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.

Thanks, Simon. Continuing now to outlook, please turn to slide 19. Now let's take a look at how we're deliberately accelerating each stage of this flywheel over the next 18 months. I've already talked about what we have done. This is looking forward for the next 18 months. These aren't random initiatives. Each one is designed to make the flywheel spin faster. First, the blue box, customer acquisition. We're expanding who we can safely serve. Stellair 2 has already proven this with originations up 27% on the same half last year. We're using next generation AI to approve more customers while maintaining credit quality. We've also started exploring embedded finance partnerships with auto marketplaces, which could open significant new acquisition channels. Second, the green box. Deliver experience. We're increasing the value we capture per customer for our auto lending product. This isn't just adding a product, it's about becoming the primary lending partner for life events. When a customer needs a car loan, we want them thinking of Harmony first. Early results are promising with our vehicle loan book up 18% since this time last year. Third, the red box, customer returns. We're accelerating the velocity at which customers return by building a mobile app with one-click loan access and launching revolving credit to reduce friction when customers need additional funds. We've already driven overall CAC down to 3.1% and there's more room to go. Finally, the yellow box, data intelligence. We're investing in next generation agentic AI for personalization at scale. Think of it as giving every customer their own private banker. Automated, intelligent, and getting smarter with every interaction. Our proprietary first party data creates a defensible AI advantage that's extremely difficult to replicate. The key insight here is that these initiatives are interconnected. Better AI means we can serve more customers. Multi-product households have higher lifetime value and lower churn. Faster return cycles mean better economics. It all compounds and we're making significant progress on each one. Now turning to slide 20. So what does it mean when we accelerate at every stage of the flywheel simultaneously? More customers joining plus higher lifetime value per customer plus faster velocity between loans equals exceptional profit growth. This compounds to our ability to deliver our upgraded guidance for financial year 26 of a loan book of over 900 million driven by Stellair 2, 13 million cash NPAT and a 31% return on equity, which is what happens when you combine margin expansion with capital efficiency. but I want you to think beyond financial year 26. We've shown over 300% growth in cash profit over the past three years. With the flywheel accelerating, with Stellair 2 deployed, with our auto product scaling, we have a clear line of sight to continue strong profit growth, all while maintaining credit quality and being able to fund growth from reinvested profits. So when I talk about accelerating the flywheel, I'm talking about driving this business to even higher profit levels over the next few years. The foundations are in place. The technology is proven. The unit economics are compelling and we're executing. That concludes today's presentation. We'll now turn to answering your questions. Just a reminder, you can submit a question at the bottom of your screen.

Thank you, David. Are you going to ask a question, Michael? Yeah, just first question comes from James. Congratulations on another Impressive result. Expansion into new regions, countries. Is that on the agenda or is the runway in the current business substantial enough to maintain the current growth run rate? If you could talk to that, it would be stellar.

Yeah, look, there's no short to medium-term plans of moving beyond Australia and New Zealand, but certainly there's lots of product adjacencies and channels that we are actively pursuing at various stages. So, yeah, and look, we obviously, we've now built a platform we've talked about for quite a while and that's now, that's highly scalable and we're able to build new products onto that new channels uh so we you know we've obviously the bigger numbers get the harder percentage growth is but uh we're uh we're very confident in being able to deliver very strong results as i said on the last slide uh going forward we've got a we've got a great model we've got a great team we've got a great total addressable market ahead of us so uh yeah very exciting

Right. The next question is, and you mentioned obviously the accelerated flywheel. Can you please provide an update on how the development of the mobile app is going? Sure.

Yeah. So we expect that we've got a pilot of it. It's not on the app store yet, but that's scheduled for Q4. So sort of the April to June period this year.

Another question in relation to obviously geographies about is the Stellar platform transferable to other countries or is there enough runway in Australia and New Zealand?

Yeah, the only part I didn't cover in the first question was just, yeah, it is transferable, but there's no intention to do that. And we're not planning on, you know, selling software off. That's just for our use.

Right. Another question touching on your product development. We've obviously covered that, David. I think maybe the next part of the question is relation to partnerships with other financial institutions.

Yeah, yeah. Look, we're working through some options there. But look, I don't have anything to update the market at this point. It's too early stage.

Well, another question talking about sort of segmentation and products is, is there any other areas you see right for disruption or, you know, extreme growth versus what's actually existing or incumbent?

Yeah, well, obviously the auto space is huge. It's a huge market across both Australia and New Zealand. We launched a new product last year in a different way to what traditional sort of finances offer. It's turning the customer into a cash buyer as opposed to sort of going with pre-approvals or having to seek the finance in the car dealer or the like. Our product enables private buyers as well. We can go and take the car off, Not have to go through a dealer. You can go and buy it. You've already got the money in your account, so you can go and buy the car from a private seller as well, which is not that common. So we're already still 18% growth there. It's still early days. We've still got lots to go there. And expect over the coming few months, we'll have more to talk about there. So certainly that's one. We talked about our revolving credit that we're building as well. We see that's a big opportunity as well because, you know, we're not in that space at the moment. And there's sort of... sort of different nuances to the product that we're looking to make to make it more customer appealing and get to be more front of wallet with customers, as I call it. So really talk about not being one-off transactions, about being more front of mind when making the customers making a decision where they need a large amount of money to do what their life event is or their home renovation or whatever they're choosing to do in their life. We want to be more front of front of mind. And, you know, that's something we're doing a huge amount of work on at the moment. So yeah, lots to do. Financial services has been around for hundreds of years. And yeah, but it continually evolves. And, you know, we feel we're, you know, making some good progress into that. And our technology allows us to be at the forefront of it.

Our next question is, what is the outlook for funding costs given recent cash rate changes and the outlook here in Australia?

Yeah, look, small changes to the underlying rate don't have a real material impact on us, to be perfectly honest. We're not a mortgage book or a really low margin business where every 25 basis points is going to make a huge difference to what your report is. the next half or year or whatever. And we've obviously got the flexibility to adjust our rates on a daily basis if we want to. So 25 base points, 50 base points, whatever it is, honestly, it doesn't keep me awake at night. It's not something that's really concerning at all. But, you know, obviously we managed that. Most importantly, we target a 10% net interest margin and we target a 6% risk-adjusted income margin. So if we're sort of sitting around that mark, you know, we're happy with that and we'll work with whatever rates do. And we've proven that for the last five years since we've been listed. So, you know, I think that's not something that's too concerning.

A question here in relation to risk-adjusted margins. Obviously, the company achieved a very impressive 6.4%. A question just around the guidance. Does that, you know, if guidance is 6%, does that sort of, you know, imply that it's sort of tracking back to that number? And what actually does give you the confidence around the higher NIM and is that all related to product mix?

Yeah, look, we've targeted the 10% and 6% for a while. So I don't guide to specific basis points. So I think you can take the view that if you model our business, if you stick to that 10 and 6, certainly on the current product mix, that's where we target. So it's been very transparent. Obviously, as we bring on other new products and the like, auto is lower NIM and it's also lower losses. So that might bring that down a little bit over time, but we're not sort of building that into this year in any way. But for us, because we have got such a scalable platform, even if we add a lower margin product, On top, it's incremental. We're not adding costs to the business to do it. So, you know, why wouldn't you write it? If you've got the funding for it and you've got the capital for it, you'd write the business every, and it's good credit performance, you'd write the business every day of the week. So that's the beauty of the business. We're not having to add costs to it to bring on new products. So that might over time change a little bit at a group level, but certainly at a, you know, at a product level, they're the margins that we have achieved for years and we target.

Our next question is congratulations on strong result and the excellent refinancing that the company recently did. Understanding actual losses are below ACL provisioning rates. Could you please give some info as to why the company has sort of looked to drop the ACL provisioning rates to 4.3% from four and a half?

Sure. I'll get Simon to answer that one. So I'll flick over to him.

Yeah, it's really driven by the relative by the relative performance of the underlying loans in the book. Back then, I think the four and a half was actually from this time last year. So over that period of time, especially with Stellia 2 coming in, the underlying performance of the loans on the book is better. And we obviously look at forward-looking economic indicators and what we think the impact will be on the current book. So those two things combined is really what's driven it down.

Thanks, Simon. Back to David. Next question is, how much funding headroom do you currently have? As an example, obviously not looking at equity capital, but can you grow to $1 billion book without further securitisation deals?

Yeah, I'll be saying that we've got close to $1 billion in warehouse funding. Look, we can increase our warehouse funding at any stage as well. And so we obviously don't go too high because we've got to pay unused line fees on, you know, that. So we've got our books, what, 857 at the moment. We've got basically a billion in capacity. So, you know, you've got 150 million grows further, I'll get another 100 million. It's not a problem. We increase warehouses all the time. And then obviously we've got the public securitization markets that we can do to clear those existing warehouses out as well. And that frees up a huge amount of capacity. So that is something that I definitely don't lose sleep at night about. We've got great funders in place, have done for a long time. We've got three, the big four banks, which I think gives us the diversification. as well. So yeah, plenty of capacity, very supportive funders. You know, we're bringing new products in, they're supporting those, you know, so we're, you know, it's an area of the business that's really well, really well managed.

Next question is around the macro environment within New Zealand. Do you see any green shoots in the New Zealand macro slash economic environment?

Yeah, look, I live across Australia and New Zealand. And so I get to see both. I think probably that certainly in Australia, sometimes the media that we see read is probably a bit more damning than what the reality is. New Zealand, they've dealt with some high interest rates for a long time. It's come off. People are now doing more things because rates are a lot cheaper. Employment's still good. You know, the country's actually going along, you know, reasonably. You know, it's talking about interest rates going back up, you know, later in the year. So, yeah, people are taking advantage of the lower rates and taking out loans to do things that they may have put off for a while. You know, it's still a small country. It's only 5 million people. But, you know, we've seen our growth turned around to the loan books started growing again.

um and we don't see that changing we think that growth has really returned and uh we'll continue to grow the existing product and roll out new products as well um more question around the auto book david just um obviously growing off a low base how how do you see the acceleration of that growth and, you know, potential of, you know, the size of that auto book?

Yeah, well, look, we, you know, probably in the next quarter, so not the one we're in now, but the one after, we've got some pretty exciting things happening. And, you know, the auto is a big space, right? So it could be, yeah. it could actually be bigger than our our current book right but the important thing for me is we continue to grow our current products um let's have the you know the returns that we're getting and anything that comes from auto and the like is pure cream on top and that incremental size so um yeah we'll we've got the scalable platform right and i'll keep saying that and i'll keep saying it because that's what makes this business much more profitable and successful than others in the market. We have a truly scalable platform that's now built and delivering. I've kept the same IT team that we had when we were doing the migration and building the platform. They're all working on new products. They're all working on improvements. They're all doing that now. All that real exciting stuff. So we haven't gone and saved a bit of money. Let's stop innovating and building in this business. We've kept the same number of people. Let's grow this business into more segments, more channels. change the product, get more centric with the customer and continue to grow this place. And we're doing that at a 19% cost to income ratio. So we'll continue to drive that down as we bring on more revenue.

Our next question is pretty much along the same thematic, David, just around the learnings of the auto loan book and what your learnings about your approach to that in the future. I think you've pretty much answered that, but if you've got any further to add.

No, look, I don't think so. Like our product is new. So obviously it takes a little bit of education. People don't quite get it initially, obviously, but everyone, once they get it, thinks it's a pretty cool product. And that's okay. It takes a little bit of time. That's why we don't build though. numbers into our guide our current year guidance for new products because you know we don't want to we want to make sure we get them right and we're not pressured into making poor decisions on rollouts because you know to hit time frames so um you know we've got you see it's already coming through but you know we've got a lot we've got a lot long way to go still and um you know and that'll all be incremental to the business going forward The beauty is the core of the business is performing. That's the beauty. So everything we do on top of that, we're trying to substitute underperformance of the core product. That's the key difference. We're not doing M&A to try and find something to substitute under poor core performance. The core is performing. So everything we do on top of that is incremental. And that's how I run a business. I don't want to be trying to find things to substitute a poor underlying business.

A question around capital management. With the ROE delivery of an impressive 31%, why is cash better utilised buying back shares rather than investing in the growth of the business? And can you give us some more thoughts from management around capital allocation?

Yeah, sure. So we brought out, we implemented the share buyback back in May last year. And a key reason for that was because we did have surplus cash for a period of time. If you recall, we couldn't repay our old corporate debt until December. So it allowed us to do that, you know, obviously buy back some shares over that time. Since then, we've bought back some shares and we've also repaid $7.5 million of corporate debt out of our cash earnings. So pretty impressive number. There's not many in the space that are paying down corporate debt out of earnings. So obviously that's obviously chewed up some cash. Share buyback's still in place. We obviously haven't bought any for a while. There's no, you know, whilst it's there and we can use it, there's not a, you know, we're not necessarily going to get to the 5%. We may not buy any more. But it is in place till April. We don't have to do anything. So, as I said, you know, there's a lot of new things coming on and, you know, to that person's question, yeah, you're right. Like I probably will leave it in the business. You know, but I had, you know, for that time there, I was particularly had a fair bit of surplus cash. So we took the opportunity to buy the shares, buy some shares back, particularly when they were ridiculously cheap. And, you know, whilst we had before we had could pay, repay that corporate debt back in December.

A question here from Steve. What's the company's thoughts in relation to sort of mitigation of sort of economic downturns?

Look, I think this comes back to, if we're talking about sort of, we've been through downturns before. We have a very diversified loan book, which is quite key in any sort of downturn. We're not like, all our loans haven't come through a broker, say in a particular state that has, it gets impacted more than another one. The loans right across Australia and New Zealand, probably reflective of the population. In terms of the mix, you know, we've got a lot of detail in our appendix around the demographics. And look, we monitor this. We look at historical loss, static loss rates to really monitor how losses perform so you can see early if things are changing. And we can adjust on the go because we are a direct platform. We can move our credit models to tighten them if we wanted to. We just we haven't had to for years and years and years to do that. You know, and the business is robust. So we're not like it's something that we monitor like any business, but not something that, again, you know, we monitor. we get too hung up on, right? We manage to monitor the data. We get 10,000 customers a month and we get bank statements for about 6,000, 7,000 of those. We see what's going on with people's ability to pay. So if we start seeing more people coming through that look stressed, we'll make decisions across the rest of the business. But I think because of that first party data that we get, we actually have a greater insight into into what's going on, you know, than a lot of others in the space, probably getting like sort of what smaller banks get, you know, where you're seeing lots of transactional data. So we're seeing all that and, you know, we can adjust as we see, you know, things improve or decline. And I'm not so sure. I think New Zealand's been through the worst of it and looking to improve and Australia will, you know, it's going pretty well from an employment sense and the like as well. So obviously what happens globally, no one really knows, but if there is things in that, we've got an adjustable business that we can make changes to as we need.

Just a question around partnership channels. Is the company sort of looking at sort of meaningful partnership opportunities?

Yeah, we are. And as I said earlier, we've, you know, we're probably too early to talk to the market about some of those things. But, you know, we haven't really been able to look at those until the platform was rebuilt. So, you know, early days on some of the bigger ones, for sure. But yeah, there's plenty of other ones coming through.

A question just about the uptick in loan losses to 3.9%. Is there correlation with the implementation of Stellair assessing the credit quality coming through?

Look, it is, and, you know, we've got a target range of 3% to 4%. I think it's moved from 3.7% to 3.9%. It's not something worth really talking about, to be honest, the same as if it went from 3.9% to 3.7%. You know, as long as it's in that range, we're happy. You can see the 90-day arrears are down to 58 base points, which is, you know, but a third of the market, what the market average is. So you can see there's not like a big tail coming through into the numbers. So, yeah, look, there's nothing of substance to see there.

Question just on economic macro in New Zealand. Unemployment rate sensitivity, you've seen a tick up of 1%. Is that affecting any of your origination growth plans?

Simply no.

Okay. Okay. Moving on, given the discount versus your listed comps, why do you think the market isn't rewarding you in terms of valuation re-rate given the growth and execution over the last 12 months?

Yeah, well, look, yeah, that's the market to determine, not me. I think for us... we're the only one that gives guidance. We deliver on guidance or exceed, and it's a good guidance number. There's some of my peers out there making big losses, right? know i can only do what i can do but hopefully from this presentation you can see the um the differentiators factors of us um through our you know platform cost income ratios growth rate uh return on equities um all that stuff the new opportunities are coming to us uh i can only control my backyard And hopefully, you know, the market starts to see that, you know, we're a company that delivers on our promises or exceeds on what we say and can get some comfort around that, that we're a growing profitable stock. We're not adding back everything in town to get to a profit number. We're consistent in our reporting. We clearly reconcile everything to our audited numbers. And, you know, I've run listed companies for many, many years now. And, you know, this is not a short-term play. You'll see that we're transparent, we deliver, and we've got a great story in front of us. And, you know, I think over time, that builds long-term shareholders and trust. And that wins in the end. So some of my peers don't have a better valuation than me at the moment. Yeah, I can't control that, but I control what we're doing and I think we'll win in the end.

Thanks, David. Just talking about your returning customer base, does that sit with a lower loss rate versus the new customers coming through it?

Sorry, I missed that. What was the question again, Mike?

Returning customers lower risk. What is the loss rate versus new customers?

Oh, yeah, good question. You're correct. Historically, it's been about 30% to 40% lower. on existing customers to new customers. I think with the implementation of Stellair 2.0, that's narrowed a little bit. I think we're getting better at the new customers origination. We're certainly seeing that in our early loss cohorts. So that percentage might be dropping a little bit. over time. But yeah, there is absolute value in when you've known a customer, you've seen them make good repayments, you're only offering repeat loans to good customers. Obviously, we're not offering them to customers that have been out of arrears. So yeah, it does perform better. But I do believe that, and I don't believe it's factual, that we're getting better on the assessment of new customers as well. So yeah, That's why the returning customer is very valuable to us and we stress that through the presentation.

Just for the benefit of an investor here, can you sort of give us a bit more sort of colour around your unrestricted cash and its use?

Yeah, it is what it is. We don't play games with it. It's our free cash flow at the top of the company where we can use that to grow the business we can use it to fund deals we can use it for anything there's no restrictions on it the total cash number is restricted cash which you know obviously i don't even include that in the numbers i talk about because it's money that's used for funders only it's not our It's not our money per se. It's not my free cash flow. It's a time difference in money that's got to be repaid back to the funder each month. We obviously have to snap the cash balance at 31 December and whatever, you know, sitting in collections accounts and the like gets included in that number. But really, it should be a net offset to borrowings. It's just the accounting standard requires you to hold it in cash because it's actually cash. But really, the right way is probably to deduct it off the borrowings number. um as cash received so yeah no it's a true cash free cash flow number um there's no restrictions on that cash just a follow-on question from jonathan just around sort of new new customers and loss rates there's a higher loss rate for new customers added into the caps for the cap for the customer acquisition cost no the customer acquisition cost is just the the marketing expense and that it's got nothing to do with the loss rate the loss rate would come through the risk adjusted income

Okay. We're just coming down to the final conscience of time. We'll get through this. Stellar 2.0 appears to be obviously a driver of land book growth operational efficiencies. Talking about New Zealand originations up 49, 50% up the rollout and the group achieving 10.3% NIM in the first half. As you scale towards 900 plus book, what specific enhancements to Stellair 2.0 or the auto or any upcoming automation initiatives? will further improve the risk-adjusted income and maintain your lower 19% cost-to-income ratio. So in short, enhancements around Stellar 2.0.

Thanks for summarising that one detailed question. Look, I'd like to think we've covered a fair chunk of that. We are continually, like, our platform is something that we are continually, you know, enhancing, finessing, updating. It is our number one asset, right? So we will continue to do that. We... I said we target that 6% plus risk-adjusted income. So that's something that hasn't changed. We do those enhancements to help keep that level. That's what our targets are. That's why we have a team of, you know, we've got around... 35, 40 people in product engineering and data science, right? That's their job is to ensure that's operating efficiently. We're continually rolling out enhancements to that to make it better. We're using a lot of that more AI within that. We've used AI, we've used machine learning for 12 years across in our platform, but And with our buying, we're now using that, obviously, a lot more of that, you know, the LLMs and the like that we, you know, within the business and we're building applications that, you know, ideally will be just using AI, having the app speak to you rather than having to fill it in. You know, there's all sorts of stuff we're doing and that all helps to get more customers so that's better experience for them. And then also not add cost to the business by when you bring these customers on. So lots and lots going on to answer that question. And yeah, we're very focused on that.

Thanks, David. Last question, just around your NIM of 10.3%. Talking about sustainability, just given a landscape of increased competitive pressure and reliance on big four bank funding.

Wow. I'd rather have my reliance on three of the big four banks funding me than others for number one. We've been around that level for quite some time. Obviously, I think it went down the low poles around nine when we were a few years ago when we had really high interest rates for a while. But, you know... i think we're in a you know we're in a better funding spot since then uh rates are nowhere near uh scheduled to go up so so much so quickly um which that was a pretty rapid increases so it was hard to move pricing and the like uh back then so you know we're very comfortable on the current product mix we're very comfortable around 10 as i mentioned earlier if we move into more into autos, that does come with a lower margin, also comes with lower losses as well. But that's all incremental on top of what we do today. So as long as that core business keeps firing and we're adding more and more on top, if that comes at a slightly lower margin, so be it, who cares? We'll keep growing shareholder returns and profit.

And that's what we're all here to do. Right. That closes out the Q&A segment of the presentation. So just for a bit of advertising, the company will circle back in March for a formal roadshow for investors potential and existing. So please feel free to Reach out to myself at Ethicus Advisory Partners. I'll pass to you, David, for closing remarks. Post a very excellent first half FY26 result.

Thanks, Michael. On behalf of Simon and myself, thank you for your time. Thank you for all those questions. I think that's probably the most questions I've had. I didn't have a glass of water after that. But yeah, look, I think in summary, we've got to... yeah a fantastic platform i'd say best in market but certainly we've got a great customer acquisition model we're building sustainable profits we've got great new product initiatives and we're doing this the return on equity of 31 it's really i think any way you cut it the the financial numbers don't lie and they really proving and we're now executing on a really strong platform and a strong business model. So I look forward to meeting some of yourselves over the next few weeks and coming on the journey with us because I think we've got something really special here and we're excited to be executing our strategy and hopefully delivering even better numbers in years to come. Thank you. Have a good day.

Thank you, David. Thank you, Simon.