Urbanise.com Limited (UBN) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to the Urbanise.com Limited FY '25 Results Briefing. My name is Francoise Dixon, and I'm Head of Investor Relations. Today, our CEO, Simon Lee; and CFO, Brent Henley, will provide an overview of our FY '25 results before opening it up for questions. If you have a question, please submit it via the Q&A text box at the bottom of the screen. I will now hand over to Simon to take us through the results.

Thanks, Francoise. Good morning, everyone, and welcome to Urbanise’s FY '25 Results Presentation. I am Simon Lee, Chief Executive Officer of Urbanise. And with me today is Brent Henley, our Chief Financial Officer. Brent joined us in July, and this is his first results presentation with Urbanise. He brings deep financial leadership experience and has already made a strong impact in sharpening our reporting and strengthening our financial discipline. I'll begin with highlights from the year and why customers are choosing Urbanise. Brent will cover the key metrics and financial results, and I will return to discuss our NAB partnership, the market opportunity, our product strength in Strata and FM and our strategy for growth. We'll then cover the outlook before opening to questions. So turning to Slide 4. Urbanise today operates at a scale very few companies in our niche can match. We now build for over 611,000 strata lots and supports almost 3,500 FM users with our platforms operating across properties in 18 countries, demonstrating both diversification and the fact that our technology scales effectively. The business has contracted ARR of $13.5 million and net ARR retention of 93.5%. I'll hand over to Brent for some key metrics for FY '25.

Good morning, everyone. Thanks, Simon, for the welcome to Urbanise. I'll cover the key metrics for FY '25. Urbanise delivered 12.7% growth in ARR to $13.1 million, supported by new wins and expansion across both Strata and FM. Retention rose to 93.5%, a meaningful improvement that reflects strong customer satisfaction. Professional services revenue grew sharply, up 31% year-on-year, thanks to a strong volume of implementations in the second half of FY '25. And importantly, FY '25 was the first year of positive operating cash flow in Urbanise's history. Turning to Slide 6, shows that over the last past 5 years, both ARR and contracted ARR have grown steadily, building the base of recurring revenue that underpins this business. In FY '25, total ARR increased to $13.1 million, up 12.7% year-on-year. That included $930,000 of new contract wins across Strata and FM, plus $1.3 million from the NAB partnership. Facilities ARR grew strongly to $5.2 million, an increase of 32%. Strata ARR finished at $7.9 million with reallocated MENA revenue or contracts now included in FM. Contracted ARR closed at $13.5 million, showing the strength of contracted revenue we carry into FY '26. This demonstrates that Urbanise is not just holding its base, we are also adding new growth drivers and expanding the scale of recurring revenue. With that overview of recurring revenue base, I'll hand back to Simon to take you through the NAB partnership and its strategic significance to the business.

Thanks, Brent. Turning to Slide 8. The Strata sector is an attractive but fragmented market. It holds over $10 billion to $15 billion of deposits and the strata deposits and processes more than $20 billion in transactions each year. But the underlying banking and technology has historically been outdated manual and inefficient. Urbanise opportunity has always been clear. We can digitize and automate these flows. But to fully unlock that opportunity, we need the banking partner with the scale, credibility and commitment to move the industry. And that's why we entered into this deal with NAB. By partnering with Urbanise, NAB it gains the ability to do so efficiently at scale and with a system that is already trusted by strata managers. And from Urbanise's perspective, the partnership is transformational. NAB has taken a 15% equity stake, providing validation, credibility and financial strength. It also secures us a long-term recurring revenue stream that scales directly with adoption. So this is not just a product integration. It's a multiyear strategic commitment that positions Urbanise as the systematic enabler of strata banking in Australia. Turning to Slide 9. Today, many strata managers are stuck with outdated systems, limited banking choice and rising costs. Smaller firms face high staff turnover and resource constraints that make transforming technology and changing banking solutions hard. With NAB, we'll change that. Together, we'll offer a cloud-native platform with integrated banking, true choice with competitive pricing and a seamless mobile-first experience for property owners. The migration path is clear. We'll focus on existing Urbanise customers. From 2026, after we complete development of our integrated products, the partnership will provide access to NAB banking as an option for strata schemes. Our rollout strategy will include supporting strata managers with updating levy notices, communications to owners and the streamlined onboarding of our customers to new banking facilities. This ensures the transition is low effort for all strata managers. Slide 10 sets out the funding arrangements agreed with NAB to deliver and scale the Data and Payment Integration Services or DPIS. The structure works in 3 parts. placement is $8.8 million already received, strengthening our balance sheet and accelerating road map delivery. Within year one, $4.6 million being $3.3 million upfront to help fund the DPIS build and $1.3 million in fixed annual recurring fees. And from year 2, a continuation of that fixed annual fee of $1.3 million plus variable platform fees that scale with adoption. In total, NAB provides a minimum of $14.7 million over the first 2 years, subject to some milestones. The design of this structure is important. It funds delivery, locks in predictable base revenue and ties upside directly to customer adoption. Importantly, Urbanise will be investing in FY '26. I think the difference here is we do so from a position of strength. FY '25 saw us achieve operating cash flow positive in every quarter, and we have go-to-market program and implementation methodology already in place. That means our investment is not about catching up, it's about scaling confidently into FY '26 and beyond. Slide 11 covers the opportunity in the Australian strata market. Australian strata market is large, fragmented and growing. There are approximately over 3.2 million lots across 340,000 schemes managed by hundreds of firms. Importantly, the vast majority of firms are SMEs, often small businesses with limited resources. But this is an industry under real pressure. Labor costs now consume almost half of operating revenue, squeezing margins and leaving little room for investment. Compliance requirements are increasing, adding to workloads and creating risk. On top of that, the industry faces a significant technology lag. Many firms are still using outdated on-premise systems or a patchwork of fragmented tools. Migration inertia is real, driven by high staff turnover and fear of disruption. Yet at the same time, the demand for modern digital platforms is only growing. Strata managers know they need to improve efficiency, reduce costs and provide a better experience for property owners. That's where Urbanise and our partnership with NAB comes in. We are uniquely positioned to help this industry modernize at scale. On Slide 13 is an overview of the Strata product. Our Strata platform is purpose-built for the unique needs of strata managers, bringing lot, scheme and financial data into a single cloud-based platform. And the differentiation here is automation. Levy notices generated automatically, bank feeds auto reconcile and compliance tasks are streamlined. That reduces manual effort, improves accuracy and allows managers to focus on service instead of administration. Slide 14 shows facilities management, the other part of our business. Our FM solution is trusted by FM service providers, aged care providers and commercial property managers. It manages work orders, assets, preventative maintenance and contractor scheduling, all within one integrated system. Key is scalability where it's a single building with a few dozen property assets or a service provider managing multiple contracts. The Urbanise FM platform delivers the same consistency and control. And this means better uptime and extended asset life, greater compliance and safety, more efficient use of labor and resources. And our ability to serve both large and small providers positions Urbanise uniquely within this landscape. Slide 15 takes you inside the FM platform itself. FM managers can gain a single interface for all core workflows from raising work orders to tracking asset management and scheduling contractors. Clients, this translates into visibility and control. So you've got real-time dashboards showing the performance against SLAs. We've got mobile tools that give field staff the ability to complete work, capture compliance data and update records instantaneously. Predictive maintenance helps reduce downtime and extend the life of critical property assets. Turning to Slide 16. Since 2022, we've executed against a clear framework of 3 horizons: Horizon 1, expand the footprint; Horizon 2, increase revenue per user through pricing; and Horizon 3, unlock adjacencies. This is where NAB fits, monetizing the strata funds our footprint delivers. This approach has been disciplined and consistent, expanding markets, growing ARR and securing transformational partnerships. NAB is the clearest proof point, a partner that turns our footprint into new revenue streams and top line growth. That covers our strategy in NAB partnership. Let me hand you over to Brent, who will take you through the FY '25 financials in detail.

Thanks, Simon. Turning to Slide 18. FY '25 was a year of financial strengthening for Urbanise. ARR grew solidly, supported by new wins in both Strata and FM. Contracted ARR expanded, underlying the stickiness of our contract base. Recurring SaaS revenue increased as a share of total revenue, improving quality and productivity -- and predictability. Most importantly, underlying operating expenses decreased by $1.9 million or 13.1%, excluding share-based payments and one-off NAB partnership costs. On top of that, our balance sheet was reinforced by $8.8 million through Placement 1 and NAB's $4.6 million year 1 funding. The key message here is that Urbanise enters FY '26 as a larger, stronger and more resilient business than a year ago. Turning to Slide 19, shows a 5-year picture where ARR and contracted ARR have grown consistently year-on-year. This demonstrates Urbanise's potential to lift net growth, supported by disciplined cost management, the go-to-market and implementation methodology Simon outlined earlier and our strengthening balance sheet. The Board and management follow a disciplined capital allocation framework grounded in experience of both Strata and FM markets. By understanding the sales cycle, the conversion points and how prospect engagements translates into ARR gives us the confidence to invest incrementally across the business. As the new CFO, I see a real opportunity to bring key operational metrics into this picture. By linking ARR growth directly to operational drivers, we can sharpen decisions and target capital where it creates the most impact. My focus is embedding this approach as we scale into FY '26 and beyond. Turning to Slide 20. FY '25 delivered $930,000 of new contract wins, slightly down from $1.04 million last year. But the mix tells the story. In Strata, new ARR increased $54,000 with wins in New Zealand, Queensland, Tasmania and Western Australia. New South Wales was, however, flat as managers focused on compliance change rather than systems. In FM, APAC delivered strong growth, up 36% or $110,000 ARR. The underlying opportunity is encouraging. APAC sales across the group is growing. New South Wales Strata is expected to regain momentum and the NAB will add a new layer from FY '26 onwards. Turning to Slide 21 to Strata's financial performance. In FY '25, ARR in Strata grew to $7.876 million, up from $7.645 million in FY '24. We now manage 611,000 lots across the business. Churn was low at 5%, reflecting the platform stickiness. As mentioned earlier, New South Wales sales were subdued, but it remains a significant market. Urbanise maintained full compliance across every regulatory change. And with NAB, we now have a unique pathway to unlock New South Wales, giving managers an integrated low-friction option to move. From an FM perspective, revenue grew 12.5% to $5.6 million, driven by growth in both licenses and professional fees. ARR in FM grew to $5.186 million, driven by relocation in MENA and new contract wins in APAC. In APAC, new wins expanded strongly across key sectors, particularly in aged care and government facilities. The key point is that it remains a critical growth engine, diversifying Urbanise's revenue base. Turning to Slide 23, operating expenses. Underlying operating expense decreased by $1.9 million or 13.1% as stated previously, excluding share-based payments and one-off NAB partnership costs. These savings were achieved through a review of both our resourcing and IT costs across the Urbanise business. Importantly, investment was directed into road map delivery and NAB integration, not into overheads. This meant the business was able to fund future growth while maintaining discipline in its cost base. The effort of this approach is clear. Every additional dollar of revenue is now contributing more to the bottom line, moving the company closer to sustainable profitability. I'll move to the balance sheet on Slide 24. Placement 1 delivered $8.8 million of new capital and NAB funding added a further $4.6 million in year 1. Net assets increased materially as a result. This stronger position leaves the business fully funded to deliver the Data and Payments Integration Services and to pursue additional growth opportunities in FY '26. Finally, on Slide 25, our cash flow. FY '25 was the first full year of positive operating cash flow in Urbanise's history, driven by revenue growth and tighter cost discipline. When combined with the capital raise through Placement 1 and NAB funding structure, the business is now well positioned to deliver the NAB partnership and continue scaling. From my perspective as CFO, the focus is to continue supporting the Board and business in careful cash flow management and internal forecasting, ensuring overheads are converting into returns and working capital is kept tight. That concludes the financial review. FY '25 delivered stronger recurring revenue, improved margins, tighter cost discipline and a reinforced balance sheet. With that foundation in place, I'll hand back to Simon to take you through the outlook and how we plan to build this momentum in FY '26.

Thanks, Brent. As we look ahead, I'm really pleased with how Urbanise is positioned. We're in markets with significant long-term growth, supported by a strong demand for modern platforms. We have a strong Board and the team is coming together. We've got passionate people focused on customers and investor outcomes. Strategy is clear and execution is already underway. So for FY '26, our priorities are straightforward: deliver DPIS with NAB, fully funded and on track. Maintain cost discipline while scaling sustainably. As Brent noted, FY '25 was the first year of cash flow positivity for the business. And in FY '26, Urbanise will be investing into the DPIS products, go-to-market and the implementation capacity. The business will continue to focus on driving ARR through new contract wins and strong retention. Importantly, Urbanise has got the experience. We understand our markets. We understand the sales cycles and how implementation success drives adoption. That depth of knowledge underpins our go-to-market and gives us some confidence in execution. The Board will continue to assess strategic opportunities in relation to its lines of business and geographical reach. FY '25 reflects a disciplined approach to transformation, while FY '26 is about converting that into sustainable growth and investor value. I'll hand back to Francoise to open it up for any questions.

Thank you, Simon. We have received a few questions in advance by e-mail. So I'll start with these first. The first couple come from [ Matt Hennessy ]. And the first one is, can you provide an update on the DPIS rollout? Is it on schedule?

Yes. So we signed the partnership agreement on the 19th of May. And so since then, we've been working closely with our partner on the DPIS. So DPIS is an integrated offering between ourselves and our banking partner. The objectives of that integration are to provide a seamless experience for strata managers and also for the property owners who are being serviced by the strata managers. So some of the key facets there that need to be considered are payments, the levies that are issued and bringing all that into one easy platform and experience for both the strata manager and the owners themselves. We will share more about what that product does. We're keeping the exact nature of the features and the exact user experience and user interface under wraps for now. It's something working on the background. We've been working with an outsourced developer since we started the contract on developing out and coding the product. In 2026, we will roll out the product -- the program is targeted to trial that product with real-life customers and to essentially work with our banking partners to work out the onboarding process as customers switch from one banking arrangement to another. So we'll update more over the next couple of quarters as to the progress. When we get closer to operational readiness and release, we will update the market.

Thanks, Simon. Our next question from Matt is, what is the cash burn looking like in FY '26?

Yes. Just stepping back, we -- pleasingly, for the first time Urbanise's history, delivered an operating cash flow positivity for 4 quarters in a row and for the year overall. As we step into FY '26, as part of the NAB partnership and part of our strategy is to invest into the DPIS products. So we will be investing funds into that. We're investing funds now. We've already started. In addition to that, we will be investing into our go-to-market capacity. One important part of our strategy is to ensure that we've got coverage across the Australian strata markets, particularly across Queensland, New South Wales, Victoria, which is really where the heartland of a lot of -- where the volume is really -- and we need to make sure we can back that up with implementation capacity. Now the good thing is we've had a good 3, 4 years of building the infrastructure and the sales process, understand the sales cycles and how to help strata managers make that decision to move. There's going to be 2 focuses here. One is new logos, so it's new contract wins and also for our existing customers, offering now an alternative banking solution for them. So we'll be investing in resources over the coming months and over the year to deploy into that space to really help our current customers make the moves to the NAB partnership and also to increase our sales capacity. We have been quite lean on sales in previous years and it's part of our careful cost management. It was also to ensure that we really understood what it took to actually make a sale, what it took to build the pipeline, what it took to actually build the funnel. And we've certainly built up our brand awareness, so people do know who Urbanise are. We're at every trade event with the Strata Community Association, big supporters of the industry. We engage with our customers very, very closely. In fact, improved our NPS -- internal NPS scores with customer surveys over the last 18 months, been very important for us to invest and understand, again, what it takes to drive adoption, drive sales. So we haven't actually forecast out what the cash utilized will be over the year. But with the strength in balance sheet, as Brent mentioned, we've got more than sufficient cash runway to invest in FY '26. At the tail end of FY '26, we'd expect that we'll start to convert our existing customer base over to the partnership. And that from FY '27 and beyond, we will start to work our way back to operating cash flow positivity.