Technology One Limited ($TNE)

Thank you for standing by, and welcome to the Technology One FY '26 Half Year Results Presentation. [Operator Instructions] I would now like to hand the conference over to Mr. Edward Chung, CEO. Please go ahead.

Good day, everyone, and thank you for the introduction. This morning, we've got Stuart MacDonald, our COO; and Cale Bennett, our CFO, presenting directly with me, but from various different parts of our business. Welcome to our 2026 half year results presentation. These materials were lodged with the ASX this morning. The DNA of our business is that we set ambitious goals and we deliver, whether that's moving 1,200 customers from on-premise to SaaS without missing a beat for our customers or our growth or whether that's entering the U.K. passing our expectations. All of this also gives us confidence in the pipeline, and we don't guide up unless we can see it day in, day out, year in, year out. That you can see behind us, I'm proud to present the following results. We're generally conservative by nature. For those who know us, we talk about heartbeats and rhythms heartbeat and rhythm, increasing our guidance range from 10% to 15% to 12% to 16% in FY '24 to 13% to 17% in FY also upgraded our profit guidance range because of the visibility and momentum in the business, which gave me confidence to guide up early. We reaffirm our of 18% to 20%, again, targeting the top end of the range. PBT margin, an expansion of 2 points from 30% to 32% and full year -- our continuing strong results will be driven by the investments we're making today, such as our AI strategy, including Plus and Guide. There are no carve-outs. Our guidance is fully included H1 has come in exactly where we said it would. ARR growth of 17%, squarely within our 16% to 18% full year guidance range with strong momentum heading into H2 and beyond. PBT growth in the high single digits, and that's in line with the phasing we flagged at our AGM as has landed exactly on plan with no surprises. Now taken together, the half delivered exactly what we committed to at the AGM, and we remain confident in delivering the upgraded and full year free cash flow equal to net profit after tax. We have clear visibility and confidence through H2, and we will deliver the full year step-up as we flagged. -- into the underlying engine of the business, what we refer to the heartbeat of the business. This is our half 1 results on a constant currency basis as well as normalizing profit and profit before tax growth of 21% and margin improvement to 30%. On top of all of that, profit would have grown to $105 million consistent growth and the confidence for the future, as I've already highlighted. Over the past 38 years, we at Tech One have ridden the economic waves and because it was a simple way to deliver through that graphical user interface. The third generation leveraged the Internet because it was a simple way to connect our customers with their customers with one product all the way back in 1987, and we've built products or we've made numerous key IP acquisitions such as Property and Rating. Property and Rating runs government, also focused on health and community services, asset and project-intensive industries and corporate and financial services. This allowed us to build deep, deep functionality years of hard work in product localization in customer reference and scaling our business. The flywheel has turned in the U.K., and we are now the de facto partner in the U.K. or the hundreds of thousands of residents of a council, opening up a new and unserviced market for us. Now through the Power of One, we became the world's first SaaS ERP in 30 days, not for thousands of days like our competitors. Now this is our strategy in action, long-term investments in R&D by staying close in 1987 to 20 products today. Each product has over 20 modules. That's over 600 modules in total. And we now have our AI strategy where we've added -- they provide software that might help you automate your finance processes or human resource processes. It's very generic functionality, and it doesn't include the deep market specifically for that function. But then you have to piece it together with sticky tape and chew income, and it doesn't really work in a SaaS world, and it's even worse in an AI world. model. We've followed the past less traveled, and we've carved out vertical niches and specialty that results in strong consistent ARR growth 10% to 15%, which is now carefully and slowly increased to 18% to 20%, which I've discussed. We call it strategy, some in the investment community call it a moat. -- serve highly regulated industries. We've got the highest level of cybersecurity certification. We serve some secret agencies, but at highest level, it's built into all of our software. Our world's first SaaS plus model with fast go-lives, removing the need for that traditional long complex and expensive consulting and 99-plus percent customer retention and 38 years of consistent execution. Okay. Let me remind you about pricing. The bear case is on the left of this slide, and it's a real bear case for many companies. AI agents replace knowledge workers, customers need fewer seats, vendors lose revenue per user. Multiples rerate downwards. We sell ratable properties, which scales with ratable numbers, not headcount. So as communities grow, we grow with them. We sell on student numbers. So as you enroll more students -- you can see it's very exciting. Stuart is going to take you through this in further details, and I invite you all to a product demonstration hosted by Chandon, our CTO this Friday. agents do more work. Remember agents faster, more complete, higher quality and cheaper for our customers, we grow with that, too. Another new opportunity -- but we've introduced a new innovation to take friction away for our customers, and that's advertising revenue built in and further advertising revenue per seat world, every AI agent that replaces a human is revenue dilution. In our world, every AI agent that does work for a customer is a revenue event. in-product AI, new revenue from our resident and student conversations with interactions in guide and new advertising revenue from Guide. We've transformation right now, and these investments enable us to continue to double in size every 5 years. Over to Cale [ and our Hackpace ], who will now take us through the financials for the first half of the year.

Thanks, Ed. Once again, we are incredibly proud of the results we have delivered in the first half of FY '26. The strength of our portfolio business came to the fore this period with local government in Australia, a standout performer in the first half. A total of $87 million in ARR was added over the past 12 months, resulting in ARR growth of 17%. Typically, ARR growth is always stronger in the second half, so the strong performance in first half gives us great confidence in our path to the full year. U.K. ARR growth came in at $2 million with recurring revenue now representing 93% of total income, highlighting a 25% uplift in the quality of our revenue of high single-digit growth to deliver 9% PBT growth to $89.1 million. With such a strong result and great confidence in our future, '24. If we view this result on a constant currency basis, our first half of '26 would have been a record half for any period over our FY '26, we delivered strong profit and ARR growth, meeting guidance. We made the commitment in previous halves to keep our rolling 12-month Rule of 40 above 40%. With another strong half of ARR growth, up 17% and a free cash flow margin of 38%, we have again delivered an outstanding SaaS and recurring revenue grew 13% to $299.2 million in the first half of '26. As mentioned, SaaS and recurring revenue growth at 13% decrease in revenue as expected as we work through the backlog of legacy contracts. This revenue is primarily driven by implementations not sold at SaaS+ such as government work sold on the old framework prior to its updating to accommodate SaaS+. Within our total expenses are net variable costs of $42.7 million, an increase of 5% on the PCP. This increase was driven by an increase in our SaaS platform costs as customers leverage more of our products. Our operating costs are up 13% to $190.9 million during the half. These are primarily people-based -- we did not have a comparative marketing event. And as such, to get a like-for-like picture of the cadence of the business, it's important to factor that in when looking at the increased cost base. The effective tax rate for the half was 25%, which is where we expect it to land by FY '26. Turning to the balance sheet. to cash collections due to the annual billing alignment with contract anniversary dates. Capitalized development has increased by $15 million in the half, which is tax asset attributable to share-based payments given the fall in our share price. Our deferred revenue has fallen $42.3 million in first half '26 was a big one for our R&D team. In the first half of FY '26, we invested 26% of revenue or $84.1 million in R&D with -- going forward, we expect to target investment in R&D in the 20% to 25% of revenue range, which we continue to believe is the optimal investment level. of our cash flow due to the annual contract anniversary date cycle. You will recall in first half '25, we benefited from pulling forward creditors into the $6 million or 16% to $245.5 million over the past 12 months. We are incredibly proud of our results in the first half of '26. Accordingly, our Board has determined an interim dividend of $0.08 per share franked at 75%. This represents a record interim dividend with increased franking. We will maintain this franking level going forward. While the interim dividend is up 21%, this only represents a payout ratio of clearly showing our confidence for the future growth in profitability. In summary, our past execution has afforded us a very strong and [indiscernible].

Thanks, Cale. As announced at our Showcase kickoff event in October last year, 26 marked a watershed moment for our AI initiatives and rollout strategy. It's important to note that we've been leveraging AI across these capabilities. But before I go any further, I thought I would take a moment and talk about Showcase and bringing up to speed about the events that have now all been completed. with Plus and in-product functionality and guide forming the centerpiece of the strategy. I would also like to highlight the resounding success of the event across every increasingly relevant for the verticals we serve. Most importantly, the pipeline generated from Showcase has significantly exceeded both historical opportunity. At the conclusion of the Melbourne Showcase event in October, we announced Plus, our Agentic AI solution for the ERP market. the boundaries we are prepared to push to better support our community. We also highlight to investors that Plus was designed to be a Trojan horse, a platform that would encourage customers to adopt more Technology One product in order to unlock the full capabilities of Plus, and we're already seeing the strategy play out. We also stated that Plus would achieve the fastest adoption rate of any product we have ever launched, and that prediction is proving to be correct. Although Plus was announced in October last year, it has only become generally available to customers in early April this year. Despite the 6-month wait, we're already seeing breaking Technology One adoption records with Plus, and we are excited to see how far this product will go. In classic Tech One fashion, we did not stop there with Plus. We pushed the boundary even further with the announcement of Guide at our U.K. showcase in February. For more than 6 years, we've been developing products designed to empower our customers' customer, whether it be students or ratepayers through what we call DXP or the digital experience platform. Our goal is to extend our reach beyond supporting only our customers' back office and instead empower our community and the communities they serve directly. As you've heard previously, our DXP LG product has been well received, and we've been running early adopter programs for -- we could have stop there and realized the guide using traditional and released guide with traditional consumption-based pricing models. commercialize this product. And as a result, we took the road less traveled. And in fact, road never traveled in the ERP market. We proposed delivering guide core values. We asked ourselves, if our customers are under pressure, how can we generally support their sector. That led us to the decision to share ad revenue -- with Guide for student scheduled for release in 2016 in August, we're already having universities compete to be the first institution globally to deploy a solution that not only empowers students but is generating new revenue streams. Historically, I've highlighted 3 significant wins during our results presentation. And today, I would like to begin with James Cook University. We've been proud partners with James Cook University since 1993 when we first -- when they first acquired our financials solution. Since then, they've been on a journey with us through major phases of technology evolution from on-premise client server all the way through to SaaS, while at the same time, adopting our student management solution. And over the past year, JCU conducted a comprehensive technology review and road map assessment focused on identifying their preferred strategic partner for the AI era. And as a result, I'm incredibly proud to share that James Cook University, a global leader in Great Barrier Reef and Coral reef resilience research with more than 1,700 team members and 21,000 students has fully embraced our AI strategy. Not only have they adopted Plus, but they've also acquired every product and module within our One Education suite to create a rich data lake so that Plus can leverage and help support the university's long-term strategic goals. Further, validating both the strength of our partnership and alignment of our innovation and strategic direction, JCU signed a 10-year agreement with Technology One. This is the perfect case study of partnership, innovation and the power of our vertical strategy, and it reinforces why we continue to grow and league now into what I believe is the fifth era of technology innovation. Townsville Council has been an on-premise customer for many years, and we're among a very small group who did not initially believe in our SaaS strategy. And in fact, they invested in building their own data center to continue to host solutions. However, once we informed them that we could no longer support on-premise customers and they would need to transition to SaaS, they commenced a 2-year evaluation program involving competitors such as Oracle and Infor and in fact, selected Oracle. Early in the Oracle implementation, they found that Oracle solution would not work, and I'm incredibly proud to say that during the first half, they not only returned to Technology One, they signed a 10-year agreement embracing SaaS and adopting full SaaS+ program as well as acquiring Plus. We also secured the University of Suffolk. Historically, the U.K. market only sees one student management RFP coming to market each year. And as we've highlighted previously, we have a strategic goal to capitalize on our unique position in the U.K. market as the only SaaS provider serving the education sector with both traditional ERP capabilities and mission-critical student management, curriculum and timetabling solutions. To secure Suffolk University as our seventh student management customer in the past 2.5 years, and the confidence customers are placing in our AI vision. SaaS+ is now embraced in everything we do. It defines us solutions have transitioned to SaaS+, and I'm pleased to report today that everything is SaaS+. And we've achieved this transition faster than expected, driven because it fundamentally disrupts traditional implementation models built around long drawn-out projects. Some even joke referring me as the Chairman of to consume additional products and drive greater operational efficiency. In the new world of AI, this also significantly increases the effectiveness and value digit growth. It is clear validation that our strategy is driving momentum. A 27% growth rate in local government is particularly significant and again validates that mission-critical SaaS solutions designed specifically for the verticals we serve are hitting the mark. Importantly, AI technology. Education also remains another significant pillar of growth with 15% and the opportunities such as AC for mission-critical solutions in our verticals in the U.K. and the enormous opportunity coming off of our U.K. showcase event. Our pipeline continues to full year results. We closely monitor NRR and churn. While NRR was 114, this was primarily impacted by foreign exchange movements, and we expect to return to our target range of 115 to 120 by the end of the financial year, notwithstanding any persistent strong Aussie dollar. Churn remains historically low at just 0.6, which is industry-leading and further validation of both our strategy and the critical long-term role we play with our customers. Ultimately, it all culminates in our ARR performance. Overall ARR and ARR per customer continues to grow strongly. And with our FY '26 guidance of $16 to -- the first half results clearly demonstrate we are on track. In closing, our results demonstrate that we are continuing to invest heavily in the future and push the boundaries of both what the market expects and what technology can deliver. From being the only SaaS provider across our verticals to deliver mission-critical capabilities such as student management, curriculum, timetabling and scheduling, property and rating, strategic asset management and so many more. We continue to differentiate ourselves through innovation and genuinely improving our customers' outcome. Combined with SaaS+, Plus, Guide and our broader AI strategy, our R&D team continuously take the road less traveled because they remain deeply connected to our customers and the industries we serve. We cannot be prouder of their direction they are taking Technology One, our industry, but most importantly, the customers every single day.

Thanks, Stuart. So to wrap up the results quite simply, our investments made in R&D, in AI, in Showcase, in SaaS+, they're delivering. We achieved our 17th consecutive half year record ARR, record revenue, record profit. Total ARR is up -- 17%, sorry, to $598 million. U.K. ARR is up 23% with a very strong pipeline for half 2, driven by our Showcase event in February this year. The flywheel is turning and profit before tax of $89.1 million, up 9% as flagged. These results enable us to continue our strong R&D investments for future growth, and that was $84.1 million, up 22% and a record interim dividend of $0.08 per share, up 30% we're on track to achieve our upgraded full year guidance. Turning to our long-term outlook. We've doubled in size every 5 years, and we're going to continue to do so. As I've done in the past, I'd like to walk you through the key mechanisms on how we achieve this consistently amazing outcome. We have a total addressable market of $13.5-plus billion, and it's growing. We have and will continue to deliver strong net revenue retention within that range of 115% to 120%. Now at 115% alone, we can continue to double in size every 5 years. We have significant white space in our existing customer base, and it continues to expand. And with that continuous investment in R&D, we released new products, features, modules 2 times every year, therefore, organically increasing the TAM. Now once we land a customer, there are many, many new products and modules that we can provide to those customers. Our pricing model is tied to a true partnership with our customers. As they grow, we grow. In summary, we benefit from population growth and our contracts include CPI. Now SaaS+ is a game changer. It was designed to differentiate us and to remove the long, complex, risky, expensive implementations, but we benefit from a 40% uplift in our price book, and we simplify our business again by removing one-off consulting revenue and replace it with high-quality recurring revenue. And leveraging AI to achieve our ERP in 30 days, you'll see significant margin improvement. Now we continue to target acquisitions in that very disciplined way that adds new IP to our business, such as Cseloop. And the leverage we're delivering in our business provides us with significant headroom for inorganic growth. We have a great vision and a platform for the future of ERP. Now as we enter the fifth generation, the AI generation, our total addressable market is exponentially turbocharged with the addition of Plus and Guide as our customers take on more and more interactions and conversation bundles. They take on ad revenue, and I'm sure many, many more will emerge. This AI transaction-driven pricing will drive additional ARR and revenue from each customer and from the residents and the students of our customers. We say exponential because it's massive. We just don't know how big it can be yet. From the initial conversations and feedback we're receiving from our customers, the usage of conversations and interactions is significantly exceeding our expectations. Now all of this just increases the depth of our moat and significantly increases the opportunity ahead of us, underpinning our confidence that we'll achieve our next big goal of $1 billion-plus ARR by FY '30. And here's a summary of what that AI opportunity does for our business. One, our AI pricing model to which I've already spoken, is tied to ratables to students enrolled and our interactions and conversations. Two, our AI enhancements provide better outcomes and value to our customers and their customers, Plus turns the ERP from thousands of screens into one single conversation. Thirdly, the data advantage. We've got 38 years of vertical workflow data, compliance with laws and regulations, best practice, tacet approvals. AI is only as smart as the data it leans on. Foundation models can't replicate this. They might have the Internet, but we've got the operating record of public sector in Australia, New Zealand and the U.K. Four, Plus is a Trojan horse. As customers use Plus, they realize that more products represents more value for them and their customers. and five, the network effect. Guide extends plus from staff to end users. With Guide, we're inside every conversation that a council has with a resident and every conversation that a union has with a student. The customer service area expands by orders of magnitude. The moat was wide before with AI, it gets wider and it gets deeper. Our people, they have a deep connection with our mission because they, their parents, their brothers and sisters, their family, we all live, work and play in the communities we serve. They live and breathe the Tech One way. They create and deliver the mission-critical products and solutions that power our customers. None of these results would be possible without the talented and committed people who make up Technology One. Our people are on the role, they've got energy and momentum, and we would like to thank every member of Tech One across the globe. firmly on the path to achieve $1 billion plus ARR by FY '30 from our current base of $598 million. We will continue to invest for the long term in R&D to build platforms for growth and the economies of scale from our global SaaS ERP solution will also drive continued profit before tax margin expansion through to 35% and beyond. We'll now hand over to the operator for questions.

[Operator Instructions] Your first question today from the phone comes from Lucy Huang from UBS.

I'll go through maybe if I start off with the first one. Just interested in [indiscernible] around flat. I think in February, you talked about 22 customers signing up. Any color as to what that number or penetration rate looks like today. And then you also make some comments around kind of conversations with customers suggesting usage is exceeding expectations. Any color you can shed on how a customer is in Plus. Are we seeing a large number of exceeding the usage?

Thanks, Lucy. There's 2 parts. I'll answer the first part and then hand to Stuart. In terms of customer take-up, it is firmly on track to be the fastest product, even though it's more than a product ever delivered by Tech One. We're just holding our powder dry to say some good news for the full year also. But rest assured, it is getting into the majority of the large transactions we're doing with our customers. Stuart talked about JCU, you used JCU or any customer you want to talk about sure. But the second part of the question is that how is that exceeding our expectations to take up .

Yes, it's a really good question. We should remember everybody that we released it with 26, and that's only been available with plus for about 3.5, 4 weeks now. So it's very early days. And so a lot of the customers are still in test, not in production with it. But the feedback related to their modeling is very impressive far exceeds our modeling related to what we expected the usage to be. And if we talk about JCU, it's orders of magnitude greater than we ever expected. It's more than 10x more than we modeled that they would use. So we don't really know yet because it's still early days, but we'll be able to give you more color at the full year. .

And maybe if I can just add a touch of additional color is that -- we don't really want to talk about the ARR of the individual customer like JCU, but it's quite large, as you can imagine. It's a large -- or medium university, but student management and units are big, but it's got every product and module. -- when we modeled the interaction and conversation uptake, it was aggressive in our minds or strong, but it is 10x more than 10x more. And so the could double in that single customer base. And so we don't really know yet, Lucy, but we do know it's exponential, and it's way more than we had naturally modeled. .

I can give you 1 case study, if you want. -- low to Yes. Okay. So when JCU bought everything, they literally bought everything. It was a new product we just announced called Invoice IQ and its ability to scan your invoices and it's -- there's a competitor product that we're taking out to do that work. When we modeled it, we modeled that they would do about 10,000 invoices through the process, they will do more than 100,000 and again, that's seen as an interaction as well. So when we model things, we're just seeing so much more usage coming out of this functionality than we ever expected, and we're just excited to see where it goes. And that's just 1 very simple case study. .

[indiscernible] half. Are you guys able to split or give us a rough idea as to how much came through from SaaS+ versus Plus?

We don't really break that out because everything is SaaS+ and just Plus is just another product that we put through the system. So we don't break that out at all. .

Yes. Lucy, if you like, we've got what we call a very diversified model. You got multiple products, multiple regions, multiple verticals. And to be honest, we're going to fire better in some halves and years in summer fire even stronger in others. And so we use that diversification of revenue streams to ensure that we can hit that 18% compound ARR growth year in, year out. .

Again, just to reiterate what I said also within the results, everything we sell now in SaaS plus. So we don't segment anything out that's not a SaaS plus proposal. .

Understood. And then maybe just the last one. Just interested in guide and the advertising revenue model, that you're rolling out. How should we think about the incremental cost associated with this because obviously, it's a different way that you're used to charging. Are you expecting to have to build a team of salespeople to attract those ad dollars? I'm just kind of keen to hear how to push the growth in that revenue .

Yes. There's 2 parts to that question. I might just race for incremental costs and then Stuart to the second part of the question. .

Yes, I guess the guide product is very early in its evolution. So we won't get too specific on costs other than to say that this is a fairly innovative approach to generating revenue for Tech One. So -- it is -- will be incremental revenue and incremental profit for us. But exactly how that's going to fall through yet, we're yet to see.

The customer excitement related to it far exceeds our expectation yet again. We've got at least 3 customers that are trying to be the first ones to take it on board gets released in '26, which will be sometime in August related to the sales team, it's the same sales team. So we're verticalized in the way we sell. So we've got an education sales team that's selling that product. and we've been enabling them for the last 6 months ready to sell the product. We will also go through a kind of a crawl, walk, run phase related to the ad revenue side as we're early into this phase as well. been talking to a lot of other providers of ad revenue to see how they grew into it to make sure that we do it the right way. But -- it's very early days, but very exciting. And it's got a real flywheel effect because the customer is servicing its customer better, so the students are getting more information, therefore, decreasing the cost for call centers and improving the relationship between a university and a student. The university is solving a problem differentiating its other universities. They're getting ad revenue from it. And so that flywheel, we benefit from, very, very exciting.

Your next question comes from Andrew Gillies from Macquarie.

Look, just following on from Lucy's questions. I appreciate the ARR tailwinds are really strong, but how should we think about kind of the dynamic of sort of existing customer versus new logo growth in contributing this ARR story, particularly calling out sort of U.K. growth where new sales was a little bit softer. Appreciate the commentary on the pipeline. But can you maybe unpack that a little bit, just help me on the drivers as we go forward. .

Yes, sure. I'll talk about the new versus existing and then maybe hand over to Stuart for the half 1 at SKU for the U.K. We run our business basically focused on really 2 metrics, PBT growth, number one, and then closely followed by ARR growth. And for us, total -- it doesn't really matter if it's new or existing, but I'll get into the details about that in a second. And we'd love to sell as much ARR in the first half versus the second, but the deal sort of land with a land and over many, many, many years, they sort of second half skewed, and I'll get this Stuart for the U.K. in a minute. Now when you look at new versus existing, if our total ARR growth is 17% at the half, before the ForEx impact. And then NRR was -- sorry, including the ForEx impact. Then 114 for existing, including the Frac, the new logo is 3%. It's just 1 mine is the other. Now since the dawn of time, that new logo growth has been about the same. It's sort of hard to explain 5 new logos in that same percentage range. but we're very strict on the definition. So if you look at Australia, local government, for example, you have a lot of the logos, but there's a bucket load of white space and runway to go. So everything goes into typically or most of it goes to NRR. And then if you go to higher education, we bought Cientia back in '21, I think, and it had pretty much every logo in higher education in the U.K. So strictly speaking, that is all NRR. And that's how we present that as well. So there's a lot of nuance in that conversation. Our focus is on the entire market. that 18% day in, day out. So 1 of the DNA parts or the hallmarks at Tech One is we don't want to shoot the lights out 1 year and have a really bad year the next year. It's just strong, consistent growth. And our commitment from a PBT point of view is that 18% to 20% at the [indiscernible] consistently and ARR growth, 16 to 18 at the top end consistently. So hopefully, that just paints the picture Andrew. Firstly, of the IRR, whether it's new or existing. And then Stuart, there was -- you want to color in the sort of what the dynamics of the year for U.K.

Yes, sure. One piece also put together as well, somebody has asked me, how did we get such growth in attendance to showcase -- we've always set showcase up as a prospecting event, but historically, it's been more of our customers coming and looking at new product component across had far more prospecting attendance than we've ever had before. And that's just a validation of our strategy and our brand in the regions we serve. So you'll see that play through. Related to the U.K., a strong first half, a great foundation for the second half. The pipeline is far exceeding what we expected it to have at this time of year. We've got some very healthy exciting deals to talk through at the full year. and very where we're going, not only next year, but going forward as well. We are the de facto provider now for local government and higher education in the U.K. and it's putting us in a very strong position.

Perfect. And then just a quick follow-up. If I look at kind of that pipeline opportunity, is that kind of both U.K. and sort of ANZ? Have you -- are you willing to kind of provide some color on the split there? Or just think about it as kind of that $9 million spend or the $7.4 million on the showcase costs.

Yes. It's pretty even, to be honest, across the board. I mean the U.K. is far more new just because it's the time we've had there. But across the board, that growth of that pipeline is pretty even on both sides. So I wouldn't really put any more to it. .

Perfect. And then just 1 last one on the products. like, obviously, the shift to a consumption-based revenue model is a bit of a change for customers. Like is there any kind of education required with that? Like how do you balance the desire to grow transaction or consumption-based revenues with the potential sticker shocker customers?

Yes, it's like every generation, to be honest, no was similar in cloud. Our first approach is that in the [indiscernible], it's bloody complex with tokens. I don't know if you or your friends have played with it, and I've personally played with and you've got millions of tokens, which means nothing to me, to be honest. So at the first level, we've simplified it by just having you ask a question and you get an answer. That's a conversation or you press the button in product and you get an answer that's an interaction. So we've already, one taken away the complexity from tokens, which means nothing to anyone. Two, when you buy Plus or in product A, you got a whole lot of bundles and then you can buy on top. And of course, it's going to take location. But Stuart, do you want to add more to that? .

Yes. I think the exciting part of this whole phase is what they're realizing there's the value they get from AI. And so we have to really enable them and educate and related to functionality. But once we've done that and if anybody came to showcases, they would have seen how we showed that we were giving time back related to that functionality, it actually pays for itself because they can do the mental math of this interaction is going to cost me $0.30 compared to spending half a day to do the work. And so we don't have to really position anymore. We just have to inform them of the functionality and then they adopt quickly because they can see the efficiencies they're getting. So we're really breaking down the old way of thinking, which is, "I need to do a function. Now I need to figure out to do functions faster, and that's what AI gives them, and that's what we're getting to return from." So don't see. I've not had any pushback. In fact, almost the opposite from our customer base, and they're pushing us to get more and more functionality into AI and leveraging those interactions.

Do you want to talk about the research we've done for local government customer service call centers and the new difference?

Sure. So if I take the U.K. as a case study, and we're working with the other product we really haven't talked much about, which is guide for LG as we released guide for LG in 27. If I look at a counsel, a decent-sized council in the U.K., they spend about GBP 2.80 for every call that comes through to their call center. And only 85% of those calls get answered and only about 60% of those calls ever get resolved. We can actually do the vast majority of that work for a $0.30 or [ 15th pent ] cost. And so we can do all of their calls and actually push them through at an absolute fraction of what they're spending right now so they can take that money and put it to more meaningful things. And once they start to understand that orders of magnitude of saving and fishing, but also NPS results related to their students or right payers, everything just kind of takes care of itself. It becomes logical. And that's what's making that flywheel turn so quickly.

Your next question comes from Paul Mason from E&P.

Just a couple from me. I just wanted to check, with the currency headwind, was that all on the U.K. So what would your ARR be $59 million, if not for currency? Or is there some New Zealand in that as well?

Thanks for your question, Paul. No, it does include New Zealand. And if you're a close watch of the kiwi dollar, it has depreciated quite significantly over the half as well.

Yes. Okay. Great. And so 2 other ones more on business. Just in terms of the rollout of Plus, I was just wondering if you could make some more specific comments on the level of upsell that's come from it with the customers that have taken it. Like you said most major deals are taking plus now, but like are they are most major deals taking plus and then something else because of Plus as well how is [indiscernible].

I don't know the exact numbers, but some of the -- I would say probably about 25% to 35% of the plus deals are plus stand-alone. Almost everything else has a pull-through of some type maybe not a JCU level, but some type of taking advantage and looking at other products that they want to take out and bring our product in, so plus can actually evaluate that information. So -- it's definitely the majority of the deals are bringing other products through. .

And I think on top of that, if you think longer term, once they get plus and they start using it and see the value and see the interactions, the surfacing insights they never thought about the lights will turn on. It's no doubt, it's a Trojan Horse, not just for now, but for the [indiscernible]. I'll take me.....

And we can see it here. If you look at and what we're doing we can see the usage here of what we're doing. We're an early adopter. And the amount of information it's providing everybody is just fascinating. Absolutely fatalities. .

Great. Just the last 1 for me would be just on the consulting revenues. You guys called out that the legacy stuff is falling -- but the overall numbers looking like they're a bit steadier, I believe, because of your application managed services business. Could you maybe like just give us a bit of an overview of like how that line is going to go through time? Should we see the absolute consulting revenues decline? Or is that just going to change nature to this more like ongoing consulting instead of like the implementation consulting as time progresses.

Yes. So basically, you're right. We will see that migrate from that line from traditional consulting, which is down about $3 million versus the PCP. While AMS, which is our application managed services will go up. It -- well, I mean, aspirationally, we'd like all of our customers to have an AMS program and -- and so expecting continued growth in AMS and traditional consulting will, over the next couple of years, really become a fairly small number, we'd expect.

Is there much margin difference between the 2? Or are they pretty similar in terms of how the economics work.

They're fairly similar. They're quite different businesses, but they're not materially different margins.

Your next question comes from Josh Kannourakis from Barrenjoey.

A couple of quick ones. Firstly, just with the route -- there's been a lot of discussion a few things that have come out over the last few weeks around sovereign AI and procurement and government. Have you guys seen any noticeable trends? And how do you view that as either opportunity or risk to your business and how you're positioning for that going forward? .

Yes. There's no doubt, it's very topical tech sovereignty and particular AI sovereignty. And we are a firm believer of buying local to support the local ecosystem of tech companies. We are a firm believer of data sovereignty and for lack of a better word, AI sovereignty as well. And I know that the ministers, whether it's air or Chilton are out there beating the drum and in fact, myself and a few colleagues will be down there next week. . Josh, pushing that barrel, not only for Tech One, but for the industry at large. And so expect Elbow's push for team Australia and for sovereignty to perhaps have some tailwinds for us. It's a long hard slog as you know, with government policy, but it's heading in the right direction, and we're fully supportive of it.

Okay. Great. And just obviously, you've signed a couple. I know James Cook obviously a long-term customer counting back to you guys. 10-year deals, obviously feel pretty significant -- just keen to understand, obviously, there's a lot of change going forward. But when you at your pipeline on a go-forward basis? Has there been any sort of change to the time frame or terms? Obviously, I know you've got some 5 years, some 10, but I'm interested to know whether that's a trend or if that's just specific to that [indiscernible].

You're right. I think if there's a standard, not that there is. But if there's a standard, it's probably a 5-year deal. But we're seeing that customers really want to take up AI and take the advantage of them and do the longer deals. Is there anything you want to add to that, Stuart? .

Yes. No, we always position with the 5-year because it's the way that SaaS plus was designed is a 5-year agreement. But we're seeing customers that really want to just come on a journey with us -- and so we take advantage of it as a partnership. So we're asking the same amount, but we've got more customers asking for longer term, and that's just a validation of our strategy. .

Got it. And so just on that, I mean, I noticed as well the capitalized commission costs were obviously a bit higher. Is that just because you've signed those -- you've obviously signed a couple of very long-term agreements, which I magic come with some healthy commissions .

It's probably not so much the term, to be honest, because they paid for the first year. There's a little bit of nuance in that. But we did sign quite a lot of deals in that.

Yes, it was a good sales half. Salespeople like to get paid.

And they deserve to be. I'll probably -- Josh, I might just add a bit to that. It might be lost on people. But if you think about a salesperson's commission, it is on the value of the deal they do for the first year, generally speaking. And they don't have the ForEx impact. So if you -- that slide that's on -- I don't know, Jio, whatever that number that slide is. It's really important because strip away or bring back to constant currency, that's meaning less to the customer account manager, but it shows they actually had the biggest half ever. And so that gives us -- that's 1 of the things that gives us a tailwind. One of the things that gives us confidence. And of course, we can see a very clear pipeline heading into half 2. But I think that message up until now, it might have been a little bit lost but they've done really well. Yes. Slide 25.

Your next question comes from Roger Samuel from Jefferies Australia.

I've got a couple of questions. First one, could you outline your confidence in hitting the top end of the guidance range, which is for 18% ARR growth in FY '26, given that you reported 17% in the first half whilst your net retention rate has come down to 114%. Just to try to understand how much heavy lifting do you need to do in the second half? And maybe just to clarify, those new contracts that you mentioned slide pack, the JCU, the tons stuff. Did they land in the first half or the second half? .

Yes. I'll start with that 1 first. Roger, they definitely landed in the first half. It's a good question you ask. I'm going back to Slide 25, if I can find it. Okay. So the whole point of Slide 25, although start is to say, if we didn't have ForEx impact, lower $6 million, we would have owned $50 million in the first half, which is the highest, by far, which means half-on-half, the growth in second half not as much. So we have huge momentum going into the half, delivered solid results. And I wouldn't say we're coasting, but we -- but there's -- the team have done such a great job that push for the second half, 1 is easier than it's been in a very, very long time. And two, we've got that huge momentum coming off the back of showcase and visibility in the pipeline as well as the excitement for Plus. And every time we show our customers plus or get presales people in front of them, it just drags the deal forward because the buying C level sees the value in it. So is the value in that interactional conversation such as the [ 23p ] compared to GBP 2.38, it's so significant Raj, that we are firmly committed. We've got huge visibility and the pipeline is so strong. .

Yes. I would also kind of look at it this way. There's more conversation inside the business now related to FY '27 and there is to finish FY '26. So we're looking that far ahead because of the confidence we have the pull-through from showcase, the AI strategy, what's happening in the regions. It's really an FY '27 and forward conversation, and that's the excitement we have. .

Got it. Okay. My second question is on margins. So SaaS so far, had an impact on margins and yet you're still guiding to margin expansion in FY '26. Is there any cost efficiency program that you're doing that drives that margin expansion. And also on SaaS+, when would you expect that margin dilution yet to fall away. .

Yes, I might start and then hand over to Carl. I think if you lifted the hood in Tech One, there's always cost out. We're always focused on the efficiency of the business. It's probably why we're in the top quartile globally of companies in the Rule of 40. So it's just part of the DNA we keep pushing. But get efficiencies in our business. So you're seeing a whole lot of things play out. The DNA of the business to continue to focus on efficiencies, the use of AI inside our own business as well as in the products for our customers, and we'll continue to drive hard to slowly but carefully increase that margin.

So we have good confidence that, that 35% margin that we put out a number of years ago, we have a pretty solid path to that. And we're pretty buoyed by how the business has gone with respect to costs through the first half of FY '26.

And I think if you look at us against our competitors, there's also another piece to look at, too. We've got massive initiatives, and we're playing on multiple fronts to support our customers, and we're still hiring. So compared to our competitors that are actually downsizing, we'll still leverage AI and gain great efficiencies through AI, but we're still looking for the people to help us deliver these amazing initiatives. So we're very different to everybody else. We're still growing in that regard because there are so many things on our plate that we're delivering.

Yes. That's a good point. So we can scale faster and do more. We've always had more ideas than we can poetic at. And AI cost efficiency just allows us to do bit of everything, to be honest. .

Your next question comes from Tom Beadle from Jarden. Please go ahead.

Just first question on ARR, just a follow-up on a few of the others. I mean -- just you just clarify just to what extent might showcase add to your AR this year, that sort of say $80 million to $90 million step up how much might actually fall into FY '26 number. And I guess, is it fair to say it's probably too early to have seen any of that impact in the first half. .

We could definitely see impact, no question. So again, if we started in October of last year, you'll start to see it flow through a little bit in the first half, but you'll start to see it in the second half. But our numbers remain the same. So again, what I'm trying to provide to you is the confidence related to the numbers. So we would be at time of year, very focused on Q3, Q4 as we're finishing off the year. We're very focused now on next year and the pipeline and the growth and the strategies and the campaigns for next year because of the foundation that we built early in this year and through showcase that's flowing through. So I don't expect that at any time to increase the ARR numbers, but it's just more confidence and comfort of them that allows us to look further ahead, if that answers your question. .

Yes, that's helpful. And just second question on NRR. Obviously, at 114%, it's obviously very respectable, but it is below your target range. So I know there's obviously a few moving parts here, but just with SaaS plus coming through just a little [indiscernible]. .

Yes, NRR growth back to that range. I think to be honest, it's just the timing of the deals, me. I think our full year guidance is 16% to 18% at the top end. And if we do about the same new logo, that 3%-ish, then we will do in the range, that's the $115 million to $120 million -- it's part of the same story. We have that visibility of the pipeline, strong momentum in the business. We're not concerned about that at all.

Yes. Got you. And just a final question on R&D costs. Obviously, they came in a little bit above your target range. Can you just talk to why that was the case? I mean, is it just as simple as your exit momentum into the second half is high. So the R&D to sales will naturally just fall back into that range? Or should we expect sort of a continued acceleration in R&D in the second half just to match that momentum we've got.

Yes. No. The 26% in first half is really a denominator issue. Our sort of the cadence, as Stuart mentioned, with respect to able to our R&D team hasn't changed. But you'll notice that our revenue increase versus the PCP was depending on which 1 you're looking at. And that was really driven by timing of of the sales in the first half. They're a little bit weighted towards the second half relative to the PCP. So when you put all those together, it just made that sort of 26% pop up a little bit. We expect it to fall back into the range through the rest of the year.

Unfortunately, that concludes our time for questions today. I'll now hand back to Mr. Chung for any closing remarks. .

Thank you, everyone. Thanks for attending. Again, our people are on a tear. We'd like to thank each and every one of them around the globe, and thank you our shareholders for continuing support. Thanks again.