I would now like to hand the conference over to your host today, CEO, Mr. Edward Chung. Thank you, sir. Please go ahead.
Thanks so much, Harmony. Well, good morning, everyone, and thank you for the introduction. This morning I've got Stuart MacDonald, our COO, to my right, and Cale Bennett, our CFO, with me on the left. Welcome to the 2024 TechnologyOne Results Presentation. These materials will lodge with the ASX today. Today I'm going to take you through the highlights of our results. Cale will take you through the detailed financials. Stuart will then take us through our significant achievements, and then I'll wrap up with an outlook for FY25. On behalf of TechnologyOne, I'm very pleased to announce that we've delivered another great result with annual recurring revenue, or ARR, up 20%. In a pivot year for TechnologyOne, this was underpinned by our global SaaS ERP, by SaaS Plus, and by the U.K., which is now accelerating, with customer adoption driving total ARR to AUD 470.2 million.
We're pleased to announce our 15th consecutive year of record profit, up 18%, and ahead of the guidance we set in May of 12% to 16%. Last year we entered the ASX 100 index, and this year was our 25th birthday as a public-listed company. Our ability to consistently deliver strong results since listing is due to our clear vision, strategy, culture, and our ongoing investment in R&D, and because of our success, we often get requests to serve new markets and new regions, but we're resolved and resolute, and we maintain our focus and discipline on our existing strategy. Everything we do is to make life simple for our community, and in particular, that's local government, education, government, health, and infrastructure. Our team, they live, work, and play in the communities we serve, and we have a real connection to our customers and the community.
Over the last 24 months, we've made significant investment in our people to refresh what we call the Tech One Way. And the final piece was our core beliefs. These core beliefs are what make Tech One special, unique, and very successful. And it results in our Blue Ocean strategy, which is vast and deep and powerful in terms of opportunity and growth, as opposed to cutthroat competition in a bloody Red Ocean strategy. It's this clear strategy which resonates with the market and why we win against our competitors. And there's five major pillars to our strategy. The first is that we're ERP. We provide a total, fully integrated ERP solution that's very broad and very deep. And you'll notice a change here in how we talk about this. We split our core back office offering, and that's CiA, from our front office offering, which is DXP.
You can see we've got 15 products in CiA with one acquisition, which I'll talk about in a minute, and three products in DXP. DXP extends the power of our enterprise software for our customers to reach and interact with their customers, residents in a council, students of a uni, employees of a company. If you think all the way back to 2008, we had 11 products, and today we've got 19 products in total, 16 core products and 3 DXP products. When we land a customer, they expand with us over many, many years by taking more products and modules to streamline their business. It's one of the reasons that customers stay with us forever and what fuels our consistent, strong growth. On the 1st of November, we closed an acquisition, and that was an acquisition of CourseLoop.
And to remind everyone of our acquisition criteria, there's a number of steps we look at. Firstly, is it in our vertical markets with a priority on local government and education? Does it provide a product or intellectual property to make us deeper into those verticals? Does it have technical fit? The next one is, what are the financials of the price we pay? Then we follow up with geography, and U.K. is a bonus. And finally, the culture of the business. And so we made a bolt-on acquisition, and our One Education platform is now even richer, even deeper, even more mission-critical for education. Today we're excited to announce the addition of a 19th product to our portfolio.
With the acquisition of CourseLoop, we are now integrating curriculum management into our ERP suite, which is specifically tailored for the higher education sector, where over 80% of the customers in our regions actively use our software daily. This acquisition extends our leadership position beyond traditional ERP products like financials, HR payroll, enterprise asset management, document management, supply chain, and analytics. We are now the only provider offering a full suite that includes Student Management, Timetabling and Scheduling, and Curriculum Management, providing unis for the first time full visibility into the entire life cycle, from course design through admissions to alumni engagement. Our second pillar is market focus and commitment. We've got the deepest functionality for the specific markets we serve. We provide mission-critical products which power local governments, universities, governments, and large infrastructure providers.
To be honest, no one comes close to our focus and commitment to our vertical markets. The third pillar is that we are an innovation company leveraging new and emerging technology at each generation for our customers. We invest about 25% of revenue per year into R&D, and this equates to over AUD 1 billion invested into our ERP, into our products and our modules. In tech shifts 10-15 years ago, we can think of cloud, and it was a gold rush. Many people rode the wave with white cloud. It was really just hosting, but they got found out. In tech shifts today, we often talk about AI. AI is at a similar stage. It's a gold rush and at the top of the hype cycle. For us, AI is a simple concept. We use technology to automate business processes and decisions.
We've been doing it for a while for our customers. Things like Local Government DXP leverages AI to understand the general public's natural language queries and bring them right back to the right answer or content, providing them with simplified user experience. The LG DXP product also leverages AI to consume and configure our customers' knowledge base in days, not months and years. In enterprise asset management, we've got AI-driven image recognition algorithms where we can identify road and footpath defects from cameras on garbage trucks for our local government customers. That integrates directly into our request management, directly into our defect management module, and completes the defect automatically. We are leveraging AI to automate processes within our organization, for example, to speed up configuration as part of our SaaS Plus strategy. Our fourth-generation ERP is available any device, anywhere, anytime. We call it CiA.
And we've successfully re-engineered our entire code base, enabling our customers to always be on the latest technology. No other ERP provider has been able to do this once, let alone the four generations we've delivered over the last 37 years. And we're the first and only global SaaS ERP solution to achieve IRAP-protected certification. Our unique approach to security and compliance was affirmed with the award of our first-ever patent this year. Through state-of-the-art engineering principles, we're protecting our customers with cutting-edge patented security intelligence, which simplifies governance, risk, and compliance, accelerates order processes, ensures compliance with a single integrated solution. And our fourth pillar is the Power of One. With the Power of One, we build, market, sell, implement, support, and run our ERP. Here's what makes the Power of One special. It's an IP engine.
So at every stage of this model, we get feedback and build it directly back into our product. We have a direct relationship with our customers. We own our customers from end to end. The third is ERP is complex, and there will be issues from time to time. And the old model is broken where the vendor blames the SI, and the SI blames the vendor. In our model, we're 100% accountable. And with all of this, it results in 99-plus% customer retention over the last 37 years. And as a 100% SaaS company, we've pivoted to our next major innovation, becoming the world's first SaaS Plus company. This is game-changing in our industry and can only happen because of the power of one, and Stuart will discuss this later.
On this slide, you can see that profit growth accelerated in FY24, up 18%, which is an obvious acceleration over our usual and historical 10%-15% growth. As you can see, we've got a track record of achieving the top end of guidance, and our outlook for FY 2025 remains strong, and we'll talk about that later. During the year, we upgraded our medium target for the second time to now surpass AUD 500 million of ARR by the first half of FY25. And our focus is to maintain the momentum well beyond AUD 500 million worth of ARR. It's why we invest in R&D to continue to double in size every five years. And these investments in R&D are investments in things like SaaS Plus to build future platforms of growth.
Our current total addressable market for the products and modules we provide in the regions we serve is currently AUD 13.5 billion. All of this gives us confidence to be able to double in size every five years. In our first-ever Investor Day this year in July, we announced the new long-term target. We've now set ambitions even higher, and we announced AUD 1 billion plus ARR by FY30. Folks, we delivered a record profit up 18%, above guidance, strong ARR growth of 20% driven by SaaS Plus and the U.K. The U.K. sold 70% more new ARR than the previous years, and PBT margin improved even with the planned negative impact of SaaS Plus. Margin would have been a further 1% better. I'll now hand to Cale.
Thanks, Ed. I'll now take you through the financials, beginning with the income statement. Our company is thriving by every measure. Profit before tax has increased 18% to AUD 152.9 million, ahead of our guidance given at the half of 12%-16% growth. SaaS Plus is resonating with our market, and this is translating into growth. With total SaaS fees up 20%, our SaaS and recurring revenue grew 19% to AUD 466.3 million in FY24. This was enabled by a net revenue retention of 117% for the year, above our long-term target of 115%, which enables our business to double in size every five years. Total expenses grew 16% to AUD 362.6 million in FY24. This is lower than the 21% growth in costs in FY23. Within our total expenses are variable costs of AUD 81.2 million, up just 3%.
This is an excellent result, given the increased usage of our SaaS platform by customers who are now live on SaaS and our increase in sales year on year. We have invested significantly in the technology underlying our SaaS platform through the financial year, and the team has delivered significant efficiency and security improvements. Our operating costs, excluding capitalization, are up 15% to AUD 310.1 million. Amortization has seen our net capitalized costs for R&D fall year on year. We continue to invest for the future. As we transition to being a SaaS Plus business, we are mindful of the impacts on profitability. The increase in SaaS Plus ARR being sold in the year has negatively impacted our PBT margin, as expected, by approximately 1%.
SaaS Plus delays our revenue recognition as we replace one-off upfront consulting revenue with recurring SaaS fees that take up to four years to achieve the same aggregate amount. This is why our path to ERP in 2030 is such a focus for us, as we are rewarded under SaaS Plus for our customers going live faster. Every day we go faster drops straight to the bottom line as margin, a complete rethink of what a consulting business does. Notwithstanding our SaaS Plus investment, we have maintained our profit growth and increased our margin from 29% to 30%. While profit before tax was up 18% to AUD 152.9 million, net profit after tax was up slightly less at 15%. The effective tax rate for the year was 23%, up from 21%, primarily driven by the growth of our R&D tax incentive claim being lower than our profit growth.
We've indicated in past periods that we expect the tax rate to migrate towards 23%, and we expect it to remain at about 23% in future periods. Our operating segments on the left-hand side of this slide. As a SaaS company, we manage our business in three segments. Strong growth in our SaaS recurring revenue is driving the profit from software segment. Our consulting segment profit is down, as planned, as we invest in our SaaS Plus offering. We expect profitability to continue to decrease in the consulting segment and grow in the software segment as we gather momentum and reach scale in SaaS Plus. Profit in the corporate segment benefits from the growth in the operational segments but was impacted by legal and other costs in FY24. On the right-hand side, you'll see our geographic splits.
In our APAC region, the company's largest, profit before tax is up 19% to AUD 150 million. The U.K. profit before tax is down 23%, as expected, to AUD 2.9 million. SaaS Plus is the go-to-market approach in the U.K., and given the U.K.'s size, high sales relative to the existing ARR results in an overweight impact during the ramp-up of the SaaS Plus strategy. As previously outlined, taking the equivalent revenue as recurring SaaS fees over a longer period does have a negative impact in the short term when compared to one-off consulting. However, the ongoing recurring nature of this revenue has a positive long-term impact on our business. With the U.K.'s ARR sales increasing 70% year on year, we are very happy with the fundamentals of the U.K. region. Our success over 35 years is based on being an R&D-led company, unlike our competitors that are sales and marketing-led.
The growth engines within our business today were built in R&D yesterday, and we have consistently allocated capital to R&D, which has expanded our TAM and driven sales. We invested 25% of revenue, or AUD 128 million, in R&D in FY24, with 54%, or AUD 70 million, capitalized. We have delivered on our roadmap for innovative products and functional improvements to our existing products. Going forward, we expect to maintain our R&D investment in the 20%-25% of revenue range. We believe this is the right level of investment to continue to grow as we have. Revenue is expected to grow faster than our R&D spend. We continue to invest in developers and their productivity to deliver more for our customers. Our balance sheet remains strong. Cash and investments have increased 25% to AUD 278.7 million over the last year.
Second-half weighted renewals and a strong collections performance have driven an uplift in cash of more than AUD 100 million in the second half. This strong cash position has enabled us to bring forward payment for some of our creditors where it made commercial sense. This has resulted in our payables falling by AUD 16.1 million year on year. We are fortunate to be able to do that. Deferred revenue has increased by AUD 31.8 million, consistent with our business growth and annual in-advance billing schedule. We renewed our lease in our Brisbane headquarters in the second half, extending it to 2033, which increased our lease-related assets and liabilities. Net assets have increased AUD 73.3 million over FY24 to AUD 379.3 million. Onto the cash flow now. In FY24, cash flow generation has come in at 101%.
This is calculated as operating cash adjusted for lease payments and capitalization of sales commissions and R&D as a percentage of EBITDA. Cash flow generation has settled year on year to land where we expect going forward at about 100%, which is consistent with FY23. Our collections were strong in the fourth quarter, so as I mentioned on the balance sheet, where it made commercial sense, we brought forward payments to suppliers. Cash flow is increasingly predictable and stable, with the business now having completed its transition to SaaS. We are incredibly proud of the results we have delivered in FY24. Our board has determined a final dividend of AUD 17.37 per share. This takes our FY24 total dividend to AUD 22.45 per share, up 15% on FY23. This year, we are paying 62% of EBITDA as dividends, which is consistent with last year. The dividend will be franked to 65%.
Tech One's balance sheet is very strong, with no debt and a significant cash position. High levels of recurring revenue, strong cash flow generation, and a strong new business pipeline provide us with confidence in the future. Consequently, we have taken some time to consider capital management options in FY24. As such, we have taken steps to implement the following actions. Firstly, the dividend policy has been revised from a growth target of 8%-10% to a payout ratio of 55%-65% of NPAT. This change allows dividend growth to align more closely with net profit after tax growth, while balancing stability, rewarding shareholders, and maintaining the capacity to invest for growth. Secondly, we'll look to continue to grow our business through acquisitions, executed in a disciplined way. We've outlined the criteria that we run our acquisitions through and are pleased today to announce the acquisition of CourseLoop.
This is an important bolt-on acquisition for our higher education solution, which makes our offering deeper and more unique than any other education software provider in the world. While earnings neutral in year one, the curriculum management IP is a valuable extension to our offering that sits well with our other products. The product had AUD 9 million of ARR at close and has been growing at 25% per year. We paid AUD 60 million in total, with AUD 45 million in cash now and AUD 8 million over the next two years. Additionally, we have issued AUD 7.5 million worth of equity options. Finally, a new policy has been established to purchase staff-related equity needs on market instead of issuing new shares. This measure aims to reduce dilution and manage the capital base effectively. For context, this represents 1.3% of the capital base over the last three years.
I'll now hand over to Stuart to take us through some of the notable achievements in FY24.
Thanks, Cale. TechnologyOne's strategy has remained consistent for the past 37 years, delivering the best products by leveraging leading technology and functionality to achieve outstanding outcomes for the industries we serve. We've been fortunate to maintain a strong focus on our core mission of developing and delivering ERP and mission-critical products with a tailored ERP solution designed specifically for our community. An example of this focus is that we are the only ERP provider to include property and rating capabilities for Australia and New Zealand, the backbone of a council's technology infrastructure. Our customers appreciate the single experience, the single line of code, the single vendor approach, which not only reduces risk, a critical factor when you're spending citizens' money, but it also empowers them with a single source of truth for all their data, delivering efficiency and improved service for ratepayers.
And as you know, the core value of a single experience, one vendor, one code base, one implementer, one support team, the true essence of ERP is evident once again in our education vertical through our One Education solution. We are privileged to be the only company globally to offer a true SaaS ERP with a comprehensive student management system that includes timetabling and scheduling. And as Ed mentioned earlier, with more than 80% of the students in our market relying on our software every day as a thought leader in education, we recognize that increasing the need for universities to achieve greater efficiency and insight in delivering world-class student outcomes. The next logical extension in our One Education solution was the introduction of a curriculum management. Curriculum management facilitates the seamless creation, approval, deployment of a university's program, effectively managing their core product.
For the first time in our industry, universities can now oversee every aspect of a course, from conception, governance, scheduling, to maintain the student journey, managing the student journey, and reporting on the institutional and student success, all through one provider, one platform, and an integrated view. We could stop there, but as our value highlights, making the impossible possible, we're going further again with our digital experience platform, or what we call DXP. The DXP puts the power of the ERP in our customers' hands, empowering students with the visibility and information for more than 30 different third-party products in a single panel. This not only enhances the student's experience with the university, but more importantly, the empowerment of the student with the university, clearly understanding what it will take to complete their course and their degree, and an overall awareness regarding how to navigate that university.
This increases the student's potential to complete their degree, which is at the core goal of a university and that student. As we've mentioned previously, our customers are risk-averse and highly mindful of expenses they manage, as these are primarily derived from taxes and student fees. Therefore, we've always strived to deliver value through our Power of One model, where we are solely responsible for the outcome, specifically lowering the risk compared to multinational generic vendors such as Workday, Oracle, and SAP. However, as thought leaders in our vertical, we knew we could do better. This led to the deployment and the development of SaaS Plus, a groundbreaking solution that significantly reduces any risk for our customers.
For the first time, not just in our markets, but in industry worldwide, we offer one price that includes not only the software, traditionally known as license, and the environment it operates on, known as SaaS, but also the implementation, which we call SaaS Plus. We launched SaaS Plus in October of 2023, and since then, its growth and success have exceeded our expectations. Not only has it surpassed our internal KPIs, but it's also become a significant differentiator in the market, and this is validated with the success we are experiencing in the U.K. We are now seeing RFPs specifically mentioning SaaS Plus, which serves as true validation that we're once again elevating market requirements and expectations. The initiative that binds the company together is our ERP and 30-day target. This is our Manhattan Project initiative.
It will not only transform TechnologyOne, but it will revolutionize the ERP landscape worldwide. Let me provide some context. A large multinational ERP provider, on average, takes hundreds to thousands of days to implement an ERP, with often a 20% increase through variations and time. Currently, we implement our One Base solution within 140 days with zero cost to the client, zero cost to the client. Every day we save not only reduces our customers' time and risk, enabling them to receive mission-critical solutions faster and achieve a quicker return on their investment, but it also significantly increases our margins as our implementation costs decrease. Additionally, our ability to sell additional products to the same customer increases as they leverage the tools faster. For over four years, I've been discussing our investment in the U.K. market and its potential.
Today, I'd like to highlight the key milestones we've achieved. One, we have fully localized our ERP solution for the U.K. market. Two, we've developed a targeted U.K.-specific SaaS Plus student management solution that we call Student Plus. Three, we've built everything on our SaaS platform, which remains unmatched by competitors in the region. Four, we've established a sales team of over 15 people. Five, we've built a disruptive brand in the market with SaaS Plus and the strong vertical focus. Six, we now have over 150 customers in the U.K. Seven, we have the largest number of referenceable customers in our history globally. These initiatives have laid the foundation for significant growth we're seeing today. Our sales ARR is now 70% higher compared to 2024. This remarkable growth is a testament to our U.K. operations' flywheel gaining momentum and accelerating impressively.
I couldn't be prouder of the work the teams have put in over the past five years, overcoming numerous challenges to build a strong foundation that will benefit us for years to come. The U.K. is not only on the path, but it is now running at full speed ahead. And with our dedicated effort in the region, we will continue to go from strength to strength. I'd like to take a minute and highlight two interesting opportunities that we were fortunate to win in the half. The Net Zero Economy Agency was initially established within the Department of the Prime Minister and Cabinet on July 1st, 2023. They are responsible for promoting an orderly transition and positive economic transformation towards a zero-carbon energy market in Australia. This agency is now being spun out to operate independently, positioning itself in the forefront of the nation's net zero agenda.
The agency came directly to TechnologyOne due to its urgent need for fast implementation, robust compliance, and federal government process, a stringent security standard. Leveraging our proven capabilities, the agency is on track to go live by December 1st. Impressively, that is less than six months from signing the contract to the project going live. This rapid timeline and seamless implementation stands in stark contrast to the challenges typically faced by government ERP initiatives in Australia. Historically, the Australian federal government has experienced significant issues with ERP implementations. Delays, budget blowouts, and complex compliance challenges have often hindered progress. Many ERP projects have faced criticism for being overly complex, taking years to deploy, and ultimately not meeting the expectations of the stakeholders.
By comparison, the Net Zero Economy Agency's engagement with TechnologyOne is a clear demonstration of how a modern SaaS ERP solution can provide a more efficient, streamlined, and compliant path to success. Our deep understanding of government needs, combined with the focus on a rapid scalable deployment, has allowed us to overcome the typical hurdles faced by federal projects. This agency will be live within six months, delivering full compliance and operational capabilities on a schedule that meets their critical needs. This partnership is a testament to TechnologyOne's ability to enable swift transformation while ensuring full compliance with government regulations. The Net Zero Economy Agency's journey exemplifies our commitment to support clients who are driving meaningful change, particularly as we navigate towards a sustainable future.
Finally, and perhaps the opportunity that I'm most proud of during the second half of 2024, was being awarded the One Education deal with the University of Chester in the U.K. The University of Chester is a well-established university with a history dating back to 1839, serving over 15,000 students today. This opportunity was presented to us as the client wanted to move away from outdated financials and student management products. They were facing challenges with legacy vendors that offered no path to SaaS and showed little to no investment in improving their products. The University of Chester saw our true SaaS solution, its full ERP capabilities, its defense-in-depth security, and our more than AUD 120 million investment in R&D over the past year as a clear path to modernize the university.
Furthermore, with our SaaS Plus design, the risk to the university has been significantly diminished, which allowed us to secure this amazing project in record time. It is also worth noting that Chester has been our timetabling scheduling customer, and this existing relationship helped us expedite the sales cycle. Additionally, this is now our third student management award in the U.K. in nine months. This is unmatched by any other vendor in the region. Our strategy of offering 19 best-of-breed products within the world's only SaaS ERP continues to resonate exceptionally well with the verticals we serve. As highlighted, local government segment grew by 21%, the government sector grew by 41%, and the education sector grew by 15%. It's important to note that our market penetration in any vertical is no more than 15%. As seen in this graph, we delivered a full-year NRR of 117%.
Our target remains between 115% and 120%. Achieving the lower end of our target at 115% will enable us to double in size every five years. On the right-hand side, you will see our churn rate. These higher-than-historical results are due to the completion of our end-of-on-premise campaign. It's important to note that these results of 1.3% are well within our target range for the completion of the end-of-on-prem project and below the 1.8% we forecast at the half. And it is best in class for our industry. For years, we've been emphasizing that customers transitioning to our SaaS products achieve over 30% savings as a result of other solutions. Please let me elaborate. A customer who initially used our financial solution while operating a third-party EAM product such as Maximo found themselves incurring significantly higher costs, both for the SaaS platform and for maintaining the integration with our solution.
Additionally, they faced the burden of training their employees on two different systems. Therefore, migrating from Maximo to our EAM solution not only provided substantial cost savings, but also enhanced functionality. Our products are specifically designed for the verticals we serve, offering a more integrated, cohesive experience that directly aligns with their operational needs. This graph clearly supports our observations. Before FY22, our customer ARR compound annual growth rate stood at 8%. It's worth mentioning that the flat growth in FY22 is attributed to our acquisition of Scientia during that year. However, since FY22, we have largely completed our SaaS transformation. The CAGR has increased to 18%, demonstrating that customers are investing significantly more with us thanks to our SaaS solution. Our success is fueled by the incredible talent and dedication of our R&D team. Their relentless pursuit of innovation turns ambitious ideas into reality that drives our achievements forward.
The recent release of 24B, featuring over 438 new features, is a powerful testament to their exceptional work. Thanks to their dedication, this release has become our fastest adopted version in our company's history. Our future is in the hands of this amazing team. They're not only behind our past and present success, but they are also laying the groundwork for the next 37 years of growth, creating the products, tools, and technology that will shape the journey ahead.
Thanks, Stuart. So to wrap up the results, we delivered our 15th consecutive year of ARR revenue and profit growth. Profit before tax grew 18% to AUD 152.9 million. Total ARR grew 20% to AUD 470.2 million. We delivered NRR of 117%. Remember that our target is 115%-120%. Our U.K. sales ARR was up 70%. You can see the flywheel is now turning, and cash and investments were up 25%. All of this enables us to continue to invest in our ambitious R&D program, up 14% to AUD 128 million to build the future. With AUD 500 million ARR just around the corner, our focus is to maintain our strong momentum well beyond the AUD 500 million ARR and to continue to double in size every five years. It's why we invest in R&D for the long term, to continue to build platforms of growth, new products, new modules, new offerings.
You've seen this slide many times before, so I don't intend to go through it in detail. But what I'll remind you is that we have multiple platforms of growth, and we have focused and disciplined on each one of these things. Some platforms perform stronger in some years while others perform stronger in others. It's the diversification of growth opportunities that is one of the reasons that gives us confidence in our long-term outlook. We now set our ambitions higher. During our first-ever investor day in July 2024, we announced a new long-term target of AUD 1 billion plus ARR by FY30. Now, let's come down to FY25. Folks, the markets we serve, they're resilient. TechOne provides mission-critical software with deep functionality for the markets we serve.
Our global SaaS ERP allows our customers to innovate and meet the challenges ahead with greater agility and speed without them having to worry about underlying technologies. We make life simple for them. Our customers have independently verified cost savings of 40-plus% by moving to SaaS. SaaS Plus is creating significant opportunities for us, and the pipeline for 2025 is strong. And we'll continue to benefit from improving margins because of the significant economies of scale from our single-instance global SaaS ERP. So we see strong ARR and profit growth for FY25. We will continue our planned reduction of lower-quality one-off traditional consulting fees replaced with high-quality SaaS Plus revenue. We are on track to surpass AUD 500 million ARR by the first half of FY25, and we have set a new long-term target of AUD 1 billion ARR by FY30.
We set ambitious goals to make life simple for the community, and we are making this a reality. This would not be possible without the talented and committed people who make up the TechnologyOne team. They are the fabric that makes our company special. They have the grit, the determination to solve complex problems and make life simple for our community. They have the passion for the community through the TechnologyOne Foundation, and we have an ambitious goal to lift 500,000 kids and their families out of poverty. We would all like to thank every team member across the globe for their continued efforts, their passion for delivering world-class software for our customers and our users. FY24 has been another amazing year for the company, and it's thanks to all of them, our TechnologyOne team members. FY24 was another great year. PBT was up 18%.
ARR was up 20%, all underpinned by SaaS Plus, and the U.K. is accelerating. We've got great momentum in the business, and we now set our sights higher on $1 billion ARR by FY30. We provide mission-critical solutions for the communities we serve with our 19 products. And from our investor day in July, we provided detail of the significant headroom we have in the markets we serve with our existing products, and that's $13.5 billion of total addressable market. We've got multiple platforms of growth with our NRR target of 115%-120%. We'll now throw back for questions and answers.
Thank you.
That's it.
Ladies and gentlemen.
It's all your water bottle.
We will now begin the question and answer session. If you wish to queue for a 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 would like to submit a question via the webcast, please type your question in the Ask a Question box and click Submit. We will now start with questions from the phone. Your first question comes from Chris Gawler from Goldman Sachs. Please go ahead.
G'day, Chris. How you going?
Yeah, g'day. It's John Cowell. Can you hear me okay?
Yes.
Awesome. First question for me, just in terms of the PBT growth range going forward, curious just around your thoughts between managing cost reinvestment against tracking towards that 35% PBT margin that you've outlined in the past and just getting a sense for your confidence that this high-teens PBT growth rate is sustainable from here?
Yeah, there's lots of levers, isn't there, and lots of financial metrics. I think we might have said in the previous results roadshow our sort of priority and metrics, if you like, is PBT growth, closely followed by ARR growth. We look at cash and margin's important, Chris, but it's probably the fourth or fifth in the priority of those. Cale, do you want to talk about how we manage our investments in R&D, for example?
Yeah, I guess our investments in R&D, I guess we've been very fortunate over a long period of time for those investments to pay off and build the business that we have today. We're not looking to sort of necessarily scale up those investments. As we continue to grow, we will start to see that margin naturally expand. Our investments in R&D is fundamentally an investment in people, so we do need to balance that.
Yeah, I think just to reiterate also what Cale said in the presentation, Chris, is we expect that R&D investment range to be in that 20%-25% of revenue. And also, probably to answer the last part of your question, there's no doubt that some in the market think we should be growing faster than our traditional historical 10%-15% to 15%-20%. And we see it, and we think we can get there carefully and gradually over time. The most important thing for us is to ensure that as we grow, we're still delivering well for our customers and not over putting too much pressure on our staff. So it's all those fine balances, Chris.
You would have seen also in the slide somewhere in the deck, for the first time, we increased that, we call it the heartbeat of the company, to 12%-16% and delivered a little bit more at 18%. Carefully and slowly over time, you should expect to see that increase, Chris.
Yep, that's very clear. And then just a follow-up question on the U.K. It's very strong second half 2024 result seems to have been driven largely by some of these student management contract wins. Do you mind talking a little bit more about the pipeline for 2025 and just your confidence that the incremental added ARR can continue to accelerate from here in the U.K.?
Yeah, I'll let Stuart answer that.
Yeah. The U.K. is really doing well. We've found a sweet spot, and we're executing well. There's two things that have happened materially: one, fully localized product with referenceability, and two, the legacy vendors in the space have done a very poor job of supporting the region, so from a technical standpoint and an investment and an availability of resources to move the customers forward, and so they're coming to the end of the life of those products, and so they've come to us because we've got the products and the technology that they want to adopt and digitize the university, and when we started the program related to student, we focused primarily on the student management product, but what we found is two actual vendors were facing the same problem at the same time.
There was a Tribal issue with a legacy system, and there was a Unit4 doing exactly the same from financials. And so customers that are Unit4 and Tribal together are coming to us asking for replacement of both financials and student management together. And that is accelerating our growth because their need to get off of those old systems. And the pipeline is very strong.
Stuart was just on one of those.
Chester is one of those.
Yeah. Thank you.
Okay, thanks, Ed. I'll jump back in the queue.
Thanks, Chris.
Thank you. Your next question comes from Bob Chen from J.P. Morgan. Please go ahead.
G'day, Bob. How you going?
Good, thanks. Hope you guys are well. Just a couple of questions for me. Just in terms of that NRR, that 117%, obviously very pleasing. Would you be able to sort of help us unpack how much of that is driven by SaaS Plus versus maybe some pricing and then customer mix as well or new customer adds?
Yeah, I think in terms of our growth targets, we're planning to double in size every five years, so you can almost backsolve what that cumulative annual growth rate is. Within that, we've got many, many levers for growth, all of the products, SaaS Plus, U.K., potentially even acquisition, so long as we're in that range and that range of the lower end of our range of the NRR target, 115%, Bob will get us there, so that's our main game, is to focus on those things. We don't intend to split out SaaS Plus because it's our only way of going to market going forward, and was there a second part to your question, Bob?
No, I was going to ask a separate question more on the end of on-premise. Obviously, it had a bit of an impact on churn. But when do you expect the impacts from that end of on-premise to essentially complete and cycle out?
Yeah, we're pretty much there from what I'd call the organic business. Now, we acquired a company, Scientia, in 2022. And so we need to move them into our SaaS platform. So there is going to be a program of work to flip them across to SaaS over time. And so there's going to be some residuals, but the organic part of the customer base, the traditional TechOne customers, we are basically complete. You probably count on one hand the customers that are still remaining.
Okay, great. And just the final one, just looking into your disclosure, it looks like you've got about sort of 50-odd customers now on SaaS Plus. Can you talk a little bit about how your customers are responding to that SaaS Plus solution? And do they have that sort of understanding that even at the end of that sort of four-year SaaS Plus period, that that sort of fee will continue?
Yeah, it's like the journey of on-premise to SaaS, the same commercial conversations. But Stuart, is there anything you want to add to that?
Two things. One, I don't think the 50 is correct. I'd say it's north of that number. And two, you've got to remember our customer base. Our customer base is risk-averse. And so this is designed specifically for them. So there is no concern or even questioning related to what happens in year five, year six. They want the stability and the understanding of what SaaS Plus provides, and they understand the value of that. So there's really no questions related to it with the customer base.
Thanks, Brent.
Great. Thanks, guys.
Thank you. Your next question comes from Apoorv Sehgal from UBS. Please go ahead.
G'day, Apoorv
Hey, g'day, guys. Good morning. Just a couple of questions from me, please. Firstly, just on the U.K., the PBT was down year on year, and obviously appreciate the impact of SaaS Plus and those dollar numbers. Just wondering if there's any sort of extra costs in there as well, maybe some new hires that have been made in the U.K. that played a role in that profit result. And I guess to that end, is the U.K. sort of fully at scale from a people and infrastructure perspective yet?
Yeah, I think you're right on all of those things. I might hand over to Stuart just to color that in a little bit.
Yeah, you're right. We're building on the success of SaaS Plus, the success of Student Plus. We're doing a lot of enabling in the U.K., both from a sales side as well as from a consulting side. So there's a tremendous amount of onboarding we're bringing in to support these big deals that we're bringing in. So you are seeing that play through. I would say from a sales and marketing standpoint, we're pretty much at the end of where we need to be for the next two-ish years, two to three years. But from a consulting side, we're still ramping up, yeah, as expected.
How many salespeople do we have in the region now?
Total of 15 people.
Yeah, so it's quite large and scaled for growth now.
Yeah, going from, I think we probably had four people four years ago. So it's a massive ramp-up.
Yeah, and I think we were just talking about the other day, the total number is about 140 staff now, or maybe even a touch higher.
Yeah, I think a little higher than that.
Yeah.
Yeah.
Yeah, so you're right on all of those assumptions.
Brilliant. And just my next question was just on DXP local government. I think going back to May, you gave a number saying something like 25-ish customers were on local government DXP. Just talk about the take-up since then, where that sort of numbers tracking and how you think the momentum of DXP local government is going versus your expectations.
Yeah, we know the numbers are now almost touching 40, so they're in the high 30s. And it's almost like it's selling itself because when you look at a customer, particularly the sort of C-level or even the politicians at the mayor level, it's touching the customer's customer. And anything they can do to make that experience better for the resident is just something they're looking for. Is there anything you'd add to that, Stuart?
It's important to note that this is a foundational product, so there will be more and more modules coming out as it goes. So there's three modules inside it that we sell today, but this story will just continue. So if we have 38-plus customers, then they'll continue to buy more modules as we're still pulling across the rest of the customer base onto the platform.
Got it.
Thanks, guys. Appreciate it.
Thank you.
Thank you. Your next question comes from Josh Kannourakis from Barrenjoey. Please go ahead.
Good day, Josh.
Good day, Cale. Hope you guys are well. Just a couple of questions for me. Just in the U.K., obviously, you've had some good momentum in the second half there, largely in the student and in the higher-ed side of things. Can you talk a little bit about just the roadmap and timing around getting more penetration into the local gov space? And I know, obviously, Property and Rating is one of those apps. You're sort of not there yet, but just maybe in terms of your views on timing and how you sort of view that as being an unlock for that side of the business.
Yeah, if you look at the logo, the deals by logo, by local government or education, it's pretty much equal. In fact, I suspect it'd be slightly more logo adoption in local government than education. It's just the education deals are bigger. When you put student management into it, when you put that collective of student timetabling, scheduling, and financials as one group, it's just materially bigger opportunity. And that's why you're seeing the skew related to the total value. But customer adoption in local government is fantastic. We are continuing to sell more into the unitaries, which has always been a goal of ours. And we hope to be able to tell you some more news about that in a future period. We are continuing to get a strong footprint in local government in the U.K.
Related to Property and Rating or what they call Revenue and Benefits in the U.K., it's not really a space we're in right now. We're going to look for differentiation in local government in the U.K. through different means in the short term. But we are winning new logos fantastically well. We have a differentiated brand. And Student Plus, sorry, and SaaS Plus is the thing that is resonating so well for those councils to get away from that risk that they see with the Oracles and the SAPs in the space.
Okay, great. No, that's helpful. And then just in terms of within the Aussie side of the business, guys, in higher ed, are there any major upcoming renewals or anything in the next 12 or so months? And how should we sort of think about the renewal cycle for the business that you're currently in?
Yeah, so there's some legacy providers here in Australia that have some of the universities, and we're actively targeting those. They're collectively known as the Callista customers, which was acquired by Tribal many moons ago. Do you want to add a bit more to that, Stuart?
Yeah, so it is a target of us to see if we can, we've acquired a few over time, but it's a focused effort now to see if we can acquire more of them and bring them across to our platform. Again, underdeveloped product for them, not a SaaS solution. So there's an opportunity there. But overall, again, we can sell so much more into the universities than just student management. We've got timetabling scheduling that's constantly getting new modules. We have a fantastic track record right now in EAM. So we've got all these products. There are 18 other products we can sell in there. And it's our ability to continue to support that customer and bring the portfolio across to TechnologyOne that you're seeing the NRR growth from.
Got it. So you guys don't have, just in terms of your customer book, though, there's no major sort of refreshes or renewals or anything like that on the horizon next couple of months?
There's nothing that we're concerned about. We get renewals quite often, but again, with a churn of 1%, it's not something we're concerned about. It's not that we're comfortable. We've got to do the work, but it's something we're very confident with.
Yep. Heavy. Final one, just for Cale, just on the cash flow. So I think the payables looked a bit lower, which obviously probably artificially pushed down the cash a little bit. Can you just talk through whether there are any particular things there, Cale, in terms of cash flow and payables that might unwind into the next period or anything particular, one-offs or callouts that you should mention in terms of things that might have impacted what was a strong cash flow, but probably could have been stronger?
Yeah, look, there's nothing material to call out other than what I've already called out on the presentation, which is really, look, we had a really strong half from a cash collections point of view and a cash flow point of view. There are some suppliers that we got a sort of commercial benefit to bring forward some of those payments, but in the grand schemes, it's not material.
Yeah. Okay. No, very good. Just calling out. Thanks, guys. Appreciate it.
Thanks, Josh.
Thank you. Your next question comes from Andrew Gillies from Macquarie. Please go ahead.
G'day, Andrew.
Good morning, guys. Can you hear me?
Yeah, sure. I can.
Stuart, come. Thank you. I'm just mindful it's early in this SaaS Plus story at the moment. I think at the investor day, you spoke to sort of high double-digit SaaS Plus customers, but not all of them were billing. Can you please confirm how many SaaS Plus customers were actually billing at the end of FY24 to be billing in 2025, please?
Yeah, no, I'm not sure where that comment came from, actually. We're billing all of them. We can tell you that over the last, I'll call it three years, it started in October 2022. So since then to now, across the three financial years, we've sold something more like 80 SaaS Plus deals. 50 was just in the last year. So that might have been picked up somewhere else, but they're all billing. Yeah.
Okay, perfect. Thanks, Ed. And then can you give me a feel for the implementation multiples you're delivering on SaaS Plus? From memory, Blackpool Council was about 0.8 times. Is that a reasonable kind of benchmark that we can think about? And how is that going to evolve as you go to that path for 30 days?
Yeah, it definitely is. The trajectory we're heading on, and Stuart talked about One Base, for example, but do you want to just color that in with a bit more information, please, Stuart?
Yeah. So again, if you're using the benchmark of Blackpool at 0.8, the rule of thumb is probably around that space now. And some products we're getting much, much faster. Products that were taking us 80 days, we can do in 15 days. Again, if you look at the DXP LG, the knowledge base, that took three months. We can do it in less than a week now. And so incrementally, everything's getting faster. Some are a little harder to get there, but we're chasing to that ERP in 30 days by 28. And so that is the overall target. When we started One Base, it probably took about 190 days to do it. We benchmarked at 160. We're now at actually less than 140 days. And so you can see that not everything is linear.
Some are going to go faster and a little bit slower, but overall, we're on track to hit our ERP in 30 days by 2028.
All these things over time help with margin, as you can appreciate. We charge the customer the same annual recurring fee, but if we can deliver faster, they go live faster, get the benefits of the software, and then we can do more implementations with the same amount of people.
But most importantly for a sales guy, it gives us the opportunity to sell them more products because they're live. So we don't have to wait two years for them to absorb that product and go back to them and sell them the next thing because they can get live so fast. They can start to absorb our products faster.
Perfect. Thank you. And then the last one from me. Just in terms of the nature of conversations you're having with your customers, if someone was to think that there may have been some higher education institution sitting on the sidelines or perhaps waiting for a little bit more evidence, would it be reasonable to think that potentially this is now we've got a little bit more adoption and there's some sort of landmark deals in the space that the job gets easier for the sales team going forward?
I don't know about easy.
The flywheel is turning, so yes, there's a level of easy, but there's still a lot of work to do, but we've got the brand, we've got the referenceability, and I think we've got a perfect situation with other vendors that are failing that has allowed us to do this, but there's still a lot of work to do, but the path is there. Absolutely there now.
Stuart, you said earlier in the presentation, a tender or maybe a couple have come out only asking for SaaS Plus?
Yeah. So one of the validations when we started this program, goodness gracious, four or five years ago, we were excited. We wanted a target that we would receive an RFP that was actually calling for SaaS Plus. And we've received that now. So that's a validation from the market that they're looking for this type of model. The other validation we get is we get customers saying, "This product or module, when is it going to be SaaS Plus?" Because we're waiting for that. And so we're pretty much there now for all of our modules and products. Not quite there, but almost there. And the customers are the ones pulling us across to get to SaaS Plus. They want it faster than we can deliver it right now.
Thanks, guys.
Thank you.
Thank you. Your next question comes from Wei Sim from Jefferies. Please go ahead.
G'day, Wei.
Hey, Ed. Hey, Stuart, hey, Cale. Great result. Really cracking. I wanted to ask on just in terms of we had a U.K. conference in Bristol last week, so it'd be good to get some, I guess, qualitative comments. Any key takeaways from that customer feedback?
It's a really, really good question. So we had over 200 customers there or potential customers, almost the exact same size as our showcase that we did two years ago. So you can see that user community is banding together. It's fantastically well-run. A lot of the customers got up there and talked about their path and actually were educating each other how to take advantage of what is CiA, the product itself. The momentum is there. The groundswell of them coming together is fantastic. The feedback is exactly what we hope for at this stage. Now we just have to build from it. So all of the energy, all of the focus is there. But again, over 200 different customers showed up to our potential customers. Equal to a showcase. So a great, great story.
Awesome. Okay. It sounds like a really strong potential pipeline coming through. The other one is just on the SaaS Plus in the U.K. So I've done a bit of modeling for that in some of our research, and that suggests that some of the headwinds, or at least the second derivative in terms of the PBT, should start to kind of trough around years three to four. Just wanted to confirm if that's correct. And also, I guess related to that, when would we expect some of these PBT headwinds from SaaS Plus to normalize, given that we are a few years in already?
Yeah. If you think about our transition from on-premise to SaaS, it sort of replicates that from the license headwinds that we had that we managed to our PBT and to our growth. But Cale, is there anything else you'd add to that?
I think it's a lot easier to model in a spreadsheet than in real life. I think if you take a step back, Wei, as Ed's talked to, we have a whole bunch of levers that we can pull in the business and that we will continue to pull in the business to make sure that we deliver holistically while we manage through this so-called trough on SaaS Plus, and we're very confident that we can manage all parts of the business to continue to deliver for everyone.
Thanks, Al.
Awesome. Okay. That's it from me. Thanks again, guys. Great job.
Yeah. I might jump in now. We can see the questions from the webcast, and pretty much all of them are CourseLoop related, so I might jump in and answer those questions in a sort of holistic answer. You heard about our criteria when it comes to acquisitions. Does it add IP? Is it in the vertical markets we serve? Is it in our geographies? And U.K. is a bonus, or we would value it a bit more highly because it would help our growth and, of course, meet our financial hurdles and have the right culture. So that's why we ended up with CourseLoop. If you think about what TechOne does in higher education, because CourseLoop's in higher education, in some way, shape, or form, in the U.K., 80% of the target customers use our products. In Australia, it's probably 90%.
And so that's a really nice place to be because you have that relationship with those customers. It creates that white space opportunity we talk about. And also, if you think about that adage, land and expand, we've landed somehow. Might have been through acquisition, through timetabling and scheduling, but we have that relationship. And that University of Chester example Stuart talked about was a perfect example of leveraging the timetabling and scheduling relationship to sell on financials and Student Plus. Now, have a look at CourseLoop. We can now sell CourseLoop, a further product into those customers, as well as financials, HR, everything else we have. But when you join curriculum, timetabling, and student management together, you've got this powerful pyramid or triangle, if you like, of products.
Now, put that into ERP. It becomes so compelling that we're the thought leader in the space by having the deepest functionality for the markets we serve, and we call that solution the One Education Solution. There's been questions on what does that do for TAM and how are we going to grow it. I think you've got to wait till we've only just acquired this product. Just wait for the half where we'll give a lot more information about the growth in the business and the results. I should just say that they have ambitious targets of growing at least 25% ARR, and we're confident they'll hit that and maybe a little bit more. I just thought I'd address all of those questions in one fell swoop, and there may have been another question. How does the acquisition of CourseLoop help with our growth?
If you look at our long-term platforms for growth, and we have multiple of them, that slide will say we've got new logos in APAC and the U.K. We've got the NRR target of 115%-120%. We also have SaaS Plus new products we're building like DXP, and one of them is acquisitions. So we'll go carefully and slowly with our acquisition strategy, making sure it meets all of those criteria, but it's one of the levers we have to hit our ambitious goal of AUD 1 billion+ ARR by FY30. So I think that covers all of the questions from line. We'll just pause for a second. Was there any more questions from the webcast that weren't related to CourseLoop? One? Yep. Can we grab that one, please? So can we have that one read out, please? No?
This is the one Monday.
Yeah. Yep.
Do you want to grab it?
Yeah.
It's just a question from Paul Mason at E&P questioning, could we provide some indication of price growth, contribution to ARR separate from SaaS Plus uplift in yields? And is there any tailwind from previous years of high inflation still coming through, or has that passed through the revenue growth numbers already?
Do you want to?
It's an annual proposition with respect to CPI, Paul, so you're right that the past high CPI print has passed through, and we've talked to that a couple of percent last year. We printed NRR 119 down a little bit this year. As expected, we've seen inflation in our main markets drop from the 7% back into the sort of 3s, so that's correct.
Thanks, Cale. And I think that's the last question from the webcast also. We're a little bit over time. Can I now hand back to Harmony to wrap up the roadshow for today?
Thank you. Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may all now disconnect.