For standing by, and welcome to the COSOL Limited HY 2025 Results Investor Call. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Mr. Scott McGowan, Managing Director and Chief Executive Officer. Please go ahead.
Thank you, Anthony. Firstly, good morning, good evening, depending on where in the world you are today. I really appreciate the opportunity to walk through COSOL's HY 2025 results. For those who want to follow along with some of the conversation that myself and CFO Anthony Stokes will provide, I'd refer you to our investor presentation, which was lodged in the ASX this morning about half an hour ago. I think, first of all, I just wanted to kind of reintroduce, I guess, COSOL. We see COSOL as a really attractive investment opportunity. Some of the highlights that we want to bring to everyone's attention really is around, over the years, our outstanding financial performance with circa 45% CAGR growth. More importantly, a deep, experienced leadership team that's sustaining the growth through the transaction or through the trajectory of COSOL's growth.
Also, our North American capability, our North American presence, which sets us up as a foundation for growth into the future. We're seeing particularly a lot of growth in that particular region, and more importantly, based off the capability that we have in the Australian market. I think, importantly, we've grown what we call our middle, which is around our million-dollar-plus customer base, and that's now over 20 customers make up over AUD 1 million each per year. That goes to—we'll talk a little bit about that future today—and really around what does that look like and how does that grow out from a sustainable business point of view. I think, importantly, we've continued to make acquisitions, particularly this in the last half around Toustone, which is really in that digital and data space, bringing us back to delivering digital solutions for asset-centric organizations.
If I just then quickly move to some of the highlights from our HY 2025, I think the overarching headline for us is we've delivered a strong performance and really underpinned by organic growth. Our organic growth was circa 10% for the half off the back of some net new customers, as well as our winning new managed services opportunities, which is sustainable recurring revenue. A couple of key headlines for the group: group revenue, AUD 57.8 million, which is up 17.8% PCP. If you think about our AUD 110 million over the last 12 months, what you can see is we're poised for growth into that circa AUD 120-odd-plus top line, which I think if you look at the history of COSOL, that's a really, really important growth trajectory for the business and really sets us up in terms of that mid-size technology-enabled business.
Underlying EBITDA of AUD 8.2 million, which is flying through from our revenue to 17.6% growth PCP. We are very happy with these results. We think this is a great platform for growth. Those results have been delivered largely organically, which obviously is a credit to the business as it stands in the sustainability business going forward. I think some other key notes to point out: we are over 420 people for the first time ever, again, continuing to grow the people in the business, which delivers our IP and our solutions to our customers. Without that foundational base of our people, they set up and work with our customers to deliver our growth. Probably a couple of key highlights from some of our key business units. One is our asset management professional services business, which grew 20% half on half for those who were around for our full year.
One of the challenges we had into the full year was a slowing growth rate or slowing of our asset management professional services, which ultimately lays a platform and a beachhead into our customer base for expansion. That has rapidly grown over the last six months and a credit to the business in delivering that growth. As well as that, we've actually integrated that business fully into COSOL and operating as a single unit across both West Coast and East Coast. That has been a really positive change for COSOL. What that means to the business is actually 11 new logos have been opened as a part of that growth, which is now we're able to land in those organizations and expand and bring through higher margin business as we continue to grow.
A couple of other key facts and figures: six new EAM as a Service contracts in the first half. This is probably the most net new EAM as a Service contracts we've delivered in the history of COSOL and four new managed services contracts. What does this mean? This is all long-term forward contracted recurring revenue work with a foundation for growth in terms of net new advisory capability, professional services, and IP pull-through. That is why we're extremely happy with that momentum in that space, particularly in that managed service recurring revenue base. I think, importantly, our North American business has now secured 11 new IBM Maximo customers. Now, what does that really mean for the business? This is just demonstrating and a proving ground for us where we can take our Australian capability in that digital asset-centric market, and we can take it into the US market.
Obviously, with the foreign exchange rates the way they are, deliver very high margin, high-value business. We are expecting to see that flow through in half two with many of those now contracted and starting to execute in the first one or two months of the half two. I think the other key point out here is there has been an uplift in the digital transformation advisory projects, and what that leads to is obviously it is underpinned by our product and product services. That leads to long, large programs of work where we bring our IP to the table and deliver high margin value.
If you think about all those things and then you combine that with our investment we made in AI in the first half, pleasingly, whilst a lot of organizations talk about AI, they talk about AI in the context of optimizing their own cost base. We've been successful in working and co-innovating with one of our large mining customers to actually leverage AI as a data quality capability within their business. This is really exciting for us because it's a net new product which has been delivered and co-innovated with one of our key mining customers that we're able to then expand out through our larger portfolio. What does this really all mean? It means it's sticky for us. It leverages new technology. It demonstrates our ability to co-innovate with customers and build out those high-margin, high-value services for our customer base.
It's important for me to also note around the Toustone acquisition that we made in the half. I think, again, and I'll repeat this a few times as we go through today, but the ability for us to then have a data-driven digital platform that encompasses machine learning, analytics, and AI to deliver true value to our customers is something that we've been, I guess, looking forward to add to our capability over the last two to three years. We're very, very pleased with the Toustone acquisition as it's come online. What we found is the revenue synergies that we've been able to get from a new opportunity point of view into our existing customer base has far exceeded our expectations. The alignment of culture in terms of the integration of that business has been a fantastic addition to the COSOL family.
We're seeing that continued growth, and we're obviously looking for how we expand that out through the COSOL channel into the broader market. With that quick overview, what I'd like to do is hand over to Anthony Stokes, our CFO, to give some of the key financial highlights and analytics around the COSOL performance in HY 2025.
Thanks, Scott. Welcome, everyone. As Scott said, pleasing revenue growth and underlying result here. From a revenue perspective, increasing revenue by 17.8% to AUD 57.8 million for the half. Underlying this was a 10% growth in our organic revenue base, underpinned by that strong performance as we've moved to a single operating model in our asset management professional services business. The other big call out there is the investment in our Western Australian customer base and our presence in Western Australia starting to pay dividends, with obviously one new managed services client being Horizon Power kicking off. Also, we're seeing a number of large advisory pieces of work being undertaken in that market. Pleasing to see that historical investment in that business and that region now starting to come through the revenue line. In terms of our underlying EBITDA, AUD 8.2 million, an increase of 17.6%.
We've maintained our EBITDA margin of 14.1% after the investment in growth that Scott referred to earlier. Some of that investment has come through our lower GM for the period, which was down to 31.5%, so 1.2% lower than the prior period. That was investing in the onboarding of those four new managed services clients we spoke about. That's part of the investment of the multi-year benefit of that contracted revenue. We're starting to see positive signs in that. They're now embedded, and we're seeing the opportunities that are presented with those customers in terms of additional work and consulting and higher margin advisory work that comes out of having those within our closed customer base. We expect to see that margin improve in the second half and going forward from where we were here. In terms of our operating expenses, we've maintained those quite controlled over those.
The call out there is there were some transformation expenses, including in our underlying result of about AUD 400,000 relating to the continued expansion and the transformation projects in place as we're integrating the acquisitions. I think, pleasingly, we're now at a position where we're seeing the benefits of that integrated model. The majority of the businesses are integrated. We're working with Core Asset and obviously the early stages with Toustone about what's the maximum benefit for the group in terms of where we start the integration and which pieces we pull together, whilst obviously giving focus on the continued growth of those two businesses through their earn-out period. The only exclusion between our statutory and underlying EBITDA was our transaction costs in relation to the Toustone acquisition. As per our historical approach, our only adjustment to our statutory EBITDA is those transaction costs when they're undertaken for an acquisition.
Moving forward to NPAT, this is obviously a key metric for us with the OnPlan business coming in and the purchase price allocation. For that, we obviously have an intangible amortization charge for the half of AUD 685,000. It is important to tie that back to what is our underlying NPAT performance year on year. There is 14.5% growth there at AUD 4.9 million. Pleasing result with that. The small leakage between our EBITDA and our NPAT is in relation to the higher interest rate in terms of our larger debt facility and some larger depreciation and underlying amortization that is taking place in the business as we go forward. Underlying EPS, again, another record for the half at AUD 0.0247, so 5.3% increase year on year. We expect to see that increase significantly more in the second half as our weighted shares on issue will be stable in the second half.
Moving on to page six, just reinforcing that consistent growth. This is a great page to reinforce the strategic acquisitions and specific growth we've delivered since listing. Delivering 38.6% CAGR and underlying EBIT lift from AUD 2.8 million in 2021 to AUD 8.2 million today is pretty impressive and pushing that EPS up by 14.7% over that period. Again, this is about the strategy and the embedding of the strategy within the business and being disciplined in our acquisitions that they're accredited to shareholders and they're accredited to our earnings and that they actually deliver us a capability set that we have going forward. I think we're starting to see that flow through in our underlying business. Moving to page seven, just covering off the cash flow and balance sheet highlights here. I'll work top to bottom there.
In terms of our debt facility, obviously we've had an increase in our debt facility as part of the restructuring we did and refinancing we did with Westpac this year, which has seen us increase our facility to AUD 38.9 million, reducing our repayment schedule, so taking some burden off our cash flow and improving our covenant position around that for some further acquisitions. Pleasingly where we're positioned today, we have sufficient headroom to cover all the deferred consideration we have on the balance sheet. You will note in our balance sheet we've included all the deferred consideration in relation to the Toustone acquisition. So there's a component of that which is now performance consideration that at the moment we've held on the balance sheet.
We'll go through a formal purchase price allocation process of that during the second half for our 30 June accounts in terms of the allocation there and assessment of what the liability we need to take forward on that one. We have increased our net debt, but effectively it's less than what the debt associated with the acquisition for Toustone took on. In terms of our underlying operating metrics for the balance sheet, the key call out here is our cash conversion was significantly lower than expected in the first half. This was driven by some timing around a couple of major projects we're invoicing. Obviously we've got a number of major projects, and the milestone timing of the project drives the invoicing and therefore the subsequent payment.
We had about AUD 2.3 million of that that was paid in January that was on our balance sheet in receivables in 31 December. The remaining increase in our trade debtors, so we had an overarching AUD 5 million increase in our trade debtors from June to December, is in line with our percentage of accounts receivable and in line with our expectations in terms of that revenue growth we've delivered in the first half. Pleasingly, our current ratio improved between half on half and prior comparative period. We are seeing that come through. It's about being disciplined in our working capital management as we go through and continue to see that growth in the business. Our leverage is obviously a little bit higher than our long-term target, and that's just in relation to the timing.
Obviously, Toustone was completed in December, so we haven't had a real material impact of their earnings into our underlying business as yet. We look forward to that, and we're obviously seeing very positive momentum of that as we work through the second half of the year. Following on to page eight, just reinforcing that consistent delivery of shareholder value with our EPS growth of 14.7% for the first half, CAGR over the period since we've been since July 2021. In terms of the dividend declaration, we've maintained our consistent approach of an interim dividend of AUD 0.01, and then we'll work through that and make a final dividend payment in the second half of the year based on our underlying performance.
Stepping down and double-clicking into what's driving our revenue on page 10, we break out our revenue performance between product and product-led, which is our IP proprietary services where we have the opportunity there to drive that performance and work that through. I'm sorry, I've missed a page. My apologies. Page nine, where we walk through that revenue piece there in terms of our different component parts. Consistent with prior periods, we have three revenue components. We talk about product, product-led services, managed services, and advisory services. In terms of that, the key call out for us for this half is that we've maintained our revenue share of product and managed services versus FY 2024. At that, 46% of our revenue base has been in product and product-led services. Pleasingly, we've seen a continued improvement in our managed services despite the loss of Ok Tedi in December 2023.
Those clients we've obviously brought in, and we've still got a number of other managed services clients that are contracted and will begin in the second half of the year that will continue to drive that revenue improvement. We've maintained a revenue split by industry consistent with where we were in the prior period, so that spreads there. Double-clicking into the point that Scott made earlier, our customer concentration of the top 10 is sitting pretty well. Pleasingly, we've got a couple of customers that are around the AUD 8 million mark, no customer above 10%. Pleasingly, we've seen a big growth in what we like to refer to as our fat middle with an increase in the number of customers we have that are sort of between AUD 1 million-AUD 5 million.
As Scott pointed out, having 20 customers above a million dollars is fantastic in the short period of time we've been listed. We continue to focus on and deliver on the cross-capabilities we have for the business and driving that share of wallet within the customer base, which continues to see that share and all the revenue per the premium brands being grown at that rate. Just walking that down into the current performance and where we are for the half and what our gross margin delivers on. Pleasingly, for the first half prior comparative period, we've held that flat at AUD 14 million for product and product-led services, improving in our margin to 39%.
We are seeing this is being driven by the data transformation projects and the unique IP we're delivering for our customer base, along with this is where our Toustone acquisition revenue streams point in that's done under their managed services component. We expect to see this continue to grow. We're seeing good demand for that data transformation piece. There's obviously still the macro conditions that drive that transition, and the movement of data and systems from on-prem to cloud is a big tailwind for us in that space. As I pointed out earlier, managed services is slightly down for the half versus prior comparative period. Obviously, with the loss of Ok Tedi, which was in the first half 2021, that was a circa AUD 3 million revenue contributor. To see that nearly recovered within the 12-month period is very good.
We're very happy with our momentum in our managed services clients and the revenue base. We've obviously got more to come in the second half, which should see us get to above the prior period's revenue for the year. As we called out earlier, a slight reduction in margin there as we've embedded and invested in those clients as we brought them on board. As you could imagine, bringing on four clients, all with three- to five-year contracts at the start and a further options on top of those, it's a worthwhile investment to make sure that that high-quality engagement's there with those clients. We expect to see that be repaid during the second half and into FY 2026 as we see additional advisory projects being worked on with those clients and an increased penetration through those businesses.
These are all very sizable businesses with large opportunities in the asset management space. Our big growth period has been in our advisory services. As we said, we've had strong growth in our asset management professional services and revenue across the area. This has really been an underpin of our growth over the period. Pleasingly, whilst we've had revenue growth, we've also improved our margin over the period as well. We are very happy with that momentum. Our focus is obviously, and as Scott pointed to before, this is a crucial go-to-market position for us. This has seen us open up new logos and new opportunities. We have seen that with a number of clients where we've come in through this door as our go-to-market action, and then that's turned into multi-million dollar projects that have happened over the preceding period.
We know this is a great space. Pleasingly, to have 11 new clients in that space is seeing that we're also diversifying the revenue base around that business as well. Just moving back to our strategy outlook, I'll pass back to Scott to talk about our priority investments.
Yeah, thanks, Anthony. What you'll notice if we go through to, I guess, our previous heat map in terms of the growth from both acquisition and investment, which changes slightly to be really our investment. What we're seeing now is our ability to co-innovate with our customer base is actually delivering new IP and new solutions we can take to market where we own the IP and the customer is part of the investment profile that pays for us to develop that.
I think if you think about the forward look for us, one is obviously embedding down and driving the revenue synergies across our existing acquisitions that have been made. Two, it's looking at opportunities to drive scale and growth within some of our key platform areas, so back to digital. I think ultimately it's about investing in embedding down new managed services, North American growth, and underpinning that by delivering it out of the Australian market, which has a lower cost of delivery with the foreign exchange rate. What I'll point you to now is just a little bit of a brief on the Toustone acquisition and kind of what does that mean to us and how does that fit into the strategy. Ultimately, look, data is fueling digital transformation revolution.
I think if you look at the combination between COSOL and Toustone, it really does position COSOL as a leader in this market. We're seeing immediate revenue synergies come out of that where there's ability to cross-sell and upsell the Toustone platform and capability, and we're expecting to deliver true value out of that over the next 12 to 18 months in particular. This just gives the graph on slide 12 actually just provides a little bit of insight as to the amount of data and what it means and how it drives to a predictive world in the future, which ultimately is going to reduce costs and drive productivity up for our customer base. Probably just a very, I'm just going to have two quick updates from a strategic growth perspective and probably an external market perspective, and then I'll open the floor if there's any questions.
A couple of quick updates on the strategic growth. A lot of this you've already heard. However, I think the organic growth in H1 really does set us up for growth in the second half and is really around how to extend those relationships with our blue- chip customers. Whilst our growth in asset management professional services and advisory was in the first half, we see that as a beachhead to expand. We're seeing that across multiple instances of our business today as we continue to grow out some of our key customers and deliver high-margin major projects in that space. What is our focus and what can you see? What can you look at from a business point of view to understand the future and where COSOL's going? I think a couple of key points here.
Growing number of customers that deliver over AUD 1 million annually. As we continue to do that, it diversifies our risk as a business, but also provides us with a mechanism to cross-sell and upsell our capabilities. We've talked a few numbers before: 11 new customers in our professional services space, 6 new EAM as a Service customers, 4 new managed services customers, and 3 new product-led digital transformation projects. For a half, that is very impressive for us and sets us up for growth, and we are expecting that to return significantly in the second half of the year. I think importantly, and whilst it's a very small part of our business right now and it's only kind of in the innovation aspect of its growth period, this AI data-infused data quality. This is going to revolutionize how people operate and how people deliver insights into their business.
We have AI conversational in our managed services. What does this really mean? It means the CFO can say, "How much did I pay in invoicing last month?" and the COSOL AI solution actually goes away, extracts that information, builds up the context around it, and delivers it to the CFO or the appropriate stakeholders here. I think this is, again, an example of where we are using AI to deliver value to customers, not AI to drive out cost or automation of our cost base. I think as we see that, we will continue to grow in that space, and customers continue to be sticking in with us moving forward. I am just going to finish quickly on one of the key things about COSOL that has always been attractive, it has always been a passion of mine, is around the size of the market opportunity as a business.
It is probably something that we have not spent a lot of time on, but I would refer you to slide 14 of the investor presentation. Particularly the size of the markets in which we operate. If you look at that in the context of the business that COSOL is today, it is just a significant opportunity which is driven by the tailwinds around migration to cloud, digital transformation, energy diversification, and energy transition across the globe. There are new assets being delivered around Australia and North America in particular. I will also point out the size of the market in the U.S. We are taking what is a pedigree that we have in the Australian market, and we have significant opportunity growing into the North American market. We have done that organically to date over the last four years.
We look to accelerate that and probably overlay potential acquisitions in that market to really capture that market as we're now seeing that we can demonstrate the ability to sell our unique IP and EAM as a Service, as well as RP Connect, etc., and platforms and Toustone into those US markets as they're relevant and add value to our customer base. I think if I was to sum up that as a macro perspective, I think we've got a significant amount of headroom in our existing customer base and net new customers in the markets we operate, which effectively are natural resources: utilities, power, water, storage, generation, distribution, transmission, public infrastructure, road, rail, ports, airports, and government defence. If you think about those critical infrastructure, think about all the common thread across those, it's about an asset-centric digital capability that delivers value to our customer base.
With that in mind, I might pause, and I think we've got a couple of minutes for questions.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Chris Savage from Bell Potter. Please go ahead.
Thanks. Hey, Scott. Hey, Anthony. Can I just focus a bit on the North America business? The revenue's been—forgive me if this is slightly negative—the revenue's been going down half on half, like 7% first half last year, 6.7% second half, 5.6% first half. Can you explain why that's been going down and when we could expect it to bottom and start growing again?
Yeah. Thanks, Chris. Fair question on that one in terms of the business over there. Obviously, a core component of that business is underpinned by the Hitachi managed services business. I think pleasingly what we've seen is improvement in our profit. So whilst our revenue PCP was down, our profit was actually flat for the period. What the model is there as an expansion process is they had a very large SAP data transformation project over those two halves that finished in the first half of FY 2024. That is what drove that project. We haven't picked up another SAP project in the first half this year. That is what drove the reduction in revenue. That was serviced predominantly between a mixture of contractors in the US and on-the-ground people in Australia.
We have actually won a project that's kicking off shortly in the U.S. back with that client and another data transformation project as well. We are seeing that revenue uptick in the second half. As we've talked about over a number of times, the focus there and the investment we've made is with two high executives from Australia who've been out there now for nearly two years building out the IBM capability. I think Scott pointed out there we've got six new clients in that IBM space. Eleven. I'm understating it. Even better. In that space, which those clients, whilst initially started a smaller revenue stream, again, we're talking about that business is probably for the first half would be 95% managed services revenue based, so predictable. It gives us an ability to grow.
There is a big space over there, and we're obviously super sensitive to projects, and that's what drove that revenue change. That's why we've been able to maintain an immediate VA contribution for them.
The revenue should increase in the second half for North America?
Yeah. The short story is, yes, the revenue will increase in the second half for North America.
Thanks, Anthony. That was obviously the flip side that the margin's been really good and improving. It was 30.6% in the first half. Can you maintain that going forward?
That will come down a bit when we get the projects in to a little degree, but we've been quite focused on that business. We've made it efficient so that we can flex as those projects came on.
We held a bench there as the project finished in the first half 2024 into the early part of the second half 2024. I would expect that margins will improve, and we anticipate the margins will improve in the North American business for the second half. Both revenue growth and margin improvement, it won't be quite as high as the first half margin.
Sure. Last question, maybe more for Scott. You caught out AUD 400,000-odd in acquisition costs in H1. Should we expect any in H2, or is that just dependent on whether you do another acquisition or not?
Look, I think, Chris, as you can probably understand from a business point of view, we've made a number of acquisitions and kind of three in quick succession.
I think what you can expect this half is we'll continue to look for acquisitions, but we don't expect to have that transaction cost in half two.
Good one. Thanks, guys. Cheers.
Thanks, Chris.
Thank you. Your next question comes from Gavin Allen from Euroz Hartleys. Please go ahead.
Good morning, guys. Excuse me. Thanks for the call, Simone. Just a couple from me. You mentioned that you had a number of customers now that deliver over sort of AUD 1 million annually, which seems like it's an important sort of evolution. What's a good target? What have you got now over AUD 1 million? If you're a AUD 150 million business at some point, let's just say, what's a good target for what's a good mix of customers over AUD 1 million?
Yeah, Gavin, look, I think it all depends. As we continue to grow, we're also seeing that those customers over AUD 5 million grow, which is significant for us as well. Look, I think if we're in the range of 30-40 from a million-dollar plus, we've got a number of customers that sit in that AUD 500,000-AUD 900,000. I think it's how do we—exploration would be the wrong word—how do we leverage that existing customer base to build out the million-dollar-plus customers? Again, probably 30-40 would be a sweet spot for us because over that, there's additional costs to manage those accounts as well. As you start to get into the AUD 5 million-AUD 6 million accounts, you really need to put some dedicated focus from us.
Yeah. Makes sense. You did talk about your sort of your 11 new asset management advisory services customers and the 6 new EAM SaaS customers. The new ones that you won during the first half, they give you the horsepower to drive the revenue change we're looking for in the second half on their own, or you still need to win a bit more work? How do we think about that?
I think you can think about from a customer base, we have enough opportunity and forward look through the pipeline and new customers that we acquired in the first half. Particularly around our managed services customers, we see organic growth in just farming and leveraging those existing managed services customers to be able to build out that revenue growth in the second half.
Yeah. Makes sense. All right. Thanks, guys. That's plenty for me. Cheers.
Cheers.
Thank you. There are no further questions at this time. I'll now hand back to Mr. McGowan for closing remarks.
Yeah. Thanks for that. Look, I think I'd just like to leave the group with we've had a solid performance in the first half. I think largely led in our digital business in terms of how we can exploit and leverage our existing customer base for growth. We're poised for significant growth in the second half and through FY 2026. That is just demonstrated by our focus and commitment to our customers and our people. I think what you can take away from this is as we continue to invest in our AI capabilities and our data and digital capabilities, you'll see significant new opportunities come through within our existing customer base. It is a pretty exciting time for COSOL. This digital transformation revolution is upon us. We're well placed to take advantage of that.
I think you'll see that in both the Australian region and North American region in half two and beyond. Thank you for your support. Thank you for your time this morning. We look forward to continuing the growth of COSOL and delivering value to our shareholders. Cheers.
Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.