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

I would like to advise there will be a short delay in the commencement of the presentation while we await the lodgement of the relevant materials on the ASX. So we will come back to you in a few minutes with a progress update. Thank you for your patience and for your time.

Good morning, everyone. As previously advised by our Investor Relations manager, Francoise Dixon, our materials have been posted to the ASX. Unfortunately, with earnings seasons in progress, it seems that the ASX is having some delays in posting that material to the public boards, following proper governance. We do need to wait until those materials have been posted to the public boards. We're hoping that, that should happen within the next couple of minutes. We will keep this webinar open for the next couple of minutes and see if those materials post. If not, we'll advise you of the deferral. But I appreciate your patience. Let's hold on there for another couple of minutes and see if the ASX can post those materials. Thank you very much for your understanding.

Good morning, everyone. Good morning, everyone.

Good morning. Good morning.

I think we're ready to go, right? We're live.

Yes. Yes. Yes.

Okay. Thank you, everyone, for your patience. Good morning, and welcome to the Urbanise.com Limited FY '26 Full Year Results Presentation. My name is Francois Dixson, Head of Investor Relations at urbanize. Joining me today are Dark Rasmussen, Executive Chair; Simon Lee, Chief Executive Officer; and Brent Handley, Chief Financial Officer. Please refer to the slide deck that has now been released to the ASX. As always, today's presentation contains forward-looking statements, which are subject to the disclaimer on the final slide of the pack. I will now hand over to Darc.

Thank you, Francois, and thank you all very much for your patience this morning. We understand the ASX had a large backlog of announcements to get out on to their board. As a matter of good governance, we had to wait until that had occurred. Your patience is very much appreciated. We see that the vast, vast majority of participants have stayed online. To those who were not able to join or dropped off, this, of course, is being recorded and will be posted for your convenience. So thank you very much for your interest in Urbanise. I'm excited to review these results with you and share the progress we've made over the past year. FY '26 was an important year for Urbanize. We made the investments we said that we would make. And today, we'll take you through how those investments are beginning to translate into stronger underlying performance and how they position the business for FY '27. We'll cover 4 areas today. First, I'll give you a perspective on Urbanize today, the FY '26 business update, which Simon Lee will take you through, the FY '26 financial highlights, which Brent will cover and finally, the FY '27 outlook, which Simon will close out with. Let me start with where Urbanize stands today. Urbanize operates the leading cloud-native Strata platform embedded within customer workflows across trust accounting, compliance, maintenance and communication. We're building a substantial base of Strata customers that blocks across our markets, and our partnership with NAV continues to strengthen our position in the market. That gives us a high-quality SaaS revenue base, $13.3 million in ARR, $14 million in contracted ARR and an impressive [ 97.4 million ] net ARR retention and 85% recurring revenue. We closed the year with GBP 11.9 million in net cash, which leaves the balance sheet well placed to fund the growth ahead. We're well positioned for FY '27 growth, with our largest ARR expansion opportunity being the monetization of our existing customer base through the Urbanize NAV integration service alongside a second strong pathway in legacy conversion, supported by the stage pilot that is already underway for the NAV integration service, the BCM owners portal and further STRATA platform enhancements. That combination of high-quality recurring revenue base and a strong balance sheet is very deliberate. It's what gives us the commercial capability to support the adoption base ahead. We're not funding FY '27 growth from a standing start. We're funding it from a position of strength, with $11.9 million in cash and term deposits and no debt on the balance sheet. It also means that we go into FY '27 able to invest in scaling capability rather than having to choose between funding growth and protecting the balance sheet. What underpins all of this is how embedded the platform is in our customers' day-to-day operations, which is reflected in the very low churn rate that we see across the base. That's the foundation of everything that we will take you through today. As we look at the market opportunity, the Australian strata market has historically been underserved by the legacy industry software and financial infrastructure. There are approximately 2.15 million managed strata lots across Australia with $10 billion to $15 billion in strata funds held on deposit by banks. This underpins the opportunity for banking integration. More than 40% of the market is still operating on non-cloud latency systems, representing a significant conversion opportunity with the estimated $70 million to $100 million in STRATA software and banking integration market. We're well placed to capture this opportunity, supported by our banking relationships, our large installed customer base and a well-funded balance sheet. Under investments in this sector isn't a criticism, it's simply where the opportunity comes from. Legacy strata software and banking infrastructure were never built to talk to each other when closing that gap is exactly what our banking integration capability is designed to do. These market dynamics present multiple pathways for ARR expansion through the installed base monetization and through the legacy customer conversion. As a result, we see 2 clear pathways to expand ARR from today's $7.9 million in Strata ARR. The first is the existing customer base opportunity. As we roll out the capabilities being deployed through the stage pilot launched in July this year, increased monetization across the customers -- across the company's Australia and build customer base has the potential to contribute another approximately $8 million of incremental ARR. The second is the legacy conversion opportunity. competitively based -- sorry, my apologies, a competitively priced cloud-based offering that combines integrated payments with banking choice is a combination that has not previously been available to this market. It creates a compelling and differentiated proposition for the more than 40% of the market still operating on legacy systems that is ready for change. Following investment in upgrading the company's sales capability, we have already signed approximately 17,000 lots from legacy competitors in the fourth quarter of FY '26 alone. That constitutes about 10% of the lots required to double the company's strata ARR. Together, means gives the company a credible path from the current $7.9 million in ARR towards $24 million in future Strata ARR. The existing customer base opportunity is particularly attractive because it doesn't require us to win a single new customer. These are lots already on our platform today. The integrated solution we're rolling out offers real operational advantages for strata managers, which is why the stage pilot approach matters. It lets us prove those advantages with real customers before we scale. The legacy conversion opportunity works differently. It is, quite frankly, a competitive elected converting managers of systems that can't offer the banking choice that we now can. Both pathways are already moving. We signed real lots and the pilots are live. To put the existing base in context, these are customers already build on the platform as at July 2026, pilot launch, and we've continued to add to that base with lots won from legacy competitors across the fourth quarter of FY '26 and in the first quarter of FY '27. And that's the combination I wanted to leave you with before Simon takes you through how FY '26 actually played out against the plan that we set. I'll now hand over to Simon for the FY '26 business update.

Thank you, Darc. FY '26 was a successful transition year for our lines. revenue was $15 million, up 14.3% driven by growth in license and professional fee revenues, supported by the NAV partnership and new customer wins. ARR increased 2.2% to $13.3 million, and contracted ARR increased 4.3% to $14 million, with backlog expanding to $0.7 million on contract wins and implementation activity. Adjusted EBITDA improved to 43,000 from 252,000 loss in FY '25, based on revenue growth and operating leverage and cost discipline, leasing outcome given where we started the year. Net ARR retention improved to 97.4%. And up from 93.5% in FY '25, continued evidence of strong customer retention and recurring revenue quality. So we ended the year with $11.9 million in cash versus $15.9 million at June 2025 after funding our planned FY '26 investment activity. The adjusted EBITDA excludes share-based payments, consistent with our previous report. So we turn to how we performed against the priorities we set out in August 2025. Five of the 6 priorities were achieved to delegate plan. Six, our cash flow target was partial, and I'll cover why shorten. So our first priority was to invest in the NA banking integration to prepare the business for scale. We delivered that in full, the NAB integration service, the BCM, owners portal and a range of commercial res initiatives. We're also committed to delivering the NAD banking integration during 2026. And and stage pilot commenced in July 2026, with contracted customers committed to adoption. We said we would remain well funded to deliver the FY '26 road map, and we did delivering the road map while maintaining a strong balance sheet, ending the year with $11.9 million in cash, term deposits and low debt. We set out to expand the customer footprint across Strata and FM group. ARR grew 2.2%, we stated at 1.2%. And and on 3.8% of new contract wins, existing customer expansion and our partnership revenues. We are well placed to improve on that in the coming year. We also plan to prepare for the FY '27 commercial ramp-up that was achieved. We strengthened commercial leadership and expanded sales capability to support the FY '27 adoption growth. Finally, we had expected operating cash flow to be negative in FY '26, but overall cash flow to be positive. However, we did not achieve the second. We had anticipated capital inflows during the course of the year, which did not play out as anticipated, both operating cash flow and overall cash flow will be negative for the year. Although outflows improved materially in the second half, and we ended the year with the $11.9 million in cash. Let me step through the capabilities we delivered across the platform. The Urbanize integration provides secure banking integration, enabling automated reconciliation, supply payments, levy processing and complete that in coverage. The BCM branded owners portal is a mobile-first experience, giving owners resident in levies, payment history and digital payments to the Strata Manager's own branded portal. The Strata platform itself remains mission-critical system of record for trust accounting, payments, compliance with the maintenance. And we've delivered Srinamanagement upgrades supporting or make a reconciliation slide brand communication and deal banking capabilities. On AI, our AI system is in progress with Enlist, with a road map for automation, data interrogation, workflow optimization using customer data. I'll come back to this in a moment. These capabilities reflect the stage pilot release on July 2026, scope and sequencing remains subject to change in applied progressors. Together, these upgrades mean the platform now supports a broader range of ranging and payment workflows than at any other point in normalizes history. So they form the foundation of the commercial bank we're planning for FY '27. Partnership with now continues to pin our growth strategy. And at its core, the partnership brings together Urbanise strive platform and industry expertise to manage banking and payments in shares. The commercial model reflects both the development was delivered and ongoing platform usage. Urbanise received software and integration and license fees, together with a variable per lot platform license that increases as customers adopt and use the integrated solutions. Stage pilot commenced in July 2026, development phases with 4.6 million [indiscernible] comprising 3 million table on agreements. The next phase carries a $1.3 million fixed annual fee plus variable platform license fees as customers adopt and usage increases. The relationship also has a strategic dollar organized and currently holds a 15% shareholding. With the potential to increase up to 19.9%, subject to exercise conditions on call options priced $1.255 per share. NAP has publicly described a broader sector parts strategy, covering specialized digital payment solutions, across professional services, insolvency real estate, strata and independent stores. Now said that I did [indiscernible] in its phone Business and Private Bank and briefing on the 30th of July 2026. [indiscernible] that is progressing to plan. It commenced in July [indiscernible] 2026, contracts the pilot and the BCM brand. Technology integration components continue to be developed throughout the pilot functionality released in stages. Given the regulatory sensitivity making integration, we deliberately taking staged and controlled approach rather than a single big bang, rolls. We'll continue to update the market on stage of progress, including line customer deployment and report more commercial incomes. On AI, specifically, our first AI capability is in progress as part of Urbanise AI road map with additional automation, analytics, workflow capabilities planned. It's built directly into Urbanise strata using our proprietary workflows, emissions and business process library. So responses a context of where. For example, Straumann can simply ask show me the bylaws registered for this building and get an instant onset. Early customer testing has demonstrated a potential productivity benefits of up to 30%. We expect this to support customer retention and competitive differentiation and to provide a foundation for further AI-enabled platform capabilities. It also demonstrates we can embed AI safely within the regulator who complies heavy workflow, higher by most consumer AI tools I'll now hand over to Brent for the financial results.

Thanks, Simon. Revenue growth accelerated, operating leverage emerge in the second half of FY '26. Revenue increased 14.3% to $15 million for the year, with the second half revenue increasing $7.7 million -- from $7.7 million from $7.3 million in the first half on license fee growth and increased NAV-related implementation activity. License fee revenue grew 6.6% driven by customer expansion and continued platform adoption. Professional fee revenue almost doubled on delivery of the NAV integration service and associated implementation activities. Operating costs increased 11.8%, driven by head count and continued strategic investment, partly offset by lower consulting expenditure and share-based payments. EBITDA improved markedly from a loss of $3.3 million in FY '25 to a loss of $1.3 million in FY '26, reflecting revenue growth and emerging operating leverage, particularly in the second half. Low EBITDA, depreciation and amortization reduced to $670,000 from $940,000 in FY '25. We recorded a foreign exchange loss of $145,000, compared with the $212,000 gain in the prior year, and other income of $816,000 was made up of interest earned from our term deposits, and this is R&D claim up from $447,000 in the prior year. We also recognized a $442,000 fair value gain on a derivative with no equivalent in FY '25. Finance costs were largely unchanged at $23,000. Taken together, these movements brought the net loss to $867,000, an improvement of 76% on FY '25. From an operating cost perspective, cost discipline underpin our earnings improvement in FY '26. Operating expenses improved by $500,000 despite continued investment in NAV integration service. The BCM owners portal, AI capabilities and commercial readiness initiatives, lower consulting expenditure, IT subscription costs and noncash fair value movements more than offset increased and contractor costs associated with strategic delivery activity. This continued -- contributed to improving operating leverage and a material reduction in EBITDA loss during the year. It's worth noting that our professional fees lining includes audit fees, legal fees, ASX compliance costs and other consultant costs, which is why you can move independently of our customer-facing professional services revenue. From a strata perspective, strata license fee revenue increased 10.8% to $7.9 million, reflecting customer expense partnership license revenues and continued platform adoption. License fees remain more 80% of total state revenue despite elevated NAV-related implementation activity Professional fee revenue increased significantly, primarily reflecting the NAB integration service development program, a key enabler of future ARR growth. StralaARR increased $8 million. Backlog increased to $520,000 and contracted ARR increased to $8.5 million, all supported by new contract legals, partnership-related revenues and implementation activity. Lots on from legacy competitors increased through the year, reaching approximately 17,000 in the fourth quarter, which is around 10% of lots required to double the company's state ARR. The license fees did fall as a share of total revenue from 94.4% to 81.2%, but that's simply a mix effect from the elevated NAV-related professional fee revenue during the build phase not a change in the underlying quality Australia license revenue. From an FM perspective, FM license fee revenue was stale at $4.9 million, reflecting the resilience of the FM recurring revenue base. Professional fee revenue declined following lower project implementation activity relative to FY '25. License fees increased to 92% of total revenue, improving their quality and predictability of FM earnings. FM ARR increased 3.8% to $5.4 million despite lower total revenue continued growth in recurring customer revenue while project implementation activity moderate. Backlog increased by 163,000 from December to June 2026, given good visibility of future revenue. License fee as a share of total FF revenue improved from 87% to 92%, reinforcing the quality of the FM recurring revenue base. Turning to cash flow. Our operating cash outflows improved materially in the second half, reducing from $3.2 million in the first half to $0.5 million, reflecting progress on major platform development and investment activity. In FY '26, operating cash flow reflects significant investment in the NAV integration service, the BCM ones portal and broader platform initiatives delivered throughout the year. This investment is primarily reflected in payments to suppliers employees, which increased 23.8%. It's worth noting that customer receipts in FY '25 benefit from the NAB-related payments and timing factors, which affects period-on-period comparability. We ended FY '26 to $11.9 million in cash and turned deposits and no debt, a strong funding position for execution in FY '27. With major development activity now substantially complete, our focus shifts to customer adoption, commercialization and further operating leverage. Turning to the balance below the operating cash flow. We placed $10.1 million into term deposits during the year, which is why our cash and term deposit position is best read together with cash alone. Financing cash flow was a modest outflow of $116,000 related to principal lease liability repayments compared with $8.7 million of net financing inflows in FY '25, you had a benefit from share process raised that year. From a balance sheet perspective, the balance sheet remains strong and well positioned to support the FY '27 execution. As stated previously, we ended the year with $11.9 million in cash and term deposits and no debt. Total liabilities reduced 37.7% to $7.9 million, driven primarily by reductions in the fee revenue, derivative liabilities and working capital obligations. Net assets increased to $13.7 million despite continued investment in platform delivery, climate readiness and commercial capability. Now turning to ARR. ARR increased to $30.3 million, supported by NAB partnership revenues, customer expansion and new contract wins. CARR grew or contracted ARR grew 4.3% on the prior year, with backlog expanding to $0.7 million. Its first highline this gross was achieved prior to the widespread deployment of and the integration service the VCM Owners Portal and Strata platform investments. So we see this as a base to build from, not the full picture of what those investments can deliver. We enter FY '27 with multiple ARR expansion pathways across both the existing customers and legacy conversion. Looking at the 5-year trend, the total ARR has grown from $10.4 billion in FY '21 to $13.3 million in FY '26. Our compounded annual growth rate of approximately 5%, with Strata ARR increasing from $6.9 million and FM increasing from $3.6 billion to $5.4 million over the same period. Now turning to our new contract lens. New contract into $845,000 in ARR, which was down 9% in FY '25, despite the lower contract wins, ARR increased to $30.3 million and contracted ARR increased to $14 million, supported by customer expansion, mateship revenues and implementation activity. As stated previously, our backlog expanded to $0.7 million. As Dan mentioned earlier, we signed approximately 700,000 lots from legacy competitors during the fourth quarter, around 10% of the lots required to double the company's Stratus ARR. Within that, Stratacontract wins we [indiscernible], with APAC wins of 328,000. Facilities management in were 511,000, which was broadly flat on FY '25. I'll now hand back to Simon for the outlook for FY '27.

So urbanized enters FY '27 positioned to convert our platform investment into customer adoption and commercialization. Our priorities for FY '27 are to continued stage pilot deployment for the MAP app integration service, BCM owners Portal and Stride platform demand met. We will progress customer adoption and customer outcomes across our installed base. We will pursue legacy conversion opportunities supported by the banking choice and integrated payments capability, build on improving the operating leverage we saw following the completion of major FY '26 development activity. We made targeted investments in team capacity and capability support the innovation and development, customer deployment and scale with. We maintained the disciplined capital management while supporting future growth initiatives. Finally, to return -- to target return to positive operating cash flow in the second half of FY '27. So FY '26 was about building the platform and improving the model. FY '27 has been converting that investment to revenue, adoption, proving cash generation. We're pleased with the progress made in, conflict in the opportunity. Thank you. I'll now hand back to Francois for Q&A.

Thanks, gentlemen. We'll now move to Q&A. [Operator Instructions] And the first 1 comes from Matt Gardner and he asks, is the pilot on track? And have you encountered any surprises?

I'll take this one. So the -- just to recap the stage pilots of the NAV integration service commenced in July 2026, and that was part of our program time line. The program is going to plan. We're testing modules with a slight number of early adopter customers. This profile and size are very comparable to the rest of our customer base. So far, the testing feedback is good. We based on that feedback and release based on a gradual release of the modules. As I mentioned in the presentation, it's not a big bang. It's a gradual release others. So in short, the pilot is going up. And I think this [indiscernible].

I think that covers it. The pilot progress has been excellent. The customer feedback has been excellent and had a great learning exercise, validating the proposition to our existing customer base as well as the legacy conversion opportunity.

Great. We have a follow-up question. And the question is, how is your relationship with NAB going?

Late the relationship, NAB is going very well. I think in terms of what we've released to the investment market, you might have seen last release, the NAV better partnership has been quite visible at market events, including the SCA events. Go-to-market activities have been very important to to be programmed in stack with the pilots, and that's been achieved through a very, very close relationship between the 2 teams, very coordinated approach leveraging Urbanizes expertise in the industry and our partners bank-led infrastructure services. So from a team perspective, it's going very, very well. We've had -- [indiscernible] talk to some of the oblation with our partners' investment into the sector.

Yes, absolutely. Thank you, Simon. So yes, I would only add that the level of focus that we see in this partnership is impressive. There is a real willingness to understand the needs at a technical level of the integration required to serve this market. Our relationship with NAB is a technical integration layer. We're an integration enabler. But understanding the business and commercial outcomes, the customer service outcomes of that is important. And we've been impressed by the ability of NAV to embrace that, but also to bring forward individuals with high levels of understanding and expertise in the Strata market. Add to that, that the technical capabilities here matter. And it is, I think, well known that NAV has leading and award-winning banking technology in our integration efforts with them, we have seen that come to life. So from a technical perspective, we've been very encouraged and impressed that, that technical relationship with the bank is playing out as well as it has.