I would now like to hand the conference over to Mr. Mark Washbourne, Co Founder and CEO.
Please go ahead.
Thank you, and good morning, everyone. Thanks for taking the time to join our investor call. I'm Mark Washbourne, Co Founder and CEO of ReadyTech. And with me today is ReadyTech's CFO, Nimesh Shah. We are delighted to present to you today the company's FY 2021 results that saw ReadyTech deliver strong growth in both revenue and earnings and provided further validation of our vision for next generation people centric software.
Before I take you through our FY 2021 results and growth outlook, I'd like to take a moment to thank the entire Rotech team, including those that have joined us this year from OpenOffice for their outstanding effort and contribution towards these results. I'd also like to personally acknowledge the open office founders, Philip Simone and Peter Naniakara, for the exceptional spirit that they've brought in joining ReadyTech. It's been an incredibly busy and rewarding year, both in terms of organic growth and M and A, and these results are a testament to the dedication and belief of our entire team at ReadyTechers. Moving to the key operational and financial highlights on Slide 3. We've seen very pleasing growth and progression on all key metrics.
Revenue grew 27.4 percent to $50,000,000 including the initial open office contribution of $4,800,000 Excluding open office, revenue growth was a healthy 15.1 percent. Underlying EBITDA was $18,900,000 representing an EBITDA margin of 37.8 percent, and underlying NPAT A was $10,600,000 Our levels of recurring revenue, customer revenue retention, cash flow conversion and gross opportunity pipeline are all notably strong. Slide 4 depicts our journey of progress over the last 4 years, and we have consistently delivered outstanding growth in recurring SaaS revenue and EBITDA and achieved a 20% CAGR in total revenue. Turning to Slide 5 and our strong momentum in new business. A core part of our strategy has been to target and onboard higher value and enterprise customers.
As a snapshot of our achievements over the year, we won 21 new high value customers, each of those generating over $100,000 in annualized subscription and implementation value, equating to an aggregate annual value of $5,000,000 across those 21 largest wins. Notable customer wins are shown on the right hand side of the slide. We're going to drill into these later in the presentation to explain the reasons that we are winning these high value new business customers. We experienced a very solid finish to the year in terms of customer wins, and we've backed up now with a high conviction pipeline of $19,000,000 We are seeing abundant opportunities across tertiary education, local government, Justice Tech, state government, as well as in the stand up economy for our Workforce Solutions segment. With respect to OpenOffice, many of you will have seen our recent ASX announcement where we were pleased to highlight that OpenOffice had achieved its first earn out in June, which was ahead of expectations.
This was driven by new local government wins, upsell of modules to existing customers and successful rollout of the Ministry of Justice contract in the UK. A key driver to underpin this new business as well as cross sell and upsell has been our continued focus and investment in sales and marketing, which now represents 11% of revenue, that's up from 9.6% in FY 2020. This planned and openly articulated strategy is clearly paying off. Now moving on to strategic execution, and I'll start with Slide 7. As many investors will be aware, ReadyTech delivers vertical market solutions to its customers across 3 main verticals, education and work pathways, workforce solutions and our latest market entry, government and justice.
ReadyTech provides mission critical SaaS solutions that are built to closely meet the specific needs of clients in these markets in which we operate. Our best practice SaaS approach is customer centric. It's based on strong software usability and configurability, but not customization. We've developed high performing customer obsessed culture spanning all aspects of the business from technology and product development through to sales and customer success. Turning to Slide 8, growth investments have been across 3 key pillars.
Firstly, the cornerstone of our success at ReadyTech, product market fit. We're investing to ensure ever greater alignment to customer needs, and we created 14 new R and D roles in FY 'twenty one with R and D representing now 31% of revenue, and this serves to underpin long term sustainable growth. The next pillar is go to market, where we have grown sales and marketing and very deliberately are targeting high value and enterprise customers. We added 7 new roles in FY 'twenty one. And to underline again, we have taken sales and marketing spend to 11% of revenue.
Finally, scaling for efficient and streamlined operations to support this accelerated growth. We've invested in greater automation across the customer experience as well as added 7 new customer onboarding and implementation headcount during the year. We include more detail under our growth initiatives for each pillar at the slide. Just some key call outs here, including the establishment of ReadyTech Academy to double down on technology and software skills, as well as high quality level engineers and the adoption of our enterprise sales book and account based marketing best practice to drive that highly valuable enterprise customer growth. I'll now hand over to Nimesh, our CFO for an update on the financials.
Thank you, Nimesh.
Thanks, Mark. So on Slide 10, we provide an overview of ReadyTech's P and L. Total revenue for FY 2021 grew 27.4 percent to $50,000,000 This included a part year contribution of open office of $4,800,000 Excluding OpenOffice, revenue was up 15.1 percent to $45,200,000 Subscription and license revenue was 87% of total revenue. Total revenue growth was driven by new customer wins, upsell and cost sell to existing customers, resulting in average revenue per new customer of over $35,000 and significant license and module upgrades. Operating expenses grew in line with our stated strategy of investment in sales and marketing as well as R and D.
Underlying EBITDA was $18,900,000 up 21.4% and included a $1,700,000 contribution from OpenOffice. Underlying EBITDA margin was 37.8 percent in line with FY 2021 guidance of 37% to 39%. Turning to the cash flow and balance sheet slide, balance sheet on Slide 11. Redtec is highly cash generative with $21,800,000 in operating cash flow delivered in FY 2021, representing 113% cash conversion as a percentage of EBITDA. This was supported by continued growth in customers prepaying annual subscription fees.
We are also conservatively geared net debt to EBITDA fixed at 1.2x at completion of open office transaction, which reduced to 0.86x by year end. As at 30th June, we have available cash for use of $18,000,000 which includes $6,000,000 headroom in the debt facility. Now I'll hand over back to Mark to run through the detail of each segment followed by strategy and outlook.
Thank you, Nimesh. Starting with Education and Work pathways on Slide 13. This slide segments its large vertical into defined addressable markets. Bruditec has strong pedigree in the private college and back to work markets where we are the clear market leader. We've had good prospects for growth across all markets, and we expect the strongest growth to come from the enterprise segment, which includes tables and universities.
Here, though we're earlier in our journey of customer acquisition, the pipeline is the most concentrated and conviction has been strengthened. Turning to Slide 14. In the education vertical, ReadyTech is known for its student management system, which covers the full student life cycle from student acquisition and enrollment through to graduation, placement and alumni. During the year, we integrated learning management into our product suite, supported by a tailwind of accelerated digital learning. Our growing success in this market comes down to our open ecosystem with superior interoperability for education institutions, our focus on student experience, modern cloud based architecture and the high levels of configurability that allow for rapid deployment.
On Slide 15, we highlight notable customer wins in the education vertical during the year. Key wins included Commonwealth Bank's in house training organization adopting our student management system, training provider National Business Institute implementing our learning management system and a major win in the UK with back to work provider, Fedcap Employment, procuring our behavioral science capability. A consistent theme across these customers as to why ReadyTech won the business with our strong product market fit, the ease of integration with other systems and the scalability of our technology. In terms of segment financials, on slide 16, education and work pathways delivered strong revenue and earnings growth. Revenue grew 16.9 percent to $24,900,000 Revenue was driven by strong new business, cross sell and significant upgrades from existing customers.
We see investment in the enterprise sales strategy paying dividends with a 42% growth in average revenue per new customer to just shy of $39,000 Also worth noting, our Bendigo Kangen TAFE project has progressed well with subscriptions being triggered and project scope expanded to reflect the additional requirements for the TAFE. Moving on to Workforce Solutions and Slide 18. In Workforce Solutions, ReadyTech operates in the payroll and HR technology space where $2,400,000,000 is spent annually on software and payroll outsourcing. Our key target is the stand up economy where sophisticated requirements around workforce management exist. Targets include logistics, hospitality, aged and disability care, manufacturing, agriculture and retail.
And we are very encouraged with our progress across these markets through the FY 2021 year. On to Slide 19, ReadyTech offers an all in one software that is highly differentiated in the mid to enterprise market. Our platform includes recruitment, onboarding, rostering, time and attendance, award interpretation, payroll and human resource management, as well as integrated reporting, all combined on 1 cloud based next generation platform. We are winning customers via our ability to replace disparate systems with a single vendor. We connect their data.
We have a unified experience for our customers. And it's our highly trusted expertise in the areas of compliance and payroll that are also supporting those wins. Also worth noting the upsell to the all in one remains a significant opportunity here with average revenue per customer often 3 times higher than payroll only. On Slide 20, we call out some of the key opportunities that we converted during FY 2021. These include major winemaker, Zivotoli, transport operator, Tasco Petroleum, New Zealand grower, Bostock.
Consistent across the three customers was the need and desire to replace legacy and separate systems with a cloud based and integrated single vendor solution. Looking at the segment financial details in Slide 21, Workforce Solutions delivered another period of sustainable revenue growth, with revenue increasing 13.3 percent to $20,300,000 driven by strong new customer demand for the all in one platform and significant upgrades from existing customers. Similar to education, high value and enterprise growth is also coming through our workforce solutions business with a 19.7% increase in average revenue per new customer to over $39,000 Now moving on to our new vertical of government and justice on slide 23, the large and highly attractive market we entered through the acquisition of OpenOffice. In this vertical, we provide citizen centric software to local and state government as well as the justice sector. We see strong trends in digital transformation and migration to the cloud in these sectors and a particularly long runway of growth ahead.
Of the 500 plus local councils in Australia, the 331 medium and large sized councils are our key targets in this market. We view this segment as highly addressable given it's estimated that over 75% of councils purchased a core solution 10 plus years ago, and there exists an ever growing need for next generation technology. Justice is currently our next largest contributor and here we offer Justice case management solutions for courts, for prosecutors, tribunals as well as commissions with customers in Australia and the UK as well as Canada, and we sell into a $211,000,000 addressable market, and this represents another sector absolutely ripe for digital transformation. I won't go into too much detail on Slide 24 as many of you will have become familiar with the OpenOffice product set and the competitive advantage that we enjoy over the past 6 months. In brief, OpenOffice is known for its community engagement platform that can be implemented as a full ERP or by individual module.
Like all ReadyTech software, OpenOffice wins through being people centric, and in this case, citizen centric, and that enables councils to offer self-service access and a digital experience for those in the community. On Slide 25, we show key customer wins, including 2 notable wins for the period under ReadyTech ownership. In local government, major wins include Gundowoody Council and Glen Innes 7 Council. In the justice space, we won a competitive process for the Legal Services Commission of South Australia. Consistent reasons we are winning come from offering a cloud based and a highly configurable platform as well as a growing reputation and strong track record of successful customer implementations.
Turning on to Slide 26, the Government and Justice part year contribution to ReadyTech's FY 2021 P and L was $4,800,000 in revenue and $1,700,000 in EBITDA. Key operating highlights for the vertical include 99% revenue retention and the profile of new enterprise deals won during the year with average revenue per new customer of $145,000 I'm going to move now to strategy and outlook on Slide 27. And firstly, and for the first time, we are delighted to share our longer term target for ReadyTech, which is to achieve organic revenue of over $125,000,000 by FY 'twenty six. For FY 'twenty two, on Slide 28, we expect FY 2022 organic revenue growth in the mid teens with full 12 months FY 2021 open office revenue being $18,300,000 EBITDA margin is expected to be in the range of 36% to 38%. Turning on to Slide 29.
We expect to achieve our targets by continuing to drive momentum in the RateTech flywheel. Our strategy is centered on subscription revenue that supports continued reinvestment to achieve high product market fit, to retain existing customers and sales and marketing spend in order to acquire new customers. This in turn grows high quality revenue, enhances our market position, allowing the business to scale, increase profitability and recycle again into reinvestment. This brings us to the end of today's presentation and Slide 30. To summarize the key takeouts after a strong FY 2021, we have a compelling $19,000,000 pipeline of opportunities to pursue.
The successful M and A acquisition of OpenOffice is performing ahead of expectations. Our sustainable revenue growth is underpinned by continued reinvestment. We are extending our products into international markets, and our 5 year target is for organic revenue growth to more than $125,000,000 by FY 'twenty six. Thank you again for your time. And I will now open for questions.
Thank you. Your first question comes from Mitch Sonnegan from Macquarie. Please go ahead.
Good morning, Mark and congrats on the results. Just a few questions from me. Just first of all, maybe starting on education segment, that was a really, really strong result there, but even better when looking at the half on half results in second half revenue, up 25% year on year and 12% half on half. Can I just talk through the drivers of that and how we should be thinking about the growth outlook into FY 2022?
Thanks. Yes. I might start with that, Mitch, and I'll let Nimesh add anything there. But yes, first of all, Mitch, you're absolutely right. The Education segment saw strong growth in the year and certainly into that back half.
I think three key things. New customer wins were strong. We're certainly enjoying the benefits of our next generation platform that's displacing legacy technology out there. We also had very good upsell. So we saw upgrades strong across the sector.
Obviously, this is a large customer base predominantly across the private college as well as higher education space. And part of that has been the addition of the learning management system, which we added last year, which has provided a really strong upsell opportunity. I think overall that due to the fact that we do play in the domestic space and particularly the very strong weighting is towards the skilled space. Now that sector has actually seen strong government support, strong funding support. So the market itself has actually been buoyant, which has also been helpful.
So I'll let Nimesh, if he'd like to add anything.
No, I think that's Mark answer that well. It reflects all the reasons for the growth in the second half. And Mitch, we have mentioned that we won 21 clients of 100 ks. This is the enterprise strategy we have, and that's paying dividends that would flow into FY 2022.
Okay, great. And then on Workforce Solutions, revenue was up 13% there, but EBITDA 2%. Can you maybe just talk through that from a margin perspective? What costs or investments you're making there? And how we should think about margins in FY 2022?
Yes. So, Mitch, the Workforce Solutions, we continue to increase our investment in sales and marketing. This is a new Badgett business. You can see the volumes growth, particularly in the all in one platform. So we are very happy with investment sales and all as well as R and D.
And I think that margins you have in FY 2021, that will be maintainable that will be maintained in FY 2022.
Okay, great. And just maybe on that FY 'twenty six target implies pretty consistent mid teens organic growth that you have been delivering there. Can you maybe just flesh that out a little bit more? And I guess what gives you confidence or maybe what upside risks you see there? That would be great.
Thank you.
Yes. Great question, Mitch. So yes, look, I think, first of all, just really pleased to be able to put out a long term target such as the confidence we have in the growth prospects and the business model focused around reinvestment. So I think first of all, if you the full year impact of open office and pro form a that, we would be at $63,500,000 So what we're effectively saying is to $125,000,000 is that we expect it to double revenue, organic revenue over 5 years. So that growth is really driven, Mitch, by the range of key strategic growth investments that we have.
1st of all, education and work pathways, this is all about winning enterprise deals in TAFE across higher ed, continued growth of upsell with areas such as Learning Management Systems and also our Work Pathways products, Workforce Solutions. This is, of course, the new clients onto the all in one platform, but we also enjoy this really strong upsell opportunity, as I mentioned, in terms of existing payroll clients. Now we expect really to see 2 strong sources of growth there. Local government is about winning medium to large local government accounts clients. The pipeline is looking good.
We feel very good about the differentiators that we have on the platform and the shift towards digital self-service for citizens. Justice case management off the back of the expansion into courts and tribunals such as Fair Work Commission and Ministry of Justice in the UK, we see a significant growth runway there. Lastly, I think just important to note that international growth from the current 7% that we saw in FY 2021, we expect to see that to grow to mid teens over the next 4 to 5 years. We're already seeing the strong clickability of our products in some of these overseas markets. So we put all those growth drivers together across multiple markets, as I said, right to digital transformation.
And we backed that up, underpinned that with continued reinvestment into R and D, as Nimesh said, continued focus and increase into sales and marketing and those large enterprise contracts. And when you put all that together, that's what gives us the confidence to put out this FY 'twenty six target, Mitch.
Got it. Thanks, guys.
Thanks, Matt.
Thank you. Your next question comes from Michael Astinol from Jefferies. Please go ahead.
Yes, thanks. Good morning, Mark and Dimesh. It's 2 for me. Several of your large customer wins appear to have gone through competitive tenders or RFP processes. Can you just give us a bit of a sense of how those progress processes progress?
Yes, absolutely. Good to hear from you, Michael. Thanks for the question. And so you're absolutely right across education as often in this environment, essentially semi government as well as government and justice. These processes do tend to be competitive and they do tend to go to formal procurement processes and include RFPs and RFPs.
We have found that we've been able to continue to maintain a very strong conversion rate of around 60% across the year from opportunities that end up in what we call the high conviction opportunity in our growth pipeline. So we expect to continue to perform well in these. I think as I've outlined, we feel very confident around the product set, the very strong maturity of the product set and our cloud based product set and certainly expect to continue to perform well in those competitive processes into the years ahead.
Yes. Okay, great. And if I think about that pipeline, the $19,000,000 would it be fair to say that at least some of that or a large portion of that will be some way through those kinds of processes?
Yes, I think I expect a good number of those to be through that type of process. I think that you might see in particularly in Workforce Solutions, which are more in a private businesses that it's less likely they'll go through that sort of formal procurement process. They still often go through a very thorough evaluation. But certainly, a good number of those enterprise opportunities that make up that $19,000,000 enterprise pipeline. We do expect to go through that type of tender process.
And I think over the last few years, we've really built a very strong playbook as to how we actually compete in those and respond to those types of tender opportunities.
Yes, great. Thanks for that. And on R and D, it's now up to 31% of revenue, the investment in kind of product. In sales and marketing, you're investing about 11% of sales. How should we expect those metrics to progress in 2022 and 2023?
Should we expect them to continue to the investments to continue to drift up?
We're very comfortable around this level, Michael, just around that 30%. It's been a historical number that we've aimed for. We think that if we maintain that around that 30% that we can continue to grow that product market fit. Obviously, that at times means that we also extend our product set, are able to build new modules and offer new value to customers. So we see that as really the lifeblood of the business and really what underpins that really long term sustainable growth.
I think it's very important in technology that you do maintain that continued reinvestment back, continued modernization of systems as well.
Okay. And last one from me. Obviously, really good to see open office delivering ahead of expectations. Can you just give us a bit of a sense of what's driving the faster growth there versus what you expected back in kind of Jan Feb?
Yes. I might give Lemesh a truck try at this one.
Yes. Thanks, Mark. So Michael, look, when we did the due diligence, we looked at both the businesses of Pop and Offers and McGurk with the Justice Case Management. And since our acquisition, that growth has continued of new clients. We've mentioned a couple of councils have won on the presentation.
There's been upgrades of modules and they've said OpenOffice got 76 modules. So the module penetration is increasing through the existing client base and as well as pipeline going into next year. And finally, the rollout of the Ministry of Justice contract. If I remind you, this is over 4 years $12,000,000 contract. It has been successfully deployed in UK and exceeded all of expectations.
So those are some of the three reasons that sort of exceeded our expectations what we projected for FY 'twenty one and moving into FY 'twenty two.
Okay, great. Thanks for that Matt very much guys.
Thanks, Mike. Thank you.
Thank you. Your next question comes from Stella Wang, Private Investor. Please go ahead.
Hi, good morning guys. Thanks for taking my question. Just going to dig slightly further into OpenOffice strong performance. How much did it grow from FY 2020 to 2021 in terms of percentage?
Yes. So look, it grew thanks for the question. It grew 30% year on year from 2020 to 2021. Now one of the key reasons for growth from what I said earlier question is we have that key enterprise contract of Ministry of Justice that came through FY 2021. And we see going forward, as we take our guidance around meeting some growth, organic growth in Opinopsis segment.
Great.
Thanks for that clarification. Just the second and last, the 19,000,000 high conviction pipeline, what's the timing of the conclusion on those? Can we expect most those coming to conclusion this current financial year?
Yes. Thanks for the question, Stella. So, well, I think first of all, worth just pointing out that the $19,000,000 is, first of all, a reflection of what we call our higher conviction opportunities, where we know that there is some form of evaluation and process happening. It's also the combination of 1 year subscription as well as the implementation fee as opposed to the full contract value. Also worth noting, it's only new budgets.
So we don't have our upsell opportunities in that pipeline. So due to the nature of enterprise opportunities, we think that predominantly these contracts and deals will be finalized across FY 2022. But due to the nature of these larger contracts and processes, it's also possible that some of these run longer, full enterprise contracts such as these could be an 18 month procurement process. So I'll probably put overall the number somewhere between 12 18 months now.
Great. Thanks for that. Thank you. Your next question comes from Mitch Sonnigan from Macquarie. Please go ahead.
Yes. Thanks, guys. I thought I might come back with 1 or 2 more there. Just, Nvesh, maybe on the corporate cost line, just increased a bit up to $2,900,000 Can you maybe just talk us through should we expect any step up there in FY 2020 2 with the addition of open office? Thanks.
Yes. Good question, Mitch. The only step up we expect is the impact of LTIP. So we had $400,000 in FY 2021. Obviously, this is a 3 of a station program.
So you probably expect another incremental $400,000 and then a little bit of investment in our people and culture. Apart from that, we don't expect any other increases in corporate costs.
Okay. Thanks. And maybe just, Mark, on open office and probably more specifically talking about local government customers here in Australia. Can you maybe talk are there any I guess, what's the larger or largest council that you currently have? I imagine there's some other competitors out there, whether it's TechOne or even some of the old legacy ERP providers there.
Can you maybe just talk through the competitive landscape? And I guess, it sounds like they have a pretty good advantage down there in the small to medium sized councils. But can you maybe talk about any progress you're making with the larger ones? And I guess how you see that progressing over the next few years? And maybe how you think about the competitors in that space?
Yes, absolutely, Mitch. So it's a fantastic question. I think first of all, the first part of your question there is who are some of our larger customers? Well, first of all, we look after really what was a very landmark win in Tasmania, was the city of Hobart. It's quite a significant council and a significant win for the business.
We also just, I think, express the scalability of our products. We actually look after the entire property and ratings for the ACT. It's a very significant overall platform and shows our ability to scale. So I think that the really key areas here where we think we'll compete very well is what I talked about on the call is this citizen centric approach. It's really a shift towards digitization.
The OpenOffice community engagement platform allows customers to log in and connects all of the services that they receive from council. It really is truly a unique differentiator for us. And as the shift occurs more and more to improved efficiency as well as customer service, And we certainly expect that to benefit us over time. And I think also it's really worth noting, we're seeing this across so many sectors is that digital transformation strategies and agendas have really been brought forward due to COVID-nineteen. These are councils, much like education institutions, that have been thrown into the world of remote work and remote servicing almost overnight.
So the I think that certainly, the pipeline looks good. We think that in terms of competition, yes, we do come across, of course, the likes of Technology 1. We see Infor and CIVICA. We feel that we are going to compete well. And we certainly think that the citizen centric approach is going to resonate very well with that target market, which is those large and medium sized councils.
Perfect. Thanks guys. That's all from me.
Thanks, mate.
Thank you. There are no further questions at this time. I'll now hand back to Mr. Washburn for closing remarks.
Yes. Thank you, everyone, and thanks for the great questions. Thanks for participating today. Nimesh and I really look forward to meeting with many of you out on the upcoming ReadyTech roadshow. I think really a final comment from me today is that ReadyTech, our teams stand ready across these multiple large verticals to meet new and ongoing demand from customers seeking technology that enable them to thrive in this era of accelerating digital transformation agendas.
So that's it for me. And thanks very much again for attending.
Thank you. Thanks.
That does conclude our conference for today. Thank you for participating. You may now disconnect.