OBJECTIVE CORPORATION LIMITED — Earnings Release 2016

Aug 25, 2016

Objective

ASX ANNOUNCEMENT

26 AUGUST 2016

OBJECTIVE CORPORATION LIMITED FINAL RESULTS FY2016

Objective Corporation (ASX:OCL) today announced its final results for financial year 2016 (FY2016).

• Revenue was slightly up on last year at $50.2 million (FY2015: $50.0 million) and net profit after tax (NPAT) increased by 18% to $5.3 million (FY2015: $4.5 million) for the year ended 30 June 2016.
• In addition, the Company contracted an unprecedented $20 million+ of forward revenue, which contributed less than $1 million to the FY2016 results; we expect to receive a significant contribution from these contracts during FY2017.
• Equally important was the Company's 14% lift in recurrent revenue to $31.0m (FY2015: $27.1 million) during the year and which represented 62% of total revenues.
• The company fully expensed its $11.3 million investment in R&D, representing 23% of revenues; and has no external borrowings.
• The cash balance has also significantly increased since 30 June 2016; As at the date of this announcement the cash balance is $22.3 million after paying for the acquisition of Onstream Systems in full.
• After a protracted period of presales engagement, the Keystone business has contracted the NAB's wealth management arm MLC. This is a significant milestone for this business and we anticipate adding more major wealth management groups to the Keystone platform during the coming months.
• Directors declared a fully franked dividend of 4.0 cents per share; and have also agreed to continue with the Share Buyback.

FINANCIAL SUMMARY

Results summary for full year ended	30 Jun 2016 ($m)	30 Jun 2015 ($m)	Change (%)
Revenue	50.2	50.0	0.3
EBITDA	6.3	5.4	16.7
Net Profit After Tax	5.3	4.5	17.7
Cash at Balance Date	12.5	20.2	(38.0)
Asia Pacific revenue	41.6	41.1	1.2
European revenue	8.0	8.2	(2.4)
R & D Expense	11.3	11.0	2.7
Earnings per share	5.8 cps	5.0 cps	16.0
Final Dividend (100% franked)	4.0 cps	3.75 cps	6.7

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ASX ANNOUNCEMENT | 26/08/16 FINANCIAL RESULTS FY2016

Mr Tony Walls, CEO, Objective Corporation said: "In spite of the 18% lift in NPAT and the forward contracts, it is fair to say we expect a far more robust FY2017. The 2016 financial year saw greater transition to a recurring revenue model and we were disappointed with our financial performance in the final quarter of the financial year.

"We have however made significant progress throughout the year. Our continuing transition to subscription licencing across all business lines, will ultimately make revenue and earnings more predictable and less skewed. This can be already seen in the 14% growth in recurrent revenue.

"Objective's solution portfolio, delivered through the cloud, is growing significantly and to provide our stakeholders with greater visibility of our underlying financial performance, we commenced reporting on the contribution of each business line with the first half results."

We continue this transparency for the full financial year below:

BUSINESS LINE SUMMARY

Results summary for the year ended	30 Jun 2016 ($m)
Objective ECM
Sales Revenue	43.4
Operating Profit	9.6
Objective Keystone
Sales Revenue	4.2
Operating Profit	(1.2)
Objective Connect
Sales Revenue	1.1
Operating Profit	(2.6)
Objective Trapeze (4 months contribution)
Sales Revenue	1.0
Operating Profit	0.2

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ASX ANNOUNCEMENT | 26/08/16 FINANCIAL RESULTS FY2016

COMMENTARY ON OPERATIONS BY SOLUTION LINE

ENTERPRISE CONNECT MANAGEMENT (ECM)

Highlights of the year for our Objective ECM solution were being awarded a new $10 million+ End User Compute (EUC) contract to be delivered over the next two financial years to the Department of Defence via partner IBM. Additionally the company earned what became a 15 year $8 million contract at the Gold Coast City Council, via partner Infor. Both of these new contracts are heavily weighted to future periods, with less than $1 million in revenue recognised in financial year 2016.

In partnership with Microsoft, the company made significant progress on the next generation of its ECM solution and it will be formally launched in October 2016. This next generation solution is characterised by a revolution in user experience, mobility and an ability to run our business process management solution on top of non-Objective document stores and information management applications.

Existing customers have been successfully trialling previews of this new release since the beginning of the year. This imminent major release has resulted in customers delaying incremental upgrades in the second half. This "roadmap effect" is a historical pattern repeated not only in the company's history, but throughout the industry.

Evidence of organisations transitioning to cloud computing models continued, with our Managed Services run rate increasing by 51% over the previous corresponding period. Managed Services is a subscription service where customers ask us to manage their environments for them as a precursor to ultimately moving to a full cloud service.

New ECM customers included: Queensland Parliamentary Services, Barangaroo Delivery Authority in NSW, Infrastructure NSW, Attorney General's Department South Australia, Independent Commissioner Against Corruption South Australia, City of West Torrens in South Australia, Kent County Council and Brighton & Hove City Council in the UK.

With known existing, unprecedented demand for the next generation release of our flagship product together with contracts already in hand, we expect material growth in our ECM revenue and profitability in the financial year ahead.

OBJECTIVE KEYSTONE

Objective Keystone had a year of further investment in the technology platform around the specific needs of the wealth management industry and the public sector.

The investment in presales effort has been significant and given that our Keystone solution is a business transformation opportunity for the wealth management market, we have had to re-calibrate our expectations of the time it takes to contract new customers. However, at an absolute minimum, we expect the Keystone business to be breakeven before the end of FY2017.

However we finished the year on a high, winning additional projects with the AMP and the Commonwealth Bank's wealth management arm, Colonial First State. As subscription licenced solutions, these wins will only contribute to FY2017 and beyond.

Since balance date, after a significant period of presales engagement, we have also contracted with the NAB's wealth management arm MLC. As our brand and reputation has grown markedly during the year, we anticipate adding more major wealth management groups to the Keystone platform during FY2017.

During the year we also welcomed many new Public Sector customers including, Manchester City Council, Liverpool (UK) City Council, Harrogate Borough Council, Wrexham County Borough Council, Purbeck District Council, Hambleton District Council, Borough of Broxbourne, London Borough of Havering, Tendring District Council.

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ASX ANNOUNCEMENT | 26/08/16 FINANCIAL RESULTS FY2016

OBJECTIVE CONNECT

Our Objective Connect solution had another outstanding year with subscription revenue again growing by more than 100% over the course of the year.

In addition to a strong take-up rate within Objective’s customer base, significantly, the majority of recent growth has been new-name customers and increasingly customers using Connect in partnership with Hewlett Packard Enterprise (HPE) Records Manager and Microsoft SharePoint.

Research and development efforts in this cloud-based solution are being focused on the requirements of enterprise class rollouts as we focus on the opportunity to become the de facto standard for cross-agency collaboration within the Public Sector market.

Objective Connect has become trusted as an enterprise-grade solution, we have appointed a number of go-to-market partners and we remain confident that it will again experience very high growth in the year ahead.

Notwithstanding these positive results and measures, to capitalise on the opportunity our investment will continue to exceed revenues in the near term and we see this as an important loss-leading process in order to enable this business to grow materially from its current revenue base.

OBJECTIVE TRAPEZE

Onstream Systems was acquired on the 1st March 2016 and has performed to expectations, contributing to earnings in this financial year. Since acquisition we have been focused on further developing the Trapeze capability to address the specific needs of the building plan collaboration and consenting processes of local government and statutory authorities around the world.

In partnership with HPE, Redman Solutions in Australia and Northgate Solutions in the UK we have added 20 new Trapeze customers in our first four months of ownership. These include Bournemouth Council, Preston City Council, Ebbsfleet District Council, Waikato District Council, Waimate District Council, Whakatane Council, Port Phillip City Council, Fremantle City Council, Manningham City Council, Kingston City Council and Moonee Valley City Council.

We are investing in our New Zealand operations and intend to expand our product development capability in Palmerston North during the course of the year.

We are making very significant progress with the development of a new generation of solutions. Their release will coincide with the transition to subscription based licencing of all Trapeze solutions later in the financial year. We anticipate growth in both revenue and earnings contribution during the year ahead.

OUTLOOK

Mr Tony Walls, CEO, Objective Corporation said: “We have made a significant amount of progress in FY2016, which can best be described as a transitional year. The building blocks are in place for a very successful FY2017 and the company is expected to deliver a meaningful step up during the first half of FY2017.

“Looking forward, we remain confident and committed to our strategy of growing all of our business lines. There are significant growth opportunities and we are confident in our competitive position in the marketplace.

“The Board and management of Objective Corporation would like to thank our loyal customers, staff and shareholders, for their commitment and valuable contribution to the success of the company,” said Mr Walls.

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ASX ANNOUNCEMENT | 26/08/16 FINANCIAL RESULTS FY2016

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ABOUT OBJECTIVE CORPORATION

Objective Corporation Limited (ASX:OCL) creates information and process governance solutions that are effortless to use and enable organisations to advance their own digital transformation.

Designed for regulated industries, these solutions turn the imperative of compliance, accountability and governance into an opportunity to streamline business processes and deliver the innovative services that customers expect.

With a heritage in Enterprise Content Management (ECM), Objective’s expended solutions extend governance across the spectrum of the modern workplace; underpinning information, processes and collaborative work-spaces.

FOR FURTHER INFORMATION, PLEASE CONTACT:

Objective Corporation
Ph: +61 2 9955 2288
Fax: +61 2 9955 5011
Email: enquiries@objective.com

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