REA Group Limited ($REA)

Good day, and thank you for standing by. Welcome to the REA Group Limited Third Quarter Financial Results 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, ma'am.

Good morning, and welcome, everyone. My name is Alice Bennett, Head of Investor Relations, and I'd like to thank you for joining us to discuss REA Group's results for the third quarter ended 31st of March 2026. 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, present and emerging. This morning, you'll firstly hear from our CEO, Cam McIntyre, who will provide a brief business update. Then Andrew Cramer, REA's CFO, will talk to the financial highlights for the quarter. And following this, we'll be happy to take your questions. And just as a reminder, before we get started, our quarterly numbers are top line results only, so we'll be restricted in the amount of details we can provide. With that, I will pass it to Cam to get us started.

Thanks, Alice, and welcome, everyone. REA has delivered an excellent third quarter result, underpinned by double-digit revenue growth across our Australian business and strong double-digit yield growth in our core residential business. Looking at our results from core operations for the quarter, excluding M&A, which, as a reminder, it strips out the impact of sale of PropTiger, the shutdown of Housing Edge and the acquisition of iGuide, revenue was $398 million, an increase of 11%, and EBITDA, excluding associates, was $220 million, an increase of 16%. Strong underlying fundamentals continue to support the property market, and supply kept pace with buyer demand. While global events and interest rate increases impacted broader economic sentiment, listing activity in Sydney and Melbourne was strong and nationally, listings were slightly up on prior year. In this balanced market, more Australians visited our platform than ever before, and our customers continue to turn to our market-leading products and services to ensure best results for their vendors. In relation to our audience, we reached a new quarterly record in Q3 of 12.9 million visitors on average each month. Just under half these visitors used our platform exclusively. This means access to a large number of potential buyers, sellers and renters is exclusive to REA customers. Our immersive experiences ensure Australians continually return to our platform, and we achieved a new quarterly record of 150 million average monthly visits. The value of our audience extends beyond scale though, and it ties into the deep engagement of our consumers. In Q3, properties tracked by their owners reached a milestone of 5 million, an increase of 16% on prior year. Seller leads increased 28% year-on-year, and we delivered an average of 2.6 million buyer inquiries to our customers each month. Our consumer strategy is centered on delivering a personalized and immersive membership experience. Members are much more likely to perform a high-value action, which amplifies the value delivered to our customers. Our active membership base continues to grow, increasing 19% on the prior year. In the quarter, we launched our new evolution of AI property search. Our new conversational search experience is now live to 50% of our web audience and 10% of our iOS app members. This intelligent search experience encourages consumers to take high-value actions such as sharing a listing or submitting an inquiry. Conversational search is going to continue evolving as we expand the number of topics covered, and that, in turn, will support a more detailed curated AI-powered companion experience for our consumers. It's also going to uncover valuable intent data for our customers. Property buyers are increasingly seeking more immersive and informative search experiences, and we officially launched iGuide in Australia in March here. iGuide uses AI to identify property features and produces immersive 3D virtual tours, precise floor plans and reliable property measurement data. It's the market leader in Canada, and we're pleased with the early uptake in Australia. We're working closely with the industry on this and several large photography networks have signed up already. There are now more than 100 iGuide specialty cameras in market, which is ahead of our own expectations, and we're seeing the strong momentum continue. Supporting our visualization strategy is the social media-style feed in our video discovery hub on the app home screen is deeply engaging our consumers. The new hub achieved a 22% growth in average monthly video viewers in Q3. In relation to our customers and some highlights here, we saw record Premiere+ penetration, which underpinned double-digit yield growth in our residential business. We also achieved record audience maximizer penetration. We continue to roll out the next generation of AI-powered tools and services for our customers as well as offering education, support and training. As part of our broader Advantage AI program, we're also pleased to announce a customer hack day initiative that will take place in September. These hack days are core to our innovative culture that we have as a business. And for the first time, customers will submit ideas and work alongside our tech team with the aim of turning customer and industry-focused ideas into prototypes and working solutions in a matter of days. During the quarter, we also launched a new AI-powered vendor campaign summary in our self-serve platform, Ignite, generating key campaign insights into our vendor-ready narrative within Ignite's vendor report. This is supporting agents in the clear communication of their campaign performance while reducing the manual reporting effort that's required. We recently also started a pilot rollout in a new chat capability in Ignite called Campaign Assist, and this is exclusive to Premiere+ feature, and it combines consumer intent and automated evaluation model data to provide customers with strategic recommendations to boost the performance of a listing. In recent weeks, we launched the AI-powered PropTrack via Impact model, which provides our customers with clear evidence of a direct link between a property sale and an realestate.com.au campaign. The new probability-based model assessed more than 1.3 million Australian properties sold over a 22-month period and analyzed more than 10 billion consumer data points. The data highlights that realestate.com.au attracts and engages the buyer for 9 in 10 homes listed on the platform that go on to sell. The combination of data scale, depth of audience, engagement and the new AI capability underpin the model, and it was independently reviewed and validated by Deloitte. Delivering on our commitment to more choice, flexibility and value for our customers, we've introduced new packaged options and a suite of features as part of the FY '27 contract rollout. From July, the Video Discovery Hub will be increasingly valuable for customers with Premiere+ property walk-through videos set to feature on the prominent carousel. Highlighting the value in video, we know that serious buyers are almost 9x more likely to watch video content than other users and listings with vertical video generating more views and more inquiries. Our commercial and new home businesses achieved double-digit revenue growth with record penetration of Elite Plus for our commercial customers and a pleasing improvement in new home -- in the new homes market. Looking at financial services and momentum continues here. Business saw exceptional growth in submission volumes, a strong increase in settlements and an increase in the loan book. Showing the strength in the market and the value in our investment in Mortgage Choice, innovation and brand average submissions per day in February were the highest Mortgage Choice has ever seen. As we've flagged previously, Housing.com is REA India's strategic priority. The app-first strategy continues to support Housing.com's leadership in app downloads in India with more than 50% of downloads sitting with our platform. As I wrap up, I'd like to share a few comments on market conditions as we look ahead. After an extended period where demand exceeded supply, the Australian property market has become a more balanced and we're moving into a period of more normalized levels of buyer demand. The rebalance in the market likely reflects some uncertainty around global events, expected further interest rate rises and potential government tax policy changes. The momentum behind price growth is anticipated to moderate, and we may see that time to sell lengthens a little as vendors readjust price expectations to meet buyers. As a business, we're incredibly well positioned in this more balanced market with agents and their vendors seeking to reach the largest and most engaged audience of property seekers and to differentiate their listings. We're focused on continuing to drive innovation, and our teams are embracing the capability and exciting opportunities presented by AI. Coupled with healthy underlying fundamentals supporting the market and strength in our market position, we're well placed to deliver further growth for the remainder of FY '26. And with that, I'd like to welcome you, Andrew, and hand over to you.

Thank you, Cam, and good morning, everyone. Can I first say thank you to you all for the warm welcome you've given me. I'm less than 3 months into this role, but I can genuinely say I'm excited by the growth pipeline in front of us and by the quality of the team around me. REA has delivered an excellent Q3, driven by double-digit revenue growth across the residential, commercial, new homes and financial services businesses. Excluding the impact of M&A, group revenue for the third quarter increased 11% to $398 million. Operating expenses increased 5% to $178 million, and group EBITDA increased 16% to $220 million. Including the impact of M&A, revenue and EBITDA increased 6% and 11%, respectively. Let me now take you through how each of our businesses performed for the quarter, starting with residential. Our residential business delivered its strongest quarter of the fiscal year with revenue growth of 12%, driven by double-digit yield growth and modest growth in listings. National new buy listings were up 1% for the quarter with the recent outperformance of Sydney up 4% and Melbourne up 7% continuing. Pleasingly, Q3 buy yield was up 14%. Buy yield was driven by a 7% average Premiere+ price rise, a strong contribution from add-ons, mainly from Audience Maximizer, but also from Luxe, an increase in subscription revenues, growth in overall depth and Premiere+ penetration and finally, geographical mix, which boosted yield by 1% in the quarter. This reflects the comparative strength of the Sydney and Melbourne listings markets. The strong performance in the month of March also resulted in a 2% deferral of revenue into Q4, reflecting higher listings in the latter part of March compared to last year. Our rent business saw continued revenue growth driven by a 6% average price rise and increased depth penetration, which was partly offset by a 2% decline in listings. Encouragingly, we also saw double-digit revenue growth for our commercial and New Homes businesses. Commercial revenue benefited from an average 7% price rise, increased depth penetration and higher listings, while New Homes revenue benefited from a 6% increase in project profile volumes, higher yield and higher growth in display revenues. Financial Services momentum continued during the quarter with double-digit revenue growth. Revenue from the mortgages business benefited from settlements growth of 21% and increased productivity across our broker network. Revenue from the PropTrack data business was driven by growth in customer data contracts, including the agreement we have with key customer, Ray White. Moving now to our international businesses. In the U.S., Move delivered its sixth consecutive quarter of revenue growth, up 10% in Q3. Revenue at Move was driven by higher sales of the premium Real Pro Select offering and revenue growth in new homes, seller and rentals. Staying in North America, iGuide, which we consolidated on the 1st of October 2025, generated revenue of $5 million during the quarter. iGuide's local currency revenue increased 26% in Q3. Meanwhile, REA India's Housing.com saw local currency revenue declined by 3% in the quarter, reflecting continued yield pressure in a competitive market. Turning now to operating expenses. Group core costs increased 1% or by 5% if you strip out the impact of M&A. In Australia, operating expense growth was 9%. COGS were a material driver of this growth, reflecting Audience Maximizer more than doubling in penetration versus the prior corresponding quarter. Excluding COGS, Australian operating expense growth was 6%. Marketing was the largest driver of cost growth in the quarter. As is often the case, the phasing of our marketing campaigns can result in lumpiness from quarter-to-quarter. Growth in Q3 fiscal '26 reflected the new Australian open sponsorship and consumer brand campaign, which was not in the prior corresponding period. Favorability in workforce costs offset the investment in technology, driven by data, AI and video. In India, Housing.com's operating costs were down 1% on a constant currency basis, reflecting the strategic reset and the simplified structure of that business. Before I turn to the outlook, I just wanted to touch on REA's on-market share buyback program. The program was launched in February, reflecting the confidence we have in the long-term outlook for our business, the strong balance sheet position of the company and our disciplined approach to capital management. So far, we bought back a little under $76 million of the planned $200 million buyback at average prices below $160 per share. While we've been in blackout since the 1st of April, we look forward to being back in the market from next week. Moving now to our fiscal '26 guidance. We expect buy yield to grow 13% for the full year. Our expectations for listings are unchanged. We're predicting a 1% to 3% decline for fiscal '26. April listings volumes were up 19% year-on-year with Melbourne increasing 20% and Sydney up 25%. This strong April performance partly reflects the easier comps that we will be cycling as we move through Q4 and into Q1 of next year. The group expects positive operating jaws in fiscal '26 for both Australia and the group. Our expectations for operating cost growth have improved with low to mid-single-digit growth now anticipated for the group, down from mid-single digits previously. And for Australia, we expect mid- to high single-digit cost growth down from high single digits previously. Our guidance for India is unchanged, and associate contributions are expected to marginally improve from fiscal '25 levels. We are incredibly pleased with the performance we've delivered this quarter, and we're excited about the future of our business. As I touched upon at the top of the call, it has been a privilege to join a company in such a strong position with such a high-quality team. As a team, we remain focused on driving consumer engagement, driving increased value to our customers and driving growth across our portfolio of assets. As CFO, I will ensure we continue to invest to drive that future growth while managing costs and capital prudently. Thank you, operator. We will now take any questions.

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

I might pick on you today, Andrew, if that's right, just for a couple of numerical questions. Just on the first one, I was wondering if we could talk about the FY '27 yield and specifically, if you could confirm the quantum of the price increase? And also, I'm interested, given Sydney and Melbourne are quite elevated right now, if those geographies were to normalize back to historic levels, theoretically, what that geo mix drag would be? Ultimately, I'm just trying to put all those pieces together, and I'll make my own guesses on Luxe and everything else to try and figure out if you guys can deliver double-digit yield in '27, even if there was a geo mix drag.

Thanks, Eric. Thanks for picking on me first. The answer to your question on price, our fiscal '27 price increase is approximately 8%, so at the lower end of the 8% to 10% range you've noted in an earlier note. Geo mix is a really tough one. You know as well as me, it's a really tough one to predict. I mean the last couple of years, we've been a beneficiary of it. It's been plus 1% this year, about the same last year. Back in fiscal '23, it was negative 5%. And it has been elevated as a result of higher listings in Melbourne and Sydney. We won't get into whether it's going to be a drag on fiscal '27 at this stage because the elevation of Melbourne and Sydney continues, as you saw in the April numbers.

That's helpful. Just one more convoluted one for you. Sorry, Andrew. Like if I just take a step back and look at this result, Australia was really good, probably -- and obviously, your cost guidance is really good, and then India top line maybe a little bit softer versus what we were expecting. So I'm just trying to piece together the fourth quarter outlook versus third quarter. I think it's still really good for Australia, maybe just dragged down by India. So just on the math, like can I just check, I'm not missing any of the key swing factors 4Q versus 3Q? And then there's probably 3. So listings growth, I think you're guiding for that to improve from 1% to, say, 3% to 4% based on the midpoint of your guidance. I don't know if you mentioned deferrals, but maybe deferrals were a drag in 3Q, maybe a couple of hundred basis points, so that could be an improvement as well. And then maybe the offset is that buy yield stepping down 1 to 2 percentage points in the fourth quarter. But like if you add up those 3 things, it still suggests residential revenue growth is potentially 4% better in the fourth quarter versus third quarter and maybe your group revenue growth could be 3 percentage points or more better. But I'm just wondering if I'm missing any key pieces there.

Thanks, Eric. You're really missing anything and your math is pretty good. If I go backwards up your list on buy yield, it does step down in the fourth quarter, and that's just a result of us lapping a really successful value and packaging rollout this time last year. So for the benefit of those who don't know, we're in market from about 6 weeks ago. And to the extent people take up the offers at that time, the clock starts ticking earlier than 1 July, and we had the benefit last year of Audience Maximizer, which doubled penetration. We had Luxe and we had subscription price increases. So that means it's just a comp issue with that stepping down in the fourth quarter. Deferrals, you're correct on that. It was 2% in the third quarter. That was really driven by like a big uptick in listings in the latter part of March. It's probably because of the timing of Easter that brought campaigns forward. We've seen a strong April, and so we would expect that deferral to be there again in April. And it's -- when we think about listings guidance for May or June, it's uncertain. And so I think your math is not incorrect. But at the same time, what we're seeing in May is slower than what we saw in April. There's uncertainty around policy changes at a federal government level, there's interest rate uncertainty. And so at this stage, May and June are relatively less certain than obviously what we've delivered to date.

And our next question will come from the line of Entcho Raykovski with E&P.

My first question, I was hoping to drill into the lowered OpEx guidance. Are you able to talk about what the key drivers have been behind that lower OpEx guidance? I mean, is it efficiencies as a result of the rollout of AI tools internally? I'm very conscious that, that's something that a lot of people are focused on right now. And how does that lower OpEx guidance feed into your expectations for OpEx into FY '27? And in particular, do you see scope to deliver wider operating jaws? And I might wait for the second one after you answer this one.

That's another one for me. So thank you, Entcho. As we sort of entered the second half, we felt the market was a little bit more volatile, and so we really wanted to control the controllables. And the thing that we can control most at that point in the fiscal year is cost. And so we just characterize it as a general timing across the business, the sort of things that you can do with that much time to go in the fiscal year. I mean AI is something that we're adopting across the whole business. The uptake has been really very positive. We are seeing efficiencies in pockets. And as a collective, we're the beneficiaries of those efficiencies. I mean the question for us and something as a leadership team, Cam and I are thinking about with our broader ELT is that benefit gives us flexibility. Do we go faster? Do we drop it to the bottom line. At this stage, we're prioritizing going faster, putting more product to market and moving more quickly. As that relates to jaws, I mean, it gives us -- it certainly gives us optionality as we go forward. But I mean the thing that we have to remind ourselves is that there's an investment required to go faster. There's a technology investment. There's a token cost, which, at this stage, we probably don't think we're probably at a run rate cost of tokens. I think they're probably being subsidized. And so we're just careful not to become too aggressive in chasing efficiency at this point.

Okay. Cool. And then -- and also, I've got a yield question on '27. So in addition to that 8% price increase or circa 8% price increase you've just spoken about, what are the key new features that you expect to add to yield growth? I mean is it primarily the Luxe bundle, but you've obviously got some additional video features as well. And sort of what sort of take-up do you need of, let's say, the Luxe bundle, what sort of take-up do you need for it to make a meaningful difference?

Your mail is pretty good, Entcho. So the Luxe is really the major thing that will be additive in fiscal '27. I mean this year, we had the -- we were the beneficiaries of a subscription price increase, and so that's not repeating into fiscal '27. I mean AMax will continue to increase in penetration. But this year, we had the benefit -- we benefited from it almost doubling or thereabouts in penetration, and that's not going to repeat into the next fiscal year.

Okay. Sorry. And maybe if I can follow up with the very last one related to that. Can you give us any sense for where Luxe penetration is sitting now and where it could get to? I mean you probably can't provide the specifics, but any sort of very broad figures?

I mean what I would say, Entcho, is the rollout has gone very well through the last 6 or 8 weeks. The team is on track for the task that we set them, which is really pleasing. They have a -- we've got a really fantastic sales team, and they've done a great job in market, educating customers as to the benefits of Luxe. So we feel good about where it sits, but we're not going to get into the exact penetration or what our expectations of that penetration is either.

Our next question will come from the line of Sriharsh Singh with Bank of America.

Andrew...

We just lost you there, Sriharsh.

Sorry for that. Apologies. A couple of questions from my side, probably a little bit more strategic and long term. One, there is a little bit of investor concerns around the rise of off-portal transactions given the rise of LLMs. And my question to you is, are you seeing any unusual increase in off-portal transactions in recent months? And how do you think about monetizing more of those in the future? Any plans around that? Or any commentary would be super useful. Second question is around India given -- and would love your first thoughts on that business in a sense that obviously, there's a significant value creation opportunity in the long run if the business succeeds. And in that context, in that long-term context, are you okay with the current level of losses around $35 million, $40 million to achieve that long-term optionality? Or do you plan for a quicker breakeven of that business?

Thanks, Sriharsh. I'll take both of those time around. So I'll start with the second one first. So I guess with India, we all understand that the size of the market and the potential of the TAM that exists in India. I think we're probably not happy with where the business is at in terms of profitability. But it's gone through a hell of a lot of change in the last 12 months or so with new management team, with the exit of PropTiger and Housing Edge. And so there's been quite a bit of a reset inside the business as well. So look, I mean, the team is doing a good job in terms of thinking about bringing new product to market, whether that be through AI-based conversational search and so on like we have. But this all takes time. So in terms of acceleration of the EBITDA losses and trying to reach profitability quicker. Clearly, that would be something we'd like to see. But it's a question of the market's ability for us to move that quickly. And so I think as a business, we're moving as quickly as we possibly can, but it's not always going to go the way we want it to in the time frame that we want it to go in. The other part of your question was just in relation to what we're seeing with the premarket type activity. And I'd say to you that we're not seeing any activity that's outside of historical norms. And we all know that in markets where there's tighter supply, you tend to see a little bit more activity. And then in markets where there's less or more supply, you tend to see a little bit less activity. So we're still seeing behaviors within those normal ranges. I guess as far as we go as a business, we're always looking at innovation and ways in which we can meet the expectations of vendors and deliver them the biggest possible audience and generate them the maximum possible outcome along with our customers. So I wouldn't say that we're not thinking about things. But at the moment, behaviors seem to be within the normal realms of activity.

Our next question will come from the line of Siraj Ahmed with Citigroup.

Cam, maybe one for you to start off with. Just in terms of that rollout of conversational search, I would thought it's a bit slower than expected, only 50% of web audience and 10% of iOS. Anything holding you back there? And more importantly, are you seeing different user behaviors? I mean, maybe more research being done through the REA portal? Just keen if there's any change in behavior? And then I have a second question I'll ask after.

Yes. No worries. Thanks for the question. Look, we're really happy with the way conversational search is rolling out. We're doing it in a thoughtful manner to ensure that we're maximizing the experience of our consumers. I'd say the way we sort of think about search is we're trying to move from utility-based search to more of a companion-based search experience for our consumers. And I think what we're seeing as we continue to roll this out, and you got to think we're trying to evolve 30 years of learned search behavior. And this sort of stuff takes time. But what we're doing is as we roll out, we're looking at the insights and the data that we're generating. And clearly, we can see better perspectives around intent. There's greater connectivity to our financial services products and so on. And the -- I guess, the insights that we're able to pass on to our customers is enhanced as well through the whole process. So we're doing all of that. At the same time, we're looking at the data that's inside the conversational search and continue to build on that. And what that does, ultimately, I think, is it creates different opportunities for us as a business as we go on. So I think I'm really excited about it. Are we moving quickly enough? I think we're moving quickly. And certainly, as you can see from our audience and engagement stats, everything is heading very, very nicely in the right direction. But we want to do it in, as I said, in a thoughtful way.

So just following up. So that's interesting. So you're saying you're actually seeing greater sort of lead potential into mortgages and stuff like that based on the conversation search. Okay. Interesting. Second one, just maybe one for Andrew, just on numbers. Just in terms of the negative 1 to negative 3 listing volume for the full year, and you said May has been a bit weaker. I mean, given April is up 19%, I think negative midpoint, I think May and June has be flat. So what are you seeing in May that you're a bit concerned in terms of outlook?

I wouldn't characterize it as concerned, Siraj. What we saw in March was a pull forward of listings due to Easter. We kind of think April probably benefited from a pull forward of listings due to the broader market volatility. Often uncertainty leads to bring their campaigns forward and get into market sooner due to the uncertainty in the future. What we're seeing in May is it's not at the pace of April. That's for sure. And I think as we roll into the back end of May, we'll have a better sense of May and obviously, June too. But at this stage, it's sort of too early to be more definitive in our guidance for May and June.

And just be clear, May is not down year-on-year. It's just not as strong as April, right?

That's exactly right. Well, sorry. And also, we're a week or 2 we get these details every day, and I love 2:00 every day because I get the new listings numbers. But what I've learned in the short 3 months I've been here is things do swing very, very quickly. So that's where May sits a week in, but we'll see where it ends up.

Our next question is going to come from the line of Lucy Huang with UBS.

I've also got 2 questions. So just a follow-up on the conversational search. Like are you able to quantify so far, what is the impact that you're seeing on leads? Like are you seeing like a multiplier effect that you're being able to deliver to vendors at this point? Or any kind of qualitative assessment on the quality of the leads? And I guess over time, you talked about opportunity to conversational search, like any thoughts on whether monetization models could change or could be additive over time? And then just my second question is on AI costs. Just wondering if you can give us a bit of color as to what proportion of the cost base currently constituting? And I think the expectation is that LLM token costs will increase over time, so any thoughts or strategies you're implementing right now to over time keep a lead on that cost pressure?

Yes. Thanks. I'm happy to take all 3. So look, in terms of tech costs, and I'll start at the bottom. Clearly, there's a reshaping of our cost base over time, and tech does become a slightly bigger part of our cost base over time. With tokens, Andrew mentioned tokens being subsidized. I wouldn't say tokens are a material part of our cost base at the moment, but we will manage our token costs over time. So I'm not expecting to see any significant change in the immediate short term there, but it will just be managed as we continue to become more an AI prime business and as we continue to change the way in which we're bringing product to market through AI. Around that conversational search, you asked about that just in terms of monetization, can we monetize in different ways using conversational search. I think there -- it's early days on that. Ultimately, our ambition as a business is to try and help vendors get the outcomes that they're trying to get. And our customers' agents clearly try to get properties to market faster for them. And if our search experience through conversational search can help facilitate that, then that's obviously a good thing for REA. And so that's -- there's somewhat of a focus around that. In terms of quality of leads, I would say our lead quality is exceptional in any case. And you can see by the numbers in the deck or in the release in the ASX, just the sort of numbers that we're generating. Clearly, though, over time, what we'd love to see is more insight, more intent data that we're getting from search that helps qualify where potential seller leads and buyer leads are in their journey. And then that obviously gives us the opportunity to help them with their experience, but also support our agents. So I think lead quality is good today. It will get better with conversational search cost around tech that will continue to reshape and evolve along with the rest of our cost base. And so I think we're -- that probably answers all 3.

Can I just have one follow-up on the quality of leads? Like do you think agents are sophisticated enough on the buyer lead side to know which -- whether REA is delivering improving quality? Because I guess feedback we get is agents want all leads even if they're not high intent. But do you think they're sophisticated enough to understand the difference and then therefore, this presents further monetization opportunities down the track for REA?

Yes. I don't see leads as a source of monetization. But in terms of the agent experience and how do we get better quality leads to agents, I think in terms of the technology that we're looking at, at the moment and what's available with artificial intelligence, the ability that we have to prequalify buyers using technology before they reach the agent and to provide agents with some insight before they pick up the phone to talk to the potential buyer, I think all those insights are highly valuable. And what they do is they mean that the agent can work on other parts of their day that are going to deliver them consequential benefit. So I think for us, quality of lead is probably in those realms as well would be how we think about it.

Our next question is going to come from the line of Bob Chen with JPMorgan.

A couple of questions for me. Just one, you sort of referenced it a little bit earlier. We've got a little bit of uncertainty with the federal budget coming through next week with potential CGT and negative gearing changes. Have you guys modeled anything internally to look at how this might impact listings both on maybe a near-term basis where you see a bit of pull forward versus maybe a more medium-term basis where you could see maybe a reduction in volumes?

Thanks for the question, Bob. Great question. I think if we knew exactly what the federal government was going to do with both CGT and negative gearing, what was being grandfathered, what wasn't being grandfathered, I think it will give us a better idea. At the moment, I think it's too early to tell, and we just need to see the detail of the federal budget to come down before we can sort of start to show what that looks like post that. But ultimately, for us, any change that brings volume forward is not a bad thing. It's a good thing for us. But also, we're conscious of anything that negatively or positively impacts the new supply of property as well. So I think, yes, like I said, too early to tell, but we'll know pretty soon.

Yes. Okay. Perfect. And then I think earlier in the call, you sort of mentioned pretty good adoption rates of iGuide so far. Can you give us a little bit more in terms of early adoption stats of iGuide across Australia and what the opportunity might look like longer term for that business?

Yes, sure. So look, as we said, we're very happy with how iGuide is going. It's only been in market since March. There's over 100 iGuides that are now in market working hard and delivering great outcomes to agents and vendors. In terms of the product itself, we're very happy with how the product is performing. The scope of market opportunity is large. There's probably between 1,000 and 2,000 photographers for us to be working with. And so there's a lot of scope for further growth. So I guess it will take some time. We've got a team focused on it. We're doing a lot in terms of client education and bringing them up to speed. We know that property buyers, as you saw in the release, they love this sort of content and we'll engage heavily with it. So the more we can get into market and the sooner we can get into market, I think the better.

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

Just a couple of questions on yield. Just the first one, just a quick clarification on the yield for Q4. I mean, obviously, the step down given the tougher comps well understood. But are you assuming any reversal of the revenue deferrals in your guidance? Firstly, just a quick one.

Connected again. No, our forecast doesn't forecast any deferral into the fourth quarter. So you will not just in your note that's come across the desk, there was a 2% deferral in Q3 that will land into Q4. We're not currently forecasting a further deferral from Q4 into the following fiscal year.

Got you. And then just on the next year's yield, probably a follow-up on Eric's question in a way. But just can you just give us a feel for what you're seeing from agents on the contract -- sorry, on their contracts for next year? Like are you seeing any changes in the mix of tiers or add-ons that they're signing up for that could help give us a feel for, I guess, what those factors can sort of add to your yield?

Yes. It's a fair question. Great question, Tom. At the same time, it's pretty early in the rollout. So we're sort of 6 or 7 weeks into the rollout. We've seen good uptake. We've seen increased penetration of Premiere+. Luxe has done well and so has Audience Maximizer. I think that our customers are really interested and like the video add-ons that have been rolled out at the moment and will kick in from the 1st of July. But it's probably too early to give you much more guidance around the breakup of our view of fiscal '27.

And our next question is going to come from the line of Roger Samuel with Jefferies Australia.

I've got 2 questions as well. First one, just on your free cash flow, it was only up 2% versus EBITDA, which is up 12%. Is there anything in the quarter that we should be aware of, maybe some sort of lumpy CapEx or some one-off tax payments?

Great question, Roger, and I like you pick that up. No, there's nothing lumpy, no, nothing to do with CapEx specifically. It's just the timing of working capital movements. So you will have seen that free cash flow has been outpacing EBITDA. It didn't in Q3 due to that working capital movement, but it will -- it should well do so for the full year.

Okay. Got it. Second question, just on iGuide, you mentioned it, I think, one of the key features in FY '27 is video. Just wondering how different is iGuide from your competitor products such as Matterport. And we understand that you outsource the photographers. And will that impact your margin as well going forward?

No. So in terms of function, I mean, they're pretty similar. Technology is probably a little slightly different, but in terms of function, they're pretty similar. In terms of time to deliver an iGuide, from what I hear, it's a little bit quicker, but fairly similar. In terms of margin impact, I mean, clearly, our approach to this is to partner with the entire industry and to work with the industry. And we know that agents and photographers have a very strong and often long-term partnership. And so we want to get the great product that iGuide is into the hands of those that are working for our agents. But it's -- the way we're approaching it, it's an incremental source of revenue for us. So it's based on a per-iGuide execution. So therefore, margin impact, yes, it will have a margin impact. It has a labor cost associated with it as well, but it's all upside.

Our next question comes from the line of Fraser McLeish with MST Marquee.

Great. Just a quick one on, Cam, and slightly related to the last question, I guess. But just is there any sort of substantial changes that you're seeing on the ground from Domain CoStar that are worth mentioning? I'm thinking things like a big step-up in marketing or sales investment or anything like that, that's maybe changing the landscape a little bit.

Thanks, Frase. Great question. Look, I mean, the short answer is no. I mean if you look at our audience and engagement data, you can see we're going from record to record. So very happy in terms of our own performance. Marketing-wise, we're continuing to invest heavily in marketing and seeing great outcomes for our investment that we're making there. But overall, I would say, haven't seen or noticed any material change in competitive landscape.

And our last question is going to come from the line of Eric Choi with Barrenjoey.

Just a quick follow-up just because we were just asking about the cost. So I was wondering if I could have a second stab at it. And like you've obviously opened up the Australian jaws to low single digit to mid-single digit now maybe in FY '26 on kind of mid-single digit to high single-digit Aussie cost growth. And then just thinking about that going into next year, like the AU revenue growth is probably unlikely to accelerate just because you're doing 13, 14 by yield this year. So to the extent that you kind of want to maintain that level of jaws or even slightly under, it sort of suggests mid-single-digit to high single-digit AU cost growth is our kind of baseline cost growth for FY '27. I wonder if that logic is okay.

Eric, I appreciate the question, and thank you. It's probably just a little bit early for us to be guiding on cost growth for fiscal '27. What we would say is we feel very comfortable with the levers we have that give us flexibility in our cost base, whether that be our ability to use our offshore centers in Manila and Cyber City, the benefits of AI that gives us flexibility to manage cost. And there has been a lot of focus on cost on this call. And I guess you would expect that given we lowered cost guidance. But we want to make sure everyone is really clear on that we'll continue to invest in the business to drive the top line because that's really the most important thing that we can do. And of course, we'll continue to manage jaws in a prudent way.

Sorry to badger you, Andrew. Very helpful.

No, I appreciate it. And for everyone, it's Eric Choi as well because I think you misintroduced there, mate.

I would like to now hand the conference back over to Cam McIntyre for closing remarks.

Thank you very much. Thanks, everyone, for joining the call this morning and look forward to catching up with you over the coming days, weeks. Thank you very much.

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