MYOB 2015 financial year results beat prospectus forecast

MYOB has reported its pro forma revenue was AU$328 million for the 2015 financial year, above the prospectus forecast of AU$323 million.
Written by Aimee Chanthadavong, Contributor

Cloud accounting software firm MYOB has reported results for the 2015 full year exceeded prospectus forecast as it continued to invest heavily in research and development.

The company reported for the period ending December 31, 2015, pro forma revenue grew 10 percent to AU$328 million, above the prospectus forecast of AU$323 million, which it said reflected strong growth across all segments of the business.

Pro forma earnings before interest, tax, depreciation, and amortisation (EBITDA) grew 19 percent to AU$153 million, up from the prospectus forecast of AU$151 million. This is compared to statutory EBITDA of AU$124 million for the full year period.

Similarly, pro forma net profit after tax and amortisation (NPATA) increased by 22 percent to AU$86 million, beyond the AU$85 million prospectus forecast. However, in net profit after tax terms, the company recorded negative AU$42 million. MYOB clarified that it considers NPATA, rather than NPAT, to be a "more meaningful measure of after-tax profit due to the large amount of non-cash amortisation of acquired intangibles that is reflected in NPAT".

Specifically, the company's SME solutions business, which made up 61 percent of total revenue, saw a 14 percent increase to AU$205 million, up from AU$180 million year-on-year. The company attributed the boost to the acquisition of New Zealand-based companies Ace Payroll for NZ$14 million, which the company secured in May last year, and Information Management Services (IMS) for NZ$9.7 million last September.

MYOB said the acquisitions contributed AU$2.9 million of total SME solutions business revenue in FY15, of which AU$2.7 million was recurring. Meanwhile, organic revenue increased by 12 percent to AU$202 million, which the company said was driven by strong uplift in recurring revenue and growth in online users.

SME online users grew by 46 percent to 170,000 from 116,000 in December 2014. As a result, this boosted total paying user base up by 8 percent to 545,000.

MYOB went on to highlight that its Practice solutions business, which made up 25 percent of total revenue, increased revenue by 3 percent to AU$81.7 million; and its Enterprise solutions business that made up 13 percent of total revenue was up 4 percent to AU$41 million.

Operating expenses for FY15 increased to AU$174.9 million, compared to AU$170.8 million reported in FY14. MYOB said it was driven by ongoing costs from its acquisition of Ace Payroll and IMS.

During the full year, MYOB reported it spent AU$46.6 million on R&D, compared to AU$44.7 million in FY14, with it primarily spent on staff-related costs, as well as investing in technology for clients, and launching MYOB Smart Bills, PaySuper, Advanced, and Portal. During the 2H15, R&D costs made up 15 percent of total revenue, and MYOB believes this is likely to remain in the upper half of the 13 to 16 percent of revenue range for FY16.

Looking ahead, MYOB CFO Richard Moore believes that based on FY15 results, 2016 financial year is expected to be another year when MYOB will remain focused on growing the company.

"In 2016, we continue our strategy of targeted investment for future growth and reaffirm June 2016 prospectus guidance," he said.

In turn, for FY16, the company expects revenue to continue in line with "historical trends" and EBITDA margin to remain with the 40 to 50 percent range, and the number of online SMB customers will further grow in 2H16 and 2017 once the online version BankLink is available.

In early February, MYOB announced plans to bring its transaction processing, compliance, and advisory tools together onto a common platform, a vision it dubbed the "Connected Practice".

As part of the Connected Practice, MYOB created an online platform to give partners access to a single dashboard view across all of their client's MYOB cloud accounting solutions. The dashboard includes many of the features found in the company's BankLink product, with the company noting it plans to add new features throughout the year.

MYOB CEO Tim Reed at the time said the idea behind the design of the Connected Practice follows on from the company's vision that it came up with a year ago, but never announced publicly, and has been working towards for the last few years.

"What we have started to see was our customers' businesses were evolving and changing; instead of there being a clear distinction between a bookkeeper, an accountant, and a certified professional or IT consultant, what we started to see was the progressive clients of ours were actually moving more to the middle where they were doing components of all of that," he told ZDNet.

"That made us start to think: 'If these aren't three separate partner groups doing separate things, and it's actually one partner servicing a wider range of needs for the small business, what would they want?' We said everything we're developing is helping them, and what would be even better is if there was a single MYOB platform to deliver all of those tools seamlessly."

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