I would now like to hand the conference over to Andrew Russell, Iress CEO and Managing Director. Please go ahead.
Good morning, and thank you for joining us. I am Andrew Russell, Group CEO and Managing Director, and I am joined by Cameron Williamson, our Chief Financial Officer. Today, we will take you through our first half performance, updated FY2026 guidance, and the progress we are making against the strategic priorities we outlined at our AGM. Most importantly, we will show how disciplined execution is building a stronger, higher quality software business and positioning Iress for sustainable long-term value creation. There are five key messages for our shareholders today. First, we have delivered a solid first half result with materially improved earnings quality, driven by disciplined execution, a simpler operating model, and continued margin expansion. Second, we have continued to simplify the business, progressed our business efficiency program ahead of plan, and strengthened the balance sheet. This provides greater financial flexibility to self-fund disciplined investment in product evolution.
Third, our focus has now shifted to evolving our products. Having mobilized our partnership with Thoughtworks in April, we are now embedding AI into our product and engineering strategy and improving our delivery velocity. Fourth, our focus is on building a higher quality software business with better products, stronger customer relationships, and more consistent commercial execution. We believe that is the right foundation for sustainable growth and driving long-term shareholder value. Finally, we have updated our FY2026 guidance, reflecting softer revenue growth of 1%-2%, driven by lower non-recurring revenue, and a higher Cash EBITDA growth of 21%-26% due to stronger underlying profitability. We remain confident in delivering our FY2026 cash EBITDA margin exit run rate target of 25%. Our first half financial performance demonstrates that disciplined execution is translating into stronger financial results.
Revenue has remained resilient, up 2.5% on a constant currency basis, driven by higher quality recurring revenue that increased 3.4% and now represents 95% of revenue. Cash EBITDA increased materially, up 47.1%, and margins expanded more than 740 basis points, reflecting both disciplined cost management and improved operational execution. Importantly, these results are not simply the outcome of cost reduction. They demonstrate the benefits of simplification, disciplined execution, and a sharper operating focus. We now have greater financial flexibility to invest selectively in product evolution while maintaining a strong balance sheet. The board has declared a AUD 0.14 per share dividend, which is up 27% on the corresponding period, reflecting our stronger earnings and financial position. At our AGM, I outlined four FY2026 strategic priorities. These were operational excellence, product evolution, AI-enabled productivity, and customer-led execution. I am pleased with the measurable progress we have made against each of these priorities.
Product evolution has now moved from planning to execution. We are targeting investment in our core platforms, improving product quality, and accelerating delivery through our partnership with Thoughtworks. Initial Xplan enhancements are being delivered to our customers, while the rollout of the new Execution Management System in our trading business is also underway. AI is embedded within this work, not treated as a separate initiative. We are using AI-enabled development tools to improve engineering productivity and delivery velocity while building AI capabilities into our product roadmaps, including Xplan. Our approach remains disciplined with appropriate governance and a clear focus on measurable customer value. Customer engagement is gaining momentum, supported by clearer roadmaps, improved transparency, and a commitment to deeper enterprise partnerships. While there is significant work ahead, strengthening customer advocacy is central to our long-term growth strategy.
These efforts define our next phase, moving from simplifying and strengthening to product evolution, deepening client relationships, and driving sustainable value through focused execution and investment. I will now pass over to Cameron to speak in more detail about the first half financial results and our updated FY2026 guidance.
Thanks, Andrew, and good morning, everybody. I will take you through the financial performance in more detail, as well as our updated 2026 guidance. The key financial message today is that there is a material improvement in the quality of our earnings, as referenced by recurring revenue growth, structural improvements in our cost base, margin expansion, and disciplined execution. In terms of the overview, I will focus on the continuing business, and there are four points that I would highlight. Firstly, recurring revenue remains resilient and grew at 3.4% on a constant currency basis. Secondly, the business efficiency program, which we announced in the second half of 2025, is delivering ahead of plan in both its quantum and pace of delivery. We have now delivered AUD 31.5 million of annualized efficiencies through this period, which is materially resetting the group's structural cost base.
Third, this is translating into a significantly stronger and cleaner set of earnings. Cash EBITDA increased 47.1% on a constant currency basis, with the Cash EBITDA margin increasing more than 740 basis points to 24.5%. These represent material improvements over the last 12 months. Additionally, there is a 45% reduction in below-the-line items, and these are trending lower. You will see that in the second half of this year. Finally, the balance sheet remains strong, with leverage of 0.5x as at 30 June. This provides financial flexibility to continue disciplined investment in product evolution while retaining capital management optionality going forward. Together, these outcomes demonstrate a structurally stronger and improving financial position for Iress entering the second half of 2026. Turning to revenue. Continuing business revenue increased 2.5% on a constant currency basis. As I have already highlighted, recurring revenue grew at 3.4% versus the same period last year.
Recurring revenue is 95% of our continuing business revenue, reinforcing the resilience of the underlying revenue base, as can be seen in the step changes half on half in the graph. For the first half of 2026, the APAC Wealth business delivered notable growth in its recurring revenue, while the Trading and Market Data business also continued to grow. Non-recurring revenue was lower, particularly in the U.K., and this reflected the completion of large client projects and a lengthening sales cycle. This distinction is important. While total revenue growth remains measured, the recurring component of our revenue continues to grow and remains our focus as we improve customer retention, product value, and commercial execution. The business efficiency program continues to deliver ahead of expectations. We have delivered AUD 31.5 million of annualized efficiencies to date across organizational structure, technology and software, property and other OpEx items.
These are not simply short-term reductions in discretionary expenditure. The program is resetting the structural cost base of Iress and embedding greater operating discipline across the business. We expect to deliver a further AUD 6 million-AUD 9 million in annualized efficiencies during the second half, with the full benefit of this flowing into 2027. This gives us confidence in the sustainability of the margin improvement while continuing to invest selectively in our strategic priorities. Turning to slide 10, you can see the impact of that discipline in the earnings bridge. Revenue growth contributed positively, but the more significant improvement has come from the reset of our operating cost base, particularly across staff and non-wage OpEx. This resulted in Cash EBITDA of AUD 62.5 million on a constant currency basis, up 47.1% on the prior period. A stronger A dollar detracted AUD 1.4 million in delivering a headline Cash EBITDA of AUD 61.1 million.
CapEx was also materially lower in the first half, reflecting the completion of significant prior year investment and the timing of our current product evolution program. Importantly, we see a step up in investment in the second half as product evolution moves further into execution. Even with that increase, we currently expect full-year CapEx to be approximately 20%-25% lower than the prior year. While lower CapEx benefited first half Cash EBITDA, the improvement in profitability also reflects the structural reduction in our operating cost base. Turning to the balance sheet, our stronger operating performance is also translating into a stronger financial position. Leverage has reduced to 0.5x over the last 12 months, providing significant balance sheet flexibility. Our capital allocation priorities remain disciplined.
We will continue to invest in the evolution of our core products, where we see clear customer and financial returns, while maintaining balance sheet strength and capital management optionality. Reflecting the strength of the financial position and confidence in the outlook, the board has declared a fully franked interim dividend of AUD 0.14 per share, an increase of 27% on the prior corresponding period. This represents the third consecutive growth in the dividend since it was reactivated for the final 2024 dividend. We believe this strikes the appropriate balance between investment in the business, shareholder returns, while maintaining financial flexibility going forward. Finally, turning to guidance. We have updated our FY2026 outlook to reflect three key factors. Firstly, lower non-recurring revenue. Secondly, stronger underlying profitability. Thirdly, a higher Australian dollar versus relevant currencies.
We are highlighting things firstly on a constant currency basis for ease of prior year and guidance comparability. As highlighted at the AGM in April, we guided FY2026 revenue growth to be at the lower end of the 3%-5% range, which we pre-announced at the beginning of the year. We now expect FY2026 revenue of AUD 509 million-AUD 515 million, representing growth of 1%-2%. This reduction primarily reflects approximately AUD 7 million-AUD 8 million of lower non-recurring revenue compared with our previous expectations. At the same time, our structural improvement in our cost base means we have increased our cash EBITDA outlook to AUD 121 million-AUD 126 million, representing growth of 21%-26%. UPAT is expected to be AUD 84 million-AUD 88 million.
We also expect a step-up in product investment and R&D CapEx during the second half, as the product evolution program accelerates into execution, alongside a further AUD 6 million-AUD 9 million of annualized business efficiencies. Importantly, we remain on track to deliver our FY2026 cash EBITDA margin exit run rate target of 25%. The stronger Australian dollar during the first half of 2026 also impacts our reported results, with the A dollar appreciating 6%-8% against the British pound and Canadian dollar year to date. This results in full year headline expectations of AUD 499 million-AUD 505 million of revenue, AUD 119 million-AUD 124 million of cash EBITDA, and AUD 82 million-AUD 86 million of UPAT. While the revenue outlook is lower, the underlying earnings outlook has strengthened, and our 25% exit margin commitment remains on track. With that, I will hand it back to Andrew to continue the presentation.
Thank you, Cam. I would like to step back and explain how we are continuing to think about the evolution of Iress as we execute at pace. When we entered 2026, our priority was to build the foundations for sustainable long-term value creation. We see the Iress evolution journey in four stages. The first stage was to simplify the business. That included simplifying our portfolio through the divestment of non-core assets, returning focus to our core businesses of wealth and trading, and strengthening our balance sheet. That work is now complete. The second stage has been to strengthen the business. We will now focus on simplifying the continuing business, as well as materially improve profitability and cash generation through the execution of the business efficiency program, creating greater financial flexibility. We are now in the third stage, evolving our products and platforms to create higher quality revenue.
Through our strategic partnership with Thoughtworks, we are accelerating the delivery of product roadmaps, embedding AI into our product and engineering strategy, improving productivity, and delivering greater value to our customers. Together, these foundations position Iress for the next phase, which is growth. Sustainable revenue growth driven by better products, increased platform adoption, stronger customer retention, and disciplined commercial execution while maintaining attractive software margins. Each stage builds on the one before it. Sustainable growth is earned through disciplined execution. Turning to our second-half strategic priorities. This pathway which we have outlined brings us back to our strategic priorities for FY2026. These have not changed. In the second half, our focus is on executing against the commitments we have already made and translating investment into measurable outcomes. Turning to the first priority, operational excellence. The efficiency program will remain ongoing as the business evolves in the new AI landscape.
We will embed the structural improvements already made and deliver a further AUD 6 million-AUD 9 million of annualized efficiencies in the second half. This is about sustaining productivity and creating greater capacity for focused and selective investment. Our second priority, product evolution. We are delivering new Xplan capabilities, including AI-enabled advisor workflow and productivity tools, as well as a refreshed client portal. In our trading business, our partnership with Thoughtworks is supporting accelerated delivery of new data and insights features. If you'd like to hear more about this, we will soon be sharing details of our product evolution showcase events to be held in the U.K. and Australia in November. Our third priority is AI-enabled products and productivity. We will accelerate adoption across Iress with a clear commercial focus and disciplined governance, translating AI capability into measurable customer value and improved productivity. Finally, customer-led execution.
We will continue our strategy to deepen enterprise relationships through stronger strategic engagement and contract renewals while improving pipeline conversion through disciplined commercial execution. This will remain my priority and focus as we have much more work to do. I would like to leave you with five key takeaways today. First, we have delivered a solid first-half financial result. Iress is simpler, stronger, and more focused. Second, improved profitability and cash generation provide greater financial flexibility, supported by disciplined capital allocation and a strong balance sheet. Third, our business efficiency program remains ahead of plan, and we are on track to deliver our 25% FY2026 cash EBITDA margin Q4 exit run rate target. Fourth, product evolution is now in execution. We are accelerating delivery, strengthening engineering capability, and increasingly focusing investment on measurable customer value.
Finally, while revenue growth will remain measured as we evolve our platforms, we remain confident in our strategy, our FY2026 outlook, and the long-term opportunity for Iress. Our priority is to build sustainable long-term value through the delivery of better products, stronger customer relationships, growing recurring revenue, and building a higher quality software business. We know trust is earned through execution and consistently delivering on our commitments. That remains our focus. Thank you for your continued support. Before we go to questions, I also want to acknowledge today's announcement regarding Cam. After three years as CFO, Cam will step down as we move into the next phase of Iress's strategy. On behalf of the board, I want to thank Cam for his significant contribution and support through an important period of change. Cam will remain closely engaged through the remainder of the year to ensure an orderly transition.
With that, Cam and I are happy to take your 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 then two. If you are using a speakerphone, please pick up the handset to ask your question. The first question today comes from Nick McGarrigle from Barrenjoey. Please go ahead.
Hi, team. Thanks for taking questions. Just around the U.K. business, can you talk us through the projects just at a high level, that we cycled into 1H 2026? Were there projects that were delayed as well that are still in the pipeline to pick up into the second half that carry through into recurring revenue into 2027?
Hi, Nick. Yeah, look, there is a couple of things at play here. The recurring revenue in the U.K. is actually quite reasonable, relative to what we had in the prior year. That has seen a step up in that. What has been the more significant drop off is in the project and implementation work. As you may be aware, there was a significant client, that body of work was a multi-year exercise, and that project has largely come to completion, albeit there are elements of that that are now feeding into a go forward. Some of that sales cycle is longer than what we have seen in the past. So we are going through that, with them at the moment. But the potential for the non-recurring in the back end of this year, I would say is quite limited, albeit we are looking at next year.
The recurring revenue that we have seen in the U.K. has stepped up. We have had a couple of accounts that have landed in the first half of this year that you will start to see come through in that revenue growth. All in all, net revenue in the U.K. is broadly flat, albeit revenue at the recurring level is growing and the non-recurring is not as strong.
And then just in terms of the TMD and the APAC Wealth businesses, can you talk through the mix between price and volume? Anecdotally, it felt like maybe volume churn was going down. Just reconciling the price rises versus the actual continuing revenue print.
Well, I'll start with the trading business. There was a little bit of churn that we saw. Volume was what I would say is more structural churn. We had a couple of exits in that business for people that were exiting markets, in particular in South Africa. We had a little bit in Australia as well. What was sort of lost in all of that, there has been some momentum in new business wins and logos, and the team have done a great job in the first half of this year in terms of getting momentum in that segment of the business. On the wealth side, the recurring revenue has been the key driver of that. We've had one significant project that's sort of come to conclusion in the first half of this year, so the non-recurring will start dropping off.
But on the recurring side, substantially price, a little bit of volume. But for the most part, it's effectively a price story for the wealth business.
And I think in the past, we were working towards a pick up in intangibles CapEx towards a 5% or 6% run rate of revenue. How should we think about that? You kind of guided us. I think your comment was more around the software CapEx being 75% of what it was last year. But how to think about that picking up into the future periods once you get everything re-engineered with Thoughtworks and have a different model?
Yeah. The software R&D is roughly-- we should be around about the bottom end of that range through the course of this year, about 5% of revenue. Where we are seeing some of the CapEx drop-off is actually in the PP&E side, where we have actually had some office moves and incurred some PP&E that is going to be slightly lower this year than what we had last year. On the R&D front, a little bit lower. The pace of some of the delivery in the first half of this year, as you can see, was a bit slower than what we had at the back end of this year. But we are expecting that to ramp up as the year goes on. And where we finish the year, we have guided on a medium-term target of 5%-7% of revenue.
We are going to be at the bottom end of that range over the course of the year.
All right. Thanks for taking those questions.
Thank you. The next question comes from Cameron Halkett from Canaccord Genuity. Please go ahead.
Hey, team. Thanks for taking questions. Can I start with just the first one around the D&A in the first half? You've made a comment there's some accelerated depreciation and a small software write-off. Are you able to confirm if there's a one-off amount in the half just gone, please? If so, can you quantify that amount? Thanks.
Yeah. Hi, Cam. There's about AUD 5 million I would call out as impacting the first half on the D&A front, both a combination of a couple of projects that we've stopped. There was a little bit of R&D that was capitalized that we wrote off. The other component was actually to do with the Melbourne office lease, where we've actually moved office at the back end of June, and we accelerated an onerous lease for the back end of 2026. So by and large, the D&A line for the first half is overinflated, probably to the tune of about AUD 5 million that you'll see unwind as the year goes on. You can pick that up.
Yeah, thanks, Cam. That's really helpful. The last one I've got is just around the cash EBITDA margin run rate exiting the year. Prior disclosures either had a plus symbol or a greater than symbol next to the 25%. Just noting in this release that's dropped off. Can I just confirm that's purposeful or that's just a small oversight?
I think what we're saying is we're setting 25% as a floor. Where it goes from there, we're still working through the pace of some of the delivery. We've got Thoughtworks mobilized. We've got a whole bunch of activity that we'll be looking to share with the market as the back end of this year goes on. We're starting our planning into 2027. The pace at which that goes and the revenue growth, as you can see, some of the revenue growth has slowed in the back end of this year as well. We're being a little bit cautious, but we are setting a floor as a 25% in terms of our target and our thinking. We may remain on track for the Q4 exit, which we set out at the beginning of the year.
Yeah, nice. All right. Thanks again, gents.
Thank you. The next question comes from Tim Lawson from Macquarie. Please go ahead.
Hi, gentlemen. Thanks for taking my question. Just on the CapEx guidance, you are talking about 5% over the year, Cam, but obviously a lower first half. Just in terms of the run rate in the second half, is that what we should expect to continue into 2027?
Well, I would say the 5%-7% is a guidance range that we have set. I would say we are earning the right to be at the upper end of that range. At the moment, 5%, given the pace at which we are looking to enact some of the modernization, is comfortable for where we sit. I would look at that over the full year, Tim. So 5% of, let us call it AUD 500 and change in terms of our revenue is going to get you roughly about AUD 25 million in CapEx R&D. So you can divide that by two, and it probably means that the second half of this year is going to be a little bit more than that. The first half of this year is a bit lower than that.
Some of it is done because we are being far more measured in terms of the way we allocate capital and the way that we think about each stage of the modernization. They are having to go through some gates, and the pace at which we move through those gates dictates, I guess, the quantum in each half. A little bit lower the first half, ramping up the second half. As we look into 2027, I would sort of extrapolate on a straight line over the course of the year, and we should end up by and large at that level.
Okay. Thank you.
Thank you. The next question comes from [Olivia Cullen] from AMP Financial Group. Please go ahead.
Hi, guys. Just wondering if you can dig in a little bit more on the non-recurring revenue and I suppose the drop-off relative to your original expectations. My understanding historically is that a lot of that work is related to new clients and onboarding clients. But it sounds like you have managed to get some recurring revenue growth from new clients without significant non-recurring revenue. How should we think about that linkage? What does the pipeline of opportunities look like? Is the pipeline moving to the right or have you just failed to convert a lot of inquiries?
Thanks for the question, Oli. It's Andrew here. Just in terms of the business, we're strategically focused on growing our recurring revenue line. We've had to make disciplined choices over the course of the last nine months on the things that we are going to prosecute and the things that we're not because we can't do everything. We want to execute and deliver well on those that we choose. There have been a number of projects that have been small revenue line items in non-recurring, which given our focus on modernizing and evolving the technology stacks that we've decided not to focus on, just let's get the evolution work completed. In the U.K., there was just a number of projects with existing clients that have been pushed to the right. But once again, we're adopting exactly the same strategy.
We're focused on delivering and executing the uplift in the core technologies.
Yeah. It's fair to say the U.K. client base, that's more a lengthening of the sales cycle, still reasonably confident that at some point they'll go live?
It is lengthening the sale cycle. I think that the clients are strong, the engagement's strong. There's a lot of work to be done, and we still think that that's a great opportunity for us with a good pathway to growth in that market. But we've got to get the fundamentals right. As you can see from today's presentation, we're progressing with that.
Yeah. So, obviously, you are not going to give 2027 guidance, but I suppose it is a roundabout way of asking, do you expect at some point that non-recurring revenue growth to lift off the 2026 base? Is this in the deed?
Ollie, I think what we would say is it is lumpy. It does depend on the size of client, the level of involvement of integration. Some of these, as you would be aware, are multi-year exercises in terms of working and implementing the relevant tech stacks into the client. So some of that, unfortunately, will be a lumpy part of our revenue base. We are very much focused on the core, which is the recurring revenue. And ultimately, as you say, the non-recurring leads to a growth in recurring. And you will see that in the U.K., where we have had an uptick in our recurring revenue as clients have gone live in the first half of this year. So, that is our focus at this point.
Yeah. Thank you.
Thank you once again. To ask a question, please press star one on your telephone. The next question is a follow-up from Nick McGarrigle from Barrenjoey. Please go ahead.
Thanks, team. You are targeting that fourth quarter to be at 25%, but you have already effectively gotten there in the first half. Is there anything in terms of reinvestment into next year that is worth flagging, or should we assume that that operating leverage and the margin run rate is looking like it is running better than that target?
Yeah. What we would say, Nick, is you look through the CapEx program, right? So whilst the margin looks attractive in the first half, we are expecting a ramp-up in the second half in terms of CapEx. When you look through that, and we will try and normalize that for an exit run rate, what is our run rate CapEx number over the course of the year, that provides the true margin. So the margin is probably a little bit inflated first half, given the pace of the CapEx delivery. In the second half, it will probably be a bit lower. But when we look at the Q4, we try and look through and normalize for some of the lumpiness that we have got in that program. Hence the focus is trying to make sure that we have got a look-through when it comes to some of the lumpy expenditure in the group as well.
All right. Thanks.
Thank you. At this time, we are showing no further questions. That does conclude our conference for today. Thank you for participating. You may now disconnect.