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Tuesday, 22 May 2018 11:16

Strong cloud growth takes TechnologyOne to record revenues

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Listed enterprise software company TechnologyOne attributes a strong first-half result, including record revenues and licence fees, primarily to its SaaS and cloud business, which delivered a profit of $3 million, up 217%.

The company’s SaaS platform contract value rose by 51% to $31 million for the half, while annual licence fees of $51 million were up 6%.

Announcing its results for the first half ending 31 March, TechnologyOne (ASX:TNE) reported net profit before tax of $10.4 million, up 1%, on revenue of $120 million, an increase of 6%.

“This half TechnologyOne has delivered record revenue, record licence fees and is continuing very strong growth in our cloud business,” said chief executive Edward Chung.

“TechnologyOne is on track to deliver profit growth of between 10% to 15% over the full year.

“Our SaaS business continued to grow very fast with Annual SaaS Platform Contract Value (ACV) up 51% to $31m per annum, and is on track to reach $143m per annum in the next four years.

“Our cloud also delivered a profit of $3 million, up 217%. We have revised the cloud profit for the full year to $7 million, up from a previous forecast of $5 million. Our single instance, mass production, software-as-a-service offering is gaining momentum and fast becoming a significant engine for growth. Margin for this business is expected to continue to expand because of the mass production architecture to exceed 30% in the coming years.

“Our SaaS offering is delivering a compelling value proposition to our customers providing them with new software features, ‘any device, anytime access from anywhere around the globe’, defence in depth security, as well as a simple and cost-effective way to run our enterprise software. This is allowing our customers to innovate and meet the challenges ahead with greater agility and speed, without having to worry about the underlying technologies. We take care of all of this.”

According to Chung, TechnologyOne now has 280 large-scale enterprise customers, “with many tens of thousands of users, making it the largest single instance ERP SaaS offering in Australia”.

“Total annual recurring revenue is on track to reach $173 million this year, representing 55% of our total revenue. We are forecasting total annual recurring revenue to reach $345 million in 2022, representing 70% of our total revenue.

“TechnologyOne Initial Licence Fee was stronger than was originally anticipated in the first half, up 7%. This was unexpected as our sales pipeline was heavily weighted to the second half of the year, but a number of deals closed earlier than expected, and this positions us well for the full year. We continued to dominate the local government and higher education markets.”

TechnologyOne executive chairman Adrian Di Marco said, “Our cloud first, mobile first strategy is driving our continuing strong results. The market is clearly seeing the benefits of our single instance, mass production, Software as a Service (SaaS) offering has over our competitors.

“TechnologyOne innovation is accelerating, as we plan to invest $54+ million dollars in R&D over the full year. This is a significant expenditure for us, and the benefits will be felt by our customers as we roll it out in the future.”

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Peter Dinham

Peter Dinham - retired in 2020. He is a veteran journalist and corporate communications consultant. He has worked as a journalist in all forms of media – newspapers/magazines, radio, television, press agency and now, online – including with the Canberra Times, The Examiner (Tasmania), the ABC and AAP-Reuters. As a freelance journalist he also had articles published in Australian and overseas magazines. He worked in the corporate communications/public relations sector, in-house with an airline, and as a senior executive in Australia of the world’s largest communications consultancy, Burson-Marsteller. He also ran his own communications consultancy and was a co-founder in Australia of the global photographic agency, the Image Bank (now Getty Images).

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