Objective Corp reported their 1H FY26 results this morning. From their presentation:

Results don't look too bad on first look until you remember that they are comparing against an equally weak 1H FY25.

On the call, CEO Tony Walls suggested that this half was more of a "solid foundation" as they look to improve for FY26. ARR growth was hampered by several large customers who have not yet migrated to the cloud and Tony said himself that he doesn't have the confidence that this will occur even in the 2H.

A lot of the presentation was spent on how AI is driving forward their software for their customers, promoting their "Private RAG" (Retrieval-Augmented Generation). They mentioned they have been heavily investing into the AI capabilities of their platform although they believe that their use of AI will be measured in "years, not sprints".

If you look into the per segment breakdown of ARR, you can see that overall ARR actually decreased in the current half due to both Information Intelligence (formerly Content Solutions) and Planning and Building going backwards. Tony said that this was partly due to some currency headwinds but also several customers churned due to a particular function not being available on their software but they have since added this feature to their software.

Planning and Building remains one of the bigger growth segments for Objective Corp however Tony said that they are being more conservative with the deployment to new customers. Currently he is working with 3 clients and would prefer that they perfect the software with these 3 before deployment to more customers rather than trying to fix issues with lots of different clients at once.

Outlook was given for the full year with expected ARR growth of between 10-14% which is below their target of 15%. Tony did say that they were being a bit more conservative as usual with giving this guidance. In regards to M&D opportunities. Tony mentioned that although they have been looking into several opportunities, he believes that valuations in the private sector will come down as they have in the public sector and he is currently waiting for this to occur before jumping in to acquire anything. And so at current they will likely pursue more organic growth opportunities.

I must also mention that the actual call didn't go very well with them having technical difficulties during the analyst question time which meant only 1 live question was answered along with a couple of text in questions. Also Tony's mobile went off several times during the call which left a bit of a sour note. Market reaction today was mostly negative with the share price ending down around 9%. I think this is fair given the weak results and outlook. As usual a big 2H is needed if they are wanting to hit their targets. They did it in the last half, so hopefully they can do it again.

Disc: Held IRL and on Strawman.

Objective Corp reported results this morning. From their presentation:

I think this was a solid result for OCL with them hitting their ARR target of 15% growth following a strong 2H.

Software revenue is now at 100% subscription which should drive further growth. Revenue growth was a bit subdued compared to last year but this should increase substantially in the coming FY given that ARR for each segment grew by more than 10% each which should see this reflected in revenue growth for the coming year.

Cash flow perhaps on the weaker side with less cash receipts compared to last year, may be related to their transition to 100% subscription model. However the cash on hand is still very strong and management did say they may take the opportunity for further bolt on acquisitions.

Haven't had a chance to listen to the earnings call yet but will go through it when/if the recording is up.

Disc: Held IRL and on Strawman.

Objective Corporation Limited (OCL) reported 1H FY25 results last week. From their presentation:

Results were probably a little weak although they still believe they are on track to hit their target of 15% ARR growth by the end of FY25. Cash flow was also on the weaker side with cash receipts less than pcp but this may be related to the timing of cash payments as a result of the transition to SaaS.

The report also did state that they may look at some non-organic growth opportunities given their balance sheet flexibility and have been doing some due diligence on a few opporunities.

Given that this company has historically been run very well under CEO Tony Walls I'm happy to chalk this half down as an odd weaker half and will wait until the full year results for further analysis.

Disc: Held IRL and on Strawman.

Objective Corporation released their FY24 results this morning. From their presentation:

Overall a solid result headlined by a very strong cash flow compared to FY23. On my numbers FCF came in around $37.5m compared to $20m in FY23.

Remember that OCL changed their accounting policy to only expense 50% of R&D in the P&L which makes the comparison of NPAT between the 2 periods a bit misleading. However, on a like for like basis, I have NPAT using the old method of accounting of around $27.2m which is still 29% higher than FY23 ($21.1m).

In his letter to shareholders, CEO Tony Walls indicated that although they did not quite reach their targets of 15% growth in ARR, they were also more efficient in deployment of their services which in term lead to a decrease in costs. They attributed this miss to a softening in economic conditions in NZ. They do think that going forward, a 15% growth in ARR is the target.

Disc: Held IRL and on Strawman.

Objective Corp reported last week. From their presentation:

Remember that OCL changed accounting policies in terms of expensing R&D. Changing from expensing 100% to 50%.

In 1H FY24, total R&D spend for $13.557m with $7.2m being expensed through the P&L. On a comparative basis, NPBT would have been around $13.3m compared to $10.7m in 1H FY23 had the R&D expense been expensed in the period. NPAT would be around flat only due to an increased tax expense in the current period.

Personally I thought this result was pretty good although I think it will be better to wait until the full year results for a better comparison given the seasonality of OCL's customers (public sector customers usually pay during the 2H).

In the shareholder letter from CEO Tony Walls, the outlook provided was strong with management targeting ARR growth of 15%. They also provided an update in regards to potential acquisitions with them having done some due diligence on a few potential candidates but ultimately deciding to focus on building the business organically.

Disc: Held IRL and on Strawman.

Forgot to do a Straw for the results which came out a few weeks ago and saw no one else had done one either.

Another solid HY result for OCL. Results from their presentation below:

NPAT came in slightly above what they guided for in January but this was excluding $1.4m which they had to pay as part of a NZCC Settlement so reported NPAT was around 8.6m which is only a 20% increase compared to PCP.

I am willing to maintain my valuation from January of $12.30 as I believe this is a high quality company that is still growing its top and bottom line at good rates however the current price is still a bit rich for me so am waiting patiently for a good entry point.

Disc: Not held