TechnologyOne profit steady at AU$58.5m as SaaS customers reach 435

The company is thanking its SaaS ERP solution for a slight after-tax profit boost.

For its 2019 financial year, Australian software-as-a-service (SaaS) company TechnologyOne reported a slight increase in after-tax profit to AU$58.5 million from the AU$51 million reported in 2018.

Before tax, however, profit increased 208% to AU$76.4 million.

The increase, the company said, was underpinned by the growth of its TechnologyOne SaaS ERP solution, where 88 enterprise customers were added this year, bringing the total "large-scale" enterprise customers on its books to 435.

The company aims to have 1,000 on its books by the end of next year.

"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," TechnologyOne CEO Edward Chung told shareholders on Tuesday. 

"TechnologyOne continued to dominate in the local government sector, where we closed 24 major deals with AU$65 million in total contract value. 

"We have more than 300 council customers and are continuing to grow fast. In education, we closed 13 major deals with AU$50 million in total contract value."

For the 12 months to 30 September 2019, the company's SaaS annual recurring revenue was AU$102 million, up 44% when compared to the year prior. SaaS fees recognised was listed on TechnologyOne's balance sheet as just over AU$81 million.

See also: Cloud computing: SaaS, IaaS or PaaS - which is growing fastest?

On-premise systems made the company just shy of AU$142 million, with annual licence fees accounting for AU$101 million of that total. Meanwhile the company's consulting business made AU$61.5 million during the 12-month period.

Expenses for the year were down 9% to AU$210 million; R&D investment was AU$60 million; and total revenue was up 13% to AU$286 million.

"TechnologyOne invested over AU$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," Chung said.

During the year, TechnologyOne secured a four-year AU$3.2 million whole-of-government contract with the ACT Health Directorate, which sees the company responsible for replacing the legacy, on-premise inventory management system with an "end-to-end" SaaS solution that it said will incorporate supply chain, prosthesis management, business intelligence, and analytics.

It followed the company scoring contracts with the City of South Perth and another with Fraser Coast Regional Council.

The City of South Perth contract is an eight-year digital transformation project that sees TechnologyOne help the council replace its on-premise legacy systems with its OneCouncil SaaS solution to create a single solution that can be accessed by staff across all levels.

While the AU$1.2 million agreement with Fraser Coast Regional Council involves replacing a number of the council's on-premise legacy software applications -- including asset management, payroll, and electronic document management -- with a OneCouncil solution.

For the half-year, TechnologyOne reported after-tax profit of AU$17.9 million, more than doubling the AU$8.2 million after-tax profit it made a year prior, attributing the gains again to record SaaS fees.  

Revenue for the six-month period also went up to AU$129.3 million, a slight jump from the AU$123.6 million recorded in the same period a year prior. This comprised of AU$37.5 million in SaaS fees, AU$61.8 million in licence fees, and AU$29 million in consulting fees. 

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