Dr. Reddy's Laboratories Ltd
Annual Report 2024

Plain-text annual report

p. (02) 9018 5525 w. readytech.io a. Level 2, 77 King Street, Sydney NSW 2000 MARKET RELEASE (ASX: RDY) 2024 Annual Report – typeset version 21 October 2024 – ReadyTech Holdings Limited (ASX: RDY) (ReadyTech) (ABN 25 632 137 216) attaches a typeset version of the ReadyTech 2024 Annual Report. This version includes a letter from the Chair and Chief Executive Officer. No other changes have been made to the version lodged with ASX on 27 August 2024, other than typesetting. – ENDS – This announcement has been authorised for release by the Chief Executive Officer of ReadyTech Holdings Limited. For more information, please contact: Nimesh Shah Chief Financial Officer e. nimesh.shah@readytech.io p. +61 437 980 296 About ReadyTech ReadyTech is a leading provider of mission-critical SaaS for the education, employment services, workforce management, government and justice sectors. Bringing together the best in people management systems from students and apprentices to payroll, employment services, and community engagement, ReadyTech creates awesome technology that helps their customers navigate complexity, while also delivering meaningful outcomes. To learn more about ReadyTech’s people-centric approach to technology, please visit www.readytech.io. ReadyTech Holdings Limited ABN 25 632 137 216 30 JUNE 2024 ANNUAL REPORT NEXT GENERATION, PEOPLE- CENTRIC SOFTWARE CONTENTS Chair's letter Chief Executive Officer’s report Corporate directory Directors’ report Auditor’s independence declaration Statement of profit or loss and other comprehensive income Statement of financial position Statement of changes in equity Statement of cash flows Notes to the financial statements Directors’ declaration Shareholder information Independent auditor’s report to the members of ReadyTech Holdings Limited 2 4 8 9 26 27 28 29 30 31 78 83 79 CHAIR’S LETTER TONY FAURE Workforce Solutions is set to benefit from increased focus on payroll compliance, remote and mobile working arrangements and growing need for efficiency and automation. In addition, growth for cloud-based payroll and all-in-one workforce management software is expected in coming years. Momentum is building across all our target markets, and ReadyTech is in stronger position than ever to leverage the opportunity created by rapid digitisation and transition to cloud. With significant tailwinds on our side, ReadyTech is on track to deliver its medium-term targets – improving margin profile and $170 million in revenue by FY27. I would like to recognise the entire ReadyTech team and our partners for their continued dedication and energy in delivering innovative solutions and high-quality service to our customers. I also want to thank my fellow Board members for their valuable support and guidance over the year, and our shareholders for their continued support. As we enter a new financial year, I am as confident as ever in ReadyTech’s ability to deliver strong performance and continued value to all its stakeholders in FY25 and beyond. Tony Faure Chair ReadyTech succeeds because our products deliver results for our customers, and we remain committed to investment in R&D and innovation. This includes deeper investment in AI to unlock new value. AI represents a rapidly evolving opportunity with several initiatives already introduced in FY24, including the use of AI in customer support, and more in the pipeline for both product development and ways of working at ReadyTech. We believe the future of enterprise software is open, connected and people centric. ReadyTech’s strong point of difference from incumbent players is our ability to connect our platform directly with other best-of-breed systems, providing the customer choice and flexibility. As organisations replace their legacy systems, this continues to position us well for their transitions. Following our success in the TAFE market, ReadyTech is now taking steps to become a major and trusted player in higher education. This is another market with a clear and established need for cloud platforms, as well as a modernised and elevated student experience. Along with TAFEs, we believe higher education providers are ripe and ready for change. Pleasingly, our recent multi-year contract win with Avondale University is proof of our ability to deliver on this opportunity. Local government, where we already have a strong foothold, represents another material opportunity with over $345 million serviceable market. The transition of IT Vision customers to Ready Community is also gaining momentum, with significant value already unlocked for customers transitioning to cloud and subscription model. We have had some sizeable wins within Justice, solidifying our position as a prominent provider of cloud software in this vertical. Dear Shareholder, On behalf of the Board, I am pleased to present you ReadyTech’s Annual Report for 2024. During the year, ReadyTech made significant progress on our mission of delivering innovation in our markets and superior experience to our customers with our next generation, mission-critical software. The Company gained significant traction within the enterprise space, delivering high-value contract wins and improved profitability through scale. ReadyTech’s sustained success across all three verticals shows that the our strategic focus on higher value enterprise customers continues to pay off. ReadyTech’s reputation as a trusted enterprise player was further strengthened with another 22 landmark customer wins which totalled $12.5 million in contract value. In addition, we were pleased to demonstrate our ability with breakthrough enterprise customers, which is now opening new large serviceable markets – most recently in higher education, with our first full university student management system win in July 2024. These high-value enterprise wins, coupled with focus on operating leverage delivered a strong financial result in FY24. Subscription and license revenue grew 13% on the prior year and now makes up 84% of total revenue. Importantly, continued growth in recurring revenue at a 3-year CAGR of 23% has created a solid and sustainable base for ongoing growth. ReadyTech’s long-term strategy is delivering – we have successfully targeted large enterprise customers within large serviceable markets that are undergoing major digital transformation. These prospective customers represent the greatest opportunity for us in terms of lifetime value and margin accretion potential. 2 3 ReadyTech Annual Report 2024 CHIEF EXECUTIVE OFFICER’S REPORT MARC WASHBOURNE Notable wins in FY24 included our largest Workforce Solutions customer to date, Seeka. We also enjoyed significant wins in Justice with our modern, cloud-based courts management platform – the Department of Justice in WA and a major contract upgrade with HM Courts & Tribunals Service in the UK. We deepened our footprint across enterprise in Education by winning a contract with University of Adelaide Professional and Continuing Education (PACE) as well as securing contract upgrades with Chisholm Institute and Melbourne Polytechnic. We also demonstrated our ability to grow market share in local government with several ERP wins. The key to ReadyTech’s success in the enterprise space is our unique value proposition of an open ecosystem approach. Our platform enables a streamlined transition from legacy systems, lowering the barrier for change. We also provide open connections and interoperability, giving customers choice and flexibility which is resonating well. This truly differentiates us from other software companies and provides us a competitive advantage. ReadyTech is now better positioned than ever to leverage the market opportunity and grow its share. Our enterprise pipeline sits at $31.8 million and our confidence in conversion remains high for the year ahead. More recently, we have been experiencing growing momentum in our enterprise pipeline, and I am increasingly confident many of these opportunities will convert in the short to medium term. Indeed, I am delighted to report that we successfully closed one of the opportunities in early FY25, delivering our first full university student management system customer win. This marked our entry to the $240 million higher education market which we believe is poised for a major wave of digital transformation. As cloud transition and digital transformation gains momentum across our target markets, we continue to invest in our key growth engines – Research & Development and Sales & Marketing – to support further pipeline expansion and sustained long-term revenue growth, backed by strong cash flow generation and a solid balance sheet. Continued success in converting enterprise opportunities Over the year, we strengthened our position as a leading provider of cloud-based next generation software by signing a further 22 enterprise contracts. Average revenue per new customer increased to over $119k, representing a 25% increase on prior year, and reflecting the focus and success of our enterprise strategy. Further breakthrough wins and landmark contracts demonstrate that ReadyTech’s cloud software, growing reputation and open ecosystem approach is truly resonating with large enterprises across our key markets. High-quality enterprise customers drive our recurring revenue base up, and we are confident they will act as strong references to pipeline opportunities still in the process of upgrading their legacy systems, paving the way for more contract wins in future years. Dear Shareholder, It is my pleasure to report on another successful year for ReadyTech as we continue to execute on our enterprise strategy and demonstrate our ability to win major software contracts across our chosen human-led verticals – Education & Work Pathways, Workforce Solutions and Government & Justice. Over the year, we made further progress on our mission to be a trusted partner to our customers, while delivering a superior user experience for students, jobseekers, employees and citizens. ReadyTech delivered a solid financial result in FY24 with continued sales growth across all verticals. Total revenue grew 10.2% on the prior year to $113.8 million, driven by new customer wins, as well as successful cloud upgrades, new product modules and value across our existing customer base. We achieved further improvement in profitability through our vertical SaaS revenue model and by leveraging our increasing scale. ReadyTech is increasingly benefiting from operational efficiencies as well as AI-driven productivity improvements in software development and other key disciplines. In FY24, Underlying EBITDA increased 11.5% to $38.8 million, representing a margin of 34.1%. Our Underlying cash EBITDA margin increased by 150 bps to 17.8%. 4 5 ReadyTech Annual Report 2024 Major cloud enterprise opportunity in Local Government Another market we are truly excited about is Local Government. With a serviceable market of over $345 million and increasing traction via notable enterprise wins, this represents another major opportunity for ReadyTech. We now enjoy relationships with 51% of councils across Australia, and an opportunity remains to grow our share further and expand adoption across our product set. ReadyTech’s citizen- centric Ready Community platform is resonating strongly with existing customers, providing us great case studies as we present our platform to prospective customers. ReadyTech acquired IT Vision two years ago to boost our position in the local government market. We saw a significant opportunity to increase share of wallet with IT Vision’s approximately 170 customers through transition to Ready Community. This transition to cloud is progressing well, already contributing to revenue growth and margin improvement in FY24, and we expect the transition to really ramp up from FY25. To optimise our success with local governments, we invested in our capability across core disciplines in FY24. Further accelerating growth in this space, we also continue to leverage partnerships with leading ERP and technology providers as well as key implementers with specialised expertise in the field. growth, with low to mid double-digit growth expected in FY25. To drive further improvement in profitability, we are actively pursuing improved net revenue retention and increased share of wallet through cloud upgrades and module upsell. In FY25, we expect to deliver an EBITDA margin of 34-35% and a further 100bps improvement in cash margin. Significant momentum in the enterprise space and a solid pipeline are expected to be key drivers of continued growth in the medium term. We are targeting $170 million in revenue in FY27, underpinned by the depth and timing of our sales opportunity pipeline. Through strong retention and further gains in share of wallet, we expect NRR to exceed 106% in the medium term, delivering cash EBITDA margin of greater than 20%. I would like to take the opportunity to thank our talented team for their hard work and commitment. I am immensely proud of what we have delivered to date, and I am confident that together we can continue to develop innovative solutions to our customers and grow the Company to meet its potential. Finally, I want to thank our shareholders for believing in ReadyTech – I look forward to updating you on our progress as we continue to deliver on our growth strategy. Marc Washbourne Co-Founder & Chief Executive Officer ReadyTech capitalising on the digital transformation within Education In recent years, ReadyTech has built a strong reputation amongst TAFE institutions – we are proud to offer a market leading platform with a proven track record and strong credibility. Significant opportunity for further growth remains as many TAFEs are yet to replace their legacy student management systems with a modern, cloud and student-centric platform. We believe many TAFEs have the readiness to upgrade their software, and with a proven product and delivery capability through our reference customers, we are very well placed to deliver additional wins over the next few years. Our success with TAFEs has enabled ReadyTech to now expand into higher education which represents another huge opportunity for the Company. Like TAFEs, universities and private higher education institutions are facing a major upgrade from their legacy systems to improve student experience. In July 2024, we announced our breakthrough win in higher education with our first university-wide student management system agreement with Avondale University. We are really excited about this opportunity, and we have been investing in our capability to further bolster our offering in this market to underpin further wins. AI unlocking new revenue opportunities and delivering efficiency gains The AI revolution is accelerating rapidly and changing the way businesses across various industries operate. As a company with innovation at the heart of everything we do, ReadyTech is poised to benefit from this revolution. Internally, we are already leveraging several AI-driven initiatives that support our operations and efficiency, driving cost savings and margin expansion. One of these initiatives is our AI support agent which is improving response times and enhancing efficiency while allowing our human staff to focus on more complex tasks. We have also started using AI in software development and testing. In some areas, coding efficiency has improved by over 30%, resulting in a significantly faster delivery of improvements and new features to our customers. Continued investment in R&D coupled with culture of innovation means ReadyTech is well placed to leverage the advancements in generative AI. To further crystallise this opportunity, ReadyTech has established an emerging technology team focused on identifying and unlocking AI opportunities for customers across every platform in FY25 and beyond. Looking ahead I am confident our innovative product offerings will continue to resonate with enterprise customers, and with growing breakthrough wins and customer advocates, we are now better positioned than ever to leverage this expanding market opportunity. Looking ahead, we remain confident in pipeline execution in FY25, including the early wins within education. Further enterprise wins and solid NRR are expected to drive acceleration in revenue 6 7 ReadyTech Annual Report 2024 ReadyTech Holdings Limited Corporate directory 30 June 2024 Directors Tony Faure - Chair and Independent Non-Executive Director Helen Lea - Independent Non-Executive Director Marc Washbourne - Chief Executive Officer Timothy Ebbeck - Independent Non-Executive Director Tom Matthews - Non-Executive Director Mark Summerhayes - Alternate Non-Executive Director to Tom Matthews Company secretaries Nimesh Shah Melissa Jones Registered office and Level 2, 77 King Street Principal place of business Sydney NSW 2000 Australia Ph: +61 2 9018 5525 Share register Link Market Services Limited Level 12, 680 George Street Sydney, NSW 2000 Australia Ph: 1300 554 474 Auditor Deloitte Touche Tohmatsu Quay Quarter Tower 50 Bridge Street Sydney, NSW 2000, Australia Ph: +61 2 9322 7000 Stock exchange listing ReadyTech Holdings Limited shares are listed on the Australian Securities Exchange (ASX code: RDY) Website www.readytech.io Corporate Governance Statement The Directors and management are committed to conducting the business of ReadyTech Holdings Limited in an ethical manner and in accordance with the highest standards of corporate governance. ReadyTech Holdings Limited has adopted and has complied with the ASX Corporate Governance Council's Corporate Governance Principles and Recommendations (Fourth Edition) (‘Recommendations’) to the extent appropriate to the size and nature of its operations. The Corporate Governance Statement, which sets out the corporate governance Recommendations that were followed during the reporting period and identifies and explains any Recommendations that were not followed was approved by the Board of Directors at the same time as the Annual Report and can be found at https://investors.readytech.com.au ReadyTech Holdings Limited Directors' report 30 June 2024 The Directors present their report, together with the financial statements, on the consolidated entity ('Group' or 'ReadyTech') consisting of ReadyTech Holdings Limited ('Company' or 'parent entity') and the entities it controlled at the end of, or during, the year ended 30 June 2024. Directors The following persons were Directors of ReadyTech Holdings Limited during the whole of the financial year and up to the date of this report, unless otherwise stated: Tony Faure - Chair and Independent Non-Executive Director Marc Washbourne - Chief Executive Officer Timothy Ebbeck - Independent Non-Executive Director Mark Summerhayes - Alternate Non-Executive Director to Tom Matthews (appointed as a Non-Executive Director on 30 July 2024) Helen Lea - Independent Non-Executive Director (appointed on 21 May 2024) Elizabeth Crouch AM - Independent Non-Executive Director (resigned on 21 May 2024) Tom Matthews - Non-Executive Director (resigned on 30 July 2024) Principal activities During the financial year, the principal continuing activities of the Group consisted of: ● Education and Work Pathways - provider of education, apprenticeship and employment services technology powering better outcomes for students, learners and job seekers; ● Workforce Solutions - provider of integrated payroll, rostering, HR and recruitment for the workforce; and ● Government and Justice - provider of technology solutions for local and state government and justice agencies. Dividends There were no dividends paid, recommended or declared during the current financial year or previous financial period. Review of operations The profit for the Group after providing for income tax amounted to $5,464,000 (30 June 2023: $4,975,000). Commenting on the FY24 result, ReadyTech Co-Founder and CEO, Marc Washbourne said: “ReadyTech made significant progress with executing its enterprise strategy and delivered a solid financial result in FY24, despite some expected enterprise contracts shifting close dates in FY24, as flagged in February. Total revenue growth of 10.2% was driven by new customer wins across all of our verticals – Government & Justice, Education & Work Pathways and Workforce Solutions – as well as successful cloud upgrades and upsell of product modules to our existing customer base. Notably, we continued to improve profitability through our vertical SaaS revenue model and by leveraging our growing scale advantage.” “Over the year, ReadyTech signed another 22 enterprise contracts with a total deal value of $12.5 million, further solidifying our position as a leading provider of cloud-based next generation software in human-led sectors. These wins demonstrate that ReadyTech’s cloud software and open ecosystem approach is resonating with large enterprises in our key focus markets. Our platform enables a streamlined transition from legacy systems and provides flexibility and interoperability with other systems, giving us a major point of competitive difference and the ability to effectively meet customer demand.” Continued growth in recurring revenue coupled with scale benefits deliver improved margins ReadyTech’s total revenue increased 10.2% to $113.8 million in FY24 (FY23: $103.3 million) underpinned by 13.1% growth in subscription and license revenue. Implementation, training and other revenue declined 3.1% following a timing delay with several high conviction enterprise deals from 2H FY24 to FY25 and increased focus on streamlined out-of-the-box implementations. Subscription-based revenue represents 83.8% of total revenue. In FY24, ReadyTech signed 22 new landmark enterprise contracts with the annualised deal value totalling $12.5 million, increasing average revenue per new customer increasing by 25% to a record $119.1k. Net revenue retention of 104% reflects strong customer retention and low churn, increased share of wallet and progress with upgrading IT Vision customers to cloud. Expenses increased 9.6%, below the rate of revenue growth, to $75.0 million with the Company benefiting from operational efficiency as well as initial AI-driven productivity improvements in software development and other key disciplines. ReadyTech is committed to ongoing investment in the key growth drivers of Research & Development (30.0% of revenue in FY24) and Sales & Marketing (7.1% of revenue in FY24) to support expanding pipeline and sustained long-term revenue growth. 8 9 ReadyTech Annual Report 2023 ReadyTech Holdings Limited Directors' report 30 June 2024 Adjusted EBITDA* grew 11.5% to $38.8 million, with margin within guidance at 34.1% (FY24: 33.7%). Adjusted cash EBITDA** margin increased by 150 bps to 17.8%, and it is expected to improve further in coming years towards a medium- term target of over 20%. New customer wins and strong net revenue retention across segments Education & Work Pathways continued to perform strongly in FY24 with revenue growing at 12.5% on pcp and EBITDA margin improving by 160 bps to 45.6%. Revenue growth was driven by cloud platform upgrade of AVAXA TAFE customers, successful upsell to existing customers and new customer wins. ReadyTech signed new agreements with several notable enterprise customers, including University of Adelaide Professional and Continuing Education (PACE) and English Language Centre (ELC), Chisholm Institute and Melbourne Polytechnic, underlining the traction in the enterprise strategy in this segment. As a market-leading TAFE platform and having recently won its first university-wide student management system customer contract, ReadyTech is well positioned to capitalise on the major opportunity within the broader education market as legacy student management systems within TAFEs and higher education are being displaced by a modern cloud alternative. Workforce Solutions delivered 7.6% revenue growth in FY24 driven by new customer wins and existing platform upgrades (software +9.7% vs pcp). The segment’s EBITDA margin declined by 360 bps to 36.4% due to planned investment in onboarding and R&D staff over FY24. Increased focus on payroll compliance, remote and mobile working arrangements and growing need for efficiency and automation are expected to drive continued growth for ReadyTech’s cloud-based payroll and all-in-one workforce management software in the coming years. The Government & Justice segment delivered another strong year with 9.9% growth in revenue driven by wins in Ready Community and Ready Contracts, contract renewal with the HM Courts & Tribunals Service in the UK, and progress with the transition of IT Vision customers to the cloud offering. Transition of the approximately 170 IT Vision customers to Ready Community supported increase in average contract value and drove higher margins, with the segment EBITDA margin increasing by 150 bps to 29.4% in FY24. Leveraging its existing 51% market penetration within councils, Local Government represents a large ongoing opportunity for ReadyTech with an estimated $345 million addressable market. Strong balance sheet and cash flows support growth initiatives ReadyTech is in a strong financial position with $29.9 million of available funds for use at 30 June 2024 (consists of cash and cash equivalents and unused loans of $8.0m) and net leverage ratio of 0.5x. The strength of the Company’s balance sheet supports strategic growth initiatives. The Company’s cash flows continue to grow, underpinned by continued growth in recurring revenue. Cash flow from operating activities totalled $40.3 million in FY24, up $7.1 million on pcp, and representing cash flow conversion of 103.7%. Material business risks The following is a summary of material business risks that could adversely affect our financial performance and growth potential in future years. Disruption to, or failure of, technology systems and software, including security breaches The Group and its customers are dependent on the effective performance, reliability and availability of the Group’s technology platforms, communications systems, servers, the internet, hosting services and the on-premise and cloud-based environments in which it provides such software solutions. There is a risk that the Group’s systems and software may be adversely affected by damaged or faulty equipment misuse by staff or contractors, disruption, failure, service outages or data corruption that could occur as a result of computer viruses, “worms”, malware, ransomware, internal or external misuse by websites, hacking or cyber-attacks, and other disruptions including natural disasters, power surges or outages, terrorist attacks, or other similar events. There is also a risk that security and technical precaution measures taken by the Group and its third-party operators will not be sufficient to prevent unauthorised access to the Group’s networks, systems and databases. Operational or business delays, and damage to reputation, may result from any disruption or failure of the Group’s information systems and product delivery platforms, which may be caused by events outside the Group’s control. This could lead to claims against the Group by its customers, reduce the attractiveness of the Group’s software and services to its clients, subject the Group to legal action and/or regulatory scrutiny and the potential termination of customer contracts. * Adjusted EBITDA excludes long term incentive costs of $1.0m and non-recurring costs of $5.2m (accounting impact of contingent consideration of $2.4m, acquisition-related transaction costs of $1.3m and restructuring and integration costs of $1.5m). ** Cash EBITDA includes actual lease payments, labour capitalisation and excludes the impact of LTIP. ReadyTech Holdings Limited Directors' report 30 June 2024 Business growth and client retention ReadyTech’s business is dependent on its ability to retain a portion of its existing clients and attract new business. ReadyTech sells its products under various subscription and licence models, all of which are exposed to the risk of expiry, non-renewal, and pricing risks. ReadyTech may fail to retain sufficient existing customers or attract sufficient new business for a number of reasons, such as the failure to meet customer expectations, poor customer service, technology disruptions, pricing or competition. ReadyTech may also be unable to, or experience delays in, converting pipeline customers into new customers, especially larger customers who generally have longer sales cycles and procurement and tender processes. Talent retention and acquisition The Group’s success depends to some extent on its ability to attract and retain key personnel; specifically technology talent, implementation and customer success roles, payroll specialists and senior management with extensive experience in, and knowledge of, the education, government, justice and employment industries in which the Group operates. The loss of key personnel may adversely affect the Group’s ability to develop its products, or implement its business strategies and may adversely affect its future financial performance. This continues to be an elevated risk due to a tight labour market, wage inflation driven by an increased demand for this talent by acceleration of digital strategies, lack of migration and skills shortages. Technology and software Long term development of software can lead to dependency on dated technology that restricts maintainability, speed of development, security and The Group's competitiveness in the market. Rapid growth can incur technical debt in service of speed to market. As with all information technology and software products, there is a risk of technology obsolescence. New technology may be perceived by customers to have advantages over the Group’s current products. Adoption of regulatory changes The Group’s products are significantly influenced and affected by government policy and regulations which apply to the education, employment and government related entities industries in which the Group operates. There is a risk that the Group may fail to keep abreast of such policy and regulations and potential changes to the same, which may have an adverse impact on its business, operations and financial performance. Any material new or altered law, regulation or policy which impacts the Group’s products could require the Group to increase spending and employee resources on regulatory compliance and/or change its business practices, which would adversely affect the Group’s operations and profitability. Further, there is a risk that customers may reduce their usage of the Group’s products, or that the Group may fail to attract new customers, if the Group fails to offer solutions with appropriate coverage of compliance or regulatory requirements as sought by its customers. Significant changes in the state of affairs There were no significant changes in the state of affairs of the Group during the financial year. Matters subsequent to the end of the financial year No other matter or circumstance has arisen since 30 June 2024 that has significantly affected, or may significantly affect the Group's operations, the results of those operations, or the Group's state of affairs in future financial years. Likely developments and expected results of operations The Group will continue to pursue growth in revenue in the next financial year. Refer to the "Review of operations " section above for further details. Environmental regulation The Group is not subject to any significant environmental regulation under Australian Commonwealth or State law. 10 11 ReadyTech Annual Report 2023 ReadyTech Holdings Limited Directors' report 30 June 2024 Information on Directors Name: Tony Faure Title: Chair and Independent Non-Executive Director Qualifications: Tony holds a Bachelor of Economics (hons) from the University of Sussex. Experience and expertise: Tony Faure is a seasoned Chair and Non-Executive Director with deep expertise in technology, data, digital media and marketing. Tony has advised some of Australia’s leading technology, data and digital media companies. He previously served as CEO of ninemsn and HomeScreen Entertainment, and he was the launch Managing Director, Australia & NZ and later Regional Vice President, South Asia for Yahoo! from 1997 to 2001. Tony's board roles have included positions at SEEK, iSelect, Independent Business Media (publisher of Business Spectator/Eureka Report), Junkee Media, and the Starlight Children’s Foundation Australia’s NSW Advisory Board. He is also the former Chair of Pollenizer and former Non-Executive Director/Interim Chair of Uno Homeloans. Other current directorships: Chair of oOh!media Ltd (ASX:OML), PredictHQ Limited, Chair of LawPath and serves as Non-Executive Director at Common Interest, and is Vice Chair at Tidal VC Former directorships (last 3 years): Stackla, Medical Media, Uno Homeloans Special responsibilities: Member of the Audit and Risk Committee and Nomination and Remuneration Committee Interests in shares: 378,819 ordinary shares Name: Marc Washbourne Title: Chief Executive Officer Qualifications: First-class degree (History), University of Leeds, UK. Company Directors Course, AICD Experience and expertise: Marc Washbourne is a founder of the ReadyTech business and was appointed CEO in 2006. A former software developer and original architect of the JobReady software, Marc brings to ReadyTech over 20 years of experience in technology for the education, employment and government sectors. Marc now heads up a global team committed to innovation and better technology. Marc couples his strong technical background with a strategic vision for ReadyTech’s Software-as-a-Service ('SaaS') products, underpinning best practice approaches shared across the platforms. Other current directorships: Year13, Future Skills Organisation Former directorships (last 3 years): None Special responsibilities: None Interests in shares: 4,293,308 ordinary shares ReadyTech Holdings Limited Directors' report 30 June 2024 Name: Timothy Ebbeck Title: Independent Non-Executive Director Qualifications: Timothy holds a Bachelor of Economics, is a Fellow of CPA Australia, a Fellow of the Australian Institute of Management, a Graduate Member of the Australian Institute of Company Directors, and a Member of the Australian Computer Society. Experience and expertise: Tim Ebbeck has over 30 years of board, executive, and advisory experience across a breadth of industries including software and technology, AI, blockchain, media, sport, consulting, energy and finance. Tim’s executive experience includes roles as Chief Executive Officer at SAP (ANZ), Chief Executive of Oracle (ANZ), Chief Commercial Officer of SAP (APJ), and Chief Commercial Officer of NBN Co. His board roles have included being Non-Executive Director for Bigtincan Limited (RDY.BTH), Indara Digital Infrastructure (JV Australian Super and Singtel), CPA Australia, Central Coast Local Health District, The Yield Technology Solutions, Nextgen Distribution, Museum of Applied Arts & Sciences NSW, and Insite Organisation. Tim is a professional company director and advisor to a range of companies in the technology and emerging industries and a former CEO member of the Business Council of Australia. Other current directorships: Indara Digital Infrastructure Limited, BigtinCan Holdings Ltd (ASX.BTH), and Central Coast Local Health District Former directorships (last 3 years): Xpon Technologies Ltd (ASX.XPN), The Yield Technology Solutions Pty Ltd, Envirosuite Ltd (ASX.EVS), Tymlez Group Ltd (ASX.TYM) Special responsibilities: Chair of the Audit and Risk Committee and a member of the Nomination and Remuneration Committee Interests in shares: 31,068 ordinary shares Name: Tom Matthews Title: Non-Executive Director (resigned on 30 July 2024) Qualifications: Tom is a CFA charter holder, a member of the Sydney CFA Society and also has a Masters of Applied Finance and Investment from the Financial Services Institute of Australasia. In 2001, Tom was awarded a Bachelor of Sciences honours degree in Management Sciences from the London School of Economics. Experience and expertise: Tom has over 20 years of experience in private equity, principal investment, investment banking and middle market advisory and valuations in both Australia and the UK. As a Managing Director at leading private equity manager Pemba, Tom has led a number of transactions across Pemba’s areas of focus since 2015, including investments into ReadyTech, Marque Group, Open Office, ONCALL, RxPx, Vets Central, Acis, Aurizn, Lumia Care and Rennie Advisory. Tom has held a variety of senior roles prior to joining Pemba, including at private equity firm Sovereign Capital Partners in the UK, the Investment Banking Group of Macquarie Bank, and Deloitte Corporate Finance in both Sydney and London. Other current directorships: Vets Central, Acis, Aurizn, ONCALL, Lumia Care and Rennie Advisory Former directorships (last 3 years): None Special responsibilities: None Interests in shares: 36,644,933 ordinary shares* * Tom Matthews is a representative of Pemba entities. The number of shares includes Pemba interests. 12 13 ReadyTech Annual Report 2023 ReadyTech Holdings Limited Directors' report 30 June 2024 Name: Mark Summerhayes Title: Alternate Non-Executive Director to Tom Matthews and appointed as a Non-Executive Director on 30 July 2024 Qualifications: Mark holds a Master’s Degree in Economics from the University of Cambridge. Experience and expertise: After graduating from Cambridge University in 1987, Mark spent seven years at Bain & Company advising corporates on a mix of strategy, Mergers and Acquisitions ('M&A'), and operational improvement projects. Mark was based in London, Munich and Sydney. Mark led assignments for leading European players in the Fast-Moving Consumer Goods ('FMCG'), financial services, telecoms, healthcare and industrial sectors. In 1996 Mark co-founded SB Capital Partners, a private equity partnership, which was backed by Bain Capital, one of the leading US private equity firms. On the back of the success of this venture, Bain Capital subsequently launched its first dedicated European buy-out fund. In parallel to this activity, Mark assisted a wealthy Norwegian family build its own portfolio of private equity investments in both early and late stage situations and private equity funds. In 2001 Mark joined Smedvig Capital full time and as a Managing Director was one of the senior executives responsible for investing, managing and reporting on a diversified A$350 million private equity portfolio. Mark moved to Sydney in 2005 to join Pemba Capital Partners and co-led the spin out of the captive fund from Pemba in 2009. More recently has co-led a $650 million and a $400 million fundraising (backed by some of the largest global and local LPs) which has established the firm as one of the leaders in its segment in Australia and NZ. Other current directorships: Currently Chairman of the Board at Coverforce and a Director of Ausreo, Instant Access, InteriorC Former directorships (last 3 years): SB Capital Partners, Managing Director at Smedvig Capital and a board member of Device Technologies Special responsibilities: None Interests in shares: 555,036 ordinary shares Name: Helen Lea Title: Independent Non-Executive Director (appointed on 21 May 2024) Experience and expertise: Helen has held various executive, directorship and committee advisory roles for ASX listed and private companies. Helen is an expert in transformation, talent and performance, human resources and holds a Master of Arts: Industrial Psychology (University of the Witwatersrand). Helen is a member of the Australian Institute of Company Directors and a Fellow member of the Australian Human Resources Institute. Helen is also a registered organisational psychologist and a member of the Australian Psychological Society. Helen’s previous executive experience included roles as Chief Employee Experience Officer & Government Policy Lead at MYOB, Executive director at Telstra and Interim executive roles at Seven Group Holdings and Uniting. Other current directorships: MiQ Private Wealth Former directorships (last 3 years): Butn Special responsibilities: Chair of the Nomination and Remuneration Committee, member of the Audit and Risk Committee Interests in shares: Nil ReadyTech Holdings Limited Directors' report 30 June 2024 Name: Elizabeth Crouch AM FAICD Title: Former Independent Non-Executive Director (resigned on 21 May 2024) Qualifications: Elizabeth holds a Bachelor of Economics and a Master of Cyber Security. She is a Fellow of the Australian Institute of Company Directors. Experience and expertise: Elizabeth is a seasoned non-executive Director with a career that includes experience in both the public and private sectors in Australia. Elizabeth is the Emeritus Deputy Chancellor of Macquarie University and held previous non-executive Director roles with Chandler Macleod Group, McGrath Estate Agents and Macquarie University Hospital. She chairs the Boards of the Sydney Children’s Hospital Network, the Customer Owned Banking Association Hearing Australia and Catholic Schools Parramatta Diocese Ltd. She is also on the Boards of the NSW Government’s Health Infrastructure and the NSW Institute of Sport. Other current directorships: None Former directorships (last 3 years): Bingo Industries Pty Ltd Special responsibilities: Former Chair of the Audit and Risk Committee and a member of the Nomination and Remuneration Committee Interests in shares: 41,899 ordinary shares Company secretaries Nimesh Shah and Melissa Jones are joint company secretaries. Nimesh Shah has been the Chief Financial Officer of ReadyTech since August 2017 and was appointed Company Secretary on 28 March 2019. Nimesh has over 20 years’ experience as an executive in technology and online digital industries, utilising experience gained working across Australia and many parts of Asia. Nimesh was Global CFO for pioneering social networking site, Friendster, Inc. Nimesh was also Finance Director at Fairfax Digital Australia & New Zealand Pty Limited for seven years, playing an instrumental role in navigating the company into the world of online publishing and transaction businesses. Nimesh was also the Chief Financial Officer and Company Secretary of ASX-listed Isentia Group Limited, a position which he held until July 2017, where he played an instrumental role in transitioning Isentia to become a leading media intelligence organisation in Asia Pacific. Nimesh holds an MBA from the Australian Graduate School of Management and a Bachelor of Commerce with Merit from the University of New South Wales. Nimesh is also a member of Chartered Accountants Australia and New Zealand and Australian Institute of Company Directors. Melissa Jones is the General Manager of Company Matters, a part of MUFG Corporate Markets, a division of MUFG Pension & Market Services. Melissa has over 20 years’ experience as a lawyer, company secretary and governance professional. Melissa is admitted as a Solicitor of the Supreme Court of New South Wales and holds a Bachelor of Laws (Honours) and is a Fellow of the Governance Institute of Australia. Meetings of Directors The number of meetings of the Company's Board of Directors ('the Board') held during the period ended 30 June 2024, and the number of meetings attended by each Director were: Full Board Nomination and Remuneration Committee Audit and Risk Committee Attended Held Attended Held Attended Held Tony Faure 12 12 4 4 4 4 Marc Washbourne* 12 12 4 4 4 4 Timothy Ebbeck 12 12 4 4 4 4 Tom Matthews** 10 12 3 4 - - Mark Summerhayes** 5 12 - - - - Helen Lea*** 2 2 1 1 1 1 Elizabeth Crouch AM**** 11 11 3 3 3 3 Held: represents the number of meetings held during the time the Director held office. * Marc Washbourne attended 4 Audit and Risk Committee meetings and 4 Nomination and Remuneration Committee meetings as an observer. ** In FY2024, Mark Summerhayes was an Alternative Non-Executive Director for Tom Matthews and attended a number of meetings either as an alternate or in an observer capacity. *** Helen Lea was appointed to the Board of ReadyTech on 21 May 2024. **** Elizabeth Crouch ceased to be a director on 21 May 2024. 14 15 ReadyTech Annual Report 2023 ReadyTech Holdings Limited Directors' report 30 June 2024 Remuneration report (audited) Commenting on the FY24 remuneration report, ReadyTech Chair of the Nomination and Remuneration Committee, Helen Lea said: "The primary objective of the Nomination and Remuneration Committee is to ensure that we align Executive Key Management Personnel (KMP) rewards with shareholder interests and achievement of our business strategy, whilst ensuring that we attract and retain exceptional Executives, Directors and Employees who are collectively responsible for delivering long-term profitable growth and sustainable shareholder returns. Our remuneration framework provides a tight relationship between performance and remuneration and has driven strong growth for the Company. On a regular basis, we undertake independent benchmarking for KMP remuneration to ensure we remain competitive and can attract and retain talented executives with the specialised skills and expertise required. This report describes the linkage between our strategic initiatives, remuneration principles and remuneration framework, and how these, in turn, drive shareholder returns". The remuneration report details the key management personnel remuneration arrangements for the Group, in accordance with the requirements of the Corporations Act 2001 and its Regulations. Key management personnel ('KMP') are those people who have authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including all Directors. The remuneration report is set out under the following main headings: ● Principles used to determine the nature and amount of remuneration ● Details of remuneration ● Service agreements ● Share-based compensation ● Additional information ● Additional disclosures relating to key management personnel Principles used to determine the nature and amount of remuneration The objective of the Group's executive reward framework is to ensure reward for performance is competitive and appropriate for the results delivered. The framework aligns executive reward with the achievement of strategic objectives and the creation of value for shareholders, and it is considered to conform to the market best practice for the delivery of reward. The Board of Directors ('the Board') ensures that executive reward satisfies the following key criteria for good governance practices: ● competitiveness and reasonableness ● acceptability to shareholders; ● performance linkage / alignment of executive compensation; and ● transparency. The Nomination and Remuneration Committee is responsible for determining and reviewing remuneration arrangements for its Directors and executives. The performance of the Group depends on the quality of its Directors and executives. The remuneration philosophy is to attract, motivate and retain high performance and high quality personnel. The Nomination and Remuneration Committee has structured an executive remuneration framework that is market competitive and aligned to the strategy of the Group. The reward framework is designed to align executive reward to shareholders' interests. The Board has considered that it should seek to enhance shareholders' interests by: ● having economic profit as a core component of plan design; ● focusing on sustained growth in shareholder wealth, consisting of dividends and growth in share price, and delivering constant or increasing return on assets as well as focusing the executive on key non-financial drivers of value; and ● attracting and retaining high calibre executives. Additionally, the reward framework seeks to enhance executives' interests by: ● rewarding capability and experience; ● reflecting competitive reward for contribution to growth in shareholder wealth; and ● providing a clear structure for earning rewards. In accordance with best practice corporate governance, the structure of non-executive Director and executive Director remuneration is separate. ReadyTech Holdings Limited Directors' report 30 June 2024 Non-executive Directors' remuneration Fees and payments to non-executive Directors reflect the demands and responsibilities of their role. Non-executive Directors' fees and payments are reviewed annually by the Nomination and Remuneration Committee. The Nomination and Remuneration Committee may, from time to time, receive advice from independent remuneration consultants to ensure non- executive Directors' fees and payments are appropriate and in line with the market. The Chair's fees are determined independently to the fees of other non-executive Directors and all non-executive Director remuneration is based on comparative roles in the external market. Non-executive Directors are not entitled to participate in any employee incentive scheme established by the Company. ASX listing rules require the aggregate non-executive Directors' remuneration be determined periodically by a general meeting. The most recent determination was performed by AON Advisory Pty Ltd, remuneration consultants, in FY2022, where the maximum annual aggregate remuneration is $750,000. For the financial year ended 30 June 2024, the fees payable to the current non- executive Directors will not exceed $600,000 in aggregate. Any non-executive Director who devotes special attention to the business of the Group or who performs services which, in the opinion of the Remuneration Committee, are outside the scope of ordinary duties of a Director, may be remunerated for the services (as determined by the Board) out of the funds of the Company. There are no retirement benefit schemes for Directors, other than statutory superannuation contributions. The annual non-executive Directors’ fees currently agreed to be paid by the Company are inclusive of superannuation and are $187,000 to the Chair and $97,500 (inclusive of superannuation) to each of the other Independent non-executive Directors. For the financial year ending 30 June 2025, it was approved to increase the annual non-executive Directors’ fees inclusive of superannuation to be $196,875 to the Chair and $102,375 to each of the other non-executive Directors, inclusive of fees for chairing the board sub-committees. Executive remuneration The Group aims to reward executives based on their position and responsibility, with a level and mix of remuneration which has both fixed and variable components. The executive remuneration and reward framework has three components: (i) fixed remuneration consisting of base pay, non-monetary benefits and other remuneration such as superannuation; (ii) short-term incentives; and (iii) long-term incentives. The combination of these comprises the executive's total remuneration. (i) Fixed remuneration Fixed remuneration, consisting of fixed salary, superannuation and non-monetary benefits, is reviewed annually by the Nomination and Remuneration Committee based on individual and business unit performance, the overall performance of the Group and comparable market remuneration. Executives may receive their fixed remuneration in the form of cash or other fringe benefits (for example motor vehicle benefits) where it does not create any additional costs to the Group and provides additional value to the executive. (ii) Short-term incentives The Group currently provides certain members of its senior management team with annual short-term incentives ('STI') which become payable upon satisfaction of specified performance criteria. These incentives are set out in each KMP service agreement. Payment of STI's in any given year will be determined by the Company and will be conditional upon achievement of: ● performance criteria tailored to each respective role (if any); and ● the Group’s financial performance against criteria set by the Nomination and Remuneration Committee. No STI will be payable if the performance criteria are not met by the relevant KMP with respect to his or her STI award. The STI program is designed to align the targets of the business units with the performance hurdles of executives. STI payments are granted to executives based on specific financial targets and key performance indicators ('KPI's') being achieved. KPI's include profit contribution, customer satisfaction, leadership contribution and product management. 16 17 ReadyTech Annual Report 2023 ReadyTech Holdings Limited Directors' report 30 June 2024 From time to time the Nomination and Remuneration Committee may, at its discretion, recommend to award bonuses which are not linked to any specified performance criteria to certain executives in recognition of work performed. For KMP, the STI is a maximum 60% of fixed salary with 70% based on Financial KPI and 30% on Personal KPI's for the year ended 30 June 2024. The Financials KPIs are based on achieving Group revenue and Group adjusted net profit after tax, excluding acquired amortisation expenses ('NPATA') targets. (iii) Long-term incentives The long-term incentives include long service leave and share-based payments. The Group implemented a long-term incentives ('LTI') plan during the financial year ended 30 June 2024 where performance rights are awarded to executives over a period of three years based on long-term incentive measures. These include earnings per share ('EPS') targets and recurring revenue per share targets. Group performance and link to remuneration Remuneration for certain individuals is directly linked to the performance of the Group. Bonus and incentive payments are dependent on financial measures such as earnings and recurring revenues per share, total revenues, EBITDA, Net Profit after tax adjusted with amortisation expense from acquired assets (“NPATA”) and personal KPIs targets being met. The Nomination and Remuneration Committee is of the opinion that the continued improved results can be attributed in part to the adoption of performance based compensation and is satisfied that this improvement will continue to increase shareholder wealth if maintained over the coming years. Refer to the section 'Additional information' below for details of the earnings and total shareholders return for the last 4 years. Use of remuneration consultants The Group did not engage any remuneration consultants during the year ended 30 June 2024. Voting and comments made at the Company's 2023 Annual General Meeting ('AGM') At the 2023 AGM, 99.86% of the votes received supported the adoption of the remuneration report for the year ended 30 June 2023. The Company did not receive any specific feedback at the AGM regarding its remuneration practices. Details of remuneration Amounts of remuneration Details of the remuneration of key management personnel of the Group are set out in the following tables. The key management personnel of the Group consisted of the following Directors of ReadyTech Holdings Limited: ● Tony Faure - Chair and Independent Non-Executive Director ● Marc Washbourne - Chief Executive Officer ● Timothy Ebbeck - Independent Non-Executive Director ● Tom Matthews* - Non-Executive Director (resigned on 30 July 2024) ● Mark Summerhayes*- Alternate Non-Executive Director to Tom Matthews and appointed as a Non-Executive Director on 30 July 2024 ● Helen Lea - Independent Non-Executive Director (appointed on 21 May 2024) ● Elizabeth Crouch AM - Independent Non-Executive Director (resigned on 21 May 2024) * Tom Matthews and Mark Summerhayes are representatives of Pemba entities and elected not to receive director fees during the financial year ended 30 June 2024. From the financial year ending 30 June 2025, Mark Summerhayes will receive director's fees as a non-executive director. And the following person: ● Nimesh Shah - Chief Financial Officer ReadyTech Holdings Limited Directors' report 30 June 2024 Short-term benefits Post- employment benefits Long-term benefits Share- based payments Cash salary Cash Annual Super- Long service Equity- and fees bonus leave annuation leave settled Total 2024 $ $ $ $ $ $ $ Non-Executive Directors: Tony Faure 187,000 - - - - - 187,000 Timothy Ebbeck 97,500 - - - - - 97,500 Helen Lea** 10,156 - - - - - 10,156 Elizabeth Crouch AM*** 81,250 - - - - - 81,250 Executive Directors: Marc Washbourne* 449,650 - 8,128 27,399 21,921 162,152 669,250 Other Key Management Personnel: Nimesh Shah* 396,750 - (11,938) 27,399 22,291 132,942 567,444 1,222,306 - (3,810) 54,798 44,212 295,094 1,612,600 * No cash bonuses approved by the Nomination and Remuneration Committee to Marc Washbourne and Nimesh Shah based on FY2024 financial and personal KPIs. These cash bonuses represent cash accrued related to FY2024. ** Helen Lea’s fees reflect a portion of director’s fees since the day she joined. *** Elizabeth Crouch AM’s fees reflect a portion of director’s fees up to the day she resigned. Short-term benefits Post- employment benefits Long-term benefits Share- based payments Cash salary Cash Annual Super- Long service Equity- and fees bonus leave annuation leave settled Total 2023 $ $ $ $ $ $ $ Non-Executive Directors: Tony Faure 170,000 - - - - - 170,000 Elizabeth Crouch AM 90,000 - - - - - 90,000 Timothy Ebbeck 90,000 - - - - - 90,000 Executive Directors: Marc Washbourne* 425,000 102,000 (24,862) 25,292 23,541 444,525 995,496 Other Key Management Personnel: Nimesh Shah* 375,000 60,000 5,062 25,292 936 324,501 790,791 1,150,000 162,000 (19,800) 50,584 24,477 769,026 2,136,287 * Marc Washbourne and Nimesh Shah received cash bonuses approved by the Nomination and Remuneration Committee based on financial and personal KPIs. These cash bonuses represent cash accrued related to FY2023. 18 19 ReadyTech Annual Report 2023 ReadyTech Holdings Limited Directors' report 30 June 2024 The proportion of remuneration linked to performance and the fixed proportion are as follows: Fixed remuneration At risk – STI At risk – LTI Name 2024 2023 2024 2023 2024 2023 Non-Executive Directors: Tony Faure 100% 100% - - - - Elizabeth Crouch AM 100% 100% - - - - Timothy Ebbeck 100% 100% - - - - Helen Lea 100% - - - - - Executive Directors: Marc Washbourne 76% 45% - 10% 24% 45% Other Key Management Personnel: Nimesh Shah 77% 51% - 8% 23% 41% The proportion of the cash bonus paid/payable or forfeited is as follows: Cash bonus related to financial year Cash bonus forfeited related to financial year Name 2024 2023 2024 2023 Executive Directors: Marc Washbourne - 100% 100% - Other Key Management Personnel: Nimesh Shah - 100% 100% - Service agreements Remuneration and other terms of employment for key management personnel are formalised in service agreements. Details of these agreements are as follows: Name: Marc Washbourne Title: Chief Executive Officer Agreement commenced: 13 December 2016 Term of agreement: No fixed term Details: Fixed salary of $475,000 plus superannuation for financial year ending 30 June 2025 and 6 month notice period. Mr Washbourne’s employment contract provides for short term incentives. Upon the termination of Mr Washbourne’s employment contract, Mr Washbourne will be subject to post employment restraints for up to 12 months. Name: Nimesh Shah Title: Chief Financial Officer Agreement commenced: 7 August 2017 Term of agreement: No fixed term Details: Fixed salary of $416,588 plus superannuation for financial year ending 30 June 2025 and 6 month notice period. Mr Shah’s employment contract provides for short term incentives. Upon the termination of Mr Shah's employment contract, Mr Shah will be subject to post employment restraints for up to 12 months. Key management personnel have no entitlement to termination payments in the event of removal for misconduct. ReadyTech Holdings Limited Directors' report 30 June 2024 Share-based compensation Issue of shares Details of shares issued to Directors and other key management personnel as part of compensation during the year ended 30 June 2024 are set out below: Name Date Number of Performance rights Value of options at the exercise date Number of Shares Issue price $ Marc Washbourne 13/09/2023 147,079 396,720 147,079 $0.00 Nimesh Shah 13/09/2023 140,260 323,338 140,260 $0.00 Options There were no options over ordinary shares issued to Directors and other key management personnel as part of compensation that were outstanding as at 30 June 2024. There were no options over ordinary shares granted to or vested by Directors and other key management personnel as part of compensation during the year ended 30 June 2024. Performance rights The terms and conditions of each grant of performance rights over ordinary shares affecting remuneration of Directors and other key management personnel in this financial year or future reporting years are as follows: Number of Fair value rights Vesting date and per right Name granted Grant date exercisable date Expiry date at grant date Marc Washbourne 60,264 17/11/2021 30/06/2024 30/06/2024 $3.99 47,380 15/11/2022 30/06/2024 30/06/2024 $3.97 47,380 15/11/2022 30/06/2025 30/06/2025 $3.97 100,334 05/12/2023 30/06/2026 30/06/2026 $3.53 Nimesh Shah 56,246 13/09/2021 30/06/2024 30/06/2024 $3.06 41,806 11/10/2022 30/06/2024 30/06/2024 $2.92 41,806 11/10/2022 30/06/2025 30/06/2025 $2.92 88,461 22/09/2023 30/06/2026 30/06/2026 $3.70 Performance rights granted in the financial year ended 30 June 2022 Performance rights are subject to an earnings per share ('EPS') hurdle (50% of grant value) and a recurring revenue per share hurdle (50% of grant value). Performance rights will be evaluated in two tranches. The first tranche, equivalent to 50% of the total grant value, is subject to be evaluated two years from 1 July 2021 ('the beginning of the performance period'). The second tranche, also equivalent to 50% of the total grant value, will be evaluated three years from the beginning of the performance period. Details of the performance hurdles are as follows: ● EPS - if the compound annual growth rate of EPS is less than the target of 13%, no vesting will occur. If the target is met, 50% of rights will vest. In the event that the compound annual growth rate is between 13-17%, vesting will be pro-rated between 50-100%. ● Recurring revenue per share - if the compound annual growth rate of recurring revenue per share is less than the target of 13%, no vesting will occur. If the target is met, 50% of rights will vest. In the event that the compound annual growth rate is between 13-17%, vesting will be pro-rated between 50-100%. Performance rights granted in the financial year ended 30 June 2023 Performance rights are subject to an earnings per share ('EPS') hurdle (50% of grant value) and a recurring revenue per share hurdle (50% of grant value). 20 21 ReadyTech Annual Report 2023 ReadyTech Holdings Limited Directors' report 30 June 2024 Performance rights will be evaluated in two tranches. The first tranche, equivalent to 50% of the total grant value, will be evaluated two years from 1 July 2022 ('the beginning of the performance period'). The second tranche, also equivalent to 50% of the total grant value, will be evaluated three years from the beginning of the performance period. Details of the performance hurdles are as follows: ● EPS - if the compound annual growth rate of EPS is less than the target of 13%, no vesting will occur. If the target is met, 50% of rights will vest. In the event that the compound annual growth rate is between 13-17%, vesting will be pro-rated between 50-100%. ● Recurring revenue per share - if the compound annual growth rate of recurring revenue per share is less than the target of 13%, no vesting will occur. If the target is met, 50% of rights will vest. In the event that the compound annual growth rate is between 13-17%, vesting will be pro-rated between 50-100%. Performance rights granted in the financial year ended 30 June 2024 Performance rights are subject to an earnings per share ('EPS') hurdle (50% of grant value) and a recurring revenue per share hurdle (50% of grant value). Performance rights will be evaluated three years from 1 July 2023 ('the beginning of the performance period'). Details of the performance hurdles are as follows: ● EPS - if the compound annual growth rate of EPS is less than the target of 13%, no vesting will occur. If the target is met, 50% of rights will vest. In the event that the compound annual growth rate is between 13-17%, vesting will be pro-rated between 50-100%. ● Recurring revenue per share - if the compound annual growth rate of recurring revenue per share is less than the target of 13%, no vesting will occur. If the target is met, 50% of rights will vest. In the event that the compound annual growth rate is between 13-17%, vesting will be pro-rated between 50-100%. The performance rights are not subject to an exercise price. Performance rights granted carry no dividend or voting rights. Performance rights vested on 30 June 2024 In evaluating the % vesting in relation to: (a) the second tranche of performance rights granted in the financial year ended 30 June 2022, and (b) the first tranche of performance rights granted in the financial year ended 30 June 2023, Adjustments were made for the impact of the IT Vision acquisition and the significant and purposeful additional investment in the enterprise strategy in the FY21-FY24 period. Additional information The earnings of the Group for the five years to 30 June 2024 are summarised below: 2024 2023 2022 2021 2020 $'000 $'000 $'000 $'000 $'000 Sales revenue 113,802 103,306 78,284 50,027 39,254 Adjusted EBITDA* 37,766 33,039 27,472 18,884 14,954 Profit after income tax 5,464 4,975 8,794 2,155 3,943 * Earnings before interest, tax, depreciation, amortisation and other non-operating items. The factors that are considered to affect total shareholders return ('TSR') are summarised below: 2024 2023 2022 2021 2020 Share price at financial year end ($) 3.25 3.30 3.10 2.40 1.40 Basic earnings per share (cents per share) 4.66 4.38 8.28 2.37 4.93 ReadyTech Holdings Limited Directors' report 30 June 2024 Additional disclosures relating to key management personnel Shareholding The number of shares in the Company held during the financial year by each Director and other members of key management personnel of the Group, including their personally related parties, is set out below: Balance at Received Balance at the start of as part of Disposals/ the end of the year remuneration Additions other the year Ordinary shares Tony Faure 378,819 - - - 378,819 Marc Washbourne 4,146,229 147,079 - - 4,293,308 Timothy Ebbeck 17,273 - 13,795 - 31,068 Tom Matthews 36,644,933 - - - 36,644,933 Mark Summerhayes 555,036 - - - 555,036 Nimesh Shah 1,462,351 140,260 - (306,039) 1,296,572 Helen Lea - - - - - Elizabeth Crouch AM 41,899 - - - 41,899 43,246,540 287,339 13,795 (306,039) 43,241,635 Performance rights holding The number of performance rights over ordinary shares in the Company held during the financial year by each Director and other members of key management personnel of the Group, including their personally related parties, is set out below: Balance at Expired/ Balance at the start of forfeited/ the end of the year Granted Exercised other the year Performance rights over ordinary shares Marc Washbourne 302,103 100,334 (147,079) - 255,358 Nimesh Shah 280,118 88,461 (140,260) - 228,319 582,221 188,795 (287,339) - 483,677 Balance vested Vested and Vested and at the end of exercisable unexercisable the year Performance rights over ordinary shares Marc Washbourne 76,421 31,223 107,644 Nimesh Shah 70,118 27,934 98,052 146,539 59,157 205,696 * 100,334 performance rights issued under ASX Listing Rule 10.14 with approval from shareholders received at the 2023 Annual General Meeting. Other transactions with key management personnel and their related parties There was no transaction with key management personnel and their related parties during the financial year ended 30 June 2024 (2023: none). This concludes the remuneration report, which has been audited. Shares under option There were no unissued ordinary shares of ReadyTech Holdings Limited under option outstanding at the date of this report. 22 23 ReadyTech Annual Report 2023 ReadyTech Holdings Limited Directors' report 30 June 2024 Shares under performance rights Unissued ordinary shares of ReadyTech Holdings Limited under performance rights at the date of this report are as follows: Number Grant date Expiry date under rights 13/09/2021 30/06/2024 190,217 17/11/2021 30/06/2024 52,731 11/10/2022 30/06/2024 104,393 11/10/2022 30/06/2025 208,775 15/11/2022 30/06/2024 23,690 15/11/2022 30/06/2025 47,380 05/12/2023 30/06/2026 100,334 22/09/2023 30/06/2026 729,546 1,457,066 The performance rights are not subject to an exercise price. No person entitled to exercise the performance rights had or has any right by virtue of the performance right to participate in any share issue of the Company or of any other body corporate. Shares issued on the exercise of options There were no ordinary shares of ReadyTech Holdings Limited issued on the exercise of options during the year ended 30 June 2024 and up to the date of this report. Shares issued on the exercise of performance rights There were no other ordinary shares of ReadyTech Holdings Limited issued on the exercise of performance rights during the year ended 30 June 2024 and up to the date of this report. Indemnity and insurance of officers The Company has indemnified the Directors and executives of the Company for costs incurred, in their capacity as a Director or executive, for which they may be held personally liable, except where there is a lack of good faith. During the financial year, the Company paid a premium in respect of a contract to insure the Directors and executives of the Company against a liability to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium. Indemnity and insurance of auditor The Company has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of the Company or any related entity against a liability incurred by the auditor. During the financial year, the Company has not paid a premium in respect of a contract to insure the auditor of the Company or any related entity. Proceedings on behalf of the Company No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company, or to intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or part of those proceedings. Non-audit services Details of the amounts paid or payable to the auditor for non-audit services provided during the financial year by the auditor are outlined in note 29 to the financial statements. The Directors are satisfied that the provision of non-audit services during the financial year, by the auditor (or by another person or firm on the auditor's behalf), is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. ReadyTech Holdings Limited Directors' report 30 June 2024 The Directors are of the opinion that the services as disclosed in note 29 to the financial statements do not compromise the external auditor's independence requirements of the Corporations Act 2001 for the following reasons: ● all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of the auditor; and ● none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants (including Independence Standards) issued by the Accounting Professional and Ethical Standards Board, including reviewing or auditing the auditor's own work, acting in a management or decision- making capacity for the Company, acting as advocate for the Company or jointly sharing economic risks and rewards. Officers of the Company who are former partners of Deloitte Touche Tohmatsu There are no officers of the Company who are former partners of Deloitte Touche Tohmatsu. Rounding of amounts The Company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and Investments Commission, relating to 'rounding-off'. Amounts in this report have been rounded off in accordance with that Corporations Instrument to the nearest thousand dollars, or in certain cases, the nearest dollar. Auditor's independence declaration A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out immediately after this Directors' report. This report is made in accordance with a resolution of Directors, pursuant to section 298(2)(a) of the Corporations Act 2001. On behalf of the Directors ___________________________ Tony Faure Chair 27 August 2024 Sydney 24 25 ReadyTech Annual Report 2023 Deloitte Touche Tohmatsu ABN 74 490 121 060 Quay Quarter Tower 50 Bridge Street Sydney, NSW, 2000 Australia Phone: +61 2 9322 7000 www.deloitte.com.au 27 August 2024 Dear Directors Auditor’s Independence Declaration to ReadyTech Holdings Limited In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of independence to the directors of ReadyTech Holdings Limited. As lead audit partner for the audit of the financial report of ReadyTech Holdings Limited for the year ended 30 June 2024, I declare that to the best of my knowledge and belief, there have been no contraventions of: (i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and (ii) any applicable code of professional conduct in relation to the audit. Yours faithfully DELOITTE TOUCHE TOHMATSU Sandeep Chadha Partner Chartered Accountants The Directors ReadyTech Holdings Limited Level 2 77 King Street Sydney NSW 2000 ReadyTech Holdings Limited Consolidated statement of profit or loss and other comprehensive income For the year ended 30 June 2024 Consolidated Note 2024 2023 $'000 $'000 The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes 21 Revenue from contracts with customers 5 113,802 103,306 Interest revenue calculated using the effective interest method 31 15 Expenses Hosting and other direct costs (8,566) (7,637) Employee benefits expense (61,289) (59,121) Third party SaaS variable costs (2,028) (965) Depreciation and amortisation expense (22,859) (17,272) Advertising and marketing expenses (1,286) (1,095) Consultancy and professional expenses (2,085) (2,909) Administration expenses (919) (970) Communication and IT expenses (2,381) (2,031) Occupancy costs (818) (723) Revaluation of contingent consideration (615) - Other expenses (1,268) (1,238) Finance costs 6 (3,309) (2,563) Profit before income tax expense 6,410 6,797 Income tax expense 7 (946) (1,822) Profit after income tax expense for the year attributable to the owners of ReadyTech Holdings Limited 5,464 4,975 Other comprehensive income Items that may be reclassified subsequently to profit or loss Foreign currency translation (77) 137 Other comprehensive income for the year, net of tax (77) 137 Total comprehensive income for the year attributable to the owners of ReadyTech Holdings Limited 5,387 5,112 Cents Cents Basic earnings per share 42 4.66 4.38 Diluted earnings per share 42 4.66 4.38 26 27 ReadyTech Annual Report 2023 ReadyTech Holdings Limited Consolidated statement of financial position As at 30 June 2024 Consolidated Note 2024 2023 $'000 $'000 The above consolidated statement of financial position should be read in conjunction with the accompanying notes Assets Current assets Cash and cash equivalents 8 21,867 20,616 Trade and other receivables 9 12,567 10,434 Contract assets 10 2,588 1,489 Derivative financial assets 11 - 76 Income tax refund receivable 7 1,840 2,150 Prepayments 2,244 2,969 Total current assets 41,106 37,734 Non-current assets Property, plant and equipment 12 1,964 2,229 Intangibles 13 210,804 212,511 Right-of-use assets 14 4,590 4,783 Contract costs 15 1,797 2,025 Deferred tax assets 7 1,168 - Total non-current assets 220,323 221,548 Total assets 261,429 259,282 Liabilities Current liabilities Trade and other payables 16 11,936 11,767 Contract liabilities 17 23,635 19,527 Lease liabilities 18 1,509 1,229 Income tax payable 7 954 - Employee benefits 7,102 7,246 Contingent consideration 19 17,408 10,181 Total current liabilities 62,544 49,950 Non-current liabilities Contract liabilities 20 722 888 Borrowings 21 41,897 46,949 Provisions 548 307 Lease liabilities 23 3,656 3,932 Deferred tax liabilities 7 - 2,718 Employee benefits 493 375 Contingent consideration 22 360 25,911 Total non-current liabilities 47,676 81,080 Total liabilities 110,220 131,030 Net assets 151,209 128,252 Equity Issued capital 24 211,831 194,292 Reserves 25 (78,526) (78,480) Retained profits 17,904 12,440 Total equity 151,209 128,252 ReadyTech Holdings Limited Consolidated statement of changes in equity For the year ended 30 June 2024 The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes Issued Retained capital Reserves profits Total equity Consolidated $'000 $'000 $'000 $'000 Balance at 1 July 2022 171,916 (81,208) 7,465 98,173 Profit after income tax expense for the year - - 4,975 4,975 Other comprehensive income for the year, net of tax - 137 - 137 Total comprehensive income for the year - 137 4,975 5,112 Transactions with owners in their capacity as owners: Contributions of equity, net of transaction costs (note 24) 21,747 - - 21,747 Share-based payments (note 39) - 3,220 - 3,220 Exercise of performance rights (note 25) 629 (629) - - Balance at 30 June 2023 194,292 (78,480) 12,440 128,252 Issued Retained capital Reserves profits Total equity Consolidated $'000 $'000 $'000 $'000 Balance at 1 July 2023 194,292 (78,480) 12,440 128,252 Profit after income tax expense for the year - - 5,464 5,464 Other comprehensive income for the year, net of tax - (77) - (77) Total comprehensive income for the year - (77) 5,464 5,387 Transactions with owners in their capacity as owners: Contributions of equity, net of transaction costs (note 24) 16,001 (764) - 15,237 Share-based payments (note 39) - 2,333 - 2,333 Exercise of performance rights (note 25) 1,538 (1,538) - - Balance at 30 June 2024 211,831 (78,526) 17,904 151,209 28 29 ReadyTech Annual Report 2023 ReadyTech Holdings Limited Consolidated statement of cash flows For the year ended 30 June 2024 Consolidated Note 2024 2023 $'000 $'000 The above consolidated statement of cash flows should be read in conjunction with the accompanying notes Cash flows from operating activities Receipts from customers (inclusive of GST) 125,667 113,266 Payments to suppliers and employees (inclusive of GST) (87,367) (80,151) 38,300 33,115 Interest received 27 15 Interest and other finance costs paid (3,013) (2,429) Payment of acquisition costs - (521) Income taxes paid (3,720) (2,374) Net cash from operating activities 38 31,594 27,806 Cash flows from investing activities Payment for purchase of subsidiaries, net of cash acquired (72) (6,424) Payments for contract costs (464) (578) Payments for property, plant and equipment (420) (1,463) Payments for intangibles 13 (17,454) (18,239) Payment of contingent consideration 19 (5,263) (1,074) Net cash used in investing activities (23,673) (27,778) Cash flows from financing activities Proceeds from borrowings - 13,000 Repayment of borrowings 21 (5,000) - Repayment of lease liabilities (1,670) (1,613) Net cash (used)/from financing activities (6,670) 11,387 Net increase in cash and cash equivalents 1,251 11,415 Cash and cash equivalents at the beginning of the financial year 20,616 9,201 Cash and cash equivalents at the end of the financial year 8 21,867 20,616 ReadyTech Holdings Limited Notes to the consolidated financial statements 30 June 2024 Note 1. General information The financial statements cover ReadyTech Holdings Limited as a Group consisting of ReadyTech Holdings Limited ('Company or 'parent entity') and the entities it controlled at the end of, or during, the period (collectively referred to in these financial statements as the 'Group'). The financial statements are presented in Australian dollars, which is ReadyTech Holdings Limited's functional and presentation currency. ReadyTech Holdings Limited is a listed public Company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business is: Level 2, 77 King Street Sydney NSW 2000 Australia A description of the nature of the Group's operations and its principal activities are included in the Directors' report, which is not part of the financial statements. The financial statements were authorised for issue, in accordance with a resolution of Directors, on 27 August 2024. The Directors have the power to amend and reissue the financial statements. Note 2. Material accounting policy information New or amended Accounting Standards and Interpretations adopted The Group has adopted all of the new, revised or amending Accounting Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period. The adoption of these Accounting Standards and Interpretations did not have any significant impact on the financial performance or position of the Group. Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted. The following Accounting Standards and Interpretations are most relevant to the Group: AASB 2021-2 Amendments to Australian Accounting Standards – Disclosure of Accounting Policies and Definition of Accounting Estimates AASB 2021-2 was issued in March 2021 and is applicable to annual periods beginning on or after 1 January 2023. This standard amends AASB Standards to improve accounting policy disclosures so that they provide more useful information to investors and users of the financial statements and clarifies the distinction between accounting policies and accounting estimates. Deficiency of net current assets The statement of financial position has a deficiency of net current assets of $21,438,000 (2023: $12,216,000) at the reporting date. The deficiency is mainly attributable to (i) contract liabilities of $23,635,000 (2023: $19,527,000) disclosed in current liabilities, which represents upfront payments received from customers on signed sales contracts which will not result in an outflow of cash within the next twelve months; (ii) an amount of $7,102,000 for employee benefits (2023: $7,246,000) is included in current liabilities, for which the majority of this liability is not expected to be settled in cash within the next twelve months. The Directors are satisfied that the Group will be able to meet its working capital requirements through the normal cyclical nature of receipts and payments and budgeted cash flows generated from operations. Basis of preparation Statement of compliance These general-purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') and the Corporations Act 2001, as appropriate for for-profit oriented entities. These financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board ('IASB'). 30 31 ReadyTech Annual Report 2023 ReadyTech Holdings Limited Notes to the consolidated financial statements 30 June 2024 Note 2. Material accounting policy information (continued) Historical cost convention The financial statements have been prepared under the historical cost convention, except for derivatives and contingent consideration at fair value through profit or loss. Critical accounting estimates The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 3. Parent entity information In accordance with the Corporations Act 2001, these financial statements present the results of the Group only. Supplementary information about the parent entity is disclosed in note 34. Principles of consolidation The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of ReadyTech Holdings Limited as at 30 June 2024 and the results of all subsidiaries for the period then ended. Subsidiaries are all those entities over which the Group has control. The Group controls an entity when the Group has the power over the investee, is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases. Intercompany transactions, balances and unrealised gains on transactions between entities in the Group are eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. The acquisition of subsidiaries is accounted for using the acquisition method of accounting. Operating segments Operating segments are presented using the 'management approach', where the information presented is on the same basis as the internal reports provided to the Chief Operating Decision Makers ('CODM'). The CODM is responsible for the allocation of resources to operating segments and assessing their performance. Foreign currency translation The financial statements are presented in Australian dollars, which is ReadyTech Holdings Limited's functional and presentation currency. Foreign currency transactions Foreign currency transactions are translated into the entity's functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at financial year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss. Foreign operations The assets and liabilities of foreign operations are translated into Australian dollars using the exchange rates at the reporting date. The revenues and expenses of foreign operations are translated into Australian dollars using the average exchange rates, which approximate the rates at the dates of the transactions, for the period. All resulting foreign exchange differences are recognised in other comprehensive income through the foreign currency reserve in equity. The foreign currency reserve is recognised in profit or loss when the foreign operation or net investment is disposed of. ReadyTech Holdings Limited Notes to the consolidated financial statements 30 June 2024 Note 2. Material accounting policy information (continued) The principal activities of the Group are to provide technology-based solutions to its customers that are organized into three reportable operating segments: Education and Work Pathways, Workforce Solutions and Government and Justice. Main products of the Group: Segment Main Product Description Education and Work Pathways JR Plus and AVAXA Ready LMS JR Plus, AVAXA and Ready LMS are ReadyTech’s student management system empowering enterprise tertiary educators to create digital student experiences and to adhere to strict compliance standards. VeTtrak, including VETtrak Cloud VETtrak is a student management system for Registered Training Organisations (RTOs). Ready Skills Ready Skills provides vocational skills tracking, recognition, planning and assessment technology. Job Ready, Ready Recruit and Job Apprentice Job Ready, Ready Recruit and Job Apprentice exists to help employment services providers, Group Training Organisations (GTOs) and Australian Apprenticeship Support Network (AASN) provides to support the completion of apprenticeship lifecycle and deliver work opportunities for jobseekers and customers. Esher House Esher House delivers behavioural assessment technology and intervention programs for Back to Work, apprentices and more. Workforce Solutions Ready Workforce Ready Workforce is an all-in-one cloud payroll, HR, rostering, time & attendance and leave management software platform. Ready Employ Ready Employ by Phoenix is a cloud-based talent management system with everything entities need to manage their leases' processes online, easily. Ready Pay Ready Pay provides people management software, combined with an end-to-end payroll outsourcing service, with local payroll experts providing customers with payroll, HR administration and workplace health & safety software and services. Government and Justice Ready Community (powered by Open Office) Ready Community (powered by Open Office) is provider of high function, integrated, statutory and compliance management systems for local government. Ready Case Ready Case (formerly case HQ, part of McGirr Technologies) is the market leader in case management systems for courts, tribunals and related justice sector agencies. Ready Contracts and Ready Buy Ready Contracts and Ready Buy are designed as procurement software suite to support distributed procurement and commercial operations to procure goods and services efficiently, cost effectively, and at reduced risk, while reducing workload on centralised procurement. Altus (powered by IT Vision) Altus is a comprehensive enterprise resource planning (ERP) platform designed specifically for local governments who need to automate and optimise their systems, enhance cross department collaboration and provide a customer experience to both community members and staff. Synergysoft (powered by IT Vision) SynergySoft is a legacy product suite used by local governments, which can be fully integrated with Altus solutions. 32 33 ReadyTech Annual Report 2023 ReadyTech Holdings Limited Notes to the consolidated financial statements 30 June 2024 Note 2. Material accounting policy information (continued) The accounting policies below apply to the Group’s products as summarised in the above table. Revenue is recognised upon transfer of control of promised products and services to customers at an amount that reflects the consideration to which the Group is expected to be entitled in exchange for transferring goods or services to a customer. For each contract with a customer, the Group: identifies the contract with a customer; identifies the performance obligations in the contract; determines the transaction price which takes into account estimates of variable consideration and the time value of money; allocates the transaction price to the separate performance obligations on the basis of the relative stand- alone selling price of each distinct good or service to be delivered; and recognises revenue when or as each performance obligation is satisfied in a manner that depicts the transfer to the customer of the goods or services promised. Contracts with customers can include various combinations of subscription fees and services, which are in certain circumstances bundled and in other circumstances are capable of being distinct and accounted for as separate performance obligations. Where a contract with multiple performance obligations that is not bundled, the revenue associated with each obligation is calculated based on its relative stand-alone selling price. Revenue is recognised over time if: ● the customer simultaneously receives and consumes the benefits as the Group performs; ● the customer controls the asset as the Group creates or enhances it; or ● the Group’s performance does not create an asset for which the Group has an alternative use and ● there is a right to payment for performance to date. Where the above criteria is not met, revenue is recognised at a point in time when control transfers. The Group earns its revenues from two main sources: a. Subscription, licences, support and hosting fees b. Training, consultancy and other services Subscription, licence and support and hosting fees Subscription revenues represent revenues earned from customers accessing the cloud-based products hosted by the Group. Customers gain access to use the Group’s cloud-based products without taking possession of the software. Customers pay a fixed subscription fee over the contract term. Subscription contracts are sold along with configuration and/or customisation, support and hosting services. For some large enterprise contracts, the contract may include customisation of the software for the customer’s specific use. Product customisation covers services to create new functions or features and special customisation of the standard reports to meet the customer’s need. Customisation service is critical to the functioning of the software for the customer’s specific use. A customer is not able to fully benefit from the software without the required software customisation. Knowledge on how to modify the software code or writing additional code is proprietary of the Group and only the Group can perform this service. Therefore, there are no other readily available resources for the customer to obtain the benefit from the software customisation prior to accessing the product. Support revenues represent revenues earned from providing post-sale technical support to respond to customers’ service requests. Hosting revenues represent revenues earned from providing the cloud-based hosting service for the service components, storage infrastructure, operating and database software. The Group has assessed and concluded that the sale of subscription, hosting and support services together are not distinct as they represent a bundled service to use the Group’s cloud-based product over the contract term. Hence, the Group considers the sale of subscription fees, customisation, hosting and technical support services as a single performance obligation. Revenues are recognised over time on a straight-line basis over the term of the subscription period, as the customers simultaneously receive and consume the benefits of accessing the product and services. The Group’s subscription revenues do not contain refund-type provisions. Costs incurred and payments received from the customer for customisation services prior to the commencement of the subscription period are deferred on the balance sheet and recognised in the profit or loss on a straight-line basis over the term of the subscription period. ReadyTech Holdings Limited Notes to the consolidated financial statements 30 June 2024 Note 2. Material accounting policy information (continued) Licences, support and hosting fees Licence revenues represent revenues from the sales of on-premise products. These products are hosted in the customer’s infrastructure environment. These products are not tailored for customer use throughout the duration of the contact and no maintenance/ training services are included. When a licence is purchased by a customer, there is an optionality for the customers to also purchase post-sale technical support or hosting services for an agreed term. Where a licence is sold with these support and hosting services, each good or service is considered to be a distinct performance obligation because the customer can benefit from the use of the software without the provision of the support or hosting services. Revenue is recognised at the point in time when the customer has purchased the licence as control of the software has transferred at that point. Revenue is recognised for the provision of support and hosting services over time on a straight line basis over the agreed term. This is because the customer is deemed to simultaneously receive and consume the benefits provided by the Group’s performance of the support and hosting services as it is performed during the contract term. Training, consultancy and other services Training revenues represent revenues earned from providing in-depth training on the product, refresher courses or induction for new users of the product. Consultancy and other services revenue represent revenues earned from providing consultation services such as business process mapping, project management of change projects, best practice of business process. The Group has assessed and concluded that revenues from training, consultancy and other services are able to be provided by a third party supplier or can be consumed by the customer on its own or with readily available resources. Therefore, training, consultancy and other services are considered to be distinct performance obligations. Training, consultancy and other services revenue is charged to the customer either on a time and materials basis or as a fixed price. Revenue is recognised as the services are rendered over time on a proportional basis using an input method, being time or cost, depending on the terms and conditions of the customer contract. 34 35 ReadyTech Annual Report 2023 ReadyTech Holdings Limited Notes to the consolidated financial statements 30 June 2024 Note 2. Material accounting policy information (continued) Summary of revenue recognition: Revenue categories Performance obligation Timing of revenue recognition Subscription fees Provide access to the Group’s intellectual property over the agreed period Over time on a straight-line basis across the customer's subscription term. Customisation services Services to customise the product to meet the customers' requirements or specifications; bundled with subscription fees Over time on a straight-line basis across the customer's subscription term. Support services - subscription Provision of post-sale support services over the agreed period bundled with subscription fees Over time on a straight-line basis across the customer's subscription term. Hosting fees - subscription Provision of cloud-based hosting services over the agreed period bundled with subscription fees Over time on a straight-line basis across the customer's subscription term. Licence fees Sale of a software licence At the point of sale. Support services - licence Provision of post-sale support services over the agreed period Over time as the services are rendered. Hosting fees - licence Provision of cloud-based hosting services over the agreed period Over time as the services are rendered. Training services Services to provide training to the users Over time as the services are rendered. Consultancy services Service includes services for software and project services Over time as the services are rendered. Principal vs agent For selected products, the Group collaborates with third parties software providers or consultants in completing the performance obligations as per customer contracts. The Group is acting as a principal when it controls the provision of the third party product or implementation service before the product or service is transferred to the customer. In the contract with a customer, the Group has control over the establishment of pricing, including determining pricing for the third party products and services. The Group is also primarily responsible for fulfilling the promise to provide the third party products to the customer and assumes fulfilment risk such as addressing customer support requests and rectifying any service issues. Contract assets/ liabilities Timing of revenue recognition may differ from the timing of invoicing to customers. Contract liabilities represent the Group’s obligation to transfer goods or services to a customer and are recognized when customer pays the consideration in advance, or when the Group recognizes a receivable to reflect its unconditional right to consideration (whichever earlier) before the Group has transferred the goods or services to the customer. Contract liabilities comprise mainly of unearned revenue related to subscription licences fees that are not refundable. Contract liabilities are generally invoiced at the beginning of each contract period. Contract assets represent unbilled revenue for goods and services that have been provided to customers but not yet billed. When corresponding payment milestones are met, contract assets are released to trade receivables. Contract assets are treated as financial assets for impairment purposes. ReadyTech Holdings Limited Notes to the consolidated financial statements 30 June 2024 Note 2. Material accounting policy information (continued) Contract costs Incremental costs incurred in obtaining a contract Costs incurred in obtaining the customer contract are expensed, unless they are incremental to obtaining the contract and the Group expects to recover those costs. Costs that meet the criteria for capitalisation will be amortised over the life of the contract that they relate to. The Group has identified certain sales commission costs as meeting the criteria of directly related contract costs. These costs are capitalised in the month in which they are incurred and amortised over the contract term. Costs to fulfil a contract Employee costs related to a contract of which product customisation is performed for a specific customer and the corresponding revenues are recognized over the contract terms, are capitalised in the month in which they are incurred and amortised over the contract term. Income tax The income tax expense or benefit for the period is the tax payable on that period's taxable income based on the applicable income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities attributable to temporary differences, unused tax losses and the adjustment recognised for prior periods, where applicable. Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applied when the assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted, except for: ● when the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting nor taxable profits; or ● when the taxable temporary difference is associated with interests in subsidiaries and the timing of the reversal can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting date. Deferred tax assets recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for the carrying amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is probable that there are future taxable profits available to recover the asset. Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable authority on either the same taxable entity or different taxable entities which intend to settle simultaneously. ReadyTech Holdings Limited (the 'head entity') and its wholly-owned Australian subsidiaries have formed an income tax consolidated group under the tax consolidation regime. The head entity and each subsidiary in the tax consolidated group continue to account for their own current and deferred tax amounts. The tax consolidated group has applied the 'separate taxpayer within group' approach in determining the appropriate amount of taxes to allocate to members of the tax consolidated group. In addition to its own current and deferred tax amounts, the head entity also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from each subsidiary in the tax consolidated group. Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts receivable from or payable to other entities in the tax consolidated group. The tax funding arrangement ensures that the intercompany charge equals the current tax liability or benefit of each tax consolidated group member, resulting in neither a contribution by the head entity to the subsidiaries nor a distribution by the subsidiaries to the head entity. Current and non-current classification Assets and liabilities are presented in the statement of financial position based on current and non-current classification. 36 37 ReadyTech Annual Report 2023 ReadyTech Holdings Limited Notes to the consolidated financial statements 30 June 2024 Note 2. Material accounting policy information (continued) An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the Group's normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 months after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period. All other assets are classified as non-current. A liability is classified as current when: it is either expected to be settled in the Group's normal operating cycle; it is held primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities are classified as non-current. Deferred tax assets and liabilities are always classified as non-current. Trade and other receivables Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less any allowance for expected credit losses. Trade receivables are generally due for settlement within 30 days. The Group has applied the simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance. To measure the expected credit losses, trade receivables have been grouped based on days overdue. Receivables from related parties and other receivables are recognised at amortised cost, less any provision for impairment. Property, plant and equipment Property, plant and equipment is stated at historical cost less accumulated depreciation and impairment. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Depreciation is calculated on a straight-line or diminishing value basis to write off the net cost of each item of property, plant and equipment (excluding land) over their expected useful lives as follows: Leasehold improvements 3-5 years Fixtures and fittings 3-10 years Computer equipment 3-5 years Office equipment 3-5 years The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting date. Leasehold improvements are depreciated over the unexpired period of the lease or the estimated useful life of the assets, whichever is shorter. An item of property, plant and equipment is derecognised upon disposal or when there is no future economic benefit to the Group. Gains and losses between the carrying amount and the disposal proceeds are taken to profit or loss. Right-of-use assets A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost, which comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the commencement date net of any lease incentives received, any initial direct costs incurred, and, except where included in the cost of inventories, an estimate of costs expected to be incurred for dismantling and removing the underlying asset, and restoring the site or asset. Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful life of the asset, whichever is the shorter. Where the Group expects to obtain ownership of the leased asset at the end of the lease term, the depreciation is over its estimated useful life. Right-of use assets are subject to impairment or adjusted for any remeasurement of lease liabilities. The Group has elected not to recognise a right-of-use asset and corresponding lease liability for short-term leases with terms of 12 months or less and leases of low-value assets. Lease payments on these assets are expensed to profit or loss as incurred. ReadyTech Holdings Limited Notes to the consolidated financial statements 30 June 2024 Note 2. Material accounting policy information (continued) Intangible assets Intangible assets acquired as part of a business combination, other than goodwill, are initially measured at their fair value at the date of the acquisition. Intangible assets acquired separately are initially recognised at cost. Indefinite life intangible assets are not amortised and are subsequently measured at cost less any impairment. Finite life intangible assets are subsequently measured at cost less amortisation and any impairment. The gains or losses recognised in profit or loss arising from the derecognition of intangible assets are measured as the difference between net disposal proceeds and the carrying amount of the intangible asset. The method and useful lives of finite life intangible assets are reviewed annually. Changes in the expected pattern of consumption or useful life are accounted for prospectively by changing the amortisation method or period. Research costs are expensed in the period in which they are incurred. Goodwill Goodwill arises on the acquisition of a business. Goodwill is not amortised. Instead, goodwill is tested annually for impairment, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Impairment losses on goodwill are taken to profit or loss and are not subsequently reversed. Patents and trademarks Significant costs associated with patents and trademarks are capitalised as an asset. These costs are not subsequently amortised. Instead, patents and trademarks are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. They are carried at cost less accumulated impairment losses. Management consider patents and trademarks to have indefinite useful lives because the potential to generate cash flows is unlimited. Customer relationships Customer relationships acquired in a business combination are amortised on a straight-line basis over the period of their expected benefit, being their finite useful life between 9 and 14 years. Software An intangible asset arising from software development expenditure on an internal project is recognised only when the Group can demonstrate the technical feasibility of completing the intangible asset so that it will be available for use or sale, its intention to complete and its ability to use or sell the asset, how the asset will generate future economic benefits, the availability of resources to complete the development and the ability to measure reliably the expenditure attributable to the intangible asset during its development. Following the initial recognition, the cost model is applied requiring the asset to be carried at cost less any accumulated amortisation and accumulated impairment losses. Significant costs associated with the acquisition of software or software internally developed is amortised on a straight-line basis over the period of its expected benefit, being a finite useful life of between 5 and 10 years. Amortisation commences when the asset is available for use, i.e. when it is in the location and condition necessary for it to be capable of operating in the manner intended by management. Impairment of non-financial assets Goodwill and other intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other non- financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. Recoverable amount is the higher of an asset's fair value less costs of disposal and value-in-use. The value-in-use is the present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or cash-generating unit to which the asset belongs. Assets that do not have independent cash flows are grouped together to form a cash-generating unit. Contract liabilities Contract liabilities are recognised when a customer pays consideration, or when the Group recognises a receivable to reflect its unconditional right to consideration (whichever is earlier), before the Group has transferred the goods or provided the services to the customer. The liability is the Group's obligation to transfer goods or provide services to a customer from which it has received consideration. 38 39 ReadyTech Annual Report 2023 ReadyTech Holdings Limited Notes to the consolidated financial statements 30 June 2024 Note 2. Material accounting policy information (continued) Borrowings Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction costs. They are subsequently measured at amortised cost using the effective interest method. Lease liabilities A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present value of the lease payments to be made over the term of the lease, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group's incremental borrowing rate. Lease payments comprise of fixed payments less any lease incentives receivable, variable lease payments that depend on an index or a rate, amounts expected to be paid under residual value guarantees, exercise price of a purchase option when the exercise of the option is reasonably certain to occur, and any anticipated termination penalties. The variable lease payments that do not depend on an index or a rate are expensed in the period in which they are incurred. Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured if there is a change in the following: future lease payments arising from a change in an index or a rate used; residual guarantee; lease term; certainty of a purchase option and termination penalties. When a lease liability is remeasured, an adjustment is made to the corresponding right-of use asset, or to profit or loss if the carrying amount of the right-of-use asset is fully written down. Provisions Provisions are recognised when the Group has a present (legal or constructive) obligation as a result of a past event, it is probable the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation. If the time value of money is material, provisions are discounted using a current pre-tax rate specific to the liability. The increase in the provision resulting from the passage of time is recognised as a finance cost. Employee benefits Short-term employee benefits Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected to be settled wholly within 12 months of the reporting date are measured at the amounts expected to be paid when the liabilities are settled. Other long-term employee benefits The liability for annual leave and long service leave not expected to be settled within 12 months of the reporting date are measured at the present value of expected future payments to be made in respect of services provided by employees up to the reporting date. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on high quality corporate bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows. Defined contribution superannuation expense Contributions to defined contribution superannuation plans are expensed in the period in which they are incurred. Share-based payments Equity-settled share-based compensation benefits are provided to employees. Equity-settled transactions are awards of shares, or options over shares, that are provided to employees in exchange for the rendering of services. The cost of equity-settled transactions are measured at fair value on grant date. Fair value is independently determined using either the Binomial or Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option, together with non-vesting conditions that do not determine whether the Group receives the services that entitle the employees to receive payment. No account is taken of any other vesting conditions. ReadyTech Holdings Limited Notes to the consolidated financial statements 30 June 2024 Note 2. Material accounting policy information (continued) The cost of equity-settled transactions are recognised as an expense with a corresponding increase in equity over the vesting period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the best estimate of the number of awards that are likely to vest and the expired portion of the vesting period. The amount recognised in profit or loss for the period is the cumulative amount calculated at each reporting date less amounts already recognised in previous periods. The cost of cash-settled transactions is initially, and at each reporting date until vested, determined by applying either the Binomial or Black-Scholes option pricing model, taking into consideration the terms and conditions on which the award was granted. The cumulative charge to profit or loss until settlement of the liability is calculated as follows: ● during the vesting period, the liability at each reporting date is the fair value of the award at that date multiplied by the expired portion of the vesting period. ● from the end of the vesting period until settlement of the award, the liability is the full fair value of the liability at the reporting date. All changes in the liability are recognised in profit or loss. The ultimate cost of cash-settled transactions is the cash paid to settle the liability. Market conditions are taken into consideration in determining fair value. Therefore any awards subject to market conditions are considered to vest irrespective of whether or not that market condition has been met, provided all other conditions are satisfied. If equity-settled awards are modified, as a minimum an expense is recognised as if the modification has not been made. An additional expense is recognised, over the remaining vesting period, for any modification that increases the total fair value of the share-based compensation benefit as at the date of modification. If the non-vesting condition is within the control of the Group or employee, the failure to satisfy the condition is treated as a cancellation. If the condition is not within the control of the Group or employee and is not satisfied during the vesting period, any remaining expense for the award is recognised over the remaining vesting period, unless the award is forfeited. If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any remaining expense is recognised immediately. If a new replacement award is substituted for the cancelled award, the cancelled and new award is treated as if they were a modification. Fair value measurement When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date; and assumes that the transaction will take place either: in the principal market; or in the absence of a principal market, in the most advantageous market. Fair value is measured using the assumptions that market participants would use when pricing the asset or liability, assuming they act in their economic best interests. For non-financial assets, the fair value measurement is based on its highest and best use. Valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, are used, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. Assets and liabilities measured at fair value are classified into three levels, using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. Classifications are reviewed at each reporting date and transfers between levels are determined based on a reassessment of the lowest level of input that is significant to the fair value measurement. For recurring and non-recurring fair value measurements, external valuers may be used when internal expertise is either not available or when the valuation is deemed to be significant. External valuers are selected based on market knowledge and reputation. Where there is a significant change in fair value of an asset or liability from one period to another, an analysis is undertaken, which includes a verification of the major inputs applied in the latest valuation and a comparison, where applicable, with external sources of data. Issued capital Ordinary shares are classified as equity. 40 41 ReadyTech Annual Report 2023 ReadyTech Holdings Limited Notes to the consolidated financial statements 30 June 2024 Note 2. Material accounting policy information (continued) Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Business combinations The acquisition method of accounting is used to account for business combinations regardless of whether equity instruments or other assets are acquired. The consideration transferred is the sum of the acquisition-date fair values of the assets transferred, equity instruments issued or liabilities incurred by the acquirer to former owners of the acquiree and the amount of any non-controlling interest in the acquiree. For each business combination, the non-controlling interest in the acquiree is measured at either fair value or at the proportionate share of the acquiree's identifiable net assets. All acquisition costs are expensed as incurred to profit or loss. On the acquisition of a business, the Group assesses the financial assets acquired and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic conditions, the Group's operating or accounting policies and other pertinent conditions in existence at the acquisition-date. Contingent consideration to be transferred by the acquirer is recognised at the acquisition-date fair value. Subsequent changes in the fair value of the contingent consideration classified as a liability is recognised in profit or loss. Contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. The difference between the acquisition-date fair value of assets acquired, liabilities assumed and any non-controlling interest in the acquiree and the fair value of the consideration transferred and the fair value of any pre-existing investment in the acquiree is recognised as goodwill. If the consideration transferred and the pre-existing fair value is less than the fair value of the identifiable net assets acquired, being a bargain purchase to the acquirer, the difference is recognised as a gain directly in profit or loss by the acquirer on the acquisition-date, but only after a reassessment of the identification and measurement of the net assets acquired, the non-controlling interest in the acquiree, if any, the consideration transferred and the acquirer's previously held equity interest in the acquirer. Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively adjusts the provisional amounts recognised and also recognises additional assets or liabilities during the measurement period, based on new information obtained about the facts and circumstances that existed at the acquisition-date. The measurement period ends on either the earlier of (i) 12 months from the date of the acquisition or (ii) when the acquirer receives all the information possible to determine fair value. Business combinations under common control Common control transactions are specifically scoped out of AASB 3 'Business Combinations'. Common control transactions are accounted for in the consolidated financial statements prospectively from the date of obtaining the ownership interest. The Directors have elected to use existing book values of assets and liabilities of the entities subject to the business combination and record the difference between the purchase price paid by the Company and the existing book value of the entity acquired immediately prior to the business combination as a reserve. Where equity instruments are issued as part of the consideration, the value of the instruments is their market price as at the acquisition date. Transaction costs arising on the issue of equity instruments are recognised directly in equity. Earnings per share Basic earnings per share Basic earnings per share is calculated by dividing the profit attributable to the owners of ReadyTech Holdings Limited, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the financial year. Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of additional ordinary shares that would have been outstanding assuming conversion of all dilutive potential ordinary shares. ReadyTech Holdings Limited Notes to the consolidated financial statements 30 June 2024 Note 2. Material accounting policy information (continued) Goods and Services Tax ('GST') and other similar taxes Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part of the expense. Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the tax authority is included in other receivables or other payables in the statement of financial position. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the tax authority, are presented as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax authority. Rounding of amounts The Company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and Investments Commission, relating to 'rounding-off'. Amounts in this report have been rounded off in accordance with that Corporations Instrument to the nearest thousand dollars, or in certain cases, the nearest dollar. New Accounting Standards and Interpretations not yet mandatory or early adopted Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet mandatory, have not been early adopted by the Group for the annual reporting period ended 30 June 2024. The Group's assessment of the impact of these new or amended Accounting Standards and Interpretations, most relevant to the Group, are set out below. AASB 2020-1 Amendments to Australian Accounting Standards – Classification of Liabilities as Current or Non-Current and AASB 2022-6 Amendments to Australian Accounting Standards - Non-current Liabilities with Covenants AASB 2020-1 was issued in March 2020 and is applicable to annual periods beginning on or after 1 January 2024, as extended by AASB 2020-6. Early adoption is permitted. AASB 2022-6 was issued in December 2022 and is applicable to annual periods beginning on or after 1 January 2024. Early adoption is permitted where AASB 2020-1 is also early adopted. These standards amend AASB 101 ‘Presentation of Financial Statements’ to clarify requirements for the presentation of liabilities in the statement of financial position as current or non-current. The amendments clarify that a liability is classified as non-current if an entity has the right at the end of the reporting period to defer settlement of the liability for at least 12 months after the reporting period. If the deferral right is subject to the entity complying with covenants in the loan arrangement based on information up to and including reporting date, the deferral right will exist where the entity is able to comply with the covenant on or before the end of the reporting date even if compliance is assessed after the reporting date. The deferral right will be deemed to exist at reporting date if the entity is required to comply with the covenant only after the reporting date based on post-reporting date information. Additional disclosure is required about loan arrangements classified as non-current liabilities in such circumstances which enables users of financial statements to understand the risk that the liabilities could become repayable within twelve months after the reporting period. Classification of a liability as non-current is unaffected by the likelihood that the entity will exercise its right to defer settlement of the liability for at least 12 months after the reporting date or even if the entity settles the liability prior to issue of the financial statements. The meaning of settlement of a liability is also clarified. The Group does not expect these amendments to have a material impact. 42 43 ReadyTech Annual Report 2023 ReadyTech Holdings Limited Notes to the consolidated financial statements 30 June 2024 Note 2. Material accounting policy information (continued) AASB 18 Presentation and Disclosure in Financial Statements This standard is applicable to annual reporting periods beginning on or after 1 January 2027, with early adoption permitted. The standard replaces AASB 101 ‘Presentation of Financial Statements’, although many of the requirements have been carried forward unchanged and is accompanied by limited amendments to the requirements in AASB 107 ‘Statement of Cash Flows’. The standard requires income and expenses to be classified into five categories: ‘Operating’ (residual category if income and expenses are not classified into another category), ‘Investing’, ‘Financing’, ‘Income taxes’ and ‘Discontinued operations’. The standard introduces two mandatory sub-totals: ‘Operating profit’ and ‘Profit before finance and income taxes’. There are also new disclosure requirements for ‘management-defined performance measures’, such as earnings before interest, taxes, depreciation and amortisation (‘EBITDA’) or ‘adjusted profit’. The standard provides enhanced guidance on how to organise and group information (aggregation and disaggregation) in the financial statements and whether to provide it in the primary financial statements or in the notes. The Group will adopt this standard from 1 July 2027 and it is expected that there will be a significant change to the layout of the statement of profit or loss and other comprehensive income. AASB 2014-10 Sale or contribution of assets between investor and its associate or joint venture AASB 2014-10 was issued in December 2014 and is applicable for annual reporting periods beginning on or after 1 January 2025 (as extended by AASB 2021-7). Early adoption is permitted. This standard makes amendments to AASB 10 ‘Consolidated Financial Statements’ and AASB 128 ‘Investments in Associates and Joint Ventures’ to clarify the extent to which gains or losses are recognised when accounting for sales or contributions of assets between an investor and its associate or joint venture. The standard requires that a full gain or loss is recognised when the transaction involves a business whilst a partial gain or loss is recognised when the transaction involves assets that do not constitute a business. The Group does not expect these amendments to have a material impact. Note 3. Critical accounting judgements, estimates and assumptions The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates and assumptions on historical experience and on other various factors, including expectations of future events, management believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will seldom equal the related actual results. The judgements, estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities (refer to the respective notes) within the next financial year are discussed below. Goodwill and other indefinite life intangible assets The Group tests annually, or more frequently if events or changes in circumstances indicate impairment, whether goodwill and other indefinite life intangible assets have suffered any impairment, in accordance with the accounting policy stated in note 2. The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations require the use of assumptions, including estimated discount rates based on the current cost of capital and growth rates of the estimated future cash flows. Refer to note 13 for further information. Impairment of non-financial assets other than goodwill and other indefinite life intangible assets The Group assesses impairment of non-financial assets other than goodwill and other indefinite life intangible assets at each reporting date by evaluating conditions specific to the Group and to the particular asset that may lead to impairment. If an impairment trigger exists, the recoverable amount of the asset is determined. This involves fair value less costs of disposal or value-in-use calculations, which incorporate a number of key estimates and assumptions. ReadyTech Holdings Limited Notes to the consolidated financial statements 30 June 2024 Note 3. Critical accounting judgements, estimates and assumptions (continued) Contingent consideration The contingent consideration liability is the difference between the total purchase consideration, usually on an acquisition of a business combination, and the amounts paid or settled up to the reporting date, discounted to net present value. The Group applies provisional accounting for any business combination. Any reassessment of the liability during the earlier of the finalisation of the provisional accounting or 12 months from acquisition-date is adjusted for retrospectively as part of the provisional accounting rules in accordance with AASB 3 'Business Combinations'. Thereafter, at each reporting date, the deferred consideration liability is reassessed against revised estimates and any increase or decrease in the net present value of the liability will result in a corresponding gain or loss to profit or loss. The increase in the liability resulting from the passage of time is recognised as a finance cost. Refer to note 28, 36 and 39 for further information. Capitalised software development expenditure Software development expenditure have been capitalised only when the Group can demonstrate the technical feasibility of completing the intangible asset so that it will be available for use or sale. Key judgements are applied in considering costs to be capitalised which includes determining expenditures directly related to these activities and allocating overheads between those that are expensed and capitalised. In addition, costs are only capitalised that are expected to be recovered either through successful development or sale of the relevant software. To the extent that capitalised costs are determined not to be recoverable in the future, they will be written off in the period in which this determination is made. Estimation of useful lives of assets The Group determines the estimated useful lives and related depreciation and amortisation charges for its property, plant and equipment and finite life intangible assets. The useful lives could change significantly as a result of technical innovations or some other event. The depreciation and amortisation charge will increase where the useful lives are less than previously estimated lives, or technically obsolete or non-strategic assets that have been abandoned or sold will be written off or written down. Revenue recognition For some large enterprise contracts, product customisation service is typically bundled with the implementation, training, consulting and other services into a single performance obligation. Management uses judgements and estimates in allocating the transaction price to different revenue streams which have more than one performance obligation. Allocation of the transaction price is determined based on the estimated costs of satisfying the performance obligation and then adds an appropriate margin. Note 4. Operating segments Identification of reportable operating segments The Group is organised into three reportable operating segments: Education and Work Pathways, Workforce Solutions and Government and Justice. These operating segments are based on the internal reports that are reviewed and used by the Board of Directors and Key Management Personnel (who are identified as the Chief Operating Decision Makers ('CODM')) in assessing performance and in determining the allocation of resources. The CODM reviews adjusted EBITDA (earnings before interest, tax, depreciation and amortisation adjusted for non-cash and significant items). The accounting policies adopted for internal reporting to the CODM are consistent with those adopted in the financial statements. The information reported to the CODM is on a monthly basis. 44 45 ReadyTech Annual Report 2023 ReadyTech Holdings Limited Notes to the consolidated financial statements 30 June 2024 Note 4. Operating segments (continued) Types of products and services The principal products and services of each of these operating segments are as follows: Education and Work Pathways mainly provides products and services to tertiary education providers. Core products are its cloud-based student management systems (SMS) and learning management systems (LMS) for education and training providers to manage the student lifecycle from student enrolment to course completion. ReadyTech also provides platforms to help state governments manage vocational education and training (VET) programs, software platforms for the pathways and back-to-work sector to manage apprentices and job seekers, and a competency assessment and skills profiling tools to track on-the-job training through a qualification. Workforce Solutions provides products and services to mid-sized company across various industries with payroll software, outsourced payroll services, human resource management (HRM) and recruitment software solutions to employers to assist them with payroll and the management of their employees. HRM consists of human resource (HR) administration and talent management. HR administration involves employee records, workplace health and safety (WHS) and organisational structure. Government and Justice provides government and justice case management software as a service solutions to local governments, state governments and justice departments. Core products in asset management, property, licensing and compliance, finance, HR and payroll, customer management and courts and justice. Refer to note 5 for disclosure of revenues from external customers for these principal products and services. Intersegment transactions No intersegment transactions were made during the year ended 30 June 2024 (30 June 2023: $nil). Intersegment receivables, payables and loans Intersegment loans are initially recognised at the consideration received. Intersegment loans receivable and loans payable that earn or incur non-market interest are not adjusted to fair value based on market interest rates. Intersegment loans are eliminated on consolidation. Major customers During the years ended 30 June 2024 and 30 June 2023, no single customer contributed 10% or more to the Group's external revenue. Operating segment information Workforce Solutions Education and Work Pathways Government and Justice Corporate Total Consolidated - 2024 $'000 $'000 $'000 $'000 $'000 Revenue Sales to external customers 30,742 40,550 42,510 - 113,802 Total revenue 30,742 40,550 42,510 - 113,802 Adjusted EBITDA 11,062 18,117 12,324 (3,737) 37,766 Contingent consideration charged as employee expenses and fair value adjustments (2,409) Integration, restructuring and acquisition related transaction cost (2,583) Employee share gifts (227) ReadyTech Holdings Limited Notes to the consolidated financial statements 30 June 2024 Note 4. Operating segments (continued) EBITDA 32,547 Depreciation and amortisation (22,859) Interest revenue 31 Finance costs (3,309) Profit before income tax expense 6,410 Income tax expense (946) Profit after income tax expense 5,464 Workforce Solutions Education and Work Pathways Government and Justice Corporate Total Consolidated - 2023 $'000 $'000 $'000 $'000 $'000 Revenue Sales to external customers 28,573 36,051 38,682 - 103,306 Total revenue 28,573 36,051 38,682 - 103,306 Adjusted EBITDA 11,120 15,269 10,764 (4,114) 33,039 Transaction, including takeover defense and acquisition related costs (3,141) Contingent consideration charged as employee expenses (2,912) Employee share gifts (369) EBITDA 26,617 Depreciation and amortisation (17,272) Interest revenue 15 Finance costs (2,563) Profit before income tax expense 6,797 Income tax expense (1,822) Profit after income tax expense 4,975 All assets and liabilities, including taxes are not allocated to the operating segments as CODM reviews and manages on an overall group basis. The Group operates predominantly in Australia and New Zealand regions. Note 5. Revenue from contracts with customers Consolidated 2024 2023 $'000 $'000 Revenue from contracts with customers 113,802 103,306 46 47 ReadyTech Annual Report 2023 ReadyTech Holdings Limited Notes to the consolidated financial statements 30 June 2024 Note 5. Revenue from contracts with customers (continued) 42 Disaggregation of revenue The disaggregation of revenue from contracts with customers is as follows: Workforce Solutions Education and Work Pathways Government and Justice Total Consolidated - 2024 $'000 $'000 $'000 $'000 Major product lines Subscription, licence, support and hosting 27,422 34,150 33,836 95,408 Training, consultancy and other 3,320 6,400 8,674 18,394 30,742 40,550 42,510 113,802 Workforce Solutions Education and Work Pathways Government and Justice Total Consolidated - 2023 $'000 $'000 $'000 $'000 Major product lines Subscription, licence, support and hosting 24,500 29,714 30,119 84,333 Training, consultancy and other 4,073 6,337 8,563 18,973 28,573 36,051 38,682 103,306 Note 6. Expenses Consolidated 2024 2023 $'000 $'000 Profit before income tax includes the following specific expenses: Finance costs Interest and finance charges paid/payable on borrowings 3,037 2,337 Interest charges on lease liability 272 226 Finance costs expensed 3,309 2,563 Superannuation expense Defined contribution superannuation expense 5,728 4,993 Share-based payments expense Share-based payments expense 2,333 3,220 Loss allowance for expected credit losses Loss allowance for expected credit losses 247 195 Consolidated 2024 2023 $'000 $'000 7,258 1,611 (5,264) 1,216 (1,048) (1,005) 946 1,822 (5,264) 1,216 6,410 6,797 1,923 2,039 ReadyTech Holdings Limited Notes to the consolidated financial statements 30 June 2024 Note 7. Income tax Income tax expense Current tax Deferred tax - origination and reversal of temporary differences Adjustment recognised for prior periods Aggregate income tax expense Deferred tax included in income tax expense comprises: (Increase)/decrease in deferred tax assets Numerical reconciliation of income tax expense and tax at the statutory rate Profit before income tax expense Tax at the statutory tax rate of 30% (2023 - 30%) Tax effect amounts which are not deductible/(taxable) in calculating taxable income: Research and development ('R&D') expenses 2,106 2,508 Research and development tax offset (3,068) (3,342) Other non-deductible expenditure 1,033 1,622 1,994 2,827 Adjustment recognised for prior periods (1,048) (1,005) Income tax expense 946 1,822 During the year ended 30 June 2024, the adjustment recognised for prior period is related to application of R&D tax offset in the 2023 lodged tax return. 48 49 ReadyTech Annual Report 2023 ReadyTech Holdings Limited Notes to the consolidated financial statements 30 June 2024 Note 7. Income tax (continued) Consolidated 2024 2023 $'000 $'000 Deferred tax (liability)/asset Deferred tax (liability)/asset comprises temporary differences attributable to: Amounts recognised in profit or loss: Allowance for expected credit losses 222 172 Labour capitalisation (3,841) (3,821) Contract liabilities 7,489 6,001 Employee benefits 2,221 2,087 Accrued expenses 1,021 1,185 Software 3,636 2,587 Customer relationships (7,865) (8,968) Brand names (139) (498) Property, plant and equipment (757) (1,138) IPO and other acquisition related costs 255 314 Right-of-use assets (1,377) (1,435) Lease liabilities 1,563 1,544 Contract costs (1,299) (768) Other 39 20 Deferred tax asset/(liability) 1,168 (2,718) Movements: Opening balance (2,718) 5,704 Credited/(charged) to profit or loss 5,264 (1,216) Additions through business combinations (153) (2,946) Adjustment recognised for prior periods (62) (618) Adjustment related to prior period TFE application - (2,991) Adjustment related to prior period R&D tax offset lodgement (1,163) - Tax impact on the finalisation of provisional accounting of business combinations - (651) Closing balance 1,168 (2,718) Consolidated 2024 2023 $'000 $'000 Income tax refund due Income tax refund due – Australia entities 1,840 2,150 Consolidated 2024 2023 $'000 $'000 Income tax payable Income tax payable – New Zealand entities 954 - As at 30 June 2024, the Group has capital losses totalling $2,996,000 (2023: $2,996,000) which have not been recognised in the statement of financial position as the recovery of this benefit is uncertain. Subsequent to 30 June 2024, the Group received the 2023 and 2021 income tax refunds from the Australian Tax Office amounting to $1,294,000. ReadyTech Holdings Limited Notes to the consolidated financial statements 30 June 2024 Note 8. Current assets - cash and cash equivalents Consolidated 2024 2023 $'000 $'000 Cash at bank 21,671 20,417 Cash on deposit 196 199 21,867 20,616 Note 9. Current assets - trade and other receivables Consolidated 2024 2023 $'000 $'000 Trade receivables 13,059 10,557 Less: Allowance for expected credit losses (739) (574) 12,320 9,983 Other receivables 247 451 12,567 10,434 Trade receivables are non-interest bearing and are on 30 day credit term. Allowance for expected credit losses The Group has recognised a loss of $247,000 in profit or loss in respect of impairment of receivables for the year ended 30 June 2024 (2023: $195,000). The ageing of the receivables and allowance for expected credit losses provided for above are as follows: Expected credit loss rate Carrying amount Allowance for expected credit losses 2024 2023 2024 2023 2024 2023 Consolidated % % $'000 $'000 $'000 $'000 Not overdue 2.14% 2.26% 7,653 4,647 164 105 0 to 3 months overdue 3.00% 2.87% 4,113 4,563 123 131 3 to 6 months overdue 18.93% 10.16% 752 738 142 75 Over 6 months overdue 57.30% 43.19% 541 609 310 263 13,059 10,557 739 574 Movements in the allowance for expected credit losses are as follows: Consolidated 2024 2023 $'000 $'000 Opening balance 574 570 Additional provisions recognised/ (reversal of unused amount) 247 (192) Additions through business combinations 13 274 Receivables written off during the year as uncollectable (95) (78) Closing balance 739 574 50 51 ReadyTech Annual Report 2023 ReadyTech Holdings Limited Notes to the consolidated financial statements 30 June 2024 Note 9. Current assets - trade and other receivables (continued) In determining the recoverability of a trade receivable, the Group considers any change in the credit quality of the trade receivable from the date credit was initially granted up to the reporting date. The concentration of credit risk is limited due to the customer base being large and unrelated. Note 10. Current assets - contract assets Consolidated 2024 2023 $'000 $'000 Contract assets 2,588 1,489 Reconciliation Reconciliation of the written down values at the beginning and end of the current and previous financial year are set out below: Opening balance 1,489 1,383 Additions 5,706 5,465 Transfer to trade receivables (4,607) (5,359) Closing balance 2,588 1,489 Allowance for expected credit losses The allowance for expected credit losses on contract assets for the year ended 30 June 2024 is $nil (2023: $nil). Note 11. Current assets - derivative financial assets Consolidated 2024 2023 $'000 $'000 Interest rate swap - 76 The Group entered into an interest rate swap arrangement to hedge the variable rate of $20,000,000 loan (2023: $20,000,000) with a fixed rate of 3.795% (2023: 3.795%) that is settled on a quarterly basis. The contract expired on 1 February 2024. ReadyTech Holdings Limited Notes to the consolidated financial statements 30 June 2024 Note 12. Non-current assets - property, plant and equipment Consolidated 2024 2023 $'000 $'000 Leasehold improvements - at cost 1,979 1,598 Less: Accumulated depreciation (662) (277) 1,317 1,321 Fixtures and fittings - at cost 354 356 Less: Accumulated depreciation (288) (235) 66 121 Computer equipment - at cost 1,987 1,740 Less: Accumulated depreciation (1,416) (973) 571 767 Office equipment - at cost 225 262 Less: Accumulated depreciation (215) (242) 10 20 1,964 2,229 Reconciliations Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below: Leasehold improve- ments Fixtures and fittings Motor vehicles Computer equipment Office equipment Total Consolidated $'000 $'000 $'000 $'000 $'000 $'000 Balance at 1 July 2022 227 180 7 563 65 1,042 Additions 1,097 70 - 504 2 1,673 Additions through business combinations (note 36) 125 - - 96 - 221 Depreciation expense (128) (129) (7) (396) (47) (707) Balance at 30 June 2023 1,321 121 - 767 20 2,229 Additions 381 2 - 263 - 646 Exchange differences - - - - (1) (1) Depreciation expense (385) (57) - (459) (9) (910) Balance at 30 June 2024 1,317 66 - 571 10 1,964 52 53 ReadyTech Annual Report 2023 ReadyTech Holdings Limited Notes to the consolidated financial statements 30 June 2024 Note 13. Non-current assets - intangibles Consolidated 2024 2023 $'000 $'000 Goodwill - at cost 125,329 125,360 Patents and trademarks - at cost 464 1,660 Customer relationships - at cost 45,108 44,506 Less: Accumulated amortisation (18,912) (14,612) 26,196 29,894 Software - at cost 116,116 98,798 Less: Accumulated amortisation (57,301) (43,201) 58,815 55,597 210,804 212,511 Reconciliations Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below: Goodwill Patents and trademarks Customer relationships Software Total Consolidated $'000 $'000 $'000 $'000 $'000 Balance at 1 July 2022 88,785 474 24,284 37,096 150,639 Additions* - - - 18,239 18,239 Additions through business combinations (note 36) 36,447 1,194 8,773 10,800 57,214 Adjustments to the provisional values 27 - 624 - 651 Exchange differences 101 (8) 6 - 99 Amortisation expense - - (3,793) (10,538) (14,331) Balance at 30 June 2023 125,360 1,660 29,894 55,597 212,511 Additions - - - 17,454 17,454 Additions through business combinations - - 602 - 602 Exchange differences (31) (2) - (34) (67) Amortisation expense - (1,194) (4,300) (14,202) (19,696) Balance at 30 June 2024 125,329 464 26,196 58,815 210,804 * Additions of software during the financial year ended 30 June 2024 include internally generated assets of $17,033,000 (2023: $16,344,000) and assets externally acquired amounting to $421,000 (2023: $1,895,000). Review of intangible asset carrying values in relation to the Government and Justice Segment. As part of business integration within the Government and Justice segment, management has performed a review of the certain assets and has resulted in the following: ● Derecognition of an acquired brand name of $1.2 million from the previous acquisition. ● Accelerate depreciation of certain acquired software with a net carrying value of $9.27 million due to a change in the assessed useful life to 3 years. A total balance of $2.2 million has been recognised as an expense within the depreciation and amortisation expenses in the consolidated profit or loss. ReadyTech Holdings Limited Notes to the consolidated financial statements 30 June 2024 Note 13. Non-current assets - intangibles (continued) Impairment testing Goodwill acquired through business combinations has been allocated to the following groups of cash generating units ('CGU'): Consolidated 2024 2023 $'000 $'000 Education and Work Pathways 19,286 19,286 Workforce Solutions 15,496 15,527 Government and Justice 90,547 90,547 125,329 125,360 Goodwill and the group of CGUs to which it belongs is tested annually for impairment or at the end of each reporting date where an indicator of impairment exists. As at 30 June 2024, management performed the annual assessment and considered whether impairment indicators existed for all CGUs and concluded that there were none. The recoverable amount of the group of CGUs is the greater of its value in use and its fair value less costs of disposal. Government and Justice segment Impairment testing of Government and Justice segment was carried out based on fair value less costs of disposal (FVLCD) calculations which uses cash flow forecasts from the most recent financial budgets and expectation of future projections driven by the business strategy, past experience and available market information. Cash flow forecasts are modelled over a ten year forecast period with a terminal growth rate at the end of year ten discounted to present value using a pre-tax discount rate of 13.25%, calculated using weighted average cost of capital. A terminal growth rate of 3% is applied. Further, revenue and EBITDA ten-year compound annual growth rate (CAGR) was forecasted at 10% and 12%, respectively. These estimates were made based on the past experience and adjusted with the business strategy to integrate a number of products and operation within the Government and Justice segment. The fair value measurement is categorised as level 3 of the fair value hierarchy. Based on the above methodology and assumptions stated above, the carrying value amount of the Government and Justice CGU as at balance date does not exceed its recoverable amount. Thus, no impairment existed at 30 June 2024. Previously, the impairment testing was carried out using Value in Use which uses a five year forecast period and a terminal growth rate at 3% and pre-tax discount rate of 13%. Other assumptions used in the 2023 financial year model were 5 year Revenue CAGR of 13% and 5 year EBITDA CAGR of 16%. The change in the valuation method from value in use to fair value less costs of disposal is to reflect the long term nature of the business model, the technology and underlying growth. Impact of possible changes in assumptions In respect of impairment testing of goodwill, judgements and estimates were made. The goodwill balance would need to be impaired, should these judgements and estimates change as per below: ● Increase in the discount rate by more than 1.2% with all other assumptions remaining constant. ● Decreased in the 10 year cash margin compound annual growth rate (“CAGR”) by more than 2% with all other assumptions remaining constant. ● Decrease in the terminal growth rate by more than 2.5% with all other assumptions remaining constant. Education and Work Pathways Impairment testing of Education and Work Pathways segment was carried out based on Value in Use calculation which uses cash flow forecasts from the most recent financial budgets and expectation of future projections driven by the business strategy, past experience and available market information. Cash flow forecasts are modelled over a five year forecast period with a terminal growth rate at the end of year ten discounted to present value using a pre-tax discount rate of 13.25% (2023: 13%), calculated using weighted average cost of capital. A terminal growth rate of 3% (2023: 3%) is applied. Further, revenue and EBITDA five-year compound annual growth rate (CAGR) is estimated at 12% and 12%, respectively (2023:13% and 13%). These estimates were made based on the past experience and adjusted with the recent business strategy and plan. 54 55 ReadyTech Annual Report 2023 ReadyTech Holdings Limited Notes to the consolidated financial statements 30 June 2024 Note 13. Non-current assets - intangibles (continued) Based on the above methodology and assumptions stated above, the carrying value amount of the Education and Work Pathways CGU as at balance date does not exceed its recoverable amount. Thus, no impairment existed at 30 June 2024. Workforce Solution Impairment testing of Workforce Solution segment was carried out based on Value in Use calculations which uses cash flow forecasts from the most recent financial budgets and expectation of future projections driven by the business strategy, past experience and available market information. Cash flow forecasts are modelled over a five year forecast period with a terminal growth rate at the end of year ten discounted to present value using a pre-tax discount rate of 13.25% (2023: 13%), calculated using weighted average cost of capital. A terminal growth rate of 3% (2023: 3%) is applied. Further, revenue and EBITDA five-year compound annual growth rate (CAGR) of year is estimated at 13% and 18%, respectively (2023: 11% and 14%). These estimates were made based on the past experience and adjusted with the recent business strategy and plan. Based on the above methodology and assumptions stated above, the carrying value amount of the Workforce Solution CGU as at balance date does not exceed its recoverable amount. Thus, no impairment existed at 30 June 2024. Impairment testing results No impairment existed at 30 June 2024. Based on the valuation methodology and assumptions stated above, the carrying amount of each group of CGUs at balance date does not exceed its recoverable amount. The Group has conducted sensitivity analysis in relation to the above CGUs which indicated that no reasonable possible change in key assumptions would result in impairment loss. Note 14. Non-current assets - right-of-use assets Consolidated 2024 2023 $'000 $'000 Right-of-use assets - at cost 9,842 8,611 Less: Accumulated depreciation (5,252) (3,828) 4,590 4,783 The Group leases land and buildings for its offices under agreements of 5 to 7 years (2023: 4 to 5 years). At the inception of a lease, management determines the non-cancellable period of a lease, including options to extend the lease if it is reasonably certain to exercise that option. Reconciliations Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below: Right-of-use assets Consolidated $'000 Balance at 1 July 2022 3,149 Additions 1,438 Additions through business combinations (note 36) 1,720 Depreciation expense (1,524) Balance at 30 June 2023 4,783 Additions 1,402 Exchange differences (1) Depreciation expense (1,594) Balance at 30 June 2024 4,590 ReadyTech Holdings Limited Notes to the consolidated financial statements 30 June 2024 Note 14. Non-current assets - right-of-use assets (continued) For other lease related disclosures refer to the following, refer: ● note 6 for details of interest on lease liabilities and other lease expenses; ● note 18 and note 23 for details of lease liabilities at the beginning and end of the reporting period; and ● consolidated statement of cash flows for repayment of lease liabilities. For impairment testing, the right-of-use assets have been allocated to all cash-generating units. Refer to note 13 for further information on the impairment testing key assumptions and sensitivity analysis. Note 15. Non-current assets - contract costs Consolidated 2024 2023 $'000 $'000 Costs to obtain contracts 679 518 Contract fulfilment costs 1,118 1,507 1,797 2,025 Certain commission costs that meet the criteria as costs to obtain contracts are capitalised. Contract fulfilment costs represent costs incurred by the Group that are related to future performance or delivery of services. These costs are capitalised and amortised over the contract terms. Note 16. Current liabilities - trade and other payables Consolidated 2024 2023 $'000 $'000 Trade payables 2,540 3,560 Accrued expenses 4,594 4,811 GST payable 4,802 3,396 11,936 11,767 Trade payables are non-interest bearing and are on 30 day credit term. Refer to note 27 for further information on financial instruments. Note 17. Current liabilities - contract liabilities Consolidated 2024 2023 $'000 $'000 Contract liabilities 23,635 19,527 Note 18. Current liabilities - lease liabilities Consolidated 2024 2023 $'000 $'000 Lease liability 1,509 1,229 Refer to note 27 for maturity analysis of lease liabilities. 56 57 ReadyTech Annual Report 2023 ReadyTech Holdings Limited Notes to the consolidated financial statements 30 June 2024 Note 19. Current liabilities - contingent consideration Consolidated 2024 2023 $'000 $'000 Contingent consideration 17,408 10,181 During the period, a number of contingent considerations were settled. The final balance of $770,000 was paid by cash to the vendor of PhoenixATS Australia Pty Ltd. In relation to the acquisition of Open Windows Software Pty Ltd, a combination of $1,668,000 by cash and $2,502,000 by shares were paid to the respective vendors. With IT Vision acquisition, a combination of $2,825,000 by cash and $13,152,000 by shares were paid to the respective vendors. Subsequent to 30 June 2024, a balance of $8,255,000 was paid by cash to IT Vision vendors. Refer to note 22 for non-current portion of contingent consideration. Refer to note 24 for further details of the shares issued. Refer to note 28 for further details on fair value measurement of the contingent consideration. Note 20. Non-current liabilities - contract liabilities Consolidated 2024 2023 $'000 $'000 Contract liabilities 722 888 Note 21. Non-current liabilities - borrowings Consolidated 2024 2023 $'000 $'000 Borrowings 42,000 47,000 Less: establishment fees (103) (51) 41,897 46,949 Refer to note 27 for further information on financial instruments. Total secured liabilities The total secured liabilities (current and non-current) are as follows: Consolidated 2024 2023 $'000 $'000 Borrowings 42,000 47,000 Assets pledged as security Borrowings are secured over the assets of the Group. ReadyTech Holdings Limited Notes to the consolidated financial statements 30 June 2024 Note 21. Non-current liabilities - borrowings (continued) Financing arrangements Unrestricted access was available at the reporting date to the following lines of credit: Consolidated 2024 2023 $'000 $'000 Total facilities Borrowings (Facility A and A1) 35,000 35,000 Borrowings (Facility B) 15,000 15,000 50,000 50,000 Used at the reporting date Borrowings (Facility A and A1) 35,000 35,000 Borrowings (Facility B) 7,000 12,000 42,000 47,000 Unused at the reporting date Borrowings (Facility A and A1) - - Borrowings (Facility B) 8,000 3,000 8,000 3,000 The Group has established two facilities, Facility A and Facility B: ● Facility A and A1 - $35,000,000 (2023: $35,000,000) as a non-revolving cash advance loan term expiring on 30 June 2026 with an interest rate set at BBSY plus a margin of 2.05-2.75% (2023: 2.05-2.75%) depending on the Net Leverage Ratio of the Group. As at 30 June 2024, $35,000,000 (2023: $35,000,000) of the total facility has been drawn down. ● Facility B - $15,000,000 (2023: $15,000,000) as a revolving cash advance facility expiring on 30 June 2026 with an interest rate set at BBSY plus a margin of 2.05-2.75% (2023: 2.05-2.75%) depending on the Net Leverage Ratio of the Group. As at 30 June 2024, $7,000,000 (2023: $12,000,000) of the total facility has been drawn down. In addition, the Group has a bank guarantee facility of $1,328,000 (2023: $1,328,000) (refer to note 31). Note 22. Non-current liabilities - Contingent consideration Consolidated 2024 2023 $'000 $'000 Contingent consideration 360 25,911 The amount as at 30 June 2024 represents contingent consideration that is not expected to be settled within 12 months. Refer to note 28 for further details on fair value measurement of the contingent consideration. Note 23. Non-current liabilities - lease liabilities Consolidated 2024 2023 $'000 $'000 Lease liability 3,656 3,932 Refer to note 27 for further information on financial instruments. 58 59 ReadyTech Annual Report 2023 ReadyTech Holdings Limited Notes to the consolidated financial statements 30 June 2024 Note 23. Non-current liabilities - lease liabilities (continued) Consolidated 2024 2023 $'000 $'000 Current (note 18) 1,509 1,229 Non-current 3,656 3,932 5,165 5,161 Reconciliation Reconciliation of lease liabilities (current and non-current) at the beginning and end of financial year are set out below: Consolidated 2024 2023 $'000 $'000 Balance at start of the year 5,161 3,390 Additions 1,402 1,438 Additions through business combinations (note 36) - 1,720 Interest 272 226 Repayment of lease liabilities (1,670) (1,613) Balance at end of the year 5,165 5,161 Note 24. Equity - issued capital Consolidated 2024 2023 2024 2023 Shares Shares $'000 $'000 Ordinary shares - fully paid 119,835,909 114,321,851 211,831 194,292 Movements in ordinary share capital Details Date Shares Issue price $'000 Balance 1 July 2022 106,977,894 171,916 Shares issued on acquisition of IT Vision 25 July 2022 3,960,792 $3.05 12,080 Shares issued to Pentagon HoldCo Pty Ltd 17 August 2022 2,905,537 $3.20 9,298 Shares issued under long term incentive plan 17 August 2022 351,462 $1.79 629 Shares issued under employee share gift 14 October 2022 126,166 $2.92 369 Balance 30 June 2023 114,321,851 194,292 Shares issued to Open Windows Pty Ltd on earn-out targets 18 July 2023 829,412 $3.21 2,665 Shares issued to IT Vision on earn-out targets 19 July 2023 994,471 $3.33 3,312 Shares issued under long term incentive plan 12 September 2023 629,118 $2.45 1,538 Employee share gift 26 October 2023 63,240 $3.59 227 Shares issued to IT Vision on earn-out targets 27 March 2024 2,098,383 $3.28 6,883 Shares issued to IT Vision on earn-out targets 27 June 2024 899,434 $3.24 2,914 Balance 30 June 2024 119,835,909 211,831 ReadyTech Holdings Limited Notes to the consolidated financial statements 30 June 2024 Note 24. Equity - issued capital (continued) Ordinary shares Ordinary shares entitle the holder to participate in any dividends declared and any proceeds attributable to shareholders should the Company be wound up in proportions that consider both the number of shares held and the extent to which those shares are paid up. The fully paid ordinary shares have no par value and the Company does not have a limited amount of authorised capital. On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote. Share buy-back There is no current on-market share buy-back. Capital risk management The Group's objectives when managing capital is to safeguard its ability to continue as a going concern, so that it can provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital structure to reduce the cost of capital. Capital is regarded as total equity, as recognised in the statement of financial position, plus net debt. Net debt is calculated as total borrowings less cash and cash equivalents. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. The Group would look to raise capital when an opportunity to invest in a business or company was seen as value adding relative to the current Company's share price at the time of the investment. The Group is not actively pursuing additional investments in the short term as it continues to integrate and grow its existing businesses in order to maximise synergies. The Group is subject to certain financing arrangements covenants and meeting these is given priority in all capital risk management decisions. There have been no events of default on the financing arrangements during the financial year. Note 25. Equity - reserves Consolidated 2024 2023 $'000 $'000 Foreign currency reserve (131) (54) Share-based payments reserve 4,711 4,680 Common control reserve (10,058) (10,058) Reorganisation reserve (73,048) (73,048) (78,526) (78,480) Foreign currency reserve The reserve is used to recognise exchange differences arising from the translation of the financial statements of foreign operations to Australian dollars. It is also used to recognise gains and losses on hedges of the net investments in foreign operations. Share-based payments reserve The reserve is used to recognise the value of equity benefits provided to employees and Directors as part of their remuneration, and other parties as part of their compensation for services. Common control reserve Common control reserve is used to recognise the difference between the consideration paid and the historical values of assets and liabilities acquired, between entities under common control. 60 61 ReadyTech Annual Report 2023 ReadyTech Holdings Limited Notes to the consolidated financial statements 30 June 2024 Note 25. Equity - reserves (continued) Reorganisation reserve Reorganisation reserve is used to recognise the difference between the consideration paid and the historical values of assets and liabilities acquired, between ReadyTech Holdings Limited and the subsidiaries it acquired. Movements in reserves Movements in each class of reserve during the current and previous financial year are set out below: Foreign currency Share-based payments Common control Reorgan- isation Total Consolidated $'000 $'000 $'000 $'000 $'000 Balance at 1 July 2022 (191) 2,089 (10,058) (73,048) (81,208) Foreign currency translation 137 - - - 137 Share-based payments - 3,220 - - 3,220 Exercise of performance rights (note 39) - (629) - - (629) Balance at 30 June 2023 (54) 4,680 (10,058) (73,048) (78,480) Foreign currency translation (77) - - - (77) Share-based payments - 2,333 - - 2,333 Exercise of performance rights (note 39) - (1,538) - - (1,538) Issuance of shares to Open Windows Pty Ltd on earn-out targets (note 19) - (764) - - (764) Balance at 30 June 2024 (131) 4,711 (10,058) (73,048) (78,526) Note 26. Equity - dividends There were no dividends paid, recommended or declared during the current financial year or previous financial period. Note 27. Financial instruments Financial risk management objectives The Group's activities expose it to a variety of financial risks: market risk (including foreign currency risk, price risk and interest rate risk), credit risk and liquidity risk. The Group's overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group. The Group may use derivative financial instruments such as forward foreign exchange contracts to hedge certain risk exposures. The Group uses different methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate, foreign exchange and other price risks and ageing analysis for credit risk. Risk management is carried out by senior finance executives ('finance') under policies approved by the Board of Directors ('the Board'). These policies include identification and analysis of the risk exposure of the Group and appropriate procedures, controls and risk limits. Finance identifies, evaluates and hedges financial risks within the Group's operating units. Finance reports to the Board on a monthly basis. Market risk Foreign currency risk The Group undertakes certain transactions denominated in foreign currency and is exposed to foreign currency risk through foreign exchange rate fluctuations. Foreign exchange risk arises from future commercial transactions and recognised financial assets and financial liabilities denominated in a currency that is not the entity's functional currency. The risk is measured using sensitivity analysis and cash flow forecasting. The Group's foreign exchange risk is managed to ensure sufficient funds are available to meet foreign denominated financial commitments in a timely and cost-effective manner. The Group will continually monitor this risk and consider entering into forward foreign exchange, foreign currency swap and foreign currency option contracts if appropriate. ReadyTech Holdings Limited Notes to the consolidated financial statements 30 June 2024 Note 27. Financial instruments (continued) Creditors and debtors as at 30 June 2024 and 30 June 2023 were reviewed to assess currency risk at year end. The value of transactions denominated in a currency other than the functional currency of the respective subsidiary was insignificant and therefore the risk was determined as not being significant. Price risk The Group is not exposed to any significant price risk. Interest rate risk The Group's main interest rate risk arises from long-term borrowings. Borrowings obtained at variable rates expose the Group to interest rate risk. As at the reporting date, the Group had the following variable rate borrowings outstanding: 2024 2023 Weighted average interest rate Balance Weighted average interest rate Balance Consolidated % $'000 % $'000 Borrowings 6.46% 42,000 4.78% 47,000 Net exposure to cash flow interest rate risk 42,000 47,000 An analysis by remaining contractual maturities in shown in 'liquidity and interest rate risk management' below. For the Group the borrowings outstanding totalling $42,000,000 (2023: $47,000,000), are principal and interest payment loans. An increase/decrease in interest rates of 100 (2023: 100) basis points would have an adverse/favourable effect on loss before tax of $330,000 (2023: $500,000) per annum. The percentage change is based on the expected volatility of interest rates using market data and analysts forecasts. Credit risk Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group has a strict code of credit, including obtaining agency credit information, confirming references and setting appropriate credit limits. The Group obtains guarantees where appropriate to mitigate credit risk. The maximum exposure to credit risk at the reporting date to recognised financial assets is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the statement of financial position and notes to the financial statements. The Group does not hold any collateral. The Group has adopted a lifetime expected loss allowance in estimating expected credit losses to trade receivables through the use of a provisions matrix using fixed rates of credit loss provisioning. These provisions are considered representative across all customers of the Group based on recent sales experience, historical collection rates and forward-looking information that is available. Generally, trade receivables are written off when there is no reasonable expectation of recovery. Indicators of this include the failure of a debtor to engage in a repayment plan, no active enforcement activity and a failure to make contractual payments for a period greater than 1 year. Liquidity risk Vigilant liquidity risk management requires the Group to maintain sufficient liquid assets (mainly cash and cash equivalents) and available borrowing facilities to be able to pay debts as and when they become due and payable. The Group manages liquidity risk by maintaining adequate cash reserves and available borrowing facilities by continuously monitoring actual and forecast cash flows and matching the maturity profiles of financial assets and liabilities. 62 63 ReadyTech Annual Report 2023 ReadyTech Holdings Limited Notes to the consolidated financial statements 30 June 2024 Note 27. Financial instruments (continued) Remaining contractual maturities The following tables detail the Group's remaining contractual maturity for its financial instrument liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the financial liabilities are required to be paid. The tables include both interest and principal cash flows disclosed as remaining contractual maturities and therefore these totals may differ from their carrying amount in the statement of financial position. Weighted average interest rate 1 year or less Between 1 and 2 years Between 2 and 5 years Over 5 years Remaining contractual maturities Consolidated - 2024 % $'000 $'000 $'000 $'000 $'000 Non-derivatives Non-interest bearing Trade payables - 2,540 - - - 2,540 Other payables - 4,802 - - - 4,802 Contingent consideration - 17,408 360 - - 17,768 Interest-bearing - variable Bank loans 6.46% - 42,000 - - 42,000 Lease liability 4.60% 1,631 1,459 2,416 262 5,768 Total non-derivatives 26,381 43,819 2,416 262 72,878 Weighted average interest rate 1 year or less Between 1 and 2 years Between 2 and 5 years Over 5 years Remaining contractual maturities Consolidated - 2023 % $'000 $'000 $'000 $'000 $'000 Non-derivatives Non-interest bearing Trade payables - 3,560 - - - 3,560 Other payables - 3,396 - - - 3,396 Contingent consideration - 10,181 25,911 - - 36,092 Interest-bearing - variable Bank loans 4.78% - - 47,000 - 47,000 Lease liability 4.81% 1,270 1,192 2,747 - 5,209 Total non-derivatives 18,407 27,103 49,747 - 95,257 Derivatives Interest rate swaps receivable - 76 - - - 76 Total derivatives 76 - - - 76 The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually disclosed above. Fair value of financial instruments Unless otherwise stated, the carrying amounts of financial instruments reflect their fair value. ReadyTech Holdings Limited Notes to the consolidated financial statements 30 June 2024 Note 28. Fair value measurement Fair value hierarchy The following tables detail the Group's assets and liabilities, measured or disclosed at fair value, using a three level hierarchy, based on the lowest level of input that is significant to the entire fair value measurement, being: Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly Level 3: Unobservable inputs for the asset or liability Level 1 Level 2 Level 3 Total Consolidated - 2024 $'000 $'000 $'000 $'000 Liabilities Contingent consideration - 17,768 - 17,768 Total liabilities - 17,768 - 17,768 Level 1 Level 2 Level 3 Total Consolidated - 2023 $'000 $'000 $'000 $'000 Assets Interest rate swap - 76 - 76 Total assets - 76 - 76 Liabilities Contingent consideration - 36,092 - 36,092 Total liabilities - 36,092 - 36,092 There were no transfers between levels during the financial year. The carrying amounts of trade and other receivables and trade and other payables are assumed to approximate their fair values due to their short-term nature. The fair value of financial liabilities is estimated by discounting the remaining contractual maturities at the current market interest rate that is available for similar financial liabilities. Valuation techniques for fair value measurements categorised within level 2 and level 3 Contingent consideration has been valued using a combination of discounted cash flow and Black Scholes models. Refer to note 19 and note 22 for further details of the contingent consideration. Interest rate swap has been valued using the present value of the estimated future cash flows based on observable yield curves. 64 65 ReadyTech Annual Report 2023 ReadyTech Holdings Limited Notes to the consolidated financial statements 30 June 2024 Note 29. Remuneration of auditors During the financial year the following fees were paid or payable for services provided by Deloitte Touche Tohmatsu, the auditor of the Company: Consolidated 2024 2023 $ $ Deloitte and related network firms Audit or review of the financial statements 425,700 425,000 Other services Tax compliance 22,000 32,000 Research and development tax services 90,000 80,000 Other services - 18,540 112,000 130,540 537,700 555,540 Note 30. Key management personnel disclosures Compensation The aggregate compensation made to Directors and other members of key management personnel of the Group is set out below: Consolidated 2024 2023 $ $ Short-term employee benefits 1,218,496 1,292,200 Post-employment benefits 54,798 50,584 Long-term employment benefits 44,212 24,477 Share-based payments 295,094 769,026 1,612,600 2,136,287 Note 31. Contingent liabilities The Group has given bank guarantees as at 30 June 2024 of $1,328,000 (2023: $1,328,000). The bank guarantees are for various office leases. No cash outflows are expected from the bank guarantees given by the Group. Note 32. Commitments The Group had no commitments as at 30 June 2024 and 30 June 2023. Note 33. Related party transactions Parent entity ReadyTech Holdings Limited is the parent entity. Subsidiaries Interests in subsidiaries are set out in note 35. Key management personnel Disclosures relating to key management personnel are set out in note 30 and the remuneration report included in the Directors' report. ReadyTech Holdings Limited Notes to the consolidated financial statements 30 June 2024 Note 33. Related party transactions (continued) Transactions with related parties Pentagon Holdco Pty Ltd and its controlled entities was majority owned by Pemba Capital, a related party, prior to its acquisition by the Group. The impact of the acquisition is presented in the Business Combinations note (note 36). The following transactions occurred with related parties: Consolidated 2024 2023 $ $ Other transactions: Shares issued to related party on earn-out tranche 2 of Pentagon HoldCo Pty Ltd acquisition - 9,297,718 Receivable from and payable to related parties There were no trade receivables from or trade payables to related parties at the current and previous reporting date. Loans to/from related parties There were no loans to or from related parties at the current and previous reporting date. Terms and conditions All transactions were made on normal commercial terms and conditions and at market rates. Note 34. Parent entity information Set out below is the supplementary information about the parent entity. Statement of profit or loss and other comprehensive income Parent 2024 2023 $'000 $'000 Loss after income tax (59) (337) Total comprehensive income (59) (337) Statement of financial position Parent 2024 2023 $'000 $'000 Total current assets 810 2,150 Total assets 124,117 106,607 Total current liabilities - - Total liabilities - - Equity Issued capital 212,458 194,919 Share-based payments reserve 4,549 4,519 Reorganisation reserve (89,471) (89,471) Accumulated losses (3,419) (3,360) Total equity 124,117 106,607 66 67 ReadyTech Annual Report 2023 ReadyTech Holdings Limited Notes to the consolidated financial statements 30 June 2024 Note 34. Parent entity information (continued) Guarantees entered into by the parent entity in relation to the debts of its subsidiaries The parent entity had no guarantees in relation to the debts of its subsidiaries as at 30 June 2024 and 30 June 2023. Contingent liabilities The parent entity had no contingent liabilities as at 30 June 2024 and 30 June 2023. Capital commitments - Property, plant and equipment The parent entity had no capital commitments for property, plant and equipment as at 30 June 2024 and 30 June 2023. Material accounting policy information The accounting policies of the parent entity are consistent with those of the Group, as disclosed in note 2, except for the following: ● Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity. ● Dividends received from subsidiaries are recognised as other income by the parent entity and its receipt may be an indicator of an impairment of the investment. Note 35. Interests in subsidiaries The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy described in note 2: Ownership interest Principal place of business / 2024 2023 Name Country of incorporation % % ReadyTech HoldCo Pty Ltd Australia 100% 100% ReadyTech Pty Ltd Australia 100% 100% ReadyTech EWP Pty Ltd Australia 100% 100% Esher House Pty Ltd Australia 100% 100% VETtrak Pty Ltd Australia 100% 100% Lirac HoldCo Pty Ltd Australia 100% 100% Lirac BidCo Pty Ltd Australia 100% 100% Ready Pay Services Pty Ltd Australia 100% 100% Readytech Workforce Solutions Pty Ltd Australia 100% 100% eLearning Australia Pty Ltd Australia 100% 100% WageLink Australia Pty Ltd Australia 100% 100% ReadyTech Limited New Zealand 100% 100% Escrow Software International Limited New Zealand 100% 100% Zambion Pty Ltd Australia 100% 100% Pentagon HoldCo Pty Ltd Australia 100% 100% Pentagon BidCo Pty Ltd Australia 100% 100% Open Office Holdings Pty Ltd Australia 100% 100% McGirr Holdings Pty Ltd Australia 100% 100% McGirr Information Technology Pty Ltd Australia 100% 100% McGirr Technologies, Inc. USA 100% 100% McGirr Information Technology UK Limited UK 100% 100% Open Windows Software Pty Ltd Australia 100% 100% Avaxa Pty Ltd Australia 100% 100% Capital Software Limited New Zealand 100% 100% PhoenixATS Australia Pty Ltd Australia 100% 100% IT Vision Australia Pty Ltd as trustee for the IT Vision Unit Trust Australia 100% 100% IT Vision Software Pty Ltd Australia 100% 100% IT Vision Unit Trust Australia 100% 100% Ready Payroll Pty Ltd* Australia 100% - * Ready Payroll Pty Ltd was acquired in April 2024. ReadyTech Holdings Limited Notes to the consolidated financial statements 30 June 2024 Note 36. Business combinations Acquisitions during the year ended 30 June 2023 Acquisition of IT Vision Software Pty Ltd and its controlled entities (IT Vision) On 25 July 2022, the Group acquired 100% of the ordinary shares of IT Vision, for the total consideration transferred of $53,102,000. IT Vision develops and implements ERP technology software in local government segment. With this acquisition, the Group expects to broaden its market presence as the local government software services provider. This acquisition is to bolster ReadyTech’s government and justice segment with a broad geographic footprint across all Australian states and territories, ultimately strengthening ReadyTech’s position as a leading local government software provider. The values identified in relation to the acquisition of IT Vision were final as at 30 June 2023. The goodwill of $36,447,000 represents future growth. Details of the acquisition are as follows: Fair value $'000 Cash and cash equivalents 3,950 Trade and other receivables, net 7,158 Other current assets 863 Right-of-use assets 1,720 Property, plant and equipment 221 Customer relationships 8,773 Trademarks 1,194 Software 10,800 Trade and other payables (2,909) Contract liabilities (9,469) Deferred tax liability (2,946) Employee benefits (980) Lease liability (1,720) Net assets acquired 16,655 Goodwill 36,447 Acquisition-date fair value of the total consideration transferred 53,102 Representing: Cash paid or payable to vendor 10,374 ReadyTech Holdings Limited shares issued to vendor 12,080 Contingent consideration 30,648 53,102 Acquisition costs expensed to profit or loss 521 Cash used to acquire business, net of cash acquired: Acquisition-date fair value of the total consideration transferred 53,102 Less: cash and cash equivalents (3,950) Less: contingent consideration (30,648) Less: shares issued by Company as part of consideration (12,080) Net cash used 6,424 As part of the acquisition of IT Vision, an amount of contingent consideration has been agreed. The contingent consideration is payable depending on total revenue, recurring revenue and EBITDA targets. 68 69 ReadyTech Annual Report 2023 ReadyTech Holdings Limited Notes to the consolidated financial statements 30 June 2024 Note 36. Business combinations (continued) The amount of contingent consideration recognised represents the fair value as at the date of acquisition if the relevant targets are met. If these targets are not met, then no amount is payable (refer to note 19). Note 37. Deed of cross guarantee The following entities are party to a deed of cross guarantee under which each Company guarantees the debts of the others: ReadyTech HoldCo Pty Ltd ReadyTech Pty Ltd (previously ReadyTech BidCo Pty Ltd) ReadyTech EWP (previously JobReady Tech Pty Ltd) Esher House Pty Ltd VETtrak Pty Ltd Lirac HoldCo Pty Ltd Lirac BidCo Pty Ltd Ready Pay Services Pty Ltd (previously Australian Payroll Professionals Holdings Pty Ltd) Readytech Workforce Solutions Pty Ltd (previously HR3 Pty Ltd) eLearning Australia Pty Ltd WageLink Australia Pty Ltd Zambion Pty Ltd Pentagon HoldCo Pty Ltd Pentagon BidCo Pty Ltd Open Office Holdings Pty Ltd McGirr Holdings Pty Ltd McGirr Information Technology Pty Ltd Open Windows Software Pty Ltd Avaxa Pty Ltd PhoenixATS Pty Ltd IT Vision Australia Pty Ltd as trustee for the IT Vision Unit Trust IT Vision Software Pty Ltd IT Vision Unit Trust Ready Payroll Pty Ltd (acquired in April 2024) By entering into the deed, the wholly-owned entities have been relieved from the requirement to prepare financial statements and Directors' report under Corporations Instrument 2016/785 issued by the Australian Securities and Investments Commission. The above companies represent a 'Closed Group' for the purposes of the Corporations Instrument, and as there are no other parties to the deed of cross guarantee that are controlled by ReadyTech Holdings Limited, they also represent the 'Extended Closed Group'. ReadyTech Holdings Limited Notes to the consolidated financial statements 30 June 2024 Note 37. Deed of cross guarantee (continued) Set out below is a consolidated statement of profit or loss and other comprehensive income and statement of financial position of the 'Closed Group'. 2024 2023 Statement of profit or loss and other comprehensive income $'000 $'000 Revenue 107,480 97,746 Revaluation of contingent consideration (615) - Hosting and other direct costs (7,979) (5,683) Employee benefits expense (58,921) (58,341) Third party SaaS variable costs (2,028) (965) Depreciation and amortisation expense (21,629) (16,314) Impairment of assets - - Advertising and marketing expenses (1,246) (1,048) Consultancy and professional expenses (2,060) (2,849) Administration expenses (903) (944) Communication and IT expenses (2,296) (1,950) Occupancy costs (784) (695) Other expenses (1,222) (1,207) Finance costs (3,300) (2,544) Profit before income tax expense 4,497 5,206 Income tax expense (127) (1,273) Profit after income tax expense 4,370 3,933 Other comprehensive income Foreign currency translation - - Other comprehensive income for the year, net of tax - - Total comprehensive income for the year 4,370 3,933 2024 2023 Equity - retained profits $'000 $'000 Retained profits at the beginning of the financial year 9,716 5,783 Profit after income tax expense 4,370 3,933 Retained profits at the end of the financial year 14,086 9,716 70 71 ReadyTech Annual Report 2023 ReadyTech Holdings Limited Notes to the consolidated financial statements 30 June 2024 Note 37. Deed of cross guarantee (continued) 2024 2023 Statement of financial position $'000 $'000 Current assets Cash and cash equivalents 20,582 19,941 Trade and other receivables 11,536 9,589 Contract assets 2,483 1,353 Derivative financial assets - 76 Income tax refund receivable 1,840 1,815 Prepayments 2,224 2,876 38,665 35,650 Non-current assets Investments 12,804 13,583 Property, plant and equipment 1,906 2,151 Intangibles 200,822 202,609 Right-of-use assets 4,481 4,615 Contract costs 1,712 2,025 Deferred tax assets 1,573 - 223,298 224,983 Total assets 261,963 260,633 Current liabilities Trade and other payables 13,954 14,049 Contract liabilities 23,827 19,344 Lease liabilities 1,443 1,167 Employee benefits 6,935 7,100 Contingent consideration 17,408 10,181 63,567 51,841 Non-current liabilities Contract liabilities 706 872 Borrowings 41,897 46,949 Provisions 548 307 Lease liabilities 3,598 3,808 Deferred tax liabilities - 1,706 Employee benefits 494 375 Contingent consideration 360 25,911 47,603 79,928 Total liabilities 111,170 131,769 Net assets 150,793 128,864 Equity Issued capital 215,097 197,558 Reserves (78,390) (78,410) Retained profits 14,086 9,716 Total equity 150,793 128,864 ReadyTech Holdings Limited Notes to the consolidated financial statements 30 June 2024 Note 38. Reconciliation of profit after income tax to net cash from operating activities Consolidated 2024 2023 $'000 $'000 Profit after income tax expense for the year 5,464 4,975 Adjustments for: Depreciation and amortisation 22,859 17,272 Revaluation of contingent consideration 615 - Share-based payments 2,333 3,220 Foreign exchange differences 41 (178) Contingent consideration treated as remuneration expense 858 1,442 Other expenses - non-cash 444 730 Change in operating assets and liabilities: (Increase)/decrease in trade and other receivables (2,111) 7,996 (Increase)/decrease in deferred tax assets (4,039) 4,825 Decrease/(increase) in prepayments 725 (752) Increase in other operating assets (819) (93) Increase in trade and other payables 126 2,063 Increase/(decrease) in contract liabilities 3,942 (8,395) Increase/(decrease) in provision for income tax 1,264 (5,377) (Decrease)/increase in employee benefits (108) 78 Net cash from operating activities 31,594 27,806 Note 39. Share-based payments FY2022 Plan The LTI performance rights are subject to an EPS hurdle (50% of grant value) and a recurring revenue hurdle (50% of grant value). These LTI performance rights will be evaluated in two tranches. The first of which, equivalent to 50% of the total grant value, will be evaluated two years from the beginning of the performance period. The second or which, equivalent to 50% of the total grant value, will be evaluated three years from the beginning of the period. If the compound annual growth rate of EPS is less than the target of 13%, no vesting will occur. If the target is met, 50% of rights will vest. In the event that performance is up to 4% above the target, vesting will be pro-rated between 50-100%. If the compound annual growth rate of recurring revenue is less than the target of 13%, no vesting will occur. If the target is met, 50% of rights will vest. In the event that performance is up to 4% above the target, vesting will be pro-rated between 50- 100%. FY2023 Plan The LTI performance rights are subject to an EPS hurdle (50% of grant value) and a recurring revenue hurdle (50% of grant value). These LTI performance rights will be evaluated in two tranches. The first of which, equivalent to 50% of the total grant value, will be evaluated two years from the beginning of the performance period. The second or which, equivalent to 50% of the total grant value, will be evaluated three years from the beginning of the period. If the compound annual growth rate of EPS is less than the target of 13%, no vesting will occur. If the target is met, 50% of rights will vest. In the event that performance is up to 4% above the target, vesting will be pro-rated between 50-100%. If the compound annual growth rate of recurring revenue is less than the target of 13%, no vesting will occur. If the target is met, 50% of rights will vest. In the event that performance is up to 4% above the target, vesting will be pro-rated between 50- 100%. 72 73 ReadyTech Annual Report 2023 ReadyTech Holdings Limited Notes to the consolidated financial statements 30 June 2024 Note 39. Share-based payments (continued) FY2024 Plan The LTI performance rights are subject to an EPS hurdle (50% of grant value) and a recurring revenue hurdle (50% of grant value). These LTI performance rights will be evaluated three years from the beginning of the performance period. If the compound annual growth rate of EPS is less than the target of 13%, no vesting will occur. if the target is met, 50% of rights will vest. In the event that performance is up to 4% above the target, vesting will be pro-rated between 50-100%. If the compound annual growth rate of recurring revenue is less than the target of 13%, no vesting will occur. If the target is met, 50% of rights will vest. In the event that performance is up to 4% above the target, vesting will be pro-rated between 50- 100%. Set out below are summaries of performance rights granted under the plan: 2024 Balance at Expired/ Balance at the start of forfeited/ the end of Grant date Expiry date the year Granted Exercised other the year 11/12/2020 30/06/2023 351,460 - (351,460) - - 13/09/2021 30/06/2023 217,394 - (217,394) - - 13/09/2021 30/06/2024 217,390 - - - 217,390 17/11/2021 30/06/2023 60,264 - (60,264) - - 17/11/2021 30/06/2024 60,264 - - - 60,264 11/10/2022 30/06/2024 244,319 - - (35,536) 208,783 11/10/2022 30/06/2025 244,309 - - (35,534) 208,775 15/11/2022 30/06/2024 47,380 - - - 47,380 15/11/2022 30/06/2025 47,380 - - - 47,380 22/09/2023 30/06/2026 - 808,403 - (78,857) 729,546 05/12/2023 30/06/2026 - 100,334 - - 100,334 1,490,160 908,737 (629,118) (149,927) 1,619,852 2023 Balance at Expired/ Balance at the start of forfeited/ the end of Grant date Expiry date the year Granted Exercised other the year 11/12/2020 30/06/2022 351,462 - (351,462) - - 11/12/2020 30/06/2023 351,460 - - - 351,460 13/09/2021 30/06/2023 217,394 - - - 217,394 13/09/2021 30/06/2024 217,390 - - - 217,390 17/11/2021 30/06/2023 60,264 - - - 60,264 17/11/2021 30/06/2024 60,264 - - - 60,264 11/10/2022 30/06/2024 - 244,319 - - 244,319 11/10/2022 30/06/2025 - 244,309 - - 244,309 15/11/2022 30/06/2024 - 47,380 - - 47,380 15/11/2022 30/06/2025 - 47,380 - - 47,380 1,258,234 583,388 (351,462) - 1,490,160 The weighted average share price during the financial year was $3.40 (2023: $3.30). The weighted average remaining contractual life of performance rights outstanding at the end of the financial year was 1.18 years (2023: 0.78 years). For the performance rights granted during the current financial year, the valuation model inputs used to determine the fair value are using the share price as at 22 September 2023 and 5 December 2023, which were $3.70 and $3.53 respectively. ReadyTech Holdings Limited Notes to the consolidated financial statements 30 June 2024 Note 39. Share-based payments (continued) Set out below are the performance rights exercisable at the end of the financial year: 2024 2023 Grant date Expiry date Number Number 11/12/2020 30/06/2023 - 351,460 17/11/2021 30/06/2024 52,731 - 13/09/2021 30/06/2024 190,217 - 11/10/2022 30/06/2024 104,393 - 15/11/2022 30/06/2024 23,690 - 13/09/2021 30/06/2023 - 217,394 371,031 568,854 Deferred consideration in shares As part of the acquisition of Open Windows Software Pty Ltd, an amount of contingent consideration has been agreed. A portion of the consideration is treated as a remuneration to the ex-founders who continue to work in the business. As per the sale agreement, a maximum of 40% could be settled in cash whilst the remaining is in shares. During the financial year ended 30 June 2024, an amount of $1,338,000 (2023: $1,470,000) which represented an equity settlement, was charged as a share based payment. Note 40. Non-cash investing and financing activities Consolidated 2024 2023 $'000 $'000 Additions to the right-of-use assets, including lease modification 1,402 1,438 Additions to lease make good assets 226 215 Shares issued in relation to exercise of vested performance rights 1,538 629 Shares issued in relation to business combinations - 12,080 Shares issued in relation to settlement of contingent consideration 15,774 9,298 Additional contingent consideration charged as employee expenses 1,338 1,470 20,278 25,130 Note 41. Changes in liabilities arising from financing activities Borrowings Lease liability Total Consolidated $'000 $'000 $'000 Balance at 1 July 2022 34,000 3,390 37,390 Net cash from/(used in) financing activities 13,000 (1,613) 11,387 Acquisition of leases - 1,438 1,438 Changes through business combinations (note 36) - 1,720 1,720 Interest expense - 226 226 Balance at 30 June 2023 47,000 5,161 52,161 Net cash used in financing activities (5,000) (1,670) (6,670) Acquisition of leases - 1,402 1,402 Interest expense - 272 272 Balance at 30 June 2024 42,000 5,165 47,165 74 75 ReadyTech Annual Report 2023 ReadyTech Holdings Limited Notes to the consolidated financial statements 30 June 2024 Note 42. Earnings per share Consolidated 2024 2023 $'000 $'000 Profit after income tax attributable to the owners of ReadyTech Holdings Limited 5,464 4,975 Number Number Weighted average number of ordinary shares used in calculating basic earnings per share 117,165,188 113,605,727 Weighted average number of ordinary shares used in calculating diluted earnings per share 117,165,188 113,605,727 Cents Cents Basic earnings per share 4.66 4.38 Diluted earnings per share 4.66 4.38 1,457,066 unissued ordinary shares under performance rights (2023: 1,490,160) were not included in the calculation of diluted earnings per share as they are contingently issuable and the conditions were not met as at the periods presented. Note 43. Events after the reporting period No other matter or circumstance has arisen since 30 June 2024 that has significantly affected, or may significantly affect the Group's operations, the results of those operations, or the Group's state of affairs in future financial years. ReadyTech Holdings Limited Consolidated entity disclosure statement As at 30 June 2024 Place formed / Ownership interest Entity name Entity type Country of incorporation % Tax residency ReadyTech Holdings Limited Body Corporate Australia Australian ReadyTech HoldCo Pty Ltd Body Corporate Australia 100% Australian ReadyTech Pty Ltd Body Corporate Australia 100% Australian ReadyTech EWP Pty Ltd Body Corporate Australia 100% Australian Esher House Pty Ltd Body Corporate Australia 100% Australian VETtrak Pty Ltd Body Corporate Australia 100% Australian Lirac HoldCo Pty Ltd Body Corporate Australia 100% Australian Lirac BidCo Pty Ltd Body Corporate Australia 100% Australian Ready Pay Services Pty Ltd Body Corporate Australia 100% Australian Readytech Workforce Solutions Pty Ltd Body Corporate Australia 100% Australian eLearning Australia Pty Ltd Body Corporate Australia 100% Australian WageLink Australia Pty Ltd Body Corporate Australia 100% Australian ReadyTech Limited Body Corporate New Zealand 100% New Zealand Escrow Software International Limited Body Corporate New Zealand 100% New Zealand Zambion Pty Ltd Body Corporate Australia 100% Australian Pentagon HoldCo Pty Ltd Body Corporate Australia 100% Australian Pentagon BidCo Pty Ltd Body Corporate Australia 100% Australian Open Office Holdings Pty Ltd Body Corporate Australia 100% Australian McGirr Holdings Pty Ltd Body Corporate Australia 100% Australian McGirr Information Technology Pty Ltd Body Corporate Australia 100% Australian McGirr Technologies, Inc. Body Corporate USA 100% Australian McGirr Information Technology UK Limited Body Corporate UK 100% Australian Open Windows Software Pty Ltd Body Corporate Australia 100% Australian Avaxa Pty Ltd Body Corporate Australia 100% Australian Capital Software Limited Body Corporate New Zealand 100% New Zealand PhoenixATS Australia Pty Ltd Body Corporate Australia 100% Australian IT Vision Software Pty Ltd Body Corporate Australia 100% Australian IT Vision Australia Pty Ltd as trustee for the IT Vision Unit Trust Body Corporate Australia 100% Australian IT Vision Unit Trust Trust Australia 100% Australian Ready Payroll Pty Ltd Body Corporate Australia 100% Australian 76 77 ReadyTech Annual Report 2023 ReadyTech Holdings Limited Directors' declaration 30 June 2024 In the Directors' opinion: ● the attached financial statements and notes comply with the Corporations Act 2001, the Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; ● the attached financial statements and notes comply with International Financial Reporting Standards as issued by the International Accounting Standards Board as described in note 2 to the financial statements; ● the attached financial statements and notes give a true and fair view of the Group's financial position as at 30 June 2024 and of its performance for the financial year ended on that date; ● there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable; ● at the date of this declaration, there are reasonable grounds to believe that the members of the Extended Closed Group will be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the deed of cross guarantee described in note 37 to the financial statements; and ● the information disclosed in the attached consolidated entity disclosure statement is true and correct. The Directors have been given the declarations required by section 295A of the Corporations Act 2001. Signed in accordance with a resolution of Directors made pursuant to section 295(5)(a) of the Corporations Act 2001. On behalf of the Directors ___________________________ Tony Faure Chair 27 August 2024 Sydney Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Asia Pacific Limited and the Deloitte organisation. Deloitte Touche Tohmatsu ABN 74 490 121 060 Quay Quarter Tower 50 Bridge Street Sydney NSW 2000 Australia Phone: +61 2 9322 7000 www.deloitte.com.au Independent Auditor’s Report to the members of ReadyTech Holdings Limited Report on the Audit of the Financial Report Opinion We have audited the financial report of ReadyTech Holdings Limited (the “Company”) and its subsidiaries (the “Group”) which comprises the consolidated statement of financial position as at 30 June 2024, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial statements, including material accounting policy information and other explanatory information, the directors’ declaration and the Consolidated Entity Disclosure Statement. In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including:  Giving a true and fair view of the Group’s financial position as at 30 June 2024 and of their financial performance for the year then ended; and  Complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional & Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report for the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. 78 79 ReadyTech Annual Report 2023 Key Audit Matter How the scope of our audit responded to the Key Audit Matter Capitalisation of software development costs During the year, the Group capitalised internal software development project costs of $17.45 million (total software capitalised during the year $17.03 million including external costs) as disclosed in Note 13. These projects were predominantly in relation to the development of the Group’s key software platforms. The costs mainly comprised of payroll and related costs for software developers and engineers. Significant management judgement is required in respect of the rate of capitalisation of payroll and related costs for software developers and engineers. Our procedures included, but were not limited to:  Through inquiries with management obtaining an understanding of the Group’s capitalisation policy, including the rationale for the percentage of payroll and related costs capitalised for software developers and engineers;  Understanding the relevant controls over the capitalisation of software development costs;  Performing analytical review of capitalised software development as a percentage of payroll costs and year on year movement analysis;  On a sample basis, testing capitalised software development costs during the year through the following: a. Assessing management’s movement schedule of software development costs by agreeing the underlying salaries to the respective payroll records; b. Understanding the significant development projects and activities undertaken during the year; c. Assessing whether eligible employees are included, and ineligible employees are excluded in the calculations, where appropriate; d. Challenging management’s key assumptions on employee level software capitalisation rates; e. Performing direct interviews and confirming with respective software developers and engineers to corroborate the roles and responsibilities, key development projects and software capitalisation rates; f. Tracing to underlying supporting records and other information; g. Assessing whether the costs incurred qualify for capitalisation in accordance with Group’s accounting policy and AASB 138 Intangible Assets. We also assessed the appropriateness of the disclosures in Note 2 and Note 13. Other Information The directors are responsible for the other information. The other information comprises the information included in the Group’s annual report for the year ended 30 June 2024, but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Directors for the Financial Report The directors of the Company are responsible:  For the preparation of the financial report in accordance with the Corporations Act 2001, including giving a true and fair view of the financial position and performance of the Group in accordance with Australian Accounting Standards; and  For such internal control as the directors determine is necessary to enable the preparation of the financial report in accordance with the Corporations Act 2001, including giving a true and fair view of the financial position and performance of the Group, and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Auditor’s Responsibilities for the Audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain professional skepticism throughout the audit. We also:  Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.  Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.  Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. 80 81 ReadyTech Annual Report 2023  Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.  Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation.  Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Group’s audit. We remain solely responsible for our audit opinion. We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied. From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial report of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 10 to 17 of the Directors’ Report for the year ended 30 June 2024. In our opinion, the Remuneration Report of ReadyTech Holdings Limited, for the year ended 30 June 2024, complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. DELOITTE TOUCHE TOHMATSU Sandeep Chadha Partner Chartered Accountants Sydney, 27 August 2024 ReadyTech Holdings Limited Shareholder information 30 June 2024 Voting Rights Ordinary shares: On a show of hands, every member present at a meeting in person or by proxy shall have one vote and upon a poll, each share shall have one vote. Earn Out Share: There are currently 3 Earn Out Shares on issue. As set out in the Notice of Meeting and accompanying documents dated 14 October 2022 (Notice), prior to Redemption (as outlined in the Notice), the holders will not be entitled to vote at any general meeting or class meeting of the Company except where a vote is required by law. Performance Rights: There are currently 1,619,852 Performance Rights on issue. Holders of performance rights have no voting rights. The below information is current as at 22 July 2024 Distribution of equity securities Analysis of number of equity security holders (fully paid ordinary shares) by size of holding: Ordinary shares Range Number % Number % of holders of holders of securities of securities 1 to 1,000 985 42.59 480,927 0.40 1,001 to 5,000 776 33.55 2,008,356 1.68 5,001 to 10,000 243 10.51 1,884,579 1.57 10,001 to 100,000 248 10.72 6,891,380 5.75 100,001 and over 61 2.64 108,570,667 90.60 Total number of security holders 2,313 100.01 119,835,909 100.00 Holders holding less than a marketable parcel of shares 124 5.36 9,128 0.01 The marketable parcel of shares was calculated based on the closing market price on 22 July 2024 of $3.30. Restricted Securities There are currently 2,997,817 restricted securities on issue. The restricted securities will be subject to escrow until the date that is 5 Trading Days after the date on which the half-year reviewed accounts of ReadyTech for the period to 31 December 2024 are released to ASX. On-Market Buy Back There is no current on-market buy back. Unquoted Securities Type of Security Number of holders Number of securities Earn Out Shares 6 3 Performance Rights 26 1,619,852 Earn Out Shares 82 83 ReadyTech Annual Report 2023 ReadyTech Holdings Limited Shareholder information 30 June 2024 Range Number of holders % of holders Number of securities % of securities 1 to 1,000 6 100.00% 3 100.00% 1,001 to 5,000 - - - - 5,001 to 10,000 - - - - 10,001 to 100,000 - - - - 100,001 and over - - - - Total number of security holders 6 3 Performance Rights Range Number of holders % of holders Number of securities % of holders 1 to 1,000 - - - - 1,001 to 5,000 - - - - 5,001 to 10,000 4 15.38 36,630 2.26 10,001 to 100,000 18 69.24 550,062 33.96 100,001 and over 4 15.38 1,033,160 63.78 - - - - Total number of security holders 26 100.00 1,619,852 100.00 Twenty largest quoted equity security holders The names of the twenty largest security holders of quoted equity securities are listed below: Ordinary shares % of total shares Number held issued PEMBA CAPITAL PARTNERS FUND I GP PTY LTD 30,157,762 25.17 J P MORGAN NOMINEES AUSTRALIA PTY LIMITED 23,924,122 19.96 CITICORP NOMINEES PTY LIMITED 13,376,200 11.16 OPEN OFFICE PTY LTD 5,374,721 4.49 PEMBA CAPITAL PARTNERS FUND 1 PARTNERSHIP LP 5,161,468 4.31 MARC RAYMOND WASHBOURNE 2,861,363 2.39 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2 2,632,092 2.20 SYNERGYSOFT PTY LTD 2,170,041 1.81 UBS NOMINEES PTY LTD 1,779,250 1.48 NANAYAKKARA HOLDINGS PTY LTD 1,697,619 1.42 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED 1,509,175 1.26 MICROEQUITIES ASSET MANAGEMENT PTY LTD 1,353,708 1.13 SYNERGYSOFT PTY LTD 1,288,168 1.07 WASHBOURNE GROUP PTY LTD 1,147,051 0.96 SYCAMORE MANAGEMENT PTY LTD 1,051,991 0.88 MALVERN AVENUE MANAGEMENT PTY LTD 942,509 0.79 MARISH PTY LTD 878,646 0.73 PEMBA TRUSCO 1 PTY LTD 841,731 0.70 SYNERGYSOFT PTY LTD 742,027 0.62 ANKSH PTY LTD 554,249 0.46 99,443,893 82.99 ReadyTech Holdings Limited Shareholder information 30 June 2024 Top 20 holders of shares 99,443,893 82.99 Balance of shares 20,392,016 17.02 Total shares on issue 119,835,909 100.01 Substantial Holders Shareholder Date of notice Number of shares % of issued equity(1) Microequities Asset Management Pty Ltd 20 December 2022 17,415,318 15.23% The Pemba Entities(2) 22 December 2021 34,539,611 32.35% (1) Percentage of issued equity held as disclosed in the substantial holding notices provided to the Company. (2) Pemba Capital Partners Fund I Partnership LP, Pemba Capital Partners Pty Limited ACN 121 906 045 as trustee of The Pemba Capital Co-Investment Trust and Pemba Capital Partners Pty Ltd ACN 121 906 045 as trustee of The Lirac Trust (together, the Pemba Entities). 84 85 ReadyTech Annual Report 2023 To learn more, visit readytech.io

Continue reading text version or see original annual report in PDF format above