I would now like to hand the conference over to Marc Washbourne, CEO. Please go ahead.
Good morning, everyone. Thank you for joining ReadyTech's H1 FY 2026 Results Call. I'm Marc Washbourne, founder and CEO of ReadyTech. Before we begin, I'd also like to welcome Bryce Thompson to his first results briefing as ReadyTech's CFO. Bryce brings a disciplined, technology-informed financial lens to ReadyTech and has already enhanced our focus on execution, capital efficiency, and sustainable growth, and I'm delighted to have him with us today. First, I want to address performance directly. Our first half performance was below our expectations. As we will outline, this performance reflects strong flagship growth, offset by mature portfolio headwinds and longer customer decision cycles in parts of the business. Importantly, in response, we are taking deliberate action during the year to simplify the organization, sharpen commercial accountability, and focus investment into our flagship products, as well as AI-enabled differentiation.
We're not satisfied with this result, but we are clear on the underlying drivers. We are confident in the long-term enterprise strategy, we are acting decisively to improve performance into future periods. On our presentation on the ASX release today, Slide 2 highlights the structural strength of ReadyTech. We operate mission-critical vertical software across education, workforce, government, and justice, sectors where accuracy, compliance, and reliability are non-negotiable. Our platforms are deeply embedded as core systems of record in regulated environments. These are deterministic systems where domain precision matters above all else. That domain expertise has been built up over decades and encoded into thousands of workflows and regulatory rules. Across the business, we support 1.2 million student enrollments annually.
We generate 7.4 million pays across Australia and New Zealand each year. We serve 51% of Australian councils, reflecting the trust placed across our platforms. Importantly, we are now ISO 42001 certified for AI governance. As AI evolves rapidly, this strengthens our position. Our AI is now embedded in trusted systems of record under formal governance. This will matter. We believe this combination of deep domain expertise, deterministic systems, and governed AI positions ReadyTech strongly for the next phase of vertical SaaS evolution. Moving to Slide 5 of our investor presentation, H1 FY 2026 reflects continued momentum in our growth platforms, alongside the realities of reshaping the portfolio towards a more focused, enterprise-led growth strategy. Total revenue grew 5.6% to AUD 61.6 million, while recurring revenue remains strong at 84% of total revenue.
Flagship products delivered revenue expansion, demonstrating healthy demand in these priority platforms. In the half, this has been offset by churn and lower growth across certain mature and non-core products, as well as some operational challenges that we will cover. We delivered an underlying EBITDA margin of 28.4% and underlying cash EBITDA margin of 12.2%, reflecting disciplined cost management while continuing to invest in flagship capability and targeted growth initiatives. Given the softer H1 trajectory and current H2 visibility, we have revised FY 2026 revenue guidance to AUD 125 million-AUD 127 million in revenue, and we're withdrawing our FY 2027 financial targets. As we sharpen execution and reshape the portfolio, we believe it is prudent to revisit long-term targets once growth visibility improves.
Turning to Slide 6, we summarize the key dynamics in the half. Let's start with some highlights. We saw strong new contracts in momentum across the enterprise portfolio. In education, we secured a 10-year agreement with Skills Tasmania. This is our largest state government vocational education deal to date, reinforcing our strategic positioning in apprenticeships and training ecosystems. Forward-looking, we are also seeing conviction strengthening in the education flagship pipeline. In justice, we signed the Workplace Injury Commission in Victoria contract. This is a strategically important reference win in a complex, regulated environment. Within our workforce, Ready Workforce was our best-performing flagship product. It has now delivered a 24% CAGR over two years, and that performance reflects the very deliberate investment we've made in building a fully integrated end-to-end workforce platform. We also formally launched our clearer, faster, stronger strategy.
This is about simplifying and consolidating our portfolio, accelerating execution, and concentrating resources further into our highest return growth engines. Turning to the challenges. We experienced more difficult trading conditions in parts of the portfolio, particularly across the mature products, as previously mentioned. In managed payroll, we saw approximately AUD 1 million of revenue churn in the half as customers sought to reduce cost in a tighter SME environment. In SME education, private college funding shifting towards TAFE has contributed to downgrades and slower new activity. The VETtrak cyber incident was also disruptive for the company, diverting management focus and impacting parts of the customer base. Remediation and restoration were prioritized, and that work is now substantially complete. In local government, we have a backlog of upgrade opportunities in Ready Community.
While the pipeline remains healthy, velocity of conversion and implementation needs to improve, and that is a major operational focus in H2. In summary, enterprise momentum is real and visible in new wins and flagship growth. However, it's mature product challenges, elongated enterprise cycles, and some operational friction that constrained revenue acceleration in the half. Again, we acknowledge and understand the shortfall, and we are actively addressing each of those factors as we move into H2. Moving on to Slide 7. This is now a segment-by-segment update and firstly, education and Work Pathways. There remains a significant long-term opportunity within TAFE and higher education, including universities and state government. Revenue grew to AUD 21.1 million, and EBITDA increased to AUD 9.5 million, reflecting continued investment and operating discipline.
As mentioned, the standout was the Skills Tasmania contract, our largest state government vocational education deal to date, reinforcing our enterprise credibility. We also transitioned successfully to the long-term Inclusive Employment Australia contract in Work Pathways, where we increased market share and strengthened our position in employment services. The pipeline remains strong in Work Pathways, with over AUD 2.5 million in opportunities expected to progress in H2. Overall, while timing has moderated near-term acceleration, the structural opportunity in education remains intact, and through our multi-year investments, we are better positioned today to capture it. Turning to Slide 8 and Workforce. Workforce delivered 12.1% revenue growth in the half, led by strong performance in our Ready Workforce flagship product, which, as I said, is growing at 24% CAGR over the last two years.
This reflects a deliberate investment in building our fully integrated end-to-end suite across payroll, workforce management, and HR, and aligning our go-to-market around clear industry verticals. Revenue increased 12.1% to AUD 18.5 million, while EBITDA remains stable at AUD 5.8 million as we continued to invest behind growth. Early indicators show that increased marketing investment in H1, alongside the dedicated sales focus, are driving improved pipeline quality and conversion. Offsetting this performance, managed payroll services face more challenging trading conditions with customers in parts of the SME market seeking cost reductions. This created some operational pressure and revenue churn in what is considered a non-core area of ReadyTech. Overall, though, the flagship trajectory in Workforce is strong, and the strategic pivot towards an integrated higher value platform is delivering measurable results. Moving on to Slide 9.
Revenue growth in local government was modest in the half, reflecting the transition from product readiness to upgrade execution within Ready Community. Underlying demand remains solid. Since the CouncilWise acquisition in early 2025, we've secured a combination of 15 wins and upgrades, with AUD 3.1 million first year value signed in CY 2025. Now the project backlog and the sales pipeline are healthy. Our focus now is on improving upgrade velocity and implementation throughput to convert that backlog into revenue more efficiently in H2 and beyond, to optimize the multi-year upgrade opportunity in front of us. Segment margins were impacted by deliberate investment in leadership capability and enterprise sales capacity ahead of capturing growth. That investment positions us to scale more effectively as upgrades accelerate. In justice, as we already mentioned, we secured the Workplace Injury Commission Victoria contract.
This is a strategically important win and a strong reference in a complex, regulated environment. While revenue growth was softer than expected in the half, the pipeline, the project backlog and reference wins give us confidence in the forward trajectory in our government segment. On to Slide 11. Over the past three years, we've been very clear that we have prioritized enterprise customers. We've been enhancing flagship products, building enterprise sales capability, and securing breakthrough reference wins. That foundation is now established. As we move into the next phase, our focus shifts to executing under the banner of Clearer, Faster, Stronger. Clearer is about simplifying and sharpening the portfolio. We're going to be rationalizing non-core products. We are centralizing operations. This year, we are consolidating our offshore development capability to reduce complexity and improve focus. Faster, operating with greater speed and agility.
This includes accelerating flagship product market fit and operationalizing AI across everything we do at the company. Stronger. We're going to be scaling what already works. We're concentrating capital and leadership attention into our highest return growth engines, investing in people capability and in AI mastery across the business, while lifting SaaS unit economics over time. This is fundamentally about driving sustainable enterprise and flagship growth, while effectively managing the mature portfolio, while improving operating leverage. The strategy itself has not changed, our execution intensity and our portfolio discipline will increase materially. On to Slide 12. Our high conviction pipeline continues to build across all segments. We currently have a growth conviction pipeline of AUD 35.3 million, that's made up of AUD 14.9 million in first-year subscription and AUD 20.4 million in services.
As noted, services revenue is typically a leading indicator of future subscription growth, given the implementation-led nature of enterprise contracts. Pipeline composition is increasingly enterprise-weighted, it includes multiple education and Work Pathways opportunities progressing through the detailed procurement processes. In local government, both new customer opportunities and upgrade activity are expanding the addressable pipeline. Within Workforce, the incremental go-to-market investment made over the past six months is now visible in improved opportunity creation and pipeline depth across ANZ. Enterprise procurement processes remain detailed and time-intensive. Timing can shift between halves. Our focus is on pipeline quality, conversion discipline, and then improving implementation velocity once contracts are secured. Overall, in what we see as a once-in-a-generation transformation opportunity, demand for our flagship products remains intact and execution speed is the key lever from here. Turning to Slide 13, enterprise conversion and execution.
In CY 2025, we signed AUD 19.5 million in new enterprise contracts and major upgrades, with AUD 7.3 million in first-year subscription and AUD 12.2 million in services. Conversion rates on pursued opportunities were strong, with only AUD 3.5 million in conviction pipeline lost, and that includes one TAFE deal. The majority of contracts signed in CY 2025 are now underway, with implementation commenced. Implementation time frames vary from 90 days to 18 months, depending on segment complexity. Again, the key focus from here is execution discipline, converting contracted wins into subscription revenue efficiently, and with a reliable cadence. Turning to Slide 14, our R&D investment. Over the past three and a half years, we have made a deliberate decision to invest behind our enterprise strategy and our flagship products.
In total, AUD 59.9 million has been invested, with 97% directed towards flagship platforms. That investment has focused on advancing education capability for TAFE and higher education readiness, completing the end-to-end Ready Workforce experience, integrating and preparing Ready Community for large-scale upgrades, embedding AI workflows and intelligence into our core platforms. R&D has averaged approximately 30% of revenue during this period as we built this enterprise-grade capability. Importantly, as flagship maturity improves, as depicted on Slide 15, and as AI-driven development efficiency increases, we expect R&D as a percentage of revenue to moderate over the medium term, also through operating leverage. This investment phase has strengthened product market fit and positioned the portfolio for scalable enterprise growth. Turning to Slide 16, for the first time, we are presenting a clearer breakdown of our software portfolio between flagship and mature products.
We believe this transparency is important as we reshape the business towards enterprise-led growth. Flagship products have delivered a 13.6% revenue CAGR over the past two years, led by Ready Student and Ready Workforce. These platforms, as well as Ready Community, represent our primary and priority growth engines, and they are where we see the opportunity for the further acceleration through new customer acquisition and deeper enterprise penetration. The mature products remain profitable, but they accounted for approximately 70% of CY 2025 AUD churn. In response, we've implemented incremental and targeted retention, contracting, and pricing initiatives, while deliberately concentrating capital and execution into our flagship portfolio. This portfolio review reinforces our strategy: simplify, focus, and scale what drives long-term value. Slide 17 and 18 position us in the AI landscape, where deep domain expertise combined with embedded intelligence creates a sustainable advantage.
Slide 17 outlines what differentiates ReadyTech structurally. This is decades of domain knowledge across education, workforce, and government, thousands of compliance rules, workflows, and edge cases embedded into our platforms. These systems operate in regulated environments where precision and auditability are critical. Replicating them would require not just building software, but rebuilding years of embedded regulatory logic, operational complexity, integrations, as well as customer trust. These are difficult and time-intensive to replicate. AI amplifies this advantage. Rather than deploying generic tools, we are embedding intelligence directly into core workflows, leveraging structured data already in our systems. We're also using AI extensively to increase engineering velocity. This will support long-term margin expansion. Slide 18 shows measurable results. In Ready Workforce, just one case study, our recruitment assistant has reduced applicant qualification time significantly, as well as time to hire.
Over 60% of customers use these capabilities, we have processed and screened over 250,000 applications. Monetization of AI is disciplined at ReadyTech. We prioritize adoption and proven value before we scale pricing. Following uptake, we're seeing 10%-15% revenue uplift in the recruitment products through the renewal cycles, this is a repeatable model for other products. This combination of deep domain expertise, proprietary data, deterministic systems, and governed AI, positions ReadyTech strongly for the next phase of vertical SaaS. On to Slide 19. For the first time, we are excited to introduce Orchestra, our unified AI intelligence layer, embedded directly within our flagship products. The launch of Orchestra enables customers across education, workforce, and government to access trusted conversational insights within the Ready platforms.
Whether identifying students at risk, analyzing roster inefficiency, or reviewing local government planning approvals, the intelligence is grounded in each platform's system of record. This is not a standalone overlay. It's an embedded, domain aware, enhanced by customer data, and governed under ISO 42001 AI framework, ensuring enhanced decision making while preserving compliance integrity. The customer uptake will increase steadily in the second half, positioning Orchestra to become the standard intelligence layer across our flagship base. I'll hand over now to our CFO, Bryce Thompson, to take us through more on the financials.
Yeah, thank you. Thank you very much, Marc. Good morning to everyone. Really pleased to join you today for my first results briefing as ReadyTech's CFO. Thanks to everyone who's dialed in to go through the presentation with us. Over the past several months, I've been focused on getting a detailed understanding of the business. I've been digging into our financial drivers, our investment priorities, and in particular, our enterprise pipeline. Before I begin going through the slides, I just wanted to emphasize to everyone what great categories of software that I believe that ReadyTech operates in. Marc has already touched on some of this. ReadyTech operates in a very complex and highly regulated set of areas. Our customers rely on us for accurate, deterministic core systems of record.
Often our software has been built around hundreds, if not thousands, of edge cases that have been embedded into the organizational operational complexity as well as through regulatory complexity. I look forward to outlining our 1H performance and the actions that we are taking to support sustainable growth, margin discipline, and operating leverage. If I can take you all to Slide 21, we delivered consistent 1H growth, with services revenue acting as a leading indicator for future subscription growth, as Marc has outlined. Subscription revenue growth grew to AUD 51.8 million, while services revenue increased to AUD 9.8 million, reflecting that strong implementation activity. Our growth was tempered by delayed enterprise contract signing, also some pockets of elevated churn in some of our more mature products.
I'd like to acknowledge that ReadyTech is not growing at a rate today that matches our ambition, and we can see this in our results that we're presenting today. However, we believe that our enterprise strategy will address that, as Marc has already clearly outlined. If we move on to Slide 22, we've presented an underlying cash EBITDA bridge. Underlying cash EBITDA was seven and a half million dollars for the half, representing a 12.2% margin. The margin is reflective of AUD 2 million of incremental strategic initiatives, which we flagged as part of our full year results. These were directed into enterprise flagship product market fit, some go-to-market capability enhancements, delivery capacity, and also into AI, all of which we have designed around driving future growth.
It's important to emphasize, I think, when we look at this bridge, that our capital allocation will remain disciplined, and we will always prioritize investing our capital in areas which will demonstrate measurable and sustainable return. Slide 23 takes you through the segment financials. Marc has already taken us through the details of the educational Work Pathways segment, workforce solutions, and government and justice. I'd just like to call out, as Marc has also covered, the group total revenue grew 5.6% to AUD 61.6 million. Our segment group, EBITDA, increased to AUD 20.6 million, which is how we measure EBITDA before corporate costs. These results obviously reflect the strength of our flagship products, they also reflect the transitional dynamics in our mature portfolio segment. Slide 24 outlines our balance sheet. Our balance sheet does remain strong.
Adjusted net debt has moved up from AUD 36 million- AUD 42 million. I would point out that ReadyTech typically has a seasonal low in terms of cash and therefore a seasonal high in terms of net debt as at 31 December. Leverage is still conservative at 1.2x. Interest cover remains healthy at 10x, giving us the flexibility to continue to invest in growth while maintaining our disciplined capital management approach. Slide 25 speaks to a little bit more in terms of that capital allocation approach. Our framework is disciplined and tightly aligned to our strategy. We will continue to invest in our core systems of record, prioritizing product development. We will also pursue both organic and selective inorganic opportunities where they align with the strategy as we have described today, Clearer, Faster, Stronger.
Where we hold excess capital, we will consider returns to shareholders while maintaining a prudent balance sheet. I'll now hand it back over to Marc to provide more information on our outlook as well as our investment proposition. Thanks everyone for your time.
Thanks so much, Bryce. On Slide 27 and onto outlook. For the company, demand remains strong. Our flagship products are performing, and our AI investment is positioned as well for the remainder of FY 2026 and into FY 2027. As outlined on Slide 27, we have revised FY 2026 guidance to AUD 125 million-AUD 127 million, and we have withdrawn our FY 2027 targets. ReadyTech's enterprise strategy is working. However, protracted sales cycles, combined with lengthy implementation timelines, have resulted in delayed impact to the P&L. We expect FY 2026 underlying cash EBITDA margins in the low to mid-teens. To Slide 28, and in summary, what do we feel really good about? We operate in large, defensive, mission-critical markets where our software is deeply embedded in customer operations.
Our flagship platforms are winning in enterprise, supported by growing references and a strengthening pipeline. We have decades of domain expertise that creates durable moats in regulation-heavy sectors, amplified by governed and embedded AI. We also benefit from structural tailwinds in cloud migration, digital transformation, as well as, of course, the AI adoption. What we are not satisfied about is this financial result. We recognize the gap between strategy and outcomes. We are taking disciplined action to simplify and reshape the portfolio, accelerate enterprise and implementation velocity, and rebuild operating leverage. With a scalable vertical SaaS model and the clearer, faster, stronger plan that we've outlined today, ReadyTech is well positioned for durable growth and long-term value creation. Thank you for your continued support. We'll open the line to 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 two. If you are on a speakerphone, please pick up your handset before asking your question. Your first question comes from Cameron Halkett and Canaccord Genuity. Please go ahead.
All right. Thank you. Morning, Marc. Morning, Bryce. Can I just start around the delays, in particular, around sales cycle conversion? First part of the question, is it something you've observed across all of your key verticals or just one or two in particular? Where the delays are concerned, we've heard anecdotes this reporting season around enterprise, clients in particular, perhaps dithering a bit on taking action, given the pace of AI change and the number of people being involved now in the decision-making. Has any of that also factored into some of the sales cycle delays? Thanks.
Thanks, Cameron. Good question. I think I would say that the enterprise delays have been most concentrated and felt most in areas where there is, firstly, in education, where there is an element of government as well as the wider government portfolio. Not so much we're seeing in areas such as workforce in the more private landscape. I think the key reasons tend to be just very detailed, drawn-out, complex procurement processes. We are not seeing a slowdown due to AI. We don't have those signals. Not saying that that may not happen in the future, but it's not something we've observed to date.
All right. Thank you. Moving on to the comments made around the, you know, mature and legacy solutions. As you say, when you look at Slide 16, there's quite a bit of a growth differential there between the mature portfolio, if you will, and your growth assets. When we think about ReadyTech as a business, how easy would it be to hypothetically separate those legacy assets? Is that something being considered by ReadyTech? Particularly given that growth is clearly stagnant, and when you consider wage inflation, tech licensing, and other costs, this last little while, profitability in those legacy assets is surely going backwards and hurting your margin. Just wonder if there's any plans around that part of the business, please.
Yeah, there's a lot of plans, and there's a lot of thinking. I think what we talk about here, Cam, is under the banner of Clearer, Faster, Stronger is simplification. This is about focus and simplification. I think over time, you know, this portfolio has grown through both organic development and acquisition. To your point, some mature products, they certainly remain profitable. They serve customers well, but they are lower growth, and they can consume disproportionate management time, some of the engineering and support bandwidth. Overall, I think our priority is to concentrate capital and leadership as much as possible, on where it really matters, the flagship platforms, where we see those, the strong product market fit, and all that enterprise traction. Rationalization, I think, can take several forms.
In some cases, it means accelerating customer migrations onto flagship products. In others, it may mean how we revalue certain products. We may look to retire products over time, stepping back from some areas that are non-core. Look, I think overall the objective is, as I said, a clearer, simpler portfolio, less drag from some of the mature assets, and greater operating leverage. I think you should expect to hear us provide a lot more detail at the full year results.
All right. Just lastly, there's obviously been some speculation recently around a certain TAFE tender in the Victorian market. Is there any update you can provide on that one, whether a decision has been made, or if not, any expectations of timeline around that one, please, given how important the TAFE market is for EduTech?
I think I'd say today that we have nothing to announce on the Victorian TAFE opportunity. I think what we understand is these are very significant decisions, and, you know, it's about coordinating a very large number of constituents across Victoria. What we do understand is that the opportunity remains live, the process has been extended, and the Victorian government have not yet formally confirmed the result of the tender process. That's the timing of that is a matter for them, but I would say that, like all material contracts, we'll update the market if and when there is something to announce.
All right. I'll hop back in the queue. Thank you for that.
Thanks, Ken.
There are no further questions at this time. I'll now hand back to Mr. Marc Washbourne for closing remarks.
Thank you. What I wanna say in close, thanks for joining today. I'd say again that we are very aware of what the market is demanding from SaaS businesses right now. We intend to meet that standard. We're in very good markets. The ingredients are there. Our job now is to deliver performance that reflects that. Thanks again for the continued support and for joining today.
That does conclude our conference for today. Thank you for participating. You may now disconnect.