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

Good morning, everyone, and welcome to the Urbanise.com Limited First Half FY '26 Results Briefing. My name is Francoise Debelak, and I'm Head of Investor Relations. Today, our CEO, Simon Lee; and CFO, Brent Henley, will provide an overview of our first half results before opening up for questions. [Operator Instructions] I will now hand over to Simon to take us through the results.

Thank you, Francoise, and good morning, everyone. Today, we'll step through the first half performance and how we're positioning the business for disciplined growth in the second half. As part of the agenda, we'll cover business highlights, the market overview and growth drivers, financial results and then finish with the outlook. So let me begin with the key highlights. Urbanise differentiates through industry-specific platforms for Strata and FM, deep domain expertise in migration and implementation, end-to-end service capability and continuous product innovation. So our focus remains on simplifying workflows, embedding automation and improving operational efficiency for customers. At 31st December 2025, we had contracted ARR of $13.6 million. Recurring revenue represented 89% of total revenue. Net ARR retention improved to 98.1%. Urbanise now operates across 18 countries, and we support approximately 617,000 Strata lots and 3,660 FM users. Retention improved materially compared to the prior period, reflecting stronger customer stability across both Strata and FM. Across Slide 5, revenue increased 15.3% to $7.3 million. License fees increased 10% and professional fees increased due to NAB-related services. ARR of $13.2 million was 17% higher relative to PCP following the NAB partnership and new customer implementations, mainly for FM. Backlog reduced 29%, largely due to timing effects and lower sales activity. Net ARR retention improved to 98.1%, up from 87% in the prior corresponding period. And we closed the half with $12.5 million in net cash and no material debt. Over on Slide 6, total ARR at December was $13.2 million. Strata ARR remained broadly stable at $7.9 million. Facilities ARR increased to $5.3 million. CARR of $13.6 million provides visibility into contracted revenue entering H2. Before handing over to Brent, I'll briefly step through the market context. So over on Slide 8 is an overview of the Strata industry in Australia. The Australian Strata market remains large and fragmented with over 3 million lots across more than 350,000 strata schemes. Regulatory complexity continues to increase, whilst many operators remain on legacy systems. Demand is shifting towards digital-first platforms that support automation, compliance and integrated payments. And this supports our positioning as a regulated financial system of record for Strata. High-level overview of the Strata platform. Strata operations are fundamentally financial workflows. So you have the levy billing, you receipting, bank reconciliations and our payables. Urbanise embeds these workflows directly into the trust ledger with automation and banking integration at the core, and this does form the foundation for our DPIS. An overview of the FM markets. Urbanise FM remains focused on outsourced service providers where we see strong market and product fit. We also expand into aged care, utilities and education where compliance and operational efficiency are also very, very important. In terms of the FM platform's capability, the platform supports works management, asset management, compliance, analytics and integrations and delivers faster deployment and clearer ROI compared to some of the complex ERP software that's out there. I'll now turn to the core of our long-term ARR growth strategy and in particular, our innovation. So our innovation strategy centers on embedding regulated banking infrastructure directly into the trust accounting workflows. And firstly, our mission-critical regulated system of record. So we operate a core trust ledger for regulated strata funds with compliance logic and financial guardrails embedded within the platform. So our system governs every levy, receipt and payment, enforces fund segregation and audit integrity and it builds deep structured transaction history across property portfolios. This foundation is not replaceable AI by AI. It is what will enable Urbanise to effectively leverage AI over time. Secondly, DPIS and embedded financial rails. So DPIS is our data payments and integrated services with NAB. We are embedding banking rails directly to trust accounts, assisting regulated daily cash movements and linking revenue to transaction volume. And this expands our share of wallet across schemes and strengthens defensibility at the financial layer, supported by deep ecosystem integrations. Our completion of DPIS remains targeted in 2026. Thirdly, AI-enabled workflow intelligence. So we have the infrastructure and guardrails in place to progressively introduce AI-assisted reporting, reconciliation and workflow support. AI will enhance productivity within regulated financial environments and further strengthen that system of record deployable at scale via our cloud architecture. Of course, that then leads to our final point here, which is cloud advantage and scale. We have a single global code base, which enables scalable, secure, continuous innovation with faster rollout of features and integrations to all customers simultaneously. Combined with centralized data scale and flexible pricing structures that are not solely seat-based, this positions us to capture migration from decentralized legacy systems. So together, these elements support and accelerate long-term ARR growth. Finally, on -- before I hand over to Brent, just a very high-level overview of our focus here across 3 horizons, 3 levers. First one is expanding our customer footprint. Secondly, increasing revenue per customer. And finally, leveraging the installed base with additional service, which includes DPIS and banking. Our execution remains disciplined and [ centered ] on our core markets. And with that, I'll hand over to Brent for the financials.

Thanks, Simon. In half 1, license fees were $6.473 million, up 10% on the PCP. Professional fees were $800,000, up 89.5%, largely driven by NAB-related partnership revenue. Total revenue increased 15.3% to $7.272 million. Operating expenses reflect continued DPI investment, including approximately $880,000 of NAB portal development costs. EBITDA improved to a loss of $707,000 with net loss improving to $678,000. From a Strata perspective, strata license revenue increased 10%, driven by NAB license revenue. Underlying ARR remained broadly stable. And as Simon mentioned, Strata ARR retention improved to 98.4%. From a facilities perspective, FM license revenue increased largely due to prior period revenue allocations in MENA. After adjustment, underlying license revenue was broadly stable in the FM business. Similar to Strata, FM ARR retention improved significantly to 97.6%. From an OpEx perspective, underlying operating expenses, excluding the NAB-related costs, reduced by $102,000 or 1.4%, reflecting cost discipline across the business, which will maintain into the second half. From a balance sheet perspective, the half closed with $12.5 million in net cash with the balance sheet remaining strong with no material debt and solid liquidity. From a cash flow discipline perspective, operating cash flow reflects continued platform investment alongside disciplined working capital management. Our capital allocation remains focused on core platform investment, DPIS progression, sales execution and cost discipline. I'll now hand back to Simon to take you through the outlook for the business.

Thanks, Brent. So looking ahead to the second half, our priorities are centered on disciplined execution and revenue momentum. So we have strengthened our sales capability with the recent appointment of a Chief Revenue Officer with a clear mandate to accelerate pipeline conversion, and increase our enterprise ARR values across our core markets. And at the same time, we will remain disciplined on our cost and cash management whilst continuing to invest strategically in the DPIS delivery milestones. So that's very important for 2026, is to deliver the DPIS. We remain focused on expanding revenue per customer through embedded financial services and deeper platform integration. And as we enter the second half with improved retention is to maintain stable recurring revenue and a strong balance sheet. We continue to target a return to operating cash flow breakeven in FY 2027. So overall, our focus remains on disciplined execution and sustainable long-term ARR growth. With that, I'll hand back to Francoise.

Thanks, Simon. We've received several questions via e-mail. So I'll start with these, and then I'll take any questions on the live chat. Our first question comes from [ Michael Hazelwood. ] Can you provide an update on the DPIS rollout? And is it on schedule?

Yes. So as I mentioned in the outlook, our target is to complete DPIS in 2026. Our progress over the last half -- over the last quarter is we progressed our core software development and application build, and we're moving through our milestones as planned. So these are our internal work streams to advance the product. In terms of providing more specific and precise guidance around when DPIS will effectively be released to customers. We intend to provide more precise guidance at the right time. To provide some context as to that, obviously, we're working with a banking partner and program -- the collective program includes regulated banking integrations and governance within our partners' environment, which includes risk and compliance and financial crime validation steps. So we're progressing quite very well with our development. So at the right time, we'll provide more precise guidance on where, when that will be released.

Great. Thank you, Simon. We have a couple of questions from [ Matt Wade, ] so I'll go through them one at a time. The first one is, how is Urbanise using AI? And do you see any threats from AI moving forward?

Obviously, AI is very topical at the moment in the broader market, specifically for Urbanise and as outlined in our innovation slide, I'll reiterate that Urbanise operates a core system of record. And there's a lot of compliance logic and financial guardrails embedded within that platform. So that foundation is not replaceable at AI. In fact, from a positive perspective is what will enable us to leverage AI over time. And so things like efficiency gains through workflows, improved insights and decision support through data -- across AI across data is where the opportunities lie for Urbanise.

Thanks, Simon. We now have a 2-part question, so I'll read out both parts at the same time they relate. What are the immediate priorities for the new CRO? And can you comment on the composition and opportunities within the pipeline?

Yes. So in terms of what our objectives are for the business generally is to -- is ARR growth. We've got a strong balance sheet, which has been enhanced through our NAB partnership also through our cash flow management -- careful cash flow management cost management. And the investment in sales and marketing generally has been made over the last half, including the recent appointment of the Chief Revenue Officer. The objective is ARR growth, which includes 2 things; new logo, new contracts. And at the point that we have completed our DPIS products is to move that into market and offer that to customers. Under the NAB and Urbanise partnership, we have a variable component to our contracts where we are able to generate more ARR growth from customers moving to DPIS. So the primary focus over the next couple of -- next period, whilst DPIS is completing our build, is for Chief Revenue Officer to focus on logos, which includes -- which is our pipeline essentially. The immediate opportunities are the legacy technologies that our prospects are using. Our biggest markets are Victoria, New South Wales and Queensland. And so there's a real focus on those markets and those types of prospects. So anyone using on-prem solutions that doesn't have the ability to integrate into broader Strata software that are frustrated with perhaps a lack of product road map. These are all things that Urbanise can offer in a modern cloud environment. So the investment will obviously the sales cycle, our CRO was appointed 5 or 6 months ago. We're starting to see some positive signs in terms of customer interest or prospect interest, and we expect those conversions over the next half to start to materialize.

Thank you, Simon. We have no questions on the live chat. So I'll hand back to you now for closing remarks.

Well, thanks again for joining us today. We look forward to the next half. Again, I'll reiterate our focus is on ARR growth and as well as cost discipline and cash management -- careful cash management, and we look forward to speaking to you in the future. Thank you very much, everyone.

Thanks, everyone.