Serko Ltd

Good day and welcome to the Circle FY26 full-year results announcement. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Darren Grafton, CEO. Please go ahead.

Good morning, everyone, and thanks for joining our investor briefing for FY26 financial results. I'm Darren Grafton, CEO of Circle. and I'm joined by our CFO, Shane Sampson, and our COO, Matthew Geary. Let's begin on slide four. This morning I'll take you through our performance and highlights for the year. Shane will cover the financial results in detail, and Matt will update you on our strategic progress. I'll then return to cover our FY27 outlook before the Q&A. Unless otherwise stated, all comparisons are to the FY25 and dollar references are to the New Zealand dollar. FY26 was a strong year for Serco, demonstrating both the quality of our business and our ability to execute. We delivered total income at the top end of our narrowed guidance range and materially grew our EBITDA fee. Booking.com for Business continues to deliver strong growth and we remain the market leader in Australasia. We are also leveraging our IP and experience to drive rapid progress. Serco AI is now in a closed beta in the US with the first users onboarded. Finally, Discipline Cost Management continues to support efficient growth with total spend at near parity to total income. while preserving a well-capitalized balance sheet. We enter FY27 with strong momentum and a disciplined focus on execution. I'm now turning to slide five. Total income grew 34% to $120.9 million, driven by strong momentum in Booking.com for Business and the first full year of the Get There revenue. which added $16.1 million. Total spend was at 102% of total income, with guidance reflecting disciplined cost management as we invest or grow. Operating expenses increased 23% against total income growth of 34%, demonstrating the operating leverage in our model. EBITDA fee reached $6.5 million, up 137%, Net loss after tax narrowed by $4.2 million, largely due to the non-cash accounting impairment in the prior year relating to our acquisition of the Get There business. Free cash flow was negative $4.4 million as we increased the investment to support our strategic initiatives. We remain well capitalised with $54.1 million in cash and no debt. Turning to slide six. where we look at our total income growth in more detail. You can see the breakdown of total income with and without GetThere. Income from the pre-acquisition business increased 22%, from the $85.7 to $104.8 million, driven by Booking.com for Business. In total, online bookings increased 41%, from $6.4 to $9 million. This scale strengthens our market position and informs smarter product decisions. Turning to slide 7, where we take a closer look at Booking.com for Business. Completed room nights grew 31% to 4.3 million, driven by strong active customer growth of 36% to 301,000. We added approximately 79,000 active customers over the year, reflecting the continued strength of our customer acquisition strategy and the appeal of the product in the SME market. Average revenue per completed room night was down 4% to €9.25, and in line with broader market pricing trends and the impact of commissions hearing as the volume scaled. Looking at the chart, our strong three-year growth trajectory gives us confidence in the long-term potential of the partnership. I'm now on slide eight. In Australasia, we continue to see growth across customers and bookings. Travel revenue was up 6%, while online bookings and ARPB both rose 1%. This travel revenue growth was largely driven by one-off services work for specific partners, so we don't expect that growth rate to repeat. NDC continues to gain real traction in this market. Very few providers globally can offer full integration across both Sabre and Amadeus. We are one of them, and our early investment has strengthened our market-leading position in this region. Turning to slide 9. Get There has established Zirco in the US in a way that would likely have taken years to build organically. Given us direct customer relationships, transaction data at scale, and greater visibility in one of the world's largest business travel markets. This US foundation is now supporting two significant initiatives, which Matt will take you through in more detail. The first being Serco AI, and the second targeting defying US corporate segments through the Booking.com for Business. Both initiatives remain early stage, but the early signals we are seeing reinforce our confidence in the opportunity ahead. Thank you, and I'll now hand to Shane.

Thanks, Darren. Turning to slide 11, FY26 delivered strong total income growth and disciplined spend. This saw EBITDAFI increase 137% to $6.5 million. This increased operating leverage from our existing businesses funded increased platform investment. While total income increased 34%, total spend increased by $30.3 million or 33% to $122.9 million. This primarily reflects a full year of get-there costs adding $20.8 million and increased platform investment of $13.3 million. Partially offsetting the increased investment, we continue to deliver increased operational leverage in Azeno and Booking.com for business operations, with reductions in direct costs of $1.7 million despite volume growth, and reductions in other operating expenses of $3 million. The net loss after tax decreased to $17.7 million, an improvement of $4.2 million, and I will talk to the drivers on the next slide. increased by $2.5 million to $4.4 million, reflecting the stronger EBITDA fee being more than offset by realized FX losses, lower interest income, and increased capitalization of internally generated software. We also made net payments of $2.8 million in relation to the get-there acquisition, reflecting the final payment partially offset by a working capital adjustment. We have excluded this from our free cash flow calculation, consistent with our approach and criteria. I'm now on slide 12. A net loss after tax improved by $0.4 million more than EBITDAFI. A very small difference, but the underlying story is a bit more complicated. The bottom part of slide 12 shows the reconciling items between EBITDAFI and the net loss. The key drivers of the movement were net finance income was $2.4 million lower, reflecting lower cash balances as a result of the Getner acquisition, lower ended interest rates and new leases. and foreign exchange losses increased by $3 million. These negatives were offset by asset impairments and disposals, which were $3.2 million lower than the prior period, and lower amortisation and depreciation of $1.9 million. In relation to the foreign exchange losses, the $3.8 million loss on forward exchange contracts in FY26 was due to the significant appreciation of the Euro and Australian dollars against the New Zealand dollar. Historically, we did not designate these as hedges for accounting purposes, even though they did act as economic hedges in substance. Any gains or losses on the foreign exchange contracts were recognised from the profit and loss, while the revenue was accounted for at the actual rates applying at the time the revenue was earned. To reduce volatility in reported revenue going forward, we have designated a significant portion of our FY27 Euro contracts as accounting hedges, which includes selling 32 million Euro across FY27 at an average rate of 1.977 New Zealand Dollars per Euro. As reported at the half year, we incurred a $2 million non-cash accounting loss on the sale of our Interflex business in September 2025. The disposal made a small positive contribution to profitability in the second half and is expected to generate ongoing financial and strategic benefits. Those of you who attended our Invest Today on 10 March will recognise slide 13. The slide shows the mix of our product and technology spend in the first quarter of FY26 and our expected mix in the first quarter of FY27. As you will see, we are roughly doubling the level of platform investment with a much more modest increase in overall spend as we continue to reduce spend on our managed travel products. As noted in November, we undertook an optimisation programme in the second half of FY26. which, while largely neutral in FY26 due to timing and severance payments, will materially reduce future spend on our Xeno product. We expect to continue to drive further efficiencies in our existing products on an ongoing basis. In this context, I note that platform investment refers to the ongoing process of moving components of Booking.com for Business onto our new platform and building new Booking.com for Business capabilities within that platform, together with our investment and building the Circo.ai experience that launched last week. The spend includes our pre-existing teams working on Booking.com for Business, and the additional staff added in both our India hub and in the US to help accelerate our transition to the new technology. Slide 14 shows our income and spend trajectory over a five-year period, during which we have grown income by 5.4 times, while spend has only increased by just under one times. Across the period FY23 to FY25, We grew income by 78% while holding spend flat, excluding the Get There acquisition, showing the strong unit economics in the business and our resulting ability to generate operating leverage. In FY26, spend grew by 33% while income grew by 34% as we increased platform investment and incorporated a full year of Get There results. Our track record of investing and growth, then delivering operating leverage, gives us confidence as we invest in the platform with the key difference to earlier years being that the investment is now substantially funded for operating cash flows of the business rather than shareholder funds. Moving to slide 15. The partnership renewal was structured to mutually incentivise and benefit both parties to grow Booking.com for business. The structure included retention of the 50% commission rate until Serco was earning strong returns on its earlier investment. Once those returns were achieved, we moved to lower commission tiers for incremental volume, which provides a stronger commercial incentive for Booking.com to drive further volume growth. The success of both parties in growing Booking.com for business means we have moved into the first of the lower commission tiers during several months in FY26, with our blended commission rate falling from 50% to 48.7%. The lower blended commission rate explains why our average revenue per completed room night sold by 3% more than the average commission per completed room note. As we continue to grow volumes strongly, we will see the blended commission rate decline, but we remain confident that each incremental transaction will continue to drive incremental profit contribution, reflecting the very low incremental cost per transaction. For the avoidance of doubt, I note that the potential future volumes on this slide are aligned to our April 2024 communication with the tiering structure, rather than a projection of FY27 and FY28 volumes. Finally, looking at slide 16, Zerco's balance sheet remains strong with cash and short-term deposits of $54.1 million in no debt. A strong balance sheet provides us with resilience and optionality as we pursue the opportunities in front of us. Thank you, and I'll now hand over to Matt.