INTEGRATED RESEARCH LIMITED — AGM Information 2016

Nov 24, 2016

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Integrated Research Limited (IRI) FY2016 Annual General Meeting

25 November, 2016 ABN: 76 003 588 449

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6 of the
10 of the
Top 10
Top 10
Automotive
US banks
120+ of the Companies
Fortune 500
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Global Commerce Depends on IR
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Key Highlights

Financial Results

• Total Revenue up 20% to $84.5m

• • New Licence Sales up 11% to $45.7m

• • Net Profit After Tax up 12% to $16.0m

Recurring Revenue Growth

• Licence revenue base continues to build

• Europe Revenue up 58% to £8.4 million

• Asia Pacific Revenue up 16% to $10.3 million

• Strategic investment in European sales paying off

• Strengthening partnership arrangements

• Record forward pipeline

• Less non-recurring perpetual business

• Heartbeat Testing: new recurring revenue stream

• Revenue up 39% to $50.8 million

New Products Growing

• Contact Centre (CC)

• Call Recording Assurance (CRA)

• Skype for Business triple digit growth

• Four new emerging products fuel growth

• Skype for Business (SfB)

• Testing Solutions

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• Prognosis 10.5 released in December 2015

• Prognosis 11 released in June 2016

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Financial Results

		30 June 2016	30 June 2015	%
		A$000’s	A$000’s	change	95,000
	Licence fees	45,725	41,031	11%	75,000
	Maintenance fees	27,153	23,700	15%	55,000
	Testing solutions revenue	4,288	-	-	35,000
	Consulting fees	7,366	5,548	33%	15,000
	Total revenue	84,532	70,279	20%
	R&D expenses - net	13,582	12,431	9%
	Sales, consulting &
	marketing expenses	44,983	35,161	28%
	General &
	Administrative expenses Total expenses Profit before tax	5,962 64,527 21,386	5,220 52,812 19,266	14% 22% 11%
	Profit after tax	16,029	14,251	12%
	PAT margin	19%	20%

Revenue '000

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2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 AUD USD

• Revenue up 20%

• Strong performance from Consulting

• Continuing investment in development

• PAT up 12%

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Balance Sheet

June 2016 A$000’s June 2015 A$000’s Cash at bank 8,544 15,323 Current receivables 29,017 25,012 Non-current receivables 23,373 13,260 Intangible assets 21,972 17,020 Current deferred revenue 20,363 18,698 Deferred consideration for acquisition (current & non current) 2,036 - Net assets 41,046 36,132	0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0	Shareholder Returns 2016 2015 2014 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Dividends (cents)
	Basic	earnings per share 9.42¢ 8.41¢ 5.03¢
	Dividends per share 6.5¢ 7.5¢ 5.0¢
	Franking percentage 58% 35% 33%
	Return on equity 39% 39% 28%

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Product Line Performance

Unified Communications Revenue '000

Revenue by Product Line ($A)	June 2016 A$000’s	June 2015 A$000’s	% change
Unified Communications	50,778	36,485	39%
Infrastructure	20,812	23,177	(10%)
Payments	5,576	5,069	10%
Consulting Services	7,366	5,548	33%
Total Revenue	84,532	70,279	20%

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60,000
50,000
8 year
40,000 CAGR
24%
30,000
20,000
10,000
-
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
AUD USD
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• UC sales continue growth trajectory 24% Eight Year CAGR

• Infrastructure sales return to five year trend

• Consulting services continues strong performance Seventh year of growth

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Regional Performance

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Europe Revenue (£'000) Asia Pacific Revenue (A$'000) Americas Revenue (US$'000)
10,000 11,000 55000
10,000
8,000 45000
9,000
6,000 35000
8,000
4,000 25000
7,000
2,000 6,000 15000
‐ 5,000 5000
2013 2014 2015 2016 2013 2014 2015 2016 2013 2014 2015 2016
Europe (GBP) Asia Pacific (AUD) Americas (USD)
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Strong growth in Europe

Solid growth in APAC

UC growth offset by lower infrastructure renewal cycle (Normalising in FY2017)

	Revenue by Geographic region	June 2016 $000’s	June 2015 $000’s	% change
	(local currency)
	Asia Pacific ($A)	10,271	8,866	16%
	Americas ($US)	41,997	43,621	(4%)
	Europe (£GBP)	8,438	5,338	58%

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~~95%+ of revenue earned offshore~~

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Growth Strategy Update

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WHO WE ARE IR IR is the leading global provider of user experience and performance management solutions for Unified Communications, Payments and IT Infrastructure.

WHAT WE DO

Capabilities Prognosis provides best in class performance management across unified communications, contact centers and payments ecosystems - cloud, hybrid or on-premises.

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Value Proposition

Competitive Advantage

• Prognosis end-to-end Unified Communications, Payments and Infrastructure experience

• management software and testing services

• optimize operations of mission critical systems

• through insight into real time and historical events.

• Intelligent analytics establish patterns and root

• causes speeding troubleshooting and problem resolution.

• Evolving prediction capabilities, automation and self-healing help Prognosis optimize operations and prevent issues occurring at all.

• Prognosis is real-time, scalable, extensible & flexible

• Prognosis supports multiple platforms, vendors and applications

• IR has 1,200+ enterprise customers globally

• IR has 120+ of the Fortune 500 customers

• IR has a world-class R&D capability

WHY CUSTOMERS BUY

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WHY WE SUCCEED

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Market & Technology Leadership

The Company: IR

• Global, publicly listed , profitable and growing

• Over 1,200 enterprise customers worldwide

• 120+ Fortune 500 customers

• 5 of the 6 ‘Leaders’ in the Gartner Communications Outsourcing Magic Quadrant are IR Customers

• • Microsoft Gold Communications Partner The Solution: Pro nosis g

• UC & CC Market Leader 14+ million managed endpoints

• Only solution certified across current Microsoft, Cisco & Avaya platforms

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• Avaya’s only Sponsored & Recommended solution

• Only Microsoft Skype for Business Online certified solution

• 4 of the top 5 Payment transaction acquirers worldwide

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• 3 of the top 5 Payment card schemes worldwide

• 100s of millions of Payments transactions monitored daily

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Four Growth Drivers

Skype for Business Cisco FedRamp

4 New Emerging Products Recurring Revenue

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Growth Driver: Recurring Revenue Revenue Model by Segment

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UC & CC Payments Infrastructure
Term Recurring 
License Fees Term Recurring Term Recurring
Perpetual 
Maintenance Fees Recurring Recurring Recurring
Heartbeat : Recurring
Testing Solutions N/A N/A
StressTest : Non-Recurring
Consulting Non-Recurring
Increased
customer
Increase in Introduction of
preference for
term recurring Heartbeat
operational
transactions Testing Solutions
style
provides solid is new recurring
purchasing vs
revenue base revenue
large up front
capital spend
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Growth Driver: Recurring Revenue Compounding Recurring Revenue

Total Recurring Revenue A$

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70,000,000
65,000,000
60,000,000
55,000,000
50,000,000
45,000,000
40,000,000
35,000,000
30,000,000
25,000,000
20,000,000
FY 13 FY 14 FY 15 FY16
Recurring revenue
Increase in Recurring
term recurring 77% revenue base
transactions – of Revenue compounding
Average Term is now every 3 to 5
of three years Recurring years
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(1) Assumes 95% renewal rate & 3 year renewal terms 12

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Growth Driver: Emerging Products Contact Centre (CC)& Call Recording Assurance (CRA)

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CC Total Addressable Market (TAM):
2016 : US$434m
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CRA Total Addressable Market (TAM): 2016 : US$600m

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Key CC & CRA Customer Wins
CC & CRA
Version 1 CC & CRA
launched Version 2
& showing build in Call Recording Assurance (CRA):
a risk & compliance solution for industries with major
solid progress
penalties for non-compliance with call recording
traction regulation. CRA ensures that calls are/are not recorded as
required, and checks the recordings to ensure that they
are retrievable, audible and intelligible.
[A$'000] FY14 FY15 FY16
Licence Sales 167 3,168 3,857
Growth 1797% 22%
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Growth Driver: Skype for Business The fastest growing product in Microsoft history

Avaya & Cisco In-House Solutions

Skype for Business (and its competitors – Spark, Google and others) Any Device, Anytime, Anywhere

Technology is changing Next Generation (highly complex) Digital UC is replacing Simple UC Solutions Phone Calls Conferencing Voice mail

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More Convenience
More Functionality
Any Device Anywhere Video
Growing Instant Calendar &
Conferencing
Complexity Messaging Presence
Document Federated Desktop
Sharing (to other companies) Sharing
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Growth Driver: Skype for Business The fastest growing product in Microsoft history

Skype … success For Business requires a …the first & only Microsoft’s Performance $1.3b Market Microsoft = + + fastest growing Management recommended Opportunity by product… solution… solution.. 2019

Technology is changing

Next Generation (highly complex) Digital UC is replacing Simple UC Solutions

By 2020, 75% Performance of Companies Management will have solutions (like projects Prognosis) underway are a fundamental prerequisite to the only 30% will be success of any UC successful project – Gartner Research[1]

Microsoft

Skype

Operations Framework

(SOF)

released by Microsoft to ensure successful Skype implementations

IR Prognosis is the first & currently only solution

certified for Skype for Business Online (part of Office 365) and recommended by Microsoft as a solution in both the Essentials & Advanced categories of the SOF

Microsoft Skype for Business has doubled its market share in the last two years and is expected to double it again in the next two years, to become market leader

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1. Gartner “Hype Cycle for IT Infrastructure Availability and Performance Management, 2016”, by Gary Spivak and Sanjit Ganguli, July 30, 2016.

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Growth Driver: Skype for Business

…

The sole Winner of the…

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…and the…

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Gartner’s Cool Vendors reports acknowledge companies that have developed truly innovative solutions . Each company is chosen for its potential to challenge conventional standards and influence IT investment .

Why Cool: IR has developed a unique method to deliver visibility specifically into Skype for Business (SfB) voice calls, with a readiness to provide the same insight for Skype for Business Online (SfBO) .[1]

Aragon Research selects Hot Vendors that are unique technological leaders. Aragon Research recognized IR for its ability to manage highly complex UC environments across multiple vendors, including Microsoft, Cisco and Avaya , without the use of network probes. The report also acknowledged IR for its analytics, which enable organizations to quickly identify and resolve communications issues in real time.[2]

1.Gartner “Cool Vendors in Availability and Performance, 2016” by Cameron Haight, Vivek Bhalla, Colin Fletcher & Sanjit Ganguli, 19 April, 2016

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2.Aragon Research “Hot Vendors in Unified Communications and Collaboration, 2016” by Jim Lundy, 20 July, 2016

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Growth Driver: Cisco FedRAMP Prognosis, Cisco’s solution of choice for the US Federal Government

• IR is a Cisco Certified Partner

• Cisco built “Cisco Prime” a competing solution to Prognosis

Cisco’s biggest customers & Partners choose Prognosis

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Cisco will deliver a Federal Government cloud solution, with access to deployment of 7 million US Federal, State & Local Government users. (Cisco decision in June 2016)

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In June 2016 Cisco chose IR Prognosis for their single largest customer, the US Federal Government. Prognosis will be included with every user licence rolled out

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Project build phase is in progress, rollout begins in January 2017. Cisco now engaged in discussions with IR beyond FedRAMP

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New Customer Exam les p

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Four Growth Drivers

Recurring Revenue

4 New Emerging Products

Skype for Cisco Business FedRamp

• Contact Centre

• Transition to Contact Centre compounding 3 & 5 Year Licence • Call Recording Renewals Assurance

• Testing Solutions

• 77% of IR Revenue now recurring

• Skype For Business

• FY17 last year before •

• compounding Early Traction shows impacts high growth for each

• Cisco chooses Prognosis for 7m+ user target rollout for US Federal Government GovCloud

• Microsoft’s fastest growing product

• US Federal • Gartner: Success Government requires a GovCloud Performance Management

• • Opportunity beyond solution GovCloud into Cisco commercial •

• Prognosis the first & only Microsoft recommended solution

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Thank you. Questions?

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