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TECHNOLOGY ONE LIMITED Annual Report 2017

Nov 20, 2017

65935_rns_2017-11-20_0b7c6f07-568b-46e5-84b6-e4733477993b.pdf

Annual Report

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2017 Full Year Results

ending 30 Sept 2017

Adrian Di Marco Edward Chung Tony Ristevski Executive Chairman Chief Executive Officer Chief Financial Officer

21 November 2017 Commercial in confidence FINAL

Disclosure Statement

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Technology One Ltd Full Year Presentation – 21 November 2017

Technology One Ltd (ASX: TNE) today conducted a series of presentations relating to its 2017 Full Year results.

These slides have been lodged with the ASX and are also available on the company’s web site: www.TechnologyOneCorp.com.

The information contained in this presentation is of a general nature and has been prepared by TechnologyOne in good faith. TechnologyOne makes no representation or warranty, either express or implied, in relation to the accuracy or completeness of the information. This presentation may also contain certain ‘forward looking statements’ which may include indications of, and guidance on financial position, strategies, management objectives and performance. Such forward looking statements are based on current expectations and beliefs and are not guarantees of future performance, and involve known and unknown risks, uncertainties and other factors, many of which are outside the control of TechnologyOne. TechnologyOne advises that no assurance can be provided that actual outcomes will not differ materially from those expressed in this presentation

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1

Agenda

  • ➢ Results

  • Significant Achievements

  • Strategic Initiatives

  • Outlook for New Year

  • Long Term Outlook

Appendix

  • TechnologyOne Overview

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8 consecutive years of:
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Record revenues Record licences Record profit

Our cloud first, mobile first strategy is driving our strong results

2

Annual cloud subscription revenue up 84%

Our cloud business continues to grow strongly.

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3

Underlying Profit Growth of 22+%[5]

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Our underlying business has continued to grow very strongly
Company
Ex. Evolve
FY17 Company Evolve BCC & BCC
Revenue $273.2m 1$1.2m 3$3.6m $278.0m
Expense $215.2m 2($1.8m) 4($0.7m) $212.7m
Profit $58.0m $3.0m $4.3m $65.3m
Margin 21% 23%
Company
Ex. Evolve
FY16 Company Evolve BCC & BCC
Revenue $249.0m - - $249.0m
Expense $195.8m - - $195.8m
Profit $53.2m - - $53.2m
Margin 21% 21%
Variance Profit $ $4.8m $12.1m
Variance Profit% 9% 22%
Profit excluding Evolve & BCC was $65.3m, up 22% ($12.1m)
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Evolve is our very successful user conference held every 3 years 3BCC revenue $3.6m: $2m lost consulting revenue, $1.2m ASM, $400k Cloud Services Evolve items below are over & above what we would normally expect1Evolve revenue: $1.2m lost revenue because consultants attended Evolve 45BCC expenses: $700k legal fees not recovered This is non IFRS and unaudited. 2Evolve expenses $1.8m: $1.4m marketing costs, $400K consulting staff travel to Evolve

We do not expect further impact on our earnings in 2018

✓ BCC contract ✓ Evolve conference

With these headwinds removed ($7.3m), this sets us up well for the 2018 financial year.

4

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Total Dividend Up 8%

Dividends for the 2017 year:

Half 1 2.60 cps up 10% (75% franked[1] ) Half 2 5.60 cps up 10% (75% franked[1] ) Total 8.20 cps up 10% Special 2.00 cps (declared, 75% franked[1] ) Total 10.20 cps up 8%

Dividend payout ratio is 72%

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Dividend Last 5 Years
UP 8%
12.00
Compound Growth 16%
10.00
Special
8.00 Div (cps)
6.00 DPS (cps)
4.00
2.00
0.00
2013 2014 2015 2016 2017
Cents per share
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Notes

  • 1We have paid less tax due to the R&D Tax Concession and the TechnologyOne Share Trust. We expect 2019 dividend to be fully franked again.

  • We have continuously paid a dividend for 20 years - since 1996 (through Dot-Com and GFC)

  • The Board considers the payment of a Special Dividend at the end of each year taking into consideration franking credits and other factors

  • The Board continues to consider other Capital Management initiatives including acquisitions

  • There was no Special Dividend in 2013 because of a lack of franking credits

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Results Summary

FY17
FY16
Variance %
Revenue
$273.2m
$249.0m
10%
Initial Licence Fees
$61.7m
$56.2m
10%
Total Consulting1
$71.3m
$71.1m
0%
Total Annual Subscription Revenue
$138.5m
$118.6m
17%
Annual Licence Fees
$119.9m
$108.5m
11%
Annual Cloud Subscription Fee
$18.6m
$10.1m
84%
Expenses
$215.2m
$195.8m
10%
R&D Expenses2
$49.9m
$46.0m
8%
Expenses excl R&D
$165.4m
$149.8m
10%
Profit
Profit Before Tax
$58.0m
$53.2m
9%
Profit After Tax
$44.5m
$41.3m
8%
Other
Operating Cash Flow
$46.4m
$43.7m
6%
Cash and Cash Equivalents
$93.4m
$82.6m
13%
Profit Before Tax Margin
21%
21%
Dividend
10.20
9.45
8%

1Total Consulting includes Plus
218% of revenue v 18% last year		 Underlying Profit
Growth of 22+%
Target Total Annual Subscription
Revenue by 2022 is$345+m
driven by growth of Annual Cloud
Subscription Fee reaching $143+m

5

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TechnologyOne Cloud Growing Strongly
Profit of $2.5m vs a loss $2.2m in 2016
Annual Contract Value of $27.1m, up 69%
Added 112 new cloud customers
$42M
UP 55%, ($14.9M)
$33M
45.0 UP 77%, ($14.4M) Target ACV of
40.0 $27.1M
35.0 UP 84%, ($8.5M)$18.6M UP 69%, ($11.1M) FY15 $42+m in 2018
30.0
25.0 $10.1M UP 100%, ($8M)$16M FY16
20.0 UP 145%, ($6.0M) FY17 Target ACV
15.0
10.0 FY18 of $143+m
Forecast
5.00.0 in 2022
Cloud Revenue Billed Annual Contract Value Signed
• As previously stated focus has moved from ACV growth to Profit growth 1Does not include associated licence Feesincremental revenue to run our software in our cloud.
• Added 112 new cloud customers: 270 vs 158 at 30 Sept 2016
• New Customer this year: 112 includes the Department of Industry, Flinders University, Cumberland Council & Moreton Bay District Council
• Our mass production architecture is now in operation
• Full year profit of $2.5m (vs a loss $2.2m in 2016)
• First enterprise vendor to be audited and recommended for certification to the Federal Government IRAP security standard
• Platform to generate significant more profits in the coming years
$'m
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New Cloud Customers for 2017 (112)

Adur & Worthing Borough Councils Department for Child Protection and Family Support National Film and Sound Archive Strathbogie Shire Council Arvida Limited Department of Industry, Innovation and Science Neami Limited SYC Ltd Aust Competition & Consumer Comm'n Dept of Indigenous Affairs North Central Catchment Management Authority Sydney Motorway Corporation Pty Limited AUSTRAC Flinders University North Eastern Community Hospital Incorporated TAFE Queensland Australian Institute of Family Studies Flourish Australia NZX Limited Tamaki Redevelopment Company Limited Australian Institute of Marine Science Forico Pty LImited Office of National Assessments Tararua District Council Australian Longline Pty Ltd Gladstone Area Water Board Otorohanga District Council Tasmanian Irrigation Pty Ltd Australian Naval Infrastructure Pty Ltd Great Lakes Council Outsource Australia Tasracing Pty Ltd Australian Rail Track Corporation Hawkes Bay District Health Board Porirua City Council Thames Coromandel District Council Best Friends Support Services Pty Ltd Hawkes Bay Regional Council PrixCar The Roman Catholic Archbishop of Perth Corporation Sole Bethesda Hospital Inc Hilltops Council Qld Airports Ltd Ticketek Pty Ltd Capital Insurance Group Hornsby Shire Council ReNu Energy Limited Tilt Renewables Limited Carnegie College Horsham District Council Royal Automobile Club of Tasmania Ltd Town of Bassendean CEnet - Archdiocese of Hobart Illawarra Credit Union Royal Flying Doctors Service (WA) Unitywater CEnet - Diocese of Bathurst Inner West Council Ruapehu District Council University of Hertfordshire CEnet - Diocese of Townsville Irrigo Centre Limited Shire of Augusta Margaret River University of Sussex CEnet - Diocese of Wollongong J.J. Richards & Sons Shire of Coolgardie University of Worcester CEnet - Sydney Catholic Schools Archdiocese of Sydney Land Information New Zealand Shire of Murray Urban Maintenance Systems Central Hawkes Bay District Council Live Borders Limited Shoalhaven City Council Victoria University of Technology Central Highlands RC Local Govt Assoc QLD SmashCare Australia Pty Ltd Victorian Institute of Teaching Charters Towers Regional Council Manawatu District Council South Burnett Regional Council Waikato District Council City of Albany Maroondah City Council South Waikato District Council Waikato Portal Group City of Canning MDA Ltd Southern Cross Hospitals Waipa District Council City of Cockburn Mercy Community Services SEQ Limited St Andrew's Toowoomba Hospital Wairoa District Council City of Kwinana (DMS) Mid Sussex District Council St Vincent de Paul Society (Canberra/Goulburn) Incorporated Waitomo District Council City of Swan Moira Shire Council State Services Commission Whanganui District Council Clontarf Foundation Moreton Bay Regional Council ** Statistics New Zealand Wise Management Services Limited Cumberland Council Mutual Marketplace Pty Ltd Stratford District Council WorkSafe New Zealand ** Existing Subscription

6

Significant investments

R&D[1] of $49.9m, up 8% fully expensed

  • Ci - our existing very successful enterprise software

  • Ci Anywhere - our new generation enterprise software for smart mobile devices

  • TechnologyOne Software as a Service

1R&D was $46.0 in 2016

Profit By Segment Analysis

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$58m, Up 9% ($4.8m)
Headcount 1101, Up 6%
70.0
60.0
50.0
$25m, Up 15% ($3.3m) FY15
40.0 $11m, Up 28% ($2.4m) Headcount 420, Up 14% FY16
Headcount 177, Down 3% $14.3m , Down 8% ($1.2m) FY17
30.0 $5.3m, Down 46% ($4.5m) Headcount 133, Up 8%
Headcount 343, Inline $2.5m, Up 100%+ ($4.7m)
20.0 Headcount 28, Up 33%
10.0
0.0
(10.0)
Total Sales (1) Consulting (2) Cloud (3) R&D (4) Corporate (5)
Net Profit Before Tax $58.0m, up 9% ($4.8m)
Notes are as follows:
$'m
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  • (1) Sales: Licence Fees up $5.5m (10%)

  • (2) Consulting: Profit down $4.5m: BCC ($2m), Evolve ($1.6m). Significant upside in the coming years. Refer Slide: Consulting Services

  • (3) Cloud: strong profit contribution growth to continue as business reaches scale

  • (4) R&D: Profit up due to Licence fees and controlled expenses

  • (5) Corporate – BCC Legal expense $700K

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7

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Net Profit Before Tax up 9%
Profit growth to move back to historical trends in
the near future with the head winds removed
70
UP 9%,
Compound Growth 14% $58M
60
We have seen continuing good growth 50
in profit. NPBT up 9%, is less than the
historical average over the last 7 years 40
of 14%. Profit growth to move back to
historical average. 30
This is discussed later in section 20
Guidance above.
10
0
2011 2012 2013 2014 2015 2016 2017
$'m
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Underlying profit excluding significant events would have been up 22+%

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Total Expenses Up 10% ($215.2m)
versus Revenue up 10%
Total Expenses
UP 10%,
250 UP 14%, $215.2M
$195.8M
200
150
100
50
0
2015 2016 2017
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Disciplined control of expenses
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8

Total Expenses Up 10% ($19.5m)

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2%,
$3.7M UP 10%,
220 $215.2M
215 6%,
210 $2.9M1%, $2.0M1%, $10.9M
205
200 $195.8M
195
190
185
2016 Expenses Marketing Cloud Expense Payroll Expense Underlying Total Expenses
Expense (1) (2) (3) Expenses (4)
$'m
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(1) Marketing: additional $2.9m in costs for the full year mainly due to Evolve ($1.4m), Showcases ($1m) (2) Cloud costs up $2.0m – as a result of increased Annual Cloud Subscription Fees, up 84% (3) Staff cost increase contributed 56% of cost increase – this is to support stronger than expected growth . across the business (ie cloud) and focus on fast tracking Ci Anywhere development in 2017 (4) In line with CPI

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Total R&D [1] Expenses up 8%
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fully expensed
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Total R&D Expenses UP 8%,
60 $49.9M
Compound Growth 9%
50
40
30
20 1R&D fully expensed in the year it is incurred;
and includes any R&D subsidies
10 2CAG – Compound Annual Growth
0
2013 2014 2015 2016 2017
$'m
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R&D remains high at 18% of Revenue compared to industry standard of 10+%

  • Ci - existing very successful enterprise software suite

  • Ci Anywhere - our new generation product for smart mobile devices

  • TechnologyOne Cloud

  • Our R&D plan which commits the company to restrict R&D growth to CAG[2] of 8% (compared to CAG of 16% historically). This represents a saving of $75m over a 5 year period. Refer slide: R&D Growth from 2016 to 2021.

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9

Cash Flow

Operating Cash Flow strong at $46.4m

  • Exceeds Net Profit After Tax of $44.5m (exceeds our ratio 1:1)

  • Up $2.7m, 6% from September 2016

  • Significant improvement from half year, which was $2.6m

Increased our Cash & Cash Equivalents by $10.8m over the year

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NPBT versus Operating Cash Flows
50 $46.4M 50
$43.7M
45 45
40 NPAT $44.5M 40
NPAT $41.3M
35 35
30 30
25 25
20 20
15 15
10 10
5 5
0 0
2016 Operating Cash Flows 2017
$'m $'m
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Sep-17 Sep-16 Var %
$ '000 $ '000
EBIT
Depreciation & Amortisation
Change in working Capital		 58,019
4,237		 53,240
3,924		 4,779
313		 9%
8%
(Increase) / Decrease in Debtors1 (10,222) (3,913) (6,309) (161%)
(Increase) / Decrease in Prepayments
Increase / (Decrease) in Creditors		 (2,470)
5,950		 (3,996)
1,560		 1,526
4,390		 38%
281%
Increase / (Decrease) in Staff
Entitlements		 (319) 1,139 (1,458) (128%)
Net Interest (Paid) / Received
Income Taxes paid		 680
(10,507)		 934
(10,711)		 (254)
204		 (27%)
2%
Other 1,075 1,563 (488) (31%)
Operating Cash Flow
Capital Expenditure		 46,442
(6,109)		 43,741
(4,889)		 2,701
(1,220)		 6%
(25%)
Payment for purchase of business2
Proceeds from Sale of PP&E and
Investments		 (1,322)
3		 (3,017)
13		 1,695
(10)		 56%
(79%)
Free Cash Flow 39,015 35,847 3,168 9%
Dividends Paid (30,370) (27,958) (2,412) (9%)
Repayment of finance lease (18) (2,363) 2,345 99%
Proceeds from Shares issued 2,169 1,525 644 42%
Increase / (Decrease) in Cash & Cash
equivalents
10,795		 7,052 3,743 53%
1Late September billing
2Acquisitions - final guaranteed second tranche payments.
Cash & cash equivalents
Prepayments
Trade and other receivables1
Earned and unbilled revenue2
Other current assets
Current assets
Property, plant and equipment
Intangible assets
Earned and unbilled revenue3
Deferred tax assets
Non-current assets
Total Assets
Trade and other payables
Provisions
Current tax liabilities
Prepaid & unearned revenue4
Borrowings
Current liabilities
Trade and other payables
Provisions
Other non-current liabilities
Non-current liabilities
Total Liabilities
Net Assets
Issued Capital and Reserves
Retained earnings
Equity
Balance Sheet
Cash & Equivalents $93.4m up $10.8m ($82.6m pcp)
• Net Cash:
29.6c/s
(vs. 26.5c/s)
• Debt/Equity:
0.01%
(vs. 0.02%)
• Net Assets:
$157.5m (vs. $138.5m, up $19m)
• Interest Cover:
1192 times
UP 13%,
$10.8M
50
60
70
80
90
100
2013
2014
2015
2016
2017
$'m
Cash and Equivalents
Compound Growth 9%
2T b billd i th t 12 th k i tti d ttd li t b billd
1Significant billings in September		 Sep-17 Sep-16 Var
%
$'000 $'000 $'000
93,383 82,588 10,795
13%
8,220 5,817 2,403
41%
53,262 41,642 11,620
28%
14,305 16,421 (2,116)
(13%)
798 793 5
1%
169,968 147,261 22,707
15%
13,525 11,681 1,844
16%
47,549 48,088 (539)
(1%)
11,914 3,980 7,934
199%
5,482 7,512 (2,030)
(27%)
78,470 71,261 7,209
10%
248,438 218,522 29,916
14%
38,253 24,587 13,666
56%
11,270 11,194 76
1%
392 1,085 (693)
(64%)
27,862 20,885 6,977
33%
10 29 (19)
(66%)
77,787 57,780 20,007
35%
8,370
 16,068
 (7,698)
(48%)
3,338
1,423		 4,555
1,625		 (1,217)
(27%)
(202)
(12%)
13,131 22,248 (9,117)
(41%)
90,918 80,028 10,890
14%
157,520 138,494 19,026
14%
64,839
92,681		 68,334
70,160		 (3,495)
(5%)
22,521
32%
157,520 138,494 19,026
14%
  • 2To be billed in the next 12 months – work in progress, retentions, and contracted licences to be billed 3To Be Billed more than 12 months – contracted licences for which the contract must include a ‘break fee’ for the total amount revenue recognized 4 Prepayments by customers - the majority of which relates to Prepaid Cloud Service Fees

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10

We are generating significant cash from the cloud

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From the Balance Sheet on previous page…
Sep-17 Sep-16
• Earned & Unbilled Revenue (non current) [1] ($11.9m) ($4.0m) Driven by cloud - Revenue recognised & to be billed over more than 12 months – multi year contracted licences must
include a ‘break fee’ for the total amount revenue recognised. We expect this to grow more slowly because of the
Commitment fee (i.e. deposit) we are requesting be paid upfront.
• Prepaid & unearned Revenue [2] $27.8m $20.9m Driven by the cloud - Prepayments by cloud customers - the majority of which relates to Prepaid Cloud Service
Fees. We expect this to grow quickly ($143m per year recurring in 2022)
• Prepayments exceed Earned & Unbilled $15.9m $16.9m Prepayments exceed Earned & Unbilled Revenue by $15.9m which means net generation of cash. This will
continue to grow quickly as Cloud ACV hits $143m per year in 2022.
The cloud contributed an additional $15.9m
of additional free cash flow this year
1To Be Billed more than 12 months – contracted licences for which the contract must include a ‘break fee’ for the total amount revenue recognized
2 Prepayments by customers - the majority of which relates to Prepaid Cloud Service Fees
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Subscription licenses of $31.7m, up
150% ($12.7m in FY16)
✓ Stop selling perpetual licences, both On Premise and On Cloud
✓ 5 year subscription licences with break fee
✓ After 5 years these subscription licences will move to yearly
licences, creating a future annuity stream
Future Annual Subscription Licences on
completion of 5 year contracts
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
FY19 FY20 FY21 FY22
Future subscription income
'$'000
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11

Full Year 2017 v Full Year 2016 FY17
$'000		 FY16
$'000		 Variance
$'000		 %
Revenue excl interest 272,525 248,142 24,384 10%
Expenses (excl R&D, interest, Depn & Amortisation) 161,094 145,768 15,326 11%
EBITDAR 111,432 102,374 9,058 9%
R&D Expenditure 49,856 46,009 3,847 8%
EBITDA 61,576 56,365 5,211 9%
Depreciation 3,707 3,394 313 9%
Amortisation of Intangibles 530 530
EBIT 57,339 52,441 4,898 9%
Net Interest Income 680 799 (119) (15%)
Profit Before Tax 58,019 53,240 4,779 9%
Profit After Tax 44,494 41,342 3,152 8%

R&D is a significant expenditure we incur today, to build the platform for our continuing strong growth in the future

1Adjusted for net cash above required working capital, which was assumed at $12m
Full Year 2017 v Full Year 2016
2017
2016
Variance %
EPS (cents)
14.18
13.26
7%
Dividends (cents)
Standard
8.20
7.45
10%
Special
2.00
2.00
Total dividends paid (cents)
10.20
9.45
8%
Dividend Payout Ratio
72%
71%
Key Margin Analysis
EBITDAR Margin
41%
41%
EBITDA Margin
23%
23%
Net Profit Before Tax Margin
21%
21%		 Full Year 2017 v Full Year 2016
2017
2016 Variance %
ROE
Return on equity
28%
30%
Adjusted return on equity1
59%
61%
Balance Sheet ($‘000s)
Net Assets
157,520
138,494
14%
Cash & Cash Equivalents
93,383
82,588
13%
Operating cash flows
46,442
43,740
6%
Debt/Equity
0.01%
0.02%
R&D as % of Total Revenue
21%
21%
Full Year 2017 v Full Year 2016
2017
2016
Variance %		 Full Year 2017 v Full Year 2016
2017
2016 Variance %
EPS (cents)
14.18
13.26
7%
Dividends (cents)
Standard
8.20
7.45
10%
Special
2.00
2.00
Total dividends paid (cents)
10.20
9.45
8%
Dividend Payout Ratio
72%
71%
Key Margin Analysis
EBITDAR Margin
41%
41%
EBITDA Margin
23%
23%
Net Profit Before Tax Margin
21%
21%		 ROE
Return on equity
28%
30%
Adjusted return on equity1
59%
61%
Balance Sheet ($‘000s)
Net Assets
157,520
138,494
14%
Cash & Cash Equivalents
93,383
82,588
13%
Operating cash flows
46,442
43,740
6%
Debt/Equity
0.01%
0.02%
R&D as % of Total Revenue
21%
21%

12

Agenda

  • ✓ Results

  • Significant Achievements

  • Strategic Initiatives

  • Outlook for New Year

  • Long Term Outlook

Appendix

  • TechnologyOne Overview

Initial Licence Fees Up 10%

14th consecutive year of strong L/Fee growth

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UP 10%,
70 $61.7M
60 Compound Growth 12%
50 14%
17%
40
11%
30 17% 5%
16%
20 23% 8% 10%
10
0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
$'m
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  • Continued strong sales in Local Government: $40m of new contracts (inc services) including Moreton Bay Council, Shoalhaven Council, NSW Amalgamations. There was no impact from BCC dispute.

  • Continued strong sales in Federal Government: DIIS and Treasury are providing shared services to other departments using TechnologyOne SaaS

  • Continued strong sales into Education: Victoria Uni, Uni of Sussex, Sydney Catholic Schools

  • Added 50 new customers, of which 7 replaced systems from Oracle, SAP, Microsoft & INFOR

  • First enterprise vendor to be audited and recommended for certification to the Federal Government IRAP security standard which will drive significant licence & cloud sales the coming years

  • Pipeline for 2018 year is strong

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13

New Customers for 2017 (50)

Adur & Worthing Borough Councils Horsham District Council Tasplan Pty Ltd Australian Institute of Family Studies Inner West Council Tasracing Pty Ltd Australian Naval Infrastructure Pty Ltd Irrigo Centre Limited Tilt Renewables Limited Best Friends Support Services Pty Ltd Legislature-General (Parliament of Tasmania) University of Sunderland Bethesda Hospital Inc Mercy Health & Aged Care ERP ** University of Sussex Capital Insurance Group Mid Sussex District Council University of Worcester CEnet - Archdiocese of Hobart Moreton Bay Regional Council ** Victorian Planning Authority CEnet - Diocese of Bathurst Mount Alexander Shire Council Waratah/Wynyard Council CEnet - Diocese of Townsville Mutual Marketplace Pty Ltd Western Australia Tafe * CEnet - Diocese of Wollongong North Eastern Community Hospital Incorporated WorkSafe New Zealand CEnet - Sydney Catholic Schools Archdiocese of Sydney Office of National Assessments Charters Towers Regional Council Rotorua District Council Clontarf Foundation Shoalhaven City Council Cumberland Council SmashCare Australia Pty Ltd Department for Child Protection and Family Support St Vincent de Paul Society (Canberra/Goulburn) Incorporated Department of Industry, Innovation and Science ** Statistics New Zealand Flourish Australia SYC Ltd Forico Pty LImited Sydney Motorway Corporation Pty Limited Great Lakes Council Tamaki Redevelopment Company Limited HAMBS Tasmanian Irrigation Pty Ltd Excluding acquisitions * New to Existing ** Existing Subscription

Licence Fee Contribution

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Asset Intensive, $2.6M,
Financial Services, 4%
$2.6M, 4%
Health & Community
Services, $6.3M, 10%
Education, $13.7M, 22%
Project Intensive, $1.7M,
3% Our APAC market
penetration in any
Corporate, $1.2M, 2%
single vertical does
not exceed 15%.
Significant room to
grow in future
years
Government, $9.5M, 15%
Local Government,
$24.2M, 40%
Licence Fees $61.7m
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14

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Annual Licence continues grow strongly: up 11%
Annual Support Fees UP 11%,
140 $119.9M
120
Compound Growth 14%
100
80
60
40
20
0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
$'m
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  • Compound growth over the last 10 years is 14%

  • Customer retention is important – remains at 99+%

  • Ci Anywhere and TechnologyOne Cloud are critical to the ongoing retention of customers

1Impacted by BCC ($1.2m) – excluding BCC would have been up 12%

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TechnologyOne Cloud

Enterprise software as a service

  • ✓ TechnologyOne Cloud 5.0+ introduced the start of our mass production Software as a Service offering

  • ✓ Have now migrated majority of customers seamlessly from Cloud 1.0, 2.0, 3.0, 4.0, 5.0 to Cloud 6.0

  • ✓ Cloud 7.0 now released

  • ✓ Increased security accreditation: IRAP and PCI

  • ✓ Only SaaS vendor to achieve this high level of security accreditation in Australia

  • ➢ Cloud 8.0 under development release H1 2018

  • ➢ Increased scalability, reliability and efficiencies, to drive profit growth

  • ➢ Profit of $2.5m vs a loss of $2.2m pcp

  • ➢ Profit growth to continue strongly in new year

15

270 customers on TechnologyOne Cloud versus 150 customers pcp

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Annual Cloud Subscription Fees engine for significant profit growth in the coming years As previously stated focus has moved from ACV growth to profitable growth in coming years

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Annual Contract Value - Compound Growth 69% per annum
160 $143.0M,
UP 25%
140
$114.6M,
120 UP 30%
100 $87.9M, UP 40%
$'m
80 $62.8M,
UP 50%
60 $42.0M,
UP 55%
40 $27.1M,
$16.0M, UP 69%
20 UP 264%$8.0M, UP 100%
0
FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22
$2m loss $2.5m loss $2.2m loss $2.5m profit $5m profit
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$143m / year (recurring) in 2022, recalibrated by financial year

16

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Ci Anywhere
Any device
Any where
Any time
Absolutely essential
in a digital world
Enterprise software, incredibly simple
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Flow across many devices in the course of a day
We are delivering our entire
enterprise suite on mobile
devices
Enterprise Software intelligently adapts to the devices
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17

Ci Anywhere

Enterprise software, incredibly simple Any device. Any where. Any time.

  • 2016B & earlier releases progressively decommissioned by mid 2017

  • 2017A progressively being rolled out

  • ➢ 2018A under development – tentative release date half 1 2018

  • ➢ Deliver all remaining functionality late 2018

  • ➢ Significant competitive advantage

  • ➢ We are the only ERP vendor committing 100% of our ERP functionality across all mobile devices

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Showcases

Insights, Inspiration, Innovation

  • ✓ Following success of Evolve

  • ✓ Create sales momentum for TechnologyOne Cloud and Ci Anywhere

  • ➢ Solution showcases delivered for Brisbane, Sydney, Melbourne. Approx cost was $1m

  • ➢ Remaining showcases planned to late 2018 to continue momentum: New Zealand, ACT, UK

Capitalising on Evolve

18

Consulting

Significant upside in future years

  • Consulting profit $5.3m, down 46% ($4.5m)

  • Consulting has not kept up with growth of the business

  • ➢ Initial focus: return to profit growth

  • ✓ Medium term goal is profit margin to be approx. 20%

  • E.g. 2017 revenue of $72m, profit of $14.4m vs $5.3m actual

  • ✓ Implementing new strategy, business processes and methodologies to handle our fast growing business

  • New Operating Officer appointed later than expected in March 2017 to oversee new strategy. Ms Nancy Mattenberger - extensive experience INFOR USA

  • Separation into 2 focused / separate business units

  • Consulting New Customers vs Consulting Existing Customers

  • Different culture, systems, processes, methodologies

  • Significantly more disciplined approach including our successful ‘countdown’ approach

UK Licence Fee Growth to 2022

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Licence Fees & Total Revenue
$93.3M,
100 UP 39%
90
80 $67.3M,
UP 50%
70 Actual Licence fee
60 $2.8m $45.0M,
UP 52% $30.4M,
50 UP 50% Licence Fees
$29.7M, $20.3M,
40 $19.2M, UP 55% UP 50% Total Revenue
$6.9M, $11.9M, UP 61% $13.5M,
30 $2.0M, $3.8M, UP 83% UP 73% $9.0M, UP 50%
UP 51% UP 87% $6.0M, UP 50%
20 $3.0M, $4.0M, UP 50%
$0.6M, $1.4M, UP 114% UP 33%
10 UP 111% UP 133%
0
2014 2015 2016 2017 2018 2019 2020 2021 2022
$745k loss $400k loss $66k profit $1.1m loss, versus target $500k profit Impacted by the UK consulting profit down $1+m pcp,
1Licence Fee Compound Growth as a result of the consulting issue previously discussed
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19

United Kingdom

  • Our ‘blue ocean’ strategy works in the UK

  • Provide a total ERP solution for higher education & local government

  • 6 new customers, all of which are on the TechnologyOne Cloud

  • UK loss $1.1m - flow on effect from the broader consulting issues discussed earlier

  • ➢ Next phase of the UK is ‘Customers First’

  • Slow sales over next 2 years to focus on ‘Customers First’ strategy and get UK Consulting back on track

  • Appointed a new Operating Officer from UNIT4 for this next phase, who is customer focused

  • Implement the new systems, processes and methodologies in the UK, as we are across the company

  • Ensure all new customers are strong references

  • Finish Product Regionalisation – significant body of work, as we work with early adopters in Local Government and Higher Education eg UCAS, UKVI, HESA, SLC etc..

    • Regionalisation will now be completed late 2018 (additional 12 months)

  • Very selective on the new business we bid & contract for over the next 2 years

Previously stated that we expected challenges in building our UK consulting practice

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UK Licence Fee Growth to 2022
‘Customers First’
Licence Fees & Total Revenue
$41.3M,
45 UP 51%
40
Compound Growth 44% [1]
35
$27.3M,
30 UP 45%
$18.9M,
25 UP 43%
$11.3M, Licence Fees
2015 $2.0M, UP 87%$3.8M, UP 83%$6.9M, UP 33%$9.2M, $11.1M,UP 21% $13.2M,UP 19% $5.0M, UP 50%$7.5M, UP 50% Total Revenue
UP 51% $3.0M, $3.0M, UP 67%
10 $3.0M, $2.8M, UP 6% INLINE
$0.6M, $1.4M, UP 114% DOWN 6%
5 UP 110% UP 135%
0
2014 2015 2016 2017 2018 2019 2020 2021 2022
$745k loss $400k loss $66k profit $1.1m loss $500k loss Breakeven
1Licence Fee Compound Growth
Slow sales growth, and focus on customers. Licence growth will return in the 2020 financial year
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20

UK Customers (43)

Local Government (13) Higher Education (14) Adur & Worthing Borough Councils Carnegie College Aylesbury Vale District Council Ealing, Hammersmith and West London College Cambridge City Council Glasgow Clyde College Clackmannanshire Council New College Lanarkshire Horsham District Council The University of Dundee Huntingdonshire District Council University of Exeter Leicester City Council University of Hertfordshire Mid Sussex District Council University of Lincoln Scarborough Borough Council University of South Wales Scottish Borders Council University of Sunderland South Cambridgeshire District Council University of the Highlands and Islands The East Riding of Yorkshire Council University of Worcester The Mayor and Burgesses of the London Borough of Haringey University of Sussex West College Scotland

Health & Community Services (10) Other (6) East Dunbartonshire Leisure and Culture Trust BT Investment Management UK Edinburgh Leisure CIPFA Business Limited Enjoy East Lothian Leisure Ltd Greater London Enterprise Equity Housing Group Live Borders Limited Hereford & Worcester Fire & Rescue Services Livingbridge EP LLP Ongo Partnership Ltd Pepper Finance Ireland Scottish Association for Mental Health Strathclyde Fire & Rescue Strathclyde Partnership for Transport West Lothian Leisure Limited

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Agenda

  • ✓ Results

  • ✓ Significant Achievements

  • Outlook for New Year

  • Strategic Initiatives

  • Long Term Outlook

Appendix

  • TechnologyOne Overview

21

Outlook for 2018 Year

Assumptions

  • The events that impacted us is 2017 are not expected in 2018

  • TechnologyOne Cloud First, Mobile First strategy is gaining strong traction

  • Cloud continues to grow strongly and profitably

  • Cloud profit of $5m expected vs $2.5m (2017) vs $2.2m loss (2016)

  • Consulting expected to return to strong profit growth

  • Consulting was $5.3m, down $4.7m pcp

  • The Pipeline for 2018 supports continuing strong profit growth

Outlook for 2018 Year

Full Year - Strong Profit growth to continue in 2018

  • We expect to see strong continuing growth

  • ➢ There was a significant number of deals close earlier than normal in 2017 half 1[1 ] and we do not expect this happening in 2018. As such we expect the first half of 2018 will not be indicative of the full year results

  • We will provide further guidance at both the Annual General Meeting and with the first half results

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1 Half 1 2017 licence fees were up 30%

22

Our focus this financial year

  • ✓ Continue developing our Cloud Mass Production model & deliver $5m profit in 2018

  • ✓ Continue to grow our initial licence fees

  • ✓ Focus is to grow our 5 year subscription licences

  • Creates recurring revenues after the 5 year period ends

  • ✓ Implement Consulting Strategy & return to profit growth in 2018

  • ✓ United Kingdom ‘Customer First’ strategy

  • ✓ Control costs, and ensure R&D growth is 8%

Agenda

  • ✓ Results

  • ✓ Significant Achievements

  • ✓ Outlook for New Year

  • Strategic Initiatives

  • Long Term Outlook

Appendix

  • TechnologyOne Overview

23

Significant Appointments

We continue to expand our executive team Greater depth, experience, and succession planning

  • Adrian Di Marco – Executive Chairman

  • Lead the Board and assist the Executive team through the transition

  • Continued focus on Strategy, R&D and Innovation

  • Edward Chung – Chief Executive Officer

  • Long serving executive for 10+ years

  • Stuart MacDonald – Chief Operating Officer

TechnologyOne is committed to evolution of our Remuneration Report and Corporate Governance

  • We continue to evolve our Remuneration Framework and Corporate Governance framework whilst still maintaining a high performing and transparent culture

  • Substantial changes implemented brings us into line with ASX 200

  • LTIs based on options now issued at market price

  • Performance hurdles for Long Term Incentives (LTI)

  • Performance hurdles are all ‘hard targets’ to generate significant shareholder wealth

  • Greater level of disclosure on all aspects of Remuneration

  • Poll now taken at AGM for all resolutions

  • ➢ Executives had a significant portion of their 2017 LTI (i.e. options) forfeited for not meeting hard targets in 2017, even though it was another record year at TNE

  • Board renewal in progress

  • Carefully manage the renewal of a high performing Board

  • New independent female director appointed Feb 2016 (Board size 6)

  • Second independent director on track to be appointed early 2018 (Board size 7)

  • Third independent director to be appointed early 2019 (Board size 8)

  • We will continue to focus on gender diversity. Search far & wide, but any appointment will in the end, be to the best candidate irrespective of gender

Seek continued support of our shareholders

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24

Agenda

  • ✓ Results

  • ✓ Significant Achievements

  • ✓ Outlook for New Year

  • ✓ Strategic Initiatives

  • Long Term Outlook

Appendix

  • TechnologyOne Overview

Long Term Outlook

Focus is to substantially improve PBT margins through:

  • Controlled R&D growth

  • Product maturity

  • Cloud becomes profitable

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Exclude BCC & Evolve, margin would have been 23%
Net Profit Margin Before Tax
35%
30%
27%
25% 25% [26%] 24% 25%
20% 21% 21% 19% [21%] [21%] [21%] [21%]
17% 17% 17% [18%]
15%
10%
5%
0%
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
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Profit margin to continue to improve to 25% in the next few years

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25

Future Annual Subscription licenses

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----- Start of picture text -----

✓ Stop selling perpetual licences, both On Premise and On Cloud
✓ 5 year subscription licences with break fee
✓ After 5 years these subscription licences will move to yearly
licences, creating a future annuity stream
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Future Annual Subscription Licences on
completion of 5 year contracts
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
FY19 FY20 FY21 FY22
Future subscription income
'$'000
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Annual Cloud Subscription Fees
engine for significant profit growth in the coming years
As previously stated focus has moved from ACV growth to profitable growth in coming years
Annual Contract Value - Compound Growth 69% per annum
160 $143.0M,
UP 25%
140
$114.6M,
120 UP 30%
100 $87.9M, UP 40%
$'m
80 $62.8M,
UP 50%
60 $42.0M,
UP 55%
40 $27.1M,
$16.0M, UP 69%
20 UP 264%$8.0M, UP 100%
0
FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22
$2m loss $2.5m loss $2.2m loss $2.5m profit $5m profit
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$143m / year (recurring) in 2022, recalibrated by financial year

26

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UK Licence Fee Growth to 2022
‘Customers First’
Licence Fees & Total Revenue
$41.3M,
45 UP 51%
40
Compound Growth 44% [1]
35
$27.3M,
30 UP 45%
$18.9M,
25 UP 43%
$11.3M, Licence Fees
2015 $2.0M, UP 87%$3.8M, UP 83%$6.9M, UP 33%$9.2M, $11.1M,UP 21% $13.2M,UP 19% $5.0M, UP 50%$7.5M, UP 50% Total Revenue
UP 51% $3.0M, $3.0M, UP 67%
10 $3.0M, $2.8M, UP 6% INLINE
$0.6M, $1.4M, UP 114% DOWN 6%
5 UP 110% UP 135%
0
2014 2015 2016 2017 2018 2019 2020 2021 2022
$745k loss $400k loss $66k profit $1.1m loss $500k loss Breakeven
1Licence Fee Compound Growth
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Slow sales growth, and focus on customers. Licence growth will return in the 2020 financial year

R&D[1] Growth from 2016 to 2021

Save $75m over the 5 year period

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100
$96.6m
9080 Historical Compound Growth 16% Historical Compound Growth 16% $29.0m Model shows savings of
70 Model Compound Growth 8% Model Compound Growth 8% $67.6m $29m/year in year 5 (2021)
60
• In year 5, R&D will be 18% of
50 revenue (vs 18.5% now)
40 Projected from • In year 10, target for R&D is
30 2016 15% of revenue
20 Historical • Still well above Industry
10 Growth Rate Average of 10% to 12%
0
2016 2017 2018 2019 2020 2021
Target for R&D growth of 8% per annum compound
• Included acquisitions to date: JRA, DMS, ICON into the baseline
$'m
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  • Operating leverage, economy of scale, new work practices, off shore R&D centres

  • Continues to be a very aggressive R&D program

  • ➢ Assumes no Acquisitions in next 5 years, and continuing growth in revenue

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1 R&D excluding acquisitions, including R&D product mods / subsidies
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27

Product Maturity

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----- Start of picture text -----

Tipping point when Profit exceeds Licence fees
5 Years
20 Contribute $16+m of additional Profit per year in 5+ years time
15
10
5
0
(5)
CPM Financials & Student Asset Management Enterprise Content HR/Payroll Property Stakeholder Spatial
Supply Chain Management Management Management
Licence Fees Profit
• Significant investment over the last 10 years in Assets, ECM [1] , HRP [2] , Property, Stakeholder Management
$'m
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  • Expected these to contribute strongly in the coming years to profitability

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1 Enterprise Content Management 2 Human Resources & Payroll
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Clear strategy for continuing long term growth

  • ✓ TechnologyOne Cloud mass production architecture reaches scale

  • ✓ Ci Anywhere – our next generation product

  • ✓ Resilient nature of the enterprise software market

  • ✓ The breadth and depth of our product offerings

  • ✓ Our enterprise vision

  • ✓ Our focus on eight markets

  • ✓ Our preconfigured solutions

  • ✓ Our large customer base

  • ✓ United Kingdom

28

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Positioned well
for the future…
----- End of picture text -----

Agenda

  • ✓ Results

  • ✓ Significant Achievements

  • ✓ Strategic Initiatives

  • ✓ Outlook for New Year

  • ✓ Long Term Outlook

Appendix

  • TechnologyOne Overview

29

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----- Start of picture text -----

Australia’s largest enterprise software company
Continually profitable Invest $50m
Back into R&D
For over 25 years
Profit
$58m
Formed in
Largest
1987 R&D centre Revenue
in Australia
1000+ $273m
employees 300+
developers Cash
$93m
1200+ Market Capitalisation
Corporate, government $1.8b
and statutory authorities
Double in size
Every 4 to 5 years
14 international offices
Australia, New Zealand, South Pacific,
Asia and United Kingdom
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1000+ High Profile customers

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Papua New
Guinea
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30

Financially Very Strong

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  • Cash and Equivalents $93.4m

  • • Return on Equity 28+%

  • • Adjusted Return on Equity[1] 59%

  • • Debt/Equity 0.01%

  • • Interest Cover 1,192

  • • Continually paid dividends since 1996 (22 years)

  • • Continually profitable since 1992 (26 years)

As at 30[th] Sept 2017 1 Adjusted for net cash above required working capital, assumed at two months of staff costs

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180
Historical Performance 160
140
Key metrics over last 10 years … 120
✓ Revenue - 11% per annum compound 100
– 80
Even through the Dot-Com and GFC
✓ Initial Licence fees - 12% per annum compound 60
✓ Annual Licence fees - 14% per annum compound 40
✓ Profit After Tax - 11% per annum compound 20
✓ Dividends - 11% per annum compound 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
✓ Net Assets - 13% per annum compound Profit After TaxInitial Licence Fees Annual Licence FeesDividends Net Assets
$'m
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Doubling in size every 5+ years

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31

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----- Start of picture text -----

Our enterprise vision
The power of a single integrated
enterprise solution
What makes us unique
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Our enterprise vision

We are one of only a few global enterprise vendors

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----- Start of picture text -----

Asset Financials HR & Enterprise Supply Property Student
Management Payroll Budgeting Chain & Rating Management
Business Enterprise Performance Spatial Enterprise Cash Stakeholder Business
Intelligence Content Planning Receipting Management Process
Management Management
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The power of a single, integrated, enterprise solution to streamline your business, reduce costs and embrace new technologies

32

Our enterprise vision

▪ We are one of only a few global enterprise vendors

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  • Suite of 14 products

  • Deeply integrated

  • Best of breed functionality

  • Common platform

  • Consistent user interface

The power of a single, integrated, enterprise solution to streamline your business, reduce costs and embrace new technologies

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The power of one
One vision
One vendor
One code-line
One experience
What makes us unique
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The power of one

We do not use implementation partners or resellers

We take complete responsibility for building, marketing, selling, implementing, supporting and running our enterprise solution for each customer to guarantee long-term success.

Compelling Customer Experience

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One vision. One vendor. One Code-line. One experience.

What makes us unique…

We focus on eight key markets…

  • Deep understanding and engagement in our markets

  • Deeply integrated preconfigured solutions

  • Proven practice

  • Streamlined implementations

  • Reduce time, cost and risk

We sell to asset and service intensive organisations. We do not service retail, distribution or manufacturing industries.

Market focus and commitment

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Preconfigured solutions

Proven practice preconfigured solutions designed to meet the needs of each sector

  • Tailored configuration

  • Proven practice

  • Streamlined implementation

  • Reduced time, cost and risk

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The power of evolution
An enterprise solution that adapts
and evolves
What makes us unique
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The power of evolution Substantial investment into R&D each year

  • New releases encompass new technologies, concepts and innovations

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• Configuration and not customisation
GREEN SCREEN CLIENT SERVER WEB BASED CLOUD COMPUTING
99% retention rate of customers who have continued
with us throughout our evolutionary journey
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TechnologyOne SaaS
Enterprise software
as a service
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TechnologyOne SaaS

  • We run our own enterprise software through the cloud

  • We take responsibility to provide a simple, cost effective and highly elastic model of computing

  • Unique mass production model delivers economies of scale and strategic benefits to our customers

  • Focus on your business, not the technology

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The Future of enterprise software, today
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Traditional Hosting
Customised
Hand crafted to your specific needs – you only get what you pay for
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✓ Economy of scale TechnologyOne SaaS
-
Massively scalable, Highly efficient , Cost effective Mass Production
✓ Highly resilient & fault tolerant
✓ Elastic - add capacity dynamically
✓ Significant cost savings
Future proof - We invest millions annually to make our production line and software better
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Ci Anywhere
Any device
Any where
Any time
Absolutely essential
in a digital world
Enterprise software, incredibly simple
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Flow across many devices in the course of a day

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We are delivering our entire
enterprise suite on mobile
devices
Enterprise Software intelligently adapts to the devices
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TechnologyOne SaaS Growth To 2022
$143m / year (recurring) in 2022
new revenue stream and does not cannibalise existing revenue streams
$'m
Annual Contract Value - Compound Growth 69% per annum
160 $143.0M,
UP 25%
140
$114.6M,
120 UP 30%
$87.9M,
100 UP 40%
80 $62.8M,
UP 50%
60 $42.0M,
UP 50%
$28.0M,
40 $16.0M, UP 75%
$8.0M, UP 100%
20 UP 264%
0
FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22
$2m loss $2.5m loss $2.2m loss 1$2.5m profit $5m profit
2Based on a financial year
1Revised from $1m to $2.5m profit 3Cloud Services Fee – new incremental revenue, does not cannibalise Initial or Annual Fees
Profit contribution in 2017/2018 year to be $5m.
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Other Facts

Diversity of revenue streams from multiple:

  • Products 14

  • • Vertical markets 8 • Geographies 12

  • All states of Australia, New Zealand, South Pacific, Asia and UK

Strong, very loyal blue chip customer base

  • We provide a mission critical solution – ‘sticky customer base’

  • 60%+ of our revenues generated from existing customers each year

  • Annual licences, increase usage, new modules, new products, ongoing services etc.

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Historical Performance 160
140
120
Key metrics over last 10 years …
100
✓ Revenue - 14% per annum compound
– 80
Even through the Dot-Com and GFC
✓ Initial Licence fees - 13% per annum compound 60
✓ Annual Licence fees - 17% per annum compound 40
✓ Profit After Tax - 12% per annum compound
20
✓ Dividends - 11% per annum compound
0
✓ Net Assets - 13% per annum compound 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Profit After Tax Annual Licence Fees Net Assets
Initial Licence Fees Dividends
$'m
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Doubling in size every 5+ years

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Delivering a Cloud first, Mobile first world

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Jun 2
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May 20
Transaction in Own Shares 2026
May 20
Earnings Release 2026
May 18
Notice of Dividend Amount 2026
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Investor Presentation 2026
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Interim / Quarterly Report 2026
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