I would now like to hand the conference call over to Mr. Marc Washbourne, Co-founder and Chief Executive Officer. Please go ahead.
Thank you, and good morning, everyone. Appreciate you taking the time to join our H1 FY2025 Results call. I'm Marc Washbourne, Co-founder and CEO of ReadyTech, and I'm joined here today by Nimesh Shah, ReadyTech's CFO. Before I go into all of the details of the first half, I'd like to start by highlighting three key points to understand about the result. First point, our enterprise strategy is working and performing well across the majority of segments, and it will continue to mature and translate to tangible growth. This is validated by some major wins in calendar 2024, and more notably by an unprecedented enterprise pipeline with AUD 13.5 million of deal value sitting at preferred or shortlisted stage due to close in H2, which I'll talk more about.
In addition, this is reflected in the full-year revenue outlook to be maintained at low double digits, with the exception of the government segment. Second point, onto the government segment, as already flagged at the AGM, we've experienced underperformance in this part of the business, which has largely contributed to 6.6% group revenue growth in H1. This related to delays in a module that affected the end-to-end product readiness, which in turn inhibited customer cloud transitions. Since then, we have addressed the issue in a decisive manner, predominantly supported by the CouncilW ise acquisition, which has provided a scalable and proven Property and Rating capability. We're now ready to meet customer demand and confident this plan unlocks and accelerates cloud transitions and a return to growth for the government business.
Third and final point, with the combination of the aforementioned exciting enterprise pipeline and our clear plan for government, we are confident of a return to low to mid-teens growth in FY2026 and beyond, and we now target AUD 160 million-AUD 170 million in revenue by FY2027. Additionally, in this time frame, through operating leverage and scale, we expect cash margin to be greater than 20%. I'll now walk through the key slides from the results, and we'll start with slide two. Let's start with a reminder on who we are.
ReadyTech is a vertical SaaS growth company providing next-generation mission-critical software across human-led verticals. We focus on carefully selected verticals that are undergoing major digital and cloud transformation. They are Education and Work pathways, Workforce Solutions, and Government and Justice, and it's that digital transformation that is driving our core growth opportunity.
Our software solutions are currently used by more than 5,000 customers, and to date, we have supported the experience of over 2 million students, apprentices, and job seekers. Our software has also successfully processed billions of dollars of payroll and council rates and supported more than a million Justice cases in the U.K. alone. Moving over to slide three, H1 financials, in the half, we achieved total revenue of AUD 58.3 million, representing a 6.6% increase on the prior corresponding period. Excluding the government segment, revenue growth was at 9%, and I'll come back to the government segment and share more on the reason for the underperformance and the decisive steps that we've taken to remedy later in this presentation. Our underlying EBITDA came in at AUD 18.2 million with an EBITDA margin of 31.2% over the same period.
Underlying cash EBITDA grew 10.2% year-on-year to AUD 8.6 million, with a cash EBITDA margin of 14.7%, up from 14.3% in H1 FY2024. As said, our enterprise momentum remained solid, with an immediate pipeline of AUD 13.5 million in opportunities at shortlisted or preferred stage. Overall, our wider gross enterprise pipeline has expanded to AUD 37.5 million, up from AUD 31.8 million in FY2024. Slide four focuses on the highlights and themes from the first half of FY2025.
ReadyTech continued to execute its enterprise strategy, delivering multiple wins across verticals. We're pleased to report that Workforce Solutions secured a number of enterprise customers, including its largest contract to date, which exceeded AUD 1 million in first-year contract value. In Education in H1, as previously reported, we signed our first university student management system contract with Avondale University. Marking an exciting entry into a significant new market and further expanding ReadyTech's reach in enterprise markets.
Meanwhile, momentum in the justice sector remained strong, with a major new tribunal contract further reinforcing ReadyTech's position in this space. As mentioned, a key focus in the half has been addressing local government underperformance caused by a delay in a module that impacted end-to-end product readiness, which acted as an inhibitor to customer cloud transitions. The acquisition of Council Wise's Property and Rating engine has accelerated both product availability and referenceability, unlocking real flexibility to address customer needs with this proven capability within one of the important modules of the end-to-end experience, with an engine that is already used extensively across Australia. Onto slide five, and looking ahead to the second half of FY2025 and beyond, ReadyTech is now well positioned for an inflection point in performance.
The gross enterprise pipeline now stands at AUD 37.5 million and a strengthening conviction, and as said, this includes AUD 13.5 million deal value of enterprise opportunities that are at shortlisted and or preferred stage, all with a close date in H2 FY2025. This has taken some patience. However, we now have high confidence in this unprecedented pipeline across Education and Work Pathways, as well as Justice, which is underpinned by a significant level of procurement activity as organizations seek to replace legacy systems.
The growing support from reference customers further strengthens ReadyTech's position in these sectors. In local government, we are confident the end-to-end product set and scalability, with greatly expanded referenceability achieved through Council Wise, will accelerate the critical cloud adoption and drive long-term growth. Lastly, the incremental cash margin from these active growth initiatives will drive operating leverage and margin expansion over the medium to longer term.
I'll now hand over to our CFO, Nimesh Shah, to take you through ReadyTech's financial performance in more detail. Thanks, Nimesh.
Thanks, Marc, and good morning, everyone. Let's turn to slide seven. As Marc mentioned, ReadyTech delivered revenue growth of 6.6% on a PCP basis. Growth was driven by enterprise contract wins and successful upsells across all verticals, though impacted by product delays in the government segment. Excluding government, revenue growth was 9% on a PCP basis. Group revenues, recurring revenue remains very strong at 85.6%. Underlying EBITDA, excluding non-recurring costs, increased 4.6% to AUD 18.2 million.
Cash EBITDA margin improved by 0.4% to 14.7% for the half, progressing towards a medium-term target of 20% and plus. This reflects a growing contribution of recurring revenue, high-value clients, and the benefits of operating leverage. Expenses increased 7.8% in H1 on a PCP basis as we continue to invest in our capability to support future revenue growth, reflecting our high confidence in ReadyTech's future growth potential.
On slide eight, moving to the balance sheet and the cash flow slide. At December 2024, ReadyTech had AUD 19.3 million available in cash. The reduction in our cash balance on 30 June reflects AUD 10.1 million paid over the half for earnouts for prior period acquisitions. The company remains conservatively geared with a net leverage ratio of 0.86 times. EBITDA to cash flow conversion is expected to exceed 95% for the full fiscal year of 2025, with strong annual subscription fees due in the quarter four.
Turning to the segment performance on slide nine, firstly in Education and Work Pathways, Education experienced strong performance over the half, delivering our first university win and continued success with TAFE. Together with Work Pathways, the vertical grew revenue by 7.1%, and the EBITDA margin remained very strong at 42.9%.
Workforce Solutions grew revenue by 10.4% in the half by new contract wins, including our first million-dollar customer in this vertical, and success with upselling additional modules to existing customer base. For the same period, the EBITDA margin improved to 36.4%. Justice revenue grew 13% on a prior year basis, driven by new customer wins and upgrades. As mentioned earlier, the government segment was impacted by product delays for the half, which has now been addressed, and we are confident in a pathway to accelerate growth from the second half onwards.
On slide ten, as you can see on the chart, ReadyTech has delivered sustained revenue growth over the last three years. Saying that, our revenue tends to be skewed towards the back half of the year, and we expect this to be the case again in this financial year.
Some of the second half performance historically has been driven by key seasonal and structural factors, including end of financial year, recognition in the Workforce Solutions segment, quarter four subscription trade-offs for some of the seat-based licenses, and increased customer spending cycles. In Work Pathways, the upcoming Disability Employment Services contract is awarded in Q4 and will provide another layer of growth momentum. I will now hand over to Marc.
Thanks, Nimesh. From slide 11, and in the next few slides, I'll talk about how we win in enterprise. Turning to slide 12, I'll start by explaining why enterprise is the right strategy and why we decided to move upmarket to target large, high-value enterprise customers across all segments. Firstly, the enterprise end of our markets means we can acquire high-value contracts with customers with sizable technology budgets that lead to ongoing expansion opportunities and high customer lifetime value. Secondly, cloud adoption remains at low penetration across our markets at the enterprise end.
This creates a large opportunity for ReadyTech to replace legacy technology and accelerate digital transformation programs in the years ahead. Third, we are building strong moats given the significant R&D investment required to reach enterprise-grade product-market fit. Lastly, through scalable and configurable platforms, enterprise supports our ambition and plans for higher margins in the longer term.
That's the enterprise setup. I'll now talk you through the enterprise journey. Turning to slide 13, ReadyTech has purposefully built enterprise capability and is now ready to scale. This journey began with a deeper investment phase between 2020 and 2024, where resources were allocated to developing enterprise-ready products, enhancing enterprise sales and marketing capabilities, and refining enterprise service delivery.
These foundational efforts set the stage for the winning of the initial enterprise customers, where ReadyTech has played a very hands-on role in ensuring successful customer onboarding. With those early breakthroughs, the shift focused to building a strong base of lighthouse customers from 2021 through to 2025, while further honing the enterprise product. These successful implementations established credibility, generated referrals and buzz, and created case studies that have positioned ReadyTech as a compelling option for future enterprise clients.
As the company moved into 2024, by addressing a broader serviceable market and leveraging the credibility gained, the focus shifted to building out the conviction pipeline. That phase is today most mature in the segments that started the journey earliest, being Education, Workforce Solutions, and closely followed by Justice. That brings us to today, with the current stage of the journey centered on converting a substantial pipeline, scaling out and solidifying our footprint, and over the longer term, targeting market leadership. In summary, with a strong foundation of reference customers, proven solutions, and expanding enterprise footprint, ReadyTech is in a prime position to accelerate the growth and realize its full potential in the enterprise market. Slide 14 provides a snapshot of our enterprise wins, some of those over the last two years.
These logos demonstrate the broad range of organizations who are now not just ReadyTech customers, but also serve as valuable references for similar opportunities across this swelling pipeline and in the wider enterprise market. Slide 15 depicts one of the key reasons that we are winning in enterprise. ReadyTech provides our customers a unique value proposition with an open ecosystem architecture and approach. Being open and connected means greater choice, flexibility, and interoperability compared to legacy systems and the platform monolith.
This approach also means we can play well and collaborate with the horizontal big tech players such as Microsoft, who are committed to investing in these markets in areas like CRM and finance, and this is serving as a major competitive difference for ReadyTech. Slide 16 is an insight into why ReadyTech is on the verge of accelerated growth in tertiary education, where multiple growth engines exist.
This is a market ripe and ready for change, with many legacy systems urgently needing a generational upgrade, coupled with strong demand for modernized and digital student experiences. When we combine our major and immediate opportunity in TAFE, ReadyTech's breakthrough university win with Avondale University, and the opening up of the higher education market, along with our unique ability to service state government's vocational and funding management needs, we are confident our education segment is ready to outperform. On slides 17 and 18, our Workforce Solutions vertical strategy is gaining traction, with strong gains in the mid-to-enterprise Stand-up Economy. We win here by solving complex and workforce management challenges while targeting very high product fit for key target industries.
Those include transport, hotels and accommodation, manufacturing, agriculture, and retail, and the demand for innovative Workforce Solutions continues to grow as businesses seek all-in-one cloud platforms that replace fragmented legacy systems, those that ensure seamless payroll compliance, support mobile workforces, and drive automation for greater efficiency. Wins in H1 included large and growing retailer Bargain Chemist in New Zealand, hospitality and event management company Te Pae, and most notably on slide 18, a major contract win with Talley's, our largest customer win yet in this vertical. We are proud to serve Talley's Group, a major player in New Zealand's food industry, operating at scale with over 6,000 employees. This case study showcases how ReadyTech's proven track record and innovative and mobile product made us the ideal partner to streamline Talley' s workforce operations and drive efficiency.
Onto slide 19, ReadyTech has established a strong foothold in the local government sector, serving over 280 councils across Australia with a modular solution set. With the rising demand for digitized services, ReadyTech is well positioned to drive efficiency and modernization. A significant opportunity lies ahead, including migrating existing customers to the cloud and replacing legacy systems with modern integrated platforms. Turning to slide 20 and further on the local government segment, following challenges in 2024 with one module that impacted the readiness of the full end-to-end cloud products offering, ReadyTech has taken decisive action to fast-track this core product strategy with the acquisition of a proven and scalable Property and Rating Engine to round out the local government ERP.
ReadyTech is confident it now has all the elements for a deployment-ready solution to meet the evolving needs of modern councils, unlocking cloud transition of a significant customer set across all states in Australia, while also providing the critical reference ability for supporting councils to embark on this cloud journey. Onto slide 21. To drive this market and product opportunity forward, we have assembled a refreshed and high-quality management team with track record of enterprise success.
With expertise spanning customer delivery, sales, and product innovation, this team is primed to optimize product fit, drive those customer transitions, and secure new government customers while providing excellence in customer experience. Additionally, the integration of Council Wise's strong management team enhances ReadyTech's local government leadership, reinforcing its deep experience and capabilities in local government as well as Property and Rating solutions.
Onto slide 22 and to our Justice segment, which is experiencing growth and expansion of conviction pipeline as the sector digital transformation accelerates. As the sector, Justice is seeing a greater adoption of digital solutions fueled by the need to modernize legacy systems, enhance efficiency, and improve citizen experiences. ReadyTech's Justice case management solutions serve an estimated AUD 230 million in serviceable market across courts, tribunals, legal services, and public prosecutors.
Our track record in the U.K., our modular platform, our rapid go-live capabilities position us as a trusted leader in digital Justice transformation, evidenced by two recent contract wins shown here, and confidence in a high conviction pipeline for 2025. In the next two slides from slide 23, I'll discuss our ongoing dedication to innovation, as well as how we are increasingly benefiting from the use of AI here at ReadyTech.
In the first half of the year, ReadyTech saw the major release of Next Generation HR and LMS modules that streamline employee lifecycle management while reducing reliance on third-party products. This enhances efficiency for our workforce as well as local government customers while delivering added value to ReadyTech. We've also accelerated AI product releases via our dedicated emerging technology team, most notably the release of Talent IQ for workforce, simplifies high-volume hiring and AI-powered candidate matching, where multiple customers have already seen time to hire reduced by over 50%. Many more AI-infused releases will follow. Just one to call out, our upcoming Council DA Agent will transform local government development approvals by cutting administrative bottlenecks.
By driving automation and efficiency through AI across regulatory processes and service delivery, ReadyTech is well placed to capitalize on new revenue and growth opportunities by unlocking this customer value with AI. Slide 24 outlines how AI is also providing a significant opportunity to drive operational efficiencies across ReadyTech with expanded adoption of AI across customer service, software development, and quality assurance.
You can see from the metrics we have started to make a tangible contribution to operating leverage in the support of higher margins for ReadyTech. Finally, slide 25 provides an overview of our outlook. The headline here is ReadyTech's enterprise strategy is ready to drive future growth in revenue and margin expansion. Revenue growth for all segments in FY2025, excluding local government, is expected to be low double digits, underpinned by the pipeline of AUD 37.5 million, including those at shortlisted and preferred stage opportunities of AUD 13.5 million.
Including local government, group revenue growth in FY2025 is expected to be at high single digits. We're targeting an underlying EBITDA margin, which excludes the impact of LTIP, in the range of 33%-34%. Underlying cash EBITDA margin is expected to be in the range of 17.5%-18.5%. To the medium-term target for FY2027, the depth of current sales opportunity pipeline and the advanced stage opportunities are forming an inflection point for a return to mid-teens growth, underpinning a revised revenue target of AUD 160 million-AUD 170 million. Again, in summary, I'll finish where I started with three key points.
The enterprise strategy is working, is at an inflection point, and reflected by AUD 13.5 million in immediate pipeline. The local government growth inhibitor has been addressed, and we'll see a rebound to an improved level of performance in the year ahead.
In the medium term, we are entering a period of strong growth and are on track to target mid-teens revenue growth with an accompanying margin expansion. Thank you again, and I'm now happy to take any questions.
Thank you. If you wish to ask a question, please press star and one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star and two. If you are on a speakerphone, we do ask that you please pick up the handset to ask your questions. Our first question today comes from Cameron Halkett from Wilsons Advisory. Please go ahead with your question.
Hi, Marc. Hi, Nimesh. If I can just start, I suppose, on the Government and Justice performance through the half. Just trying to understand some of the moving parts here, given IT Vision has gone, I think, pretty well, given its earnout achievements, and justice was up 13% on PCP. I guess Nimesh somewhat suggests Open Office had a pretty challenging half year- on- year, and just trying to understand whether that's just services revenue not being replaced or potential churn. Just some help there would be good. Thanks.
Yeah, yeah. Thanks, Cam. Look, I think the earnouts on the IT Vision, they're predominantly at the last calendar on the margin side, but the revenue was earlier. The softness, as Marc indicated, in the government segment has predominantly been due to those one specific product issue for the module issue that we've unlocked, which has impacted our service revenue and also getting those reference of clients getting in this first half. Now, what we see this calendar year, we've addressed this issue. The pipeline looks strong, and we expect that growth to return back.
Yep. Okay. Perhaps directionally, given there's probably sensitivities around the decomposition of the two, but we are concerned for the impairment charge made within the year. Are you able to give us directionally some composition there between the redundant assets acquired that are no longer needed to certain acquisitions and how much actually was more attributed to just lower growth rate assumptions and certain acquisitions?
Yeah, definitely can. Look, the impairment that we've taken on the CGU, the government CGU, to your point, both the reasons, the first half performance has led to it. Also, we have deliberately and purposefully end-of- lifed some of those legacy assets because we want to accelerate our growth. The composition is a bit of both in that, Ken, to tell you the truth. We have done it deliberately because we want to make that, for instance, the Council Wise engine as our main platform for property and rates. It consolidates our flagships, and then we have to, as a result, deprecate or end of life some of those legacy assets.
Okay. The point being is that whole AUD 20 million is not just strictly due to low performance in government this year. That is a legal deepened down. Okay. I guess just lastly on the pipeline, the AUD 13.5 million that has been called out, I suppose, with the deals pertaining to that amount, what is, I suppose, ReadyTech's expectation for when they may close? Is that something we could see by the end of this financial year or potentially towards the end of this calendar year? That some color would be helpful.
Yes. What we really call now our immediate pipeline, which is at shortlisted and preferred stage. Firstly, I'd say that we expect to have a very high close rate on those. At this stage, all of those opportunities are tracking to a close before the end of the financial year. They are all H2 closes at this stage, Ken.
All right. Thanks, Marc. Thanks, Nimesh. I'll hop back in with you. Thank you, Ken.
Our next question comes from Jules Cooper from Shaw and Partners Limited. Please go ahead with your question.
Thanks, guys. Can you hear me?
Yes.
Yep.
Yes. All right. Just sort of following up there on Cameron's question just around that preferred pipeline. I mean, it's the first time you've given us an insight like this into the business. Are you able to sort of maybe talk about how the current situation might compare to previous points in time where you've had this sort of preferred pipeline or not and how that shapes maybe like last year or the year before?
Yeah. Yeah. Look, this is much, much higher, Jules. I think that we spoke last year in 2024 about some delays in pipeline and delays in decision-making. I think part of that was sort of macro conditions. This is really an unprecedented level of pipeline. As we said, deals that are at this stage, particularly the weighting here is to preferred stage. The probability rate of closing is obviously very high. Yeah, this is far higher than we've seen previously and one that we were happy to share.
Okay. One maybe for you, Nimesh. The cash conversion was a little bit lower in the first half. I wonder if, and I take the point that you've said for the full year that it'll get back to really good levels. Is that also related to the project delays in sort of that local government area? Should we sort of think of that first half cash flow being impacted by that? And then as some of those reference clients move forward, that unlocks in the second half?
Yeah. Thanks, Jules. Look, predominantly it's to do with the second half. It's always weighted with annual subscriptions come in the second half and first half. You'll always find our first half conversion at the lower end of that range, but we're confident to be greater than 95% for the full year. Has the slowness in local government? Yes, a small bit, but it wouldn't be material. Jules is predominantly doing timing of the subscription payments.
Right. Got it. Okay. Thanks, guys.
Our next question comes from Edward Woodgate from Jarden. Please go ahead with your question.
Hi, team. Good morning. Thanks for taking the question. Just on the impact of the module in the government segment, can you just talk through what the group NRR would have been, excluding the government segment, and then also what government growth might have been if it wasn't for the module delays? Sorry, just to clarify, the delays with the module, is that purely technical? Is it in the product wasn't ready, or is it something else? Sorry, I was just jumping to think. I just wanted to get some clarity there.
Yeah. No problem. No problem. Taking first question. We had NRR tracking towards 103, 104 for the half. The sort of slowdown in those customer transitions caused by this product readiness issue, and I think really importantly, the lack of referenceability has impacted that NRR. In terms of the second question, look, we were experiencing delays in one module being ready for market. That module was Property and Rating. It effectively meant that the total end-to-end experience was blocked, and that is what has caused the slowdown in the customers committing to the transition.
The Property and Rating area is very complex. There are different business rules in different states. We wanted to get that right, and we found the best way to fast track that was through this highly specialized provider of a Property and Rating engine. That is Council Wise. The process is all these complex rules in a very scalable way. We moved on that in a decisive way, I think I would say. Look, they specialize in this area. We have a much, much wider ERP with many other modules. This is all they do.
They've got 35 clients in production in the cloud. This acquisition effectively means we are ready to go end-to-end. We'll finalize the current projects that are currently in implementation, and that in turn opens up the transition and the cloud migration pipeline through these really important reference sites. Hopefully that's all clear.
Yeah, that's very helpful. Appreciate the color and the acquisition in that context sounds like a smart one. I mean, just following on, I guess in relation to the medium-term revenue growth target, is there an element of conservatism there? Have you downgraded? I mean, just interesting to see you downgrade given it's an issue specific to one module, and you've now made the acquisition, and your enterprise pipeline's grown, and the preferred pipeline seems to be very strong. Just kind of curious as to how you characterize the conservatism of that growth target.
I think that the growth target out for the medium term now sort of implies that 14-16, 17% on a sort of CAGR basis. The componentary parts of that, we're now confident that we will move NRR to that 105% plus range through the unlocking of these LG local government transitions. There's a very significant backlog of transitions which will open up. I suppose the gap up to that mid-teens revenue growth means we need roughly another 10% from new logos.
We've obviously had a quieter year in FY 2024 than we had originally anticipated, but I guess the shape now of the preferred and shortlisted conviction pipeline plus further opportunities that sit behind that that will also enter that phase in FY 2026. We think that's the right guidance or the right target for FY 2027 now. Okay. Sure. That’s helpful. I understand just the color of what you're saying is that a lot of deals have been pushed to the right. Just for the ones that have come through, can you talk to what your win rates are? Maybe talk to some deals that you've missed out on. Sorry to talk about, I guess, the negative in that context, just be useful to. No, not at all. Not at all.
I think over the wider pipeline, which now sits at AUD 37.5 million, our win rate is around 60% on that wider pipeline. In terms of what we've called out is this immediate pipeline of opportunities which are shortlisted or preferred. We would expect deals in there to be 80-90% plus in terms of close rate. Sorry, Ed, what was the second part of the question? Just any. Or have we lost any? Very, very few, actually. Since we last reported, that pipeline has grown by around AUD 5-AUD 6 million. Very few have been lost. There's probably been more shift to the right in terms of the pipeline as opposed to lost. A couple of smaller opportunities were lost, but nothing major.
Okay. Just one last question from me. You've called out AI potentially having an impact on your cost. Can you just, again, give some color as to how you see that playing out? Is that, say, permanent cost out in certain line items? Does it allow you to leverage certain line items? I mean, would overall cost decrease at any point, or is it just that it's more moderate growth?
I think what it means is that in some of the areas, and I call out customer service and probably R&D, we're effectively getting more productivity for less. I think the best way to think about it is we'll be able to hold some of these cost bases across some of these functional areas as the revenue growth comes through. What it's helping with is the operating leverage coming through as business.
Got it. Thanks, guys.
Thank you.
Our next question comes from Wei Sim from Jefferies. Please go ahead with your question.
Hi, Marc. Hi, Nimesh. Just in terms of the justice in the U.K., can you talk about, I guess, what potential upside opportunity that is? I appreciate it's probably still pretty small at this point in time, but do we see that as an area where there could be more growth? In terms of our, I guess, midterm targets, how much growth would we be seeing coming from the U.K.?
Yeah. We renewed that contract last year. It is ReadyTech's largest customer. It's a few million dollars a year. Certainly, there is future opportunity. The HMCTS, Magistrates' Courts, is going through a sort of generational digital upgrade. I think ReadyTech's considered a very trusted provider, and certainly, we see further opportunity. I think the core aspect that ReadyTech is currently used for is called scheduling and listing. It's effectively the scheduling and the management of court cases across England and Wales in civil courts. There's potential to expand to further courts and potentially to solve further problems for them. In terms of the medium-term target, there is really nothing sort of baked into that in terms of HMCTS. I think that would be upside.
Yeah. You saw in the half growth of 13%, just a bit of that growth in that contract is baked into that growth.
Yeah. Okay. That makes sense. That's helpful. The other question is, and sorry if I missed this on the call, but just in terms of our pipeline, how much of that is coming through from the enterprise versus non-enterprise side?
Very high proportion. I think that firstly, the AUD 13.5 million is all enterprise. The wider AUD 37.5 million, 90% of that is enterprise. There's certainly still SME, as we call it, new business comes through, and particularly some of that SME business would be in the workforce solution segment. Yeah, vast majority of the growth is new logo growth is coming from enterprise.
Okay. Okay. Just last question for me is just related to the Council DA product, which you mentioned. That sounds pretty exciting. I'd like to understand just the competition landscape, what kind of software solutions that might be displacing. Would, for example, Objective Trapeze be an alternate solution, or who else plays in that space? Thanks.
Yeah. Look, I think many of the local government players, the classic sort of ERP players, will have within their suite a planning application. There are also specialists in that space as well. At this stage, I think that we obviously have a shortage of housing in Australia, and one of the key aspects or reasons for that is understood to be bottlenecks within Council to get these applications through. That is what the technology uplift is designed to do. We already have a DA approvals module. There are a lot of human decisions that have to happen through very complex planning applications.
This is designed to automate a lot of that through AI and effectively to reduce planning application approval time frames. Very exciting addition, and it has been very customer-led. We will be working with some pilot customers. The benefit I think that we had, as we call out in our deck, is with 280 existing local government relationships, this type of new innovation that we'll be able to offer through our customer success teams to drive adoption of these types of new innovations. Yeah.
That's really great. Thanks. Great, great color, Marc. And yeah, great, great set of results. Thanks, Marc, and thanks, Nimesh.
Thanks, Wei.
Our next question comes from Lindsay from E&P. Please go ahead with your question.
Hi, guys. Can you hear me?
Hi, Lindsay. Yeah.
Yeah.
Yeah.
Brilliant. Just I've got a couple of maybe finer point questions on the shortlisted preferred pipeline. So first one, like you've said, conversion is something like 80-90% of that. You've said it's coming in the second half. If I just pin that at, say, 12-ish to drop in the second half, how much would be implementation, roughly?
Yeah. It's usually half, Lindsay. Of that, it will be about, give and take, AUD 6 million will be implementation, and the rest is first-year subscriptions. That's probably the maker. Yeah. Yeah.
Brilliant. No, I just wanted to confirm there wasn't kind of something strange going on. If I think about you're kind of looking for mid-teens growth next year, which on your current revenue basis I don't know, AUD 15-ish million, AUD 20 million, something like that. If we just take that 6 as dropping, I mean, it's going to be pretty late in the half. You're kind of entering next year with like an AUD 6 million tailwind just naturally of kind of the 15. Is that the right way to think about it? That's kind of like 30-40-50%.
Yeah. Absolutely. Yeah. I think you look at around that AUD 6 million tailwind, plus you have to put on that the NRR. As Marc mentioned, we expect our NRR going forward to be around that 100-105%. If you put those two together, we have strong visibility for FY2026. Of that meetings, nearly 9-10% at this stage based just on that AUD 13.5 million shortlisted, predominantly preferred pipeline and the NRR. The gap of 5-6% is that needs to be converted from that rest of the conviction pipeline as well. We look here, and that's why we reiterated our medium-term guidance based on that very specific point.
Okay. Brilliant. Just the third and a half itself, is there a skew to any one division, or is it all kind of relatively evenly split as we think about that?
Yeah. There is a weighting towards education, and I think then justice, and then to a lesser degree, it is Workforce Solutions and local government. Certainly, and I think we have talked about sometimes, certainly bullish about the education enterprise opportunities. I just say this again, we talked about the enterprise journey. The enterprise journey started earlier in education, and I think that is what we are seeing bear fruit now.
Okay. Brilliant. Just final question. I mean, I will stick with the pipeline questions, but I will close it up after this. I mean, you have said you have closed AUD 7.8 million worth of deals in the half, but that is what is in the presentation. The pipeline itself, not the high conviction, just kind of the general pipeline's grown by AUD 6 million, which implies your top-of-funnel deal flow is coming in at like AUD 14-AUD 15 million a half. I mean, you talked about deals pushing to the right. That just kind of feels like things truly are taking longer, but top-of-funnel is no issue with that. Am I reading that right? Is the math on that right? Just trying to get rid of that.
Yeah. Yeah. Lindsay, that 7.8 is actually for calendar 2024 and the half. Your point on top-of-the-funnel and going for the velocity is spot on. This time last year, we're talking about elements like funding for some of these contracts or taking the right decisions. We find that funding has come back. We see some of these enterprise contracts in that they're shortlisted for the main, in some cases, main for efficiencies. We have some really good dialogues. The velocity that leads to from pipeline to list is very strong. That is why for the first time we're calling out that the deals that get shortlisted for this half because we remain very confident of that conversion.
Okay. Brilliant. Thank you, guys. Appreciate your time. Thank you.
Thanks, Lindsay.
Once again, if you would like to ask a question, please press star and one on your telephone and wait for your name to be announced. Our next question comes from Richard Harrisberg from Canaccord Genuity. Please go ahead with your question.
Morning, team. Thanks very much for taking the question. We've talked a lot about pipeline already on the call, but just one quick one from me. You flagged some of those deals that had a bit of a delay in timing in FY2024. I think of those four deals, if I recall correctly, one of them was Avondale. Of the other three, have those now closed, or are those part of the immediate pipeline that you've been discussing?
Yeah. Thanks, Richard. One of those closed in H1, which was the large workforce opportunity. Two of those now sit in the immediate pipeline, as we call it, which are in shortlisted and preferred stage. None of them lost, and obviously, it shifted to the right. There has definitely been a clustering of pushed opportunities into this H2 period.
Okay. Great. That's helpful. Thanks. Just quickly on the guidance, the cash EBITDA margin, you were previously hoping for a 100 basis point expansion, FY2025 now sort of flat. Is that fully a function of just some of the lower performance in the government segments, or is it also a function of the slightly higher sales and marketing spend and pursuing deals on that front?
Richard, it's former. It's definitely gone straight to the underperformance in the first half for the government sector. As we have said in the past, we believe we are fully costed to deliver the future pipeline growth. We don't see any incremental costs coming through above the margin. It is predominantly linked to the underperformance in the government sector.
Gotcha. That's great. Thanks, guys. Well done.
Thanks, Richard.
Ladies and gentlemen, ensuring no further questions at this time, I'd like to hand the floor back over to Mr. Washbourne for closing remarks.
Yes. Thanks again, everyone, for joining. Thanks for all the great questions. Just finally to say, we look forward to further interactions across the coming weeks. Have a great day, everyone. That does conclude our conference for today. We thank you for participating. You may now disconnect your lines.