DATA#3 LIMITED — Annual Report 2018

Aug 21, 2018

==> picture [336 x 92] intentionally omitted <==

FY18 RESULTS BRIEFING 22[nd] AUGUST 2018

CONTENTS

FY18 Summary 3 Our Business 6 FY18 Financial Performance 11 Update on Acquisitions 19 FY19-21 Strategy 22 FY19 Outlook 25 Q&A

2

FY18 SUMMARY

==> picture [429 x 540] intentionally omitted <==

“Despite continued growth in revenue and cloud-based business, and a strong second half performance, the full year earnings were impacted by a number of one-off events, primarily in the services segment. This reduced EPS by 8.4%, and the board declared a full year dividend of 8.2 cps, a decrease of 7.9% on FY17.”

Laurence Baynham CEO & MD, Data[#] 3 Limited.

4

FY18 SUMMARY

• Sustained revenue growth

• Strong growth in the emerging cloud-based business

• Earnings impacted by one-off events, both planned and unplanned

• Record staff satisfaction and national Employer of Choice awards

• Record customer satisfaction

5

OUR BUSINESS

==> picture [429 x 540] intentionally omitted <==

7

OUR SOLUTIONS

We work with our customers to enable their business objectives, utilising our technology solution categories:

==> picture [762 x 186] intentionally omitted <==

Delivered under our PDO[2] Customer Solution Lifecycle methodology: Position – Plan – Design – Deploy – Operate – Optimise CONSULTING PROJECT SERVICES SUPPORT SERVICES

8

Foundation

Cloud Mobile Security Data[#] 3 leadership

==> picture [120 x 120] intentionally omitted <==

==> picture [139 x 157] intentionally omitted <==

Innovation Blockchain Cognitive Services Internet of Things (IOT) Data and Analytics Artificial Intelligence Robotics

9

==> picture [142 x 70] intentionally omitted <==

==> picture [194 x 72] intentionally omitted <==

==> picture [155 x 49] intentionally omitted <==

==> picture [138 x 157] intentionally omitted <==

Innovation Examples Blockchain

AI Chatbot

IOT/Data Analytics

==> picture [73 x 54] intentionally omitted <==

10

FY18 FINANCIAL PERFORMANCE

==> picture [429 x 540] intentionally omitted <==

FY18 PERFORMANCE – MIXED RESULTS

Revenue	Up 7.6%	$1,181.4M
Product	Up 8.1%	$961.2M
Services	Up 5.3%	$219.1M
Cloud-based (included in Product & Services above)	Up 58.0%	$267.8M
Other revenues		$1.1M
Gross Profit(excluding Other Revenue)	Up 0.8%	$160.1M
Product	Up 6.7%	$77.4M
Services	Down 4.2%	$82.7M
Gross Margin	Down 0.9 points	13.6%
EBITDA	Down 9.3%	$22.4M
EBIT	Down 10.0%	$19.5M
NPBT	Down 8.9%	$20.4M
NPAT (excluding minority interests)	Down 8.4%	$14.1M
Earnings per share	Down 8.4%	9.14 cents
Dividend per share	Down 7.9%	8.20 cents

==> picture [73 x 54] intentionally omitted <==

12

GROWTH IN REVENUE

==> picture [289 x 163] intentionally omitted <==

----- Start of picture text -----

Product revenue ($M)
1,200
961.2
1,000 889.2
791.3
697.3 709.2
800
639.6
600
400
200
0
FY13 FY14 FY15 FY16 FY17 FY18
----- End of picture text -----

==> picture [293 x 163] intentionally omitted <==

----- Start of picture text -----

Services revenue ($M)
240 208.1 219.1
190.0
200
160.2
160 130.2 134.8
120
80
40
0
FY13 FY14 FY15 FY16 FY17 FY18
----- End of picture text -----

Total revenue ($M)

==> picture [326 x 162] intentionally omitted <==

----- Start of picture text -----

1,200 1,098.2 [1,181.4]
983.2
1,000 870.5
833.6
771.0
800
600
400
200
0
FY13 FY14 FY15 FY16 FY17 FY18
----- End of picture text -----

Product revenue increased by 8.1% and Services revenue increased by 5.3%

Continued market share gain in infrastructure and software licensing.

Strong growth in public cloud-based revenues, up 58% to $267.8M.

==> picture [73 x 54] intentionally omitted <==

13

SHIFT IN BUSINESS MIX

Product gross profit ($M)

==> picture [308 x 144] intentionally omitted <==

----- Start of picture text -----

100
77.4
80 70.5 72.5
64.2 62.0 66.2
60
40
20
0
FY13 FY14 FY15 FY16 FY17 FY18
----- End of picture text -----

Total gross profit ($M)

==> picture [324 x 149] intentionally omitted <==

----- Start of picture text -----

200
158.9 160.1
146.6
150 129.5
122.5 118.9
100
50
0
FY13 FY14 FY15 FY16 FY17 FY18
----- End of picture text -----

Services gross profit ($M)

==> picture [306 x 146] intentionally omitted <==

----- Start of picture text -----

100
86.3
82.7
76.0
80
63.3
58.3 56.8
60
40
20
0
FY13 FY14 FY15 FY16 FY17 FY18
----- End of picture text -----

Product gross margin decreased slightly from 8.2% to 8.1% but on higher revenues delivered a 6.7% increase in product gross profit.

Services gross margin reduced from 41.5% to 37.8% by one-off events and a change in mix, delivering a 4.2% decrease in services gross profit.

Total gross margin decreased from 14.5% to 13.6%, and total gross profit increased by 0.8%

==> picture [73 x 54] intentionally omitted <==

14

EXPENSES OPTIMISED

==> picture [367 x 154] intentionally omitted <==

----- Start of picture text -----

Internal staff costs ($M)
150
114.1 117.6
105.0
97.8
90.2 92.9
100
50
0
FY13 FY14 FY15 FY16 FY17 FY18
----- End of picture text -----

==> picture [355 x 172] intentionally omitted <==

----- Start of picture text -----

Operating expenses ($M)
24.0
23.3 23.3
25
18.1
20 16.7
16.0
15
10
5
0
FY13 FY14 FY15 FY16 FY17 FY18
----- End of picture text -----

Internal staff costs up 3.1%, with general market increases and headcount growth from 1,177 to 1,210 during the year (increase of 2.8%).

Operating expenses held steady after ‘step-up’ from acquisitions in FY16.

==> picture [73 x 54] intentionally omitted <==

15

EARNINGS IMPACTED BY ONE-OFF EVENTS

==> picture [317 x 155] intentionally omitted <==

----- Start of picture text -----

NPAT ($M)
15.4
13.8 14.1
15
12.1
10.6
10
7.5
5
0
FY13 FY14 FY15 FY16 FY17 FY18
----- End of picture text -----

==> picture [320 x 159] intentionally omitted <==

----- Start of picture text -----

EPS (cents)
12
9.99
8.98 9.14
10
7.88
8 6.89
6 4.89
4
2
0
FY13 FY14 FY15 FY16 FY17 FY18
----- End of picture text -----

DPS (cents)

==> picture [321 x 134] intentionally omitted <==

----- Start of picture text -----

10 8.90
8.00 8.20
8 7.00
6.30
6
4.50
4
2
0
FY13 FY14 FY15 FY16 FY17 FY18
----- End of picture text -----

The decommissioning of Data[#] 3’s Cloud platform reduced the contribution from Managed Services, and lower than expected contributions from Business Aspect and Discovery Technology also impacted profit.

Earnings per share decreased by 8.4% and total dividends decreased by 7.9%.

==> picture [73 x 54] intentionally omitted <==

16

SOLID BALANCE SHEET & CASH FLOW

• Strong balance sheet with no material debt

• Any borrowings are ‘back-to-back’ with customer contracts

• Cash flow ‘seasonality’ consistent with previous years

• $8.2M operating cash inflow, with temporary surplus at year end slightly lower than PCP.

• Average DSOS of 25.3 days - industry best practice, and even better than PCP

==> picture [73 x 54] intentionally omitted <==

17

FY18 PERFORMANCE – PEOPLE

==> picture [814 x 173] intentionally omitted <==

----- Start of picture text -----

Employer of choice
Number of people People satisfaction / 5
(% recommended by Data [#] 3)
1,210 4.38
95%
----- End of picture text -----

Independent Employer of Choice awards:

==> picture [156 x 156] intentionally omitted <==

==> picture [223 x 88] intentionally omitted <==

==> picture [263 x 65] intentionally omitted <==

==> picture [73 x 54] intentionally omitted <==

18

UPDATE ON ACQUISITIONS

==> picture [429 x 540] intentionally omitted <==

BUSINESS ASPECT

==> picture [176 x 59] intentionally omitted <==

• Powerful strategic positioning

• Structure fine-tuned following national growth, with focused service lines

• Revenue growth not yet matched with profit growth

• 1H loss largely recovered in 2H, with full year close to breakeven but below FY17.

• Improved profit contribution expected in FY19

==> picture [73 x 54] intentionally omitted <==

20

DISCOVERY TECHNOLOGY

==> picture [188 x 96] intentionally omitted <==

• Data[#] 3 increased shareholding to 77.4% in July 2017; fully consolidated in FY17 & FY18 results

• Software developer of Wi-Fi content management and analytics application “CCX”

• Operates independently of Data[#] 3

• Disappointing FY18 result with NBPT $1.7M lower than FY17, largely due to early termination of

• 5-year supply contract, currently subject to legal proceedings

• Market demand remains strong, with significant pipeline of opportunities

• Commenced closer integration with Data[#] 3

==> picture [73 x 54] intentionally omitted <==

21

FY19–21 STRATEGY

==> picture [429 x 540] intentionally omitted <==

MARKET FUNDAMENTALS

• Digital transformation is a high priority in business strategy.

• The overall IT market growth is fuelled by digital transformation.

• Industry consolidation is creating opportunity.

• Cyber security is our customers’ number one priority.

• Data and analytics are leading drivers of competitive differentiation.

• Cloud provides the platform for automation, artificial intelligence, blockchain and many more innovative technologies.

• Skilled resources are becoming more scarce.

==> picture [73 x 54] intentionally omitted <==

23

KEY PRIORITIES IN FY19

• 1. Services improving margins
• 1. Digital Enablement helping our customers succeed in their digital transformation
• 1. Customer Experience unifying every customer touchpoint across our company to improve the overall customer experience

==> picture [73 x 54] intentionally omitted <==

24

FY19 OUTLOOK

==> picture [429 x 540] intentionally omitted <==

We see economic conditions in FY19 remaining steady, with a positive IT industry growth outlook. We continue to see digital technologies leading business transformation in both the commercial and public sectors. We remain well positioned to enable this transformation and to capture new business. Our overall financial goal remains to deliver earnings growth and improved returns to shareholders.

==> picture [73 x 54] intentionally omitted <==

26

Q&A

==> picture [429 x 540] intentionally omitted <==

APPENDIX 1 – FINANCIAL SUMMARY

==> picture [490 x 407] intentionally omitted <==

==> picture [73 x 54] intentionally omitted <==

28

DISCLAIMER

This presentation has been prepared by Data[#] 3 Limited (“the Company”). It contains general background information about the Company’s activities current as at the date of the presentation. It is information given in summary form and does not purport to be complete. The distribution of this presentation in jurisdictions outside Australia may be restricted by law and you should observe any such restrictions.

This presentation is not (and nothing in it should be construed as) an offer, invitation, solicitation or recommendation with respect to the subscription for, purchase or sale of any security in any jurisdiction, and neither this document nor anything in it shall form the basis of any contract or commitment. The presentation is not intended to be relied upon as advice to investors or potential investors and does not take into account the investment objectives, financial situation or needs of any particular investor. These should be considered, with or without professional advice, when deciding if an investment is appropriate.

The Company has prepared this presentation based on information available to it, including information derived from publicly available sources that have not been independently verified. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness, correctness or reliability of the information, opinions and conclusions expressed.

Any statements or assumptions in this presentation as to future matters may prove to be incorrect and differences may be material. To the maximum extent permitted by law, none of the Company, its directors, employees or agents, nor any other person accepts any liability, including, without limitation, any liability arising from fault or negligence on the part of any of them or any other person, for any loss arising from the use of this presentation or its contents or otherwise arising in connection with it.

==> picture [73 x 54] intentionally omitted <==

29

==> picture [192 x 50] intentionally omitted <==

==> picture [620 x 144] intentionally omitted <==

30