Ladies and gentlemen, thank you for standing by, and welcome to the Technology One Full Year Results Roadshow. For this presentation, Edward Chung, Chief Executive Officer, Stuart MacDonald, Chief Operating Officer, and Paul Dobbins, Chief Financial Officer, are on the call in Brisbane. There will be a presentation followed by a question and answer session. Participants on the phone who wish to queue for questions will need to press star followed by one on their telephone. If you wish to ask a question via the webcast, please type your question into the ask a question box. I would now like to hand the conference over to your host today, Mr. Edward Chung. Thank you. Please go ahead.
Thanks, Harmony. Good morning, Stuart. Good morning, Paul. Good morning, everyone, online. Thanks for joining us today, for the Technology One 2021 full year results presentation. These materials were lodged with the ASX this morning. Let's jump straight in, and I'll start with the highlights. When you think about Tech One's customers and target markets, local governments, universities, TAFEs, government departments, hospitals, they're hugely complex organizations. They use and rely on TechOne's global SaaS ERP to run their business. We've got now 15 with the recent acquisition of Scientia and hundreds of modules. When you add them all up, there's over 300 modules that we provide to the markets we serve. It's a very, very broad organizations, and they use and rely on TechOne's global SaaS ERP to run their business.
It's a very, very broad and deep ERP, provides mission-critical software for those organizations to run them, to automate them, to streamline their processes, and really make life easy for these complex organizations. Secondarily, our global SaaS ERP is available on any device, anytime, anywhere around the world. It's just. It couldn't have been better suited for situations like COVID, and as we come out of COVID, remote working or hybrid working in the office and at home. When you put that together, it's allowing our customers in those markets to innovate with greater speed, greater agility, and face those challenges ahead that we all face.
Our customers can then just leverage our apps to streamline their business, automate it, and make life easier for them because we take care of all the technology. When you put it together, there is continuing strong demand for TechOne's global SaaS ERP. If we turn to the next slide. The key metric for our business is SaaS. Hybrid working in the office and at home. When you put that together, it's allowing our customers in those markets to innovate with greater speed, greater agility, and face those challenges ahead that we all face. Our customers can then just leverage our apps to streamline their business, automate it, and make life easier for them because we take care of all the technology. When you put it together, there is continuing strong demand for TechOne's global SaaS ERP. If we turn to the next slide.
The key metric for our business is SaaS annual recurring revenue or SaaS ARR growth. This organic SaaS growth is powering our business. We delivered SaaS ARR of AUD 192.3 million, and that's up 43%, all organically, on the prior comparative period. We added about 100 SaaS customers during the year. You can see there that we ended with 637 large enterprise scale SaaS customers. These are customers with thousands and tens of thousands of users. With our fast-growing SaaS business, we're on track to hit our target of AUD 500+ million worth of ARR by FY 2026. We ended the year with, you can see on the slide there, AUD 257.5 million in total ARR.
That's an additional AUD 242.5 million of ARR by FY 2026. We have a very clear runway and a line of sight and are confident that we can achieve this. We delivered our 12th consecutive year of record profits, with profit up 19%. Profit before tax up 19% to AUD 97.8 million. That's at the top end of guidance that we set at the half year. As that SaaS continues to drive and power our business, the outlook for us for FY 2022 is strong, and I'll get into that in a bit more detail later. I'll turn to the dividend slide now at the bottom of page five. There's no doubt we had a great year, and we remain confident on our outlook and confident on the outlook for FY 2022 in particular.
As a result, the tax up 19% to AUD 97.8 million. That's at the top end of guidance that we set at the half year. As that SaaS continues to drive and power our business, the outlook for us for FY 2022 is strong, and I'll get into that in a bit more detail later. I'll turn to the dividend slide now at the bottom of page five. There's no doubt we had a great year, and we remain confident on our outlook and confident on the outlook for FY 2022 in particular. As a result, the full year dividend is AUD 0.1391 per share. You can see that on the slide there, up 8%. When you look back over the last 10 years, that's compound growth in dividend of 12%.
Just want to go through a couple of key highlights and milestones that we've achieved through the year. In August, late August, we announced the end of on-premise by 2024 for our on-premise customers. It's a watershed moment. It's a key milestone for TechOne, and it gives our remaining on-premise customers ample time to move from on-premise to SaaS. When you think about a company, when you think about TechOne, we've been hugely successful for the last 34 years. It was an on-premise license fee business, and we've completely reinvented ourselves, completely reinvented our business, our systems, our processes, our culture, our people, our structures, our commissions, policies, absolutely everything. We've delivered a global SaaS ERP that's massively scalable. It's a single instance global SaaS ERP.
To be honest, I can't think of many companies in the world that have been able to achieve what we have. The move from on-premise to SaaS for our customers is seamless, it's simple. We've architected in such a way, it's the same software. Our systems, our processes, our culture, our people, our structures, our commissions, policies, absolutely everything. We've delivered a global SaaS ERP that's massively scalable. It's a single instance, global SaaS ERP. To be honest, I can't think of many companies in the world that have been able to achieve what we have. The move from on-premise to SaaS for our customers is seamless, it's simple. We've architected in such a way, it's the same software, and they can move in weeks, not years, like people using our competitors' products.
You know, you think of them, SAP, Oracle, Infor. By transitioning to SaaS, our on-premise customers will unlock all the benefits that our SaaS customers get. There's plenty of them, but I'll just call out two or three. One, they get defense in-depth security built in. We have the highest levels of cybersecurity of any SaaS provider in the world. All of our products and modules are available to the customers. It's frictionless. They can use them, they can try before they buy. It's all available, and they can take those on at any time. On SaaS, our customers have reported to us they save 30% on their total cost of ownership. Our customers have then moved to SaaS.
They can easily take our next generation product, Ci Anywhere, and then they can take advantage of exciting new technology like artificial intelligence, which is built into DXP, and I'll talk about that a bit later. All right, turning to the next slide. Our future state business will grow at 15%+ per annum, and I'm gonna take a few moments to explain this. Today, our business is made up of two businesses, if you like. A legacy license fee business, which we're purposefully reducing over time.
That's not a true reflection of our underlying business, which is our SaaS and continuing business, and I'm gonna get into that now. When our license fee business is totally wound down as planned, you can see that the SaaS and continuing business will coalesce and become our total revenue, and that will grow at 15% per annum. If you look at that graph there, you can see today's total revenue. That's the black dotted line. For FY 2021, that was total revenue of AUD 311 million, and included in that is AUD 18 million of our legacy license business. Our SaaS and continuing business, and I'm gonna get into that now.
Have a look at those orange bars, if you like. That legacy license business was circa AUD 75 million in FY 2018, then came down as planned to AUD 43 million, again as planned to AUD 22 million to AUD 18 million, and over the next few years, it will be gone. This reduction in license fees and our license fee business hits our P&L straight away.
It creates a headwind. You can see this year, we had an immediate impact in FY 2021 compared to FY 2020 of AUD 10 million. That was a headwind that's . It creates a headwind. You can see this year, we had an immediate impact in FY 2021 compared to FY 2020 of AUD 10 million. That was a headwind that we had planned for.
You can see also in the blue line there, our revenue from SaaS and continuing business, and it's up 9%. This business, it's high quality recurring revenue, but the revenue is recognized ratably over time, so it has very little impact on this year's business. I can sort of sum that up, a contract which was previously a legacy license deal, that AUD 10 million would have been a one-off hit, a one-off gain, if you like, to the P&L. That's now converted to AUD 2 million annual recurring revenue, which is, you know, high quality, and with our 99%+ retention, you can see that's significantly more valuable to TechOne.
What I wanted to reiterate is that our SaaS and continuing business will become. It will coalesce and will become our total revenue, and will grow at 15%+ per annum when license fees have wound down as planned. I'd like to now get a bit deeper into the results. Let's go to the results summary, please. You can see at the bottom of this slide here, the SaaS ARR grew 43%. Retention. You can see that's significantly more valuable to TechnologyOne.
You can see at the bottom of this slide here, there's SaaS ARR grew 43%. That's the main metric. That's what's powering our business. If I move my eye up to profit before tax, and that resulted in our profit before tax of AUD 97.8 million, and that was at the top end of guidance. Starting at the top then, you can see that revenue from SaaS and continuing business up 9%, and that was, you know, I explained that in the previous slide. 3%. That's the main metric. That's what's powering our business. If I move my eye up to profit before tax, and that resulted in our profit before tax of AUD 97.8 million, and that was at the top end of guidance.
Starting at the top then, you can see that revenue from SaaS and continuing business up 9%, and that was, you know, I explained that in the previous slide. Similar, you know, the revenue from legacy license business. It was circa AUD 75 million back in FY 2018, and we're driving that business down aggressively and driving up the revenue from our SaaS and continuing business. Our total expenses, they were in line with our expectations. They were down slightly. I call it line ball, but not to the detriment of R&D. We had strong investment of R&D for future growth, up 13%. I'll talk about that a bit later as well. And then two more other sort of notes here.
The cash flow generation was very strong and met our expectations, and I'll get into that a bit more detail. Just a final note, the profit after tax there is up 15%, and that was because of an increased tax rate in the year, FY 2021, due to some reduced R&D tax benefits.
When we look forward going to FY 2022 with the updated R&D tax regime, we expect the effective tax rate to return to our previous levels in FY 2022. Okay. looking at our margin, you can see there that the profit margin before tax for FY 2021 was 31%. That's up on 28% in the prior year. it's really the strong margin expansion is driven by the significant economies of scale we're getting from our single instance global SaaS ERP. we're more efficient in all parts of our business in terms of technology, but also in terms of overhead, as all efficiencies from focusing on SaaS, you know, flow through to all parts of our business.
Similar to what we said at the half year in FY 2020, in the second half of FY 2020, we rebalanced headcount from our on-premises business to growth areas like SaaS and to DXP, and that's flowing through into FY 2021. We maintained our COVID-inspired remote implementation, you know, flow through to all parts of our business. Similar to what we said at the half year in FY 2020, in the second half of FY 2020, we rebalanced headcount from our on-premises business to growth areas like SaaS and to DXP, and that's flowing through into FY 2021. We maintained our COVID-inspired remote implementations. All implementations or most implementations are done remotely now, and remote digital user groups.
I just wanted to reiterate that, the higher margin and lower expenses, it's coming from the scale that we're getting from our SaaS platform. As we continue to win more and more SaaS business and our SaaS business scales globally, you'll see that margin continue to improve to 35%+ in the next few years. If you've been following TechOne for a while, you know when we get there, we'll just set the bar higher again, and we'll continue to drive margin growth and margin expansion, in our business. Just reiterating that while expenses were line ball R&D, but it wasn't to the detriment of R&D, with R&D investment up 13%. I'll get into that a bit more detail later.
We used it to extend the functionality of our global SaaS ERP, new products, new modules, but also invested in some really exciting new technologies such as local government DXP. I'll get into that in the next section. We'll continue to double in size every five years.
I'll jump into the balance sheet there. On the bottom of the page 17, you can see the balance sheet. We continue to have a strong balance sheet with cash and equivalents of AUD 142.9 million. That's up 14%. After the initial payment for Scientia of AUD 11.6 million. We continue to have no debt. I just wanted to call out a few items here. You can see there that our trade and other receivables was up, and that's a positive, and it related to many deals closing, you know, late in the year. We continue to have strong collections early in this year. You can see contract assets there.
Contract assets relate to extended payment terms, typically for customers with long consulting implementations, or term licenses for customers on-premise. Those term licenses, they're not perpetual licenses. They're higher quality because, again, they're recurring revenue, and they're getting our customers ready for SaaS. When you think about the end of on-premise announcement we've made, you know, end of on-premise by 2024, it marries the two strategies together. One is that we move our customers to SaaS, and two is we move our customers off that one-off revenue to recurring revenue. If I sum up, you know, these contract assets, they'll decline over time as we move all of our customers to software as a service. The other important note there is deferred revenue. Deferred revenue represents the amounts that customers pay us.
They prepay us for SaaS annually in advance. That number has grown 11%. You should continue to see that number to grow in line with SaaS growth. All right. Might turn our attention to cash flow now. You can see cash flow generation, obviously, they'll decline over time as we move all of our customers to software as a service. The other important note there is deferred revenue. Deferred revenue represents the amounts that customers pay us . You can see cash flow generation of AUD 63.9 million. That's up 12%.
That's 88% of net profit after tax, which was AUD 72.7 million. That slightly beat our expectations that we set at the half year of 80% of net profit after tax. It's important to note there that at the half, cash flow generation was AUD -3 million, and this is gonna occur and reoccur in future years because the majority of our customers have their anniversary dates and therefore cash inflow in the second half of our financial year. When you look at the cash flow, it was even more special considering that FY 2020 had a bumper start to the year of circa AUD 12 million from large license deals that were closed in FY 2019. That's a similar message that we presented at the half.
As I've said previously, we continue our long history of strong cash flow generation, and we expect that to progressively grow from where it is today to match net profit after tax by FY 2024. We'll turn to segments now. That's at the bottom of the page there. You can see that we break our business up into three operating segments on the left. We have our Software segment driven by strong SaaS growth. Our Consulting segment really driven by improved execution, margin, and delivery for our customers. We have the Corporate segment, which really is getting royalties from both the Software and Consulting segments. If you look at the geographic segment there, you can see that U.K. delivered a profit of AUD 1.6 million, and that's up from a break-even last year.
I'll get into that in a lot more detail in the U.K. slide. If we can turn to the results analysis and key metrics. I won't propose to go through any of this. The important note is that TechOne has one of the highest return on equity of any company in Australia. When we adjust it for net cash above, you know, required working capital, it's even higher at 60%+. I now want to turn to some significant achievements through the year. Just to reiterate, there's the 14 products we have before the acquisition of Scientia. We're one of only a few companies globally that has such a big footprint. It's so broad and so deep.
As I said, each one of those products can stand on its own, has 20-30 modules, and when you put it together, it's a very compelling proposition. We provide mission-critical software which runs, automates, and streamlines the organizations we serve. They're deeply integrated out-of-box. They compete on a best-of-breed basis, as well as coming together for a total ERP. There's a common platform, a common user interface. It's this single integrated experience that streamlines the business for our customers. Thanks, Paul. We'll turn to the vertical markets now. You can see that that solution is really resonating with the markets we serve, and all verticals perform strongly.
The significant white space or opportunity in the markets we serve, and in any single market, we don't exceed 15% of the total addressable market in each sector. Our market penetration. If you look at the graph there, you can see that local government was up. It's very small now, 8%-15% . Education up 17%. Government up 22%. Thought I might just pause for a second.
Stuart, can you add some color and some examples about how we achieved these results through the year?
Sure. Thanks, Ed. If you look at the impressive logos on the right, they validate the company's strategy and strength of our verticalized global ERP solution. Starting with Charles Sturt, they came to market for a small module. Once we finalized the sales engagement, we had sold them a full OneEducation solution. Again, a new logo for us, Charles Darwin University, came to market to replace their Oracle and other disparate products. Again, we were able to position our OneEducation solution. It should be noted that OneEducation incorporates our award-winning Student Management, Financials, HRP, EAM, just to name a few. The University of Tasmania was a partner of ours for 12 years. We've been talking to them for some time about migrating to our SaaS platform. With the announcement of the end of on-prem, they accelerated the decision-making.
It should be highlighted that each of these wins mentioned above were over AUD 1 million in ARR. On to the successful local government wins. Gympie Regional Council was a full OneCouncil win to replace Civica. This started with an unsolicited proposal less than 12 months ago. A partner of ours, 15 years, Logan City Council, made the move to the SaaS platform as part of their overall modernization program. In the U.K., there are three local council sizes: a district council, a unitary, and a borough/city council. We have a strong position in the district space with a very high win rate. With this success, we responded to Blackpool Council to see if we could compete at the unitary level.
I'm proud to announce that we are awarded this project, and since then have been awarded another unitary. This opens up many new and exciting opportunities for us in the U.K. These are only a few of the very high win rate. These are only a few of the impressive successes we have had in the half, and it shows our strategy and our vertical ERP SaaS solution is defining the sector we operate in.
Great. Thanks Stuart. I'll turn to the next slide there. You can see we continued our very strong customer retention across all markets. Slight blip this year, but nothing to be concerned about. We've also added for the very first time a new metric. It's known in the SaaS world, and it's called net revenue retention. The way it's calculated is you grab your opening ARR, add the new ARR sold to existing customers, remove any lost ARR from existing customers, and divide it again by opening ARR, and that's how you get the metric of net revenue retention.
In short, this category includes customers moving from on-premise to SaaS, or customers who might take new products, new modules, new users, extensions, et cetera. The only thing it doesn't include is new logo revenue. It's a quality measure, and anything over 110% is seen as a good outcome. You can see there, we've delivered strong expansion performance of 112%. It comes from new users, extensions, et cetera.
The only thing it doesn't include is new logo revenue. It's a quality measure, and anything over 110% is seen as a good outcome. You can see there, we've delivered strong expansion performance of 112%. It comes from, as I explained before, our global SaaS ERP. It's very broad. It's mission-critical. There's lots of functionality for our customers to take. It's a significant opportunity in our existing customer base, and it's frictionless. All customers on SaaS can see all modules, all products, all extensions. Everything is available to them. We call it open licensing. It's frictionless. They can use it. They can configure it themselves. They don't have to ask for purchase orders. They don't need to have any software downloaded. It's all available all the time for our customers.
As a result, it is, it's becoming more and more predictable. It's non-competitive. It's transactional in nature, and there's a low cost of selling to existing customers, and we will continue to drive what we call product penetration into our existing customer base all the time for our customers. Our SaaS business is growing really strongly. Just to mention it again, SaaS ARR is growing at 43%, all organically. It's also because it's so compelling. You know, we've got one global code line, which makes us hugely efficient.
We can invest AUD 10 millions each year, and every customer gets the benefit of that. There's massive economies of scale. The customers get two releases automatically each year with new features, new functions. 30% all organically. It's also because it's so compelling. You know, we've got one global code line, which makes us hugely efficient. They've got eight active data centers. It is the highest level of security. There's fast migration. They save 30%+ on their total cost of ownership, and they can take additional products quickly. It really is making life simple for our customers. Next slide, please, Paul.
You can see there that moving our customers from on-premise to SaaS, there's an additional AUD 145 million just from that. We call it one platform for growth. We've got a very clear runway. We've announced the end of the on-premise. We've got clear line of sight. You can see there that moving our customers from on-premise to SaaS, there's an additional AUD 145 million just from that. We call it one platform for growth. We've got a very clear runway. We've announced the end of the on-premise.
We've got clear line of sight, and we're working with all of our remaining on-premise customers to move them to SaaS. Our SaaS business continues to grow very strongly. The quality of the revenue stream is extremely high because, you know, contractually, it's a recurring contractual nature, and we have a very low churn rate. Today, ARR is now 90%. 90% of our revenue is recurring, which positions us really strongly. It's locked in for the next financial year. With a fast-growing SaaS business, with a hugely compelling value proposition, combined with the announcement of the end of on-premise by 2024, we are confident we are on track to see total ARR of AUD 500+ million by FY 2026.
It's locked in for the next financial year. With a fast-growing SaaS business, with a hugely compelling value proposition, combined with the announcement of the end of on-premise by 2024, we are confident we are on track to see total ARR of AUD 500+ million by FY 2026. Now I wanna spend a couple of moments on R&D. We continued our significant investments in R&D. You can see there R&D investment of AUD 77 million. That's 24% of revenue and up 13%. It was significantly higher than our benchmark of 8%, but we took the opportunity to invest for the future, and we did it all within our total cost envelope. Total cost was line ball.
We do this to maintain our leadership in innovation to really focus on not the here and now, but the next 5%. It was significantly higher than our benchmark of 8%, but we took the opportunity to invest for the future, and we did it all within our total cost envelope. Total cost was line ball. We do this to maintain our leadership in innovation to really focus on not the here and now, but the next five to 10 years. It's focused on a couple of areas. It's focused on adding new features, new functions, new capabilities to our global SaaS ERP with the two releases every year. In 2021B, you know, we delivered 308 new product enhancements, modules, extensions across the enterprise suite.
2022A is in development now, finishes around Christmas time and is launched in February next year. Going forward, probably this year, we expect R&D to be around 10%, but going forward over the next few years, R&D growth, I should say, will revert to 8% over the next few years.
Now, I just wanna take a few moments to give you an update on DXP. It's so exciting and it's game-changing. We just gotta remember, DXP, it's a long-term strategy. It's not a short-term thing. We're gonna make significant investments in DXP for future growth, just like we did in our SaaS platform 10 years ago. If you think about that SaaS platform, over the first few years, we made losses, but we knew what was the right thing to do strategically. If you look forward now, it's powering our growth, and will continue to power our growth 10 years on.
DXP is gonna be similar. We're making long-term investments that will power our growth in five to 10 years' time. TechOne is very strong in supporting our customers in the back office. You know, the 100, the 1,000 Of users doing month-end processing rates, admitting students. You can picture it, right? We're now reaching into our customers and helping them service their stakeholders, their customers, their rate payers, their students.
We go from the back office, you know, with 1,000, sometimes 10,000 of users to the front office with 100,000 , sometimes millions of users. It's really gonna differentiate us, make us even more sticky, provide even more mission-critical software for our customers. And going forward in the future, it'll be a significant, you know, product and a revenue stream for us. The customer feedback's been amazing. LG DXP, we've got our first early adopters are working on it. The first customer went live only a couple of months ago.
You see the feedback there from City of Canning. It says there, "My feedback is nothing but great. I see there's been some thought gone into making our work easier for both customers and ourselves and our customers. Super excited. Can't wait." The next couple of early adopters are about to go live imminently. Student DXP, another really exciting project. It's in the research phase now, and I'll update that more in future presentations. Turning to our defense-in-depth security.
This year, we elevated all of our federal customers to a new security level, and that's IRAP Protected, the only global SaaS ERP provider to be able to provide that. We continue to invest AUD 1 millions to set the bar even higher. We all know that cybersecurity is you know, a hot topic in all boardrooms. It just isn't feasible for anyone to be on-premise and to be able to keep up with you know, the requirements to manage cybersecurity. You can only do that if you move to a SaaS-first strategy.
We might move to the U.K. next. Thanks, Paul. We see significant upside in the U.K. You know, it's three. It might even be bigger. It's at least three times the size of the APAC market. We continued our significant investments for future growth. As I said at the half year, we're just completing our customer-first or remediation phase, and our focus is now on growth. If you look down the left-hand column there in the FY 2021 achievements, we delivered a profit of AUD 1.6 million versus break even last year. It now has ARR of AUD 9 million, up 20% on this time last year. We closed eight new logos, seven in local government, one in higher education. We predicted that at the beginning of the year.
As Stuart said, we've closed through this year two unitaries, which pushes us up to the next tier of larger councils in the U.K. They're probably, you know, double the size in ARR in the districts that we've been so successful in. When we look forward, the pipeline for FY 2022 is strong. We're confident U.K. Student Management and HRP regionalizations are on track for completion.
For Student Management in particular, we finished the last R&D deliverable in August this year. We're now into the, you know, the third phase implementation. It's looking and feeling good. We're starting to now bid for Student Management deals in the U.K. We appointed a new Executive Vice President for the U.K., Leo. He comes with a proven track record, and he's really focused on growth in the business.
Of course, you would have seen recently, we acquired Scientia, and that provides us that additional brand recognition, the customers that I have in the U.K. in particular, and the scale. The next slide is about Scientia. In September, Tech One acquired Scientia Resource Management. It's a U.K. headquartered company, and the impact on FY 2021 was negligible. It was insignificant. The acquisition is really focused on that strategic focus of ours to build the deepest functionality for the markets we serve. When you think about their product, which is scheduling and timetabling, it's mission-critical software that all higher education universities need to run their business. They've got an enviable customer list, you know, 150-200 customers.
We're gonna tap that customer list to obviously sell our own products into them. It's the first international acquisition that we've ever made, and it demonstrates our commitment to both higher education and our commitment to the U.K. market. We're excited about the opportunities and guess what? If you're thinking about Student DXP, one of the most important things for a student is obviously their timetable, and this is a very important part for the DXP strategy as well.
Okay. I wanted to spend a few moments talking about our people, our culture, our team. TechOne's people solve incredibly complex business problems for our customers. It's them. You know, they've delivered this massively broad and deep global SaaS ERP. We compete and win against some of the world's largest multinational software companies. Timetabling, and this is a very important part for the DXP strategy as well.
We know them, you know, SAP and Oracle. They've got tens of thousands, probably hundreds of thousands of R&D staff, and we're only a fraction of their size and win. We independently recognize them as employer of choice and, you know, we're all reading about the market pressures related to employment. At TechOne, we continue our investments in our team. It's in a holistic and integrated way.
We provide our leaders with healthy budgets for remuneration, but equally as important, we've focused our investment on the team and our culture. You know, we focus on our team members and their careers with career plans. We continued our investments in a whole lot of programs and cultural events you see there. One Talks, Buddy Programs, Grads, Hack Days, Continuous eNPS Surveys, MARVEL Awards, Regional ays. The list goes on. One thing I wanted to call out is during the year, we were fortunate enough to be able to invest in a company kickoff. That's what CKO is there. We brought all staff in from all regions to reconnect with our vision, our purpose, our strategies, and hear from their leaders. It was quite amazing to be part of.
You know, our people, they continue to amaze me with their strong culture of creativity and innovation. These fantastic results you see here is really couldn't happen without them. It's a testament to the leaders of TechOne and our people that have really delivered those results. Now, if I fast go to the next slide. Sorry, Paul. The TechOne Foundation, it's also another critical initiative to retain and attract staff. The TechOne Foundation defines who we are, it defines our value. Couldn't happen without them. It's a testament to the leaders of TechOne and our people that have really delivered those results. Now, if I fast go to the next slide. Sorry, Paul. The TechOne Foundation, it's also another critical initiative to retain and attract staff.
The TechOne Foundation defines who we are, it defines our values, our culture, and, we believe, you know, through the youth, through investing in the youth, we can have the biggest impact on the future. Like everything in TechOne, we set ambitious goals, and our ambitious goal is to lift 500,000 children and their families out of poverty. There's also a nice quote there. I won't read it all out, but that's from a recent TechOne graduate, and it really just resonates with us as a mechanism also to, you know, attract and retain, the next generation of TechOners. To wrap up, this part of the presentation, we delivered record profits, record SaaS ARR, record revenues.
SaaS ARR, our key metric, is AUD 192.3 million. As a mechanism also to, you know, attract and retain the next generation of TechOners. To wrap up this part of the presentation, we delivered record profits, record SaaS ARR, record revenues . That's up 43% total, totally organically. Our total ARR was up 16% to AUD 257.5 million. Profit before tax up 19% to AUD 97.8 million. We delivered margin improvement. U.K. is coming out of its customer-first phase, you know, really poised for growth. Profit up AUD 1.6 million. Our consulting continued to improve its delivery and execution, up 14% to AUD 15.6 million.
We have very strong balance sheet, cash and cash equivalents, and cash flow generation. If I just go now to the last section, the outlook for next year. When we're looking forward to FY 2022, the markets we serve are highly resilient. We provide that significant value to our customers with the deepest functionality. You know, it's mission-critical software. It runs, it streamlines, it automates their business processes. With our global SaaS ERP, we take care of all the technology for them. We've got all the benefits that I've discussed through the presentation, and it allows our customers to innovate with speed and agility. We really make life simple for them.
SaaS, it's, you know, creating significant opportunity for us. We've got a very strong pipeline for FY 2022. We see continuing strong growth, and we'll provide much more detail in the AGM and with our first half results. We're on track to hit AUD 500 million+ ARR by FY 2026. Just thought I might pause there now and say thanks, everyone, for listening to the presentation. I'll hand over to Harmony. Harmony, can you introduce the Q&A session, please?
Thank you. We will now begin the question and answer session. Thank you. We will now begin the question and answer session. If you wish to queue for a phone question, please press star followed by one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star followed by two. If you wish to ask a question via the webcast, please type your question into the ask a question box. Your first phone question comes from Nick Harris from Morgans. Please go ahead.
Thanks and good morning, everyone. A couple questions from me. Just the first one. You added 61 SaaS customers in the half. I was just wondering if you could give us a bit of a split between net new customers versus on-premise customers flipped.
Hey, Nick. It's Ed here. How are you?
Hey, Ed. Very well, thank you.
We don't disclose the numbers that way, Nick, but what we have done for the first time is disclose net revenue retention, and that's all revenue from existing customers. I think you can effectively back solve that now because we've said existing customers grew 12%, total ARR grew 16%, and I think that's about AUD 8 million then, Nick, in new logo revenue. The rest is from existing customers either flipping to SaaS or taking new products, modules, extensions, et cetera.
Thanks, Ed. Just obviously you've said you'll end the on-premise solutions by 2024, which is a massive milestone. Just trying to understand.
Yeah.
For customers, does that mean you no longer support it, and they could still run it offline, or do they actually have to migrate or turn it off?
Yeah.
Yeah. Probably the first thing I say is we're very loyal to our customers, Nick, and we won't leave them hanging. We've obviously drawn a line in the sand, and we'll work with all of our customers to get them to SaaS as soon as they're ready. If there are any customers left after 2024, which I doubt there'll be many, but there might still be 5%. If it's on-premise, they can continue using the software, but they'll be unsupported because we won't support on-premise anymore. So long as customers and our team are working together and putting a roadmap together when they're moving to SaaS, then, you know, I'm sure we'll continue to support them through that journey.
Got it. That makes sense. Thank you. Just the Scientia acquisition, and I've probably got a few more, but I'll stop and let other people have a go.
Yeah.
Just on the Scientia acquisition, are you able to just provide any sort of commentary around A, the P&L on an annualized basis and B, just the sort of source code and the software? Are you rewriting the whole thing?
Mm.
To put into Technology One stack or just a little bit on how you'll integrate that? Thank you.
Yeah. Yeah. Okay. From a P&L point of view, we, you know, we continue our way, Nick. We're not buying businesses, you know, for huge profit growth or ARR growth. It really is a strategic piece of software for us in the higher education product. It's mission-critical. Every university and TAFE requires this type of software to schedule their rooms, their students, their teachers in an efficient way. Also, it fits really neatly with two of our strategies. One, our DXP strategy, because we'll be able to deliver, you know, that timetable in a really user-friendly way to the 1,000 of students, 10,000 thousands of students in universities.
Our U.K. strategy, you know, giving us the scale, the brand recognition in the U.K. We'll provide more detail on P&L and numbers when we provide the detailed guidance that we prepare, you know, in the next couple of releases. What was the second part of your question, Nick?
Oh, rewriting the code.
We have a way, we have a method, we have a technique in when we buy companies, we maintain their code, maintain, you know, the customers, provide bug fixes, et cetera. We will definitely rewrite their code into our single instance, you know, global SaaS ERP to make it hugely efficient, to have the same look and feel. All those benefits I talked about like every other product. Generally, that takes about two or three years, Nick. If you think about the acquisitions we made in 2015, it was Spatial, ePlanning and Strategic Asset Management. Those were rewritten over two, three years, Nick. We'll continue that method.
That's great. Thanks very much, Ed.
Thanks, Nick. I might hand over to some more questions, please, Harmony.
Thank you. Your next question comes from Chris Savage from Bell Potter. Please go ahead.
Thanks. Good morning, Ed, Stuart, Paul. First question, Ed, kind of a general question. You announced the end of life of on-premise, what, a few months ago around mid-year.
Yeah.
Have you seen a change in customer behavior since then? Like, has the switch to SaaS accelerated in any way?
Good day, Chris. It's Ed here. Yeah, we announced late August, so it was only a couple of months ago. I'd say the majority of our customers, nearly all have said, "Yeah, about time." Like, you know, everyone has a strategy to move from on-premise to SaaS. We don't see in the market any tenders, any requirements for on-premise at all. In fact, it's quite unusual. Stuart, I'm looking at you. I can't even think of one that's been coming out. Does that answer the first part of your question, Chris?
I was more just interested. Has this prompted some of the customers who are perhaps a bit tardy in-
Yes. I'd say the majority of our customers, nearly all has said, "Yeah, about time." Like, you know, everyone has a strategy to move from on-premise to SaaS. We don't see in the market any tenders, any requirements from on-premise at all. In fact, it's quite unusual. It'd be unusual. Stuart, I'm looking at you. I can't even think of one that's come out. Does that answer the first part of your question, Chris? Then-
Yes.
you know, looking to switch? Has that sort of-
Yeah.
You know, got their skates on a bit?
Yeah, I might hand to Stuart for that.
Yeah. They definitely weren't ready with budgets and the budget cycle, so they've had to go back, mainly the councils, to go through and get the budget cycle processed. You know, we're working with them to make sure that they can get in their very managed and controlled cycles that they need to be very forward with. In that regard, they've been probably a little bit caught out. From a philosophy and from a need and from an IT standpoint, there's absolutely no issue at all. We're working with all those councils to manage that.
Yeah. It's probably important to note, Chris, we've given plenty of notice. You know, FY 2024.
Yeah.
We'll work with all of our customers. We speak to them all to make sure that they move there in due course.
Sure. Thanks.
Thanks, Chris.
Second question is probably a bit more for Paul.
Yeah.
The expense growth has been, you know, pretty anemic the last few years, sort of low single-digit or even negative like last year. Are we getting to the point where we're gonna see a step up?
Chris, we'll give more guidance, obviously, at the half year and a little bit of guidance with the AGM. You're aware that we have a headwind of the increasing amortization
Mm-hmm.
As we amortize the development of R&D. I mean, I'm not imagining an enormous step-up in costs. We will continue to manage our overall investments, and ensure that we can continue to increase our investment in R&D within the parameters. More guidance, obviously, at the half year and a little bit of guidance with the AGM. You're aware that we have a headwind of the increasing amortization.
Mm-hmm.
Ed mentioned, maybe at 10% this financial year. We're not expecting an enormous increase in costs. We will, as I said, give more guidance at the half. I think you also understand what we talked to with our margin expansion that, you know, we've also said that we expect our PBT margin to be growing to 35% + in the next few years. That will happen steadily over that time. I think that's-
Mm.
Yeah. From that broad guidance, you can work out what we think costs might do.
Chris, I might add that.
Sure
Chris, I might add that, you know, as we move to a full SaaS business, we'll get greater efficiencies in our business, number one. Number two, we continue to drive significant investments in our SaaS platform to deliver higher security, high performance, but also margin expansion for TechOne. Just to reiterate, that's what's really driving us in the next few years.
Yep. Last question, probably back to you, Ed. The payout ratio continues to fall, and the cash balance continues to increase. Are you sensing or flagging more acquisitions in the next year or two?
I think we're just firstly being a conservative, Chris. We, you know, look at all things. We look at dividends, special dividends, acquisitions. I just wanna leave a message that we're responsible with the money. You know, we won't waste it. We have very high hurdles. If it makes strategic sense l ike acquisition, then yeah, we'll jump in an acquisition. You know, we're very cautious when it comes to acquisitions.
All right. Thank you.
Thanks, Chris.
Thank you. Your next question comes from Mitch Sonogan from Macquarie. Please go ahead.
Good morning, Ed, Paul, and Stuart. Can you hear me?
Yeah, we can. Good day. How are you?
Yeah. Good, thanks, Ed. Maybe just a quick one first up. Just in FY 2021 for the customers that you did slip over to SaaS, are you able to give us any indication of what the multiplier uplift was from each of those annual license fees r evenues transitioned to SaaS?
It's around our standard, Mitch. Our standard is 1.25 x their annual license fees when they're on premise. I don't know how to put it. We delivered it at that standard rate.
Yep. Thank you. Just quick one, moving on to Scientia. You mentioned there wasn't much revenue PBT contribution, given the timing of the acquisition. Was there any ARR contribution? I guess I'm just wondering, the last public accounts in the U.K. had them doing sort of over GBP 10 million of revenue. Just trying to understand how that sits today. There's obviously a bit of commentary in the-
Yeah.
In the financial statements?
Yep.
Just keen to understand that. Thank you.
If you look at the results we've delivered today, Chris, SaaS ARR growth of 43%, total ARR of 16%, it does not include anything from Scientia. When we obviously do our next results briefing, we will provide more information at that time. Everything you see today has been organic growth.
Yep. Excellent. Just on that, you mentioned there's some hurdles for the earn-out out to FY 2023. Is it possible to talk about it in any more detail, or will that be given at the next result?
Yeah, that'll be given at the next result. We have profit and ARR hurdles and that's similar to every other acquisition that we've done, Mitch.
Yep. Thanks, Ed. Just another one. Just on the R&D spend, obviously continues to tick up, and you've mentioned it'll be up around 10% year-on-year, before going back to your target at 8%. Can you maybe just talk through, have you increased the headcount through the organization significantly? Has this sort of been ongoing reallocation of resources?
Just trying to understand that because the expense line for employee costs through the P&L continues to come down. Just trying to understand that dynamic. Thank you.
Yeah. The macro headcount number remains about the same, Chris. We made those rebalancing in half two FY 2020. We obviously want people to continue to grow with the business and move from supporting on-premise to SaaS, and that's always our way. Last year there was a few people that didn't wanna make that move. We offer it to them. We rebalanced those positions out and moved to SaaS. We continue to invest strongly in R&D. R&D headcount is growing, but within the total cost envelope of TechOne. It's really investing for the future, you know, future modules and things like DXP and continuing to make the SaaS platform scale.
Yeah. Thanks, Ed. Just final one from me. Just looking at the higher education, that was a good number of wins in higher education here. Can I maybe just touch-
Yeah.
On the competitive landscape as how you're seeing it here in Australia, who you're mainly competing against and tenders, and I guess has there been any
Yeah.
in particular, competitors that are losing more share than others? Thank you.
I'll hand over to Stuart in a second. I'll just reiterate I remember us being here in the half saying, you know, that the numbers for the half for education weren't very strong in terms of growth, but we had a huge runway, you know, in half two, and we delivered on that, on that promise. Stuart, can you talk a bit about the competitive landscape?
Sure. First, I'll just I couldn't be prouder of the work and the results we did in the education space. It was a huge success for us all. As an ERP, there really isn't a competitor, so it's really dealing with point solutions. Obviously you've got an Oracle for financials, but we don't see them playing very much anymore in the space. On Student Management side, we really haven't lost a deal in Student Management at scale for quite some time. Workday came in with some noise about three, four years ago in the space, but has now left the market and not really supporting the Student Management side.
On the HRP side, it's your traditional players that we would see, but we don't see anybody offering the depth and breadth of what we offer as a verticalized ERP SaaS solution. As a result, that's why you see. Obviously, you've got an Oracle for financials, but we don't see them playing very much anymore in the space. On Student Management side, we really haven't lost a deal in Student Management at scale for quite some time. Workday came in with some noise about three, four years ago in the space, but has now left the market and not really supporting the Student Management side.
As a result, that's why you see the wins. We'll always compete against point solutions, and we do very well there. But if somebody's coming for an end-to-end solution, we're the only game. We're pretty excited about that, and that's why we got the results we did.
Thanks.
Yeah. Thanks for taking the questions, guys.
Thanks, Mitch. Back to you, Harmony.
Thank you. Your next question comes from Lucy Huang from Bank of America. Please go ahead.
Thanks and good morning, Ed, Stu, and Paul. I just have three questions. Firstly, you've mentioned that post FY 2024, that you expect the business to grow about 15%+. Just wondering what you're thinking around, you know, what will drive this growth. Is it going to come from existing customers taking on extra modules? Do you see that 15% being driven by new customer growth across Australia, U.K.? Just wanted to get your thoughts on, you know, what drives that number.
G'day, Lucy, it's Ed here. Lucy, it's the continuation of our clear strategy we have today. It's probably gonna be a little bit of all those, to be honest, Lucy. We obviously try to get new logos in the markets we serve. I should say in Australia, we have a lot of logo penetration, but we've got lots of products and modules to sell them. We'll see new logo growth mainly come from the U.K. We'll continue to sell more and more products to our existing customers. You know, we've just bought Scientia, a new product. I'm sure, if we fast-forward to FY 2024, there will be a couple more products that we've either built or acquired along the way.
Every time we enter a new region or create a new product module extension, we're creating more total addressable market, if you like. That market will continue to grow, and then we'll harvest that market in new logos in Australia. Fast-forward to FY 2024, there will be a couple more products that we've either built or acquired along the way. Every time we enter a new region or create a new product module extension, we're creating more total addressable market, if you like. That market will continue to grow, and then we'll harvest that market in new logos in Australia, new logos in the U.K., and product penetration. It's effectively why we start disclosing Net Revenue Retention because it's a key plank of ours.
It's gonna be a little bit of all of those, Lucy.
Yep. Wonderful. Just secondly, you mentioned that we've got a first customer on a trial for DXP Local Government. Just wondering?
Yeah.
Have you guys put any thought as to any potential monetization?
Yeah.
Of this product? You know, what's your thinking around that?
It's very early days, Lucy, but if I can tell you that when we worked with some of the customers and prospects in local government and higher education, they were spending AUD 1 millions per year each, you know, working with the likes of Salesforce or some startups to try to handcraft it, create a bespoke solution. You know, when they're using TechOne to power their whole enterprise, all the data's coming from TechOne, it just makes sense for us to extend and reach out to the front office, create more value for our customers, become stickier. We think there's a lot of value in it. That's where we're going, in short. We think you know we sell Property & Rating today.
It could be 1x Property & Rating, so we're talking 100,000 , maybe even AUD 1 millions for a large council. It's very early days. You know, we're testing the market, but we know that they're paying the likes of some startups and salesforce.com AUD 1 millions a year to try to create what we've already been able to achieve in phase one for local government.
Yes.
It's very exciting, Lucy.
Um-
I think it will increase our total addressable market significantly in local government and higher education.
Yes. Understood. Just one last one from me. I just noticed that churn ticked up slightly to 1.37% for this year.
Mm-hmm.
Just wondering if you can give us some color around, what were the moving parts to that?
Yeah. It's nothing to be concerned about. We're not concerned. You see back in 2011 and 2012, it sort of sometimes ticks up, sometimes it doesn't. We did see through COVID a couple of mergers. Mergers of some not-for-profits, mergers of some banks, et cetera. Then there's the usual mergers of government departments. Nothing we're concerned about, just a slight blip for the year, Lucy.
No. Understood. Thank you so much.
Thanks very much.
Thank you. Your next question comes from Jules Cooper from Shaw and Partners. Please go ahead.
Hi, guys. Thanks for taking a couple of questions. Firstly, Ed, the success in the U.K. with eight new logos,
Mm-hmm.
Certainly a bit of a step up. Can you maybe just talk to how we should think about that from a win rate perspective on the RFPs that you did participate in? That's the-
Yeah.
The first one to get a sort of sense for the cadence there. Then the AUD 8 million of new revenue, haven't sort of worked all the way through it, but you know, just taking your comments earlier about you know, backing out the existing customer contribution, if you could just give us a sense for maybe how that fell between the U.K. and Australia, and if you could just give us some examples in Australia without you know, specifically talking to
Yeah.
a number of logos, which I know you don't like to do, but just how we can sort of think about where that's coming from, you know, in the Australian market.
Yeah.
What proportion was coming from the U.K.?
Yeah. Thanks, Jules. You'll see that we reported total ARR in the U.K. of AUD 9 million from AUD 7.5 million, so that's AUD 1.5 million. That's all new logos, to be honest. We do a fraction of just selling a few products and modules in the U.K. That will grow over time. I think one part of your question was the win rates in the U.K. I might hand to Stuart.
We already set up, or we knew that there wasn't gonna be much business that came to market in higher education at all, during FY 2021, and those predictions came true. We said almost all the activity will come from local government. Stuart, can you talk to us about-
Sure.
the districts and unitaries and
Yeah.
what you're seeing?
Yeah. We definitely know our sweet spot with the districts in the U.K. Our win rate's e asily over 65%. We know how to position. We know who we're taking out as well as we have a very clean model of the current incumbent and how we replace them. We're doing very well there. As I mentioned before, the universities, we're learning, but we're doing surprisingly well. That is growing. That pipeline is growing quite fast. I would say our win rate is, you know, probably in the high 30s%-low 40s%, but it's better than expected, and we're learning very fast how to even improve upon that.
Thanks. Jules, there was many parts to your question. Can you just let us know if we've missed any or come back to ones that you would like us to address?
No, no, that's helpful. Clearly you're maybe just in addition, just some examples of where you are seeing new logos in ANZ, because it's actually quite a reasonable number. Just some sort of flavor of maybe sectors or something that we can put a pin in the board around.
Yeah. I might hand this to you. Some of those logos in higher ed are new logos as well.
In our core verticals of government, education and local government, when there's a new logo, we jump on it like mad because it's a rare opportunity that we can actually take advantage of it. That's where you see the wins that we got this year, definitely from that space, 'cause we hyper-focused on it. Our traditional new logos come from the asset intensive market, from the health community service market. You know, for us, that's a greenfield and we're building that out. When there's an opportunity for w hen there's an opportunity for a local council in Australia, we jump all over it because it's so important to us.
Well, yeah. Excellent. Just lastly, Ed, from me, just the cash flow generation was good, you know, versus your guidance. Just wondered if you could make a comment just around the rent rebate, I think you described it. Is that something expected to occur next year? Just if you can give us any color around how do you think about cash flow generation as a percentage of NPAT or growth this year?
Yeah.
How you see it tracking next year would be helpful.
Yeah. I might start with your last question first. If you can think back to the half, we gave some models, if you like, predictions of cash flow generation. We predicted that we'd do 80% of NPAT this year, and you could probably draw a straight line between there and FY 2024, where it will turn to be in line with NPAT, Jules. We're on track to deliver that guidance, if you like, that we gave back then. Paul, do you wanna take the ball on the rent rebate and what to expect this year?
Yeah. Hi, Jules. The rent rebate runs out in July. We put the numbers in the notes and the financial statements. It won't continue.
It's not material.
It's something that we negotiated when we negotiated the extension here at HQ two or three years ago. We're able to take the benefit of it over these 12 to 18 months. No, not recurring. I agree with Ed's comments about the cash flow generation versus NPAT. That will increase to be in line with NPAT by FY 2024.
That will increase to be in line with NPAT by FY 2024 as the R&D amortization catches up to the amount of R&D, which is of the development that's capitalized.
Okay. Well, just to sort of be clear, you mean July next year in terms of the?
2022.
when that runs out, yeah?
Yeah. 2022.
All right. Thank you.
Thanks, Jules.
Thank you. Your next question comes from Michael Aspinall from Jefferies. Please go ahead.
Thanks. Good morning, Ed, Stu, and Paul. I might just start with a few on revenue. Revenue in the continuing business ARR was up kinda much more than revenue recognized, which implies a bit was adding late in the year, and I think you mentioned something similar when talking through working capital. Can you just give us an idea of what the driver of customers being added later in the year was?
Yeah. Yeah. If you look at our customer base, Michael, local governments, higher education, many of them have financial year ends around June. It's quite interesting. They're either spending up their budgets in June or waiting till a new financial year in July. We see this phenomenon where a lot of our business gets done in, you know, June, July, August, September. It's been the way for TechOne for many years, and that's why, like you said, the amount of deals are done in Q3, Q4. Obviously, we get the benefit of that in the next year. From a cash flow point of view, it means that's where their anniversary dates fall, and that's when we get a big sorta cash inflow from those customers. Does that make sense, Michael?
Yeah, that makes sense. You showed revenue from the continuing business was up 9% this year.
Mm-hmm.
kind of growing at 15% every year from here. Just wondering what's gonna drive the uptick from-
Yeah.
-say, 9% -15% .
Yeah. Just to clarify, firstly, it will grow to 15%+ in FY 2024, and it's really the headwinds that are coming off our license fee business. If you can picture that slide where it went from 75% down to 18% today, it'll be, you know, progressively drive down as we end of on-premise to FY 2024. Then as customers are buying more and more SaaS, they're not buying on-premise anymore, you'll see that grow.
It's the growth in SaaS and the reduction in on-premise license that will result in the SaaS and continuing business becoming our total revenue and growing at 15%+ per annum by about FY 2024, Michael.
Okay. I think wasn't it then + 9% excluding the change in initial license fees?
It was 9% when you exclude the initial license fees. That's right. Yep. We still got a few years ahead.
Yeah. Yeah. Right.
Of when those license fees comes down progressively.
Okay. Did you mention before that the uplift from moving from on-prem to SaaS was 1.25?
Yep. Yeah. If a customer is paying us, say AUD 100,000 for their on-premise annual license fees, you add another AUD 125 on top of that. That's the SaaS platform fee as they come to SaaS platform. If you look at that customer, the total they'll be paying us is AUD 225,000 per annum in that example.
Okay. Cool. Gotcha. Just wanted to clarify that. Following on one from Mitch, you gave some context on kinda how you retain staff outside of remuneration.
Mm-hmm.
there's a very tight labor market in tech by all accounts.
Yeah.
What should we expect on kind of the labor front from a pricing perspective? Other companies are kind of seeing double-digit rises in the next 12 months or so.
Yeah. We've given our managers healthy budgets for annual increases. It's not a number we disclose because some high performers in our business will earn more and lower performers will probably get a lower increase. It's all done within, you know, the cost profiles we set. You know, again, we're just driving efficiencies in our business, in the SaaS platform, for example, and that fuels or funds us to make investments in R&D and in our people. We're confident that we've addressed, in a holistic way, our team and our people. It's not just remuneration. It really is about careers and all of the cultural events and the foundation. We look at it as a complete package.
You know, we survey our staff and we seem to be hitting the mark with them.
Okay. Just the last one from me, kinda on the U.K. I know it's been talked about a bit already, but if I think forward to, say, FY 2026, can you give us kind of a rough idea of how much of that AUD 500 million ARR is coming from the U.K.?
That's a good question. It's not something that we've thought about in that much detail yet or disclosed, I should say, Michael. We don't need U.K. to be contributing hugely to achieve those numbers. When you look at the SaaS flips we have in Australia, product penetration, new products that we've acquired. I'll put it this way, we've got many, many levers that we can pull with our customers to achieve that AUD 500+ million.
Okay. Sorry. I'll just tack one more on then. I mean, is pricing a large component of that or a lever that you would pull, and have you pulled it much kinda in the past few years?
Yeah, we haven't pulled any pricing levers. We have naturally in our recurring revenue contracts, you know, CPI growth, but CPI has been very low for the last couple of years. On two fronts, we haven't seen pricing pressure to drop pricing down, but we haven't increased our prices either. This is all just through, you know, selling customers, moving to on-premise, selling them new modules, new products, or in fact, winning new logos that we don't have yet, Michael.
Okay, great. Thanks very much for that.
Thank you. Harmony?
Thank you.
Oh, sorry, Harmony. Over to you.
Sorry. Thank you. Your next question comes from Andrew Donlan from UBS. Please go ahead.
Morning, all. Just one from me, sort of following on the last question. Just the net adds of the enterprise customers in the second half in 61. You kinda talked around the seasonality of the business, which makes sense. I mean, just given that sort of, you know, ending on-premise sales support, how should we think about the pipeline? I mean, should it be that typical seasonality? 'Cause it has been, I guess, around that 100 net adds for the last couple of years. I'm just wondering if it should look more like the second half in both halves or typical seasonality this year.
It's probably the first, Andrew. We expect that typical seasonality to continue. Announcing end of on-prem does give us a bit of a tailwind. You know, it's a line in the sand. We have been working with the existing, you know, remaining on-premise customers to move to SaaS. As Stuart said, now they go into their budget cycles and, you know, if you think about those types of government departments or local levels of higher eds, the budget cycles typically are June, July, you know, and August, September. We think that seasonality will continue, Andrew.
Okay. No, great. That's it from me. Thanks.
Thank you.
Thank you. Once again, if you wish to ask a question via the phones, please press star one on your telephone. If you wish to ask a question via the webcast, please type it into the ask a question box. Your next question comes from Ross Barrows from Wilsons. Please go ahead.
Yeah, great. Thanks for taking my question. Just, some considerations around growth. I mean, there's a lot of confidence around the business, and rightly so. It's a robust outlook.
Yeah.
Can you perhaps share with us some of the things that you'll be watching closely over the coming year in terms of potential challenges and, you know, perhaps focus on the controllables more than the, I guess, the uncontrollables and externalities? Thanks.
Thanks. Good day, Ross. Thanks for your question. For us, it's all about execution. We've got a very clear runway with our customers. We're very close to our customers, so we are working with them closely. We have roadmaps of when they're gonna move to Software as a Service and when they're gonna, you know, come to tender and come to market for different products and modules. So we don't see the externalities per se are gonna have impact because what we do is provide mission-critical software that is really streamlining the operations of a local government or a university. I remember sitting here probably this time last year, Stuart, when people were asking us about, you know, international students and would people, you know, do you see downside in higher education.
In fact, we only see upside for us because organizations are looking to save money, automate processes, et cetera. Is there anything you'd add?
No, no, I totally agree.
Yeah.
Yeah.
Yep. Ross, that we think mission-critical software, streamlining business, saving money, all the benefits customers get from SaaS, we just got to remain focused, keep close to our customers, and execute for them and with them.
That's great. Thank you.
Thanks, Ross. One more question, you said?
Mm-hmm.
Yeah.
Thank you. Your next question comes from Nick Harris from Morgans. Please go ahead.
Thanks. I promised to come back with a couple more, so I thought I better. Just quickly, the consulting side. I saw you've got a slide there talking about consulting moving more to a recurring,
Yeah.
Could you elaborate on that? The second bit also on consulting was just-
With the move to end of on-premise, should we?
Yeah.
Do you expect consulting to grow or just the ease of migration means it stays broadly where it is? Thank you.
Thanks, Nick. That's in the appendices. We've got two parts to our consulting business. One which is new projects. If we win a new customer or, you know, a whole new or a couple of new products into existing customers, the new projects division implements that with our customers and for our customers. The second part is Application Managed Services for existing customers. Think about a customer that's already gone through new projects and is live. They might hire us through Application Managed Services to supplement their own, you know, system administrators or buy AMS contracts, which is the recurring revenue contracts that you're talking about to, you know, update workflows, write reports, do simple configuration changes.
Part of our strategy is not only to win new business and implement it, but to sell AMS contracts to help our customers extract the most value out of the software that they've acquired. That existing consulting, if you like, is a key part of our consulting strategy, to you know, sell those Application Managed Service contracts to our customers. It's sticky, it's recurring revenue. It's sort of like ARR. It's not in our ARR number. But it's a great strategy and the team are executing well on that. Was there a second part to-
Yeah, EOP.
End of on-prem? It's end of on-premise is a little bit unrelated in a respect because that's about just moving our customers to software as a service from on-premise. That's frictionless for our customers. It's the same software. It's done in weeks, not months. Doesn't need any consulting. But what the magic comes from once you're on the SaaS platform and all products and all modules are available, it's frictionless. They might then approach us to implement it for them to buy new software, to buy new modules. SaaS platform just opens up frictionless sales for us, Nick.
Perfect. Thanks very much.
Thanks. I think that comes to time. Harmony, I might just say a few words of thanks and then we might wrap up. It's been a fantastic year. None of this could be done without the passionate, talented, hardworking people at TechOne. Thanks to Stuart, thanks to Paul, thanks to the leadership team and all the staff and team members at TechOne. We couldn't do it without you. Look forward to doing it again in FY 2022. Harmony, I might throw over to you now to wrap up, please.
Thank you. That does conclude the conference for today. Thank you for participating. You may now disconnect.