2013 full year results presentation - technologyone · 1 *final november 2013 commercial in...

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Commercial in confidence *FINAL November 2013

2013 Full Year Results Presentation

Adrian Di Marco

[email protected]

September 30th 2013

Technology One Ltd (ASX: TNE) today conducted presentations relating to its 2013 Full Year results.

The attached presentation was made by:

• Mr Adrian Di Marco - Executive Chairman

• Mr Edward Chung - Operating Officer Corporate Services and CFO

These slides have been lodged with the ASX and are also available on the company’s web site: www.TechnologyOneCorp.com.

Disclosure Statement

Technology One Ltd Full Year Presentation - 25 Nov 2013

2

TechnologyOne Overview

Formed in

1987Employees

800+300+developers

in R&Dcentre

800+corporations, government and statutory authorities

14 international offices in Australia | New Zealand South Pacific | Asia United Kingdom

Invest 20%of revenue back into

R&DContinually

profitablesince 1992

Doubles in sizeEvery 4 years

One of Australia’s most successful software companies

Revenue

$180+m

We believe in the freedom of choice

our solution is modular by design


We are one of only a few Enterprise Vendors globally...

Single supplier of a suite of 12 products

Best of Breed functionality

Deeply integrated

Common platform

Consistent user interface

Embraces new & emerging technologies

The power of a single, integrated, enterprise system to streamline your business, reduce costs and embrace new technologies

3

We focus on seven key markets...


Market focus and commitment

We sell to asset and service intensive

organisations.

We do not service retail, distribution or

manufacturing industries.

Deep understanding and engagement in our markets

Deeply integrated preconfigured solutions

Proven practice

Streamlined implementations

Reduce time, cost and risk

We take complete responsibility for building, marketing, selling, implementing, supporting and running our enterprise solution for each customer to guarantee long term success.

We do not use implementation partners or resellers


The Power of One

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One of Australia’s largest software houses, specialising in the research, development and commercialisation of enterprise software – invest $35+m in R&D per year

Connected Intelligence (Ci) is our current generation enterprise suite

Next generation of our enterprise suite, Ci² is being finalized

TechnologyOne Cloud is also being finalized

Diversity of revenue streams from… Multiple geographies, 12 products , Seven vertical markets


Strong financial track record1…

Doubling in size approx. every 4 yrs (last 15 yrs)

Continually profitable since 1992 (22 years)

Continually paid dividends since 1996 (18 years)

Cash and Equivalents $65.4m

Return on Equity 31%

Adjusted Return on Equity2 70+%

Debt/Equity 6%

Interest Cover 961as at 30th Sept 2013 2Adjusted for net cash above required working capital, which was assumed at $10m

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Agenda

Results

Significant Achievements

Outlook for Full Year

Long Term Outlook

Results Summary

FY13 FY12 Variance %

ProfitProfit After Tax** $27.0m $23.6 m 15%

Profit Before Tax $35.1 m $30.3 m 16%

Revenue $180.6 m $169.1 m 7%Initial Licence Fees $37.1m $35.4 m 5%

Consulting Services Fees $47.6 m $45.4 m 5%

Annual Licence Fees $72.8 m $63.7 m 14%

Expenses $145.5 m $138.8 m 5%R&D Expenses* $35.6 m $33.5 m 6%

Expenses excl R&D $109.9 m $105.3 m 4%

OtherOperating Cash Flow $33.0 m $28.0 m 18%

Cash and Cash Equivalents $65.4 m $51.1 m 28%

Profit Before Tax Margin 19% 18%

•20% of revenue v 20% last year

** The difference in growth between Profit Before Tax and Profit After Tax is due to the unusually high tax concession that we received last year associated with our R&D program.

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Guidance

Full Year Guidance Continuing profit growth of 10% to 15%

Profit Before Tax up 16%

Profit After Tax up 15%

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5

10

15

20

25

30

35

40

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

$'m

Profit Before Tax Profit After Tax

27m, up 15%

35.1m, up 16%

Compound Growth 13%

Compound Growth 14%

Results Highlights

Strong result given challenging and uncertain economic climate

Positions us for continuing strong growth Resilient nature of the enterprise software market Our significant investment in R&D Our preconfigured solutions that reduce cost, time & risks The strength of our product offerings

Investments have continued as follows TechnologyOne Cloud Ci², continued evolution of our Ci product Preconfigured solutions United Kingdom Fully expensed as incurred

Highlights

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‐

10

20

30

40

50

60

70

2009 2010 2011 2012 2013

$'m

Cash and Equivalents

Balance Sheet

Strong balance sheet Cash & Cash Equivalents $65.4m (up $14.3m)

Net Cash*: 19.5c/s (vs.13.7c/s)

Debt/Equity: 6% (vs. 10%)

Net Assets: $87.7m (up $13.7m)

Interest Cover: 96 times

Strong balance sheet Cash & Cash Equivalents $65.4m (up $14.3m)

Net Cash*: 19.5c/s (vs.13.7c/s)

Debt/Equity: 6% (vs. 10%)

Net Assets: $87.7m (up $13.7m)

Interest Cover: 96 times

*after debt per share

Compound Growth 21%

Up 28%, $14.3m

Sep-13 Sep-12 Var %$'000 $'000 $'000

Cash & Available-for-sale financial assets 65,397 51,133 14,263 28%Trade and other receivables 30,509 27,455 3,054 11%Other current assets 9,155 4,077 5,078 125%Current assets 105,061 82,665 22,395 27%

Property, plant and equipment 11,617 15,490 (3,873) (25%)Intangible assets 15,938 16,191 (253) (2%)Other non-current assets 4,952 5,590 (638) (11%)Non-current assets 32,507 37,271 (4,764) (13%)

Total Assets 137,568 119,936 17,631 15%

Trade and other payables 19,673 16,110 3,563 22%Provisions 14,169 11,946 2,223 19%Unearned revenue 7,566 6,525 1,041 16%Borrowings 5,367 7,344 (1,977) (27%)Other liabilities 3,057 4,014 (957) (24%)

Total Liabilities 49,832 45,939 3,892 8%

Net Assets 87,736 73,997 13,739 19%

Issues Capital and Reserves 43,602 39,610 3,992 10%Retained earnings 44,134 34,387 9,747 28%Equity 87,736 73,997 13,739 19%

Sep-13 Sep-12 Var %

$ '000 $ '000 $'000

EBIT 33,804 29,453 4,351 15%

Depreciation & Amortisation 5,497 5,643 (147) (3%)

Change in working Capital

(Increase) / Decrease in Debtors (7,148) (7,287) 139 2%

Increase / (Decrease) in Creditors 3,798 3,473 325 (9%)

Increase / (Decrease) in Staff Entitlements 894 279 615 (220%)

Net Interest Paid 1,293 872 422 48%

Income Taxes paid (5,751) (4,706) (1,045) (22%)

Other 597 271 326 121%

Operating Cash Flow 32,983 27,997 4,986 18%

Capital Expenditure (1,519) (1,868) 350 19%

Proceeds from Sale of PP&E and Investments 2,158 0 2,158 100%

Free Cash Flow 33,623 26,129 7,494 29%

Dividends Paid (16,100) (19,118) 3,018 16%

Repayment of finance lease (1,873) (2,090) 217 10%

Proceeds from leasing of PPE 0 0 0 0%

Proceeds from Shares issued 717 678 39 6%

Increase in Cash & Cash equivalents 16,367 5,599 10,768 (192%)

Cash Flow

Operating Cash Flow $33m

• Up 18% from $28m*

• Versus NPAT of $27.0m

* As at September 2012

Operating Cash Flow $33m

• Up 18% from $28m*

• Versus NPAT of $27.0m

* As at September 2012

NPAT $23.6m

NPAT $27.0m$28.0m

$33m

0

5

10

15

20

25

30

35

0

5

10

15

20

25

30

35

2012 2013

$'m

$'m

NPAT versus Operating Cash Flows

Operating Cash Flows

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Dividend

Dividends for this year

Half 1 1.77 cps up 10% (paid)

Half 2 3.83 cps up 10% (proposed)

Sub Total 5.60 cps up 10%

Special Dividend1 nil

Notes• We have continuously paid a dividend since 1996 (through Dot-Com and GFC)• A recent independent review of our R&D tax claims has found a substantial additional tax concession which has

impacted the availability of franking credits. As such, our 2013 dividend will now be 85% franked • We expect in 2014 financial year to continue with approx 85% franked dividends• We expect in 2015 financial year to return to 100% franked dividends• 1As previously advised, the Board considers the payment of a Special Dividend each year. As there are

insufficient franking credits this year, the Special Dividend will not be paid • We continue to consider Capital Management initiatives

0.00

1.00

2.00

3.00

4.00

5.00

6.00

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Cents per share

DividendCompound Growth 8%

up 10%

2013 Full Year Results – Key Metrics

Full Year 2013 v Full Year 20122013$'000

2012$'000

Variance$'000

%

Revenue excl interest 179,297 168,199 11,098 7%

Expenses (excl R&D, Depn & Amortisation) 104,401 99,579 4,822 5%

EBITDAR 74,896 68,620 6,276 9%

R&D Expenditure 35,595 33,524 2,071 6%

EBITDA 39,301 35,096 4,205 12%

Depreciation 5,244 5,373 (129) (2%)

Amortisation of Intangibles 253 270 (17) (6%)

EBIT 33,804 29,453 4,351 15%

Net Interest Income 1,293 872 421 48%

Profit Before Tax 35,097 30,325 4,772 16%

Profit After Tax 26,984 23,559 3,425 15%

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Full Year 2013 v Full Year 2012 2013 2012 Variance %

EPS (cents) 8.8 7.73 14%

Dividends (cents)

Standard 5.60 5.09 10%

Special - - -

Dividend Payout Ratio 64% 66%

Key Margin Analysis

EBITDAR Margin 42% 41%

EBITDA Margin 22% 21%

Net Profit Before Tax Margin 19% 18%

Net Profit After Tax Margin 15% 14%

Full Year 2013 v Full Year 2012 2013 2012 Variance %

ROE

Return on equity 31% 32%

Adjusted return on equity * 70+% 70+%

Balance Sheet ($‘000s)

Net Assets 87,736 73,997 19%

Cash & Cash Equivalents 65,397 51,133 28%

Operating cash flows 32,983 27,997 18%

Debt/Equity 6% 10%

R&D as % of Total Revenue 20% 20%

* Adjusted for net cash above required working capital, which was assumed at $10m

2013 Full Year Results – Key Metrics

Profit By Segment Analysis

Net Profit Before Tax $35.1m, up 16% (up $4.8m)

Sales $3.8m, inline (inline)

Consulting $9.1m, up 16% (up $1.3m)

PLUS $2.5m, up 14% (up $297k)

R&D $11.6m, up 32% (up $2.8m)

Corporate $8.1m, up 5% (up $399k)

$3.8m, Inline Heads 144, Up 8%

$9.1m, Up 16%Heads 224, Down 3%

$2.5m, Up 14%Heads 67, Down 11%

$11.6m, Up 32%Heads 293, Up 5%

$8.1m, Up 5%Heads 119, Up11%

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

Sales Consulting PLUS R&D Corporate

$'m FY12

FY13

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Key metrics over last 15 years … Revenue - 17% per annum compound

Even through the Dot-Com and GFC

Initial Licence Fees - 14% per annum compound

Annual Licence Fees - 24% per annum compound

Profit Before Tax - 14% per annum compound

Dividends - 14% per annum compound

Net Assets - 30% per annum compound

Historical Performance

Doubling in size every 4 years for last 15 years

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10

20

30

40

50

60

70

80

90

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

$'m

Profit Before Tax Annual Licence FeesNet Assets Initial Licence FeesDividends

**

Revenue Streams

Annual licence fees up 14%

Customer retention is critical to our continuing success Investing in our Compelling Customer Experience

program Investing in Ci², the continued evolution of Ci

Compound growth last 10 years: 20%

Initial licence fees up 5%

10th consecutive year of record licence fees

Increasing market share due to strength of Ci

We expect this growth to accelerate in future years with the imminent release of Ci² , TechOne Cloud ...

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40

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

$'m

Initial Licence Fees

Compound Growth 15%

Up 5%, $1.6m

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20

30

40

50

60

70

80

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

$'m

Annual Licence Fees

Compound Growth 20%

Up 14%$9.1m

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50+ Major New Customers

Catholic Education Commission Victoria Ltd

Toowoomba Regional Council

Central Queensland University

Defence Housing Australia

Noosa Shire Council

Airways Corporation of New Zealand Limited

Christchurch International Airport Limited

Department of Culture and Arts

Queenstown Lakes District Council

Queensland Police Citizens Youth Welfare

Catholic Education (Northern Territory)

Waimakariri District Council

Benetas

NSW Business Chamber Limited

Department of Water (WA)

Department of Racing, Gaming & Liquor (WA)

BT Investment Management

Department of Indigenous Affairs

Royal District Nursing Service Limited

Bland Shire Council

Hanover Welfare Services

Deniliquin Council

North Central Catchment Management Authority

Macedon Ranges Shire Council

Port Marlborough New Zealand Ltd

Alliance Airlines

Northland Regional Council

Eda Ranu

Nortec Employment & Training Limited

Grant Broadcasters Pty Ltd

The Uniting Church in Australia Property Trust NSW

Ministry of Business Innovation and Employment

Tourism Western Australia

LMS Energy Pty Ltd

Australian Defence Credit Union Limited

The Office of the Director of Public Prosecutions

Mareeba Shire Council

Australian Community Support Organisation

Department of Regional Australia, Local Government, Arts and Sport

National Portrait Gallery

Small Business Development Corporation

Healthdirect Australia

Livingstone Shire Council

The Office of Ombudsman Western Australia

Local Government Association of South Australia

Scottish Association for Mental Health

Tasmania Medical Local Limited

West Lothian Leisure Limited

EECU Limited (credit union for the ExxonMobil)

Crane & Equipment

15 new customers replaced one of Oracle, Microsoft or SAP

Revenue Streams

Product Consulting revenue up 5%

Consulting profit up $1.3m, 16% on prior year through better utilisation

Restructure of this business to world best practice

New opportunities for growth

Compound growth the last 10 years: 15%

Plus (non product consulting) revenue down 3%

Plus profit is up $0.3m, 14% on prior year

Market conditions for non Ci product services challenging

Strategy to move this business to ‘value added’ services around our Ci products

Merged into our Product Consulting Business

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2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

$'m

Consulting

Compound Growth 15%

Up 5%, $2.2m

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25

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

$'m

Plus

Compound Growth 5%

Down 3%, $489k

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$10.7mUp 10%

$5.9mUp 29%

$3.7mUp 78%

$452kDown 61%

$902kDown 39%

$1.7mDown 5%

$4.6mDown 5%

$9.1mDown 3%

0.0

2.0

4.0

6.0

8.0

10.0

12.0

Financials &Supply Chain

StudentManagement

HR/Payroll CRM Enterprise ContentManagement

Property AssetManagement

CPM

$'m

FY11

FY12

FY13

Licence Fee by Product

Financials & Supply Chain licence fees $10.7m, up 10% (up $988k)

Student Management licence fees $5.9m, up 29% (up $1.3m)

HR/Payroll licence fees $3.7m, up 78% (up $1.6m)

CRM licence fees $452k, down 61% (down $716k)

Enterprise Content Management licence fees $902k, down 39% (down $585k)

Property licence fees $1.7m, down 5% (down $96k)

Asset Management licence fees $4.6m, down 5% (down $267k)

CPM licence fees $9.1m, down 3% (down $320k)

Licence fees $37.1m, up 5% (up $1.6m)

Licence Fee Contribution - Vertical Market

Education, $12.4m, 33%

Financial Services, $1.3m, 3%

Government, $4m, 11%

Health & Community Services, $4m, 11%

Local Government, $9.8m, 27%

Managed Services, $1.6m, 4%

Utilities, $4m, 11%

Licence Fee Contribution ‐ Vertical Market

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Agenda

Results



Long Term Outlook



Ci² - evolution of Ci

TechnologyOne Cloud

TechnologyOne’s Journey to the Cloud

Sales Transformation

Other Initiatives

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Ci² - Evolution of Ci

Powerful specification Native Browser – no more software installs, future proof

Incredibly simple to use, Consumer type software

Support smart mobile devices iPhone, iPad, Android etc.

Instant familiarisation & adaptive behaviour

One Powerful Workplace across all roles & devices

High performing and very scalable

Published Services

On Premise and Cloud

No more major upgrades - Enterprise App Store

Simple and easy way forward for our customers

Enterprise software, incredibly simple

Ci² Positioning

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Ci² Positioning

Enterprise softwareAny device. Any where. Any time.

Ci² Positioning

Ci focus was the ‘Back Office’ users

Ci² targets ‘Front Office’

Large occasional user population of 100+

Consumer type software, incredibly simple

Use of smart mobile devices

Minimal hardware - high performance, scalable

Minimal licensing - native browser, no middleware

Ci² Significant platform for growth in coming years

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Strategy for roll out of Ci²

Early adopters are being identified

Official launch will be mid 2014

Generally available late 2014

TechnologyOne Ci²




TechnologyOne Cloud



Other Initiatives

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Powerful Specification for TechOne Cloud

We develop the software and run it for you

Economies of scale benefits our customers

Continually evolving & improving

We are investing 10’s millions dollars every year

We manage the complexity

We take care of everything

You simply pick the devices you want (BYOD)

Gold standard to run TechnologyOne products

CloudTechnologyOne

Positioning for TechOne Cloud

The future of Enterprise Software, today.

Enterprise Software as a Service

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2 Data centres commissioned in Sydney in ‘highly available’ configuration Partnerships with Amazon (global Infrastructure As a Services provider)

TechnologyOne Enterprise suite now optimised for the TechOne Cloud

Proven - 8 Early adopters (5 live) WA Tourism, WA Small Business Development Council, MTC Works, Pepper UK,

TechOne, Dept Of Water, PCYC, Noosa Council

Cloud Fee / Pricing Model now finalized

Status – Achieved

Building our pipeline of Cloud opportunities Appointed a GM Cloud to manage sales pipeline

Building out the ‘TechOne Cloud team’ for operational support Appointed Director of Cloud Operations

Building out our ‘TechOne Cloud R&D team’

Evolving our architecture to get greater operational efficiencies in long term

Official launch will be mid 2014

Generally available late 2014

Strong pipeline of opportunities emerging

Status – In Progress

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Cloud5 - Option 1Initial Licence¹ $1,000,000

Annual Licence² $225,000

Annual Cloud Services³ $450,000

Year 1 $1,675,000

Year 2,3,4... $675,000

Total over 5 years $4,375,000

Cloud Impact on Revenue

Cloud5 - Option 2SAAS Licence4 $333,000


Annual Cloud Services³ $450,000

Year 1 $1,008,000

Year 2,3,4... $1,008,000


² Annual Licence - 22.5% of Initial Licence; provides access to support, new features, fixes and next generation product Ci² (annually, from day 1)

³ Annual Cloud Services - 45% of Initial Licence; provides the processing power, storage, IT skills, Disaster Recovery services (annually, from day 1)

4 SAAS Licence - 33% of Initial Licence; provides the Licence to use the software on a yearly subscription basis (annually, from day 1)

Current – On PremiseInitial Licence¹ $1,000,000


Year 1 $1,225,000

Year 2,3,4... $225,000


1 Initial Licence - provides the licence to use the software, calculated on number of users, products & modules (once off, year 1 only) **most popular way to licence software

Notes

5 Cloud Pricing - Subject to change, as time goes on ; not indicative how it will be shown to customers

Cloud - a positive impact on revenue ...

This is the most popular option




TechnologyOne Cloud


Sales Restructure

Other Initiatives

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TechnologyOne’s Journey to The Cloud

TechnologyOne’s Journey to the Cloud ...

Email done

Corporate Accounting done

R&D in the Cloud done

Documents & Files in the Cloud Dec 2013

Demonstrations via the Cloud Mar 2014

Consulting in the Cloud Mar 2014

Expected cost savings of $1.5m in 2013/2014 year




TechnologyOne Cloud



Other Initiatives

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Review of our Sales Operation in progress Accelerate licence fee growth in a challenging environment Prepare to capitalize on our new offerings – TechOne Cloud, Ci² Run an expanded sales team Build a world class sales operation Improve Sales to existing customers Underpin our next stage of growth




TechnologyOne Cloud


Sales Restructure

Other Initiatives

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Other Initiatives

Transformation of our Marketing Business

TechnologyOne Leadership

TechnologyOne Solutions

Compelling Customer Experience

TechnologyOne College

United Kingdom • 2 new customers added this year – total of 13 customers

• Review of the UK operation at the moment

• Disclose more information at the Half Year 2014

Agenda

Results



Long Term Outlook

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Economic Environment

The economic climate remains unchanged – challenging & uncertain.

The enterprise software markets has been one of the most resilient sectors of the IT industry in recent years.

In particular TechnologyOne markets have remained robust in recent years: government and government related businesses.

The Pipeline for 2014 supports continuing profit growth.


2014 Full Year - Profit growth to continue

We expect to see continuing growth in licence fees and revenue

We will need to carefully monitor and manage the sales cycle for potential contract delays given the economic climate

As in previous years we note that the half year results may not be indicative of the full year results, depending on timing of when new contracts close

We will provide further guidance at both the Annual General Meeting and with the first half results

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Our focus next financial year is ...

Leverage our expanding & fast maturing product portfolio• HRP, Asset Management, ECM

Focus on our seven vertical markets – resilient & strong

Cross sell into our large existing customer base

Contain R&D costs

Launch of the TechnologyOne Cloud

Launch of Ci² - the next generation of Ci

Agenda

Results



Long Term Outlook

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21%

25% 26%24% 25%

21%

17%17% 17%18%

19%

0%

5%

10%

15%

20%

25%

30%

35%

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Net Profit Margin Before Tax

Improved Margins

Profit margin has contracted over the last 10 years

Expanded our product range investment

Profit margin now started to improve, as predicted

Focus is to substantially improve margins over next five years

10

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2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

$'m

2011 Model for R&D Expense Growth

Actual

Projected from2011

$67m

$47m

R&D Growth Projections

Target for R&D growth of 8% per annum compound, over 5 years set in 2011• Operating leverage, economy of scale, new work practices...• In 2012 & 2013 year we demonstrated this was achievable with R&D growth of 5% and 6% respectively• Continues to be a very aggressive R&D program• Assumes no Acquisitions in next 5 years, and continuing growth in revenue

In year 5, R&D will be 18.5% of revenue (vs 20% now)

In year 10, target for R&D is 15% of revenue

Still well above Industry Average of 10% to 12%

2011 Model, shows savings of $20m/year in year 5 (2016)

2012 year growth was 5%

2013 growth was 6%