Thank you for standing by, and welcome to TechnologyOne Half Year Results Roadshow. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. If you wish to ask a question via the phone, you will need to press the star key followed by the number one on your telephone keypad. If you wish to ask a question via the webcast, please enter it into the Ask a Question box and click Submit. I would now like to hand the conference over to Mr. Edward Chung, Chief Executive Officer. Please go ahead.
Thank you, and good morning, everyone, and thanks for the introduction. This morning I've got Stuart MacDonald, our COO, on my right, and Cale Bennett, our CFO, on my left with me. Welcome to our 2024 Half Year Results presentation. These presentation materials were lodged with the ASX today. Today, I'm going to take you through the highlights of our results. Cale will take us through the detailed Financials. Stuart will then take us through our significant achievements, and then I'll wrap up with guidance for 2024 and our long-term outlook. Okay, turning to our highlights. I'm very pleased to announce that we've delivered another great result. Annual recurring revenue, or ARR, was up 21%. Net profit before tax grew up 17%, and this has been 20 years of consistent, great results.
And I want to spend a bit of time telling you why and how we continue these great results. You know, recently, we were told that we're one of the best-performing stocks on the ASX of all time, based on total shareholder return over the last 25 years since listing. Now, that's quite flattering, and it got me thinking about some of our recent achievements and what makes us unique, because when we understand this uniqueness and continue it, it puts us in a very strong position to continue our track record of innovating and delivering continuing strong growth. The last few years have presented some important milestones for TechOne. We completed our fourth generation ERP. We call that CiA. We successfully completed the transition from on-premise to SaaS. As a listed company, we entered the ASX 100.
We launched our DXP, taking us from the traditional back-office strength to end users of our customers. That's our customer's customer, or ratepayers of a council, or students of a TAFE or university. Our U.K. business became profitable, and the flywheel is really starting to turn now. Momentum is growing. Finally, we became the world's first SaaS+ company. These achievements, they didn't happen overnight. They're result of a very clear and very consistent strategy, and that strategy has stood the test of time, and we execute against this very clear strategy. Our team have got that relentless focus on execution. They've demonstrated many, many years of hard work, taking bold and calculated risks, constantly adapting and changing, and this translates into our ambitious R&D agenda, and I want to take you through that strategy now.
Our strategy puts us in what we call the blue ocean, as opposed to the red ocean, which is a sea of blood. We're one of few ERP vendors globally with very broad and deep functionality. It puts us up there with the likes of Oracle and SAP, and we say the rest are best of breed. In our core markets of local government and education, there's no one like us. We're an ERP software provider. We provide very broad and deep functionality. When you look back in 2008, we had about 11 products. Today, we've got 16 products and over 500 modules, and we continue to invest in even more functionality for our customers. We've got the deepest functionality for the specific verticals we serve, and we're not all things to all people. You hear us say that all the time.
We provide mission-critical products, which powers local governments, powers unis, governments, and large infrastructure providers. Our fourth generation ERP is available any device, anywhere, anytime, and we've successfully reengineered our entire code base, enabling our customers to always be on the latest technology. When you think about it, there's no other ERP provider on the planet that's done this once, let alone the 4x we've done in the past 36 years. This fourth generation ERP is also our global SaaS ERP. It's highly efficient, which allows us to invest for our customers and for the future. I'm really proud to say that we're that we're at the end of our SaaS transition, with only a handful of customers left to go live. The customers on SaaS, they unlock significant benefits, including 2 releases each year, providing new features and new functions.
Our customers are always on the latest release and always on the latest technology, and that enables defense-in-depth security with the highest levels of cybersecurity certification of any ERP provider around. All of our products and modules are available on SaaS so that our customers can take on additional products with little friction, and our customers report to us that they save over 30% on their total cost of ownership by moving to our SaaS. You know, we're one of only a few companies globally that has successfully made the transition from a traditional on-premise business to a SaaS business. This was a long-term strategy we started in 2012, and we've totally reengineered our products, changed our structures, our commissions, our reward plans, how we write and deliver software, every part of our business, and we've done it without skipping a beat for our customers.
We've carefully managed the massive license fee reduction shown in the dark orange on this graph. That is, we reduced lower quality, one-off, traditional legacy license fee revenue and transitioned to very high-quality recurring revenue, which is shown in that light orange line on the graph. We did this without missing a beat for our profit, which has consistently grown at 15% per annum. Some years, the license fee reduction was as large as AUD 25 million, and that's an immediate reduction to revenue and to our profit, so it's a truly amazing feat... But this isn't the first time we've reengineered the whole company, it's the fourth time. We started with green screen and went to client-server, client-server to Ci, now our Ci Anywhere SaaS generation, and we do this about every 10 years. Guess what? We're gonna do it again with SaaS+.
We're gonna transition very carefully from one-off, lower quality, new projects consulting revenue to high quality recurring revenue without missing a beat. Once again, we're doing something that the industry has never done before. We did it with license fees, and we're gonna do it again with consulting, and this continues the streamlining and simplification of our business for us and for our customers. We expect the impact of this transition to be much smaller than our transition from license fees to recurring revenue. Like we've done in the past, we'll manage the impact to revenue growth, to profit growth, and margin growth very carefully, and Cale will explain this a little bit later. When our customers are on SaaS, they take more products and more modules to automate and streamline their business.
You would have seen a graph like this in our last few presentations, where we showed cohort analysis. You know, customers have been moving to SaaS for 12 years, and each cohort that's moved to SaaS takes on more products and more modules to streamline and automate their business. There has been no SaaS cliff, SaaS Flip cliff. Customers continue this trend, and you're gonna see in our results, in our ARR growth, our ARR, average ARR per customer, and our net revenue retention, which are all very, very strong, and Stuart will take us through that example a bit later, too. Now, with the Power of One, we build, we market, sell, implement, support, and run our SaaS ERP. Our game-changing solution as a service, or SaaS+, which the guys will talk about later, can only happen because of the Power of One.
And finally, we're an innovation-driven company, and we leverage new tech and emerging technologies at each generation for our customers. So when you sum it all up, we're very unique. It's this clear strategy which resonates with the market and why we win against our competitors. Once we land a customer, they expand with us over time, taking more products and more modules to streamline their business. It's why our customers stay with us forever and what, what fuels our consistent, strong growth. Now, that results in our title-- total ARR up, growing strongly, up 21% to AUD 423.6 million, and that's both in new and existing customers. And with that number, you can see we're clearly on track to hit our goal of AUD 500 million ARR by FY 2025.
This ARR growth, it culminates in strong profit growth, up 17%, and as Cale will explain later, this includes a small headwind from our investment in SaaS+. For those who've been following us for a while, we had a target of AUD 500 million ARR by FY 2026. You would have heard me say many times before that cloud is war, and we've won this war in our vertical markets. As we've now transitioned all but a few customers to SaaS, our customers on SaaS, they take more products more quickly than customers on-premise, and we've proven this. This results in a very clear and strong and predictable pipeline, which in turn leads to our very strong net revenue retention number. So we're confident that we'll beat that target, and last year we upgraded that target to AUD 500 million ARR by FY 2025.
If we're on track to beat that target of AUD 500 million ARR by FY 2025, the next obvious question is: What is your next ambitious goal? Our focus is to maintain our momentum well beyond the AUD 500 million. I'll talk about that at the end of this presentation. SaaS+, it's the next logical evolution of SaaS, where TechOne delivers the entire outcome faster, with little risk, in one single annual fee to our customer. There is no traditional consulting, you know, from the likes of the big systems integrators or the Big Four, with massive costs and massive overruns. When you think about it, customers don't buy SaaS or software to spend years implementing it. They buy our software to streamline and automate their business. They want to go live fast and receive the benefits that comes with going live fast.
SaaS+ will deliver faster time to value as we continue to dramatically drive down our implementation time frames, and we remove the need for traditional, long, drawn-out, and risky implementations. Through the Power of One, TechOne is the only SaaS ERP provider to deliver on this compelling value proposition because we own all parts of the value chain. We've got our deep mission-critical products, industry-specific IP, which we've built over the last 37 years, and expertise in our highly skilled in-house consulting team. To be honest, SaaS+ is a game changer in the ERP industry, and it'll power our growth for many, many years to come, and we'll provide you an update later. When you narrow down to FY 2024, our outlook is very strong, and I'll get into that guidance a bit later. Before I hand over to Cale, I'll provide a highlight.
We delivered strong ARR growth of 21%, strong net revenue retention of 117%, and remember, with 115%, we can... per annum, we can continue to double in size every five years. SaaS and recurring revenue growth grew 21%. Cash flows basically break even at the half, and Cale will explain that it will be strong over the full year and approximately 100% of net profit after tax. Our net profit before margin is expected at the half and will grow net profit before margin at the full year. Even with the introduction of SaaS+, which has an immediate hit on revenue, on profit, and margin, we have and will continue to deliver strong growth and strong results. At the half, profit is up 17%.
So you can see that our operating result was good across all parts of our business.
The business has performed strongly in the first half of FY 2024, delivering net profit before tax up 17% to AUD 61.5 million. Revenue from SaaS and recurring business was up 21% at AUD 223.1 million.... Total revenue was up 16% on the previous corresponding period, or AUD 34.5 million, noting we are cycling over the AUD 7.4 million dollar impact in the first half of 2023 from the Scientia earn-out write-off. Variable costs have been well contained despite increased customers going live on our SaaS platform. I'm happy to confirm that we have delivered on our commitment in the half to invest in our long-term SaaS+ strategy while maintaining our short-term results. SaaS+ continues to gather momentum. With the SaaS+ model, we forego revenue initially without deferring any of our implementation costs.
Under SaaS+, in year one, we receive one quarter of the first-year revenue we would under the traditional implementation model, but we receive it forever. In the half, our investment in SaaS+ has impacted our net profit before tax margin in the order of 1%. This is planned, and as Ed mentioned earlier, the maximum impact will be much less than that of the license fee to SaaS transition. Despite this, our profit before tax is still up 17%. We will share more information on how we expect the SaaS+ transition to unfold later in the year. The effective tax rate was 21% in the half, and you should expect something similar, maybe a percentage point higher at the full year. Our operating segments are on the left-hand side of this slide. As a SaaS company, we manage our business in three operating segments.
Strong growth in our SaaS recurring revenue drives the profit from our software segment, up 36% to AUD 50.7 million in the half. Our consulting segment is down as planned, as we invest in our SaaS+ offering with strong market acceptance. We expect this to continue to reduce over time as we gather momentum and reach scale in SaaS+. The corporate segment benefits from growth in the operational segments, but versus the previous corresponding period, was down due to the non-recurring Scientia earn-out write-off. On the right-hand side, you can see our geographic segments. As planned, the U.K.'s profit fell in the first half of FY 2024 versus the first half of FY 2023, as the market acceptance of the SaaS+ model gathers momentum.
SaaS+ is the go-to-market model in the U.K., and as we build scale, the U.K. business will benefit materially over the long term from this investment. It's worth noting that the first half 2024 profit is up on first half 2023 in the U.K., where we delivered a profit of AUD 0.7 million with investment in increased sales headcount for scale. ARR in the U.K. is growing strongly, and Stuart will take you through that later. Turning to the balance sheet, cash and investments have increased 24% to AUD 172 million over the last year. With cash flow generation seasonally weighted to the second half and the final dividend paid during the first half, cash is always lower through the first half. Capitalized development. This has increased on the balance sheet by AUD 27 million, net of amortization from 12 months ago.
We continued to invest in our products to improve the utility for our clients now and into the future. R&D investment was 24% of revenue in the first half, with 54% capitalized. This is consistent with past performance. Non-current contract acquisition costs, higher sales activity, and the customer contract acquisition we spoke to at the full-year results have driven this line higher. Deferred revenue liability. This increased year-on-year by 21% to AUD 171.9 million. Deferred revenue growth is consistent with our business growth over the year. It is down during the half as we earned the revenue we were prepaid for in the second half of FY 2023. Long-term lease liabilities. During the half, we exited a property lease we inherited during the Scientia acquisition, reducing our long-term lease liabilities.
Additionally, with no new leases, the passage of time has seen the long-term portion decrease. We have signed an extension on our head office lease this half, so our lease liabilities will increase. TechOne's robust financial position, characterized by significant cash holdings and no outstanding borrowings, provides balance sheet flexibility for inorganic growth. Cash is expected to grow significantly in the second half of FY 2024. Over the last 12 months, net assets have increased by AUD 64 million to AUD 317.5 million. On to the cash flow. As mentioned on the balance sheet, cash flow generation at TechOne is weighted to the second half, consistent with the sales cycle and historical anniversary dates for committed renewals. It was broadly flat in the first half. Cash flow generation is expected to finish the year at approximately 100%, consistent with the prior year.
We had a significant tax outflow in the first half, following an increase in our ATO installment rate, a function of higher profitability in 2023. This is a cash flow timing point. It doesn't change our effective tax rate, which, as I mentioned earlier, will be around the 21%-22% mark in FY 2024. We have focused on maximizing returns on our cash holdings in the first half, with AUD 2.9 million in interest earned, up from AUD 600,000 in the PCP. This is reflected in the cash outflow for investing activities. This is simply transfers to term deposits to increase yield. Our cash flow is predictable now that we have transitioned to SaaS.... You should expect the seasonality of low CFG in the first half, followed by strong CFG in the second half, to continue.
On all measures, our company continues to perform well while we invest in the future. Strong revenue and cash generation and a clean balance sheet, which has built a significant cash reserve over time, enables us to reward our shareholders. Our board has determined an interim dividend of AUD 0.0508 per share, up 10% on the PCP, a record for our company. We've increased the franking rate from 60% to 65%, which we expect to be the new level. I'll now hand over to Stuart to take you through some of our achievements.
Thanks, TechnologyOne's strategy remains precisely the same as it has for the last 36 years: delivering the best products that provide the best technology, functionality, and outcomes for the verticals we serve. What does that mean? We have 16 fully integrated, best-of-breed products that together form the world's only fully SaaS ERP, tailored for the verticals we serve. Our differentiation goes even further. We're the only SaaS ERP provider with Property and Rating solution within their portfolio. Moreover, this solution is considered the gold standard in Australia and New Zealand. Furthermore, we're the only provider globally with a full SaaS ERP that includes Student Management, which again, is the gold standard in Australia. But we don't stop there. With the release of DXP LG solution, the market adoption of this innovative technology and enablement solution is further differentiating us in the local government market.
With the early adopter release of our student management DXP, we are once again setting the standard of what an ERP partnership with a vertical should look like. This is all underpinned by our SaaS+ go-to-market strategy, which I'll discuss further. Our primary objective is to deliver products that consistently enhance the efficiency for our customers. This enables us to continually increase the number of products we manage within our customer's portfolio. This accompanying growth clearly demonstrates the success of this strategy, showcasing the steady growth of ARR and ARR growth per customer. As we mentioned during our last roadshow, we've added the additional line to show the growth per customer, both with and without that Scientia acquisition, now referred to as timetabling and scheduling, which we acquired about 2.5 years ago.
Our strategy of offering 16 best-of-breed products within the world's only SaaS ERP continues to resonate exceedingly well within the verticals we serve. As highlighted, local government segment grew by 29%, government sector, 21%, and the education sector, 15%. It is important to note that our market penetration in any vertical is no more than 15%. The U.K. continues to accelerate its growth, with new ARR up 40% compared to the prior comparative period. Our sales team in the region has now exceeded 15 members. We've secured our first SaaS management contract to replace the outdated on-premise Tribal solution. This initiative, known as Student Plus, has a very strong pipeline. The pipeline for local government is significantly larger than ever and growing at a rate that supports our strong regional growth.
We're very proud of the growth in this region and expect this positive trend to continue. I'd like to take a minute and highlight a few of the significant wins during the half. In the U.K., which is experiencing significant growth, I couldn't be prouder of the partnership we've now built with Solent University. It was a direct award, marking the largest financials and HRP deal we've ever done in our U.K. history in the education vertical. The success was driven by our SaaS+ offering, which enabled a very short sales cycle. Moving on to McConnell Dowell, it was a highly competitive bid process involving large multinational vendors. Our key differentiator in achieving this significant outcome were our SaaS+ offering and the robust functionality of our financials and Asset Management solution.
And lastly, ASIC project is a remarkable federal government logo for us to add to our portfolio. This significant win replaces Oracle with our Defense in Depth security architecture being the key differentiator for us. I'd like to take a moment and thank the team for their success in these deals and all other deals that we achieved in the half. I brought this slide to your attention last year to highlight that once a customer transitions to the SaaS platform, the rate of adoption of products significantly, significantly accelerates. This is because the products are always available, up to date with the latest technology, security, functionality, regional, and vertical compliance requirements. With our ERP architecture, the solution is fully integrated, allowing for seamless information flow. Our analytical tools provide a complete enterprise visibility.
By consolidating their IT budget with our CiA SaaS ERP solution, our customers experience an average of more than 30% savings. We also introduced the cohort analysis, which clearly highlights the growth of ARR per cohort over time. Now, if we focus on the 2012 cohort. We were privileged to acquire a new large Queensland council, with a new customer—and with this new customer, had an opening balance of about AUD 250,000 ARR. If I analyze this council in the same way I represented the previous council last year, you quickly see that the ARR growth over the last 12 years. What should be highlighted in this slide is a significant growth in new products that have been acquired post-SaaS Flip. Their CAGR pre-SaaS Flip was 9%, and post-SaaS Flip is 40%. This graph shows the profile of our ARR per half.
The gold section represents the ARR achieved via product sales, while the black section highlights ARR achieved via flips. This graph clearly shows that we've comfortably replaced SaaS Flip opportunities with our 500+ modules and 16 products. This validates what we've been saying for the past few years. We needed to transition our customers to the world of SaaS, so they could leverage all the benefits of our CiA ERP SaaS solution. The additional purchase of new modules and products post-flip clearly fills any void left from the completion of our SaaS Flip campaign. As seen in this graph, we delivered a first-half NRR of 117%. We hope these results and the transparency of our NRR profile dispel any concerns the market might have about our performance post-SaaS Flip program. Our target remains between 115% and 120% NRR.
Achieving the lower end of our target of 115% per year will enable a double in size every 5 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 is important to note that these results of 1.8% are well within our target range for the completion of our end-of-on-premise campaign. The traditional model of ERP implementations is flawed because the responsibility of a successful project is very unclear. This confusion arises from having one vendor provide software and another vendor, such as KPMG, Deloitte, or Accenture, handling the implementation. To address this significant flaw in the industry's ERP go-to-market strategy, our founder developed the concept of the Power of One more than 20 years ago.
This approach makes every aspect of the engagement our responsibility, from R&D, sales, marketing, to support, but most importantly, the implementation of the project. As a result, we are solely responsible for the outcome. We believe this is why we've been so successful and have a 99.2% retention of our customer base. As we continue to evolve the Power of One model, we focus on minimizing any friction or risk our customers might face, aiming to have faster, less risky, successful projects. Five years ago, we began work on what we now call SaaS+. We formally introduced SaaS+ to the market a year and a half ago at our showcase event in Brisbane, and I'm proud to report that we now have over 65 customers leveraging this industry-first concept of a single-fee solution as a service.
This means there is no consultancy fees for these projects, and we are fully responsible for the delivery and outcome for our customers. The market adoption of SaaS+ has exceeded our expectations, significantly differentiating us in the U.K. and contributing to our growth. As discussed, this is the primary reason for our success at McConnell Dowell in a competitive landscape, and we're already seeing tenders referencing this design. We are more than 70% complete in the rollout of all of our products to be SaaS+, and we're actively engaging with our community in its design. As we've highlighted before, a key initiative within the SaaS+ model is to reduce the days needed for implementation, thus accelerating our customers' ability to realize their return on their investment.
We've already made significant strides in this initiative, reducing implementation times from current products from about 120 days, which is already 50% faster than our competitors, down to 35 days. For example, our core financials, which traditionally took 9 months to implement, again, already the best in the industry, now only takes 16 weeks. We have referenceable customers who have achieved these results. Aligned with our company's value of making the impossible possible, we aim to push the envelope even further. So today, I'd like to announce a new company-wide initiative. Our goal is to reduce the implementation time of our ERP solution, which currently takes over 300 man days, down to just 30 days. This is not only unique in the market, but groundbreaking in the global enterprise tech sector.
These initiatives will enable our customers to go live with their products in weeks, not months, not years, driving greater efficiency in their operations, while at the same time removing any project-related risk, resulting in massive cost savings and significant outcomes for our community. We are proud to announce that we will achieve this ERP in 30-day initiative by 2028, and we will be leveraging our AI engines to make this vision a reality. Now, none of these amazing results would be possible without our significant investment in R&D. With the release of 24A, featuring more than 20 new modules and over 540 new features, we've experienced the fastest version adoption in our history. The growth of DXP LG is faster than we expected, and we will provide you with more details on DXP at our full year results.
We are privileged to have an incredible R&D team, who not only provide the functionality and products that were the foundation of the results of our past, but they're also building the products, tools, and technology that will underpin our growth for the next 35 years.
Thanks, Stuart. So to wrap up these results, we delivered our 15th half year of record profit, revenue, and ARR. Profit before tax of AUD 61.5 million was up 17%. We grew total ARR, up 21% to AUD 423.6 million. We delivered an NRR of 117%. Remember that if we can achieve the minimum end of our target range of 115%, we can continue to double in size with that platform for growth alone. Our U.K. sales ARR is up 40%, the flywheel is now turning, and cash and investments are up 24%. I'll now turn to our outlook and guidance for the full year for FY 2024. You know, the markets we serve, they're resilient. TechOne provides mission-critical software with deep functionality for those markets.
Our global SaaS ERP allows our customers to innovate and meet their challenges ahead with greater agility and speed, without having to worry about the underlying tech, and we make life simple for them. They look to us to automate and streamline their business. SaaS+, it's creating significant opportunities for us, and the pipeline for 2024 is strong. We'll continue to benefit from improving margins because of the significant economies of scale from our single instance global SaaS ERP solution. We expect strong ARR growth of approximately 15%-20%. Planned reduction of lower quality, one-off traditional consulting fees replaced with high-quality SaaS revenue. Now, similar to our planned license fee reduction, this will cause a temporary headwind, but not to the extent of our license fee to SaaS transition, and we will carefully manage the P&L impacts.
And finally, we expect full year Net Profit Before Tax margin growth of approximately 1%. Now, a few points about our FY 2024 guidance. Firstly, we talk about a heartbeat in our business, and that heartbeat has been 10%-15% profit growth. And this has been the rate that we can grow and successfully deliver for our business and for our customers, and it served us well. We've been consistent in our approach and message, and that is that we're measured, and we're predictable, and we focus on that heartbeat of strong, consistent, steady growth. And what this means is, you won't see us shoot the lights out one year and then have a lower profit growth the next year. Secondly, and over time, we've carefully managed that transition of one-off, lower quality license fees to high quality recurring revenue. So our business is highly predictable.
Thirdly, we're also successfully and carefully rolling out SaaS+ that you heard about today. It's a game changer and resonating with our customers. Again, with one hand, this means we're transitioning off the one-off, lower quality consulting revenue to high quality recurring revenue. And relatedly, we're driving down the time to implement, which is an even faster time to go live for our customers, and also better margin for us over time. And finally, we're growing all parts of our business, our methods, our products, and solution. So when you put all that together, what this means is that we can carefully increase our heartbeat. So you'll see a moderate increase in our profit heartbeat growth to 12%-16% growth. And to repeat what Cale and Stuart have said earlier, we're investing in the future. We're investing in things like SaaS+.
It's a game changer for our customers and the industry, and it's a long-term strategy. There will be an impact on net profit, revenue grow-- I'm sorry, on revenue growth, profit growth, and margin growth. But even with this, we're forecasting continuing strong, consistent, and steady growth. Now, turning to the long-term outlook. We're positioned well for the future. Firstly, with strong NRR of 115%-120%, at 115% alone, we can continue to double in size every five years. Secondly, you know, with AUD 2 billion of ARR white space in our existing APAC customer base, just by taking out products and modules they don't have today. Our R&D team continue to create new products and modules such as DXP, such as App Builder. Over the next five years, that increases that white space.
It doubles it from AUD 2 billion to AUD 4 billion. Solution as a service, which you've heard a bit about today, it's a game changer. Again, that increases our ARR opportunity by 40%. We continue to search for strategic acquisitions like Scientia, which we did 2.5 years ago, like Property and Rating. In the final few platforms of growth, we continue to win new logos in APAC. We continue our growth in the U.K., and our focus and strategy is to continue to grow our margin of 35% through our significant economies of scale through our global SaaS ERP. Ladies and gents, none of these results would be possible without the talented and committed people who make up TechOne. We'd like to thank each and every member of TechOne across the globe.
We'd also like to thank you, our shareholders, for your continuing support. Can I now hand back to Darcy for questions?
Thank you. If you wish to ask a question via the phone, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question. If you wish to ask a question via the webcast, please type your question into the Ask a Question box and click Submit. Your first phone question comes from Chris Gawler with Goldman Sachs. Please go ahead.
Yeah, good morning, Ed, Stuart, and Cale. Can you hear me okay?
We can. Good day, Chris. How are you?
Good day. Yeah, well, thanks. Hey, first question, just on CIA, was interested to get an update on the percentage of customers that you now have purely on CIA, and whether you'd consider... or whether you are considering end-of-lifing any of the CI products to accelerate that transition to CIA?
Yeah, I might just kick it off and then hand over to, Stuart. So, CiA is our fourth generation, software, if you like, and Ci is our third, just to, remind everyone. And, Stuart will explain that we don't have-- you know, there's a mix of all the products and modules our customers on and our long-term plans to move them, just like we did SaaS-
Yep
... flip, Stuart.
Yeah, so we started work on CiA about 12 years ago, and as we released a module or a product, we released that to the market. So I don't know of any customer that's 100% Ci. They're all in some transition across. And I'd say there's probably between 70 and 90 customers that are wall-to-wall CiA and all of them doing that transition. What we wanna do is we'll get to a point when we get comfort in mass, probably in that 30%-40% of our customer base, that is full CiA, and then we'll create an end of Ci campaign, and we'll give them 4 years to get off of Ci, and so plenty of room to move across. So it's in the future, and we can see it, but we're not quite there yet.
Thanks, Chris.
Yep, that makes sense. And then putting together a couple of the comments on the outlook. With ARR growing at 15%-20% this year, obviously it gives you a good base of revenue into next year.
Mm.
Just marrying that against your commentary for continued PBT margin expansion towards 35%, just curious in your thinking around the PBT growth outlook over the next few years, whether you'd, you know, allow that to run up, you know, closer to high teens, or whether there's a preference to reinvest instead?
Yeah, it's always a delicate balance, Chris, so thank you for your question. I think, you know, we've had plenty of commentary about us over the years, stepping up our growth, you know, from 10% to 15% to, say, 15%-20%. And with all of the things that we discussed on the call, I won't go through them all again. We can see a time in the future where it's, you know, in that range of 15%-20% profit growth, but if you know our style well, you'll see that we won't shoot the lights out one year and then potentially drop the next. So it's a steady increase over time to get there, if that makes sense, Chris?
Yeah, that's clear. And then one last question, just on SaaS+.
Mm.
Given the way you've been pushing that in the U.K., and just against, I think, Stuart's comment, that you're 70% of the way there in terms of the work across the product suite to get it up to speed for SaaS+, just interested if you could talk a bit more in terms of what you've learned from some of those SaaS+ implementations in the U.K.-
Yeah
... and your confidence to push it harder in ANZ as a result.
Yeah. I think, SaaS+ is a game changer. I think Stuart said there's about 50 customers, 50 or so customers.
56.
Yep. Yep, seven or eight of them are already live, so we've already made some key learnings. But, Stuart, do you wanna just give us more details about that?
Yeah. What we're learning is we can speed up the implementation, but we need to spend more time with the customer to get them spooled up. So they become the constraint with their resourcing, which is a good problem to have, but it's something that if we can work with them and give them, on the onset, a bit more of an understanding of what resources we need when, we can really see the speed really coming through the whole program, not just our part of the program. But it's absolutely resonating with the market. It differentiates us in the U.K.. Again, McConnell Dowell is an example of a very large deal that we won, that was significantly won because of SaaS+. So the market is really getting excited.
I think our validation point is when we started seeing RFPs come out to market that were referencing a SaaS+ model for the first time. You could see it really starting to take hold in the markets we serve.
Thanks, Stuart. I might just add that, in the U.K., 100% of our business is SaaS+. And in Australia, over time, it will be 100% of our business. But to be clear, if it's a new logo, it's SaaS+. If it's products like, financial, supply chain, enterprise asset management, now HRP, it's all SaaS+.
One of the questions-
Right
... we've been getting is: Is it only for new customers? So what we've done is we've actually SaaS+ our products and our modules. We call them cartridges. So we can actually put them onto a traditional implementation. So anything new that is sold, EAM, regardless of if it's a new customer or it's an existing customer, that's all SaaS+.
Mm-hmm.
We're building that functionality across the platform.
Thanks, Stuart.
Yep. Thanks, team. That's all for me.
Thanks, Chris.
Thank you. Your next question comes from Paul Segal with UBS. Please go ahead.
Hey, good morning, guys. First question, just wanna double-check if I heard correctly on SaaS+. Was it 65 customers now on SaaS+ globally? And was that up from 34 as of 2023?
56 customers, and yes, up from the previous numbers.
Yep, perfect. Okay, and then just on DXP Local Government-
Mm.
Could you talk about, like, how many local council customers have taken it up now?
Mm.
Just any thoughts on how that ramp up might look like going forward?
Yeah, thanks for the question, Paul. We didn't spend a lot of time this results release, 'cause we've got a lot of good stories to tell about DXP. There's something like 25-ish customers that have taken LG DXP. And we'll tell a lot more in future roadshows, but the message—the value proposition is really so extreme, and it's resonating really well with the local government customer base. In fact, customers are buying LG DXP without us even demonstrating. They're talking to their peers and seeing it used in other councils, and it's almost walking off the shelf.
Sure. Just my final question is a bit more of a general sort of one.
Mm.
How are you seeing kind of like IT spending budgets within local council and, and education sectors? Like, I just would have thought, in order for customers to take on your new products, like the DXP, budgets sort of implicitly would need to keep going up. Unless you think that's sort of not quite the right way to think about it.
Yeah, I think the way to look at it is our customers, whether it's a council or a university, in fact, any customer, they're spending the money with another provider. And so, in some respects, we call it zero-sum game, so we have to displace another provider to effectively, you know, you know, in technical term, gain some more of their wallet share. Now, our whole proposition is to land and expand, and if we do a good job with the first product, the first implementation, then the customers will, you know, take that over time with us. Secondarily, we would have talked about all of our products and modules being available on SaaS platform. So whether you're licensed for it or not, you see it, you can access it, you can use it.
And if you use it and, and love it, then we can have a conversation about you potentially buying it. And then thirdly, in any tough times, organizations look to organizations like TechOne, SaaS ERP to save money. And when they come to our SaaS, they're reporting saving 30%+ on the total cost of ownership of using TechOne when compared to other products, other modules, and on-premise.
Cool, guys. Thank you.
Thanks, Paul.
Thank you. Your next question comes from Josh Kannourakis with Barrenjoey.
G'day, Josh.
Please go ahead.
G'day, Ed, Stuart, Cale. Thanks for taking my question, guys. Just first one, just a clarification on guidance.
Mm.
So, you know, obviously, this is the first time you've stepped it up a little bit-
Yep
... and you've historically been very conservative. Is the way that we should think about it as well, given you've got some maybe slight headwinds on the SaaS+, but that will be become a pretty significant tailwind-
Mm
... over the next few years, that sort of range could increase up to, you know, up closer to the sort of, you know, 15%-20% over the next few years? Or how should we sort of think about the timing of that, and is there a natural tailwind over that period of time-
Yeah
... as this headwind becomes a tailwind?
Thanks, Josh. Look, our goal is to get to 15%-20%, and we'll do it conservatively and carefully over time. I don't wanna commit to a timeframe. The reason for that is that we just gotta make sure that every slight step up we do, that moderate increase in heartbeat, that everything delivers well, you know? And we've got a good track record of delivering well, but I just wanna see it, and then we gently and gradually increase it to 15%-20%. But, I'm picking up what you're putting down, we will get there. It's... I just don't wanna commit to the timing, until proving it to ourselves.
Okay, got it. Just a question on SaaS+.
Mm.
So, you know, 40% ARR uplift, as you mentioned. Just to be clear on that, if you've got a 5-year contract, and they've sort of taken that over there, at the end of the contract, does that revert back to a historical sort of level, or does it hold some of the uplifted sort of ARR? Can you just talk through what happens on sort of renewal there?
Yeah. It's the same as the transition from license fees to SaaS. You know, in that transition, that stayed forever, and that's gonna be the same with SaaS+.
Mm.
You know, so year six onwards, it'll stay forever.
Yep. No, good, thanks for clarifying that. And final one, just on the U.K. momentum, just to talk through, obviously, there's been a few moving parts-
Mm
... you know, in the student management side of things. Ellucian tried to buy Tribal. It didn't go ahead. Just keen to get your views on the sort of competitive dynamics.
Yep
... on both the Student Management side, and maybe some comments on that-
Mm
... sort of, you know, transaction there, and then also just on the broader competitive ecosystem in the U.K.
Yeah, no problem. So I'll just note that our student management competitors are pretty much the same globally. It's TechOne, Tribal, and Ellucian. Workday has pulled out of higher education globally. They're just servicing the handful of customers they start in the U.S.. But Stuart, can you elaborate on all competition in the U.K.?
Yeah. The profile really hasn't changed over the last six months. We see that some of the old companies, like Unit4, they haven't invested there in a little bit of an issue because they're getting caught out because of that lack of investment. They're trying to force customers to go to a cloud, and that's actually making that customer base come out to market and look for other alternatives, which is playing very well to us because of the SaaS+ model, because we can get them there with next to no risk. So the traditional players are still the same. From a student management side, Tribal is still in question because of its financial stability and where it's going, and the product is old and not been invested in.
Ellucian is trying to get a hold in playing there, so, we came out with a new offering called SaaS+—Student Plus, which is specifically designed to move customers from Tribal to us in a SaaS+ model. So it's the first time we're trying to do a SaaS+ concept with student management, and we're trying to make it frictionless for those customers to move across, and we already announced a win in that market, and that pipeline is growing. So traditional answer is still the same, but a little bit of movement back and forth.
And maybe, Stuart, just on the trajectory, and like, obviously, good ARR growth in the period, but as of the overall business still, you know, all apart, how do you sort of see that, you know, progressing, and do you sort of see, you know, any potential for that ARR to accelerate sort of further?
Oh, yeah. No, it's doing well, and just watch this space, Josh. You know, all that hard work we've done over the years to one, localize the product, two, build the team to support it. And with that, again, with that Scientia purchase that we now have 90% of the universities in the U.K. using our brand one way or another. We've got that ability to really make a difference and have an impact, and right at the table to have a conversation, and you'll see that growth come through. So just keep watching this space.
Okay. Got it. Thanks, guys.
Thanks, Josh.
Thank you. Your next question comes from ZheWei Sim with Jefferies. Please go ahead.
G'day, Wei.
Ed, Stu, Cale. Hey, good day. Good day. Thanks. Thanks for taking my questions. The first one is just on slide 30. So, U.K. ARR-
Mm.
Very nice, it's growing very strongly. For the new ARR figure that we've got there, is that on top of or that's included? So for example, first half 2024, that AUD 2.7, that's included in the AUD 28.8?
Yeah.
Or is it on top of?
Yeah, no, that's included.
Yeah. Yep. Yeah. Okay, perfect. And just for that number, do we have a number for first half 2022 as to what that looks like, or that's when it really just started?
I'm just trying to catch up with your slide, firstly.
Yeah, sorry about that.
Uh,
There it is there. It's actually the U.K. slide, Jen, the one that's got... Sorry, I'm just catching up now. This one here, first half 2022.
Yeah,
I'm sure we can provide that number in future releases, so Cale might take that action.
Okay, great. The other one is just in terms of, we called out an increase in churn for FY 2024-
Mm
...because the end of on-premise impact-
Yeah
...which is coming through. I appreciate we don't kind of like split out, you know, churn by the half year.
Yeah.
But is that impact expected to be more so in second half loaded, or how should we think about that?
Yeah, it's a full year forecast. And so to answer your question, yes, second half loaded. I think it says 1.8% for the full year, but we should note, we said that last year. As we come to the very end of our end of on-premise program, there is probably a, you know, a tolerance level of customers we expect not to come to SaaS platform. So that is totally within the tolerance, and we're not worried about it. And secondly, all of our strong guidance on total ARR growth and NRR, it is inclusive of having that lost ARR. So, all within tolerance, we're not worried about it. It's as expected, and even with that, we have strong growth in the important numbers.
Okay, perfect. And, and just the final one, probably for, for Stu, but just in terms of DXP.
Mm.
I'm not. I haven't used the platform before. So just how should we think about that? Is that like a product, or is it more of a new generation? And, you know, just in terms of the cost to the end customer, if we were to think about it as a product, what would that be relative to, say, the average price of, you know, the products that we typically sell?
Yeah, I think there's about five questions in there, so let me see if I can break them down. Look at it as a platform, and so what we've done is we've tried to extend what was traditionally an ERP, which is a back office, providing efficiency and functionality to a council or to a university. What we're trying to do is extend our reach to the ratepayer or the student. It does a couple of things. It creates a relationship with us, with the council that's even stronger because we're servicing their customer. But at the same time, it creates a relationship of leveraging our data that's in the system with that ratepayer, that improves the relationship between the ratepayer and the council.
One thing that was said earlier that I should just highlight, when we introduced DXP, it's a whole new market, and so we don't really have a competitor in the space. We saw functionality and technology that we wanted to leverage to be able to extend that reach for that council or that university. So it's a platform. If you look at what we're doing for DXP Student, it looks very different to what we're doing for DXP LG, because in DXP LG, we call it a Google to outcome experience, because you don't want that training or that interaction with a ratepayer. You just want them to go to Google, whereas in Student, you want an app. And so if you look at it on face value, they look different, but the foundation is exactly the same.
How we price it, if you look at the traditional pricing we have for Student Management and Property and Rating, which are the crown jewels in our platform, and at the higher end of our price point, the full product of DXP LG will be the same price as a Property and Rating for a council. The full product of Student DXP will be the same price as Student Management for a university. Now, there's a few more years to finish out all the different modules. We're quite far along on the DXP LG, but we've got a bit of a ways to go in Student Management.
Thanks, Stuart. I might just add a little bit on there as well. So, Wei, if you are looking at before we released any of our DXP products, if you looked at any council or any university, they were spending AUD millions per year with the likes of Salesforce.com or startups trying to write their own equivalent of DXP. And, that's AUD millions a year, which was wasted because it's a customized, hand-built, not even a product, solution for that customer. Now, ours works out of the box, deeply connected all the way into all the data that's held in our ERP, and so, councils, universities, they see the value in it. Rather than spending AUD millions with Salesforce.com, they can extend the ERP experience with us and get a great experience for their customers.
... I'll go one more step.
Yeah.
when we built or have been building Student DXP, we didn't do it in a vacuum. We actually have seven universities-
Mm-hmm
and TAFEs working with us to build it, so we're getting all that rich IP as we're building it out, so it's pretty exciting.
Yeah.
Great. That is very exciting. Sounds very good. Thanks for answering the question, guys. That's it for me.
Thanks, ZheWei.
Thank you. Your next question comes from Paul Mason with E&P.
Mm-hmm.
Please go ahead.
Hey, team.
G'day, Paul.
Thanks for taking the questions. I've just got two on, SaaS+. So there's gonna be a little bit of overlap to a couple before. I was just wondering, with your initial customers that are sort of tendering with, like, a requirement that reads like it wants SaaS+ specifically, could you give us some color on, like, you know, are they, are these typically like larger customers that have pretty good resources to do implementations anyway? Or are these like, smaller customers that, you know, by definition, would struggle more with an implementation on average so far?
It's all of the above.
Mm.
You know, we get all the different flavors, different verticals, different regions, different budgets, different products and modules. So... There's no single answer to your question. We're getting all the different flavors come through.
Okay, great. And could I just ask, just in follow-up then, the transition for a customer who's already on just your SaaS offering and has done a full implementation and is pretty well upsold already, what does that sort of look like to get them to migrate over time? Is it just that at the end of the contract-
... Yes
You'll just push them onto the new model, or is there, like, a different process around getting sort of that, that uplift?
Yeah.
Yeah, no, it's only related to the net new product or module they're taking. So if a customer in the past had an ARR of, let's call it AUD 1 million, and they're perfectly happy, that AUD 1 million would only increase based on CPI going forward. But when they came to buy a new product or module from us, that would be SaaS+, just that module or product, and so that would be the add-on to the AUD 1 million. That would be a SaaS+ component. Not the whole portfolio, just the add-ons.
Yeah. Okay, okay. All understood. All right, thank you. That's all from me.
Thanks, Paul.
Thank you. Your next question comes from Andrew Gillies with Macquarie. Please go ahead.
G'day, Andrew.
Morning, guys. Thanks for taking my questions.
No problems.
Morning. So first one, I was just wondering, on the team in the U.K., you've got, you know, over 15 staff now. In terms of that market, you know, what does the team look like at scale from your perspective, and, you know, do you think that there's any more resourcing potentially needed in that market to capitalize on the opportunity?
That's a great question. Just a clarification, we've got about 120 staff there. That was 15 related to the sales and marketing component. We're at the scale we need right now to get to the next stage of growth, which is probably the next 12-18 months, and then we'll play it out from there, but we're well-resourced. We spend a lot of time,
Thank you. Your next question-
Um
-is a webcast question-
Yeah
From Rory van Koolen, who says: "U.K. ARR seems to suggest negative net revenue retention. Is this correct? If correct, is this driven by customer churn?
Oh, yeah
Net product churn, or net price decreases? Thank you.
There might be a little bit of misunderstanding there. Yeah, there is, there is no net negative and no net ARR. The numbers for us are as per the slide. We show the sales ARR up 40% compared to PCP and up 36% compared on for the last 12 months. And I understand there's one more question on the phone line, so we can take that. On the webcast, I should say.
Thank you. Your next webcast question comes from Lachlan Woods, who asks: "Can you explain why your operating cash flow was flat year over year?
Mm. Cale?
Thanks for your question, Lachlan. The short answer is we had an increase in our installment rate in the first half from the ATO, so you'll notice there quite a significant cash outflow from to the tax office. It hasn't changed our effective tax rate, it's just a timing of cash flow.
Just to wrap up, we expect strong cash flow for the full year, and that should align with net profit after tax.
Thank you. There are no further questions at this time. I'll now hand back to Mr. Chung for closing remarks.
Well, thanks a lot, ladies and gents. That ends the roadshow for today. We'll see you on the road again. Thanks.