Harmoney Corp Limited

Good morning and welcome to Harmony Corp Limited's first half 26 investor presentation with David Stevens, the CEO and Managing Director and CFO Simon Moore presenting this morning. Many thanks for your attendance. It's just a bit of housekeeping. David and Simon will do their presentation and would direct any questions to be taken to the Q&A box down the bottom of your screen. And management will happily fill those questions and answer your questions at the conclusion of the presentation. So, David, over to you and many thanks for everyone attending.

Thanks, Michael. Hello and welcome to Harmony's half year 2026 results presentation. I'm David Stevens, the CEO and Managing Director of Harmony. With me today is Simon Ward, our CFO. Harmony has produced a very strong profit result this half year, surpassing our full year profit result from the last year in just six months. This result has been underpinned by the work we have done developing and launching Stellair 2 over the past 24 months. This has set us up to capitalise on the huge market opportunity we have in front of us. We're also upgrading our FY26 cash impact guidance to record levels. Now turning to slide two. Today I'll begin with our first half 26 key highlights, then our upgraded FY26 profit guidance, and then I'll remind you of Harmony's key differentiators before handing you over to Simon, who will talk you through the financial results in more detail. Finally, I'll discuss our outlook and strategic priorities before responding to your questions. Now turning to slide three, then onto slide four. This half year, we've achieved a $6.1 million statutory net profit after tax, a massive 202% growth on the same half last year. Remarkably, the six-month result has already surpassed our total statutory NPAT for the entire 2025 financial year. This was driven by our underlying cash NPAT, which also reached $6.1 million, with non-cash adjustments netting to zero for the half. Cash NPAT also exceeded our full year FY25 result of $5.7 million, driven by strong loan book growth and continuing efficiency gains. This profit result delivered a 31% return on equity, a significant leap from the 13% achieved in the same half last year. Our loan book growth remains robust, up 9% overall. This was led by a standout 17% growth in our Australian loan book, In New Zealand, the book has also returned to growth, up 5% in local currency, with New Zealand originations surging 49% following the successful deployment of Stellair 2 in June 2025. Our net interest margin, or NIM, continues to be a core strength. Sustained new lending NIM of over 10% has driven our total portfolio NIM to 10.3%, an increase of 130 basis points on the same half last year. On the credit front, performance remains stable with credit losses of 3.9%, while our 90 plus day arrears improved to 58 basis points down from 64 basis points, reflecting the high quality of our loan portfolio. Our commitment to automation continues to drive efficiency, maintaining a 19% cost to income ratio as the loan book scales. Finally, Harmony remains exceptionally well positioned for future growth. In December 2025, we successfully refinanced our corporate debt with one of the Australian Big Four banks. A facility of this nature from a Big Four bank is rare in the non-banking finance industry, so it's yet another endorsement of the strength of our business. In addition, we maintain warehouse facilities with three of the big four banks with a total capacity of approximately $1 billion. And even after making a $7.5 million corporate debt repayment, we close the half of $24 million in unrestricted cash. Now turning to slide five, then onto slide six. Our outstanding performance in the first half of financial year 26 has provided the confidence to further lift our guidance. We're upgrading our financial year 26 cash NPAT guidance by $1 million, an 8% increase over our previous guidance to $13 million. As you can see from the chart, this guidance represents 128% increase on last year's record result and a phenomenal compound annual growth rate of 331% since financial year 24. This growth trajectory is driven by the continued impact of Stellair 2, which we expect to propel our year-end loan book to over $900 million at a net interest margin of around 10% and a risk-adjusted income of around 6%. Risk-adjusted income is our income after funding costs and actual credit losses and one of our core efficiency metrics. This upgrade is a clear reflection of the scalability of our platform and our team's ability to execute. We entered the second half of the year with strong momentum and a clear path to delivering these record results. Now turning to slide eight. I'd like to take a moment here to provide a quick recap of what sets Harmony apart from others. We're Australia and New Zealand's largest 100% online consumer direct lender. We have a total market opportunity of 150 billion with our current market share less than 1%. So we have a huge total addressable market in front of us. Our algorithms partner with Google's to attract prime high intent customers at low cost. And then our direct relationship with those customers and great customer experience sees them returning again and again for the next borrowing needs at near zero acquisition cost. We use deep first-party data and AI models to deliver a prime loan book at a 6.4% risk-adjusted income. Remember, that's our income after both funding costs and credit losses. We're funded by three of the big four Australian banks plus public securitizations. Our stellar automation drives a low cost to income ratio of 19%. And our return on equity for the half was 31%, which is exceptional in any business, especially financial services. Just a quick reminder of our products on the right-hand side of the page. Our loans are up to $100,000 with an average new loan size of $18,000, which is dispersed to customers within minutes. We offer personalised rates on borrowers' risk profile. We don't charge any fees other than a one-off establishment fee, and all our loans are fully compliant with applicable consumer legislation. Our loans are typically used for renovations, debt consolidation and helping people with life events such as travel, education and weddings. Now turning to slide nine. Now I want to spend a moment on what I believe are a couple of the most important slides in this presentation, our customer flywheel. When Harmony acquires a customer, we're not thinking about a single transaction. We're thinking about an ongoing relationship that builds over time as customer's financing needs come and go. The data here tells a powerful story. Our history shows us that on average, our customers borrow an additional 150% after their initial loan. So if someone takes out $18,000 initially, they subsequently come back for another $27,000 over their lifetime with us so far. Here's the economics that matter. That first loan to the customer costs us around 5.6% in customer acquisition costs or CAC. So about a thousand dollars on an $18,000 loan. Each time that customer returns, the cost of acquisition is near zero due to our existing direct relationship with them. This is pure margin expansion. And they don't take long to start to come back. The average time between a customer's first and second loan is 15 months. This isn't a theoretical long-term play. This flywheel spins fast. We're not in the business of one-time transactions. We're building a compounding profit engine where every customer we acquire today becomes increasingly more valuable tomorrow and over time. Now turning to slide 10, I'll walk you through each component of the Harmony Flywheel. This slide shows the four interconnected stages of the Harmony Value Flywheel, all powered by our Stellair platform I'll now talk you through each stage describing exactly how this creates compounding economics for Harmony. Stage one, customer acquisition. We start with smart targeted acquisition. Our algorithms work alongside Google's to identify prime customers who are actively looking for credit. People with strong credit histories and genuine intent. We're using 10 years of proprietary data to find exactly the right customers. And that precision is hard to replicate. Next, stage two, deliver experience. We next focus on delivering an experience that makes our customers want to come back. Minutes to apply, instant decision and money in minutes, generating a 4.8 out of five star rating with over 60,000 reviews. This isn't just good service, this is creating customer delight at scale through automation. Every interaction built builds trust and increases the likelihood they'll return. Then stage three, customers returning. This is where the magic happens. Because we already have a direct relationship with our customers, subsequent lending CAC is near zero. And so far, on average, customers come back for a further 150% of their first loan value over time. Because we've already covered our acquisition cost, the net income on every dollar of additional lending is nearly pure margin. Then finally, stage four, data intelligence. This stage is what makes Harmony's flywheel truly defensible. With every loan we generate more first party data, which makes our AI and decision models better. Better models mean better decisions, lower losses, and the ability to improve customers safely. It's a virtuous cycle that is hard for competitors to replicate. This isn't theory, these are actual results and the beauty is the flywheel is accelerating with Stellaire 2. Now I'll hand over to Simon to present the financial results in detail.

Thanks David and hello everybody. Please turn to slide 12 summarising our key financial metrics for the half year ending 31 December 2025. As David has mentioned, this half harmonies delivered exceptionally strong growth in both our statutory and underlying cash net profit after tax, both surpassing last year's full year result. This success has been driven by strong gains across almost every key metric. I'll briefly touch on each of these now before going into more detail on the following slides. Firstly, our loan book continued its strong growth trajectory, up 9% on the same half last year to $857 million. That growth, combined with the higher portfolio interest yield, drove a 12% lift in revenue to $71.9 million. Our net interest margin, or NIM, improved by 130 basis points to 10.3%, from both the higher portfolio interest yield and lower funding costs. Our risk-adjusted income, which is our margin after both funding costs and credit losses, improved by 110 basis points to 6.4%, driven by the higher NIM. Our acquisition to originations ratio improved to 3.1%, as Taliatu delivered higher new customer conversion rates across both countries, and Harmony's customer flywheel, where existing customers returned for future borrowing at near-zero acquisition costs, began to include those increased new customers. Our cost to income ratio was up slightly on the same half last year, but remains a market leading 18.5% and is an improvement on the full year FY25 ratio of 18.9%. This exceptionally strong cost to income ratio is a direct result of the operating leverage achieved from our highly automated Stelia 2 platform. These improvements across key metrics have delivered our statutory MPAT of $6.1 million, up 202%, with non-cash adjustments netting to zero, our cash MPAT was also $6.1 million, up 166%. Our capital efficient balance sheet means that this strong profit result translates to an annualised return on equity for shareholders of 31%. On the next few slides, I'll discuss each of these performance metrics in more detail. So now turning to slide 13, looking at our loan book and revenue. With Talia II operating in both countries, it's driving a re-acceleration of the loan book. The group loan book is up 9% on the same half last year to $857 million, and that headline growth is suppressed by the current New Zealand dollar weakness against the Australian dollar, down at its lowest level in 13 years. By way of comparison, if the exchange rate had remained at the 30 June 25 level, the group loan book would be $882 million, nearly $30 million higher. While the weaker New Zealand dollar suppresses the headline group loan book, it does not have a material impact on our profitability due to structural hedging within the business. In local currency, the New Zealand loan book was up 5% on the same half last year, an expected but nevertheless pleasing turnaround after contracting during FY25. Stelia II led the turnaround with a 49% increase in originations compared to the same half last year. The Australian loan book growth remains strong, up 17% on the same half last year. Australian loan books now 61% of the group loan portfolio. Looking at the chart on the right, accelerating loan book growth together with an increased average portfolio rate has increased revenue growth, up 12% on the same half last year to 71.9 million. Now turning to slide 14, looking at our lending margins. A key feature of the Harmony business is the consistent strength of our lending margins, underpinned by our proprietary credit assessment models, which drive attractive pricing to prime borrowers in turn driving low credit losses, with those low credit losses then unlocking competitive funding rates. Looking at the chart on the top right, you can see the three core levers of our lending margin. top line shows our average portfolio interest rate has continued to climb now at 17.2 percent as we originate new lines at higher yields and older lower yielding loans paid down the middle line shows our funding rate the rate at which we borrow which is reduced to seven percent then the third line is our actual credit losses which are up slightly but remain low at 3.9 percent looking at the chart on the bottom right you can see the combined outcome of these underlying trends. The combination of higher lending rates and lower funding costs lifted our net interest margin by 130 basis points to 10.3%. Then, the ultimate measure of our portfolio's profitability is risk-adjusted margin, being income after both funding costs and credit losses. This is the key comparator between lending portfolios. In this half, Harmonies has reached an exceptional 6.4%. Next, turning to slide 15, I'll provide more detail on our credit performance. Harmony's consumer direct model provides rich, deep consumer data. We use this data to train our AI credit models, and this has enabled us to build a prime loan book of resilient borrowers, with 70% employed in either professional, office or trade roles, and 89% aged 30 years or older. Further demographic detail on the loan book is provided in the appendix to this presentation. Looking at the chart on the top right, you can see that while credit losses ticked up slightly this half, they've remained largely consistent and stable, with a downward trend over the past two years. The small uptick this half is expected to flatten or reduce over the remainder of the year. Moving to the chart on the bottom right, our 90 plus day arrears, which are a forward-looking indicator, remain very low at 0.58%, less than half the Australian market average. Next, turning to slide 16, looking at our operating expenses. A key feature of Harmony's business model has always been our Stelia platform and the high levels of automation that it provides, enabling us to scale our loan book without proportionally scaling operating costs. As the chart on the right shows, while our loan book grew by 9%, our cost to income ratio continued its long-term downward trend down from 18.9% last year to 18.5% this half. Harmony's combination of loan book growth, strong risk-adjusted margins, and scalable cost base underpins another record result, with this half statutory and cash impact of $6.1 million surpassing the profit for all of last year, which was itself a record, and delivering a return on equity for shareholders of 31%. Next, heading to slide 17, looking at our capital position. Harmony has a well-diversified funding programme with warehouses from three of the big four Australian banks, plus a securitisation programme and now an Australian big four bank corporate debt facility. As is typical with warehouse funding arrangements, Harmony's own money is also invested in its loan book. The strong credit quality of Harmony's loan book means that we can be very capital efficient, with borrowings funding 96% of the current loan book and Harmony providing the rest. The chart on the left shows in the red section, Harmony's required cash contribution of 34 million for its current loan book of 857 million. On top of this, Harmony has an additional 5 million, which it is entitled to draw cash from funders at any point, plus 24 million of unrestricted cash on hand. These together add to 29 million of cash which can support growing the loan book by over 75% to 1.5 billion today without needing to raise any equity. Then, in addition to already being able to support a loan book of up to $1.5 billion today, being profitable means Harmony can reinvest its profits for its contribution in book growth beyond that 1.5 billion, with every 1 million of profits funding an extra 25 million of loan book growth. Finally, as a reminder, Harmony's share buyback announced last May of up to 5% of share capital remains in place through to the end of April. So in summary, we have a profitable, scalable, and self-funding business model that is well capitalized for the significant growth ahead. And with that, turning to slide 18, I'll hand you back to David to take you through our outlook.