SaaS business lifts profits for TechnologyOne

TechnologyOne (ASX: TNE) has today shown why its shares are trading well above pre-coronavirus levels, with a six per cent rise in profit after tax to $19.1 million.

The Brisbane-based company’s Software as a Service (Saas) business was a key driver of growth for the period, with annual recurring revenue up 33 per cent at $110 million and a 22 per cent lift in the number of large-scale SaaS customers to 475.

“It is important to note that although COVID-19 hit hard in March, the last month of our half year, it had minimal impact on our business,” says CEO Edward Chung (pictured), noting the company is delivering its 11th year of record profit, revenue and SaaS fees.

“This is a credit to TechnologyOne team members who have swiftly and seamlessly transitioned to remote working and who continued to support our customers, ensuring our mission critical software which underpins their business continues to operate efficiently and effectively.

“Our SaaS customers have hundreds of thousands of users, making ours the largest multi-tenanted ERP (enterprise resource planning) SaaS offering in Australia.”

TechnologyOne chairman and founder Adrian Di Marco says the results are due to continuing strong demand for the group’s global SaaS ERP solution.

“Customers are now differentiating between inferior ‘cloud hosted’ solutions, offered by our competitors, and the significant benefits and efficiencies offered by our true multi-tenanted Global SaaS offering,” he says.

“While COVID-19 has caused significant pain for many organisations, our customers have been able to seamlessly move from working in their office, to working from home, the park, or anywhere they want, with no loss of functionality, speed or agility.

“We are now seeing organisations take a ‘long hard look’ at their suppliers, and their ability to deliver a true digitally enabled solution. Many of these suppliers have not delivered, creating a significant opportunity for us.”

He emphasises 85 per cent of TechnologyOne’s revenue, which reached $138.4 million in the half, is from recurring subscription revenue.

“In light of the company’s strong results, and our confidence going forward, the dividend for the half year has increased to 3.47 cents per share, up 10 per cent on the prior year,” says Di Marco.

Chung says SaaS ARR growth could be higher than 30 per cent for the full year.

“With a strong pipeline, a high proportion of locked in recurring revenues, no debt and a strong balance sheet, we are well positioned to deliver continuing strong growth over the full year,” he says.

“Having said this, COVID-19 is an evolving situation, and we have reflected this in our full year guidance of net profit before tax up 8-12 per cent

After a bullish two months since the post-pandemic drop, TNE shares are down 4.4 per cent this morning despite a slight rise in the S&P/ASX All Technology index.

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