Objective Corporation ASX:OCL has suffered a setback after the Defence Digital Group (DDG) declined to renew the Objective ECM Upgrade and Support Program agreement that has been in place across the Australian Department of Defence (DoD) for more than 25 years.

The decision means the DoD will no longer have access to Objective’s dedicated Upgrade and Support Program (USP) capabilities from 1 July.

Objective confirmed there would be no impact on FY26 revenue or earnings, but the non-renewal will reduce its annual recurring revenue balance.

The company had expected a renewal on anticipated terms to support FY26 annual recurring revenue (ARR) growth within its guided range of 10% to 14% on a constant currency basis.

Agreement Not Renewed

Objective and DDG had been negotiating the contract renewal since March.

The two companies are yet to reach an agreement on the terms of ongoing licence entitlements for Objective ECM users across the DoD, who number approximately 140,000 across all divisions.

The platform—which supports deployed forces under federal government-assigned national directives—is the largest public sector document and records management solution in Australia.

The expired USP program gave the DoD access to deep engineering support, remediations for critical and high-security vulnerabilities, and software upgrades.

Objective confirmed the DoD and any third parties engaged by the Department have no access to Objective source code for any purpose.

Revenue Growth Impact

Objective expects its closing FY26 ARR balance to be approximately in line with its FY25 closing ARR on a constant currency basis.

That outcome falls short of the growth profile the company would have expected if the DoD agreement had renewed on anticipated terms.

Objective’s position is that licensed users above 85,000 were linked to the term of the now-ended USP agreement.

The company will redirect resources previously tied to DoD-specific ECM support toward accelerating Objective Nexus innovation for broader defence and national security markets.

‘Deeply Disappointed’

Founder and chief executive officer Tony Walls said Objective was deeply disappointed by the short-notice decision after a partnership of more than a quarter-century.

“Objective is proud to have built a strong sovereign tech capability, exporting to many trusted nations, and we will continue to work constructively with DoD and other Defence and National Security customers to provide access to our capability.”

Mr Walls said Objective’s reinvestment of 30% of its annual software revenues into research and development showed its commitment to maintaining a base in Australia.

“Objective employs hundreds of people in Australia to develop, maintain and support our information governance solutions and we see it as critical to Australia's national interest that we maintain our significant program of sovereign innovation,” he said.

DoD Relationship Continues

DDG has confirmed it remains committed to the widescale use of Objective ECM across the DoD.

Objective confirmed the USP non-renewal does not restrict its ability to sell other solutions to the Department.

The company retains specialist knowledge of the mission-critical systems and remains engaged with the DoD across numerous relationships.

Objective has made around $150 million in sovereign R&D investment since the release of Objective ECM 11, including three generational releases of Objective Nexus as the replacement solution for ECM.

“We are proud of the contribution we have made to DoD over our long relationship, and we look forward to finding new ways to leverage our capabilities to build on this contribution in the future,” Mr Walls added.