Tony Walls will be speaking, among a host of other CEOs. Not something he commonly does.

https://event.asx.com.au/ceoconnectoctober2025?utm_source=event&utm_medium=splash&utm_campaign=7012e000000C4ukAAC&utm_uniqueid=22ASX0000001993&utm_date=oct-25

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.

Saw this on LinkedIn. Looks like a first win in the UK for their RegWorks product acquired from Itree several years ago.

We’re delighted to welcome the Gambling Commission to the Objective family!

The Commission has selected specialist SaaS regulatory platform, Objective RegWorks, to help digitise and futureproof its regulatory practices across Great Britain.

The partnership will:

- Deliver a flexible and integrated case management solution to support the end-to-end digital journey for gambling licence applicants.

- Modernise and automate processes to reduce regulatory burden and operational costs.

- Futureproof digital activities to support the Commission’s evolving needs

Full thoughts: https://www.growthgauge.com.au/p/objective-corporation-asx-ocl-fy24

ARR:

Revenue:

NPAT

I have written a new article about Objective Corp and buyback history.

https://www.growthgauge.com.au/p/is-objective-corporation-asxocl-a

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.

Buffet stated on buybacks "Blindly buying an overpriced stock is value-destructive, a fact lost on many promotional or ever-optimistic CEOs"

Objectives last years earnings were flat and they are only forecasting 15% growth. Currently on a PE of 48, would this statement apply to Objective I wonder. I wouldn't call them promotional, but can't help thinking that there is a good chance they are trying to support their share price, especially when taking into account Gary Fisher has sold over $40m worth of shares over the last two years.

They may be hoping that the market will re-rate them now that they have decided to capitalise 45-55% of R&D, but even using this model, they are still trading on a PE of 32. R&D is an ongoing expense to their business and I personally have a problem with the way software companies capitalise R&D. Charlie Munger once said EBITDA earnings are bullshit earnings.

I would have thought their money could be better used for M&A, since they have detailed that this is part of their ongoing strategy.

Objective/Altium comparison

I have been doing a comparison of Objective (OCL) to Altium (ALU) as they are both high quality software companies that have shown good growth over the last 10 years. Both business I have been following for some time. Whilst in very different industries they both have excellent recurring revenues and stable management.

Differences/Quality

• OCL is a software provider to government mainly, whilst ALU provides software to design circuit boards to industry.
• ALU has many more clients and is a lot more diversified in my opinion than OCL, who concentrates on govt, which is sticky but the loss of a large customer could be a huge headwind.
• Both have great management but OCL seems to be run by a CEO who has a lot of control, whereas ALU has an experienced diversified board. OCL almost runs as a private company, where ALU is engaged with the market and transparent.
• ALU has had a great year in FY23 growing at almost 20% where OCL's revenue has been pretty flat.
• OCL is forecasting 15% growth over the next few years and ALU's USD500m target indicates growth of around 25% out to 2026

Valuation

Assuming management of both companies can achieve their target growth, then by 2026 ALU will be on a PE of 24 assuming a NPAT margin of 29% and OCL will be on a PE of 22 assuming the same margin. I have used OCL's updated financial model to capitalise R&D and am assuming they are similar in this way. Share price of OCL is $11 and ALU $42 at this time.

Conclusion

Whilst both are very high quality businesses and should provide good returns if they can meet their targets, ALU to me is more attractive and better value at these levels. ALU is likely to grow more than 50% faster than OCL and is on a similar multiple three years out to OCL. ALU is a more diversified business with a more mature board and is more transparent with the market.

OCL just had their investor presentation. I put in a written question to them asking what their revenue exposure was to their biggest customer and their top 5 customers and they chose to ignore the question. This is after experiencing on a few occasions the company being unresponsive to my investor inquiries and to others as well. I feel this puts a big question over management integrity and transparency. Just an observation for what it is worth.

They are the only company I have ever experienced this with.

Objective release its FY23 result this morning. As guided to market the result will be muted compare to other years.

Revenue:

Customer Receipts

Operating Cash

No. Of Shares on issues

Objective CEO's recent letter has an interesting comment about the market.

Objective announced that they are expecting slowdown in revenue growth and margin compression for fy23 and i am not sure if this is going to be the story of FY23 for the most companies.. but it does look increasingly that way or this is probably because of Objective's strategic direction of offloading implementation to partners instead of inhouse for scale.?

Objective is very high quality company with very aligned founder in Tony. Although it is trading on very high multiple for single digit growth but again they are expensing 100% of their R&D.

Short term pain ahead for long term gain? May be one to watch out and dust off valuation for potential opportunity ?