Operator: —Harmoney Corp Limited Q1 FY 2027 Operational Update. I would like to introduce Mr. David Stevens, the CEO and Managing Director of the company. Accompanying David is Simon Ward, the Chief Financial Officer. Before we start the presentation, just as a matter of housekeeping, we will be answering any questions you have at the end of the formal presentation, and we kindly ask you to fill these in the Q&A box on your screen. Many thanks for your interest this morning. Looking forward to hearing a good story around the continued operating leverage that is coming through Harmoney as it continues to scale the business and also more exciting intermediary channel that is showing rapid growth. Over to you, David. Thank you.
David Stevens: Thanks, Michael. Hello and welcome to Harmoney's first quarter financial year 2027 trading update. I am David Stevens, CEO and Managing Director of Harmoney. With me today is Simon Ward, our CFO, who will join me in answering your questions at the end of the presentation. Turning to slide two. Today, I will begin with our financial year 2027 profit guidance and then take you through our key metrics for the first quarter. I will then give you an update on our intermediary channel, which has been the standout of the quarter, and then recap on our customer flywheel. I will finish with a reminder of our capital and funding position before answering any questions. Turning to slide three.
David Stevens: At Harmoney, we are committed to our track record of delivering on what we tell the market, so I am pleased to reaffirm our financial year 2027 cash NPAT guidance of NZD 16 million plus, which represents growth of at least 18% on the NZD 13.5 million we delivered in financial year 2026. As you can see from the chart, that guidance continues a remarkable trajectory, a compound annual growth rate of 187% from NZD 0.7 million of cash NPAT in FY24 to our financial year 2027 guidance. Two engines are driving that growth. Stellare 2.0, which continues to grow our direct business in both countries, and our new intermediary channel. Together, they are driving our year-end loan book to NZD 1 billion plus.
David Stevens: Finally, on this slide, the board and management continue to see significant value in Harmoney's equity at current levels and our on-market share buyback is continuing in line with the extension we announced on 22 April 2026. Now turning to slide 4. This slide compares our Q1 with the same quarter last year. Our group loan book grew 9% to NZD 912 million. Growth was strong in both markets in local currency, with our Australian loan book up 14% to AUD 573 million and our New Zealand loan book up 11% to NZD 418 million. Australia now makes up 63% of the group loan book. Our net interest margin, or NIM, held steady at 10.3%. Credit performance also remains stable, with credit losses steady at 3.8%.
David Stevens: Our 90-day plus arrears, which are a forward-looking indicator of credit quality, improved 13 basis points to 0.64% from 0.77%. Steady NIM and credit losses delivered a continuing strong risk-adjusted margin of 6.5%. Risk-adjusted margin is our income after both funding costs and actual credit losses, and as such, is a core measure we manage this business to. Our Stellare platform, with its high levels of automation, continues to deliver increasing operating leverage as we grow our loan book, with our cost-to-income ratio improving a further 100 basis points to 18%. Now turning to slide 5. Our new intermediary channel has been a standout of the quarter, so I would like to spend some time on it. We only launched our Australian intermediary channel in mid-August. In the short time to 30 September, we have already originated AUD 7 million in car loans.
David Stevens: We had two partners live in Australia in September, LoanOptions.ai and Driva, taking us to four partners now live across Australia and New Zealand, with more already lined up to join through the Q2. What our partners value most is speed and certainty. Stellare was built to serve direct online applications, so it also assesses, approves, and funds intermediary introduced loans within minutes, which is a compelling proposition for our partners and their clients. As Julian Fayad, the Founder and CEO of LoanOptions.ai, put it, "Cleared funds in 25 minutes from when the client first picked up the phone call." This channel only adds marginal overheads because it runs on the same Stellare platform, the same credit models, and the same automation as our direct business.
David Stevens: We have onboarded partners at a deliberate pace to get that experience right from day 1. The opportunity in front of us is large. The Australian car lending market is around AUD 20 billion a year, and we see a pipeline opportunity of over AUD 100 million of annual funded volume by FY 2028 from 10 or more intermediaries. Now turning to slide 6. Many of you will have seen our flywheel before, so rather than walk you around the wheel again, I would like to tell it as one customer's story and show you where the last quarter's progress fits in. So stage 1, a customer comes to us looking to borrow AUD 18,000. Today, they can find us in three ways. Through online sites and search tools like Google Search, through AI answer engines, and now through our partners.
David Stevens: Wherever they come from, we are looking for a prime customer, and winning that first loan currently costs us around 5.6% of the loan or about NZD 1,000. Stage 2, they apply in minutes, get an instant decision, and have their money in minutes. The 25 minutes from phone call to cleared funds that I mentioned on the last slide is this stage at work, now in the hands of our partners. Stage 3, where the economics turn. On average, our direct customers come back and borrow a further 1.5 times their loan, about another NZD 27,000. Because we already have the relationship, that further lending costs us nothing to acquire. So the longer a customer stays with us, the more valuable they become. At this stage, it is too early to say how the relationship will develop under our new intermediary channel.
David Stevens: The key point with the intermediary channel is that it is all new incremental volume that we were previously not targeting. Stage 4, every one of these loans, the first and every one after it, adds to our first-party data. The data trains our seasoned AI credit models, which make sharper decisions about the next customer arriving at stage 1. The wheel feeds itself. Now turning to slide 7. Think of this slide as our scorecard for FY 2027. Each box is one stage of the flywheel with what we are building to make it spin faster. Rather than repeat the plan, I will focus on what has moved since we last spoke to you only a couple of months ago in August. The blue box, customer acquisition. When we presented in August, our first Australian partner had gone live.
David Stevens: Less than 2 months later, our Australian intermediary partners have originated NZD 7 million. Alongside that, we are about to launch the next generation of our AI-assisted underwriting, helping customers complete their applications more accurately and efficiently. The green box, deliver experience, is about earning more from each customer relationship with personal and car loans together and lending that follows a customer's life events. The clearest sign of progress here is a growth in our vehicle loan book, up 22% on the same time last year. The red box, customer returns, is about making it easier for customers to return the next time they need a loan. Our mobile app, which we have just launched this week to customers, will give customers streamlined access to their next loan. The yellow box, data intelligence, is our longest term investment.
David Stevens: Next generation agentic AI for personalization at scale and predictive retention models working towards a private banker experience for every customer. This advantage builds quietly because it is trained on proprietary models and customer behavioral data built up over many years. These four boxes are not separate projects. A customer can now join us through a partner in the blue box. Car loan alongside a personal loan deepens that relationship in the green box. The app brings them back sooner in the red box, and every loan sharpens our model in the yellow box. Progress in any one of these boxes speeds up the other three, and that is what we mean by accelerating the flywheel. Now turning to slide 8. Now turning to our capital position. The figures on this slide are as at 30 June 2026, our most recent audited balance date.
David Stevens: Harmoney's business model is very capital efficient. Our warehouse funding provided by three of the Big Four Australian banks funds 97% of our loan book, with Harmoney providing the remaining 3%. The chart on the left shows in the red section Harmoney's warehouse equity of NZD 28 million supporting the existing loan book. On top of this, Harmoney had a further NZD 12 million of accessible cash. That being loans funded by Harmoney, which are available to be drawn down as cash from our funders at any point. Plus, we had a further NZD 27 million of unrestricted cash on hand. Combined, that is NZD 39 million of cash, which would support growing the book by another 113% to NZD 1.9 billion. Beyond that, being profitable, we can reinvest our profits to fund further growth. With every NZD 1 million of profit funding NZD 30 million of additional loan booking.
David Stevens: You saw both of these levers at work in FY 2026. Our profits funded loan book growth and improved funding advance rates allowed us to repay NZD 7.5 million of corporate debt while still growing our cash reserves. Our only recourse borrowing is corporate debt at a low 31% of equity, which was covered 2.8 times by operating cash flow in FY 2026. The key point being that we have a profitable, scalable, and self-funding business model, and Harmoney is well-funded for growth ahead. That concludes our presentation for today. Simon and I will now turn to answering your questions. Just a reminder, you can submit a question at the bottom of your screen.
Operator: Thanks very much, David. I just paused there for some questions to come through. Right. I have got a question here from Lachlan, from MA Financial. Originations of NZD 122 million in the quarter. What quarterly origination run rate are you expecting from here to achieve a NZD 1 billion plus loan book? How much of an acceleration is required, and do you expect this to be driven primarily by the intermediary channel or in the core personal loan book?
David Stevens: Yeah. Thanks, Lachlan. We have given increased guidance around the size of the expectation of the loan book, which we did not do in August. So, hopefully, that gives the market a lot more color on where we are thinking. I have not given guidance on quarterly originations for obvious reasons. It is something that is pretty granular. But hopefully, you can sort of work backwards from that year-end loan book number to get to that. Look, certainly, we see the intermediary channel being a key component of that growth. It is obviously coming off a zero base, and we are bringing on new partners all the time. You can see the growth on one of the earlier slides. As we bring on more partners, that number grows, and obviously, the speed that we bring them on will help drive that number higher than NZD 1 billion.
David Stevens: But we are doing it in a very safe way and very measured, and managed way. We want to make sure the product is exactly how our partners want it. We have had great success already with the two partners that we are with, and you have seen by public comments made by the Founder and CEO of LoanOptions.ai. That is really pleasing. We want that type of feedback. This is not a winner-takes-all market, but we feel we have got a unique product in the market, and we want to get it right. That will be there.
David Stevens: The direct business continues to grow well. New Zealand is going along really well, probably a little bit further through the cycle than Australia, to be honest. Australia is probably a little bit softer than probably in the last month or two. But we expect that to turn around and it is just, I think Australia is a little bit behind in the current cycle of, say, what New Zealand is, that we are going through now. So, really positive on the outlook on both segments.
Operator: Thanks, David. Next question, and this question is quite commonly asked. 90-day plus arrears have improved, which has obviously been a great outcome given the macro backdrop. What is your outlook on credit losses in FY 2027?
David Stevens: Well, look, we have sort of said for quite some time now, we want to run a book of around 3% to 4% on credit losses. That has not changed. That is sort of what the expectation in our guidance. Obviously, it has been around the high end of the threes, and we would expect it to stay around there. As I said, I think the New Zealand economy is actually probably slightly better at the moment than the Australian economy. So, obviously, a year ago, everyone was talking about the New Zealand economy being not so great.
David Stevens: So, things change, we move, and the numbers stay around the same. We do not play around with our credit underwriting. We use a consistent model that we improve with data all the time. We do not open up the credit jaws when things look a bit better and go the other way. We have consistent underwriting, and I think that helps make consistent results in our losses. We are comfortable where that is at, and as you said, 90-day plus arrears are down, which is a great lead indicator, and that is a number we really focus on. So look, we are expecting a similar level in this financial year as last year.
Operator: A question here from Mark. How can you be assured of credit quality in the car market given used car prices are soft and under pressure, and you have a few years exposure when conditions could deteriorate?
David Stevens: Yeah. Thanks for the question, Mark. I would like to ask that one myself as a question. Well, the good thing is that essentially, we underwrite the loan as if it is an unsecured loan. We actually do not take any more comfort, if you like, from it being secured. The loan is always done against the consumer themself rather than any recovery value of the car. All we do in our product is give a pricing discount to the customer for securing it. That is obviously a pricing decision, as opposed to a credit decision.
David Stevens: We would not expect to see any worse performance than the unsecured book, which we have been writing for 13, 14 years. But obviously, in a net loss position, so after recovery, you would expect that where debt does go bad, we would obviously have the ability to collect on the car itself. The net loss position would be lower. So yeah, great question. Absolutely no difference from our unsecured underwriting.
Operator: Thanks for that. A question here from Jonathan. When stress testing the credit quality of the book, what unemployment rate do you use and what type of customer concentration do you have? What do you look at to monitor the credit quality?
David Stevens: Yeah. There's a few questions in there. I might take them in a slightly different order. The type of customer concentration we have, we disclose that every H1 and full year, and we've done it since we listed. It shows the demographic of customer really clearly, very much spread across the population, fairly evenly. This is both Australia and New Zealand. 70-odd percent, 73% I think it is or so, are in office trade roles, office roles, trade roles, professional type roles. The average age of customer is in their mid-40s. Because we're direct, we're not concentrated on a specific state or anything, or where we're getting a lot of deals from one particular area, which is a great thing for managing losses. You want to have diversification, which this book really does, which is great. Unemployment is obviously a measure.
David Stevens: One thing to note, that a change in the unemployed, we've seen unemployment rate move from what it has, and it's had no impact on arrears whatsoever. If it moves another 1% up, there'll be a little bit in there, but it's not like all our customers have personal all the people that lose their jobs have personal loans with us. Even if it goes up another 1% or 2%, we don't feel it would have a material impact on our business. It also depends on how long that unemployment rate's up for as well. That's another key thing that needs to be looked at.
David Stevens: Then it is whether you actually believe the unemployment rate that is published, which I think anyone that spends a little bit of time seeing how that rate is calculated would probably find the unemployment rate is quite a lot higher than what it actually is being reported, particularly when you look at underemployment and the like. So I think you are already experiencing, the books were already experiencing quite a lot higher unemployment than what is reported anyway. So, look, as I said, that diversification is key. Consistency of credit underwriting is key in there as well. So we monitor that. We monitor our static loss, which for anyone that is technical on this, we do not just look at the percentage of the loan book of loans written off in arrears.
David Stevens: We actually look at how a cohort of loans has performed in month 1, month 2 against month 1 and month 2 of loans written for the last 5 to 10 years. So we can see if those trends start to look, if losses start to appear earlier since the loan was originated. That is something we have done as a business. I have done it my whole career, and we have been doing this at Harmoney since day 1. We do not just write a lot of loans and grow the denominator so the loss number looks good. You have got to be looking at it much earlier in the origination cycle and that.
Operator: Just another question just in relation to New Zealand. Obviously, there has been a formal launch of their national election over there. Just from past learnings of the market in New Zealand leading into election, do you anticipate any change around originations or growth there at all?
David Stevens: Yeah, I might hand that one to Simon Ward being the local Kiwi, to answer that from more historical thing. But, go for it.
Simon Ward: Yeah, I think there is probably a little bit of a pause in activity at the moment because the election does seem to be hanging in the balance a bit. I think that once we are through that, I would expect things to sort of pick up as normal post any election. We tend to have, I guess, fairly centrist governments here, so it does not swing too far either way, depending on who gets into power. I think, yeah, natural around election slowdown at the moment, which will probably pick up again as we get post that and head into the holiday season.
Operator: Thanks, Simon. I will just pause there to see whether any further questions come through on the Q&A box. I would direct you to that box if you do have any questions, before we pass back to David for any closing remarks. So we will just pause there for a moment to see whether any more come through, Dave.
David Stevens: Okay. All right. It was only a couple of months since we spoke last time, so hopefully, you are seeing we have made some good progress in those couple of months. Really excited about where the business is at and really looking forward to delivering some really good returns over the coming period. Thank you. Have a great day.
Operator: Thanks, David. Thanks, Simon. Any further questions, please feel free to direct those back through the email contact at the back of the ASX release this morning, or alternatively, please contact myself directly at Ethicus Advisory Partners. Again, thanks very much for your time and interest today, and have a pleasant day. Thank you.
