ASX 200 tech stock lifts off on another record-setting half-year profit

Investors are bidding up the ASX 200 tech company following its half-year results.

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S&P/ASX 200 Index (ASX: XJO) tech stock Technology One Ltd (ASX: TNE) is marching higher today.

The TechnologyOne share price closed yesterday at $16.02. In morning trade on Tuesday, shares are swapping hands for $16.14 apiece, up 0.75%.

For some context, the ASX 200 is down 0.1% at this same time.

This comes following the release of the software company's half-year results for the six months ending 31 March.

Read on for the highlights.

ASX 200 tech stock marching higher on revenue and profit boost

  • Total revenue of $244.8 million, up 16% year on year
  • Total annual recurring revenue (ARR) of $423.6 million, up 21%
  • Profit after tax of $48.0 million, up 16% from the prior corresponding period
  • Total expenses of $183.2 million, up 16% year on year
  • Record interim dividend of 5.08 cents per share franked at 65%, up 10% from the prior interim dividend

What else happened for Technology One during the half year?

Other key metrics that look to be helping boost the ASX 200 tech stock include the 117% net revenue retention for the half year, exceeding management's target by 2%.

TechnologyOne also reported a 21% increase in revenue from its SaaS and recurring business, which came in at $223.1 million.

Management noted that, as expected, cash flow generation was negative $3.8 million for the six months. However, they noted that cash flow generation will be strong over the full year.

On the research front, R&D investment (before capitalisation) also increased by 15% year on year to $56.9 million. This represents 24% of the company's revenue.

And the United Kingdom business was a strong performer with ARR in the UK up 36% to $28.8 million.

As at 31 March, TechnologyOne held cash and investments of $172.0 million, up 24% from last year.

Impressively, this marks the 15th year of record first-half profit, revenues, and SaaS fees.

What did management say?

Commenting on the results boosting the ASX 200 tech stock today, CEO, Ed Chung said, "These are strong half year results for TechnologyOne and validate the strength of our SaaS strategy, which continues our strong growth trajectory in both Australia and the UK."

Chung continued:

Net revenue retention (NRR), which is the net amount of new ARR from existing customers, was 117% for the 12 months to 31 March. This was an outstanding result given that best-in-class in the ERP market is considered between 115% and 120%.

We expect to meet our 115% target for the full year. By growing NRR at 115%, we can double the size of our business every five years, which shows the strength and resilience of our strategy and deep customer relationships

What's ahead for the ASX 200 tech stock?

Looking at what could impact the ASX 200 tech stock in the months ahead, the company's FY 2024 guidance foresees a 12% to 16% increase in profit.

This is expected to be driven by ARR growth of 15% to 20% and net profit before tax margin growth of around 1% for the full year.

Guidance for FY24 – profit up 12% to 16%, underpinned by strong ARR growth up 15%-20% and net profit before tax margin growth of approximately 1% for the full year.

"We expect strong growth for the full year FY 2024 and the company sees significant growth opportunities in the coming years," Chung said.

Looking at what's further ahead for the ASX 200 tech stock, Chung added:

We are on track to surpass total ARR of $500 million-plus by FY 2025, from our current base of $424 million. We will continue to invest for the long-term in R&D to build platforms for growth to continue to double in size every five years.

TechnologyOne share price snapshot

With today's intraday moves factored in, the ASX 200 tech stock is up 6% so far in 2024.

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Technology One. The Motley Fool Australia has recommended Technology One. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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