Technology One Limited · ASX:TNE
Technology One — H1 2006 Earnings Presentation
45 slides from Technology One's earnings presentation, March 2006
Slide 1: Half Year Results – Dec 2005
Half Year Results – Dec 2005 Adrian Di Marco March 2006 Executive Chairman www.TechnologyOneCorp.com [email protected] Private and Confidential
Slide 2: Agenda
Agenda AIFRS* Implications for TechnologyOne 2006 Half Year Results Significant Achievements Last Six Months Outlook Our Strategy for Growth *Australian International Financial Reporting Standards 2 Connected Intelligence
Slide 3: AIFRS Implications: Revenue Recognition
AIFRS Implications for TechnologyOne Our approach - adopt AIFRS and also look at ‘world best practice’ where there was ambiguity Revenue recognition – substantial change: Revenue previously recognised: • Firm proposal had been issued and accepted by the customer • A firm Purchase Order/Letter
Slide 4: AIFRS Implications: R&D, Goodwill, Foreign Currency
AIFRS Implications for TechnologyOne Research & Development (R&D) – no change All R&D fully expensed as incurred – no capitalisation This is clearly best practice globally and widely adopted by international software companies Amortisation of Goodwill – minimal estimate: $296k in this half
Slide 5: AIFRS Implications: Comparison Basis
AIFRS Implications for TechnologyOne Because of transitional AIFRS issues we will provide comparison to prior year adjusted for AIFRS (mandated) • ie H1 2006 AIFRS vs H1 2005 AIFRS comparison to prior year as was previously reported (ie under AGAAP) • ie H1 2006 AIFRS vs H1 2005 AGAAP H1 200
Slide 6: Agenda
Agenda AIFRS Implications for TechnologyOne 2006 Half Year Results Significant Achievements Last Six Months Outlook Our Strategy for Growth 6 Connected Intelligence
Slide 7: 2006 Half Year Results
2006 Half Year Results 2006 H1 AIFRS vs 2005 H1 AGAAP Record Half Year Revenue $31.7m: up 20% Record Half Year Profit Before Tax $7.2m: up 14% Profit After Tax $5.1m: up 13% Expenses excluding R&D: up 27% Substantial increase in cost to put in place the platform for our international expan
Slide 8: 2006 Half Year Results: Revenue by Licence and Service
2006 Half Year Results 2006 H1 AIFRS vs 2005 H1 AGAAP Initial licence fees to new customers of $6.9m up 70% Licence fees to existing customers of $1.3m down 2% Annual licence fees of $9.5m up 14% Consulting services of $8.0m up 22% Project Services revenue of $4.4m down marginally 3% 8 Con
Slide 9: 2006 Half Year Results: Strong Result Drivers
2006 Half Year Results 2006 H1 AIFRS vs 2005 H1 AGAAP Strong result because: Continuing strong demand for our products (70% increase in Initial Licences) Continued investment in our HR & Payroll (R&D loss of $336k) Continued investment in our Supply Chain (R&D loss of $608k) Malaysia poor
Slide 10: 2006 Half Year Results: Licences by Product
2006 Half Year Results 2006 H1 AIFRS vs 2005 H1 AGAAP Financials Licences up $2.6m (to $5.2m) up 100% Involved in all deals Supply Chain and HR & Payroll Licences up Amounts still relatively minor (up $312k & $29k respectively) Business Intelligence new initiative, strong performance Lic
Slide 11: 2006 Half Year Results: ROE, Cash Flow, Balance Sheet
2006 Half Year Results 2006 H1 AIFRS vs 2005 H1 AGAAP Return on Equity (adjusted) improved to 28% (vs 24% last year) Strong Operating Cash Flow of $4.2 million (vs $5.1m NPAT) Revenue recognised not invoiced because of staged payment terms on larger contracts Prepaid income tax for the perio
Slide 12: Half Year Reporting Table (AIFRS vs AGAAP)
Half Year Reporting Table 2006 H1 AIFRS vs 2005 H1 AGAAP H1 2006 AIFRS v H1 2005 AGAAP H1 2006 H1 2005 Variance Increase $ (000) $ (000) $ (000) % Total Revenue 31,659 26,311 5,348 20% Revenue (PRE 3rd party costs) (excl interest) 31,026 25,660 5,366 21% Expenses (excl R&D, Depn, Amort) 18,024 14,20
Slide 13: 2006 H1 AIFRS vs 2005 H1 AIFRS
2006 Half Year Results 2006 H1 AIFRS vs 2005 H1 AIFRS Following is a summary of half year results based on comparison to H1 2005 adjusted for AIFRS ie: H1 2006 AIFRS vs H1 2005 AIFRS Provided for statutory requirements only 13 Connected Intelligence
Slide 14: 2006 Half Year Results (AIFRS comparison)
2006 Half Year Results 2006 H1 AIFRS vs 2005 H1 AIFRS Record Half Year Revenue $31.7m: up 31% Record Half Year Profit Before Tax $7.2m: up 52% Profit After Tax $5.1m: up 46% Expenses excluding R&D up: 29% Company continued to invest in its future R&D $5.8m, up $877k, up 18% - represents
Slide 15: 2006 Half Year Results: Revenue Lines (AIFRS)
2006 Half Year Results 2006 H1 AIFRS vs 2005 H1 AIFRS Initial licence fees to new customers of $6.9m up 182% (vs 70% under AGAAP) Annual licence fees of $9.5m up 22% (vs 14% under AGAAP) Licence fees to existing customers of $1.3m down 2% (no change) Consulting services of $8.0m up 22% (no c
Slide 16: Half Year Reporting Table (AIFRS vs AIFRS)
Half Year Reporting Table 2006 H1 AIFRS vs 2005 H1 AIFRS H1 2006 AIFRS v H1 2005 AIFRS H1 2006 H1 2005 Variance Increase $ (000) $ (000) $ (000) % Total Revenue 31,659 24,185 7,474 31% Revenue (PRE 3rd party costs) (excl interest) 31,026 23,533 7,493 32% Expenses (excl R&D, Depn, Amort) 18,024 13,96
Slide 17: Agenda
Agenda AIFRS Implications for TechnologyOne 2006 Half Year Results Significant Achievements Last Six Months Outlook Our Strategy for Growth 17 Connected Intelligence
Slide 18: Significant Achievements Last Six Months
Significant Achievements Last Six Months Strong demand for our products, particularly Connected Intelligence (Ci) series Signed 35 new contracts in the half TechnologyOne Financials underpinned all new deals Performed strongly in our core markets: General Commercial – 23 new customers Lo
Slide 19: New Clients
New Clients Adelaide Bank Northern Territory Legal Aid Commission Australian Medical Council NT Airports Bananacoast Community Credit Union NZ Education Institute (NZ) Catholic Archdiocese of Sydney Premier Media Group City of Bayswater Property Council of Australia City of Cambridge Qld Airports Lt
Slide 20: Opportunities in the Tier One Space
Significant Achievements Last Six Months Opportunities in the Tier One space High profile organisations included whole of Government of Papua New Guinea and Ministry of Justice (New Zealand) Tier One organisations becoming disillusioned with our competitors offerings and strategy Ci and Powe
Slide 21: HR & Payroll and Supply Chain
Significant Achievements Last Six Months TechnologyOne HR & Payroll (People One) in 19 new deals 126 HR & Payroll customers now Gaining momentum – On the way to being one of Australia’s leading HR & Payroll solutions Untapped potential in our existing user base Another 12 to 18 months befo
Slide 22: Student Management and Property & Rating
Significant Achievements Last Six Months TechnologyOne Student Management (Student One) No new deals Remained profitable – focus on existing customers Strong opportunities in H2 TechnologyOne Property & Rating (Proclaim One) No new deals Remained profitable – focus on existing customer
Slide 23: New Zealand, Malaysia, Project Services
Significant Achievements Last Six Months Continued penetration in New Zealand Hawkes Bay District Health Board, Ministry of Justice, NZ Education Institute, Rodney District Council Good opportunities going forward Malaysia No new deals Project Services Business stabilised Focus on Qu
Slide 24: Continued Strong R&D Program
Significant Achievements Last Six Months Continued strong R&D program Financials Ci continued to gain traction Underpinned all new deals 90+ sites now committed; 31+ sites now fully live Release 11.2 nearing completion Extensive modifications for the UK HR & Payroll Ci to be “patched”
Slide 25: Continued Organisational Changes
Significant Achievements Last Six Months Continued organisational changes Significant changes to R&D to deliver “Awesome Software” • Domain teams – small, creative and empowered R&D teams with deep ownership of product areas • Product Specialists added to R&D teams for user input • Consolidating
Slide 26: Changes To Create Awesome Software
Changes To Create Awesome Software Customers Customers Support Customer 5 Year Centre Advisory Group Strategic Plan Active Sales Top 5 Team Consultants Active Domain Active Product Product Top 5 Top 5 Prospects Team Service Marketing Delivery Customers Spin out Competitors larger risky projects Prod
Slide 27: Preparation for TechnologyOne UK
Significant Achievements Last Six Months Preparation for TechnologyOne UK gains momentum Continued as per our plan for international expansion Strategy finalised: Power of One business model adopted United Kingdom office location selected: Maidenhead Country Manager appointed TechnologyO
Slide 28: Rationalising Product Brands
Significant Achievements Last Six Months Rationalise our product brands to maximise our effectiveness Always promote TechnologyOne TechnologyOne Enterprise suite • TechnologyOne Financials (was Finance One) • TechnologyOne HR & Payroll (was People One) • TechnologyOne Supply Chain (was Retail
Slide 29: Agenda
Agenda AIFRS Implications for TechnologyOne 2006 Half Year Results Significant Achievements Last Six Months Outlook Our Strategy for Growth 29 Connected Intelligence
Slide 30: Outlook for 2005/2006
Outlook for 2005/2006 Clearly on track for continuing profit growth: Continuing strong opportunities for TechnologyOne Enterprise suite Strong opportunities for TechnologyOne Student Management United Kingdom costs contained to $800k this financial year 30 Connected Intelligence
Slide 31: Next 12+ Months: Organisational Changes
Next 12+ Months Continued organisational changes Continue to challenge the ‘status quo’ Continue on our ‘Awesome Software’ initiative Focus now on our Consulting Business to deliver “Exceptional Customer Service” Focus now also on our Sales and Marketing to increase our market penetration
Slide 32: Next 12+ Months: R&D Program
Next 12+ Months Aggressive R&D program to continue 18% to 19% of revenue Complete move of our applications to the Ci platform Supply Chain HR & Payroll Student Management Property & Rating Continued enhancements across all products Work closely with existing customers ‘Best in Cl
Slide 33: Next 12+ Months: Business Intelligence and Research
Next 12+ Months Business Intelligence One integrated/unified BI workplace across all our applications ‘out of the box’ Extend the functionality General research Customer Relationship Management (CRM) ‘One System’ initiative TechnologyOne Mobile 33 Connected Intelligence
Slide 34: Next 12+ Months: Partnerships
Next 12+ Months Extend our product offering through partnerships: Budgeting – Chameleon (completed) Strategic Planning – Outcome Manager (completed) Strategic Asset Management – under negotiation Document Scanning – under negotiation 34 Connected Intelligence
Slide 35: Market Conditions: Enterprise Market Confusion
Market Conditions Enterprise market confusion continues Unique time in the history of enterprise applications Microsoft has four overlapping products that will be replaced with Project Green. Oracle has three overlapping products that will be replaced with Project Fusion Project Green and
Slide 36: Market Conditions: Integrated Solution, Consolidation
Market Conditions Integrated solution from one vendor ‘Best of Breed’ no longer in favour TechnologyOne is one of a few companies that can deliver this Higher Education consolidation in progress Viability of alterative solutions in the Australian market in question Callista has recorded
Slide 37: Market Conditions: United Kingdom
Market Conditions United Kingdom United Kingdom 3+ times size of Australian market, with substantial opportunities Same competitors as Australia Key drivers for our success identified: • Enterprise market confusion (Oracle, Microsoft etc.) • New generation offering (Connected Intelligence se
Slide 38: Outlook 2006/2007
Outlook 2006/2007 Opportunities for 2006/2007: Enterprise market - increased ‘win rate’ and Tier One opportunities for TechnologyOne Enterprise suite Higher Education - capitalise on our competitors weakness with TechnologyOne Student Management Ci Improvement in sales in NSW and Victoria
Slide 39: Outlook – 2007 & Later
Outlook – 2007 & Later Opportunities will see growth accelerate: United Kingdom – very large market with significant growth opportunities for us (3+ times ANZ market) Higher Education in Australia – continuing opportunities Local Government in Australia – consolidation coupled with our new T
Slide 40: Agenda
Agenda AIFRS Implications for TechnologyOne 2006 Half Year Results Significant Achievements Last Six Months Outlook Our Strategy for Growth 40 Connected Intelligence
Slide 41: Our Strategy for Growth
Our Strategy for Growth 41 Connected Intelligence
Slide 42: Our Strategy for Growth: Focus on Core Markets
Our Strategy for Growth Management of risks is critical as we expand internationally and continue aggressive R&D program Focus on our core markets and strengths Sharp focus on our core markets/strengths Identified as: • Financial Services • Health & Community Services • Local Government • Ce
Slide 43: Our Strategy for Growth: Core Strengths and Markets
Our Strategy for Growth Focus on our core strengths and markets Minimise execution risk and improve the efficiencies in the business Progressively develop and release other Ci products for our core markets To achieve clear market leadership and increased win rate Entry into United Kingdom
Slide 44: Our Strategy for Growth: Market Consolidation, Acquisitions
Our Strategy for Growth Capitalise on market confusion and consolidation Traditional mid tier opportunities Emerging Tier One opportunities ‘Last Man Standing’ in Local Government and Higher Education Acquisition and partnerships To ‘add value’ in new areas, extending our product breadth
Slide 45: Half Year Results – Dec 2005
Half Year Results – Dec 2005 Adrian Di Marco March 2006 Executive Chairman www.TechnologyOneCorp.com [email protected] Private and Confidential