Iress Limited · ASX:IRE

Iress — Investor Presentation (August 2021)

55 slides from Iress's investor presentation, Aug 19, 2021

1. Slide 1: Half year results presentation

   Half year results presentation For the six months ended 30 June 2021

2. Slide 2: Agenda

   Agenda Overview of Iress 3 1H 21 results summary 4 Performance review 11 Growth and outlook 22 Appendix 31 Andrew Walsh John Harris Managing Director & CEO Chief Financial Officer 2

3. Slide 3: Overview of Iress

   Overview of Iress Iress’ vision: simpler, faster with higher returns (2, 3) Highlights Consistent revenue growth with ~90% recurring ● Core business leverages common technology in Trading, Wealth and Data to build scale in large markets with similar (1) regulatory frameworks y rrenc ● Opportunity to

4. Slide 4: 1H 21 constant currency and pro forma financial performance

   1H 21 constant currency and pro forma financial performance Delivered pro forma segment profit and NPAT growth - full year guidance affirmed 2021 guidance affirmed 296.2 298.7 164-168 Constant currency Pro forma revenue (1) (using average 2020 FX rates) 76.1 Up 1% segment profit (5) 71.9 Up 6% 1H 2020 1H 2

5. Slide 5: 1H 21 reported financial performance

   1H 21 reported financial performance Reported revenue +7%, leveraging Product & Technology investments 270.7 290.2 75.5 71.9 Reported revenue Reported 26.6% 26.0% Up 7% segment profit & margin Up 5% 1H 2020 1H 2021 1H 2020 1H 2021 40.9 25% 24% Reported NPAT (1) 26.4 Product & Technology Up 55% % of re

6. Slide 6: 1H results summary

   1H 21 results summary Delivered Growth Progress In constant currency, pro forma Strong revenue growth up 10% v 1H UK margins have increased v 1H 20; segment profit up 3% v 1H 20. 20 in constant currency - largely Super client Guild and two Mortgage NPAT up 9%, EPS up 6%, ROIC 9%. driven by full perio

7. Slide 7: New medium term target

   New medium term target Targeting more than double NPAT in 2025, with potential upside to 3x. Total addressable markets(2) Targets exceed consensus revenue based on modest market share gains. Shift to single technology platform to drive operating leverage and higher returns with $15m $1.4bn p.a. of p

8. Slide 8: Accelerating the benefits from a changing operating model

   Accelerating the benefits from a changing operating model Today Target future state Product strength is primarily based on the individual capability of The IP and functionality in each product can be easily leveraged by each product. Iress and accessed by clients across multiple offers. Integration a

9. Slide 9: Our five areas to win

   Our five areas to win Areas to win Opportunity Progress Additional focus 1 Single technology Operational leverage, speed and Building & delivering cloud native Movement of remainder of Iress platform response business capabilities (Migrations include applications to cloud 85% of CommPay and 62% of Xp

10. Slide 10: Accelerating growth with capital management, enhancing earnings

    Accelerating growth with capital management, enhancing earnings FY20 FY25 base Target growth FY25 potential upside Potential upside Actuals case targets v FY20 growth growth v FY20 Revenue (AUD$m) $542.6m $766m - $806m 7-8% pa $870m - $910m ~10%-11% pa Segment profit in constant currency (AUD$m) $152

11. Slide 11: Performance review

    Performance review

12. Slide 12: Historic revenue growth, 13% CAGR with organic growth and acquisitions

    Historic revenue growth, 13% CAGR with organic growth and acquisitions Growth +$345m (1) Australia Trading and Wealth +$74m Acquired businesses +$271m Total Revenue CAGR = 13% 550.4 512.7 446.9 472.9 397.0 Organic 333.4 351.6 314.2 257.5 287.5 CAGR = 5% 196.7 238.7 253.7 162.6 205.5 153.2 83.7 (incl

13. Slide 13: 1H 20 to 1H 21 pro forma segment profit breakdown

    1H 20 to 1H 21 pro forma segment profit breakdown(1,2) +3% pro forma segment profit - strong performance in Trading & Market Data with technology investments to support growth Ongoing resilience in Trading & Market Data, Mortgages benefited from Revenue contribution from new Lower people costs in APAC

14. Slide 14: 2H 20 to 1H 21 pro forma segment profit breakdown

    2H 20 to 1H 21 pro forma segment profit breakdown(1,2) Excluding annual leave, segment profit growing vs 2H 20 with Trading & Market Data, North America and OneVue contributing Key milestones achieved in Wealth and Investment Infrastructure is Using average 1H 21 FX rates, segment Trading. Higher proj

15. Slide 15: Segment performance - constant currency

    Segment performance - constant currency(1,2) Segment (AUD$m) 1H 20 2H 20 1H 21 1H 21/1H 20 1H 21/2H 20 Key notes Revenue Constant Currency APAC 142.3 147.9 165.3 16% 12% Strong revenue performance in APAC driven by Trading & Market Data growth and positive UK & Europe 79.1 79.9 80.9 2% 1% contributi

16. Slide 16: 1H 20 to 1H 21 cost breakdown

    1H 20 to 1H 21 cost breakdown(1) Pro forma cost analysis: strong cost discipline with a focus to scale flat Pro forma people and opex cost flat vs 1H 20 reflects strong cost discipline across the group. (2) (1) Figures are presented on a constant currency basis, assuming results are converted at the av

17. Slide 17: 2H 20 to 1H 21 cost breakdown

    2H 20 to 1H 21 cost breakdown(1) Pro forma cost analysis: investment across group with a focus to scale Reflects timing of when leave is taken which was significantly weighted towards the second half in 2020, a profile which is expected to be repeated in 2021.(3) + 5% (excl. Annual leave flat) Pro forma

18. Slide 18: 2H 20 vs 1H 21 pro forma net profit after tax analysis

    2H 20 vs 1H 21 pro forma net profit after tax analysis(1) Segment profit impacted by A benefit from a partial release of BC Gateways earnout Pro forma corporate tax rate was 27% Provision release associated with annual leave timing in 2H 20(3). provision; partially offset by acquisition costs in relati

19. Slide 19: 1H 20 vs 1H 21 pro forma net profit after tax analysis

    1H 20 vs 1H 21 pro forma net profit after tax analysis(1) 9% pro forma NPAT growth vs 1H 20 Pro forma corporate Provision release tax rate was 27% associated with (1H 20: pro forma tax finalisation of rate was 27%) QuantHouse earnout arrangements.(2) +9% (1) Figures are presented on a constant currenc

20. Slide 20: Adjusted earnings per share in constant currency

    Adjusted earnings per share in constant currency: +7.3% growth vs pcp Key assumptions Adjusted EPS (constant currency) (AUD$m) 1H 19 2H 19 1H 20 2H 20 1H 21 NPAT has been adjusted for share-based payments, non-operating items, and Segment profit (constant currency) 74.1 78.0 71.8 83.4 77.2 acquisitio

21. Slide 21: Net debt analysis

    Net debt analysis Free cash flow $34.3m Strong cash Final 2020 conversion 90% dividend payment +47% Free Cash Flow = $34.3m(1) (2) 2H 20 to 1H 21 cash flow breakdown (AUD$m) (1) Free Cash Flow = Reported segment profit of $75.5m, add change in working capital (-$4.0m), Non-operating expenses (-$4.1m),

22. Slide 22: Executing growth strategies & outlook

    Executing growth strategies & outlook

23. Slide 23: FY21 segment profit guidance affirmed

    FY21 segment profit guidance affirmed Guidance (constant currency) (AUD$m)(1) Delivered FY20 1H 21 2H 21 guidance FY21 guidance - Affirmed FY21 segment profit guidance affirmed: up 7-10% on pcp. ROIC Inc OneVue Total required Total expected to be in the range of 10% Actual Actual Low High Low High to 11%. S

24. Slide 24: 2H 21 segment profit breakdown

    2H 21 segment profit breakdown(1) 16-21% segment profit growth - 2H will benefit from a lower annual leave expense and growth across most major segments Segment profit guidance affirmed Segment profit will benefit from the full period impact of OneVue. Margins expected to grow. APAC includes strong pipeline

25. Slide 25: Capital management further enhancing earnings metrics

    Capital management further enhancing earnings metrics Capital management Potential cumulative dividends Target leverage ratio post buyback (cents per share) ex potential Buyback(1) MSO sale proceeds Potential dividend(2) Neutral net leverage = 2 x Segment profit 400 Capacity of Range Range additional

26. Slide 26: Base case target of 103% NPAT growth to 2025

    Base case target of 103% NPAT growth to 2025(1) NPAT in constant currency (AUD$m)(2) Reflects the NPAT result FY22 and FY23 assumes $15m p.a. of including a $15m p.a. pre tax investment (ie $30m in total) to investment, for acceleration accelerate growth and scale in Product & of growth and scale in

27. Slide 27: Iress' vision: simpler, faster with higher returns

    Iress’ vision: simpler, faster with higher returns Benefits Technology Capital management 2021 We see benefits being A single technology New medium term 2021 guidance affirmed realised at a greater platform is key to target of more than 2x rate with the unlock scale and NPAT in 2025 (Base opportunity fo

28. Slide 28: Q&A

    Q&A

29. Slide 29: Close

    Close Andrew Walsh Chief Executive

30. Slide 30: Thank you

    Thank you

31. Slide 31: Appendix

    Appendix

32. Slide 32: Income statement - constant currency

    Income statement - constant currency(1) Constant Currency Key notes AUD$m 1H 20 2H 20 1H 21 1H 21/1H 20 1H 21/2H 20 Pro forma operating costs were in line vs 1H 20 Operating Revenue 270.7 280.0 298.7 10% 7% Non-operating expenses includes $15.2m gain from Operating Costs (198.7) (196.6) (221.5) 11%

33. Slide 33: Income statement - reported results

    Income statement - reported results Reported Currency AUD$m 1H 20 2H 20 1H 21 1H 21/1H 20 1H 21/2H 20 Operating Revenue 270.7 271.9 290.2 7% 7% Operating Costs (198.7) (191.0) (214.7) 8% 12% Segment Profit 71.9 81.0 75.5 5% (7%) Share-based Payments (10.4) (10.6) (10.3) (1%) (3%) Segment Profit after

34. Slide 34: Pro forma NPAT reconciliation - 1H vs 1H

    Pro forma NPAT reconciliation - 1H 21 vs 1H 20 1H 20 1H 21 Add: Add: Remove: Remove: Earnout AUD$m Reported OneVue Pre-Acq(1) O&M Pre-Acq(2) Pro forma Reported Currency(3) provision release(4) Pro forma Operating Revenue 270.7 24.7 0.7 296.2 290.2 8.5 298.7 Operating Costs (198.7) (21.5) (0.7) (221.

35. Slide 35: Pro forma NPAT reconciliation - 1H vs 2H

    Pro forma NPAT reconciliation - 1H 21 vs 2H 20 2H 20 1H 21 Remove: Add: Remove: Remove: Earnout AUD$m Reported Currency(2) OneVue Pre-Acq(1) Pro forma Reported Currency(2) provision release(3) Pro forma Operating Revenue 271.9 8.1 15.6 295.6 290.2 8.5 298.7 Operating Costs (191.0) (5.7) (14.6) (211.

36. Slide 36: Pro forma segment profit reconciliation by region - 1H vs 1H 20

    Pro forma segment profit reconciliation by region - 1H 21 vs 1H 20 Reported segment profit to pro forma segment profit by region 1H 20 1H 21 1H 21/1H 20 Add: Add: Pro Remove: Pro Pro forma AUD$m Reported Reported OneVue Pre-Acq(1) O&M Pre-Acq(2) forma Currency(3) forma % change APAC 102.1 18.7 120.8 11

37. Slide 37: Pro forma segment profit reconciliation by region - 1H vs 2H 20

    Pro forma segment profit reconciliation by region - 1H 21 vs 2H 20 Reported segment profit to pro forma segment profit by region 2H 20 1H 21 1H 21/2H 20 Remove: Add: Pro Remove: Pro Pro forma AUD$m Reported Reported Currency(2) OneVue Pre-Acq(1) forma Currency(2) forma % change APAC 101.9 0.1 11.6 113.

38. Slide 38: Segment performance

    Segment performance Reported currency Segment (AUD$m) 1H 20 2H 20 1H 21 1H 21/1H 20 1H 21/2H 20 Revenue Reported Reported Reported APAC 142.3 147.5 164.6 16% 12% UK & Europe 79.1 75.5 75.7 (4%) - Mortgages 11.8 15.1 13.6 15% (10%) South Africa 22.8 20.1 21.3 (6%) 6% North America 14.7 13.7 15.0 2% 1

39. Slide 39: Segment performance

    Segment performance Constant currency using average 2020 rates Segment (AUD$m) 1H 20 2H 20 1H 21 1H 21/1H 20 1H 21/2H 20 Revenue APAC 142.3 147.5 165.1 16% 12% UK & Europe 79.1 75.5 78.6 (1%) 4% Mortgages 11.8 15.1 14.1 19% (7%) South Africa 22.8 20.1 21.1 (8%) 5% North America 14.7 13.7 15.7 7% 15%

40. Slide 40: Segment performance

    Segment performance 1H 21 results (Reported & constant currency) Segment (AUD$m) 1H 21 1H 21 1H 21 Revenue Reported FX Constant ccy (using avg. 1H 20 FX rates) Constant ccy (using avg. 2020 rates) APAC 164.6 165.3 165.1 UK & Europe 75.7 80.9 78.6 Mortgages 13.6 14.6 14.1 South Africa 21.3 21.9 21.1

41. Slide 41: APAC

    APAC Ongoing demand for financial advice software & high client retention. Super admin client delivery momentum building Performance is attributable to the full period impact of AUD$m 1H 20 2H 20 1H 21 1H 21/1H 20 1H 21/2H 20 OneVue and revenue momentum in the Trading & Market Data business. Operatin

42. Slide 42: APAC - Trading & Market Data

    APAC - Trading & Market Data Resilient trading and market data revenue. Implementation of Private Wealth solution to leading wealth manager Trading and Market data growth underpinned by AUD$m 1H 20 2H 20 1H 21 1H 21/1H 20 1H 21/2H 20 stable recurring subscription revenue. Operating revenue Successfu

43. Slide 43: APAC - Wealth

    APAC - Wealth Financial Advice software as advisors continue to focus on risk, data & compliance. Super admin deployment progressing well 1H 20 2H 20 Financial Advice revenue reflects ongoing demand AUD$m Pro forma Pro forma 1H 21 1H 21/1H 20 1H 21/2H 20 for Iress’ advice software, Xplan. Operating r

44. Slide 44: UK & Europe

    UK & Europe Stable underlying revenue. Market data feeds growing. Client delivery and ongoing demand to drive growth Revenue growth reflects the contribution from O&M GBP (m) 1H 20 2H 20 1H 21 1H 21/1H 20 1H 21/2H 20 (acquired in 2020) as well as new and ongoing projects Operating Revenue with client

45. Slide 45: Mortgages

    Mortgages One client live in first half. Another client already live in second half. Size of opportunity remains Revenue growth was largely driven by the full GBP (m) 1H 20 2H 20 1H 21 1H 21/1H 20 1H 21/2H 20 period impact of two clients that went live in 2H 20 and another successful deployment compl

46. Slide 46: South Africa

    South Africa Successful client deliveries amidst challenging market conditions. In local currency, revenue declined 3% from ZAR (m) 1H 20 2H 20 1H 21 1H 21/1H 20 1H 21/2H 20 1H 20 and increased 1% from 2H 20 to 1H 21 respectively. Direct Contribution margin was Operating revenue 246.7 237.0 239.3 (3

47. Slide 47: North America

    North America Stable underlying client base. QuantHouse broadens market data capability. In local currency, revenue increased by 10% while CAD (m) 1H 20 2H 20 1H 21 1H 21/1H 20 1H 21/2H 20 direct contribution increased by 32%. Operating revenue 13.1 13.1 14.4 10% 11% The 1H 21 revenue increase reflec

48. Slide 48: Ongoing cost discipline across functional segments

    Ongoing cost discipline across functional segments Product & Technology AUD$m 1H 20 2H 20 1H 21 1H 21/1H 20 1H 21/2H 20 Product & Technology costs (1) increased 3% vs pcp and the cost P&T Costs ($m) 68.1 62.1 70.3 3% 13% as a % of revenue on a constant P&T Costs as % of revenue 25% 22% 24% currency

49. Slide 49: Strengthened balance sheet and strong cash conversion 90%

    Strengthened balance sheet and strong cash conversion 90% AUD$m 1H 20 2H 20 1H 21 Cash conversion (%) Total current assets 174.8 133.8 131.7 Total non-current assets 732.1 869.9 893.8 Total Assets 906.9 1,003.8 1,025.5 Total current liabilities 105.3 102.2 102.2 Total non-current liabilities 250.3 3

50. Slide 50: Depreciation and amortisation

    Depreciation and amortisation D&A - Operational 1H 20 2H 20 1H 21 Depreciation Plant & Equipment 5.4 5.6 5.7 Amortisation Software (3rd Party Purchased) 0.7 0.9 0.8 Leases 5.6 6.5 7.5 Total 11.7 13.0 14.1 D&A - Acquisition Related 1H 20 2H 20 1H 21 2H 21 1H 22 2H 22 1H 23 2H 23 Computer Software Ave

51. Slide 51: Foreign exchange rates

    Foreign exchange rates 1H 20 foreign exchange rates 2020 foreign exchange rates 1H 20 Rate 2020 Rate GBP 0.5221 GBP 0.5391 CAD 0.8955 CAD 0.9244 ZAR 10.907 ZAR 11.350 EUR 0.5977 EUR 0.6052 1H 21 foreign exchange rates 1H 21 Rate GBP 0.5577 CAD 0.9640 ZAR 11.228 EUR 0.6421 51

52. Slide 52: Glossary

    Glossary 1H 20 is adjusted to add back six months of OneVue pre-acquisition and three months of O&M trading results 2H 20 is adjusted to add back four months of OneVue pre-acquisition trading results and remove currency movements from 1H 20 Pro forma 1H 21 is adjusted to remove currency movements fr

53. Slide 53: Glossary

    Glossary Measured as the percentage of revenue from lost customers / prior year total group revenue. Value of revenue from lost customers is equal to Churn rate the last 12 months of revenue recognised prior to the month of leaving. Calculated by taking the inverse of the groups churn rate (i.e. 1 d

54. Slide 54: Disclaimer

    Disclaimer The material in this presentation is intended to be general background information on Iress Limited and its activities, current at the These risks and uncertainties could cause actual results, performance or events to differ materially from those expressed or date of the presentation. The

55. Slide 55: iress.com

    Contact Andrew Walsh, CEO John Harris, CFO +61 3 9018 5800 iress.com

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