TechnologyOne (ASX:TNE) share price on watch following strong SaaS growth in FY21

This tech share had a strong 12 months in FY 2021…
The post TechnologyOne (ASX:TNE) share price on watch following strong SaaS growth in FY21 appeared first on The Motley Fool Australia. –

The TechnologyOne Ltd (ASX: TNE) share price will be on watch this morning.

This follows the release of the enterprise software company’s full year results.

TechnologyOne share price on watch after reporting strong growth

Total revenue up 4% to $312 million
Total annual recurring revenue (ARR) up 16% to $257.5 million
Software-as-a-Service (SaaS) ARR up 43% to $192.3 million
Profit before tax up 19% to $97.8 million
Expenses down 1% to $214.2 million
Cash flow generation up 12% to $63.9 million
Total dividends increased 8% to 13.91 cents per share

What happened in FY 2021?

For the 12 months ended 30 September, TechnologyOne delivered a 43% increase in SaaS ARR to $192.3 million and a 19% lift in profit before tax to $97.8 million. The latter was at the top end of its guidance and underpinned by the continuing fast growth of its Global SaaS ERP solution.

The SaaS ERP solution continues to grow in popularity and is supporting strong recurring revenue growth. Pleasingly, with the company recently announcing the end of its On-Premise business by October 2024, this side of the business is expected to continue its growth in the years to come. So much so, management continues to target $500 million in ARR by FY 2026. This is almost double its current ARR.

Management commentary

TechnologyOne spoke very positively about its SaaS business and its outlook.

It said: “Our SaaS business continues to grow quickly. The quality of this revenue stream is exceptionally high, given its recurring contractual nature, combined with our very low churn rate of ~1%. Combined with our announcement of the end of our On-Premise business, this is driving our Annual Recurring Revenue growth.”

“Our Total ARR is $257.5m, up 16%. We are on track to hit our target of $500m+ ARR by FY26. Given the current ARR is $257.5m, this is an additional $242.5m of annual recurring revenue in the next 5 years. Our ARR stands at 90% of Total Revenue which means the majority of our revenue is locked-in at the start of the financial year. This positions us well to achieve strong continuing growth in the new year,” it added.

No real guidance has been provided for FY 2022, other than management’s expectations that revenue will grow by 15%+ per annum in the next few years. Management also expects its strong profit growth to continue in 2022.

The TechnologyOne share price is up 57% in 2021.

The post TechnologyOne (ASX:TNE) share price on watch following strong SaaS growth in FY21 appeared first on The Motley Fool Australia.

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More reading

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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 no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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