Hansen Technologies Limited (HSN) Earnings Call Transcript

Thank you for standing by, and welcome to the Hansen Technologies Limited Full Year 2025 Results Briefing. [Operator Instructions] I would now like to hand the conference over to Mr. Andrew Hansen, Global MD and CEO. Please go ahead.

Good morning, everyone, and welcome to our results presentation. My name is Andrew Hansen. On the call today, I've got Richard English, our CFO. Just a quick couple of our housekeeping matters. I'm actually dialing in from overseas. So Rich and I aren't in the same room. So if we do experience technical issues today, we'll just take a short break whilst we bring it back together again. But if worst comes to worst, either Rich or I will take over. So questions, as the moderator said, will be taken at the end. So let's kick off on Page 5. Just an overview of our business. Certainly, this year was another year of focused transition and disciplined investment for Hansen, something I think it will become used to expecting certainly as a listed company for our whole history. We've certainly made strong progress with our road map integration and also launching new innovations, particularly around AI, which we're very, very excited about. And as always, we keep on deepening those client partnerships. Our view is always never trying to give a reason for our customers to have to leave us. There have been some macroeconomic pressures plus the headwinds, which we all see, but we've stayed very focused, long-term and sustainable growth organization as represented in our financials. Certainly, this year shows strength and resilience in our business model and certainly expanding our clients through the delivery, innovation above all, just meeting their expectations is what they come to expect from us. We continue to win new business and keep on expanding our business. And naturally, the M&A targets, which we've pursued this year again with powercloud 1.5 years ago and then CONUTI this year have been reached. And we finished the year very strongly, lifting our -- and I think we pointed out in the first half, our second half was going to be stronger and it was by lifting our financial year '25 cash, which is a clear sign of that on continuing momentum of our organization as we go forward. So overall, guys, we thought it was once again a great year, and our business is in great strength. Over the page, look, I think a lot of people know the Hansen story, but I'm sure there'll be a few people knew which don't really know us that well at all. So just a bit recap, this business actually started back in 1971. It was a family-type business. I think to this date, that's still very true to those values. And as we've grown internationally, when you think about it, as a small Melbourne-based organization, to be a business where we are as broad as we are now, is a great testament to some very talented people. Hansen has been around for 50 years and ASX since 2000. I think our long-term view, we just prioritize sustainable growth and customer success. It's always been the view of Hansen that we we're not doing any short term, but it's all about the long-term relationship we have with our business and our customers. I think we've also done over a dozen acquisitions just in the last number of years, and each of those have expanded our global reach, always maintaining the focus of the business. And nearly every case, it can be tracked, we've actually doubled the profit of each of the businesses we've actually been buying. Our software has always sat at the very heart of the customers we look after. It is mission-critical, highly regulated. It's used by customers all around the world. And in many cases, we like to be close to that cash register. And that being we're building the products, doing the rating, doing the billing of all the things we're doing for our customers, so we end up having a very special relationship. We actually focus on 2 key markets, the communications and media and the energy and utilities. And we currently support 600 customers through [ 8 ] countries with a team of 1,600 people. Our growth is steady. And as always, I think one of the headwinds is just the cash-generative nature of Hansen. It's amazing to follow a company like us, and we can buy businesses, pay down debt, [indiscernible] our working capital and also keep on paying dividends, I think, is an amazing testament to the hard-working people. Just over the next slide, the financial summary for the year. Clearly, we're very happy with the results for the financial year. We achieved operating revenue of $392 million for the full year, an increase of 11.2%. Certainly, this growth reflects the powercloud acquisition. I know there's probably a number of investors or shareholders, which were clearing our logic to buy the business. But I think the rapid turnaround of the business, I think most of you now understand the opportunities which are sitting in that particular marketplace. Underlying EBITDA is up 20.9% and underlying EBITDA margin of 28.5%. There was no doubt the second half was a significant recovery on earnings and cash flow with newer agreements, et cetera. And I know that Rich will go into a bit more detail. We're certainly carefully managed and maintained our expense around R&D and continue to deliver what [indiscernible] innovative products and services for our customers and maintain the cash EBITDA margin of 23.8%. And once again, Richard will drive into that cash shortly. Energy and utilities revenue supported by powercloud, new wins grew by 8.3%, and the communications and media revenue year-on-year grew by 15% as we look to modernize some of these legacy systems. Our underlying NPATA of [indiscernible] at $56.9 million has considerably over, reflecting a very strong second half and the profitability and turnaround of the powercloud business. Next slide, just on operational highlights. Look, this has been an exciting year for us with a lot of new logos. We're not slow on the uptake of AI into our own business and using that innovation to provide a strong outcome. We've continued to sign lots of new business. So certainly of note, and ones we did talk about, was the 5-year agreement with Virgin Media, which is a Telefonica global business. We had a very strategic deal in the U.S. with one of the largest renewable energy portfolio with a $16 million deal. We also, in April '25, announced the continuation of our German thesis, which is growing out that marketplace by buying CONUTI and other business in that marketplace. We also, some 12 months or so ago, we did realign our business into 2 operating verticals for efficiency and also bringing the business in and just to understand that the reason for that, the communications market is a global product set where the energy market is really on most, state by state, country by country marketplace. We've been certainly harnessing AI capabilities, and we're seeing a significant boost in the productivity and efficiency across our business. And ultimately, that's aiming towards the bottom line. So that's the highlights now. I think it's probably -- if I could hand over to you, Richard, to discuss probably the financial details in more detail. Richard, please, and welcome.

Thank you, Andrew, and welcome, everybody, again, to our FY '25 results. Certainly, we've been looking forward to talking to the market about what has been a very good year for us. And we were pleased to come out to the market on the 14th of July with a profit upgrade. We talked to a revenue number of $391 million to $393 million, and we actually came in with a revenue number of $392.5 million, so at the top end of what we provided to the market last month. Our growth rate was 11.2% year-on-year. And I think the real success story here is our communications vertical. We talk a lot about diversity in our business. Last year, energy was the star. And this year, communications is up 15% year-on-year supported by a transformational win with VMO2 in January for $50 million, so A very good top line year from a growth perspective. I think what's very important to draw out for everybody on the call is about 3 years ago, we talked to medium-term growth rates of 5% to 7%. And there was quite a few questions back then as to whether or not that was achievable. And I'm very pleased to say that our CAGR over the last 3 years is just [ on 6% ]. So we are exactly where we said we would be. And that CAGR of 6% over 3 years excludes the powercloud acquisition. So we have delivered on our revenue growth, which is pleasing. And of course, that then flows across to our underlying EBITDA. You can see here a substantial change year-on-year. Now of course, last year was impacted by the losses of powercloud, for the 5 months that we own the business. But we backed ourselves, we have turned that business around, and it was profitable 8 to 9 months after acquiring the company. So you can see here that year-on-year, our EBITDA number is up $19 million versus last year, margins returning to the sort of margins that we would expect. And we'll talk a little later to our margins going forward, but 28.5% for the group is exactly where we thought we'd be. And we had guided the market only last month to $110 million to $112 million, and we came in right at the top end of that, at $111.7 million. Moving down to underlying NPATA again, you would expect this to be up based on the 2 metrics I just talked to, but we're up 43% year-over-year. There is some tax in these numbers. So for the first time, we did take up a very modest deferred tax asset in our EMEA region and our effective tax rate for the year is 20% versus 31% last year. And then finally, cash EBITDA, which is, for us, very much a proxy for profit. And a lot of companies talk to EBITDA. We think cash EBITDA is more relevant for Hansen, and cash EBITDA excludes the capitalization of R&D. Again, we guided to -- at the start of the year, we guided to $76 million to $85 million, and we're well and truly outperformed that, coming in at $93.4 million and margins at 23.8% versus 21.8% last year. So all in all, we're very, very pleased with the year. These top line numbers reflect what has been a strong year for Hansen. Moving on to Slide 10 around our diversity. And every year, we talk to the same important diversity of Hansen, which is not having all of our eggs in one basket. And in fact, we have our eggs across many, many different baskets. We have Tier 1, Tier 2 customers. We have products across different jurisdictions. We work in different countries, currencies, and of course, we work into mission-critical verticals being energy and communications. You can see in the top left-hand pie chart that EMEA remains the growth driver of Hansen. It now represents 68% of the business. It's one of the reasons Andrew was based over in London this week. He is working with the team on some pretty important initiatives. And of course, when 70% of your business is based over there, that's appropriate. You can see our split between communications and energy is somewhat skewed towards energy, and that's off the back of the powercloud acquisition we did recently. But we are very comfortable that we have many customers across different jurisdictions that ensure that there is no one customer that could cause us any great level of grief. Bottom left-hand corner, support and application revenue. We look at this revenue as highly repeatable, predictable revenue, very cash generative, some high-margin sources of income here. It's also the reason we are so cash generative. And you can see that the EMEA region has grown 22% year-over-year. And then finally, on to license revenue, and this is often a topic we have with shareholders, with analysts. And what we can see here is, yes, there has been a modest elevation in license revenue in the year. It is 12.7% of our total turnover. But if you look at the last 3 years, it bounces between 9% to 12.7%. So typically, we think it's in the range of 9% to 12%. And I think that in FY '26, our license revenue will not be as high as it has been in FY '25. Nonetheless, it is a core part of our business. It is aligned with accounting standards, and it's exactly the same accounting standard treatment we have used for the past 8 years. Moving on to communications and media. I mentioned before, it's been the start of the year, vertical growth of [ 15% ] year-on-year. And you can see that the margins are improving quite significantly. So on the right-hand table, the segment result or what we would call gross margin is moving from $73 million to $93.9 million, a 28.6% increase. And importantly, the contribution margin is moving from 49% to 54.8%. We've talked a lot about the tailwinds in the energy sector, but I think it's more important as well to talk about tailwinds in communications. We have a lot of large telecommunications companies that we work with and hope to work with that are looking to monetize 5G, Internet of Things, looking at ways to bundle complex customer billing solutions. And of course, we can help with that. And I think with the VMO2 deal that we announced in February, it's further proof that we do have market-leading products. And I think for those that would like to do some research, we are acknowledged by many of the associations around the world, including TM Forum, for having market-leading communications and media products our Hansen Suite is very well known. So communications and media is doing particularly well in FY '25. And if you think back to a few years ago when we talked about Telefonica, we were hoping to land more of those types of deals, and we hope to do more in the future. We have a pipeline that remains robust and growing, and we look forward to announcing future opportunities when they come forward. On to energy and utilities. So I think what I would like to really draw out here is energy is up on a CAGR basis, excluding powercloud, 6% plus over the last 3 years. So very much in line with our medium-term guidance of 5% to 7%. The energy and utility space is up over 6% CAGR, excluding acquisitions in the last 3 years. So whereas communications were certainly firing on all cylinders this year, it's been a more modest year for energy. But nonetheless, a 3-year period of sustained growth is excellent. You will see on the right-hand side that margins have been impacted in FY '25, and that's primarily due to the turnaround of the powercloud business and the restructuring costs incurred in that business, which were approximately $7 million. And we also had a further approximately $3 million of restructuring costs in the Hansen core business, which related to realigning our organizational structure with the wake board. And Andrew will certainly talk to AI initiatives and some of the efficiencies that we are seeing from that space shortly. So all in all, across both verticals, mission-critical, doing particularly well and holding margins. I will say that the tailwinds in communications that I talked to are, of course, still absolutely relevant in energy. I think everybody now globally would talk to this energy transition, the transformation that's underway. We are seeing it. We have customers that are demanding it, and we have ultimately end customers like yourselves that that are demanding the ability to have solar panels, virtual power plants, the ability to trade. These are all offerings that our large retailers need to have. And our products, of course, can support them on that journey. On to cash generation and conversion, and I talk a lot to cash EBITDA, but ultimately, it's all about the cash generation. And at the first half, you would have noted that our cash generation was slightly lower than historical years, but I'm very pleased to say that in the second half, that recovered. And more importantly, as of today, on this call, we are now in a net cash positive position. So we now have more cash than debt. Our leverage -- or our balance sheet is very, very strong, and we expect to make some pretty significant debt repayments in the next 90 days. And of course, we've got a dividend going out to our loyal shareholders in September of about [ $9.5 million ]. So for us, it's great news that we're net cash positive. And that's despite in the year investing a further $13.4 million into acquisitions, being the Dial AI application in Canada and the CONUTI acquisition in Germany. So very, very good to see that our cash flow has recovered, and you can rest assured that at today's date, we're in a particularly strong position. Moving on to capital allocation. it's very dear to our heart. We have been, for a long time, founder led. We spend the money like it's our own. We treat the cash that shareholders have as very, very sacred to us. And with great responsibility, we take care of that capital. And you can see the rapid debt reduction paydown over time. With a strong balance sheet, of course, we now have opportunities for some significant M&A. We have the firepower of a balance sheet, but we also have some very supportive banks that continue to support us on the journey. And Andrew will touch on M&A shortly, but you can understand we are ready and raring to go with further acquisitions. And then one statistic that I always like to talk to, and I think it reminds all of us, including our own team internally, just the cash-generative nature of Hansen. In the last 5 or 6 years, we've now returned nearly $0.25 billion to our banks or shareholders. So certainly points to the robustness of the business and what we can deliver. On Slide 15, R&D, and you'll note here for the first time, we have disclosed all of our R&D investment. And typically, in the past, we've talked to what's been capitalized. Capitalized R&D has, over the journey, bounced between [ $3.5 million to sort of $5 million ] historically. And what we've done here is disclosed that the total amount for the whole year is $34.5 million or just under 9% of revenue. And I think it's important that everybody is aware that we are heavily investing in our products across all different regions to ensure that they can support our consumer customers and across telco and energy to make sure that we can meet their demand. So no doubt there'll be a few questions on this, but we were pleased to share that the business is investing substantial amounts of capital into R&D. And I think with the abilities, with AI now quickly being adopted by not only us but others as well, we'll ensure that we get some products to market more quickly and efficiently going forward as well. I just want to talk briefly about sustainability. And we're not an ASX top 50 company who's been on this journey for a while, but we certainly started back in about 2022, and we established a road map, and we've committed to that road map and continue to raise the bar over the last 4 years. And I think for a company of our size, we punch above our weight. We have now are being recognized 4 years running is carbon neutral. In advance of rolling out ASRS, the reporting standard, we've just completed our climate scenario analysis. And I think especially in Europe where this is considered imperative to be able to compete and win new customers, we certainly offer a road map that aligns with our customers' needs. It's also nice to be acknowledged. So on the right-hand side, you can see there, Ecovadis, a global body, has awarded us the committed badge. And MSCI has upgraded us to a AA status. So we're clearly doing all the right things. There is a substantial sustainability report published today in our annual report, and we also have a data book with some more information provided on our website. So all credit goes to our sustainability team for building out what is a pretty robust road map. And every year, as the bar raises across the world, we continue to raise our bar as well. So we feel like we're in a good position from a sustainability standpoint. I think that's an update on financials. There will be no doubt a few questions in many meetings over the next few days. But again, we're thrilled with the results. And Andrew, back to you to talk about M&A and AI.

Richard, thank you. My thanks for the details. I'm sure it was informative for everyone. Look, just touching on M&A, which we talked. There's no doubt that Hansen, both organically, inorganically, has grown its business. And we think we've been very successful in all the deals we've actually done. We haven't had a failed one. Every deal we've done has actually delivered above or beyond even our expectations, what we've done. And it certainly helped us expand and going to overseas and overseas markets culturally where just by rolling in, knocking on those doors we would not have been able to enter without an acquisition. I think our balance sheet, as Richard, he went into some details there and certainly positioned us going forward. I think just of note, in 2008, we've achieved a 14.5% operating revenue CAGR and a 14.7% EBITDA CAG on what we've been doing. I think we have a very careful or approach to M&A. And then our playbook is not to interact those business, but we do spend money like it's our own. I think it's probably unique, and it probably comes back to the origins of family business starting back in 1971. We only do deals because they make sense. And certainly, it has given us a new lens now, AI. We adopted internally our AI first approaching our company. And we're actually using that same thing with helping us do analysis of organizations, but also where we think some of the efficiencies could take in. We would like to think we're probably ahead of a large pack of people the way we're thinking about how AI is being used in our business. And we're using that same lens as we think through the M&A when we're looking at acquisitions at the moment now. Just talking to the German market expansion. Look, we certainly turned around powercloud and probably once again exceeded our expectations about how quick our team were able to do it. It's a cash-generative business. We have a new management team in place now, with German executives going there. And certainly, there's more further opportunities in the German market for Hansen where we start to look at some of our talent centers around the world. We continue to invest in the product, which we've actually got there, which we now call powercloud, which is now a Hansen business, and now launched as Hansen in Germany. One of the most significant things is that certainly, there's a lot of competition in that marketplace, but there's a very, very significant major release, which had to go into the marketplace this year. And we're very proud. We're one of the only few people which delivered on time and on budget to the German marketplace. And that means meeting -- beating the big Tier 1 people. So very, very proud of the team of people which have adopted some of Hansen's methodologies, et cetera, to deliver that. We've moved forward into the acquiring of the CONUTI business. I think, as you've heard me outline before, it's a very immature market in Germany. And the CONUTI is like playing at our game play as we're looking to further expand. There's over 1,000 retailers in the German marketplace, which all have to adopt to smart meters and smart grid by 2030. So the CONUTI acquisition, some other things we have planned, is all about owning more of the IP and the end-to-end internal solutions we want to do in that marketplace and also now starting to cross-sell. So we've also got some of our products in Scandinavia, like in trade, et cetera, going into that marketplace. So our focus now just turns is the Hansen business, it's an integrated business. We're now on building out the product set and winning new clients in what will be this rapid change in German marketplace. The pipeline in the region, so we're very confident that it continued expansion into what is the third large economy in the world. A little bit further on that M&A strategy. Look, we follow close to 250 targets which are sitting out there. And we think we're still probably best placed in some of those to actually optimize those businesses by the way which we approach these things. The energy and utilities marketplace, we're always looking at those high-growth markets, but also we continue to expand our own application within the marketplace, a bit like the CONUTI in the German marketplace. Communications and media, that's certainly moving down more to the global standards of TM Forum, and we're a key partner of TM Forum, which is the international standards for all telecommunications company around the world, and also looking for opportunities where we can plug into our existing product stack, which is he interesting. We've talked lots about a third vertical. Please don't think we not thinking about those 3 verticals where we're going to go to. We do a lot of analysis. We've never wanted to do a Robinson Crusoe deal with one particular acquisition without us seeing where we could actually globally expand it. And there's certainly some marketplaces, which we think and certainly insurance is one which has got our attention at the moment now, and we don't want to give too much details at the moment now. But it's certainly aligned to our strength and certainly potential for integration in the way -- which is the way we think about things. But there's other markets around financial services, health care and education, which we've had a team of people doing their work at the moment now. We're always natural enough looking for mission-critical software, and we want IP ownership. We like every -- we are trying to find that predictable recurring revenues but also where we can leverage or transfer our technology, et cetera. And of course, those Tier 1 and Tier 2 customers where we think we provide the right level of management to what they're looking for as well, our partnership credentials also work well. So we'll keep on pushing down this M&A strategy, but we'll remain very, very disciplined. As we search out those right sort of applications, those are opportunities for us to expand our business. Look, there's a lot of talk about AI in the marketplace, everyone. There's a lot of sloping mirrors around AI. Everyone's promising AI. It's a massive marketplace. Our approach, we launched last year internally our AI First. And so it is actually very core to our technology and road map. And we're certainly looking the main thing is just driving automation, and also analytics and how you can make smarter decisions quicker. We are putting AI across all that. As Richard pointed, one of the reasons I'm over here now is part of our AI first strategy at the moment now. And the best opportunities for us, which we're dealing with our customers, is just automating repetitive tasks and optimating workforce. You'll understand in our industry there's a very large diverse sets of data with enormous amount of complexity. And they've got the same issues there with security, safety and cyber. So from our point of view, where we're trying to help those customers is certainly lower those costs. But we're finding internally rather to drive some of those. So our outlook for that is the deep interaction of AI for us is there to reduce costs. But it also allows us to certainly enhance our R&D productivity. We're doing more for less, and that's certainly been seen by our customers with takeover upgrades. We also see opportunities for Hansen, which is predictive analytics. And some of the -- the quicker the market, we've talked in the past about our investment in Dial AI, which is just around call centers, which is probably one of the more basic tasks which are doing it. And a number of customers around the world now, which are doing it. So you'll all be in the next year or 2, you won't even realize that you'll be dealing with AI when you're actually talking to an agent, which is handling all questions on the phone. It's rather amazing. Certainly, service quality and customer engagement. One of the things which AI also helps is the speed to that service quality for people and that accuracy in what we're doing. We see this as a fantastic opportunity for Hansen. We're not threatened by AI at all. We're a great enabler of it and providing those benefits. It's the advantage for Hansen is that we deal with such broad data sets and data lakes for our customers and pushing us very much to what we would be in our industry as that subject matter expert and that valued part of -- and that's why we're still making sales at the moment now. Certainly, our customers are embracing our view in AI and how we're helping their businesses going forward. So we're excited by it, guys. As far as the outlook is concerned, look, we remain very optimistic of our growth prospects moving forward to the medium term. I think we go past the last number of years and continue to look at our growth rate of that 5% to 7% over the medium term. Certainly, looking to our target of the 30% EBITDA, we've had a good year; this year, improving. We continue to see opportunities to improve across the business at the moment now. There's no doubt the opportunities in all our marketplaces, as Richard touched on, is actually growing for the opportunities, smart grid rollouts, meter, data, the addressable markets, there's all aspects of our business at the moment now as just seeing opportunities for growth across the board. And I think you put on top of that, which is our view on M&A, which we'll probably speed up to a little degree now. as far as we find those opportunities and where we do take it through the lens of AI, not only reviewing the companies of where we can actually help these companies achieve it. And guys, we're undertaking our future as a very strong cash-generative business. I think companies of our size and our turnover, as Richard pointed out, $250 million, $0.25 billion is a testament to a business since its origins has just been a very profitable focused cash-generative business is amazing. And on that point, I wish to thank all of the extended team of Hansen of achieving what I think a phenomenal growth and the fantastic opportunities we see the way going forward. So I will now put back to -- if there's any Q&A questions, we'd take the opportunity for Richard and I to do our best to try and answer them. Any questions, please?

[Operator Instructions] The first question today comes from Garry Sherriff from RBC.

And Richard, 3 questions: one, just on your FY '26 outlook; another one on powercloud; and final one just on the costs. If I look at -- I just want to clarify to that FY '26 outlook I certainly understand around your license revenue that won't repeat I just wanted to make sure that I'm looking at this correctly. So if you had about $15 million upfront revenue or license revenue in the second half that won't recur, I understand that. Just clarifying, that will be partially offset by the remaining, what, $7 million to $8 million you get a year from the remainder of that contract. So from a net point of view, the FY '26 starting point is, what, about $7 million to $8 million lower than the end of FY '25. I just want to make sure that math makes sense or if I'm missing anything.

Garry, yes, you're right on those maths. Of course, there are other license fees that will cycle through in FY '26 as well. So we just wanted to highlight that it was certainly a higher year in FY '25, and we can talk more about the guidance shortly. But if that's the starting point that you're referring to, yes, it's $5 million, $6 million or $7 million difference.

Next one, powercloud revenue, how should we think about incremental growth for powercloud, in and of itself, for '26 from a revenue perspective?

I think we've been pretty consistent in the last 12 months. We've certainly talked to getting our arms wrapped around our existing customer base. Andrew talked about the significant regulatory changes that have just been completed and completed successfully. We're talking to FY '27 as sort of where the rubber hits the road in terms of growth. We are seeing opportunities. We have a pipeline which is fantastic. But it's got a long tail. This smart meter rollout in Germany is only just starting. So the investment thesis for getting into Germany remains front and center. And I suspect, Garry, you'll start to see some proper growth in FY '27 and beyond.

Understood. Last question just on cost improvements into 2016. You did a really good job at $25 million. How should we think about continued cost efficiencies into 2016? And should we be factoring in any more one-off costs in '26?

I think in terms of efficiencies, of course, we've managed this year particularly well. We have made some restructuring changes recently. You would have seen the $11 million of cost that's gone through the books for some organizational changes. That, of course, flows through into FY '26 and beyond. And we do expect, with adopting more of the AI applications that we are currently using that, over time, like many companies, we will find some further efficiencies in the business.

The next question comes from Annabel Li with Goldman Sachs.

I've just got 2, please. First, just to follow up on Garry's question on license revenue. Are there any larger renewals coming up over the next 12 to 18 months that we should be thinking about? And the second one is just on the pipeline, if you were able to give us some more color on potentially the size vertical, maybe geography mix into '26 or any comments that would be helpful.

Annabel, I'll talk to the licensees, and then Andrew can talk to the pipeline. So every year, we have licensees rolling through. It's just part of our business. So you would have seen, on that chart that I talked you through, historically between 9% and 12%, it will be again in that range for FY '26. It's not like licensees disappear. We are bound by accounting standards. So yes, there will be a substantial amount of revenue that's recognized from license fees. Andrew, perhaps you can talk to the pipeline across all 3 jurisdictions.

Yes. Well, I think it's a good question about pipeline. Look, we've always got a healthy pipeline. You'd understand it does take some of our transactions in a number of years. We spent a lot of time with customers sometimes where it's a proof of concept, which is running. The best way to talk about our pipeline is that we're actually investing even more in the next year or 2 in actually marketing and sales. That would be what we see as the opportunities which lie ahead. I think we see our pipeline as healthy as it has ever been in the past. So I think probably that might be [indiscernible]. We're actually investing more in that sales and marketing function inside of our business. So I don't think there's any massive step change. I think it's business as usual us, and we'll continue to close deals over the next 12 months and going forward.

The next question comes from Josh Kannourakis with Barrenjoey.

First one, just clarifying on guidance. So obviously, you sort of talked to the update in July that you still had some project timing issues, that some of that will sort of shift into '26. I guess what people are trying to focus on today is just the bridge from '25 to '26, looking at obviously moving off some of the license fees, but also looking at some of the step-ups in your recurring revenue as well as some of those deferred contracts. Is there anything you can do to sort of help us bridge it out into next year a little bit more around revenue and just, I guess, your confidence around, still being able to get to or get close to the sort of 5% plus sort of growth range?

Yes, Josh, no worries at all. So look, we spoke at length with our board recently, you'll see more and more companies that are moving towards a medium-term outlook. And we feel like we've delivered on multiple years of 5% to 7% growth, and there's no reason to think that, that won't continue. So we moved away from doing this 12-month lock-in guidance, which is, in some ways, problematic to talk to every 6 months and even more frequently than that. We feel like we've got the runs on the board to support the 5% to 7% growth. We certainly feel as confident about the margin. Margins are not going backwards at all. In fact, margins will continue to move forward from FY '25. So that's again positive. And we've got -- of course, November is our AGM. We typically provide an update to the market in November and again in February. So plenty of time to talk to what we will for FY '26, but I can reassure everybody, we've got license fees rolling through like we do every year. We've won some substantial deals that are now being implemented that we announced recently. So business is growing, margins are increasing, and it's a positive outlook for us.

Yes, got it. So I guess the takeaway there, and I'll try not to put words in your mouth here, Rich, but just in terms of still expecting EBITDA growth into this year from a respective obviously some revenue, but also in terms of the margin enhancement still coming through as a result of those operational efficiencies and other leverage that you're getting in the business.

Yes, Josh, you don't need to put words in my mouth. I'm happy to speak to it. So we absolutely are expecting our EBITDA to continue growing and remain even more cash generative. So certainly not going backwards in any way, shape or form, I'm not sure what conclusions people have drawn from the outlook, but we're very positive. And Andrew, you can hear it in his voice over there in the U.K., He's very excited about where it's headed and so am I. So onwards and upwards, Josh.

I just wanted to be a bit blunt there because I think the market is clearly looking at it, looking at the license fees, maybe being a bit better and saying that maybe it's going to be harder to grow. So that's very helpful to clarify that. Second question, just with regard to M&A. Like, can you give us a little bit more context around -- Andrew, you mentioned that pipeline is as good as it's been and it's accelerating and you're obviously spending a lot of time offshore with the team. What are you seeing out there maybe in terms of the different categories there, in terms of some of the PEO entities, some of the founder-owned entities? just in light of some of the broader uncertainty in the market. Is that helping your position? And maybe just a little bit more detail on how you guys are thinking about that in terms of the current pipeline right now.

Josh, thanks for the question. And look, there's no doubt, from an M&A point of view, Hansen's always been very disciplined about what price we're paying. What I can say is the targets or the businesses we think Hansen should naturally own, they're not transacting. Deals aren't going through at the moment now. I think there's some sort of false expectation evaluations leading up to post COVID where some ridiculous valuations were being done. That does not happen anymore. So if people want to transact at the moment, they have to meet the market and where the market -- we've just remained as disciplined as we possibly can. We do want to buy things earnings accretive. And I know a whole bunch of banks can stand behind us and say we can afford to pay 50% more for a business because of the efficiencies and what we bring. We've always viewed the efficiencies and the transformational program we put companies through should be the benefit of our shareholders and not to the benefit of the vendor. So in simple terms, we're staying where we are on pricing. We say, well, the market's price does if that's what the market is with, there's no business out there which has been around as long enough that's made nearly as much money as us going forward. So we think we should always be buying it at a valuation at least no more than what we actually value ourselves. So in simple terms, they're not transacting. If they want to transact, they have to accept the money we're offering.

The next question comes from Lafitani Sotiriou with MST Financial.

I'll kick off with the one-off costs both for powercloud and there's also roughly $4 million, $5 million of other one-off costs excluded. So I think it's around $12 million all up. Could you give us an idea of what the expectations would be for FY '26. Can we expect $6 million, $10 million, $12 million in one-off costs? Or do you think that it's possible it could arrive at a 0.

Laf, yes, so all of those costs relate to, as you said, genuine restructuring costs. So we have taken out substantial amounts of head count from the powercloud business. And we also made some redundancies or restructuring costs in the Hansen core business. It's very, very unlikely that there'll be anything like that in FY '26. It was an unusual year with the turnaround of powercloud. We did say we would be investing money in turning that business around. We had actually invested less than we disclosed to get the business back to profitability. And in the Hansen core business, there was about $4.5 million of genuine redundancy costs that have been booked in June and audited by RSM.

Yes. Got it. So we can expect some one-off costs, but not to the same extent as what we've just seen. Can I move on to then churn within the core business and then also powercloud? Is it still just only a handful of clients you lose every year in the core business? And for powercloud, can you give us an update on the client book? How many -- what percentage or idea of how many clients have left since acquisition? And have any others indicated that they are leaving?

So I'll talk to churn in Hansen first. So I mean, you're quite right. We have churn like all companies do. It's particularly low. So our bigger customers have been around for 10, 15, 20 years and continue to be around. So every year, you lose a few customers, and you hopefully put on more, which is what we're doing. We're growing the business on the top line. So obviously, price plus new logo wins is supporting the existing Hansen business. And then on the powercloud side, there's been a couple of customers that have left the German market unrelated to powercloud. So as of now, the customers that we acquired is pretty much the same as what's on the register now. And your question around who's intending to leave, I don't know of anyone who's intending to leave, but we certainly don't talk to any one specific customer out of 600 on the books.

Yes. Got it. Okay. And just with the guidance, just another follow-up. So if we were to exclude the license revenue and exclude the acquisitions being made, is the rest of the business guidance for 6% in FY '26 revenue growth? Or is that not yet certain?

I'm just trying to get my head around you excluding license fees, Laf, because we don't look at it that way. As you know, we have them every single year. So I'm just trying to understand your logic for why you're unwinding the licensees. Maybe you could elaborate on that?

Because you've guided to license fees being down, so I'm just trying to understand, we've got some guidance for licensee fees. So what's the guidance for the rest of the business revenue is another way of putting it. Is it to your medium-term target of 6%? Or how should we think about it?

Yes. I mean we don't talk to individual streams, but I mean the business -- and as I said before, we're very confident in the medium-term growth of 5% to 7%. We don't want to get hung up talking every few months to shareholders about the next 12 months. So we look at it in totality, Laf. We don't try and break it down into services, support maintenance and license fees, but we're confident in the medium term.