DATA#3 LIMITED — Interim / Quarterly Report 2021

Nov 8, 2021

Data#3

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Delivering the Digital Future

Laurence Baynham CEO & Managing Director

Agenda

• Introduction Laurence Baynham
• Company Overview Laurence Baynham
• Financials Brem Hill
• People Tash Macknish and Janelle Phillips
• Q&A
• Customer Experience Garrett MacDonald

Agenda

• Solutions and Vendors Brad Colledge and Jelaine Doncaster
• Customer Success John Tan
• Q&A
• Cybersecurity Michael Bowser
• Services Growth Carlos Gouveia
• Q&A

Summary and Close Laurence Baynham

Data#3 in FY21

FY22 Outlook

Fast start

FY21 \$3M profit backlog will be realised in FY22

IT outlook

Gartner predict Australian IT market to grow by 4% to over \$100 billion in 2021 and by 6% in calendar year 2022

Position in the market

Positioned to capitalise on growth opportunities.

Accelerating Services

Services growth and strategic focus will improve profit margins

6

Digital Transformation

"Every industry and every organization will have to transform itself in the next few years. What is coming at us is bigger than the original internet."

Tim O'Reilly, Founder and CEO, O'Reilly Media

Satya Nadella Microsoft

Data#3

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Delivering the Digital Future

Brem Hill Chief Financial Officer

Sustained revenue growth, boosted by cloud

Strong revenue growth fuelled by software licensing and cloudbased solutions. 14.4% CAGR (FY15 to FY21).

Total FY21 revenue includes \$792M of public cloud revenues. Now 40% of total revenue.

Approximately 62% of revenue is recurring.

Changing revenue mix

Revenue trend by functional area (\$M)	Business unit	FY21 revenue (\$M)	FY21 revenue growth
	Infrastructure Solutions	467	+ 13%
	Software Solutions	1,249	+ 27%
	Consulting	18	+ 9%
	Project Services	63	+ 7%
	Support Services	96	+ 11%
	People Solutions (Recruitment)	57	- 3%
	Discovery Technology	5	+ 6%
	Total Services	240	+ 6%

Revenue commentary

Significant interdependencies:

Software & Infrastructure revenues depend on Services

• Mandatory technical accreditations & certifications with key vendor partners
• Ability to design, deploy & support vendor offerings is essential
• Approx. 500 technical staff provide competitive advantage & barrier to entry
• Customer adoption & customer experience require ongoing Services involvement
• Vendor rebates are shifting to Services

62% recurring revenue:

Committed revenue under term-based contracts approximately \$1,220M

• Comprised of Software & Support Services
• Excludes revenue under contract that is not 'locked in'
• Significant proportion is public cloud (approx. \$750M)
• Government and large corporate customers

Revenue commentary

Opportunities for accelerating Services growth:

Consulting

Positioned for expansion and profitable growth

Project Services

Increase in large integration project activity

Managed Services

• Transformational change completed in FY21
• Maturation of offerings following previous investment
• Microsoft Azure Expert Managed Services Provider certification

Gross margin and Gross profit

Overall Gross Margin % varies with the changing revenue mix.

• Strong growth in software licensing and public cloud revenues relative to services in recent years.
• Accelerated services growth will boost total Gross Profit \$ and should also increase the blended Gross Margin %.

Gross Margin % within each business unit has remained relatively stable.

Changing vendor rebate programs will increasingly reward Services.

Objective is to deliver steady, sustained growth in total Gross Profit \$

Business unit	FY21 revenue (\$M)	FY21 revenue growth	Relative Gross Margin % LOW MED HIGH
Infrastructure Solutions	467	+ 13%	LOW to MED
Software Solutions	1,249	+ 27%	LOW
Consulting	18	+ 9%	MED to HIGH
Project Services	63	+ 7%	MED
Support Services	96	+ 11%	Maintenance Services LOW Managed Services HIGH
People Solutions	57	- 3%	LOW to MED

Operating leverage

Short term factors:

• Supply chain constraints expected to continue throughout FY22
• Increased wage pressure and resource constraints
• Partial return to pre-COVID operating models, including some increase in travel expense
• Investment in new Microsoft Dynamics 365 ERP platform

Longer term drivers:

• Considerable leverage opportunity, especially in Services:
• Managed Services adding new contracts on relatively fixed cost base, and selective use of off-shore resource
• Project Services higher utilisation and accelerated growth
• Consulting higher utilisation, growth and optimising the resource mix
• Infrastructure & Software capacity to transact higher volumes without increasing the cost base
• Productivity improvements from new ERP system

Sustained earnings growth and shareholder return

High dividend payout ratio

Average payout approx. 90%

Substantial growth in market capitalisation

• \$732M at 30/6/21
• S&P/ASX 300 index (XKO)
• S&P/ASX All Technology index (XTX)

Strong total shareholder return

• 26.7% TSR for FY21
• 45% average TSR for past 7 years

Strong financial position

Strong balance sheet with no borrowings.

Efficient working capital model, with short or negative working capital cycle:

• Low inventory, allocated to customer orders or projects
• Average collection cycle of 28 days
• Favourable trade terms with suppliers

Stable working capital position, despite significant seasonal fluctuations at year end.

Traditional 4Q revenue spike inflates trade receivables & trade payables at 30 June, and generates large temporary cash surpluses.

Cash flow 'seasonality' due to timing differences in collections and payments around 30 June. This usually generates operating cash inflow in second half, and outflow in first half.

High cash conversion 182%## over last 7 years (FY15 to FY21).

Low capital expenditure.

Underlying 'free cash' is typically in the \$10 to \$20M range.

High dividend payout of approximately 90%.

Total Free Cash Flow \$221M / Total NPAT \$121M = 182%

Tash Macknish

Group Manager - Organisational Development & Human Resources

Janelle Phillips General Manager - People Solutions

Data#3 OD&HR FY22 Plan on a Page

customers' success.

To harness the power of people and technology for a better future.

Honesty Excellence Agility Respect Teamwork

Our People Our Customers Our Community Our Partners Our Shareholders

Our strategy is to Embrace Diversity, Inspire our People and Grow with Heart

Purpose Vision Values Stakeholders Strategy OD&HR Strategic To enable our Priorities

Talent & Capability

Diversity & Inclusion

Health, Engagement & Community

Organisational Change Management & Communications

Compliance & Safety

Data#3's Core Values

Honesty Excellence Agility Respect Teamwork

People Satisfaction

2021 Achievements

Data#3's Environmental, Social & Governance (ESG) Pillars

Data^'3 Envi

Data#3

Delivering the Digital Future

Community

Data^*3 Environmental, Social & Governance

• \$100K • 400 volunteer hours

People

Data#3 Environmental, Social & Governance

• Resourcing Services

Contracting, Permanent Recruitment and Staff Augmentation

• Talent Sourcing

Enables our customers in delivering the digital future

• War For Talent

Data#3 annual growth 6% / Technology Industry annual Growth 4.3%*

Data#3

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Delivering the Digital Future

Garrett MacDonald

Chief Marketing Officer

Data#3's Customers in FY21

Number of Active Customers 5157	Top 100 Customers deliver 67% of the revenue	80% of the total revenue comes from; 210 customers	Customers delivering recurring revenue 62%
ACT percentage of Total Data#3 revenue 24%	QLD percentage of Total Data#3 revenue 21%	VIC percentage of Total Data#3 revenue 19%		NSW percentage of Total Data#3 revenue 15%
Government 55% Of revenue	Commercial 45% Of revenue	Focus Industries Education ~ Health Resources

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Data#3

Delivering the Digital Future

Data#3's Customer Approach

Average Spend By Year 10 >7X

Land Adopt Expand Renew

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Customer Story: Sydney Football Stadium

"We accelerated in our team, and cloud was a critical part of that. We became a more agile organisation that could pivot as quickly as our clients needed us to."

Darren Warner, Head of IT, Knight Frank Australia.

Business Aspect Customer Story

"We wanted to push the college" forward through its use of technology. Before we could work on digital transformation, we needed to address some of the low-hanging fruit, the quick wins."

Swain Kirk, Chief Information Officer, South Regional TAFE.

Brad Colledge

Executive General Manager

Jelaine Doncaster General Manager - Software Solutions

Digital Transformation

Artificial Intelligence

Internet of Things 3D Printing

Foundation Layer

Data & Analytics

Integrated Solutions

Multi-cloud Modern Data Centre Public Cloud Private Cloud Modern Workplace Collaboration End User Devices Printing Systems Management Security Cloud Security Data Security and Privacy Identity and Access Management Infrastructure and Endpoint Security Security Monitoring and Analytics Data & Analytics Business Analytics Customer Management Internet of Things Location-Based Analytics Connectivity IT-OT Networking Software-Defined Networks Software-Defined WAN Wireless Networks Consulting Project Services Support Services Lifecycle

#1 partner in Australia #1 partner in Australia #1 partner in Australia

Top five partner in Australia

400+ other partnerships

Spotlight on Microsoft

Microsoft is the market leader

The market is evolving e.g; Public Cloud

The market opportunity is huge

Data#3 is the leader in Microsoft Solutions

Data#3 Microsoft Solutions Focus

John Tan General Manager - Infrastructure Solutions

Delivering the Digital Future requires different Delivery

Lifecycle and Outcomes

Success Economics

Delivering Data#3 the Digital Future

Data#3 Customer Success

• Customer Success Methodology
• Talent focused on lifecycle
• Data-Driven Platforms
• Digital Strategy

"Data#3's post implementation support has been faultless. With large-scale events occurring at the MCG on a weekly basis, their professionalism in responding to and rectifying any issues has been outstanding.

"In Data#3, we feel confident that we have a reliable, long-term technology partner, and one that deeply understands our IT requirements both now and into the future."

Rey Sumaru, General Manager of IT and Innovation – Melbourne Cricket Club

The Digital Future is brighter with a strong Customer Success focus

Data#3

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Delivering the Digital Future

Michael Bowser

Executive General Manager

Cybersecurity

Delivering a digital future

My Role

Executive General Manager Data#3 Operations, Security and Projects A member of the Data#3 Senior Leadership Team

My background

34 years at Data#3 Technical, Sales and Management roles.

Focus of this presentation

Security and Data#3 – for our customers and our business

Context

Cybersecurity is one of 3 imperatives we have in the business for FY21 Cyber risk exists for Data#3, its Suppliers and its Customers.

Insight into the customer demand for Security

Threats are real

Cost balance

Cyber maturity

Being prepared

Staying up to date

Compliance

Cyber security has been #1 customer priority for the last 7 years. (Data#3 Customer Survey)

Where is the opportunity?

Gartner estimate the Australian Market spend for Cyber Security will surpass \$5b in 2021.

Framework shown is based on the NIST - National Institute of Standards and Technology

Security in Data#3

The Data#3 Benchmark

Uplifting the level of security for our business Program of Work

Increasing Technical & Governance Controls Improving staff awareness and culture Building our Identity in the market

Security as part of all our sales narratives.

Carlos Gouveia General Manager, Victoria and Tasmania

IT Services demand and supply

Market demand

• IT services to grow 8.6% in 2022
• Fastest growing tech market segments align to our core offerings with services attach:
• Enterprise software
• Data centre systems
• Devices
• Communication Services

Market Supply

• 60k IT roles required per annum for next 5 years vs 7k students graduating with IT degree in 2019
• Cloud and security skills in priority demand
• Talent availability is the leading factor inhibiting technology adoption

Services aligned to Customer Success – Data#3 Velocity

"The Data#3 team was working on-site with us for a year and operated with us as one team working towards the best outcome for Hydro Tasmania. You only get that attitude when it is genuinely threaded throughout the organisation, and it is part of the organisation's culture."

David Orvington, Program Manager – Hydro Tasmania

Data#3 Services

• Delivering the Digital Future in a flexible way based on the customer's need
• Skills vs project vs packaged service vs managed services or any combination
• Specialisation and certification to the highest standards achievable by small group of providers in Cloud services
• Microsoft Azure Expert Managed Services Partner
• Automated packaged services that help ensure governance and monitoring

"The Azure Expert MSP certification is a badge of distinction for Microsoft partners globally.

We're pleased to award this distinction to Data#3, a valued Australian partner since 1994.

Across services, people, processes and technologies, Data#3 has demonstrated a deep investment and ongoing commitment to deliver the digital transformation outcomes that customers require."

Rachel Bondi - Chief Partner Officer, Microsoft Australia

Uniting Vic.Tas

"By introducing the managed services from Data#3, we were able to deliver to critical deadlines at scale and work more efficiently to meet the needs of our users, who can in turn better serve the needs of our clients."

Chris Pivec Chief Information Officer Uniting Vic.Tas

How are we transforming our services through Accelerate Services?

Data#3

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Delivering the Digital Future

www.data3.com.au 1300 23 28 23 Linkedin.com/company/data3 Twitter.com/data3limited Facebook.com/data3limited YouTube.com/data3limited