Okay, good morning and welcome to the first half financial year 2025 financial results, and thanks for joining us this morning. So first of all, just a reminder of really what our mission is all about here at Objective: Outstanding GovTech, Driving Stronger Communities and Nations. And I think if you follow our stories strongly, that will really resonate for you. The agenda for this morning, I'll go through the financial summary, call out the first half highlights, go through each of the business lines for you and what's been happening within those, and then just summarise at the end with the outlook statement. Hopefully by now you've had a chance to look at at least the commentary with the financial results that have gone up to the ASX, and this presentation is also available to you there as well.
So if we begin with the financial highlights, revenue up to AUD 61 million for the first half, annualized recurring revenue up 10% to AUD 107 million. I'll talk a little bit more about this with respect to the target shortly. Adjusted EBITDA of AUD 23 million, up 6%, NPAT AUD 17 million, R&D up slightly to AUD 15 million, and of course cash as a carry-on from our strong full year result, up 26% to AUD 84 million. I think for any of you that are analysts on the call, I think most of these numbers are pretty much within the consensus view for the first half numbers. So moving along, again, we've been showing this graph for some time now, and this is, I guess, just a continuation of that theme.
We in fact increased by 3% points on the recurring revenue number, our highest number ever, 84% of the revenue was recurring in the first half of this year. As you know, we've made that full transition to subscription software, and we've also been compressing quite hard on our cost to deploy, which sort of has capped the overall number. But again, none of these numbers should be of any great surprise to anybody, but great to see that that trend line is continuing. Equally, if we look at SaaS driving revenue growth, I think as you've seen with most companies making the SaaS flip, we've been, I guess, quite sort of progressive on what you've seen over time. There is an increasing number of our larger customers, in fact, looking to make the move during calendar year 2025.
You can see here again, the SaaS compound growth rate of 29% is still extremely strong, while the USP or our traditional on-premise upgrade and support program is still maintaining at the current revenue line level. In line with our strategic plan, we've spoken a lot about this over time. I'll talk about it a little bit at the end, but we maintain our strong margin at the same time as driving our ARR growth, and you can see that the combination of those two is quite strong and quite powerful. Equally, we've spoken both last year and continue to talk this year about our 15% ARR growth target. What we've outlined for you here is just where we see this growth coming through.
Between 11% and 13% from the Content Solutions business, between 20% and 25% from the Planning and Building Solutions business, and between 20% and 25% from the Regulatory Solutions business to meet the annual growth rate target. For some of you keen-eyed will know that we did 10% in the first half last year, and we have done 10% in the first half this year. However, the difference is probably quite a little bit different or quite a bit different in that we obviously are measuring ARR exactly at December 31. There has been quite a strong growth as expected early in calendar 2025, and we are already some sort of additional AUD 4.5 million into the number that we need to retire to get to our 15%.
So we remain relatively confident of achieving this growth rate, and unlike last year, we don't have a couple of massive key deals that are going to swing it one way or the other. So I think all in all, right across the business, we remain, as I said, relatively confident about the full year number. If we talk about some of the highlights, of course, no presentation from Objective is delivered without just revisiting the firewall of innovation. This has just continued on, as you've seen through the numbers. Again, we've talked about increased investment, not just increased investment in R&D. I think again, we've telegraphed in the past that certainly at the full year that we would in fact be putting more boots on the ground in the U.S.
We've been building out that team, and I'll talk a little bit more about that in a couple of slides' time. At the core of the business, of course, is outstanding software that's continued unabated, and you will see that in the R&D investment, delivering great outcomes for customers and therefore the financial performance that delivers us the EBITDA margin that we all enjoy. If we look at the R&D investment, again, just calling out over the last six years, 44% of our all-time investment in R&D has occurred in that timeframe, and it's fairly easy to see that by the time June 30 comes around, we'll be in fact again well ahead of where we were even a year ago, and we'll break through that AUD 300 million mark in terms of gross all-time investment in R&D since listing.
So we think that's a fantastic thing for customers and ultimately a fantastic thing for all of our stakeholders. The permanent demand drivers. Don't read too much into Elon Musk with a chainsaw. I think there's permanent demand drivers right across all the countries where we operate. We've seen an increase in scrutiny, as I'm sure if I open the media today, I'll see all sorts of things around community expectations around governance, things about effective regulation, and certainly the use of digital means to achieve government outcomes. Notwithstanding, we're seeing more and more people trying to advance these things with AI as well, and we'll talk about that shortly.
If you look at the drivers also for Nexus conversions, as I said, I mean, it's been probably somewhat of a confidence booster that we've seen over the past 12 months that's seen a lot of customers move to Nexus and an increasing number of the large customers moving to Nexus as well. So we may report on some of those during the second half, but certainly some of our largest customers, if not our largest customers, are looking to make that Nexus conversion, which at one point in time we weren't sure that was going to be the case. Generally speaking, the uplift, as we've sort of illustrated here, our base case was 1.5 times to 2.5 times. At the moment, the average is still coming in at about 2.2 times in terms of that conversion.
So I think fairly much this conversion is happening as planned or better than planned. Equally, right across each of our business lines, we've got things incorporating AI that have historically incorporated AI. Not that we've always called it out, but we've been a big proponent of computer vision for a long period of time, along with other uses of OpenAI capabilities prior to ChatGPT. So I think it's fair to say that we've been making a lot of further inroads into the use of that technology over time. And each of these products here that we've illustrated are called product sets, whether it be the Nexus, 360, Redact, and Connect product set, whether it be Build or Keyplan. These are all areas where we've been now applying a new capability called Objective Intelligence to these applications.
I think it's probably fair to say that we're going to be looking at doing another investor day to present or investor half day to present some of these technologies in the second half of the year, where you'll get a stronger feeling for where we've been applying Objective Intelligence to these applications. And if we look at the demand drivers globally, we've now got a stronger presence in North America, as we set out to do at the beginning of the half. We've now got a lot more activity going on with RegWorks in the U.K. Our early customers certainly have got projects underway. We additionally have been looking in the planning and building space, not only for growth through M&A, but the organic growth rate looks like it's going to continue strongly as well.
I'll talk to that when I get to the individual slide on planning and building. And certainly, 360 has certainly been building strong demand across ANZ as well as the U.S. If we dig in a little bit deeper to each of the business lines, again, this is sort of outlined in the commentary in the 4D, which we've released to the exchange this morning, and we'll have a look at this through each of these areas. So again, one of the things that I like to sort of underscore for people is people talk about these as completely separate business lines, but I think we all understand that all three business lines are all driven by the same things: governance, regulation, and digital service, and that underpins each of them.
So if we start off and talk about Content Solutions, again, the common thread that you will see in the first half around each of these business lines has been that ARR is growing far stronger than sales revenue, and that's just a continuation of what we said with respect to decreasing the cost to deploy. And we've been passing on that reduced cost to deploy or the benefit of that reduced cost to deploy to customers. At the same time, it's probably fair to say that we've reached a lot of the end of that journey and that services revenue just through sheer weight of new deals is likely to start moving up again in the second half and certainly into FY26. So it's been a great exercise. It's been great for customers.
It's been great for employees as well, and it manifests itself in a much stronger product focus for the entire organization. So if we just touch on a couple of the highlights here, we have been doing a lot with 360 and Nexus during the first half with AI, which we're not going to go into a lot of detail on today. I think we'll leave that for really the more formal launch of Objective Intelligence, although if you go to our website, you'll see some of the earlier capabilities coming through. As I said, we've got momentum in the transition of customers that historically have been on Objective ECM to Nexus, including our largest customers. And I think you should expect to certainly see most of our top five customers sort of coming through onto the cloud over the course of this calendar year.
We've seen further traction with 360 in North America. We signed up the City of San Diego. We expanded both our partner capability, and we've also brought on a new team directly to go to market in the US, which is now completely operational. I've spoken about 360 and AI, and I think it's fair to say that the AI story with 360 and our ability to apply large language models to customer corpuses of information that's stored in their Objective Nexus system, as well as other systems, is really strong today. So again, you could probably go to our website if you want to get more of a feel for all those things. Objective Connect extended its market position. We've reinvested in the go-to-market team with Connect. It's fair to say it hasn't been punching above its weight in the last 12 months, and that's brought about some changes.
Equally, Keystone, we've done a lot of work on Keystone over the past 12 months, and certainly with strategic planning and what we've done with digital engagement capabilities, we've now got this huge opportunity with public sentiment analysis with AI, and that's sort of, I guess, the state of the art in terms of digital engagement and being able to deal with the sentiment, particularly as it relates to strategic planning, particularly in the U.K. And then finally, we also signed one of Australia's largest superannuation customers back to the fold or into the fold with Hostplus and more recently signed Macquarie Asset Management as well, but that's happened since the end of the half. If I move along and talk about planning and building, I know there'll be some questions around ARR only rising 7%.
I think the reality is that most of this revenue today comes from New Zealand, where it's been a fairly tight market in New Zealand. People understand that this has been sort of a transactional business since the beginning in terms of the business model. And I think with interest rates high in New Zealand, there has been a continued reduction in the number of consents, although that feels like and looks like it is bottoming at the moment. Equally, as many of you will be aware, the economic situation in New Zealand has been improving during more recent months. So we would expect that number in an organic sense to start improving in the second half of the year. We've now got 24 councils live on Build with a further 11 projects underway.
That's more than 50% of the New Zealand councils, not the number of consents, but certainly the number of councils that are signed up to using Build. And we have also finally given a sunset date for the heritage product of GoGet. And what that will mean is from the end of this current year, we'll move everyone to a consistent pricing model. And certainly, by the end of the next financial year, that will be the sunset date for the use of the GoGet product. So all of the customers will have moved to new platforms by then. Again, we've continued to press on with R&D with Objective Build for new markets. I know a lot of people have asked about that over time.
We now get obviously asked about Australia and I guess more formally than any other market, but what we're doing with Build, the building process is largely the same in most Western countries. And so what we're doing with Build is the R&D investment is going into platforms that not only use AI for the generation of checklists and other things that councils need, but certainly also for a broad range of countries, not just Australia, not just New Zealand, but a broader capability than that. During the half, we also delivered a brand new inspections capability. I think that's generally regarded as the state of the art, and it was something that we were waiting on delivering so that we could, so that we should sunset the GoGet product.
We really wanted to make sure that we were delivering value to customers when asking them to make the switch over to Build. So that for us was a milestone that we delivered customer value, and that's been out in the wild for some months now. And of course, Objective Trapeze continued to be the dominant standard for use by assessment professionals across Australia and New Zealand and to some extent increasingly in the U.K. as well. So I think whilst the ARR number is low in the first half, I think you'll see it rapidly change in the second half or for the full year, I should say. And then finally, I probably left the most exciting numbers till last. We've had a very good half with RegWorks. As you can see there, the ARR number is up 22%.
And at the same time, services has only gone up by half that amount. And that is clearly part that has been part of our strategy as we've clearly communicated. So I think it's great to see RegWorks defining its clear market position as a leading COTS application in Australia and New Zealand. As I've mentioned, we've got our first customers coming online in the U.K. And whilst we can't pay anyone with pipeline, it's fair to say that there is quite a large set of opportunities as we go into the second half of the year. And already into looking at FY26 as well, it's a very robust part of the marketplace. The good thing is, as I mentioned, Accelerator or our fast track way of delivering RegWorks to customers is now established as the default implementation approach. That's giving customers a better outcome.
It's also making sure that we can give customers a better outcome as RegWorks customers for a very long period of time in terms of bringing through new innovations, getting customers upgraded to those new innovations. The Accelerator platform really gives customers that ability to always be on the latest versions of innovation over time. We equally introduced a new reporting center and made a whole host of UX enhancements. So I think for any RegWorks customers, they're getting a much faster time to implementation, a much faster time to upgrade, and a whole range of new innovations that are coming through as well. So it has been a very exciting first half, and I think a very exciting full year outlook for RegWorks. So it's fair to say that we're on target for our full year plan.
I think the new strategic planning process that we implemented for last year has made a big difference to the way we've executed and continue to execute. We're just about to start our FY26 planning process as well, where we'll make some improvements. But overall, I think this has been a good step forward and encapsulates the way we're running each of the business lines. And then finally, just I guess I don't need to keep reiterating the growth target. I think that's been well exercised during the discussion. I think for most GovTech companies, and we look at this around the world, we've got this really good balance between achieving our ARR growth and also increasing our profitability. And we think that this is kind of the sweet spot in the market. I've mentioned this before.
We could grow much faster, but we would have a massive hit on profitability. And of course, we could increase profitability, but that would have a material impact on our growth. So I think as far as GovTech's concerned, we operate at the higher end of all the metrics if you benchmark us against the global GovTech players. And I think this is a sweet spot for us to continue to play in and produces a very consistent result year in, year out. At the same time, R&D investment is at 30% of all software is at an all-time high. I've said before this is probably about the limit of where we're going to get to in terms of percentage. But as our ARR is growing, we can expect that's still going to remain at the high 20s over the second half and into FY26.
And then finally, I think historically, we've spoken a lot about M&A. I spoke about this at the full year. It's been really difficult to find, I think, opportunities probably more broadly internationally, particularly in the U.S., on metrics for which you as shareholders are going to applaud us. And so that value equation, we've been in the last half, I guess, as we've seen momentum really coming through in every one of our organic business lines, more of our focus has shifted back to there and continues to be there at the moment. That's not to say that you should not expect M&A activity from us potentially in the second half of the year and certainly during the calendar year. It's certainly something that we continue to be actively engaged on.
But we've got this really good balance where we've got great strength in the organic business. That's where we think the best returns for shareholders and, well, probably all stakeholders, customers, and employees alike by growing out these organic opportunities. It's a very fast pace at the moment. And you should look to us to potentially make smaller acquisitions that fit in with the strategic businesses as they currently exist in their organic form. So with that, I'd like to conclude and open up to any questions.
Thanks, Tony. The first question is going to be from Christian Andjelic at Blue Ocean Equities. He's coming online now.
Here and see me?
We can.
Just the first one is just on. I think you've made a mention of about AUD 4.5 million of ARR that you guys have won to date. Can you give us an idea, as in up until when we're speaking now in this half, can you give us an idea of where you were last year and whether this is a dynamic that's always in play or something that's more towards this year alone?
No. I think, look, we're always a second half business because that's just the way that the GovTech machine works. It's always skewed to the second half. And I think, look, we are well ahead on where we were last year. The math is pretty easy. We're in the 40% of the target. And so I wouldn't say it's necessarily, are we stronger? Yes, we're stronger this year than last year. But I'd probably respectfully say we were weaker last year rather than stronger, if I can put it in that perspective. So I think, but we are ahead of the norm.
Okay. And then the second one was just on the Nexus customers. So you mentioned that I guess your top five customers might be looking to change within the next 12 months. The first part is just whether that's a change of stance from some of those customers to, I guess, six, 12 months ago, whether they were always in question of transferring on to Nexus. And then maybe the second part of that is, are you expecting the same revenue uplift from obviously these bigger customers as you have from some of the smaller ones and what you've been telling us to date?
Look, I think the uplift will be in the ballpark. I won't know until we enter into contracts, of course. But yes, anecdotally, that looks like being the case. I think, if anything, it's not that we didn't think that they would convert. It's just that we didn't think that they would convert as soon as they are.
What's driving that? Is it a change in mentality from them or?
Yeah, I think so. I think government has been very slow to embrace the cloud. And I think our approach has been. I've telegraphed this before. Our approach has been we're not. Some GovTech vendors have forced their customers to the cloud through saying, "Look, on-prem is end of life. You have to move to the cloud." And our approach has been, "We're here. We're cloud ready. We've got customers on cloud. All new customers are on cloud. And we're here to support you when you want to move." And I think just customers have been progressively moving all their workloads to the cloud. And their time has come. So we certainly. Yeah, we welcome it. But I think we're just progressively moving. So I think, again, some other vendors we've found, certainly suppliers of ours, have been aggressively pushing customers to the cloud at all costs.
We've taken the view that, and have had sort of post-cloud blues, we've just taken the view that we're just going to move customers as they want to move.
Okay. Perfect. Thank you. I might let someone else have a go. Cheers. Speak to you guys tomorrow.
Thanks, Christian. Next question is from Josh Kannourakis at Barrenjoey. He's coming online. Hi, Josh.
Yes. Just mic myself up a little bit. Hey, Tony. Ben, how are you? Firstly, just a little bit of follow-up on the incremental ARR you talked about. So obviously, that's a pretty strong start to this year. In terms of breaking it down, how should we sort of think about that in terms of the three specific areas? And you mentioned there were sort of no chunky contracts like you talked about last year. What are you seeing in terms of the funnel across those businesses and maybe how the conversion has potentially changed this time this year versus where it has been historically?
I'll probably try and answer the second part first. I think last year, we had confidence around several larger key deals, which, look, we were sensitive to those deals, but we had a high degree of confidence. This year, I think the heavy lifting is spread among a broader range of deals. So we just don't have that sensitivity. I think we touched on it in the commentary, but the lift is largely, the additional lift since 31 December is largely between Content Solutions and Planning and Building.
Got it. That's really helpful. Thanks, Tony. Just on the build platform and just referencing the points on NZ, how's progress going on? Obviously, you've mentioned the numbers, but in terms of some of those larger councils, can you give us a little bit of an update on where you think they're positioned, if there is particular friction where that's coming from, and how you can work to alleviate that?
Look, the only point of friction has really been. There's talk of a change to the way planning is organized in New Zealand. So the planning reforms, as they're referred to. But all they're talking about doing. I shouldn't say all. The predominant theme is clustering the consenting process. Our software already caters for that. So it's not that we have any technology issues in catering for that. It's more a case of there is a little bit of waiting to see what those reforms are going to be. So that's probably caused some delays. But really, when I say that, that is not. I think you'll find the numbers will play out, Josh, to be fair. There's a little bit of a schism in the way the reporting timing has played out.
Okay. Great. No, that's really helpful. And then final quick one maybe for Ben, just because he looks like he hasn't had a chance to jump in and answer questions. I know he's chomping at the bit. If we think about operating leverage, obviously this year was talked about as one of a little bit of reinvestment. How should we think about that profile over the next few years and maybe just remind us in terms of how we should be thinking about R&D reinvestment and how sort of the revenue will flow through to operating leverage over the next few years?
Sure. Well, this half, I think, as we called out in the presentation, the adjusted EBITDA margin was at that level in line with the H2 FY24. And so, as we said, there might be some modest growth in that margin. And that would carry through FY25 as we invested in some of these go-to-market activities, but also cycled through the sales performance from FY24. And then looking forward from FY25, with the expectation that we're going to meet the target on our growth, then there is significant operating leverage that gets built into the business each year from those two sources of the go-to-market capability and also the general administrative expenses. Both of those provide significant operating leverage in each future reporting period.
Okay. Great. I will give someone else a go.
Thanks, Josh. Next question, Sinclair at Moelis.
Good day. Can you hear me, guys?
We can.
Excellent. Thanks for taking my question. I was just interested in, I think I saw in the commentary a win in San Diego. And I was just interested in sort of how long that had been in the pipeline and if I could get a sense of what that sort of sales cycle might look like if it's representative of what opportunities over in the U.S. might be like.
Yeah. That was quite some time incoming. Just to give, I guess, some color to that, it was part of a broader opportunity that was awarded to Hyland. As you might recall, Hyland is a significant go-to-market partner for that product in North America. They OEM our product. Hyland had won a larger project at the City of San Diego. It was part of that broader project. It was in the pipeline probably six months ago. We knew we had won it six months ago, but it took quite some time to actually get the paperwork done.
Okay. No, thanks. That's great. And I guess another question just on build. And you mentioned, obviously, some other markets other than Australia are interesting to you. It's just interesting to understand is maybe planning's less complicated by the layers of government in other markets, and maybe it makes it more prospective and a more straightforward, I guess, sale. Is that something to do with your rationale to start looking outside of Australia a bit?
No. The rationale is certainly with RegWorks and Build, we are trying to build global category leaders, and so if you look at the planning regime and the planning process, it is very surprisingly very consistent in a lot of markets, so the checklists might be different, and the workflows might be a little bit different, but essentially, you've got a set of regulations, whether they be set at a national, state, or local level. You've also got applications that come in in surprisingly the same form, which in the loosest possible way, a set of plans, a statement of environmental effects, or some such legislative requirement, and then a series of other supporting documents, whether they be environmentally related or whether they be heritage-related. Typically, that's a set of documents that comes into an authority of some form, and then those things are checked.
There's often an RFI or request for further information regime that exists. And then finally, there's an approval. And then it goes into a further regulatory step around making sure that what's been approved actually gets built before they get an occupation certificate. And so that process largely exists in most Western countries, just in slightly different forms.
Okay. Great. Okay. Thank you very much. Thanks for your time.
Thanks, Sinclair. Next question is from Jules Cooper at Shaw and Partners. Hi. Hi, Jules. We can.
Fantastic. Tony, if I could ask one question. On 360, you mentioned the win with the City of San Diego looks great. But also, there's a few other developments in that product and the business in North America. You've talked about partner capability, a new team in place. I guess my question is here, when you present the growth range for this line of business that 360 is a part of, the Content Solutions, 11-13, I don't know whether it really does justice to 360. And if you could maybe shed a bit of light on how you see that product growing. You're obviously making some good investments, but it could be really quite exciting. And I just wonder whether it's sort of hidden amongst a whole bunch of other things and we can't really observe it that well.
Yeah. Look, I think we're going to see the major acceleration of 360 into FY26. Whilst we haven't, we will continue to sign new business. In 2025, I think the real opportunity is in 2026 and beyond. That's why we haven't overplayed it. I mean, you asked fairly well, Jules. We prefer to deliver first and brag later. So I think that's kind of where we are.
Yeah. Fantastic. And can I ask, with some of the M&A opportunities that you continue to assess, is that really tied in with accelerating the 360 product primarily, or is it, I'm just sort of drawing too many lines there?
I think you're drawing too many lines. I think in the near term, they're more likely to be in the regulatory solutions and planning and building area.
Fantastic. All right. Thank you very much.
Thanks, Jules. The next question is from Evan at UBS. I'm not sure. I think that was all of the questions from the analyst group, Tony.
Is there any out of the chat that you want to?
I just think there's a couple here. Just one, that the U.K. market was mentioned a number of times as having a strong pipeline opportunity, and do you think that as more customer reference sites become available, the growth might accelerate, or do you need more boots on the ground?
Absolutely to both. It's really strong over there. I'll be over there in a few weeks' time for the Institute of Regulation annual event that we have essentially been running for the last number of years now. I mean, look, I hate talking about the pipeline. I think, look, it's fair to say that we've got a very strong interest in our technology in the U. K. market. As you can appreciate, when it's something new, these things take time to mature. But I think we're absolutely there now. And so we do have a lot of opportunity. Do we need more boots on the ground? We absolutely do. And we're trying to address that at the moment, or we are addressing that at the moment. And more feet on the street will certainly make a difference. As it will in the domestic market, for that matter.
There's a lot of opportunity here in Australia where we're hiring, where it's a busy time for that business line.
Thanks, Tony. I think we're getting it now.
Hopefully. Can you guys hear me okay?
We can.
Yeah. Thanks, Evan.
Good one. Just the first one I had was on that AUD 4.5 million ARR step-up that you just called out through Ben Treg. Is there anything unusual in that? Was that sort of delayed awards from the prior half, or is that a pull forward of awards? Just trying to understand.
I think you could say they were delayed in part. Some of them were just questions of time. I mean, people have different methods by which they want to acknowledge ARR in terms of signings. One thing is, when does it come into effect, and so some of that was already in the bag, but it doesn't come into effect until the second half, and so we felt that it was more pure just to report it as that, so could we have reported a larger first half number? Yes, but we wanted to remain sort of true to our way of thinking about it.
Yeah. Okay. All right. Fair enough. And then I'll just ask two quick ones to finish here. Do you need some of those top five customers that you alluded to that are sort of going to close in the next 12 months to reach the full-year ARR target? And then just also on the M&A cost, is that sort of an ongoing feature we should expect here? I guess specifically, why did we call it out this time? What's changed or what's different with those M&A costs that you've called out to?
Yeah. So the first question, I would expect some of them, perhaps not all of them, over the course of the year. So I don't think it's going to be one big, it won't be one big bang, and then it doesn't happen again. It'll be progressive. With respect to the M&A costs, we spent quite a lot of money on a, we were very close to something in North America. It didn't conclude, but we were well, well down that process and incurred a lot of costs. I can't imagine for anything that we've got currently going on that we've got costs of that magnitude, anything like that magnitude going forward.
Okay. All right. Thanks for that.
That was all of the questions on the analyst line, Tony.
All right. Thanks, Ben. Look, thanks everyone for your interest. I appreciate your time, and I know that I'll be catching up with many of you during the next two days, so look forward to talking then. Thank you.