Technology One (ASX:TNE) Q2 2026 Earnings Call

0:01 Thank you for standing by and welcome to the Technology One FY26 half-year results presentation. All participants are in a listen-only mode. There'll be a presentation followed by a question and answer session. If you would like to ask a question, you'll need to press the star key followed by the number one on your telephone keypad. If you would like to ask a question via the webcast, please type it into the ask a question box and click submit. I would now like to hand the conference over to Mr. Edward Chung, CEO. Please go ahead.

0:28 G'day everyone and thank you for the introduction. This morning we've got Stuart McDonald, 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 UK to take on the established players and become the de facto solution for local government and higher education, or whether that's to take on the establishment with their long, complex, traditional, risky implementations and invent SaaS Plus. We set big goals and we deliver.

1:15 There's huge momentum and confidence in the business today in our SaaS Plus strategy, which is fueling the results you're about to see and allows us to continue to invest in the future. Now, with our AI strategy, the adoption, the feedback, it's surpassing 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. Now our people, they challenge us and they challenge the market, which makes us better. More than 65% of them are shareholders with you and me. On behalf of the 1600 people that make up TechOne, a few of them 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 all the time in our business. And for as long as I can remember, our heartbeat and rhythm was 10 to 15% profit before tax growth.

2:07 And we're able to do this because we're disciplined, we're focused, and we have a history of delivering. Now, as we've transitioned to SaaS and now a SaaS Plus company, we've been able to carefully and surgically increase that heartbeat and rhythm, increasing our guidance range from 10 to 15%. to 12 to 16% in FY24 to 13 to 17% in FY25. But we did something different this financial year by providing our guidance three months earlier than we usually do in our February AGM. And at this time, we 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 upgraded full year FY26 profit guidance.

2:53 That's ARR growth of 16 to 18%, targeting the top end of the range. Net profit before tax growth of 18 to 20%, again targeting the top end of the range. PBT margin, an expansion of two points from 30% to 32%. And full year cash flow generation equal to net profit after tax. That's a 100% cash conversion. The results we're achieving today is from the investments we made five years ago, and 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 inclusive of all the investments we're making. The numbers we're committing to absorb every dollar of strategic investment we make in the future in our business inside that committed earnings envelope.

3:41 H1 has come in exactly where we said it would. ARR growth of 17% squarely within our 16 to 18% four-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 we explained then, half one profit growth would sit in the high single digits because of the planned investment in Showcase, where we're bringing forward the launch of our new AI products. So half one has landed exactly on plan with no surprises. Now taken together, the half delivers exactly what we committed to at the AGM and we remain confident in delivering the upgraded four year guidance. That's a top end of 18 to 20% PBT growth and a top end of 16 to 18% ARR growth Again, with that margin expansion to 32% 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 in the past.

4:42 You know, we don't talk statutory compared to underlying, it's just not our way. And to repeat, we're very pleased with our half one results that met our expectations and guidance. Our half-won results include significant investments in Showcase, where we launched our AI products, and because of the strong growth in our UK business, an unusually big impact on ARR resulting from foreign exchange impacts as the Australian dollar strengthened against the pound. So to give investors additional transparency into the underlying engine of the business, what we refer to the heartbeat of the business, this is how Half One results on a constant currency basis, as well as normalising profit for the significant Half One investment in Showcase. This view of the business shows ARR growth of 19%, NRR of 116% 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 and 32% margin if we excluded our continuing investment in SAS+.

5:45 Our DNA is to deliver strong results and to invest significantly in the future so we can continue to deliver these results day in, day out, year in, year out. The results you see are coming from our strategy. The foundation of this strategy comes from staying true to our vision, our purpose, and our mission. These three things shape every decision at Tech One. They're not slogans. They're how we choose what to build, who to hire, who to serve, and what to ignore. The reason this slide matters to investors is this is the foundation that's compounded into 38 years of 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 have come out stronger each time because of the significant investments we have made in technology and people, as well as our conservative nature.

6:38 We leverage the latest technology for the benefits of our customers. It's why we're called TechOne. We're the only enterprise company at scale that's rewritten our ERP four times. That's millions of lines of code, and that's genuinely rare. The first generation leveraged relational database because it was a simple way of storing and reporting. The second generation leveraged PCs 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. The fourth generation, SaaS, we made life simple for our customers as we delivered our software as a service. And now the fifth generation is leveraging AI to simplify ERP with no clicks, no screens, just a conversation.

7:26 Our strategy has led to our history of innovation. We started 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 a council. You know, you get your rates from the software, register your cat or dog, put in a development application, or perhaps apply for health license to run a cafe, and much, much more. Now every time we acquire a company, we rewrite the acquired code into our single global code line, delivering one look and feel, one security posture, one upgrade path, one integration approach, one source of the truth. Next, we became hyper focused on a small number of vertical markets, mainly higher education, local government and government, also focused on health and community services, asset and project intensive industries and corporate and financial services.

8:17 This allowed us to build deep, deep functionality out of the box for these markets to create a significant competitive advantage. Now we've been in the UK for over 20 years, but about five to eight years ago, we completed many, many years of hard work and product localization in customer reference and scaling our business. The flywheel has turned in the UK and we are now the de facto partner in the UK for local government and higher education and growing very fast. We launched DXB, that's what we call our digital experience platform for local government and higher education. Now these products move past the traditional sort of back office users of ERP, you know, think about the accountants or payroll clerks or town planners, to the tens of thousands of students in a uni or the hundreds of thousands of residents of a council, opening up a new and unsurfaced market for us.

9:06 Now, through the power of one, we became the world's first SaaS Plus company, removing the need for traditional, complex, long, risky implementation models, incorporating all into single fee, into one single annual recurring revenue fee. We do it all, and we call it Solution as a Service, or SaaS Plus for short. Even more compelling, though, for our customers is our strategy and commitment to deliver ERP in 30 days, not the thousands of days like our competitors. Now, this is our strategy in action, long-term investments in R&D by staying close to our customers and solving their problems, differentiating and growing. Now, some of you might remember this slide representing how we evolved and grew our products from one product in 1987 to 20 products today.

9:53 Each product has over 20 modules, that's over 600 modules in total. And we now have our AI strategy where we've added Plus and Guide, which Stuart's going to take you through in greater detail. Now, we compete against the traditional ERP vendors like the ones you see at the bottom of this slide. 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 functionality that TechOne provides to the verticals of local government or higher education and that those markets require to operate their businesses. We call generic ERP plain milk. And we also compete against the best of breed providers who provide that single application. They're very focused on what they're doing very deeply, those in the middle of the slide. Take property and rating or student management or enterprise asset management or enterprise content management.

10:46 The argument for best of breed is that you get specialist or advanced capabilities tailored specifically for that function, but then you have to piece it together with sticky tape and chewing gum and it doesn't really work in a SaaS world and it's even worse in an AI world. We're really neither, we're different. We're the only SaaS ERP provider that delivers deep mission-critical solutions for verticals we serve, and we deliver it in a SaaS Plus model. We've followed the path less traveled, and we've carved out vertical niches and specialty that results in strong, consistent ARR growth. And you can see their cumulative growth at 18% per annum. 99 plus percent customer retention for 38 years, and a very long-term historical profit growth of 10 to 15%, which has 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. In summary, here's the moat before AI.

11:42 We built verticalized software for the most demanding customers in the world, mission-critical apps that only a handful of vendors globally can provide. We serve highly regulated industries. We've got the highest level of cybersecurity certification. We serve some secret agencies, but that highest level, it's built into all of our software. A 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 of our 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.

12:28 Multiples rewrite downwards. That's the sell-off that you're seeing in 2026 in one column. The bear case is not our case. In the middle is how we derive value now. We don't sell seats we never have. We sell rateable properties, which scales with rateable numbers, not headcount. So as communities grow, we grow with them. We sell on student numbers. So as unis enroll more students, we grow with them. Now AI. For more than five years, we've been working with AI and we've been leveraging it to solve some problems, both internally and externally. But two years ago, we began investigating agentic AI, and we wanted to see how far we could productize agentic AI for our customers. And we're at the very, very beginning of this fifth generation, the AI generation, but we're at the forefront of this tech in our industry.

13:15 The adoption, the feedback, it's surpassing our expectations. And the new opportunities we can see, it's very exciting. Stuart's gonna take you through this in further details and invite you all to a product demonstration and hosted by Chandon, our CTO this Friday. This is just the beginning of this journey and the opportunity for us is enormous. Now, one of the many new opportunities of value for us and for our customers is in-product AI. It has interactions, and we have Plus, which has conversations. You would call these transaction-based revenue. As interactions and conversations are used more, that's as AI agents do more work. Remember, agents are faster, more complete, higher quality, and cheaper for our customers. We grow with that too. Another new opportunity is how we've commercialised Guide.

14:02 As residents and students, that's our customer's customer, have more conversations with their council and their uni through our software, we grow with that too. 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 shared with our customers, so what used to be a cost centre for our customers is now a revenue centre for our customers. Now look at that polarity for a moment. In a per seat world, every AI agent that replaces a human is revenue deletion. In our world, every AI agent that does work for a customer is a revenue event. The same wave that's terrifying horizontal SaaS, that's a tailwind for us. That's why our moat deepens.

14:48 And here is our new opportunity in Plus and Guide, and here's how it increases our moat. We have new transaction revenue from customer conversations with Plus. We have new transaction revenue from customer interactions in our in-product AI, new revenue from our resident and student conversations with interactions in Guide, and new advertising revenue from Guide. we've invested a billion dollars plus in our ERP today. The success we're having today is from our investments five years ago, and the success we have tomorrow is from the investments we're making right now. And these investments enable us to continue to double in size every five years. Over to Cale in our Hackspace, who will now take us through the financials for the first half of the year.

15:36 Thanks, Ed. Once again, we are incredibly proud of the results we have delivered in the first half of FY26. 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. UK ARR growth came in at 23%. Stuart will unpack the UK in greater detail a bit later. SAS and recurring revenue is up 13% to 299.2 million, with recurring revenue now representing 93% of total income, highlighting a 25% uplift in the quality of our revenue from only three years ago. As Ed mentioned, this gives us greater visibility and confidence for the future.

16:37 SaaS and recurring revenue growth at 13% reflects timing of new contract signings in the half, which was weighted to the end of the period relative to the PCP. At the PBT line, we met our guidance 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, our board has determined a record interim ordinary dividend of $0.08 per share, up 21% on the PCP. In all, we have met or exceeded our expectations across all metrics in the first half of 26, an unequivocally strong result. To highlight the strong ARR performance in the first half, we added $43.4 million in ARR. This is a first half record for the business and only slightly behind the overall record we achieved in the second half of FY24.

17:31 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 38 years. clearly showing continued strong momentum in our growth trajectory and providing us with continued confidence that we will achieve the guidance for both ARR and PBT for full year 26. Our sales team delivered exceptionally well, executing on our strategy. In the first half of FY26, 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 55% for the Rule of 40.

18:24 I'll now take you through the detailed financials, beginning with the income statement. Profit before tax increased 9% to $89.1 million, which is in line with the guidance we provided at our IGM. Total SAS fees were up 14%, while SAS and recurring revenue grew 13% to $299.2 million in the first half of 26. As mentioned, SAS and recurring revenue growth at 13% reflects timing of new contract signings in the half, which was weighted to the end of the period relative to the PCP. Traditional new project consulting recorded a decrease in revenue, as expected, as we work through the backlog of legacy contracts. This revenue is primarily driven by implementations not sold as SaaS Plus, such as government work sold on the old framework prior to its updating to accommodate SaaS Plus.

19:17 Within our total expenses, a net variable cost 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 costs. As we have called out, our investment in Showcase of $9 million represents 37% of the $24.3 million increase. The PCP 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. We will continue to invest for the future.

20:03 Our total expenses grew 12% to $233.6 million in the half. Excluding Showcase, total expenses only grew 7% against our ARR growth of 17%. Net profit after tax was up 6% to $66.8 million. The effective tax rate for the half was 25%, which is where we expect it to land for FY26. Turning to the balance sheet, cash and investments have decreased by 74.1 million to 245.5 million over the half, consistent with significant dividend payments and our second half weighting to cash collections due to the annual billing alignment with contract anniversary dates. Capitalised development has increased by 15 million in the half, which is primarily driven by salary costs of our R&D team working on our products.

20:55 Other non-current assets have fallen during the half, driven by a reduction in our deferred 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, as we earned the revenue for which we were paid in advance in previous periods. Net assets have decreased by 22.6 million over the first half of 26 to 428.1 million. Our balance sheet provides us with the opportunity to drive future growth. Throughout our history, TechOne has consistently invested in R&D to enable us to deliver the most impactful products to our customers. As anyone who attended our showcase knows, the first half of FY26 was a big one for our R&D team.

21:43 In the first half of FY26, we invested 26% of revenue or 84.1 million in R&D with 54% or 45.1 million capitalised. This is consistent with previous periods. The team delivered 26 A and a half, releasing it in early April. 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. Onto the cash flow now. In first half of 26, free cash flow generated was 20.3 million, which is a strong result given the second half weighting 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 second half of 24, which was not repeated in the second half of 25.

22:35 Our income taxes paid have increased in line with our tax rate and profit growth. Dividend payments were up significantly, driven by the increased final dividend and special dividend for FY25. The total cash increased 33.6 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 40%.

23:21 Consistent with our cash flow profile, we will weight the dividend to the second half to ensure we land in our stated payout ratio of 60 to 75%, clearly showing our confidence for the future growth in profitability. In summary, our past execution has afforded us a very strong and clean balance sheet. Momentum in the business through the first half of FY26 gives us great confidence in our ability to continually achieve our numbers going forward. I'll now hand over to Stuart.

23:55 Thanks, Cale. As announced at our Showcase kickoff event in October last year, 26A marked a watershed moment for our AI initiatives and rollout strategy. It's important to note that we've been leveraging AI across many of our products and programs for more than five years. However, Showcase and 26A represented a milestone where we truly productized and commercialized these capabilities. But before I go any further, I thought I would take a moment and talk about Showcase and bring you up to speed about the events that have now all been completed. Within the heartbeat of the company, Showplace plays a critical role. It's the event we produce every two years to reconnect with our customers at scale, evolve our messaging and strategy, but most importantly, announce our major initiatives.

24:46 Historically, Showcase has been a platform where we announced the completion of CIA, our modern platform, where we introduced SaaS Plus to the market. And this year, Showcase focused on AI. 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 region. Attendance was up 85% compared to showcase two years ago, demonstrating that our brand and the innovative strategy are becoming increasingly relevant for the verticals we serve. Most importantly, the pipeline generated from Showcase has significantly exceeded both historical performance and our expectations.

25:33 In summary, for every dollar invested in Showcase, we have generated more than 10 times that value in pipeline opportunity. At the conclusion of the Melbourne Showcase event in October, we announced PLUS, our agentic AI solution for the ERP market. Built around the theme of no screens, no clicks, just a conversation. PLUS fundamentally challenged traditional ERP expectations and introduced the first phase of ERP for the AI era. by every measure, from customer feedback to media response, plus has been an enormous success. It has demonstrated to both the market and our customers just how innovative technology one can be and the boundaries we are prepared to push to better support our community.

26:24 We also highlight to investors that Plus was designed to be a Trojan horse, a platform that would encourage customers to adopt more technology on 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 this six 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.

27:11 We pushed the boundary even further with the announcement of Guide at our UK showcase in February. For more than six years, we've been developing products designed to empower our customer's 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 DXP student. However, when we saw the power of PLUS and its ability to support students and rate payers through natural language conversations, we quickly recognized the opportunity to combine the visibility and engagement of DXP with the intelligence of PLUS and combine it together to make guide.

28:11 We could have stopped there and realized the guide using traditional and released guide with traditional consumption based pricing models. However, we took a step back and evaluate the usage patterns, operating costs, and the broader impact on the community. We knew we needed to find another way to commercialize this product. And as a result, we took the road less traveled. And in fact, road never traveled in the ERP market. We propose delivering guide free of charge. Let me repeat, free of charge, supported by advertising revenue. And then we went even another step further, aligning to our 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 our customers.

29:02 Now, this announcement has not only surprised the market, it has significantly elevated the conversations we're having with our customers. With Guide for Students scheduled for release in 26B in August, we're already having universities compete to be the first institution globally to deploy a solution that not only empowers their students, but is generating new revenue streams. Historically, I've highlighted three 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 they first acquired our financial 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.

29:58 And over the past year, JCU conducted a comprehensive technology review and roadmap 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 1700 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 the alignment of our innovation and strategic direction, JCU signed a 10-year agreement with Technology One.

30:54 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 lead now into what I believe is the fifth era of technology innovation. Townsville Council has been an on-premise customer for many years and were 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 two-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 SAS and adopting full SAS Plus program, as well as acquiring Plus.

32:03 We also secured the University of Suffolk. Historically, the UK market only sees one student management RFP come to market each year. And as we've highlighted previously, we have a strategic goal capitalized on our unique position in the UK 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 two and a half years is a significant achievement. It validates not only our strategy, but also the market's growing demand for a modern SaaS solution and the confidence customers are placing in our AI vision.

32:55 SaaS Plus is now embraced in everything we do. It defines us. Fundamentally, and it's changing conversations we have both internally and externally. Historically, I have updated you on what products and solutions have transitioned to SaaS Plus, and I'm pleased to report today that everything is SaaS Plus. And we've achieved this transition faster than expected, driven largely by customers pushing us by demanding this new model. And underpinning all of this is our ERP and 30-day vision, for which we remain firmly on track. As I said at Showcase, nobody in our industry wants us to succeed in this innovation because it fundamentally disrupts traditional implementation models built around long, drawn-out projects.

33:47 Some even joke referring me as the chairman of the Flat Earth Society, and I could not disagree more. Fast implementations accelerate customer benefits realization, which in turn increase customers' ability to consume additional products and drive greater operational efficiency. In the new world of AI, this also significantly increases the effectiveness and value that Plus can deliver. The diversification of our portfolio continues to deliver. And with three of the six verticals delivering double-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 SAS Plus solutions designed specifically for the verticals we serve are hitting the mark.

34:39 Importantly, every major local government deal secured in the first half included Plus, highlighting the strength of the intersection between ERP and the agentic AI technology. Education also remains another significant pillar of growth with 15% and the opportunities such as JCU and Suffolk University reinforce the strength of our strategy. The UK continues to deliver. Based on us becoming the de facto provider for mission-critical solutions in our verticals in the UK and the enormous opportunity coming off of our UK showcase event, our pipeline continues to impress. And this is validated by our first-off results.

35:25 We remain on track to achieve our full-year UK objective and once again deliver record results. At the full year announcement, I intend to dedicate a significant time to discuss in the UK business as I did at the previous 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.

36:16 Ultimately, it all culminates in our ARR performance. Overall ARR and ARR per customer continues to grow strongly. And with our FY26 guidance of 16 to 18%, the first half results clearly demonstrate we're on track. In closing, our results demonstrate they will continue to invest heavily in their 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, 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 on, our industry, but most importantly, the customers every single day.

37:37 Thanks, Stuart. So to wrap up the results quite simply, our investments made in R&D, in AI, in Showcase, in SaaS Plus, they're delivering. We achieved our 17th consecutive half-year record ARR, record revenue, record profit. Total ARR is up 17% to 598 million. UK ARR is up 23% with a very strong pipeline for half two, 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 four-year guidance.

38:26 Turning to our long-term outlook. We've doubled in size every five years and we're gonna 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 dollars 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 five 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 release new products, features, modules, two times every year, therefore organically increasing the TAM.

39:11 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 Plus 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 Course Loop. And the leverage we're delivering in our business provides us with significant headroom for inorganic growth.

40:04 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.

40:50 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 a billion dollars plus ARR by FY30. 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, tacit approvals.

41:37 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 UK. 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 uni has with a student. The customer surface area expands by orders of magnitude. The moat was wide before, with AI it gets wider and it gets deeper. You know, 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.

42:33 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 roll, they've got energy and momentum and we would like to thank every member of Tech One across the globe. We'd also like to thank you, our shareholders and our community for your continuing support. So to wrap up, we've got great confidence and momentum in the business, and we're firmly on the path to achieve a billion dollars plus ARR by FY30 from our current base of 598 million. We will continue to invest for the long term in R&D to build platforms of 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.

43:21 We'll now hand over to the operator for questions. Thank you. If you would like to ask a question via the phone, you'll need to press star one on your telephone and wait for your name to be announced. If you would like to cancel your request, please press star two. If you are on a speakerphone, please pick up the handset to ask your question. If you would like to ask a question via the webcast, please type it into the ask a question box and click submit. Your first question today from the phone comes from Lucy Huang from UBS. Please go ahead.

43:54 G'day, Lucy.

43:56 Hey, Ed. Thanks for taking questions. I've got three, but maybe if I start off with the first one. Just interested in some extra colour around plus. I think in February you talked about 22 customers signing up. Any colour as to what that number or penetration rate looks like? today and then you'll also make some comments around kind of conversations with customers suggesting usage is exceeding expectations. So any comment you can shed on how a customer is using Plus? Are we seeing a large number of them exceeding their usage cap?

44:30 Yeah, thanks, Lucy. There's two parts. I'll answer the first part, 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 TechOne. 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. Use JCU or any customer you want to talk about, Stuart. But the second part of the question is that how is it exceeding our expectations to take

45:05 up? Yeah, it's a really good question. We should remember, everybody, that we released it with 26A. And that's only been available with Plus for about three and a half, four weeks now. And 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 incredible. 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 10 times 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.

45:41 And maybe if I can just add a touch of additional colour is that we don't really want to talk about the ARR or 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 unis are big, but it's got every product and module. When we modelled the interactions and conversation uptake, it was... it was aggressive in our minds or strong, but it is 10 times more, more than 10 times more. And so the ARR 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 initially modeled.

46:24 I can give you one case study if you want, if I'm allowed to. When JCU bought everything, they literally bought everything. There was a new product we just announced called Invoice IQ and its ability to scan your invoices. 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. Again, that's seen as an interaction as well. 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 one very simple case study.

47:09 ...that you've achieved this half.

47:11 Are you guys able to split or give us a rough idea to how much came through from SES plus versus plus?

47:19 We don't really break that out because everything is SaaS Plus and just Plus is just another product that we put through the system. So we don't break that out at all.

47:28 Yeah, Lucy, if you like, we've got what we call a very diversified model. You've got multiple products, multiple regions, multiple verticals. And to be honest, some are going to fire better in some halves and years and some will 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.

47:52 Again, just to reiterate what I said also within the results, everything we sell now is SaaS Plus. So we don't segment anything out that's not a SaaS Plus proposal.

48:02 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 they're going to push the growth in ad revenue.

48:31 Yeah, there's two parts to that question. I might just throw to Cale for incremental costs and then Stuart to the second part of the question.

48:37 Yeah, 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 will be incremental revenue and incremental profit for us. But exactly how that's going to fall through yet, we're yet to see.

49:03 The... Customer excitement related to it far exceeds our expectation yet again. We've got at least three customers that are trying to be the first ones to take it on board when it gets released in 26B, 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 six 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. We've 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.

49:48 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 centres and improving the NPS relationship between a university and a student. The university's solving a problem differentiating its other universities. They're getting ad revenue from it, and so that flywheel we benefit from. Very, very exciting.

50:12 That's great. Thank you so much, guys.

50:15 Thanks, Lucy. Thank you. Your next question comes from Andrew Gillies from Macquarie. Please go ahead.

50:22 Good day, Andrew.

50:24 Hi, Ed. Hey, guys. Thank you very much for the opportunity. Look, just following on from Lucy's questions, I appreciate the ARR tower winds are really strong, but how should we think about kind of the dynamic of sort of existing customer versus new logo growth and contributing to this ARR story, particularly calling out sort of UK growth where new sales ARR was a little bit softer. Appreciate the commentary around the pipeline, but can you maybe unpack that a little bit and just help me understand the drivers as we go forward?

50:49 Yeah, sure. I'll talk about the Nuverse existing and then maybe hand over to Stuart for the half one, half two SKU for the UK. We run our business basically focused on really two metrics, PBT growth, number one, and then closely followed by ARR growth. And for us, it's total ARR. It doesn't really matter if it's new or existing, but I'll get into the details about that in a second. And, you know, we'd love to sell as much ARR in the first half versus the second, but the deals sort of land where they land. And over many, many, many years, you know, they've sort of second half skewed. I'll get to Stuart for the UK in a minute. Now, when you look at Nuverse 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 Forex impact, then NuLogo is 3%.

51:47 You know, it's just one minus the other. Now, since the dawn of time, that new logo growth has been about the same. It's sort of hard to explain, you know, 50 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, we have a lot of the logos, but there's a bucket load of white space and runway to go. So everything goes into NRR. typically, or most of it goes to NRR. And then if you go to higher education, we bought Scientia back in 21, I think. And it had pretty much every logo in higher education in the UK. So strictly speaking, that is all NRR. And that's how we present that as well. There's a lot of nuance in that conversation.

52:32 Our focus is on the entire market, that 18% day in, day out. So one of the DNA parts or the hallmarks of Tech One is we don't want to shoot the lights out one 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 top end consistently and ARR growth 16 to 18 at the top end consistently. So hopefully that just paints the picture, Andrew, firstly of the ARR, whether it's new or existing. And then Stuart, you want to colour in the dynamics of the year for UK?

53:08 Yeah, sure. One piece I also put together as well. Somebody's asked me, how did we get such growth and attendance at Showcase? We've always set Showcase up as a prospecting event, but historically it's been a lot more of our customers coming and looking at new product and pulling it across. We 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 UK, 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 excited where we're going, not only next year, but going forward as well. We are the de facto provider now for local government in higher education in the UK, and it's putting us in a very strong position.

53:58 Perfect. Thanks very much, guys. And then just a quick follow-up. If I look at kind of that pipeline opportunity, is that kind of both UK and sort of ANZ? Are you willing to kind of provide some colour on the splits there? Just think about it as kind of 10 times that $9 million spend or the 7.4 on the showcase cost.

54:18 Yeah. It's pretty even, to be honest, across the board. I mean, the UK 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.

54:35 Perfect. Thanks, guys. And then just one last one on the AI 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, you know, the desire to grow transactional consumption-based revenues with the potential sticker shocker customers?

54:53 Yeah, it's like every generation, to be honest, and it was similar in cloud. Our first approach is that in the AI world, it's bloody complex with tokens. I don't know if you or your friends have played with it. I've personally played with it and you get millions of tokens, which means nothing to me, to be honest. So at a 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, you get a whole lot of bundles and then you can buy on top. And of course, it's going to take education.

55:38 But Stuart, do you want to add more to that?

55:40 Yeah, I think the exciting part of this whole phase is what they're realizing is the value they get from AI. And so we have to really enable them and educate them related to the functionality. But once we've done that, and if anybody came to the 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 30 cents 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 it quickly because they can see the efficiencies they're getting. So we're really breaking down that old way of thinking, which is I need to do a function. Now I need to figure out how to do functions faster. And that's what AI gives them. And that's what we're getting the return from.

56:26 So we 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.

56:37 Do you want to talk about the research we've done for local government customer service call centers and the value difference?

56:43 Sure. So if I take the UK 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 27A, If I look at a council, a decent sized council in the UK, they spend about £2.80 for every call that comes through to their call centre. 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 30 cent or 15 pence 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 is saving and efficient, but also NPS results related to their students or rate payers, everything just kind of takes care of itself. It becomes logical.

57:35 And that's what's making that flywheel turn so quickly.

57:40 Thanks very much, Kaz. Thank you. Thank you. Your next question comes from Paul Mason from E&P. Please go ahead. G'day, Paul.

57:52 Hey, thanks for taking the questions, guys. Just a couple from me. I just want to check, with the currency headwind, was that all on the UK? So, like, would your ARR have been $59 million if not for currency, or is there some New Zealand in that as well?

58:08 Thanks for your question, Paul. No, it does include New Zealand. And if you're a close watcher of the Kiwi dollar, it has depreciated quite significantly over the half as well. Yeah, okay, great.

58:22 And so two 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 a You said most major deals are taking plus now, but are most major deals taking plus and then something else because of plus as well? How does that look?

58:47 I don't know the exact numbers, but I would say probably about 25% to 35% of the Plus deals are Plus standalone. Almost everything else has a pull-through of some type, maybe not at 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.

59:13 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 their 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 dawn of time. You know, yeah, they'll take more. And we can see it here.

59:33 If you look at tech one, 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 fascinating.

59:43 It really is, yeah. All right. Just the last one for me will be just on the consulting revenues, you guys have 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 just give us a bit of an overview of how that line's gonna go through time? Should we see the absolute consulting revenues decline or is that just gonna change nature to this more ongoing consulting instead of the implementation consulting as time progresses?

1:00:22 Yeah, 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. Well, I mean, aspirationally, we'd like all of our customers to have an AMS program, 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.

1:01:01 Is there much margin difference between the two, or are they pretty similar in terms of how the economics work?

1:01:07 They're fairly similar. They're quite different businesses, but they're not materially different margins.

1:01:15 All right. Thank you. Thanks, Paul. Thank you. Your next question comes from Josh Kanarakis from Baron Joey. Please go ahead.

1:01:25 G'day, Josh.

1:01:26 Hey, guys. Thanks for taking my question. A couple of quick ones. Firstly, just with the route, there's been a lot of discussion and a few things that have come out over the last few weeks around sovereign AI and AI procurement in 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?

1:01:49 Yeah, there's no doubt it's very topical tech sovereignty, in 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, you know, the ministers, whether it's Ayres or Charlton are out there beating the drum. And in fact, myself and a few colleagues will be down there next week, Josh, pushing that barrow, not only for Tech One, but for the industry at large. And so expect, you know, Albo'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.

1:02:39 Okay, great. And just obviously you've signed a couple. I know, you know, James Cook, obviously a long-term customer, coming 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, you know, when you look at your pipeline on a go-forward basis, has there been any sort of change to the timeframe or terms. Obviously, I know you've got some five years, some 10, but I'm interested to know whether that's a trend or if that's just specific to that.

1:03:10 Yeah, I think you're right. I think if there's a standard, not that there is, but if there's a standard, it's probably a five-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?

1:03:27 Yeah, no, we always position with a five-year because it's the way that SAS Plus was designed as a five-year agreement. But we're seeing customers that really want to just come on the 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 a longer term. And that's just a validation of our strategy.

1:03:49 Got it. And so just on that, I mean, I noticed as well, you know, the capitalized commission costs are obviously a bit higher, I imagine. Is that just because you've signed those, you've obviously signed a couple of very long-term agreements, which I imagine come with some healthy commissions and things?

1:04:04 It's... Probably not so much the term, to be honest, because they're 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. Yeah, it was a good sales half.

1:04:17 Salespeople like to get paid.

1:04:19 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, G or 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 one 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 two, but I think that message, you know, up until now, it might've been a little bit lost, but they've done really well. Yeah.

1:05:11 Slide 25, Geo. Yeah.

1:05:13 Yeah, no, that's great. I'll hold off the questions for the other call. Thanks, guys. Cheers, mate.

1:05:17 Thanks, Josh. Thank you. Your next question comes from Roger Samuel from Jefferies, Australia. Please go ahead.

1:05:27 G'day, Roger. Well, hi, morning, guys. I've got a couple of questions. First one, could you outline your confidence in hitting the top 10 of the guidance range, which is for 18% ERR growth? Yes. In FR26, given that you reported 17% in the first half, whilst your net retention rate has come down to 114%. Just 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 in the slide pack, you know, the JCU, the Townsville, Suffolk, did they land in the first half or the second half?

1:06:09 Yep, I'll start with that one 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 subtle, is to say if we didn't have Forex impact, Kayla was six million, we would have done 50 mil 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 the team have done such a great job that the push for the second half one 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, you know, pre-sales people in front of them, it just drags the deal forward because the buying C-level sees the value in it, sees the value in that interaction or conversation, such as the, you know, 23 pence compared to £2.38. It's so significant, Rog, that...

1:07:26 We are firmly committed. We've got huge visibility and the pipeline is so strong.

1:07:31 Yeah, I would also kind of look at it this way. There's more conversation inside the business now related to FY27 than there is to finish off at FY26. So we're looking that far ahead because of the confidence we have to pull through from Showcase, the AI strategy, what's happening in the regions. It's really an FY27 and forward conversation and that's the excitement we have.

1:07:55 Got it. Okay. Thanks. My second question is on margins. So SaaS Plus so far had an impact on margins, and yet you still got into margin expansion in FY26. Is there any cost efficiency program that you're doing that drives that much expansion? And also on SESC Plus, when would you expect that margin dilution to get to fall away?

1:08:22 Yeah, I might start and then hand over to you, Cale. I think if you lifted the hood in tech one, there's always cost outs. We always focus on the efficiency of the business. probably why we're in the top quarter globally of companies in the rule of 40. So it's just part of the DNA we keep pushing. But you have to remember that when we started our AI strategy five years ago and started things like ERP in 30 days, we saw that we could leverage AI to 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.

1:09:09 And in terms of the direct impact on our margin from SAS+. Fundamentally, what we're seeing is, as we said, would play out a couple of years ago when we announced SAS+, and started to talk about the modelling. Now, it's very difficult to be very prescriptive about the path here, but we are seeing decreasing impacts on the margin as we move forward here, and as we continue to execute on our ERP and 30 strategy. 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 cost through the first half of FY26.

1:10:04 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

1:10:32 we're delivering. Yeah, that's a good point. So we can scale faster and do more. We've always had more ideas than we can poke a stick at. And, you know, AI cost efficiency just allows us to do a bit of everything, to be honest.

1:10:49 That's great. Thank you.

1:10:51 Thanks. Thank you. Your next question comes from Tom Beedle from Jarden. Please go ahead.

1:10:59 G'day, Tom. G'day, thank you for the opportunity. Just the first question on ARR, just to follow up on a few of the others. I mean, can you just clarify just to what extent might Showcase add to your ARR this year, that sort of, say, $80 million to $90 million step up? How much might actually fall into FY26's 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?

1:11:28 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 this 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 it 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.

1:12:13 Yeah, that's helpful. Thank you. 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 SAS Plus coming through and just the law of large numbers possibly kicking in, do you think that this is a sustainable target going forward? And just can you talk to what you believe can accelerate your NRR growth back to that range?

1:12:43 I think it, to be honest, it's just the timing of the deals, mate. I think, you know, 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, you know, we will do in the range. That's the 115 to 120. 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.

1:13:06 Gotcha. 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 your R&D sat 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 you've got?

1:13:35 Yeah, no, the 26% in first half is really a denominator issue. Our sort of the cadence, as Stuart mentioned, with respect to adding people to our R&D team hasn't changed. But you'll notice that our revenue increase versus the PCP was 11 or 13%, depending on which one 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 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.

1:14:19 Great. Thank you very much.

1:14:21 Thank you. Thank you. Unfortunately, that concludes our time for questions today. I'll now hand back to Mr Chung for any closing remarks.

1:14:30 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 to thank you, our shareholders, for your continuing support. Thanks again.