RECKON LIMITED — Annual Report 2011

Feb 5, 2012

Results Presentation Year ended December 2011

To be read in conjunction with the Appendix 4E and the Accounts

==> picture [721 x 271] intentionally omitted <==

2

– Performance Highlights Year Ended December 2011

Revenue up 1% to $91.3m EBITDA ( exc re oca l l ti on )* up 10% o t $33 1. m NPAT (excl relocation) up 6% to $18.3m EPS (excl relocation) up 8% to 13.4cents

• Non-IFRS financial information

3

Reckon Group

		1st half	2nd half	Full year
Operating revenue		$46.7m	$43.5m	$90.2m
%	growth	-%	-%	-%
%	lit sp	52%	48%
EBITDA (excl relocation costs)*		$16.6m	$16.5m	$33.1m
%	growth*	8%	11%	10%
%	split*	50%	50%
EBITDA margin*		36%	38%	37%

• Non-IFRS financial information

Reckon Group – Major revenue movements

	Growth	$m	$m
2010 Operating revenue			90.1
Business Division – direct Australia	+6%	1.9
Business Division – Corporate Services	+5%	0.8
Professional Division - Australia	+5%	1.0
Foreign exchange impact		(1.2)
Business Division – retail & NZ upgrades	-33%	(2.9)
Other		0.5
2011 Operating revenue			90.2

5

	Margin trends 2011 2010 2009 2008 2007 EBITDA 33.1m 30.2m 25.1m 19.0m 16.5m Margin 37% 33% 29% 31% 29%*

• Excluding relocation costs -Non-IFRS financial information

Divisional results (excl FX impacts)

	Growth 2011 2010 Business Division operating revenue -% $55.8m $56.0m Business Division EBITDA -% $20.6m $20.7m EBITDA margin 37% 37% Professional Division operating revenue +5% $25.6m $24.5m Professional Division EBITDA +21% $12.3m $10.1m EBITDA margin 48% 41% nQueueBillback Div operating revenue +5% $8.8m $8.4m nQueueBillback Division EBITDA +3% $3.5m $3.4m EBITDA margin 40% 40% 7

Divisional results (reported)

	Growth 2011 2010 Business Division operating revenue -% $55.8m $56.1m Business Division EBITDA -1% $20.6m $20.7m Professional Division operating revenue +3% $25.6m $24.7m Professional Division EBITDA +20% $12.3m $10.2m nQueueBillback Div operating revenue -6% $8.8m $9.3m nQueueBillback Division EBITDA -8% $3.5m $3.8m 8

Cash Flow Hi hli hts g g

	2011	2010	2009
Cash at Dec 2011 / Dec 2010	$4.7m	$8.1m
Operating cash flow	$26.8m	$28.2m	$18.9m
Development cost expenditure	$7.4m	$7.6m
Amortisation of development costs & IP	$7.0m	$6.4m
Investment in Melbourne IT1	$7.3m	-
Fixed asset acquisitions2	$1.8m	$1.4m
Share buyback	$1.4m	-
Treasury shares - long term incentive plan3	$1.4m	$0.4m
Dividends paid4	$10.6m	$9.9m

1. Interim dividend only included the 2011 results

2. Additional spend is due to North Sydney fit out & data centre move

3. Additional spend is due to the very long term incentive plan announced at the AGM (P&L impact is over 7 to 9 years)

4. 2011 final dividend maintained at 4.5cents (90% franked)

9

Revenue Breakdown

==> picture [721 x 388] intentionally omitted <==

----- Start of picture text -----

100%
90%
80%
54%
70% 60%
71% 70% Recurring
60% Revenue
50%
Full Product
(incl Corp
40%
Services)
30% Service
36%
11% 28% Revenue
20%
23%
10% 18%
10% 12%
7%
0%
Business Professional nQBB Group
Prior year
52% 71% 66% 59%
recurring
revenue
10
----- End of picture text -----

Group trends

Operating revenue

EBITDA

==> picture [642 x 292] intentionally omitted <==

----- Start of picture text -----

100 35
90
30
80
70 43.6 43.5 25 16.5
42 0.
60 14.9
20
50 13.3
28.8
27.4
40 15
9.6
22.1
30 8.3
` 43.3 46.5 46.7 10 6.3
20 16.6
15.3
31.2
10 22.9 28.0 5 9.4 11.8
8.2
6.7
0
0
2006 2007 2008 2009 2010 2011 2006 2007 2008 2009 2010 2011
Half year Full year
Half year Full year
$m
----- End of picture text -----

Note: 2011 excl relocation costs (Non-IFRS financial information)

11

Group trends

==> picture [654 x 331] intentionally omitted <==

----- Start of picture text -----

NPBT EPS
30
16
25 14
12
20
12.3 10 6 6.
11.0 6.1
15
9.6 8
5.3
7.6 6 4.3
10 6.6 3.7
5.2 2.9
4
11.4 12.3 6.3 6.8
5 9.4
5.8 6.7 7.5 2 3.3 3.8 4.2 4.6
0 0
2006 2007 2008 2009 2010 2011 2006 2007 2008 2009 2010 2011
Half year Full year
Half year Full year
Note: 2011 excl relocation costs (Non-IFRS financial information)
$m
----- End of picture text -----

12

Business Division

Summary	Summary
	Revenue $55.8m (flat on prior year) Represents 62% of Group Revenue EBITDA $20.6m (flat on prior year)
Product suite	Business software suitable for SME’s through to larger enterprises, personal financial software, company secretarial services & practice management software for smaller accounting firms
Revenue by Market	• Australia 98% • New Zealand 2%
Revenue by Channel	• Direct 90% • Retail 10%
Revenue by Product Mix	• QuickBooks/Quicken 55% • Corporate Services 27% • Elite, Memberships, POS, other 18%

13

Business Division

Performance	Performance
Divisional revenue	• Strong unit growth with an ongoing emphasis on expanding the subscription customer base
Direct QuickBooks and Quicken grew by 7%	• Volume increase 10% Online & enterprise volume increases were most significant • Price increase offset by product mix -3% Focus is on subscription products (recurring revenue) at the expense of higher upfront revenue
Retail & NZ upgrades reduced by 33%	• Market share growth, however weaker sell through in channel and de- stocking impact • New Zealand revenue down, impacted by no significant tax changes in 2011
Corporate Services grew by 5%	• Company formations grew by 8% (market grew by 5%) • Superannuation and trust services revenue reduced due to investment uncertainty/weaker self managed superannuation market
Other products grew by 4%	• Professional partner membership revenue grew by 7% • Elite grew by 8%

14

Business Division

Opportunities

• Expectations remain for continued strong and steady growth to be maintained in our core products, driven in particular by:

• High growth rates in the enterprise space

• High growth rates in online users

• Continued growth in traditional desktop offerings

• Annual price increases

• Offsetting reduced average sell price as we move more towards a subscription model

• Reckon developed online CashBook has been launched targeting entry level users

• Expanded online offerings/features, such as

• GovConnect

• Exchange Hosting

• Web Hosting

• Domain names

• Focus on harnessing the APS and professional partner relationships to drive recommendations and therefore continued market share growth in:

• Core business software products and services

• Company secretarial/corporate services products

• Improved economic conditions – Retail and New Zealand markets

15

Professional Division

Summary	Summary
	Revenue growth of 3% to $25.6m (up by 5% in base currency) Represents 28% of Group Revenue EBITDA growth of 20% to $12.3m (up by 21% in base currency)
Product Suite	Extensive suite of enterprise level practice software for accounting firms Cost recovery software, print solutions, expense management solutions and other l t d d l t t d ifi ll t th l l f i i A t li l re a e mo u es arge e spec ca y o e ega pro ess on n us ra a on y
Revenue by Market	• Australia 77% • New Zealand 16% • United Kingdom 7%
Revenue by Product Mix	• Maintenance 71% • Consulting 18% • Software 11%

16

	Performance Divisional revenue • 29% of revenue derived from new customer sales/additional module rollout, despite difficult market conditions Australia • Australia has had a strong result with the following features: • New revenue (software & consulting) up 3% • Maintenance revenue up 6% • EBITDA up 24% Professional Division New Zealand • New Zealand has had a stronger second half, resulting in full year: • Revenue up by 3% in base currency • Revenue impacted by adverse FX rates (-2% impact) United Kingdom • United Kingdom has had a stronger second half, resulting in full year: • Revenue being flat in base currency • Revenue impacted by adverse FX rates (-8% impact)	Performance Divisional revenue • 29% of revenue derived from new customer sales/additional module rollout, despite difficult market conditions Australia • Australia has had a strong result with the following features: • New revenue (software & consulting) up 3% • Maintenance revenue up 6% • EBITDA up 24% Professional Division New Zealand • New Zealand has had a stronger second half, resulting in full year: • Revenue up by 3% in base currency • Revenue impacted by adverse FX rates (-2% impact) United Kingdom • United Kingdom has had a stronger second half, resulting in full year: • Revenue being flat in base currency • Revenue impacted by adverse FX rates (-8% impact)
	Performance
	Divisional revenue	• 29% of revenue derived from new customer sales/additional module rollout, despite difficult market conditions
	Australia	• Australia has had a strong result with the following features: • New revenue (software & consulting) up 3% • Maintenance revenue up 6% • EBITDA up 24%
	New Zealand	• New Zealand has had a stronger second half, resulting in full year: • Revenue up by 3% in base currency • Revenue impacted by adverse FX rates (-2% impact)
	United Kingdom	• United Kingdom has had a stronger second half, resulting in full year: • Revenue being flat in base currency • Revenue impacted by adverse FX rates (-8% impact)

17

Professional Division

Opportunities	Opportunities
Australia	• Strong pipeline going into 2012 • New products gaining traction – average client only has 3 to 4 modules out of a possible 14 • Lite product expands the addressable market • Company secretarial solution launched
New Zealand	• Newproductsgainingtraction • Market share growth opportunities • Lite product expands the addressable market
United Kingdom	• New products gaining traction • Greater focus on existing clients and their growth
All Countries	• Continued maintenance revenue growth • Mobility offerings for iPad and iPhone • Private cloud solution launched • Automated time monitoring solution that enables more effective time capture

18

nQueueBillback Division

Summary	Summary
	Revenue down by 6% to $8.8m (up by 5% in base currency) Represents 9% of Group Revenue EBITDA down by 8% to $3.5m (up 3% in base currency) Reckon holds a 74% shareholding in the USA and 75% in the UK
Product suite	Cost recovery software, print solutions, enhanced scan solutions, expense management solutions and other related modules historically targeted at the legal profession Expense management solutions and print management applications targeted at corporations to drive cost reductions within these organisations
Revenue by Market	• USA 76% • UK 24%
Positioning	Historically targeted at the legal profession, and as such is strategically placed in the top 200 law firms in the USA with a 35% market share, along with a significant share of the top tier UK based firms

19

nQueueBillback Division

Performance	Performance
Divisional revenue	• 30% of revenue derived from new customer sales/additional module rollout, despite difficult market conditions (i.e. market share growth)
United States of America	• Revenue up by 3% in base currency • Revenue impacted by adverse FX rates (-11% impact) • Continued migration from a hardware solution to a software solution (adverse revenue impact, but improves margin %) • Solid history of client retention continues • Pipeline is stronger • Legal market generally showing interest but slow to place orders • First commercial customers signed
United Kingdom	• Weak first half, but recovered in second half • Revenue up 13% in base currency • Revenue impacted by adverse FX rates (-8% impact) • Continued migration from a hardware solution to a software solution (adverse revenue impact, but improves margin %) • Transitioned to new management team with deep legal industry experience, and re-positioned business for growth

20

nQueueBillback Division

	Opportunities	Opportunities
	United States of America	• Continued gain in market share • Prospects in the commercial and government sectors are building (including through reseller channel) • Expanded geographies/sales team • Mid sized legal market as yet untapped • Cloud based solutions for print capture expected to be available in 2nd half of 2012 • Pipeline remains strong
	United Kingdom	• Much stronger pipeline than we have enjoyed in the past • Product and service offering well respected in the market – nominated for several awards • Expanded geographies (previously London centric) e.g. new clients signed in the broader UK market and South Africa. Asia also being explored. • Improved economic conditions

21

	Group Online Strategy Personal & Micro Businesses • A new online offering has just been launched (CashBook), targeted at • Micro Businesses • Personal users • Features Simplicity, automatic feed of bank transactions and GovConnect (enables integrated, efficient and accurate lodgement of tax and other government forms) • Online and offline capability Business products • Hosted QuickBooks has been in the market for just 2 years • Fully featured accounting software • No learning process required when moving from our desktop products • Includes GovConnect - enables integrated, efficient and accurate lodgement of tax and other government forms • Coming Soon – Automatic feed of bank transactions • Online offerings, such as • Exchange Hosting • Web Hosting • Domain names Practice Management for Accountants • Soon to be released APS Enterprise Hosted Service • No additional training required when moving from our on-premise solution • Reduces client overhead and complexity of managing IT in house • Many current APS modules are well suited for conversion to online. Applications which are/will shortly be available are: • Business intelligence modules • Time capture • Mobility solutions	Group Online Strategy Personal & Micro Businesses • A new online offering has just been launched (CashBook), targeted at • Micro Businesses • Personal users • Features Simplicity, automatic feed of bank transactions and GovConnect (enables integrated, efficient and accurate lodgement of tax and other government forms) • Online and offline capability Business products • Hosted QuickBooks has been in the market for just 2 years • Fully featured accounting software • No learning process required when moving from our desktop products • Includes GovConnect - enables integrated, efficient and accurate lodgement of tax and other government forms • Coming Soon – Automatic feed of bank transactions • Online offerings, such as • Exchange Hosting • Web Hosting • Domain names Practice Management for Accountants • Soon to be released APS Enterprise Hosted Service • No additional training required when moving from our on-premise solution • Reduces client overhead and complexity of managing IT in house • Many current APS modules are well suited for conversion to online. Applications which are/will shortly be available are: • Business intelligence modules • Time capture • Mobility solutions
	Group Online Strategy
	Personal & Micro Businesses	• A new online offering has just been launched (CashBook), targeted at • Micro Businesses • Personal users • Features Simplicity, automatic feed of bank transactions and GovConnect (enables integrated, efficient and accurate lodgement of tax and other government forms) • Online and offline capability
	Business products	• Hosted QuickBooks has been in the market for just 2 years • Fully featured accounting software • No learning process required when moving from our desktop products • Includes GovConnect - enables integrated, efficient and accurate lodgement of tax and other government forms • Coming Soon – Automatic feed of bank transactions • Online offerings, such as • Exchange Hosting • Web Hosting • Domain names
	Practice Management for Accountants	• Soon to be released APS Enterprise Hosted Service • No additional training required when moving from our on-premise solution • Reduces client overhead and complexity of managing IT in house • Many current APS modules are well suited for conversion to online. Applications which are/will shortly be available are: • Business intelligence modules • Time capture • Mobility solutions

22

Strategic focus

• Organic growth • Opportunities continue to exist in:

• remains the key focus • Online products and services across all divisions • Market share growth is expected to continue in all divisions

• for the group • Market expansion opportunities are significant • Rollout of our vast suite of products to existing customers

• • Reckons’ financial strength and proven track record gives our customers and partners confidence that we can continue to lead the market in delivering innovative and high quality products and solutions now and into the future.

23

Questions

Thank you

24