growth rate when you take out those one-offs. And that is the 10% plus the increase in depth. Now as you can see on the penetration chart, we will see less benefit from just general depth uptick, but we all see more benefit from some of the add-on products. Again, I don't want to get drawn into overall size, but we're confident around that double-digit yield noting the fact that there has been that strong take-up in Audience Maximizer. As Owen said, though, some of it is at that lower price point. So whilst it's been good penetration, the overall yield impact whilst positive, might not be quite as high as the overall penetration impact. But still, we're very confident in that double-digit yield target. And developer -- Commercial and Developer. So developer hasn't had a price rise for this year. Commercial was put through 11% -- sorry, 7% increase in price for commercial for next -- this FY '26, and we are confident in the runway we've got around developer with the benefit, we've got the flow through of the price rise from developer continuing to flow through as that occurs throughout the year as contracts get rolled over. But also, we've now seen 3 quarters of overall project commencements in developer being positive. So I think the momentum is starting to turn. And we have seen duration continue to hold in this environment. So we are optimistic about the developer runway for growth into '26.

And our last question is going to come from the line of Fraser McLeish with MST Marquee.

Great. Yes, just a basic one on the -- you've got pretty reasonable cash balance now that's going to continue to grow. The payout is still fairway below earnings. What's your sort of strategy for that cash growing going forward? Should we expect to see an increase in the payout ratio?

Look, we have increased our payout ratio this year, reflecting that cash balance. And we've always said in the absence of any investment opportunities, then we will look to pass that out to shareholders over time. So on balance, in the absence of some M&A, then you can expect that ratio to be higher than it has been historically.

And I would now like to hand the conference back over to Owen Wilson for closing remarks.

Well, thanks, everyone, for joining us today. Great set of results from our perspective. I look forward to seeing many of you in the coming days. Thank you.

This concludes today's conference call. Thank you for participating, and you may now disconnect. Everyone, have a great day.