Technology One (TNE:ASX)

Last update - 21 November 2023 By James Woods

TechnologyOne Limited is an Australian-based company that is engaged in the development, marketing, sales, implementation, support, and distribution of financial management and enterprise software solutions. The Company has operations in New Zealand, the United Kingdom, the South Pacific, and Malaysia.

Technology One (TNE), a current holding in the ASX Growth Portfolio, announced its full-year results today, reflecting a robust financial performance. Despite the shares remaining flat this morning, the company’s report highlights noteworthy year-on-year growth. 

The software provider recorded a net income of $102.9 million, marking a 16% increase from the previous year’s $88.8 million. A key highlight is revenue, which surpassed estimates, reaching $429.4 million against a forecast of $426.9 million. The pre-tax profit also saw a similar year-on-year increase of 16%, totaling $129.9 million, albeit slightly below the anticipated $130.6 million. 

Importantly for shareholders, TNE has raised its final dividend per share to $0.119, up from last year’s $0.1082, alongside a special dividend of $0.03 per share, an increase from the previous $0.02. 

The company’s operational efficiency is evident in its robust annual recurring revenue (ARR), which soared by 23% to $392.9 million. This figure constitutes 90% of its total revenue, ensuring a stable financial base at the beginning of each financial year. Notably, Technology One has upgraded its medium-term target, now aiming to surpass $500 million in ARR by FY25, a year earlier than previously planned. 

This optimism is bolstered by the success of their SaaS+ initiative, which is expected to generate significant opportunities and a strong pipeline for 2024. The company anticipates continued growth in both ARR and profit, with net revenue retention standing at an impressive 119%, exceeding its long-term target of 115%. 

Technology One’s latest financial results highlight the company remains on a solid growth trajectory. With most revenue already secured at the start of the financial year and a strategic focus on expanding its recurring revenue base, the company seems well-positioned for sustained growth and profitability in the coming years. As a reminder, TNE’s inclusion in the ASX Growth component is based on fundamentals such as profitability and valuation, and based on the latest figures is likely to remain within the portfolio for the next rebalance date of December 15th. The stock remains an active buy/hold recommendation.  

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