Profits triple for TechnologyOne

Written on the 19 November 2019 by Matt Ogg

Profits triple for TechnologyOne

Profit growth may plateau for some companies as they mature and their size makes them clunky, but TechnologyOne's (ASX: TNE) result today proves even longstanding tech titans can send earnings into overdrive.

The Software as a Service (SaaS) company which has been listed for almost two decades today announced its profit before tax surged 208 per cent to $76.4 million, backed by continued fast growth for its enterprise resource planning (ERP) solution.

This figure was aided by a restatement of its FY18 results for AASB15 standards, but even on a comparable basis the performance represents a 50 per cent rise.

TechnologyOne CEO Edward Chung (pictured) highlights annual recurring revenue (ARR) has now hit $202 million and believes it will exceed $500 million in five years.

"Our global SaaS ERP solution is transforming our customers' business and makes life simple for them. This is resonating strongly with the market, driving our continuing strong results," says Chung, noting this was the tenth consecutive year of record profit and ARR for the group.

"The TechnologyOne global SaaS ERP solution is growing very fast with SaaS ARR of $102 million, up 44 per cent.

"This growth is all organic and includes no acquisitions. We added 88 enterprise customers this year to our global SaaS solution."

The company now has 435 large scale enterprise customers with hundreds of thousands of users, making it the largest single instance SaaS ERP offering in Australia.

"Our global SaaS ERP solution is delivering a compelling value proposition for our customers providing them any device, anytime access from anywhere around the globe as well as a simple and cost-effective way to run their enterprise," he says.

"This is allowing our customers to innovate and meet the challenges ahead with greater agility and speed, without having to worry about underlying technologies. We take care of all of this, making life simple for them.

"This year we continued to acquire new, large enterprise customers from our competitors. 18 organisations replaced our competitors' systems, including systems from Oracle, SAP, Microsoft, and Infor."

He emphasises the company continues to dominate in the local government sector, having closed 24 major deals with $65 million in total contract value.

"We have more than 300 council customers and are continuing to grow fast," notes Chung.

"In Education, we closed 13 major deals with $50m in total contract value, cementing our position as the dominant provider to the APAC education sector.

"The APAC region performed strongly with profit up 40%, underpinned by strong SaaS growth from our market leading enterprise SaaS offering. We continued to invest strongly in the UK and its result improved by 64 per cent."

The executive is optimistic for continued growth in the SaaS segment and in the UK market.

"We will continue to grow quickly, and like we have in the past 32 years, we expect to double in size again in the next five years," he says.

"TechnologyOne has consistently delivered strong and growing results since listing on the ASX in 1999. Our ability to deliver these results for 20 years is due to our clear vision, strategy and our significant investment in R&D.

"TechnologyOne invested over $60 million in R&D this year and we continue to invest in new exciting ideas and innovation including Artificial Intelligence and Machine Learning, which we will ship in our 2020A release in the first half of 2020."

Executive chairman and founder Adrian Di Marco describes 2019 as a transition year with the new AASB15 accounting standard and reporting as a SaaS company.

"Over the last few years we have made the transition to a SaaS company, reengineering our business, systems and processes, and retrained our entire organisation. It is pleasing today to release these strong results after all the hard work," he says.

"We have now also become the 'go to standard' for SaaS ERP solutions for both Local Government and Higher Education.

"Today, we have over 150 local councils and universities using our SaaS ERP solution to run their organisations, transforming their business and making their life incredibly simple. This is a significant achievement."

Di Marco says TechnologyOne has not seen any significant competitive threat in its markets for the older generation products typified by large multinational vendors, or from newer SaaS players "which are still many years from being able to offer an enterprise footprint that comes close to ours".

"These older products cannot offer a simple and easy transition from their traditional on premise enterprise solution to a fully functional multitenanted global SaaS ERP solution," he says.

"Our customers are able to move in as little as two weeks, to two months for our very large customers, from on premise to our multi-tenanted massively scale SaaS solution, with no loss of functionality.

"They see immediate benefit of a much more efficient, simpler and cost effective solution that is also 'future proof' as we continually add new features, new capabilities and new technologies."

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Author: Matt Ogg

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