TechnologyOne shares surge as interim recurring revenue races past $500m for the first time

Shares in enterprise software group TechnologyOne (ASX: TNE) rose sharply today after the Brisbane-based company delivered a record sales and earnings performance in the six months to the end of March.

The shares hit a high of $37.58, up almost 14 per cent on yesterday’s close, as investors were buoyed by a 31 per cent increase in profit after tax to $63 million.

The result was aided by TechnologyOne lifting annual recurring revenue by 21 per cent to $511.1 million – the first time the group has topped the half-a-billion-dollar mark and well ahead of the targeted timeframe.

The software-as-a-service group (SaaS), which provides enterprise software for more than 1,300 companies and organisations globally, grew total revenue by 19 per cent to $291.3 million in the first half.

TechnologyOne CEO Ed Chung notes that the earnings performance represents the 16th year of consecutive growth in first-half revenue, annual recurring revenue (ARR) and profit for the group.

“We have a new ambitious goal of $1 billion-plus ARR by FY30 as we surpassed $500 million in ARR 18 months earlier than planned, an incredible achievement for our company,” says Chung.

“SaaS+, our game-changing offering which combines our vertical specific and mission critical SaaS ERP (enterprise resource planning) and implementation with the fastest implementation times in our market, is delivering. It is fuelling our growth.”

TechnologyOne's performance was aided by “significant customer wins” during the half-year which drove organic growth amid strong momentum for the group in the local government sector globally.

“In the UK, these wins included Islington London Borough Council, our first London Borough, demonstrating our success in moving up to the larger-scale local governments in the UK,” says Chung.

“Our strategic focus in the UK has been to establish our brand in the more complex and larger councils. And our success with Islington, validates this strategy.”

Chung says the diversity of TechnologyOne’s revenue streams from “multiple regions, multiple products and multiple vertical markets ensure we can maintain strong consistent growth”.

“The company is well positioned to deliver strong growth over the full year,” he says, adding that the group is targeting an increase of 13 to 17 per cent in net profit before tax for FY25.

TechnologyOne is paying an interim dividend of 6.6c, up 30 per cent from a year earlier.

The company's shares were trading at $37.10, up $4.08, at 12.25pm (AEST).