Announcement PDF Integrated Research Ltd > ABN 76 003 588 449 Suite 9.03, Level 9, 420 George Street, Sydney NSW 2000 Australia t: +61 (2) 9966 1066 e: InfoAP@ir.com Market Announcement Investor Presentation Sydney, 20 February 2025 – Further to Integrated Research Limited’s (Company, IR) (ASX:IRI) announcement to the market today on its results for the half-year ended 31 December 2024, please find attached the presentation to be delivered this morning. This announcement is approved for release by the Board. Leanne Ralph Company Secretary Integrated Research Limited ABN 76 003 588 449 About Integrated Research Limited (ASX: IRI). Integrated Research (IR) is the leading global provider of user experience and performance management solutions for payment transactions and collaborative systems. We create value through our realtime, scalable & extensible hybrid cloud platform and our deep domain knowledge to optimise operations of missioncritical systems and improve user experience through intelligent and actionable insights. We enable many of the world’s largest organisations to simplify complexity and provide visibility over systems that millions of people can’t live without – systems that allow them to transact and collaborate. For further information on IR, visit www.ir.com. 1 www.ir.com Integrated Research Limited (ASX:IRI) FY2025 Half-Year Financial Results 20 February 2025 Ian Lowe, CEO Christian Shaw, CFO 1 IR provides Observability... Deeper insight. Better experiences. Discover better. Powered by Prognosis Our technology harvests and analyses real time data to help large enterprise control and optimise their IT ecosystem. Optimise Reduce business-critical technology downtime and outages Monitor Turn big data into performance in real time intelligent insight Future-proof Improve productivity technology investments optimise efficiency and user experience Trusted by the world's leading organisations 3 Strategy Reset IR has come from... • Revenue performance reliant on contract renewals, which are lumpy • Revenue contribution from new business has been inconsistent and insufficient to offset reliance on renewals • Limited investment in building new products that will support growth in new business revenue IR has reset its strategy to... • Invest in innovation to create and commercialise new products • Grow sales pipeline and revenue contribution from new business (new clients + upsell to existing clients) • Transition to sustainable growth and a future less reliant on contract renewals 4 Summary of 1H FY25 Results • Growth in new business revenue – $7.6m up by 76% versus PCP (prior corresponding period) - points to progress against strategic objective to accelerate new business growth • Softer 1H TCV/statutory revenue - reflects softer 1H renewal book. TCV $26.5m - down 36% versus PCP, Statutory Revenue $28.8m - down 29% versus PCP - aligns to focus on new business revenue • EBITDA - $4.6m down by 58% on PCP • Underlying performance steady - pro forma revenue down by 2% • New product released, foundation client secured – High Value Payments product release completed, major US bank signed 5 New Product Release: High Value Payments - major US bank signed Client: US Bank 5-year term/new client 10.4 million transactions per month Solution: High Value Payments (Transact) What are high value payments? A large payment that results in a bank-tobank settlement, and/or a corporate transaction. How do banks manage high value payments? High value payments are queued and individually assessed by banks for compliance and commercial risk. What value does IR's High Value Payments product deliver? IR's High Value Payments product allows a bank to assess their high value payments queue holistically and historically to identify status, progress, monitor real time availability across the bank's settlement toolset (including CHIPS, SWIFT, and Fedwire), assess liquidity risk and compliance risk. • IR's High Value Payments product reduces compliance, liquidity and commercial risk for banks. • Major US bank signed is a reference client for sales activity targeted to existing bank clients (upsell), and new clients. 6 Financials TOTAL CONTRACT VALUE (TCV) Softer renewals book in 1H25; solid new business growth 1H25 TCV $26.5m (-36%) ▪ TCV is the total value of client contracts secured in any given period ▪ 1H25 TCV softer driven by FY25 renewals book ▪ New business (new clients and upsell to existing clients) at $7.6m up 76% v PCP o Growth in TCV from new clients achieved in multiple products and multiple geographies o Encouraging early results for product led growth strategy ▪ Average contract life reduced from 4 to 3 years, due to shift in contract product mix 8 STATUTORY REVENUE Statutory revenue aligned to TCV 1H25 Statutory Revenue $28.8m (-29%) ▪ Under Statutory Revenue, the licence component of a contract is recognised upfront, rather than over the life of the contract ▪ Statutory Revenue tracks Total Contract Value, and can be lumpy ▪ Softer 1H Statutory Revenue reflects softer renewals book ▪ Growth in new business revenue contribution at 26% versus 10% PCP *See Glossary within the Appendix for definitions and further information on pro forma subscription revenue, including a reconciliation of statutory to pro forma revenue 9 PRO FORMA REVENUE A$M 37.3 36.6 4.4 4.2 1H25 Pro forma Revenue $36.6m (-2%) ▪ Pro forma Revenue apportions upfront licence fee revenue evenly over the life of the contract. ▪ Pro forma Revenue remains steady at $36.6m or 2% lower versus PCP 32.9 32.4 ▪ 89% is secured via term based contracts ▪ No material impact from currency movement 1H24 Term Based 1H25 ▪ IR is targeting sustainable growth in Pro forma Revenue over the medium term, supported by its product-led growth strategy Other *See Glossary within the Appendix for definitions and further information on pro forma subscription revenue, including a reconciliation of statutory to pro forma revenue 10 PRO FORMA REVENUE by territory New business growth in Americas and APAC APAC up 1% Americas stable Europe down 16% 3.7m 7.9m 25.0m Americas APAC Europe ▪ Americas stable against PCP ▪ APAC up 1% up on PCP ▪ Europe down 16% on PCP ▪ Strong new business sales including key win with anchor client in Transact ▪ Strong new business sales including key win with MSP in Collaborate ▪ Go to market refresh in progress post global re-alignment in Jul-24 *See the Appendix for related information in the ‘pro forma Summary Breakdown’ slide 11 PRO FORMA REVENUE by product (excl services) Collaborate down 10% Transact up 10% Infrastructure up 6% 9.9m 15.7m 6.8m Collaborate Transact Infrastructure ▪ Collaborate down 10% vs PCP ▪ Transact growth vs PCP driven by new business (new clients and upselling to existing clients) ▪ Infrastructure growth vs PCP largely driven by upsell ▪ Improvement in new business offset by downsize and churn * pro forma revenue by product excludes services * See the Appendix for related information in the ‘pro forma Summary Breakdown’ slide 12 EBITDA Operating profit, aided by strong cost management and other gains 1H25 EBITDA $4.6m (-58%) ▪ EBITDA performance reflective of softer 1H revenue In thousands of AUD 1H25 1H24 Change % Total revenue 28,839 40,844 -29% Total Operating expenses -27,476 -28,475 -4% Other gains and (losses) 3,280 -1,412 332% EBITDA 4,643 10,957 -58% ▪ Largely fixed cost base sees the business well positioned to benefit from operating leverage over the medium term ▪ EBITDA benefited during the period from: o Cost management, operating expenses reduction of $1.0m or 4% o $3.3m non-operating gains (FX and gain on sale of non-core Testing solutions business) ▪ There was no capitalisation during the period, as R&D focused on short-term feature completion, IR Labs remained in ideation/research phase *See Glossary within the Appendix for definitions and related information in the ‘Operating Costs’ slide 13 PRO FORMA EBITDA Growth reflects uplift from other gains 1H25 Pro forma EBITDA $11.8m (+53%) A$M 3.5 1.2 0.2 (0.8) 11.8 7.7 EBITDA 1H24 Exchange Gain on sale rate change Expenses change Revenue change EBITDA 1H25 ▪ Pro forma EBITDA takes pro forma revenue and deducts expenses after adjusting commission costs for timing differences, to ensure revenues and expenses are matched to the correct reporting period ▪ Pro forma EBITDA is a preferential measure of underlying operating profitability, as it ‘looks through’ period on period TCV and statutory revenue cycles ▪ Between 1H24 and 1H25, the Pro forma EBITDA increase reflects an uplift from other gains, (FX and disposal of a non-core business) * See Glossary within the Appendix for definitions and related information in the ‘EBITDA Cashflow bridge’ slide 14 NET CASH Benefit of exchange rate movements and gain on asset sale 1H25 Net Cash $31.1m (-3%) A$M 28.3 ▪ (25.7) Cash flow from operations of $0.5m o Customer receipts lower due to soft renewals book and timing 1.6 31.9 (1.3) Net cash 30 June 24 Cash receipts Cash paid to Non-recurring from suppliers and customers employees (1.1) (0.8) Income tax 1.7 Investing activities * Refer Appendix for related information in the ‘EBITDA Cashflow bridge’ slide o Supplier and employee payments includes $1.3m of non-recurring people and office move costs 31.1 (3.5) Lease liabilities Payment of dividend Exchage rate change ▪ Investing activities includes interest receipts, proceeds from sale of testing business, and relocation costs for new Sydney office. Bond of $1.1m from office relocation was refunded post period ▪ Fully franked, FY24 final dividend payment of $3.5m ▪ FX effect of +$1.7m Net cash 31 Dec 24 15 BALANCE SHEET Strong capital management discipline maintained Dec 24 Jun 24 A$M A$M Cash and cash equivalents 31.1 31.9 (3%) Trade and other receivables 77.4 73.5 5% Right-of-use assets 1.9 2.5 (26%) All other assets 7.8 6.2 25% 118.2 114.2 3% Trade and other liabilities 6.4 6.1 5% Provisions 2.7 3.9 (29%) Tax liabilities 0.4 0.3 39% Deferred revenue 14.7 13.9 5% Period Ended (as at) ▪ ▪ ▪ ▪ Strong balance sheet with cash of $31.1m and no debt Trade receivables up by 5%: a strong source of future cashflow. High quality, low doubtful debt risk Net assets reflect an improvement in trade receivables NTA (net tangible assets) is 51.8 cents per share * Rounded Total assets YoY Lease and other liabilities 2.2 1.7 28% Total liabilities* 26.4 25.8 2% Net assets 91.8 88.4 4% 16 Priorities Strategy Reset IR has come from... • Revenue performance reliant on contract renewals, which are lumpy • Revenue contribution from new business has been inconsistent and insufficient to offset reliance on renewals • Limited investment in building new products that will support growth in new business revenue IR has reset its strategy to... • Invest in innovation to create and commercialise new products • Grow sales pipeline and revenue contribution from new business (new clients + upsell to existing clients) • Transition to sustainable growth and a future less reliant on contract renewals 18 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 pro forma 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. Indications of, and guidance on, future earnings and financial position and performance are also forward-looking statements. While due care and attention has been used in the preparation of forward-looking statements, they are not guarantees of future performance and involve known and unknown risks, uncertainties, assumptions and other factors, some of which are beyond the control of IRI, that may cause actual results, conduct, performance or achievements to differ materially from those expressed or implied in such statements. There can be no assurance that the actual outcomes will not differ materially from these statements. You are cautioned not to place undue reliance on forward-looking statements, particularly in light of the current economic climate and the significant volatility, uncertainty and disruption caused by the outbreak of COVID-19. Neither IRI nor any other person gives any representation, warranty, assurance or guarantee that the occurrence of the events expressed or implied in any forward-looking statements in the presentation will actually occur. All forward looking statements in the presentation reflect views only as at the date of this presentation. Except as required by applicable law or the ASX Listing Rules, IRI disclaims any obligation or undertaking to publicly update any forward-looking statements, whether as a result of new information or future events or otherwise. NOT AN OFFER The presentation is for information purposes only and is not a prospectus, product disclosure statement or other disclosure or offering document under any law. The presentation does not constitute or contain an offer, invitation, solicitation, recommendation, advice or recommendation with respect to issue, purchase, or sale of any shares or financial products in any jurisdiction. The presentation does not constitute an offer to sell, or a solicitation of an offer to buy, any securities in the United States or to any 'US person’ (as defined in Regulation S under the US Securities Act of 1933, as amended (Securities Act) (US Person)). Securities may not be offered or sold in the United States or to US Persons absent registration or an exemption from registration. IRI shares have not been, and will not be, registered under the Securities Act or the securities laws of any state or jurisdiction of the United States. GENERAL Each of IRI, its related bodies corporate and their respective affiliates, officers, employees, agents and advisers, to the maximum extent permitted by law, expressly disclaim any and all liability in respect of any expenses, losses, damages or costs (including indirect or consequential loss) arising from or in connection with this presentation or the information contained in or omitted from it, including, without limitation, any liability arising from fault, negligence or otherwise. No representation or warranty, express or implied, is made as to the fairness, currency, accuracy, reliability or completeness of information contained in the presentation. The information in the presentation remains subject to change without notice. PAST PERFORMANCE Statements about past performance are not necessarily indicative of and should not be relied upon as an indication of, future performance. 19 Appendix EBITDA CASH FLOW BRIDGE Timing differences increased receivables and reduced operating cash flow ▪ 1H25 Pro forma EBITDA exceeded EBITDA by $7.1m, reflecting Pro forma revenue differential, with minor cost adjustments ▪ Cash flow from Operations reduced by an increase in net working capital ▪ Receivables increased due to timing differences, where a very high proportion of invoicing occurred late in the half, and the proportion of upfront cash for multi-year deals, declined ▪ Provisions also declined, as cash was used for employee entitlement reductions and other activities ▪ Non-operating cash gains relate to currency exchange and testing solutions business A$M 7.1 11.8 (3.3) (7.2) 4.6 (0.8) EBITDA - statutory Over-time revenue conversion Pro forma EBITDA Non OCF gains Working capital/other Income taxes paid change 0.5 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. 21 Operating Costs – A$M Disciplined cost management continues - total costs down 3% 30 25 Total expenditure 28.5 25 27.6 15 15 10 10 5 5 3% 0 1H24 1H25 6.7 2% 1H24 General and administration 25 20 15 15 10 10 5 No capitalisation during period 6.8 0 20 0 • Product and Technology reflects a balanced and disciplined approach to innovation investments aligned to value drivers, including ‘IR Labs’ 20 20 25 Product and Technology • Sales & marketing spend reflect lower headcount and variable cost tied to TCV, versus prior period 1H25 Sales and marketing 19.0 • General and administration costs includes restructure costs 17.6 • Depreciation & amortisation is included in operating costs 5 2.8 3.2 1H24 1H25 12% 8% 0 1H24 1H25 22 Pro forma Summary Breakdown By Geography By Product 11% 11% 12% 10% 25% 27% 21% 22% 17% 19% 67% 68% 47% 43% 1H24 1H25 Collaborate Transact Infrastructure Services FY21 1H24 Americas 1H25 APAC Europe • Pro forma revenue steady • Transact and Infrastructure product lines are growing mainly from upselling to existing clients and new business in Transact • Collaborate continues to decline over time • Americas has stabilised and experienced growth half on half 23 1H25 pro forma recurring revenue Reconciliation of statutory to pro forma revenue Interim revenue 1H22 1H23 1H24 1H25 1H22 1H23 1H24 1H25 A$M A$M A$M A$M Infrastructure 9.1 9.4 9.3 9.9 (7%) 4% 0% 6% Transact 5.3 5.5 6.2 6.8 7% 3% 12% 10% Collaborate 20.1 19.2 17.3 15.7 (9%) (4%) (10%) (10%) Pro forma term based revenue 34.4 34.1 32.9 32.4 (6%) (1%) (4%) (1%) Perpetual sales 0.5 0.3 0.2 0.3 (25%) (46%) (31%) 33% Testing Services 2.2 1.9 1.8 1.9 (6%) (17%) (5%) 6% Professional Services 3.7 1.9 2.5 2.0 (12%) (49%) 30% (18%) Pro forma revenue 40.9 38.1 37.3 36.6 (7%) (7%) (2%) (2%) Statutory revenue 32.3 38.4 40.8 28.8 (5%) 19% 6% (29%) Pro forma revenue 40.9 38.1 37.3 36.6 Deduct Amortised licence fees (26.1) (25.8) (24.7) (25.0) Add license fees recognised upfront * 17.5 26.1 28.2 17.2 Statutory revenue 32.3 38.4 40.8 28.8 Reconciliation to Statutory Accounts: * Excludes perpetual sales 24 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 New logos Upsell Downsell/Churn Closing ARR APAC AUD 14.3 Americas USD 29.5 0.7 0.4 (1.7) 13.7 0.3 0.4 (1.1) 29.1 6.0 Americas USD 15.4 0.7 0.0 (1.4) 5.3 0.2 0.2 (0.7) 15.1 8.4 0 0.0 0.3 (0.3) 8.4 Americas USD 14.1 0 0.2 0.2 (0.5) 14.0 APAC AUD APAC AUD Europe GBP Consolidated AUD 4.1 66.6 1.1 0.0 1.2 0.2 1.4 (0.9) (5.1) 3.5 65.2 Europe GBP Consolidated AUD 2.1 33.1 0.6 0.0 0.9 0.0 0.4 (0.8) (4.0) 1.3 31.0 Europe GBP Consolidated AUD 2.0 33.5 0.00 0.5 0.0 0.3 0.2 1.0 (0.0) (1.1) 2.2 34.2 Growth 1.6% 1.7% 2.1% -7.6% -2.2% • Collaborate showed improvement in new logos, however headwinds persisted with losses exceeding wins • T&I growth driven by new customers and upselling to existing customers Growth 1.8% 2.7% 1.2% -12.2% -6.5% Growth 1.6% 0.8% 3.0% -3.2% 2.2% 25 Reconciliation of Revenue and Pro forma Revenue, and Net Profit After Tax (NPAT) to EBITDA and Pro forma EBITDA In thousands of AUD 1H25 1H24 Revenue 28,839 40,844 Term l i cens e fees recogni s ed upfront -17,239 -28,246 Amortis ed l i cens e fees 24,960 24,716 36,560 37,314 Net Profit after Tax (NPAT) 4,572 11,181 Income ta x expens e 1,403 805 Fi na nce Income -1,440 -1,078 108 49 4,643 10,957 Cos t deferra l rel a ted to over time revenue -606 277 One-time revenue converi s on 7,720 -3,530 11,757 7,704 Pro forma Revenue (1) Depreci a tion a nd Amortis a tion EBITDA (2) Pro forma EBITDA (3) 1 Pro forma 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 pro forma and statutory revenue views. 2 EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortisation) is a non-IFRS measure used to evaluate the Company's operating performance by focusing on profit from core operations and excluding the effects of capital structure, tax rates, and non-cash accounting items like depreciation and amortisation. 3 Pro forma EBITDA provides a non-statutory alternate view of the underlying operating performance of the Company by using pro forma revenue instead of statutory revenue and then deducting operating expenses after adjusting commission costs for timing differences, to ensure revenues and expenses are matched to the correct periods. * Excludes perpetual sales 26 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 pro forma revenue EBITDA EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortisation) is a non-IFRS measure used to evaluate the Company's operating performance by focusing on profit from core operations and excluding the effects of capital structure, tax rates, and non-cash accounting items like depreciation and amortisation Pro forma 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 onetime testing services are consistently treated, as part of pro forma and statutory revenue views Proforma Revenue illustrative example Licence Contract Value Revenue Recognition Statutory revenue Proforma revenue 500 Year 1 500 100 Contract Term = 5 Years Year 2 100 Year 3 100 Year 4 100 Year 5 100 Total 500 500 Pro forma EBITDA provides a non-statutory alternate view of the underlying operating performance of the Company by using pro forma revenue instead of statutory revenue and then deducting operating expenses after adjusting commission costs for timing differences, to ensure revenues and expenses are matched to the correct periods Net Revenue Retention (NRR) 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 27