Integrated Research Limited (ASX:IRI) FY2024 Full Year Financial Results 20 August 2024 John Ruthven, CEO Christian Shaw, CFO We are IR A leading global software company providing performance and experience management solutions for the world’s mission critical ecosystems. Real-time analytics, fast troubleshooting, dynamic alerts, comprehensive reporting and customizable dashboards delivers a seamless user experience across … collaborate highly complex and expanding communications environments transact increasingly complex and expanding global payments networks infrastructure business critical network infrastructure 2 Global Blue Chip Customer Base Long-term, high value relationships based on mission critical solutions Tech | Telco BFSI Health | Gov | Edu Retail |Industrial | Other 5/10 top telcos 6/10 top USA banks 5/25 Fortune 500 top companies 5/20 largest Australian companies (market cap) 3 CEO Key Messages Building a stronger IR with an expanded product set to meet market demand • Strong revenue growth, profit result with robust cash generation • Americas delivered strong growth with Collaborate new wins partially off-setting headwinds • Cost base being tightly managed, operating efficiencies continue • Strategic shift to product and technology led growth underway • Timing is right for new leadership and CEO transition • FY25 strategy will focus on initiatives to optimise performance of existing business and redirect resources and capital to new growth opportunities 4 Full-Year Performance Review: Statutory (A$M) Improving market dynamics and prudent cost management drives profits 69.8 83.3 REVENUE 19% Jun-23 76.3 72.4 Jun-23 Jun-24 13.8 13.0 Jun-23 Jun-24 CASH RECEIPTS FROM CUSTOMERS Jun-24 5% 24.6 12.1 103% EBITDA Jun-23 NET OPERATING CASHFLOW Jun-24 6% 31.9 27.1 18.6 NPAT * 963% 2.6 Jun-23 Jun-24 *Jun-23 NPAT excludes $31.8M impairment of goodwill and intangible assets NET CASH Jun-23 Jun-24 72% 5 Full-Year Performance Review: Proforma (A$M) Strong year for renewals 68.5 83.9 TOTAL CONTRACT VALUE (TCV) 67.5 22% Jun-23 Jun-24 75.6 74.8 1% PROFORMA REVENUE Jun-23 23% ANNUAL RECURRING REVENUE 1 PROFORMA EBITDA Jun-24 1% Jun-23 Jun-24 17.5 16.7 Jun-23 Jun-24 101% 97% 5% 22% 1ppt EBITDA MARGIN Jun-23 66.6 Jun-24 CASH CONVERSION RATE 2 4ppt Jun-23 Note: Proforma revenue is a non-statutory alternate view of term licence and maintenance revenue (unaudited); refer to appendix for calculations 1. ARR (Annual Recurring Revenue) means monthly recurring revenue as of 30th of June multiplied by 12 2. Cash conversion rate equals cash receipts divided by proforma revenue Jun-24 6 Executive Summary FY24 Report Priority Status Notes 1. Returning the Americas and Europe to growth on plan Americas TCV up ~50% and Europe TCV up ~30%; underwritten by strong renewals and new business in the Americas 2. Increasing new product adoption and traction behind plan Percent of TCV from new products trailing plan 3. High customer retention and ongoing managed migration to cloud mixed Net revenue retention 96% – strong in Transact & challenged in Collaborate; enterprise customers adopting hybrid 4. Launch of generation II products – building on the new SaaS products launched in FY22 reset Re-focused to customer-driven solutions & near-term opportunities; Cisco Webex, NonStop Business Insight, Genesys CC on-plan Balance sheet remains debt free, and cash balance at 30-JUN $31.9M 5. Retain a strong balance sheet 7 Collaborate Customer Wins Successfully targeting larger clients with complex ecosystems Federal Government Agency (USA) State Government Agency (USA) A leading independent technology and services provider (USA) 1-year term 5-year term 3-year term New customer New customer New customer 135,000 users 30,500 users 5,000 users (Service Provider) Solution: Collaborate suite, Path Insight, SBC, Audio Codes and Dashboard Mailer Solution: Full suite of IR's Collaborate products, Cisco, CUCM, UCCX, Path Insight, SBC, Remote WUL, vCenter and Remote Insight. Solution: Collaborate suite SP Edition Server, Advanced Reporting, Path Insight, SBC/SIP Trunk Management, Contact Center and IVR. Customer challenge: PCA set not being fully utilized and difficult to use. Technology refresh, upgrade to IR Collaborate. Persistent issues with ease-of-use reporting & looking into CDR records, we can do out of the box. Customer challenge: Insight into UC/CC platforms & remote workers. Identify root cause & stop from repeating. Limited resources. Customer challenge: Brought their monitoring in-house from an MSP, and now provide monitoring and administration segment for their UC clients. IR solution: IR's Collaborate product suite provides end-to-end visibility, reporting & alerting, while monitoring of classified and non-classified environments. IR solution: IR's Collaborate product suite improves customer and staff satisfaction and productivity, reduces risks, exposure and downtime, while proactively improving trouble-shooting efficiencies IR solution: The company recently established a new managed services business, IR earned their business with a strong product & commercial offering 8 Transact Customer Wins Ensuring reliability in today’s complex payments environments Commercial Public Bank Commercial Public Bank Chile India 1-year term 18-month term New customer New customer Solution: Transact and Infrastructure Solution: Transact and Infrastructure Customer challenge: Real-time visibility and monitoring of the card infrastructure, applications, and transaction data to provide insights in their system, operations, financial performance, and customer payments experience and to have real-time identification and management of faults on unattended terminals connected to BASE24. Improving resolution of ATM difficulties. Customer challenge: Reliance on some of the very basic native tools and required the teams to manually execute. Basic transaction monitoring and alerting and lack of ML capabilities. Lack of monitoring 3rd party tools like XPNET, Oracle Golden Gate, SSL/TLS expiry for the interfaces, and file synchronization between their systems. IR solution: Real-time visibility and monitoring enabling insights into system performance, operational patterns, financial performance, and customer payment experiences. Analytics capabilities to derive insights from the monitored data, aiding in decision-making and optimization of business operations. Facilitating real-time identification and management of faults on unattended terminals ensures smooth operations. Improving the timely resolution of ATM difficulties, ensuring consumers can easily access their funds, thus enhancing customer satisfaction and trust. IR solution: Our POC showcased our solution around the ease of use, monitoring, and the level of information we can capture. The requirements/ challenges they had were easily achievable using our solution. We deployed the complete solution in their UAT systems, and the customer is very happy with the solution and in our commitment to address their challenges. 9 Financials Revenue Analysis: Statutory, Proforma and ARR ARR is stabilising 120.0 • Decline in proforma revenue was mainly driven by Collaborate churn partially offset by Transact and Infrastructure growth due to capacity increases. • ARR has been generally flat over the past 4 years with new wins offset by net churn. • Statutory revenue fluctuation largely reflects the renewal timing. • Proforma revenue includes recurring and non-recurring revenue. 100.0 80.0 60.0 40.0 20.0 - 2019 2020 Statutory 1. 2021 2022 Proforma 1 ** 2023 2 2024 ARR ARR (Annual Recurring Revenue) means monthly recurring revenue as of 30th of June multiplied by 12 11 Geographic and Product Revenue Analysis Transact and Infrastructure gains offsetting Collaborate churn Geographic Asia Pacific - A$M Europe - £M 20 20 15 15 10 10 5 5 0 0 2019 2020 2021 Statutory 2022 Proforma 2023 2024 Americas - US$M 60 50 40 30 20 10 2019 ARR 2020 2021 Statutory 2022 Proforma 2023 2024 0 2019 ARR 2020 2021 Statutory 2022 Proforma 2023 2024 ARR Product 70 60 50 40 30 20 10 0 2019 2020 2021 Statutory 2022 Proforma Revenue by product excludes services. Infrastructure A$M Transact A$M Collaborate A$M 2023 ARR 2024 30 30 20 20 10 10 0 2019 2020 2021 Statutory 2022 Proforma 2023 ARR 2024 0 2019 2020 2021 Statutory 2022 Proforma 2023 2024 ARR 12 Revenue Analysis: ARR Summary Flat ARR reflects business stability, headwinds offsetting growth and tailwinds 80 4.4 7.0 67.5 67.7 1.1 66.6 A$M 70 2.8 60 50 • • • • ARR Jun 2023 Upsell/New Collaborate Upsell/New T&I Downsell/churn Collaborate ARR Constant Currency FX loss ARR Jun 2024 New logos for Collaborate including large defense agency, a state agency and a healthcare organisation in the Americas. Upsell Transact and Infrastructure were large payment processing companies in Americas and Asia Pacific. ARR decline of 1% on pcp negatively impacted by FX translation headwind of 2%. Collaborate down 9% reflecting churn and down sell across all geographies. 13 Operating Costs – A$M Cost control improved by 18% to prior year 80 75 70 65 60 55 50 45 40 35 30 25 20 15 10 5 0 50 45 40 35 30 25 20 15 10 5 0 Total 70.9 58.0 18% Jun-23 * Jun-24 General and Administration 6.3 6.5 Jun-23 Jun-24 * Note - Jun-23 excludes impairment expenses 3% 50 45 40 35 30 25 20 15 10 5 0 50 45 40 35 30 25 20 15 10 5 0 Product and Technology • Product and Technology: adopted a more balanced and disciplined approach to innovation investments aligned to value drivers. FY23 included amortisation of $10.3M. • Sales & marketing spend reflect lower headcount versus prior period. • General and administration costs reflect increase in wages due to inflation mostly offset by a reduction in staff numbers over the year. 23.7 12.8 Jun-23 46% Jun-24 Sales and Marketing 40.9 38.7 5% Jun-23 Jun-24 14 Full-Year Performance Review: Key Metrics Recurring proforma subscription revenue ~90% Proforma Revenue $75.6M 10% 90% $74.8M 11% 89% $68.5M 42% 28% 30% Jun-23 Jun-24 Jun-23 Recurring Non Recurring 1 & 2 Yrs • ~90% of total proforma FY21 revenue is recurring in nature (multi-year nonFY22 cancellable licences and related maintenance) TCV Renewal & New Contract Life 43% 60% 41% 30% $83.9M 73% 18% 16% 10% 9% Jun-24 Jun-23 Jun-24 3 & 4 yrs 5 yrs • Average contract length from sales during the period slightly increased from 3.0 years to 3.1 years with a balanced mix between Collaborate and Transact & Infrastructure contracts Renewal New & Capacity Services • Stronger contracts renewal period • New business decline • Lower attach rate in services 15 Net Cash Flow Analysis Strong cash conversion, drives balance sheet strength 100 72.4 90 58.4 80 70 A$M 60 50 40 30 1.0 0.0 0.3 31.9 Income tax Capitalised development Lease, Interest & FX Net cash 30 Jun 24 18.6 20 10 0 Net cash 30 June 23 • Cash receipts from customers Cash paid to employees, suppliers and invested in development reduced compared to last year Cash paid to suppliers and employees • Stable cash conversion rate at 97% • The company hasn’t capitalised development spend in FY24 16 EBITDA Cash Flow Bridge No further impact from debtor factoring 30 A$M 24.6 7.9 20 16.7 0.6 1.0 Working capital/other change Income taxes paid Ran-off in December 2023 10 0 2.1 EBITDA - statutory Over-time revenue conversion * Proforma EBITDA Historical debtor factoring 13.0 Net cash from operations * Over-time revenue conversion deducts “upfront” licence fees and adds back the (“over-time”) amortised licence component that relates to the reporting period. Commission costs associated with this timing difference are also adjusted to ensure revenues and expenses are matched to the correct reporting period. 17 Balance Sheet Net tangible assets up 48% Jun 24 Jun 23 A$M A$M Cash and cash equivalents 31.9 18.6 72% Trade and other receivables 73.5 63.5 16% Right-of-use assets 0.2 0.0 - All other assets 8.6 7.7 10% 114.2 89.7 27% Trade and other liabilities 6.1 7.9 (23%) Provisions 3.9 4.4 (12%) Tax liabilities 0.3 0.4 (38%) Deferred revenue 13.9 14.1 (1%) Lease and other liabilities 1.7 3.1 (44%) Total liabilities 25.8 29.8 (13%) Net assets 88.4 59.9 48% Period Ended (as at) Strong balance sheet with net cash of $31.9M and no debt carried forward. Trade receivables: a strong source of future cashflow. High quality, low doubtful debt risk. Net assets reflect an improvement in net cash and trade receivables. Total assets YoY 18 Strategy Strategy – Reset for Product Led Growth Refocus go-to-market and customer support on a narrow set of highvalue, ideal Collaborate and Transact customers to optimize growth and reduce churn Target product and engineering on fewer, high-yield product extensions, for Collaborate and Transact for product-led growth in existing markets Restructure the organization and effort to optimally support GTM and product extensions, and yield cash and resources for growth Implement capital management plan to invest cash in innovation to diversify organic revenue, targeted M&A for fresh inorganic growth and shareholder returns 20 Strategy – Capital Management and Dividend • IR has a solid capital platform and expects to remain cash generative • The product set is sticky, but operates in mature, low-growth markets • The Company must innovate for product led growth and revenue diversification • IR’s Capital Allocation Priorities are: 1. Invest in innovation: – Allocate up to an additional 10% of TCV annually to product innovation for new revenue streams Targeting 3 – 5-year payback – Seek right-sized synergistic acquisitions to enter adjacent growth markets – 2. Targeted M&A: 3. Shareholder returns: – Board declared a $0.02 dividend, fully franked 21 FY25 Priorities & Observations FY25 Priorities • FY25 will be a transitional year, headlined by the appointment of a new CEO, refreshed Board and an emphasis on product-led growth. • IR’s strategic focus will be on: 1. Refocus go-to-market and customer support on a narrow set of high-value, ideal customers to optimize growth and reduce churn 2. Target product and engineering on fewer, high-yield product extensions, for productled growth in existing markets 3. Restructure the organization and effort to optimally support 1 and 2, and yield cash and resources for growth 4. Implement capital management plan to invest cash in innovation to diversify organic revenue, targeted M&A for fresh inorganic growth and shareholder returns 23 FY25 Observations We make the following observations regarding the current trading year: • Renewals book is softer to the prior year and is weighted towards H2 FY25. Renewals skewed modestly towards Transact and Infrastructure clients; • Collaborate churn expected to persist as clients migrate to a full SaaS environment; • Current new business & upsell pipeline is up on pcp, weighted to Collaborate. Increased focus on targeting larger enterprise customers across all products and geographies; • The effective tax rate is expected to normalise in FY25 given brought forward R&D tax credits utilized in FY24. 24 Disclaimer SUMMARY INFORMATION This document and the associated transcript (together “the presentation”) has been prepared by Integrated Research Limited (ABN 76 003 588 449) (IRI). The presentation provides general background information about IRI's activities current at the date of preparation. IRI is not responsible for updating, and does not undertake to update, the presentation. It contains information in a summary form and does not purport to be complete. It should be read in conjunction with IRI's other announcements released to ASX (available at www.asx.com au). NOT INVESTMENT ADVICE The information contained in the presentation does not constitute investment or financial product advice or a recommendation to acquire shares or other financial products. It does not take into account the investment objectives, financial situation or needs of any particular investor. Investors should consider these factors, with professional advice if appropriate, before making an investment decision. FINANCIAL INFORMATION All dollar values are in Australian Dollars (A$) unless stated otherwise. All financial information is presented in respect of the year ended 30 June 2022 unless stated otherwise. The presentation contains certain non-IFRS financial measures that IRI believes is relevant and appropriate to understanding its business. The presentation uses proforma subscription revenue, which is used consistently without bias year on year for comparability and to present a clear view of underlying results. The basis of preparation and a reconciliation to statutory results is provided in the appendix to this presentation. A number of figures, amounts and percentages in the presentation are subject to the effect of rounding. FORWARD LOOKING STATEMENTS The presentation contains certain "forward-looking statements”. The words “anticipate”, "believe", “expect”, "project", "forecast”, “estimate”, “likely”, "intend”, “should", “could", "may", "target", “plan” and other similar expressions are intended to identify forward-looking statements. 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PAST PERFORMANCE Statements about past performance are not necessarily indicative of and should not be relied upon as an indication of, future performance. 25 Appendix Annual Recurring Revenue - Analysis All Products Opening ARR FX gain/(loss) New logos Upsell Downsell/Churn Closing ARR Collaborate Opening ARR FX gain/(loss) New logos Upsell Downsell/Churn Closing ARR T&I Opening ARR FX gain/(loss) New logos Upsell Downsell/Churn Closing ARR APAC AUD APAC AUD APAC AUD 15.5 Americas USD 28.2 0.6 1.0 (2.3) 14.7 1.7 2.9 (3.3) 29.4 7.1 Americas USD 16.0 0.4 0.1 (1.4) 6.3 1.6 0.9 (3.2) 15.3 8.3 Americas USD 12.2 0.1 0.9 (1.0) 8.4 0.1 2.0 (0.1) 14.1 Consolidated AUD 4.5 67.5 (1.1) 0.0 3.1 0.2 5.7 (0.7) (8.6) 4.0 66.6 Europe GBP Consolidated AUD 2.4 36.3 (0.6) 0.0 2.8 0.0 1.6 (0.4) (7.0) 2.0 33.1 Europe GBP Consolidated AUD 2.1 31.2 (0.5) 0.0 0.3 0.2 4.1 (0.3) (1.6) 2.0 33.5 Europe GBP Growth -2% 5% 8% -13% -1% Growth YoY -2% 8% 4% -19% -9% • Overall FX headwind of 2%. • Americas the only region with wins exceeding losses. • Significant Collaborate headwinds with losses exceeding wins. • T&I growth driven by upselling to existing customers. Growth -2% 1% 13% -5% 7% 27 Proforma Revenue Purpose: To provide an alternate view of underlying performance by restating term licence and maintenance revenues on a recurring subscription basis. How: Provides a non-statutory alternate view of underlying performance by restating term licence fee revenue to be on a recurring subscription basis (i.e., overt time), rather than upfront at the commencement of a contract, per the statutory view. Other recurring revenues such as maintenance fees and cloud services, as well as other non-recurring revenue streams such as perpetual licence fees, professional services and onetime testing services are consistently treated, as part of proforma and statutory revenue views. 28 Full Year proforma subscription revenue Reconciliation of statutory to proforma revenue 2021 2022 2023 2024 2021 2022 2023 2024 A$M A$M A$M A$M Infrastructure 18.3 17.8 18.6 19.2 -15% -2% 4% 4% Transact 10.0 10.9 11.5 12.7 -5% 10% 5% 11% Collaborate 41.4 39.6 38.3 34.9 -16% -4% -3% -9% Proforma subscription revenue 69.6 68.4 68.3 66.8 -14% -2% 0% -2% Perpetual sales 1.2 0.6 0.3 0.3 -73% -53% -48% -7% Testing Services 4.3 3.8 3.3 3.1 -22% -11% -13% -7% Professional Services 8.4 7.1 3.7 4.6 -3% -16% -48% 25% Proforma revenue 83.5 79.8 75.6 74.8 -16% -4% -5% -1% Statutory revenue 78.5 62.9 69.8 83.3 -29% -20% 11% 19% Proforma revenue 83.5 79.8 75.6 74.8 Deduct Amortised licence fees Full Year Revenue Reconciliation to Statutory Accounts: (51.2) (51.9) (51.1) (50.3) Add term licence fees recognised upfront (excl perpetual licences) 46.2 34.9 45.3 58.9 Statutory revenue 78.5 62.9 69.8 83.3 29 Product TCV by Geography Rebound in Americas driven by large renewals APAC – A$M Europe - £M Americas – US$M 36.3 6.8 19.8 4.8 4.5 7.5 9.0 Jun-23 Jun-24 Renewal 21.3 13.5 12.3 16.5 Jun-23 New & Capacity APAC, down 32%: Renewal Strong renewals mainly in FY22 Transact • Large contracts renewed across all product lines • New & capacity driven by upsell to existing customers • Added 12 new customers • Added 10 new customers 3.9 4.7 3.7 Renewal New & Capacity Americas, up 71%: 0.6 Jun-23 Jun-24 • Note: Product TCV by geography excludes services and testing 5.2 29.5 Jun-24 New & Capacity Europe, down 25%: • Weak renewals period • Added 1 new customer 30 Glossary Annual Recurring Revenue (ARR) equals to the monthly recurring revenue at the end of the period multiplied by 12. Cash conversion rate equals cash receipts divided by proforma revenue. Customer retention equals the opening customer count for the reporting period less customers who are deemed to cease purchasing from IR in the reporting period; this total is then divided by the opening balance and presented in percentage terms. Proforma revenue provides a non-statutory alternate view of underlying performance by restating term licence fee revenue to be on a recurring subscription basis (i.e., overt time), rather than upfront at the commencement of a contract, per the statutory view. Other recurring revenues such as maintenance fees and cloud services, as well as other non-recurring revenue streams such as perpetual licence fees, professional services and one-time testing services are consistently treated, as part of proforma and statutory revenue views. Net revenue retention equals recurring revenue generated from existing customers over a set period. Total Contract Value (TCV) means the total value of a revenue generating contract written in the period of performance less any residual value from a previous related contract. The value includes software licence and related maintenance, cloud, testing and consulting services bookings. Capacity sell or Upsell existing products sold to existing customers due to increase in usage. 31