A matter of housekeeping. David and Simon will undertake the presentation, and we will field questions at the end of that presentation. If you do have any questions, please use the Q&A box to fill those questions, and we'll happily accommodate the answers for that. Thank you for attending this morning, and I will pass over to David. Many thanks.
Thanks, Michael. Hello and welcome to Harmoney's third quarter 2026 trading update and presentation. I'm David Stevens, the CEO and Managing Director of Harmoney. With me today on the line is Simon Ward, our CFO, who'll be available to join me in answering your questions at the end of the presentation. Harmoney has continued to produce very strong performance across all our key metrics this quarter. With Stellare 2.0, we are continuing to seize a huge market opportunity we have in front of us, enabling us to reaffirm our financial year 2026 cash NPAT guidance of NZD 13 million. Now turning to Slide 2. Our outstanding performance in the year to date has provided the confidence to reaffirm our guidance of NZD 13 million cash NPAT, which we increased from NZD 12 million at the half year.
As you can see from the chart, this guidance represents 128% increase on last year's result and a phenomenal compound annual growth rate of 331% since FY 2024. This growth trajectory is driven by the continued impact of Stellare 2.0, which we expect to propel our year-end loan book to over NZD 900 million, at a net interest margin of around 10% and a risk-adjusted income of around 6%. Risk-adjusted income is our income after funding costs and actual credit losses and one of our core efficiency metrics. This is a clear reflection of the scalability of our platform and our team's ability to execute. Now turning to Slide 3. Now looking at the key year-to-date metrics driving our strong profit guidance. Our group loan book grew by 10% on the prior comparative period to NZD 879 million.
Even more impressive is that this headline growth masks even stronger underlying growth due to the suppressing effects of the current weak New Zealand dollar, which is at its lowest level in 12 years. Our Australian book has grown by an impressive 17% to NZD 544 million, now representing 62% of the total loan book, and our New Zealand loan book has grown by 9% in local currency to NZD 402 million. This strong momentum was driven by the enhanced efficiencies of our Stellare 2.0 platform, which lifted originations by 19% in Australia and over 50% in New Zealand in local currency. Our lending margins also remain exceptionally strong. Net interest margin on the loan book increased by 120 basis points to 10.3%, with new lending NIM continuing at over 10%.
Meanwhile, credit performance remains stable, with credit losses flat at 3.8% and our 90-plus day arrears continuing to improve to 0.62%, which remains at less than half of the industry average. The combination of higher NIM and stable credit losses increased our risk-adjusted income margin by 120 basis points to an impressive 6.5%. Finally, our high levels of automation continue to provide significant operating leverage, bringing our cost-to-income ratio down further to 18.2%, which remains exceptional for the industry. Now turning to Slide 4, and then onto Slide 5. I'd like to remind you of one of the most important aspects of our business model, our customer flywheel. When Harmoney acquires a customer, we're not thinking about a single transaction. We're thinking about an ongoing relationship that builds over time as customers' financing needs come and go. The data here tells a powerful story.
Our history shows that on average, our customers borrow an additional 150% after their initial loan. If someone takes out an NZD 18,000 loan initially, they subsequently come back for another NZD 27,000 over their lifetime with us. Here are the economics that matter. That first loan costs us around 5.6% in customer acquisition cost, or about NZD 1,000. Each time that customer returns, the cost of acquisition is near zero due to the existing direct relationship. This is pure margin expansion. On this slide, you can see the four interconnected stages of the Harmoney value flywheel, all powered by our Stellare platform. Let me talk briefly through how this creates compounding economics for Harmoney. Stage one, customer acquisition. We start with smart, targeted acquisition. Our algorithms work alongside Google's to identify prime customers who are actively looking for credit, people with strong credit histories and genuine intent.
We're using over 10 years of proprietary data to find exactly the right customers, and that precision is hard to replicate. Next, stage two, deliver experience. We next focus on delivering an experience that makes our customers want to come back. Minutes to apply, instant decision, and money in minutes. Generating a 4.8 out of 5-star rating with over 60,000 reviews. This isn't just good service. This is creating customer delight at scale through automation. Every interaction builds trust and increases the likelihood they will return. Stage three, customers returning. This is where it all happens. Because we already have a direct relationship with our customers, subsequent lending CAC is near zero, and so far, on average, customers come back for a further 150% of their loan value over time.
Because we've already covered our acquisition cost, the net income on every dollar of additional lending is nearly pure margin. Then finally, stage four, data intelligence. This stage is what makes the Harmoney flywheel truly defensible. With every loan, we generate more first-party data, which makes our AI and decision models better. Better models mean better decisions, lower losses, and the ability to approve more customers safely. It's a virtuous cycle that is hard for competitors to replicate. This isn't theory. These are actual results, and the beauty is the flywheel is accelerating with Stellare 2.0. Moving to slide six. Now let's take a look at how we're deliberately accelerating each stage of this flywheel over the remainder of this year and next financial year. First, the blue box, customer acquisition. We're expanding who we can safely serve.
Stellare 2.0 has already proven this with originations up 29% on the prior comparative period. We're using next-generation AI to approve more customers while maintaining credit quality. We've also started exploring embedded finance partnerships with auto marketplaces, which could open significant new acquisition channels. Second, the green box, deliver experience. We're increasing the value we capture per customer through our auto lending product. This isn't just adding a product, it's about becoming the primary lending partner for life events. When a customer needs a car loan, we want them thinking of Harmoney first. Early results are promising, with our vehicle loan book up 19% since this time last year. Third, the red box, customer returns. We're accelerating the velocity at which customers return by building a mobile app with one-click loan access and launching revolving credit to reduce friction when customers need additional funds. Finally, the yellow box, data intelligence.
We're investing in next-generation agentic AI for personalization at scale. Think of it as giving every customer their own private banker, automated, intelligent, and getting smarter with every interaction. Our proprietary first-party data creates a defensible AI advantage that's extremely difficult to replicate. A key insight here is that these initiatives are interconnected. Better AI means we can serve more customers. Multi-product households have higher lifetime value and lower churn. Faster return cycles mean better economics. It all compounds, and we're making significant progress on each one. Now turning to slide seven. Next, I wanted to provide an update on our innovative secured auto product, which leverages Stellare's money in seconds capabilities to provide customers with the flexibility to become a cash buyer, shopping with a competitive, pre-approved, secured credit line, not dependent on dealer finance options.
We view this product as a material incremental profit driver for the business, and our consumer education around this innovative offering is beginning to gain traction with our vehicle loan book growing strongly, achieving 19% growth over the prior comparative period. To support this strategic expansion, we've obtained a credit-approved term sheet from a Big Four Australian bank for a secured lending warehouse in New Zealand, which will unlock a lower cost of funds for our car loans. We are poised to accelerate this momentum even further, having onboarded a significant new auto partner in New Zealand in April 2026, which will be followed by a subsequent rollout in Australia in the next financial year. Now turning to slide eight. Concluding with a return to our Harmoney flywheel, what does it mean when we accelerate every stage of the flywheel simultaneously?
More customers joining, plus higher lifetime value per customer, plus faster velocity between loans, equals exceptional profit growth. This combined effect accelerates our profit growth and gives us the absolute confidence to reaffirm our FY 2026 guidance of a loan book of over NZD 900 million, delivering NZD 30 million Cash NPAT, and our first half return on equity of 31%, which is what happens when you combine margin expansion with capital efficiency. I want you to think beyond FY 2026. We've shown over 300% growth in cash profit over the past 3 years. With the flywheel accelerating, with Stellare 2.0 fully deployed, with our auto product scaling, we have a clear line of sight to continue strong profit growth, all while maintaining credit quality and being able to fund growth from reinvested profits.
When I talk about accelerating the flywheel, I'm talking about driving the business to even higher profit levels over the next few years. The foundations are in place. The technology is proven. The unit economics are compelling, and we're executing. At this level of profitability demonstrated and a clear pathway for expansion, the board and management believe that Harmoney's shares remain undervalued at current levels, and therefore, it's in the best interest of shareholders to extend its on-market share buyback program beyond the current expiry date of the 29th of April, 2026. This buyback will be extended for a further 12 months, ending no later than the 29th of April, 2027. That concludes the results presentation for today. We'll now turn to answering your questions. Just a reminder, you can submit a question at the bottom of your screen. Thank you.
We'll just pause there for questions to come through, [David Hanson. Okay, actually, we'll address the question on auto. Would you address the portfolio weighting parameters around motor vehicles?
I think the question around the portfolio weighting, look, obviously it's a small percentage of our book currently, but we see that as being a, you know, I've used the words, you know, a significant and material part of the business going forward. Yeah, that's sort of our expectation, that it'll become a, you know, a material part of the Harmoney book. You know, we're only just really getting it going, but you can see we're already up 19% loan book growth in that segment. We expect the acceleration to really commence as we bring on these new partners that I mentioned.
Question around probably the total addressable market. Obviously there's some peers out there that have third-party relationships. David, has there been any external interest in relation to partnerships to support Harmoney's growth, either from a, you know, direct or equity level?
Yeah, look. You're right, the market is huge and as I mentioned, we're just bringing on a significant partner in New Zealand this month. Looking to bring more on. At this stage, there's no sort of equity tie-ups or things like that. Obviously I'm always open to looking at things like that, but certainly at this stage, you know, we're not doing that.
Maybe some questions around the Kiwi market in relation to whether the company is actually sort of taking share in New Zealand or sort of the pie is getting larger to drive that loan book growth. Maybe if you can give some color around that and also just around, you know, the growth opportunity obviously in New Zealand.
Yeah. Well, I received the Equifax report only yesterday around the inquiry. Inquiry is up in single digits year-on-year in the personal loan space. The market is starting to recover in that respect. Obviously we are, you know, we're 50% up on originations in New Zealand, but yeah, that's really off the back of us taking some more market share because our platform, you know, we've only launched last July in New Zealand. You know, that's obviously having a combination of yes, taking some market share and obviously the market improving in the space a little bit as well.
Got a question around the long-term incentive plan, David, and more around the TSR, being fully vested, you know, to be in the top 25% of the [Small Ords]. Probably questions around that structure, whether it's, you know, a metric of the capitalization or whether there's any further complexity to it.
Oh, look, quite simply, we have to be in the top 25% of companies over a period of time, I think from July last year through to. It's the three different tranches that vest for another two years from that point and another three to four years from that point. It's relative-based, so it needs to be in the top 25% of companies in that index for the full vesting to occur.
Another question just from [Aubernet], just around commentary coming out of the Reserve Bank of New Zealand in relation to near-term inflation risks driven by obviously fuel and energy coming out of, you know, driven by the Middle East conflict. The question is whether you're seeing any sort of early signs of stress in borrower repayments or arrears. Obviously, the numbers you've put out, David, this morning are pretty compelling. I'll let you add further to that.
Yeah, look, the short answer is no. We haven't seen. You can see our numbers and they're our, you know, very flat. The losses are flat at 3.8%. The 90-day arrears are flat or just slightly improved. You know, there's not really any mix going on between Australia and New Zealand either. It's been quite consistent. There's still the unemployment rate's really low. New Zealand's still, I think it's 5.4%, the latest numbers. You know, I think sometimes New Zealand gets a bit of a poor media coverage in Australia. I see that, obviously, living across both countries. You know, you, it's still, you know, we're not seeing that at all.
Obviously, we, you know, in applications in the last month or two, we've seen customers, you know, it's more expensive. People, you know, buying fuel, it's more expensive than what it was. There's maybe a little bit less surplus cash to pay loans. But, you know, when we're looking at new applications, people make it work. People, you know. As I said, employment is still very high across both countries and people find a way to make it work. I use the example that three years ago, everyone thought there's going to be defaults everywhere in mortgages. There was this huge mortgage cliff coming when interest rates were going from 2%-6%. People absorbed that and made it work. We don't even talk about it anymore because it was one of those things that never really happened.
I think this time, again, people find a way to make it work. Those ones out there that don't, we'll work with them too through hardship provisions and the like that we're required to do under the legislation. We're really pleased where those numbers are coming out.
Right. Obviously, the next question, very similar line of questioning just about NZ unemployment. I will direct the question to your mobile app and the timing of that release, David.
Yeah. That'll be likely first half, next financial year. Second half of this calendar year.
Just any trends that you're seeing. I know you're obviously spending extensive time with Google in recent times, but around SEO, customer acquisition costs, and the like, inflation around keywords, which obviously may or may not be relevant here. Yeah, just your learnings from-
Yeah. Look, we've got a pretty sophisticated model that we've been using for Google for about 10, 12 years. We haven't seen much change at all in that space. Obviously, people are using AI Overviews and ChatGPT and Gemini and Claude and all that stuff, ways to find and research things on the internet now. Still clicking through to our ads. Our ads just aren't coming up through search. We were never a big player in SEO. We got most of ours through the paid advertising. You can see our acquisition costs and the like are still very consistent, and I think that comes about because we actually buy pretty smart. We're not just throwing up ads and AdWords to everyone that's using the internet or everyone that's searching on ChatGPT or the like.
Yeah, look, we haven't seen much change, and that's been consistent for years now. You would think that if the LLMs were having an impact. I should imagine most people on this call are using these things every day. You would think that that would have had an impact already, and we haven't seen it. We're obviously adjusting our models, so we're more highly relevant on those, and obviously the 10-12 years' worth of data intelligence that we've got on that is being used to do that. Yeah. I guess the truth's in the numbers and we're not seeing any real change there as far as how we originate, the cost for us to originate, I should say.
A question about the revolving loan product. Any timeline for release of that product?
Yeah. That'll be financial year 2027. I'm not sure yet whether it'll be first half or second half.
Mm.
Just a priority call on some other things we're working on.
Sure. Question around corporate debt refinancing. Obviously, we saw a refi done December last year. A question about any sort of further scope or timelines around any refis down the pipe.
No. Look, that's what I call a platinum facility. It's with a Big Four bank, a very competitive rate. It's a three year term, which we'd be looking to roll over probably 12 months out. It's effectively like a, think of it as an overdraft facility in some ways. It's not required to be drawn like a lot of credit funds require. It just gives us some extra capital there. Look, we only just set it in December. It's not front of mind at all. I don't think I could do any better than what we've got there as well. Yeah, there's no look to that. Obviously, our warehouses come up for renewal all throughout the year, or years I should say. We renew them as they go, and we've been doing that since we changed the business from peer-to-peer in 2020.
Thanks, David. There's a question around white labeling the tech. Is there any sort of consideration around white labeling Harmoney's product?
No. Look, I've had that question before, and it's not a bad question. We're focused on our core strength, and that's lending in Australia and New Zealand. Having an IT helpdesk facilitating software, being out to other third parties is just not something that we see as being a core competency of ours or something that we need to do to grow this business into what we want it to.
A question on the auto market, on secured autos. Any learnings from the early experience in relation to the launch, David? What's sort of exciting you from a consumer aspect, and have there been any challenges that you've seen to date?
Yeah, look, I think because our product is different to what's currently in the market, you actually become a cash buyer. You actually get the cash before you go into the dealer. Or if you're going for a private sale, you already have the cash. That's very relevant, our product for private sales. People that get it and use it, they love it because it's so easy. I was only talking to a friend the other day that used the product and just by chance, and that they ended up, they weren't doing it, using us initially, but they were trying to get a security released, and it was a private sale, and they were having trouble getting that, and the bank wouldn't give them the money until they got that released, and it was sort of a chicken and egg scenario.
With our product, that was easy because they could buy the car with the money. The security would then come off on the sale, and they could go and register the security after they owned it within 60 days. It's getting that knowledge out there. I think we're getting better at it, but it does require that. When I explain the product features to pretty much everyone I have to, everyone thinks it's a great product and it works really well. You've got to get that education and knowledge through, which has probably been the slower part, I suppose, of the rollout. The product itself actually works well and the tech around it.
A question here, in relation to your peers and their performance. Are they experiencing similar growth levels, or is Harmoney sort of outperforming them on a relative basis?
Yeah, look, yeah, obviously, there's been some side-by-side analysis done. I think it's even on our website by Trim Capital. That's probably the best way for yourselves to look at that. Look, I feel the flywheel that we talk about in our platform. I think we have a very scalable business, and we have a truly profitable business. You can see our Cash NPAT and our Statutory NPAT are both, so at the half year, they're aligned. We're not sort of making up profit numbers by different definitions. I think that's something to really call out. We're writing the book at good margins as well, and doing at a really good return on equity. I'll leave that. I don't want to really talk about our peers per se, because they've always got their own stories.
I think our numbers are really strong, and I think when you look at that side-by-side analysis, I'll let you make your own mind up.
Just to reiterate that, on the Harmoney website, there has been a recent research piece done by Trim Capital, doing a peer review on Harmoney's listed peers. I would obviously encourage you to have a look at that, and Trim Capital regularly does update that on a more mark-to-market basis. I'm sure there will be further work done on that in time. A question around weighting motor vehicles. I suppose the question I think where an investor's coming from, David, is what could you see auto being as a percentage of contributed profitability to Harmoney as a group?
Look, the auto space is large, both in Australia and New Zealand. We can see that. We talked about peers earlier. A lot of them are in the car space, and it's actually the majority of their loan books because the market size is bigger. There's nothing to say we couldn't have a similar pathway. I suppose the important thing I want to really reiterate here is the motor vehicle is another product segment for us, I suppose. We see significant growth in the unsecured personal loan product as well. This is now about, because we have a platform where we can go broader, why we're focusing on that now. Look, it could be over half the book, but I'm not going to give any sort of. Because it is a market that's probably two or three times the size of the unsecured personal loan book.
That's why we're excited about it. That's the reason we built this platform, was to be able to push harder into some of these markets. You can see we've signed a big partner in New Zealand now. This month we've got more to come. We're also doing it in Australia as well. It'll be big. We're going to do it right. We're not going to rush it. We make sure we get this right. We're lending on the same scorecard as our unsecured scorecard, just with a pricing difference. We're not taking on any extra credit risk. If anything, it's slightly less because there's security behind it as well. We're very confident about this.
A question here from Jonathan. Just wondering whether you could provide insight into tracking new loan risk in this uncertain environment, and when will we see the true creditworthiness of recently originated loans, and how does the company actually track that?
Yeah. Look, we don't present this to the market, obviously, because it's complicated. We track it on what's called a vintage or static loss basis. What that means, I'll try to summarize this the best I can. We track every loan on how it's performed one month in, two months in, three months in, et cetera, and we look at that over a 10-year period. If we start to see the curve, if you like, you are getting more arrears or losses happening at month one than I did in month one for the last 10 years, or, and then month two, et cetera, that's when we start to notice if there's something going on. This is well before a loan goes to write-off, or loss or whatever. We track that very closely. That's something we have in our monthly reporting.
I should imagine most credible credit businesses would be doing that. That's how we track the business by doing that since here, we used to do that back at FlexiGroup and the like. It's the true way to manage losses. We see that. Look, our loans really run about two and a half years, so they're not seven-year. Even though they might be five or seven-year loans they're written on, people don't take the loan out for that long. We get a really good gauge on it. We look at first payment dishonors. There's many things we look across there, and we're not seeing that. As I said, we probably see a little bit more in the applications where obviously the last month or two, there's been a little bit more cautiousness. People have obviously had more expense coming through.
Petrol's a huge cost to most households. Yeah, look, as I said before, using that example from the mortgage cliff, people find a way to make it work. We're not seeing any change to those curves.
Thanks, David. A question here, probably more from a macro, is whether Harmoney have made any sort of forward looking at economic overlays on credit provisions for obviously the oil crisis at the moment, like what NAB have recently announced. Obviously given transport fuel and probably expected food price increases coming through.
Yeah, look, not as such. We're not seeing that in any of our numbers. We do have a macro overlay, in our provision anyway. Obviously, we didn't know the oil shock was coming, obviously, but there's always something seems to be coming. We'll assess that particularly at year-end. Look, I think that what we have in there would be sufficient, but obviously I don't have a crystal ball either. We'll continue to monitor that.
With the recent rise in interest rates, has that led to any sort of pickup on new lending inquiries from potential customers shopping around product, David?
Look, no, not really. We saw the first couple of weeks of March be a little bit softer when the Iran war broke out. I think people were a bit uncertain, so we saw less inquiry coming through. Look, I think customers will always shop around to some degree, whether it's interest rates going up, going down, staying flat. We haven't really seen any change there.
Sure. A question around the auto product. Have you seen increased inquiries with obviously a significant movement in fuel prices, whether people are shopping around for more fuel-efficient vehicles, EVs, to upgrade to, David?
Look, I'd honestly be guessing at that. We're obviously seeing more inquiries. We don't look necessarily at what vehicle they're getting. Again, we're assessing them for an amount. We're not necessarily looking at if it's an EV or if it's a cut combustion engine or the like. Yeah, look, I wouldn't have necessarily the right answer for that one.
Yep. What does the average customer look like? Obviously from a profile perspective, what is the use of the loan, and has it actually changed over time?
Yeah, look, if you look at our half-year results or our full year, we put in the appendix the answer to this every time. You could almost drop the pie charts over one another over the last half. How many half years we listed for now? What, six half years and six full years, so 12. You'd be able to see it hasn't changed that much. That's your best point of reference, for that average age customers, mid-40s, average loan size, NZD 20,000, using for a number of different purposes. Basically, full-time employed in office, trade roles, that sort of thing. Encourage you to look at that slide in our appendix in all our presentations, because that'll give you a detailed answer.
Okay. Coming down to a few more questions. Just a question trending on gross yields across the market, given the recent moves in interest rates.
Yeah, look, I guess we've got two things. New Zealand's rates haven't really moved. Certainly not the cash rate. Obviously, swap rates move around a little bit. Australia, look, we've gone up, what, 50 basis points or so. We're not a mortgage book, so we're not really hanging on to every basis point makes a huge difference. We look at our pricing. Obviously, customers are more open to pricing going up because they hear it in the market. We borrow off the swap curves anyway, the two-year swap rates. Look, we look at our margins on a, I wouldn't say on a daily basis, but close to it. We look to see that we're getting the returns that we seek, which is we target a 9%-10% NIM. We target risk-adjusted income around 6%.
As long as we're achieving around that level, we feel our pricing is right.
There's a question around the share buyback here. I probably think the company does not provide guidance to this, but the question is down to what ROI would the company buy shares?
Yeah, look, I think you've answered the question for me, Michael. I can't state that. Under the law, we're required to only buy shares at certain VWAPs and things like that. Yeah, we monitor that, and obviously, when we feel appropriate, we instruct our broker to buy shares in accordance with the law.
Okay. We just might pause there for any further questions to come through. While we're waiting for that, this presentation actually has been recorded, and the company will provide this recording on the website in the coming days. David, I think we've probably exhausted the Q&A.
Right
section of this presentation, so I would pass back to you for any closing remarks that you'd like to make.
Yeah. Thanks, Michael. Look, thanks for everyone's interest today and for all the detailed questions. If you've got any questions following the meeting, please send them through Investor Hub and we'll do our best to get back to you as soon as we can. Thank you, everyone. Have a great day.
Thank you very much.