Highlights

• Cash EBITDA rose 47.1 per cent on a continuing, constant-currency basis in the half to 30 June 2026.

• Continuing Revenue rose 2.5 per cent to A$250.0 million, and Recurring Revenue made up about 95 per cent of the group total.

• Iress cut its FY26 revenue guidance to growth of 1 to 2 per cent while lifting its cash EBITDA guidance.

• Operating costs on a continuing basis fell 1.9 per cent, with A$31.5 million of annualised savings delivered ahead of plan.

Why is Iress (ASX:IRE) growing its profit so much faster than its revenue? The short answer is cost discipline. In its results for the half year to 30 June 2026, released on 17 August, the financial software provider reported cash EBITDA of A$61.1 million, up 47.1 per cent on a continuing-business, constant-currency basis, while continuing revenue rose just 2.5 per cent to A$250.0 million. It also cut full-year revenue guidance while raising Earnings guidance.

Iress has largely finished a multi-year programme of simplifying the business. The question now is whether a leaner cost base can become durable top-line growth.

What Iress does and where its revenue comes from

Iress develops software for the Wealth Management and Capital Markets industries. Its best-known product in Australia is Xplan, a financial advice platform used by advisers for client management, planning and compliance.

The company now reports a continuing Business made up of three parts: APAC Wealth, Global Trading and Market Data, and UK Wealth & Sourcing. Recurring revenue, mostly subscriptions and licence fees, was A$237.8 million in the half, up 3.4 per cent. That is about 95 per cent of group revenue.

The rest is volatile non-recurring revenue, largely project and implementation work.

The half-year numbers in detail

Statutory group revenue fell 16.5 per cent to A$250.0 million because the prior-year comparison still included businesses Iress has since sold. Underlying net profit after tax rose 18.4 per cent to A$38.8 million at group level, and 24.5 per cent on a continuing basis. Statutory net profit rose 85 per cent to A$32.0 million.

Underlying Earnings Per Share were 20.8 cents, up from 17.6 cents. The cash EBITDA Margin widened to 24.5 per cent from 15.2 per cent at group level.

Operating costs on a continuing basis fell 1.9 per cent to A$181.4 million. The company said its efficiency programme had delivered A$31.5 million of annualised savings, ahead of plan, and it expected a further A$6 million to A$9 million in the second half.

The board declared a fully franked Interim Dividend of 14.0 cents a share, up 27.3 per cent. Leverage was 0.5 times at 30 June 2026. Iress said its Balance Sheet gave it "optionality for future capital management initiatives", but it did not announce a specific buyback.

A softer revenue outlook, a firmer earnings one

Alongside the result, Iress lowered its FY26 revenue guidance to growth of 1 to 2 per cent in constant currency, or A$509 million to A$515 million. Its previous range was 3 to 5 per cent. At the same time, it lifted its cash EBITDA guidance to A$121 million to A$126 million in constant currency, up from A$116 million to A$123 million.

Underlying net profit guidance narrowed to A$84 million to A$88 million in constant currency. After allowing for currency movements, the reported ranges are A$499 million to A$505 million for revenue and A$119 million to A$124 million for cash EBITDA.

According to the results call, the revenue cut mainly reflects lower non-recurring revenue. A large multi-year UK client project has largely finished, a significant wealth project ended in the first half, and some UK projects have been delayed by longer sales cycles. Management put the impact on revenue at roughly A$7 million to A$8 million.

Currency has also hurt: the company said the Australian dollar had appreciated 6 to 8 per cent against relevant currencies during 2026, reducing the value of offshore earnings.

Chief executive Andrew Russell said "execution has shifted from simplifying the business to investing in product evolution and sustainable growth".

Competitive position and sector conditions

Xplan has a long-established position among Australian financial advisers, which supports pricing power. The call indicated that recent recurring revenue growth in APAC Wealth came mainly from price rises rather than more users. That helps margins but has limits.

In trading and market data, Iress said recurring revenue kept growing. However, it noted Volume churn from clients leaving markets in South Africa and Australia, partly offset by new client wins.

The company is investing in AI-enabled adviser workflow tools, a refreshed client portal and a new execution management system for trading clients. Consultancy Thoughtworks is helping strengthen engineering capacity. Iress has signalled that product Investment and Capital Expenditure will rise in the second half.

Risks and what to watch

The main risk is that revenue growth stays weak once most cost savings have been banked. Earnings growth would then depend more on winning and keeping clients.

Other risks include execution of the product roadmap, continued churn in trading, longer UK sales cycles and further strength in the Australian dollar. Leadership is changing too: chief financial officer Cameron Williamson is stepping down and will stay through the year-end transition.

Iress reports on a calendar-year basis, so its full-year FY26 results are expected in early 2027. Investors will look at whether the company met its revenue and earnings ranges and reached the 25 per cent margin run-rate. They will also want to see whether new products are starting to lift recurring revenue, and whether the board turns its stated balance-sheet flexibility into a specific capital management plan.