RECKON LIMITED — Interim / Quarterly Report 2017

Aug 7, 2017

Results Presentation

For the six months ended 30 June 2017

To be read in conjunction with Appendix 4D and Accounts

The Reckon Story

Our mission is to bring millions of businesses and professionals closer together with our software to create a brave new, connected economy...

It's been quite a ride already: 800,000+ registered businesses around the world have used Reckon software, 70% of the top accounting firms in Australia, three of the Big Four, and many of the worlds leading legal firms.

We owe a huge amount to our loyal Partners, our gifted in-house team, and active customer base. It is shaping up to be an exciting future as we continue to unleash our innovations into the market.

Reckon is split into three core areas:

1. Business

Our next-generation online accounting software, Reckon One, continues to be progressively released into the AU, NZ and UK market. It has been getting positive feedback, and is showing month on month growth. In addition our connected services are expanding with Reckon Loans (powered by Prospa) gaining momentum.

2. Practice Management

Our Reckon APS software is used by 3 of the 4 big accounting firms in Australia to manage their professional accounting practices, and 70 of the top 100 firms. nQueue Billback is continuing to show strong growth particularly for it's new scan product and is used by some of the leading legal firms in the world. A testament to our ability to deliver world class software.

3. Document Management

This business has been de-merged and listed on AIM effective 4 August 2017.

In all Reckon has leading solutions across many businesses with significant opportunities. A strong foundation for an exciting future.

Clive Rabie

The Agenda

• 1. CEO update
• 1. Financial update
• 1. Outlook
• 1. Q & A

1. CEO update

Clive Rabie RECKON CEO

Half year 2017 focus

Reinvestment for future growth

• Second and final year
• Product development
• Sales and marketing

• Document management business de-merged

Results summary

$50.1 million $18.4 million $9.8 million

Revenue EBITDA Development Spend

3.3% organic growth* 2.5% organic growth* 16.6% cashflow improvement

*Note: at constant currency

6

Subscription revenue growth continues

Revenue	H1 FY17$ M	H1 FY16$ M	GROWTH
SUBSCRIPTION REVENUE	37.4	34.7	8%
UPFRONT AND SERVICE REVENUE	6.9	6.9	-
OTHER RECURRING REVENUE	2.3	3.0	-22%
CONTENT REVENUE	3.6	3.9	-10%
(at constant currency)ORGANIC GROWTH	50.1	48.5	3%
BUSINESS SOLD	-	0.8
CURRENCY	-	0.9
TOTAL REVENUE	50.1	50.2
CONTINUING BUSINESSESSUBSCRIPTION REVENUE	31.0	29.4	5%

Three core areas of our business

We have a strongly diversified business across multiple markets, with exciting synergies between them.

We provide accounting software to SME's around the world. Over 800,000+ businesses having used our software, and we have a partner network of over 6,000+.

Practice Management

Market leaders in practice management software for professionals. Over 70% of the leading 100 firms use our accounting software, and many of the worlds leading legal firms use our legal products.

Document Management

Business de-merged.

• Subscription revenue grew by 8%.
• Over 43k cloud users (+21% user growth).
• 18% cloud revenue growth over HY16.
• 33% of revenue is now cloud.
• Overall volume growth of 2%.
• Delivered 6 feature releases for Reckon One in HY17.
• Countries operational:

Online user growth

• Subscription growth of 6% in accountants group.
• 3k seats added across the APS suite (6% seat growth).
• Impressive and expanding customer list.
• Scan product in legal market generates more than 50% of new sales.
• Docs market moving to subscription.
• Countries operational:

Reckon APS seat growth

Document Management highlights

• Business de-merged on 4 August 2017.
• 5k new paying customers added in HY17.
• Virtual Cabinet and SmartVault online portals are currently used by 752k+ users to share documents.
• Countries operational:

Increase in paying customers

2. Financial update

Chris Hagglund RECKON CFO

Financial performance

RevenueAt constant currency:	H1 FY17$ M	H1 FY16$ M	GROWTH%
CONTINUING BUSINESS	42.3	42.0
DISCONTINUED	7.8	6.5
	50.1	48.5	3%
BUSINESS SOLD	-	0.8
CURRENCY	-	0.9
	50.1	50.2
EBITDAAt constant currency:
CONTINUING BUSINESS	16.9	17.4
DISCONTINUED	1.5	0.5
	18.4	17.9	3%
BUSINESS SOLD	-	0.3
CURRENCY	-	0.3
	18.4	18.5
NPAT
CONTINUING BUSINESS	5.5	6.5
DISCONTINUED	-	(0.3)
	5.5	6.2

Subscription business with strong online growth.

Revenue	H1 FY17	H1 FY16		Financial performance
at constant currency:	$ M	$ M	GROWTH	Revenue•
SUBSCRIPTION	14.7	13.5	8%	•Volume growth 2%.
PERPETUAL / SERVICEOTHER RECCURING	4.8	5.6	-14%
				•Subscription now 86% of available revenue.
TOTAL	19.5	19.1	2%	now cloud).
				EBITDA•
EBITDA				NZ and UK.
at constant currency:	9.9	10.0	-1%

• Revenue
  • Volume growth 2%.
  • ARPU impacted by faster growing Reckon One.
  • Subscription now 86% of available revenue.
  • 18% cloud revenue growth (33% of revenue is now cloud).
• EBITDA
  • Invested in Reckon One sales and marketing in AU, NZ and UK.

Strong subscription growth and an already impressive customer base.

Revenue	H1 FY17	H1 FY16		Financial highlights
	$ M	$ M	GROWTH	•Revenue
ACCOUNTANTS GROUP
SUBSCRIPTION	11.8	11.1	6%
UPFRONT AND SERVICE	0.7	1.3	-46%
LEGAL GROUP	6.8	6.4	6%
CONTENT	3.6	3.9	-10%	•EBITDA
SUBTOTALat constant currency	22.8	22.8	-	scan products.
CURRENCY	-	0.2
BUSINESS SOLD	-	0.8
TOTAL	22.8	23.8

• Revenue
  • Strong subscription revenue growth.
  • One-off upfront / service revenue in HY16.
  • Content market moving to subscription.
  • Subscription now 85% of available revenue.
• EBITDA
  • Investment in sales and marketing for legal scan products.

at constant currency:	9.6	9.9	-3%
-----------------------	-----	-----	-----

Customer growth continues to accelerate. Global market opportunity.

Revenue	H1 FY17	H1 FY16		Financial performance
	$ M	$ M	GROWTH	•Revenue
SUBSCRIPTION	6.4	5.4	19%	•Strong revenue growth in all regions.
UPFRONT AND SERVICE	1.5	1.2	21%	•Subscription now 81% of revenue.
SUBTOTALat constant currency	7.8	6.6	19%	•EBITDA improvement reflects:
CURRENCY	-	0.7		•Revenue growth.
TOTAL	7.8	7.3		•SmartVault turnaround.

• Revenue
  • Strong revenue growth in all regions.
  • Subscription now 81% of revenue.
• EBITDA improvement reflects:
  • Revenue growth.
  • SmartVault turnaround.

EBITDA

CONSTANT CURRENCY	1.5	0.5	187%
CURRENCY	-	0.3
TOTAL	1.5	0.8

Cashflow highlights Development spend

25

	H1 FY17	H1 FY16
	$ M	$ M
OPERATING CASHFLOW	16.3	15.4
DEVELOPMENT SPEND	9.8	11.8
RECKON LOANS	0.9	-
SMARTVAULT ACQUISITION	-	5.8
DIVIDENDS PAID	3.4	1.7

Cash spend on capex/ development is lower than depreciation and amortisation for the half year.

Development spend	$ M
CONTINUING BUSINESS	7.9
DISCONTINUED BUSINESS	1.9
	9.8

3. Outlook

Reckon One growth opportunity

Strong, rapidly growing customer feedback.

Customer feedback

Reckon One growth opportunity

We're only getting started

Practice Management strength

We continue to add to our already impressive customer base at the fastest pace in years. Leading accounting and legal firms across the world are using Reckon products.

Building a sustainable growing company by investing in product development, sales and marketing initiatives.

Growing momentum

Revenue and customer volumes continue to increase.

Proving success

We're executing on our strategy and showing we deliver.

Substantial subscription base

We're ready

We've made and are making the right investments for an exciting future. High quality revenue.

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