TechnologyOne CEO, Edward Chung said: “I am pleased to announce that we have delivered our 12th year of record first half profit and revenue and record SaaS fees.
Our Profit After Tax for the half is up 48%. And our SaaS Annual Recurring Revenue (ARR) is up 41% as we increased the number of large-scale enterprise SaaS customers by 21 per cent, to 576. Our SaaS business continues to grow strongly.”
Our Global SaaS ERP is the future of enterprise software. It provides our enterprise customers a mission critical solution to run their entire business on any device, anywhere at anytime. It also allows them to innovate and meet the challenges ahead with greater agility and speed, without having to worry about underlying technologies. This makes life simple for them.
We had many significant wins in the first half. Momentum in the Federal Government sector continues with our Global SaaS ERP, chosen by the Australian Department of Agriculture, Water and the Environment to streamline and modernise their business. This was a significant win against SAP. In addition, TechnologyOne and the NZ Ministry of Business Innovation and Employment announced a new procurement framework which will pave the way for 20+ NZ government agencies to transition to SaaS.
The UK has continued to improve, with profit before tax of $500k for the half-year. We see significant growth opportunities in the coming years. TechnologyOne is on track to deliver continuing strong growth over the full year in the UK.
For the half-year, expenses were down 5%, but not to the detriment of R&D which was up 14%. The primary driver for lower expenses in the first half is the significant efficiencies we are delivering as we gain scale on our SaaS platform. As we continue to win more customers and our SaaS platform continues to scale globally, our margin will continue to grow even further.
Our significant R&D investment is extending the functionality and capabilities of our Global SaaS ERP solution including our new and exciting Local Government - Digital Experience Platform (LG DXP). LG DXP, will revolutionise how residents interact with councils. The initial feedback from our group of early adopters has been excellent and we believe our DXP strategy will create an additional long-term platform for future growth.
Cash flow generation is typically negative in the first half, however will be strong over the full year. This will be covered in more detail in the Half Year Results Presentation.
TechnologyOne Chairman, Adrian Di Marco added: “Our results are due to the continuing strong demand for our Global SaaS ERP solution. Today 85%+ of our revenue is recurring subscription revenue.1”
“In light of the Company’s strong results, and our confidence going forward, the dividend for the half year has increased to 3.82 cents per share, up 10% on the prior year,” Mr Di Marco said.
Guidance for continuing strong growth
Mr Chung said: “As in previous years, our first half result is not necessarily indicative of our full year. In particular, as we continue to aggressively grow our SaaS business we will also continue to reduce our legacy licence fee business, which will be down approximately $7m over the full year. While this has a significant immediate impact on our P&L over the full year, this is an integral part of our strategy to grow our SaaS business and the recurring revenue base.”
TechnologyOne is well positioned as the markets we serve are resilient. Our Global SaaS ERP solution is mission critical to our markets and enables any device, any time access from anywhere around the world. We expect to see our SaaS ARR continuing to grow strongly, up more than 35%+ over the full year” states Mr Chung.
We also expect full year expenses to be broadly in line with last year, as we invest in new areas of growth. We are well positioned to deliver continuing strong growth over the full year.
We have reflected this in our full year guidance of Net Profit Before Tax for FY21 of $94.3m to $98.6m. That is Profit Before Tax up 10%-15% per cent on FY20 Underlying Profit and up 14%-20% on FY20 Reported Profit,” Mr Chung said.
Long term outlook
We see long term continuing strong growth driven by our Global SaaS ERP solution as we continue to increase penetration with our existing customers, add new customers, and expand globally.
Over the next few years, our SaaS and Continuing Business is expected to grow by approximately 15%+ per annum, once we have wound down our legacy licence fee business.
We also see our Total ARR increasing to $500+m by FY26, from the current base of $233m.
The economies of scale from our Global SaaS ERP solution will also see continuing Profit Before Tax margin expansion to 35%.