We're standing by and welcome to the Hansen Technologies Limited Half Year 2026 Results Briefing. 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. Andrew Hansen, MD and CEO. Please go ahead.
Good morning, everyone, and welcome to our results presentation. You've got myself here today, along with Richard English, our CFO, and also Peter Beamsley, our head of IR. We'll just work through just some housekeeping matters, everyone. If we do experience any technical difficulty, we'll just take a short break and recommence, and we'll be running questions at the end of the session. So let's just get straight into it, which is probably the financial highlights of the year. Geez, it's always great to present to everyone what has been a fantastic first half of financial year. Uplift there of 7.3 receipts, both verticals contributing positively across the organization. A bit of a breakdown.
Certainly, EMEA is our stronger performing region, certainly delivering a broad-based, forward-based growth across the business and a healthy pipeline as we go forward. I know our communication and media vertical did deliver double-digital growth of about 13.5 in the first half, and certainly supported by some really good wins, et cetera, and reinforce our position as a tier one provider. Utilities and energy vertical, positive as well. Certainly, EMEA also contributed positively with 9.4% growth, and that's probably a bit of a focus on the EMEA region for us. And probably a bit of destabilization in the Americas, which we all understand at the moment now. AUD 5.7 million, that's a 46.1 increase over the previous corresponding period. Similarly, for EBITDA margin at 29.2%.
And the thing with probably most people, Hansen has always been that cash-based organization, increasing to AUD 68.8 over AUD 49.3. And then, consequently, our NPAT also increased by 142% compared to the previous corresponding period. So it does reflect the high quality, the benefits, which I think, Hansen now, in its 26th year being a listed entity, that strong discipline around cost management. Along with operational improvements and productivity gains, we certainly see further opportunities for margin gain, which I'll probably cover off a little bit in the next couple. Hansen and AI.
Guys, we all understand we've been talking for the last couple of years about what we're doing in AI, and I know a number of you actually go on site to our websites, and you see our wins, and you see what we're actually talking about. So I think it's probably important to understand that AI is well entrenched and embedded in the Hansen business. Like probably many established companies, this is not our first rodeo, if you think in terms of navigating changes over the decades, and we've very successfully, along with all the big names in SAP and Microsoft, we've actually moved from things like mainframes, client server. We've navigated into the internet, we've navigated COVID, et cetera, and AI is no different to that.
AI is not a concept inside Hansen. It is a structural shift, and we are early adopters in it. If you think of Copilot, which is the coding used by programmers, has been installed in Hansen for over 2.5 years now. It's important to understand we're not trying to retrofit AI into our business. We have. Now, this gets a bit technical. It's called RAG, which is Retrieval Augmented Generation. And to probably best explain that is to understand our business, we're the custodians and sit across key data. And just trying to dumb it down as much as possible, it's a bit like you are using AI to ask a question in the internet versus asking a question with very specific data around your customers.
So we sit at the very heart of the customers, whether it be their call records or usage, their payment records. So we use AI based on exact data rather than asking. So it's quite a barrier when we are actually the custodians of that data. And because we're not retrofitting it, it means we can use that domain expertise because we're deeply embedded in our customers and our customers' relationships, and certainly strengthen us. AI is now embedded in our business now across day-to-day workflows. Not only that's the only - the way into which we retrieve data, but we make changes, how we do engineering. It also works the whole way through sales and delivery. And we are certainly internally much faster execution, particularly speed to market.
So when you're talking a highly regulated market, when people are still making massive changes, trying to be fresh and new to the marketplace, we're actually hitting the ground running much faster than we historically have been. So AI has been fantastic as far as that's concerned. The advantage, which I talked about, is that measurable productivity and that big data which we're involved in, because we've got decades of data to which we can retrieve from and looking at it. And it is that key advantage Hansen has. We also deliver high-value AI outcomes. It's actually, it's meaningful data to someone rather than there's no hallucination which takes place with AI at the moment now. We're certainly expanding our AI centers.
We have two centers at the moment now, which is actually just specific where AI products are being defined, which is actually in California and London. Mainly in those locations because it's-- These aren't people which have been in the industry for the, we're doing it 10 or 20 years ago. This is actually new and emerging. On top of that, we developed what our, our AI champion network inside our business, and we do things which are called hackathons, where we bring all our technical people together, and our technical people find new ways and quicker ways of doing it, which we actually roll out in our business. It's important to understand, guys, AI, we've moved well, but beyond experimentation, this is actually real. We now have 8 products using. I'll go into some of those in a moment now.
But once again, we're addressing real customer problems at the moment now and able to find a clear ROI, and probably like a lot of organizations, but where our absolute focus is, is how are we adding more to our customers? It's a bit like buying a car, and we're throwing in lane change or climate control. We're actually putting more and more around our products to actually deliver greater value to our customers from where we are. We do have a clear AI strategy because it's, we have this unique data. We have this strong balance sheet inside the business, so we, we will continue to invest because we see fantastic opportunities for someone like Hansen in the marketplace. It is embedded, it's commercial, and it's already contributing to our business going forward. Turn to slide 15.
Just some of, I'll just run over the top of these, because these, certainly some of our AI solutions are more relative to our customers and the way they see it. Products, and certainly, more, some more. And these aren't pilots; they're already, already embedded in it. We have a trading application, and, the, the trading application actually uses predictive intelligence to look at the, the predicted consumptions of power, and it helps our, our customers using our trade product futures in the marketplace, and so therefore, better contracts and more money for them. We have Agentic IVR, replace improving first contact. When someone rings up, they can direct the call where it best goes to. But then you've got the next one that goes to a workflow and exceptions, which helps resolving issues because of the deep set of history.
Because once again, with RAG, we've got the knowledge of calls coming in the past, and we've got that history. We also won as we go forward, and certainly in Europe, in the Nordic region, we're behind the meter where people have solar, EV cars, all these meters now. And what AI to help orchestrate how the best utilization of that stored asset and how it directs where the power gets taken from. Product catalog, trying to use natural language, in other words, simpler questions and rather than coding for people to get products to market much quicker than they used to. EV charging stations. It's a little bit like the first one, but it means that in-home, where to actually charge their car or use the battery themselves rather than going to the marketplace.
Even in Australia here, there's a number of energy companies which provide opportunities now for where you can actually wholesale your power back to them because we know the feed-in tariffs are so low at the moment now. It's a natural, and once you're on our website, it will show you, you're actually talking to a machine now, answering your questions. Why? Because with AI, we're able to have the history, similar situations, et cetera. And once again, that whole RAG technology built into our software, it's just looking at our data and that history of that data going forward. So taken together, we're already embedded. It is contributing, but it's certainly reinforcing our longing for 2.5+ years now, at the moment now.
If we think about AI once again and keep on talking about it, but I think there's a number of people who truly want to understand it. We understand AI is shaking up the software industry. We understand everyone seems to be AI into their name, et cetera. But we're using AI in a RAG situation with the deep history and knowledge of our customers and all their data sitting there at the moment now. We know our systems are very complex, highly regulated, and integration-heavy environments because they have to comply with rules and regulations. Hansen works very hard to add as much value as we possibly can to all of our customers as they go forward. And we are embedded. We are, you know, the domain. We sit at the center of that great big data lake of information as it goes forward.
Because we're the database of record and that source of truth, and certainly compliance, it's really important to understand Hansen's role going forward with our customers is actually more deeply entrenched than it probably ever has before. These systems are complex because changing over a vendor or a customer, in our case, sometimes takes years, but then you lose that deep history. So customers now understand to, to look at the buying patterns, change patterns, usage patterns over a long period of time, helps them predict their business going forward. So eroding decades of logic and meeting inflows, et cetera, becomes, could become detrimental to them at the moment now. But rather than rely on that as some sort of heavy moat, we're trying to add value to that moat, which is why people actually entrusting us moving forward.
There is no doubt, our ability to code now is much, much quicker. The last number of calls on this, you've heard me talk about subject matter expertise. Hansen is promoting very heavily subject matter expertise, that deep understanding of the industry, the compliance, and the data to move forward. Our customers don't wish to gamble away, which affects their revenue, their infrastructure, or that absolute trust for their citizens and their compliance. Because we're not a generic SaaS organization. We have always and will continue to be this mission-critical lifeblood of hundreds of organizations around the world. That's our quick talk on AI. I hope it's helped a little bit to explain what RAG and LLM stands for and how it actually works. Richard, if I could hand over you to look more in detail, please.
Thanks, Andrew, and thanks everyone for joining the call. I think you can hear the passion in Andrew's voice. We are taking the AI journey very seriously, and you'll see from our slide pack that we have already a lot of products in market and revenue generating. So let me walk you through the financial slides, and I've got a few key points to make as I move through them, and I'll draw your attention to those as we go. Top line growth, 7.3% growth year-on-year. Admittedly, last year, the first half was softer than the second half, and you can see there that last year we did AUD 178 million versus AUD 215 million in the second half.
But nonetheless, AUD 191 million of revenue growth, again, driven out of EMEA, and you'll see in our slide pack that EMEA now represents over 70% of our business. It is the growth engine of Hansen. We've also made a recent acquisition into EMEA with Digitalk, so, it continues. There's been a lot of talk in the market around FX and the impact of FX on revenue, and for companies like Hansen, of course, we are exposed overseas. We had some modest FX tailwinds, immaterial, but the Aussie dollar was depressed against the four key currencies that we deal in, being the Canadian dollar.
But you would have seen in recent, probably two to three weeks, the Aussie has strengthened, and we're now expecting a fairly modest full-year FX headwind at the top line, and I'll talk to what that means on a cost base shortly. They won't be material, but there might be a small headwind based on the current spot rates. Andrew will talk shortly to the full-year numbers, but we've done AUD 191 million in the first half, and we are expecting our second half to be stronger than that, which is very, very positive. But moving on to probably just as an important metric for us is around our profitability and underlying EBITDA. This is one of the key points to mention.
The EBITDA performance is particularly solid. Our margin is 29.2% in the half versus 21% at the same time last year. So you can see a material step up in our second half numbers. Andrew talked to AI initiatives, speed to market, productivity gains. You can see in our numbers, it's absolutely clear across all of our delivery function and in fact, all of our corporate services function as well. And there are legitimate productivity gains that are, that are evident in the first half and will continue to be so over the next 12-24 months at least. Moving down to underlying NPAT, look, it's a, it's a reflection of the underlying EBITDA going up. Obviously, NPAT is up. Income tax rate, 26.2%.
I think for the second half of the year, it'll be around the 25%-26% mark. And then finally, on Cash EBITDA, which really is the key metric for us. This is profitability excluding R&D, capitalized from an accounting standpoint. 16% Cash EBITDA margin last year, jumping to 26% this year. So we are well and truly back on margins that we have talked to the market for many years. We are heading towards 30%+ , and Andrew will talk to that shortly. In terms of FX, so I mentioned the FX tailwinds in the first half from a revenue standpoint and the headwind in the second half. That's obviously negated on the cost base.
So for those that know Hansen, we have a lot of our costs sitting overseas in areas where GBP, euro, Canadian dollar jurisdictions. So the strengthening of the, of the Aussie dollar actually assists in reducing that cost base. So from a, from a group standpoint, the, the FX is probably not a material issue for Hansen coming into the full year results. R&D perspective, we disclosed in, in recent times, our R&D expense and capitalized, and for the first half, we expensed or all capitalized approximately AUD 15 million of R&D or 8% of our turnover, and a significant portion of that is now going directly into our AI applications tool sets, as, as Andrew walked you through before. You can see we've been busy over the last six months. Moving on to the next slide.
I think everybody's probably sick of hearing me talk about our diversification, but it's, it's real, it's genuine. We have now over 700 customers, multiple products, two mission-critical verticals. We operate in three regions, and we invoice in over 20 different currencies. So, diversification is key to us being predictable, bulletproof, and robust during, I think we all agree, some interesting times around the world. In terms of the diversity, you've got the EMEA region now representing 72% of revenue turnover. That will increase as the year progresses with Digitalk coming into the business from the first of January. But on the flip side, energy is currently 57% of the revenue turnover. That will naturally reduce as Digitalk rolls into the comms division for the second half.
We expect at this stage, it'll probably deliver another or a circa AUD 10 million contribution, AUD 10 or 11 million contribution to the second half from Digitalk. But my second key point is around support and maintenance. This is really key for us. You know, support and maintenance is the predictable, profitable backbone of this business, and you can see here the material step up in the first half of 2026, and more importantly, over the last three years. CAGR growth of 18% in three years on our support and maintenance, lucrative, predictable on the first half of 2025. That's off the back of rolling out implementations that have now rolled into ongoing support and maintenance contracts. We've also renegotiated with several...
It's a really important point, and I'm glad it hasn't been missed in the community that this is a sign of a very strong business, that support and maintenance is continuing to grow. Finally, on license revenue, there's often a lot of talk around Hansen and licenses. This year will be a low license revenue year. We expect it to be no more than 8%-10% of revenue turnover. You can see the large uplift in license fees last year, where we had some big wins. We had a VMO2 license deal land in the second half of FY 2025. But this year the number will be substantially lower.
I think that goes to the point that we are delivering, and we are expecting to deliver margins of around 30%, and that's with a much lower license revenue cadence for the year. So I think that's important to draw out.... Cool. So communications and media. Andrew talked to the growth, 13.5% year-on-year. Again, EMEA, we're doing some really great things over there in EMEA, and it continues to be a source of growth for the business. We also excluding Digitalk, we think the comms and media business will be growing half-on-half into the second half of the year. We had Scott Weir, our President, here this week. He presented to the board his pipeline, and there are some sizable opportunities out there.
So we are optimistic that this momentum can continue into FY 2027 as well. Bottom left-hand corner, you can see the license revenues. I just touched on that. You can see the AUD 29 million in second half 2025, primarily VMO2 and a few other licenses. But I will say that our second half 2026, we're expecting license fees to be slightly... Overall, if you look at the contribution margin on the or the table on the right-hand side, this is the perfect the perfect sort of table to illustrate what we're doing here. So we're growing the top line 13.5%, and we're maintaining and actually reducing our cost base by 3.2%.
That, of course, results in contribution margin expanding from 48 to—Talk the talk for a while now about utilizing AI and other applications to drive efficiencies, and you're seeing it in our business now. Moving on to the next slide, to energy and utilities. You can see here the business is up 3% year-on-year. You know, the energy business has been through a transition over the last few years in Nordics with the energy transformation, digital transformation. They are leading the charge globally on what happens. We are front and center in the Nordics, and we are taking our learnings. More recently, we rolled out one of our applications from Finland into the North American market. So we're taking our best in breed products and expanding them globally.
Significant, but what is something worth highlighting is the margin expansion, and we're going from 13% last year to 42% this year. And again, revenue growth of 3% and cost control, with costs coming down 11% year on year. Again, I talked to pipeline, David Castry, our President for Energy and Utilities. He has a very solid pipeline. He's actually expanding that pipeline into parts of North America, and there's a lot of activity happening in that market with the municipalities. And more recently, we expanded into new regions. We won a deal in Lithuania and looking at other opportunities in the Baltics as well. So the business is doing well from an energy standpoint and obviously from a profitability standpoint as well. Moving on to what is my third key point to draw out.
So I've talked to the margin expansion, our support and maintenance uplift, but our third point is around cash generation, and that's the reason we're in business. We are generating a substantial amount of cash in the first half of the year. The headline number of 418% seems hard to believe, and I'll just break it down a little easier for you. Operating cash flow is AUD 54 million in the first half versus AUD 10 million at the same time last year. Remembering last year, we had some buildup of working capital. We also had the restructuring cost of PowerCloud and other funding that went through the business. Not exactly an apples with apples comparison, but this has been a particularly strong first half cash generation for us. I mentioned before the R&D investment.
Obviously, we acquired Digitalk, net of cash, for AUD 65 million, and that closed on the 31st of December. We also paid out a dividend of AUD 1 million. Then finally, and really importantly, leading to the next slide, we paid down about AUD 30 million of debt. So I think from a cash generation standpoint, this has been one of our strongest halves in many years. Finally, on to the balance sheet and leverage. So off the back of the acquisition of Digitalk, our leverage ratio right now is 0.4, and it's actually declining as we head into the second half of the year. I expect our position will be net cash positive at some stage in FY 2027. We're going to be paying down further debt.
We've paid down more debt in the month of January, and this, of course, is a dividend coming up in March. We're paying out another circa AUD 10 million of dividends in, in March. So that brings our dividends paid out to our loyal shareholders to AUD 71 million in the last three years. So we're in a very strong position to, to do further acquisitions. You know, there's a lot happening in the market right now with valuations for tech companies. We're not going to change our thesis. We are buying very patiently, very prudently. The valuation is obviously very important to us, but to be in a position where we're sitting with a leverage ratio of 0.4, right off the back of a, of an acquisition is, is a, is a great place to be.
So I hope I've drawn out the three key points for me. We've got some strong margin expansion and increasing to the second half. The support and maintenance, which is the rump of the business, the backbone of the business, is accelerating, and we are highly cash generative. Over to you, Andrew.
Richard, thank you. Mate, even I'm slightly amazed when you talk about how much we provide our own working capital, use capital to buying businesses. It's amazing. So thank you, Richard, for your your fiscal management. I just want to touch on Digitalk just for a moment, because it is a new acquisition, even though we've spoken to everyone about it. But we did complete that, as Richard said, the 31st of December. It is a great business, with some great managers sitting in the business, and I think we already alluded to that the founder of the business, after 30 years, used this as an opportunity to retire. And we're still transitioning Digitalk under the Hansen unified brand strategy. At the moment now, it's very good customers, strong customer retention.
Where we're seeing is some cross-selling opportunities, but I think the thesis when we actually did that deal was based on what Hansen brings to the table. That's a small business up in Milton Keynes in UK, with global customers, and what we're able to do is help expand that reach by utilizing our language and culture around the world. So we're very, very optimistic of how that's actually going, and we truly believe that global reach. On top of it, we advanced on AI. The fact that we can come in on things like AI and help with Digitalk actually move their products forward, probably leans a little bit more into- we think about things that we have to buy well. We've always bought well, and we've always traded on Hansen's key assets, which is our know-how, et cetera.
I think going forward, we would find other opportunities like a Digitalk to take advantage. So it's a great one, and we certainly welcome all the Digitalk team to the Hansen brand. We certainly keep on looking at other verticals. I know we talked about it, but I'd probably like to be rewarded for not doing some acquisitions. We've always tried to find where Hansen can add value, and where it's not just be one deal or one transaction in isolation as an island. We want to move forward, but we're heavy into it. In fact, we've actually team members in our M&A team now in our European office. So we welcome them to the thing going forward.
Look, turning to outlook, as we expect our second half revenue to be higher than the first half, and we're certainly targeting full year EBITDA margin of approximately 30%. We told you a couple of years ago we would climb there, and we certainly are. We also note that the achieving long-term, Hansen's always had a long-term view of running out, really about the predictable, the execution, the tailwinds. So as far as the first one, that's visibility, that's the recurring revenues from our customers and the high level of predictability and is mission critical. And the way we're thinking in terms of that is making sure that we're not giving a customer a reason to leave. Execution, that's a proven playbook at Hansen.
We, we understand we have these deep, deep customer relationships with over 600-700 customers around the world at the moment. Trying to identify increasing license share from our- our way at the moment now is, is how do we add value to our product and our product investment to that thing going forward? But also the opportunity, the decarbonization, Smart Grid, cross-sell, AI multiplier is happening to all of our customers around the world at the moment now. We certainly are very lucky to have some great staff, some great innovators in our team as subject matter experts, et cetera, and giving AI the tools as we've done the last couple of years, we're seeing the benefits.
So we remain extremely confident and have demonstrated, not a made-up number, something which is real and sustainably be a margin of at least 30% over the medium term is the way we're aiming. So that's my outlook. Thank you for listening to our presentation. I'm always sure there may be a question or two, and I'd be more than happy to answer if someone has one.
Thank you. Hold 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. Today's first question comes from Josh Kannourakis with Barrenjoey. Please go ahead.
Hi, Andrew and Richard. Can you guys-
Morning, Josh.
Great. Great. I generally make a habit of not congratulating people on results, but you guys did a really good job on the AI discussion there, and really helpful. First question is on that topic, so around AI. Just in terms, you obviously talked about that being an execution multiplier in terms of speed. In terms of looking at your existing customer base for potentially developing those new products, and maybe if we can just expand a little bit more on the new product pipeline, does that accelerate the time to market on new products? And does it also add additional, you know, opportunity for pricing uplifts?
That's a very, very broad question, Josh, and,
Yeah.
I don't want to give too much information out, but let me, let me answer the question this way.
Yeah.
Mate, but efficiency is not just about the way you, you spend money, it's actually the value for the money you actually spend. We, two, three years ago, our journey on AI was how can we add more or do quicker for our customers? And that's what we're trying to execute upon at the moment now. So if we can give in the hands of our customers more value for what we already provide, Josh, at the moment now, that's what our goal is. Now, if that means if we can do it quick and we can do it faster, but we still get we maintain the same wallet, that's a great outcome as we go forward.
Our view at the moment now is because we've got these long-term contracts, there's a lot more in terms of our R&D, but you, one of your, part of your question was, we are certainly developing quicker than what we did before. We're getting things out there quicker in a more natural language out to our customers as we go forward, and they are seeing the benefits. So it does mean that we should be able to get newer products or newer services, newer offerings to market quicker than they once were. I don't want to really give examples, but, you know, some complex product offerings or new tariffing or new regulations, which may have taken three months, we can now do maybe in two weeks.
In fact, I was in our Indian office recently having this whole conversation with where we're seeing the benefits of our business. But as far as the business is concerned, we're really concentrating. It's a bit like releasing a new model of a car. We're just adding more features to the model because we can, and we're utilizing that excess capacity to deliver more for less.
That's great. Thanks, Andrew. Second one, just on support and maintenance, obviously extremely strong result there. And you did note that's sort of continuing to accelerate. Can we just give a little bit more detail about, you know, was this period a particular... But how should we think about the profile of that continuing? And I guess as to the second part of it, bringing back in AI, obviously support and maintenance and updates and things that go through, how much more effective and efficient can you do? So both the revenue side and also maybe just to talk on the margin support profile there as well, how that's aided by it.
Josh, just in terms of the growth rate. So it is right. I mean, the year there's been a particular step up. So I mentioned some implementations that have now rolled in. Some of the customer contract renewals are not such common business as usual step up for us. So, there's a bit of an uplift from that that's more of a one-off, but the underlying message I was trying to get at is that the underlying business continues to grow in the year, obviously substantially stronger, but over the last three years, you can see it's a steady growth rate. But I would probably temper it a touch heading into FY 2027, but I think it's all heading in the right direction.
Your second question around efficiencies, that's exactly what we've been doing. You can see it in our financials. There is significant productivity six, 12, 18, 24 months at least, and it's across the whole industry. It's not just in technology, it's in many different parts of the world. But we are leveraging it, and I think you'll see some further margin expansion in that area as well.
Actually, Josh, as a broader thing, there's also some pent-up changes which regulators want to make at the moment now, and often the market's having to push back because they can only absorb so much change so quick. So it actually goes, if there's more capacity, the regulation will be making more at the moment now. So we do feel deregulation, regulatory changes will probably be on the uptick for the next number of years as well.
Yeah, that's great. Richie, when you're talking on the Cash EBITDA margins, obviously strong performance in the period. I think you mentioned maybe trending towards 30%. Did I get that right, or you're more discussing the other margins?
Trending towards 30, and that's the outlook. From a Cash EBITDA standpoint-
Yeah.
I think we're at 2026, and that will naturally lift as underlying EBITDA lifts as well.
I mean, obviously, we've seen the listed market disruption with AI. How are you seeing the pipeline and potentially some of the opportunities that may come up over the next few years? Do you think you'll be able to take advantage of some of that disruption in the market? Maybe just to give us a little bit, Andrew, a bit more flavor on where the current pipeline is sitting, what you're seeing out there, you know, obviously, listed multiples have come back a lot. So how does that change your view or parts of your-
Well, we certainly want to use this reduction in multiples, Josh, to our advantage, and that means a bit of a focus of the team, also looking at listed entities, look at where Hansen adds value. If we can't add anything to the equation, we tend to walk away. So we like it where we think we're because we're reasonably advanced on AI, a lot of companies aren't. And we're trying to find those where we can actually bring value to. Our book is full of just as many opportunities today as it was, you know, last year. It's not moved. You're dealing also with people having to relook at the valuation models.
If you're privately owned, if I was talking about buying your house for AUD 3 million, now I'm offering you AUD 2 million, you've just got to sometimes let that work through the system. That's it hence some listed opportunities, which Hansen has not really done in the past. We've done some divisions, but ultimately there's a number of companies in our space, in a Digitalk, which had been a public company. It never had the legs to truly globally expand, and we just gave it to them for nothing, et cetera. So our team is just as busy as ever. But you're right, we probably more than ever, we want to buy well, and we want our asset, which is really our know-how, our Hansenization AI, to be used well to optimize any business we buy.
Excellent. Thanks, Andrew. Thanks, Richard.
Our next question today comes from Garry Sherriff with the Royal Bank of Canada. Please go ahead.
Yeah, morning, Andrew, Richard, Peter. Good result. A couple of questions on AI and also energy. Thanks for flagging around the 8 embedded, 8 embedded solutions you guys have put out into into the platform. Just trying to get a sense, how many of those are in market versus proof of concept, and maybe just a sense of the quantum of revenue? I understand it's early days, but just trying to get a bit more color around those 8, how many are actually in market, and roughly how much is being produced from a revenue perspective?
are in market and a proof of concept. Proof, proof of concept means that a customer is actually using them, maybe not the full scale, Gary. So that, that's where we are at the moment. Nervousness with customers because they don't want to break, break their businesses. As far as the commercialization of the offering, if you think in terms with, with this is not replacing the existing product, because what you do with RAG, you use RAG on your existing product. So you actually have, like, a module added to your existing app to retrieve data in different contexts to what we're doing at the moment now. Because we've been able to get these things out quick at the moment now, we're probably less thinking to use our surplus capacity to add this value to actually be more entrenched with our customers.
Understood. Thank you. or a fair bit about margins, and talking about efficiency and productivity improvement, which has been super impressive. I mean, realistically, where do you think the contribution-
Gary, I know we all want to disclose where we think it's headed. Look, we're in the same market as a lot of other tech companies. We are seeing efficiencies. You would have seen it last year and yesterday coming out with an announcement. There is certainly a speed to competency that we're seeing and, say, is that we think this has got some legs to run. I mentioned six to 24 months of productivity gains. I think our best bet, to be honest, is we'll keep updating the market every six months with our views, but our views are no different to the rest of large tech companies out there. You're seeing it every single day in the papers, and I'm just pleased that we've been able to embrace it as-
It also goes into all your supportive parts of your business, like these new applications, which our legal team actually use now, or what happens in finance. We're still, you know, 20% of our business is actually operational support for the business. So we're looking across the board where these efficiencies are taking place.
Mm-hmm. With the, from an energy perspective, looking at the energy segment, it grew 3% of the top line. I just wonder, is there any impediments to faster growth that you're seeing on the ground? And I guess... Is there any risk around deprioritizing, energy transition policy just in the midst of the geopolitical tensions? You know, we obviously see what Trump's doing, et cetera, but has there been any slowdown around that? 'Cause I guess I would have thought that the top-line growth for any-
Yeah, so Gen 3 , we probably have a similar sort of view. The trouble is when you've got destabilization and, you know, we've all been around this industry for a long time, it does play into the marketplace. And destabilization, the revenue is not sometimes lost, they've actually just move out. It's a longer decision-making process when people are looking to deploy capital and making changes. So in the energy market, if you think in terms, when the regulator puts a change at play, that is compliance, they must do it. But when it comes to their operational efficiency, that probably becomes second to an organization. We think, as Richard said, we've got a number of initiatives at the moment now, which we've never taken advantage of, and this is cross-selling into different regions.
To sell a product which is very strong in Europe, and our first one going to North America, is a catalyst for us to tackle a market we've never gone after before. And so that's actually MDM, part of it, we've never tackled before. So we certainly see some changes. We. I could probably answer it this way, and you'll probably understand. We're investing much more in sales and marketing in the energy market than we ever have, as a sign of confidence, and what the potential opportunity is.
Understood. Last question is probably a devil's advocate question, just around AI and the proprietary data. You know, Hansen's the system of record that acts as a truth for billing and settlement. You mentioned there's proprietary data within the platform, which generic AI can't easily access. Can you maybe walk me why, why can't generic AI or agent access the data? I guess the market somewhat worries around systems of records becoming commoditized and reduced to the back end while users interact with an agentic front, front end. So maybe just again, long-winded question, just trying to get a sense of walking through why you don't think that's a material risk?
Well, if you look in terms of our customers' data, their customers, their CRM to their general ledger, to their compliance, their market responses, their data, their billing, and all those things there. So they're all databases of record. That's exact data. And so the trouble when you start looking at LLM, large language model, it actually is looking at more and not being able to focus into it. Secondly, a lot of this data is not out in the marketplace. This data is not shared. It's not on Google, you can't find it. An amazing tool. As we say inside Hansen, AI is the answer. People just don't know how to pose the question. It's-- There's a degree of, in our industry, actual data must be accurate and can't be compromised.
There's so many stories about the troubles when you go out into the ether, the hallucinations of data, which is not real. Our customers can't afford to ever be looking at data which is not their data, and so therefore, to ring-fence it in a RAG is the way to achieve it. It is by nature, so a new, someone trying to enter our market historical decades worth of data at their fingertips, all they have is what's out in the ether, which doesn't make any sense when you're trying to make, make sense of the data because it's, it doesn't-
Understood. Thank you. Stock's up about 16%, so well, well done. Well done today.
Thanks for letting us know.
Then Evan Karatzas with UBS, please go ahead.
Hi, hi, guys. Morning all, morning, guys, I should say. Can you give a bit more the 2H revenue growth expectations? Like being above is a big range. So any sort of additional information you can give would be appreciated there.
I think we're being a little-- we're being a bit cautious, Evan. I mentioned FX, and honestly, in the last week, you've seen it change even further. And we have some pipeline opportunities that if they land, you know, it'll obviously change things as well. So in our view, it's where are we? We're in February. We came out last year with an update to the market in July. I'm not suggesting we'll do that, but we're just being a little bit careful. We have, as you remember, withdrew full year formal guidance for FY 2026 back in August, and we're just consistent with that theme going forward.
Okay. All right. Well, maybe just to, you sort of said in your prepared remarks, Richard, that license sales will be, you know, 8%-10% of revenue this year, won't be more than that. I think they're about 6% in the first half. So just confirming that, I mean, there'll be some level of step up in the second half from the licenses.
Yeah-
And then-
There will. I mean, I, I mentioned... Sorry, sorry, Evan, you want to finish?
All right, but then as well as the other, just the final part to that.
Mate, I won't talk about specific contracts, and Telefónica is one of many large Tier 1 customers we have. But I did say that license fees will be, will be stronger in the second half, and that's primarily in the communications and media space, but nowhere near the level of last year, which is why I think the results are particularly strong when you're coming off, you know, circa AUD 50 million of license fees last year. It's, it's a substantially lower number at FY 2026.
Yep. No, no, agreed on, on that. Just one final one. Just noting the growth and expansion, you've sort of talked to in the energy business throughout Europe, but probably still the biggest opportunity remains that German market. Can you just speak to, I guess, how you're thinking about that business or that region returning to growth in FY 2027, and any data points you can give us around, you know, how the RFP pipeline is shaping in that German region, please?
... Yeah, look, it's a massive disruptor, as you know, the rolling out of smart meters and getting behind the meters is a very immature market at the moment now. We had a massive change to the market and the regulators, which rolled out about seven months ago. We hit that on time, et cetera. It's fair to say the manage, as they're on their journey at the moment now. But when we first talked about the German marketplace was always this 10-year view. It's one of the third largest economy in the world, technology. Like, we're very happy with our purchase, very happy, excited by the marketplace, but it's the biggest change will happen with the forcing of smart meters and new regulations coming forward. And it's tabled, it's just we're just waiting.
It's all about positioning ourselves and our applications to be ready for it. You know, we're rolling out some AI into that marketplace, et cetera. We're doing all the right things, but it was never gonna be in the next 12 months. It was always, as you know, there's another 5 years to go for this regulation to be fully rolled out.
Okay. All right, cool. I'll pass it on. Thanks.
Thank you, Ash.
Today comes from Jules Cooper at Shaw and Partners. Please go ahead.
Hi, guys. Look, I don't mind complimenting really strong today. Just one question, if I could, Richard, just on the revenue, just to sort of be clear, you know, we can see that the Australian Dollar is stronger, and, you know, who knows where it ends up in the second half on average. But just from an underlying perspective, ignoring the currency, have your expectations changed at all around revenue generation in the second half, versus, say, you know, August?
We're largely on track, Jules, to exactly where we thought we'd be from a budget standpoint. So, you know, the rates we set from a budget standpoint, you know, for FX change quite a lot. The Aussies, you know, the Aussies strengthened. But, you know, when the business is turning over, what are we gonna call it? Circa AUD 400+ million , you know, a few Australian Dollar million here or there is not material to us anymore. It was when we were a AUD 200 million business, but not now. So what I wanted to draw out was, yes, the top line will be impacted by FX, and it won't be overly material, but we're hedged on the cost side as well, so EBITDA is largely protected.
Thank you. Those messages loud and clear. Thanks.
Thank you.
Our next question today comes from Amelia Hamer at Ord Minnett. Please go ahead.
Thanks, Andrew. Richard, well done on the result today. I know we're all sort of flogging AI like a dead horse today, but I noticed a drop in the capitalized development costs from about AUD 9 million- AUD 6 million, or, sorry, from AUD 9 million to sort of AUD 6.5 million in that Cash EBITDA number. Would you attribute that all to AI? And is there anything you can kind of quantify in terms of, you know, have you done a headcount reduction? Is there anything quantifiable from those development costs? And then when we look forward to the second half of the year, would you expect that to fall again, or what are you sort of thinking?
Yeah, Amelia, we're getting a lot more done for less, is the simplest way to put it. So, AI toolsets, Andrew talked to the RAG, which for those that know technology, establishing multiple products is actually quite difficult. We've got that up and running a long time ago, and we're now seeing the ability to get development done far quicker than we have. You know, the R&D actual capitalization probably won't increase a lot because we're utilizing tools to get it done quicker. And then in terms of... Sorry, what was your--what was the second part to your question there, Amelia?
Can you quantify anything in terms of headcount reduction? Anything that you-
Yeah, I mean, look, we don't-
Yeah.
It's a sensitive topic. We talked about it at the full year results, that there had been some reduction in headcount. Obviously, there has been, right? So in the first half of the year, you can see it in the financials that some headcount has come out of the business. If you look at the trends globally, that's where the market is typically going. But, you know, we're just going forward. So, it's a combination, and it's a balancing act between speed to competency, getting more done with less, but also having the right people in the right seats.
Particularly in the energy side of the business. Been hearing a bit of a bit of commentary from sort of adjacent players and, and different people in the space about a bit of increased competition that they're seeing. Anything you can give us in terms of the dynamics you're seeing in the market at the moment?
I mean, there's the standard players, Amelia, that have been around forever. The two key ones that come to mind are SAP and Oracle in the energy space. If I was in their shoes, they've got probably some bigger challenges than most. One of them is end-of-lifing their current software and looking to migrate to a new stack. So they've got some challenges. There are hundreds and hundreds of billing providers out there. Many of them are on legacy tech stacks, which we are not. So we look at this as a great opportunity on the energy side. You hear about these new entrants into the market. Honestly, we think that's quite a good thing. It triggers the market to consider more RFPs and moving off legacy tech stacks. So we're all for new entrants into the market.
On the comms side, it's a global product we have. There are the standard two or three competitors that there have been for the last five, 10 years. We come up against them on a frequent basis. We punch above our weight, I believe, for the size of our company. And if you look at the ranking of our products at bodies such as TM Forum, which is a global body for communications, we are ranked consistently at the top of the pile. So competition's everywhere. It's obviously good for some and bad for others, but we look at it as a positive.
You're not seeing any, any pressure on implementation costs or anything like that in the energy space? We've just heard that raised.
I'm not probably sure what they're saying. There's no doubt-
... implementation times will be coming down, et cetera, all these things, it's still your subject matter. So whilst we can talk about developing is quicker, the deep-seated knowledge of the data and the people, that doesn't really change. But there's no doubt some of coding and other things, and certainly migration helps. So we would like to think, like all our application, our, our plan is to implement our software quicker into the future. And it's already. It's like we're already doing it quicker now. So, I know this is actually driven by customers because they're all customers. Once they've made the decision, they want the application as soon as possible. So, that's always been the case. The fact that we can do it quicker is to our advantage.
Terrific. Thank you so much.
Thank you.
Thank you. Our next question comes from [Michael Chard] at MST Financial. Please go ahead.
Good morning, Andrew and Richard. I just wanted to start with revenue in energy and utilities, and specifically, EMEA, which had 9% growth, but this also roughly includes, twenty-one mil from PowerCloud and like the one point five to two mil from... Based on that, which implies 6%-7% growth in the underlying business, can you just provide some color on whether there was any growth in PowerCloud over the half? And then I guess as a follow-up to that, given any growth in PowerCloud suggests deterioration in the underlying ENU growth, can you just give us some color on, I guess, the churn in EMEA that you might be seeing?
It's been a pretty optimistic day, but we'll go with the negative question. So we don't disclose PowerCloud anymore. It's part of the CGU, Michael, that it just rolls up into the energy space. You know, we talked to this year not being a growth year for PowerCloud. You know, we've got hundreds of customers up there in the Nordics. Sure, there might be a few that drop off, but we've also won plenty of new deals. So, there might be some more color at the front what you're after, but the PowerCloud is now Hansen Germany. It's just part of our business. The product we sell in Germany for Hansen is not just the PowerCloud product. We sell our MDM, our EDM, our trade solution, and others.
So to be honest, mate, we don't even talk to the PowerCloud solution anymore as a standalone business.
So was there any growth then, or just happy to leave that for the full year, I guess?
Or-
Yeah.
Like I said, we, it's part of the CGU, so it's, it's irrelevant, really. It's, we, we don't even report on it separately anymore.
Okay. Then moving on to augmented generation and how this distinguishes your business from, I guess, the overall view on SaaS and the AI, AI disruption. I'm just kind of wanting to these current RAG capabilities versus those being developed and deployed by some of your competitors. Is Hansen more of like a traditional RAG with like a traditional router module? Competitors are looking into, which is agentic RAG.
Mate, we're probably. I don't know. You might have full details on what our competitors are doing. I don't, so it's very hard to compete against someone doing. But, maybe that's probably a more deep-seated question, which might pretty goes more to our customers, to our, to ourselves, et cetera. So, I'll probably best leave the more technical element to people who better understand or understand the context of the question.
Yep, sure thing. And then lastly, just wanting to, because you've just touched a lot on it, other factors are the, like, switching costs and the fact that, the data your customers hold is not openly available. Just with the world's gradual, like, move towards open data reforms, do you think this eventually starts to impact on the moat currently held by some of your peers and yourself, or, is it still something that you think will just, like, not have an impact overall?
Do you think our customers want their data out open? They, they don't. Their, their data is their asset if you think about all these companies. So, I can just predict we support the industry. The industry does not have an open mind to presenting all their customer usage data, call center data. Others will work very, very hard to have their own moat about their own data and not wanting to put it out there as an open architecture retrieval process.
Just with open data, you can still have it open but encrypted so that the average consumer can't see it. It's more so that it enables switching costs amongst, like, such some of your peers to, I guess, make it more sustainable and more open for customers to be able to, I guess, not be locked into these long-term contracts.
I can only say it from our side, I've not necessarily heard of any customer at the moment now, which is actually in favor of doing it. So, I don't quite. I'm sure maybe someone's mentioned, maybe an energy company said, "We're happy to give our data out to the Ether." I've not heard of it myself yet, mate, to be honest.
Okay, cool. Thank you very much, guys.
Thanks, mate. Thank you.
Thank you. And our next question comes from Annabel Lee at Goldman Sachs. Please go ahead.
For taking questions. I've just got one follow-up on margins. So clearly, you've talked about, you know, a lot of opportunity coming from efficiencies and AI as well. But just with 31% in the second half, my math correct, should we think about this run-rate into or even expanding into 2027, just given some of that commentary?
The way to look at it, Annabel, is we are talking consistently and have for three years that we'll be getting back to a 30%+ margin , and-
Okay.
We're delivering it now. For effect, that will continue. Whether or not there's further, you know, upside to that, we'll go through our budget process, and we'll update all of you in August.
Great. Thank you.
Thank you. There are no further questions at this time, so I'd like to thank.
Thank you very much, and also thank you for the questions which came through. I think we've provided a bit of color to what we're doing as an organization. Appreciate. We enjoy your support and our continual journey together. Thank you very much, and goodbye.
Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.