Integrated Research Limited Annual Report 2020

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FY2020 Annual Report · Integrated Research Limited

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Integrated Research
Annual Report 2020

ABN 76 003 588 449

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Asia Pacifi c/Middle East/Africa

Integrated Research Limited

Level 9, 100 Pacifi c Highway

North Sydney NSW 2060

Australia

T. +61 (2) 9966 1066

E. info.ap@ir.com

United Kingdom & Ireland

Integrated Research UK Ltd

The Atrium, Harefi eld Road

Uxbridge, Middlesex

UB8 1PH

United Kingdom

T. +44 (0) 189 581 7800

E. info.europe@ir.com

Singapore

Integrated Research (Singapore) Pte. Ltd.

Unit 14-03, Palais Renaissance

390 Orchard Road

Singapore 238871

T. +65 6813 0851

E. info.ap@ir.com

Americas - West Coast

Integrated Research, Inc.

Americas - East Coast

Integrated Research, Inc.

Americas - Mid West

Integrated Research, Inc.

6312 S. Fiddlers Green Circle, Suite 500N

12950 Worldgate Dr, Suite 720

6601 Lyndale Ave. S., Suite 330

Denver, CO 80111, USA

T: +1 (303) 390 8700

F: +1 (303) 390 877

E. info.usa@ir.com

Herndon, VA 20170, USA

Richfi eld, Minnesota, MN 55423, USA

T: +1 (303) 390 8700

F: +1 (303) 390 8777

E. info.usa@ir.com

T. +1 (612) 243 6700

F. +1 (303) 390 8777

E. info.usa@ir.com

ir.com

Corporate

directory

Directors

Paul Brandling

Independent Non-Executive

Director & Chairman

John Ruthven

Managing Director and

Chief Executive Offi cer

Nick Abrahams

Independent Non-Executive Director

Garry Dinnie

Independent Non-Executive Director

Peter Lloyd

Anne Myers

Independent Non-Executive Director

Company Secretary

David Purdue

Registered Offi ce

Level 9, 100 Pacifi c Highway

North Sydney NSW 2060

T. +61 (2) 9966 1066

Share Registry

Computershare

Solicitors

Ashurst

Level 11, 5 Martin Place

Sydney NSW 2000

Bankers

National Australia Bank

Westpac Banking Corporation

HSBC Bank Australia

Securities Exchange Listing

Australian Securities Exchange

Code: IRI

Country of Incorporation

Integrated Research Limited,

incorporated and domiciled in

Australia, is a publicly listed

company limited by shares.

Notice of Annual General Meeting

The 2020 Annual General

Meeting of Integrated Research

will be held on Wednesday,

25 November 2020. The meeting

will take place virtually, owing to

the ongoing COVID-19 pandemic.

A formal Notice of Meeting will be

released in October.

This Annual Report is printed on Impress DM Matt. Impress DM is a FSC Certifi ed paper which is made from elemental
chlorine free pulp derived from well-managed forests. It is manufactured by an EMAS and ISO 14001 certifi ed mill.

5017 Designed and Produced by RDA Creative www.rda.com.au

Contents

CEO’s report

Chairman’s letter

Financial highlights

2
4
6
9
10
13 Directors’ report
27 Remuneration report (audited)

2020 in IR

About IR

41 Corporate governance statement
49 Financials
83 Directors’ declaration
84
90 Lead auditor’s independence declaration
91
93 Corporate directory

Independent auditor’s report

ASX additional information

Annual Report 2020Integrated Research and its controlled entitiesFinancial highlights

$111M
Revenue

$24M
Profit

APAC growth
 17%

Total revenue
(AUD millions)

Net profit after tax
(AUD millions)

Revenue from licence sales
(AUD millions)

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2
2

84.5

91.2

91.2 100.8 110.9

16.0

18.5

19.2

21.9

24.1

45.7

53.4

52.6

62.8

72.1

2016

2017

2018

2019 2020

2016

2017

2018

2019 2020

2016

2017

2018

2019 2020

Annual Report 2020

Annual Report 2020Integrated Research and its controlled entities

IN MILLIONS OF AUD (EXCEPT EARNINGS PER SHARE)

Our customers

Year ended 30 June

2020

2019

% Change

Revenue from licence fees

72.1

62.8

15%

Total revenue

110.9

100.8

10%

Net profit after tax

24.1

21.9

10%

Net assets

82.5

69.8

18%

Cash at balance date

9.7

9.3

Americas revenue

75.8

69.4

Europe revenue

17.5

16.9

Asia Pacific revenue

17.7

15.0

17%

Earnings per share (cents per share)

14.0

12.7

10%



Year ended 30 June

2020

2019

% Change

Americas revenue (USD)

50.3

49.7

Asia Pacific revenue (AUD)

17.7

15.0

17%

Europe revenue (UK Sterling)

9.2

9.4

(1%)





9/10

Top US Banks

7/10

Biggest Telcos

6/10

Top Fin Services
Companies Globally

6/10

Top Automotive
Companies

R&D investment
 20%

Headcount
 266

Unified
Communications
revenue
 17%

Professional
services
revenue
 17%

Annual Report 2020

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Annual Report 2020Integrated Research and its controlled entities

Chairman’s letter

Dear fellow shareholders,

On behalf of the Board, thank you
for your continued and valued
support of Integrated Research
Limited (the “Company” or “IR”).
I am pleased to present the annual
report for the financial year ended
30 June 2020. A year of record
performance for IR against a global
backdrop of unparalleled disruption
caused by the COVID-19 pandemic.

2020 Performance
The Company achieved an increase of 10% in net profit
after tax to $24.1 million, the 7th consecutive year of
annual profit growth. Total revenue also grew by 10% to
$110.9 million and licence fees grew by 15% to $72.1 million.

Strong operational discipline and agility in responding to
rapidly evolving global conditions driven by the pandemic
is reflected in consistent margins. EBITDA margin
measured as EBITDA/revenue was 39% (2019: 40%),
and NPAT margin measured as NPAT/revenue was 22%
(2019: 22%). Total expenses for the year were up 7% to
$78.2 million.

The strong results are a testament to the resilience of IR’s
business model with a geographically diversified Tier 1
customer base and revenue split across three primary
product lines. Over 95% of the Company’s revenue was
derived outside of Australia demonstrating the global
profile and strength of the business.

Typically, multi-year contracts (up to 5 years) with these
customers ensure future revenue streams and the
‘stickiness’ of IR’s solutions is evident with high retention
rates. Expanding IR’s footprint with existing customers
is a key focus and it was pleasing to note a renewal and
extension licence agreement with a long term financial
services customer resulting in the largest deal in IR’s
history at US$10 million which was signed in March.

New business is an important part of IR’s growth strategy
and 38 new customers were added during the year.
These customers reflect the strength and diversity of the
enterprise customer base including major brands such as
Glaxo-Smith Kline, Fannie Mae and Ricoh.

Annual Report 2020Integrated Research and its controlled entities“The strong results are a testament to
the resilience of IR’s business model
with a geographically diversified
Tier 1 customer base and revenue split
across three primary product lines.”

Dividend
The Board declared a final dividend of 3.75 cents per
share franked to 100%. This takes the total dividend for
the year to 7.25 cents, in-line with FY19.

Acknowledgements
The Board would like to acknowledge the contribution
of our dedicated team at IR under the leadership of
John Ruthven. The safety and wellbeing of all employees
is paramount and the Company has implemented all
the appropriate protocols to ensure a safe working
environment and support for our staff. We will continue
to monitor and adjust as the health situation evolves.

The professionalism and agility of the team enabled a
rapid and seamless transition to global remote working
as the pandemic unfolded. A strong customer focus and
engagement has been maintained and it is very pleasing
to note that customer satisfaction as measured by NPS
(net promoter score) significantly increased in 2020
against this turbulent backdrop.

I thank our customers for their continued support of IR.
We will continue to support you and remain committed to
providing software solutions that help you succeed today
and into the future.

Thanks also to my fellow Non-Executive Directors Nick
Abrahams, Garry Dinnie, Peter Lloyd and Anne Myers.
In addition to expertise, their commitment, collegiate
support and counsel has been invaluable and appreciated
as we have navigated an intense but successful 2020.

The Board remains confident in the future for IR and once
again, I would like to thank our valued shareholders for
your ongoing support.

Accelerating Innovation

Delivering innovation is core to the value proposition of
a software company. IR has a proud history of technical
excellence and investing to drive innovation. We are
committed to providing software solutions that enhance
the performance of our customers and the experiences
of their customers.

The global pandemic has created many changes and
uncertainties which continue to evolve across the world.
We believe that some of the structural changes in market
dynamics such as the step change to remote working and
cashless payments are an opportunity for the Company.
We continue to invest in research and development to
accelerate innovation and expand IR’s value proposition
for customers across the globe.

Gross spending on R&D was up 19% to $22.5 million
representing 20% of revenue and a key achievement
was the completion of a new SaaS platform that
will support the launch of new cloud-based UC and
Payments solutions in 2021. These are in addition to
ongoing enhancements to IR’s existing on-premise
Prognosis solutions and represent an exciting inflection
point for the Company.

As these new products come on stream it provides IR
with the unique proposition of supporting enterprise
customers as they adjust to structural changes and
typically embrace an environment of on-premise,
hybrid and cloud solutions.

The Company also continues to invest to drive internal
innovation and operational effectiveness. A critical and
strategic investment was made this year to implement
a new ERP (enterprise resource planning) system.
This project was delivered on-time and on-budget and
will deliver operational efficiencies, improved business
reporting and support for strategy and business
planning as we position the Company for future growth.

During the year, the Company continued to strengthen
its leadership capability and bench strength. The IR
Leadership Impact program was launched which is a
strategic investment to develop, attract and retain talent.
It is focused on all levels of leadership, including high
potential and emerging talent.

Paul Brandling

Chairman

Annual Report 2020Integrated Research and its controlled entitiesCEO’s report

Dear Shareholders,

As I reflect on my first year as CEO of Integrated Research, I am pleased
with what we have achieved for our customers, employees and for you
as our shareholders.

I am also excited about the future, as we look to capitalise
on the opportunity the current market dynamics present,
through accelerated innovation and improved execution
across the business.

We remain focused and determined in our mission, as
we navigate our way through the COVID-19 world and
the broad and wide-ranging effects of the pandemic -
health, social and economic. We have adapted to the
new way of working, and since March the vast majority
of our teams have been productively working from home.
This also reflects the working environment for most
of our customers. We have responded by leveraging
digital channels to maintain our close connection and
engagement with them.

In this remote working environment, the Company’s
enduring value proposition is even more relevant, as our
customers are working remotely at scale. The increase in
calls and ‘hosted’ meeting minutes are staggering, with
Microsoft, Cisco, Avaya, Zoom and others all reporting
significant increases globally. The fact that the entire
commercial world is operating in this mode, heightens the
mission critical nature of Unified Communications (UC)
and collaboration platforms and the need for ways to
monitor and manage those ecosystems.

Similarly, the way we pay for everyday goods and services
has changed. Electronic payments, such as eCommerce
payments when shopping on-line or contactless payments
when shopping in store, have accelerated the decline
of cash.

The Americas under new leadership broke through
US$50 million of revenue for the first time. APAC was the
standout performer with revenues up 17% to $17.7 million,
which is the seventh year of consecutive growth for the
region. Europe revenue declined 1% to £9.2 million, with a
stronger contribution from Unified Communications sales
relative to other products.

Turning to products, Unified Communications (UC)
achieved growth of 17% to $59.8M, off a strong renewal
base and increases in capacity on both the Cisco and
Avaya platforms. Nearly 10% of UC revenues were derived
from new licence sales with the addition of 29 new
customers. Service Providers play a critical role in the
go-to-market for UC, providing managed services to
thousands of their customers that include Prognosis for
performance monitoring. During the last year, $14.3 million
of revenue was derived from sales to Service Providers.

Infrastructure revenue was up 9% to $28.7 million,
including the largest single deal in the Company’s
history, with a large financial services company.
Ongoing innovation on the Prognosis platform was
key to this significant extension of a long-standing
customer relationship.

Payments revenue was down 14% on the prior year
to $13.8 million, noting a very strong prior year result.
The compound growth of payments over the last
5 years remains strong at 22%. During the year, nine
new customers were added for a total of $2.2 million
in revenue.

Against this backdrop, we are pleased to report another
record year for the Company, achieving $24.1 million in
net profit after tax, 10% up over the prior year. This was
on revenue of $110.9 million, up 10% on the prior year.
Contributing to this result licence sales grew 15% to
$72.1 million.

The globalisation of Professional Services, under new
leadership, delivered growth and improved customer
satisfaction. Services revenue increased 17% to $8.6M,
driven by greater focus on time to value for customers
and high value professional services activities combined
with better execution.

Core to this performance is the high quality nature of IR’s
revenue, which in simple terms is mission critical software
sold to a Tier 1 global enterprise customer base. More
than 87% of revenue is of a recurring nature, and sold on
multi-year contracts ranging in length from 1 to 5 years.
The strength and resilience of the business model is in part
due to the diversification across three product portfolios
and three geographic regions.

The Company continued the cadence of two major
product releases within the year, as well as ongoing
investment in a new SaaS platform. The SaaS platform
went into production in December 2019 and is
currently in beta test with a number of major customers
and partners, for both UC and Payments products.

At the same time, the Company maintained its strong
investment approach to Research & Development (R&D).
Gross spending on R&D was 20% of total revenue, up from
19% in the prior year.

Annual Report 2020Integrated Research and its controlled entitiesA key differentiator for IR is the ability to support hybrid
environments. The Prognosis on-premise platform is now
complemented with the launch of the new SaaS platform.
This enables IR to support its enterprise customer base on
their journey to the Cloud. These customers are taking a
measured approach to moving mission critical workloads
to SaaS or Cloud environments. In the near term,
managing hybrid environments is critical, as workloads are
balanced across both on-premise and SaaS platforms.

Throughout the year, significant focus was placed
on maintaining high levels of customer engagement.
In October and November 2019 the Company hosted
customers in Denver, Frankfurt and London at the annual
customer Summit. The events were well attended and
provide a forum for customers to engage in the Company’s
innovation process. The events have been re-branded to
‘IR Connect’ and will be virtual events this coming year due
to travel restrictions brought on by the pandemic.

The ongoing dedication to innovation and technical
excellence, in part, resulted in a 25% (or significant)
increase in customer satisfaction, as measured by
NPS (net promoter score). IR’s customer relationships
are long term with large global customers.
Maintenance retention rates remained high at 93%.

As we look to the future, we think about it in terms
of head winds and tail winds. The macro-economic
environment brought on by the pandemic does give us
reason to be cautious. Adding to this, currency volatility
can work both for and against us, with 95% of our
business transacted outside of Australia.

In contrast, we are well placed to benefit from the surge
in remote working and cashless payments, both of which
have been accelerated by the pandemic. During 2020,
we accelerated and re-prioritised our product roadmap
to take advantage of these market dynamics. In 2021, we
are on track to bring to market a rich set of new products
to help our customers manage remote working at scale as
well as increases in cashless payments.

It is important to recognise that this rich new set of SaaS
products, will drive a transition of the business model over
the next few years. As more of our revenue is generated
from these new products, our revenue model will become
more heavily weighted to subscription, without large
upfront recognition of revenue. This has a profound effect
on how we develop and support products, as well as how
we market and sell products.

In reviewing our strategy and setting plans for 2021 and
beyond, we took account of these head winds and tail
winds, as we look to capitalise on the opportunity the
current market dynamics present. We are sharply focused
on leading indicators, to ensure that we respond quickly to
any changes in market conditions.

I would like to acknowledge the talented IR team around
the world, their hard work and dedication. The Company
appreciates the ongoing commitment from our customers
and the continued support of our shareholders.

John Ruthven

Managing Director and Chief Executive Officer

Annual Report 2020Integrated Research and its controlled entitiesTEAM UP

BE HUMAN

OWN IT

CRUSH IT

HAVE A LAUGH

The IR tribe - working together to create great.

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Annual Report 2020

Annual Report 2020Integrated Research and its controlled entities

About IR

IR is the corporate brand name of Integrated Research
Limited, the leading global provider of proactive experience
management solutions for critical unified communications,
payments, contact centres and IT infrastructure ecosystems.

The modern world relies on a complex array of technologies to keep turning. IR’s aim is to
simplify that complexity.

We provide insights, monitoring and support to keep payment hubs, unified
communications ecosystems and contact centres running as they should.

Our purpose is to create clarity and insight in a world of connected devices.

Our vision is to make the world a smarter, easier place to live and work, where people
and technology interact in a frictionless way.

Our mission is to create innovative technology that optimises operations, predicts business
disruption and automates the steps to improve the experience of every interaction.

Infrastructure
IR’s infrastructure solution
provides real-time insight
into HPE Non-Stop
environments to help
manage IT performance,
spot patterns in data
and proactively prevent
problems, to ensure
a solid foundation for
business-critical systems.

Payments
IR’s payments solutions
provide real-time
visibility across the entire
payments ecosystem,
making the environments
easier to manage,
troubleshoot and optimise.

Analyse transaction data,
deploy new technology
with confidence and
ensure a seamless
payments experience
across ACI, FIS and internal
environments on-premises
and in the cloud.

Communication
and collaboration
IR’s solutions for unified
communication and
collaboration ecosystems
enable customers to
manage their entire
multi-vendor ecosystem,
enable their remote
workforce, connect
employees to customers,
and deliver the best
possible user experience.

Whether on premises,
in the cloud, or hybrid,
IR’s performance and
experience management
capabilities allow
for real-time issue
identification, fast
problem resolution and
proactive optimization
across Avaya, Cisco and
Microsoft platforms.

Annual Report 2020Integrated Research and its controlled entities2020 in IR

TEAM UP

To team up is to collaborate.

At IR, we always strive for innovation - it is the vital ingredient that drives
growth - and this year was full of remarkable achievements that could not
have been accomplished without a remarkable collaborative effort.

We launched the Prognosis cloud platform, built with state-of-the-art data
collection, analysis, and visualisation technologies to facilitate the delivery
of more comprehensive real-time insights and analytics. This new platform
enables an immensely powerful level of intelligence and allows for greater
innovation, faster deployment and better agility to deliver continuous
enhancements and increased value to customers.

We also launched our first product on our cloud platform, Payments
Analytics. With the capability to process and analyse data from thousands
of transactions in seconds.

BE HUMAN

Have empathy, respect and compassion.

Through our Take2 volunteer program, the last year saw IR employees use
paid days off to dedicate their time to a range of fantastic causes including
OzHarvest, Red Cross, Feed My Starving Children and Conservation Volunteers.

We also offered support to the Australian Bushfire Relief effort. The Company
and employees donated upwards of $50,000 to various charities helping
with the recovery, we collected food, clothing and school supplies to send
to impacted areas, and dedicated our FY20 Hackathon to proposing an
innovation to help prevent, or recover from, disasters such as bushfires.

Annual Report 2020Integrated Research and its controlled entitiesOWN IT

Ownership, responsibility, and recognition.

With the expectation of ownership comes the commitment to recognize
the hard work our employees demonstrate every day.

The Celebrating Our People program was launched to provide a framework
to reward employees who go above and beyond.

CRUSH IT

Determination to succeed.

2020 was a year of success.

We recorded another record-breaking year for revenue and profit, as well as
closing the largest deal in IR’s corporate history with JP Morgan Chase.

IR were also named as a foundation member of the S&P ASX All
Technology Index.

These achievements are a great indication of the trust that our customers
and the market have in the Company, and reinforce the high calibre of
our organisation, products and employees.

HAVE A LAUGH

Find time to enjoy every day.

The last year has seen the world endure hardships. It’s more important than
ever to find joy where we can.

In our commitment to fostering a positive working environment for our
employees around the globe, we have tried to provide space for enjoyment
by hosting a range of social and wellbeing activities including games nights
(both in person and virtually), a virtual Amazing Race, Culture and Diversity
week, exercise classes, and mental health talks.

Annual Report 2020Integrated Research and its controlled entitiess
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Annual Report 2020Integrated Research and its controlled entities

Directors’
report

Contents

14 Review of operations
18 Outlook and strategy for 2021
20 Board of Directors
22 Senior management
24 Directors’ interests
25 Share options and performance rights
27 Remuneration report (audited)

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Annual Report 2020

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Annual Report 2020Integrated Research and its controlled entities

Directors’
report

Annual revenue  10%

Licence Fees  15%

Annual after tax profit  10%

$110.9M

$72.1M

$24.1M

Review of
operations and
activities

Principal activities
Integrated Research Limited’s
(the “Company” or “IR”) principal
activities are the design,
development, implementation and
sale of systems and applications
management computer software for
business-critical computing, Unified
Communication networks and
Payment networks.

Group overview
Integrated Research has a long
heritage of providing performance
monitoring, diagnostics and
management software solutions
for business-critical computing
environments.

Since its establishment in 1988, the
Company has provided its Prognosis
products to a cross section of large
organisations requiring high levels of
computing performance and reliability.

Prognosis is an integrated suite
of monitoring and management
software, designed to give an
organisation’s management and
technical personnel operational insight
into and optimise the operation of
their HP NonStop, distributed system
servers, Unified Communications
(“UC”), and Payment environments
and the business applications that
run on these platforms.

Integrated Research has developed
its Prognosis products around a
fault-tolerant, highly distributed
software architecture, designed to
achieve high levels of functionality,
scalability and reliability with a low
total cost of ownership.

Integrated Research services
customers in more than 60 countries
through direct sales offices in the
USA, UK, Germany, Singapore
and Australia, and via a global,
channel-driven distribution network.
Integrated Research’s customer
base consists of many of the world’s
largest organisations and includes
major stock exchanges, banks, credit
card companies, telecommunications
carriers, technology companies,
service providers and manufacturers.

The Company generates its
revenue from licence fees, recurring
maintenance, testing solutions
and professional services (formerly
referred to as consulting). Revenue
from the sale of licences where there
are no post-delivery obligations is
recognised in profit at the date of the
delivery. Revenue from maintenance
contracts is recognised rateably over
the service agreement. Revenue from
professional services and testing
solution services is recognised over
the period the services are delivered.
The Company has recently expanded
its product offering to Software
as a Service (“SaaS”) with the
introduction of cloud based solutions.
SaaS revenues are recognised
rateably over the delivery period.

Review and
results of
operations

Overview
The Company achieved $24.1 million
in profit after tax, representing a
10% increase over the prior year and
within the guidance provided to the
Australian Securities Exchange on
17 July 2020. The result was driven
through strong licence sale growth
in Unified Communications and
was supported through a strong
renewal cycle. The Infrastructure
and Payments product lines were
underpinned by the closure of the
JP Morgan transaction for US$10
million as announced in March 2020.
The contract was the largest deal in
the Company’s 30+ years of trading.
The fourth quarter result carried the
effect of the COVID-19 pandemic
and whilst sales were lower than the
previous fourth quarter, the Company
remained profitable for the period and
is a testament to the resilience of the
business. Whilst there are short term
headwinds such as the unresolved
impact of the pandemic and the rising
Australian dollar, the Company stands
to benefit over the medium term
through the release of new products
to serve the acceleration in demand
for on-line collaboration driven by
remote working and the increasing
need for cashless transactions.

Annual Report 2020Integrated Research and its controlled entitiesDirectors’ reportRevenue
Revenue for the year was $110.9 million, an increase of 10% over 2019 with the strongest growth coming from the
Company’s Asia Pacific operations. Licence fees increased by 15% to $72.1 million with strong growth from Unified
Communications followed by Infrastructure.

The following table presents Company revenues for each of the relevant product groups:

In thousands of AUD

Unified Communications

Infrastructure

Payments

Professional services

Total revenue

2020

59,818

28,657

13,808

8,630

110,913

2019

% Change

51,043

26,343

16,047

7,387

100,820

17%

(14%)

17%

10%

Unified Communications revenue grew 17% over the prior year to $59.8 million with growth sourced through a strong
renewal cycle attached with additional capacity sales on both the Cisco and Avaya platforms. New business licence sales
of $5.8 million were achieved for the year with 29 new customers added to the fold. Licence sales to Microsoft Skype for
business customers was down against the prior year with further customer migration to Microsoft Teams. Fourth quarter
sales faced some headwinds due to the impact of the pandemic. Importantly, customers continued to buy Prognosis
solutions through this period.

Infrastructure revenues increased by 9% to $28.7 million and were underpinned by the large JP Morgan transaction
closed in March. Licence transactions sold during the year were closed on a multi-year term basis with maturities ranging
from three to five years.

Payments revenue decreased by 14% over the prior year to $13.8 million, however the compound growth rate across
the last five years remains high at 22% demonstrating the underlying trend remains on a growth trajectory. There were
nine new customers added over the year facilitating an increase in the baseline for future growth. Existing customers
who renewed their Prognosis solution typically added capacity together with additional modules demonstrating their
commitment to the product.

Professional services revenue increased by 17% to $8.6 million. The Company implemented a renewed global professional
services structure during the year under new leadership. There was greater focus on time to value for customers and high
value professional services activities combined with better execution to deliver the strong growth.

The following table presents Company revenues for each of the relevant geographic segments in underlying
natural currencies:

Asia Pacific (A$’000)

Americas (USD’000)

Europe (£’000)

2020

17,651

50,258

9,243

2019

% Change

15,052

49,696

9,360

17%

(1%)

Asia Pacific revenues grew 17% over the prior year to $17.7 million and represents seven years of consecutive growth with
a compound annual growth rate of 13% across this period. The region achieved growth across all product lines with a
combination of renewals, capacity sales and new business.

The Americas revenue of US$50.3 million was up 1% compared to the prior year. The region successfully delivered a
strong second half with licence fees up 35% with growth across all product lines. Importantly, the region continued to
drive revenue in the fourth quarter despite the difficult macro-economic environment caused by the pandemic.

Europe revenues declined by 1% to £9.2 million. The region achieved licence sales growth over the prior year in Unified
Communications which was offset by cyclical falls in Payments and Infrastructure. The region continues to develop their
sales capabilities under new leadership.

Annual Report 2020Integrated Research and its controlled entitiesExpenses
The following table presents the Company’s cost base compared to the preceding year:

In thousands of AUD

Research and development expenses

Sales, professional services and marketing expenses

General and administration expenses

Total expenses

2020

17,388

54,560

6,232

78,180

2019

17,888

49,787

5,557

73,232

% Change

(3%)

10%

12%

Total expenses were up 7% to $78.2 million with a conservative approach to investment in the fourth quarter following the
on-set of the COVID-19 pandemic. Total staff numbers finished the year at 266 (2019: 270). Gross spending on research
and development expenditure represents 20% of total revenue (2019: 19%):

In thousands of AUD

Gross research and development spending

Capitalisation of development expenses

Amortisation of capitalised expenses

Net research and development expenses

Gross spend as a % of revenue

2020

22,518

(13,962)

8,832

17,388

20%

Shareholder returns

Returns to shareholders remain strong through the payment of franked dividends:

Net profit ($’000)

Basic EPS

Dividends per share

Dividend franking percentage

Return on equity

2020

$24,054

14.00c

7.25c

100%

29%

2019

18,966

(11,275)

10,197

17,888

19%

2019

$21,851

12.72¢

7.25¢

100%

31%

% Change

19%

(24%)

(13%)

(3%)

2018

$19,180

11.19c

6.5c

100%

33%

Annual Report 2020Integrated Research and its controlled entitiesDirectors’ reportFinancial position

The following table presents key items from the consolidated statement of financial position:

In thousands of AUD

Assets

Cash and cash equivalents (current)

Trade and other receivables (current and non-current)

Right-of-use assets (non-current)

Intangible assets (non-current)

Liabilities

Lease liabilities (current and non-current)

Borrowings (non-current)

Deferred Revenue

2020

2019

9,744

87,252

6,397

29,052

6,514

5,000

22,323

9,316

72,767

23,101

22,330

Equity

82,522

69,827

The Company’s end of year cash position was $9.7 million with $5 million of debt. The increase in trade receivables
was in part driven by the continuation of deferred payment sales to customers and in part due to delays in cash
collections toward the end of the year. There was $9.4 million past due as disclosed in Note 11 of the Financial Statements.
Importantly, $6.7 million of the overdue debtors have been collected in the subsequent period. The Company’s risk
exposure is heavily weighted toward financial institutions and the long-term record of historic bad debt write-offs have
been minimal.

The increase in right-of-use assets along with the increase in lease liabilities is the result of bringing the Company’s
operating leases onto the balance sheet upon the adoption of the new AASB16 accounting standard on leases.

The growth in intangible assets represents the investment in the Company’s next generation Prognosis platform. These
assets will be amortised over a five-year period in the new financial year.

The consolidated statement of financial position presented at page 51 together with the accompanying notes provides
further details.

Annual Report 2020Integrated Research and its controlled entitiesOutlook and
Strategy for 2021

The innovation agenda
has accelerated at
Integrated Research
to respond to new
opportunities offered by
the rapid shift to remote
working and increased
volume of cashless
payments, simplifying
the complexity of critical
systems to ensure
business continuity.

The overnight shift to work from
home (“WFH”) that has occurred in
response to the global pandemic
has resulted in significant changes
how we work and how we live. The
resultant dramatic spike in the use
of online services and collaboration
platforms, like Microsoft Teams,
Cisco WebEx, Avaya Cloud Office,
Zoom and Slack, as well as cashless
payment forms, has accelerated IR’s
innovation agenda.

During the past six months there
has been an explosion in ‘meeting
minutes’ hosted on collaboration
platforms. Microsoft reported that
the number of ‘daily active users’
on Microsoft Teams has reached
75 million, up nearly 70%. Zoom
reported that overall users is up
over 350%, and their enterprise
customer base has increased by
90%. The estimated size of the
experience management market for
cloud unified communications and
collaboration is US$1.2 billion.

There has been an accelerated
shift away from cash and towards
contactless and ecommerce
payment options. This places
higher demands on the reliability of
payment networks and increases
the potential for fraudsters to find
opportunities to exploit. These factors
have increased the demand for
transaction monitoring and analytics
tools that proactively identify system
issues and provide real-time insights
enabling corrective action.

IR is ideally positioned to expand and
grow in the current environment.
The sharp escalation in call volumes,
meeting minutes, and online and
credit card transactions plays to
the Company’s core strengths. To
that end, the strategy leverages IR’s
market position in both collaboration
and payments as demand in these
spaces continues to grow.

The recent launch of the next
generation Prognosis platform as
a hybrid cloud service provides
customers with flexible deployment

options and accelerates the time
to market for a range of new
solutions. Leveraging the platform,
IR’s strategy focuses on providing
continued support for existing
on-premises collaboration and
payments systems, whilst extending
further into new cloud services.
As organisations seek to manage
the additional complexities that
have been driven by recent events,
IR provides the insights required to
increase productivity and optimise
critical systems.

With a long history of providing
market-leading solutions for Cisco,
Avaya and Microsoft on-premises
deployments, IR is drawing on
that extensive experience and
knowledge to develop solutions
for cloud-based collaboration
platforms. The Company’s phase
one focus will be on delivering
solutions for Microsoft Teams
and Zoom, with support for other
cloud-based platforms to follow in
subsequent phases.

Supplementing the existing unified
communications and collaboration
portfolio with these new offerings
will meet customer demand for
tools to seamlessly manage their
increasingly complex, hybrid,
multi-vendor ecosystems.

The pandemic has created a volatile
payments market, in which volumes
can fluctuate wildly. Customer
preference has surged towards
contactless and ecommerce
payment methods, while cash has
seen an accelerated decline.

IR’s newly expanded Payments
solution set, now covering both
on-premises and SaaS deployments,
enables payments providers globally
to contend with these rapid and
fluctuating changes by simplifying
complexity, providing deep, real-time
visibility into their systems, and giving
teams at all levels the insights they
need to take corrective action and
ensure success.

Annual Report 2020Integrated Research and its controlled entitiesDirectors’ reportHP Enterprise NonStop remains at
the operational core of many of the
world’s largest companies. These
organisations leverage NonStop to
support high-volume environments,
with the demand from financial,
telecommunications, trading and
other high-value verticals remaining
strong, as these customers seek to
leverage their existing assets. This
well-defined market represents a
notable portion of IR’s customer base,
in which the Company will continue
to invest.

The Research and Development
focus has been on improving the
delivery of high‑value, high‑quality
solutions to market at speed.

A quality baseline was determined
using historical data that the
team has built on demonstrating
continuous quality improvement. The
velocity at which the team are able
to develop feature sets is another key
indicator that is measured, to ensure
the development cycle matches
evolving industry requirements, and
that internal skillsets are aligned with
those requirements. The Company
continues to adhere to strict
standards, such as secure by design,
to guide product development.

In the unified communication and
collaboration space, IR’s customer
base is made up of large enterprises
and service providers, who are
leveraging solutions primarily from
Avaya, Cisco and Microsoft. The
focus is on enterprises with more
than 5,000 users and tier one
service providers, with a current split
of approximately 60% enterprises
and 40% service providers.

In the payments space, IR’s
customers include banks, large
retailers and 20 of the top 100
merchant acquirers globally. While
most of these customers use ACI or
FIS technology in their environment,
there is a focus on expanding
capabilities over the coming year to
accommodate organisations utilising
other payments platforms.

For Infrastructure the focus is on
large organizations who run the HP
Enterprise NonStop platform. The
NonStop platform has a particular
strength in payment transaction

processing which is aligned with
IR’s payments product line. Around
75% of IR’s NonStop customers are
running payments applications.

The Company faces competition in
various forms in each market. While
there are some nuances by region,
these competitors fall broadly into
four buckets.

Firstly, some larger collaboration and
payments vendors have developed
their own performance management
software. These proprietary
solutions are generally limited in
their functionality compared to IR’s
solutions, both in terms of metrics
captured and analysed (which
directly translates to the power of
the insight and time to resolution of
issues) and the inability to monitor
complex multi-vendor environments.

Secondly, some of the large
enterprise software vendors offer
performance management products,
which tend to focus on broad
coverage rather than deep insights.

Thirdly, there are niche competitors.
These are generally smaller
companies, with lower cost offerings
and less functionality.

Finally, some customers have
developed bespoke capabilities,
often in the form of scripting, to
perform competing functions.
These are usually targeted to a
specific function, highly customised,
and not scalable.

The Company’s competitive
differentiation across all four
competitive segments lies in IR’s
proven deep domain expertise.
Customers choose IR when they value
the quality of the experience, the use
cases are complex, the data volumes
are high, and the environment is
mission critical.

IR’s direct sales model is
complemented by a large global
network of certified partners who
sell IR solutions and integrate
value-added products and services
to ensure customers maximise the
value. Their intimate knowledge
of the customer environment,
coupled with the domain knowledge
provided by IR, helps drive world-class
customer satisfaction.

Service providers reduce complexities
for their customers by managing
collaboration and payment systems
on their behalf. By integrating
IR solutions into their standard
offerings, service provider can deliver
against service level agreements
and reduce their cost of delivery.
As they onboard new customers,
IR’s pricing model allows for shared
success. The service providers are
not only important customers in
their own right, but IR’s channel to
the mid-market and medium size
customers that are not targets for
the direct sales force.

Customers gain maximum value
from IR solutions when they are
finely tuned to the environment in
which they operate. IR’s Professional
Services team are highly trained
consultants who configure IR
solutions in line with a customer’s
specifications. Through Professional
Services, customers are able to
achieve more with IR’s solutions,
improving customer satisfaction
and contributing to improved
renewal rates.

For more than 30 years, IR’s
enduring value proposition has
been a proven ability to help
customers simplify the complexity
of their critical systems and
ensure performance, reliability
and scalability.

With close to 90% of IR’s revenue
recurring as multi-year contracts,
retention rates are high, and the
foundations of the business model
are strong. IR’s product roadmap
and innovation agenda is leveraged
to current market dynamics and the
Company expects to benefit from
the growth in collaboration services
and cashless payments. IR has a
proven track record of acquiring
new customers, with 38 new logos
in the 2020 financial year. The new
financial year brings continuing
global economic uncertainty
from the pandemic. To that end
management will take a prudent
approach to costs in the first half and
will take advantage of anticipated
stronger demand during the 2021
calendar year through the sale of
new solutions.

Annual Report 2020Integrated Research and its controlled entitiesBoard of Directors

The Directors of the Company at any time during or since the end of the financial year are listed below:

Paul Brandling
BSc Hons, MAICD

Independent Non‑Executive
Director and Chairman

John Ruthven
B.Ed

Managing Director and
Chief Executive Officer

Nick Abrahams
B Comm, LLB (Hons), MFA

Independent
Non‑Executive Director

Paul was appointed a Director
in August 2015 and elected
Chairman in November 2018. He has
worked in the information technology
industry for over 30 years and has
broad experience in hardware,
services and software. He has
previously held the positions of Vice
President and Managing Director
of Hewlett-Packard South Pacific
plus Vice President and Managing
Director of Compaq South Pacific.
From 2001 to 2012, Paul was a
member of the International CEO
Forum (Australia) and served as a
Director of the Australian Information
Industry Association (AIIA) from
2002 to 2011. Mr Brandling was
previously a Director of Amcom
Telecommunications Limited until
its acquisition by Vocus and was a
Director of Vocus Communications
Limited until February 2016. He
was a Director of Tesserent Limited
(ASX: TNT) until October 2017 and
a Director of Avoka Technologies
Pty Ltd until December 2018. He
currently serves as a Non-Executive
Director of Infomedia Ltd (ASX: IFM).
Paul’s current term will expire no later
than the close of the 2021 Annual
General Meeting.

Listed company directorships held in
the past three years other than listed
above: None.

John joined IR in July 2019 as the
Company’s Chief Executive Officer
and was appointed as Director
in September 2019. Mr Ruthven is an
internationally experienced software
industry executive respected for his
strategic approach and operational
expertise across global enterprises.
Mr Ruthven has over 20 years’
experience working in the technology
industry with a proven track record
of leadership and delivering strong
profitable growth.

Most recently, Mr Ruthven was the
Operating Officer - Global Sales
at TechnologyOne. Prior to that he
was President & Managing Director
ANZ of SAP, SVP International
Sales at Zuora Inc, and held various
senior positions at CA Technologies
and Computer Associates Inc.
John has extensive international
experience in the USA, Europe and
Asia Pacific regions.

Listed company directorships held in
the past three years other than listed
above: None.

Nick was appointed as a Director
in September 2014. Mr. Abrahams
is highly experienced in corporate,
intellectual property and
international law pertaining to
the technology industry, with
over 20 years’ experience as a
private practice lawyer. He has
worked extensively internationally
representing Australian high-tech
companies as well as working for
three years with a law firm in Japan.
Mr Abrahams also spent time
working in the United States in the
late nineties and was an executive
with Warner Brothers in Los Angeles,
followed by a period as a senior
executive at listed technology
company, Spike Networks, also in
Los Angeles. Mr Abrahams returned
to legal practice in 2002 and is a
partner of and is global leader for the
technology and innovation practice
of a global law firm. Mr. Abrahams
is on the Board of the Vodafone
Foundation, on the Board of Sydney
Film Festival and is a Director of
the Garvan Research Foundation.
Nick’s current term will expire no later
than the close of the 2020 Annual
General Meeting.

Listed company directorships held in
the past three years other than listed
above: None.

Annual Report 2020Integrated Research and its controlled entitiesDirectors’ reportGarry Dinnie
BCom, FCA, FAICD, FAIM

Independent
Non‑Executive Director

Peter Lloyd
MAICD

Independent
Non‑Executive Director

Anne Myers
MBA, GAICD

Independent
Non‑Executive Director

Garry was appointed a Director
in February 2013. He is a Director &
Chair of the Audit & Risk Committee
of CareFlight Limited, Australian
Settlements Limited and a Director
of a number of private companies.
He is also the Chair or member of a
number of Audit & Risk Committees
of NSW public sector and private
sector entities. He was previously a
partner with Ernst & Young for 25
years specialising in audit, advisory
and IT services. Garry’s current term
will expire no later than the close of
the 2022 Annual General Meeting.

Garry is currently Chair of
Integrated Research’s Audit & Risk
Committee and Nomination &
Remuneration Committee.

Listed company directorships held in
the past three years other than listed
above: None.

Peter was appointed Director
in July 2010. He has over 45 years’
experience on computing technology,
having worked for both computer
hardware and software providers.
For the past 35 years, Peter has been
specifically involved in the provision
of payments solutions for banks and
financial institutions. He is currently
the proprietor of The Grayrock Group
Pty Ltd, a management consultancy
company focusing on the payments
industry. Peter is a Non-Executive
Director of privately held Taggle
Pty Ltd. Peter has previously been a
Non-Executive Director of Flamingo
AI Limited (ASX: FGO) and a Non
Executive Director of identitii Ltd
(ASX:ID8). Peter’s current term will
expire no later than the close of the
2022 Annual General Meeting.

Peter is currently Chair of Integrated
Research’s Strategy Committee.

Listed company directorships held in
the past three years other than listed
above: None.

Anne was appointed a Director
in July 2018. Ms. Myers has worked in
the finance and technology industry
for over 30 years with experience
in business strategy, technology,
digital innovation and operational
functions. Anne is the former Chief
Operating Officer and CIO of ING
Direct Australia and has acted in
executive technology and business
roles for QBE, Macquarie Bank and
St George Bank. She currently acts
as an advisory board member to
early phase technology innovators,
is a director of both Defence Bank
Limited and United Way Australia
Limited and is a Council Member of
the University of New England. Ms.
Myers has also worked in the not for
profit sector for United Way Australia,
and was a member of the Industry
Advisory Network for the University of
Technology. Anne’s current term will
expire no later than the close of the
2021 Annual General Meeting.

Listed company directorships held in
the past three years: None.

Company Secretary

David Purdue
BEc, MBA, Grad Dip CSP, FCA, FGIA, FCIS, GAICD

David was appointed Company Secretary in July 2012. David was also the Company’s
Global Commercial Manager until his retirement in July 2016. Prior to this, David spent
three years at Integrated Research’s Colorado office to manage the Americas finance
operations. David is a Chartered Accountant and Chartered Secretary with over
30 years experience in both professional practice and industry.

Annual Report 2020Integrated Research and its controlled entitiesSenior management

Peter Adams
B.Com, CA

Chief Financial
Officer

Peter joined IR in March 2008 and is responsible for overseeing
the Company’s finance and administration, including
regulatory compliance and investor relations. Peter is a
Chartered Accountant with over 25 years experience. He has
held a number of senior accounting and finance roles, including
seven years as CFO with Infomedia (an ASX-listed technology
company), six years with Renison Goldfields (ex ASX top 100
Resources Company) and two years with Transfield Pty Ltd.
Peter’s career began with Arthur Andersen, where he was
responsible for managing large audit clients.

Matt Glasner
B.Eng (Hons), GAICD

Chief Commercial
Officer

Kevin Ryder
M.Mgt, MBA, GAICD

Chief Marketing and
Product Officer

Matt joined IR in July 2018 and was appointed Chief Commercial
Officer in January 2019. Matt is a seasoned business leader
and Non-Executive Director with 20 years of successful sales,
management and leadership experience. Matt’s previous roles
include Managing Director South APAC for First Advantage and
Managing Director Experian Marketing Services ANZ. Matt brings
solid strategic and tactical expertise across sales and marketing,
operations, offshoring, organisational structure, change
management and leadership. Matt graduated from the University
of Birmingham, England with a Bachelor of Engineering (Honours)
and is a Graduate of the Australian Institute of Company Directors.

Kevin joined IR in October 2013 and is responsible for marketing
and product strategy. He has extensive experience in the
technology industry, including leadership roles in Europe, North
America, Asia and Australia. Prior to joining IR, Kevin was the
Enterprise Marketing Director at Microsoft and has previously
held senior executive roles at KAZ Group, Attachmate and Eicon
Technology. Kevin was ranked at number 18 by CMO Magazine
in the 2015 CMO50 list, recognising Australia’s most innovative
chief marketing officers.

Michael
Tomkins
Chief Technology
Officer

Michael joined IR in September 2018 and is responsible for
leading the development teams. Michael has deep expertise
and a proven track record in building cloud platforms at scale,
and is also a cyber security expert. Michael was formerly
CEO of Deluxe Media Cloud and was CTO of FoxSports for
5 years where he transformed the business from an ‘iron and
airwaves’ broadcaster of premium sports content, to a fully
digital cloud-based service, delivering a flawless experience to
millions of viewers.

Vanessa
Walker
B.Bus

Chief People and
Culture Officer

Vanessa joined IR in September 2017. Vanessa has extensive
experience in both strategic and operational commercially
driven HR roles, particularly in the technology sector with
companies such as Experian, Hyperion, Sage and Hitachi Data
Systems. This includes a strong focus on Talent Management,
Culture and Employee Engagement across Asia Pacific through
leadership of regional HR teams and globally via active
participation in the organisations’ global HR Councils.

Annual Report 2020Integrated Research and its controlled entitiesDirectors’ reportThe Directors present their report together with the Financial Statements of
Integrated Research Limited (“the consolidated entity”), being the Company
and its controlled entities, for the year ended 30 June 2020 and the Auditor’s
Report thereon.

Results

The net profit of the consolidated entity for the 12 months ended 30 June 2020 after income tax expense was $24.1 million.

Dividends

Dividends paid or declared by the Company since the end of the previous financial year were:

Final 2019 - Ordinary shares

Interim 2020 - Ordinary shares

Final 2020 - Ordinary shares

100% franked

3.75

3.5

3.75

6,445

6,015

15 Oct 2019

17 Apr 2020

6,445

15 Oct 2020

Cents
Per share

Total Amount
$’000

Date of
Payment

Events subsequent to reporting date

For dividends declared after 30 June 2020 see Note 23 in the financial statements. The financial effect of dividends
declared and paid after 30 June 2020 has not been brought to account in the financial statements for the year ended
30 June 2020 and will be recognised in subsequent financial statements.

Future developments

Likely developments in the operations of the consolidated entity in future financial years and the expected results of
those operations are referred to generally in the Review of Operations and Activities Report.

Further information on likely developments including expected results would be in the Directors’ opinion, result in
unreasonable prejudice to the Company and has therefore not been included in this Report.

Directors and Company Secretary

Details of current directors’ qualifications, experience and special responsibilities are set out on pages 20 to 21. Details of
the Company Secretary and his qualifications are set out on page 21.

Officers who were partners of the audit firm during
the financial year

No officers of the Company were partners of the current audit firm during the financial year.

Annual Report 2020Integrated Research and its controlled entitiesDirectors’ meetings

The numbers of meetings of the Company’s Board of Directors and of each board committee held during the year ended
30 June 2020, and the numbers of meetings attended by each director were:

Board Meetings

Audit and Risk
Committee
Meetings

Nomination and
Remuneration
Committee
Meetings

Strategy
Committee
Meetings

Nick Abrahams

Paul Brandling

Garry Dinnie

Peter Lloyd

Anne Myers

John Ruthven

A: Number of meetings attended.

B: Number of meetings held during the time the Directors held office or was a member of the Board or committee during the year.

State of affairs

In the opinion of the Directors there were no significant changes in the state of affairs of the consolidated entity that
occurred during the financial year under review.

Environmental regulation

The consolidated entity’s operations are not subject to significant environmental regulations under either
Commonwealth or State legislation.

Directors’ interests

The relevant interest of each director in the shares, options or performance rights over ordinary shares issued by the
companies in the consolidated entity and other relevant bodies corporate, as notified by the Directors to the Australian
Securities Exchange in accordance with S205G(1) of the Corporations Act 2001, at the date of this report is as follows:

Ordinary shares in Integrated Research

Options

Performance
rights

Paul Brandling

Nick Abrahams

Garry Dinnie

Peter Lloyd

Anne Myers

John Ruthven

Directly held

14,234

9,000

Beneficially
held

25,104

13,446

9,000

27,000

Total

Number of options

Number of rights

39,338

13,446

9,000

27,000

9,000

152,438

Annual Report 2020Integrated Research and its controlled entitiesDirectors’ reportShare options and performance rights

Options and performance rights granted to directors and key management personnel
During or since the end of the financial year, the Company granted performance rights for no consideration over
unissued ordinary shares in Integrated Research Limited to the following named directors and executive officers of the
consolidated entity as part of their remuneration:

Directors

John Ruthven

Executive Officers

Peter Adams

Matt Glasner

Number of
performance
rights granted

Performance
hurdle

Exercise price

Expiry date

106,707

45,731

40,000

27,515

44,811

Yes

Nil

Aug 2022

The performance rights were granted under the Integrated Research Performance Rights and Option Plan
(established November 2011).

Unissued shares under performance rights

Unissued ordinary shares of Integrated Research Limited under performance rights at the date of this report are as follows:

Expiry date

Aug 2020

Sep 2020

Feb 2021

Aug 2021

Oct 2021

Feb 2022

Aug 2022

Total performance rights

Performance rights

Exercise price

Number of shares

Nil

70,000

244,000

40,000

83,000

148,000

89,988

378,705

1,053,693

Performance rights do not entitle the holder to participate in any share issue of the Company or any other body corporate.

Annual Report 2020Integrated Research and its controlled entities • The non-audit services provided
do not undermine the general
principles relating to auditor
independence as set out in
Professional Statement F1
Professional independence, as
they did not involve reviewing
or auditing the auditor’s own
work, acting in a management or
decision making capacity for the
Company, acting as an advocate
for the Company or jointly sharing
risks and rewards.

A copy of the auditors’ independence
declaration as required under
Section 307C of the Corporations Act
is on page 90 and forms part of the
Directors’ Report.

Rounding
of amounts
to nearest
thousand dollars

The Company is of a kind referred
to in ASIC Corporations Instrument
2016/191 and in accordance with
that Class order, amounts in the
Financial Statements and the
Directors’ Report have been rounded
off to the nearest thousand dollars,
unless otherwise stated.

This report is made in accordance
with a resolution of the Directors.

Indemnification
and insurance
of officers and
auditors

Indemnification
The Company has agreed to
indemnify the Directors of the
Company on a full indemnity basis to
the full extent permitted by law, for
all losses or liabilities incurred by the
Director as an officer of the Company
including, but not limited to, liability
for negligence or for reasonable costs
and expenses incurred, except where
the liability arises out of conduct
involving a lack of good faith.

To the extent permitted by law, the
Company has agreed to indemnify
its auditors, Ernst &Young Australia,
as part of the terms of its audit
engagement agreement against
claims by third parties arising
from the audit (for an unspecified
amount). No payment of this type
has been made to Ernst & Young
during or since the financial year.

Insurance
During the financial year Integrated
Research Limited paid a premium to
insure the Directors and executive
officers of the consolidated entity
and related bodies corporate.

The liabilities insured include costs
and expenses that may be incurred
in defending civil or criminal
proceedings that may be brought
against officers in their capacity as
officers of the consolidated entity.

Remuneration
report

The Company’s Remuneration Report,
which forms part of this Directors’
Report, is on pages 27 to 39.

Corporate
governance

A statement describing the Company’s
main corporate governance practices
in place throughout the financial year
is on pages 41 to 47.

Non‑audit
services

During the year Ernst and Young, the
Company’s auditor, has performed
certain other services in addition to
their statutory duties.

The Board has considered the
non-audit services provided during
the year by the auditor and in
accordance with written advice
provided by resolution of the Audit
& Risk Committee, is satisfied that
the provision of those non-audit
services during the year by the
auditor is compatible with, and
did not compromise, the auditor
independence requirements of
the Corporations Act 2001 for the
following reasons:

• All non-audit services were subject

to the corporate governance
procedures adopted by the
Company and have been reviewed
by the Audit & Risk Committee
to ensure they do not impact the
integrity and objectivity of the
auditor, and

Paul Brandling
Chairman

John Ruthven
Managing Director and
Chief Executive Officer

Dated at North Sydney this 20th day of August 2020

Annual Report 2020Integrated Research and its controlled entitiesDirectors’ reportRemuneration Report
(audited)

1. Strategic priorities and link to

remuneration objectives

The Company’s remuneration strategy and remuneration framework are aligned with the Company’s business strategy.
Our remuneration framework is underpinned by our strategy to:

• Drive innovation and research and development activities on new platforms, particularly cloud-related platforms;

•

Focus on growing and consolidating our footprint in key geographical markets; and

• Build strong and lasting alliances

The remuneration structures of the Company are designed to attract suitably qualified candidates, reward the
achievement of strategic objectives, and achieve the broader outcome of creating strong value and returns to
shareholders. These remuneration structures are competitively set based on the remuneration principles including:

• Attract and retain top talented Key Management Personnel (“KMP”)

• Alignment between remuneration reward with business strategy and driving shareholders’ value/return

• Structure that is flexible in adapting to a changing environment

•

Fair and equitable remuneration framework

1. Relationship between remuneration and

Company performance

In considering the Company’s performance and benefits for shareholder wealth, the Nomination and Remuneration
Committee (the “Committee”) has regard to the following indices in respect of the current financial year and the previous
four financial years:

Five‑year selected financial indices of the Company

Licence fees ($’000)

Net profit after tax (NPAT) ($’000)

Dividends paid ($’000)

Closing share price

Change in share price

Reported NPAT growth %

Average KMP remuneration growth

2020

72,098

24,054

12,460

$3.85

$0.55

10%

2019

62,774

21,851

12,027

$3.30

$0.19

14%

(2%)

2018

52,591

19,180

11,137

$3.11

($0.11)

2017

53,441

18,520

11,088

$3.22

$0.97

16%

2016

45,725

16,029

11,906

$2.25

$0.56

12%

Paul Brandling

Chairman

John Ruthven

Managing Director and

Chief Executive Officer

Annual Report 2020Integrated Research and its controlled entities

Licence Fees vs Average KMP Remuneration

NPAT vs Average KMP Remuneration

80,000

70,000

60,000

50,000

40,000

30,000

20,000

10,000

450

430

410

390

370

350

330

310

290

270

250

30,000

25,000

20,000

15,000

10,000

5,000

450

400

350

300

250

2016

2017

2018

2019

2020

2016

2017

2018

2019

2020

Licences ($’000)

Average Remuneration per KMP ($’000)

Net profit ($’000)

Average Remuneration per KMP ($’000)

Two of the financial indices shown in the table above are Licence Fees and NPAT. The Committee considers these two
financial performance metrics as Key Performance Indicators (KPIs) in setting the STI and LTI elements of the KMP
remuneration package.

The graphs show a decrease in the average KMP remuneration for 2019 due to the resignation of the CEO and reversal
of associated share-based payments expense. The CFO (Peter Adams) was placed as interim CEO from February 2019
until the commencement of the new CEO (John Ruthven) in July 2019.

The above charts show that the Executive KMP’s remuneration framework has successfully driven performance and the
creation of shareholder wealth over the longer term. In addition, it is evident that the Executives KMP’s remuneration is
aligned with overall Company performance. The Committee considers that the above performance-linked structure is
generating the desired outcomes.

2. Persons included in the Remuneration Report

KMP, including directors, have authority and responsibility for planning, directing and controlling the activities of the
Company and the consolidated entity. The following were KMP of the Company at any time during the reporting period,
and unless otherwise indicated were KMP for the entire period:

2.1. Executive KMP
As of the current year, the Committee assessed the Executive KMP to include the following executive roles.

Executive KMP

Role

John Ruthven

Chief Executive Officer and Managing Director

Peter Adams

Chief Financial Officer

Matt Glasner

Chief Commercial Officer

Appointed

July 2019 as Chief Executive Officer
September 2019 as Managing Director

March 2008

January 2019

The Chief Commercial Officer (CCO) role was a newly created position in January 2019 reporting directly to the CEO with
the regional leadership reporting into the CCO. As a result, the previous roles of Senior Vice President Asia Pacific and
President Americas & VP European Field Operations ceased to be KMP. Further, upon the appointment of the new CEO
in July 2019, the role of Chief Marketing and Customer Officer (held by Kevin Ryder) was deemed not to be KMP based
upon delegated authority remits.

2.2. Independent Non‑Executive Directors

Directors

Role

Paul Brandling

Independent Non-Executive Director and Chairman

Nick Abrahams

Independent Non-Executive Director

Garry Dinnie

Independent Non-Executive Director

Peter Lloyd

Independent Non-Executive Director

Anne Myers

Independent Non-Executive Director

Appointed

Director from August 2015
Chairman from November 2018

September 2014

February 2013

July 2010

July 2018

Annual Report 2020Integrated Research and its controlled entitiesRemuneration report (audited)3. Executive remuneration

3.1. Remuneration framework
The remuneration framework set out below considers the capability and experience of the KMP, their ability to control
business performance, and the Company’s performance.

Fixed remuneration

Short‑term incentive (STI)

Long‑term incentive (LTI)

Description of
components

Base salary plus
superannuation and any fringe
benefits such as motor vehicles.

The STI is an “at risk” bonus
provided in the form of cash.

Objectives

To ensure that KMP
remuneration is competitive in
the marketplace.

The measures are chosen as
they directly align the individual
KMP’s reward to the KPIs of the
Company and to its strategy
and performance.

KPIs

N/A

The KPIs vary with position and
responsibility and are aligned
with each respective year’s
budget. Financial KPIs include:

• NPAT

• Licence revenue

• Total revenue

In addition to the above,
non-financial KPIs exist and vary
with the KMP position. Refer to
section 3.2 for further details.

The LTI is provided as either
options or performance rights
over ordinary shares of the
Company under the rules
of the Integrated Research
Performance Rights and
Option Plan ("IRPROP").

The IRPROP enables Company
to offer performance rights or
options to eligible employees
to obtain Company's shares at
no cost upon meeting certain
performance conditions that
reflect long-term performance
of the Company.

NPAT is currently considered the
most appropriate performance
hurdle given its intrinsic link to
creating shareholder wealth.
Performance hurdles are tested
at each vesting date.

Performance
period

N/A

Annual

3 years for performance rights

Alignment to
strategy

Fixed remuneration is
set to ensure the KMP's
remuneration is competitive
in the marketplace to
attract and retain KMP with
the necessary skills and
experience. Remuneration
levels are reviewed annually
through a process that
considers individual and overall
performance of the Company.

Executive KMP are rewarded
for delivering the Company's
financial performance based
on NPAT, Licence fees or Total
revenue KPIs.

Executive KMP are also set
appropriate non-financial
KPIs with appropriate stretch
goals. KPIs are aligned to
strategic goals and creation of
shareholder value.

The ability of Executive KMP
to exercise either options
or performance rights is
conditional on the Company
achieving certain NPAT
performance hurdles over
the vesting period. This sets
a link between the long-term
performance of the Company
and shareholder value. The use
of NPAT encourages the focus
on driving shareholder returns,
while the Company's trading
share price drives the intrinsic
value of the options and
performance rights.

Annual Report 2020Integrated Research and its controlled entities3.2. Short‑term incentives
The Committee is responsible for setting the KPIs for the Chief Executive Officer (CEO), and for approving the KPIs for
the other Executive KMP who report to the CEO. The KPIs generally include measures relating to the Company and the
individual, and include financial, people, customer and strategy. The measures are chosen as they directly align the
individual KMP’s reward to the KPIs of the Company and its strategy and performance. At the end of the financial year,
the Committee assesses the actual performance of the CEO against the KPIs set at the beginning of the financial year.
A percentage of the predetermined maximum amounts for each KPI is awarded depending on results. The Committee
recommends the cash incentive to be paid to the CEO for approval by the Board. The maximum stretch overperformance
for each KMP is limited to 110%.

CEO and Managing Director KPIs and 2020 performance outcome

Performance metrics

Payment eligibility criteria

Financial (60% weighting)

NPAT

Licence Revenue

Total Revenue

Financial goal achievement

Non‑financial (40% weighting)

Sliding scale based on meeting or exceeding certain target threshold

Strategic growth

Activity driven performance measurement

Employee engagement

Sliding scale based on meeting or exceeding certain target threshold

Customer NPS

Non-Financial goal
achievement

Total achievement

Sliding scale based on meeting or exceeding certain target threshold

CFO KPIs and 2020 performance outcome

Performance metrics

Payment eligibility criteria

Financial (45% weighting)

NPAT

Sliding scale based on meeting or exceeding certain target threshold

Licence Revenue

Sliding scale based on meeting or exceeding certain target threshold

Financial goal achievement

Non‑Financial (55% weighting)

Strategic Growth

Activity driven performance measurement

Employee engagement

Sliding scale based on meeting or exceeding certain target threshold

Process Efficiency

Risk Management

Activity driven performance measurement

Non-Financial goal achievement

Total achievement

2020
performance
outcome/
payout

59%

27%

86%

2020
performance
outcome/
payout

45%

47%

92%

Annual Report 2020Integrated Research and its controlled entitiesRemuneration report (audited)CCO KPIs and 2020 performance outcome

Performance metrics

Payment eligibility criteria

Financial (73% weighting)

NPAT

Sliding scale based on meeting or exceeding certain target threshold

Licence Revenue

Sliding scale based on meeting or exceeding certain target threshold

Professional Services Revenue

Sliding scale based on meeting or exceeding certain target threshold

Total Revenue

Sliding scale based on meeting or exceeding certain target threshold

Financial goal achievement

Non‑Financial (27% weighting)

Employee engagement

Sliding scale based on meeting or exceeding certain target threshold

Customer growth

Customer NPS

Non-Financial goal
achievement

Total achievement

Specified percentage per customer

Sliding scale based on meeting or exceeding certain target threshold

2020
performance
outcome/
payout

72%

19%

91%

3.3. Long‑term incentive (LTI)
LTI remuneration at the Company is made up of Performance Rights under the IRPROP, which is made up of service
conditions and varying performance conditions by KMP.

Feature

Value

Entitlement

Performance
period

Description

The value of the LTIs issued each year is typically set at 15% to 30% of total remuneration. It is
determined each year in accordance with the IRPROP at the absolute discretion of the Board.

Each LTI entitles the performance rights to one Company share in the future, which will be exercised
within the period specified by the Board in the Invitation Letter, for no consideration.

The performance period of the LTIs is three years, starting from the grant date and extends for a
three-year period to a specific vesting date. Each KPI is assessed annually and at the end of the
three-year performance period.

Annual performance rights are offered with performance measures as referenced below. From
time to time performance rights are offered with a service only condition that may be required in
particular circumstances. Performance rights with service only conditions were offered to the CFO
upon his conclusion as Interim CEO. Performance rights with service only conditions were offered to
the CEO upon his commencement with the Company.

In relation to the LTI granted in 2020, their performance measures are presented below:

Performance measures

Performance period

Testing period

Diluted Earnings
Per Share (DEPS)

Compound Annual
Growth Rate (CAGR)

3 years

Annually

3 years

Annual Report 2020Integrated Research and its controlled entities3.4. Detail of executive remuneration and service conditions

Features

CEO and Managing Director

Fixed Remuneration

Short Term Incentive

$550,000

$250,000

CFO

$350,000

$120,000

CCO

$475,000

$250,000

Contract term

No specified end date

Termination notice by
Individual/Company

Employment termination

6 months

3 months

All unvested LTIs are
forfeited

4. Non‑executive Director remuneration

4.1. Board and Committee Structure
The Board and Committees are structured as follows:

Non-Executive &
Independent Directors

Director

Board

Paul Brandling

 (Chair)

Audit & Risk
Committee

Nomination &
Remuneration
Committee

Strategy
Committee



Nick Abrahams 



Garry Dinnie

Peter Lloyd

Anne Myers

Executive Director

John Ruthven



 (Chair)



 (Chair)



4.2. Non‑Executive Director fees
Directors’ fees cover all main Board activities and committee membership. Directors can elect to salary sacrifice their
director’s fees into superannuation. Non-executive Directors do not receive performance-related compensation or
retirement benefits. The total remuneration pool for all Non-executive Directors is not to exceed $750,000 per annum,
which the Shareholders last voted upon at the Annual General Meeting in November 2013.

Non‑executive Director fees

Board/Committee

Position

Per Position

Aggregate

Board

Audit & Risk Committee

Fee for a Member

Fee for role as Chair

Nomination and Remuneration Committee

Fee for role as Chair

Strategy Committee

Fee for role as Chair

Total fees for Non‑executive Directors

$90,000

$10,000

$450,000

$90,000

$10,000

$570,000

Annual Report 2020Integrated Research and its controlled entitiesRemuneration report (audited)5. Statutory remuneration

5.1. Directors’ and Executive KMP’s remuneration
Details of the nature and amount of each major element of the remuneration of each of the KMP are reported below.

Short term

Post‑
employment

Share‑
based
payments

Long
term

Other
compensation

Proportion of
remuneration

For the
year ended
30 June 2020
(in AUD)

Salary &
fees
$

Bonus
$

Non‑
cash
Benefits
$

Super‑
annuation
Contribution
$

Long
service
leave
$

Value of
rights1
$

Termination
Benefit
$

Total
$

Performance‑
related

Value of
rights

Executive
KMP

Peter Adams3

328,926 110,584

3,399

21,003

7,735

183,183

- 654,830

17%

28%

Matt Glasner

453,997 227,201

Directors

Executive

John Ruthven

518,825 215,952

Non‑executive

Paul Brandling

164,384

Nick
Abrahams

82,192

Garry Dinnie

100,457

91,324

82,192

Peter Lloyd

Anne Myers

Total
compensation

21,003

11,708

49,121

- 763,030

30%

21,003

12,601

96,250

15,616

7,808

9,543

8,676

7,808

864,631

25%

11%

180,000

90,000

110,000

100,000

90,000

1,822,297 553,737

3,399

112,460 32,044 328,554

- 2,852,491

1) The estimated value of options and performance rights disclosed is calculated at the date of grant using the Black-Scholes methodology, adjusted to consider

the inability to exercise options during the vesting period.

2) No director or executive appointed during the year received a payment as part of his or her consideration for agreeing to hold the position.

3) 'Salaries & fees' include remuneration for Interim CEO position held to 8 July 2019.

Annual Report 2020Integrated Research and its controlled entitiesShort term

Post‑
employment

Share‑
based
payments

Long
term

Other
compensation

Proportion of
remuneration

Salary &
fees
$

Bonus
$

Non‑
cash
Benefits
$

Super‑
annuation
Contribution
$

Long
service
leave
$

Value of
rights1
$

Termination
Benefit
$

Total
$

Performance‑
related

Value of
rights

For the
year ended
30 June 2019
(in AUD)

Executive KMP

Peter Adams

390,973

129,111

4,532

20,531

9,089

73,248

Jason Barker2

190,639

70,157

Andre Cuenin2

192,715 277,993

15,106

11,638

1,922

24,899

(1,136)

42,281

528,881

627,484

297,333

10,266

6,005

7,385

20,531

6,700

24,539

373,568

- 433,087

21%

12%

24%

53%

32%

23%

Matt Glasner2

229,734 120,178

Kevin Ryder

280,369 100,948

Directors

Executive

John
Merakovsky2

Non‑executive

308,113 83,334

Paul Brandling

150,685

Steve Killelea2

58,506

Nick
Abrahams

82,192

Garry Dinnie

100,457

Peter Lloyd

88,280

Anne Myers2

79,390

11,977

6,726 (341,299)

24,267

93,118

89%

14,315

5,558

7,808

9,543

8,387

7,542

165,000

64,064

90,000

110,000

96,667

86,932

Total
compensation

2,152,053 781,721

19,638

130,018 28,520 (212,364)

66,548 2,966,134

1) Negative figure reflects lapsing and/or forfeiture of performance rights during the financial year.

2) Reflects remuneration for the period the individual was determined to be Key Management Personnel only.

Annual Report 2020Integrated Research and its controlled entitiesRemuneration report (audited)6. Actual remuneration received ‑ Executive KMP

The table below reflects the actual remuneration received by the Executive KMP for the financial year ended
30 June 2020. The values presented below may differ from the statutory remuneration disclosed in section 5.
The statutory disclosures are prepared in accordance with the Australian Accounting Standards, including share-based
payments valuation and accounting, which may not always represent what the Executive KMP have received.

Short term

Post‑
employment

Long term

Other
compensation

LTI

For the
year ended
30 June 2020
(in AUD)

Salary &
fees
$

Non‑
cash
Benefits
$

Super‑
annuation
Contribution
$

Long
service
leave
$

Value of
Performance
rights2
$

Bonus1
$

Termination
Benefit
$

Total
$

John Ruthven

518,825

215,952

Peter Adams

328,926

110,584

3,399

Matt Glasner

453,997

227,201

21,003

755,780

463,912

702,201

Notes

1) Bonus received or receivable for the financial year ended 30 June 2020.

2) Value of the performance rights is calculated based on the fair value of the vested rights at the vesting date.

Annual Report 2020Integrated Research and its controlled entities
7. Additional statutory disclosures

7.1. Equity Instruments
All options refer to options over ordinary shares of Integrated Research Limited, which are exercisable on a one-for-one
basis under the Employee Share Option Plan (ESOP). No options have been granted to named executives either during or
since the end of the financial year. Performance rights granted as compensation are listed in the table below.

7.2. Analysis of rights over equity instruments granted as compensation

Performance rights granted

Number

Date

Fair value
per share
($)

Percent
vested in
year

Percent
forfeited
in year
(A)

Financial
year in
which
grant
expires

Executive KMP

John Ruthven

106,707

Peter Adams

45,731

20,000

22,000

67,988

40,000

27,515

Matt Glasner

22,000

44,811

Notes

Nov-19

Sep-17

Sep-18

Jan-19

Feb-19

Aug-19

Sep-19

Jan-19

Sep-19

2.87

3.18

2.27

2.29

2.28

2.48

2.80

2.29

2.80

2023

2021

2022

2021

2023

2022

2023

Value yet to vest or
value vested ($)

Min
(B)

Max
(C)

nil

305,715

131,019

63,558

49,823

155,418

91,352

99,200

77,097

50,291

125,560

(A) The percentage forfeited in the year represents the reduction from the maximum number of performance rights available to vest due to the

performance hurdles not being achieved or due to the resignation of the executive.

(B) The minimum value of performance rights yet to vest is $nil as the executives may not achieve the required performance hurdles or may terminate

their employment prior to vesting.

(C) The maximum values presented above are based on the values calculated using the Black-Scholes methodology as applied in estimating the value of

performance rights for employee benefit expense purposes.

Annual Report 2020Integrated Research and its controlled entitiesRemuneration report (audited)7.3. Performance rights over equity instruments granted as compensation
The movement during the reporting year in the number of performance rights over ordinary shares in the Company held,
directly, indirectly or beneficially, by each KMP, including their related parties, is as follows:

For the
year ended
30 June 2020

Executive KMP

Held at
1 July 2019

Granted as
compensation

Exercised

Other
changes

Held at
30 June
2020

Vested
during the
year

Vested and
exercised
at 30 June
2020

Peter Adams

149,988

John Ruthven

Matt Glasner

22,000

67,515

152,438

44,811

217,503

152,438

66,811

For the
year ended
30 June 2019

Executive KMP

John
Merakovsky2

Peter Adams

Jason Barker2

Andre Cuenin2

Matt Glasner

Kevin Ryder

Notes

Held at
1 July 2018

Granted as
compensation

Exercised

Other
changes1

Held at
30 June
2019

Vested
during the
year

Vested and
exercised
at 30 June
2019

210,000

129,988

20,000

110,000

75,000

15,000

(210,000)

149,988

(60,000)

70,000

22,000

(50,000)

(47,000)

50,000

22,000

15,000

22,000

30,000

1) Other changes represent performance rights that expired or were forfeited during the year

2) 'Held 30 June 2019' value represents holding on last day as Key Management Personnel

Performance rights expire on the earlier of their expiry date or termination of the individual’s employment.

Annual Report 2020Integrated Research and its controlled entities7.4. Movement in shares
The movement during the reporting period in the number of ordinary shares in the Company held, directly, indirectly or
beneficially, by each KMP, including their related parties, is as follows:

For the year ended
30 June 2020

Held at
1 July 2019

Purchases

Received on
exercise of
performance
rights

Other
changes

Sales

Executive KMP

Peter Adams

Directors

Non‑executive

Paul Brandling

Nick Abrahams

Garry Dinnie

Peter Lloyd

Anne Myers

10,000

35,306

13,446

9,000

27,000

4,032

9,000

For the year ended
30 June 2019

Held at
1 July 2018

Purchases

Executive KMP

Peter Adams

Andre Cuenin

Kevin Ryder

Directors

Non‑Executive

Paul Brandling

Nick Abrahams

Garry Dinnie

Steve Killelea1

Peter Lloyd

Notes

10,000

35,000

10,202

5,042

2,000

68,193,231

25,104

8,404

7,000

2,000

25,000

Received on
exercise of
performance
rights

50,000

Other
changes

Sales

1) 'Held 30 June 2019' value represents holding on last day as Key Management Personnel

Held at
30 June
2020

10,000

39,338

13,446

9,000

27,000

9,000

Held at
30 June
2019

10,000

50,000

35,000

35,306

13,446

9,000

68,193,231

27,000

Shareholdings at the date of the Directors’ Report for existing Key Management Personnel remain unchanged.

7.5. Other Transactions with KMP
Apart from the details disclosed in this note, no director has entered into a material contract with the Company since the
end of the previous financial year and there were no material contracts involving directors’ interests existing at year end.

There were no other transactions between the KMP, or their personally related entities, and the Company.

Annual Report 2020Integrated Research and its controlled entitiesRemuneration report (audited)8. About this report

8.1. Basis for preparation of 2020 remuneration report
The information in this Remuneration Report has been prepared based on the requirements of the Corporations Act
2001 and applicable accounting standards. The Remuneration Report is designed to provide shareholders with a clear
and detailed understanding of the Company’s remuneration framework, and the link between our remuneration policies
and Company performance. The Remuneration Report details the remuneration framework for the Company’s KMP.
This report has been audited.

8.2. Remuneration Governance
The Committee is responsible for developing the remuneration framework for IR’s Executives and making
recommendations related to remuneration to the Board. The Committee develops the remuneration philosophy and
policies for Board approval.

The responsibilities of the Committee are outlined in their Charter, which is reviewed annually by the Board. The key
responsibilities of the Committee include:

• Advising the Board on IR’s policy for Executive and Director remuneration

• Making recommendations to the Board on the remuneration arrangements for Executives and Directors to ensure they

are aligned with IR’s vision and are set competitively to the market

• Approving KMP terms of employment

In making recommendations to the Board, the Committee reviews the appropriateness of the nature and amount of
remuneration to Executives and Non-executive Directors on an annual basis. In carrying out its duties, the Committee can
engage external advisors who are independent of management.

Annual Report 2020Integrated Research and its controlled entitiess
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Annual Report 2020Integrated Research and its controlled entitiesCorporate governance statement

Corporate
governance
statement

Contents

42 Board of Directors and its committees
45 Risk management
46 Ethical standards
47 Communication with shareholders

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Annual Report 2020Integrated Research and its controlled entities

This statement outlines
the main corporate
governance practices
that were in place
throughout the financial
year, which comply
with the ASX Corporate
Governance Council
recommendations,
unless otherwise stated.

Board of
Directors and its
committees

Role of the Board
The Board’s primary role is the
protection and enhancement of
long-term shareholder value.

To fulfil this role, the Board is
responsible for the overall corporate
governance of the consolidated
entity including evaluating and
approving its strategic direction,
approving and monitoring capital
expenditure, setting remuneration,
appointing, removing and creating
succession policies for directors
and senior executives, establishing
and monitoring the achievement of
management goals and assessing
the integrity of internal control and
management information systems.
It is also responsible for approving
and monitoring financial and
other reporting.

Board process
To assist in the execution of its
responsibilities, the Board has
established a number of board
committees including a Nomination
and Remuneration Committee,
an Audit and Risk Committee
and a Strategy Committee. These
committees have written mandates
and operating procedures, which
are reviewed on a regular basis.
The Board has also established a
framework for the management of
the consolidated entity including
board-endorsed policies, a system
of internal control, a business
risk management process and
the establishment of appropriate
ethical standards.

The full Board currently holds twelve
scheduled meetings each year and
any extraordinary meetings at such

other times as may be necessary to
address any specific matters that
may arise.

The agenda for its meetings is
prepared in conjunction with the
Chairman, Chief Executive Officer
and Company Secretary. Standing
items include strategic matters
for discussion, the CEO’s report,
financial reports, key performance
indicator reports and presentations
by key executives and external
industry experts. Board papers are
circulated in advance. Directors have
other opportunities, including visits to
operations, for contact with a wider
group of employees.

Director education
The consolidated entity follows
an induction process to educate
new directors about the nature of
the business, current issues, the
corporate strategy and expectations
of the consolidated entity concerning
performance of directors. In
addition executives make regular
presentations to the Board to ensure
its familiarity with operational
matters. Directors are expected to
access external continuing education
opportunities to update and enhance
their skills and knowledge.

Independent advice
and access to company
information
Each director has the right of access
to all relevant company information
and to the Company’s executives
and, subject to prior consultation
with the Chairman, may seek
independent professional advice
from a suitably qualified adviser at
the Company’s expense. A copy of
the advice received by the Director is
made available to all other members
of the Board.

Annual Report 2020Integrated Research and its controlled entitiesCorporate governance statementposition based on the skills deemed
necessary for the Board to best carry
out its responsibilities. The committee
then selects a panel of candidates
and the Board appoints the most
suitable candidate who must stand for
election at the next general meeting of
shareholders.

The Company Secretary is
accountable directly to the Board,
through the chair, on all matters to
do with the proper functioning of
the Board.

Nomination and
Remuneration
Committee
The Nomination and Remuneration
Committee has a documented
charter, approved by the Board.
The Nomination and Remuneration
Committee is a committee of the
Board of Directors and is empowered
by the Board to assist it in fulfilling
its duties to shareholders and
other stakeholders. In general,
the committee has responsibility
to: 1) ensure the Company has
appropriate remuneration policies
designed to meet the needs of the
Company and to enhance corporate
and individual performance and
2) review board performance, select
and recommend new directors to
the Board and implement actions
for the retirement and re-election
of directors. The Nomination and
Remuneration Committee Charter
may be viewed on the Company’s
website: www.ir.com.

Responsibilities
Regarding Remuneration
The Committee reviews and makes
recommendations to the Board on:

• The appointment, remuneration,

performance objectives
and evaluation of the Chief
Executive Officer.

• The remuneration packages for

senior executives.

• The Company’s recruitment,
retention and termination
policies and procedures for
senior executives.

• Executive remuneration and

incentive policies.

• Policies on employee incentive

plans, including equity
incentive plans.

• Superannuation arrangements.

• The remuneration framework and
policy for non-executive directors.

• Remuneration levels are

competitively set to attract and
retain the most qualified and
experienced directors and senior
executives. The Remuneration
Committee obtains independent
advice on the appropriateness
of remuneration packages,
given trends in comparative
companies and industry surveys.
Remuneration packages include
a mix of fixed remuneration,
performance-based remuneration
and equity-based remuneration.

Composition of the Board
The names of the Directors of the
Company in office at the date of this
report are set out on pages 20 to 21
of this report. Director profiles are also
provided on the Company’s website:
www.ir.com.

The Company’s constitution
provides for the Board to consist of
between three and twelve members.
At 30 June 2020 the Board members
were comprised as follows:

• Mr Paul Brandling - Independent

Non-Executive Director (Chairman)

• Mr John Ruthven - Chief Executive
Officer and Managing Director

• Mr Nick Abrahams - Independent

Non-Executive Director

• Mr Garry Dinnie - Independent

Non-Executive Director

• Mr Peter Lloyd - Independent

Non-Executive Director

• Ms Anne Myers - Independent

Non-Executive Director

At each Annual General Meeting
one-third of directors, any director who
has held office for three years and any
director appointed by directors in the
preceding year must retire, then being
eligible for re-election. The CEO is not
required to retire by rotation.

The composition of the Doard is
reviewed on a regular basis to ensure
that the Board has the appropriate
mix of expertise and experience. When
a vacancy exists, through whatever
cause, or where it is considered
that the Board would benefit from
the services of a new director with
particular skills, the Nomination
and Remuneration Committee,
in conjunction with the Board,
determines the selection criteria for the

Annual Report 2020Integrated Research and its controlled entitiesResponsibilities
Regarding Nomination
The Committee develops and makes
recommendations to the Board on:

• The CEO and senior executive

succession planning.

• The range of skills, experience
and expertise needed on the
Board and the identification of
the particular skills, experience
and expertise that will best
complement board effectiveness.

• A plan for identifying, reviewing,

assessing and enhancing director
competencies.

• Board succession plans to

maintain a balance of skills,
experience and expertise on
the Board.

• Evaluation of the Board’s

performance.

• Appointment and removal

of directors.

• Appropriate composition

of committees.

The terms and conditions of the
appointment of non-executive
directors are set out in a letter of
appointment, including expectations
for attendance and preparation for
all board meetings, expected time
commitments, procedures when
dealing with conflicts of interest,
and the availability of independent
professional advice.

The performance review of the
Chief Executive Officer and the
Board was undertaken in the
reporting period identifying both
strengths and development actions.
The performance review of other
senior management was conducted
by the Chief Executive Officer in the
reporting period.

The members of the Nomination and
Remuneration Committee during the
year were:

• Mr Garry Dinnie - Independent

Non-Executive Director (Chairman)

• Mr Paul Brandling - Independent

Non-Executive Director

• Ms Anne Myers - Independent

Non-Executive Director
(member from 21 August 2019)

During the period 1 July 2019 to
20 August 2019 the Company
did not comply with the ASX
Corporate Governance Council
recommendation that the committee
consist of three members, a majority
of whom should be independent
directors. The Board appointed
Ms Anne Myers to the Nomination
and Remuneration Committee on
21 August 2019.

A matrix of skills and diversity
of the Board as required by
the ASX corporate governance
recommendations is available on the
Company’s website at www.ir.com.

The Nomination and Remuneration
Committee meets at least twice a
year and as required. The Committee
met six times during the year
under review.

Audit and Risk
Committee
The Audit and Risk Committee has
a documented charter, approved by
the Board. The charter states that
all members must be non-executive
directors with a majority being
independent. The chairman may
not be the chairman of the Board.
The committee advises on the
establishment and maintenance of
a framework of risk management
and internal control of the
consolidated entity.

The members of the Audit and Risk
Committee during the year were:

• Mr Garry Dinnie - Independent
Non-Executive (Chairman)

• Mr Nick Abrahams - Independent

Non-Executive Director

• Ms Anne Myers - Independent

Non-Executive Director

During the year, the Audit and Risk
Committee provided the Board
with updates to the Company’s
risk management register (with the
Board approving this document).
In accordance with the Audit
and Risk Charter, the Committee
undertook a competitive tender
process for the Company’s external
audit with three leading accounting
firms. The outcome was that the
incumbent auditor, Ernst & Young,
was the successful candidate and will
therefore continue as the Company’s
external auditor.

The external auditor, Chief Executive
Officer and Chief Financial Officer are
invited to Audit and Risk Committee
meetings at the discretion of the
committee. The committee met five
times during the year and committee
members’ attendance record is
disclosed in the table of directors’
meetings on page 24.

The external auditor met with
the audit committee/board four
times during the year, two of which
included time without the presence
of executive management. The Chief
Executive Officer and the Chief
Financial Officer declared in writing
to the Board that the Company’s
financial reports for the year
ended 30 June 2020 comply with
accounting standards and present
a true and fair view, in all material
respects, of the Company’s financial
condition and operational results.

The main responsibilities of the Audit
and Risk Committee as set out in the
charter include:

• Serve as an independent

party to monitor the financial
reporting process and internal
control systems.

• Review the performance
and independence of the
external auditors and make
recommendations to the Board
regarding the appointment or
termination of the auditors.

• Review the scope and cost of the
annual audit, negotiating and
recommending the fee for the
annual audit to the Board.

Annual Report 2020Integrated Research and its controlled entitiesCorporate governance statement • Review the external auditor’s

management letter and responses
by management.

• Provide an avenue of

communication between the
auditors, management and
the Board.

• Monitor compliance with all

financial statutory requirements
and regulations.

• Review financial reports and other
financial information distributed to
shareholders so that they provide
an accurate reflection of the
financial health of the Company.

• Monitor corporate risk

management and assessment
processes, and the identification
and management of strategic and
operational risks.

• Enquire of the auditors of any

difficulties encountered during the
audit, including any restrictions
on the scope of their work, access
to information or changes to the
planned scope of the audit.

The Audit and Risk Committee
reviews the performance of the
external auditors on an annual basis
and normally meets with them during
the year as follows:

• To discuss the external audit

plans, identifying any significant
changes in structure, operations,
internal controls or accounting
policies likely to impact the
financial statements and to review
the fees proposed for the audit
work to be performed.

• Review the results and findings
of the auditor, the adequacy
of accounting and financial
controls, and to monitor
the implementation of any
recommendations made.

To finalise half-year and
annual reporting:

• Review the draft financial report
and recommend board approval
of the financial report.

• As required, to organise, review

and report on any special
reviews or investigations deemed
necessary by the Board.

Strategy Committee
The Strategy Committee has a
documented charter, approved
by the Board and is responsible
for reviewing strategy and
recommending strategies to the
Board to enhance the Company’s
long-term performance. The Board
appoints a member of the committee
to be chairman.

The members of the Strategy
Committee during the year were:

• Mr Peter Lloyd - Independent
Non-Executive (Chairman)

• Mr Paul Brandling - Independent

Non-Executive

• Ms Anne Myers - Independent

Non-Executive Director

The Strategy Committee is
responsible for:

• Reviewing and assisting in defining

Prior to announcement of results:

current strategy.

• To review the half-year and

preliminary final report prior to
lodgement with the ASX, and
any significant adjustments
required as a result of the
auditor’s findings.

• To recommend the Board approval

of these documents.

• Assessing new strategic

opportunities, including M&A
proposals and intellectual property
developments or acquisitions.

• Staying close to the business

challenges and monitor
operational implementation of
strategic plans.

• Endorsing strategy and business
cases for consideration by the
full Board.

The Committee met four times during
the year under review.

Risk
management

Under the Audit and Risk Charter,
the Audit and Risk Committee
reviews the status of business
risks to the consolidated
entity through integrated risk
management programs ensuring
risks are identified, assessed
and appropriately managed and
communicated to the Board.
Major business risks arise from such
matters as actions by competitors,
government policy changes and the
impact of exchange rate movements.
The Audit and Risk Committee
Charter may be viewed on the
Company’s website: www.ir.com.

Comprehensive policies and
procedures are established such that:

• Capital expenditure above
a certain threshold requires
board approval.

•

Financial exposures are controlled,
including the use of derivative
instruments.

• Risks are identified and managed,
including internal audit, privacy,
insurances, business continuity
and compliance.

• Business transactions are properly

authorised and executed.

The Chief Executive Officer and
the Chief Financial Officer have
declared, in writing to the Board
that the Company’s financial reports
are founded on a sound system
of risk management and internal
compliance and control which
implements the policies adopted
by the Board.

Annual Report 2020Integrated Research and its controlled entitiesInternal control
framework
The Board is responsible for the
overall internal control framework,
but recognises that no cost effective
internal control system will preclude
all errors and irregularities. The Board
has instigated the following internal
control framework:

•

Financial reporting - Monthly
actual results are reported against
budgets approved by the Directors
and revised forecasts for the year
are prepared monthly.

• Continuous disclosure - Identify

matters that may have a
material effect on the price of the
Company’s securities, notify them
to the ASX and post them to the
Company’s website.

• Quality and integrity of

personnel - Formal appraisals are
conducted at least annually for all
employees.

•

Investment appraisals - Guidelines
for capital expenditure include
annual budgets, detailed appraisal
and review procedures and levels
of authority.

Internal Audit
The Company does not have an
internal audit function but utilises
its financial resources as needed
to assist the Board in ensuring
compliance with internal controls.

Material Exposure
to economic,
environmental and social
sustainability risks
Exposure to economic, environment
and social sustainability risks for the
Company are routinely examined
through the risk management
framework, overseen by the Audit

and Risk Committee. The Company
considers risk in the conduct of its
operations and outlines exposure to
specific economics and operating
risk in the notes to the financial
statements. With the exception of
the current pandemic, there was no
material exposure to environmental
or social sustainability risks during
the period.

Ethical standards

All directors, managers and
employees are expected to act with
the utmost integrity and objectivity,
striving at all times to enhance the
reputation and performance of the
consolidated entity. Every employee
has a nominated supervisor to whom
they may refer any issues arising
from their employment.

Conflict of interest
Each Director must keep the Board
advised, on an ongoing basis, of any
interest that could potentially conflict
with those of the Company. Where
the Board considers that a significant
conflict exists the Director concerned
does not receive the relevant board
papers and is not present at the
meeting whilst the item is considered.
The Board has developed procedures
to assist directors to disclose potential
conflicts of interest. Details of director
related entity transactions with the
consolidated entity are set out in
Remuneration report page 27 to 39.

Code of conduct
The consolidated entity has advised
each director, manager and employee
that they must comply with the code
of conduct. The code aligns behaviour
of the Board and management
with the code of conduct by
maintaining appropriate core values
and objectives.

The Code of Conduct may be
viewed on the Company’s website
and includes:

• Responsibility to the community
and fellow employees to act
with honesty and integrity, and
without prejudice.

• Compliance with laws and

regulations in all areas where the
Company operates, including
employment opportunity,
occupational health and safety,
trade practices, fair dealing,
privacy, drugs and alcohol,
and the environment.

• Dealing honestly with customers,

suppliers and consultants.

• Ensuring reports and other
information are accurate
and timely.

• Proper use of company resources,
avoidance of conflicts of interest
and use of confidential or
proprietary information.

Equal Employment
Opportunity
The Company has a policy on Equal
Employment Opportunity with the
provision that commits to a workplace
that is free of discrimination of all
types. It is Company policy to hire,
develop and promote individuals
solely on the basis of merit and their
ability to perform without prejudice
to race, colour, creed, national origin,
religion, gender, age, disability,
sexual orientation, marital status,
membership or non-membership of
a trade union, status of employment
(whether full or part-time) or any other
factors prohibited by law. The Board is
satisfied that the Equal Employment
Opportunity policy is sufficient
without the need to further establish
a separate policy on gender diversity
as required by the ASX Corporate
Governance Council recommendation.

Annual Report 2020Integrated Research and its controlled entitiesCorporate governance statementTrading in company
securities by directors
and employees
Directors and employees may acquire
shares in the Company, but are
prohibited from dealing in company
shares whilst in possession of price
sensitive information, and except in
the periods:

•

From 24 hours to 56 days after
the release of the Company’s
half-yearly results announcement.

From 24 hours to 56 days after
release of the Company’s annual
results announcement.

• Directors must obtain the approval
of the Chairman of the Board and
notify the Company Secretary
before they buy or sell shares in
the Company, subject to board
veto. The company advises
the ASX of any transactions
conducted by directors in shares
in the Company. The Company’s
Trading in Securities policy may be
viewed on the Company’s website:
www.ir.com.

Participants in the Company’s
Performance Rights program are
specifically prohibited to hedge the
exposure to the Integrated Research
share price during the vesting
period in respect of the unvested
performance rights. For the purposes
of this policy, hedging includes
the entry into any transaction,
arrangement or financial product
which operates to limit the economic
risk of a security holding In the
Company and includes financial
instruments such as equity swaps
and contracts for differences.

Communication
with shareholders

The Board provides shareholders with
information using a comprehensive
continuous disclosure policy which
includes identifying matters that may
have a material effect on the price of
the Company’s securities, notifying
them to the ASX, posting them on
the Company’s website (www.ir.com),
and issuing media releases.
Disclosures under this policy are in
addition to the periodic and other
disclosures required under the ASX
Listing Rules and the Corporations
Act. More details of the policy are
available on the Company’s website.

The Chief Executive Officer and
the Chief Financial Officer are
responsible for interpreting the
Company’s policy and where
necessary informing the Board.
The Company Secretary is
responsible for all communication
with the ASX.

The Board encourages full
participation of shareholders at the
Annual General Meeting to ensure
a high level of accountability and
identification with the consolidated
entity’s strategy and goals.
Important issues are presented to the
shareholders as single resolutions.
The external auditor is requested to
attend the Annual General Meetings
to answer any questions concerning
the audit and the content of the
auditor’s report.

The shareholders are requested
to vote on the appointment and
aggregate remuneration of Directors,
the granting of options and shares to
Directors, the Remuneration Report
and changes to the Constitution.
Copies of the Constitution are
available to any shareholder
who requests it.

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Annual Report 2020Integrated Research and its controlled entitiesFinancial statements

Financials

Contents
50 Consolidated statement of comprehensive income
51 Consolidated statement of financial position
52 Consolidated statement of changes in equity
53 Consolidated statement of cash flows
54 Notes to the financial statements

54 Note 1: Significant accounting policies
62 Note 2: Segment reporting
63 Note 3: Revenue from contracts with customers
63 Note 4: Expenditure
64 Note 5: Other gains and (losses)
64 Note 6: Finance income
64 Note 7: Auditors’ remuneration
65 Note 8: Income tax expense
66 Note 9: Earnings per share
66 Note 10: Cash and cash equivalents
67 Note 11: Trade and other receivables
68 Note 12: Other assets
68 Note 13: Other financial assets
68 Note 14: Property, plant and equipment
69 Note 15: Deferred tax assets and liabilities
71 Note 16: Intangible assets
72 Note 17: Goodwill
72 Note 18: Trade and other payables
72 Note 19: Employee benefits
74 Note 20: Provisions
74 Note 21: Lease assets and liabilities
75 Note 22: Other financial liabilities
75 Note 23: Capital and reserves
77 Note 24: Financial instruments
80 Note 25: Consolidated entities
81 Note 26: Reconciliation of cash flows from operating activities
81 Note 27: Key management personnel disclosures
81 Note 28: Related parties
82 Note 29: Parent entity disclosures
82 Note 30: Subsequent events

Directors’ declaration

Independent auditor’s report

83
84
90 Lead auditor’s independence declaration
91

ASX additional information

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Annual Report 2020Integrated Research and its controlled entities

Consolidated statement of comprehensive income

For the year ended 30 June 2020

In thousands of AUD

Revenue from contracts with customers

Licence fees

Maintenance fees

SaaS fees

Testing solution services

Professional services

Total revenue

Expenditure

Research and development expenses

Sales, professional services and marketing expenses

General and administration expenses

Total expenditure

Other gains and (losses)

Profit before finance income and tax

Finance income

Profit before tax

Income tax expense

Profit for the year

Other comprehensive income

Items that may be reclassified subsequently to profit

Gain/(loss) on cash flow hedge taken to equity

Foreign exchange translation differences

Other comprehensive income

Consolidated

Notes

2020

2019

72,098

23,945

697

5,543

8,630

62,774

24,995

669

4,995

7,387

110,913

100,820

(17,388)

(17,888)

(54,560)

(49,787)

(6,232)

(5,557)

(78,180)

(73,232)

(1,868)

1,312

30,865

28,900

606

31,471

(7,417)

24,054

747

29,647

(7,796)

21,851

337

388

749

844

Total comprehensive income for the year

24,442

22,695

Profit attributable to:

Members of Integrated Research

Total comprehensive income attributable to:

Members of Integrated Research

24,054

21,851

24,442

22,695

Earnings per share attributable to members of Integrated Research:

Basic earnings per share (AUD cents)

Diluted earnings per share (AUD cents)

14.00

13.94

12.72

12.70

The consolidated statement of comprehensive income is to be read in conjunction with the notes to the financial statements set out on pages 54 to 82.

Annual Report 2020Integrated Research and its controlled entitiesFinancial statementsConsolidated statement of financial position

As at 30 June 2020

In thousands of AUD

Current assets

Cash and cash equivalents

Trade and other receivables

Current tax assets

Other current assets

Total current assets

Non‑current assets

Trade and other receivables

Other financial assets

Property, plant and equipment

Right-of-use assets

Deferred tax assets

Intangible assets

Other non-current assets

Total non‑current assets

Total assets

Current liabilities

Trade and other payables

Provisions

Income tax liabilities

Deferred revenue

Lease liabilities

Other financial liabilities

Total current liabilities

Non‑current liabilities

Borrowings

Deferred tax liabilities

Provisions

Deferred revenue

Lease liabilities

Other non-current financial liabilities

Total non‑current liabilities

Total liabilities

Net assets

Equity

Issued capital

Reserves

Retained earnings

Total equity

Consolidated

Notes

2020

2019

9,744

57,853

2,963

70,624

29,399

236

1,883

6,367

1,404

29,052

872

69,213

139,837

10,213

3,852

2,192

20,767

1,372

9,316

51,378

222

3,133

64,049

21,389

236

2,631

1,286

23,101

829

49,472

113,521

9,797

3,197

1,638

21,410

139

38,433

36,181

5,000

6,450

713

1,556

5,142

18,882

57,315

82,522

1,667

5,079

75,776

82,522

5,837

723

920

7,513

43,694

69,827

1,667

3,978

64,182

69,827

The consolidated statement of financial position is to be read in conjunction with the notes to the financial statements set out on pages 54 to 82.

Annual Report 2020Integrated Research and its controlled entitiesFinancial Statements

Consolidated statement of changes in equity

For the year ended 30 June 2020

Hedging
reserve

Translation
reserve

Consolidated
In thousands of AUD

Balance at 1 July 2019

Profit for the year

Other comprehensive income for
the year

Total comprehensive income for
the year

Share based payments expense

Dividends to shareholders

Share
capital

1,667

‑

Balance at 30 June 2020

1,667

(51)

‑

Employee
benefit
reserve

3,536

‑

713

‑

Retained
earnings

64,182

24,054

Total

69,827

24,054

‑

388

24,054

24,442

‑

713

(12,460)

493

‑

337

‑

830

4,249

75,776

82,522

Consolidated
In thousands of AUD

Balance at 1 July 2018
(as reported)

Effect of adoption of new
accounting standards - AASB 15

Share
capital

Hedging
reserve

Translation
reserve

Employee
benefit
reserve

Retained
earnings

Total

1,667

(146)

(256)

3,445

53,128

57,838

1,230

Balance at 1 July 2018 (restated)

1,667

(146)

(256)

3,445

Profit for the year

Other comprehensive income for
the year

Total comprehensive income for
the year

Share based payments expense

Dividends to shareholders

749

54,358

21,851

59,068

21,851

844

21,851

22,695

(12,027)

Balance at 30 June 2019

1,667

(51)

493

3,536

64,182

69,827

The consolidated statement of changes in equity is to be read in conjunction with the notes to the financial statements set out on pages 54 to 82.

Annual Report 2020Integrated Research and its controlled entitiesConsolidated statement of cash flows

For the year ended 30 June 2020

In thousands of AUD

Cash flows from operating activities

Cash receipts from customers

Cash paid to suppliers and employees

Cash generated from operations

Income taxes paid

Net cash provided by operating activities

Cash flows from investing activities

Payments for capitalised development

Payments for property, plant and equipment

Payments for intangible asset

Interest received

Net cash used in investing activities

Cash flows from financing activities

Proceeds from borrowings

Repayment of borrowings

Payment of principal portion of lease liabilities

Interest payments

Payment of dividend

Net cash used in financing activities

Net (decrease)/increase in cash and cash equivalents

Cash and cash equivalents at 1 July

Effects of exchange rate changes on cash

Consolidated

Notes

2020

2019

96,369

89,472

(66,024)

(61,498)

30,345

(6,193)

24,152

27,974

(6,737)

21,237

(13,962)

(320)

(922)

992

(11,275)

(1,273)

(28)

799

(14,212)

(11,777)

14,000

3,000

(9,000)

(3,000)

(1,872)

(386)

(52)

(12,460)

(12,027)

(9,718)

(12,079)

222

9,316

206

9,744

(2,619)

11,238

697

9,316

Cash and cash equivalents at 30 June 2020

The consolidated statement of cash flows is to be read in conjunction with the notes to the financial statements set out on pages 54 to 82.

Annual Report 2020Integrated Research and its controlled entitiesNotes to the
financial
statements

For the year ended
30 June 2020

Note 1: Significant
accounting policies
Integrated Research Limited (the
“Company”) is a company domiciled
in Australia. The financial report
of the Company for the year
ended 30 June 2020 comprises
the Company and its subsidiaries
(together referred to as the
“consolidated entity”).

The financial report was authorised
for issue by the Directors on
20 August 2020.

Integrated Research is a for-profit
Company limited by ordinary shares.

A. Statement of
Compliance
The financial report is a general
purpose financial report which has
been prepared in accordance with
Australian Accounting Standards and
Interpretations and the Corporations
Act 2001. Financial statements of
the consolidated entity comply with
International Financial Reporting
Standards and interpretations
adopted by the International
Accounting Standards Board.

B. Basis of Preparation
The financial statements are
presented in Australian dollars and
are prepared on a going concern
basis using historical cost, with the
exception of derivatives, which are at
fair value.

The Company is of a kind referred
to in ASIC Legislative Instrument
2016/191 and in accordance with
that Class Order, amounts in the
financial report and Directors’
Report have been rounded off
to the nearest thousand dollars,
unless otherwise stated.

The preparation of financial
statements in conformity with
Australian Accounting Standards
requires management to make
judgements, estimates and
assumptions that affect the
application of policies and reported
amounts of assets and liabilities,

income and expenses. The estimates
and associated assumptions are
based on historical experience
and various other factors that are
believed to be reasonable under
the circumstances, the results of
which form the basis of making the
judgements about carrying values
of assets and liabilities that are not
readily apparent from other sources.
Actual results may differ from
these estimates. These accounting
policies have been consistently
applied by each entity in the
consolidated entity.

The estimates and underlying
assumptions are reviewed on
an ongoing basis. Revisions to
accounting estimates are recognised
in the period in which the estimate
is revised if the revision affects only
that period or in the period of the
revision and future periods if the
revision affects both current and
future periods.

New accounting
standards and
Interpretations
The accounting policies and methods
of computation adopted in the
preparation of the financial report
are consistent with those adopted
and disclosed in Integrated Research
Limited’s 2019 annual financial
report, except for the adoption
of new standards for the 2020
financial year. These accounting
policies are consistent with
Australian Accounting Standards
and with International Financial
Reporting Standards.

AASB 16 ‘Leases’

The standard is applicable to the
year ended 30 June 2020.

On transition to AASB 16, right-of-use
assets of $2.1m and lease liabilities
of $2.1m were recognised as at
1 July 2019. The deferred tax impact
of these changes was determined
to be insignificant. The Company
adopted AASB 16 using the
modified retrospective method of
adoption. The prior year figures were
not adjusted.

Annual Report 2020Integrated Research and its controlled entitiesFinancial statementsNote 1: Significant accounting policies (cont.)
The Company has analysed the impact of the first-time application of AASB 16, as a consequence of the change to
AASB 16 as at 1 July 2019, contracts that previously had been recognised as operating leases, now qualify as leases as
defined by the new standard, namely office space leases. The following reconciliation to the opening balance for the
lease liabilities as at 1 July 2019 is based upon the operating lease obligations as at 30 June 2019:

Reconciliation:

Operating leases at 30 June 2019

Gross lease liabilities at 1 July 2019

Discounting

Lease liabilities at 1 July 2019

In thousands of AUD

2,359

(212)

2,147

The lease liabilities were discounted at the incremental borrowing rates as at 1 July 2019. The incremental borrowing
rates for the portfolio of leases were between 3% and 4%.

For the year ended 30 June 2020:

• Depreciation expense increased because of the depreciation of additional assets recognised (i.e., increase in

right-of-use assets, net of the decrease in ‘Property, plant and equipment’). This resulted in increases in expenses
of $2,019,000.

• Rent expense relating to previous operating leases, decreased by $2,030,000.

•

Finance income decreased by $210,000 relating to the interest expense on additional lease liabilities recognised.

• Cash outflows from operating activities decreased by $210,000 and cash outflows from financing activities increased

by the same amount, relating to decrease in operating lease payments and increases in principal and interest
payments of lease liabilities.

IFRIC Interpretation 23 Uncertainty over Income Tax Treatment

The Interpretation addresses the accounting for income taxes when tax treatments involve uncertainty that affects
the application of AASB 112 Income Taxes. It does not apply to taxes or levies outside the scope of AASB 112, nor does
it specifically include requirements relating to interest and penalties associated with uncertain tax treatments. The
Interpretation specifically addresses the following:

• Whether an entity considers uncertain tax treatments separately

• The assumptions an entity makes about the examination of tax treatments by taxation authorities

• How an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates

• How an entity considers changes in facts and circumstances

The Company determines whether to consider each uncertain tax treatment separately or together with one or more
other uncertain tax treatments and uses the approach that better predicts the resolution of the uncertainty.

The Company determined on adoption and at 30 June 2020 no uncertain tax positions exist and therefore the
Interpretation did not have an impact on the consolidated financial statements of the Company.

Annual Report 2020Integrated Research and its controlled entitiesNote 1: Significant accounting policies (cont.)

Standards and Interpretations issued not yet effective
At the date of authorisation of the financial report, a number of standards and Interpretations were in issue but not yet
effective.

Initial application of the following Standards is not expected to materially affect any of the amounts recognised in the
financial statements, but may change the disclosures made in relation to the consolidated entity’s financial statements:

Standard/Interpretation

Effective for
annual reporting
periods beginning
on or after

Expected to be
initially applied in
the financial year
ending

Conceptual Framework for Financial Reporting

1 Jan 2020

30 June 2021

AASB 2019-1 Amendments to AASs - References to the Conceptual
Framework

1 Jan 2020

30 June 2021

AASB 2018-7 Amendments to AASs - Definition of Material

1 Jan 2020

30 June 2021

AASB 2019-5 Amendments to AASs - Disclosure of the Effect of New IFRS
Standards Not Yet Issued in Australia

AASB 2020-1 Amendments to AASs - Classification of Liabilities as Current
or Non-current

AASB 2020-3 Amendments to AASs - Annual Improvements 2018-2020
and Other Amendments

1 Jan 2020

30 June 2021

1 Jan 2022

30 June 2023

1 Jan 2022

30 June 2023

C. Basis of consolidation
Subsidiaries are entities controlled by the Company. Control is achieved when the Company is exposed, or has rights,
to variable returns from its involvement with the investee and has the ability to affect those returns through its power
over the investee. Specifically, the Company controls an investee if and only if the Company has power over the investee
(i.e. existing rights that give it the current ability to direct the relevant activities of the investee). Exposure, or rights,
to variable returns from its involvement with the investee, and the ability to use its power over the investee to affect
its returns.

When the Company has less than a majority of the voting or similar rights of an investee, the Company considers
all relevant facts and circumstances in assessing whether it has power over an investee including: the contractual
arrangement with the other vote holders of the investee; rights arising from other contractual arrangements and the
Company’s voting rights and potential voting rights.

The Company re-assesses whether or not it controls an investee if facts and circumstances indicate that there are
changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Company obtains
control over the subsidiary and ceases when the Company loses control of the subsidiary. Assets, liabilities, income and
expenses of a subsidiary acquired or disposed of during the year are included in the statement of comprehensive income
from the date the Company gains control until the date the Company ceases to control the subsidiary.

Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity holders of the
parent of the Company and to the non-controlling interests, even if this results in the non-controlling interests having
a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their
accounting policies into line with the Company’s accounting policies. All intra-group assets and liabilities, equity,
income, expenses and cash flows relating to transactions between members of the Company are eliminated in full
on consolidation.

A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction.
If the Company loses control over a subsidiary, it: de-recognises the assets (including goodwill) and liabilities of the
subsidiary; de-recognises the carrying amount of any non-controlling interests; de-recognises the cumulative translation
differences recorded in equity; recognises the fair value of the consideration received; recognises the fair value of any
investment retained; recognises any surplus or deficit in profit or loss; reclassifies the parent’s share of components
previously recognised in OCI to profit or loss or retained earnings, as appropriate, as would be required if the Company
had directly disposed of the related assets or liabilities.

Annual Report 2020Integrated Research and its controlled entitiesFinancial statementsNote 1: Significant
accounting policies (cont.)

The principal or the most
advantageous market must be
accessible by the Company.

D. Foreign currency
In preparing the financial statements
of the individual entities transactions
in foreign currencies are translated
at the foreign exchange rate ruling
at the date of the transaction.
Monetary assets and liabilities
denominated in foreign currencies
at the year end date are translated
to Australian dollars at the foreign
exchange rate ruling at that date.
Foreign exchange differences arising
on translation are recognised in profit
or loss. Non-monetary assets and
liabilities that are measured in terms
of historical cost in a foreign currency
are translated using the exchange
rate at the date of the transaction.
Non-monetary assets and liabilities
denominated in foreign currencies
that are stated at fair value are
translated to Australian dollars at
foreign exchange rates ruling at the
dates the fair value was determined.

On consolidation, the assets and
liabilities of foreign operations,
including goodwill and fair value
adjustments arising on consolidation
are translated to Australian dollars
at foreign exchange rates ruling at
the year end date. The revenues
and expenses of foreign operations
are translated to Australian dollars
at rates approximating the foreign
exchange rates ruling at the
dates of the transactions. Foreign
exchange differences arising on
retranslation are recognised directly
in other comprehensive income and
accumulated in the translation reserve.

E. Fair value
measurement
Fair value is the price that would
be received to sell an asset or paid
to transfer a liability in an orderly
transaction between market
participants at the measurement
date. The fair value measurement is
based on the presumption that the
transaction to sell the asset or transfer
the liability takes place either:

ii)

in the principal market for the
assets or liability; or

in the absence of a principal
market, in the most
advantageous market for the
asset or liability.

The fair value of an asset or a liability
is measured using the assumptions
that market participants would use
when pricing the asset or liability,
assuming that market participants
act in their economic best interest.

A fair value measurement of a
non-financial asset takes into
account a market participant’s
ability to generate economic benefits
by using the asset in its highest and
best use or by selling it to another
market participant that would use
the asset in its highest and best use.

The Company uses valuation
techniques that are appropriate in
the circumstances and for which
sufficient data are available to
measure fair value, maximising
the use of relevant observable
inputs and minimising the use of
unobservable inputs.

All assets and liabilities for which fair
value is measured or disclosed in the
financial statements are categorised
within the fair value hierarchy,
described as follows, based on the
lowest level input that is significant to
the fair value measurement as whole:

• Level 1 - Quoted (unadjusted)

market prices in active markets for
identical assets or liabilities

• Level 2 - Valuation techniques
for which the lowest level input
that is significant to the fair
value measurement is directly or
indirectly observable.

• Level 3 - Valuation techniques
for which the lowest level input
that is significant to the fair value
measurement is unobservable.

For assets and liabilities that
are recognised in the financial
statements at fair value on a
recurring basis, the Company
determines whether transfers
have occurred between levels
in the hierarchy by re-assessing
categorisation (based on the lowest
level input that is significant to the
fair value measurement as a whole)
at the end of each reporting period.

F. Derivative financial
instruments
The consolidated entity uses derivative
financial instruments to hedge its
exposure to foreign exchange risks
arising from operational activities. In
accordance with its treasury policy, the
consolidated entity does not hold or
issue derivative financial instruments
for trading purposes.

Derivative financial instruments
are recognised initially at fair value.
Subsequent to initial recognition,
derivative financial instruments are
stated at fair value. The gain or loss
on remeasurement to fair value is
recognised immediately in profit
or loss. However, where derivatives
qualify for hedge accounting,
recognition of any resultant gain or
loss depends on the nature of the
item being hedged.

The fair value of forward exchange
contracts is their quoted market
price at the year end date, being
the present value of the quoted
forward price.

G. Hedging
On entering into a hedging
relationship, the consolidated
entity normally designates and
documents the hedge relationship
and risk management objective
and strategy for undertaking the
hedge. The documentation includes
identification of the hedging
instrument, the hedged item or
transaction, the nature of the risk
being hedged and how the entity
will assess the hedging instrument’s
effectiveness in offsetting the exposure
to changes in the item’s fair value or
cash flows attributable to the hedged
risk. Such hedges are expected to be
highly effective in offsetting changes
in fair value or cash flows and are
assessed on an ongoing basis to
determine that they actually have
been highly effective throughout the
financial reporting periods for which
they are designated.

For cash flow hedges, the associated
cumulative gain or loss is removed
from equity and recognised in profit
or loss in the same period or periods
during which the hedged forecast
transaction affects profit or loss. The
ineffective part of any gain or loss is
recognised immediately in the profit
or loss.

Annual Report 2020Integrated Research and its controlled entitiesNote 1: Significant
accounting policies (cont.)
Where financial instruments entered
into by the Company are not
designated as a hedging instrument
the gain or loss is recognised
immediately the profit and loss.

H. Property, plant and
equipment
Items of property, plant and
equipment are stated at cost or
deemed cost less accumulated
depreciation and impairment losses
(see accounting policy (l)). The cost of
acquired assets includes (i) the initial
estimate at the time of installation
and during the period of use, when
relevant, of the costs of dismantling
and removing the items and restoring
the site on which they are located,
and (ii) changes in the measurement
of existing liabilities recognised for
these costs resulting from changes
in the timing or outflow of resources
required to settle the obligation or
from changes in the discount rate.

Where parts of an item of property,
plant and equipment have different
useful lives, they are accounted for
as separate items of property, plant
and equipment.

Depreciation is provided on property,
plant and equipment. Depreciation
is calculated on a straight line
basis so as to write off the net cost
of each asset over its expected
useful life to its estimated residual
value. Leasehold improvements
are depreciated over the period
of the lease or estimated useful
life, whichever is the shorter, using
the straight line method. The
estimated useful lives, residual
values and depreciation method are
reviewed annually, with the effect
of any changes recognised on a
prospective basis.

The following useful lives are used in
the calculation of depreciation:

• Leasehold improvements

6 to 10 years

• Plant and equipment

4 to 8 years

I. Leases
The Company assesses at contract
inception whether a contract is, or
contains, a lease. The Company
applies a single recognition and
measurement approach for all
leases, except for short term leases
and low-value assets. The Company
recognises lease liabilities to make
lease payments and right-of-use
assets representing the right to use
the underlying asset.

Right‑of‑use assets

The right-of-use assets comprise
the initial measurement of the
corresponding lease liability, lease
payments made at or before the
commencement day, less any lease
incentives received and any initial
direct costs. They are subsequently
measured at cost less accumulated
depreciation and impairment losses.
Right-of-use assets are depreciated
on a straight-line basis over the
lease term.

Lease liabilities

At the commencement date of the
lease, the Company recognises lease
liabilities measured at the present
value of lease payments to be
made over the lease term. The lease
payments include fixed payments
(including in-substance fixed
payments) less any lease incentives
receivable, variable lease payments
that depend on an index or a rate,
and amounts expected to be paid
under residual value guarantees.
The lease payments also include the
exercise price of a purchase option
reasonably certain to be exercised
by the Company and payments of
penalties for terminating a lease, if
the lease term reflects the Company
exercising the option to terminate.
The variable lease payments that do
not depend on an index or a rate are
recognised as expense in the period
on which the event or condition that
triggers the payment occurs.

In calculating the present value of
lease payments, the Company uses
the incremental borrowing rate at
the lease commencement date if
the interest rate implicit in the lease
is not readily determinable. After the
commencement date, the amount of
lease liabilities is increased to reflect
the accretion of interest and reduced
for the lease payments made. In
addition, the carrying amount of
lease liabilities is remeasured if

there is a modification, a change
in the lease term, a change in the
in-substance fixed lease payments
or a change in the assessment to
purchase the underlying asset.

Short‑term leases and leases of
low‑value assets

The Company applies the short-term
lease recognition exemption to its
short-term leases (i.e., those leases
that have a lease term of 12 months
or less from the commencement
date and do not contain a purchase
option). It also applies the lease
of low-value assets recognition
exemption to leases of office
equipment that are considered
to be low value. Lease payments
on short-term leases and leases of
low-value assets are recognised as
expense on a straight-line basis over
the lease term.

Policy applicable to year ended
30 June 2019

Payments made under operating
leases were recognised in profit or
loss on a straight-line basis over the
term of the lease. Lease incentives
received were recognised in profit or
loss as an integral part of the total
lease expense and spread over the
lease term.

J. Intangible Assets

Research and development

Expenditure on research activities,
undertaken with the prospect of
gaining new scientific or technical
knowledge and understanding,
is recognised in profit or loss
as incurred.

Expenditure on development
activities, whereby research findings
are applied to a plan or design for the
production of new or substantially
improved products and processes, is
capitalised if the product or process
is technically and commercially
feasible and the consolidated
entity has sufficient resources to
complete development.

The useful lives of the capitalised
assets are assessed as finite. The
expenditure capitalised includes
the cost of materials, direct labour
and an appropriate proportion of
overheads. Other development
expenditure is recognised in profit or
loss as an expense as incurred.

Annual Report 2020Integrated Research and its controlled entitiesFinancial statementsNote 1: Significant
accounting policies (cont.)
Capitalised development expenditure
is stated at cost less accumulated
amortisation and impairment losses
(see accounting policy (L)).

Amortisation is charged to profit or
loss on a straight-line basis over the
estimated useful life, but no more
than three years, the exception being
for the Prognosis next generation
(SaaS) platform which will be
amortised over five years.

Intellectual property

Intellectual property acquired from
third parties is amortised over its
estimated useful life, but no more
than three years.

Computer software

Computer software is stated at cost
and amortised on a straight-line
basis over a two and a half to three
year period.

Customer Relationships

Customer relationships are initially
measured at fair value and
amortised over the estimated useful
life, but no more than five years.

K. Trade and other
receivables
Trade and other receivables are
stated at their amortised cost less
expected credit losses. To measure
the expected credit losses the
utilises the simplified approach in
calculating the expected credit loss
and recognises a loss allowance
based on a lifetime expected credit
losses at each reporting date.
The Company has established a
provision matrix calculated based
on the group historical credit loss
experience adjusted for forward
looking factors.

Trade receivables are written
off when there is no reasonable
expectation of recovery.

For the trade receivables with
extended payment terms beyond
twelve months, the receivable is
initially recognised at fair value
less transaction costs calculated
by applying a discount to the
contracted cash flows. The discount

rate applied is based upon the
corporate borrowing rate that would
apply to the type of customer,
taking into account the customers’
credit worthiness based on its size
and jurisdiction.

L. Cash and cash
equivalents
Cash and cash equivalents comprises
cash balances and call deposits with
an original maturity of three months
or less.

M. Impairment
The carrying amounts of the
consolidated entity’s assets are
reviewed at each reporting date
to determine whether there is any
indication of impairment. If any
such indication exists, the asset’s
recoverable amount is estimated.
Refer to Note 1 (U) for Goodwill
impairment considerations.

For intangible assets that are not yet
available for use, the recoverable
amount is estimated at each year
end date.

An impairment loss is recognised
whenever the carrying amount of
an asset or its cash generating unit
exceeds its recoverable amount.
Impairment losses are recognised
in profit or loss unless the asset
has previously been revalued, in
which case the impairment loss is
recognised as a reversal to the extent
of that previous revaluation with any
excess recognised through profit
or loss.

The recoverable amount of other
assets is the greater of their fair value
less costs to sell and value in use.

In assessing value in use, the
estimated future cash flows are
discounted to their present value
using a pre-tax discount rate that
reflects current market assessments
of the time value of money and
their risk specific to the asset. For
an asset that does not generate
largely independent cash inflows, the
recoverable amount is determined
for the cash-generating unit to which
the asset belongs.

N. Employee benefits

Superannuation

Obligations for contributions to
defined contribution pension plans
are recognised as an expense in
profit or loss as incurred. There are no
defined benefit plans in operation.

Long‑term service benefits

The consolidated entity’s net
obligation in respect of long-term
service benefits, other than pension
plans, is the amount of future benefit
that employees have earned in
return for their service in the current
and prior periods. The obligation is
calculated using expected future
increases in wage and salary rates
including related on-costs and
expected settlement dates, and is
discounted using the rates attached
to the high quality corporate bond
rate at the year end date which
have maturity dates approximating
to the terms of the consolidated
entity’s obligations.

Share‑based payment transactions

The performance rights programmes
allow the consolidated entity’s
employees to acquire shares of
the Company. The fair value of
performance rights granted are
recognised as an employee expense
with a corresponding increase in
equity. The fair value is measured
at grant date and spread over the
period during which the employees
become unconditionally entitled
to the performance rights. The fair
value of the instrument granted is
measured using a Black-Scholes
methodology, taking into account the
terms and conditions upon which the
options were granted. The amount
recognised as an expense is adjusted
to reflect the actual number of share
options or performance rights that
are expected to vest.

Wages, salaries, annual leave, and
non‑monetary benefits

Liabilities for employee benefits for
wages, salaries and annual leave
represent present obligations resulting
from employees’ services provided
to the year end date, calculated at
undiscounted amounts based on
remuneration wage and salary rates
that the consolidated entity expects to
pay as at the year end date.

Annual Report 2020Integrated Research and its controlled entitiesNote 1: Significant
accounting policies (cont.)

O. Provisions
A provision is recognised in the
statement of financial position
when the consolidated entity has
a present legal or constructive
obligation as a result of a past event,
and it is probable that an outflow of
economic benefits will be required
to settle the obligation. Provisions
are determined by discounting
the expected future cash flows
at a pre-tax rate that reflects
current market assessments of the
time value of money and, where
appropriate, the risks specific to
the liability.

Employee benefits

Provisions for employee benefits
include liabilities for annual leave and
long service leave and are measured
at the amounts expected to be paid
when the liabilities are settled.

Make good

The make good provision is
for leases undertaken by the
Company. For each provision raised
a corresponding asset has been
recognised and is amortised over the
shorter of the term of the lease or the
useful life of the asset.

P. Trade and other
payables
Trade and other payables are stated
at their amortised cost.

Q. Revenue
Revenue from contracts with
customers is recognised either at
a point in time (licence fees) or
over time (maintenance, SaaS,
testing solutions and professional
services fees), regardless of when
payment is received. Amounts
disclosed as revenue are net of
agency commissions and discounts.
Where the Company bundles
the products or services, the
transaction price is allocated to
each performance obligation based
on the proportionate stand-alone
selling prices.

Licence fees are recognised on
delivery of the licence key, where
the Company’s contracts with

customers provide the right to
use the Company’s intellectual
property. As such, the Company’s
performance obligation is satisfied at
the point in time which the customer
receives the licence key.

Maintenance fees are recognised
on a monthly basis over the term of
the service agreement, which may
range between one to five years.
Services provided to customers under
maintenance contracts include
technical support and supply of
software upgrades.

SaaS fees are recognised on a
monthly basis over the term of the
service agreement which may range
between one to five years. The
Company’s contracts with customers
provide a right of access to the
Company’s intellectual property
(hosted on the Company’s cloud
environment) for the duration of the
term of the contract.

Testing solutions services
revenues are recognised either
rateably over a service period or
as services are rendered. Testing
services relate to the provision of
services to performing testing of
customer environments.

Professional services are revenues
recognised as the services are
rendered, typically in accordance
with the achievement of contract
milestones or hours expended.
Professional services include
implementation and configuration
services for licenced software.

Unsatisfied performance obligations
are disclosed as deferred revenue
on the consolidated statement
of financial position. Where
the Company has a multiyear
non-cancellable contractual
commitment but does not expect to
satisfy the performance obligation
within twelve months, no deferred
revenue or trade receivable
is recognised.

The Company typically provides
multi-year payment terms to
customers ranging between one to
five years. For such contracts with
customers, the transaction price is
discounted using a rate that would
be reflected in a separate financing
transaction between the Company
and the customer. This amount
is recognised rateably as finance
income over the payment period.

Directly related contract costs in
obtaining the customer contracts are
expensed unless they are incremental
to obtaining the contract and the
Company expects to recover those
costs. These costs are recognised as
contract assets and amortised over
the life of the contract they relate to.
The incremental costs in obtaining
customer contracts for the Company
relate to specified commissions paid
to employees which meet the criteria
of directly related contract costs.

No revenue is recognised if there are
significant uncertainties regarding
the recovery of the transaction price,
the costs incurred or to be incurred
cannot be measured reliably or there
is a risk of return.

R. Financing income
Financing income comprises interest
receivable on funds invested and
the financing component of the sale
of licences, less interest payable
on borrowings.

S. Income tax
Income tax on the profit or loss for
the periods presented comprises
current and deferred tax. Income tax
is recognised in profit or loss except
to the extent that it relates to items
recognised directly in equity, in which
case it is recognised in equity.

Current tax is the expected tax
payable on the taxable income for
the year, using tax rates enacted or
substantively enacted at the year
end date, and any adjustment to tax
payable in respect of previous years.

Deferred tax is recognised on
temporary differences between the
carrying amounts of assets and
liabilities for financial reporting
purposes and the amounts used for
taxation purposes. The amount of
deferred tax provided is based on the
expected manner of realisation or
settlement of the carrying amount of
assets and liabilities, using tax rates
enacted or substantively enacted at
the year end date.

A deferred tax asset is recognised
only to the extent that it is probable
that future taxable profits will be
available against which the asset can
be utilised. Deferred tax assets are
reduced to the extent that it is no
longer probable that the related tax
benefit will be realised.

Annual Report 2020Integrated Research and its controlled entitiesFinancial statementsNote 1: Significant
accounting policies (cont.)
Additional dividend franking deficit
tax that arises from the distribution
of dividends are recognised at the
same time as the liability to pay the
related dividend.

T. Goods and
Services Tax
Revenue, expenses and assets are
recognised net of the amount of
goods and services tax (GST), or
similar taxes, except where the
amount of GST incurred is not
recoverable from the taxation
authority. In these circumstances, the
GST is recognised as part of the cost
of acquisition of the asset or as part
of the expense.

Receivables and payables are stated
with the amount of GST included.
The net amount of GST recoverable
or payable is included as a current
asset or liability in the statement of
financial position.

Cash flows are included in the
statement of cash flows on a gross
basis. The GST components of
cash flows arising from investing
and financing activities, which are
recoverable or payable are classified
as operating cash flows.

U. Business Combination
and Goodwill
Business combinations are
accounted for using the acquisition
method. The cost of an acquisition
is measured as the aggregate of
the consideration transferred at
acquisition date measured at fair
value. Any contingent consideration
to be transferred by the acquirer
will be recognised at fair value at
the acquisition date. Changes in
the fair value of the contingent
consideration are recognised in the
Statement of Comprehensive Income.

Goodwill is initially measured at cost,
being the excess of the aggregate
of the consideration transferred over
the net identifiable assets acquired
and liabilities assumed. Goodwill
is tested annually for impairment.
Acquisition-related costs are
expensed as incurred and included in
administrative expenses.

V. Significant accounting
judgements, estimates
and assumptions
The carrying amounts of certain
assets and liabilities are often
determined based on estimates
and assumptions of future events.
The key estimates and assumptions
that have a significant risk of
causing a material adjustment to the
carrying amounts of certain assets
and liabilities within the next annual
reporting period are:

Intangible assets ‑ Development

An intangible asset arising from
development expenditure on an
internal project is recognised only
when the consolidated entity can
demonstrate the technical feasibility
of completing the intangible asset
so that it will be available for use
or sale, its intention to complete
and its ability to use or sell the
asset, how the asset will generate
future economic benefits, the
availability of resources to complete
the development and the ability to
measure reliably the expenditure
attributable to the intangible asset
during its development. Following the
initial recognition of the development
expenditure, the cost model is
applied requiring the asset to be
carried at cost less any accumulated
amortisation and accumulated
impairment losses. Any expenditure
capitalised is amortised over the
period of expected benefits from the
related project commencing from the
commercial release of the project.
The carrying value of an intangible
asset arising from development
expenditure is tested for impairment
annually when the asset is not yet
available for use or more frequently
when an indication of impairment
arises during the reporting period.

Intangible assets ‑ Goodwill

Goodwill acquired from business
acquisitions is initially measured at
cost. Goodwill is tested annually for
impairment or earlier if changes in
circumstances indicate a potential
impairment, the impairment
policy is explained in note 1(M).
The impairment testing requires
judgements over future cashflow
streams and assumptions used in
the calculations.

Share based payment transactions

The consolidated entity measures the
cost of equity-settled transactions
with employees by reference to the
fair value of the equity instruments at
the date at which they are granted.
The fair value is determined by using
a Black-Scholes methodology and
applying management determined
probability factors relating to
non-market vesting conditions.

Provision for expected credit losses
of trade and other receivables

The Company uses a provision
matrix to calculate the expected
credit loss for trade and other
receivables. The provision rates are
based on the days overdue and
differ by geography. The provision
matrix is based on the historical
default experience for the Company
and adjusted for forward-looking
information and includes the use of
macroeconomic information where
appropriate. The determination of
the provision rates is considered a
significant estimate as it is sensitive
to change in circumstances and of
forecast of economic conditions. The
expected credit loss also may not
be representative of the customers’
actual default in the future.

Income Tax

The Company regularly assesses the
adequacy of income tax provisions
having regard to the differing tax
rules and regulations applicable in
the various jurisdictions in which
the Company operates. Due to
the complexities of tax rules and
regulations in numerous jurisdictions,
matters such as the availability
and timing of tax deductions and
the application of the arm’s length
principle to cross-border transactions
often require significant judgements
and assumptions to be made.
Deferred tax assets are recognised
for deductible temporary differences
and tax losses to the extent that
it is probable that future taxable
profits will be available to utilise those
temporary differences and tax losses.
Significant judgement is required
by the Company to determine the
amount of deferred tax assets that
can be recognised, based upon the
likely timing and the level of future
taxable profits.

Annual Report 2020Integrated Research and its controlled entitiesNote 2. Segment reporting
The Chief Operating Decision Maker (CODM), being the Chief Executive Officer, reviews a variety of information,
including profit, on the performance of Prognosis solution across the group for the purpose of resource allocation.

The principal geographical regions are The Americas - Operating from the United States with responsibility for the
countries in North, Central and South America, Europe - operating from the United Kingdom and Germany with
responsibility for the countries in Europe, Asia Pacific - operating from Australia and Singapore with responsibility for
the countries in the rest of the world, and Corporate Australia - with responsibility for research and development and
corporate head office functions of the Company. Inter-segment pricing is determined on an arm’s length basis.

Segment profit represents the profit earned by each segment without allocation of investment revenue and income
tax expense.

Information regarding these geographic segments is presented below. The accounting policies of the reportable
segments are the same as the Group’s accounting policies.

In thousands of
AUD

Sales to customers
outside the
consolidated entity

Inter-segment
revenue

Total segment
revenue

Total revenue

Segment results
(before finance
income and tax)

Results from
operating activities

Financing income

Income tax expense

Profit for the year

Americas

Europe

Asia Pacific

Corporate
Australia1

Eliminations

Consolidated

2020

2019 2020

2019 2020 2019

2020

2019

2020

2019

75,786 69,362 17,476 16,885 17,651

15,052

‑

(479)

‑

110,913 100,820

‑

- 58,134 52,629 (58,134)

(52,629)

‑

75,786 69,362 17,476 16,885 17,651

15,052 58,134 52,150 (58,134)

(52,629)

110,913 100,820

2,276

2,075

458

420

615

441 27,516 25,964

110,913 100,820

- 30,865 28,900

30,865 28,900

606

747

(7,417)

(7,796)

24,054

21,851

8,557

1,143

12,058

11,335

‑

Capital additions2

675

234

619

149

121

7,114

700

Depreciation
and amortisation
expenditure

960

426

270

198

70 10,630 10,745

Americas
(USD)

Europe
(GBP)

In local currency3

2020

2019 2020

2019

Sales to customers
outside the
consolidated entity

50,258 49,696 9,243 9,360

Inter-segment sales

‑

Total segment
revenue

50,258 49,696 9,243 9,360

Segment results

1,517

1,491

245

234

1 Corporate Australia includes both the research and development, hedging and corporate head office functions of Integrated Research Limited.

2 Excludes internal development costs capitalised but includes third party assets acquired. Additions also include right-of-use assets.

3 Segment results represented in local currencies.

Annual Report 2020Integrated Research and its controlled entitiesFinancial statementsNote 3. Revenue from contracts with customers
Information regarding the disaggregation of the Company’s revenues from contracts with customers is presented below.

In thousands of AUD

Timing of Revenue Recognition:

At a point in time

Over time

Total Revenue from contracts with customers

Type of product Group

Unified communications

Infrastructure

Payments

Professional services

Total Revenue

Consolidated

2020

2019

72,098

38,815

110,913

59,818

28,657

13,808

8,630

110,913

62,774

38,046

100,820

51,043

26,343

16,047

7,387

100,820

The transaction price allocated to the remaining performance obligations (unsatisfied or partially unsatisfied), which are
not included above, is $15,169,000 (2019: $13,656,000) as at 30 June and is expected to be recognised as revenue in
two to five years. This amount relates to contracts with customers where the Company has a multi-year non-cancellable
contractual commitment but does not expect to satisfy the performance obligation within twelve months, and no
deferred revenue or trade receivable is recognised.

Note 4. Expenditure
Total expenditure includes:

In thousands of AUD

Employee benefits expense:

Defined contribution plans

Equity settled share-based payments

Other employee benefits

Depreciation and amortisation

Bad and doubtful debt expense

Operating lease rental expenses

Consolidated

2020

2019

2,974

671

56,823

60,468

12,058

899

‑

2,644

111

50,268

53,023

11,335

264

1,954

Annual Report 2020Integrated Research and its controlled entitiesNote 5. Other gains and (losses)

In thousands of AUD

Loss on sale of financial assets

Currency exchange gains/(losses)

Note 6. Finance income

In thousands of AUD

Interest income

Interest on borrowings

Interest on lease liability

Note 7. Auditors’ remuneration

In AUD

Fees to Ernst & Young (Australia)

Note

Consolidated

2020

(861)

(1,007)

(1,868)

Consolidated

2020

992

(176)

(210)

606

2019

(324)

1,636

1,312

2019

799

(52)

747

Consolidated

2020

2019

Fees for auditing the consolidated financial report of the Company and auditing
the statutory financial reports of any controlled entities

233,669

239,195

Fees for other assurance and agreed-upon-procedures services under other
legislation or contractual arrangements where there is discretion as to whether
the service is provided by the auditor or another firm

‑

20,800

Fees for other services

- Tax compliance

Total fees to Ernst & Young (Australia)

Fees to other overseas member firms of Ernst & Young (Australia)

Fees for other services

- Tax compliance

Total fees to overseas member firms of Ernst & Young (Australia)

Total auditor's remuneration

48,000

281,669

32,810

292,805

37,500

130,792

319,169

423,597

Annual Report 2020Integrated Research and its controlled entitiesFinancial statementsNote 8. Income tax expense

Recognised in profit for the year

In thousands of AUD

Current tax expense:

Current year

Prior year adjustments

Deferred tax expense:

Origination and reversal of temporary differences

Total income tax expense in profit and loss

Numerical reconciliation between income tax expense and profit before tax

In thousands of AUD

Profit before tax

Income tax using the domestic corporate tax rate of 30%

Increase in income tax expense due to:

Non-deductible expenses

Effect of tax rates in foreign jurisdictions

Other

Decrease in income tax expense due to:

R&D tax incentive

Prior year adjustments

Income tax expense

Consolidated

Note

2020

2019

8,222

(310)

7,912

(495)

7,417

Consolidated

2020

31,471

9,441

182

(261)

(213)

(1,422)

(310)

7,417

9,043

(290)

8,753

(957)

7,796

2019

29,647

8,894

154

(1,105)

(290)

7,796

Annual Report 2020Integrated Research and its controlled entities
Note 9. Earnings per share
The calculation of basic and diluted earnings per share at 30 June 2020 was based on the profit attributable to ordinary
shareholders of $24,054,000 (2019: $21,851,000); a weighted number of ordinary shares outstanding during the year
ended 30 June 2020 of 171,860,753 (2019: 171,794,468); and a weighted number of ordinary shares (diluted) outstanding
during the year ended 30 June 2020 of 172,529,700 (2019: 172,108,542), calculated as follows:

In thousands of AUD

Profit for the year

Weighted average number of shares used as the denominator

Number

Number for basic earnings per share:

Ordinary shares

Effect of employee share plans on issue

Number for diluted earnings per share

Basic earnings per share (AUD cents)

Diluted earnings per share (AUD cents)

Note 10. Cash and cash equivalents

In thousands of AUD

Cash at bank and on hand

Consolidated

2020

24,054

2019

21,851

Consolidated

2020

2019

171,860,753

171,794,468

668,947

314,074

172,529,700

172,108,542

14.00

13.94

12.72

12.70

Consolidated

2020

9,744

2019

9,316

Annual Report 2020Integrated Research and its controlled entitiesFinancial statementsNote 11. Trade and other receivables

Current

In thousands of AUD

Trade debtors

Less: Allowance for expected credit losses

GST receivable

Non‑current

In thousands of AUD

Trade debtors

Consolidated

2020

59,898

(2,217)

57,681

172

57,853

2019

52,534

(1,417)

51,117

261

51,378

Consolidated

2020

29,399

2019

21,389

The Company provides customers of good credit worthiness extended payment plans over the committed term of the
licence contract ranging between one to five years. For customers not on extended payment plans the credit period on
sales range from 30 to 90 days.

Ageing of past due but not impaired:

Consolidated

In thousands of AUD

Past due 30 days

Past due 60 days

Past due 90 days

Total

2020

1,584

1,851

5,995

9,430

The movement in the allowance for expected credit losses in respect of trade receivables is detailed below:

In thousands of AUD

Balance at beginning of year

Amounts written off during the year

(Decrease)/increase in provision

Balance end of year

Consolidated

2020

1,417

(99)

899

2,217

2019

3,195

2,329

3,595

9,119

2019

1,346

(193)

264

1,417

The Company has used the following criteria to assess the allowance loss for expected credit losses shown above:

• historical default experience;

• macroeconomic factors specific to the geography of the customer;

• an individual account by account specific risk assessment based on past credit history; and

• any prior knowledge of debtor insolvency or other credit risk.

Included in the Company’s trade receivable balance are debtors which are 90 days past due at the reporting date which
the Company has not provided for as there has been no significant change in credit quality and the consolidated entity
believes that the amounts are still recoverable. The Company does not hold any collateral over these balances.

Annual Report 2020Integrated Research and its controlled entitiesNote 12. Other assets

Current

In thousands of AUD

Other prepayments

Contract assets

Fair value of assets - forward foreign exchange contracts

Total

Non‑current

In thousands of AUD

Contract assets

Total

Note 13. Other financial assets

In thousands of AUD

Deposits

Consolidated

2020

1,821

941

201

2,963

Consolidated

2020

872

2019

2,104

1,029

3,133

2019

829

Consolidated

2020

236

2019

236

The carrying amount of other financial assets is a reasonable approximation of their fair value.

Note 14. Property, plant and equipment

Plant and Equipment

In thousands of AUD

At cost

Accumulated depreciation

Leasehold improvements

In thousands of AUD

At cost

Accumulated depreciation

Consolidated

2020

6,517

(5,147)

1,370

Consolidated

2020

3,464

(2,951)

513

Total property, plant and equipment

Consolidated

In thousands of AUD

At cost

Accumulated depreciation

Total written down amount

2020

9,981

(8,098)

1,883

2019

6,277

(4,397)

1,880

2019

3,442

(2,691)

751

2019

9,719

(7,088)

2,631

Annual Report 2020Integrated Research and its controlled entitiesFinancial statementsNote 14. Property, plant and equipment (cont.)

Plant and Equipment

In thousands of AUD

Carrying amount at start of year

Additions

Disposals

Effects of foreign currency exchange

Depreciation expense

Carrying amount at end of year

Leasehold Improvements

In thousands of AUD

Carrying amount at start of year

Additions

Effects of foreign currency exchange

Depreciation expense

Carrying amount at end of year

Note 15. Deferred tax assets and liabilities

Deferred tax assets and liabilities are attributable to the following:

Consolidated

2020

1,880

200

(9)

(726)

1,370

Consolidated

2020

751

(262)

513

Consolidated

In thousands of AUD

Intangible assets

Trade and other payables

Employee benefits

Provisions

Other current liabilities

Unrealised foreign exchange gain

Deferred tax assets/(liabilities)

Set off of deferred tax asset

Net deferred tax assets/(liabilities)

Assets

Liabilities

Net

2020

130

391

1,018

790

403

2,794

(1,390)

1,404

2019

268

1,095

420

628

2,411

(1,125)

1,286

2020

7,338

‑

502

‑

7,840

(1,390)

6,450

2019

5,799

365

798

6,962

(1,125)

5,837

2020

(7,208)

391

1,018

790

(99)

(5,046)

‑

2019

1,653

872

(675)

1,880

2019

894

206

(71)

(278)

751

2019

(5,799)

268

730

420

628

(798)

(4,551)

(5,046)

(4,551)

Annual Report 2020Integrated Research and its controlled entitiesNote 15. Deferred tax assets and liabilities (cont.)

Movement in temporary differences during the year:

For year ended 30 June 2020

Consolidated

In thousands of AUD

Intangible assets

Trade and other payables

Employee benefits

Provisions

Other current liabilities

Unrealised foreign exchange gain

For year ended 30 June 2019

In thousands of AUD

Intangible assets

Trade and other payables

Employee benefits

Provisions

Other current liabilities

Unrealised foreign exchange gain

Balance
1 July 19

(5,799)

268

730

420

628

(798)

(4,551)

Balance
1 July 18

(5,454)

619

1,140

170

206

(275)

(3,594)

Recognised
in income

Recognised
in equity

Balance
30 June 20

(1,409)

123

288

370

(727)

860

(495)

‑

(7,208)

391

1,018

790

(99)

(5,046)

Consolidated

Recognised
in income

Recognised
in equity

Balance
30 June 19

(345)

(351)

(721)

250

422

(523)

(1,268)

311

(5,799)

268

730

420

628

(798)

(4,551)

Annual Report 2020Integrated Research and its controlled entitiesFinancial statementsNote 16. Intangible assets
The balance of capitalised intangible assets comprises:

Cost

In thousands of AUD

Balance at 1 July 2018

Fully amortised & offset

Internally developed

Purchased

Effects of foreign currency exchange

Software
development

Third party
software

40,332

(11,429)

11,275

1,424

(26)

Balance at 30 June 2019

40,178

1,473

Consolidated

Goodwill

3,334

190

3,524

Balance at 1 July 2019

Fully amortised & offset

Internally developed

Purchased

Effects of foreign currency exchange

40,178

(7,934)

13,962

‑

Balance at 30 June 2020

46,206

2,408

1,473

3,524

‑

930

‑

104

3,628

Consolidated

Amortisation

In thousands of AUD

Balance at 1 July 2018

Fully amortised & offset

Amortisation for year

Effects of foreign currency exchange

22,153

(11,429)

10,215

1,324

(26)

Balance at 30 June 2019

20,939

1,308

Balance at 1 July 2019

Fully amortised & offset

Amortisation for year

Effects of foreign currency exchange

20,939

(7,934)

8,832

‑

1,308

‑

Balance at 30 June 2020

21,837

1,353

Customer
Relationship

812

859

‑

882

‑

487

167

686

‑

178

882

Software
development

Third party
software

Goodwill

Customer
Relationship

Carrying amounts

Consolidated

In thousands of AUD

Balance at 30 June 2019

Balance at 30 June 2020

Software
development

Third party
software

19,239

24,369

165

1,055

Goodwill

3,524

3,628

Customer
Relationship

173

‑

Total

45,902

(11,455)

11,275

247

46,034

(7,934)

13,962

930

132

53,124

Total

23,964

(11,455)

10,382

22,933

(7,934)

9,051

24,072

Total

23,101

29,052

Annual Report 2020Integrated Research and its controlled entitiesNote 17. Goodwill
Goodwill arose on the acquisition of IQ Services business in the year ending 30 June 2016. Management has identified
the Group as the cash generating unit (the Prognosis CGU) to which goodwill is allocated for impairment testing.
Management performs its annual impairment testing at least annually. The carrying value of goodwill at 30 June 2020 is
$3,628,000 (2019: $3,524,000). A reconciliation of the movement in goodwill is included in Note 16.

The recoverable amount of the Prognosis CGU has been determined using a value in use approach. The value in use has
been based on the following key assumptions:

1. Cash flow forecasts

The cash flow forecasts are based upon a Board approved 2021 budget and management projections for the
subsequent four years of the Prognosis CGU.

2. Discount rate

Discount rate of 11% (2019: 11%) applied for value in use calculation is based on the post-tax weighted average cost of
capital applicable to the Prognosis CGU.

3. Terminal value

The terminal growth rate after the five-year projection period has been calculated using a growth rate of 3% (2019: 3%)
which is determined by Management based on their assessment of expected long term annual growth for the
software industry.

The value in use does not indicate any impairment is required at 30 June 2020.

Management believe that a reasonable change in any of the above key assumptions would not cause the carrying values
to exceed their recoverable amounts.

Note 18. Trade and other payables

In thousands of AUD

Trade and other creditors

The average credit period on trade and other payables is 30 days.

Note 19. Employee benefits

Current

In thousands of AUD

Liability for annual leave

Liability for long service leave

Non‑current

In thousands of AUD

Liability for long service leave

Pension plans

Consolidated

2020

10,213

2019

9,797

Consolidated

2020

2019

2,746

1,106

3,852

Consolidated

2020

190

2,178

1,019

3,197

2019

201

Employees of the consolidated entity accumulate pension benefits through statutory contributions by the entities
in the consolidated entity as required by the laws of the jurisdictions in which they operate, supplemented by
individual contributions.

Annual Report 2020Integrated Research and its controlled entitiesFinancial statementsNote 19. Employee benefits (cont.)

Share based payments

Performance Rights

On 21 November 2011, the consolidated entity established the Integrated Research Performance Rights and Options Plan
(IRPROP). The plan enables the Company to offer performance rights to eligible employees to obtain shares in Integrated
Research at no cost contingent upon performance conditions being met. The performance conditions include either
a service period with performance components or a service period with a net after tax profit hurdle. The performance
rights are automatically exercised into shares upon the performance conditions being met. The following performance
rights were granted during the period:

Grant Date

Number of Rights

Earliest Vesting Date

Expiry date

Aug-19

Sep-19

Nov-19

40,000

211,424

45,731

106,707

Aug 2022

Sep 2022

The fair value of the performance rights including assumptions used are as follows:

Grant date

Fair value at measurement date

Share price

Exercise price

Expected volatility

Contractual life (expressed in days)

Expected dividends

Risk-free interest rate (based on 3 year treasury bonds)

Aug 2019

Sep 2019

Nov 2019

$2.480

$2.71

nil

50%

1,118

2.89%

1.5%

$2.802

$3.05

nil

50%

1,069

3.81%

1.5%

$2.865

$3.06

nil

50%

1,015

2.37%

1.5%

Model Used

Black Scholes

The fair values of services received in return for performance rights granted to employees is measured by reference to
the fair value of share options granted.

During the year ended 30 June 2020, the consolidated entity recognised an expense through profit of $671,000 related
to the fair value of performance rights (2019: $111,000).

The following table provides the movement in performance rights during the year:

In thousands of performance rights

Outstanding at the beginning of the year

Forfeited during the year

Exercised during the year

Granted during the year

Outstanding at the end of the year

Exercisable at the end of the year (vested)

2020

791

(141)

‑

404

1,054

‑

2019

1,000

(474)

(180)

445

791

Annual Report 2020Integrated Research and its controlled entitiesNote 20. Provisions

Current

In thousands of AUD

Employee benefits

Non‑current

In thousands of AUD

Employee benefits

Lease make good

Note 21. Lease assets and liabilities

Note

Right‑of‑use assets

Office premises

In thousands of AUD

At cost

Accumulated depreciation

Carrying amount at start of year

On adoption of AASB 16

Addition during the year

Disposals

Effects of foreign currency exchange

Depreciation expense

Carrying amount at end of year

Current lease liabilities

In thousands of AUD

Lease liabilities

Non‑current lease liabilities

In thousands of AUD

Lease liabilities

Contractual undiscounted cash outflows

In thousands of AUD

Less than one year

Between one and five years

Greater than five years

Consolidated

2020

3,852

Consolidated

2020

190

523

713

Consolidated

2020

8,386

(2,019)

6,367

‑

2,147

6,204

‑

(2,019)

6,367

Consolidated

2020

1,372

Consolidated

2020

5,142

Consolidated

2020

1,579

5,460

‑

7,039

2019

3,197

2019

201

522

723

2019

1,721

638

2,359

Annual Report 2020Integrated Research and its controlled entitiesFinancial statementsNote 22. Other financial liabilities

Current

In thousands of AUD

Fair value of hedge liabilities - forward foreign exchange contracts

Non‑current

In thousands of AUD

Other creditors

Note 23. Capital and reserves

Share capital

In thousands of shares

On issue 1 July

Issued against employee performance right exercised

On issue 30 June 2020

Consolidated

2020

Consolidated

2020

2019

139

2019

Ordinary shares

2020

171,861

‑

171,861

2019

171,681

180

171,861

The Company does not have authorised capital or par value in respect of its issued shares.

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote
per share at meetings of the Company. All shares rank equally with regard to the Company’s residual assets.

Hedging reserve

The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging
instruments related to hedged transactions that have not yet occurred.

Translation reserve

The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements
of foreign operations where their functional currency is different to the presentation currency of the consolidated entity,
as well as from the translation of liabilities that hedge the consolidated entity’s net investment in a foreign subsidiary.

Employee benefit reserve

The employee benefit reserve arises on the grant of either share options or performance rights to employees under the
Integrated Research Performance Rights and Option Plan (established November 2011) or the Employee Share Option
Plan (established October 2000). Refer to note 19 for further details.

Annual Report 2020Integrated Research and its controlled entitiesNote 23. Capital and reserves (cont.)

Dividends

Dividends recognised in the current year by the Company are:

In thousands of AUD

Cents
per share

Total amount

Franked/
unfranked

Date of
payment

2020

Final 2019

Interim 2020

Total amount

2019

Final 2018

Interim 2019

Total amount

3.75

3.5

6,445

100% franked

15 Oct 2019

6,015

100% franked

17 Apr 2020

12,460

3.5

6,012

100% franked

16 Oct 2018

6,015

100% franked

16 Apr 2019

12,027

After the end of the financial year, the following dividend was proposed by the Directors. The financial effect of this
dividend has not been brought to account in the financial statements for the year ended 30 June 2020 and will be
recognised in subsequent financial statements:

In thousands of AUD

Final 2020

Cents
per share

3.75

Total amount

Franked/
unfranked

Date of
payment

6,445

100% franked

15 Oct 2020

The final dividend declared of 3.75 cents together with the interim dividend paid in April 2020 of 3.5 cents takes total
dividends for the 2020 financial year to 7.25 cents.

Franking account disclosure:

In thousands of AUD

Adjusted franking account balance

Impact on franking account balance of dividends not recognised

Company

2020

8,503

(2,762)

2019

8,254

(2,762)

Annual Report 2020Integrated Research and its controlled entitiesFinancial statementsNote 24. Financial instruments

Capital risk management
The consolidated entity manages its capital to ensure that controlled entities will be able to continue as a going concern
while maximising the return to stakeholders through the optimisation of treasury management.

The capital structure of the consolidated entity consists of cash and cash equivalents and equity attributable
to equity holders of the Company, comprising issued capital, reserves, and retained earnings as disclosed in
Notes 10 and 23 respectively.

Borrowing Facility
The Company has a $20 million multicurrency revolving cash advance facility with an expiry date of 31 July 2023 at
which point all outstanding cash advances must be repaid. The primary purpose of the facility is to fund working capital
requirements. There was $5 million drawn under the facility at 30 June 2020 (2019: $nil).

The facility is secured by a General Security Agreement with a deed of cross guarantee including the parent entity,
Integrated Research UK Limited, and Integrated Research Inc. The facility is also subject to certain debt covenants
including a leverage ratio, interest cover ratio and capitalisation ratio. The Company met all the covenant requirements
during the year. Interest is variable, linked to Bank Bill Swap Bid Rate (BBSY), plus a margin.

Bank Guarantee Facility
The Company has a $1,200,000 bank guarantee facility. The primary purpose of the facility is to provide bank
guarantees to the Company’s landlord pursuant to contractual lease arrangements. At 30 June 2020, the total value of
bank guarantees provided was $1,110,000 (2019: $819,000). The facility terminates on 31 December 2020.

Significant accounting policies
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of
measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset,
financial liability and equity instrument are disclosed in Note 1 to the financial statements.

Financial risk management objectives
The Board of Directors has overall responsibility for the establishment and oversight of the consolidated entity’s financial
management framework. The Board has an established Audit and Risk Committee, which is responsible for developing
and monitoring the consolidated entity’s financial management policies. The Committee provides regular reports to the
Board of Directors on its activities.

The Audit and Risk Committee oversees how Management monitors compliance with risk management policies and
procedures and reviews the adequacy of the risk management framework in relation to the risks. The main risks arising
from the consolidated entity’s financial instruments are currency risk, credit risk, liquidity risk and cash flow interest
rate risk.

The consolidated entity seeks to minimise the effects of these risks, where deemed appropriate, by using derivative
financial instruments to hedge these risk exposures. The use of financial derivatives is governed by the consolidated
entity’s policies on foreign exchange risk, credit risk, the use of financial derivatives and non-derivative financial
instruments, and the investment of excess liquidity. The consolidated entity does not enter into or trade financial
instruments, including derivative financial instruments, for speculative purposes.

Market risk
The consolidated entity’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates
and cash flow interest rate risks. The consolidated entity enters into foreign exchange forward contracts to hedge the
exchange rate risk arising from transactions not recorded in an entity’s functional currency.

Annual Report 2020Integrated Research and its controlled entitiesNote 24. Financial instruments (cont.)

Foreign currency risk management
The consolidated entity undertakes certain transactions denominated in foreign currencies, hence exposures to
exchange rate fluctuations arise. Exchange rate exposures are managed within approved policy parameters utilising
forward foreign exchange contracts.

The carrying amount of the consolidated entity’s foreign currency denominated monetary assets and monetary liabilities
at the reporting date that are denominated in a currency that is different to the functional currency of the respective
entities undertaking the transactions is as follows:

In thousands of AUD

US Dollar

Sterling

Euro

Consolidated

Liabilities

Assets

2020

1,788

‑

2019

1,467

2020

9,973

3,085

2019

7,879

3,339

Foreign currency sensitivity
At 30 June 2020, if the US Dollar and Euro weakened or strengthened against the Australian dollar by the percentage
shown, with all other variables held constant, net profit for the year would increase (decrease) by:

In thousands of AUD

2020

2019

2020

2019

Consolidated

Net profit before tax

Equity

US Dollar

Sterling

Euro

Change in currency (i) - 10% decrease

US Dollar

Sterling

Euro

Change in currency (i) - 10% increase

909

343

(744)

(1)

(280)

712

371

(583)

(304)

909

343

(744)

(1)

(280)

712

371

(583)

(304)

(i) This has been based on the change in the exchange rate against the Australian dollar in the financial years ended 30 June 2020 and 30 June 2019.

The sensitivity analysis has been based on the sensitivity rates used when reporting foreign currency risk internally to
key management personnel and represents management’s assessment of the possible change in foreign exchange rates
based on historical volatility.

In addition to the above, there is also an A$38.6 million (2019: A$24.9 million) intercompany receivable in the parent
entity at 30 June, denominated in US dollars, that eliminates on consolidation. The gain or loss on revaluation of the
intercompany balance to Australian dollars is not eliminated and is therefore carried through to the consolidated profit
and loss. A 10% decrease in the Australian dollar against the US dollar would result in a A$4.3 million (2019: A$2.8 million)
increase to net profit before tax and equity, whilst a 10% increase would result in a A$3.5 million (2019: A$2.3 million)
decrease to net profit before tax and equity.

Annual Report 2020Integrated Research and its controlled entitiesFinancial statementsNote 24. Financial instruments (cont.)
In management’s opinion, the sensitivity analysis is not fully representative of the inherent foreign exchange risk as
the year end exposure does not necessarily reflect the exposure during the course of the year. The consolidated entity
includes certain subsidiaries whose functional currencies are different to the consolidated entity presentation currency.
The main operating entities outside of Australia are based in the United States, the United Kingdom, Germany and
Singapore. As stated in the consolidated entity’s accounting policies per Note 1, on consolidation the assets and liabilities
of these entities are translated into Australian dollars at exchange rates prevailing at the year end date. The income
and expenses of these entities is translated at the average exchange rates for the year. Exchange differences arising
are classified as equity and are transferred to a foreign exchange translation reserve. The consolidated entity’s future
reported profits could therefore be impacted by changes in rates of exchange between the Australian Dollar and United
States Dollar, UK Sterling, Euro and Singapore Dollar each.

Forward foreign exchange contracts
The consolidated entity is exposed to foreign currency risk on sales and purchases that are denominated in a currency
other than the AUD. The currencies giving rise to this risk are primarily United States Dollar, UK Sterling and the Euro.

The consolidated entity uses forward exchange contracts to hedge its foreign currency risk. The forward exchange
contracts have maturities of less than two years after the year end date.

The consolidated entity classifies its forward exchange contracts hedging forecasted transactions as cash flow hedges
and measures them at fair value. The following table details the forward foreign currency contracts outstanding as at
reporting date:

Average
Exchange Rate

Foreign Currency

Contract Value

Fair Value

Outstanding
contracts

2020

2019

2020
FC’000

2019
FC’000

2020
A$’000

2019
A$’000

2020
A$’000

2019
A$’000

Consolidated

Sell US Dollar

Less than 3 months

3 to 6 months

6 to 9 months

9 to 12 months

Sell Euros

Less than 3 months

3 to 6 months

6 to 9 months

0.68

0.61

0.60

‑

Sell Sterling

Less than 3 months

0.55

3 to 6 months

6 to 9 months

‑

0.71

0.72

0.71

0.62

0.61

0.56

0.55

4,250

2,000

2,500

2,000

3,250

1,750

2,250

1,000

6,296

2,918

3,677

2,924

4,546

2,444

3,184

1,415

(24)

(1)

(19)

‑

250

100

‑

405

179

181

‑

(82)

(42)

(7)

(1)

(2)

(1)

(3)

(1)

(139)

These hedge assets and liabilities are classified as a level 2 fair value measurement, being derived from inputs provided
from financial institutions, rather than quoted prices that are observable for the asset either directly (i.e. as prices) or
indirectly (i.e. derived from prices). The fair value measurement of the over the counter forward contact would not qualify
as Level 1 as there is not a quoted price for the actual contract, even though data used to value the contract may be
derived entirely from active foreign-exchange and interest-rate market.

Annual Report 2020Integrated Research and its controlled entitiesNote 24. Financial instruments (cont.)

Credit risk management
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the
consolidated entity. The consolidated entity has adopted a policy of only dealing with creditworthy counterparties and
obtaining sufficient collateral where appropriate, as a means of mitigating the risk of financial loss from defaults.

Trade receivables consist of a large number of customers, spread across diverse industries and geographical areas.
The largest single counterparty balance with any one customer at 30 June 2020 was $12.1 million (2019: $5.3 million).
Ongoing credit evaluation is performed on the financial condition of accounts. Subsequent to 30 June 2020, the
Company has collected $6.7 million (2019: $2.7 million) in overdue trade receivables.

The Company continued its program to sell selected account receivable balances to a third party without recourse.
The purpose of the program is to manage credit risk and improve working capital. During the year ended 30 June 2020
a total of $8.5 million (2019: $5.6 million) debtors were sold at a cost of $862,000 (2019: $324,000). The Company
continues to bear maintenance support obligations to the end customers which are carried as a liability in the deferred
revenue account of the Company’s balance sheet of $2.6 million (2019: $2.7 million).

The credit risk on liquid funds and derivative financial instruments is limited because the counterparties are banks with
high credit ratings assigned by international credit-rating agencies.

Liquidity risk management
Ultimate responsibility for liquidity risk management rests with the Board of Directors, who have built an appropriate
liquidity risk management framework for the management of the consolidated entity’s short, medium and long-term
funding and liquidity management requirements.

The consolidated entity manages liquidity risk by maintaining adequate reserves, by continuously monitoring forecast
and actual cash flows and matching the maturity profiles of financial assets and liabilities.

All creditor and other payables shown in Note 18 and Note 22 for both 2020 and 2019 carry no interest obligation.

Fair value of financial instruments
The carrying value of financial assets and financial liabilities of the consolidated entity is a reasonable approximation of
their fair value.

For non-current trade debtors Integrated Research has considered a discount rate to recognise the net present value
of the debtors. Level 3 inputs have been considered including corporate borrowing rates, size of the customer and
jurisdiction of the customer. A discounted cashflow model was used to derive the fair value. The range of discount rates
was between 3.5% to 5.5%. The carrying value of non-current trade debtors for 2019 and 2020 of the consolidated
entity was a reasonable approximation of their fair value.

Note 25. Consolidated entities

Parent entity:

Integrated Research Limited

Subsidiaries of Integrated Research Limited:

Integrated Research Inc

Integrated Research Singapore Pte Limited

Integrated Research UK Limited

Subsidiaries of Integrated Research UK Limited:

Country of
incorporation

Ownership interest

2020

2019

Australia

USA

Singapore

100%

Integrated Research Germany GmbH

Germany

100%

Annual Report 2020Integrated Research and its controlled entitiesFinancial statementsNote 26. Reconciliation of cash flows from operating activities

In thousands of AUD

Profit for the year

Depreciation and amortisation

Provision for expected credit loss

Interest received

Interest paid

Share-based payments expense

Net exchange differences

Change in operating assets and liabilities:

(Increase)/decrease in trade debtors

(Increase)/decrease in future income tax benefit

(Increase)/decrease in other operating assets

Increase/(decrease) in trade and other payables

Increase/(decrease) in other operating liabilities

Increase/(decrease) in provision for income taxes payable

Increase/(decrease) in provision for deferred income taxes

Increase/(decrease) in other provisions

Impact of new accounting standards - AASB 15

Net cash from operating activities

Note 27. Key management personnel disclosures

Key management personnel compensation

The key management personnel compensation are as follows:

In thousands of AUD

Short-term benefits

Post-employment benefits

Long term benefit

Equity compensation benefits

Termination benefits

Consolidated

2020

24,054

12,058

800

(992)

386

671

(558)

(14,485)

(11,443)

416

11,393

554

613

645

‑

24,152

2019

21,851

11,335

(799)

111

(21)

(1,618)

216

(2,151)

(343)

(9,911)

(348)

1,556

1,230

21,237

Consolidated

2020

2019

2,379,433

2,953,412

112,460

32,044

130,018

28,520

328,554

(212,364)

‑

66,548

2,852,491

2,966,134

Apart from the details disclosed in this note, no director has entered into a material contract with the consolidated entity
since the end of the previous financial year and there were no material contracts involving directors’ interests existing at
year end.

Note 28. Related parties
At 30 June 2020 Mr Steve Killelea, the founder of IR, owned either directly or indirectly 39.0% of the Company
(2019: 39.7%). A related entity of Mr Killelea provided consulting services totaling $100,000 in the year ended
30 June 2020.

Annual Report 2020Integrated Research and its controlled entitiesNote 29. Parent entity disclosures

In thousands of AUD

Financial Position

Assets

Current assets

Non-current assets

Total Assets

Liabilities

Current Liabilities

Non-current liabilities

Total Liabilities

Net Assets

Equity

Issued Capital

Employee benefits Reserve

Hedging reserve

Retained Earnings

Total Equity

Financial Performance

Profit for the year

Other comprehensive income

Total comprehensive income

Parent Entity

2020

2019

64,391

30,424

94,815

19,383

11,498

30,881

63,934

1,667

4,249

‑

58,018

63,934

21,251

21,302

49,710

19,731

69,441

9,028

6,034

15,062

54,379

1,667

3,536

(51)

49,227

54,379

20,168

20,263

Investments in subsidiaries are included at cost.

Note 30. Subsequent events

Dividends

For dividends declared after 30 June 2020 see Note 23 in the financial statements. The financial effect of dividends
declared and paid after 30 June 2020 have not been brought to account in the financial statements for the year ended
30 June 2020 and will be recognised in subsequent financial reports.

Annual Report 2020Integrated Research and its controlled entitiesFinancial statementsDirectors’ declaration

Directors’ declaration

In accordance with a resolution of the Directors of Integrated Research Limited, we state that:

In the opinion of the Directors:

a) the financial statements and notes of Integrated Research Limited for the financial year ended 30 June 2020

are in accordance with the Corporations Act 2001, including:

i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2020 and of its

performance for the year ended on that date; and

ii)

complying with Accounting Standards and the Corporations Regulations 2001;

b) the financial statements and notes also comply with International Financial Reporting Standards as disclosed in

Note 1; and

c) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they

become due and payable.

2. This declaration has been made after receiving the declarations required to be made to the Directors by the Chief
Executive Officer and Chief Financial Officer in accordance with section 295A of the Corporations Act 2001 for the
financial year ended 30 June 2020.

This declaration is made in accordance with a resolution of the Directors.

Dated at North Sydney this 20th day of August 2020.

Paul Brandling

Chairman

John Ruthven

Managing Director and Chief
Executive Officer

Annual Report 2020Integrated Research and its controlled entities84

Annual Report 2020Integrated Research and its controlled entities85

Annual Report 2020Integrated Research and its controlled entities86

Annual Report 2020Integrated Research and its controlled entities87

Annual Report 2020Integrated Research and its controlled entities88

Annual Report 2020Integrated Research and its controlled entities27 to 39

Annual Report 2020Integrated Research and its controlled entities90

Annual Report 2020Integrated Research and its controlled entitiesASX additional information

Shareholder information

Analysis of numbers of equity security holders by size of holding as at September 2020

1 -1,000

1,001 - 5,000

5,001 - 10,000

10,001 - 100,000

100,001 and over

Class of equity security

Ordinary shares

Options

Performance
Rights

1,654

2,696

1,068

1,229

6,715

Fully Paid Ordinary Shares (Total)
Twenty largest security holders of quoted equity securities as of 11 September 2020.

Rank Name

Units

% of Units

MR STEPHEN JOHN KILLELEA

J P MORGAN NOMINEES AUSTRALIA PTY LIMITED

HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED

CITICORP NOMINEES PTY LIMITED

UBS NOMINEES PTY LTD

MR ANDREW RHYS RUTHERFORD

BRISPOT NOMINEES PTY LTD

NATIONAL NOMINEES LIMITED

MR NICHOLAS BARRY DEBENHAM

BNP PARIBAS NOMINEES PTY LTD

BNP PARIBAS NOMS PTY LTD

CS FOURTH NOMINEES PTY LIMITED

CITICORP NOMINEES PTY LIMITED

NEWECONOMY COM AU NOMINEES PTY LIMITED <900 ACCOUNT>

CUSTODIAL SERVICES LIMITED

BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD

NETWEALTH INVESTMENTS LIMITED

BNP PARIBAS NOMINEES PTY LTD

CS THIRD NOMINEES PTY LIMITED

20 SANTOS L HELPER PTY LTD

Totals: Top 20 holders of FULLY PAID ORDINARY SHARES (Total)

Total Remaining Holders Balance

Total Number of Ordinary Shares on issue

51,880,619

19,802,524

14,819,298

5,277,238

5,067,027

2,794,210

2,774,765

2,349,197

1,489,356

1,241,719

1,021,979

988,694

980,000

788,423

705,036

643,728

625,901

625,503

469,416

403,087

30.18

11.52

8.62

3.07

2.95

1.63

1.61

1.37

0.87

0.72

0.59

0.58

0.57

0.46

0.41

0.37

0.36

0.27

0.23

114,747,720

57,183,033

66.74

33.26

171,930,753

100.00

Annual Report 2020Integrated Research and its controlled entitiesASX additional information

Unquoted equity securities

Option issued under the Integrated Research Limited
Employee Option Plan to take up ordinary shares

Performance Rights issued under the Integrated Research Limited Performance Rights and
Option Plan to take up ordinary shares

989,693**

Number
on issue

Number
of holders

* Number of unissued ordinary shares under the Options.

** Number of unissued ordinary shares under the Performance Rights.

On‑market buy‑back
There is no current on-market buy-back.

Substantial holders
Substantial holders in the Company are set below:

Stephen John Killelea*

* Includes direct and indirect holdings at 11 September 2020.

Number held Percentage

52,218,231

30.38

Corporate