RECKON LIMITED — Interim / Quarterly Report 2015

Aug 10, 2015

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Business Software for Accountants and Accounting Software for Businesses

Results presentation Half year ended 30 June 2015

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

Reckon group

• The Business Group

Develops and distributes accounting software solutions on either desktop, hosted or cloud platforms to small and medium sized businesses. It has over 300,000 active customers, supports 6,000 partners and has over 30,000 online users.

• The Accountant Group

The supplier of choice in practice management software to accounting practices, with 4 out of the top 5 firms and over 1,000 larger practices using the comprehensive APS suite, comprising of 77,000 seats across multiple modules. This division also services circa 7,000 practices using our Elite smaller practice management and tax solution or Reckon Docs company secretarial solution.

• The International Group

Is an industry leader in enabling business efficiencies for accountants, lawyers and business in general, offering a range of document management, portal, scan and cost recovery solutions to circa 2,000 clients globally.

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pg 1

SOFTWARE THAT CONNECTS

SMALL / MED BUSINESS

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RECKON ONE SAAS - ONE LEDGER

APS / SYNC DIRECT ONE PROCESS

VIRTUAL CABINET ONLINE COLLABORATION & DOCUMENTS

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ACCOUNTANT

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pg 2

2015 achievements

Continued growth

• Revenue +6%

• EBITDA +5% , whilst:

• Continuing investment in cloud infrastructure, sales capability and product development.

• Investing in the Reckon One launch in the UK and Virtual Cabinet into the USA.

• EPS +8%

• +11%

• Operating cashflow

Supported by continued volume growth, including annualised growth of:

• 10% in APS seats in the Accountant Group.

• 30% in online users in the Business Group.

• 20% in Virtual Cabinet seats in the International Group.

Further increased the subscription component of the group revenue to enhance long term sustainability

• 91% of Practice management revenue in the Accountants Group is subscription.

• 70% of core Business Group revenue is subscription.

• 77% of International group revenue is subscription.

Multiple product releases across the whole Reckon range

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pg 3

Future opportunities

Accountant Group

• Organic growth continues:

• New customers.

• Additional module cross sell.

• Docs products reach into the existing Accountant base.

• New and relatively untapped sectors - Sync Direct, Private Cloud, Document Management.

• Subscription pricing increases the addressable market.

Business Group

• Organic growth generated by the Hosted product.

• Significant pricing competitiveness and future pricing upside.

• Latest version of Reckon One just launched.

• Most affordable in the market (unique pricing model).

• Payroll and other new features launch is imminent.

• Online accounting market still largely untapped.

International

• Organic growth - increased market share in very large markets.

• Virtual Cabinet launched into the USA.

• Reckon One launch into the UK imminent through substantial existing accountant customer base. Market is significantly larger than Australia / New Zealand.

• Reckon One launch into USA / Canada next target.

pg 4

Performance highlights Half year ended 30 June 2015

REVENUE + 6% to $54.0m EBITDA + 5% to $20.2m NPAT - 1% to $9.3m EPS + 8% to 7.9 cents

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pg 5

Revenue growth Half year ended 30 June 2015

Subscription product revenue Other recurring revenue Upfront and service revenue	2015 Growth	2014
	31.4m +21% 4.8m -38% 6.5m -9% 11.3m +10% 54.0m +6%	25.9m
		7.8m
		7.2m
Content revenue		10.2m
		51.1m

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pg 6

Accountant group results

Half year ended 30 June 2015

REVENUE Subscription product revenue	2015 Growth	2014
	11.8m +8% 1.1m -45% 11.3m +10% 24.2m +6% 8.7m +3%	11.0m
Upfront and service revenue		2.0m
Content revenue EBITDA		9.8m
		22.8m
		8.4m

Revenue

• Move towards a subscription model is complete.

• 10% increase in practice management seats.

• Content business continues historical growth.

Overheads

• Cost base maintained despite additional volume.

• Cost increase relates to COGS on content business (ASIC fees).

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pg 7

Business group results

Half year ended 30 June 2015

REVENUE Subscription product revenue Other recurring revenue Upfront and service revenue EBITDA	2015 Growth	2014
	11.6m +42%	8.2m
	4.9m -38%	7.8m
	3.0m -16%	3.6m
	19.5m -1% 10.4m -3%
		19.6m
		10.7m

Revenue

• Move to subscription aggressively escalated.

• 71% of core Business group product revenue is subscription (prior half year 49%).

• Net volume growth maintained.

• Reckon One gaining traction.

• Over 30,000 online users (increased by 30%).

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pg 8

International group results

Half year ended 30 June 2015

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REVENUE 2015 Growth 2014
Subscription product revenue 8.0m +18% 6.8m
Upfront and service revenue 2.3m +54% 1.5m
Content revenue
- 0.4m
(moved to accountants group)
10.3m +19% 8.7m
EBITDA 3.6m +44% 2.5m
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Revenue

• Strong new customer acquisition in Virtual Cabinet and nQueue.

• Virtual Cabinet signed customers in USA.

• nQueue scan product gaining traction.

Overheads

• Investment in UK online sales capacity continues.

• Investment in Virtual Cabinet in USA.

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pg 9

EBITDA margin

Half year ended 30 June 2015

Business Group Accountants Group International Group Group	2015 2014	2015 2014
	53.5%	54.7%
	35.8%	36.6%
	35.5%	29.2%
	37.5%	37.7%

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pg 10

Cash flow highlights

Half year ended 30 June 2015

Net debt Operating cash fow Capitalised development cost expenditure (net of grant) Capitalised internal systems Dividends paid	2015 2014 $37.1m $20.2m $18.1m ($8.9)m ($7.2)m ($0.8)m - ($5.3)m ($6.0)m 2nd Half 2014 ($8.1)m	2015 2014 $37.1m $20.2m $18.1m ($8.9)m ($7.2)m ($0.8)m - ($5.3)m ($6.0)m 2nd Half 2014 ($8.1)m
	$20.2m	$18.1m
	($8.9)m	($7.2)m
	($0.8)m	-
	($5.3)m	($6.0)m

Cash flow post half year

• Acquisition of remaining 30% of Virtual Cabinet for $9m.

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pg 11

15

Group Trends

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Half Year
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2nd Half
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OPERATING REVENUE EBITDA EPS
$ MILLIONS $ MILLIONS CENTS
0 20 40 60 80 100 10 20 30 40 3 6 9 12
2009 43.3m 42.0m 2009 11.8m 13.3m 2009 4.6 5.3
2010 46.5m 43.6m 2010 15.3m 14.9m 2010 6.3 6.1
2011 46.7m 43.5m 2011 15.6m 15.7m 2011 6.1 6.0
2012 48.1m 48.5m 2012 17.1m 16.9m 2012 7.1 6.3
2013 49.5m 48.6m 2013 18.7m 16.6m 2013 7.9 6.0
2014 51.1m 49.7m 2014 19.3m 17.8m 2014 7.3 6.9
2015 54.0m 2015 20.2m 2015 7.9
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pg 12

Future opportunities

Accountant Group

• Organic growth continues:

• New customers.

• Additional module cross sell.

• Docs products reach into the existing Accountant base.

• New relatively untapped sectors - Sync Direct, Private Cloud, Document Management.

• Subscription pricing increases the addressable market.

Business Group

• Organic growth generated by the Hosted product.

• Significant pricing competitiveness and future pricing upside.

• Latest version of Reckon One just launched.

• Most affordable in the market (unique pricing model).

• Payroll and other new features launch is imminent.

• Online accounting market still largely untapped.

International

• Organic growth - increased market share in very large markets.

• Virtual Cabinet launched into the USA.

• Reckon One launch into the UK imminent through substantial existing accountant customer base.

Market is significantly larger than Australia / New Zealand.

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• Reckon One launched into USA / Canada next target.

pg 13

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Questions

thank you