The TechnologyOne Ltd (ASX: TNE) share price is up more than 3% after the ASX tech share reported a strong HY23 result.
This business provides enterprise resource planning (ERP) software to organisations around the world.
HY23 result
Here are some of the highlights from the company’s half-year result:
- Total revenue grew by 22% to $210.3 million
- Software as a service (SaaS) annual recurring revenue (ARR) grew by 40% to $316.3 million
- Total expenses grew by 21%
- Profit before tax and profit after tax went up 24%, to $52.7 million and $41.3 million respectively
- Interim dividend per share up 10% to 4.62 cents
- Cash and equivalents jumped 20% to $139.1 million
While the UK division only represents a small part of the business, it’s growing faster than the overall company. TechnologyOne said UK profit was up 29% to $3 million.
It revealed that the number of large-scale enterprise SaaS customers rose by 27% to 903. Some of its recent wins include the Hume City Council, City of Parramatta Council, six Victorian water authorities and the London Business School.
The ASX tech share also reported its net revenue retention (NRR), which is the net amount of new ARR won and retained from existing customers, was 119% for the 12 months to 31 March, compared to 114% for the same period last year.
By growing its NRR at 115%, it can “double the size” of its business every five years, according to management. This could help drive the TechnologyOne share price higher.
Outlook for the TechnologyOne share price
The technology company is expecting profit to grow by between 10% to 15%, with SaaS ARR up 40%.
Even if the economy is to struggle, management are expecting the business can keep growing strongly, with a number of clients being local government, higher education and government being “resilient”.
TechnologyOne noted how its clients save money using its SaaS ERP, and that its subscription revenue contracts pass on inflation. Significant economies of scale are helping boost its profit margins.
In the long-term it’s “on track to surpass” total ARR of at least $500 million by FY26 from the current base of $350.6 million. It’s expecting to see its profit before tax margin to reach at least 35% in the coming years.
I think the business is one of the strongest tech companies on the ASX, but it’s priced expensively considering how high interest rates are, so I’d rather invest during a dip than today.
