I have looked at these numbers and the announcement in much more detail. It is a great result and based on strategies that TNE put in place many years ago when they went down the CI Anywhere route. This strategy has been hugely successful as they have been able to increase their recurring revenue significantly by moving their customers from annual support and maintenance to SAAS. This has been a significant revenue upside. These re-implementations have also included significant consulting effort whih has created significant revenue. This should continue to happen until July 2024 as this is the date they told their customers was when their current solution reaches end of life. That means the next year is going to be really important as these implementations are significant and this is potentially the time when organisations will be choosing whether they continue with TNE or go to another product as they have a compelling event. At this point they will have sold a significant number of new modules to customers as part of their upgrade path, so they will have not have a significant revenue oppoprtunity with existing customers after July 24.
They have not sold to significant numbers of new customers over this period. This is very much because of the key markets they operate in. Governments in Australia are locked into various all of government contracts such as Victoria, NSW, and WA with Oracle, Qld with SAP, and Tas with TNE. I know SA are looking to move but the rest are pretty much locked in. The Local Government area is pretty much locked into current vendors and is a heavily contested space with Oracle making moves, and ReadyTech being aggressive. Microsoft are also in this space, but most cuncils are where they will stay for a while. Education has made moves to the solutions they want to and TNE has a solid footprint. The other markets are small.
They have lost good people. Adrian Di Marco is a huge loss as he was the visionary for the past success, but they have also recently lost the guy who over the last few years was the face of their council business. This guy is Peter Suchting and was the face of their local government business which accounted for 35.4% of their revenue. How they deal with this will be important.
So their will be chances to increase revenue in Australia and NZ within client base, but this alone does not justify the price. Of course they have contracts which are the greater of CPI and salary index for IT workers, so it will always increase.
The slides show growth being based on increasing product penetration, increasing market penetration and expanding geographies. I think the best chances for continuing the growth trajectory they are on is acquisitions and expansion into new territories. I think it would be great to get some guidance on this from them.
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