Slide 1: IFRS 15 / AASB 15
IFRS 15 / AASB 15 International Financial Reporting Standards Edward Chung Gareth Pye Chief Executive Officer Deputy Chief Financial Officer 17 July 2018 Commercial in confidence 129 FINAL Disclosure Statement IFRS Presentation – 17 July 2018 Technology One Ltd (ASX: TNE) today conducted a series of
Slide 2: Agenda: Background
Agenda Background IFRS Adoption Outlook Long Term Outlook Background TechnologyOne has created a world leading SaaS platform Our SaaS revenue is growing very fast Our SaaS business is a significant engine of future growth We have built a true multi-tenanted SaaS platform One global
Slide 3: Background to IFRS 15
Agenda Background IFRS Adoption Outlook Long Term Outlook Background to IFRS 15 IFRS 15 is the international standard for “Revenue from Contracts with Customers”. In Australia it is referred to as AASB1 15. AASB 15 was issued by the AASB in December 2014 and replaces all revenue recognition
Slide 4: Our approach / The Benefits
Our approach Strategic approach Well planned & researched over 3+ years in conjunction with our advisors and external auditors Benefit from being a true SaaS business by adopting true SaaS accounting Ease of comparison to our SaaS peers eg WiseTech, Aconex, Xero …. Take a holistic approa
Slide 5: New Simple & Robust Revenue Model
New Simple & Robust Revenue Model SaaS Fee - based on usage (number of users, properties, students) - Matrix of licensable products & modules (approx. 325 modules over 14 products) - Revenue recognised daily, paid one year in advance Implementation Services - fee for service - Once off fee – invoice
Slide 6: Our SaaS Peers R&D
Our SaaS Peers Recognise the SaaS Fee over time Recognise R&D investment over time R&D Our SaaS peers capitalise a portion of R&D Approx. 40% to 60% of R&D expected to be capitalised and amortised over 3 to 7 years starting in FY19 Based on detailed timesheets from our staff we can identify work
Slide 7: R&D Expenses: Illustrative models
R&D Expenses Illustrative models only Not to be used as guidance Profit and Loss Before After $m FY19 FY19 58 58 8% Growth as per published information R&D Expenditure Less: R&D Capitalised - (29) 50% of current yr R&D is capitalised Add: R&D Amortisation of current year R&D - 3 Current year capital
Slide 8: New P&L Headings
TechnologyOne has provided models for P&L, Balance Sheet and Cashflows to illustrate the impact of adopting new Accounting Policies Assumptions used, for illustrative purposes only • NPBT and NPAT growth at 15%. • Total Revenue growth approx. 11% • Total Expense growth approx. 10% To support this we
Slide 9: Summary of Changes: Minimal net impact on P&L
Summary of Changes On Premise – Perpetual Licence No change to revenue recognition. Reduces over time from $30m in FY19 as customers move to SaaS • Impact on P&L is nil • On Premise – Annual Licence1 • Previously Annual licence component booked annually upfront on its anniversary date • Annual Licen
Slide 10: % of Total Revenue
Illustrative models only Not to be used as guidance ARR is growing at approx. 20% per annum Annual Recurring Revenue 88% (% Revenue excl. Consulting) $327M UP 18% 90% 400 80% $276M UP 21% 350 $229M UP 21% % of Total Revenue 85% 300 $189M UP 21% 250 80% $156M 200 UP 22% 150 $128M 75% 100 50 70% 0 FY1
Slide 11: No longer have a large H2 skew (85% profit)
Illustrative models only Not to be used as guidance No longer have a large H2 skew (85% profit) No longer dependent on lumpy licence fees Half on Half – NPBT profile 80 Before After 70 85% 55% 60 50 40 30 45% 20 10 15% - Before IFRS H1 H2 After IFRS Illustrative models only Not to be used as guidanc
Slide 12: No Change to Cashflow
Illustrative models only Not to be used as guidance No Change to Cashflow Cashflow Before After $m FY19 FY19 Operating cash flow 69 98 Investing cash flow (6) (35) Free cash flow 63 63 No change to cashflow Net profit after tax (“NPAT”) 58 56 NPAT ratio1,2 1.19 1.75 1 NPAT ratio is calculated as Ope
Slide 13: The Benefits
The Benefits True SaaS accounting – much simplified Recognise revenue on a daily basis Improved predictability of earnings No longer dependent on lumpy Licence Fees No longer have a large H2 skew (85% profit in H2) SaaS deals have minimal impact on our earnings in the current year We g
Slide 14: Outlook for Full Year
Outlook for Full Year Outlook for the full year remains unchanged Assumptions also remain unchanged Outlook for 2018 Year We expect NPAT growth of 10% to 15% for the full year We also expect underlying profit growth of 10% to 15% for the full year Guidance is based on TechnologyOne’s reported earnin
Slide 15: Outlook for 2018 Year
Outlook for 2018 Year Assumptions • The current pipeline remains strong for the second half • Substantial base of committed Annual Licence fees heavily weighted to the second half • Total Consulting Profit will be $7m (vs $5.3m pcp) • SaaS Platform Profit will be $7m (revised up from $5m, vs pcp of
Slide 16: Long Term Outlook
Long Term Outlook Continuing strong profit growth Foundations for long term growth 14 Licensable products1 8 Vertical markets1 Diversified geographies3 Over 325 licensable modules Asset Intensive Other 2 3% International Spatial 3% 7% 6% ECM 5% CPM (EB, PP, BI) 20% New Zealand Health 8% HRP 9% Servi
Slide 17: We have many platforms for continuing strong growth
We have many platforms for continuing strong growth Substantial future growth in our existing customer base SaaS Platform to continue to grow strongly Continuing growth in APAC Continuing growth in the UK DXP – Digital Experience Apps, our next platform for growth Substantial growth in our
Slide 18: SaaS Platform to continue to grow strongly
SaaS Platform to continue to grow strongly $143m ARR in FY22 Incremental revenue generated from our SaaS platform not cannibalising our other revenue streams Yearly recurring revenue will be $143m by FY22 Annual Contract Value - Compound Growth 69% per annum 160 $143.0M, UP 25% 140 $114.6M, 120 UP 3
Slide 19: Continuing growth in the UK / DXP
Continuing growth in the UK The UK market is 3x the size of Australian market for our enterprise system Our ‘Blue Ocean’ strategy is succeeding UK to move to profit in 2021 DXP – The Digital Experience Incorporating AI and ML Empowering thousands of stakeholders The next platform for growth because
Slide 20: Cloud first, Mobile first strategy
Positioned well for the future and to continue to double in size every 5 years. Cloud first, Mobile first strategy Questions ? 20
Slide 21: Appendix 1 - SaaS peers R&D Capitalisation
Appendix 1 - SaaS peers R&D Capitalisation % of R&D Spend Company Capitalise R&D Amortisation period Capitalised Wisetech Yes 44% 3 – 10 years Aconex Yes 43% 3 years Xero Yes 44% 3 – 5 years 21