This is the first of two articles identifying the ASX’s fastest growing software companies. Before presenting the findings, here are the parameters of my search.

  1. I only looked at revenue growth from the latest financial report which is for half a year in some cases.
  2. I only considered stocks listed under Global Industry Classification Standard (GICS) industry group Software and Services. Therefore, software companies like Pro Medicus Limited (ASX: PME) and Hub24 Ltd (ASX: HUB) which are listed under other groups are not included.
  3. I only looked at companies with annualised revenue of more than $20 million.
  4. I stripped out acquired revenue growth where possible. Sometimes it was easier to exclude the effect of acquisitions altogether and other times I used pro forma figures which assumed a full contribution from acquisitions in both the current and prior period.
  5. I did not adjust for foreign exchange. In most cases foreign exchange effects have been positive because software companies often generate significant revenue overseas and the Aussie dollar has been falling over the past two years. However, the magnitude and mix of foreign earnings varies and some companies report in foreign currencies.
  6. I only considered companies that make money primarily by selling access to their in-house developed software to users.

There are five such companies that grew organic revenue by more than 30% over the last year. In reverse order of growth rate, they are:

Wisetech Global (ASX: WTC) achieved 30% pro forma revenue growth to $103.3 million in 2016. The company provides software to the global logistics industry and 98% of its revenue is recurring in nature. It also has very high customer retention rates and so is in a great position to continue growing for years to come.

Pro forma net profit after tax (NPAT) was $14.2 million for the year which included $11.2 million of depreciation and amortisation but the company spent $20.1 million on intangible assets and property, plant and equipment. Therefore, free cash flows were significantly lower than reported profit reflecting the fact that the company is investing back into the business to maintain its growth trajectory.

Wisetech had $103.2 million in cash after debt at 30 June 2016 and has a market capitalisation of $1.5 billion.

Aconex Ltd (ASX: ACX) supplies cloud collaboration software to the construction industry and delivered organic revenue growth of 32% in 2016. 59% of its revenue is project based and so the company’s growth profile is likely to ebb and flow depending on the global construction industry.

Aconex generated $123.4 million of revenue in 2016 which converted into $9.9 million NPAT from core operations. This NPAT result included $7.5 million of depreciation and amortisation versus $13.7 million spent on intangible assets, capitalised development and property and equipment. The company has $52.5 million in cash after debt and a market capitalisation of $1.2 billion.

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Motley Fool contributor Matt Brazier has no position in any stocks mentioned. The Motley Fool Australia owns shares of WiseTech Global. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.