Technology One Delivers Record H1 as SaaS+ and AI Momentum Builds

About TechnologyOne Ltd

TechnologyOne Ltd (ASX: TNE) is an Australian enterprise software company providing fully integrated enterprise business software solutions. Its products cover financials, human resources and payroll, enterprise asset management, student management, property and rating, business analytics, enterprise budgeting, performance planning, supply chain management, enterprise content management and other core business functions. The company serves sectors including local government, education, government, health and community services, and asset-intensive industries.

Record first-half performance continued

The result marked TechnologyOne’s 17th consecutive record first-half profit, record revenue and record SaaS fees. Revenue from ordinary activities increased 11 per cent to $318.4 million, while net profit attributable to members increased 6 per cent to $66.8 million. Basic earnings per share increased to 20.44 cents, compared with 19.26 cents in the prior corresponding period.

Profit before tax rose 9 per cent to $89.1 million, with a PBT margin of 28 per cent. The company said the result was in line with the phasing it previously flagged, reflecting significant planned investment in its Showcase event, where it launched new AI products. Excluding the Showcase investment and foreign exchange impacts, TechnologyOne said its underlying “heartbeat of the business” showed ARR growth of 19 per cent, net revenue retention of 116 per cent and PBT growth of 21 per cent on a constant-currency and normalised basis.

ARR growth remained the key driver

Annual recurring revenue increased 17 per cent to $598.0 million, keeping TechnologyOne on track towards its longer-term target of more than $1 billion in ARR by FY30. The company said growth has historically been weighted toward the second half, meaning the first-half performance positions it well to target the top end of its FY26 ARR guidance range of 16 to 18 per cent.

Net revenue retention of 114 per cent remained strong and broadly in line with the company’s long-term target of 115 per cent or more. This reflects existing customers adopting additional products and modules. TechnologyOne said its customers continue to adopt products faster than they did as on-premise customers, with the AI strategy expected to further support adoption.

SaaS and recurring revenue increased 13 per cent to $299.2 million. The company said this reflected the timing of customer contract signings in the half, which were weighted towards the end of the period relative to the prior corresponding period.

SaaS+ and AI strategy are central to growth

A major focus of the update was TechnologyOne’s transition from SaaS to SaaS+, with the ambition of delivering ERP in 30 days. The company said SaaS+ is creating a higher-quality business by replacing lower-quality, one-off traditional consulting revenue with high-quality recurring SaaS+ revenue. It noted that the shift may create a short-term margin headwind, but should support stronger long-term margins.

The launch of the AI strategy was described as a major step in the company’s evolution. TechnologyOne’s AI products include Plus, Guide and in-product AI. These products are intended to anticipate business needs, suggest actions and help organisations simplify operations through enterprise-wide data. The company said customer feedback and adoption have surpassed expectations.

TechnologyOne is also positioning AI as a revenue opportunity rather than a threat to traditional seat-based SaaS. In its investor presentation, the company said its model is linked to outcomes, interactions and conversations, with Plus and Guide creating potential transaction-based AI revenue streams.

Customer wins supported organic growth

TechnologyOne reported strong momentum across its core verticals. Local government was a standout, with ARR in the local government vertical growing 27 per cent. Key Australian customer wins included City of Townsville, Cardinia Shire Council, Liverpool City Council, Salisbury City Council and City of Ryde Council.

The education sector also performed well, with ARR growth of 15 per cent. Major wins included James Cook University, which signed a 10-year deal across the full TechnologyOne product suite. In the UK, the company won the University of Suffolk and Royal Holloway, University of London. These wins support TechnologyOne’s strategy of migrating UK higher education customers from legacy student management systems to modern ERP products built for the sector.

UK ARR increased 23 per cent to $53.0 million, showing the international business continues to scale. The company noted that the UK business is now a larger part of the group, meaning foreign exchange movements can have a greater impact on statutory results.

Investment remained elevated but disciplined

TechnologyOne continued to invest heavily in product development. R&D investment before capitalisation increased 22 per cent to $84.1 million, representing 26 per cent of total income. The company said this investment supported the launch of new AI products and the continued development of SaaS+ ERP solutions.

Despite this investment, the balance sheet remained strong. Cash and investments increased 16 per cent to $245.5 million, and the company had no debt. Free cash flow was $20.3 million, down from $24.0 million in the prior corresponding period, reflecting the usual first-half weighting and investment profile.

Dividend increased

TechnologyOne increased its interim dividend by 21 per cent to 8.0 cents per share, franked to 6.0 cents per share. The record date is 29 May 2026, with payment scheduled for 12 June 2026.

Outlook

TechnologyOne reaffirmed its upgraded FY26 guidance, targeting profit before tax growth of 18 to 20 per cent and ARR growth of 16 to 18 per cent, with both measures targeting the top end of the range. The company is also targeting a 2 percentage point PBT margin expansion, from 30 per cent to 32 per cent, and free cash flow generation equal to net profit after tax.

Overall, TechnologyOne delivered a strong first-half result, supported by recurring revenue growth, high customer retention, SaaS+ adoption, AI product launches and a strong balance sheet. The main positives are record ARR, strong NRR, continued local government and education wins, UK growth and reaffirmed guidance. The main risks are execution on SaaS+, AI commercialisation, foreign exchange impacts and the need to keep converting pipeline into long-term recurring revenue.