INTEGRATED RESEARCH LIMITED — Annual Report 2017

Aug 16, 2017

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Integrated Research Limited (IRI) FY2017 Financial Results

August 2017 ABN: 76 003 588 449

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6 of the
10 of the
125+ of the Top 10
Top 10
Fortune 500 Automotive
US banks
Companies
6 of the
7 of the 10 Top 10
biggest Fin Services
Telcos Companies
Globally
Innovation
‘Top Value Vendor’ Award Excellence Award Winner
Global Commerce Depends on IR
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WHO WE ARE

IR

Capabilities

WHAT WE DO

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

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 endtoend Unified Communications,  Prognosis is real-time, scalable, Payments and Infrastructure experience extensible & flexible

• management software and testing services  Prognosis supports multiple platforms,

• optimize operations of mission critical systems

• through insight into real time and historical events. vendors and applications

• Intelligent analytics establish patterns and root  IR has 1,200+ enterprise customers

• causes speeding troubleshooting and problem globally resolution.  IR has 125+ of the Fortune 500 customers

• Evolving prediction capabilities, automation and  IR has a world-class R&D capability

• self healing help Prognosis optimize operations and prevent issues occurring at all.

WHY CUSTOMERS BUY

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

• 125+ Fortune 500 customers

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

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• Microsoft Gold Communications Partner

The Solution: Prognosis

• UC & CC Market Leader 16+ million managed endpoints

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

• 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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“UCC has become a crucial technology for success in digital transformation initiatives, yet many organizations face performance issues and consequently, lower-thanoptimal user adoption, because they aren’t leveraging the right management tools”

~ Robin Gareiss President, Nemertes Research

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Top Value Vendor

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Market Recognition

“..we wanted to formally recognize those companies that demonstrated leadership in innovation and unwavering commitment to helping our mutual customers attain new successes in their respective business operations”

“IR was named as an IDC Innovator for its competitive advantage derived from its unique intellectual property and 100% software-based probeless design… Enterprises and Service Providers can deploy IR Prognosis to bring real-time visibility, insight and control to complex , multivendor UC and contact centers”

~ Rich Costello Senior Analyst, IDC

~ Eric Rossman VP Developer Relations, Avaya

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Excellence Award Winner

Top Innovator

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Prognosis architecture supports future growth

The core platform enables quick product line expansion

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Communications Customer Risk & Compliance Data Analytics
Experience Experience
Management Management • Call Recording • Benchmarking
Assurance • Anomaly Detection
•• Pre-DeploymentVoice Quality •• Pre-DeploymentIVR •• Trading TurretsUC Fraud •• Intelligent Root Cause Analysis
• Video Quality • Voice Channel Business Intelligence
•
• Adoption • Omnichannel Multiple data sources
• Mobility • Outbound Dialler (Internet of Things)
• Work from home agent
Alerting
API Layer
Operational
Automation Testing Licensing and Billing
Reporting Collection
Layer
Core Platform (e.g. SSO, On Premises Agent, Security, etc.)
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Financial Results

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Key Highlights

Financial Results

• Licence Sales up 17% to $53.4m

• • Total Revenue up 8% to $91.2m

• • Net Profit After Tax up 16% to $18.5m

• All regions growing

• All product lines growing

• 61% improvement in cashflow

• No debt

Recurring Revenue Growth

• Revenue base continues to build

• Less non-recurring perpetual business

• Strong UC renewals pipeline

• Doubling of Microsoft revenue over FY16

• Balanced portfolio of Cisco, Avaya & Microsoft

• Avaya emergence from Ch 11 imminent

• Additional 39 certified Microsoft partners

Results in Constant Currency

•	Licence Sales	up	22%
•	Total Revenue	up	13%
•	Net Profit After Tax	up	28%

• Prognosis 11.1 and 11.2 released

• CRA – speech detection

• Microsoft UC assessor

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Financial Results • Revenue up 8% (13% Constant currency) • Strong performance from Payments and Infrastructure • Continuing investment in development 30 June 2017 A$000’s 30 June 2016 A$000’s % change Licence fees 53,441 45,725 17% Maintenance fees 26,871 27,153 (1%) Testing solutions revenue 4,073 4,288 (5%) Consulting fees 6,784 7,366 (8%) Total revenue 91,169 84,532 8% R&D expenses net 14,862 13,582 9% Sales, consulting & marketing expenses 43,605 44,983 (3%) General & Administrative expenses 6,086 5,962 2% Total expenses 64,553 64,527 0% Profit before tax 25,881 21,386 21% Profit after tax 18,520 16,029 16% 15,000 35,000 55,000 75,000 95,000 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Revenue'000 AUD USD

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•
PAT up 16%
(28% Constant currency)
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Key Profit Metrics • Improvements in key margins • Growth in revenue and profit on constant cost base 30Jun17 30Jun16 % change A$000’s A$000’s Licence fees 53,441 45,725 17% Maintenance fees 26,871 27,153 (1%) Testing Solution fees 4,073 4,288 (5%) Consulting fees 6,784 7,366 (8%) Total revenue 91,169 84,532 8% EBITDA 37,007 31,989 16% EBITDA margin 41% 38% EBIT 25,708 21,352 20% EBIT margin 28% 25% Profit after tax 18,520 16,029 16% PAT margin 20% 19% 15,000 35,000 55,000 75,000 95,000 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Revenue'000 AUD USD

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Recurring Revenue

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(A$)
90,000,000
80,000,000
70,000,000
60,000,000
50,000,000
40,000,000
30,000,000
20,000,000
10,000,000
-
FY 13 FY 14 FY 15 FY16 FY17
Total Recurring Revenue
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Increase in Recurring
84%
term recurring revenue base
of revenue
transactions – compounding
is now recurring
average term every 3 to 5
(up from 77%
of three years years
in FY16)
97% maintenance renewal rate
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UC Growth: All routes covered

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• Cisco’s biggest customers and partners continue to choose Prognosis

• FedRamp upside still to be realised

• Deepening partnership between IR and Cisco

• SfB revenues double, growth continues

• 39 new Microsoft partners recruited to IR Global Partner Program

• Prognosis 11.3 released with significant new support for SfB

• Success with large enterprise customers

• Avaya’s Plan Support Agreement to emerge from Chapter 11

• New CEO, networking business sold, UC & CC will be sole focus

• Anticipate a return to growth this year

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Balance Sheet

June 2017 A$000’s June 2016 A$000’s Cash at bank 14,113 8,544 Current receivables 35,998 29,017 Noncurrent receivables 23,299 23,373 Intangible assets 19,934 21,972 Current deferred revenue 20,077 20,363 Deferred consideration for acquisition (non current) 1,476 2,036 Net assets 48,520 41,046	0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0	Shareholder Returns 2017 2016 2015 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Dividends (cents)
	Basic earnings per share 10.86¢ 9.42¢ 8.41¢
	Dividends per share 6.5¢ 6.5¢ 7.5¢
	Franking percentage 85% 58% 35%
	Return on equity 38% 39% 39%

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Product Line Performance

Unified Communications Revenue '000

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60,000
50,000
8 year
CAGR
40,000
21%
30,000
20,000
10,000
‐
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
AUD USD
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Revenue by	June 2017	June 2016	%
Product Line ($A)	A$000’s	A$000’s	change
Unified Communications	51,132	50,778	1%
Infrastructure	24,449	20,812	17%
Payments	8,804	5,576	58%
Consulting Services	6,784	7,366	(8%)
Total Revenue	91,169	84,532	8%

• Microsoft sales doubled over FY17

• Avaya Ch 11 softens UC growth

• Strong Payments & Infrastructure sales

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Regional Performance

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Asia Pacific Revenue (A$'000) Americas Revenue (US$'000)
Europe Revenue (£'000)
14,000 60,000
10,000
12,000 50,000
8,000
10,000
40,000
6,000 8,000
30,000
6,000
4,000
4,000 20,000
2,000
2,000
10,000
‐ ‐
2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 ‐
2013 2014 2015 2016 2017
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		Revenue by Geographic region (local currency) June 2017 $000’s June 2016 $000’s % change Asia Pacific ($A) 11,596 10,271 13% Americas ($US) 48,207 41,997 15% Europe (£GBP) 8,752 8,438 4% ~~95%+ of revenue earned offshore~~

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Summary

Financial Results

• Licence Sales up 17% to $53.4m

• • Total Revenue up 8% to $91.2m

• • Net Profit After Tax up 16% to $18.5m

• All regions growing

• All product lines growing

• 61% improvement in cashflow

• No debt

Recurring Revenue Growth

• Revenue base continues to build

• Less nonrecurring perpetual business

• Strong UC renewals pipeline

• Doubling of Microsoft revenue over FY16

• Balanced portfolio of Cisco, Avaya & Microsoft

• Avaya emergence from Ch 11 imminent

Results in Constant Currency

•	Licence Sales	up	22%
•	Total Revenue	up	13%
•	Net Profit After Tax	up	28%

• Additional 39 certified Microsoft partners

• Prognosis 11.1 and 11.2 released

• CRA – speech detection

• Microsoft UC assessor

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Thank you. Questions?

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