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Operator: Thank you for standing by, and welcome to the Smartgroup Corporation Limited SIQ FY 2025 Results Release. [Operator Instructions] I would now like to hand the conference over to Mr. Scott Wharton, CEO. Please go ahead.
Scott Wharton: Great. Thank you, Betsy, and good morning, everyone, and thank you for joining us on the call today. My name is Scott Wharton, and I am the Managing Director and CEO of Smartgroup. Joining me on the call today is Jason King, our Chief Financial Officer. First, I would like to acknowledge the traditional owners of the land on which I'm speaking to you, the Gadigal people of the Eora Nation. As this event is broadcast nationally, I would also like to acknowledge the traditional custodians of the various lands on which you all have joined this call. I recognize their continuing connection to land, waters, and culture, and pay my respects to the Elders past and present. Today, I'll start by providing some of the key highlights of 2025 and a recap of Smartgroup's investment proposition. I'll then talk through the progress we have made across our strategic priorities. Jason will then take you through the full year performance in more detail. To conclude, I'll provide a brief outlook. Now let's turn to Slide 5 of the investor presentation. Smartgroup reported strong financial results with solid operating momentum in 2025. Revenue increased 8% versus 2024 to $329.3 million, and total expenses increased 5% to $182.7 million. The strong revenue growth was underpinned by higher novated leasing volumes, driven by demand-generating activities and new client wins. We also continued to invest to deliver our strategic priorities. We are enhancing our scalable and customer-centric platform that delivers great customer service and experience. EBITDA of $135.3 million was up 14% on pcp, and EBITDA margin was 41% for the year, an increase of 2 percentage points on pcp. NPATA increased by 11% to $80.2 million. Smartgroup also delivered return on equity of 30%, an improvement of 1.2 percentage points on pcp. Our strong financial performance and high level of cash generation have enabled the Board to declare a final fully franked dividend of $0.215 per share. In addition, the Board also declared a fully franked special dividend of $0.12 per share as a further return to shareholders. Together with the $0.195 per share interim ordinary dividend declared in August 2025, this brings fully franked dividends to $0.53 per share, representing 90% of 2025 NPATA. Turning to Slide 6. During the year, Smartgroup continued to retain and attract clients by investing in client relationships, market-leading service, and customer experience. We continued to grow salary packaging customer numbers, novated leases under management, and fleet-managed vehicles to record numbers. Our proposition generated solid novated leasing demand for both electric and internal combustion vehicles. In 2025, battery electric new vehicle orders grew 49% compared to 2024. While the EV share of our novated lease portfolio is growing, ICE vehicles remain an important and growing part of our business. In 2025, the number of ICE new vehicle orders increased 4% compared to 2024. Smartgroup remains actively focused on managing yield while also growing volumes. In 2025, leasing yield was stable compared to 2024. We're also making strong progress against our strategic priorities, and I will speak about this later. In short, we are well on track to achieve our ambition of delivering smarter benefits for a smarter tomorrow. In sustainability, we are proud to have been ranked in the 85th percentile worldwide in the S&P Global Sustainability Assessment. In addition, Smartgroup was again recognized as an inclusive employer by Diversity Council Australia. We've held this citation since 2019. This morning, we also released our 2025 Impact Report, a voluntary report, which contains additional information on our sustainability achievements and progress over the past year, as well as our new 2028 sustainability strategy. These outcomes recognize the importance of ESG and diversity and inclusion to Smartgroup and our customers. Moving to Slide 7. We believe our investment proposition remains highly compelling. Smartgroup's differentiated position underpins our ability to deliver strong growth and sustainable returns over the long term. Smartgroup is a leading employee services and fleet solutions provider with a client base that employs around 2.5 million Australians. Our existing client base represents a significant growth opportunity. In the last 12 months, we provided services to around 584,000 of those people and managed over 120,000 vehicles across novated leasing and fleet. We are the largest salary packaging provider in Australia, and this scale enables us to continue investing in superior customer experience and in the systems and protections that safeguard our customers. Over the last 2 years, we have consistently demonstrated improvements in operating efficiency. In 2025, the number of customers per operations FTE has improved 16% to 1,645. Smartgroup's operating platform continues to demonstrate strong capability in attracting, migrating, and retaining some of the country's largest and most complex clients. Our scalable technology foundations, sector expertise, and customer-centric service model enable seamless transitions for new clients. The group has significant recurring revenues and long-term contracts with clients in attractive and growing segments like government, health, education, and not-for-profit. Our offerings are even more relevant to our customers during tough economic times when people are looking for ways to make the most of their take-home salaries. We have a track record of revenue growth and a resilient and scalable earnings base with strong cash flow conversion. Smartgroup's investment proposition to shareholders is underpinned by our capital-light business model. This model means that we carry relatively low levels of vehicle residual value and credit risk. Combined with our strong balance sheet and high free cash flows, this means that we can pay fully franked dividends to shareholders at the same time as we are investing for growth. Finally, we have articulated a clear set of strategic priorities to drive profitable growth into the future. We are focused on our customers and our core businesses of salary packaging, novated leasing, and fleet, while investing in digital and technology, accelerating growth, and delivering scale efficiencies. Turning to Slide 8. Since we announced our strategic priorities in February 2024, we have delivered strong financial performance. Revenue has grown 31% through disciplined execution of our strategic priorities. This has included continued investment in digital to enhance our customer proposition and stronger account management and business development capabilities. Over the same period, EBITDA increased 35%, reflecting the increased scalability of our operating model. NPATA increased 27%. Turning to Slide 10. This slide recaps Smartgroup's strategic priorities and focus areas as communicated to the market in February of 2024. Smartgroup is committed to delivering smarter benefits for a smarter tomorrow through disciplined execution of its strategic priorities. Our strategy has 4 priorities. The first is centered around digital and technology investments that improve customer experience and driving operational efficiencies in our core salary packaging business. The second priority is focused on leading innovative leasing, where we have delivered tremendous growth since embarking on our strategy. The third is broadening our product range to meet our customers' growing needs. Finally, we are making targeted investments in our fleet business to strengthen its competitiveness and profitability, including enhancements to our product offering. Turning to Slide 11. This slide outlines our strategic road map. While our strategy focuses on the 4 strategic priorities, we have deliberately phased execution. The first phase focused on growth and demand generation to build our leadership position in novated leasing. We've also invested in our front-end digital assets to enhance customer experience and sustainably fuel growth into the future. The second phase, which commenced in 2025, is focused on building a scalable business platform. This phase includes investments in consolidating our brands, removing duplication of operations, modernizing our technology, and automating processes. The third phase focuses on innovation of propositions to meet evolving customer and client needs. We have made good progress. For example, we expanded our novated leasing network through partnerships, including BMW Financial Services and Qantas, and broadened our employee benefits proposition by adding IntelliHub, Count, and Finspo to the platform. Our fleet funding offering has also been expanded with Volkswagen Financial Services Australia. As a result of these 3 phases of focus, and as mentioned at our 2025 half year results, we anticipate EBITDA margin to be in the mid-40s during 2027. Beyond 2027, with sustained investment, particularly in automation and AI, we see opportunities to further elevate business performance. We will continue to develop our product offering to meet evolving customer needs and strengthen our value proposition. Turning to Slide 12. A key focus of Phase 1 of our road map is digital transformation, and I wanted to provide some examples. We have now delivered enhanced market-leading digital solutions, improved customer experience, and expanded our digital reach. As I mentioned in our full year results in 2024, we launched our enhanced car leasing portal, and we also delivered smart.com.au, our new customer digital home. These investments have made it easier for customers to engage with us on their salary packaging and novated leasing needs, how they want and when they want. In 2025, we have delivered our new digital salary packaging sign-up journey, marking a significant milestone in our platform modernization. This digital asset enhances customer onboarding by offering an improved experience that simplifies the sign-up process. Feedback has been positive from clients. We've also developed a new smart app, which is now in testing with customers and will be rolled out in 2026. Importantly, over the last year, we have improved our digital product and technology capabilities to ensure we continuously enhance our digital assets. These capabilities will ensure that our products remain market-leading and continue to meet customer needs into the future. Turning now to Slide 13, which outlines some of the work underway in Phase 2 of our strategic road map. A central objective of Phase 2 is reducing operational complexity. We've already reduced our brand footprint from 8 to 4, and early in 2024, we divested noncore businesses to sharpen our focus. This consolidation allows us to concentrate our marketing investment, better leverage our ongoing investment in product technology, and remove duplication across the organization. Operationally, we're also simplifying the way we serve customers. We've already reduced our contact centers, and we're now on a clear pathway toward a more unified and streamlined contact center operation. We've also made significant progress in enhancing our technology. When we began this journey, we were operating multiple legacy systems inherited through acquisitions, including duplicate product platforms. Today, we've delivered meaningful improvements, with 45% of our compute now running in the cloud. By 2028, we will reach 100% modernization of our technology infrastructure. This reduces operational risk, accelerates the delivery of new digital experiences, and enables future automation. In 2023, our automation activity was limited. In recent years, we have stepped up significantly, introducing AI-driven knowledge management, AI operative intelligence, and automation of key high-volume processes such as claims. We will continue to expand automation as we build out our highly scalable omnichannel operation. As a result, we are already seeing tangible efficiency improvements, including sustained gains in customers per operational FTE. As these initiatives come together, and consolidation, contact center rationalization, full technology modernization, and deeper automation, the efficiency and platform scalability benefits will continue to grow. The third phase of our strategic road map is about enhancing our propositions, expanding benefits, strengthening feature sets, and introducing new products into our operating platform that create even more value across our core markets. Moving to Slide 14, which highlights some examples of what we delivered against our strategic priorities in 2025. Our new digital customer home, smart.com.au, has attracted 3 million total users since launch at the end of 2024, educating and enabling our customers to easily find the information they need to understand our products and services. We also achieved efficiency improvements, including increasing the number of customers per operations FTE by 16% in 2025. In novated leasing, we delivered strong improvements, record customer numbers, as well as ongoing enhancements to our car leasing portal. Small- to medium-sized business clients continue to play an important role in Smartgroup's strategy, with over 1,500 SME clients. Last year, they constituted around 10% of our novated leasing orders. We remain committed to anticipating our customers' needs and forging partnerships to build a service offering that truly resonates with them. And in fleet, we onboarded Volkswagen Financial Services Australia as an external funding provider. We also expanded our fleet team to build capability and drive our next phase of growth. Moving to Slide 15. Smartgroup is well positioned and is unlocking value through scale, disciplined investment, and execution. As we continue to enhance the customer experience and expand our market reach, we are generating operating leverage that benefits clients, partners, and shareholders. This reflects the strength of our leading capital-light digital platform, which connects employers, employees, and partners at scale. These outcomes demonstrate that the delivery of the strategic priorities announced 2 years ago are now translating into sustained improvements in efficiency, scale, and financial performance. Our approach to value creation remains unchanged. Firstly, we are focused on winning additional clients to expand our total addressable market. This is now at around 2.5 million Australian workers. In 2025, we continued to grow our customer base to record numbers. For example, we were successful in winning Monash Health and Grampians Health in Victoria. We were also added to the Transport for New South Wales leasing panel, and we welcomed many new clients across all segments, while retaining all major contracts up for renewal in 2025. Since announcing our strategic priorities, we have grown our eligible employee customer base by over 300,000, which represents a 14% increase between 2023 and 2025. Secondly, we are focused on the organic opportunity to expand the uptake of our packaging and benefits offerings within our eligible customer base to leverage the great work of the operations teams that are already in place to support our clients. Since announcing our strategic priorities, active customer uptake has had a relative improvement of 9%. Our approach for driving uptake is working well and gives us a clear pathway to further organic growth. And finally, we are focused on expanding our products and services to better meet customer needs, as we have already outlined in our strategic priorities. This will increase customer lifetime value. We are making good progress, showing a relative improvement in the cross-sell of our products by 13% since announcing our strategic priorities. In combination, improvements in total eligible customer base, customer uptake, and product cross-sell have underpinned our growth over the past 2 years. We are making strong progress on each front, and these improvements will drive improved financial returns over the medium term. I'll now hand it over to Jason to talk through the key drivers of our financial performance in more detail.
Jason King: Thank you, Scott, and good morning to everyone on the call. I'll start on Slide 17 to cover our financial performance in 2025. In 2025, we continued to deliver broad-based growth across product lines, customer segments, and vehicle segments. Our active number of salary packages increased 10% year-on-year to 491,000. Novated leases under management continued to grow, reaching 85,300 leases under management, an increase of 15% year-on-year. Our fleet business reached 35,200 managed vehicles, an increase of 9% year-on-year. Turning to Slide 18. Our novated leasing business continues to show strong growth. In 2025, new lease vehicle orders were up 13%, and total settlements, which include new, used, and refinanced vehicles, were up 7% year-on-year. The amount of pipeline unwind reduced in 2025 relative to 2024. The growth rate in new lease vehicle settlements in 2025 reflects this higher base. Smartgroup remains actively focused on managing yield. In 2025, leasing yield was stable compared to 2024. As we outlined in the first half results, we experienced a modest decline in yield in the first half associated with the increased PHEV volume. However, yield recovered in the second half as we maintained our focus on product attachment rates. Delivery time frames continued to improve in 2025 and on average, are now 35 days. Electric vehicles are becoming more accessible with new models available in the market in 2025. For ICE vehicles, we continue to experience some variation in availability across makes and models. However, we do not currently see vehicle supply as a constraint on our business. Moving to Slide 19. Demand for novated leasing continued to be strong across battery electric vehicles and ICE. Combustion engine vehicles remain an important part of our business, and in 2025, ICE new vehicle orders increased 4% compared to 2024. The federal government electric car discount policy for plug-in hybrid vehicles ended on the 31st of March last year. As a result, PHEV demand accelerated in the first quarter of 2025. Following the end of the discount policy for PHEVs and for this type of vehicle has reduced, but was offset by increased interest in battery electric vehicles. New orders for plug-ins declined 31% year-on-year, while new orders for battery electric vehicles grew 49% year-on-year. As legislated, the government has now commenced a review to assess the electric car discount policy's performance over its first 3 years. The review findings will help inform broader policy development on how to continue expanding electric vehicle choices for more Australians and bring transport emissions down. Smartgroup has been a key enabler of making EV ownership more accessible through novated leasing. Our market-leading offering, digital platforms, and dedicated education initiatives have helped thousands of working Australians understand and benefit from EV leasing, ensuring the government's policy delivers meaningful outcomes for employees and employers across the country. Turning to the P&L on Slide 20. NPATA for 2025 increased 11% compared to 2024 to $80.2 million off the back of sustained revenue growth and improved EBITDA margin. EBITDA grew 14% to $135.3 million, and EBITDA margin was 41%, an increase of 2 percentage points on 2024. EBITDA margin remains a key focus for management, as Scott mentioned earlier. We anticipate EBITDA margin to be in the mid-40s during 2027. However, 2026, in particular, is expected to be a significant year of technology investment and change delivery for the organization to achieve this. Revenue growth was driven by novated leasing and new client wins. In 2025, revenue grew 8% to $329.3 million. Similarly, net revenue grew by 9% to $318 million. Product costs reduced 19% year-on-year through a mix of improved supplier pricing and lower attachment rates. Total expenses increased 5% to $182.7 million. Staff costs increased 3%, reflecting a combination of increased wage costs with lower average headcount. These outcomes were achieved while significantly growing our customer volumes, with active salary packages growing 10% year-on-year. In 2025, Smartgroup serviced 1,645 customers per our operations FTE. Non-staff costs increased 12% and were largely driven by enhanced marketing, lead generation activities, and expenses relating to our technology investments. We remain focused on growth while operating efficiently and differentiating our offering to strengthen our competitive position. Depreciation and amortization expense increased 40% in 2025, mostly driven by capitalized IT development costs to deliver our strategic priorities. Slide 21 highlights our continued strong cash conversion at 122% of NPATA. This was influenced by favorable timing of working capital movements and tax payments, which are outlined in the appendix. Capitalized IT development costs were $12.6 million in 2025, in line with guidance. Our balance sheet on Slide 22 shows that we ended the year with a conservative net debt position of $38.1 million and 0.3x leverage. Since 2021, we have been piloting fleet funding products with selected clients utilizing our balance sheet capacity. This pilot has successfully assisted us to refine our product proposition for this market, and we have moved to providing a more complete offering with the integration of external fleet funding providers. We expect internal funding of this product will, therefore, be significantly lower in the coming years. The business is well positioned. Our low net debt and strong cash generation provides us the flexibility to invest for growth while delivering dividends to shareholders as per our stated policy, which I'll now turn to. As many of you would have seen before, Slide 23 articulates our capital allocation approach to ensure that we deliver long-term sustainable growth and maximize shareholder value. Our strategic priorities provide significant opportunities for Smartgroup's medium- and long-term growth. To ensure we make the most of these opportunities, we will continue to invest in core and digital technologies as well as customer experience improvement initiatives. These necessitate allocating sufficient capital to ensure we can execute well. Similarly, we will maintain flexibility to take advantage of attractive acquisitions, partnerships, and other organic and inorganic growth opportunities. It is our intention to pay fully franked dividends in line with our current policy of 60% to 70% of NPATA, and we will look to return excess capital to shareholders whenever appropriate. Other returns to shareholders may include special dividends or share buybacks. For 2026, we have allocated technology CapEx in the range of $11 million to $13 million, similar to 2025. This represents between 3% and 4% of 2025 revenue. We expect CapEx to remain at current levels in the short term as we deliver our strategic priorities before returning to a more normalized level. Consistent with this capital allocation approach and factors, including our solid returns and cash generation and our meaningful ongoing investments in growth in the business, the Board has declared a final fully franked dividend of $0.215 per share. In addition, the Board has also declared a fully franked special dividend of $0.12 per share. Together with the $0.195 per share interim ordinary dividend declared in August 2025, this brings fully franked dividends to $0.53 per share, representing 90% of 2025 NPATA and an increase of 9% compared to 2024. This special dividend shows Smartgroup's commitment to its capital allocation policy of returning capital to investors where prudent, while ensuring we continue to invest for growth. Finally, as evidence of our disciplined approach to capital management, you can see from this chart on the page, our continued delivery of strong returns on equity for shareholders, which in the last 12 months was 30% after tax. With that, I'll hand back to Scott.
Scott Wharton: Great. Thank you, Jason. Moving to Slide 25 and in summary. In 2025, Smartgroup again delivered strong financial results and solid operating momentum through disciplined execution. We delivered record customer numbers across salary packaging, novated leasing, and fleet. These results reflect a business that is performing very well across all meaningful metrics. We will continue to remain focused on driving further growth and scalability through the delivery of our strategic priorities. Turning to Slide 26 and the outlook. We continue to see a supportive environment for further growth. Demand for our products and services is robust. In January, leasing orders and settlements increased compared to pcp. January yield also increased compared to pcp. Our distribution partnerships have received a positive response from clients and customers, validating our strategic direction and unlocking new channels for scalable expansion. As we have said before, 2026 will be a significant year of technology investment and change delivery. This will position the group to realize the scale benefits associated with our strategic priorities. As we have mentioned, we are targeting EBITDA margin to be in the mid-40s during 2027. With sustained investment, including automation and agentic capabilities, we see continued opportunities to further elevate business performance beyond 2027. Through continued strong execution of our strategic priorities, Smartgroup is well positioned for sustained profitable growth, enhancing value for our shareholders. A big thank you to Smartgroup's customers, partners, and, of course, our team. Thank you also to our investors for your ongoing support. I'll now hand back to Betsy for questions.
Operator: [Operator Instructions] Your first question today comes from Tim Lawson with Macquarie.
Tim Lawson: Just a couple of questions. The growth seems to be pretty strong, both across the salary packaging and novated. Can you just talk about the underlying operating metrics that you're getting there to drive that growth? It seems to be outperforming the market a little bit. And just maybe the conversion to novated would be good as well.
Scott Wharton: Yes. No, sure. I agree with your observation, outperforming versus the market. I think let me take you back to Slide 15 from our deck that we went through today. And as we talked about before, as far as organic growth goes, the focus has been firstly growing our TAM, so total addressable market. We've made really good progress there over the past couple of years. Obviously, Tim, as you know, with onboarding clients like the South Australian government through to Monash Health and many, many others. And in fact, if you look over the past couple of years, we've been onboarding new eligible employees at record levels, which is great. It goes to the quality of our digital investments and the customer experience that we're offering in the market. The reputation is coming with that. Then to your question, it's really then down to how do we, with that TAM, which we always aim to keep growing, how do we increase the uptake within our TAM. And a number of areas of focus there. Firstly, through the more traditional means, working with clients to be out educating their employees. That's how we've traditionally done things. That's been enhanced now with much more sophisticated and targeted digital marketing and use of data to target in a personalized way, our marketing to customers. And then also, we've expanded, as we touched on in today's results and our half year update, our partnership network so that we can work with the likes of, say, BMW Financial Services or Qantas to be also out engaging our total addressable market, and again, educating them and drawing them into either salary packaging or novated leasing. And then if we look across then onto the right-hand side, we look at effectively the cross-sell improvement. Really, the number that has been, in addition to what I've already mentioned, are getting far more targeted in our current salary packaging client base, understanding the nature of our clients better, and presenting targeted and tailored offerings around novated leasing to those customers. And that, again, is why our partnerships have been very important and the strengthening of our partnerships because that's enabled us to offer quite often differentiated offers, both in terms of pricing and overall value proposition for specific novated leasing products to those customers to cross-sell to them out of salary packaging.
Tim Lawson: That's very clear. Also, just in terms of your margin -- your medium-term margin commentary, can you just talk about what you're assuming there on government policy in terms of the EV FBT benefit for nongovernment, et cetera, workers?
Scott Wharton: Yes. And obviously, as you're alluding to, the government was required under the electric car discount policy to do a review. And that review is underway at the moment. We don't know the outcomes of that review. As we look at the medium-term, suffice to say, there's a range that could be impacted by any significant changes to that policy, but we don't anticipate that happening. We'll just need to wait and see what happens from a government perspective. But that being said, I'd point us back to the fact that, and in fact, this slide, Slide 15, is relevant. It shows that we've been able to drive significant growth, and that's not just in EV. It's also been able to drive growth over the past 2 years in combustion engine vehicles. So from our perspective, Tim, to your question, irrespective of EV policy, obviously, the current policy is helpful for demand and will now continue. We've successfully been able to drive growth in combustion engine vehicles through novated leasing, which itself is a fantastic product. So in summary, obviously, there may be some slight swing depending on what, if anything, the government decides to do with the electric car discount policy off the back of this review. But as you would see in the media, even as recently as yesterday, a point that Minister Bowen made out in the media highlighted the success of the policy in driving EV transition in Australia.
Tim Lawson: Okay. And just...
Scott Wharton: Another point to add to that, Tim, actually, is also with respect to Smartgroup. It's important also to think about the nature of our customer base, which we've talked about before. Teachers, nurses, education, not-for-profit workers, these are people who've got to drive to work, right? And novated leasing is the best way to get into a car, and often for many of these workers, the only way they can get into a car.
Tim Lawson: Yes. You're obviously spending, going through the platform transformation as well, but you call out, and there's obviously a number of productivity benefits you're already getting. So you referenced that mid-40s margin target, as you work through that platform spend. Are you seeing further opportunities? Obviously, getting some productivity benefits already, but are you seeing further opportunities to suggest that mid-40s is not enough -- is not high enough?
Jason King: Tim, it's Jason. I think we're comfortable that we're on track for what we put out there as a target with the mid-40s. Scott went through the Phase 2 of the strategy road map, what that entails. There's a reasonable amount to be delivered there, but the progress to date has been very good, and that is what has driven the efficiency improvements that we've seen to date. There's more to do. But I think we're pretty comfortable with how we're tracking towards that medium-term goal of getting to mid-40s during 2027.
Operator: The next question comes from Phil Chippindale with Ord Minnett.
Phillip Chippindale: A couple of questions from me. Just in terms of performance so far for the year. Obviously, the PHEV expiry was 31st of March last year. You've said that January volumes were up. I'm just interested in a February comment. I know I'm not normally one to dwell on such short-termism, but I guess this is we're in the 2 months leading into the PHEV expiry in terms of cycling a tough comp. So I just wanted a comment on how Feb is trading so far.
Scott Wharton: Yes. Thanks for the question, Phil. We won't comment on February. What I'd point to, obviously, is that commenting on January, the message we're giving is the year is off to a great start. And on the PHEV numbers, as you would have seen in the slides, not surprisingly, there was a shift in PHEV volumes. It remains a good area of business for us. But what we've seen is customers switch out into then either ICE or battery EV. And net-net, volumes remain very, very strong. And that thematic is continuing into the start of this year, which is great.
Phillip Chippindale: Just touching on headcount. I think it was Jason earlier, you mentioned that 2026 is a significant year of IT and change investments in order to achieve your 2027 targets. Can you just give us a sense of what does that look like from a headcount perspective? CY '25 the FTE came down a little bit. But does some of this investment require some additional headcount in the shorter term?
Jason King: So yes, you're right. If I look at the 2025 result, we did have modest headcount reduction. What we're doing through the efficiency gains and the technology investment is we're really looking to reinvest that capacity into the capability within the business in order to achieve the next phase, and that next phase being Phase 2 of the platform. So there's more to do, again, in terms of efficiency gains. But what I'd say to the direct question about headcount is we're a growing business. So as far as the efficiency gains, they're coming not from taking costs out of the business but actually growing customer volumes, and we've been able to support much higher customer volumes without having to increase the number of headcount in the last year. And that's really the track that we're on. So whilst we could be adjusting the cost profile of the business in response to external demand changes, at the moment, we're tracking very well as far as growth goes, and that's the way we're positioned.
Scott Wharton: And just to add to that, Phil, I'll again draw you back to Slide 13 from our presentation. That's why we were keen to talk a bit more about the Phase 2 work we kicked off last year. We are starting to really see that scalability come through. And that metric at the bottom we provided there, which talks about customers per operations FTE, just brings that to life for you. And obviously, there's other efficiencies that are non-headcount related, but that's something we look at very closely across the business as far as driving scalability in the platform. That name of the game being to get more widgets through the system without increasing headcount, and we're tracking really well there.
Phillip Chippindale: Last one for me, just on the contracts. I think, Scott, you earlier mentioned that you retained all the major contracts that were up for renewal in calendar '25. I guess, for the next 12 months, is there particularly significant number of renewals coming up? Just love a comment in terms of just how busy you'll be on that renewal side of things.
Jason King: Yes, it's really interesting is that the last 2 years, there were a lot of contracts that came up, and we got through all those renewals. As we disclosed, for example, the ATO was obviously a real bellwether account that went to active RFP. The ATO oversees our policy in many ways as far as salary packaging. And after a very active competitive process, they reappointed us for all their staff for 5 years, which is wonderful. But yes, that thematic flowed through all our other renewals. As we look ahead over the next couple of years, it's a very typical churn. And by the nature of contracts, they are 3 to 5 years, and there's always contracts coming up, but there's nothing abnormal. If anything, by the volume, I think looking back, we've got over the hump of many of the renewals we needed to get through over the past couple of years.
Operator: The next question comes from Hayden Nicholson with Bell Potter.
Hayden Nicholson: Maybe just coming back to your medium-term EBITDA margin targets and headcounts. Like volumes aside, or just with that in mind, do you think you can -- maybe just can you outline the parameters? And I'm just thinking if we are cycling tougher comps, do you imagine you're going to be able to pull cost out of the business in line with that and some of the efficiencies? Just trying to work out how we build to mid-40s if we have a downturn in the volumes.
Jason King: Yes, Hayden, it's Jason. So I think the way that we think about that when we consider strategic planning is that you can hypothesize about different scenarios in the future and what they mean to the business, but they all tend to lead you back to the same place, which is that we should continue to invest in the efficiency of the business because that's the way that we can continue to grow the customers efficiently and have improving operating margins, operating leverage in the business. And the same logic applies in the reverse. So that's why we're so focused on the delivery of the road map. If we are expanding our ability to operate efficiently, that applies to any scenario based on different levels of customer demand.
Scott Wharton: And I mean, just to build on that, as we look forward, again, we've been building scalability in the platform, which goes to cost efficiency, but also ability to scale up and scale down capacity more easily as well. And ultimately, though, as we look forward, and obviously, there's a range of things that might evolve in the market over the next few years, but look at the spread of things that might happen, we're really excited about the revenue trajectory that we're on. And why is that? Again, the proof points that we've given today on the momentum that we have, ultimately, that's underpinned by us realizing the benefits of the technology investments that we're making, the customer proposition that we've been sharpening, and we've removed [ Health-e ] from the business and doubled down on our 3 key core propositions around salary packaging, novated leasing, and fleet, and are winning in those propositions. And coupled with much better account management capabilities, much better business development capabilities. I'll just point to, obviously, the revenue line is the one that is particularly important in the equation here for us. Cost is important, but revenue is even more important, and we're confident in the structure that we have and our ability to respond to any changes in the market.
Hayden Nicholson: Okay. And then just a follow-up, if I may. Just thinking about growth as well. You're still spitting off good free cash and even just seen in the paper. Are you thinking about M&A at the moment maybe to plug some weakness that could come through, thinking about even just in the near term, March and April comps? Is that something that's on the table or would work? Or should we not think about that as an additional lever to pull?
Jason King: I think as we've said pretty consistently, we've got a flexible balance sheet and ability to look at things opportunistically. But we don't feel compelled to do something to achieve the strategic goals that we're pursuing because we've got a lot of capability to achieve that organically. So if there is something that was compelling, we do have an ability to do inorganic. There's nothing active. I know there's always media about this sector, and we try not to get too distracted by that. But we try to stay true to the capital allocation approach, which is we're firstly allocating to the organic plan, but we reserve reasonably substantial capacity for other initiatives if they are compelling. I'd probably just also add, one of the things where we are focusing on the organic opportunity, and we spoke about is the fact that we now have an external fleet funding provider. So we're maintaining our capital-light approach more generally, including in fleet. And again, we're really excited about the opportunity to pursue fleet based on the capabilities and the funding options that we now have.
Operator: The next question comes from Chenny Wang with MS.
Chenny Wang: Sorry, I was jumping a bit on and off the call. So maybe I did miss this, but I want to come back on EBITDA margins and that midterm guide there. I thought I heard you say for 2026 that it was going to be a significant year of tech investment and change delivery to deliver that mid-40s in '27. Obviously, the January numbers to start this year have looked pretty good. And I guess your outlook is also positive. And with that positive top line momentum, generally, this would translate to margin expansion. But just trying to marry that, I guess, historical trajectory, if you like, with your comments on investments. How should we be thinking about EBITDA margins in 2026, obviously, before that mid-40s in '27?
Jason King: Chenny, it's Jason. So yes, as I said before, obviously, increased revenue growth does contribute to the operating leverage. When we're talking about the mid-40s ambition for 2027, the reason we tie that back to the delivery items, and I'm referring here to Page 13, is because that there is the articulation of what we believe we need to achieve to underpin those outcomes. So whilst we are also focused on delivering a result for 2026, the majority of the benefit from the actual program, we feel won't necessarily come in 2026. There will be more organic opportunity for growth in '26, but delivery of these investments is what we're focused on when it comes to that target.
Scott Wharton: And I think, Chenny, obviously, and just to build on that, again, some important work to be done this year. But I'd say, obviously, the main game is driving the expansion in 2027, but I'd say that things are pretty stable this year on the EBITDA margin front. But next year, definitively, we're very focused on the EBITDA margin expansion.
Chenny Wang: And then maybe just one on the new lease vehicle orders. So look, I don't want to maybe read too much into this, but I do want to pick up on that half-on-half decline of 2%. I'm just curious what you saw there. Was that just seasonality? Yes, was that just seasonality? Or was there something else there? Yes, some color there would be great.
Jason King: So yes, I guess you're referring to Slide 18, new car...
Chenny Wang: Yes, that's right.
Jason King: Yes, there was a modest dip in orders in the second half relative to what was effectively a very strong first half. But as you can see that it's up on pcp. Settlements were up quite strongly on pcp. And as we said in the outlook statement, January was also up on pcp. So we weren't overly concerned by that number. There's still good momentum in the business, I would say.
Chenny Wang: Got it. And then maybe just one last one. Just in terms of your order mix. Obviously, I think historically, you've given some color on broad customer mixes, just in terms of that order mix more specifically. Anything you can share in terms of percentage from corporate versus health care, education, government?
Jason King: I guess what I'd say is that it's actually pretty broad-based. So looking at the penetration numbers and back to the story about how we are focused on penetration of the customer base and the product uptake, we're achieving that across most sectors. We tend to be more weighted towards health, education. So that, therefore, does, when we're growing, contribute more to the growth. But when we look at the sectors, all the sectors are growing.
Operator: This concludes our question-and-answer session. I'll hand the call back over to Mr. Wharton for any closing remarks.
Scott Wharton: Great. Thank you, Betsy, and thank you, everyone, for your interest in Smartgroup, and look forward to speaking with many of you over the coming days.
Operator: That does conclude our conference for today. Thank you for participating. You may now disconnect.