RECKON LIMITED — Interim / Quarterly Report 2013

Aug 12, 2013

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Results presentation Half year ended 30 June 2013

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

2013 achievements

1. Rebranded QuickBooks + Quicken with no adverse revenue impact

2. Developed and launched Reckon One - positive feedback received (including in the UK)

3. Extended the APS Private Cloud solution - positive feedback received

4. Introduced Virtual Cabinet to all markets - pipelines are building

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pg 1

PERFORMANCE HIGHLIGHTS

Half year ended 30 June 2013

REVENUE UP 3% to $49.5m EBITDA UP 10% to $18.7m NPAT UP 10% to $10.2m EPS UP 11% to 7.9 cents INTERIM DIVIDEND UP 7% to 4.0 cents

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0% 2% 4% 6% 8% 10% 12%
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pg 2

GROUP TRENDS by division

Half year ended 30 June 2013

	Operating	Operating	Operating	Operating	Operating	Operating	Revenue	Revenue	Revenue	($ MILLIONS)	($ MILLIONS)	($ MILLIONS)
Business		0 2013:		5 29.9m					10			15		20		25		30
Division		2012:		30.4m
Professional		2013:		12.1m
Division		2012:		12.3m
Process Automation		2013:		7.5m
Divisions		2012:		5.4m
						**Total 2013 **			49.5m
						**Total 2012 **			48.1m

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pg 3

GROUP TRENDS by division

Half year ended 30 June 2013

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EBITDA ($ MILLIONS)
-3 -2 -1 0 1 2 3 4 5 6 7 8 9 10 11 12
Business 2013: 10.8m
Division 2012: 11.0m
2013: 5.9m
Professional
Division 2012: 5.8m
2013 2.5m
Process Automation
Divisions 2012 2.3m
2013: (0.5m)
Corporate
2012 (2.0m)
Total 2013 18.7m
Total 2012 17.1m
2013 includes profit on sale of investment in Connect2Field of $1.3m
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*** 2013 includes profit on sale of investment in Connect2Field of $1.3m**

pg 4

reckon group

Major Revenue Movements

$ Millions

Growth

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2012 Operating Revenue 48.1
Australian Direct - SME Accounting Products 0.4 +3%
Australian Retail - SME Accounting Products (1.0) -51%
Docs 0.5 +6%
APS (Aus + NZ) 0.3 +2%
APS UK (business sold, replaced by royalty) (0.5)
Virtual Cabinet 2.4 -
nQueue Billback (0.3) -6%
Other (0.3)
2013 Operating Revenue 49.5 +3%
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pg 5

reckon group

EBITDA margin %

Accounts (including Docs) APS nQueue Billback Virtual Cabinet Group	2013 2012	2013 2012
	35.9%	36.1%
	49.0%	47.1%
	37.6%	42.4%
	25.3%	-
	37.8%	35.4%

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pg 6

business division results

Half year ended 30 June 2013

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2013 2012
$ MILLIONS $ MILLIONS
Revenue $29.9 $30.4
EBITDA $10.8 $11.0
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Accounts

• Direct Revenue grew by 3%

• QuickBooks + Quicken rebranded with no impact on revenue

• Hosted + Enterprise were again the star performers

• Move to subscription pricing continues to impact on $ growth

• Price increases conservative due to name change

• Retail continues to be a declining market, revenue down 51% (significantly impacted by de-stocking)

One

Launched, but no revenue as yet

Docs

Revenue growth of 6%

Overheads

• Proportionally higher Docs growth adversely impacts margin

• Marketing costs higher related to the Reckon One launch

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• Higher proportion of development costs capitalised

pg 7

PROFESSIONAL division results

Half year ended 30 June 2013

Revenue (Aust + NZ) Revenue (UK) EBITDA	2013 2012 $ MILLIONS $ MILLIONS	2013 2012 $ MILLIONS $ MILLIONS
	$11.8	$11.6
	$0.2	$0.7
	$5.9	$5.8

Australia and New Zealand

• Revenue growth 2%

• Subscription revenue growth 10% ($0.9m)

• Upfront revenue reduced by 20% ($0.7m)

• Focus remains on moving the business towards a subscription model

• Minimal revenue from APS Private Cloud offering to date

APS UK

• Royalty revenue of $0.2m

No material impact on EBITDA, but improves margin %

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pg 8

process automation divisions results

Half year ended 30 June 2013

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2013 2012
$ MILLIONS $ MILLIONS
Revenue $7.5 $5.4
EBITDA $2.5 $2.3
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Virtual Cabinet

• Revenue up marginally on the previous half year

• Revenue is expected to be 2nd half weighted

• Focus on moving business to a subscription model

• EBITDA improved by 21% on the previous half year

• Sales mix favourable (less third party products sold)

nQueue Billback

• Revenue down by 6%

• Subscription revenue +4%

• Upfront revenue -32%

• Investment in future Virtual Cabinet revenue potential (costs in half year; minimal revenue as yet)

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pg 9

revenue breakdown

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Accounts
Recurring Revenue
80% 7% 13%
Full Product Revenue
76% recurring revenue prior year
Service Revenue
Docs (all new product sales)
100%
0% recurring revenue prior year
APS
75% 9% 16%
72% recurring revenue prior year
nQueue Billback
81% 14% 5%
75% recurring revenue prior year
Virtual Cabinet
66% 13% 21%
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pg 10

reckon group

Cash Flow Highlights - half year ended 30 June 2013

Cash Flow Highlights - half year	ended 30 June 2013	ended 30 June 2013
Net debt Operating cash fow Capitalised development cost expenditure Fixed asset acquisitions Dividends paid	2013 2012 $ MILLIONS $ MILLIONS
	$9.2
	$13.4	$11.0
	($6.1)	($4.1)
	($0.8)	($0.3)
	($6.1)	($5.9)

Cash spend on development

Capitalised Expensed Existing products New products - VC Total velopment	2013 2012 $ MILLIONS $ MILLIONS
	$5.8	$4.1
	$0.2	$1.1
	$6.0	$5.2
	$0.3	-
	$6.3	$5.2

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pg 11

GROUP TRENDS

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OPERATING REVENUE EBITDA
$ MILLIONS $ MILLIONS
0 10 20 30 40 50 60 70 80 90 100 0 5 10 15 20 25 30 35
2006 22.9m 22.1m 2006 6.7m 6.3m
2007 28.0m 27.4m 2007 8.2m 8.3m
2008 31.2m 28.8m 2008 9.4m 9.6m
2009 43.3m 42.0m 2009 11.8m 13.3m
2010 46.5m 43.6m 2010 15.3m 14.9m
2011 46.7m 43.5m 2011 15.6m 15.7m
2012 48.1m 48.5m 2012 17.1m 16.9m
2013 18.7m
2013 49.5m
Half Year Half Year
2nd Half 2nd Half
pg 12
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GROUP TRENDS

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NPBT EPS
$ MILLIONS CENTS
0 2 4 6 8 10 12 14 16 18 20 22 24 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14
2006 5.8m 5.2m 2006 3.3 2.9
2007 6.7m 6.6m 2007 3.8 3.7
2008 7.5m 7.6m 2008 4.2 4.3
2009 9.4m 9.6m 2009 4.6 5.3
2010 11.4m 11.0m 2010 6.3 6.1
2011 11.0m 11.2m 2011 6.1 6.0
2012 12.5m 11.4m 2012 7.1 6.3
2012 13.2m 2012 7.9
Half Year Half Year
2nd Half 2nd Half
pg 13
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reckon’s UNIQUE Positioning

1. Customer choice

We are and will continue to be a supplier of Desktop, Hosted & Cloud offerings

2. A “Designed for you” development methodology

Flexibility and cost savings for clients

3. Relationship focused

Strong relationships with customers and partners is firmly integrated into the

Reckon culture

4. Domain expertise

Provides best practice technology across our range of products

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pg 14

Supplier of choice to progressive accountants and SMEs

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Relationships Designed by you
Desktop
Hosted
Engaged
Connections
Cloud
Reckon Personality
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pg 15

business division

Reckon is an industry leader in accounting software solutions suitable for small to enterprise sized business.

Reckon partners with over 6,000 accounting practices and has more than 600,000 registered businesses as customers in its Reckon Accounts business.

+100,000 repetitive customers buying a variety of solutions annually.

Reckon Docs services 3,000+ clients.

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pg 16

reckon one goes to beta

The modular approach adopted in this recently launched product allows businesses to customise and configure a solution to meet specific requirements and therefore only pay for the functionality required.

• Initial launch ~4,000 people at 19 venues in Australia

• End July moved to Beta

• Limited Roadshow to ~25 accounting practices in UK with equally good response

• UK localisation has commenced

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pg 17

business division

Opportunities:

Reckon One

• New market catering to micro clients seeking a modern web based solution - strong response to launch

• Opens up an opportunity to seek out new territories - positive feedback from UK presentations

• Go to market strategy leverages off our broad range of Accounts, Docs + Professional customers and partners.

Reckon Accounts + Reckon Docs

Continued organic growth particularly in Enterprise and Hosted solutions, as well as Docs content.

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pg 18

professional division

Reckon is an industry leader in practice management software to accounting practices of all sizes.

Customer base:

• 1,000+ customers use the APS suite

• 3,000+ customers use the Reckon Elite suite

Reckons APS offers a truly integrated solution and is now well entrenched as the supplier of choice to the top tier of accounting firms. Reckons APS focuses on building strong relationships with clients to truly understand their business needs. Only then can we work together to design, build and maintain effective solutions.

pg 19

professional division

Customer trends are towards:

• Hosting all of their IT requirements rather than having to manage their

• own infrastructure and internal IT teams.

• Moving to subscription pricing model providing certainty and consistency around cost of IT purchases

Opportunities

• Continue to roll out more modules to our existing customer base and gain further market share.

• Promote APS and Elite products as hosted solutions (market potential amongst existing clients is significant).

• Place more focus on the mid market using the cost effective hosted solution.

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pg 20

Process automation divisions

Reckon is an industry leader in solutions to enhance business efficiencies for accountants, lawyers and businesses in general across the globe.

• The combination of scan, document management and client portal solutions facilitates a paperless office and office virtualisation, and is well suited for mobile workforces.

• Expense Management of all disbursement types combined with print solutions allows for efficient cost management, recovery and value billing options.

• Reckon One delivers a mobile Business Management and Accounting system

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pg 21

Process automation divisions

Opportunities:

• Distribution of Virtual Cabinet into all markets serviced by Reckon companies

• Market share expansion into large markets such as the USA

• (Pipelines are building)

• Promote the latest scan and print solutions which are well suited for our customer base of predominately lawyers and accountants in all markets.

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pg 22

strategic focus

• Reckon Accounts + Reckon Docs

• Organic growth particularly in Hosted and Enterprise offerings as well as Docs content

• Lock in the benefit from the profit uplift in 2014 from no more royalties

• payable to Intuit

• Reckon One

• Release product into a new and fast growing market

• Offshore opportunities

• Extend available modules

• Professional

• Organic growth from new client wins and additional module rollout

• Major revenue opportunities form APS Private Cloud & Document Management

• Virtual Cabinet

Focus on meeting 2015 targets

• Compliment growth by adding sales from Reckon’s companies outside the UK

• nQueue Billback

• Refocused sales initiatives, following new product releases

• Document management opportunities in legal clients

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pg 23

Questions

thank you