TechnologyOne share price charges higher amid strong half-year growth

a man looks down at his phone with a look of happy surprise on his face as though he is thrilled with good news.

a man looks down at his phone with a look of happy surprise on his face as though he is thrilled with good news.

The TechnologyOne Ltd (ASX: TNE) share price is on the move on Tuesday morning.

At the time of writing, the enterprise software provider’s shares are up 2.5% to $15.71.

This follows the release of a half-year result, which has impressed the market.

TechnologyOne share price higher on half-year results

For the six months ended 31 March, here’s a summary of how Technology One performed:

  • Revenue up 22% to $210.3 million
  • Software-as-a-Service (SaaS) annual recurring revenue (ARR) up 40% to $316.3 million
  • Profit before tax up 24% to $52.7 million
  • Profit after tax up 24% to $41.28 million
  • Interim dividend up 10% to 4.62 cents per share

What happened during the half?

Technology One reported strong top line growth during the first half thanks to its SaaS business. Management advised that it increased the number of large-scale enterprise SaaS customers by 27% to 903 during the period.

In addition, the company’s Net Revenue Retention (NRR), which is the net amount of new ARR won and retained from existing customers, was strong. It came in at 119% for the 12 months to 31 March, compared to 114% for the same period last year. Management highlights that this is an outstanding result given that best practice in the ERP market is between 115% and 120%.

Technology One is also having a lot of success over in the UK. The company’s UK business delivered almost the same amount of new ARR in the first half of FY 2023 as it did for the full year in FY 2022. This saw the UK business deliver profit before tax of $3 million for the half, which is a 29% increase year over year.

This ultimately led to Technology One reporting a 24% increase in both profit before tax and profit after tax to $52.7 million and $41.28 million, respectively.

How does this compare to expectations?

As you might have guessed from the Technology One share price reaction today, this result has come in ahead of expectations.

For example, according to a note out of Bell Potter, its analysts were expecting a 14% increase in revenue to $196.6 million and a 17% jump in profit before tax to $49.9 million. The company has beaten on both metrics.


Management believes the company is well positioned to deliver continuing strong growth over the full year and is expecting net profit before tax growth of 10% to 15%.

Technology One CEO, Edward Chung, commented:

We expect to see our SaaS ARR continuing to grow strongly, circa 40% over the full year. As we continue to aggressively grow our SaaS business, we will also continue to reduce our legacy licence fee business, which will be down to approximately $2.0m over the full year (vs $10.0m pcp). While this has a significant immediate impact on our P&L over the full year, this is an integral part of our strategy to grow our SaaS business and the recurring revenue base.

Chung also spoke about the long-term and is confident the company will achieve its $500 million+ ARR target by FY 2026. He concludes:

Over the next few years, our SaaS and Continuing Business is expected to continue to grow strongly. We are on track to surpass Total ARR of $500m+ by FY26, from our current base of $350.6m. We continue our significant long-term investments in R&D to build platforms for growth to continue to double in size every 5 years. The economies of scale from our global SaaS ERP solution will also see continuing Profit Before Tax margin expansion to 35%+.

The post TechnologyOne share price charges higher amid strong half-year growth appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Technology One. The Motley Fool Australia has recommended Technology One. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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