R&D Spending Soars as Objective Faces Pressure to Sustain Profit Margins
Objective Corporation reported solid FY2025 results with 5% revenue growth and a 15% jump in Annualised Recurring Revenue, underpinned by significant R&D investment and a strong subscription model.
- 5% revenue growth to $123.5 million
- 15% increase in Annualised Recurring Revenue to $120.2 million
- Adjusted EBITDA rises 5% to $46.5 million with 39% margin
- R&D investment hits $31.2 million, 30% of software revenue
- 22 cents per share dividend declared, including a 13 cent final unfranked dividend
Strong Financial Momentum
Objective Corporation has delivered a steady performance in its FY2025 results, reporting a 5% increase in group revenue to $123.5 million. The company’s adjusted EBITDA also grew by 5% to $46.5 million, maintaining a robust margin of 39%. Net profit after tax rose by a more pronounced 13% to $35.4 million, signaling improved operational efficiency and profitability.
Recurring Revenue and Subscription Model Drive Growth
One of the standout metrics is the 15% growth in Annualised Recurring Revenue (ARR), which climbed to $120.2 million. This growth was fueled by strong performances across all business segments, Content Solutions ARR increased by 12%, Regulatory Solutions by 17%, and Planning & Building by an impressive 31%. Notably, 100% of Objective’s software revenue is now subscription-based, with recurring revenue accounting for 84% of total customer revenue, underscoring the company’s successful transition to a predictable, recurring revenue model.
Significant Investment in Innovation
Objective Corporation’s commitment to innovation is evident in its substantial R&D spend, which rose to $31.2 million in FY2025, representing 30% of software revenue. Of this, $15.7 million was capitalised, reflecting ongoing development of new and enhanced software solutions. This level of investment positions the company well to maintain its competitive edge in the public sector and regulated industries, where digital transformation and governance are critical.
Healthy Cash Position and Shareholder Returns
The company’s operating cash flow was $46.3 million, down from $55.8 million the previous year, yet it maintained a strong cash balance of $99.2 million, up 3% year-on-year. Importantly, Objective Corporation remains debt-free, providing flexibility for future investments or strategic opportunities. Shareholders will also welcome the declared total dividend of 22 cents per share, including a final unfranked dividend of 13 cents, reflecting confidence in the company’s cash generation and financial stability.
Outlook and Strategic Positioning
While the company did not provide explicit forward guidance, the combination of recurring revenue growth, strong R&D investment, and a clean balance sheet suggests a solid foundation for continued expansion. Objective’s focus on digital solutions for public sector organisations aligns with broader trends toward digital governance and remote work capabilities, potentially unlocking further growth opportunities.
Bottom Line?
Objective Corporation’s FY2025 results highlight a well-executed growth strategy anchored by recurring revenue and innovation, setting the stage for future market gains.
Questions in the middle?
- How will Objective sustain its high R&D investment while maintaining profitability?
- What new product innovations or market expansions are planned following this R&D spend?
- How might the unfranked dividend impact investor appetite and share price momentum?
