Annual General Meeting Presentation - TechnologyOne · Annual General Meeting Presentation Adrian Di Marco [email protected] February 12th 2014 Technology One Ltd

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Commercial in confidence FINAL 3.0 Feb 2014

Annual General Meeting Presentation

Adrian Di Marco

[email protected]

February 12th 2014

Technology One Ltd Annual General Meeting – 12 February 2014

Technology One Ltd (ASX:TNE) today conducted its Annual General Meeting at the Brisbane Convention & Exhibition Centre.

The attached presentation was given at this meeting by the company’s Executive Chairman, Mr Adrian Di Marco.

These slides are also available on the company’s web site: www.TechnologyOneCorp.com.

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Agenda

Overview

Results

Company Update

Outlook for Full Year

Long Term Outlook

TechnologyOne Overview

Formed in

1987Employees

900+300+developers

in R&Dcentre

1000+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

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TechnologyOne Overview

Financially very strong¹ ....

Cash and Equivalents $65.4m

Adjusted Return on Equity² 70+%

Debt/Equity 6%

Interest Cover 96

Continually paid dividends since 1996 (18 years)

Continually profitable since 1992 (22 years)

1as at 30th Sept 2013 ; 2Adjusted for net cash above required working capital, which was assumed at $10m

We believe in the freedom of choice

our solution is modular by design

What makes Us Unique ...

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

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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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Transforming business, making life simple

Clear & focused vision ...

Our Vision

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

-

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

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Agenda

Overview

Results

Company Update


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%

OtherProfit 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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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

‐

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

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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

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%

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Agenda

Overview

Results

Company Update


Long Term Outlook

Company Update

Ci² - evolution of Ci

TechnologyOne Cloud

TechnologyOne’s Journey to the Cloud

Sales Transformation

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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 in progress

Official launch will be Mar 2014

Generally available late 2014

TechnologyOne Ci²

Company Update


TechnologyOne Cloud



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Positioning for TechOne Cloud

The future of Enterprise Software, today.

Enterprise Software as a Service

Enterprise Software As a Service

TechOne Cloud is unique in Enterprise Software

We take care of everything

We build the software and run it for you

Economies of scale Continues to evolve Platform for the future Innovate and move quickly Pick Devices, Pick Services and go

Focus on your business, not the technology

Enterprise Software as a Service

CloudTechnologyOne

We own the software and invest millions each year to make it better for the Cloud

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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 WA Tourism, WA Small Business Development Council, MTC Works, Pepper UK,

TechOne, Dept Of Water, PCYC, Noosa Council

Official launch March 2014, Generally available late 2014

Strong pipeline of opportunities emerging

All TechnologyOne Cloud costs are being fully expensed as incurred

Status

Company Update


TechnologyOne Cloud



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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 done

Demonstrations via the Cloud Jun 2014

Consulting in the Cloud Dec 2014

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

Company Update


TechnologyOne Cloud



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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 Provide a further update at the Half Year results

Company Update


TechnologyOne Cloud



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Agenda

Overview

Results

Company Update


Long Term Outlook


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

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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 the Half Year results


Our focus this financial year is ...

Increase penetration of our newer products• HRP, Asset Management, ECM

Cross sell into our large existing customer base

Focus on our seven vertical markets – resilient & strong

Contain R&D costs

Launch of the TechnologyOne Cloud

Launch of Ci² - the next generation of Ci

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Agenda

Overview

Results

Company Update


Long Term Outlook

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

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10

20

30

40

50

60

70

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%