One Annual Report 2023 | Quarterlytics

Plain-text annual report

Annual Report. 2 0 2 3 UP 23% Annual Recurring Revenue up 23% FY19 $202.5M FY20 $221.9M FY21 $257.5M FY22 $320.7M FY23 $392.9M Annual Recurring Revenue UP 16% Profit before tax up 16% FY19 $76.4M FY20 $82.5M FY21 $97.8M FY22 $112.3M FY23 $129.8M Profit before tax 119% Net Revenue Retention 119% FY19 114% FY20 107% FY21 112% FY22 116% FY23 119% Net Revenue Retention UP 19% SaaS and Continuing Business up 19% FY19 $241.8M FY20 $269.8M FY21 $293.6M FY22 $358.7M FY23 $426.4M Revenue - SaaS and Continuing Business These graphs should be read in conjunction with the Financial highlights table on p.13 2 Making life simple for our community. Gurbindar Singh CHIEF FINANCIAL OFFICER Southern Downs Regional Council 3 Making life simple for our community16 products strategically focused over key industries. Built on a code base that is set up for future innovation & is highly scalable. Integrated GPS, Ai, Camera & Machine Learning functionality. Two major software releases a year. We focus on customer evolution. Best in class, global support providing customers with 24/7 assistance. Highest level security accreditations in the industry. An all-inclusive offering specifically tailored for your industry. 400+ modules with over 10,000 capabilities. Build an app faster without having to code. One simple intuitive UX focused workplace for everything. Simplicity, in the hands of your customers . Explore hours of training to help you every day. We take care of the upgrade so you can focus on the future. 4 TechnologyOne Annual Report 2023What’s inside. 6 8 12 14 24 30 36 42 52 64 68 Our history At a glance Financial highlights Letter to shareholders Our strategy Global SaaS ERP solution Our growth Our operations Our people TechnologyOne Foundation Financial statements 72 84 111 124 125 167 Directors’ report Auditor’s independence declaration Corporate governance statement Voluntary tax transparency report Financial statements Directors’ declaration 168 Auditor’s report 174 175 Shareholder information Corporate directory 5 Making life simple for our community Our history 1987 Adrian Di Marco founded TechnologyOne in a demountable office at a hide processing plant in an industrial suburb of Brisbane. Becoming one of the first tech state ups in Australia. Back then, there was no venture capital or private equity, so one of Adrian’s previous customers, the Mactaggart Family, provided the funding. The idea was to build a new generation of software where the source code did not need to be customized for each customer, which was then the common practice. The software could be configured for each customer and the configuration sat outside the software. Because all customers used 1991 1995 1998 TechnologyOne broke away from the approach taken by TechnologyOne software was global ERP vendors like Oracle voted #1 Software for Financial and SAP of focusing on all Management and Accounting markets, and focused on six by a survey of 3000 CFOs by vertical markets: Education, MIS magazine. TechnologyOne Local Government, Government, repeated this win three years Health & Community Services, in a row. TechnologyOne broke Asset & Project Intensive and away from the industry ‘reseller Corporate & Financial Services. model’ and adopted our unique This allowed us to build deep the same software, we could TechnologyOne released its first Power of One model, taking functionality out of the box then ship new releases every product, called FinanceOne, responsibility to build, market, for these markets, to create year, with new features and using the Oracle relational sell, implement and support its a significant competitive functionality. database technology (RDBMS). software. advantage. 1988 1993 1996 1999 Adrian knew that using TechnologyOne made the With the rise of PCs, TechnologyOne floated on the technology to get a decision to shift away from TechnologyOne became Australian Securities Exchange competitive advantage would Oracle’s RDBMS, to become an early adopter of PCs for (ASX) in 1999. TechnologyOne be the number one factor in database independent. That enterprise systems, rebuilding was one of the first IT companies our success, so he named the same year, TechnologyOne its suite of products in a new to become publicly listed and company TechnologyOne. pivoted from being Best and emerging technology one of the most successful TechnologyOne was one of the earliest developers in the world to use relational database technology. of Breed to become one called client/server. That listings in 1999. of the first ERP vendors. same year, FinanceOne for TechnologyOne’s enterprise Windows was released. vision became a key differentiator, allowing it to deliver a single, integrated enterprise solution, built on a single modern platform, with a consistent look and feel. 6 TechnologyOne Annual Report 20232015 TechnologyOne makes three acquisitions: ICON Software, Digital Mapping Solutions and Jeff Roorda & Associates. The acquisitions broadened 2012 With the emergence the breadth and depth of the cloud, of TechnologyOne’s TechnologyOne became enterprise solutions, an early adopter of adding planning, the cloud for enterprise spatial and strategic software, re-architecting asset management our ERP system. functionality to our suite 2021 2022 TechnologyOne partnered with the University of Lincoln to go live with our state-of-the-art student management Delivering a multi- of products for Local TechnologyOne made system. Making the tenanted global ERP Government and Higher its first international University our first UK SaaS system, providing Education markets. In acquisition, Scientia, as institution using the 2002 TechnologyOne huge economies of scale the same year, Adrian part of our strategic internationally trusted enabling us to take full Di Marco was listed focus to deliver the system and joining over responsibility for our on SmartCompany’s deepest functionality 100 higher education acquired Proclaim customers – building, top 10 most influential for higher education customers utilising Pty Ltd, for its implementing, and people in the Australian becoming the only ERP TechnologyOne products Property & Rating running our software for IT industry, inducted into provider in the world in the UK. Adrian Di product extending them. Our customers can the Pearcey Hall of Fame, to offer this solution to Marco commenced his TechnologyOne’s easily and seamlessly and named as 2015’s the higher education retirement. Handing the Local Government move from on premise to top 10 CEOs by AFR Boss market, as part of a full reigns of Non-Executive enterprise solution. the cloud. magazine. enterprise suite. Chair to Pat O’Sullivan. 2003 2014 2017 With the emergence TechnologyOne SaaS TechnologyOne of the internet, was released. With the launched the TechnologyOne became emergence of mobile TechnologyOne an early adopter, devices, TechnologyOne Foundation, committing rebuilding our entire ERP rebuilt our ERP systems to raise 500,000 system for the internet. to provide any device, children and their TechnologyOne Ci anywhere, and any families out of poverty. (Connected Intelligence) time access. 100% of TechnologyOne is also was released. TechnologyOne ERP committed to the 1% 2006 TechnologyOne functionality is available Pledge – committing across all devices 1% of profit, staff time including mobile phones. and products to its The new product Ci Foundation. Adrian released preconfigured Anywhere was released Di Marco steps down solutions for each of in 2014. In the same as CEO but retains our key vertical markets year, TechnologyOne Executive Chair position dramatically reducing hit $1 billion market and appoints Chief the time, cost, and capitalisation and Executive Officer, risks associated with entered the ASX 200 Edward Chung. implementing its ERP Index. software. 2023 TechnologyOne hosted a series of Showcase events across Australia, New Zealand, and the UK which had 1,633 delegates in attendance. In FY23, TechnologyOne also achieved a milestone and became one of Australia’s top 100 ASX-listed companies and launched their game- changing SaaS Plus strategy which removes the need for traditional, long, complex, risky, and expensive implementations. 7 Making life simple for our communityAt a glance 8 TechnologyOne Annual Report 202310 12 Our finances Financial highlights 9 Making life simple for our communityUP 23% TOTAL ARR $392.9M UP 15% Dividend of 19.52cps $112.0M R&D investment up 21% (25% of revenue) UP 19% $426.4M revenue from SaaS & continuing business Our vision. As the only company offering a true global Software as a Service (SaaS) ERP solution across the entire enterprise, we are making life simple for our community. Our Difference We are the only vendor that develops, sells, implements, supports, and runs a fully integrated suite of enterprise software solutions. Our global SaaS ERP solution spans across the entire enterprise and allows our customers to embrace the digital revolution and an exciting new world of possibilities in a cloud-first, mobile-first world. Our Reach TechnologyOne has a global presence throughout Australia, New Zealand, Asia, and the United Kingdom. Our Culture At TechnologyOne, we believe in a culture of innovation, creativity, and collaboration, and have created an environment that allows our people to thrive. This culture is built into the fabric of our business, driving high performance, and underpinning our success. Our global team is made up of more than 1,200 passionate individuals. We believe in investing in our people, and we do this with a wide range of initiatives such as O Week, One Talks, MARVEL awards, and leadership courses. Compelling Customer Experience We continue to recognize that our customers are our true north for the decisions we make, the people we employ and the processes we create. This is why we continue to invest in our Compelling Customer Experience (CCE) program, which provides our people with ongoing development and support in delivering outstanding customer experiences. The program supports and encourages our team members so that they can deliver outstanding customer service every day. Providing a compelling customer experience is fundamental to the way TechnologyOne does business and positions us well to attract customers away from our competitors. Our Market-Leading Solutions and Products As the leading supplier of enterprise software solutions for more than 1,200 large-scale companies, and with more than 36 years’ success in the business, we have developed a deep understanding of our key markets. We offer our customers a range of industry-leading preconfigured enterprise solutions. Our solutions streamline implementations, reducing time, cost, and risk for customers. We also offer a comprehensive suite of enterprise software products. 10 TechnologyOne Annual Report 2023UP 28% $306.0M Net assets 14 YEARS Continued record profit 30% Profit Before Tax margin UP 16% $129.9M Profit Before Tax UP 54% UK profit $3.7M UP 19% Total revenue $441.4m $500MA R R on track to surpass by 2025 UP 13% $198.3M Cash and cash equivalents Our Markets Our Products Our Research & Development • • • • • • Local Government Education Government Health and Community Services Asset and Project Intensive Corporates and Financial Services Our Preconfigured Solutions • • • • • • OneCouncil OneEducation OneGovernment OneCare OneAsset OneCorporate • • • • • • • • • • • • • • • • Corporate Performance Management Enterprise Content Management Human Resources & Payroll Spatial Supply Chain Management Strategic Asset Management Enterprise Cash Receipting We continue to focus our research and development (R&D) efforts on new and emerging technologies, including cloud-based technologies, artificial intelligence, machine learning, and other innovations. Our Australian-owned commercial R&D centre is the largest of its kind, with offshore facilities in Indonesia and Vietnam. Enterprise Asset Management New Ideas, New Concepts Financials Property & Rating Student Management Business Analytics Enterprise Budgeting Performance Planning Timetabling & Scheduling DXP Local Government We are committed to a continuous cycle of redeveloping our software platform from the ground up. This process leaves no line of code untouched and ensures that we are free to embrace new ideas, concepts, and technologies – rather than needing to retain legacy systems. Over the past 35+ years we have completely redeveloped our software platform four times. 11 Making life simple for our communityFinancial highlights n. noun. /sæs Plus/ Delivering an end to end solution built with the customer in mind so they can focus on the communities they serve (the abbreviation for ‘solution as a service’) With SaaS Plus, TechnologyOne takes full responsibility for the solution experience - reducing risk and saving time and money for our customers. One plan, one price, one point of call. 12 TechnologyOne Annual Report 2023 2023 $’000s 2022 $’000s Growth on last year 15-year compound growth 2021 $’000s 2020 $’000s 2019 $’000s Comparable 2018** $’000s 2017 $’000s 2016 $’000s 2015 $’000s 2014 $’000s 426,379 358,668 19% - 293,553 269,774 241,790 221,046 231,151 192,657 175,279 140,024 Revenue - SaaS and Continuing Business Total revenue 441,363 369,391 19% 10% 312,012 299,018 286,164 254,491 273,253 249,018 218,724 195,124 Annual Recurring revenue (ARR)1 R&D Investment Net Profit Before Tax Net Profit After Tax Earnings Per Share (Cents) Total Dividends (cents per share) Dividend Payout ratio Cash, Cash equivalents and short-term Investments 392,884 320,694 23% - 257,495 221,908 202,480 173,912 153,896 126,996 108,853 - 111,995 92,197 21% 12% 77,005 68,062 60,124 54,042 49,856 46,009 41,038 37,873 129,854 112,320 16% 12% 97,843 82,470 76,389 50,807 58,019 53,240 46,494 40,235 102,876 88,843 16% 13% 72,691 62,945 58,459 47,681 44,494 41,344 35,785 30,967 31.71 27.51 15% 12% 22.64 19.75 18.43 15.10 14.18 13.26 11.57 10.06 19.52 17.02 15% 11% 13.91 12.88 11.93 11.02 10.20 9.45 8.78 8.16 62% 62% - - 62% 65% 65% 73% 72% 72% 76% 81% 223,265 175,865 27% 16% 144,210 125,244 105,046 104,322 93,383 82,588 75,536 80,209 Net Assets 306,006 239,097 28% 13% 190,234 142,168 106,857 103,480 157,520 138,494 117,940 104,499 The table above shows previously reported results to FY17. Results for those years have not been restated for AASB15. *Before capitalisation. **2018 Comparable applies AASB15. It also assumes non-IFRS pro forma capitalisation of R&D costs (50%) for the FY18 year and is unaudited. As a SaaS company, R&D costs are capitalised from FY19 onwards, which is the common practice of our SaaS peers. We measure our performance using the comparable method because it is a better reflection of the performance of our business, setting a higher bar for the prior comparable period (FY18) than the statutory reporting. It allows for a ‘like for like’ comparison of the performance of the business, assuming R&D costs (50%) were capitalised in FY18. This is the basis used for all comparable reporting throughout this document. 1ARR is not an IFRS measure and is unaudited, it represents future contracted annual revenue at year end. 13 Making life simple for our communityLetter to shareholders 14 TechnologyOne Annual Report 202318 23 Results summary Afterword Oliver Pring G E N E R A L M A N A G E R C O U N C I L S U S T A I N A B I L I T Y Scenic Rim Regional Council 15 Making life simple for our communityOn behalf of TechnologyOne Limited we are pleased to announce our fourteenth consecutive year of record profit, record revenues, and record SaaS fees. Our Global SaaS ERP solution is making life simple for our community. Continuing strong performance TechnologyOne has consistently delivered strong results since listing on the ASX in 1999. Our ability to deliver these results for 20+ years is due to our clear vision, strategy, culture, and our ongoing investment in R&D, which was validated in March as we entered the ASX 100 index. 16 TechnologyOne Annual Report 202317 Making life simple for our communityHighlights for the year Profit before tax, up 16% – Beating guidance set in May 2023 of 10%-15% profit growth. Total Annual Recurring Revenue (ARR) up 23% – Driven by the significant value proposition of our global SaaS ERP solution. Net Revenue Retention (NRR) of 119%, up from 116% pcp – Existing customers continue to expand their use of our global SaaS ERP solution to streamline their operations. UK ARR up 52% – Our long-term investment in the UK continues to build momentum. Upgrade to medium-term guidance: Now on track to surpass $500 million ARR by FY25 – One year earlier than planned. Investing in the future – With strong results and a strong sales pipeline, this year we made additional investments to enable us to continue to double in size every five years beyond $500 million ARR. These include additional investments in the UK, new products and modules, including DXP, AppBuilder, and SaaS+. Additionally, we completed acquisition due diligence on a potentially transformational combination opportunity. We became the world’s first SaaS+ ERP company – We established our visionary SaaS+ offering by combining our mission-critical global SaaS ERP solution and implementation in one single fee, removing the need for traditional, complex, long, risky and expensive consulting implementations to provide faster go-lives and therefore unlocking value for our customers more quickly. Strong balance sheet and Strong cashflow generation at 102% of NPAT – We returned cashflow generation to NPAT ratio of approximately 100%, one year earlier than planned. With significant cash and investment holdings of $223.3 million and no debt, our balance sheet retains flexibility and strength for inorganic growth in the future. These points are discussed later in more detail. Results summary Key results were as follows: • • • • • • • • • • • • Profit Before Tax of $129.9m, up 16%, beating guidance of 10%-15% growth Profit After Tax of $102.9m, up 16%, beating guidance of 10%-15% growth Total Annual Recurring Revenue (ARR)1 of $392.9m, up 23% On track to surpass $500m ARR by FY25 Net Revenue Retention (NRR) of 119%. Above our long-term target of 115% Total Revenue2 of $441.4m, up 19% Revenue from our SaaS and Recurring Business of $390.7m, up 22% Expenses of $311.5m, up 21%3 Cash Flow Generation4 of $104.6m, up 36% Cash and Investments of $223.3m, up 27% Total Dividend of 19.52 cps, including a special dividend of 3.0 cps, up 15% R&D investment of $112.0m before capitalisation, up 21%, which is 25% of revenue 1ARR represents future contracted annual revenue at year end. This is a non-IFRS financial measure and is unaudited. 2Includes other income of $12.0m, driven by the contingent consideration reversal for Scientia of $7.4m 3Includes $5.9m for the derecognition of certain Scientia intangible assets. Also impacted by acquisition due diligence expenses and investments brought forward. 4Cash Flow Generation is cash flow from operating activities less capitalised development costs, capitalised commission costs and lease payments. This is a non-IFRS financial measure and is unaudited. Expected to approximate NPAT. 18 TechnologyOne Annual Report 2023UP 16% Net profit after tax FY13 $26.9M FY14 $30.9M FY15 $35.8M FY16 $41.3M FY17 $44.5M FY18 $47.7M FY19 $58.5M FY20 $62.9M FY21 $72.7M FY22 $88.8M FY23 $102.9M Net Profit After Tax with less than 200 staff, knows they will get the same enterprise grade, built-for-Government configuration, and industry-leading cyber security standards as our largest Government customers. We have successfully completed our transition from an on-premise legacy licence business to a SaaS business. Our plan to reduce on- premise legacy licence fees from a high of circa $75 million to zero over five years is complete. We have aggressively grown our SaaS recurring revenue business to replace that revenue, delivering increasing earnings every year. This transition was extremely complex as we re-engineered all parts of our business, including our products, our structure, our policies, processes, and disciplines. No other ERP company in the world has successfully made this transition without negatively impacting either its customers or its profit growth. TechnologyOne made the transition to our SaaS solution for our on- premise customers simple and seamless. Customers can move to SaaS in weeks, not years, in stark contrast to those using our competitors’ products. From their first step to SaaS, our customers can easily move to our next generation SaaS ERP, CiA, and take advantage of new technologies, such as Artificial Intelligence and our new Digital Experience Platform (DXP). Total ARR grows 23% Adoption of the TechnologyOne global SaaS ERP solution exceeded our expectations, with customer adoption driving Total ARR to $392.9 million, up 23%. TechnologyOne continues to lead in the Local Government sector, where we closed over 25 major deals in FY23 totalling more than $113 million in contract value. Consequently, more than 300 council customers now benefit from our high-quality products in APAC. We continue to win clients from our larger competitors, including the City of Parramatta’s digital transformation project, one of several excellent wins from Infor, and another returning customer from Oracle. These Local Government customers are just a few examples of councils choosing our market-leading ERP, CiA, with the digital customer at its centre. In the Government sector, we signed five major deals with a total contract value of more than $23 million. TechnologyOne successfully completed the transition of our existing 230+ Government customers to SaaS. The new customers we signed validated our SaaS-for- Government vision, with the most notable being the Department of Veteran’s Affairs (DVA), which was awarded to TechnologyOne at the conclusion of a competitive tender process against SAP. DVA, a large agency, chose TechnologyOne for the first stage of its digital transformation based on our proven ability to deliver within the Federal Government. Equally, the Commonwealth’s National Anti-Corruption Commission, Revenue Retention (NRR) of 119%, up from 116% pcp In FY23, we delivered Net Revenue Retention of 119%, which is industry- leading in the ERP market and above our long-term target of 115%. At 115% per annum, we will continue to double in size every five years. This clearly shows our products and solutions are resonating with the market. Customers are continuing to take up more products and modules from us as they embrace our enterprise vision and the significant efficiencies and productivity lift that come with it. Our focus is to land a customer with products such as Financials, Property and Rating, or Student Management and then expand with other products and modules over time. As the only true SaaS ERP vendor in the market, our SaaS customers have all products and modules available at all times and are always on the latest software release. This open licence approach removes the friction from TechnologyOne selling and from our customers taking up new products and modules to streamline their business. We continue to invest in our products and modules to provide even deeper mission-critical functionality for the markets we serve. In doing so, we increase the available whitespace and runway for our team to sell additional value to our existing customers. Our SaaS customers continue to take up products and modules at a faster rate than we had seen for our on- premise customers. The average ARR 19 Making life simple for our community from our customers has grown from $100,000 in FY12 to almost $400,000 in FY23. UK ARR of $26.5 million, up 52% We have seen our UK business continue to grow, with ARR up 52% to $26.5 million. We delivered a profit of $3.7 million, up from a profit of $2.4 million last year, and we see significant opportunities in the coming years in this market, which exceeds the size of the APAC market considerably. The regionalisation of our OneEducation solution is now complete for our Student Management and Human Resources and Payroll (HRP) products, and we signed two new Student Management deals this year in the UK. Our ERP offering and the breadth and depth of functionality that we bring to the Local Government and Higher Education markets are unique in the UK, and our pipeline is growing strongly. We continue to invest in products, sales, marketing, and all other functionality in the UK to further accelerate our growth. Upgrade to medium-term guidance, on track to surpass $500 million ARR by FY25 The quality of the revenue from our latest generation global SaaS ERP business is exceptionally high, given its recurring contractual nature, combined with our industry-leading low churn rate of ~1%. Our ARR stands at 90% of Total Revenue , which means most of our revenue is locked in at the start of the financial year. This positions us well to achieve strong continuing growth in the new year. Today, our Total ARR is $392.2 million, up 23%. We are upgrading our medium-term target to surpass $500 million ARR by FY25 (previously, “we will surpass $500 million ARR by FY26”). Investing in the future TechnologyOne invested $112 million in R&D this year, up 21%. Our R&D program continues to be at the leading edge of our industry as we embrace new technologies, new concepts, and new paradigms. Our R&D team is focused on extending the functionality and capabilities of our global SaaS ERP solution, CiA, which increases the whitespace in the verticals we serve. We continue to invest in new, exciting ideas and innovations, including SaaS+, AppBuilder and Digital Experience Platform (DXP) for Local Government and Higher Education. Our 16th product, DXP LG, was released for general adoption and extends our ERP from traditional back-office users to residents. We became the world’s first SaaS+ ERP company SaaS+ will be a game changer in the ERP industry. It is the next logical evolution of SaaS where TechnologyOne delivers the entire outcome faster, with little risk and in one single annual fee to our customers. SaaS+ will deliver faster time to value as we continue to dramatically drive down implementation timeframes, removing the need for traditional, long-drawn- out, risky implementations. Through the “Power of One”, TechnologyOne is the only SaaS ERP provider able to deliver on this compelling proposition as we own all parts of the value chain with deep mission-critical products, industry-specific IP built over 36 years and our highly skilled in-house consulting team. During FY23 TechnologyOne launched our new SaaS+ offering, which was embraced by 34 customers across all our industry verticals, surpassing all our initial expectations and demonstrating a very positive outlook for our future approach to sales and delivery. Queensland Parliamentary Services was the first government example, recognising how crucial time to value is for government agencies in times of economic and budget uncertainty. Other notable examples include the London Business School of Economics in the UK and our first full OneCouncil solution, inclusive of Property & Rating, at Whitsunday Regional Council in Australia. Our SaaS+ proposition is resonating with the market. Our shift from traditional new project consulting revenue to SaaS+ revenue will mirror our successful transition from legacy license fees to SaaS revenue, which is now complete. This strategic move enhances our focus on high-quality, recurring revenue. We are excited about the opportunities these investments will bring to our APAC and UK customers. Importantly, SaaS+ has become the go-to-market sales approach in the UK. These investments in R&D and SaaS+, to build our future platforms for growth, enable our ability to continue to double in size every five years. We will manage this significant investment within our total cost base, continuing to balance strong profit growth with investment for future growth beyond $500 million ARR. Profit Before Tax margin to return to growth in FY24 As we transitioned to SaaS and continue to build deep pipelines, our profit and loss has become more predictable. Early in our second half, we could see with confidence that we were going to have a strong full year. We have delivered above guidance profit before tax growth of 16%, strong ARR growth of 23%, NRR of 119% (above our long-term target of 115%) and cashflow generation to NPAT of 102% for the year, one year earlier than planned. Combined with a strong pipeline, this allowed us to make additional investments in our ambitious R&D program earlier than planned. These long-term investments, including DXP, AppBuilder, additional modules, and SaaS+, will enable us to grow beyond $500 million ARR and continue to double in size every five years. We also invested in the UK and in scaling our service centre in Malaysia. In considering future growth opportunities, TechnologyOne continues to pursue potential deals that will unlock further value for shareholders and strengthen our product offering. During the year, we made an approximately $2 million investment in due diligence and put forward a non-binding and indicative proposal for a public-listed UK-based higher education software provider. Following significant and disciplined 20 TechnologyOne Annual Report 2023 FY13 19% FY14 21% FY15 21% FY16 21% FY17 21% FY18 22% FY19 27% FY20 29% FY21 31% FY22 30% FY231 30% due diligence, we did not proceed as the potential acquisition did not meet our criteria and the prudent decision was made not to proceed. TechnologyOne remains in a strong position to explore other appropriate M&A opportunities in the near and medium term given the company’s strong balance sheet. These planned additional investments resulted in a flat underlying profit before tax margin of 30%. We expect margin growth to return in FY24, and we see Group margins continuing to improve to 35% in the coming years, driven by the significant economies of scale from our single instance multi- tenanted global SaaS ERP solution. Investment in people and culture Our people solve incredibly complex business problems for our customers and have delivered our massively broad and deep global SaaS ERP solution. We compete and win against the world’s largest multinational software companies, which have R&D teams with tens of thousands of staff. We have set an ambitious target Employee Net Promoter Score (eNPS) of +50 by FY26. Our eNPS score increased to +34, driven by new and exciting people programs and initiatives delivered in FY23. Since inception, we have been extremely successful, by any measure, because of our consistent strategy, mission, purpose, core beliefs, values, leadership philosophies and compelling customer experience. During the Profit Before Tax Margin year, we refined and simplified our core beliefs and compelling customer experience philosophies and relaunched them to our team through our Culture Book, a collection of stories that explain to new starters and remind long-timers what makes TechnologyOne special and how we make the impossible, possible. This completes the 24-month refresh of the TechOne Way, the key artefact that describes the DNA of our business to our staff. During the year, we promoted 130 team members across all areas of our business. We continued our focus on diversity and strategies to increase the number of women across the organisation. Women now hold more than 42% of senior roles against an industry average of 25%. Our overall representation of women across all roles at TechnologyOne has increased to 38%. We have also launched Australia’s best Employee Share Plan, which provides one free share for every two shares purchased by our employees. In the year, 44% of our team members elected to become owners of TechnologyOne to share in the growth of our great company. To continue to double in size every five years, we launched our ongoing investment in our leaders through our Leadership Summit. This initiative is designed to grow our leaders, teach them the TechOne Way and equip them to lead our teams to make the impossible possible. The first cohort graduated in FY23 and cohort two commenced this year. Strong balance sheet and Strong cashflow generation at 102% of NPAT TechnologyOne continues to have a strong balance sheet with net assets of $306.0 million, up 28% and cash and investments of $223.3 million, up 27%. Cash Flow Generation (CFG) was once again strong at $104.6 million for the full year, versus a Net Profit After Tax of $102.9 million, a CFG to NPAT ratio >100%, which is one year earlier than planned. TechnologyOne continues its long history of strong CFG, which we expect will continue to approximate Net Profit After Tax in FY24 and beyond. Dividend Considering the company’s strong results, our confidence in the future, and the significant capacity in our balance sheet to invest in growth and opportunities that may arise, we have announced a Special Dividend of 3.0 cents per share in addition to our final FY23 dividend of 11.90 cents per share. For the full year, our dividend has increased to 19.52 cents per share (including the Special Dividend), up 15% on the prior year and in line with our Net Profit After Tax growth of 16%. Executive remuneration TechnologyOne remains focused on delivering strong growth, and our current remuneration structure positions us well to continue to achieve this – both in the short and long term - but also to ensure alignment across our Executive KMP. 1Excluding one-off Scientia acquisition accounting impact and the acquisition due diligence costs incurred in FY23 21 Making life simple for our community Governance Given that TechnologyOne is such a significant R&D and innovation-led business, coupled with our long track record of profitable growth, we continue our cautious and measured approach to the renewal of our Board. We would like to recognise Ron McLean, who, after 31 years of service, firstly as an executive and subsequently a non-executive director, retired from the company on 26 February 2023. Ron was instrumental in developing the sales team and disciplines and TechnologyOne culture over his time and left the business in excellent shape for future growth. We wish him well in his future endeavours. Please refer to our TechnologyOne website at: https:// www.technologyonecorp.com/company/investors/ corporate-governance for our full Sustainability Report and Corporate Governance Statement. We continued to execute our strategy, delivering strong results again in FY23. When many businesses have struggled to deliver in uncertain economic and geopolitical times, TechnologyOne has delivered exceptional growth – Total ARR growth of 23%, Record Net Profit After Tax growth of 16%, and upgraded our medium- term guidance to surpass $500 million ARR by FY25. Our 3-year rolling TSR is 97%, and annual TSR is 48%. There is a clear alignment between the performance of the business and executive remuneration. Refer to the remuneration report for more detail. Environment, Social, Governance (ESG) Environment TechnologyOne is committed to its ESG obligations beyond just regulatory requirements. We became Carbon Neutral globally, and this year is our second year benchmarking and reporting under the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). While the TechnologyOne operations do not have a material impact on the environment, we acknowledge that it is the changing attitude of many that will have a material impact on reducing climate change. Social - TechnologyOne Foundation The TechnologyOne Foundation defines who we are as a company and is an important driver of our culture and values. We are committed to making a difference to underprivileged, disadvantaged, and at-risk youths by empowering them to transform their lives and create their own pathways of success. We believe that it is through youth that we can have the greatest impact on the future. We have an ambitious goal of lifting 500,000 children and their families out of poverty by FY31, which we are on track to achieve. An important part of the TechnologyOne Foundation is supporting great Australians doing great work, both locally and internationally, which includes the Fred Hollows Foundation, School of St Jude, Opportunity International, Solar Buddy and St James College. The Foundation will continue to grow with TechnologyOne through our commitment to the 1% pledge – which includes 1% profit, 1% product and 1% time. This represents a commitment of more than $2 million each year. The TechnologyOne Foundation will continue to shape the DNA of our company and staff. Please refer to the TechnologyOne website for our full Sustainability Report and Corporate Governance Statement. 22 TechnologyOne Annual Report 2023 Outlook for Full Year 2024 Afterword The economic outlook and geopolitical issues continue to create uncertainty, and TechnologyOne has seen difficult and challenging economic environments many times in the past 36 years. We have continued to grow strongly during these times, and we will continue to do so. As we have seen over the last few years, the markets we serve continue to remain resilient, with our mission-critical products providing our customers the opportunity to reduce their costs, streamline their business and improve their efficiencies in such challenging economic times. Our customers report savings of 30%+ by utilising our Global SaaS ERP Solution. The TechnologyOne global SaaS ERP solution is driving our continuing success. As a result, TechnologyOne’s sales pipeline of opportunities for FY24 is strong, and this positions us for continuing strong ARR and profit growth in FY24. We are on track to deliver $500m ARR by FY25, one year earlier than previously communicated. The company will provide further guidance at both the Annual General Meeting and the FY24 first half results. *For more details on these event dates, please see our website. To continue to succeed, we must continue to innovate and focus on building beautiful software that is incredibly simple and easy for our customers to use. Our software must work on any device, anywhere, at any time if we are to enable our customers to embrace the exciting future that is possible within the digital revolution. Also, we must continue to earn the right to be the enterprise software partner for our customers. At every touchpoint we have with our customers, we must strive to make things simpler for them and give them a great experience. We set an ambitious goal to make life simple for our community, and we are making this a reality. This would not be possible without the talented and committed people who make up the TechnologyOne team. We would both like to thank every team member across the globe for their continued efforts and passion for delivering world-leading software solutions for our customers and users. FY23 has been another amazing year for the company, and that is thanks to all of you. We would also like to thank you, our shareholders, for your continuing support. Pat O’Sullivan Chair Edward Chung Chief Executive Officer 23 Making life simple for our communityOur strategy 24 TechnologyOne Annual Report 202326 28 Mission & purpose Our core beliefs 25 Making life simple for our communityOur purpose and mission 26 TechnologyOne Annual Report 2023Our passion is to solve the complex. Our mission is to better our community, from its citizens to students, by leveraging our team’s innovation, drive, and determination. Our vision is to build and deliver truly great products and services, making life simple for our community. Our core beliefs allow us to deliver on this vision. For close to four decades, TechnologyOne’s clear vision, purpose, mission, beliefs, people, and supporting initiatives have underpinned our growth and success. At TechnologyOne, we know that our customers’ experiences define our success. We believe in leadership, not management. We know that our survival depends on our ability to set ambitious goals, and to lead and inspire our people to achieve great things. As a large, successful company, we also believe it is important to give back to the community. To pay our success forward, this is why we established the TechnologyOne Foundation. Our core beliefs, dedication to customer experience, leadership model and charitable ethos helped form the TechnologyOne Way more than 36 years ago and continues to define the way we operate. 27 Making life simple for our communityOur core beliefs The TechnologyOne Way sets out our mission statement, along with our six core beliefs. Together these guide our business strategy, product development and our brand. By clearly defining why we exist and what we believe in, every team member can understand what makes TechnologyOne work – and feel empowered to contribute to its success. The Power of one. Evolution not revolution. We dream big and deliver. The Power of one Evolution not revolution We dream big and deliver It is what we are known for. We do not accept the normal way of doing things. We have a singular source of vision, development, implementation, sales, and support, and take full responsibility for the complete outcome of the solution experience - not just the software. SaaS+ is a true symbiotic partnership with our customers – it benefits us both. It’s rarely the big bang that does it – rather, it’s incremental but constant improvement that changes the world. Our enterprise solution adapts and evolves as we embrace new technologies, concepts, and innovation – and we share that with our customers – never leaving them behind. We tackle the complex and face the difficult. With one eye on today’s challenge and the other on the future, we deliver solutions that stand the test of time. We are the masters of our own destiny and don’t follow the established path. We think differently, we work differently, and we embrace it. 28 TechnologyOne Annual Report 2023Making life simple for our community At TechnologyOne, our mission is to make life simple for our community, from its citizens to students, by leveraging our team’s innovation, drive and determination. Our passion is to solve the complex, with simplicity as our compass and our customers as our true north driving our decisions and helping us to build software they can’t live without. Whether streamlining administrative processes for local governments, enhancing educational tools for universities, or optimising business operations, our solutions aim to be a catalyst for positive change. Through the relentless pursuit of simplicity, we contribute to building a connected and efficient community where our technology becomes an enabler, fostering progress and making daily tasks simpler for everyone. We are committed to continuously deliver outcomes that enrich the very fabric of the communities we live, work and study in. One experience for our customers. Market focus & commitment. Tech is the answer. One experience for our customers With one globally integrated line of code, and a deep understanding of our chosen markets we deliver mission critical software, and a single streamlined experience, reducing cost, time, and risk Market focus and commitment Tech is the answer We are not all things to all people. We have deep industry knowledge of our chosen sectors, but we also have local access & presence. We are members of our communities - ratepayers, students, patients - it’s why we feel such a deep connection Tech is the way we think. Tech means we can solve the complex. Tech changes the way our customers work. Tech evolves rapidly, inviting new possibilities daily. Tech IS the answer. 29 Making life simple for our communityGlobal SaaS ERP solution 30 TechnologyOne Annual Report 202331 Making life simple for our communityTechnologyOne is at the very forefront of delivering the benefits of mass production to the enterprise software industry. As we have seen in other industries, the economies of scale of mass production will change the face of the software industry. TechnologyOne’s global SaaS ERP solution delivers the full functionality of an ERP on any device, without compromise. Our SaaS platform runs one global code line, allowing us to continuously deliver new innovations to our customers, who benefit from the scale of our investment as an enterprise vendor. One single global code line, run on thousands of servers, at massive scale, for all customers. Because of this, we gain enormous economies of scale, allowing us to continuously deliver new innovations to customers. Every customer benefits from each dollar we invest, amounting to $112 million investment in R&D in FY23. Our solution leads the market because we own, build, run, implement, and support our own software. We take complete responsibility for providing the processing power, software and services, including backup, recovery, upgrade and support services for our SaaS customers. Other ERP providers fail to deliver the same economies of scale and cost efficiencies because they use cloud hosting but handcraft each customer’s environment individually. Our solution delivers the deepest functionality for the markets we serve, comprising 16 products and up to 30 modules per product. Our global SaaS ERP surpasses best- of-breed products because we offer one partner, one integrated solution, one look and feel, one technology platform and integration out of the box. It’s a single instance of software delivered globally, with a mass production line of servers running thousands of customers’ organisations that creates cost efficiencies that hosting providers cannot come close to, and a level of service, security, reliability, scalability, and future 32 TechnologyOne Annual Report 2023We are now working on the next generation of our SaaS solution, 2024A. The pace at which we are innovating is accelerating, and we are seeing many opportunities to continue to improve the features, speed, security, availability, and scalability of our SaaS solution for our customers. proofing that would not be otherwise possible. TechnologyOne makes a substantial investment each year in ongoing R&D, to continue to improve our software and to capitalise on new technologies, concepts, and ideas. Our global SaaS ERP solution provides a compelling value proposition to our customers, giving them what is essentially a very simple, cost effective and highly scalable model of computing. Our customers are always on the latest technology, with access to two releases of software per year that delivers new features, functionality and concepts, as well as access to the TechnologyOne University for ‘just-in-time’ training. This is all provided standard, and we guarantee it will be future proof. Our current release, 2023B, delivers simplicity without limits, helping customers streamline the way they do business with CiA. For existing customers, the migration from on-premise to SaaS is seamless, with no loss of functionality or complicated re-implementations required. The accelerated transition allows them to immediately save up to 30+% on their total cost, so they can focus on their business, not on technology. With our configuration- driven software design, all our customers’ unique configuration information is stored in their own dedicated and secure database. This is also the case for our customers’ transactional data, allowing us to deliver personalised service at scale. 33 Making life simple for our communityRealising our vision as a SaaS- first company Any device, anywhere, at any time Over ten years ago, we started our journey to SaaS, by committing to building a software solution that would operate anywhere, any time, on any device. We set an aspirational goal to develop the next generation of ERP software, to transform our customers through a digital platform. Today, that solution is CiA, delivered via SaaS. Over the last six years, our customers have validated this strategy with the overwhelming adoption of SaaS. Transitioning to SaaS has allowed them to become more agile and more importantly, gives them the ability to focus on their customers and not on their technology. We now know that SaaS is the future, and the only way to provide our customers with the experience they need to succeed. That’s why we’ve transitioned the majority of our on-premise customers to our SaaS platform, providing them with a digital platform for evolution. We have committed to moving all remaining on-premise customers to SaaS by 2024 and will work closely with our on-premise customers on their pathway to SaaS to ensure no customer is left behind. This shift will not only allow us to realise our vision as a full SaaS company but will enable us to better focus our resources on developing and delivering our products, new enhancements, and innovations on a single platform. We now have over 1000 large-scale enterprise organisations with millions of users, leveraging our fourth generation SaaS ERP, CiA, for mission critical activities for themselves and their customers. This makes TechnologyOne the largest single instance SaaS ERP offering in Australia. Our award-winning CiA platform delivers a single solution for our key verticals, that enables possibilities now and in the future. CiA is the path forward for our customers and provides a springboard for future innovations. Through CiA, customers gain access to the full functionality of our enterprise software on any device, anywhere, at any time. Organisations can embrace iPad, iPhone and Android devices as part of their enterprise solution and our adaptive screen design guarantees a great user experience regardless of the device. Because the experience is tied to the user, not the device, an employee can move seamlessly from one device to another without interrupting their work. The hybrid working model validates CiA’s any device, anywhere, anytime capability and enables the functionality that hybrid working demands and employees have come to expect. With its incredibly simple design, CiA has created a new standard in enterprise software, giving us a significant competitive advantage. For customers undertaking digital transformations, this is the key to future success. Most trusted SaaS ERP provider We take the privacy and security of our customers’ data very seriously and weave this consideration into the fabric of everything we do. We are committed to building the world’s most trusted SaaS platform for enterprise software and will continue to make significant investments to that end. That’s why, since 2017, we have achieved the highest-level security accreditation of any SaaS ERP vendor operating in Australia. The foundation of our global SaaS ERP solution is a class-leading security and compliance program designed to give our customers the strongest protection and privacy. As part of this program, we develop and maintain our security framework, which passes the most stringent external verification, testing and scrutiny. Customers receive the benefit of these certifications, along with ongoing security and privacy enhancements, at no extra charge. Taking SaaS to the next level It’s SaaS, but better. All our customers’ ERP needs are in one place with Solution as a Service (SaaS Plus). We are leveraging our unique domain experience of over 36 years and our unwavering commitment to our industries by taking complete responsibility to deliver outcomes with our best-in- class SaaS ERP. With SaaS Plus, TechnologyOne takes full responsibility for the complete outcome of the solution experience, not just the software – removing the need for traditional long, complex, risky and expensive implementations. Our all-inclusive offering is specifically tailored for the industries we serve, delivering industry specific software solutions. Harnessing TechnologyOne’s unique ‘Power of One’, SaaS Plus offers end to end software implementation quickly, securely, and efficiently. Ensuring there is minimal risk for our customers. This innovation sets a new industry benchmark and redefines the relationship between technology providers and customers, removing the need for expensive third-party consulting practices and complex implementations. SaaS Plus will change the world of ERP solutions and move us forward into the future. CiA Live Taking customers from one generation to the next, CiA Live is the simple solution to upgrade business processes from our previous Ci platform to our CiA platform. When signing up for CiA Live customers don’t need to worry about the upgrade process – TechnologyOne has it covered. 34 TechnologyOne Annual Report 2023App Builder A simple no-code offering that further extends the TechnologyOne software and helps solve our customers’ business problems quickly and easily. App Builder allows users to extend our ERP and create applications inside our TechnologyOne ecosystem, with no code and little training, empowering customers to further personalise the software solutions for their business in real-time. Each one of our customers is different, while operating in similar markets, no challenge or opportunity is exactly the same. App Builder exists as a more intimate and unique way for TechnologyOne to solve specific challenges for each individual customer. DXP (Digital Experience Platform) TechnologyOne’s Digital Experience Platform (DXP) extends the power of enterprise software for our customers to reach and interact with their customers. Enabling organisations to digitally transform with our simple, intuitive interface that offers a streamlined customer- centric experience. Leveraging next generation technologies such as Artificial Intelligence (AI) and machine learning (ML) DXP allows open, accessible, and convenient engagements, from anyone, in any way. It is a smart, frictionless platform that provides tailor made experiences for customer service, content creation, and communities. Reinvent the customer journey with a simple interface that takes the guess work out of customer service and experience the true power of an interconnected system with a centralised location for name records, content, and more. TechnologyOne has released our Local Government DXP and is continuing to work on the development of our Student DXP. Our commitment to innovation In FY23, we invested $112 million in R&D to improve our SaaS offering with new enhancements and Standard TechnologyOne Infor Workday SAP IRAP (PROTECTED) IRAP (OFFICIAL) NZ IRD SPS 13/01 ISO/IEC 27001:2013 ISO/IEC 27017:2015 ISO/IEC 27018:2014 ISAE 3402 SOC1 AT-C 205 SOC2 AT-C 205 SOC3 SSAE 18 Cyber Essentials Plus (UK) innovations. Running on one global code line allows us to continuously deliver new innovations to our customers, who benefit from the scale of our investment as an enterprise vendor. With each new customer, our solution is enriched with new IP that powers the evolution of our software. Each customer benefits from the hundreds of millions of dollars that we have invested to date and our commitment to continued investment. We take care of patching and upgrades and offer two major software releases per year. Our SaaS offering is massively scalable, resilient and fault tolerant. All our customers run the same code-line globally, and all processing resources are shared. When we make an improvement to the service, we automatically roll out that improvement to all our customers. It is a testament to the collective skill of our people and organisational structure that we have achieved such a competitive advantage and level of differentiation in the SaaS market. Our SaaS monitoring platform (Insights) gives us unprecedented visibility of the real-time performance and reliability of our SaaS environments and software. This enables us to analyse, detect and respond to issues faster than ever before. Insights also strengthens our support processes by connecting our development teams directly with customers. TechnologyOne University TechnologyOne University is the learning and training hub for our software. Through the power of SaaS, all our customers can receive self- paced learning and comprehensive training on any device, anywhere, at any time. An innovative digital learning solution, TechnologyOne University gives our customers a dynamic, real-time and up-to-date self-service support and education option that empowers users at all levels. 35 Making life simple for our communityOur growth 36 TechnologyOne Annual Report 202340 Showcase 23 Aimee van der Hulst E X E C U T I V E A S S I S T A N T Southern Downs Regional Council 37 Making life simple for our communityGlobal SaaS ERP solution Our ongoing success has been underpinned by the incredible growth of our SaaS business, which doubles in size every 18 months. This is powering the growth of TechnologyOne, which continues to double in size every five years. We now have over 800 customers on our global SaaS ERP solution, with 34 of those customers taking up our SaaS Plus offering. Our solution is a clear market leader because we are the only enterprise vendor to offer a true SaaS ERP solution across the entire enterprise. Unlike many other software providers that use cloud hosting, we own, build, and support our software. Because other providers handcraft each customer’s environment, they cannot offer similar shared benefits or economies of scale. On track to surpass $500m+ ARR by FY25 TechnologyOne is focused and we are clearly on track to surpass our strategic goal of reaching $500 million+ Annual Recurring Revenue (ARR) by 2025. To achieve this, we are focused on a number of platforms for growth: • • • • • Driving the growth of our customer base Expanding within our vertical markets Expanding our product range and depth Becoming a SaaS Plus company Growth in the UK, and beyond We see the UK as a significant growth area, demonstrated by the increased success we have seen in that region over the last five years. We are also leveraging our unique domain experience and unwavering commitment to our industries with SaaS Plus. Taking complete responsibility to deliver outcomes with our best-in-class SaaS ERP to become a true SaaS Plus company. 1. Driving the growth of our customer base As an established company with over 36 years of success, we benefit from the investment of more than 1,300+ customers. We draw on these relationships and deep industry knowledge to power our success and bring new customers to TechnologyOne. We focus and specialise on six large vertical markets, which enables us to build deep industry knowledge and develop preconfigured solutions that quickly meet our customers’ needs. There is a significant runway for us to expand our customer base across all markets and grow our solution footprint as we add value for customers. This growth is supported by the vertical alignment of our marketing, sales, product, and consulting teams, and is a testament to the deep industry knowledge and expertise that we have developed in-house across these fields. 2. Expanding within our vertical markets We have experienced continued success and expansion within each of our vertical markets. The adoption of our global SaaS ERP has also enabled us to further penetrate our key vertical markets. Driving adoption of our global SaaS ERP, TechnologyOne has made the transition to our SaaS solution simple and seamless for our on-premise customers. They can move to SaaS in weeks, not years, like those using our competitors’ products. By transitioning to SaaS, our on- premise customers will unlock the significant benefits that our SaaS customers already receive. Our end of on-premise strategy aims to end our on-premise business by October 2024. This watershed milestone gives our remaining on- premise customers ample time to make the transition to our global SaaS ERP solution. We expect 90%+ of all our remaining on-premise customers to move to our SaaS solution, driving the growth of our SaaS business. Increasing adoption of our products Our global SaaS ERP solution comprises of 16 products and up to 30 modules per product, delivering the deepest functionality for the markets we serve. Our solutions are modular by design, providing customers with the flexibility to add new products as their needs increase. We’re constantly enhancing the functionality of our products and delivering new innovations, for the benefit of our customers. This has been key to our 99% customer retention and our continued growth. Our focus for existing customers is to increase our product footprint, to ensure customers are benefiting from the full depth and breadth of our solution. 3. Expanding our product range and depth We work closely with our customers to ensure we understand their needs, meet their priorities, drive continuous improvement, and provide an increasing range of functions within our enterprise solutions. Our goal is to build proven practices into our solutions and deliver the best software and services available for our customers. The result is that we continue to extend our product offering by developing additional features and functions – further building on what is already one of the world’s most comprehensive enterprise software suites. By re-engineering all our products for CiA, customers can enjoy the same software functionality across any device, anywhere, any time. Through DXP, we are extending the reach of our software from the back-office power users such as accountants, payroll clerks, student administration, and customer service teams, to the front office end users 38 TechnologyOne Annual Report 2023such as employees, ratepayers, and students, making the power of ERP available to everyone. Our sales, marketing and customer success teams keep customers informed about recent developments and the experience of fellow TechnologyOne customers. This helps customers further improve their technology systems, business processes, and models. Building on this partnership approach, the TechnologyOne customer community has transformed our support experience. As a dynamic group of TechnologyOne experts and customers, the customer community provides a world-class support experience to customers. It also enables them to influence product direction, keep up to date with industry news and collaborate with other customers. Our Timetabling and Scheduling product has solidified our dominance in the Higher Education market, with 75% of institutions in Australia and 50% in the UK supported by this product. This supports our strategy to deliver a student-centric, end-to-end SaaS ERP solution for the Higher Education sector. 4. Becoming a SaaS Plus company It’s time to take SaaS to the next level. All of our customers’ ERP needs are in one place with Solution as a Service (SaaS Plus). We are leveraging our unique domain experience of over 36 years and our unwavering commitment to our industries by taking complete responsibility to deliver outcomes with our best-in-class SaaS ERP. With SaaS Plus, we take full responsibility for the complete outcome of the solution experience, not just the software removing the need for traditional long, complex, risky and expensive implementations. Through one code-line, one plan, one price, and one point of call. It’s an all-inclusive offering specifically tailored for our customers’ industries and delivers all aspects of our enterprise solution – including implementation. The single yearly fee contains all the costs required to implement, run, support, and upgrade our solutions. 5. Growth in the UK, and beyond We see the UK as a significant growth area, demonstrated by the increased success we have seen in that region over the last five years. In FY23, we built on our breakeven status, with SaaS ARR $20,585,799.41, up 78.2%. Our team continues to execute our value proposition and strategies in our two industries, Local Government and Higher Education. FY23 saw Coventry University and Buckingham University sign up to our state-of-the-art Student Management system. This is another milestone for our internationally trusted solution. These two esteemed institutions join over 100 of our Higher Education customers benefiting from TechnologyOne products across the UK. SaaS Plus is also now the UK’s primary delivery option with 80 per cent of deals within the UK being sold leveraging our SaaS Plus solution. We have global locations across Australia, the United Kingdom (UK), New Zealand, the South Pacific and Asia. We have adapted our business to meet the differing needs of customers in each of these regions. We adapt our sales strategies for different regions as we identify new and ongoing customer needs. Soon we will explore opportunities in new geographies, including the US. Deepest functionality for the markets we serve A deep understanding and engagement with our key markets means we can deliver to our customers integrated, preconfigured solutions that provide proven practice, streamlined implementations and reduce time, cost and risk. 39 Making life simple for our communityShowcase 2023 Unleash the future. as well as explore how Software as a Service (SaaS) is empowering industry transformation, ensuring our customers partner with us to be at the forefront of change. With educational breakout sessions exploring key industry trends and insights from our knowledgeable business leaders and inspiring guest speakers, including ex-professional tennis player Ash Barty and surfing legend, Steph Gilmore, over 1,600 customers and prospects enjoyed sessions that aimed to help them excel within their fields and make the most out of their TechnologyOne solutions. Showcase is TechnologyOne’s largest external event, open to both customers and prospects. The event is held every couple of years over one day to deliver product and industry- focused updates. In FY23 Showcase was held in all regions we serve across Australia, New Zealand, and the UK. It was considered a milestone in TechnologyOne’s development, launching some key initiatives that are shaping the future of the company and how we interact with our customers, including CiA, DXP, Solution as a Service (SaaS Plus), and more. The seven events deep dived into how we’ve been innovating to solve the complex and change our communities for the better and offered our customers the chance to discover exciting new innovations with our platform for the future, CiA 40 TechnologyOne Annual Report 202341 Making life simple for our communityOur operations 42 TechnologyOne Annual Report 2023Steve Brown I T C O O R D I N A T O R Southern Downs Regional Council 43 Making life simple for our communityStuart MacDonald Chief Operating Officer relationship between students and their universities. Delivery done differently – SaaS Plus The standout achievement of the year was our announcement of Solution as a Service, known as SaaS Plus (SaaS+), to the market, and it’s unbelievable success in only its first year. Customers with SaaS Plus are already experiencing significant benefits given that the implementation of our products now only takes weeks, not months. With TechnologyOne taking on full responsibility for delivery, this mitigates risk for councils, government departments, and universities in implementing ERP, allowing us to benefit from the speed and scale of the opportunity. What a truly exceptional year it has been, and all thanks to our amazing team at TechnologyOne. Their unwavering determination to make the impossible possible, always guided by our customers being our true north, has been the driving force behind our success. For TechnologyOne, FY23 was a year of focusing on customer-centric initiatives, breaking new ground, making the impossible possible, and achieving remarkable records once more. Customers are our true north At the start of the year, we refreshed our company values, centring them around our core belief that customers are our true north. With this mindset, we embarked on FY23 with ambitious goals, reaffirming our commitment to actively engage with our community and support them in every way possible. From pioneering groundbreaking new products, to evolving the delivery of solutions and delivering on our pledge to help 500,00 children and their families out of poverty. Showcasing our talent We hit the road to promote the completion of our next generation platform CiA, through our world- class Showcase events. Conducting five events in Australia, one in New Zealand, and, hosting our inaugural Showcase event in London marked a significant milestone in our history. Throughout these events, we met thousands of customers and prospects, shedding light on how CiA could support them and offering insights into our future roadmap. The UK Showcase stood out as the highlight of the campaign, attracting over 400 customers and prospects who spent the entire day with the TechnologyOne team, of over 100 members, including the full senior leadership team. It was a transformational event for us, firmly putting TechnologyOne on the map for local government and education in the UK. End of on-prem Along with completing our next generation platform CiA, in FY23 we successfully completed our customers’ transition from traditional on-premise software to SaaS. This 12-year journey has had a profound impact on every aspect of our company. As a result, we took this opportunity to review and refresh our mission, purpose, values, core beliefs, and even our tagline to align our identity as a SaaS company and pave the way for our evolution into being a SaaS Plus company moving forward. Customer experience redefined After over five years of dedicated research and development, we unveiled the first three phases of DxP LG to the market. Our first customer described the experience as “Google to outcome”, highlighting the intuitive design and usability that is already resonating with our customers. Looking ahead, we are well on track for the launch of DxP Student to our education customers late in FY24. This release will empower students with OneEducation, ushering in an unprecedented evolution in the 44 TechnologyOne Annual Report 2023As a department, our mission is to drive trust, alignment and transparency across the business. We do this through empowering and supporting our team members, providing frictionless systems, processes, and encouraging knowledge sharing. Cale Bennett Chief Financial Officer Supporting our people Supporting our business To support our global team members’ financial wellbeing, FY23 saw the successful delivery of our first Employee Share Plan (ESP). The TechnologyOne ESP is an opt-in scheme established to help foster a culture of shared ownership in the business, offering team members the opportunity to purchase shares in a simple and straightforward way. Ultimately, providing access to what we consider the ASX’s best share plan available. Aligning with our core value, People are our Power, in FY23 the team drove bottom-line benefits through positive working capital efforts and effective cash deployment. This will continue throughout FY24 and beyond as we constantly explore ways to invest in and enable our people. Another focus of the last year has been enhanced collaboration with the Strategic Planning team, with an aim to deliver a more robust plan for the future of TechnologyOne and improving alignment between business streams to collectively deliver our strategic goals. Throughout FY23 the team also placed a heavy emphasis on system enhancements and innovation, notably by implementing our Quote to Cash system, which enables productivity through consistency and automation. Looking to FY24, this functionality will be further enhanced to provide a self- service model that delivers a more compelling experience for our internal stakeholders. Finally, we continue to improve our risk intelligence by adopting a proactive approach to risk management. This has involved the ongoing review of risk frameworks and assessments as well as applying new technologies to make our compliance process more efficient and effective. 45 Making life simple for our communityFY23 proved to be a milestone year for the Sales and Marketing team, validated by our customer engagement and successful partnership strategies across all our key industries. The continued focus on partnering with our customers, enabling digital transformation to keep our communities at the forefront of innovation, and new partnerships have allowed the team to build deeper strategic alignment with our industries and regions. Tim Moylan Executive Vice President - Sales and Marketing These watershed wins accelerate our ‘buy local’ campaign at the Australian Federal and State Government level and showcase that TechnologyOne continue to be the gold standard in Local Government. In the UK, Student Management has also gained significant traction throughout FY23 and established credibility in the Higher Education sector, our most important growth market. SaaS Plus Finally, ensuring our customers continue to get the most out of their solutions and be at the forefront of innovation, we’ve had great traction with SaaS Plus within the first year of positioning this new methodology to all markets, giving our team strong momentum moving into FY24. Customer engagement Strong customer engagement was evident with the success of our world-class Showcase events, held across all regions we serve and culminating in an inaugural Showcase event in London. These events saw over 1,600 customers and prospects attend sessions that explored our new innovations and how to get the most out of our solutions. Partnering for success Our team demonstrated their ability to execute our strategy of enhancing, retaining, and acquiring new customers with lighthouse wins with: • Australian Federal Government Department of Veteran Affairs • WA Department of Education • • • • • Redlands City Council Port Macquarie Hastings Council South Taranaki District Council Ashfield District Council North Hertfordshire District Council 46 TechnologyOne Annual Report 2023Chandan Potukuchi Chief Technology Officer FY23 saw the team welcome Chief Technology Officer, Chandan Potukuchi, with an extensive background in product development, SaaS software. Seizing the opportunity for further growth, the team also welcomed new talent both internal and external. This dynamic mix continued to help us accelerate our journey to become a leading SaaS provider, aligning with our objectives and strategies. While there has been a lot of growth within the team with new talent, we also demonstrated a strong commitment to leadership excellence through multiple Leadership Summits throughout FY23. These events provided our leadership team with dedicated time for strategic discussions, values alignment, and leadership skill enhancement. Strategic business realignment FY23 saw the successful restructuring of the department, amalgamating our New Engineering, Products, and SaaS teams into a unified group. This strategic move enhances collaboration, fosters innovation, and places a strong emphasis on continuous improvement of our SaaS architecture and services. Customer-centric software releases Our two major software releases, 2023A and 2023B, were successfully delivered throughout FY23. Incorporating customer-driven features and improvements. This underscores our commitment to providing cutting-edge solutions tailored to our customers’ evolving requirements. Agile development transformation Global engagement and collaboration Through implementing agile development methodologies throughout the year across the entire R&D group, the team cultivated a culture of empowerment, ownership, and accountability. This strategic shift enhances product quality and expedites the deployment of our SaaS solutions and delivering faster time to value for our customers. Finally, FY23 saw the successful execution of our Showcase customer event series, various user groups, and customer events, facilitating invaluable interactions between our team and the communities we serve. This engagement has helped enhance our understanding of customer needs and expectations. 47 Making life simple for our communityThe UK had another strong year, achieving profit before tax of $3.7m, with the team continuing to execute our value proposition and strategies in Local Government and Higher Education. FY23 resulted in ten new customers, including some of the biggest local authorities and higher education institutions within the UK. Continuing the success that we have seen across the UK customer base, which has doubled year on year. Leo Hanna Executive Vice President – United Kingdom Higher Education strategy and results FY23 saw Coventry University and University of Buckingham both select our state-of-the-art Student Management system. This year also saw the migration of 21 Timetabling & Scheduling customers from their on-premise software to our world-leading SaaS platform. This number demonstrates the team’s commitment and successful execution of TechnologyOne’s end of on-premise strategy. Showcasing TechnologyOne to the market On Thursday, 27 April, we held our inaugural UK Showcase event with over 400 delegates in attendance, making a large impact on the markets we serve, current customers as well as potential customers. The event included a diverse line-up of speakers that shared technology previews and expert advice, while our customers shared their stories about how they leverage our products and successfully partner with the TechnologyOne team. Pioneering SaaS Plus Leveraging our unique domain experience and our unwavering commitment to our industries, TechnologyOne is taking complete responsibility to deliver outcomes with our best-in-class SaaS ERP, through SaaS Plus. Now the UK’s primary delivery option, eighty percent of deals within the UK have been sold leveraging our SaaS Plus solution. People are our power Aligning with a TechnologyOne key value, ‘people are our power’ I’m pleased to announce that our team continues to grow and be welcomed into our UK-based office. FY23 saw the addition of 20 new UK-based team members. Many of our new hires are based in our Sales and Consulting departments, demonstrating our commitment to the UK, Higher Education, and Local Government markets. 48 TechnologyOne Annual Report 2023In FY23 the Customer Experience team was formed, combining our Consulting, AMS, Support, Customer Success, and Solutions teams, to continually align all customer facing service and delivery functions to ensure a deep market focus and commitment that differentiates us from competitors. David Cope Executive Vice President – Customer Experience Customer focus and success SaaS Plus Following on from the FY22 launch of SaaS Plus, FY23 saw the benefits of the SaaS Plus time to value come to life through repeatable and rapid adoption with simplicity of implementation. With SaaS Plus TechnologyOne takes responsibility for the outcome of the solution experience, not just the software. Moving into FY24 the team will continue to refine and enhance the methodology to drive down the time to value, reduce risk, and solidify outcomes for our customers. Throughout the year AMS saw strong growth with the continued drive to navigate efficient and effective use of the TechnologyOne platform as customers adopt CiA. In FY23, we evolved our TechnologyOne Training Series to an ongoing subscription model. This saw a strong uptake with ongoing enablement for customers across new features and functions, as well as platform services. The team also had ongoing success within our key industry markets of Local Government, Government, and Higher Education implementations across ANZ and the UK. Finally, Support utilised the wide- spread adoption of AI powered search capabilities which enabled streamlined knowledge sharing and self-service between our teams and customers. 49 Making life simple for our community Our mantra at TechnologyOne has recently evolved to ‘Making life simple for our community’, and the People & Culture and Corporate Services teams work together to bring that mantra to life. Enabling our people to do amazing things and truly make a difference throughout our communities. Alison Chalmer Executive Vice President – People & Culture and Corporate Services Leadership Our People & Culture team are focused on developing leadership, driving results and protecting our TechnologyOne culture, which has been an integral part of our success over the last 36 years. Key to this has been our ongoing investment in the Leadership Summit Series, comprising of three separate Summits. Bringing together our top 100 leaders these Summits aim to create alignment, transparency, and trust through gaining a shared understanding of our TechnologyOne vision, mission, core beliefs, values, compelling customer experience, and our approach and cadence to planning and execution. Our investment in leadership will continue throughout FY24 and FY25, assuring consistency and clarity, underpinning our leadership capability and growth. Recruitment and Diversity FY23 also saw our teams strengthen their focus on placing the right people in the right place, at the right time – with a strategic investment in resources in leadership, R&D, and Customer Experience roles. In FY23, there was also a focus on strengthening the increased investment into our offshore delivery centres, creating scale. Overall, female representation within TechnologyOne increased to 38% in FY23 from 37.4% in FY22. Surpassing the industry average of 30%, this reflects the positive steps TechnologyOne have taken to create an equal opportunity workplace. Our People Our company eNPS (Employee Net Promoter Score) increased in FY23 from +33 to +34, moving us towards our target of +50 and indicating our initiatives are assisting with engagement. Finally, our focus on wellbeing continues with the launch of our Employee Share Plan, HQ ‘Health Lab’ gym plus gym memberships for team members working in offices around the globe, and the continuation of a number of our inclusion activities including, Men’s Health Week, International Womens Day, and more. 50 TechnologyOne Annual Report 2023One of the highlights of the year was the acceleration of our $500 million Annual Recurring Revenue (ARR) target from financial year 2026 to 2025, marking a significant milestone. In establishing our ambitious 2030 goals, we implemented several strategic initiatives that position our business for sustained growth and success. Brock Douglas Executive Vice President Critical Incident Response Management – a safe pair of hands. Recognising our role as a provider of critical infrastructure for our customers, we prioritised enhancing our critical incident response capabilities. This involved a top-to-bottom review and the implementation of a new critical incident response process and playbooks for key incident types. Our proactive approach was validated through externally run simulation exercises, stress-testing our processes, systems, and people. Our innovative updates have gained recognition from our ASX peers, and we are honoured to be sought out by ASX listed companies to share our expertise in this vital area. Location Optimisation – an enabler of growth. In pursuit of our 2030 targets, we strategically assessed how and where we deliver our products and services. This comprehensive strategy places our key resources closer to our customer to align with their geographic compliance and product localisation needs. As part of this initiative, we also established a service delivery centre in Kuala Lumpur, Malaysia, building on our 20-year history with local customers. By the end of financial year 2024, this centre will host over 150 team members dedicated to driving our CiALive and SaaS+ strategic initiatives. Notably, we have achieved a remarkable 45% female diversity representation in the establishment of our service centre, surpassing the industry standard of 30%. Furthermore, we enhanced the quality of our product releases by establishing quality assurance testing centres of excellence in our existing Indonesian and Vietnamese centres. Back-end systems – systemising Licence to SaaS+. A critical aspect of our evolution into a SaaS+ company is aligning our back-end systems to support the new business paradigm. We completed a review of critical systems for alignment to SaaS+, implementing a new pricing system and commencing work on full self- service capabilities to empower our customer-facing sales teams. 51 Making life simple for our community Our people 52 TechnologyOne Annual Report 202354 62 Culture Sustainability performance at a glance 64 Foundation 53 Making life simple for our communityCulture, collaboration and alignment At TechnologyOne, we believe in a culture of innovation, creativity, and collaboration, and have created an environment that allows our people to thrive. This culture is built into the fabric of our business, driving high performance and underpinning our success. Over the last four years, we have focused our operating model and business to be a true SaaS business, and pivot away from an on-premise operating model. Employer of Choice Our people are a crucial source of our competitive advantage, and we purposefully invest in initiatives that support the recruitment, retention, development, and progression of individual talent within our workforce. As a nationally recognised Employer of Choice, TechnologyOne is committed to providing an environment in which our talented people can be innovative, creative, and realise their full potential. This year, TechnologyOne received more than 11,574 recruitment applications. We also value the voices of our team members to help shape our organisation. Our Employee Net Promoter Score (eNPS) surveys provide a channel for our people to be heard, with the results used to influence ongoing enhancements to our initiatives and programs. Extensive onboarding and training TechnologyOne hires passionate, talented, and innovative people who are inspired to think about the future. Our comprehensive onboarding program provides the best possible start for our people in their careers at TechnologyOne. We continue to support our commitment to developing our people and growing their careers by delivering training in leadership, technical, and professional skills development. This year, we also welcomed 275new team members who joined TechnologyOne. Our market-leading orientation and onboarding experience enabled us to seamlessly welcome our newest team members to the TechnologyOne family. Cultivating a culture of innovation The innovation and creativity of our team is key to our success. With a team of more than 400 developers, TechnologyOne runs one of the largest Australian-owned R&D centres for enterprise software. In addition to our R&D centres in Brisbane and Perth, we have offshore R&D centres in Indonesia and Vietnam, allowing us to extend our capability and better support our customers and existing products. Our developers are leaders in their field who challenge conventional thinking and go beyond the traditional realms of development methodology. Our state-of-the-art R&D centre and initiatives are designed to foster collaboration, creativity, and innovations that provide the platform for our future growth. 54 TechnologyOne Annual Report 202355 Making life simple for our communityCollaborative facilities and technology Our focus over the last few years has been ensuring we can maintain flexibility and provide an environment conducive to learning, collaboration, and in-person collisions that spark innovation, which is at the heart of our culture. To support this, we have continued to invest in our physical offices, the refit for our office supports our laser focus on customer outcomes as we know that to solve the complex for our customers and the communities we serve we need to optimise our workspace to enhance collaboration and create space for dedicated customer interactions. Our spaces are designed to foster creativity and teamwork, with collaborative spaces for team members and graduates to innovate and develop world-class software. With technology and design being at the forefront of the concept, the Village Green social areas provide spaces in our offices to showcase the ongoing accomplishments and achievements of the company in an environment that reflects our products and values. This combination of company- led flexible working and in-person collaboration has allowed us to maintain productivity, drive creativity, and honour our Power of One core belief, which is contingent on cross- team engagement. People initiatives to drive employee engagement In order to continue to double in size every five years, we continue to invest in our leaders through our Leadership Summit. FY23 saw our second Leadership Summit take place with cohort one graduating and cohort two commencing, these summits aim to grow our leaders, teach the TechnologyOne Way, and equip them to continue to lead our teams. During the year we also undertook numerous wellbeing initiatives for our people. We continued our work with Stephanie Gilmore as our brand ambassador, focused on physical and mental wellbeing. We kicked off our One Talks again, an event held on the rooftop of our HQ building and streamed live. One Talks feature a different speaker each week, designed to keep our team up-to- date on the latest news from across the company, from the people doing the work on the group. We also continued Surprise and Delights, an initiative aimed at ensuring consistent company and leader-led team activities that would drive team reconnection and build excitement. The Surprise and Delight ‘menu’ of activities featured team lunches, themed Friday drinks, random acts of kindness and hosted events. In addition to these initiatives, we continued our investment in existing employee engagement and recognition initiatives, including Hack Days, MARVELs, Town Halls, and Regional Days. Hack Days provide employees the opportunity to collaborate across functional teams and work on projects that fall outside their normal day-to-day work. These Hack Days are key to driving our culture of innovation and creativity. Our Hack Day has been extended to be a 56 TechnologyOne Annual Report 2023newest graduates work across TechnologyOne with the company’s most influential and skilled leaders, who provide them with valuable learning opportunities and experience. two-day event, which allows us to better engage with team members across the globe, given the various time zones. Meanwhile, our MARVEL awards celebrate team members who go above and beyond and showcases ordinary people, doing extraordinary things. They are designed to recognise and reward top talent, as part of our achievement-oriented culture. MARVEL stands for Merit, Achievement, Recognition, Values, Excellence and Leadership. Categories for the MARVEL awards are centred around our key initiatives. These include: • • • • • Leader of the Year Compelling Customer Experience of the Year Hack of the Year Rookie of the Year TechnologyOne Superheroes Winners of the MARVELs receive company-wide recognition and are inducted into TechnologyOne’s League of Extraordinary People. Our quarterly Town Hall meetings provide employees with the chance to hear from our CEO and other TechnologyOne executives about company direction and strategy, as well as ask questions directly that are answered in real time. These were complemented by our Regional Days for Sales and Consulting, where these teams discuss strategy and goals, allowing them to strengthen relationships across regions, teams, and projects, and improve engagement across the whole organisation. Graduate program Our graduate and intern programs form the foundation of our talent pipeline into the future. Our graduate brand and experience is highly regarded by our peers, competitors, and industry bodies alike. We received more than 387 applications, highlighting the competitive and highly sought-after nature of our program. Our award-winning graduate program runs across our software, sales, and consulting teams. Our 57 Making life simple for our communityIndustry partnerships We are committed to actively fostering a diverse and vibrant information and communications technology (ICT) industry. We want to create interest around this exciting time in Australia’s economy and ensure we are engaging early with Australia’s youngest and brightest minds in science, technology, engineering, and maths (STEM) subjects. With a focus on diversity and building exceptional female talent pipelines. TechnologyOne partners with Women in Technology and Women in Digital to continue to build our recognition and employee value proposition to attract rising female stars to TechnologyOne. 58 TechnologyOne Annual Report 2023Equal Opportunity TechnologyOne takes diversity and inclusion seriously. We advocate for equal opportunity for all and are committed to addressing the shortage of female technology professionals in Australia. To help achieve this, we provide equal pay opportunities for men and women and have a zero-tolerance policy for discrimination and harassment of any kind. Recruitment and promotion within TechnologyOne are based only on the relevant skills, experience, qualifications, aspirations, potential and aptitude of applicants. Women make up 38% per cent of TechnologyOne’s workforce, which is high compared to other technology and software companies globally. However, we are committed to further increasing the representation of women by working with strategic partners to encourage more women to pursue STEM-based careers. In doing so, we play a leading role in growing a more diverse pipeline of future candidates to work in technical fields and at TechnologyOne. Some key programs TechnologyOne supported this year included the Women in Digital and the Queensland Women in Technology Awards. 59 Making life simple for our communityWellbeing Initiatives At TechnologyOne, our ‘People are Our Power’, with a firm belief that in keeping healthy minds, bodies, and finances ensure our Life@TechOne has balance and purpose. Wellbeing is a key priority for the organisation and consists of three key pillars: Mental, Physical, and Financial. To support team members’ financial wellbeing, the company launched the first Employee Share Plan (ESP). The TechnologyOne ESP is an opt-in scheme established to help foster a culture of shared ownership in the business, offering team members the opportunity to purchase shares in a simple and straightforward way. Information sessions to help educate team members on shares was offered as part of this program. Getting active positively impacts both physical and mental wellbeing. TechnologyOne offers all team members access to a gym near their local office to help team members seamlessly make exercise part of their day-to- day life. 60 TechnologyOne Annual Report 2023Sustainability TechnologyOne also retires credits generated by the Oakvale Native Forest Protection Project in NSW which protects native forest from deforestation and in turn protects the native fauna (including the crucifix toad, planigale, kultarr, native bees, and wedge-tailed eagles which make their home on the property). TechnologyOne is committed to managing our business operations in an environmentally responsible manner. Our headquarters in Brisbane’s Fortitude Valley has a Six Green Star environmental rating. The building includes numerous environmentally rated sustainable development features, including 50 per cent more fresh air than standard commercial buildings, carbon dioxide monitoring, external views to maximise daylight, energy-efficient lighting, dedicated exhausts in photocopier areas, a gas-powered generator and a large rainwater collection area on the roof to supply water for the toilets and garden irrigation. We are proud to continue our Climate Active carbon neutral certification through offsetting our carbon footprint with certified carbon credits generated through an energy wind farm in India which re-invests the funds back into the community including training for local youth and developing local healthcare systems, clean water, and sanitation. 61 Making life simple for our communityFY23 Sustainability performance at a glance Responsible business Customer Community • • • Maintained a comprehensive corporate governance framework based on risk management, compliance, and assurance controls Invested $112m in R&D for FY23, which is approximately 25 per cent of revenue. Achieved FY23 record revenues, profit and SaaS ARR • • • Maintained 99 per cent customer retention and 99.9 per cent SaaS uptime Released two software upgrades – 2023A & 2023B – to deliver enhancements designed to simplify the way our customers work Maintained SaaS certifications and accreditations to provide the highest levels of data protection • • • • • $856,849 of profit contributed to the TechnologyOne Foundation to give back to our communities 5,341 hours volunteered to charity and community organisations 900 SolarBuddy lights/ assembled for disadvantaged children in Fiji, Papua New Guinea, and Sudan Awarded the Community Contribution Award 2023 by the Australian Business Awards Completed over 230 vendor screening assessments for new and existing suppliers 62 TechnologyOne Annual Report 2023For more information see our Sustainability Report on our website or scan the QR code. Our people Environment • • • • Employee engagement score increased to 34 (up 94 per cent since FY21), a continued step towards our FY26 target of +50 Increased women in senior roles to 43 per cent Awarded Employer of Choice for 2023 by the Australian Business Awards No fatalities or material workplace injuries reported during the year • • • Maintained Climate Active carbon neutral certification for our global operations Decreased our global Scope 1 and 2 emissions by 19 per cent against FY22 Set company-wide targets to reduce our Scope 1 and 2 global emissions by 80 per cent by 2025 and 100 per cent by 2030 from a FY22 baseline 63 Making life simple for our communityThe TechnologyOne Foundation is dedicated to making a difference to disadvantaged children and families in our communities by empowering them to transform their lives and create their own pathways to success. The Foundation was established in 2016 to ensure that charitable giving would become a long-term initiative for the business and encourage philanthropy to become part of the company culture. Our Foundation helps great Australians achieve great things and we are committed to long term contributions to our key partners. The 1% Pledge The TechnologyOne Foundation is part of the 1% Pledge corporate philanthropy movement, which is dedicated to making the community a key stakeholder in every business. In committing to the 1% Pledge movement, individuals, and companies donate 1% of their net profit, product, and employee’s time to their communities. TechnologyOne donates 1% of annual net profit to our charity partners, supporting our vision of changing the future by empowering disadvantaged children and families to transform their lives. This strategic approach to charitable giving enables us to make a bigger difference to the causes we support. Through the 1% product, our commitment is to donate 1% of New Annual Recurring Revenue each year. This makes it easier for not-for- profit organisations to access our solutions and take advantage of the efficiencies they provide, which in turn extends the impact of their work. All TechnologyOne team members can also take up to 2.5 days leave each year to volunteer during work hours for charitable and nonprofit organisations. This supports our 1% of time commitment. The total 1% Pledge equated to a more than $2 million commitment by the company in FY23. Our contributions have helped children access education right across the globe – from refugee and First Nation students right here in Brisbane and across Australia to disadvantaged children and youth in New Zealand, Tanzania, UK, Malaysia, Indonesia, Vietnam and India. We are proud of the impact we make through our long-term commitments to charitable organisations, helping families escape the cycle of poverty. 64 TechnologyOne Annual Report 2023More then $2m global pledge. Our goal is to lift 500,000 children and their families out of poverty The Year in Summary $856,849 Profit contributed to the TechnologyOne Foundation to give back to our communities $442,265 Worth of product discounts to NFPs 5,341 hours Of volunteering, equating to $41,371 Raised by team members (employee generated) Delivered in house education programs for The Salvation Army Independent School 85 Charitable events supported worldwide 900 Solar Buddies built 65 Making life simple for our communityOur Key Charity Partners Opportunity International Designs, delivers, and scales innovative financial solutions that help families living in extreme poverty build sustainable livelihoods and access quality education for their children. The Salvation Army Providing broad range and far-reaching social services to diverse people experiencing hardship or injustice, including youth support, accommodation services, addition recovery, emergency relief and financial counselling. The School of Saint Jude Providing a free, high-quality education to children in poverty and with social pressures in Tanzania to complete their schooling. Solar Buddy Uniting a global community to gift six million solar lights to children living in energy poverty by 2030, to help them to study after dark and improve their education outcomes. The Fred Hollows Foundation Treats, trains, and equips the local communities to expand the reach of eye care services, ensuring the poorest and most marginalised groups, including children, can access free or low-cost care. The Smith Family Helping disadvantaged Australians to get the most out of their education to create better futures for themselves. St James Bursary Bursary Endowment Fund – Providing an extensive tertiary education pathway to an array of cultural, socioeconomic, and academic backgrounds. Dignity for Children Foundation Aims to break the cycle of poverty through the provision of quality and transformative education for children aged 2 – 19 years. 66 TechnologyOne Annual Report 2023How we’re making a difference over time 83,628 children and families in partnership with Opportunity International Australia 900 lights in partnership with SolarBuddy Enrolled 315 new students for a free quality education and supported 210 of graduating students on STEM pathways in partnership with The School of St Jude 24 students provided TAFE and higher education scholarships in partnership with The Salvation Army 10,684 school children and community members educated in eye health in partnership with The Fred Hollows Foundation Supporting 58 First Nations students and working together to help close the gap in educational outcomes in partnership with The Smith Family 2,349 hot meals prepared for disadvantaged Kiwi children in partnership with KidsCan 300 students have been equipped to ensure they have an equal chance at school in partnership with St James Bursary Fund Our work with Opportunity International Australia Through our donations to and partnership with the microfinance group Opportunity International Australia, we are transforming communities and helping families. We aim to lift 500,000 children and families out of poverty over a 15-year period. As a result of this partnership, families in India can access small loans to enable them to build businesses. This will also help them to earn regular incomes to support themselves, as well as feed, clothe, and educate their children. With funds for initiatives such as starting a shop or buying seeds for a vegetable farm, families can transform their lives and their children’s futures. Further, because 98 per cent of the small loans are repaid and recycled, the impact creates a positive ripple effect in their communities as more jobs are created. Those jobs might include delivering goods or helping with sewing and weaving orders. Boosting local communities With more income and therefore more money to spend on items such as food and transport, families who used to live in poverty become active participants in their local economies. This benefits the providers of those products and services, who are themselves often entrepreneurs. This virtuous cycle ensures that microfinance provides a long-term boost to economies and helps to develop self-sustaining communities more so than one-time handouts. Creating change Micro-entrepreneurs are also to use their influence to bring about positive changes in their communities. With the confidence that comes with having their own businesses, people can begin to seek better infrastructure or educational facilities from government or bring local families together to take on community projects. Our support to date, with the benefit of leverage and recycling of funda, has helped 83,628 children and their families to free themselves from poverty. Opportunity International believes that every person has the right to reach their potential. Just like us, people living in poverty have dreams and hopes. But while talent is universal, opportunity is not. Our giving to Opportunity is changing that equation. 67 Making life simple for our communityFinancial statement 68 TechnologyOne Annual Report 202369 Making life simple for our communityContents Results for announcement to the market Directors’ Report Independent Auditor's Declaration Remuneration Report Corporate Governance Statement Voluntary Tax Transparency Report Financial Report Consolidated income statement Consolidated statement of comprehensive income Consolidated statement of financial position Consolidated statement of changes in equity Consolidated statement of cash flows Notes to the consolidated financial statements Directors' Declaration Independent Auditor's Report Shareholder information Corporate directory - Technology One Limited 71 72 84 85 111 124 125 126 126 127 128 129 130 167 168 174 175 70 TechnologyOne Annual Report 2023 Appendix 4E Results for announcement to the market Results for announcement to the market For the year ended 30 September 2023 For the year ended 30 September 2023 (Compared to the year ended 30 September 2022) Revenue from ordinary activities Profit from ordinary activities after tax attributable to members Net profit for the period attributable to members Up Up Up 17% 16% 16% to to to Dividends CURRENT PERIOD Interim dividend Final dividend Special dividend PRIOR PERIOD Interim dividend Final dividend Special dividend 2023 ($'000) 2022 ($'000) 429,378 368,234 102,876 102,876 88,843 88,843 Amounts per security (cents) Franked amount per security (cents) 4.62 11.90 3.00 4.20 10.82 2.00 2.77 7.14 1.80 2.52 6.49 1.20 The record date for determining entitlements to the final dividend for the year ended 30 September 2023 is 1 December 2023. There will be no conduit foreign income paid on the final dividend. The payment date for the final dividend is 15 December 2023. Profit for the ordinary activities after tax attributable to members Breakdown of the revenue figures above Revenue - SaaS and continuing business Revenue - Legacy licence business Revenue from ordinary activities Up Down 19% 69% to to Basic EPS Diluted EPS 2023 ($'000) 2022 ($'000) 426,379 358,668 2,999 9,566 429,378 368,234 2023 (cents) 31.71 31.54 2022 (cents) 27.51 27.38 Weighted average number of ordinary shares outstanding during the period used in the calculation of the Basic EPS 324,422,822 322,953,789 NTA backing Net tangible asset backing per ordinary share 2023 (cents) 20.04 2022 (cents) 10.01 Compliance statement The report is based on the consolidated financial report which has been audited. Refer to the attached full financial report for all other disclosures in respect of the Appendix 4E. Pat O’Sullivan Chair Brisbane 21 November 2023 71 Making life simple for our communityDirectors’ Report Your Directors present their report on the consolidated entity (referred to hereafter as the Company or the Group) consisting of Technology One Limited and the entities it controlled at the end of, or during, the year ended 30 September 2023. The following persons were Directors of Technology One Limited during the financial year and up to the date of this report: Pat O’Sullivan Appointed 2 March 2021. Experience and expertise Special responsibilities Board Chair Interests in shares and options 39,779 ordinary shares held in Technology One Limited. Pat is a Chartered Accountant and has 40 years’ experience working across a wide range of industries both as an executive and a non-executive director. His last executive role was the Chief Operating Officer and Finance Director of Nine Entertainment Co Pty Limited, a position he held for 6 years until June 2012 and prior to that he was the Chief Financial Officer of Optus for 5 years. He is currently Chair of Carsales.com and Siteminder. His previous ASX non-executive director roles include Afterpay, iiNet, iSelect, APN Outdoor, iSentia and Marley Spoon. Pat is a member of The Institute of Chartered Accountants in Ireland and Australia. He is a graduate of the Harvard Business School’s Advanced Management Program. 72 TechnologyOne Annual Report 2023Edward Chung Appointed 15 August 2023. Experience and expertise Edward has led TechnologyOne through its continued growth trajectory and transformation into Australia’s leading enterprise Software as a Service (SaaS) business. With a passion for growth, innovation, and TechnologyOne’s people, he led the business to become one of Australia's ASX 100 listed companies in 2023 and has long-term continued growth in his sights for the future. Appointed as CEO in May 2017 after more than 10 years in senior executive roles at TechnologyOne, including one and a half years as the company’s Chief Operations Officer. From 2014, Edward headed up TechnologyOne’s products and solutions division, including Research and Development (R&D) where he led the team that transitioned the business into a fully SaaS-based organisation. Prior to that he led the finance and corporate services division and developed the commercial frameworks to drive the company’s expansion. Special responsibilities Managing Director Interests in shares and options 700,068 ordinary shares and 1,340,002 options held in Technology One Limited. John Mactaggart FAICD Appointed 8 December 1999. Experience and expertise Interests in shares and options 24,872,500 ordinary shares in Technology One Limited held beneficially through JL Mactaggart Holdings Pty Ltd. 30,000 ordinary shares in Technology One Limited held via the Jontra trust. Mr Mactaggart’s experience spans industries such as agriculture, agri-tech, manufacturing and software. He co-founded the Australian Association of Angel Investors Limited, is a co-founder of Brisbane Angels and was the Australian representative of the World Business Angels Association. Mr Mactaggart played an integral role in the creation, funding, and development of TechnologyOne and remains a major shareholder. John has been a Fellow of the Australian Institute of Company Directors since 1991. 73 Making life simple for our communityDirectors’ Report his investments, Mr Anstey has added value wherever appropriate to maximise shareholder value and has also been actively involved in the trade sale of seven companies to organisations in the US, Europe and Australia. Mr Anstey is a Fellow of the Australian Institute of Company Directors. Mr Anstey now continues his career in venture capital and corporate advisory roles as a founder of iQ360 Pty Ltd. Interests in shares and options 20,000 ordinary shares in Technology One Limited held beneficially through the Anstey super fund. Richard Anstey FAICD, FAIM Appointed 2 December 2005. Experience and expertise Mr Anstey’s career has spanned over 40 years. His first company, Tangent Group Pty Ltd, established a strong reputation for the development of software products and strategic management consultancy for the banking and finance sector. With the sale of Tangent, he then co-founded lnQbator/iQFunds in 2000, an early-stage investment group focused upon the technology, telecommunications and life sciences sectors. Through iQFunds and personally, Mr Anstey has co-invested in more than 30 companies with the support of Commonwealth Government programs, Venture Capital Funds and both corporate and personal investors. While being an active Non-Executive Director of Dr Jane Andrews GAICD, PhD Appointed 22 February 2016. Experience and expertise Special responsibilities Dr Andrews joined the Board in 2016, bringing more than 15 years leadership experience in research and innovation-based organisations. Chair of the Remuneration Committee, member of the Audit and Risk Committee and the Nomination and Governance Committee. Interests in shares and options 30,600 ordinary shares held in Technology One Limited. As a founder and investor in numerous innovative companies, Dr Andrews has extensive experience in corporate strategy, entrepreneurship, commercialisation, innovation, research and development. Dr Andrews is a Graduate of the Australian Institute of Company Directors, holds a PhD in Life Sciences, a Bachelor of Science (First Class Honours) and a Graduate Diploma in Applied Finance and Investment. 74 TechnologyOne Annual Report 2023Sharon Doyle B Laws (Hons), B IT (Dist), G Dip Bus Admin, FAICD Appointed 28 February 2018. Experience and expertise Ms Doyle is the Executive Chair and majority owner of corporate advisory firm, InterFinancial Corporate Finance Limited. She has successfully navigated technology companies through the challenges of steep global growth curves, with a strong understanding of the dynamics in Software as a Service (SaaS). Ms Doyle’s leadership of InterFinancial has seen her develop a core practice providing strategic advice for technology and other IP-rich, high-growth companies. She also has extensive international experience managing merger, acquisition and private equity processes across the technology industry. Ms Doyle was previously Vice President at Mincom, one of Australia’s most successful enterprise software companies. Ms Doyle is a Non-Executive Director at Auto & General. She holds a Bachelor of Laws (Hons) and Bachelor of Information Technology (Dist.) from the Queensland University of Technology, as well as a Graduate Diploma of Business Administration from the University of Queensland. She is a Fellow of the Australian Institute of Company Directors. Special responsibilities Member of the Audit and Risk Committee and the Nomination and Governance Committee. Interests in shares and options 18,280 ordinary shares in Technology One Limited. Clifford Rosenberg B Bus Sc (Hons), M Sc (Hons) Appointed 27 February 2019. Experience and expertise Mr Rosenberg has more than 25 years’ experience leading change and innovation in technology and media companies. As the former Managing Director of LinkedIn for Australia, NZ and South-East Asia, Mr. Rosenberg started the Australian office in 2009 and oversaw the expansion of LinkedIn in Australia from 1 million members in 2009 to more than 8 million members in 2017. Previously, he was Managing Director at Yahoo! Australia and New Zealand, and prior to that role he was the founder and Managing Director of iTouch Australia NZ where he grew the Australian office to one of the largest mobile content and application providers in Australia. Mr Rosenberg has more than ten years’ experience on the boards of publicly listed companies. His directorships include A2B Australia Limited and Bidcorp. Cliff was also a Non-Executive Director with Nearmap which was sold and delisted in December 2022 as well as Afterpay, which was acquired in January 2022. He holds a Bachelor of Business Science (Hons) from the University of Cape Town and a Masters of Science (Hons) from the Universitat Ben Gurion Ba-Negev. Special responsibilities Chair of the Nomination and Governance Committee and member of the Remuneration Committee. Interests in shares and options 27,533 ordinary shares held in Technology One Limited held beneficially through Clifro Pty Ltd ATF Cliffro Trust. 75 Making life simple for our communityPeter Ball B Bus, CA Appointed 2 March 2020. Experience and expertise Mr Ball is a Chartered Accountant who has enjoyed a long career in the professional services sector spanning nearly 40 years, initially in audit both nationally and internationally, with the last 30 years in management consulting. Mr Ball was a Partner with KPMG for 25 years providing a range of professional services and advice to both public and private sector organisations. He has also held senior roles with KPMG including the national leader of KPMG's Strategic Planning and Economic Development service line and more recently as national partner responsible for the finance and operations for KPMG's Government Advisory Practice. Most of Mr Ball's work involves providing strategic, economic, commercial and business improvement advice to enable organisations to make fully informed business decisions. During his management consulting career Mr Ball has worked across a number of industries including tourism and leisure, gaming and wagering, arts and sports, and state and local governments. Mr Ball has an entrepreneurial spirit and has been involved with a number of start-ups across a range of sectors including property, education, gaming and the pharmaceutical sector. He is also actively involved in the community/not for profit sector having been a Director of Alzheimer's Queensland for over 10 years. Special responsibilities Chair of the Audit & Risk Committee and member of the Remuneration Committee. Interests in shares and options 21,900 ordinary shares held in Technology One Limited held beneficially through the Noosa Hill Super Fund. Ron McLean Appointed 8 December 1999. Retired on 22 February 2023. Experience and expertise Mr McLean has more than 40 years’ experience in the enterprise software industry including holding Senior Executive and Managing Director roles in several international and Australian software companies. Mr McLean joined the Board as a Non-Executive Director in 1992. He was appointed as the General Manager in 1994, Chief Operating Officer in 1999 and was promoted to Chief Executive Officer of Operations in 2003. His involvement in the enterprise software industry has included leading and managing software development, consulting and sales and marketing teams. Mr McLean retired from this role at TechnologyOne on 15 July 2004 and retired as Non-Executive Director on 22 February 2023. 76 TechnologyOne Annual Report 2023Company Secretary Stephen Kennedy B Bus, FGIA Appointed 13 April 2017. Mr Kennedy was appointed Company Secretary on 13 April 2017 and has been employed with TechnologyOne since January 2017. Meetings of Directors The numbers of meetings of the Company's Board of Directors and of each Board Committee held during the year ended 30 September 2023, and the numbers of meetings attended by each Director were: Full meetings of Directors (Board) Meetings of committees Audit & Risk Nomination Remuneration R McLean1 J Mactaggart R Anstey J Andrews S Doyle C Rosenberg P Ball2 P O’Sullivan E Chung3 4(5) 12(13) 13 13 13 12(13) 10(13) 13 0(0) - - - 4 4 - 4 - - - - - 3 3 - - - 3 - 2(3) 1(3) - - - 3 - - 1 Ron McLean retired on 22 February 2023. 2 Edward Chung was appointed Managing Director on 15 August 2023. 3 Peter Ball was on leave without Internet access for a period of 4 days during which time 2 unscheduled Board meetings were held. Where a Director did not attend all meetings of the Board or relevant committee, the number of meetings for which the Director was eligible to attend is shown in brackets. In sections where there is a dash, the Director was not a member of that committee. Principal activities The principal activity of Technology One Limited (the Company) during the financial year was the development, marketing, sales, implementation and support of fully integrated enterprise business software solutions, including: • • • • • • • • • • • • • • • • Technology One Business Analytics Technology One Corporate Performance Management Technology One DXP Local Government Technology One Enterprise Asset Management Technology One Enterprise Budgeting Technology One Enterprise Cash Receipting Technology One Enterprise Content Management Technology One Financials Technology One Human Resource and Payroll Technology One Performance Planning Technology One Property and Rating Technology One Spatial Technology One Strategic Asset Management Technology One Student Management Technology One Supply Chain Management Technology One Timetabling and Scheduling 77 Making life simple for our communityDividends Dividends paid to members during the financial year were as follows: Ordinary shares Final dividend for the year ended 30 September 2022 of 10.82 Cents (2021: 10.09 Cents) per fully paid share paid in December 2022 (2021 - December 2021) 2023 ($’000) 2022 ($’000) 60% franked (2021: 60%) based on tax paid at 30% 35,119 32,454 Special dividend for the year ended 30 September 2022 of 2 Cents (2021: nil) per fully paid share paid in December 2022 Strong balance sheet and Strong cashflow generation at 102% of NPAT – We returned cashflow generation to NPAT ratio of approximately 100%, one year earlier than planned. With significant cash and investment holdings of $223.3 million and no debt, our balance sheet retains flexibility and strength for inorganic growth in the future. These points are discussed later in more detail. • • Profit Before Tax of $129.9m, up 16%, beating guidance of 10%-15% growth. Profit After Tax of $102.9m, up 16%, beating guidance of 10%-15% growth. • Total Annual Recurring Revenue (ARR)1 of $392.9m, up 23%. 60% franked (2021: nil) based on tax paid at 30% 6,491 - • Net Revenue Retention (NRR) of 119%. Above our long-term Interim dividend for the year ended 30 September 2023 of 4.62 Cents (2022: 4.2 Cents) per fully paid share paid in June 2023 (2022: June 2022) target of 115%. • Total Revenue2 of $441.4m, up 19%. • Revenue from our SaaS and Recurring Business of $390.7m, 60% franked (2022: 60%) based on tax paid at 30% 14,995 13,673 up 22%. Total dividends paid 56,605 46,127 Review of operations On behalf of Technology One Limited (TechnologyOne) we are pleased to announce our fourteenth consecutive year of record profit, record revenues, and record SaaS fees. Our Global SaaS ERP solution is making life simple for our community. Continuing strong performance TechnologyOne has consistently delivered strong results since listing on the ASX in 1999. Our ability to deliver these results for 20+ years is due to our clear vision, strategy, culture and our ongoing investment in R&D, which has been validated in March as we entered the ASX 100 index. Highlights for the Year Profit before tax, up 16% – Beating guidance set in May 2023 of 10%-15% profit growth. Total Annual Recurring Revenue (ARR) up 23% – Driven by the significant value proposition of our global SaaS ERP solution. Net Revenue Retention (NRR) of 119%, up from 116% pcp – Existing customers continue to expand their use of our global SaaS ERP solution to streamline their operations. UK ARR up 52% – Our long-term investment in the UK continues to build momentum. Upgrade to medium‑term guidance: now on track to surpass $500 million ARR by FY25 – One year earlier than planned. Investing in the future – With strong results and a strong sales pipeline, this year we made additional investments to enable us to continue to double in size every five years beyond $500 million ARR. These include additional investments in the UK, new products and modules, including DXP, AppBuilder, and SaaS Plus. Additionally, we undertook acquisition due diligence on a potentially transformational combination opportunity. We became the world’s first Solution as a Service (SaaS+) ERP company – We established our visionary SaaS+ offering by combining our mission-critical global SaaS ERP solution and implementation in one single fee, removing the need for traditional, complex, long, risky and expensive consulting implementations to provide faster go-lives and therefore unlocking value for our customers more quickly. • Expenses of $311.5m, up 21%3. • Cash Flow Generation4 of $104.6m, up 36%. • Cash and Investments of $223.3m, up 27%. • Total Dividend of 19.52cps, including a special dividend of 3.0cps, up 15%. • R&D investment of $112.0m before capitalisation, up 21%, which is 25% of revenue. 1 2 3 4 ARR represents future contracted annual revenue at year end. This is a non-IFRS financial measure and is unaudited. Includes other income of $12.0m, driven by the contingent consideration reversal for Scientia of $7.4m Includes $5.9m for the derecognition of certain Scientia intangible assets. Also impacted by acquisition due diligence expenses and investments brought forward. Cash Flow Generation is cash flow from operating activities less capitalised development costs, capitalised commission costs and lease payments. This is a non-IFRS financial measure and is unaudited. Expected to approximate NPAT. Results Summary Total ARR up 23% Adoption of the TechnologyOne global SaaS ERP solution exceeded our expectations, with customer adoption driving Total ARR to $392.9 million, up 23%. TechnologyOne continues to lead in the Local Government sector, where we closed over 25 major deals in FY23 totalling more than $113 million in contract value. Consequently, more than 300 council customers now benefit from our high-quality products in APAC. We continue to win clients from our larger competitors, including the City of Parramatta’s digital transformation project, one of several excellent wins from Infor, and, another returning customer from Oracle. These Local Government customers are just a few examples of councils choosing our market-leading ERP, CiA, with the digital customer at its centre. In the Government sector we signed five major deals with a total contract value of more than $23 million. TechnologyOne successfully completed the transition of our existing 230+ Government customers to SaaS. The new customers we signed validated our SaaS-for-Government vision, with the most notable being the Department of Veteran’s Affairs (DVA), which was awarded to TechnologyOne at the conclusion of a competitive tender process against SAP. DVA, a large agency, chose TechnologyOne for the first stage of its digital transformation based on our proven ability to deliver within the Federal Government. Equally, the Commonwealth’s National Anti-Corruption Commission, with less than 200 staff, knows they will get the same enterprise grade, built-for-Government configuration, and industry-leading cyber security standards as our largest Government customers. 78 TechnologyOne Annual Report 2023We have successfully completed our transition from an on-premise legacy licence business to a SaaS business. Our plan to reduce on-premise legacy licence fees from a high of circa $75 million to zero over five years is complete. We have aggressively grown our SaaS recurring revenue business to replace that revenue, delivering increasing earnings every year. This transition was extremely complex as we re-engineered all parts of our business including our products, our structure, our policies, processes, and disciplines. No other ERP company in the world has successfully made this transition without negatively impacting either it's work or its profit growth. TechnologyOne made the transition to our SaaS solution for our on-premise customers simple and seamless. Customers can move to SaaS in weeks, not years, in stark contrast to those using our competitors’ products. From their first step to SaaS, our customers can easily move to our next generation SaaS ERP, CiA, and take advantage of new technologies, such as Artificial Intelligence and our new Digital Experience Platform (DXP). Net Revenue Retention (NRR) of 119%, up from 116% pcp In FY23, we delivered Net Revenue Retention of 119% which is industry leading in the ERP market and above our long-term target of 115%. At 115% per annum, we will continue to double in size every five years. This clearly shows our products and solutions are resonating with the market. Customers are continuing to take up more products and modules from us as they embrace our enterprise vision and the significant efficiencies and productivity lift that come with it. Our focus is to land a customer with products such as Financials, Property and Rating, or Student Management and then expand with other products and modules over time. As the only true SaaS ERP vendor in the market, our SaaS customers have all products and modules available at all times and are always on the latest software release. This open licence approach removes the friction from TechnologyOne selling and from our customers taking up new products and modules to streamline their business. We continue to invest in our products and modules to provide even deeper mission-critical functionality for the markets we serve. In doing so we increase the available whitespace and runway for our team to sell additional value to our existing customers. Our SaaS customers continue to take-up products and modules at a faster rate than we had seen for our on-premise customers. The average ARR from our customers has grown from $100,000 in FY12 to almost $400,000 in FY23. UK ARR of $26.5 million up 52% We have seen our UK business continue to grow, with ARR up 52% to $26.5 million. We delivered profit of $3.7 million, up from a profit $2.4 million last year, and we see significant opportunities in the coming years in this market which exceeds the size of the APAC market considerably. The regionalisation of our OneEducation solution is now complete for our Student Management and Human Resources and Payroll (HRP) products and we signed two new Student Management deals this year in the UK. Our ERP offering and the breadth and depth of functionality that we bring to the Local Government and Higher Education markets are unique in the UK and our pipeline is growing strongly. We continue to invest in products, sales, marketing and all other functionality in the UK to further accelerate our growth. Upgrade to medium‑term guidance, on track to surpass $500 million ARR by FY25 The quality of the revenue from our latest generation global SaaS ERP business is exceptionally high, given its recurring contractual nature, combined with our industry leading low churn rate of ~1%. Our ARR stands at 90% of Total Revenue1 which means most of our revenue is locked-in at the start of the financial year. This positions us well to achieve strong continuing growth in the new year. Today, our Total ARR is $392.2 million, up 23%. We are upgrading our medium-term target to surpass $500 million ARR by FY25 (previously, “we will surpass $500 million ARR by FY26”). 1 Excludes traditional consulting revenue as it flows from business wins, and the Scientia contingent consideration reversal. Investing in the future TechnologyOne invested $112 million in R&D this year, up 21%. Our R&D program continues to be at the leading edge of our industry, as we embrace new technologies, new concepts and new paradigms. Our R&D team is focused on extending the functionality and capabilities of our global SaaS ERP solution, CiA, which increases the whitespace in the verticals we serve. We continue to invest in new, exciting ideas and innovations, including Solution as a Service (SaaS+), AppBuilder and Digital Experience Platform (DXP) for Local Government and Higher Education. Our 16th product, DXP LG, was released for general adoption and extends our ERP from traditional back-office users to residents. 79 Making life simple for our communityWe became the world’s first Solution as a Service (SaaS+) ERP company Solution as a Service (SaaS+) will be a game changer in the ERP industry. It is the next logical evolution of SaaS where TechnologyOne delivers the entire outcome faster, with little risk and in one single annual fee to our customers. SaaS+ will deliver faster time to value as we continue to dramatically drive down implementation timeframes, removing the need for traditional long-drawn-out, risky implementations. Through the “Power of One”, TechnologyOne is the only SaaS ERP provider able to deliver on this compelling proposition as we own all parts of the value chain with deep mission-critical products, industry-specific IP built over 36 years and our highly skilled in-house consulting team. During FY23 TechnologyOne launched our new SaaS+ offering, which was embraced by 34 customers across all our industry verticals, surpassing all our initial expectations and demonstrating a very positive outlook for our future approach to sales and delivery. Queensland Parliamentary Services was the first government example, recognising how crucial time to value is for government agencies in times of economic and budget uncertainty. Other notable examples include the London Business School of Economics in the UK and our first full OneCouncil solution, inclusive of Property & Rating, at Whitsunday Regional Council in Australia. Our SaaS+ proposition is resonating with the market. Our shift from traditional new project consulting revenue to SaaS+ revenue will mirror our successful transition from legacy license fees to SaaS revenue, which is now complete. This strategic move enhances our focus on high-quality, recurring revenue. We are excited about the opportunities these investments will bring to our APAC and UK customers. Importantly, SaaS+ has become the go-to-market sales approach in the UK. These investments in R&D and SaaS+, to build our future platforms for growth, enable our ability to continue to double in size every five years. We will manage this significant investment within our total cost base, continuing to balance strong profit growth with investment for future growth beyond $500 million ARR. Profit Before Tax margin to return to growth in FY24 As we transitioned to SaaS and continue to build deep pipelines, our profit and loss has become more predictable. Early in our second half, we could see with confidence that we were going to have a strong full year. We have delivered above guidance profit before tax growth of 16%, strong ARR growth of 23%, NRR of 119% (above our long-term target of 115%) and cashflow generation to NPAT of 102% for the year, one year earlier than planned. Combined with a strong pipeline, this allowed us to make additional investments in our ambitious R&D program earlier than planned. These long-term investments, including DXP, AppBuilder, additional modules and SaaS+, will enable us to grow beyond $500 million ARR and continue to double in size every five years. We also invested in the UK and in scaling our service centre in Malaysia. In considering future growth opportunities, TechnologyOne continues to pursue potential deals that will unlock further value for shareholders and strengthen our product offering. During the year we made a $2 million investment in due diligence to put forward a non-binding and indicative proposal for a public-listed UK-based higher education software provider. Following significant and disciplined due diligence, we did not proceed as the potential acquisition did not meet our set criteria and the prudent decision was made not to proceed. TechnologyOne remains in a strong position to explore other appropriate M&A opportunities in the near and medium term given the company’s strong balance sheet. These planned additional investments resulted in a flat underlying profit before tax margin of 30%. We expect margin growth to return in FY24, and we see Group margins continuing to improve to 35% in the coming years, driven by the significant economies of scale from our single instance multi-tenanted global SaaS ERP solution. Investment in people and culture Our people solve incredibly complex business problems for our customers and have delivered our massively broad and deep global SaaS ERP solution. We compete and win against the world’s largest multinational software companies, which have R&D teams with tens of thousands of staff. We have set an ambitious target Employee Net Promoter Score (eNPS) of +50 by FY26. Our eNPS score increased to +34 driven by new and exciting people programs and initiatives delivered in FY23. Since inception, we have been extremely successful, by any measure, because of our consistent strategy, mission, purpose, core beliefs, values, leadership philosophies and compelling customer experience. During the year, we refined and simplified our core beliefs and compelling customer experience philosophies and relaunched them to our team through our Culture Book, a collection of stories that explain to new starters and remind long-timers what makes TechnologyOne special and how we make the impossible, possible. This completes the 24-month refresh of the TechOne Way, the key artefact that describes the DNA of our business to our staff. During the year, we promoted 130 team members across all areas of our business. We continued our focus on diversity and strategies to increase the number of women across the organisation. Women now hold more than 42% of senior roles against an industry average of 25%. Our overall representation of women across all roles at TechnologyOne has increased to 38%. We have also launched Australia’s best Employee Share Plan which provides one free share for every two shares purchased by our employees. In the year, 44% of our team members elected to become owners of TechnologyOne to share in the growth of our great company. To continue to double in size every five years, we launched our ongoing investment in our leaders through our Leadership Summit. This initiative is designed to grow our leaders, teach them the TechOne Way and equip them to lead our teams to make the impossible, possible. The first cohort graduated in FY23 and cohort two commenced this year. 80 TechnologyOne Annual Report 2023Social ‑ TechnologyOne Foundation The TechnologyOne Foundation defines who we are as a company and is an important driver of our culture and values. We are committed to making a difference to underprivileged, disadvantaged, and at-risk youths, by empowering them to transform their lives and create their own pathways of success. We believe that it is through youth that we can have the greatest impact on the future. We have an ambitious goal of lifting 500,000 children and their families out of poverty by FY31, which we are on track to achieve. An important part of the TechnologyOne Foundation is supporting great Australians doing great work, both locally and internationally, which includes the Fred Hollows Foundation, School of St Jude, Opportunity International, Solar Buddy and St James College. The Foundation will continue to grow with TechnologyOne through our commitment to the 1% pledge – which includes 1% profit, 1% product and 1% time. This represents a commitment of more than $2 million each year. The TechnologyOne Foundation will continue to shape the DNA of our company and staff. Governance Given that TechnologyOne is such a significant R&D and innovation-led business, coupled with our long track record of profitable growth, we continue our cautious and measured approach to the renewal of our Board. We would like to recognise Ron McLean, who after 31 years of service firstly as an executive and subsequently a non-executive director retired from the company on 26 February 2023. Ron was instrumental in developing the sales team and disciplines and TechnologyOne culture over his time and left the business in excellent shape for future growth. We wish him well in his future endeavours. Please refer to our TechnologyOne website at: https://www.technologyonecorp.com/company/investors/ corporate‑governance for our full Sustainability Report and Corporate Governance Statement. Strong balance sheet and Strong cashflow generation at 102% of NPAT TechnologyOne continues to have a strong balance sheet with net assets of $306.0 million, up 28% and cash and investments of $223.3 million, up 27%. Cash Flow Generation (CFG) was once again strong at $104.6 million for the full year, versus a Net Profit After Tax of $102.9 million, a CFG to NPAT ratio >100% which is one year earlier than planned. TechnologyOne continues its long history of strong CFG, which we expect will continue to approximate Net Profit After Tax in FY24 and beyond. Dividend Considering the company’s strong results, our confidence in the future, and the significant capacity in our balance sheet to invest in growth and opportunities that may arise, we have announced a Special Dividend of 3.0 cents per share in addition to our final FY23 dividend of 11.90 cents per share. For the full year, our dividend has increased to 19.52 cents per share (including the Special Dividend), up 15% on the prior year, and in line with our Net Profit After Tax growth of 16%. Executive remuneration TechnologyOne remains focused on delivering strong growth and our current remuneration structure positions us well to continue to achieve this – both in the short and long-term, but also to ensure alignment across our Executive KMP. We continued to execute our strategy, delivering strong results again in FY23. When many businesses have struggled to deliver in uncertain economic and geopolitical times, TechnologyOne has delivered exceptional growth – Total ARR growth of 23%, Record Net Profit After Tax growth of 16%, and upgraded our medium-term guidance to surpass $500 million ARR by FY25. Our 3-year rolling TSR is 97% and annual TSR is 48%. There is a clear alignment between the performance of the business and executive remuneration. Environment, Social, Governance (ESG) Environment TechnologyOne is committed to its ESG obligations, beyond just regulatory requirements. We became Carbon Neutral globally and this year is our second year benchmarking and reporting under the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). While the TechnologyOne operations do not have a material impact on the environment, we acknowledge that it is the changing attitude of many that will have a material impact on reducing climate change. 81 Making life simple for our communitySignificant changes in the state of affairs There were no significant changes in the Company's state of affairs during the financial year. Matters subsequent to the end of the financial year On 21 November 2023, the Directors of Technology One Limited declared a final and special dividend on ordinary shares in respect of the 2023 financial year. The total amount of the dividend is $48,376,534 and is 60% franked. No other matter or circumstance has occurred subsequent to period end that has significantly affected, or may significantly affect, the operations of the Company, the results of those operations or the state of affairs of the Company or economic entity in subsequent financial years. Likely developments Refer to the Review of Operations section above. Indemnification and Insurance of Officers Insurance and indemnity arrangements concerning officers of the Company were renewed or continued during the year ended 30 September 2023. An indemnity agreement is in place between TechnologyOne and each of the Directors of the Company named earlier in this report and with each full-time Executive officer and secretary of the Company. Under the agreement, the Company has indemnified those officers against any claim or for any expenses or costs that may arise due to work performed in their respective capacities. TechnologyOne paid an insurance premium in respect of a contract insuring each of the Directors of the Company named earlier in this report and each full-time Executive officer and secretary of the Company, against all liabilities and expenses arising as a result of work performed in their respective capacities, to the extent permitted by law. Non‑audit services Non-audit services provided by the Company’s auditor, Ernst & Young, in the current financial period and prior financial year included taxation advice and other advisory services. The Directors are satisfied that the provision of non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act. 2023 ($) 2022 ($) Ernst and Young: Taxation advice and other advisory services 948,484 197,241 Total remuneration 948,484 197,241 Non-audit services include $301,734 in relation to taxation advice and $646,750 in relation to acquisition due diligence services for an acquisition target that the Company did not ultimately pursue. 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 on page 84. Rounding of amounts The Company is of a kind referred to in Instrument 2016/191, issued by the Australian Securities and Investments Commission, relating to the 'rounding off' of amounts in the Directors' report and financial report. Amounts in the Directors' report and financial report have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, to the nearest dollar. Environmental regulation TechnologyOne has assessed the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). The outcome of the assessment is discussed in the section below. TechnologyOne’s Climate change position Our operations do not have a material impact on the environment. We acknowledge that climate change mitigation will require deep and permanent greenhouse gas reductions as part of a universal transformation from business, government, and individuals collectively. To this end, TechnologyOne accepts the science of climate change and is committed to reducing our carbon emissions to the lowest amount possible and offsetting residual amounts to maintain carbon neutrality. TechnologyOne has adopted an iterative approach to implementing the TCFD recommendations. We will continue to assess how we quantify climate-related risks and opportunities, how the Board integrates climate-related considerations into decision-making and strategy, and how we engage with shareholders, customers, team members, suppliers and other key stakeholders. 82 TechnologyOne Annual Report 2023Share options Unissued shares As at the date of this report, there were 5,909,979 unissued ordinary shares under options (4,752,991 at the reporting date). Refer to note 32 for further details of the options outstanding. Option holders do not have any right, by virtue of the option, to participate in any share issue of the company. Options granted carry no dividend right to holders. Shares issued on the exercise of options During the year, employees and Executives have exercised options to acquire 1,303,806 fully paid ordinary shares in Technology One Limited at a weighted average exercise price of $6.24. Refer to note 32 for further details of the options exercised during the year. Corporate governance statement The most recent Corporate Governance Statement can be located at the Group’s Website (www.technologyonecorp.com). This report is made in accordance with a resolution of Directors. Pat O’Sullivan Chair Brisbane 21 November 2023 Climate Governance The TechnologyOne Board maintains oversight of sustainability matters, translating these into our strategy for long-term value. TechnologyOne’s broader focus on environmental, social and governance factors (ESG) is overseen by the Nomination & Governance Committee. The responsibility for implementing ESG sits with each internal Business Division. Our Risk Management Framework, the Audit & Risk Committee oversees TechnologyOne’s material enterprise-wide risks and the integrity of our statutory statements. The Remuneration Committee considers executive performance on ESG issues. Climate Strategy To understand the strategic implications of climate-related risks and opportunities, we assessed the potential positive and negative impacts on our business against three global warming scenarios. Under the 2°C scenario characterised by late, disruptive and sudden climate action, our key risks include reputational and legal risks associated with a lack of climate risk disclosure and action, as well as financial risks. Under the 4°C scenario characterised by limited climate action beyond what has already been committed, key aspects of the risks relate to physical damage, network disruptions, missed sales opportunities and health impacts on our staff. Climate Risk Management We aim to ensure that our risk management process is dynamic and that emerging and existing material climate related risks are identified, managed, and incorporated into our existing risk management processes. Our GHG reduction strategy involves three phases: Phase 1: Phase 1: measure (understand the key emission sources) Phase 2: Phase 2: manage and minimise (reduce energy consumption and associated carbon emissions where practicable) Phase 3: Phase 3: offset (all or a proportion of our carbon emissions). Climate Metrics and Targets During the reporting period, TechnologyOne conducted a GHG assessment in accordance with the GHG Protocol: A Corporate Accounting and Reporting Standard and Corporate Value Chain. TechnologyOne’s total global emissions for FY23 amounted to 8,465 tonnes of carbon dioxide equivalent. We aim to use any arising opportunities to reduce our emissions. We’re focused on reducing our impact on the environment and are proud to be Climate Active carbon-neutral certified for our global operations. Reflective of the increased urgency to accelerate carbon reduction initiatives, we recently set reduction targets to reduce our Scope 1 and 2 global emissions by 80% by 2025 and 100% by 2030 from a FY22 baseline. Refer to our 2023 Sustainability Report for further TCFD related information. 83 Making life simple for our communityIndependent Auditor's Declaration 84 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Ernst & Young 111 Eagle Street Brisbane QLD 4000 Australia GPO Box 7878 Brisbane QLD 4001 Tel: +61 7 3011 3333 Fax: +61 7 3011 3100 ey.com/au Auditor’s Independence Declaration to the Directors of Technology One Limited As lead auditor for the audit of the financial report of Technology One Limited for the financial year ended 30 September 2023, I declare to the best of my knowledge and belief, there have been: a. No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; b. No contraventions of any applicable code of professional conduct in relation to the audit; and c. No non-audit services provided that contravene any applicable code of professional conduct in relation to the audit. This declaration is in respect of Technology One Limited and the entities it controlled during the financial year. Ernst & Young John Robinson Partner 21 November 2023 TechnologyOne Annual Report 2023Remuneration Report (Unaudited) Introduction from the Chair of the Remuneration Committee Dear Shareholders, On behalf of TechnologyOne’s Remuneration Committee (the Committee), I am pleased to present our Remuneration Report (the Report) for the year ended 30 September 2023. The primary objective of the 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. We are one of only a few ERP vendors globally. Our unique approach sees us highly focused on six vertical markets with the deepest functionality for those markets, delivered through our 16 products and over 400 modules. This includes mission-critical operational systems for local government and higher education. We have rewritten our rich ERP four times over the last 36 years, taking advantage of the latest technological shifts for our customers – relational database, PC, web and now SaaS. Our Power of One approach, core to our strategy, means we build, market, sell, implement, support, and run our ERP for our customers. TechnologyOne’s products make life simple for our customers, but our business is complex and unique, demanding deep and broad expertise from our exceptional team. Execution of our consistent strategy by our leaders has been key to our strong growth. We constantly adapt and evolve to changes in technology, the market and feedback from our customers while remaining focused on delivery for our verticals. This year TechnologyOne entered the S&P/ASX 100 index. This is an important milestone for the company, which commenced in 1987 as a small start-up venture operating from a hide plant in Hemmant, Brisbane. Since listing on the ASX in 1999, TechnologyOne has delivered more than 18% compound growth for our shareholders, turning $1 invested 24 years ago into more than $50. With dividends reinvested, over the last 10 years, TechnologyOne's Total Shareholder Return (TSR) has exceeded the ASX 200 by more than 6 times-more than 860%. The growth has been delivered via execution of our strategy which aims to double our ARR every five years. Pleasingly, through this same period, our employee Net Promoter Score has grown from +1 to +34, and we are on track to deliver our ambitious goal of $500m Annual Recurring Revenue (ARR) by FY25, earlier than planned. As we move into this next period, we have set our focus on doubling from $500m to $1bn ARR by FY30. Our remuneration framework provides a tight relationship between performance and remuneration and has driven strong growth for the company. In FY23, we undertook independent benchmarking for KMP remuneration. We will continue to benchmark to ensure we remain competitive and can attract and retain talented executives with the specialised skills and expertise required. This Report intends to describe the linkage between our strategic initiatives, remuneration principles and remuneration framework, and how these, in turn, drive shareholder returns. Incentive outcomes and alignment to Company performance Company performance was strong with exceptional results delivered in FY23 across all key metrics: • Total ARR growth of 23%. • Net profit before tax growth of 16%. • UK profit up 54% at $3.7m. These results indicate we are on track to deliver our ambitious goal of $500m ARR by FY25, earlier than planned. Continuing Executive KMP remuneration continues to be clearly aligned with shareholder value creation: • • Total continuing Executive KMP remuneration grew by 5% between 2022 and 2023 (excluding retention LTI). Remuneration growth is relative to, and less than, the Company’s 16% growth in statutory net profit before tax (NPBT). Short-Term Incentive (STI) outcomes across our continuing Executive KMP were up 15% directly reflecting 15% growth in Executive NPBT. • Deferred STI earned was up 16% in line with average growth in Executive NPBT over the last three years. • The Long-Term Incentive (LTI) plan, based on earnings per share (EPS) growth and total shareholder return (TSR) relative to technology companies, resulted in 100% of ‘at risk’ LTI vesting for our Continuing Executive KMP. This result reflects the strong performance over the 3-year vesting period, with challenging LTI targets set by the Board achieved, ensuring superior performance and long-term shareholder wealth creation. Executive and Director changes Mr Edward Chung, our CEO for the past 6 years was appointed to the Board as Managing Director on 15 August 2023. Mr Paul Jobbins resigned as CFO and company secretary on 17 July 2023. Mr Cale Bennett commenced as CFO on 1 August 2023. Mr Ron McLean retired from the Board at the end of the 2023 AGM on 22 February 2023. (a) Executive KMP remuneration There has been no change to the continuing Executive KMP remuneration framework. Fixed base salary increases were limited to 1.5%, including the super guarantee rate increase. Actual short-term incentive and deferred STI increased in line with Executive Net Profit Before Tax (NPBT). Long-term incentives were increased by 1%, as the opportunity as a percentage of salary remained unchanged. Increases in salary and LTI were less than inflation. For FY23, Fixed remuneration comprised no more than 29% of Executive KMP remuneration. (b) Directors’ fees Shareholders resolved to increase the fee pool to $2,000,000 at the FY22 Annual General Meeting. The increase is the first increase since the Director Fee Pool was set at $1,500,000 four years earlier. The increased pool resulted from independent benchmarking, Board renewal, including an experienced non-executive Chair, and recognition of the increased workload and management of complexity and growth for the non-executive Chair and Directors. Further details are described in section 7 of the Report. Afterword TechnologyOne remains focused on delivering sustainable long-term growth. We believe that our remuneration policies continue to position us well for providing our shareholders with strong returns via effective executive attraction, retention and focus on performance. Dr Jane Andrews Chair, Remuneration Committee Brisbane 21 November 2023 85 Making life simple for our communityRemuneration Report (Audited) Contents The remuneration report contains the following sections. 1 About this report 2 Remuneration governance 3 Executive Remuneration at TechnologyOne - strategy, principles, and target mix 4 How Executive Remuneration is structured 5 Relationship between remuneration and Company performance 6 Service agreements for the Executive KMP 7 Non-executive Director fees 8 Statutory Remuneration 9 Additional statutory disclosures 10 Key questions 87 88 88 90 95 102 102 104 105 108 86 TechnologyOne Annual Report 20231 1.1 About this report Basis for preparation of FY23 Remuneration Report The information in this Remuneration Report has been prepared based on the requirements of the Corporations Act 2001 and applicable Accounting Standards. The Remuneration Report is designed to provide shareholders with a clear and detailed understanding of TechnologyOne’s remuneration framework, and the link between our remuneration policies and Company performance. The Remuneration Report details the remuneration framework for TechnologyOne’s Key Management Personnel (KMP). For the purpose of this report, KMP are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of TechnologyOne, directly or indirectly, including any Director (whether Executive or otherwise). This report has been audited. 1.2 People covered by the Remuneration Report The Remuneration Report discloses the remuneration arrangements and outcomes for those individuals who we have determined to meet the definition of KMP under AASB 124 Related Party Disclosures. The below table identifies each KMP, their position and term as KMP. Name Position NON‑EXECUTIVE DIRECTORS Pat O’Sullivan Ron McLean Independent Non-Executive Chair Independent Director John Mactaggart Non-independent Director Major shareholder Richard Anstey Independent Director Dr Jane Andrews Independent Director Remuneration Committee Chair Audit and Risk Committee Nomination and Governance Committee Sharon Doyle Independent Director Audit and Risk Committee Nomination and Governance Committee Clifford Rosenberg Independent Director Nomination and Governance Committee Chair Remuneration Committee Peter Ball Independent Director Audit and Risk Committee Chair Remuneration Committee EXECUTIVE DIRECTORS Edward Chung Managing Director and Chief Executive Officer EXECUTIVE KMP Stuart MacDonald Chief Operating Officer Paul Jobbins Chief Financial Officer Cale Bennett Chief Financial Officer Period Full year 1 October 2022 – 22 February 2023 Full year Full year Full year Full year Full year Full year Full year (Managing Director from 15 August 2023) Full year 1 October 2022 – 17 July 2023 1 August – 30 September 2023 87 Making life simple for our communityRemuneration Report (Audited) 2 Remuneration governance The Remuneration Committee (the Committee) is responsible for developing the remuneration framework for TechnologyOne KMPs and making recommendations for KMP’s remuneration to the Board. The Committee sets the remuneration philosophy and policies for Board approval. The responsibilities of the Committee are further outlined in their Charter, which is reviewed annually by the Board. The key responsibilities of the Committee include: • Advising the Board on TechnologyOne’s policy for KMP’s remuneration. • Making recommendations to the Board on the remuneration arrangements for KMP to ensure they are aligned with TechnologyOne’s vision and are set competitively to the market. • Approving KMP terms of employment. In making recommendations to the Board, the Committee reviews the appropriateness of the nature and amount of remuneration to KMP on an annual basis. Prior to the award or vesting of any deferred remuneration including deferred Short-Term Incentives (STI) and Long-Term Incentives (LTI), the Committee considers whether there are any irregularities or other factors (including ESG matters) that would affect the payment or vesting of that award. This is a formal agenda item for the Remuneration Committee and it is conducted without the executives present. 3 Executive Remuneration at TechnologyOne ‑ strategy, principles, and target mix Our remuneration strategy and principles 3.1 At TechnologyOne, our remuneration strategy is aligned with our vision of “making life simple for our community”. The Board believes that in order to deliver on our vision and build sustainable long-term shareholder growth, TechnologyOne must have a remuneration framework that allows it to compete for talent both locally and globally in a highly competitive and fast-moving environment, and against companies such as Oracle, SAP and Workday, as well as other Australian and global software companies. The remuneration principles that underpin our remuneration strategy and framework are to: • Attract, retain and motivate skilled Directors and Executives in • leadership positions. Provide remuneration which is appropriate and competitive both internally and against comparable companies (our peers). • Align Executives’ financial rewards with shareholder interests and our business strategy. • Achieve outstanding shareholder wealth creation. • Articulate clearly to Executives the direct link between individual and Company performance, and individual financial reward. • Reward superior performance, while managing risks. • Provide flexibility to meet changing needs and emerging competitive market practices. • Commit to diversity, reflecting a fair and equitable remuneration framework. • Commit to simplicity. Our Executive remuneration framework aligns with common practices for ASX 100 companies, with adaptations to meet the demands of a growing company in the enterprise software market. The structure of our Executive remuneration comprises: • Comparatively low fixed remuneration to enable a greater emphasis on performance. • Relatively large at-risk STI portion aligning focus to current year performance. • A deferred STI component to help further drive long-term shareholder wealth and retention. • LTIs linked to long-term strategy, targets, and shareholder wealth creation. Due to the nature of our SaaS revenue generation, the winning of new business and driving continued profit growth in the current year is the key to our long-term success. It is for this reason, our short-term incentive (STI), as a percentage of the total remuneration, tends to be higher than our ASX-listed peers. Correspondingly, the fixed remuneration for our Executives is comparatively low compared to our ASX-listed peers. The significant weighting towards the STI encourages our Executives to drive new business and financial performance in the current year, which creates Annual Recurring Revenue (ARR)1 for future years, therefore securing long-term success and shareholder wealth. 1 ARR is not an IFRS measure and is unaudited, it represents future contracted annual revenue at year end. 88 TechnologyOne Annual Report 2023TechnologyOne Executives are focused on, and rewarded for, the long-term outcomes of the business through the Deferred STI and a generally larger LTI proportion of remuneration than our ASX-listed peers. The talent pool in Australia for Executives with large-scale enterprise software companies is highly competitive. Therefore, it is important to ensure that our remuneration framework is appropriately structured for the enterprise software market. We believe that our remuneration structure offers the necessary flexibility and incentive to ensure that we attract and retain talented Executives who understand the industry and, in turn, drive shareholder value. Target remuneration mix Target granted remuneration mix at the beginning of the contract for the CEO (Figure 1), and other Executive KMP (Figure 3) is represented below, based on target STI achievement and maximum LTI achievement. Over time, the remuneration changes due to a larger increase in STI relative to other remuneration components. The below represents the target contract remuneration mix for the CEO at the beginning of a contract (Figure 1) and demonstrates how the remuneration mix changes over time (Figure 2). The below graphs show the accounting expense of the remuneration mix, excluding the expense related to the one-off retention LTIs granted in FY22. Figure 1. Target CEO remuneration mix (contract target started in FY17) Figure 2. CEO remuneration mix FY23 At-risk 27% 7% 33% At-risk 47% 10% 18% Fixed 33% Fixed 25% Fixed STI-current Deferred STI LTI Fixed STI-current Deferred STI LTI The below represents the target contracted remuneration mix for other continuing Executive KMP at the beginning of a contract (Figure 3) and demonstrates how the remuneration mix changes over time (Figure 4). Figure 3. Target Executive KMP remuneration mix (contract target started in FY17) Figure 4. Executive KMP remuneration mix FY23 At-risk 27% 7% 33% At-risk 46% 10% 15% Fixed 33% Fixed 29% Fixed STI-current Deferred STI LTI Fixed STI-current Deferred STI LTI While the STI is the largest component of remuneration, Deferred STI encourages Executives to have a sustainable long-term mindset when approaching profit generation. The combination of STI for the current year, and deferred STI and LTI for future years, ensures the overall variable remuneration is balanced between achieving short-term and long-term outcomes for the business and shareholders. The growth in STI-current and Deferred STI as a proportion of overall remuneration seen in the graphs above arises due to the STI being directly linked to profit, which has grown strongly over time. Refer to section 4.2 for more details on the STI-current. 89 Making life simple for our communityRemuneration Report (Audited) 4 How Executive Remuneration is structured 4.1 Fixed remuneration Fixed remuneration comprises base salary plus superannuation. Fixed base salary increased by 1% for FY23. The increase in the Superannuation Guarantee rate was paid for by the company for Executive KMP, in line with policy for all employees. This resulted in a further increase in fixed remuneration of 0.5% from July 1 2023. 4.2 Short‑term incentive (STI) Executives participate in an STI plan which is based on Executive NPBT1. Key features of the STI plan are detailed below: Feature Opportunity Description The value of the STI is based on a percentage of applicable Executive Net Profit Before Tax1. The percentage is determined at the outset of the Executive’s contract and remains fixed for the contract period for each Executive KMP. Refer to section 5.2 below for each Executive’s agreed percentage. STI awarded is uncapped to encourage over-achievement, drive performance in the current year and the creation of long-term shareholder wealth. Given expected growth in NPBT over time, the longer the Executive stays with TechnologyOne, the greater the weighting of the STI component of total remuneration in comparison to the fixed and LTI components, which typically only increase by CPI or less on an annual basis. An illustrative example of how this works over time in practice has been presented following this table. This effect encourages retention of outperformers by increasing their earning potential the longer they stay with the Company, which aligns them with shareholders. Award vehicle Cash. Performance measures The STI is based on a percentage of applicable Executive Net Profit Before Tax1. This effectively aligns the target incentive with shareholder return since share price has trended with the increase in earnings. TechnologyOne’s use of STIs differs from most other organisations in that it utilises only one performance measure in determining STI awards. This is to create focus and clarity for Executives whilst also providing transparency for shareholders as to how STI awards are determined. The Board and Remuneration Committee continue to monitor STI performance measures to ensure that they best align with the Company’s commitment to providing shareholder wealth. As a SaaS company, NPBT is critical to driving long term shareholder wealth. This is because the winning of new business, drives NPBT growth in the current year. This winning of new business translates to growth in ARR2 in a SaaS company, which results in contracted returns for the business in the future. Therefore, although the KMP are rewarded in the Short-Term for increases in profitability, the Company and shareholders continue to reap the benefits of that increase in profitability for the foreseeable future. An important element of the success of our STI has been that it is uncapped so the greater the results in the current financial year, the greater the STI. This not only encourages over performance in the current financial year for the Company, it also has a dramatic flow on effect in future years through the greater recurring revenues for the Company. Combined with the LTI, the uncapped STI also helps retain Executives over the long-term because the more they succeed, the more financial incentive there is to stay with us and continue to work hard to achieve results each year, and the greater benefit to our shareholders through an ever-increasing recurring revenue base. Market value is contingent on high and sustained annual growth. Likewise, if the Company under-performs (e.g. loss of customers) or the results in a year are lower (e.g. impairment), there is a significant financial impact to Executives as their STI forms a large portion of their total remuneration. Just as the STI is uncapped on the upside, it is also uncapped on the downside. Given that our Executives' fixed remuneration is significantly lower than our ASX-listed peers, under-performance has a significant, negative impact on their total remuneration. This ensures that Executive awards are aligned with shareholder returns. The STI framework aligns performance with remuneration outcomes encouraging over performance and penalising under performance. The ability to apply Malus Provision to Deferred STI exists in the unlikely event that business outcomes differ materially from expected or if there are any irregularities or other factors that would or have affected the payment of that award. To mitigate inappropriate actions that could increase short-term incentives, the Company has long-standing effective controls in place, including internal and external audits, and practice management reviews. Specific internal controls in place include strict pricing and discounting policies and processes; selling solutions into only six (6) specific markets reducing risk and complexity; maintaining robust approval processes for any non-standard or high-risk contractual terms; performing active management of outstanding debtors; and malus provisions for Deferred STIs. STI cap Malus Controls Termination On termination, the Executive foregoes any further STI payments which would have otherwise been available for the remainder of the financial year under their STI plan. 1 Executive Net Profit Before Tax is calculated based on Company profit before tax and before the Executive STI is deducted. 2 ARR is not an IFRS measure and is unaudited, it represents future contracted annual revenue at year end. 90 TechnologyOne Annual Report 2023TechnologyOne Executives have an STI set at the start of their contract which is typically 33% of their total targeted remuneration. As noted above, this percentage of their total remuneration will increase with the Executive’s tenure. The best way to consider the mechanics of the TechnologyOne STI is by way of the following worked example. Example 1: STI calculation and model over time Consider a candidate who can command a remuneration package of $900,000 in the open market. The TechnologyOne STI opportunity is determined as 1/3 of the total remuneration package and modelled as follows: STI target $300,000 is used as the initial STI target. If we assume that NPBT of the Company, applies for this employee and the forecast NPBT is $100m then contract STI will be 0.30% of NPBT ($300,000/$100m). STI rate set at 75% to 100% of fixed remuneration (as established during contract negotiations). Assuming an ambitious profit target increase of 15% per annum and actual profit increases of 12% per annum, the following illustrates the operation of the STI. Year 1 2 3 STI (%) 0.30 0.30 0.30 Profit target ($m) 100.00 112.01 125.45 Actual profit ($m) 97.40 109.09 122.18 STI target (STI % x profit target ($)) Actual STI (STI % x actual profit ($)) 300,000 336,030 376,350 292,200 327,270 366,540 As can be seen in this example, growth is achieved in the STI, in line with growth in company profit. This leads to an increase, over time, of the proportion of STI to fixed remuneration. 4.3 Deferred STI Feature Opportunity Description TechnologyOne introduced a Deferred STI in the FY19 year. An additional amount equal to 25% of the annual STI earned in the year under review is deferred (i.e. 20% of total STI) and paid at the conclusion of the two-year period following the end of the financial year. Award vehicle Cash. Cap For the same reasons outlined in section 4.2 for the STI, this Deferred STI is also uncapped on both the upside and the downside. Deferral period and service requirements The award will only be paid at the conclusion of the two-year period following the end of the financial year, on the condition that the Executive KMP remains employed with the Company for the entire deferral period. Malus Controls Termination The Deferred STI component is subject to a malus provision in that there must be no irregularities or other factors that would have affected the payment of that award. The controls are in line with those in place for the STI. Refer section 4.2 for detail. On termination, the Executive forgoes any accrued and Deferred STI. The following provides a worked example to illustrate the operation of the Deferred STI. 91 Making life simple for our communityRemuneration Report (Audited) 4 How Executive Remuneration is structured (continued) 4.3 Deferred STI (continued) Example 2: Amounts recognised for Deferred STI As can be seen from the table below, the Deferred STI expense is recognised over a three-year period, being the year of award plus the two years of deferral. The award is paid at the conclusion of the two-year period following the end of the financial year of the award. A reward granted in FY23 will be paid to the Executive following the conclusion of FY25. STI Measure NPBT NPBT NPBT FY 1 2 3 STI (%) 0.30 0.30 0.30 Financial result ($m) STI‑ received immediately ($) Deferred STI (%) Deferred STI Year 1 Year 2 Year 3 Year 4 Year 5 Amounts expensed for Deferred STI 97.40 292,200 112.01 336,030 122.18 366,540 25 25 25 84,008 91,635 - - 28,003 28,003 28,003 - 30,545 30,545 30,545 - - 73,050 24,350 24,350 24,350 - Total Expense 24,350 52,353 82,898 58,548 30,545 Cash Received by Executives - - 73,050 84,008 91,635 4.4 Long‑term incentives (LTI) TechnologyOne Executives are eligible to participate in an LTI Plan. The LTI Plan is designed to provide participants with the incentive to deliver substantial consistent growth in shareholder value: Feature Opportunity Award vehicle Performance period Description The value of the total number of LTI options and/or rights issued each year (a grant) to an KMP is typically set at 75% to 100% of fixed remuneration and is determined during contract negotiation when an KMP is hired. Each LTI entitles the KMP the right to purchase one TechnologyOne share in the future at an agreed strike price, subject to meeting specified performance targets. The KMP has a choice between Options or Equity Performance Rights (EPRs, rights). LTIs have a three-year performance period. The number of options and/or rights in the grant are split into tranches based on the weighting of each performance measure. For performance measures with a three-year target, the relevant tranche vests at the end of the three-year period in accordance with the vesting schedule provided below. For accounting purposes, the expense is recognised in accordance with AASB 2 Share Based Payments over the three-year period. Performance measures Performance measures for the most recent LTI grants are: • • 75% of the options / rights vest based on EPS Growth. See Vesting Conditions below. 25% of the options / rights vest based on Relative Total Shareholder Return (rTSR) compared against the constituents of the ASX All Technology (XTX) index. See Vesting Conditions below. 92 TechnologyOne Annual Report 2023Feature Description Vesting conditions For each performance target there is a mid and stretch target. Mid hurdles have been calculated so that if they are achieved, this will create substantial shareholder wealth. Performance Metric Growth <5% Growth >=5%, <15% Growth >=15% EPS growth1 0% vest 50% vest at 5% growth with linear vesting (50% to 100%) up to 15% growth 100% vest Performance Metric Percentile <50 Percentile >=50, <75 Percentile >=75 Relative TSR2 0% vest 50% vest at 50th percentile relative TSR with linear vesting (50% to 100%) up to 75th percentile 100% vest The number of options / rights that vest at the end of the relevant performance period is determined as follows: • Number of LTI options/rights earned per three-year performance period = Number of LTI options/rights granted x percentage earned x individual performance factor3 Vesting conditions are applicable to KMP only. 1 EPS growth is calculated to 2 decimals places. 2 Relative TSR targets are determined with reference to our peer group. Our peer group is defined as those constituent companies making up the ASX All Technology Index (XTX). Calculations for the vesting outcomes for relative TSR vesting conditions are prepared by an independent external company. 3 The individual performance factor is typically 100% unless Malus Provision is applied. It can never exceed 100%. Allocation methodology The LTI is allocated based on the fair value of the option or right with no discount for the likelihood of non-market performance conditions being met. Board discretion In situations where the vesting conditions are affected by factors beyond the control of the employee (e.g. global pandemic, trade restrictions, war, large-scale natural disasters, profit windfalls or unforeseen tailwinds), the Board has discretion to increase or decrease the number of LTI options and/or rights vesting. The Board retains sole discretion to determine the amount and form of any award that may vest (if any) to prevent any unintended outcomes, or in the event of a corporate restructuring or capital event. Change of control The Board has discretion to determine the extent to which LTIs vest based on the period elapsed since the start of the performance period and the performance at the time of any change of control event. Termination Expiry Revision Malus Awards lapse unless the Board determines otherwise, in which case it considers performance of the individual over the relevant period up to the date of termination of employment. Any LTIs that have vested will expire 5 years after vesting. We do not revise our LTIs over the relevant performance period. The LTI component is subject to a Malus Provision in that there must be no irregularities or other factors that would affect the vesting of the award. Under the Malus Provision the Board has the ability to vary the LTI as appropriate e.g. reduce, forfeit, defer for longer period. Margin loans Directors and Executives are not permitted to use TechnologyOne securities as security for margin loans. 93 Making life simple for our communityRemuneration Report (Audited) 4 How Executive Remuneration is structured (continued) 4.4 Long‑term incentives (LTI) (continued) The following provides a worked example to illustrate the operation of the LTI Given an LTI grant value of $300,000, the KMP has the following two choices or a 50:50 mixture of each. The value remains the same in all three choices. Feature Award vehicle Vesting period Description Options 3 years LTI grant value $300,000 Description Equity Performance Rights 3 years $300,000 LTI metrics and weighting EPS (75% weighting) and relative TSR (25% weighting) EPS (75% weighting) and relative TSR (25% weighting) Fair value of option at grant date Share price at grant date Exercise price $1.50 $7.65 $7.39 $7.50 $7.65 $0.00 In this example, we assume the KMP makes a 100% choice of Options. Amounts recognised for LTI, given 100% weighting to a choice of Options FY 1 2 LTI metrics Weighting Grant number of units Expense of Grant Share price at grant Exercise price per share EPS growth % Relative TSR 75% 25% 150,000 $225,000 50,000 $75,000 $7.65 $7.65 $7.39 $7.39 200,000 $300,000 For the Year 1 tranche of LTIs, the fair value is $300,000, recognised over 3 years. For the purposes of this worked example, we have assumed that the fair value of options granted with each metric is the same. 94 TechnologyOne Annual Report 20235 Relationship between remuneration and Company performance 5.1 TechnologyOne’s five‑year performance The below table sets out information showing the creation of shareholder wealth for the years ended 30 September 2019 to 30 September 2023. Profits and dividends have grown over the last five years, and growth in the fair value of Executive KMP’s remuneration has not exceeded growth in profits over the period. Net Profit before Tax reported ($’000) 76,389 82,470 97,843 112,320 129,854 2019 2020 2021 2022 2023 Profit before tax growth Total dividend, including special Share price for the year (closing) Earnings per share (basic) EPS growth Annual Total Shareholder Return (TSR) Rolling 3-year TSR Continuing Executive STI Continuing Executive STI Growth Continuing Executive STI % of NPBT LTI vesting as a % of maximum Continuing Executive KMP remuneration growth1 Executive Remuneration % of NPBT 1 Excluding retention LTI granted in FY22 (%) (cps) ($) (cps) (%) (%) (%) 15 11.93 7.18 18.43 14 31 35 8 12.88 7.94 19.75 8 12 58 19 13.91 11.36 22.64 15 45 97 15 17.02 10.60 27.51 22 (5) 61 ($,000) 1,047 1,136 1,343 1,537 (%) (%) (%) (%) (%) 16 1 72 12 6 9 1 98 12 7 18 1 99 12 6 14 1 97 8 5 16 19.52 15.51 31.71 15 48 97 1,767 15 1 100 5 4 Profits have grown strongly and sustainably over the last five years, as have earnings per share and dividends, all while transforming from perpetual licenses to a SaaS model. As can be seen from the tables above, the Executive Remuneration Framework has successfully driven performance and the creation of shareholder wealth over the longer term. 95 Making life simple for our communityRemuneration Report (Audited) 5 Relationship between remuneration and Company performance (continued) 5.2 Detail of Executive remuneration and performance The remuneration for Executives comprises the amounts outlined in the following tables. Refer to section 6 below for details of service agreements with Executive KMP. Edward Chung Managing Director and Chief Executive Officer 2023 ($) 2022 ($) Variance (%) Notes Fixed remuneration Base salary Superannuation Total fixed remuneration STI STI - profit1 STI % Total STI Total Deferred STI LTI 521,250 513,358 27,500 27,500 548,750 540,858 1 Increase includes statutory increase for superannuation. 134,562,612 117,090,048 15 0.78% 0.78% 1,049,588 913,302 15 Growth in STI is consistent with growth in NPBT, the primary measure of STI. 230,081 198,851 16 Deferred STI (refer to section 4.3) Fair value of options recognised 391,346 508,468 The value included for FY23 includes one third of the FY21 LTI fair value plus one third of the FY22 LTI fair value plus one third of the FY23 LTI fair value. Fair value of options forfeited Fair value of EPRs recognised Fair value of EPRs forfeited ‑ ‑ ‑ (18,684) - - Total LTI 391,346 489,784 (20) Fair value of Retention LTI recognised 305,710 152,855 100 Grant in FY22 to encourage retention of key Total remuneration 2,525,475 2,295,650 executive during critical growth phase through to November 2026 and the transition from a founder led company. This is not an annual grant. The fair value of the grant will be recognised over the five year vesting term FY22 to FY26. The increase year on year here is reflective of a partial year in the year of grant versus a full year of expense in FY23. 10 Total remuneration has grown by 10%, less than reported net profit before tax growth of 16%. 1 Executive Net Profit Before Tax is calculated based on Company profit before tax and before the Executive STIs are deducted. 96 TechnologyOne Annual Report 2023 Stuart MacDonald Chief Operating Officer Fixed remuneration Base salary Superannuation Total fixed remuneration STI STI - profit1 STI % Total STI Total Deferred STI LTI 2023 ($) 2022 ($) Variance (%) Notes 432,592 425,976 27,500 27,500 460,092 453,476 1 Increase includes statutory increase for superannuation. 134,562,612 117,090,048 15 0.533% 0.533% 717,219 624,090 15 Growth in STI is consistent with growth in NPBT, the primary measure of STI. 157,222 135,882 16 Deferred STI (refer to section 4.3) Fair value of options recognised 234,040 272,214 The value included for FY23 includes one third of the FY21 LTI fair value plus one third of the FY22 LTI fair value plus one third of the FY23 LTI fair value. Fair value of options forfeited Fair value of EPRs recognised Fair value of EPRs forfeited ‑ ‑ ‑ (9,258) - - Total LTI 234,040 262,956 (11) Fair value of Retention LTI recognised 173,138 76,181 127 Grant in FY22 to encourage retention of key Total remuneration 1,741,710 1,552,585 executive during critical growth phase through to November 2026 and the transition from a founder led company. This is not an annual grant. The fair value of the grant will be recognised over the five year vesting term FY22 to FY26. The increase year on year here is reflective of a partial year in the year of grant versus a full year of expense in FY23. 12 Total remuneration has grown by 12%, less than reported net profit before tax growth of 16%. 1 Executive Net Profit Before Tax is calculated based on Company profit before tax and before the Executive STIs are deducted. 97 Making life simple for our community Remuneration Report (Audited) 5 Relationship between remuneration and Company performance (continued) 5.2 Detail of Executive remuneration and performance (continued) Paul Jobbins Chief Financial Officer (resigned 17 July 2023) Fixed remuneration Base salary Superannuation Total fixed remuneration STI STI - profit1 STI % STI forfeit Total STI 2023 ($) 2022 ($) Variance (%) Notes 227,023 223,363 27,500 27,500 254,523 250,863 1 Increase includes statutory increase for superannuation. 134,562,612 117,090,048 15 0.343% 0.343% (92,310) - (100) Mr Jobbins forfeited the 20% retention element of his STI on resignation. 369,240 401,619 (8) Mr Jobbins resigned on the 17th of July 2023. His service continued for the full FY23. Total Deferred STI (91,960) 87,444 (205) The Deferred STI recognised in prior years was forfeited on resignation. LTI Fair value of options recognised 98,736 262,304 Fair value of options forfeited (40,457) (9,557) The value in FY23 includes only the final year of expense for the FY21 grant. The value represents 191,015 share options that were awarded as LTI in previous and current financial years and were forfeited on resignation. Fair value of EPRs recognised Fair value of EPRs forfeited Total LTI ‑ ‑ - - 58,279 252,747 (77) Fair value of Retention LTI recognised (29,115) 29,115 (200) Grant in FY22 to encourage retention of key executive during critical growth phase through to November 2026 and the transition from a founder led company. This is not an annual grant. The retention LTI recognised in prior period represented 205,761 share options that were forfeited on Paul's resignation. Post-employment benefits 247,000 - Total remuneration 807,967 1,021,788 (21) 1 Executive Net Profit Before Tax is calculated based on Company profit before tax and before the Executive STIs are deducted. 98 TechnologyOne Annual Report 2023 Cale Bennett Chief Financial Officer (commenced 01 August 2023) 2023 ($) 2022 ($) Variance (%) Notes Fixed remuneration Base salary Superannuation Total fixed remuneration STI STI - profit1 STI % Total STI Total Deferred STI LTI Fair value of one-off LTI options Total LTI Total remuneration 60,060 6,607 66,667 41,970,337 0.297% 124,652 10,388 96,153 96,153 297,860 - - - - - - - - - - The value included the salary in relation to two months of the current year. 100 The value included the remuneration in relation to two months of the current year. 100 The value included is in relation to two months of the FY23 STI. 100 Deferred STI (refer to section 4.3) FY23 value for buyout of equity held from previous employment. 100 100 1 Executive Net Profit Before Tax is calculated based on Company profit before tax and before the Executive STIs are deducted. 99 Making life simple for our community Remuneration Report (Audited) 5 Relationship between remuneration and Company performance (continued) 5.3 Options and EPRs that became eligible to vest during FY23 During the year, Edward Chung, Stuart MacDonald and Paul Jobbins completed a three-year performance period relating to the LTI instruments granted to them in FY21 and vesting in FY23. 100% of the Relative TSR options and 100% of the EPS Options became eligible to vest, resulting in 100% of total LTI vesting. A summary of the targets set and performance against each target and options which have vested and are available to be exercised has been set out below: Edward Chung Grant year Performance measure Option or EPR Number of LTIs available Testing Testing year Relative TSR Option 63,730 3 year FY23 Performance measure achieved 88.63% Target 75th percentile FY21 EPS Growth Option 191,189 3 year FY23 15% 17.10% Stuart MacDonald Grant year Performance measure Option or EPR 254,919 Number of LTIs available Testing Testing year Relative TSR Option 38,113 3 year FY23 Performance measure achieved 88.63% Target 75th percentile FY21 EPS Growth Option 114,339 3 year FY23 15% 17.10% Paul Jobbins Grant year Performance measure Option or EPR 152,452 Number of LTIs available Testing Testing year Relative TSR Option 33,359 3 year FY23 Performance measure achieved 88.63% Target 75th percentile FY211 EPS Growth Option 100,077 3 year FY23 15% 17.10% 133,436 Number forfeited LTIs vested % LTI vested - - 63,730 100% 191,189 254,919 100% 100% Number forfeited LTIs vested % LTI vested - - 38,113 100% 114,339 152,452 100% 100% Number forfeited LTIs vested % LTI vested - - 33,359 100% 100,077 133,436 100% 100% 1 Mr Jobbins fulfilled the vesting requirements for this LTI tranche. Given his resignation, the expiry date of these options has been brought forward to 30 November 2023. 100 TechnologyOne Annual Report 20235.4 Options/EPRs that have been granted in FY22 and FY23 and not yet vested Edward Chung Grant year Performance measure FY22 FY23 Relative TSR EPS Growth Relative TSR EPS Growth Stuart MacDonald Grant year Performance measure Relative TSR EPS Growth Relative TSR EPS Growth FY22 FY23 Paul Jobbins Grant year Performance measure FY22 FY23 Relative TSR EPS Growth Relative TSR EPS Growth Number of LTIs available 48,104 144,312 43,126 129,378 Number of LTIs available 28,768 86,304 25,791 77,373 Number of LTIs available1 - - ‑ ‑ 1 The number of available LTIs is nil as these were forfeited on resignation. Testing Testing year LTIs due to vest 3 year 3 year 3 year 3 year FY24 FY24 FY25 FY25 Nov 2024 Nov 2024 Nov 2025 Nov 2025 Testing Testing year LTIs due to vest 3 year 3 year 3 year 3 year FY24 FY24 FY25 FY25 Nov 2024 Nov 2024 Nov 2025 Nov 2025 Testing Testing year LTIs due to vest 3 year 3 year 3 year 3 year FY24 FY24 FY25 FY25 Nov 2024 Nov 2024 Nov 2025 Nov 2025 101 Making life simple for our communityRemuneration Report (Audited) 5 Relationship between remuneration and Company performance (continued) 5.5 LTI Retention options granted during the prior year that will vest on 30 November 2026 Edward Chung Grant year Performance measure Number of options available for vesting Vesting Vesting year Total grant value FY22 Service 720,165 Nov 2026 FY27 $2,038,066 Stuart MacDonald Grant year Performance measure Number of options available for vesting Vesting Vesting year Total grant value FY22 Service 475,000 Nov 2026 FY27 $1,154,250 Paul Jobbins Grant year Performance measure Number of options available for vesting1 Vesting Vesting year Total grant value FY22 Service - Nov 2026 FY27 $582,305 1 The number of available LTIs is nil as these were forfeited on resignation. 6 Service agreements for the Executive KMP Remuneration and other terms and conditions of employment for Executive KMP are formalised in service agreements which are reviewed each year. All Executive KMP service agreements are rolling contracts which cease following notice of termination by either employee or employer. The following table presents some of the key contractual arrangements for the Executive KMP: KMP CEO Other Executive KMP Contract term Termination notice by either party Post‑employment restraint Ongoing Ongoing 6 months 12 weeks 12 months 12 months If a service agreement is terminated, payment in lieu of notice that is not worked may be provided, in addition to any statutory entitlements. Typically, no other additional termination or post-employment benefits are provided on termination of employment. Refer to sections 4.3 and 4.4 for treatment of STIs and LTIs on cessation of employment. 7 Non‑executive Director fees Determination of Non‑executive Director fees Director fees are set to enable TechnologyOne to attract and retain high calibre Directors and in recognition of the workload for Directors. Director fee levels and fee pool are reviewed every three years by an independent consultant to remain competitive with comparable companies based on market capitalisation, operational scope and key geographical areas. Fee increases between independent reviews are capped at CPI. In FY22, Board fees were $145,230 per Director, including statutory superannuation contributions. This was increased to $175,000 in FY23. An additional fee of $27,500 was paid to each committee chair. The Independent Chair’s fee was $300,000 in FY23 (FY22: $145,230). Aggregate fee pool The total amount of Directors’ fees is capped at a maximum pool that is approved by shareholders. The current fee pool is capped at $2,000,000, which was approved by shareholders at the Annual General Meeting on 22 February 2023. 102 TechnologyOne Annual Report 2023FY23 aggregate fee pool and Non‑Executive Director fees Non‑Executive Director shareholdings and requirements Non-Executive Directors (NEDs) are required to hold a minimum shareholding of one year’s NED fees (pre-tax) in TechnologyOne shares. NEDs are required to rectify any short fall within a 12-month period. New NEDs are allowed 36 months to meet this requirement. The Board in total holds 25,060,592 shares representing 8% of the total shares outstanding of the Company. Individual holdings are as shown below. The share price as at the end of the reporting period was $15.51. 2023 Balance at the end of the year % of Mandatory Shareholding Requirement Non‑Executive Directors of Technology One Limited An independent market review of Non-Executive Director (NED) fees was conducted in the prior year. Consequently, the board determined that an increase in the Board and Committee fees was appropriate given: • • • The need to appropriately compensate an Independent Non‑Executive Chair in recognition of the additional workload of Pat O’Sullivan who was appointed to the position on 30 June 2022. Increased workload of Directors due to significant growth in size over the last 3 years, additional responsibilities transitioning from a founder-led company, and international expansion in the UK. NED fees were below market and inconsistent with market practice where additional fees are paid to recognise the additional workload in chairing a committee. Shareholder approval was obtained at the FY22 AGM to increase the fee pool to $2,000,000, from $1,500,000. This will allow the Board to attract and retain high calibre directors (including overseas directors) in a competitive technology market, provide flexibility for Board succession planning and appointment of new directors. The table below sets out the Non-Executive Director Fees paid during FY23. Board and Committee Fees (inclusive of superannuation) Board Chair – all-inclusive fee Non-Executive Director – base board fee Audit and Risk Committee Chair Audit and Risk Committee Member Remuneration Committee Chair Remuneration Committee Member Nomination and Governance Committee Chair Nomination and Governance Committee Member P O’Sullivan J Mactaggart R Anstey Dr J Andrews S Doyle C Rosenberg P Ball FY23 Fees 2022 $300,000 $175,000 $27,500 P O’Sullivan R McLean - J Mactaggart $27,500 R Anstey Dr J Andrews - S Doyle C Rosenberg P Ball $27,500 - The Board Chair does not receive any additional committee fees. Non‑Executive Directors of Technology One Limited 39,779 24,902,500 20,000 30,600 18,280 27,533 21,900 100% 100% 100% 100% 100% 100% 100% Balance at the end of the year % of Mandatory Shareholding Requirement 39,779 69,737 26,902,500 30,000 30,600 18,280 27,533 21,900 100% 100% 100% 100% 100% 100% 100% 100% 103 Making life simple for our communityRemuneration Report (Audited) r a e y r o i r p r a e y r o i r p n o h t w o r g % n o h t w o r g % f o e u a V l f o e u a V l t n e m y o p m E l m r e t ‑ t r o h S d e x i f l a t o T I T L l c n i I T L l c x e l a t o T s I T L n o i t n e t e r s n o i t p o e r a h s I T S d e r r e f e D s t i f e n e b e v i t n e c n I n o i t a r e n u m e r n o i t a u n n a r e p u S s e e f n o i t a r e n u m e r e m a N s e v i t n e c n i m r e t ‑ g n o L ) s I T L n o i t n e t e R g n d u c n i ( i l ‑ t s o P t s o P t n e m y o p m e l s t i f e n e b 0 0 0 0 0 3 , 7 0 5 8 2 , l s t i f e n e b e e y o p m e m r e t ‑ t r o h S r o t c e r i D r i a h C d n a d e x F i . d e s i l a e r r o d e r e f f o e u a v l e h t t n e s e r p e r t o n s e o d d n a P M K h c a e r o f d e n r a e n o i t a r e n u m e r f o e u a v l r i a f g n i t n u o c c a y r o t u t a t s e h t n o d e s a b s i l w o e b e b a t l e h t n i n o i t a m r o f n i e h T n o i t a r e n u m e R y r o t u t a t S 8 104 % 7 0 1 % 7 0 1 0 0 0 0 0 3 , % 0 2 % 0 2 % 9 3 % 0 2 % 9 3 % 9 3 % 0 2 % 0 2 % 9 3 % 0 2 % 9 3 % 9 3 % 2 5 ‑ % 2 5 ‑ 0 3 2 5 4 1 , 0 0 0 5 7 1 , 0 3 2 5 4 1 , 0 0 0 5 7 1 , 0 3 2 5 4 1 , 0 0 5 2 0 2 , 0 3 2 5 4 1 , 0 0 0 5 7 1 , 0 3 2 5 4 1 , 0 0 5 2 0 2 , 0 3 2 5 4 1 , 0 0 5 2 0 2 , 0 3 2 5 4 1 , 1 4 0 9 6 , 0 3 2 5 4 1 , % 9 2 % 9 2 1 4 5 , 1 0 5 , 1 , 0 4 8 1 6 1 1 , % 0 0 1 ‑ % 0 0 1 ‑ ‑ % 0 1 % 2 1 % 1 1 % 0 1 , 9 5 7 7 0 2 1 , , 5 7 4 5 2 5 2 , , 0 5 6 5 9 2 2 , 1 1 7 , 1 4 7 , 1 , 5 8 5 2 5 5 1 , % 1 2 ‑ % 8 2 ‑ , 7 6 9 7 0 8 % 0 0 1 % 0 0 1 % 2 1 ‑ % 5 ‑ % 9 1 ‑ % 0 1 ‑ , 8 8 7 1 2 0 1 , - 0 6 8 7 9 2 , , 3 1 0 3 7 3 5 , , 2 8 7 7 7 0 6 , , 4 5 5 4 7 8 6 , , 2 2 6 9 3 2 7 , ‑ - ‑ - ‑ - ‑ - ‑ - ‑ - ‑ - ‑ - ‑ - ‑ - , 0 1 7 5 0 3 5 5 8 2 5 1 , 1 8 1 6 7 , 8 3 1 , 3 7 1 ) 5 1 1 , 9 2 ( 5 1 1 9 2 , ‑ - , 3 3 7 9 4 4 , 1 5 1 8 5 2 , 3 3 7 9 4 4 , 1 5 1 8 5 2 ‑ - ‑ - ‑ - ‑ - ‑ - ‑ - ‑ - ‑ - ‑ - ‑ - 6 4 3 , 1 9 3 , 4 8 7 9 8 4 0 4 0 4 3 2 , 6 5 9 2 6 2 , - 9 7 2 8 5 , , 7 4 7 2 5 2 3 5 1 , 6 9 , 8 1 8 9 7 7 , 8 1 8 9 7 7 , 7 8 4 5 0 0 1 , , 7 8 4 5 0 0 1 , ‑ - ‑ - ‑ - ‑ - ‑ - ‑ - ‑ - ‑ - ‑ - ‑ - , 1 8 0 0 3 2 , 1 5 8 8 9 1 2 2 2 7 5 1 , 2 8 8 5 3 1 , ) 0 6 9 , 1 9 ( 4 4 4 7 8 , 8 8 3 0 1 , - , 1 3 7 5 0 3 , 7 7 1 2 2 4 , 1 3 7 5 0 3 , 7 7 1 2 2 4 ‑ - ‑ - ‑ - ‑ - ‑ - ‑ - ‑ - ‑ - ‑ - ‑ - ‑ - ‑ - - ‑ - 0 0 0 7 4 2 , - - 0 0 0 7 4 2 , 0 0 0 7 4 2 , ‑ - ‑ - ‑ - ‑ - ‑ - ‑ - ‑ - ‑ - ‑ - ‑ 3 3 6 8 2 8 , , 8 8 5 9 4 0 , 1 2 0 3 3 1 9 , 9 1 2 7 1 7 , 0 9 0 4 2 6 , 0 4 2 9 6 3 , , 9 1 6 1 0 4 2 5 6 4 2 1 , - , 9 9 6 0 6 2 2 , , 4 4 6 7 6 7 2 , 0 3 2 5 4 1 , 0 0 0 5 7 1 , 0 3 2 5 4 1 , 0 0 0 5 7 1 , 0 3 2 5 4 1 , 0 0 5 2 0 2 , 0 3 2 5 4 1 , 0 0 0 5 7 1 , 0 3 2 5 4 1 , 0 0 5 2 0 2 , 0 3 2 5 4 1 , 0 0 5 2 0 2 , 0 3 2 5 4 1 , 1 4 0 9 6 , 0 3 2 5 4 1 , 1 4 5 , 1 0 5 , 1 , 0 4 8 1 6 1 1 , ‑ , 6 2 1 9 7 3 , 0 5 7 8 4 5 , 8 5 8 0 4 5 , 2 9 0 0 6 4 , 6 7 4 3 5 4 , 3 2 5 4 5 2 , 3 6 8 0 5 2 7 6 6 6 6 , - , 2 3 0 0 3 3 , 1 , 3 2 3 4 2 6 1 , , 9 9 6 0 6 2 2 , 3 7 5 , 1 3 8 2 , , 4 4 6 7 6 7 2 , , 3 6 1 6 8 7 2 , 3 0 2 3 1 , 9 2 6 6 1 , 3 0 2 3 1 , 9 2 6 6 1 , 3 0 2 3 1 , 2 4 2 9 1 , 3 0 2 3 1 , 9 2 6 6 1 , 3 0 2 3 1 , 2 4 2 9 1 , 3 0 2 3 1 , 2 4 2 9 1 , 3 0 2 3 1 , 0 6 5 6 , 3 0 2 3 1 , 0 8 6 2 4 1 , 2 2 6 5 0 1 , ‑ 0 8 7 5 2 , 0 0 5 7 2 , 0 0 5 7 2 , 0 0 5 7 2 , 0 0 5 7 2 , 0 0 5 7 2 , 0 0 5 7 2 , 7 0 6 6 , - 7 0 1 , 9 8 0 8 2 8 0 1 , 7 8 7 , 1 3 2 2 0 9 3 1 2 , 3 9 4 , 1 7 2 7 2 0 2 3 1 , , 1 7 3 8 5 1 7 2 0 2 3 1 , , 1 7 3 8 5 1 7 2 0 2 3 1 , 8 5 2 3 8 1 , 7 2 0 2 3 1 , , 1 7 3 8 5 1 7 2 0 2 3 1 , 8 5 2 3 8 1 , 7 2 0 2 3 1 , 8 5 2 3 8 1 , 7 2 0 2 3 1 , 1 8 4 2 6 , 7 2 0 2 3 1 , , 1 6 8 8 5 3 , 1 , 8 1 2 6 5 0 1 , ‑ 3 7 7 7 0 1 , ‑ - ‑ - ‑ - ‑ - ‑ 3 7 7 7 0 1 , ‑ - ‑ - ‑ - ‑ - ‑ - ‑ - ‑ - ‑ - ‑ - ‑ , 3 7 5 5 4 2 0 5 2 , 1 2 5 8 5 3 3 1 5 , , 2 9 5 2 3 4 , 6 7 9 5 2 4 3 2 0 7 2 2 , 3 6 3 3 2 2 , 0 6 0 0 6 , - , 5 2 9 0 4 2 , 1 , 0 7 2 8 0 4 1 , , 1 6 8 8 5 3 , 1 , 5 2 9 0 4 2 , 1 , 1 9 9 3 6 1 1 , , 0 7 2 8 0 4 1 , 3 2 0 2 2 2 0 2 3 2 0 2 2 2 0 2 3 2 0 2 2 2 0 2 3 2 0 2 2 2 0 2 3 2 0 2 2 2 0 2 3 2 0 2 2 2 0 2 3 2 0 2 2 2 0 2 3 2 0 2 2 2 0 2 3 2 0 2 2 2 0 2 3 2 0 2 2 2 0 2 3 2 0 2 2 2 0 2 3 2 0 2 2 2 0 2 3 2 0 2 2 2 0 2 3 2 0 2 2 2 0 2 3 2 0 2 2 2 0 2 3 2 0 2 2 2 0 2 s r o t c e r i D e v i t u c e x E ‑ n o N n a v i l l u S O ' t a P e v i t u c e x e - n o N ( t r a g g a t c a M J ) r o t c e r i D y e t s n A R e v i t u c e x e - n o N ( ) r o t c e r i D e v i t u c e x e - n o N ( s w e r d n A J r D e v i t u c e x E - n o N ( ) r o t c e r i D e v i t u c e x E - n o N ( g r e b n e s o R C ) r o t c e r i D r o t c e r i D l e y o D S e v i t u c e x E - n o N ( l l a B P ) r o t c e r i D e v i t u c e x e - n o N ( n a e L c M R 1 ) r o t c e r i D e v i t u c e x E ‑ n o N l a t o T s r o t c e r i D P M K e v i t u c e x E e v i t u c e x E ( o c r a M i D A i g n g a n a M ( g n u h C E 2 ) r i a h C ) r e c i f f O e v i t u c e x E i f e h C & r o t c e r i D i f e h C ( l d a n o D c a M S ) r e c i f f O g n i t a r e p O i f e h C ( s n b b o J i P 3 ) r e c i f f O l i a c n a n F i i f e h C ( t t e n n e B C 4 ) r e c i f f O l i a c n a n F i P M K e v i t u c e x E l a t o T e v i t u c e x E ‑ n o N ( l a t o T ) P M K e v i t u c e x E d n a s r o t c e r i D d e r e f f o e r e w , l t n e m y o p m e s u o v e r p m o r f d e h l i y t i u q e f o t u o y u b a s a r e f f o 4 2 Y F e h t n i d e u s s i e b o t r s t n a g f f o - e n o g n d u c n l i i , I s T L . 3 2 Y F r o f d e t a r - o r p , T B P N e v i t u c e x E . f o % 7 9 2 0 s a d e t a u c a c s l l i I T S s ’ t t e n n e B r M . 3 2 0 2 y r a u r b e F 2 2 n o d e r i t e r n a e L c M r M . 2 2 0 2 e n u J 0 3 n o d e r i t e r o c r a M i D r M . 3 2 0 2 y u J l 7 1 n o d e n g s e r i ’ i s n b b o J r M . 3 2 0 2 t s u g u A 1 n o d e c n e m m o c t t e n n e B r M . n o i t a r e n u m e r s ’ t t e n n e B r M f o t r a p s a 1 2 3 4 TechnologyOne Annual Report 2023 9 Additional statutory disclosures 9.1 Long‑term incentive scheme In 2016, TechnologyOne replaced its previous Executive Option Plan (EOP) with an LTI Plan aligned to market, shareholder and Executive requirements. Options and EPRs issued under the new plan are outlined in the tables below. Options 2023 Name Opening balance of share options Number of options granted during the period Number of options exercised during the period Number of options forfeited during the period1 Other movements2 Closing balance of share options Vested and exercisable Unvested Edward Chung 1,425,033 172,504 (257,535) Stuart MacDonald 905,425 103,164 (54,000) - - - - 1,340,002 254,917 1,085,085 954,589 152,450 802,139 Paul Jobbins 582,497 90,298 (142,583) (396,776) (133,436) - - - 1 Options and EPRs forfeited during the vesting period, are due to employment resignation. 2 Other movements are options vested on resignation. 9.2 Fair value of options granted in FY23 2023 Name Edward Chung Stuart MacDonald Paul Jobbins3 Number of options granted during the period1 Weighted average/ Fair value per options issued during the period2 Grant date Exercise price Vesting date Expiry Date Fair value of grant Metrics 129,378 2.65 01/10/2022 11.03 30/11/2025 30/11/2030 342,852 EPS 43,126 77,373 25,791 67,722 22,574 2.32 01/10/2022 11.03 30/11/2025 30/11/2030 100,052 Relative TSR 2.65 01/10/2022 11.03 30/11/2025 30/11/2030 205,038 EPS 2.32 01/10/2022 11.03 30/11/2025 30/11/2030 59,835 Relative TSR 2.65 01/10/2022 11.03 30/11/2025 30/11/2030 179,463 EPS 2.32 01/10/2022 11.03 30/11/2025 30/11/2030 52,372 Relative TSR 1 LTIs are offered to Executive KMP as either options (with an exercise price) or EPRs (executive performance rights issued at market price). 2 The assessed fair value at grant date of options granted to the individuals is recognised over the period from grant date to vesting date. The amount is included in the remuneration tables above. 3 Mr Jobbins' grant was forfeited during the year on resignation. The model inputs for options granted to Executives are as follows: (a) Options are granted for no consideration. Each tranche vests subject to meeting performance hurdles (b) Dividend yield – 1.35% (c) Expected volatility – 33.89% (d) Risk-free interest rate – 3.61% (e) Price of shares on grant date – $10.60 (f) Fair value of options – $2.32-$2.65 The performance measures for LTI grants made in FY23 are presented below while the Retention LTIs vest based on service conditions. The performance targets, set out below, are such that they are all considered to be challenging targets that, if met, will drive significant shareholder wealth creation. 105 Making life simple for our communityRemuneration Report (Audited) 9 Additional statutory disclosures (continued) 9.2 Fair value of options granted in FY23 (continued) Performance Metrics Performance period EPS growth Relative TSR1 3 years 3 years The performance targets to be achieved by the Executives are set out below: Testing 3 years 3 years Weighting (all KMP) 75% 25% Performance Metric Growth <5% Growth >=5%, <15% Growth >=15% EPS growth 0% vest 50% vest at 5% growth with linear vesting (50% to 100%) up to 15% growth 100% vest Performance Metric Percentile <50 Percentile >=50, <75 Percentile >=75 Relative TSR1 0% vest 50% vest at 50th percentile for relative TSR with linear vesting (50% to 100%) up to 75th percentile 100% vest 1 Relative TSR targets are determined with reference to our peer group. Our peer group is defined as those constituent companies making up the ASX All Technology Index (XTX). 9.3 Equity instruments held by Directors and Key Management Personnel The number of shares in the Group held during the financial year by each Director and Executive KMP of Technology One Limited, including their personally related parties, are set out below. There were no shares granted during the reporting period as compensation. 2023 Balance at the start of year Purchased during the year Sold during the year Other movements1 Balance at the end of the year Directors of Technology One Limited P O’Sullivan R McLean J Mactaggart R Anstey Dr J Andrews S Doyle C Rosenberg P Ball 39,779 69,737 26,902,500 30,000 30,600 18,280 27,533 21,900 - - - - (20,000) (2,000,000) 4,000 (14,000) - - - - - - - - - (49,737) - - - - - - 39,779 - 24,902,500 20,000 30,600 18,280 27,533 21,900 1 Represents balance held at date of resignation. 2023 Balance at the start of year Purchased during the year Sold during the year Other movements1 Balance at the end of the year Senior Executives of the Group E Chung S MacDonald P Jobbins C Bennett 900,068 46,367 68 - 257,535 54,000 142,583 - (457,535) (100,367) (142,583) - - 2,862 (68) - 700,068 2,862 - - 1 The balance for S MacDonald represents total shares obtained via the Employee Share Plan. The balance for P Jobbins represents balance held at date of resignation. 106 TechnologyOne Annual Report 20232022 Balance at the start of year Purchased during the year Sold during the year Other movements1 Balance at the end of the year Directors of Technology One Limited A Di Marco R McLean J Mactaggart R Anstey Dr J Andrews S Doyle C Rosenberg P Ball P O'Sullivan 17,378,500 69,737 26,902,500 30,000 30,600 18,280 27,533 21,900 15,509 - - - - - - - 24,270 - - - - - - - - (17,378,500) - - - - - - - - - 69,737 26,902,500 30,000 30,600 18,280 27,533 21,900 39,779 1 Represents balance held at date of resignation. 2022 Senior Executives of the Group E Chung S MacDonald P Jobbins Balance at the start of year Purchased during the year Sold during the year Other movements2 Balance at the end of the year 900,068 55,068 68 172,876 46,299 212,763 (172,876) (55,000) (212,763) - - - 900,068 46,367 68 9.4 Loans to Directors and Key Management Personnel There have been no loans to Directors or Key Management Personnel during the financial year (2022: nil). 9.5 Other transactions with Key Management Personnel During the year there were no transactions with the Key Management Personnel (2022: nil). 107 Making life simple for our community Remuneration Report (Audited) 10 Key questions Key questions TechnologyOne approach Why does our remuneration framework have such a high weighting towards variable remuneration? Our Executive Remuneration Framework aligns with many common practices for ASX 100 companies but has been adapted to meet the demands of the enterprise software market. Relative to our ASX-listed peers, our Executives receive: (a) (b) (c) (d) (e) Relatively low fixed remuneration to enable a greater emphasis on performance. Relatively large at-risk short-term incentive (STI) portion aligning Executives to current year performance. Deferred STI component to help further drive long-term shareholder wealth and ensure that we retain high performing Executives. Long-term incentives (LTI) linked to long-term strategy, targets, and shareholder wealth creation. FY22 Retention LTI grants to ensure the retention of high performing technology industry executives during a critical phase of growth and to ensure smooth transition from a founder-led company. Winning of new business, driving continued profit growth in the current year is the key to our long-term success, and it is for this reason our STI as a percentage of the total remuneration is significantly higher than our ASX-listed peers. At the same time, the fixed remuneration for our Executives is comparatively low compared to our ASX-listed peers. The significant weighting towards the STI encourages our Executives to drive new business and financial performance in the current year, which creates Annual Recurring Revenue (ARR)1 for future years, and therefore long-term success and shareholder wealth. TechnologyOne Executives are aligned to the long-term outcomes of the business through the Deferred STI and a large long-term incentive (LTI and FY22 retention LTI) component. The talent pool in Australia for Executives with large scale enterprise software companies is highly competitive. Therefore, it is important to ensure that our remuneration framework is appropriately structured for the enterprise software market. We believe that our remuneration structure offers the necessary flexibility and incentive to ensure that we attract and retain talented Executives who understand the industry and, in turn, drive shareholder value. Why is the KMP LTI based on EPS growth and Relative TSR? Earnings per share (EPS) growth and relative total shareholder return (rTSR) have been selected as appropriate performance measures. The rationale for the selection of these two measures is as follows: • • EPS growth: Ensures that our Executives are remunerated in line with growth in shareholder wealth over the long term. Relative TSR: Ensures that our Executives are remunerated in line with the Company’s creation of shareholder wealth relative to our peers over the long term. These two measures ensure we have LTI targets which are directly aligned with trends in shareholder wealth over the long term. There is debate among proxy advisors and investors about the use of rTSR as an LTI metric, with some for and some against. Relative TSR may not be particularly useful as an incentive on its own, as management have little direct influence over outcomes, however, when combined with the EPS growth metric (which has been given a higher weighting of 75%) we feel it results in a very effective LTI for our Executive KMP. The combination of these metrics ensures that Executives are aligned with shareholder wealth creation (EPS growth) ensuring that performance is better than that of our peers (rTSR). 1 ARR is not an IFRS measure and is unaudited, it represents future contracted annual revenue at year end. Key questions TechnologyOne approach Why does the Relative TSR performance hurdle not have a gate for positive TSR? Relative TSR considers the relative performance of the Company’s share price, relative to the share price of its market peers. For instruments to vest, the Company’s performance needs to be better than that of our peers. If relative TSR is better than market peers, but represents a negative return, it is unlikely that there will be any intrinsic value in the equity instrument, so the Executive is unlikely to realise any increased value at the time of vesting. Further, the value of the instrument is aligned with shareholder experience, either positive or negative. We believe that this framework is consistent with our remuneration principle of commitment to simplicity. Is our STI plan sufficiently challenging with only one performance measure? The winning of new business, driving continued profit growth is the key to our long-term success. Having Executives focus solely on net profit before tax (NPBT) ensures there is clear line of sight for Executives and transparency for shareholders as to how STI awards are determined. The setting of NPBT as the measure (rather than components contributing to NPBT) give Executives the flexibility to be agile and choose appropriate strategies based on the market environment and leveraging opportunities to meet their targets. NPBT incorporates the outcomes of the key drivers of our business including winning new annual recurring revenue through new and existing customers, customer retention, expense management and margin expansion. 108 TechnologyOne Annual Report 2023Key questions TechnologyOne approach What is the rationale for having an uncapped STI? An important element of the success of our STI has been that it is uncapped on the upside and downside. The greater the results in the current financial year, the greater the STI. This not only encourages over performance in the current financial year for the Company, it has a significant flow on effect in future years through the greater annual recurring revenues for the Company. The uncapped STI also helps retain Executives over the long-term, because the more they succeed, the more financial incentive there is to stay with us and continue to work hard to achieve each year, and the greater benefit to our shareholders through an ever-increasing recurring revenue base. Likewise, if the Company under-performs (e.g. loss of customers) or the results in a year are lower (e.g. impairment), there is a significant financial impact to Executives as their STI forms a significant portion of their total remuneration. Just as the STI is uncapped on the upside, it is also uncapped on the downside. Given that the Executive’s fixed remuneration percentage is significantly lower than our ASX-listed peers, under-performance has a significant, negative impact on their total remuneration. This performance measure is well-aligned with the interests of shareholders, as NPBT outcomes above target, rewards shareholders as well as executives. Poor performance also penalises Executives as well as shareholders. 109 Making life simple for our communityRemuneration Report (Audited) 10 Key questions (continued) TechnologyOne approach Key questions Why did we introduce a Deferred STI? A Deferred STI component was introduced in FY19 where an additional amount equal to 25% of the STI earned in the year under review is awarded and deferred for a period of two years (i.e., 20% of total STI). The award is only paid out to the Executive if they remain in employment with the Company for the entire deferral period. This deferral: • • • Assists in retaining high performing Executive KMP Helps further drive long-term shareholder wealth via Executive skin in the game, fostering a long-term mind set among executives Provides opportunity to forfeit the award. Prior to its award or vesting, the Remuneration Committee considers whether there are any irregularities or other factors that would affect the payment or vesting of that award (Malus Provision). What is the rationale for deferring 20% of the total STI award, and not a higher amount? Our Executives receive: • • Relatively low fixed remuneration to enable a greater emphasis on performance Relatively large at-risk short-term incentive (STI) portion aligning Executives to current year performance • Deferred STI component to help further drive long-term shareholder wealth and ensure that we retain high performing Executives Given the low fixed remuneration, and emphasis on performance related at-risk remuneration, it is not considered appropriate to defer greater than 20% of the total STI. Were Retention LTIs granted? No retention LTIs were granted in FY23. Does our remuneration framework align our executives with shareholders? TechnologyOne Executive remuneration continues to be clearly aligned with shareholder value creation. Our Executives have the greatest percentage of their remuneration at risk and aligned with Company performance when compared to our peers. Refer section 3.1 for our remuneration strategy and principles, and section 5.1 showing the creation of shareholder wealth for the years ended 30 September 2023 compared to executive remuneration growth. The Executive Remuneration Framework has successfully driven performance and the creation of shareholder wealth over the longer term. 110 TechnologyOne Annual Report 2023Corporate Governance Statement Contents 1 Corporate Governance Statement 2 Board of Directors 3 Company Secretary 4 Audit & Risk Committee 5 Remuneration Committee 6 Nomination & Governance Committee 7 Corporate Governance Principles & Recommendations 7.1 Ethical Standards and Code of Business Conduct 7.2 Safeguard Integrity in Financial Reporting 7.3 Continuous Disclosure 7.4 Risk Assessment Management 7.5 Accounting Standards and Company Policies 7.6 Remuneration Principles 7.7 Performance Evaluation 7.8 Trading in Company Securities 7.9 Shareholders’ Rights and Communication 8 ASX Corporate Governance Principles and Recommendations 4th Edition Compliance 112 112 114 115 116 116 118 118 119 119 119 121 121 122 122 123 123 111 Making life simple for our community Corporate Governance Statement 1 Corporate Governance Statement The Board of Directors of the Company is responsible for its corporate governance. The Board guides and monitors the business and affairs of the Company on behalf of the shareholders by whom they are elected and to whom they are accountable. The Directors have established guidelines for the operation of the Board and its Committees. Set out below are the Company’s main corporate governance practices. The TechnologyOne Board routinely considers industry governance initiatives of benefit to the Company and its many stakeholders. The Board has adopted the 4th Edition of the ASX Corporate Governance Principles and Recommendations. The Corporate Governance Statement, as well as supporting documents are available on the Company’s internet site: www.technologyonecorp.com/company/investors/ corporate‑governance 2 Board of Directors The Board of the Company currently comprises eight Directors and includes: Pat O’Sullivan Non-Executive Director - Independent Board Chair (appointed 30/6/22) Edward Chung Managing Director (appointed 15/08/2023) (CEO since 23 May 2017) John Mactaggart Non-Executive Director - Major shareholder (appointed 08/12/1999) Richard Anstey Non-Executive Director – Independent (appointed 02/12/2005) Dr Jane Andrews Non-Executive Director – Independent (appointed 22/02/2016) Sharon Doyle Non-Executive Director - Independent (appointed 28/02/2018) Cliff Rosenberg Non-Executive Director - Independent (appointed 27/02/2019) Peter Ball Non-Executive Director – Independent (appointed 02/03/2020) The following information is provided in the Corporate Governance section of the Company’s Annual Report: • Details of names, qualifications, skills, experience and dates of appointment of each Board member. • • The number of meetings of the Board and the names of attendees. Explanation of any departures from the ASX Corporate Governance Principles and Recommendations. The role of the Board is as follows: • Setting objectives, goals and strategic direction for management, with a view to maximising shareholder value. • Input into and ratifying any significant changes to the Company. • Adopting an annual budget and monitoring financial performance. • • • • Ensuring adequate internal controls exist and are appropriately monitored for compliance. Ensuring significant business risks are identified and appropriately managed. Selecting, appointing and reviewing the performance of the Chief Executive Officer / Managing Director. Setting the highest business standards and code of ethical behaviour. • Decisions relating to the appointment or removal of the Company Secretary. • To review and evaluate the performance of the Board as a whole, each Committee, key Executives and each Director on an annual basis. The Board has the authority to delegate any of their powers to committees consisting of such Directors and external consultants, as the Board think fit. The Board has established the following committees: • Audit & Risk Committee • Remuneration Committee • Nomination & Governance Committee Board papers are prepared for the Directors, containing detailed operational reports from each region and department in the Company, highlighting: • Operational performance. • • Initiatives undertaken/completed. Identified problems/risks and proposed solutions. The Chief Executive Officer / Managing Director also prepares a summary report that highlights: • Financial performance year to date, and forecast for the full year. • Key matters and significant issues. • • Significant changes proposed. Proposed strategic initiatives. • Risk Management. On a regular basis, members of the Senior Leadership Team are invited to present to the Board directly and to answer questions the Board may have. The strategy of the Company, as well as matters reserved to the Board, are reviewed at least annually by the Board. 112 TechnologyOne Annual Report 2023Matters Reserved to the Board Matters that are reserved to the Board are as follows: • Communications with shareholders and the market in general, including ASX announcements, through the Board Chair. • Input into and subsequent approval of corporate strategy and performance objectives. • Oversight of the Company’s governance policies, including the Company’s Code of Business Conduct. • Oversight and monitoring of the internal compliance with legal and regulatory obligations (e.g. ASX, ASIC, ATO, Whistleblower, Workplace Health Safety) • Input into and subsequent approval of significant organisational structure/restructure. • Review of the Chief Executive Officer / Managing Director and Company Secretary to the relevant Code of Conduct established by the Board. • Appointing and removing the Managing Director and / or Chief Executive Officer and monitoring their performance respectively. • Input into and subsequent approval of the budget including Operating Expenditure and Capital Expenditure, and any significant variations. • Oversight of the Company, including its control and accountability systems. • Input into and subsequent approval of changes to internal systems and controls. • Review, and accept/reject recommendations from sub-committees such as Audit & Risk, Remuneration and Nomination & Governance committees. • Input into and ratifying any acquisitions and divestitures. All other matters are referred to management via the Chief Executive Officer / Managing Director. The Chief Executive Officer / Managing Director are authorised to sub-delegate their authority for the day-to-day operation of the Company. Board Skills As a collective, the Board has extensive commercial skills and experience which provide a solid base for the governance of the Company. The Board has a combination of experience in the following core areas: • • Strategic and Commercial Acumen Finance and Taxation • Risk and Compliance • • • IT and Communications Industry Software and Product Development Start-ups and Early Stage Investments • Corporate Governance and ESG • • • • • Sales and Marketing People, Culture and Conduct Executive Management and Leadership Listed Entities International Business. The Board as a whole benefits from the combination of the Director’s individual skills, experience and expertise in particular areas, as well as the varying perspectives that arise from the Board’s interactions through their diverse backgrounds. The Board membership is to provide a suitable level of skills to properly guide the Company and deliver the Company’s strategic objectives and provide a solid base for governance. The Board assesses its level of skills annually and will address any requirements for additional skills that it feels would be in the best interest of the Company in response to wider market factors and the growth of the Company. The Board has determined the core skills for its governance of the Company. The Board has the authority to appoint Directors and will consider the recommended appointments as proposed by the Nomination & Governance Committee. The Board will assess whether to recommend / not recommend endorsement of a Director at each General Meeting. Director Principles The Directors operate in accordance with the following broad principles: • • • • • • The Board should comprise of at least three members, but no more than 10. The Board may increase the number of Directors where it is felt that additional expertise in specific areas is required. The size of the Board is to be appropriate to all it to be effective and to react quickly to opportunities and mitigate threats. The Board should be comprised of Directors with an appropriate mix of skills, qualifications, expertise, experience and diversity. The skills, experience and expertise which the Board considers to be particularly relevant include those listed above. In respect of diversity, the Board recognises that diversity includes, but is not limited to gender, age, ethnicity and cultural background. The Board values diversity and acknowledges the individual contribution that people can make and the opportunity for innovation that diversity brings. The Board shall meet on both a planned basis and an unplanned basis when required and have available all necessary information to participate in an informed discussion of agenda items. The Directors are entitled to be paid expenses incurred in connection with the execution of their duties as Directors. Each Director is therefore able to seek independent professional advice at the Company’s expense, where it is in connection with their duties and responsibilities as Director. The Company policy is that a Director wishing to seek independent professional advice should advise the Board Chair at least 48 hours before doing so. The Directors and Officers will not engage in Short-Term trading of the Company’s shares. Furthermore, the Directors and Officers will not buy or sell shares at a time when they possess information which, if disclosed publicly, would be likely to materially affect the market price of the Company’s shares. Information is not considered to be generally available until a reasonable time has elapsed to allow the market to absorb these announcements. A detailed policy exists on this matter – refer below, section: Trading in Company Securities. • Directors have a clear understanding of the corporate and regulatory expectations of them. To this end, formal letters of appointment are made for each Director setting out the key terms and conditions, any special duties or arrangements, remuneration and expenses, their rights and entitlements, confidentiality and rights of access to corporate information, as well as Indemnity and Insurance cover provided. • Newly appointed Directors undertake an induction course covering the Company’s strategy, products and operations. They are also provided a copy of the Company’s constitution, charters and key policies. 113 Making life simple for our communityCorporate Governance Statement 2 Board of Directors (continued) Director Appointments Director Principles (continued) • Directors are required to disclose Directors’ interests and any matters that may affect the Director’s independence. This includes disclosure of conflicts of interest, which may include transactions with family members or related entities. • If there is a potential conflict of interest, conflicted Directors must immediately inform the Board and abstain from deliberations on such matters. Such Directors are not permitted to exercise any influence over other Board members. If the Board believes the conflict of interest is material or significant, the Directors concerned will not be allowed to attend the meeting or receive the relevant Board papers. Director Independence The Board comprises a majority of independent Non-Executive Directors who have broad commercial experience and bring independence, accountability and judgement in discharging the Board’s responsibilities to ensure optimal returns to shareholders and the ongoing provision of benefits to the Company’s employees. The Board is required to disclose any material information that could influence, or would be reasonably perceived to influence, in a material respect their capacity to bring an independent judgement to bear on the issues before the Board and to act in the best interests of the Company and its shareholders. The independence of the Directors is assessed annually in accordance with the ASX Corporate Governance Principles and Recommendations. TechnologyOne will only enter into an agreement for the provision of consultancy or similar services by a Director or Senior Executive or by a related party of theirs if TechnologyOne has independent advice that the services being provided are outside the ordinary scope of their duties as a Director or Senior Executive; the agreement is on arm’s length terms; and the remuneration payable under it is reasonable and with full disclosure of the material terms to securityholders. TechnologyOne has aligned its Committee composition strategy to comply with the ASX Corporate Governance Principles and Recommendations, ensuring that newly appointed Directors are made members of the appropriate Committees once they have had sufficient time to develop a comprehensive understanding of TechnologyOne’s operations. All Committees are comprised of independent Non-Executive Directors. All Directors, both Executive and Non-Executive, receive written notifications of their appointment and a new Director induction pack which details the terms and conditions of their appointment, remuneration (including superannuation contributions), continuous disclosure requirements (including interests in the Company), ongoing confidentiality obligations, Company policies on when to seek independent professional advice, and the Company’s indemnity and insurance measures. Prior to appointment, appropriate checks are undertaken on the candidates and relevant information provided to shareholders to consider when voting on the election of the Director. Relevant information is also provided for shareholders to consider when voting to re-elect existing Directors upon rotation. Executive Directors and Senior Executives of the Company will also have formal written employment agreements which set out the terms of their employment, roles and responsibilities, reporting lines, remuneration, confidentiality and termination provisions. All Directors and Senior Executives are required to comply with key corporate policies which include, but are not limited to, Code of Business Conduct, Share Trading Policy, Insider Trading Policy, Privacy Policy and Diversity Policy. All new Directors and Senior Executives participate in the Company’s formal on-boarding program which includes an induction program which incorporates meetings with key Senior Executives. The Board has the authority to appoint Directors and will consider the recommended appointments as proposed by the Nomination & Governance Committee. The Board will assess whether to recommend / not recommend endorsement of a Director at each General Meeting. 3 Company Secretary Company Secretaries are appointed by the Board by resolution. Company Secretaries are accountable directly to the Board, through the Board Chair. The role of the Company Secretary is as follows: • Advising the Board and Committees on governance matters. • Monitoring adherence of Board and Committees to policies and procedures. • Coordinating timely completion and despatch of Board and Committee papers. • • Ensuring business at Board and Committee meetings is accurately captured in the minutes. Helping to organise and facilitate induction and professional development of Directors. 114 TechnologyOne Annual Report 20235. Compliance • Monitor compliance with the requirements of the Corporations Act, Listing Rules, Australian and Foreign Taxation Offices and other related legal obligations. 6. Risk Management • Oversee the ongoing development by management of an enterprise-wide risk management framework for management of material risks. • Periodically review the adequacy and effectiveness of the Company’s policies and procedures relating to risk management and compliance. • Make recommendations to the Board on key risk management matters and levels of risk appetite. • Oversight of the insurance portfolio with consideration of material risks, including cyber risk and information security. The committee meets at least four times per year, with full minutes being kept, and reports to the Board on a regular basis. The number of meetings held during the year and the attendance of the members is provided in the Annual Report. The Audit & Risk Committee Charter is available on the Company’s website. Principles of the Audit & Risk Committee The committee operates in accordance with the following broad principles: • Advise and assist the Board in fulfilling its responsibilities relating to financial management, risk oversight and reporting functions and in safeguarding the Company's assets. • Provide a means of easy access to the Board for the external auditors in order to assist them in performing their functions. • Assign the Secretary of the Committee such duties and responsibilities as the Committee may deem appropriate. • • Take actions as necessary or prudent to fulfill the responsibilities of the Committee, provided that no action will be taken without prior approval of the Board. TechnologyOne requires the rotation of the external audit partner every five years. The Audit & Risk Committee includes members who are financially literate; and at least one member who has financial expertise, preferably a qualified accountant. 4 Audit & Risk Committee The Board has established an Audit & Risk Committee. The committee is comprised of: Peter Ball (Chair) Independent Non-Executive Director Dr Jane Andrews Independent Non-Executive Director Sharon Doyle Independent Non-Executive Director The role of the committee is to assist the Board in discharging its obligations with respect to the following areas: 1. • Financial Reporting Ensure the integrity in financial reporting (refer section below – Safeguard Integrity in Financial Reporting). • Review for accuracy financial statements for each reporting period prior to approval by the Board, and publishing. • • Ensure required declarations from the Company’s Chief Executive Officer and Chief Financial Officer are received for each reporting period. Ensure that the financial statements for each reporting period comply with appropriate accounting standards. • Regularly review Accounting Standards and Company Policies in conjunction with the Auditors and recommend adoption/ changes to the Board. • Directly follow-up action where considered necessary. • Relay any matters of concern to the Board. 2. Tax Governance • Oversight of the Company’s group taxation matters and ongoing development. • Review of taxation governance processes, policies, control framework and reporting. 3. Internal Audit • • Ensure that systems of internal control are functioning effectively and economically and that these systems and practices contribute to the achievement of the Company’s corporate objectives. Ensure the Internal Audit Function maintains a high standard of performance. 4. External Audit • Receive and review reports from the external Auditor. • Oversight of the process to ensure the independence and competence of the Company’s external auditors. • Review the performance of the external auditor on an annual basis. • Recommend the selection and the appointment of the external Auditors, based on specified criteria. 115 Making life simple for our communityCorporate Governance Statement 5 Remuneration Committee The Board has established a Remuneration Committee. The committee is comprised of: Dr Jane Andrews (Chair) Independent Non-Executive Director Cliff Rosenberg Independent Non-Executive Director Peter Ball Independent Non-Executive Director The role of the committee is: To advise the Board with regard to the Company’s broad policy for Senior Executive and Director remuneration. To determine, on behalf of the Board, the individual remuneration packages for Senior Executives and Directors. To give the Company’s Senior Executives encouragement to enhance the Company’s performance and to ensure that they are fairly, but responsibly, rewarded for their individual contribution. • • To consider the vesting of any deferred remuneration including deferred STI & LTI to assess whether there are any irregularities or other factors that would affect the payment or vesting of that award (that is, consider whether to apply malus provision or utilise discretion). Non-Executive Directors’ remuneration is determined by the Board within the aggregate amount per annum which may be paid in Directors’ fees. Executives are not present for Committee discussions on Senior Executive remuneration. • • • • 6 Nomination & Governance Committee The Board has established a Nomination & Governance Committee. The Committee is comprised of: Cliff Rosenberg (Chair) Independent Non-Executive Director Sharon Doyle Independent Non-Executive Director Dr Jane Andrews Independent Non-Executive Director The role of the Committee is as follows: • Assessment of the necessary and desirable competencies and experience for Board membership. Consideration of the membership of the Board, Audit & Risk and Remuneration committees Evaluation initially and on an on-going basis of Non-Executive Director’s professional development, commitments, and their ability to commit the necessary time required to fulfill their duties to a high standard. • Adherence by Directors to the Director’s Code of Conduct and to good corporate governance. • Review of Board succession plans. • Recommendation for changes to Committees. • Recommendation of, and undertaking the appropriate checks, before the appointment of new Directors. • Recommendation of, and undertaking the appropriate checks, for the endorsement or non-endorsement of existing Directors. The number of meetings held during the year and the attendance of the members is provided in the Annual Report. • Ensuring that an effective induction process is in place for new Board members. The Remuneration Committee Charter is available on the Company’s website. • Review and oversight of the Company’s Corporate Governance Statement and governance related policies. • Review and oversight of the Company’s Environmental, Social & Governance (ESG) strategy and Sustainability Reporting • Oversee compliance with Modern Slavery Regulations The number of meetings held during the year and the attendance of the members is provided in the Annual Report. The Nomination & Governance Committee Charter is available on the Company’s website. Principles of the Remuneration Committee The Committee operates in accordance with the following broad principles: • • • • • The Committee should provide the packages needed to attract, retain and motivate Senior Executives, but avoid paying more than is necessary. The Committee should judge where to position the Company relative to other companies. Be aware of comparable companies’ pay, but exercise caution. The Committee should be sensitive to the wider scene, especially regarding salary increases. Performance related elements should form a significant proportion of the package; should align interests with those of shareholders; and should provide keen incentives. The Committee should ensure that the framework remains largely consistent year on year with any changes designed to motivate executives rather than destabilise them. 116 TechnologyOne Annual Report 2023Assessment of Director Independence The Board has determined that an independent Director will meet all the following criteria: • • • Is not an Executive Director (i.e. not a member of the management team). Is not a substantial shareholder of the Company, as defined by Section 9 of the Corporations Act, or an officer of a company that is a substantial shareholder. Is not directly associated with a substantial shareholder of the Company. • Within the last three years, has not been employed in an Executive capacity by the Company or another group member, or been appointed a Director within three years after ceasing to hold such employment. • Within the last three years, has not been a principal of a material professional adviser or a material consultant to the Company or another group member, or an employee materially associated with the service provider. • Is not a material supplier or customer of the Company or other group member, or an officer of or otherwise associated, either directly or indirectly, with a material supplier or customer. This includes family members being in these categories. • Has no material contractual relationship with the Company or another group member other than as a Director of the Company. • Is free from any interest and any business or other relationship which could, or could reasonably be perceived to, materially interfere with the Director’s ability to act in the best interest of the Company. Principles of the Nomination & Governance Committee The committee operates in accordance with the following broad principles: • • • The Nomination & Governance Committee is entitled to seek the advice of an external consultant. The Nomination & Governance Committee will make recommendations to the Board. The Board is responsible to appoint the most suitable candidate, after receiving recommendations from the Nomination & Governance Committee. The nominated appointee upon acceptance will hold office until the next Annual General Meeting, where the appointee will stand for election. The name of all candidates submitted for election as Director is accompanied with necessary information required by shareholders to make an informed decision including biographical details, competencies, qualifications, details of relationships between the Company, the candidate and incumbent Directors; other directorships held, particulars of other positions held which involve significant time commitments, and any other particulars required by law or good corporate governance. For existing Directors standing for re-election, the number of years as a Director of TechnologyOne will also be provided in the Annual Report. • Directors (with the exception of a Managing Director if appointed by the Board) must stand for re-election every three years in accordance with the Company’s Constitution. One third of the Directors retire from office at each Annual General Meeting and are eligible to nominate for re-election. • A structured process has been established to review and evaluate the performance of the Board and its Committees. This process also identifies ways to improve their performance, interaction with management, and quality of information provided. The following information is provided in the Annual Report: • • • • • The skills, experience and expertise relevant to the position of Director. The names of Directors considered by the Board to constitute independent Directors and the Company’s materiality thresholds. The term of office held by each Director at the date of the Annual Report. The number of meetings held by the Nomination & Governance Committee and the names of attendees. Explanation of any departures from the ASX Corporate Governance Principles and Recommendations. 117 Making life simple for our communityCorporate Governance Statement 7 Corporate Governance Principles & Recommendations 7.1 Ethical Standards and Code of Business Conduct All Directors, Senior Executives and employees are expected to act with the utmost integrity and objectivity, observe the highest standards of behaviour and business ethics, and always strive to enhance the reputation and performance of the Company. A Code of Business Conduct has been established which is applicable to each of the following: • Directors • Chief Executive Officer / Managing Director • Chief Financial Officer • Chief Operating Officer • • Senior Executives Employees The Code of Business Conduct has been approved by the Board and given their full support. The Code of Business Conduct addresses: • Responsibilities to shareholders and customers. • • “The TechnologyOne Way”, which refers to the success of the Company coming from our shared values, our entrepreneurial spirit and innovation. Employment practices (including diversity, inclusiveness, anti-discrimination, workplace health and safety). • Responsibilities to the community. • Responsibilities to the individual. • Compliance with the codes. In addition, all employees have employment agreements, which include job descriptions that describe their duties, rights and responsibilities. In conjunction with the Code of Business Conduct, TechnologyOne has developed a Whistleblower Policy, Modern Slavery Policy, Supply Chain Policy and Bribery & Corruption Policy. The Whistleblower Policy encourages employees to come forward with concerns that the entity is not acting lawfully, ethically or in a socially responsible manner and provides suitable protections if they do. The Board will be informed of any material concerns raised that call into question the culture of TechnologyOne or have been raised under the Bribery & Corruption Policy. The Whistleblower Hotline is facilitated by an external, independent third party and they provide translation services for those where English is not their primary language. The Board is informed of any material breaches of the Code of Business Conduct by a Director or Senior Executive and of any other material breaches of the code that call into question the culture of the organisation. 118 Diversity Policy TechnologyOne has an inclusive Diversity Policy which covers the broader dimension of diversity covering aspects of gender, age, disability, ethnicity, marital or family status, religious or cultural background, sexual orientation and gender orientation within the total organisation, including the Board, and senior management. In conjunction with this policy, the Company has measurable objectives which are assessed and reported in the annual report. The Board has developed and has oversight of the following diversity objectives: • Ensuring compliance with the published Diversity Policy. • Not less than 30% of the Board to be of each gender by 2025 (to allow for the Board transition) • 70% of all vacant roles are to have at least one female candidate shortlisted. • Maintain reporting measures that are in compliance with both the ASX guidelines and Workplace Gender Equality Agency. • Continue to identify employee feedback mechanisms through the review of existing forums and information provided as well as the identification of appropriate new mechanisms for employee consultation. • Maintain existing educational programs that support diversity including but not limited to induction, on boarding and leadership programs. The diversity of TechnologyOne remains fundamental to our ongoing success. TechnologyOne has established a Diversity Policy which reflects the Company’s commitment to providing an inclusive workplace. A summary of the Diversity Policy is following: • Diversity is one of TechnologyOne’s strengths. TechnologyOne values this diversity and recognises the individual contribution our people can make and the opportunity for innovation such diversity brings. • • • TechnologyOne believes that we will achieve greater success by providing our people with an environment that respects the dignity of every individual, fosters trust, and allows every person the opportunity to realise their full potential. TechnologyOne is committed to providing an inclusive workplace and our commitment to diversity extends to our interactions with customer and suppliers. TechnologyOne’s remuneration policy includes a commitment to equal pay for men and women. We conduct a gender pay gap analysis annually, following which we investigate any potential gender bias in performance pay, and correct like-for-like gaps. The Company’s 2023 Workplace Gender Equality Agency report can be found on the ‘Corporate Governance’ section of the Company’s website. TechnologyOne continues its strong support for the involvement of women in the technology sector, including building on strong relationships with groups such as Women in Digital and being the proud sponsors of the Women in Digital Transformation Leader of the Year award. TechnologyOne has policies in place in relation to anti-discrimination, workplace gender equality, diversity, sexual harassment, flexible working arrangements and paid parental leave. Further details are available in the TechnologyOne Sustainability Report, published on the Company website each year. TechnologyOne Annual Report 20237.2 Safeguard Integrity in Financial Reporting 7.4 Risk Assessment Management The Company has adopted an active approach to risk management and the Board recognises that the Company’s participation in commercial and operational activities require a certain level of risk. As such, the Board has delegated the risk management function to the management of the Company with oversight by the Audit & Risk Committee. A standing Item has been included in the Audit & Risk Committee agenda to consider the Enterprise Risk Register. The Board has received assurance from the Chief Executive Officer and Chief Financial Officer that the declaration provided in accordance with section 295A of the Corporations Act is founded on a sound system of risk management and internal control and that the system is operating effectively in all material aspects in relation to the financial reporting risks. The risk appetite of the Company considers the level of risk and risk combinations that the Board is prepared to take to achieve strategic objectives together with the level of risk shock that the Company is able to withstand. The Company performs risk reviews at least semi-annually and has identified several key risk categories for the business. Material Risks Cyber Risk TechnologyOne has successfully completed the Information Security Registered Assessors Program (IRAP) assessment for PROTECTED classified data. This provides our SaaS customers with an increased cyber security posture and greater certainty in a constantly evolving cyber security landscape. This was achieved by leveraging the strong compliance and security foundations established over recent years and is a testament to TechnologyOne’s mature security practices, accountability mechanisms and belief in continuous assessment and improvement. The Company has a robust data security and privacy program developed to meet the requirements set out in Australia’s Privacy Amendments (Notifiable Data Breaches) Act 2017, UK Data Protection Act 2018 (DPA Act) and the EU General Data Protection Regulation. This program ensures security is considered throughout the day-to-day operations of the Company and is backed by an independently verified process for dealing promptly with matters should they arise. The Company also is certified to the standards required in ISO27000, ISO9001, SOC1, SOC2 and SOC3 (Service Organisation Controls). The Company has established a structure of reviews and authorisations designed to ensure the truthful and factual presentation of the Company’s financial position. This includes: • • The establishment of an Audit & Risk Committee, and the review and consideration of the accounts by the Audit & Risk Committee. Process to ensure the independence and competence of the Company’s external auditors. • Requirement that the CEO and CFO state in writing to the Board that the Company’s financial reports present a true and fair view in all material respects of the Company’s financial condition; operational results are in accordance with the relevant accounting standards and the Company’s Risk Management and Internal Compliance and Control System is operating efficiently and effectively in all material respects. • Ensuring that the Company’s external Auditor attends the Company’s Annual General Meeting each year. • Verification of statements and data supplied in the annual Directors’ report and other corporate reports to ensure that the releases to the market are accurate, balanced and understandable and provide investors with appropriate information to make informed investment decisions. • Disclosure of the annual tax transparency statement. The Company put the external audit services to tender in 2020 which is another example of how the Company expresses its dedication to ensuring integrity of the financial reporting is maintained. 7.3 Continuous Disclosure The Company Secretary working closely with the Board Chair, CEO and CFO have been delegated responsibility for the continuous disclosure of information to the market, to ensure: • All investors have equal and timely access to material information concerning the Company, including its financial position, performance, ownership and governance. • Company announcements are factual and presented in a clear and balanced way, requiring the disclosure of both positive and negative information. • When analysts are briefed on aspects of the Company’s operations, the market is forewarned, and the materials used in such presentations are also released to the ASX and posted on the Company’s website. • Any information that a reasonable person would expect to have a material effect on the price or value of the Company’s share price (as per Listing Rule 3.1) is immediately notified to the ASX. The Company has established a documented procedure to handle continuous disclosure requirements. Directors are provided with copies of all announcements made under listing rule 3.1 promptly once made. 119 Making life simple for our communityCorporate Governance Statement 7 Corporate Governance Principles & Recommendations (continued) 7.4 Risk Assessment Management (continued) People Risk Software Risk The Company needs to ensure we attract, retain, develop and foster the talent, skills and knowledge needed to deliver ambitious goals. The Company manages people risk through: • Education of the Company’s mission, values and purpose. • Career progression and succession, remuneration and achievement and reward initiatives. • Wellbeing initiatives – physical, mental, and financial (including provision of an Employee Share Plan and gym facilities for employees). • Leadership training and coaching. • eNPS surveys and retention / turnover reporting and analysis. • Promotion of the success of the Company internally and externally. • Alignment of education of the Company’s and departmental strategies, and empowerment to deliver. • Graduate, intern and global mobility program. The Board is provided with a summary of these initiatives at each board meeting. Building the Future Risk The Company sets ambitious goals for its future growth which are delivered on through: • Alignment and education of the Company’s and department strategies and empowerment to deliver. • Product success, Practice Management, Customer Success Teams, and tribes and ‘Brains Trust’ groups established. • Ongoing and frequent engagement with customers and user The Company has a rigorous product development process that reviews Software Release management, including resourcing and development issues. Insurance Risk The Audit & Risk Committee reviews the Company’s insurance requirements on an annual basis and compares this to the level of cover provided to ensure it is adequately covered. A recommendation is then provided to the Board for the placement of the Company’s insurance policies. Project Risk The Board requires the Chief Executive Officer / Managing Director to report on any customer implementation project that may be at significant risk of either incurring substantial penalties or incurring substantial over-runs. In addition, the Company has established a Customer Experience Team that reviews current projects and consulting activities to provide an early detection mechanism to ensure that any activities that pose a significant risk to the Company are identified and resolved before exposing the Company to potential liabilities. Sustainability Risk The Company believes that it does not have material exposure to specific economic, environmental, or social sustainability risks due to controls implemented. However, the company recognises the importance of these to its stakeholders and has developed a Sustainability Report to outline the Company’s position and initiatives across several sustainability risks. The Sustainability Report provides the Company’s initiatives and targets on items including: groups and early adopter programs. • Diversity • Continuous investment in R&D and ‘tribal days’ including • Customer satisfaction Hack Day. • Ongoing monitoring of operating environment and competitors. Other Risks The Company’s focus on risk management is primarily conducted through the Audit & Risk Committee, with a number of identified areas of specific risks as follows: Contract Risk The Company has established a Contract Approval Process that reviews all proposed new contracts with non-standard terms prior to signing to ensure the contracts can be fulfilled, the risks are known and can be managed, and that the contract can be completed profitably without exposing the Company to ongoing liabilities. Financial Risk The Chief Financial Officer, in conjunction with the Chief Executive Officer / Managing Director, review the Company’s financial exposure with a particular focus in the area of Outstanding Debtors, with oversight by the Board. • Employee satisfaction • Corporate culture • • Ethical business practices Supply chain • Community support • Environmental sustainability practices The Company has engaged external subject matter experts to assist in the preparation of environmental risk reporting aligned with the Taskforce for Climate-related Financial Disclosure (TCFD) recommendations. The Board acknowledges that climate change is both an environmental and economic issue. TCFD disclosures are now provided in the Financial Statements and in the annually published Sustainability Report. Suppliers to TechnologyOne are expected to comply with all applicable local, national and international laws and regulations, including in relation to bribery and corruption, modern slavery and ethical conduct. TechnologyOne undertakes due diligence of all new suppliers and has initiated an annual supplier attestation process to ensure our suppliers continue to comply. The Sustainability Report is available on the Company’s website. 120 TechnologyOne Annual Report 20237.5 Accounting Standards and Company Policies 7.6 Remuneration Principles Adhering to Accounting Standards and Company Policies, and the appropriate interpretation of such policies/standards, is seen as critical to managing the financial risk of TechnologyOne. Accounting Standards and Company policies are reviewed on a regular basis by the Audit & Risk Committee working in conjunction with the Auditors, and recommendations for adoption/change are made to the Board. Compliance with Accounting Standards and Company policies are included as part of the Auditors annual review. Internal Controls and Compliance The Company has an internal control framework that consists of: • Written policies and procedures. • Division of responsibilities to ensure appropriate segregation of duties. • Careful selection of high calibre well qualified staff. TechnologyOne undertakes Internal Audits in accordance with the Internal Audit schedule as approved by the Audit & Risk Committee. These audits are undertaken by the Governance, Risk & Compliance Team and reported directly through to the Audit & Risk Committee. The scope of the Internal Audits includes evidencing the responses to the semi-annual Management Attestations, ensuring the controls listed in the Enterprise Risk Register are operational, confirming findings from the previous audit are complete and to ensure that company-wide processes are being complied with. Independent auditors are engaged to review the Company’s internal controls and compliance and to provide a report to the Audit & Risk Committee. The Audit & Risk Committee oversees the Company’s compliance program with relevant international standards (including ISO 9001, 27001, 27017 and 27018, SOC 1, 2 & 3. IRAP and UK Cyber Essentials). The Company has established Practice Management teams in each business area to undertake reviews of compliance with certain operational policies and procedures. Each Practice Management Team provides quarterly reporting of their findings to the Audit & Risk Committee. An independent audit of the Practice Management reviews is undertaken by the Internal Audit team annually. TechnologyOne believes in the full disclosure of remuneration of its Directors and Key Management Personnel to the market, on at least an annual basis. Disclosure includes all monetary and non-monetary remuneration including salary, fees, non-cash benefits, bonuses or profit share accruing each year irrespective of payment, superannuation contributions, entitlements at termination or retirement, value of shares or options issued and sign-on payments. As a matter of principle, TechnologyOne has adopted the following guidelines to motivate Directors and Senior Executives to pursue long-term growth, and ensure their interests and those of the shareholders are closely aligned: • Remuneration packages should be set in the context of what is reasonable and fair, considering the Company’s legal and industrial obligations, labour market conditions, the scale of the business and competitive forces. • Non-Executive Directors should be remunerated solely on the basis of a cash payment, plus superannuation contributions as required by law. Non-Executive Directors should not be provided with bonuses, options, performance rights or loans. They should not participate in schemes designed for the remuneration of Senior Executives. The Company does not provide a Director’s Retirement Plan. • Non-Executive Directors will not be provided termination or retirement payments other than statutory superannuation. • Company Senior Executives (including Executive Directors) should be provided with a significant component of their expected salary on “an at-risk basis”, tied to the Company’s profit target. Shares, Options or Performance Rights may also be provided as part of the “at risk component”, but these must be tied to performance hurdles. The performance hurdles are to be reasonable, objective and measurable. Vesting of securities is also subject to malus provisions. • Termination payments should be agreed in writing and in advance if any are to be provided. 121 Making life simple for our communityCorporate Governance Statement 7 Corporate Governance Principles & Recommendations (continued) 7.7 Trading in Company Securities Performance Evaluation 7.8 Board The Board meets annually for the purpose of reviewing and evaluating the performance of the Board as a whole, each Committee, key Executives and each Director individually in meeting key responsibilities and achieving its objectives. The following areas were considered by the Board in its 2023 annual review: • Performance evaluation of Directors and Senior Executives. • Review of skills and experience of the Board for current operations of the Company and identification of any shortfalls. • Board Chair, Director and CEO succession planning. • Review of each Director’s independence status. • Review of skills matrix to ensure relevance of required skills. To assist the Board in maximising its effectiveness, the Board and Nomination & Governance Committee have a skills matrix to provide objective information about each Director and the Board during the past year. Each Director is encouraged to discuss any issue concerning Board performance with the Board Chair at any time. Directors are encouraged to maintain and improve their knowledge, skills and expertise through briefings, seminars and attending professional development programs. Remuneration of the Board is assessed every three (3) years against comparative data for Australian publicly listed companies supplied by an independent consultant and reported to the Remuneration Committee. The relative risk, time, effort, complexity of the underlying business, competency of the management team, financial performance and track record, clarity of strategy as well as the number of Board meeting required to oversee the business are used as benchmarks to determine the appropriate level of Director’s fees. For years where a formal assessment of remuneration is not conducted, the Director’s fees are increased by the Australian Consumer Price Index (CPI). Senior Executives The performance of Senior Executives is reviewed and evaluated annually by a combination of the Company’s internal performance management program and as part of the formal remuneration review that is conducted annually by the Remuneration Committee. The Directors have resolved to adopt the following policy in relation to trading by Directors and Officers in the Company’s shares. • • The Directors and Senior Executives will not engage in Short-Term trading of the Company’s shares. The Directors and Senior Executives will not buy or sell shares at a time when they possess information which, if disclosed publicly, would be likely to materially affect the market price of the Company’s shares. Information is not considered to be generally available until a reasonable time has elapsed to allow the market to absorb these announcements. The Directors and Senior Executives are not permitted to use the Company’s shares as security for margin loans. To assist Directors and Senior Executives in abiding by these principles Trading Windows have been established, relating to when Directors and Senior Executives can buy and sell the Company’s shares. These Trading Windows are open for 50 days following the full and half year result releases. At all times, the Director or Senior Executive must notify the Board (as a minimum the Board Chair) in advance of any intended transactions involving the Company’s shares. It is recognised that there may be circumstances where it may not be appropriate for Directors and Senior Executives to buy and sell within the above Trading Window in the event the Company is involved in strategic initiatives (such as acquisitions), which could materially affect the market price of the Company’s shares. The Directors and Senior Executives must advise the Company Secretary of any completed trades immediately once each transaction is done. This will allow the Company Secretary sufficient time to notify the ASX of the change in shareholding within the required period. A register of Director’s holdings is made available for inspection at every Board meeting. This policy applies to Directors and Senior Executives (including their nominee companies) and the entities which they control. For the purpose of this Policy, Senior Executive is deemed to include the following parties: (a) persons named by the Chief Executive Officer / Managing Director from time to time who may be involved in strategic issues (b) persons named by the Chief Executive Officer / Managing Director from time to time who are involved in financial reporting (c) Senior Executives of the Company as defined as Officers in section 9 of the Corporations Act being: ‘any person by whatever name called who is concerned or takes part in the management of the Company’. In addition to the policy for Directors and Senior Executives, all employees are reminded of the Insider Trading provisions of the Corporations Act. Staff are reminded of their obligations during the Trading Windows. 122 TechnologyOne Annual Report 20237.9 Shareholders’ Rights and Communication The Board of Directors aim to ensure that shareholders are informed of all major developments affecting the Company’s state of affairs. The information is communicated to shareholders, and forms part of the Company’s two-way investor relations program: • By ensuring that all shareholders can elect to receive information and communications from the Company’s share registry either physically or electronically and can update their preferences through the share registry. • By the Annual Report being distributed to all shareholders. The Board ensures the Annual Report contains all relevant information about the operations of the Company during the financial year, together with details of future developments and other disclosures required under the Corporations Act 2001. • By publishing its Notice of Meeting and Explanatory Memorandum for each Annual General Meeting (AGM) or other such meetings as required from time to time. • By encouraging shareholders to attend and participate in the Company’s Annual General Meeting. • By encouraging shareholders to participate in proxy voting should they be unable to attend the Company’s AGM. • By enabling shareholders to pose questions to the Company in the lead up to the AGM for responding during the meeting. • By facilitating polls for each resolution voted during an AGM. • By the Half Year results released to the market; • By disclosures forwarded to the ASX under the Company’s continuous disclosure obligations. • Through the Company’s website, under a special area called Investor Relations. • By the Company’s participation in scheduled briefings with institutional shareholders and security analysts. • By the participation of the Company’s Auditors and Solicitors at the AGM. TechnologyOne held its inaugural hybrid technology AGM in February 2023 with favourable feedback from its shareholders. TechnologyOne informed its shareholders at that meeting that it will continue to utilise this hybrid technology whenever possible for future AGMs, to encourage shareholder participation for those unable to attend in person. TechnologyOne does value the opportunity to meet with our shareholders face-to-face so will continue to offer that also for AGMs. All information communicated by the Company is in accordance with its continuous disclosure requirements under ASX Listing Rule 3.1. Legislative changes to the Corporations Act 2001 (Cth) effective from 1 April 2022, means that companies are no longer required to send shareholder communications by mail unless specifically requested. TechnologyOne aims to continually reduce our carbon emissions and to maintain carbon-neutrality, while continuing to provide effective communications to shareholders. By no longer sending shareholder communications by mail as the default position, we save time and cost, and it helps reduce our carbon footprint. Shareholders can still elect to receive some, or all, communications by mail if they choose. Shareholders are encouraged to review or update their communication preferences through the Company’s share registry provider. Contact details are available on the Company’s website through the Investor Relations area. 8 ASX Corporate Governance Principles and Recommendations 4th Edition Compliance The Company has complied with all the recommendations outlined in the Corporate Governance Principles and Recommendations 4th Edition. 123 Making life simple for our communityVoluntary Tax Transparency Report Voluntary Tax Transparency Report TechnologyOne has a strong commitment to transparency and compliance. TechnologyOne supports the objectives of the Government and the Board of Taxation to provide stakeholders with additional information and confidence that a company is compliant with their statutory obligations. The information provided complies with the standard of disclosure expected of ‘large businesses’ under the Voluntary Tax Transparency Code. The requirements of the Code are broken into Part A, which forms part of the tax notes as referenced below and Part B as disclosed below. The make-up of the respective parts is as follows: (a) Part A: • Effective company tax rates for our Australian and global operations (Note 7). The effective tax rate of the Australian Group for FY23 is 21% • A reconciliation of accounting profit to tax expense and to income tax payable (Note 7) • Identification of material temporary and non-temporary differences (Note 7) (b) Part B • • Tax policy, tax strategy and governance Information about international related party dealings International related party dealings TechnologyOne seeks to ensure all intercompany transactions are undertaken in accordance with the arm’s length principle. TechnologyOne has an Advanced Pricing Arrangement (APA) with the Australian Taxation Office. As an Australian headquartered company, we have created and maintained significant intellectual property in Australia which has been successfully utilised in our overseas operations. Our engagement with the ATO through the APA process, seeks to ensure Australia receives a commercial return for the use of intellectual property by our overseas businesses. These returns are taxable in Australia. In addition, loans are made to and received from foreign controlled entities for short-term, medium-term and long-term funding requirements. As a large global group, these transactions assist with managing cash flow and funding requirements. Tax Contribution Summary Below is a summary of the taxes paid, collected and remitted by TechnologyOne to the relevant revenue authorities during the financial year ended 30 September 2023. Year ended 30 September 2023 Consolidated Global Group AUD • A tax contribution summary of income tax paid. Corporate income taxes Information in relation to the year ended 30 September 2023 is set out below. Our Approach to Tax Fringe benefit taxes Payroll taxes Net GST/VAT taxes TechnologyOne has a tax governance framework which has been approved by the Board. Tax falls under the oversight of the Audit and Risk Committee. Employee taxes remitted Total 16,425,205 1,021,940 9,502,510 44,673,070 62,337,444 133,960,169 Tax is one of a broad range of commercial factors that is taken into account when assessing and undertaking investment activities. TechnologyOne is conservative in its approach to tax risk. TechnologyOne aims to achieve full compliance with tax obligations in each tax jurisdiction in which it operates. In accordance with its commitment to best practice corporate governance and a culture of excellence, TechnologyOne will not enter into any arrangements that may be regarded as tax evasion. The Tax Risk Governance Policy includes a framework for the internal escalation process for referring matters to the CFO. The CFO must report any material tax issues to the Board. TechnologyOne will not pursue aggressive tax positions or strategies or adopt positions that are not able to be supported or defended in a court of law. Where the tax law is unclear or subject to interpretation, advice is obtained and when necessary, the Australian Taxation Office (ATO) (or other relevant tax authority) is consulted to ensure certainty. TechnologyOne has a strong history of compliance and an open engagement with relevant tax authorities. We seek to be co-operative and transparent and to maintain collaborative relationships. 124 TechnologyOne Annual Report 2023Financial Report Contents Consolidated income statement Consolidated statement of comprehensive income Consolidated statement of financial position Consolidated statement of changes in equity Consolidated statement of cash flows Notes to the consolidated financial statements 126 126 127 128 129 130 125 Making life simple for our communityFinancial Statements Financial Statements Consolidated income statement Consolidated income statement For the year ended 30 September 2023 Notes 30‑Sep‑23 ($’000) 30‑Sep‑22 ($’000) Revenue - SaaS and continuing business Revenue - Legacy licence business Revenue from contracts with customers Other income Total Revenue Variable costs Variable customer SaaS costs Total variable costs Occupancy costs Corporate costs Depreciation and amortisation Computer and communication costs Marketing costs Employee costs Share-based payments Finance expense Total operating costs Profit before income tax Income tax expense Profit for the year Basic earnings per share Diluted earnings per share 5 5 6 6 6 7 31 31 The above consolidated income statement should be read in conjunction with the accompanying notes. Consolidated statement of comprehensive income For the year ended 30 September 2023 Profit for the year (from above) OTHER COMPREHENSIVE INCOME Items that may be reclassified to profit or loss Exchange differences on translation of foreign operations Other comprehensive income/(loss) for the period, net of tax Total comprehensive income for the period 426,379 2,999 429,378 11,985 441,363 (21,031) (34,863) (55,894) (3,304) (32,305) (53,502) (9,715) (13,724) (135,115) (5,827) (2,123) 358,668 9,566 368,234 1,157 369,391 (20,701) (26,350) (47,051) (2,539) (20,370) (38,110) (10,458) (8,685) (124,661) (3,353) (1,844) (255,615) (210,020) 129,854 (26,978) 102,876 Cents 31.71 31.54 112,320 (23,477) 88,843 Cents 27.51 27.38 30‑Sep‑23 ($’000) 30‑Sep‑22 ($’000) 102,876 88,843 3,500 3,500 106,376 (3,196) (3,196) 85,647 The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes. 126 TechnologyOne Annual Report 2023 Consolidated statement of financial position As at 30 September 2023 Notes 30‑Sep‑23 ($’000) 30‑Sep‑22 ($’000) ASSETS Current assets Cash and cash equivalents Financial assets Prepayments Trade and other receivables Contract assets Other current assets Contract acquisition costs Total current assets Non‑current assets Property, plant and equipment Right-of-use assets Intangible assets Capitalised development Deferred tax assets Contract assets Contract acquisition costs Total non‑current assets Total assets LIABILITIES Current liabilities Trade and other payables Provisions Contingent consideration Deferred revenue Current tax liabilities Lease liability Total current liabilities Non‑current liabilities Provisions Other non-current liabilities Lease liability Total non‑current liabilities Total liabilities Net assets EQUITY Contributed equity Other reserves Retained earnings Total equity 8 9 10 11 12 14 13 21 14 14 15 11 14 16 18 19 17 21 20 21 22 23 198,265 25,000 25,151 62,416 22,891 1,127 9,576 175,865 - 20,379 57,266 21,540 600 6,505 344,426 282,155 13,315 22,641 59,510 148,618 21,382 3,618 23,227 292,311 636,737 49,247 21,277 ‑ 214,495 9,923 8,894 303,836 2,565 68 24,262 26,895 330,731 306,006 67,466 99,604 138,936 306,006 8,505 23,110 59,452 126,909 21,060 4,881 13,873 257,790 539,945 48,559 20,902 6,997 184,008 2,784 7,897 271,147 2,200 94 27,407 29,701 300,848 239,097 57,635 81,875 99,587 239,097 127 The above consolidated statement of financial position should be read in conjunction with the accompanying notes. Making life simple for our community Financial Statements Consolidated statement of changes in equity For the year ended 30 September 2023 Contributed equity ($’000) Retained earnings ($’000) Dividend reserve ($’000) Note FOREX reserve ($’000) Share option reserve ($’000) Total equity ($’000) Balance as at 1 October 2022 57,635 41,455 (1,238) 41,658 239,097 9,831 (63,527) 67,466 138,936 6,922 48,377 2,262 48,965 306,006 Balance as at 1 October 2021 51,645 32,454 1,958 38,305 190,234 Profit for the period Exchange differences on translation of reserves Total comprehensive income for the period Dividends paid Transfer to dividends reserve Exercise of share options Employee share-based compensation Share based payments Tax impact of share trust Balance at 30 September 2023 24 22 22 32 Profit for the period Exchange differences on translation of reserves Total comprehensive income for the period Dividends paid Transfer to dividends reserve Exercise of share options Share based payments Tax impact of share trust Balance at 30 September 2022 - - ‑ - 3,500 3,500 99,587 102,876 - 102,876 - (56,605) (63,527) 63,527 - - - - - - - - - - ‑ - - 8,139 1,692 - - - - ‑ - - - 244 3,907 3,156 7,307 102,876 3,500 106,376 (56,605) - 8,139 1,936 3,907 3,156 (39,467) - - ‑ - - - 3,353 - 88,843 (3,196) 85,647 (46,127) - 5,990 3,353 - 3,353 (36,784) - - - - - - - - - - - - - - - ‑ - - 5,990 - - 24 22 32 65,872 88,843 - 88,843 - - ‑ - (3,196) (3,196) - (46,127) (55,128) 55,128 - - - - - - 5,990 (55,128) 57,635 99,587 9,001 41,455 (1,238) 41,658 239,097 The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes. 128 TechnologyOne Annual Report 2023 Consolidated statement of cash flows For the year ended 30 September 2023 CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers (inclusive of GST) Payments to suppliers and employees (inclusive of GST) Interest received Net income taxes paid Interest paid Net cash inflow / (outflow) from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Payments for property, plant and equipment Payments for development expenditures and intangibles Payments for investment in short-term deposits Net cash inflow / (outflow) from investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from exercise of share options Principal repayments of lease liabilities Dividends paid to shareholders Net cash inflow / (outflow) from financing activities Net increase / (decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the period Effects of exchange rate changes on cash and cash equivalents Cash and cash equivalents at the end of the period Notes 30‑Sep‑23 ($’000) 30‑Sep‑22 ($’000) 501,247 (292,567) 3,536 (16,434) (2,123) 193,659 (7,770) (82,356) (25,000) (115,126) 8,139 (7,757) (56,605) (56,223) 22,310 175,865 90 198,265 30 13 14 9 21 24 8 413,885 (251,407) 423 (18,339) (1,844) 142,718 (3,767) (63,515) - (67,282) 5,920 (3,652) (46,127) (43,859) 31,577 144,210 78 175,865 The above consolidated statement of cash flows should be read in conjunction with the accompanying notes. 129 Making life simple for our community Notes to the consolidated Notes to the consolidated financial statements financial statements 1 Summary of significant accounting policies The financial report of Technology One Limited (the Company) for the year ended 30 September 2023 was authorised for issue in accordance with a resolution of Directors on 20 November 2023. Technology One Limited (the Company) is a company limited by shares incorporated in Australia whose shares are publicly traded on the Australian Securities Exchange. The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated. The financial statements are for the consolidated entity consisting of Technology One Limited and its subsidiaries. The nature of the operations and principal activities of the Group are described in the Directors' report. (a) Basis of preparation (b) Principles of consolidation (i) Subsidiaries The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Technology One Limited ('Company' or 'parent entity') as at 30 September 2023 and the results of all subsidiaries for the year then ended. Technology One Limited and its subsidiaries together are referred to in this financial report as the 'Group' or the 'Consolidated entity'. Intercompany transactions, balances and unrealised gains on transactions between companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. (ii) Employee Share Trust The Group has formed a trust to administer the Group's employee share scheme. This trust is consolidated, as the substance of the relationship is that the trust is controlled by the Group. At 30 September 2023, the Group had 161,813 treasury shares (2022: 260,813). Treasury shares are shares in the Group that the Employee Share Trust holds for the purpose of transferring shares under the TechnologyOne employee share scheme. The financial report is a general-purpose financial report prepared by a for profit entity, which has been prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board. The financial report is presented in Australian dollars and all values are rounded to the nearest thousand dollars ($000) unless otherwise stated. The accounting policies adopted are consistent with those of the previous financial year as no new or amended Standards or Interpretations were applicable in the current year. Certain comparative items have been reclassified in the financial statements to align with the 30 September 2023 year end disclosures. (i) Compliance with IFRS This financial report also complies with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board. (ii) New accounting standards and interpretations The accounting policies adopted are consistent with those of the previous financial year. (i) Issued but not yet effective No new standards or amendment to an existing Standard have been issued that will have a material impact to the Group. (ii) Critical accounting estimates The preparation of 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. 130 TechnologyOne Annual Report 2023(iii) Business combination and goodwill (c) Foreign currency translation Business combinations are accounted for using the acquisition method under AASB 3 Business Combinations. The cost of an acquisition is measured as the aggregate of the consideration transferred, which is measured at acquisition date fair value, and the amount of any non-controlling interests in the acquiree. For each business combination, the Group elects whether to measure the non-controlling interests in the acquiree at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred and included in administrative expenses. When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree. Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. Contingent consideration classified as an asset or liability that is a financial instrument and within the scope of AASB 9 Financial Instruments, is measured at fair value with the changes in fair value recognised in the statement of profit or loss in accordance with AASB 9. Other contingent consideration that is not within the scope of AASB 9 is measured at fair value at each reporting date with changes in fair value recognised in profit or loss. Goodwill is initially measured at cost (being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interests and any previous interest held over the net identifiable assets acquired and liabilities assumed). If the fair value of the net assets acquired is in excess of the aggregate consideration transferred, the Group re-assesses whether it has correctly identified all of the assets acquired and all of the liabilities assumed and reviews the procedures used to measure the amounts to be recognised at the acquisition date. If the reassessment still results in an excess of the fair value of net assets acquired over the aggregate consideration transferred, then the gain is recognised in profit or loss. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. Where goodwill has been allocated to a cash-generating unit (CGU) and part of the operation within that unit is disposed of, the goodwill associated with the disposed operation is included in the carrying amount of the operation when determining the gain or loss on disposal. Goodwill disposed in these circumstances is measured based on the relative values of the disposed operation and the portion of the cash-generating unit retained. (i) Functional and presentation currency Items included in the financial statements of each of the Group's operations are measured using the currency of the primary economic environment in which the entity operates ('the functional currency'). The consolidated financial statements are presented in Australian dollars, which is Technology One Limited's functional and presentation currency. (ii) Transactions and balances Foreign currency transactions are translated into the 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 year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement. (iii) Group companies The results and financial position of foreign operations (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: • Assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that statement of financial position • Income and expenses for each income statement and statement of comprehensive income are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions) • All resulting exchange differences are recognised in other comprehensive income. 131 Making life simple for our communityNotes to the consolidated financial statements 1 Summary of significant accounting policies (continued) (d) Revenue recognition 2. Annual Licence Fees The Group has the following key revenue categories: 1. 2. SaaS Fees Annual Licence Fees 3. Consulting Services 4. Initial Licence Fees The accounting policies for each of these categories has been set out below: Revenue categories 1. SaaS Fees Revenue from term SaaS contracts are recognised on a daily basis over the term of the contract. Included within this category is revenue from contracts for annual SaaS licences as well as Platform services associated with initial licence fees. The Group considers that SaaS licence contracts represent a right to access the Group’s licenced intellectual property and as such the performance obligation is fulfilled over the contract term. Payment terms in respect of SaaS Fees are typically annual within 14 to 30 days of invoice. Invoiced amounts are reflected in trade and other receivables until paid. Unsatisfied performance obligations in respect of SaaS Fees received or receivable are recognised as deferred revenue in the consolidated statement of financial position. Refer to note 17 for details of deferred revenue. 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 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 an average contract term of 5 years. The movement in the year and the closing balance of this asset is disclosed within note 14 as ‘contract acquisition costs’. This balance is presented as ‘contract acquisition costs’ in the statement of financial position. Revenue from Annual Licence Fees are recognised daily over the term of the contract. The Group considers that the performance obligation in respect of these services is satisfied over time. Payment terms in respect of Annual Licence Fees are typically annual within 14 to 30 days of invoice. Invoiced amounts are reflected in trade and other receivables until paid. Unsatisfied performance obligations in respect of Annual Licence Fees received or receivable are disclosed as deferred revenue in the consolidated statement of financial position. Refer to note 17 for details of deferred revenue. 3. Consulting Services Consulting services includes services for software and project services revenue. Revenue from these services is recognised as services are rendered, typically in accordance with the achievement of contract milestones and/or hours expended. 4. Initial licence fees Initial licence fees includes both perpetual licence fees and subscription term licences and are recognised on provision of the software. The Group considers that such contracts represent a right to use the Group’s licenced intellectual property and as such the performance obligation is fulfilled at the point in time at which the customer receives the licence key. Payment terms in respect of Initial Licence Fees are typically within 14 to 30 days of invoice. Invoiced amounts are reflected in trade and other receivables. Perpetual licence fees are typically invoiced upfront on signing the contract but subscription term licences are billed annually throughout the subscription period. As the performance obligation is satisfied at a point in time (i.e. at contract delivery), there are no unsatisfied performance obligations in respect of Initial Licence Fees. The Group considers the effects of variable consideration, reviews the contracts to identify if a significant financing component exists and considers the standalone pricing of the initial licence fees when allocating the transaction price of the contract to the performance obligation. 132 TechnologyOne Annual Report 2023Associated contract balances Consistent with AASB 15 Revenue from Contracts with Customers, the timing of revenue recognition, customer invoicing and cash collections results in the recognition of trade and other receivables, contract asset and deferred revenue (contract liability) on the Group’s Consolidated statement of financial position. As deferred revenue represents payments received or receivable in advance from customers for SaaS Fees and Annual Licence Fees which will be recognised in future periods, and not a future cash outflow, this balance does not impact the Group’s ability to meet its short-term obligations as and when they fall due. Revenue Groups disclosed in the consolidated income statement The Group has the following revenue groups: i. Revenue – SaaS and continuing business The Group defines continuing business as those revenue streams that form part of the growth strategy. Namely this includes SaaS fees, Annual Licence Fees and Consulting Services. ii. Revenue – Legacy licence business The legacy licence fee business encompasses the sale of initial licence fees which will continue to decline as our customers transition to SaaS, growing the SaaS and continuing business revenue. Included within this revenue group is Annual Licence Fees recognised from the date the associated initial licence is delivered until the end of the first financial year post signing. (e) Income tax The income tax expense or benefit for the period is the tax payable on the current period's taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses. The current income tax charge is calculated based on the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the Group's subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate based on amounts expected to be paid to the tax authorities. Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss except for transactions that, on initial recognition give rise to equal taxable and deductible temporary differences such as recognition of an ROU Asset and a lease liability. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. 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. Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in foreign operations where the Group is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. Technology One Limited and its wholly owned Australian controlled entities have implemented the tax consolidation legislation. Consequently, these entities are taxed as a single entity and the deferred tax assets and liabilities of these entities are set off in the consolidated financial statements. The head entity, Technology One Limited, and the controlled entities in the tax consolidated group account for their own current and deferred tax amounts. These tax amounts are measured as if each entity in the tax consolidated group continues to be a stand-alone taxpayer. The Group has applied the Group allocation approach in determining the appropriate amount of current taxes and deferred taxes to allocate to members of the tax consolidated group. The current and deferred tax amounts are measured in a systematic manner that is consistent with the broad principles in AASB 112 Income Taxes. The Group created an Employee Share Trust in 2009 which allows an employee on the exercise of an option to hold the resultant share in the Trust. In accordance with AASB 112, on granting the option, the Group records a deferred tax asset on the expected value of the share. If the amount of the tax deduction (or estimated future tax deduction) exceeds the amount of the related cumulative remuneration expense, the difference is recognised directly in equity. When the employee exercises the option, the tax effect difference between the actual market value and what was recorded as a deferred tax asset is recognised in equity. The Group is entitled to claim special tax offsets in relation to qualifying expenditure (namely the Research and Development Tax Incentive regime). In relation to non-refundable tax offsets, the Group accounts for such allowances as tax credits, which means that the allowance reduces income tax payable and current tax expense. 133 Making life simple for our communityNotes to the consolidated financial statements 1 Summary of significant accounting policies (continued) (f) Segment reporting An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity), whose operating results are regularly reviewed by the entity's chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance and for which discrete financial information is available. Operating segments have been identified based on the information provided to the chief operating decision maker - being the Managing Director and Chief Executive Officer. Operating segments that meet the quantitative criteria as prescribed by AASB 8 Operating Segments are reported separately. However, an operating segment that does not meet the quantitative criteria is still reported separately where information about the segment would be useful to users of the financial statements. (g) Leases AASB 16 Leases sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to recognise most leases on the balance sheet. The Group’s lease portfolio primarily consists of property leases. Lease terms are negotiated on an individual basis and contain a range of different terms and conditions. Lease contracts may contain both lease and non-lease components. The Group allocates the consideration in the contract to the lease and non-lease components based on their relative stand-alone values. Lease liability The lease liability is initially measured at the present value of outstanding lease payments (including those to be made under reasonably certain extension options). The payments used in this calculation include the following: • • fixed payments (including in-substance fixed payments), less any lease incentives receivable, variable lease payment that are based on an index or a rate, initially measured using the index or rate as at the commencement date, • amounts expected to be payable by the group under This rate is the rate of interest that a lessee would have to pay to borrow the funds necessary to purchase the right of use asset, over a similar term and with a similar security, in similar economic environment. In the absence of borrowings the Group uses the relevant interest rate swap curve as the starting point in determining the incremental borrowing rate. In line with the accounting standard the Group ensures the swap curve rate reflects the term of the leases, the value of the leases and the creditworthiness of the Group. Once the lease liability has been recognised on the balance sheet the periodic lease repayments are allocated between an interest and a principal element. The interest is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability. Variable lease payments that do not depend on an index or a rate are recognised as expenses in the period in which the event or condition that triggers the payment occurs. Right‑of‑use asset The right-of-use asset is initially calculated as being equal to the lease liability and then adjusted for the following: • Lease payments made on or before the commencement date less any incentives received, • Any initial direct costs, and; • An estimate of restoration costs. This right-of-use asset is then depreciated on a straight-line basis over the calculated lease term. Right-of-use assets are also subject to impairment testing under AASB 136 Impairment of assets. Short‑term assets The Group applies the short-term lease recognition exemption to its short-term leases (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). Payments associated with short-term leases are recognised on a straight-line basis as an expense in profit or loss. (h) Variable costs residual value guarantees, The components of variable costs comprise: • the exercise price of a purchase option if the group is reasonably certain to exercise that option, and; • payments of penalties for terminating the lease, if the lease term reflects the group exercising that option. The lease payments above are discounted using the interest rate implicit in the lease if that rate is readily determinable. This is not the case for the Group’s current leases. When the interest rate implicit in the lease is not readily determinable AASB 16 requires the use of the incremental borrowing rate to calculate the present value of the lease payments. • Costs incurred in obtaining an initial licence fee contract as well as incentives on achievement of KPIs. These are expensed as incurred. • Costs incurred in fulfilling the contract with a customer are capitalised if the requirements in AASB 15 are fulfilled and are then amortised in line with the satisfaction of the related performance obligation. The expense is recognised within the Depreciation and Amortisation line of the Consolidated Statement of Profit or Loss. (i) Variable customer SaaS costs Variable customer SaaS costs relate to costs incurred in providing our customers with access to our SaaS Platform. These costs are expensed as consumed. 134 TechnologyOne Annual Report 2023(j) Impairment of assets (iii) Impairment Goodwill and 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 assets are tested 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. The recoverable amount is the higher of an asset’s fair value less costs to sell and value-in-use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period. (k) Financial assets and liabilities Financial instruments recognised in the statement of financial position include; cash and cash equivalents, trade and other receivables, contract assets, lease liabilities, trade payables and contingent consideration. (i) Classification The Group classifies its financial assets and financial liabilities into the following measurement categories; • • those to be measured at amortised cost (using the effective interest method) and; those to be measured at fair value with changes through the profit or loss (FVPL). Classification into these categories is based on an assessment of the Group's business model for managing its financial instruments and the contractual terms of the cash flows. (ii) Measurement Amortised cost Financial assets are initially measured at fair value. Trade receivables that do not contain a significant financing component or for which the Group has applied the practical expedient are measured at the transaction price. Financial assets and liabilities at amortised cost are subsequently measured using the effective interest method. Further adjustments to the carrying value of the financial instrument will arise if there is a modification to the contractual cash flows creating a gain/loss in the measurement or if there is no longer a reasonable expectation of recovery of a financial asset, resulting in a write-off. Fair value through profit and loss (FVPL) The financial instrument is measured at fair value. Changes in fair value are recognised in profit and loss as they arise. The Group recognises impairment losses on its financial assets carried at amortised cost using an expected credit losses (ECL) model, in line with AASB 9 Financial Instruments. The ECL model essentially aims to calculate the assets' credit risk. It involves consideration of scenarios that would lead to default, calculating the shortfall between what is contractually due and what would be received under each scenario and then multiplying the shortfall/loss by the probability of the default situation occurring. The Group has elected to apply the AASB 9 Financial Instruments’ simplified approach to measuring expected credit losses which uses a lifetime expected credit loss allowance for all trade receivables and contract assets. The Group has also made use of the practical expedient available for calculating expected credit losses for Short-Term receivables. This practical expedient involves using a “provision matrix” to calculate the loss allowance. This matrix is based on historical default rates over the expected life of the trade receivables, adjusted for forward-looking estimates. A 6-month historical default rate is applied to the trade receivables balance to calculate the expected credit loss. This appears as a provision against the trade receivables balance. Movements in this provision are recognised as an expense in the consolidated income statement to the extent that the related revenue has been recognised in the consolidated income statement. If a receivable balance is identified as being unrecoverable it is written off against the allowance for expected credit losses. (l) Cash and cash equivalents For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Investments with original maturities over three months are classified as financial assets in the statements of financial position. Cash and cash equivalents are presented in the consolidated statement of cash flows, net of outstanding bank overdrafts. (m) Trade and other receivables Trade and other receivables are recognised initially at transaction price which is deemed to be fair value and subsequently measured at amortised cost using the effective interest method. Trade receivables are typically due for settlement within 14 to 30 days. 135 Making life simple for our communityNotes to the consolidated financial statements 1 Summary of significant accounting policies (continued) (n) Property, plant and equipment (iii) Software development Property, plant and equipment are measured at cost less accumulated depreciation and any impairment in value. Depreciation is calculated on a straight-line basis over the estimated useful economic lives of the assets as follows: Office furniture and equipment Computer software 3 - 11 years 3 - 4 years The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount (note 1(j)). Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the Statement of Comprehensive Income. (o) Intangible assets (i) Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the Group's share of the net identifiable assets of the acquired subsidiary/associate at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill is not amortised. Instead, goodwill is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired and is carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose (note 14). (ii) Intellectual property/source code Intangible assets acquired separately are capitalised at cost, and if acquired as a result of a business combination, capitalised at fair value as at the date of acquisition. Following initial recognition, the cost model is applied to all classes of intangible assets. The useful lives of the intangible assets are assessed to be either finite or indefinite. Where amortisation is charged on intangible assets with finite lives, this expense is recognised in the Income Statement through the 'depreciation and amortisation expense' line item. Intangible assets with finite lives are tested for impairment where an indicator of impairment exists. Useful lives are examined on an annual basis and adjustments, where applicable, are made on a prospective basis. Intellectual Property/Source Code Customer contracts Trade names 5 - 8 years 6 - 12 years 8 – 12 years Gains or losses arising from the de-recognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the statement of comprehensive income when the intangible asset is derecognised. 136 Research expenditure is recognised as an expense as incurred. Research costs are largely made up of employee labour which is included in employee costs in the consolidated Income Statement. Development expenditure is only capitalised if the recognition requirements within AASB 138 Intangible Assets have been fulfilled and an economic benefit of more than 12 months is expected. Costs that are directly associated with the development of this software are recognised as an intangible asset where the following criteria are met: (a) The technical feasibility of completing the intangible asset so that it will be available for use or sale; (b) Intention to complete the intangible asset and use or sell it; (c) Ability to use or sell the intangible asset; (d) How the intangible asset will generate probable economic benefits. Among other things, the entity can demonstrate the existence of a market for the output of the intangible asset or the intangible asset itself or, if it is to be used internally, the usefulness of the intangible asset; (e) The availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and (f) Ability to measure reliably the expenditure attributable to the intangible asset during its development. As a SaaS company, access is provided to our products via a SaaS platform over a prolonged term. The technical feasibility of our products can be established through pre-defined project roadmaps. TechnologyOne follows a robust process to ensure the accuracy of the amounts capitalised on the balance sheet. The costs included in the balance are costs of personnel and other directly attributable costs incurred in the development of software. The process for determining what constitutes capitalisable expenditure under AASB 138 involves a detailed analysis of all timesheet data available regarding projects that employees have worked on during the year and other directly attributable costs in respect of software development spend. Capitalised software development costs are recognised as an intangible asset and amortised over their estimated useful lives, which is considered to be five years. Software development costs are capitalised as “under development” until the products to which the costs relate become available for use. At the point in which the products become available for use, the costs are transferred from “under development” to “in use” and amortised from that point (refer to categorisation in note 14). Development costs previously recognised as expenses are not recognised as assets in a subsequent period. TechnologyOne Annual Report 2023(p) Trade and other payables These amounts represent liabilities for goods and services provided to the Group prior to the end of financial year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. (q) Provisions Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated. Provisions are not recognised for future operating losses. Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognised as interest expense. The cost of share-based payments is recognised, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (the vesting period). If options or rights do not vest at the end of the performance period due to the service condition or non-market condition not being met, the corresponding expense will be reversed. (s) Contributed equity Ordinary shares are classified as equity. Issued and paid up capital is recognised at the fair value of the consideration received. Any transaction costs arising on the issue of ordinary shares are recognised directly in equity as a reduction of the share proceeds received. (t) Earnings per share (i) Basic earnings per share (r) Employee benefits (i) Short‑term obligations Liabilities for wages and salaries, including non-monetary benefits and annual leave expected to be settled within 12 months after the end of the period in which the employees render the related service are recognised in respect of employees’ services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for sick leave, which are non-vesting, are recognised when the leave is taken and measured at the rates paid or payable. (ii) Deferred STI An amount equal to an additional 25% of the annual STI earned by Executive KMP in the year is deferred and paid at the conclusion of the two-year period following the end of the financial year. It is accrued over a three-year period from the annual performance period in which it is determined and deferred for a two-year period following the end of the financial year. (iii) Long service leave The liability for long service leave is recognised in the provision for employee benefits and is measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting period. 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 end of the reporting period on national corporate bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows. (iv) Share‑based payments The Group provides benefits to certain employees in the form of share-based payment transactions, whereby employees render services in exchange for rights over shares. The costs of share-based payment transactions with employees are measured by reference to the fair value of the equity instruments at the date at which they are granted. Refer to note 32. Basic earnings per share is calculated by dividing: • The profit attributable to owners of the Group, excluding any costs of servicing equity other than ordinary shares • By the weighted average number of ordinary shares outstanding during the year, adjusted for bonus elements in ordinary shares issued during the year and excluding treasury shares. (ii) 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 The weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares. (u) Dividends Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the entity, on or before the end of the reporting period but not distributed at the end of the reporting period. (v) Goods and services tax (GST) and equivalent overseas value added taxes Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of 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 taxation authority is included with other receivables or 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 taxation authority, are presented as operating cash flows. 137 Making life simple for our communityNotes to the consolidated financial statements 2 Financial instruments recognised in the consolidated statement of financial position include; cash and cash equivalents, investments, trade and other receivables, lease liabilities, trade payables and contingent consideration. Financial Risk Management It is, and has been throughout the period under review, the Group’s policy that no trading in financial instruments shall be undertaken. The main risks arising from the Group’s financial assets and liabilities are interest rate risk, foreign currency risk, credit risk and liquidity risk. The Board reviews and agrees policies for managing each of these risks and they are summarised below. The Group holds the following financial instruments: (a) Interest rate risk At balance sheet date, some of the Group’s cash and investment assets are exposed to movements in variable interest rates. The Group does not hedge this exposure. Interest rate risk on cash and investments is not material. (b) Foreign currency risk As a result of operations in New Zealand, Malaysia, Papua New Guinea, the United Kingdom and Europe, and sales contracts denominated in different currencies, the consolidated statement of financial position can be affected by movements in the exchange rates applicable to these geographical locations and currencies. The Group does not hedge this risk. The Group’s exposure to foreign currency changes is not significant. At balance date, the Group had the following exposures in Australian dollar equivalents of amounts to foreign currencies which are not hedged: Trade receivables (c) Credit risk 2023 PGK ($’000) 2023 EUR ($’000) 2023 USD ($’000) 2023 HKD ($’000) 2022 USD ($’000) 2022 PGK ($’000) 2022 EUR ($’000) 1,193 344 191 65 11 104 106 The Group is exposed to credit risk from its operating activities (primarily trade and other receivables and contract assets) and from its financing activities, including deposits with banks and financial institutions. To manage this risk the Group trades only with recognised, creditworthy third parties. It is the Group's policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis with the result that the Group's historic experience of credit loss is not significant. Information on credit risk exposures is contained in note 10. 138 TechnologyOne Annual Report 2023(d) Liquidity risk Liquidity risk arises from the financial liabilities of the Group and the Group’s subsequent ability to meet their obligations to repay their financial liabilities as and when they fall due. The below table represents the financial assets under note 2(c) and the liquidity risk of financial liabilities referred to in note 2(d). AT 30 SEPTEMBER 2023 FINANCIAL ASSETS Cash and cash equivalents Financial assets Trade and other receivables Total FINANCIAL LIABILITIES Trade and other payables Contingent consideration Lease liabilities1 Total Net inflow / (outflow) AT 30 SEPTEMBER 2022 FINANCIAL ASSETS Cash and cash equivalents Trade and other receivables Total FINANCIAL LIABILITIES Trade and other payables Contingent consideration Lease liabilities1 Total Net inflow / (outflow) 1 For lease liabilities, this table (d) represents contracted future cashflows. Less than 12 months ($’000) Between 1 and 5 years ($’000) Over 5 years ($’000) Total contractual cash flows ($’000) 198,265 25,000 62,416 285,681 49,247 - 10,609 59,856 - - - ‑ - - - - - ‑ - - 24,867 24,867 1,640 1,640 225,825 (24,867) (1,640) 198,265 25,000 62,416 285,681 49,247 - 37,116 86,363 199,318 Less than 12 months ($’000) Between 1 and 5 years ($’000) Over 5 years ($’000) Total contractual cash flows ($’000) 175,865 57,266 233,131 41,562 6,997 9,715 58,274 174,857 - - ‑ - - - - ‑ - - 27,276 27,276 2,635 2,635 175,865 57,266 233,131 41,562 6,997 39,626 88,185 (27,276) (2,635) 144,946 139 Making life simple for our communityNotes to the consolidated financial statements Financial Risk Management 2 (continued) 3 Critical accounting estimates and judgments (e) Fair value measurement Contingent consideration was classified as Level 3 in the prior year. The release of the contingent consideration that does not represent payment is recognised within the other income line of the consolidated income statement while any payment would be applied against this provision. For further details please refer to note 19. Contingent consideration Opening balance Reversal of contingent consideration Foreign Exchange movement Closing balance 2023 ($’000) 6,997 (7,378) 381 ‑ 2022 ($’000) 7,576 - (579) 6,997 The carrying value of trade and other receivables, contract assets and trade payables are assumed to approximate their fair value due to their short-term nature. (f) Capital risk management The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance. The Group’s current conservative capital structure does not include debt funding. The equity funded position of the Group is managed by the Board through dividends, new shares and share buy backs as well as the issue of new equity where considered appropriate to fund business acquisitions. Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a financial impact on the entity and that are believed to be reasonable under the circumstances. The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. (i) Impairment of goodwill and other assets The Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated in note 1(o)(i). The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations require the use of assumptions. Refer to note 14 for details of these assumptions and the potential impact of changes to the assumptions. All other assets are reviewed for indicators or objective evidence of impairment. If indicators or objective evidence exists, the recoverable amount is reviewed. (ii) Share‑based payments The Group provides benefits to certain employees in the form of share-based payment transactions, whereby employees render services in exchange for rights over shares. The costs of share-based payment transactions with employees are measured by reference to the fair value of the equity instruments at the date at which they are granted. Refer to note 32. The cost of share-based payments is recognised, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (the vesting period). In the event that the rights over shares do not vest at the end of the performance period, the expense relating to the unvested rights is reversed. No expense is recognised for awards that do not ultimately vest due to not meeting the non-market conditions or service conditions. (iii) Capitalisation of development costs The Group capitalises costs related to software development. Software development costs are recognised upon meeting the criteria set out in note 1(o)(iii). The carrying value of these costs are regularly reviewed for impairment. Software development costs are amortised over a period of five years. (iv) Legal Provision Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. The group recognises legal provisions based on the probability and management’s best estimate of the outcome of the claim. 140 TechnologyOne Annual Report 2023 4 Segment information (a) Description of segments The Group’s chief operating decision maker (CoDM), being the Managing Director and Chief Executive Officer Executive Officer, makes financial decisions and allocates resources based on the information received from the Group’s internal management system. Sales are attributed to an operating segment based on the type of product or service provided to the customer. Segment information is prepared in conformity with the accounting policies of the Group as discussed in note 1 and the Accounting Standard AASB 8 Operating Segments. The Group’s reportable segments are: • • • Software – consists of Sales and Marketing, R&D, SaaS platform. Consulting – responsible for services in relation to our software. Corporate – includes all corporate functions. Intersegment revenues/expenses are where one operating segment has been charged for the use of another's expertise. Royalties are a mechanism whereby each segment pays or receives funding for their contribution to the ongoing success of the Group. For example, Software pays Corporate for the use of corporate services. The chief operating decision maker views each segment’s performance based on revenue post royalties and profit before tax. No reporting or reviews are made of segment assets, liabilities and cash flows and as such this is not measured or reported by segment. (b) Segment information provided to the Chief Operating Decision Maker 2023 REVENUE SaaS fees1 Annual licence fees1 Consulting services1 Initial licence fees2 Intersegment revenue Net royalty Total revenue from contracts with customers Other income EXPENSES Total external expenses Profit before tax Income tax expense Profit for the year Total assets Total liabilities Total depreciation and amortisation Software ($’000) Consulting ($’000) Corporate ($’000) Total ($’000) 316,181 37,203 - 2,811 (555) (72,372) 283,268 377 - - 73,183 - 738 (7,738) 66,183 - (185,876) (52,360) 97,769 13,823 - - - - (183) 80,110 79,927 11,608 (73,273) 18,262 316,181 37,203 73,183 2,811 - - 429,378 11,985 (311,509) 129,854 (26,978) 102,876 636,737 330,731 (53,502) 141 Making life simple for our communityNotes to the consolidated financial statements 4 Segment information (continued) Software ($’000) Consulting ($’000) Corporate ($’000) Total ($’000) 216,812 70,221 - 8,531 (443) (66,320) 228,801 583 - - 72,670 - 602 (7,300) 65,972 - - - - - (159) 73,620 73,461 574 (151,902) 77,482 (49,121) 16,851 (56,048) 17,987 2023 ($’000) 350,364 47,185 397,549 31,829 429,378 2023 ($’000) 547,467 23,444 570,911 44,444 615,355 216,812 70,221 72,670 8,531 - - 368,234 1,157 (257,071) 112,320 (23,477) 88,843 539,945 300,848 (38,110) 2022 ($’000) 302,486 40,482 342,968 25,266 368,234 2022 ($’000) 442,497 37,901 480,398 38,487 518,885 2022 REVENUE SaaS fees1 Annual licence fees1 Consulting services1 Initial licence fees2 Intersegment revenue Net royalty Total revenue from contracts with customers Other income EXPENSES Total external expenses Profit before tax Income tax expense Profit for the year Total assets Total liabilities Total depreciation and amortisation 1 Recognised over time / as services are rendered. 2 Recognised at a point in time. (c) Other segment information (i) Segment revenue Australia New Zealand and Asia Pacific APAC total United Kingdom Total segment revenues from sales to external customers (ii) Segment assets Australia New Zealand and Asia Pacific APAC total United Kingdom Total segment assets1 1 Segment assets are presented net of deferred tax. (iii) Major customers No Group customer contributes greater than 10% of external revenue. 142 TechnologyOne Annual Report 20235 Revenue REVENUE FROM CONTRACTS WITH CUSTOMERS SaaS fees1 Annual licence fees1 Consulting services1 Revenue ‑ SaaS and continuing business Initial licence fees2 Annual licence fees associated with initial licence fees2 3 Revenue ‑ Legacy licence business Total revenue from contracts with customers 1 Recognised over time / as services are rendered. 2 Recognised at a point in time. 2023 ($’000) 2022 ($’000) 316,181 37,015 73,183 216,812 69,186 72,670 426,379 358,668 2,811 188 2,999 8,531 1,035 9,566 429,378 368,234 3 This represents revenue on Annual Licence Fees recognised from the date the associated initial licence is delivered until the end of the first financial year post delivery. OTHER INCOME Foreign exchange gains / (losses) Interest received Reversal of contingent consideration (note 19) Other Total other income Total revenue 2023 ($’000) 2022 ($’000) 21 4,139 7,378 447 11,985 441,363 34 423 - 700 1,157 369,391 143 Making life simple for our communityNotes to the consolidated financial statements 6 Expenses PROFIT BEFORE INCOME TAX INCLUDES THE FOLLOWING SPECIFIC EXPENSES: DEPRECIATION Plant and equipment Total depreciation AMORTISATION Other intangible assets amortisation Contract acquisition costs amortisation Capitalised development amortisation Amortisation of right-of-use assets Total amortisation Total depreciation and amortisation Wages and salaries Defined contribution plan expense Payroll tax Other employee benefits Other Total employee costs1 Share based payments Employee Share Purchase Plan Share‑based payments Profit and loss movement in expected credit loss Foreign exchange (gain) / loss (Gain) / loss on sale of property, plant and equipment 2023 ($’000) 2022 ($’000) 2,957 2,957 1,933 8,574 34,055 5,983 50,545 53,502 98,840 12,182 9,562 1,079 13,452 135,115 3,907 1,920 5,827 498 (106) (3) 2,627 2,627 1,185 5,839 23,383 5,076 35,483 38,110 94,048 10,680 8,588 415 10,930 124,661 3,353 - 3,353 639 (68) (6) 1 In addition to the employee benefits expense disclosed above, ‘Variable costs’ in the consolidated income statement includes $17.9m (2022: $17.7m) relating to employee costs, In addition, ‘Contract acquisition costs’ in the consolidated statement of financial position includes $17.1m (2022: $11.9m) and ‘Capitalised development’ includes $52.7m (2022: $41.6m) of current year employee benefits that have been capitalised. 144 TechnologyOne Annual Report 20237 Income tax expenses (a) Income tax expense Current tax Relating to origination and reversal of temporary differences Adjustments for tax expense of prior periods Income tax expense DEFERRED INCOME TAX EXPENSE / (REVENUE) INCLUDED IN INCOME TAX EXPENSE COMPRISES: (Increase) / decrease in deferred tax assets (note 15) Increase / (decrease) in deferred tax liabilities (note 15) Adjustments for deferred taxes of prior periods Deferred tax expense (b) Numerical reconciliation of income tax expense to prima facie tax payable Profit from continuing operations before income tax expense Tax at the Australian tax rate of 30% (2022: 30%) Adjustments for current tax of prior periods Research and development tax concession Non-taxable income Expenditure not allowable for income tax purposes Current year tax losses not recognised Tax rate variance in subsidiaries Change in foreign tax rate Income tax expense (c) Amounts recognised directly in equity 2023 ($’000) 26,549 672 (243) 26,978 (4,955) 7,789 (2,162) 672 2023 ($’000) 129,854 38,956 (244) (10,214) (1,584) 218 16 (858) 688 2022 ($’000) 19,374 5,717 (1,614) 23,477 (1,786) 6,447 1,056 5,717 2022 ($’000) 112,320 33,696 (1,614) (8,453) - 279 (35) (396) - 26,978 23,477 2023 ($’000) 2022 ($’000) Aggregate current and deferred tax arising in the reporting period and not recognised in net profit or loss or other comprehensive income but directly debited or credited to equity: Net deferred tax debited / (credited) directly to equity (3,156) - 145 Making life simple for our communityNotes to the consolidated financial statements 8 Current assets ‑ Cash and cash equivalents Cash and cash equivalents 2023 ($’000) 2022 ($’000) 198,265 175,865 The Group has a $2 million overdraft facility to assist with working capital requirements. The facility is unused at 30 September 2023. Cash at bank earns interest at floating rates based on daily bank deposit rates (ranging from 0.0% to 4.45%). Included in the Cash and cash equivalents amount are term deposits invested for periods ranging from one day to three months (earning interest from 4.47% to 5.67%). Given the short-term nature of these term deposit accounts, the fair value of cash assets at 30 September are their carrying values. 9 Current assets – Financial assets Term deposits 2023 ($’000) 25,000 2022 ($’000) - Term deposits with original maturities over three months, but less than twelve months, are classified as current financial assets (earning interest of 5.02%). 10 Current assets – Trade and other receivables Trade and other receivables Allowance for expected credit losses Sundry receivables 2023 ($’000) 62,764 (1,849) 1,501 62,416 2022 ($’000) 59,917 (3,172) 521 57,266 Trade and other receivables are non-interest bearing and are on 14 to 30 day terms. No interest is charged on trade and other receivables. Included in the trade and other receivables balance are debtors with a carrying amount of $2.8m (2022: $4.2m) which are past due at the reporting date for which the consolidated entity has not provided a specific allowance as there has not been a significant change in credit quality. The Company believes that the amounts are still recoverable. The Company does not hold any collateral over these balances, however is able to withdraw future support and software licence use rights if concerns arise relating to the recoverability of an outstanding customer balance. (a) Allowance for expected credit losses Movements in the provision for expected credit losses are as follows: Opening balance - 1 October Increase/(decrease) in expected credit loss allowance Amounts reversed/written off Closing balance ‑ 30 September 2023 ($’000) 3,172 176 (1,499) 1,849 2022 ($’000) 4,158 (387) (599) 3,172 In determining the recoverability of a trade and other receivable the Group considers any change in the credit quality of the trade receivable from the date credit was initially granted up to the reporting date. The concentration of credit risk is limited due to the customer base being large and unrelated. 146 TechnologyOne Annual Report 2023Age 0 – 30 days 31 – 60 days 61 – 90 days 91+ days 11 Contract assets Contract assets - current Contract assets - non-current Allowance for expected credit losses Trade Debtors 2023 ($’000) 58,751 1,687 360 1,966 Expected credit loss 2023 ($’000) (664) (175) (26) (984) 62,764 (1,849) Trade Debtors 2022 ($’000) 47,234 4,742 1,135 6,806 59,917 2023 ($’000) 23,134 3,618 (243) 26,509 Expected credit loss 2022 ($’000) (433) (44) (262) (2,433) (3,172) 2022 ($’000) 21,781 4,881 (241) 26,421 The above contract asset balance represents revenue recognised for contracts with customers which has not been invoiced at the end of the financial year, in accordance with customer contracts. Expected credit loss for contract assets Movements in the provision for impairment of contract assets are as follows: Opening balance - 1 October Increase/(decrease) in expected credit loss allowance recognised in profit and loss during the year Closing balance ‑ 30 September 12 Current assets – Other current assets Refundable deposits 2023 ($’000) 2022 ($’000) 241 2 243 209 32 241 2023 ($’000) 1,127 1,127 2022 ($’000) 600 600 147 Making life simple for our communityNotes to the consolidated financial statements 13 Non‑current assets – Property, plant and equipment Office furniture & equipment ($’000) Other ($’000) Total ($’000) 8,501 7,752 (3) (2,955) (17) 17 13,295 50,975 (37,680) 13,295 7,323 3,767 (13) (2,577) (54) 55 8,501 46,311 (37,810) 8,501 4 18 - (2) - - 20 4,789 (4,769) 20 54 - - 8,505 7,770 (3) (2,957) (17) 17 13,315 55,764 (42,449) 13,315 7,377 3,767 (13) (50) (2,627) - - 4 4,770 (4,766) 4 (54) 55 8,505 51,081 (42,576) 8,505 YEAR ENDED 30 SEPTEMBER 2023 Opening net book amount Additions Disposals Depreciation charge Make good movement Exchange difference Closing net book amount AT 30 SEPTEMBER 2023 Cost Accumulated depreciation Net book amount YEAR ENDED 30 SEPTEMBER 2022 Opening net book amount Additions Disposals Depreciation charge Make good movement Exchange difference Closing net book amount AT 30 SEPTEMBER 2022 Cost Accumulated depreciation Net book amount 148 TechnologyOne Annual Report 202314 Intangible assets Intellectual property/ source code ($’000) Customer contracts ($’000) Contract acquisition costs1 ($’000) Software under development ($’000) Goodwill ($’000) Software‑ in use ($’000) Total ($’000) YEAR ENDED 30 SEPTEMBER 2023 Opening net book amount 46,580 6,792 6,080 Additions Transfers to software - in use Amortisation charge Derecognition Foreign Exchange difference Closing net book amount AT 30 SEPTEMBER 2023 Cost Accumulated amortisation Accumulated impairment Net book amount - - - - 1,371 47,951 54,704 - (6,753) 47,951 YEAR ENDED 30 SEPTEMBER 2022 Opening net book amount 47,694 Additions Transfers to software - in use Amortisation charge Derecognition Foreign Exchange difference Closing net book amount AT 30 SEPTEMBER 2022 - - - - (1,114) 46,580 987 - (802) (916) 62 6,123 15,949 (6,233) (3,593) 6,123 5,900 1,547 - (569) - (86) 6,792 Cost 53,333 14,900 Accumulated amortisation Accumulated impairment Net book amount - (6,753) 46,580 (5,431) (2,677) 6,792 20,378 20,764 - - - (1,131) (8,574) - 487 - 235 33,947 60,605 (51,574) - - 149 92,962 206,739 - 82,356 51,574 - (34,055) (44,562) (5,022) 32 (5,938) 2,336 5,436 32,803 43,127 105,491 240,931 7,626 56,347 43,127 188,038 365,791 (2,190) (23,544) - - - - (77,525) (109,492) (5,022) (15,368) 5,436 32,803 43,127 105,491 240,931 7,180 - - (616) - (484) 6,080 7,139 (1,059) - 14,677 11,908 30,295 50,060 70,713 176,459 - 63,515 - (46,369) 46,369 - (5,839) - (368) - - (39) (23,383) (30,407) - (737) - (2,828) 20,378 33,947 92,962 206,739 35,348 (14,970) - 33,947 136,432 281,099 - - (43,470) (64,930) - (9,430) 6,080 20,378 33,947 92,962 206,739 1 Balance of contract acquisition costs is split between current portion of $9.6m and non-current portion of $23.2m (2022: current $6.5m; non-current $13.9m). Assets with indefinite life other than goodwill are within Intellectual property/source code above. 149 Making life simple for our communityNotes to the consolidated financial statements Intangible assets (continued) 14 (a) Review of intangible asset carrying values in relation to the contingent consideration The events and circumstances leading to the reduction in the provision for contingent consideration (note 19) have also been considered in terms of whether there are indicators of impairment in the carrying value of the goodwill and other intangibles acquired. An assessment of Goodwill and other intangible assets resulted in no impairment being recognised. In addition, a review of the intangible assets acquired has been performed in the period that has resulted in the following: • The carrying value of the acquired tradename has been derecognised in full ($0.9m, £0.5m) as the tradename is no longer in use. • Certain acquired software assets have been derecognised ($5.0m, £2.7m). • A portion of the acquired customer relationship asset has had accelerated amortisation due to a change in the assessed useful life ($0.9m, £0.5m). A total of $5.9m (£3.2m) has been recognised as an expense within the Corporate costs line of the Consolidated Income Statement representing the carrying value of assets derecognised. An amount of $0.9m (£0.5m) has been recognised as an expense within the Depreciation and amortisation line of the Consolidated Income Statement representing the accelerated amortisation of a portion of acquired customer relationships. These expenses have been recognised within the external expenses line of the Corporate segment (note 2). (b) Impairment tests for goodwill Goodwill and indefinite life intangibles are allocated to the Group's Software and Consulting cash-generating units (CGUs) which are also operating and reportable segments for impairment testing purposes. A segment-level summary of the goodwill and indefinite life intangible assets allocation is presented below. 2023 Goodwill Indefinite life intangible assets 2022 Goodwill Indefinite life intangible assets Software ($’000) Consulting ($’000) Corporate ($’000) Total ($’000) 38,343 1,362 39,705 36,972 1,362 38,334 9,608 660 10,268 9,608 660 10,268 ‑ ‑ ‑ - - - 47,951 2,022 49,973 46,580 2,022 48,602 The recoverable amounts of each CGU has been determined based on cash flow projections based on financial budgets approved by senior management covering a five-year period, with a value-in-use basis being used for all valuations. The following table sets out the key assumptions for each cash-generating unit: 2023 Pre-tax nominal discount rate applied to the cash flow projections Terminal growth rate 2022 Pre-tax nominal discount rate applied to the cash flow projections Terminal growth rate Software Consulting 11.5% 3% 15% 3% 11.6% 3% 15% 3% 150 TechnologyOne Annual Report 202315 Non‑current assets – Deferred tax (a) Deferred tax assets THE BALANCE COMPRISES TEMPORARY DIFFERENCES ATTRIBUTABLE TO: Employee benefits Other provisions Accrued expenses Intangible assets Copyright - software Lease liability (net) Employee share trust Deferred revenue Other 2023 ($’000) 2022 ($’000) 5,434 2,042 981 477 31 2,315 4,738 58,259 3,195 77,472 5,097 2,450 1,384 830 37 3,066 2,952 50,621 2,924 69,361 Set-off of deferred tax liabilities pursuant to set-off provisions (56,090) (48,301) Net deferred tax assets Net deferred tax assets expected to be recovered within 12 months Net deferred tax assets expected to be recovered after more than 12 months MOVEMENTS: Opening balance at 1 October Credited / (charged) to the consolidated income statement Credited / (charged) to equity Offset from deferred tax liabilities Closing balance at 30 September 21,382 53,120 (31,738) 21,382 21,060 48,688 (27,628) 21,060 2023 ($’000) 2022 ($’000) 69,361 4,955 3,156 (56,090) 21,382 67,643 1,718 - (48,301) 21,060 151 Making life simple for our communityNotes to the consolidated financial statements 15 Non‑current assets – Deferred tax (continued) (b) Deferred tax liabilities THE BALANCE COMPRISES TEMPORARY DIFFERENCES ATTRIBUTABLE TO Contract assets Accelerated depreciation for tax purposes Prepayments Capitalised development Contract acquisition costs Total deferred tax liabilities Set-off of deferred tax liabilities pursuant to set-off provisions Net deferred tax liabilities MOVEMENTS Opening balance at 1 October Charged/(credited) to the Consolidated income statement (note 7) Offset to deferred tax assets Closing balance at 30 September 16 Current liabilities – Trade and other payables Trade payables Sundry creditors Directors fees 2023 ($’000) 2022 ($’000) (4,412) (1,491) (44) (42,685) (7,458) (56,090) 56,090 ‑ (5,461) (914) (25) (36,176) (5,725) (48,301) 48,301 - 2023 ($’000) 2022 ($’000) (48,301) (41,854) (7,789) 56,090 ‑ 2023 ($’000) 39,733 9,340 174 49,247 (6,447) 48,301 - 2022 ($’000) 40,331 8,163 65 48,559 Trade payables and sundry creditors are non-interest bearing and are normally settled on 30 day terms. No interest is payable on outstanding balances. The Group has financial risk management policies in place to ensure that all payables are paid within the credit timeframe. 152 TechnologyOne Annual Report 202317 Current liabilities – Deferred Revenue Carrying amount at 1 October Carrying amount at 30 September Revenue recognised from the opening balance 2023 ($’000) 184,008 214,495 182,471 2022 ($’000) 169,322 184,008 168,003 Deferred Revenue represents payments received or receivable in advance from customers for SaaS Fees and Annual Licence Fees which will be recognised as revenue in future periods, generally over the next 12 months. These amounts are classified as a contract liability under AASB 15. These amounts do not result in a future cash outflow. 18 Current liabilities – Provisions Make good provision Other provisions1 Annual leave Long service leave 2023 ($’000) ‑ 5,302 7,743 8,232 21,277 2022 ($’000) 76 5,524 8,032 7,270 20,902 1 On 2 October 2020, the Federal Court issued a judgement against TechnologyOne in a civil employment case. As a result of the judgement, the Group’s provision was increased to $5.2m as at 30 September 2020. The company lodged an appeal to the Full Federal Court on 26 October 2020. The company won its appeal, with the original judgement being overturned in August 2021, and a retrial being ordered. The Group has retained the full value of the provision at 30 September 2022 and 2023 ($5.2m) based on management’s best estimate pending the results of the retrial. 19 Contingent consideration Contingent consideration - current Contingent consideration- non-current 2023 ($’000) ‑ ‑ ‑ 2022 ($’000) 6,997 - 6,997 On 15 September 2021, the Group acquired Scientia Resource Management Limited (Scientia), a United Kingdom company servicing the higher education sector. The total consideration at 30 September 2021 of £10.2m included an initial cash payment of $11.5m (£6.1m) and contingent consideration payable of $7.6m (£4.1m). The contingent consideration represented amounts potentially payable on the achievement of specified performance targets. The performance hurdles set were based on Net Profit Before Tax (NPBT) and Annual Recurring Revenue (ARR) results as of 31 December 2022. The assessment period for these performance hurdles has now concluded and the Group notes that the NPBT and ARR targets set out in the acquisition agreement have not been met. Therefore, no contingent consideration payment in respect of the calendar year ending 31 December 2022 was required to be paid under the agreement. Given the above, the Group released the provision held on the Balance Sheet at 30 September 2022. $7.4m (£4.1m) has been credited to the profit and loss within the Other Income line of the Consolidated Income Statement. Movement of $0.4m since 30 September 2022 is due to foreign exchange movements. 153 Making life simple for our communityNotes to the consolidated financial statements 20 Non‑current liabilities – Provisions Long service leave Make good provision (a) Movements in provisions 2023 ($’000) 2,359 206 2,565 2022 ($’000) 2,066 134 2,200 Movements in each class of provision during the financial year, other than employee benefits, are set out below: The non-current provisions have been discounted using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. Annual leave ($’000) Long service leave ($’000) Make good ($’000) Legal provision ($’000) Contingent consideration ($’000) Other ($’000) Total ($’000) 2023 Carrying amount at 1 October 2022 Additional provisions recognised Release of provision 8,032 3,451 - 9,336 2,498 - Amount used during the year or Foreign Exchange movement (3,740) (1,243) Carrying amount at 30 September 2023 7,743 10,591 210 130 (134) - 206 5,221 - - - 5,221 6,997 - (7,378) 381 ‑ 303 42 - 30,099 6,121 (7,512) (264) (4,866) 81 23,842 Property ($’000) Equipment ($’000) Total ($’000) 23,071 1,912 2,809 - (5,932) 626 22,486 43,510 (21,024) 22,486 39 167 - - (51) - 155 367 (211) 156 23,110 2,079 2,809 - (5,983) 626 22,641 43,876 (21,235) 22,641 21 Leases Right‑of‑use assets YEAR ENDED 30 SEPTEMBER 2023 Opening net book amount Additions Modifications during the year Disposals Depreciation charge Exchange difference Closing net book amount AT 30 SEPTEMBER 2023 Cost Accumulated depreciation Net book amount 154 TechnologyOne Annual Report 2023Lease liability YEAR ENDED 30 SEPTEMBER 2023 Opening liability New leases entered into during the year Modifications during the year Payments Interest expense Exchange difference Closing liability1 The following are amounts recognised in profit or loss under AASB 16: Amortisation on right-of-use assets Interest expense on lease liabilities Total amount recognised in profit or loss Cashflow from leases Total cash outflow as a lessee2 Property ($’000) Equipment ($’000) Total ($’000) 35,253 1,879 2,803 (9,765) 2,058 760 32,988 51 167 - (55) 5 - 168 2023 ($’000) 5,983 2,063 8,046 2023 ($’000) 9,820 9,820 35,304 2,046 2,803 (9,820) 2,063 760 33,156 2022 ($’000) 5,076 1,724 6,800 2022 ($’000) 5,376 5,376 1 Of the closing liability amount, $8.9m is classified as current in the Consolidated statement of financial position. 2 Increase in lease payments year on year is primarily due to the expiry of a rental rebate on the Group’s HQ lease. This rebate significantly reduced base rent payable between 1 July 2020 and 1 April 2022. The rent rebate applied in FY23 was nil (FY22: $3.1m). 155 Making life simple for our communityProperty ($’000) Equipment ($’000) Total ($’000) 22,385 4,558 1,292 - (5,018) (146) 23,071 38,164 (15,093) 23,071 57 40 - - (58) - 39 199 (160) 39 22,442 4,598 1,292 - (5,076) (146) 23,110 38,363 (15,253) 23,110 Property ($’000) Equipment ($’000) Total ($’000) 33,325 4,543 1,280 (5,322) 1,723 (296) 35,253 64 40 - (54) 1 - 51 33,389 4,583 1,280 (5,376) 1,724 (296) 35,304 Notes to the consolidated financial statements 21. Leases (continued) Leases Right‑of‑use assets YEAR ENDED 30 SEPTEMBER 2022 Opening net book amount Additions Modifications during the year Disposals Depreciation charge Exchange difference Closing net book amount AT 30 SEPTEMBER 2022 Cost Accumulated depreciation Net book amount Lease liability YEAR ENDED 30 SEPTEMBER 2022 Opening liability New leases entered into during the year Modifications during the year Payments Interest expense Exchange difference Closing liability 156 TechnologyOne Annual Report 202322 Contributed Equity (a) Share capital ORDINARY SHARES Fully paid (b) Movements in ordinary share capital Date Details 1-Oct-22 Opening balance Exercise of options Share grant to employees Movement in treasury shares 30‑Sep‑23 Closing balance 1-Oct-21 Opening balance Exercise of options Share grant to employees Movement in treasury shares 2023 Shares 2022 Shares 2023 ($’000) 2022 ($’000) 324,674,728 323,365,816 67,466 57,635 Number of shares 323,365,816 1,303,806 108,912 (103,806) 324,674,728 321,648,793 1,392,572 4,607 319,844 ($’000) 57,635 8,139 1,692 - 67,466 51,645 5,920 70 - 30‑Sep‑22 Closing balance 323,365,816 57,635 Information relating to the TechnologyOne Employee Share Option Plan, including details of options issued, exercised and lapsed during the financial year and options outstanding at the end of the financial year, is set out in note 32. 23 Reserves (a) Other reserves Share option reserve Foreign currency translation Dividend reserve (b) Nature and purpose of other reserves (i) Share option reserve 2023 ($’000) 48,965 2,262 48,377 99,604 2022 ($’000) 41,658 (1,238) 41,455 81,875 The reserve is used to record the value of equity benefits provided to employees, through share-based payment transactions and associated tax benefits. (ii) Foreign currency translation Exchange differences arising on translation of the foreign controlled entity are recognised in other comprehensive income as described in note 1(c) and accumulated in a separate reserve within equity. The cumulative amount is reclassified to the consolidated income statement when the net investment is disposed of. (iii) Dividend reserve The reserve records retained earnings set aside for the payment of future dividends. 157 Making life simple for our communityNotes to the consolidated financial statements 24 Dividends (a) Ordinary shares Final dividend for the year ended 30 September 2022 of 10.82 Cents (2021: 10.09 Cents) per fully paid share paid in December 2022 (2021 - December 2021) 60% franked (2021: 60%) based on tax paid at 30% 35,119 32,454 Special dividend for the year ended 30 September 2022 of 2 Cents (2021: nil) per fully paid share paid in December 2022 60% franked (2021: nil) based on tax paid at 30% 6,491 - 2023 ($’000) 2022 ($’000) Interim dividend for the year ended 30 September 2023 of 4.62 Cents (2022: 4.2 Cents) per fully paid share paid in June 2023 (2022: June 2022) 60% franked (2022: 60%) based on tax paid at 30% Total dividends paid (b) Dividends not recognised at the end of the reporting period Final In addition to the above dividends, since year end the directors have recommended the payment of a final dividend of 11.90 cents per fully paid ordinary share (2022: 10.82 cents) 60% franked (2022: 60%) based on tax paid at 30% (2022: 30%). The directors have also recommended the payment of a special dividend of 3 cents per share, 60% franked (2022: 60% franked). The aggregate amount of proposed dividend expected to be paid out of retained earnings, but not recognised as a liability at year end 14,995 56,605 13,673 46,127 2023 ($’000) 2022 ($’000) 38,637 34,988 9,740 6,467 48,377 41,455 (c) Franked Dividends The franked portions of the final dividends recommended after 30 September 2023 will be franked out of existing franking credits or out of franking credits arising from the payment of income tax in the year ended 30 September 2023. Franking account balance as at the end of the financial year at 30% (2022: 30%) Franking credits that will arise from the payments of income tax payable as at the end of the financial year Franking credits available for subsequent financial years based on a tax rate of 30% 2023 ($’000) 2022 ($’000) 402 6,712 7,114 171 1,197 1,368 The above amounts represent the balance of the franking account as at the end of the reporting period, adjusted for: (a) Franking credits that will arise from the payment of the amount of the provision for income tax (b) Franking debits that will arise from the payment of dividends recognised as a liability at the reporting date The impact on the franking account of the dividend recommended by the Directors since the end of the reporting date, but not recognised as a liability at the reporting date, will be a reduction in the franking account of $12,439,681 (2022: $10,659,985). 158 TechnologyOne Annual Report 202325 Directors and key management personnel disclosures Short-term employee benefits Deferred STI Share-based payments 2023 ($) 2022 ($) 5,339,272 5,553,807 305,731 422,177 1,229,551 1,263,638 6,874,554 7,239,622 Equity instrument disclosures relating to key management personnel Details of options provided as remuneration to KMP and shares issued on the exercise of such, together with terms and conditions can be found in the remuneration report. 26 Remuneration of auditors During the year, the following fees were paid or payable for services provided by the auditor of the consolidated entity: (a) Ernst and Young (Australia) Fees to Ernst and Young (Australia) Fees for auditing the statutory financial report of the parent covering the group and auditing the statutory financial reports of any controlled entities Fees for other assurance and agreed-upon-procedure services Fees for other services1 Total remuneration of Ernst & Young Australia 1 Other services include $301,734 in relation to taxation advice and $646,750 in relation to acquisition due diligence services. 2023 ($) 2022 ($) 772,356 878,450 223,300 948,484 214,987 197,241 1,944,140 1,290,678 27 Contingencies TechnologyOne is a global business and from time to time in the ordinary course of business it receives enquiries from various regulators and government bodies. TechnologyOne cooperates fully with all enquiries and these enquiries do not require disclosure in their initial state, however should the Group become aware that an enquiry is developing further or if any regulator or government action is taken against the group, appropriate disclosure is made in accordance with the relevant accounting standards. As a global business, from time to time TechnologyOne is also subject to various claims and litigation from third parties during the ordinary course of its business. The Directors of TechnologyOne have given consideration to such matters which are or may be subject to claims or litigation at year end and, unless specific provisions have been made, are of the opinion that no material contingent liability for such claims of litigation exists. The group had no material contingent assets or liabilities. Guarantees At 30 September 2023, the Group had $3,833,314 (2022: $3,745,483) in outstanding bank guarantees issued to TechnologyOne. The total available guarantee facility is $8,300,000 (2022: $8,300,000). These guarantees relate primarily to office leases. The parent entity, Technology One Limited, continues to support its subsidiaries in their operations, by way of financial support. 159 Making life simple for our communityNotes to the consolidated financial statements 28 Related party transactions (a) Ultimate controlling entity The ultimate controlling entity of the consolidated entity is Technology One Limited, a company incorporated in Australia. (b) Subsidiary entities Interest in subsidiary entities are set out in note 29. 29 Controlled entities The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy described in note 1(b): Country of incorporation Class of shares 2023 (%) 2022 (%) Equity holding Technology One Corporation Sdn Bhd Technology One New Zealand Ltd Technology One UK Limited Avand Pty Ltd Desktop Mapping Systems Pty Ltd (DMS) Malaysia Ordinary New Zealand Ordinary England Ordinary Australia Ordinary Australia Ordinary Digital Mapping Solutions NZ Limited (DMS) New Zealand Ordinary Boldridge Pty Ltd Icon Solution Unit Trust (ICON) Icon Strategic Solutions Pty Ltd Jeff Roorda and Associates Pty Ltd (JRA) Scientia Resource Management Limited (UK) Cyon Knowledge Computing Pty Ltd Scientia Limited Scientia P3M Limited Cyon Knowledge Computing SDN BHD Scientia GmbH Cyon S.E Asia PTE Limted Procyon Research Ltd Australia Ordinary Australia Ordinary Australia Ordinary Australia Ordinary England Ordinary Australia Ordinary England Ordinary England Ordinary Malaysia Ordinary Germany Ordinary Singapore Ordinary England Ordinary 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 `100 100 100 100 100 100 100 100 100 100 The parent entity is Technology One Limited, a public company, limited by shares and is domiciled in Brisbane, Australia and whose shares are traded on the Australian Securities Exchange. All entities operate in the software industry in their geographical locations. The Registered office is located at: TechnologyOne HQ Level 11, 540 Wickham Street, Fortitude Valley, Qld, 4006 160 TechnologyOne Annual Report 202330 Reconciliation of profit after income tax to net cash inflow from operating activities Profit for the year Depreciation and amortisation Non-cash employee benefits expense - share-based payments Finance costs Other non-cash Net (gain) / loss on sale of non-current assets Movement in ECL through profit or loss (increase) / decrease in trade and other receivables and contract assets (increase) / decrease in prepayments and other current assets (increase) / decrease in tax assets and liabilities Increase / (decrease) in trade creditors Increase / (decrease) in provisions Increase / (decrease) in lease liabilities Increase / (decrease) in deferred revenue Net cash inflow / (outflow) from operating activities 2023 ($’000) 102,876 53,502 5,827 602 (608) ‑ 498 (5,237) (5,901) 10,544 2,252 965 (2,148) 30,487 193,659 2022 ($’000) 88,843 38,110 3,353 1,844 - (6) 639 (6,771) (6,568) (3,466) 11,206 (1,067) 1,915 14,686 142,718 161 Making life simple for our communityNotes to the consolidated financial statements 31 Earnings per share (a) Basic earnings per share Basic earnings per share (cents per share) Diluted earnings per share (cents per share) 2023 (cents) 31.71 31.54 2022 (cents) 27.51 27.38 Profit used for calculating basic and diluted earnings per share ($’000) 102,876 88,843 (b) Weighted average number of shares used as denominator 2023 (number) 2022 (number) Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share 324,422,822 322,953,789 Adjustments for calculation of diluted earnings per share: Options Weighted average number of ordinary and potential ordinary shares used as the denominator in calculating diluted earnings per share 1,799,585 1,526,148 326,222,406 324,479,937 There are no potentially dilutive share instruments not included in the calculation of diluted earnings per share. There have been no transactions involving ordinary shares or potential ordinary shares that would significantly change the number of ordinary shares or potential ordinary shares outstanding between the reporting date and the date of completion of these financial statements. 32 Share‑based payments (a) Employee option plan Options are granted to employees at the discretion of the Board based on the option plan approved by the Board. TechnologyOne issues options with up to 25% discount on the volume weighted average price for the 10 days prior to the grant date. The period available between vesting date and expiry date of each option is five years. There are no cash settlement alternatives. Each option entitles the holder to purchase one share. For non-KMP employees, covered extensively the Remuneration Report, options granted as part of remuneration are based on values determined using the Black-Scholes option pricing model. Set out below are summaries of options outstanding1 under the plan: 1 Options granted summaries below have been combined by issue date for presentation purposes, however grant date differ based on acceptance. 162 TechnologyOne Annual Report 2023- - - - - - - - - - - - - - - 0 0 0 0 5 , 2 0 9 8 0 1 , 2 0 9 3 7 , 5 8 7 4 2 , 0 0 5 6 1 , 0 0 0 0 5 , ) 7 7 1 1 1 ( , 7 7 1 1 1 , - 9 8 0 4 2 3 , , 1 9 9 2 5 7 4 , ) 6 6 3 9 5 6 ( , , ) 6 0 8 3 0 3 , 1 ( 0 1 0 , 1 3 2 , 1 3 5 1 , 5 8 4 5 , , 9 3 2 8 5 6 ) 3 6 6 8 1 ( , 3 5 6 1 5 , 9 8 1 2 , 2 0 3 4 3 1 , 8 6 6 5 7 2 , , 8 7 2 6 6 3 , 5 6 1 5 9 1 1 , - 3 9 5 7 3 , , 7 4 4 6 3 4 9 8 4 7 0 3 , 4 6 0 1 1 , 4 1 0 2 1 4 , , 1 0 8 0 4 5 - 0 0 0 0 5 , 2 0 9 8 0 1 , 2 0 9 3 7 , 5 8 7 4 2 , 0 0 5 6 1 , 0 0 0 0 5 , ) 7 7 1 1 1 ( , 7 7 1 1 1 , - - - - - - ) 6 9 2 0 9 , ( ) , 4 4 7 1 0 1 ( , ) 1 6 7 5 0 2 ( ) 4 5 9 3 7 ( , ) , 9 1 7 0 0 1 ( - ) 9 2 2 8 6 , ( - - - - - - - - - - - - - - - - - - - - - - - - ) 0 4 7 4 3 , ( - ) , 4 8 2 9 0 1 ( ) , 8 1 1 4 5 4 ( ) 7 1 0 5 2 6 , ( - ) 8 2 1 7 2 , ( ) 0 0 5 3 , ( ) 6 6 1 7 2 , ( - ) 3 5 8 2 2 , ( 2 0 9 6 7 6 , 3 5 6 1 5 , 9 8 1 2 , 2 0 3 4 3 1 , 4 6 9 5 6 3 , - - - - - - - - - - - - - - - - - - - - - - - - 2 2 0 8 6 4 , , 6 2 9 0 0 4 1 , 3 9 5 7 3 , 0 4 7 4 3 , , 1 0 4 0 1 5 , 8 0 2 8 0 4 4 6 0 1 1 , , 3 4 2 0 8 4 , 1 0 8 0 4 5 4 8 2 9 0 1 , 0 0 0 0 5 , 0 2 0 3 6 5 , , 9 1 9 8 9 6 3 1 9 1 5 , 0 0 0 0 2 , 0 0 0 0 5 , 9 8 9 5 1 , 7 7 1 1 1 , 3 5 8 2 2 , 0 0 6 4 9 . 0 0 6 4 9 . 0 0 6 4 9 . 0 0 6 4 9 . 0 0 3 0 . 1 1 0 0 8 7 7 . 0 0 7 3 0 1 . 0 5 8 8 5 . 0 0 3 2 9 . 0 0 3 2 9 . 0 0 1 3 2 1 . 0 5 8 8 5 . 0 5 8 8 5 . 7 6 4 8 7 . 0 5 8 8 5 . 4 1 9 8 . 1 4 5 8 3 7 . 1 9 3 5 5 . 2 2 1 1 . 4 6 6 1 1 . 4 4 1 9 8 . 1 6 5 4 1 . 5 4 7 4 7 5 . 2 2 1 1 . 4 0 3 0 2 / 1 1 / 0 3 2 2 0 2 / 1 1 / 5 2 9 2 0 2 / 1 1 / 0 3 2 2 0 2 / 1 1 / 5 2 8 2 0 2 / 1 1 / 0 3 2 2 0 2 / 1 1 / 5 2 9 2 0 2 / 1 1 / 0 3 2 2 0 2 / 1 1 / 5 2 0 3 0 2 / 1 1 / 0 3 2 2 0 2 / 0 1 / 1 1 3 0 2 / 1 1 / 0 3 2 2 0 2 / 7 0 / 8 1 3 0 2 / 1 1 / 0 3 2 2 0 2 / 2 0 / 3 2 8 2 0 2 / 1 1 / 0 3 1 2 0 2 / 1 1 / 6 2 7 2 0 2 / 1 1 / 0 3 1 2 0 2 / 1 1 / 6 2 9 2 0 2 / 1 1 / 0 3 1 2 0 2 / 1 1 / 6 2 9 2 0 2 / 1 1 / 0 3 1 2 0 2 / 1 1 / 6 2 8 2 0 2 / 1 1 / 0 3 1 2 0 2 / 3 0 / 0 3 8 2 0 2 / 1 1 / 0 3 1 2 0 2 / 1 0 / 2 2 8 2 0 2 / 1 1 / 0 3 1 2 0 2 / 1 0 / 2 2 7 2 0 2 / 1 1 / 0 3 1 2 0 2 / 1 0 / 2 2 7 2 0 2 / 0 1 / 1 0 2 0 2 / 7 0 / 1 7 2 0 2 / 0 1 / 1 7 2 0 2 / 0 1 / 1 6 2 0 2 / 0 1 / 1 5 2 0 2 / 0 1 / 1 9 1 0 2 / 0 1 / 1 9 1 0 2 / 0 1 / 1 8 1 0 2 / 0 1 / 1 8 1 0 2 / 0 1 / 1 5 2 0 2 / 7 0 / 1 8 1 0 2 / 0 1 / 1 5 2 0 2 / 0 1 / 1 5 2 0 2 / 0 1 / 1 7 1 0 2 / 0 1 / 1 7 1 0 2 / 0 1 / 1 6 2 0 2 / 0 1 / 1 8 1 0 2 / 7 0 / 1 l e b a s i c r e x e & d e t s e V t a e c n a a B l g n i r u d d e t i e f r o F g n i r u d d e s i c r e x E g n i r u d d e u s s I t a e c n a a B l r e b m u N r e b m u N d o i r e p e h t f o d n e t a d o i r e p e h t f o d n e r e b m u N d o i r e p e h t r e b m u N d o i r e p e h t r a e y e h t r e b m u N r e b m u N d o i r e p e h t f o t r a t s e c i r p e s i c r e x E e t a d y r i p x E e u s s I e t a d 3 2 0 2 ) d e u n i t n o c ( s t n e m y a p d e s a b ‑ e r a h S 2 3 . 7 8 4 $ . 7 9 8 $ . 4 7 9 $ . 4 2 6 $ . 3 9 9 $ 0 2 8 $ . e c i r p e s i c r e x e e g a r e v a d e t h g e W i 163 Making life simple for our community Notes to the consolidated financial statements - - - - - - - - - - - - - - - 3 1 9 1 5 , 0 0 0 0 2 , 0 0 0 0 5 , 9 8 9 5 1 , 7 7 1 1 1 , 3 5 8 2 2 , - - - - 2 2 0 8 6 4 , , 6 2 9 0 0 4 1 , 3 9 5 7 3 , 0 4 7 4 3 , , 1 0 4 0 1 5 , 8 0 2 8 0 4 4 6 0 1 1 , , 3 4 2 0 8 4 , 1 0 8 0 4 5 4 8 2 9 0 1 , 0 0 0 0 5 , 0 2 0 3 6 5 , , 9 1 9 8 9 6 - 3 1 9 1 5 , 0 0 0 0 2 , - 0 0 0 0 5 , 9 8 9 5 1 , 7 7 1 1 1 , 3 5 8 2 2 , - - - - - - - - - - ) 2 1 7 6 3 , ( ) 9 5 9 1 3 1 ( , - - - ) 1 3 5 5 1 ( , ) , 9 4 8 5 0 1 ( - ) 1 8 8 4 , ( - - - ) 7 5 7 7 2 , ( - - - - - - - - - - - - - - - - - - - ) , 6 6 1 7 4 8 ( ) , 9 3 6 5 8 3 ( - ) 9 9 7 2 , ( ) 0 5 7 6 1 ( , ) 8 6 2 8 4 , ( - - ) 0 5 6 6 1 ( , ) 0 0 3 5 1 ( , ) 0 0 0 0 3 , ( ) 0 0 0 0 3 , ( 2 2 0 8 6 4 , , 6 2 9 0 0 4 1 , - - - - - - - - - - - - - - - - - - - 3 9 5 7 3 , 0 4 7 4 3 , , 3 1 1 7 4 5 , 8 0 2 8 0 4 2 3 9 , 1 7 1 3 5 1 , 5 8 4 5 , ) 9 8 6 2 2 3 ( , , ) 2 7 5 2 9 3 , 1 ( , 2 0 6 6 9 8 2 , , 2 1 8 3 0 3 4 , - - - - - - 4 6 0 1 1 , 2 0 2 2 1 6 , , 1 0 8 0 4 5 4 8 2 9 0 1 , 0 0 0 0 5 , , 1 5 5 8 7 5 , 8 6 7 4 0 8 , 9 7 0 9 9 8 , 0 2 5 0 9 3 9 9 7 2 2 , 0 5 7 6 1 , 0 0 0 0 5 , 4 1 0 2 9 , 7 7 1 1 1 , 3 5 8 2 2 , 0 5 6 6 1 , 0 0 3 5 1 , 0 0 0 0 3 , 0 0 0 0 3 , 0 0 8 7 7 . 0 0 7 3 0 1 . 0 5 8 8 5 . 0 0 3 2 9 . 0 0 3 2 9 . 0 0 1 3 2 1 . 0 5 8 8 5 . 0 5 8 8 5 . 7 6 4 8 7 . 0 5 8 8 5 . 4 1 9 8 . 1 4 5 8 3 7 . 1 9 3 5 5 . 2 2 1 1 . 4 9 2 8 4 5 . 6 6 1 1 . 4 3 3 6 8 0 . 4 1 9 8 . 1 6 5 4 1 . 5 4 7 4 7 5 . 2 2 1 1 . 4 3 3 6 8 0 . 3 3 6 8 0 . 0 5 4 3 0 . 0 5 4 3 0 . 1 3 0 2 / 1 1 / 0 3 2 2 0 2 / 7 0 / 8 1 3 0 2 / 1 1 / 0 3 2 2 0 2 / 2 0 / 3 2 8 2 0 2 / 1 1 / 0 3 1 2 0 2 / 1 1 / 6 2 7 2 0 2 / 1 1 / 0 3 1 2 0 2 / 1 1 / 6 2 9 2 0 2 / 1 1 / 0 3 1 2 0 2 / 1 1 / 6 2 9 2 0 2 / 1 1 / 0 3 1 2 0 2 / 1 1 / 6 2 8 2 0 2 / 1 1 / 0 3 1 2 0 2 / 3 0 / 0 3 8 2 0 2 / 1 1 / 0 3 1 2 0 2 / 1 0 / 2 2 8 2 0 2 / 1 1 / 0 3 1 2 0 2 / 1 0 / 2 2 7 2 0 2 / 1 1 / 0 3 1 2 0 2 / 1 0 / 2 2 7 2 0 2 / 0 1 / 1 7 2 0 2 / 0 1 / 1 7 2 0 2 / 0 1 / 1 6 2 0 2 / 0 1 / 1 6 2 0 2 / 0 1 / 1 5 2 0 2 / 0 1 / 1 5 2 0 2 / 7 0 / 1 5 2 0 2 / 7 0 / 1 5 2 0 2 / 0 1 / 1 5 2 0 2 / 0 1 / 1 6 2 0 2 / 0 1 / 1 4 2 0 2 / 7 0 / 1 3 2 0 2 / 7 0 / 1 0 2 0 2 / 7 0 / 1 9 1 0 2 / 0 1 / 1 9 1 0 2 / 0 1 / 1 8 1 0 2 / 0 1 / 1 8 1 0 2 / 0 1 / 1 8 1 0 2 / 0 1 / 1 8 1 0 2 / 0 1 / 1 8 1 0 2 / 0 1 / 1 7 1 0 2 / 0 1 / 1 7 1 0 2 / 0 1 / 1 8 1 0 2 / 7 0 / 1 7 1 0 2 / 7 0 / 1 6 1 0 2 / 7 0 / 1 3 2 0 2 / 8 0 / 5 2 0 1 0 2 / 8 0 / 5 2 4 2 0 2 / 8 0 / 5 2 1 1 0 2 / 8 0 / 5 2 . 7 6 3 $ 0 2 8 $ . 5 1 . 6 $ . 5 2 4 $ . 4 9 9 $ 0 6 5 $ . e c i r p e s i c r e x e e g a r e v a d e t h g e W i l e b a s i c r e x e & d e t s e V t a e c n a a B l g n i r u d d e t i e f r o F g n i r u d d e s i c r e x E g n i r u d d e u s s I t a e c n a a B l r e b m u N r e b m u N d o i r e p e h t f o d n e t a d o i r e p e h t f o d n e r e b m u N d o i r e p e h t r e b m u N d o i r e p e h t r a e y e h t r e b m u N r e b m u N d o i r e p e h t f o t r a t s e c i r p e s i c r e x E e t a d y r i p x E e u s s I e t a d 2 2 0 2 ) d e u n i t n o c ( s t n e m y a p d e s a b ‑ e r a h S 2 3 164 TechnologyOne Annual Report 2023 32 Share‑based payments (continued) A total of 1,231,010 options (2022: 2,896,602) were issued to employees during the year. The weighted average strike price at the date of exercise of options exercised during the year ended 30 September 2023 was $6.24 (2022: $4.25). The weighted average remaining contractual life of share options outstanding at the end of the period was 6.6 years (2022: 7.0 years). (b) Fair value of options granted The fair value of the equity-settled options is measured at the reporting date taking into account the terms and conditions upon which the instruments were granted. The fair value of options granted during the year was between $2.32 and $7.42 (2022: $2.13 and $3.65). The model inputs for options granted during the year ended 30 September 2023 included: (i) (ii) Dividend yield of 1.35% (2022: 1.2%) Expected volatility 33.89% (2022: 33.15%) (iii) Risk-free interest rate 3.61% (2022: 1.24%) (iv) Expected life of option 3.3 years (2022: 3.3 years) (v) Option exercise price between $9.46 and $11.03 (2022: $12.31 and $9.23) (vi) Weighted average share price at grant date was $12.64 (2022: $11.56) The expected volatility reflects the assumption that the historical volatility of the Group’s share price over a period similar to the life of the options is indicative of future trends, which may not necessarily be the actual outcome. (c) Executive performance rights After further market consultation, the Group made the decision to return to issuing options or EPRs. Please refer to section 3 of the remuneration report for further information. (d) Expenses arising from share‑based payment transactions Total expenses arising from share-based payment transactions recognised during the year as part of employee benefit expense were as follows: Options issued under employee option plan: Vested or yet to vest Forfeited Total share‑based payment expense (e) Employee share plan 2023 ($’000) 4,085 (178) 3,907 2022 ($’000) 3,589 (236) 3,353 During the year the Group launched an Employee Share Plan which provides 1 bonus share (fully paid ordinary share) for every 2 shares purchased by an employee. An eligible employee under the plan is defined as a current permanent full-time or part-time Group employee who: (a) has completed their probation period, (b) (c) is 18 years or older, and reside in Australia, New Zealand, the United Kingdom or Malaysia. Eligible employees can opt into the plan and choose an amount to be deducted from their post-tax salary each month during the contribution period (typically a 12-month period with the contribution capped at $25,000 AUD per person. This equates to a monthly contribution cap of $2,083. This post-tax deduction is used to purchase TechnologyOne shares at market value at the end of each contribution month. Employees who participate in the plan will become entitled to one matched share for every two shares they acquire under the plan subject to vesting conditions. The vesting condition attached to the bonus shares is that the employee must remain employed for one month after the contribution period ends. A participant who satisfies the vesting conditions will become entitled to the matched shares on the last day of the vesting period. The fair value of the matched share is estimated at the measurement date using Black-Scholes option pricing model and is recognised over the period that the matched share vests. FY23 was the first year that employees have been able to enter into the employee share plan. The contribution period for the first offering was 1 January 23 to 30 June 23, with the vesting date being 31 July 23 and the second offering is 1 July 23 to 30 June 2024, with the vesting date being 31 July 24. 165 Making life simple for our communityNotes to the consolidated financial statements 33 Parent entity financial information (a) Summary financial information The individual financial statements for the parent entity show the following aggregate amounts: BALANCE SHEET Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities SHAREHOLDERS' EQUITY Contributed equity Dividend reserve Share option reserve Retaining earnings Profit or loss before tax for the year Total comprehensive income 2023 ($’000) 2022 ($’000) 313,297 288,687 601,984 270,830 19,254 290,084 67,466 48,377 48,965 147,092 311,900 119,914 119,914 227,751 260,224 487,975 219,344 14,207 233,551 57,635 41,455 41,658 113,676 254,424 103,583 103,583 At 30 September 2023, the statement of financial position shows a current liability balance of $271m (30 September 2022: $219m) which is largely attributable to the Deferred Revenue balance in current liabilities. As Deferred Revenue represents payments received or receivable in advance from customers for SaaS Fees and Annual Licence Fees which will be recognised in future periods, and not a future cash outflow, this balance does not impact the Group’s ability to meet its short-term obligations as and when they fall due. (b) Guarantees entered into by the parent entity At 30 September 2023, the Group had $3,833,314 (2022: $3,745,483) in outstanding bank performance guarantees. The total available guarantee facility is $8,300,000 (2022: $8,300,000). The parent entity, Technology One Limited, provides ongoing financial support to its subsidiaries in their operations. (c) Contingent liabilities of the parent entity At 30 September 2023, the Parent had no contingent liabilities. At 30 September 2022, the Parent had a provision for contingent consideration as disclosed in note 19. 34 Events after the reporting period On 21 November 2023, the Directors of Technology One Limited declared a final and special dividend on ordinary shares in respect of the 2023 financial year. The total amount of the dividend is $48,376,534 and is 60% franked. No other matter or circumstance has occurred subsequent to period end that has significantly affected, or may significantly affect, the operations of the Group, the results of those operations or the state of affairs of the Group or economic entity in subsequent financial years 166 TechnologyOne Annual Report 2023Directors' Declaration Technology One Limited Directors' declaration 30 September 2023 In accordance with a resolution of the Directors of Technology One Limited, I state that: In the opinion of the Directors: (a) the financial statements and notes set out on pages 125 to 166 are in accordance with the Corporations Act 2001, including: (i) (ii) giving a true and fair view of the consolidated entity's financial position as at 30 September 2023 and of its performance for the year ended on that date; and complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; (b) the financial statements and notes also comply with International Financial Reporting Standards as disclosed in note 1(a); and (c) (d) there are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due and payable; and this declaration has been made after receiving the declarations required to be made to the Directors in accordance with section 295A of the Corporations Act 2001 for the reporting year ended 30 September 2023. On behalf of the Board of Directors Pat O’Sullivan Chair Brisbane 21 November 2023 167 Making life simple for our communityIndependent Auditor's Report Independent Auditor's Report 168 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Ernst & Young 111 Eagle Street Brisbane QLD 4000 Australia GPO Box 7878 Brisbane QLD 4001 Tel: +61 7 3011 3333 Fax: +61 7 3011 3100 ey.com/au Independent auditor’s report to the members of Technology One Limited Report on the audit of the financial report Opinion We have audited the financial report of Technology One Limited (the Company) and its subsidiaries (collectively the Group), which comprises the consolidated statement of financial position as at 30 September 2023, the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, notes to the financial statements, including a summary of significant accounting policies, and the directors’ declaration. In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: a. Giving a true and fair view of the consolidated financial position of the Group as at 30 September 2023 and of its consolidated financial performance for the year ended on that date; and b. 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 and 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 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 judgment, were of most significance in our audit of the financial report of the current year. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context. We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the financial report section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial report. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial report. TechnologyOne Annual Report 2023169 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Measurement and recognition of revenue and associated assets and liabilities Why significant How our audit addressed the key audit matter The Group applies AASB 15 Revenue from Contracts with Customers to account for the following key revenue streams: ► SaaS fees; ► Annual licence fees; and ► Consulting services The measurement and recognition of revenue and associated assets and liabilities is considered to be a key audit matter due to the significance of revenue to the financial statements. Note 1(d) to the financial statements details the Group’s revenue streams and the associated accounting policies. Revenue is disclosed in Note 5, associated assets in Note 10 and Note 11 and associated liabilities in Note 17. Our audit procedures included the following: ► For a sample of customer contracts related to SaaS fees and Annual licence fees, assessed whether the revenue has been recorded appropriately, by: ► Agreeing the amounts recorded to contract, invoice and payment; and ► Reperforming the recognition of revenue based on the satisfaction of performance obligations. ► For a sample of consulting services contracts, we assessed the Group’s controls associated with the recording of consulting days delivered and the contracted fee rates applied to the days delivered. ► For deferred revenue (contract liabilities) and contract assets, we tested a sample of balances at year end, including: ► Agreeing the amounts recorded to contract, invoice and payment, where appropriate; and ► Recalculating the amount of the contract asset or contract liability balance at year end. ► Assessed the adequacy of the disclosures included in the financial report. Making life simple for our communityIndependent Auditor's Report 170 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Accounting for software development costs Why significant How our audit addressed the key audit matter As set out in Note 14 to the financial statements the Group capitalises costs related to the development of software products in accordance with AASB 138 Intangible Assets. The accounting for software development costs is considered to be a key audit matter due to: ► Judgement on whether the costs incurred relate to research costs, which are required to be expensed, or development costs which meet the definition of an intangible asset that is required for capitalisation; ► The assessment of the useful life of the asset and the timing of amortisation; and ► The assessment of future economic benefits and indications of impairment of the capitalised software development costs. We performed the following procedures in respect of the development costs capitalised: ► Assessed the nature of the Group’s projects and the policy of capitalisation of software development costs for compliance with the criteria in AASB 138 Intangible Assets. ► Held inquiries with R&D Directors and other team members, to understand the development activities undertaken. ► For capitalised salaries, we performed the following procedures: ► For a sample of employees, we agreed the salary rates used in the capitalisation calculation to underlying payroll records and employee contracts; and ► For a sample of time capitalised, agreed hours to the relevant timesheet and confirmed the associated work relates to activities eligible for capitalisation. ► For a sample of other directly attributable costs capitalised, agreed the amount to invoice or other supporting documentation and assessed the Group’s determination that the service or goods received was attributable to development activities. ► Considered the appropriateness of the amortisation period including the commencement date of amortisation for the capitalised software development costs and the timing of amortisation. ► Assessed the Group’s indicators of impairment of capitalised software development costs. ► Assessed the adequacy of the disclosures included in the financial report. TechnologyOne Annual Report 2023171 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Information other than the financial report and auditor’s report thereonThe directors are responsible for the other information. The other information comprises the information included in the Company’s 2023 Annual Report other than the financial report and our auditor’s report thereon. We obtained the Directors’ Report, the Corporate Governance Statement and the Voluntary Tax Transparency Report that is to be included in the Annual Report, prior to the date of this auditor’s report, and we expect to obtain the remaining sections of the Annual Report after the date of this auditor’s report.Our opinion on the financial report does not cover the other information and we do not and will not express any form of assurance conclusion thereon, with the exception of the Remuneration Report and our related assurance opinion.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 on the other information obtained prior to the date of this auditor’s report, 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 reportThe directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error.In preparing the financial report, the directors are responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters relating 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 have no realistic alternative but to do so.Auditor’s responsibilities for the audit of the financial reportOur objectives are to obtain reasonable assurance about whether the financial report as a whole isfree 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 judgment and maintain professional scepticism 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 auditevidence 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 theoverride of internal control.Making life simple for our communityIndependent Auditor's Report 172 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation ► 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. ► 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 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 to the directors, we determine those matters that were of most significance in the audit of the financial report of the current year 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. TechnologyOne Annual Report 2023173 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Report on the audit of the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included within the Directors’ Report for the year ended 30 September 2023. In our opinion, the Remuneration Report of Technology One Limited for the year ended 30 September 2023, 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. Ernst & Young John Robinson Jennifer Barker Partner Partner Sydney Brisbane 21 November 2023 21 November 2023 Making life simple for our communityShareholder information Shareholder information The shareholder information set out below was applicable as at 27 October 2023. (a) Distribution of Equity Securities Number of Shares 1-1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over There were 290 holders of less than a marketable parcel of ordinary shares (1.93% of shareholders). (b) Equity Security Holders Twenty largest quoted equity security holders Name JL Mactaggart Holdings Pty Ltd1 Masterbah Pty Ltd Selector Funds Mgt (Sydney) State Street Global Advisors (Sydney) Vanguard Group (Philadelphia) Hyperion Investor Mgt (Brisbane) Macquarie Asset Management (Sydney) Blackrock Investment Management (San Francisco) Argo Investments (Sydney) First Sentier Investors (Sydney) Dimensional Fund Advisors (Sydney) Fundsmith (London) Alphinity Investment Mgt (Sydney) Acadian Asset Mgt (Boston) Vanguard Investments (Melbourne) Plato Investment Mgt (Sydney) Blackrock Investment Mgt (Australia) Walter Scott & Partners (Edinburgh) Wasatch Global Investors (Salt Lake City) Goldman Sachs Asset Mgt (New York) 1 Substantial holder (including associate holdings) in Technology One Limited. (c) Unquoted Securities Details TNEAI (Options) TNEAJ (Performance Rights) Number of Shareholders Percentage of Shareholders 7,659 4,954 1,214 1,111 61 51.06% 33.03% 8.09% 7.41% 0.41% Number Held Percentage of Issued Shares 24,902,500 14,372,500 11,721,486 11,152,446 10,402,343 8,740,149 7,788,446 7,246,455 6,750,000 6,577,263 6,366,523 6,339,946 6,082,859 6,069,950 4,989,311 4,835,896 4,577,703 4,426,290 4,263,005 4,256,091 7.67% 4.43% 3.61% 3.44% 3.20% 2.69% 2.40% 2.23% 2.08% 2.03% 1.96% 1.95% 1.87% 1.87% 1.54% 1.49% 1.41% 1.36% 1.31% 1.31% Number on Issue 5,278,909 159,503 Number of Holders 99 50 (d) Voting Rights All ordinary shares issued by Technology One Limited carry one vote per share without restriction. Options and Performance Rights have no voting rights. 174 TechnologyOne Annual Report 2023Corporate directory ‑ Technology One Limited Board of Directors Pat O'Sullivan Branch Locations Brisbane Sydney Melbourne Canberra Adelaide Perth Auckland Wellington Kuala Lumpur London Auditor Ernst & Young Level 51, 111 Eagle Street Brisbane QLD 4000 www.ey.com/au Edward Chung John Mactaggart Richard Anstey Jane Andrews Sharon Doyle Cliff Rosenberg Peter Ball Company Secretary Stephen Kennedy Australian Business Number (ABN) 84 010 487 180 Registered Office Technology One Limited Level 11, TechnologyOne HQ 540 Wickham Street Fortitude Valley QLD 4006 Australia www.TechnologyOneCorp.com P. 1800 671 978 International: +617 3167 7300 Lawyer McCullough Robertson Level 11, 66 Eagle Street Brisbane QLD 4000 www.mccullough.com.au Share Registry Link Market Services Limited Locked Bag A14 Sydney NSW 1235 Phone: 02 8280 7454 Fax: 02 9287 0303 www.linkmarketservices.com.au Stock Exchange Listing Australian Securities Exchange (ASX: TNE) 175 Making life simple for our communityTechnologyOne (ASX: TNE) is Australia’s largest enterprise software company and one of Australia’s top 100 ASX-listed companies, with locations globally. We provide a global SaaS ERP solution that transforms business and makes life simple for our customers. Our deeply integrated enterprise SaaS solution is available on any device, anywhere and any time and is incredibly easy to use. Over 1,300 leading corporations, government agencies, local councils and universities are powered by our software. For more than 36 years, we have been providing our customers enterprise software that evolves and adapts to new and emerging technologies, allowing them to focus on their business and not technology. ABN: 84 010 487 180 2 0 2 3 A n n u a l R e p o r t TechnologyOneCorp.com Australia | New Zealand | South Pacific | Asia | United Kingdom Freecall 1800 671 978 (within Australia) | +617 3167 7300 (outside Australia) l T e c h n o o g y O n e L i m i t e d

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