DATA#3 LIMITED — Investor Presentation 2023

Nov 15, 2023

ELECTRONIC LODGEMENT Data#3 Limited ABN 31 010 545 267

16 November 2023

The Manager ASX Markets Announcements Office Australian Securities Exchange 20 Bridge Street SYDNEY NSW 2000

Dear Sir or Madam,

DTL Investor Briefing Presentation

Data#3 Limited (ASX:DTL) advises it will hold an in-person Investor Briefing from 9:00am to 12:30pm (AEDT) today. The briefing will be held at J.P. Morgan in Sydney: Sky Lobby Reception, 85 Castlereagh Street.

In accordance with the Listing Rules, I have attached a copy of the presentation for release to the market.

A recording of the presentation will be available after the event, accessible via the following link: https://investor.data3.com/investor-centre/?page=Presentations---Webcasts.

Authorised by:

Cherie O'Riordan Chief Financial Officer

Investor Day Briefing 2023

SPEAKER	TOPIC	TIME
	Breakfast	8:30am
Session One
Laurence Baynham, CEO & Managing Director	Opening
Mark Gray, Chairman	Introduction
Brad Colledge, EGM	Data#3 Overview and Strategy
Cherie O'Riordan, CFO	Financial Insights and ESG
Graham Robinson, CTO	Artificial Intelligence
	Session 1 Q&A
	Morning Tea	10:25am
Session Two
John Tan, CCO	Industry, Customers and Case Study	10:45am
	Sales Strategy and Vendors
Steven Worrall, MD Microsoft A/NZ	Microsoft and AI
Brad Colledge, EGM	People
Richard Dornhart, National Practice Manager - Security	Security
	Session 2 Q&A
	Summary and Closing
	Optional Lunch	12:30pm

Agenda

Mark Gray

Chairman

Brad Colledge

Executive General Manager

Data#3 in FY23

Economic Outlook and Australian IT Market FY24

IT Market (Australia)

• IT Market to grow at 5.8% (Gartner)
• Artificial Intelligence is fast becoming the driving force for market growth
• Significant improvements in supply chain
• Predicted growth in Security and Cloud

FY24 Strategy

Digital Transformation

Integrated Solutions embedded with AI

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

Customer stories: Visit Data3.com

Strategic partnerships with global leaders

Significant investment in technical capability and certifications

400+ other partnerships with emerging vendors

Announcing

November 8, 2023; Leading Australian technology services and solutions provider, Data #3, has once again been honoured at the Cisco Partner Conference in Miami, receiving the "Cisco Software Partner of the Year" award, its sixth consecutive global award.

November 8, 2023; Leading Australian technology services and solutions provider, Data #3, is proud to announce that it has been recognised as the Cisco Asia Pacific, Japan and China (APJC) "Customer Experience (CX) Partner of the Year".

Awards

Data#3 wins Cisco Global Software Partner of the Year award 2023

Data#3 Competitive Advantages

Our Opportunity

Services growth that will complement Software and Infrastructure leading to improved margins and Lifecycle Services

Growth in Multi-Cloud solutions and Cyber Security

Generative AI is accelerating digital transformation and fuelling growth across all our solutions

Growing pipeline of large infrastructure projects

Cherie O'Riordan

Chief Financial Officer

Profitability and Gross Margins

Focus on sustained earnings and gross profit growth, rather than gross margins

• Overall gross margin at or slightly below 10% in previous three financial years
• Slight tapering in product margins in recent years due to:
• Increase in multi-year deals and annuitybased consumption and as-a-service offerings - spreads profitability across future years, including rebates

• Low margin public sector and education supply contracts, that drive long term revenue and cross selling opportunities

• Larger, more competitive deals won at lower margins to drive strategic future business, including services

• Competitive market factors

Profitability and Gross Margins

Inbuilt protections against price and wage inflation include:

• Reseller Agreements enable pass through of any price increases in product and software
• Services contract structures Time & Materials (low risk) vs. Fixed Price (project managed; with inbuilt contingencies)
• Periodic price reviews for multi-year Services contracts e.g. CPI increases
• Annual review and update of services rate cards and pricing models to price in any staff and operational cost increases, while keeping pricing competitive

Enterprise Managed Services Contract Profitability Sales/ Transition Year 1

• Often elongated sales process
• Investigate and connect customer's environment
• Assess key risks and gaps
• Provide recommendations for mitigation

• Investment required for successful service – minimal return during this phase

• Stabilisation period

• Build further process maturity and knowledge

• Continued high effort results in lower profitability than later years

• Refine customer environment

• Reduce volumes e.g. tickets
• Realise benefits of prior years' investments and improved profitability

Years 2-3 Year 4 Onwards

• Continued profitability
• Renew contracts for a second generation – increased profitability due to previous investments made

Increasing Profitability

• Cross selling by line of business and solution
• Driving profitable services that make the customer sticky
• New solutions like Copilot where we are the major incumbent
• Making sure we can sell from Consulting led all the way through to Managed Services and never disconnect from the customer
• Driving security and building out a managed service – as security is the #1 concern for our customers
• Increasing market share across all core vendors

Average total spend (revenue) by customer based on tenure with Data#3:

Internal Cost Ratio

Steady improvement in operating leverage

• System and process improvements, including enhancements of ERP and Managed Services platforms
• AI and automation such as customer invoicing portals and customer self service; incident monitoring and reporting
• Analytics and reporting to improve visibility and decision making – investing in Modern Data Platform and Power BI
• Investment in ISO27001 certification for Managed Services and Data#3 IPT during FY23; ongoing recertification costs should be reduced

• Opportunities to put more volume and contracts through all lines of business with proportionately fewer additional resources

Working Capital

• Self-funded business with efficient working capital model and short or negative working capital cycles
• Favourable trade terms with suppliers (often greater than customer payment terms)
• DSO improvements in FY24 with reduction in partial shipments / normalisation of supply chain
• Seasonal peaks in cash position June and December – due to increased sales and customer prepayments end Q2 and Q4

• Inventory committed to customer contracts. Some aged due to partial shipments and timing of customer deliveries, but majority current

• Average cash position FY23 of \$120.9M however some low points < \$10M throughout year

• Net Working Capital average of approx. \$29M previous 5 financial years

Financial Reporting Insights

See notes on the types of revenue and expenses allocated to each line of the Consolidated statement of profit or loss:

	\$'000	Explanatory Notes
Revenue
Revenue from contracts with customers	2.560.700	Sales of products and provision of services to customers
Other revenue	3.870	Primarily interest earned on bank accounts
	2.564.570
Expenses
Change in inventory	(13,665)	Net decrease in inventory on balance sheet on recognition of sale
Purchase of goods	(2,078,047)	Products such as licenses and infrastructure purchased for customers, net of vendor rebates
Employee and contractor costs directly on- charged (cost of sales on services)	(99, 148)	Payments to contractors directly on-charged to customers in relation to work carried out for them
Other cost of sales on services	(119, 189)	Third party contractor costs and licenses (net of rebates) in relation to services provided to customers
Internal employee and contractor costs	(176, 941)	Wages/salary, commissions, leave entitlements, and other employee-related expenses paid or accrued in relation to employees (both billable and admin)
Telecommunications	(2.073)	Telephone, mobile telephone and internet expenses
Rent	(1,780)	Rent expenses paid in relation to leases
Travel	(1,299)	Air fares, meals, accommodation, taxis, etc, in relation to business travel
Professional fees	(1, 304)	Fees for recruitment, legal, audit, taxation and other miscellaneous professional services
Depreciation and amortisation	(6, 280)	Depreciation of right-of-use assets, equipment, leasehold improvements and software
Finance costs	(1.247)	Interest expense in relation to leases of premises
Other	(10, 363)	Software licensing and maintenance, subscriptions, insurances, marketing and office expenses
	(2,511,336)
Profit before income tax expense	53,234
Income tax expense	(16, 204)
Net profit for the year	37,030
Other comprehensive income, net of tax:	231	Exchange of differences on translation of Fiji operations

ESG

ESG is integral to our company strategy

• Released 2023 ESG Report to ASX 24 October 2023, including alignment with United Nations Sustainable Development Goals (UN SDGs): 2023 ESG Report
• Received Frost & Sullivan Institute 2023 Enlightened Growth Leadership Award for second year running
• Finalised Reflect Reconciliation Action Plan (RAP) during FY23
• Year 3 of our Greenhouse Gas (GHG) Assessment with Pangolin Associates to establish baseline Scope 1, 2 and 3 emissions. More meaningful disclosures from FY24
• Emissions predominately Scope 2 and 3 electricity and IPT equipment
• Staged process to integrate climate reporting with financial reporting for FY25
• Next Steps: Carbon neutrality by 2032

Graham Robinson

Chief Technology Officer

Energy Machines Computing Internet Artificial Intelligence

Artificial Intelligence

We are at the beginning of a new era of IT.

Generative AI will be as impactful as cloud or the internet.

Satya Nadella, CEO of Microsoft

Moore's Law

Digital Transformation

John Tan

Chief Customer Officer

B2B IT Spending by Technology Area 2021-27

IT Spending by Business Size 2021-27

Future Opportunity

• Australian IT Spending increasing from +5.8% in 2023 to +7.8% in 2024
• B2B spend rising from low single digits to double digit growth in Transportation, Healthcare, Utilities, Oil & Gas, Construction, Government, Education, Banking.
• Through 2024, the small business segment (<250 employees) will tighten their IT spending due to the economic uncertainties, compared to the midsize and large segments
• By 2026, two-thirds of software deployment will be done by SaaS rather than on-premises in the small and midsize organizations (< 1,000 employees), driving extra IT spend through easier cross- and upselling.

Buying Model Trends

Business & Technology Focus

Public Cloud Private Cloud Cyber Security Cloud Management

Collaboration Devices Security Sustainability

Resale Solution Sale Marketplace As a Service Managed Service

Generative AI Enterprise AI Data Management Security

Data#3 Customers

Customer Success Strategy 2x Opportunity Volume

8x Opportunity Value

+36% Improvement in Win Rates

Improvement in Gross Margins

The Griffith University Network Transformation Project represents a strategic investment for the University. Data#3's history of working with the University and strong capability in using technology to drive our business was a key part of our decision.

Our teams are working closely with the Data#3 team to deliver a world class campus network to support our business and learning objectives for the future.

Mark Keenan, Director - Digital Foundations

2018	2019	2020	2023	Current
Becomes a Data#3 Customer	Purchases an Enterprise Agreement	Assigned a Customer Success Manager	Awarded Network Transformation Project	Smart Campus Proof of Concept

Sales & Go To Market

Scale & Capability

Salespeople across Australia supported by sales operations and customer success. Supported by solution specialists.

Channels

Largely Face-to-Face Sales with a shift towards digital sales for efficiency and scale

JuiceIT Brisbane 2023

Engagement

Mix of long-term relationships with a focus on cross selling and upselling value

Delivering a Digital Future

Data, Telemetry, Insights, and AI

One place where I can buy, engage and optimise the lifecycle of hardware and software across my environment.

Vendor Strategy and Programs

Steven Worrall

Managing Director, Microsoft Australia and New Zealand

Data#3 and Microsoft

Increase in capital investments

New regulatory patterns emerging

Safety and Security

• Ensure humans retain control of AI and it works as expected
• Ensure people can't misuse AI to create new dangers for society

Rights of Citizens

• Protect privacy, child safety, consumer protection, and election integrity
• Obligations for developers & deployers with high-risk systems

Value of Labour and IP

• The copyright debate as fundamentally a labor debate
• Issues around shifts in economic value

A three-part plan for the next two years

• Invest A\$5B to build out Australia's AI and digital capacity
• Bring digital skills to 300,000 people
• Partner with the Australian Signals Directorate the Microsoft-ASD Cyber Shield

Brad Colledge

Executive General Manager

4.46/5 People Satisfaction

5.7 Years Average tenure

Our Core Values

Honest y Excellence Agility Respect Teamwork

*Reduced by 7%, industry average 19.7%

Key People Opportunities & Risks

Talent Acquisition & Skills Shortage

Employee Centric Labour Market

People Solutions Differentiator in the market

Career Pathways Diversifying Talent Pools

Investment in Sourcing Platforms

Skills for the Future

1.2M tech workers by 2030

+8% increase in tech jobs

10,000+ hours professional Development

Innovation, Diversity & Inclusion

Potential 30% Productivity Gains through AI

28% English second Language

60% Caring Responsibilities

35% Female representation across the business

Workforce Growth FY19-FY23

Total Workforce Size FY19-FY23

The Data#3 People Experience

People-related opportunities are central to our future success

We are committed to creating a skilled, dynamic, diverse, inclusive, and adaptable workforce

That is ready to meet our strategic objectives, drive profitability and sustainable growth

Ensuring the future success of our people, partners, customers and Data#3.

Richard Dornhart

National Practice Manager – Security

Business Outcomes in 2023

Business Optimization & Risk Management 2 3 1 Employee Retention & Productivity Customer Excellence TOP BUSINESS OUTCOMES IN 2023* CIO DIGITAL INITIATIVES ALIGNED TO BUSINESS OUTCOMES* Application Modernisation Enhance Online Presence Hybrid-Work Connectivity Operational Resilience Data Analytics User Experience Optimisation Process Automation Innovate with Emerging Technology Collaborative Workspaces

CISO Priorities

CIO DIGITAL INITIATIVES*	CISO CYBERSECURITY PROJECTS*			CYBERSECURITY TOOLS*
Application Modernisation	Data Security	Application Security	Identity & Access Management	Data Privileged Access Data Loss Endpoint Cloud Access Single Sign-On Prevention Encryption Classification Security Broker Management Static Code Web Application Identity Multi-Factor Dynamic Application Container Security Analysis Firewall Management Scanning Authentication
Operational Resilience	Governance, Risk & Compliance	Security Operations	Security Services	Session Replay / Risk Supplier / Partner Risk Regulatory / Industry Risk Statistics Packet Capture Monitoring Management Mandate Compliance Security Digital Log Correlation & Event User Behavioural Malware Analysis Monitoring Forensics Analysis Ticketing Analysis
Process Automation	Cloud Security	Security Operations	Endpoint Security	Threat Intelligence Threat Container System Hardening & Serverless SOAR Management Investigation Security Intrusion Detection Computing Malware Scanning for Endpoint Protection for Cloud System Hardening & Endpoint DLP for Cloud Storage Servers Workload Protection Protection
Enhance Online Presence	Cloud Security	Application Security	Identity & Access Management	Standards & Vulnerability Data Cloud Access Privileged Access Single Sign-On Management Classification Security Broker Management Container Identity Multi-Factor Dynamic Application Static Code Analysis Authentication Security Management Scanning
Data Analytics	Data Security	Application Security	Identity & Access Management	Data Loss Endpoint Data Cloud Access Dynamic Application Container Prevention Encryption Classification Security Broker Scanning Security Static Code Web Application Privileged Access Identity Multi-Factor Single Sign-On Analysis Firewall Management Management Authentication
Innovate with Emerging Technology	Network Security	Security Services	Endpoint Security	Endpoint Device Endpoint Local Mobile Threat System Hardening Endpoint Protection Management Encryption Sandboxing Protection Next Gen Incident Response Attack Surface Threat Phishing Managed Threat Firewalls Services Management Research Hunting Readiness
Hybrid-Work Connectivity	Network Security	Cloud Security	Endpoint Security	Encrypted Traffic Email Secure Web DNS Malware Network Intrusion Security Security Analysis Management Gateway Analytics Prevention Serverless Container System Hardening & Endpoint Endpoint Device Endpoint Computing Protection Management Encryption Security Intrusion Detection
User Experience Optimisation	Identity & Access Management	Remote Access	Endpoint Security	Data Loss Single Sign Privileged Access Endpoint Data Cloud Access On Management Prevention Encryption Classification Security Broker Identity Multi-Factor ZTNA ADEM URL Filtering Secure Web Gateway Management Authentication
Collaborative Workspaces	Content & Collaboration	Cloud Security	Endpoint Security	Encryption in Email Protection & Content Browser Container System Hardening & Transit Filtering Response Isolation Security Intrusion Detection Serverless Container Malware Scanning for Data Loss Prevention for Cloud System Hardening & Computing Security Storage Cloud Workload Protection

	Choosing the Solutions

Complexity is the Enemy of Security

Total Addressable Market

Australian security spending to grow 11.5 per cent in 2024: Gartner - Security - CRN Australia

What We Do

Reduce Complexity

Can you run it for me?

What Do I Plan for?

What technology do I need? Am I protected?

Complexity is the Enemy of Security Complexity is the Enemy of Security

data3.com

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