INTEGRATED RESEARCH LIMITED — Annual Report 2012

Aug 16, 2012

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Integrated Research Limited FY2012 Financial Results

August 2012 ABN: 76 003 558 449

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8 of the world’s
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www.ir.com

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WHO
WE ARE
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WHAT
WE DO
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Integrated Research

IR is the leading global provider of Prognosis for performance management solutions for Unified Communications, Payments and IT Infrastructure.

Capabilities

Prognosis provides availability and performance management, diagnostics and insight for mission critical systems

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WHY WE
SUCCEED
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Competitive Advantage

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

• Prognosis supports multiple platforms, vendors and applications

• IR has 1,000 enterprise customers globally

• IR has a world-class R&D capability

• IR is profitable, debt-free and growing

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WHY
CUSTOMERS
BUY
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Value Proposition

Prognosis increases technology performance, minimizes outages, reduces cost and ensures user satisfaction

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FY2012 Highlights

Financial Strength

UC Growth

• 156 new customers

• New Licence Sales $28.9m up 15%

• Total Revenue $48.6m up 9%

• Net Profit After Tax $9.0m up 21%

• No debt

• Over 5.7 million phones licensed and monitored to date

• Revenue up 26%

Payments Growth

Currency Impact

• Investment in payments yields a further 32% increase in

• revenue

In constant currency:

• New Licence Sales up 19%

Infrastructure

• Total Revenue up 13%

• Sound result: $20.5m revenue

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Financial Results

www.ir.com

Financial Results

Revenue $'000

	30 June	30 June		% change
	2012	2011	%	in
	A$000’s	A$000’s	change	constant currency
Licence fees	28,861	25,005	15%	19%
Maintenance fees	16,406	16,941	(3%)	2%
Consulting fees	3,341	2,646	26%	31%
Total revenue	48,608	44,592	9%	13%
R&D expenses - net	10,134	8,949	13%
Sales, consulting &	23,004	21,023	9%
marketing expenses
General &	4,278	4,137	3%
Administrative
expenses
PBT	11,568	9,694	19%
PAT	9,035	7,465	21%

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55,000
50,000
45,000
40,000
35,000
30,000
25,000
20,000
15,000
2004 2005 2006 2007 2008 2009 2010 2011 2012
AUD USD
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• Revenue growth – 4% stronger in constant currency

• Ongoing investment in R&D and Sales & Marketing

• Margin* increased from 17% to 19%

• PAT/Revenue

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Balance Sheet

	30 June	30 June
	2012	2011
	$000’s	$000’s
Cash at bank	12,038*	11,635
Current Receivables	20,725	14,058
Development	13,849	13,808
capitalization
Deferred Revenue	11,783	9,259
Net assets	29,233	27,357

Dividends

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6.0
5.0
c 4.0
e
n 3.0
t
2.0
s
1.0
0.0
2005 2006 2007 2008 2009 2010 2011 2012
Final Special Interim
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Shareholder Returns

	2012	2011	2010
Basic earnings per share	5.41¢	4.47¢	3.24¢
Dividends per share (interim
and final)	5.0¢	4.0¢	3.0¢
Franking percentage	58%	65%	19%
Return on equity	31%	27%	22%

• Cash at 31 July 12: $15.9M

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Review of Operations - Products

**Unified Communications Billings ***

	June	June		% change in
Revenue by	2012	2011	%	constant
Product Line ($A)	$000’s	$000’s	change	currency
Unified Communications (UC)	21,448	16,977	26%	31%
Infrastructure	20,558	22,504	(9%)	(5%)
Payments	3,261	2,465	32%	36%
Consulting Services	3,341	2,646	26%	31%
Total Revenue	48,608	44,592	9%	13%

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25,000
20,000
15,000
10,000
5,000
-
2007 2008 2009 2010 2011 2012
AUD USD
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• Strong growth in UC - now the Company’s highest revenue line

• High Payments growth, validating investment

• NonStop sales up 2%

*Excluding deferred revenue

• Consulting growth continues

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Review of Operations - Regions

Revenue by	30 June	30 June
Geographic region (In	2012	2011
local currency)	000’s	000’s	% change
Americas ($US)	33,137	26,489	25%
Europe (GBP)	4,687	4,416	6%
Asia Pacific ($A)	8,668	8,858	(2%)

• Americas up 25% due to strong UC sales

• Europe up 6% on improved Payments sales

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Revenue by region (‘000)
35,000
30,000
25,000
20,000
15,000
10,000
5,000
-
2007 2008 2009 2010 2011 2012
Europe (GBP) Americas (USD) Asia Pacific (AUD)
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• Growth opportunity in Asia Pacific

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Growth Strategy

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Growth Strategy

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Create, sell and support Prognosisbased products and services

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Deliver profitable growth from existing markets and customers Create new products to open new markets

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IR Revenue Growth Trend
2001 – 2012
$ US M’s
60.0
50.0
Total
40.0
30.0
Infrastructure
20.0
UC
10.0
Payments
Consulting
0.0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Revenue
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Growth Strategy – Unified Communications

1 UC shipments increasing – accelerated by Microsoft Lync

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Target
accelerated by Microsoft Global UC Endpoints (M's)
Market
Source: Gartner
Lync Share 25%
300
250
Expansion from Voice to 200 Current
Market
2
UC applications increases Share 5%
market 150
100
50
Growth in size, complexity
3
and criticality of networks
0
=
greater need for 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Performance Management Global UC Endpoints
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Growth Strategy – Payments

1 Increasing Payments transactions – fuelled by micropayments and developing economies Greater Payments 2 complexity – online, phone, cross-border …

Increasing governance and 3 regulation = Demand for Performance Management

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Global Payments Volumes
(M's Transactions)
Source: BCG
800,000
700,000 Middle East and North
Africa
600,000 Asia-Pacific
500,000
Central and Eastern Europe
400,000
Western Europe
300,000
200,000 Latin America
100,000
North America
-
2010 2020
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Growth Strategy – Global

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EUROPE
•
Increase global
share of revenue
• APAC
Expand presence in
•
Germany – focus on Maximize fastest
strong economy growing market
AMERICAS
•
• Open office in
Maximize largest
market Singapore
•
Develop Latin
America
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Growth Strategy – R&D

	30 June 2012 A$000’s	30 June 2011 A$000’s	% Change
Gross spending	10,215	8,924	14%
Development –	6,730	5,655	19%
Capitalised
Capitalised %	66%	63%
Amortised	6,649	5,680	17%
Net Expense	10,134	8,949	13%
% of revenue	21%	20%

• Maintain investment in R&D – 21% of revenue

• New product development – expand vendor and application support

• People – graduate program and Agile development increase R&D capability

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Growth Strategy - Risks

Risk and Challenges

• Currency exchange rate movements

• Global economic volatility

Proactive Management

• Hedging

• Diversification of product and services

• Geographic diversification

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Source: National Australia Bank
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• Continuous productivity improvements:

• Absorbs AUD increases

• Well positioned if AUD declines

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FY2012 Summary

Financial Strength

UC Growth

• 156 new customers

• New Licence Sales $28.9m up 15%

• Total Revenue $48.6m up 9%

• Net Profit After Tax $9.0m up 21%

• No debt

• Over 5.7 million phones licensed and monitored to date

• Revenue up 26%

Payments Growth

Currency Impact

• Investment in payments yields a further 32% increase in

• revenue

In constant currency:

• New Licence Sales up 19%

Infrastructure

• Total Revenue up 13%

• Sound result: $20.5m revenue

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Providing Business Insight™