Record profits again for software stalwart TechnologyOne as R&D spend continues to climb

Record profits again for software stalwart TechnologyOne as R&D spend continues to climb

TechnologyOne CEO Ed Chung.

Brisbane-based TechnologyOne (ASX: TNE) has announced its 13th consecutive year of record profit as customers continue to adopt its upgraded enterprise resource planning (ERP) software in droves.

The company, which recorded a 22 per cent surge in profit after tax to hit $88.8 million, has spent the last four years transitioning clients from legacy licences towards its Software as a Service (SaaS) model instead.

Legacy licence revenue is now less than 3 per cent of TechnologyOne's sales. 

In an update to the ASX today, TechnologyOne noted its global SaaS ERP solution exceeded expectations, with customer adoption boosting SaaS annual recurring revenue (ARR) by 43 per cent to $274.2 million. Revenue also reached a record $369.4 million, reflecting a year-on-year increase of 18 per cent.

TechnologyOne now serves more than 800 large-scale enterprise organisations in industries like higher education, health services, construction management and local government.

With the SaaS division growing faster than anticipated, TechnologyOne CEO Ed Chung noted the company is on track to surpass $500 million in ARR by FY26.

Shares in the company jumped 6 per cent to $13.14 each off the back of the announcement.

“Our ability to deliver these results is due to TechnologyOne’s clear vision, strategy, culture and our significant investment in R&D,” Chung said.

“Our strategy is clear – we strive to deliver a compelling customer proposition, providing our customers with any device, any time access from anywhere around the globe, as well as a simple and cost-effective way to run their enterprise.

“We also exceeded our ambitious annual recurring revenue (ARR) targets and ended legacy licences. I’m proud to announce that we have successfully completed our strategy ahead of schedule.”

Founded in 1987, TechnologyOne provides its clientele with software that allows them to perform important daily business functions from any device with an internet connection, giving them access to data analytics, payroll, reports and more.

In FY22, the group closed 20 deals collectively worth $63.9 million with organisations in the local government sector – one of the company’s strongest performing segments. TechnologyOne also secured 10 deals worth $47 million in the higher education sector, securing clients such as the Queensland University of Technology and University of Technology Sydney.

The group’s UK division grew by 95 per cent, recording an ARR of $17.5 million and profit of $2.4 million, reflecting a 50 per cent increase from last year. The result comes more than a year after the company acquired UK-based higher education software provider Scientia for $22 million. 

TechnologyOne lifted spending on R&D by 19.6 per cent over the year, forking out $92.2 million.

“No other ERP company in the world has successfully made the transition to SaaS without impacting its customers or its profit growth,” Chung said.

“During the year, we completed our fourth generation global SaaS ERP, CiA, having re-engineered our entire ERP code base using SaaS technology.

“We have showcased exciting new products and solutions that underpins our ability to continue to double in size every 5 years.”

In light of the results, TechnologyOne announced a special dividend of 12.8 per share, payable on December 16.

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