MACQUARIE TECHNOLOGY GROUP LIMITED — Interim / Quarterly Report 2021

Feb 23, 2021

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Half Year Results. 2021.

24 February 2021

Authorised for release by the CEO of Macquarie Telecom Group Limited

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Macquarie Telecom Group

33

Key Business Highlights.

Revenue EBITDA $143.6m $36.4m

NPAT $7.0m

EPS

33.0 ps

• Thirteen consecutive halves of revenue and EBITDA growth

• EBITDA CAGR of 17.4% over the last 3 years %)

• All Business Units grew revenue, with particularly strong growth in Cloud Services and Government in 1H FY21 vs 2H FY20

• Macquarie Data Centres has sold 10MW of IT Load to a Leading Corporation

• Intellicentre 3 East (IC3 East) is on budget and will achieve practical completion in March 2021

• Intellicentre 5 (IC5) in Canberra was completed on time and on budget

• Remaining undrawn debt facility of $96.5m to fund the IC3 data centre capacity expansion

• Telecom continue to migrate services to the nbn network in line with plan and expects to complete this by late 2021

Macquarie Telecom Group | Half Year Results 2021

4[4]

Macquarie Telecom

Macquarie Cloud Services

• 1 in Asia Pacific for SD WAN with over 5,000 sites activated

• Strong cross sell of Cloud Services solutions into Telecom’s customers

• nbn migrations program completion date delayed until late 2021 due to COVID-19

• Continues to grow successfully leveraging the Hybrid IT megatrend

• Managed Azure Practice continues to perform strongly

• GloTel Innovation award for ‘Managed Azure’ and the world first development of SD WAN into Azure

• Higher mobile usage has negatively impacted mobiles cost of sales

Business Highlights Summary.

Macquarie Government

Macquarie Data Centres

• 42% of Australian Government agencies

• Certified Sovereign cloud for classified / protected workloads

• Upgrades to our Government Secure Internet Gateway across all our data centre campuses

• Commenced providing ATO cyber security services in 1H FY21

• IC3 East on budget with practical completion in March 2021

• 10 MW of IT Load sold to a Leading Corporation (new customer)

• Remaining floor at IC3 is available for our 3 business units and wholesale customers

• IC5 was completed in December, on time and on budget

Macquarie Telecom Group | Half Year Results 2021

Best Customer Experience in the World

At the 2020 World Communication Awards in London we won the award for best Customer Experience in the World for our Heartbeat program.

Our CEO David Tudehope was also recognised with the World CEO of the Year award.

“We’re definitely looking for the X-Factor and we definitely found it here. The judges described the winner as the most customer experience focused CEO they've ever seen. Which has resulted in his company delivering a net promoter score at the same level as Apple and Amazon.”

• Cormac Whelan FITP, CEO of Nokia UK and Ireland

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Macquarie Telecom Group | Half Year Results 2021

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A Differentiated Offering.
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Macquarie Telecom Group | Half Year Results 2021

7 Company purpose.

Customer focus.

To make a difference in markets that are under served and overcharged.

• Our continued focus on providing a great customer experience is core to our service offering and differentiation

• Won the World’s Best Customer Experience Award at the World Communications Awards

• Macquarie’s net promoter score (NPS) continues on an upward trend at +76 for 1H FY21 – Australian leading NPS

• 76 NPS

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• NPS is the measure of customer experience that is assessed on a scale of -100 to +100, where a score of greater than +50 is excellent

• NPS is calculated on the single question "how likely is it that you would recommend our company to a friend or colleague?"

• Growth in our NPS is good for our investors

Macquarie Telecom Group | Half Year Results 2021

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Infrastructure.
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Macquarie Telecom Group

Data Centre Portfolio.

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Intellicentre 2 Macquarie Park

Intellicentre 1 Sydney CBD

Intellicentre 3 East Macquarie Park

Macquarie Data Centre’s projected total load is 50MW

comprising of:

• Macquarie Park Data Centre Campus 43MW: IC2, IC3 East and IC3 West;

• Macquarie Canberra Data Centre Campus 4MW: IC4 and IC5; and

• Existing IC1 in Sydney CBD 3MW.

Macquarie Telecom Group | Half Year Results 2021

Intellicentre 4 Bunker, Intellicentre 5 South Canberra Bunker, Canberra

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IC3 East Progress.

• IC3 East build is progressing well and we expect completion in March 2021 and on budget

• Construction of capacity under the new contract will occur through CY21 for completion late CY21 / early CY22 – billing due to start shortly after completion

• Planning for IC3 West

• Review options to expand Campus capacity

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Macquarie Telecom Group

| Half Year Results 2021

IC5 South Bunker Canberra.

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• Completed in December 2020 on time and on budget

• Built to Federal Government security standards (SCEC Zone 5 ready) and redundancy (Tier IV)

• Stage 1 investment of $17m complete with planning approval for expansion options

• Australian Sovereign data centres to support expected growth in Federal Government business

Macquarie Telecom Group | Half Year Results 2021

Our private cloud continues to be a key source of data centre utilization and generates higher revenue per rack.

Underlying infrastructure anonymised as we sell outcome focused solutions

Cloud Services & Government’s Hybrid IT managed services deliver 10 times revenue per MW compared with colocation

Macquarie Telecom Group

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Financials.
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Macquarie Telecom Group | Half Year Results 2021

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Financial Results.

$m	1H FY20	2H FY20	1H FY21	1H FY21 v 2H FY20	% change
Total Revenue
Telecom	71.1	68.5	68.7	0.2	0.3%
Cloud Services & Government	51.9	56.4	64.8	8.4	14.9%
Data Centres	17.4	17.9	19.6	1.7	9.5%
Inter-Segment	(8.5)	(8.5)	(9.5)	(1.0)	11.8%
Total Revenue	131.9	134.3	143.6	9.3	6.9%
EBITDA
Telecom	9.4	9.7	9.1	(0.6)	(6.2%)
Cloud Services & Government	13.5	15.7	18.0	2.3	14.6%
Data Centres	8.7	8.2	9.3	1.1	13.4%
Total EBITDA	31.6	33.6	36.4	2.8	8.3%
Depreciation & Amortisation	(20.1)	(21.3)	(23.8)	(2.5)	11.7%
EBIT	11.5	12.3	12.6	0.3	2.4%
Interest	(2.2)	(2.2)	(2.8)	(0.6)	27.3%
NPBT	9.3	10.1	9.8	(0.3)	(3.0%)
Tax NPAT	(2.6) 6.7	(3.3) 6.8	(2.8) 7.0	0.5 0.2	(15.2%) 2.9%

• Inter-segment revenue predominately relates to services provided by the Data Centre segment to both the Cloud Services & Government and Telecom segments, eliminated on consolidation

Macquarie Telecom Group | Half Year Results 2021

15 Group Financial Performance.

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• Over the last 3 years:

• Revenue CAGR of 7.6%

• EBITDA CAGR of 17.4%

• EBITDA margin increased from 19.6% (1H18) to 25.3% (1H21)

Macquarie Telecom Group | Half Year Results 2021

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Financial Performance – Hosting Segment (Cloud Services & Government + Data Centres)

Hosting Revenue ($m)

Hosting EBITDA ($m)

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84.4 27.3
69.3 74.3 22.2 23.9
46.1 49.5 53 57.6 15.3 16.9
13.4 13.4
1H18 2H18 1H19 2H19 1H20 2H20 1H21 1H18 2H18 1H19 2H19 1H20 2H20 1H21
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• Over the last 3 years:

• Revenue CAGR of 22.3%

• EBITDA CAGR of 26.8%

• EBITDA margin increased from 29.1% (1H18) to 32.3% (1H21)

Macquarie Telecom Group | Half Year Results 2021

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Financial Performance – Telecom

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Telecom Revenue ($m) Telecom EBITDA ($m)
71.1 71.4 70.4 70.4 71.1 68.5 68.7 11.9
9.1 10.1 9.8 9.4 9.7 9.1
1H18 2H18 1H19 2H19 1H20 2H20 1H21 1H18 2H18 1H19 2H19 1H20 2H20 1H21
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• Telecom revenue and EBITDA have been broadly flat over the historical period.

Macquarie Telecom Group | Half Year Results 2021

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Financial Performance – Cloud Services & Government

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Cloud Services and Government Cloud Services and Government
Revenue ($m ) EBITDA ($m)
18.0
51.9 56.4 64.8 13.5 15.7
1H20 2H20 1H21 1H20 2H20 1H21
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• Revenue in 1H21 grew 14.9% compared to 2H20

• EBITDA grew 14.6% in 1H21 compared to 2H20

• Cloud Services & Government is a new segment from FY21

Macquarie Telecom Group | Half Year Results 2021

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Financial Performance – Data Centres

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Data Centres Revenue ($m) Data Centres EBITDA ($m)
17.4 17.9 19.6 9.3
8.7
8.2
1H20 2H20 1H21 1H20 2H20 1H21
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• Data Centres revenue increased 9.5% in 1H21 compared to 2H20

• EBITDA increased 13.4% in 1H21 compared to 2H20

• Data Centres is a new segment from FY21

Macquarie Telecom Group | Half Year Results 2021

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Growth Capex.

• Growth Capex is for the building of new data centre capacity, increased power supply, new technology creation and transformational investment

• In the Data Centres business, a current example is IC5

• In the Cloud Services & Government business, a current example is the Secure Internet Gateway services which is for the ATO and other agencies

Customer Growth Capex.

• Customer Growth Capex is for additional cabling, racks, servers & storage that enable us to provision new customer orders

• In the Telecom business, a current example is investment in SD WAN and nbn migrations

• Customer Growth Capex was $13.9m in 1H FY21 reflective of our data centre sales success and product mix

Maintenance Capex.

• Most of the remaining Capex is infrastructure refresh and internal software development known as Maintenance Capex

• Maintenance Capex was $5.3m for 1H FY21

• Due to its significant scale IC3 spend has been separately reported

• Growth Capex was $13.7m in 1H

FY21

Macquarie Telecom Group | Half Year Results 2021

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21

s.

$m FY20 1H FY21 Cash & Cash Equivalents 37.9 11.7 Current Assets 43.9 60.9 Non Current Assets 242.4 290.2 Total Assets 324.2 362.8 Creditors 57.4 48.9 Other Liabilities 144.7 183.7 Total Liabilities 202.1 232.6 Total Equity 122.1 130.2 $m 1H FY20 1H FY21 Cash Flows from OperatingActivities 13.8 13.6 Cash Flows used in InvestingActivities (26.8) (79.8) Cash Flows from FinancingActivities 2.8 40.0 Net decrease in cash (10.2) (26.2) Opening Cash and Cash Equivalents 17.1 37.9 Closing Cash and Cash Equivalents 6.9 11.7

Balance Sheet & Cash Flows.

• Cash and cash equivalents of $11.7m. The undrawn debt facility amounts to $96.5m which will be used to fund the build of IC3 data centre

• Strong conversion of EBITDA to operating cash flows

• 1H FY21 capital spend of $32.9m ex IC3

• Growth Capex $13.7m

• Customer Growth Capex $13.9m

• Maintenance Capex $5.3m

• IC3 development expenditure is currently classified as current assets in the balance sheet until practical completion where it will form part of the development agreement with Keppel

Macquarie Telecom Group | Half Year Results 2021

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22 Outlook.

• FY21 EBITDA is expected to be approximately $72 to $75m

• Telecom continue to win customers from legacy data and IP carriers with our nbn and SD WAN solutions

• Cloud Services continue to grow successfully leveraging the Hybrid IT megatrend

• Continued demand from our Federal Government Agencies for cybersecurity and secure cloud, including from Tier 1 Agencies like ATO, gives great confidence for future growth in the Government Business

• IC3 expenditure is expected to be between $123 to $126m. Included in this is development expenditure which is expected to be in the range of $26 to $27m for FY21

	FY21 $m EBITDA 72 - 75 Customer Growth Capex 25 - 28 Growth Capex 17 - 20 Maintenance Capex 15 - 18 Total CAPEX excluding IC3 57 - 66 IC3 Expenditure 123 - 126 Depreciation 50 - 53

Macquarie Telecom Group | Half Year Results 2021