Good morning, everybody. My name is John McMahon. I am the Chair of Solution Dynamics. It is my pleasure to welcome you here to our annual shareholders' meeting. The meeting is obviously being held in person and online via the Computershare online meeting platform. In addition to providing a live webcast of the meeting and access to the meeting documents, shareholders and proxies have the ability to vote and ask questions, and I will shortly provide details on how to do this. The company's directors that we have present today are Julian Beavis, Elmar Toime, Lee Eglinton, and Andy Preece.
Online, we have SDL's North American based director, Patrick Brand, and he will address the meeting later. Susie Watts, Solution Dynamics CEO, is also present, as are our auditors, Baker Tilly Staples Rodway. I am pleased to confirm that we have a quorum and therefore declare the 2026 annual shareholders' meeting of Solution Dynamics to be open. The terms of business for the meeting and the items to take care of, and the resolutions to be considered by shareholders, were contained in the notice of meeting, which was sent out on September 24. Please note the small print, the important disclaimer information, as we will be making and commenting on forward-looking statements today. The agenda today goes through a few things. Firstly, I will take us through the procedures for voting and for questions.
We will undertake a general overview of FY 2026, the trends we saw, also the key financial metrics. As part of that, Susie Watts will also address the meeting. We will comment on the domestic mailhouse operations and how we are getting on with progress with our new nGAGE product, and then we will cover our guidance for FY 2027. After that, there will then be an opportunity for questions. Lastly, the formal business of the meeting will occur, and then any other general business that arises. I will now explain the voting process, which is pretty straightforward. From now onwards, anyone who is online, you will be able to vote on the resolutions that are to be considered at this meeting. If you are logged on as a shareholder and you are eligible to vote, then a Vote tab will show on your screen.
To vote, simply click on the tab, select your voting directions from the options, and you can vote for all resolutions at once, or you can vote for them individually. Your vote has been cast when the tick appears. To change your vote, just simply select, unsurprisingly, Change Your Vote. You have the ability to change your vote up until the time I declare voting closed at the end of the meeting. For those in the room, you will have registered, and you will have collected a ballot paper on the way in. Let someone from Computershare know. Raise your hand if you do not have a ballot paper, and one will be brought to you. Online, you may submit questions at any time on each resolution being put by shareholders.
To ask a question online, whether it is related to a resolution or any matter, just click on the Q&A tab, as indicated on the slide, type your question into the field, and once you have finished typing, please click on Send to submit it to us. You can submit questions from now onwards, although we will not address them until the relevant time in the meeting. Note that your questions may be moderated, or if we receive multiple questions on one topic, these will be combined. However, if you do not consider your question has been addressed, then please resubmit it. To ensure all shareholders have a chance to ask a question, please limit yourself to a couple of questions.
If we do run out of time to answer all questions, we will make sure that we respond following the meeting, and I do encourage anyone who is online to submit questions as early as possible. The Q&A tab can also be used for immediate help. If you need assistance, please submit your query in the same manner as typing a question, and a Computershare representative will contact you. For those in the room, questions will be taken after general business and after each resolution. Please wait for the microphone to be brought to you and state your name to identify yourself as a shareholder before asking your question to the meeting. Moving now to the result and business commentary. The company had a demanding year in FY 2026.
It was a tough year that followed the late FY 2025 significant restructuring, which saw a material reduction in costs, notably from lower staffing levels. This did result in a number of operational challenges in the first half of FY 2026. However, these were well bedded down by the end of the first half. I would like to give particular thanks to all SDL staff, who stepped up through that challenging period of change and helped ensure the company both remained profitable and also provided our ongoing strong level of customer service. Additionally, Solution Dynamics CEO, Patrick Brand, was unable to continue in the role due to family health issues, with Susie Watts stepping into the CEO role from 1st of January 2026.
On behalf of the board, I would particularly like to reiterate our thanks to Pat for his significant contributions in helping steer SDL through COVID and continuing Nelson Siva's legacy of transitioning SDL from a print mail house towards an increasingly software-oriented organization. Pat played an instrumental role in realigning the cost structure post the major customer RFP loss in FY 2025, plus leading the development of the nGAGE product. The directors asked Pat to join the board to assist with continuity of key offshore relationships he holds, as well as provide strategic input and support to international products and customer initiatives that are key to our future growth prospects. We will hear from Pat later in the meeting. In the meantime, I would like to introduce Susie Watts, who was recently confirmed from acting to permanent CEO, to introduce herself and to say a few words
Good morning, everybody. It is an immense privilege to stand before you for the first time as the Chief Executive Officer of Solution Dynamics. I want to thank the directors for their formal endorsement, and the confidence in appointing me to lead SDL into its next chapter. I also want to echo John's thanks to Pat. His leadership has been foundational in our international growth in international business. Pat's deep knowledge of the U.S. market and his strong relationships remain an important asset to SDL as we execute our strategy in these areas. I spent my career in the IT and software sector. I have helped small companies, from startups to global enterprises, grow. I bring a commercial drive, that strong governance expertise to execute SDL's strategy into this new growth era, and value for our shareholders.
Look, we continue to face a range of challenges, particularly the systematic decline in our mail volumes. Challenge, however, is something that reveals the true determination of our organization. Since taking on the role, my absolute focus has been driving changes across the company. The company, to ensure we are actively engaged with the clients, driving revenue, optimizing our margins, and also remaining agile with our expenses. I am incredibly proud of the leadership team, and indeed all the staff within the company, who have risen to these challenges. Their dedication, their capability, the deliverance of the business in an evolving situation is one that is leaner, sharper, and fundamentally continues to be stronger. SDL's core business, digital resilience this year, our revenue and our top 10 customers grew 11%. Although the New Zealand customers, a lot of that was result of higher low-margin postage rates.
Our digital revenue grew in U.S. click volumes by 19%, supported by a strong partnership with Pitney Bowes. We have secured new local authority accounts, and we are well-placed with the new council-owned water entities establishing their billing systems in New Zealand. I am proud to note that SDL is the leader in the local authority market, a position that continues to grow, and the support of the local team has been amazing. The evolution of our customers' demand has seen, for the first time in SDL's history, the change from the volume of emails sent on behalf of our customers outnumbering the number of physical mail. At the same time, we have aggressively reduced our expenses by 24%, and improving our systems, and in some cases, enhancing them.
Following the launch of nGAGE in the U.K. dental market earlier this year, the company's ongoing digital innovation saw the release and release of nGAGE Transact, a new bundling offering for Australia and our New Zealand market. This solution bridges our future and our past, combining two decades of expertise in transactional communications for billing and invoicing. This is backed by AI innovation and technology. This is the type of product innovation that will help shape the business in the next two years. SDL has a robust growth strategy, an exceptional strong balance sheet, and the team have the detailed knowledge and experience to succeed and execute under this pressure. I would like to thank the staff and the board, our customers, and of course, the shareholders. Looking forward to the future and making improved efforts across. I will now hand you back to John.
Thanks, Susie. Look, before moving to the next slide, which covers some key financials, I think there's probably a couple of points to call out around that slide. The first is the effect that we've had on profit from developing and launching nGAGE. We scaled up, we employed a range of staff in the U.K. And this had a negative pretax earnings impact of around NZD 500,000 . For the part-year cost, and it was only for part year, of the U.K. staff, the customer support costs we added, marketing, travel. This excluded the development costs of the domestic staff that we have in New Zealand who actually built the system. Now, I'd also emphasize no costs were capitalized. Everything was expensed, so it all ran through the P&L. Now, nGAGE only launched mid second half, and consequently saw minimal revenue in FY 2026.
The second is SDL's balance sheet, where the net cash position that closed FY 2026 was NZD 7.7 million, and that was following a requirement to spend NZD 1.3 million on replacing some end-of-life and server equipment. Now, this cash position provides the board with the ability to consider a range of options for growth, and we will consider all options. Although at this point, the focus is on buying back shares, and again, we'll talk about that a bit more later when we get to one of the resolutions. During FY 2026, almost half a million shares were acquired at an average price of NZD 0.60 per share. The directors view this as not only assisting with trading liquidity on the share market, but also as value accretive for all shareholders. The numbers unfortunately tell the story on the slide. It was a very difficult year.
The loss of a major contract in FY 2025 clearly rolled through revenue, and hit revenue and gross profit, and with sizable declines. We clearly made a significant readjustment to the cost base, dropping, as Susie said, our SG&A, selling and general and admin expenses, by around about 24%. However, that wasn't sufficient to offset that reduction in gross margin, and that resulted in earnings that fell 85%. Just noting my prior comment that that earnings decline does include NZD 500,000 pre-tax of development and launch costs for nGAGE. The dividend was increased to NZD 0.04. We paid out slightly more than the earnings per share. However, I'd put that in the context of the prior year, where we went below our standard payout ratio, probably from an overabundance of caution about what FY 2026 would look like. Moving now to the domestic mailhouse business.
That saw revenue rise around 4%. However, mail lodgements dropped 11%. And by the way, that 11% is in the context of an overall drop that New Zealand Post saw of around about 15%. So again, it's just an indicator or a data point that we're picking up a little bit of market share. But what that combination of revenue up four, but lodgements down 11 means is that most of the revenue gain, in fact all of it, came from the increase in low-margin postage revenue that Susie mentioned. Now, NZ Post, they had raised prices 15% at the start of FY 2026, and they have again raised prices. This is the price of a standard letter, not the price we pay. It's the price of a standard letter that you go and buy from a post shop, the stamp, is now up a further 24% this year.
They have a clear strategy of trying to drive transactional mail volumes down. That is obviously increasing the focus on the cost of physical mail, and the process of digitization will consequently continue. Although, we do see our customers having a range of their customers, and they are getting to that rump that still require ongoing physical communications for a period of time, although it is difficult to tell how long that will be. The digital-first sales approach that we take now to the market, that is being driven by nGAGE Transact. That provides improved functionality and usability for customers, a greater ability to self-manage and customize the content of their communications. FY 2026 saw ongoing cost reductions post the restructuring from improvements in staffing levels and operational efficiency, and that process is continuing in FY 2027, with further gains to come.
As Susie noted, the council market remains a source of growth. We are getting both additional work from outsourcing of what was in-house print by some of them, albeit tempered by ongoing digitization, and also initial work from some of the council-owned water entities. Although most of those newly formed ones have yet to formally implement their ERP and billing systems. SDL is very well positioned in that market.
We are the long-term supplier to New Zealand's largest council-owned water entity. In terms of AI usage, our AI usage and embedding, it does continue to grow. It has got quite mature in SDL's software development side of things. The developers are seeing immense productivity gains out of it. It is progressively being introduced across a range of other activities within the organization, such as customer service. Although, I would state it is still in the early stages. Looking at our dental marketing software.
nGAGE integrates with what is the leading, and we estimate it has got over 80% market share, dental practice management software system in the U.K. nGAGE utilizes the existing patient information from those systems with some AI assistance to create and send highly targeted marketing campaigns. SDL has a wide range of campaign templates that we have already built, along with a very easy-to-use template builder that allows dental practices to either customize or create their own bespoke campaign templates. nGAGE also then integrates back with the practice management system to track the results of campaigns and effectively provide an ROI or return on investment analysis of campaign effectiveness in terms of the revenue that those campaigns are generating. And we have now got a brief video covering some of the key nGAGE features.
[presentation]
There's a link to that video in the NZX release, and there's also a link to the website. We've got a dedicated website that's set up for nGAGE, and you can look at that website for further details around how nGAGE works and the functionality that it provides. Just in terms of the market, I obviously said we're aiming initially at the U.K. U.K. market's got around about 12,000 dental practices. SDL estimates that the practice management software we're integrated with has got around about 8,000- 10,000 practice sites utilizing its software. The majority of those, though, are still on probably an older version of the software than we're integrating with. They're on an on-premises solution. That's still the main market share that they've got. However, they're progressively fading that out and moving it to the cloud-based solution that we integrate with.
We think we will keep pace as that conversion progresses. What we do is we operate a revenue share model with that software supplier. We are quite aligned in terms of wanting an outcome. And we provide quite a good incremental piece of functionality that their software does not have. Since starting to market and sell the product during the second quarter of FY 2026, we've now got around 170 sites signed up. We have a very strong pipeline. There are around 68 sites fully onboarded. We have a number of customers who are on board, but they're running two to three-month trials just to prove up the ROI to be comfortable that it works, and we expect those to progressively convert to full paying sites in the near term. The company's in discussion with several corporate dental groups.
These are typically groups that have rolled up a range of dental practices. They've got anywhere from 50 to, in some cases, over 200 practice sites. Although I would note that those enterprise customers, they typically do require slightly longer sales cycles than an individual practice does. We've also reached agreement with the software supplier to begin marketing nGAGE into customers in Australia and New Zealand, and we're in discussions with a dental practice in Australia to be the initial regional trial site. And look, nGAGE is the first product that we've had, which we developed, which is not enterprise-focused. It's got the ability to scale beyond a single customer, a single problem, a single solution. The data architecture is designed to be used more broadly than just in the dental market. And we're currently in negotiations with two non-dental opportunities in New Zealand for nGAGE Transact.
What does that all mean for the future? In FY 2027, we clearly still face the headwinds from the structural challenge of significantly higher postage costs continuing to erode physical volumes from existing customers. We're at least partly offsetting this erosion through increased market share, which is a combination of new customers and increases in volumes from some existing customers outsourcing what was previously in-house print. New customers in New Zealand are spread across the council and new water entities, plus new opportunities outside that local authority market from nGAGE Transact. We're also reviewing our print equipment configuration, and we expect changes in the second half that should lower the cost of production. Additionally, further staff restructuring in the current half is lowering costs for customer service and production. We've got a premises lease break point later in 2027.
That should enable a sizable drop in our rental expense, although this obviously won't affect the FY 2027 earnings. Technology operations continue to mature across the company. Most of our operations are now in the cloud. We are steadily progressing our AI adoption and usage. As I said earlier, the software development side, it has got very mature, progressively rolling it through into customer service. On the international side, Pitney Bowes volumes are continuing to increase. There are new market segments Pitney Bowes are chasing that could further benefit SDL volumes. The main focus for international revenue is the U.K. dental market with nGAGE. That is where we are proving it out, and that is the base point from which we will look to expand and grow our dental footprint. The U.K. dental pipeline, as I have said, is very strong, and we have got a well-differentiated product that is seeing good market recognition.
The key nGAGE factor for the 2027 outcome will be that pace of conversion from pipeline through the extent to which customers want trials into customers that are fully onboarded and generating revenue. Particularly for the larger corporate customers, that will take a little bit of time. Just heading back to the balance sheet. While the share price remains modestly ahead of cash backing per share, the directors intend to continue with the buyback. The buyback is capped under legislation at 5% of outstanding shares on issue. We have a resolution later in the meeting which, if passed, will increase this buyback capacity to 20% of shares outstanding. The buyback obviously remains subject to there being no constraints around whether it is trading blackout windows or the directors holding material non-public information. The directors do reiterate that all options for shareholder value do remain on the table.
The end result of that is we are maintaining our guidance range of NZD 0.4 million to NZD 1 million for the year, FY 2027. Our underlying trading for the first three months is modestly behind budget. However, the opportunity pipeline remains very strong. So much of the upturn will depend on that conversion of pipeline and the timing around when new business comes on and converts to revenue. We expect the nGAGE dental operation in the U.K. to continue building on its FY 2026 success in terms of building pipeline. However, FY 2027 will also see a full year of costs in the U.K. So the negative effect on earnings is likely to be similar to FY 2026. We believe, based on early feedback, that nGAGE has broader potential, both within existing SDL New Zealand customers and in other vertical markets.
Expanding the opportunity pipeline for nGAGE in dental particularly is a priority, but also in these other areas. Although, in terms of the other areas, it is unlikely to be anything other than modest revenue contribution outside of dental. New vertical market development may require some additional costs. We provide the usual caveats around our earnings guidance. Lots of things can go wrong in the world and domestically, whether it is geopolitical or macroeconomic. That covers the material, so we will now move to shareholder questions. We have a microphone, so please, if you do want to ask a question. Actually, why don't we go online first? Do we have any questions online, Andy?
Yes, I do, John. There's one. Kirsten Roberts.
Yep.
It's a general business question. Given the costs associated with nGAGE in the U.K. that have been expensed this year, should we assume a similar number this year? Are you able to give any further color on the expanded sectors you're targeting for the nGAGE product suite and TAM?
Yeah. As I've just said, I think the earnings drag in FY 2027 will be similar to the earnings drag in FY 2026, largely because although we're starting to build the revenue on nGAGE, we've also got the full year of costs this year. I would note, just because of the timing of that, the revenue's likely to be more back-end loaded into the second half as opposed to front-end loaded. Therefore, normally we'd see earnings for SDL higher in the first half and typically lower in the second half based on domestic business seasonality. Because of that nGAGE effect, it's probably going to be the other way around this year. I think we'll see a lower first half and a better second half. In terms of other markets, yes, the video flew past a number of other sectors that we are considering.
It's a case of, one, establishing domain expertise, because that's critical to getting success and has been critical to our success in the U.K. as we have got specific dental domain expertise on board. We've hired it in, and we've used that to help build and develop the specifics of how we target the dental sector. There's a number of obvious sectors we can go after. We're working through some analysis around that at the moment. But again, I think that's probably more of a second half story, and it won't have much impact on FY 2027, possibly aside from some additional costs if we do decide to hire additional expertise for a particular sector that we target. So no, I can't help with TAM on other sectors. We haven't got that far yet.
At the moment, the key focus is on building out dental in the U.K., making sure the onboarding process is as smooth and efficient as possible, getting some of those corporate groups online, and then thinking about other geographic regions that we can take the product into. That is the initial port of call. The second port of call, but we have already started thinking about it, is then which other sectors do we go and start targeting? As I said, we have already got a version of the product, nGAGE Transact, that we have got a couple of live prospects within New Zealand right now. In fact, one of them has recently indicated that they would like to utilize it. I think that has answered that one. Anything else online?
No. Thanks, John.
Okay.
If I get any feedback from Kirsten, I will let you know.
Okay, thanks.
That's the only question.
Okay.
Yeah. Hi, John. What sort of concerns me is that nGAGE was pitched about three AGMs ago as the future, and nGAGE is now starting to get some traction. But it seems to be the string to the bow. Obviously, there's been a pretty big upset with the loss of a major customer in a different area, and nGAGE is really an evolution of the historic relationship between SDL and Henry Schein Group and Dentally. So it's not really, shall we say, a dramatic recreation, but more an evolution, which is appropriate, right? But it's not something new, and with the declining domestic market, I just wonder what the board's thinking about as far as what's the new thing that's going to help pull you out of the potential quagmire. And if nGAGE fails in some way, then what's going to happen?
Well, I guess there's a few things to unpack inside there, Mark. The first one is, it is a complete rearchitecture of anything we've ever done before. It is a complete bottom-up build. When you say it started three years ago, it's not correct. We actually started building nGAGE, I'm going to say, we started building nGAGE late last year.
Mid last year.
Mid last year. We had some AI activity that we were looking at prior to that, Mark, which you may be-
It was in the AGM notes, the name.
Yeah, three years ago.
Yeah. This is the product we started building mid last year. And we took about less than six months to get an MVP. You are correct, though. We used some of the building blocks, but we rearchitected, and it was a bottom-up rebuild to provide that additional functionality.
The name three AGMs ago would've been GenComm AI.
Yeah. It was GenComm AI three, yeah. I'm not aware we used the nGAGE name three years ago. We had some generic AI branding, but we did not have nGAGE three years ago. Secondly, in terms of the relationship, yes, we have a very good relationship with that supplier. We've hired specific domain staff to ensure we gave ourselves the best shot of success with a completely new, for us, it is a new product and a new build. Quite frankly, we are seeing traction with that product already. We've got very strong engagement with the software supplier, to the point where they're comfortable now with us selling it in Australia and New Zealand. We've gone on sales calls with that supplier to some of those large enterprise groups. At the moment, the early signs we're seeing are that this will be successful.
Probably the delay to date has been getting efficiency around the onboarding and some of the data integration process. There's a few technical aspects to that, but we have largely ironed those out now. Bear in mind, this product is, in terms of selling, it's barely six months old. Yeah, we are seeing good traction, so I'm very comfortable with it. Again, broader application.
The single string to the bow question?
Well, it's a single product, but it's got multiple market applications.
There's no other markets being explored?
As I said earlier, we're proving it and setting it up to get going in dental, and then we're now looking, and in fact had a discussion at the board meeting this morning, about what one of the next markets we would do some exploration around will be. But that's still relatively early stage. We wanted to iron the kinks out of the product first. Now that we've done that, we're now thinking about what's the next stage, what are the other geographies we take it into with dental. By the way, there are other dental package suppliers that have expressed some interest in having our product integrate with them as well. While it's a single product, it has multiple touch points that it can engage, if I can use the term, it can engage with. Apologies for the bad pun.
I don't think it's quite the single string to the bow that you're suggesting. But I accept it is a single code base.
Forgive me for a slight rebuttal, but World Vision was a substantially different product, a different kind of product in the market. You would never compare the two.
No, no. Well, I haven't-
I was looking for what's the alternate, because I think nGAGE and its forebears existed when World Vision existed. It's like, well, okay, we've lost a leg to our stool with the product that was the World Vision product. What are we doing about adding a new leg back in? Because obviously we've had the example- a leg can be removed. Something can go wrong.
Correct.
We need to build some redundancy in the business, and two extra legs would be good.
Yeah
because you never know which one's going to succeed.
Yep.
John, can I just add something? I think it's some case.
Sorry, grab the mic.
Oh, yeah. Sorry. It's a really relevant question, Mark. I think that, to use your analogy, World Vision was a bespoke build for one customer. You can't build a business on that from a repeatable perspective. nGAGE presents the opportunity for us to look at existing customers at a more granular level, where we're selling a product which doesn't involve such complex onboarding. I think nGAGE is a completely different strategy. As you've quite rightly pointed out, the loss of a major customer was different. If we were doing the same thing after the loss of that customer, I think your criticism would be absolutely founded. But I think nGAGE is a completely different proposition, and a recognition by the business that you can't grow a business on these massive customers. You can't turn them down, of course not.
Yeah.
But we need to continue to build products which can be at a lower total cost of ownership perspective from us and the client. I've been pretty close to that transition, starting with Pat and then through Susie, so that's why I wanted to make that point.
Yep. No, thanks, Andy. Yeah. Any other questions? Mike.
Thanks, John. Firstly, nice to see the nGAGE product. Something different, which is great. Thanks. Just a quick question. In New Zealand, I understand that dental practices use Exact. Does nGAGE integrate with Exact?
It's a very good question, Mike.
Yeah. No. Actually, no, no. No. I want to say-
We can integrate into an older version of Exact, but one of the things we don't necessarily want to do is, that will stymie some of those customers from moving from Exact to Dentally. Schein wants to move those customers to Dentally, and that's one of the support aspects that we're helping provide to them, which is why they're being very supportive to us. But the short answer is we can if we needed to. But those Exact customers, they probably will all come off that package over the next few years. So it's a very short street that we'd be driving down, Mike. But it's doable, is the short answer. If there was money in it and we had support from the software provider, yes, we'd probably look at doing it if the cost was minimal.
A chunk of the functionality is already there, as Nick said.
Yeah, a lot of those Exact customers already use Campaign Plus.
Yep. So Nick-
Which is an older product.
Just-
That can move to-
Yeah. Nick, too much detail, Nick. Sorry. Sorry, folks online. We are just some backchat here. Sorry, Mike. Keep going.
Thanks. Is it possible to have an indication of the sort of revenue you might get from a standard, say, dental practice by the time you have shared it with the company itself, the practice itself?
We haven't made the rev share proportions public, and it may yet change, so I won't do that right now. We've got a tiered pricing structure for dentists. The rack rate starts at, I think it's about 140 GBP a month for the very base level for a single practice site, and then it ratchets up to nearly twice that if you add on a range of- we've modularized it in some ways, so there's add-on bits in addition to the base package.
Thanks. Just a slight pivot through to the rates and the water rates specifically. You've obviously made great inroads there, which was excellent. Just a question, every time I get my Auckland water rates and all the printing, I think, "Wow, that's great news," but how long do you think it'll be until they decide to send that out via email?
Well, they're progressively looking to move customers to email. The rump that they've got on print, it's less than a quarter now. It would've been probably 60/40 a year or two ago. So they have been progressively making that move, and that's part of that move to digitization. But as I commented early, there are a rump of customers that, for whatever reason, still will require a physical communication. So we will be on a slow glide path down, Mike. There's absolutely no doubt about that.
Thank you.
Hi. I'm Tommy Scrivener. I've got a couple questions that relate to Resolution Four. I believe last year-
Do you want to wait till we get there, or do you want to fire them now?
I'm happy to wait.
Okay. Yes, because if we bundle it all up around Resolution Four, if you're okay with that? Yes. Is there anything outside of Resolution Four you wanted to ask about?
Yeah, actually. I believe you guys have imputation credits enough to fully impute a dividend of up to NZD 3 million. Have you guys considered doing that?
We have got ICs. I couldn't tell you off the top of my head what the number is, but that sounds roughly right.
Yeah.
At the moment, I think the initial port of call is to see if we can buy back as much stock as we possibly can. You're right, that is partly related to Resolution Four because it's a bit of a how do we use the cash in terms of paying out an imputed dividend versus buying back shares. Philosophically, I'm probably a little bit more in the camp of buying back the shares gives a permanent value accretion to the residual shareholders as opposed to paying out the cash, it's value to shareholders, but it doesn't add any further value to the existing shareholders.
Thank you.
You might be asked a question. I actually have a couple of. In regard of your small shareholders,
Yep
which seem to distort the share price pretty regularly, have you looked at compulsory buyback of, I don't know, less than 3 or whatever the number is, thousand shares or. Would that be of any advantage? I don't know. There's not many shareholders, I guess, but
Well, first, there's not many shareholders, and secondly, I suspect when you start seeing those small transactions go through, that's typically Sharesies.
Yeah.
Sharesies sits inside a pooled account.
Yeah.
If someone owns two shares inside Sharesies nominees, we cannot go and buy those back because we cannot identify them. All we see is Sharesies nominees that own X number of shares. The look-through is not there, and so we could not technically go back and make a compulsory acquisition of them. You are right, the number of other shareholders with small shareholding, it is a very small number.
Would you like to try a little harder in your buyback and which might be a bit more useful for all shareholders?
That is a very good question, Phil. I guess there is a couple of parts to that. The first part is we are pretty thinly traded. We are a micro-cap. We have an obligation as the company to ensure that we maintain a fair and transparent share price. We cannot be seen to be pushing the share price or supporting it. We largely have to be a price taker, which in a smaller liquid share like this does mean occasionally it gets lumpy, but occasionally there is nothing there for a period of time. We have to be very careful about not overstepping a mark and be seen to be effectively manipulating a share price upwards. That will get us into trouble with a whole range of people.
This is not like a large corporate which can go in and do sort of 20% of the volume on a day and get a lot of shares. We have to sit there and effectively sit on the bid and wait for sellers to come to us.
You last at NZD 0.63. There's 13,000 on the offer.
Thank you. Thank you. Thank you for the bid. Thank you for the market dip, Phil. I'm very conscious of that. We discuss it most days with the broker that's doing the buyback.
Yes.
No. We are very aware of it. I'm very conscious of, in general, would prefer not to cross the spread, just as a matter of good practice around not being seen to too aggressively push or support the share price. We largely have to be quite passive in how we acquire. I agree with you. I would like to buy back more stock at current levels.
I definitely would. To some extent, we're a taker. We have to sort of take what we're given as opposed to chasing it too hard.
There you go, mate. There's your chance. You can buy me. You can sell me to John.
Right. Sorry. Do we have any other questions? Okay, anything else? Okay. All right. Let's move to the formal part of the meeting. Just reiterating the voting procedure, it's by way of poll. Once the votes are cast, they'll be counted by Computershare, and the results will be released on NZX following the completion of verification of voting. Again, if you're eligible, a Vote tab will show on your screen. You'll get a list of the resolutions and the voting options. To cast your vote, simply select one of the options, and the vote's recorded when the tick appears. You can change your vote up until voting is declared closed. All the resolutions today are ordinary resolutions and are required to be passed by a simple majority of votes. Proxies have been received on approximately 3.4 million shares, which represents around 24% of the total shares on issue.
The majority of these proxies have been directed and are in favor of all resolutions. As chair of the meeting, I hold discretionary proxies for less than 100,000 shares, and I intend to vote those discretionary proxies in favor of all resolutions. Resolution 1 relates to my own re-election, and for that purpose, at this point, I will pass over to Andy Preece to chair the meeting for the purposes of conducting this resolution. So, Andy, over to you.
I'll give you my sheet because couple of versions. Right. Thank you. Good morning, everybody. Resolution 1, which is the re-election of John McMahon. NZX Listing Rule 2.7.1 requires that the company's directors must not hold office without re-election past the third annual general meeting of shareholders following their appointment or three years, whichever is longer. John will retire from office at this year's annual meeting. Being eligible, he offers himself for re-election as a director of the company, and John's biography was in the notice of meeting. I'll take this as read and pass over to John to say a few words.
Thanks, Andy. As noted, my bio is in the nom, so it's reasonably straightforward. I've been a Director of SDL since 2012. That period, up until last year, did see a period of sustained growth in earnings and shareholder value. We're now in a rebuild phase. We have a new product. We have a clear product and go-to-market strategy around that. I'm very confident that it will work, it will expand our software business, and grow our international development and our international footprint. I'm very confident in being able to return SDL to higher levels of profitability. I'm also very aligned with shareholders. I own approximately 11% of the company, so I have a strong personal incentive to make this work. A very strong personal incentive.
I want to thank my fellow Directors for their ongoing confidence and support, and also thank our shareholders, staff, and our customers. Does anyone have any questions for me? Mark.
Forgive me.
Unlikely, but keep going.
I know
Depends on the question, Mark.
I'll be
I believe Patrick Brand is online.
Yes. Pat will be speaking next.
Yes.
His-
My question sort of drives to, a little bit to both of you. You spoke to your personal commitment of a substantial shareholding in the business as a strong motivator. The question is about your view of the other directors, and Pat incoming, not really holding many shares. I am sort of like, "Come on, guys, this has been a long time," and some people have received a lot of money from the company in the form of salaries and stuff. Surely 100,000 shares, even I was able to buy a couple of hundred thousand. They are not expensive right now. If the board has true belief, where is a bit of the money where the mouth is? I would like your comment on that. Subsequently, when Pat talks, I would like his comment on that.
Yeah. I would make a couple of observations because this is a question that does often come up, and it is one also that the New Zealand Shareholders Association regularly asks as well. They opine on it. They also like to see some skin in the game, so to speak. It goes to a question of alignment. Having said that, I actually do not believe in compulsion. Some companies have put share schemes in, where there is automatic part of directors' fees goes into that. Everybody's financial circumstances are different. I do not know what the other directors' other portfolios, assets, or investments are like, so I am not going to opine on whether, in terms of what they have or what they own, it makes a difference. The thing I am most interested in directors is diversity of view, diversity of experience, and diversity of opinion.
I can very confidently say that around this board table, very few free passes get handed out. It is a challenge. It is a challenge to Susie. It is a challenge amongst the board as to how we think, what the right strategies are. To me, it is that, what is the commercial experience? I effectively, I bring the voice of the shareholder to some of that. I have got a range of relationships with a number of the larger shareholders, personal relationships and professional relationships. I regularly do get feedback from some of them around what they think about our strategy, what they think we are doing, and, lucky Mark, they are happy to make suggestions on occasion. None of them are shrinking violets. It is not like we do not have that input to it.
It's up to any individual director to decide what they do and don't do, and I'm not going to opine one way or another on those decisions.
Okay.
Any other questions?
I thought I'd need to say something else.
You do need to say something.
Loitering with intent.
Yeah.
I move, as an ordinary resolution, to re-elect John McMahon as a director of the company. Please cast your vote if you haven't already done so, and I'll now pass the role of chair of the meeting back to John. Thank you, John.
Thank you, Andy. Now, Resolution 2, which is the election of Patrick Brand. Pat was appointed to the board by the directors on 1 January 2026, and therefore is required to stand for election at the next annual shareholders' meeting. Being eligible, he offers himself for election as a director of the company, and Pat's bio was likewise in the notice of meeting, and I think we can take that as read, and ask Pat, who is online from New York City, to say a few words.
Thank you, John. Can you hear me okay?
Yep. Loud and clear.
Great. Well, it is nice to be with all of you again. Good morning. You have read my bio, and many of you know me personally. Just to maybe reiterate some of the things that most of you know, or for new information for others. First of all, I am immensely grateful to the board and the shareholders for your support throughout my years with SDL. Then, of course, as CEO, and more recently, on the transition to the board. On a personal note, I did want to mention that my family's recent medical challenges were really pretty serious. They were life-threatening. Having said that, thankfully they are now largely under control. I know, since I know many of you personally, you perhaps would be interested in that information. That also frees up my time to make sure that I can fully concentrate my focus on the company.
My value to SDL, as you saw and heard from others, continues to be my international experience, particularly in the U.S., but across North America, and to some extent, Europe as well. Key customer relationships, Pitney Bowes is certainly one that I was instrumental in terms of landing them as a customer, and continue to be connected with them and help Susie and the team navigate that. Strategic input and support for international products and customer initiatives. My functional experience is really in product management and in marketing and go-to market, and those are areas that I can provide strategic input and support for. You have heard a lot about nGAGE. nGAGE was started under my leadership, and obviously I have a deep understanding of the strategy and the build-out of that product, what we are trying to accomplish, and how we can best drive that forward.
Really, when you put it all together, all of this enables me to bring a very balanced perspective. I am very keenly aware of the market dynamics that SDL is going through, not only in the Australian-New Zealand market, but globally. Obviously some of the technology and digitization challenges and potential ways to navigate through that. I am very much excited by the opportunity to continue to work with my board colleagues. I have enjoyed that immensely over the last year or so, as well as in my previous role. To help Susie in her new role and help the team navigate through these challenges and deliver value for really everyone. I really want to express my appreciation for the shareholders' continued support moving forward as a director of the company. Certainly, happy to take any questions.
I hate to be the one again. Hi, Pat. Mark Horton here.
Mark. Hi, Mark.
Yeah. What concerns me into the future, and I'd like your view on, is that, to me, it's the elephant in the room that the company, John alluded to it. We lost a major customer, but you don't lose them. It didn't fall out of your pocket, right? Unless you have some other insight, it was the way we managed the customer, its market, our partners, who I believe are involved in its business now, and things like that. So what's the view about how we avoid that sort of situation in the future?
Well, as you know, Mark, and many of you in the room know, you don't own a customer. You deliver value, and that customer is free to go out under RFP and choose a different supplier. Things change. Priorities change, approaches change, and customers have that freedom. We had a very good run with World Vision, and quite frankly, I think Susie would confirm that we continue to do work with World Vision, so it had nothing to do with our support capability. So from that standpoint I'm not concerned at all, and I believe World Vision will continue to be a customer of ours going forward. So hopefully that answered your question.
Okay. In that case.
Nothing online, John.
I move as an ordinary resolution to elect Patrick Brand as a Director of the company. Please cast your vote if you haven't already done so. Moving to Resolution 3, which is the auditor's fees. Baker Tilly Staples Rodway is the existing auditor of the company and automatically reappointed by virtue of Section 207T of the New Zealand Companies Act 1993. The proposed ordinary resolution is required to authorize the Directors of the company to fix the auditor's remuneration for the purposes of Section 207S of the New Zealand Companies Act 1993. I move as an ordinary resolution that the board be authorized to fix the remuneration of the company's auditors for the FY 2027. If you haven't already done so, please vote now. Lastly, moving to Resolution 4, which is an approval of an increase in the size of SDL's share buyback.
That buyback program was rolled over in early 2026 as the board considered that continuing to repurchase the company's shares at current market prices or around these levels was likely to be value positive for shareholders. The board proposes to continue and extend the share buyback program by means of a top-up of an additional 15% of the number of shares on issue over and above the shares that may be acquired by means of the company's existing share buyback. All share buybacks will be acquired on market through the NZX. While it's not required to do so under the NZX listing rules, the board considered it was good governance to seek shareholder approval for this buyback top-up by putting it to a shareholder vote. Now, I will ask, are there any questions on this? And I already know Tommy's got a couple.
Yeah, hi. My understanding is you guys repurchased around 3.5% last year, and you are looking to extend it up to 20%. Would there be enough liquidity in the market? My second question would be, have you guys given much consideration to an off-market tender for shares?
At the moment, like I say, and to answer each of them in turn. As I said earlier, around the buyback, we are largely a passive taker of volume that comes to us, so liquidity will depend on who wants to sell and whether someone is seeking liquidity or not. To the extent that none of our shareholders seek liquidity, then we will not have much success. To the extent that we get one or two folks or some sizable holders who do want liquidity, then we will clearly be sitting there and able to take those shares up. I have thought about the off-market tender process. However, given we are a relatively small illiquid stock, I think my and the board's initial thought was, let us provide the option for those people who specifically do want out first off.
That, as you rightly pointed out, the possibility of a dividend or running an off-market tender would be alternative mechanisms to return capital. The first port of call was always an on-market buyback, and so that is the approval that we are seeking at this point. Any other questions? Okay, I now move as an ordinary resolution that shareholders approve and authorize the company to make one or more offers to acquire on market up to an additional 15% of its fully paid ordinary shares, over and above the shares that may be acquired by means of the company's existing on-market buyback program through the NZX in accordance with Section 61B (2), read together with Section 61 of the Companies Act 1993 and NZX listing rules 4.14D and 4.16.1, on the terms and conditions set out in Explanatory Note 4 that accompanied the meeting.
If you have not already done so, please vote. Right. That concludes the resolutions. As a reminder, once the votes have been verified and counted by Computershare, the results of today's meeting will be released on NZX. If there are any final questions, please ask them now. Right. Nothing online. Andy?
Nothing, John. We are done.
Okay. In that case, we have no further questions. Thank you for attending our meeting today. We look forward to seeing you next year, and I declare the meeting closed. Thank you.