Dropsuite : June 2022 Quarterly Activities Report and Appendix 4C

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ARR exceeds $20m. Record Positive Cashflow

18 July 2022: Global cloud backup and archiving software provider Dropsuite Limited (ASX: DSE) ("Dropsuite" or the "Company") is pleased to provide an overview of the Q2 results and Appendix 4C for the period ending 30 June 2022.

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Highlights

• Annual Recurring Revenue (ARR1) of $20.1m, a 13% increase on the prior quarter and a 68% increase on previous corresponding period (pcp) on a constant currency basis
• Q2 FY22 normalised cashflow of $0.40m. The Company maintains guidance of positive cashflow for 2022
• Users increased 78k to 808k up 11% quarter on quarter and 56% on pcp
• Monthly ARPU of A$2.07 up 1% quarter on quarter on a constant currency basis
• Product gross margin of 64%
• Churn rate remains below 3%
• Strengthened management with appointment of head of channel sales of Australia and New Zealand
• DSE ended the quarter with $21.6m in cash and remains well funded to progress on acquisitions and internal product development initiatives

ARR ($M)

Constant Currency

20.1

17.0

14.7

13.0

11.4

9.9

1QFY21 2QFY21 3QFY21 4QFY21 1QFY22 2Q FY22

For

CEO Charif El Ansari stated: "It is exceptionally pleasing to deliver another quarter of revenue growth and importantly, a return to positive quarterly cashflow which is in line with our target to achieve the same for the full year. It was also an honour during the quarter to be ranked number one in the 2022 Email Backup Solutions Data Quadrant report from Software Reviews for the third consecutive year.

The award is a recognition of not only our leading technology but also our dedicated team and their excellent level of customer service and support.

"With a combination of a growing ARPU and expanding customer base, we are well positioned to continue to deliver future revenue growth. Our well capitalised balance sheet and our highly experienced and motivated team, ensures that Dropsuite will stay at the forefront of the strong industry tailwinds we are witnessing in the global data security sphere and create value for our shareholders over the course of 2022 and beyond."

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Financial Overview

• Material Prior Corresponding Period (PCP) and Quarter on Quarter (QoQ) ARR and ARPU growth aided by the recent 5% appreciation of the USD/AUD. This was partially offset by the depreciation of EUR/SGD currency pairing, depreciating 3% over the quarter.
• Strong PCP and QoQ ARR and ARPU in constant currency.

• Actual (non‐normalised) cash receipts from customers were $4.34 million, up 17% on Q1 2022 ($3.72 million) and up 81% on pcp ($2.40 million).
• Normalised net cashflow from operations of $0.40 million, reversing the performance of the previous quarter and returning to the trend of previous positive cashflow quarters.
• The Company reaffirms its guidance for positive cashflow in 2022.
• During the quarter, ongoing cost saving initiatives in storage resulted in gross margin increasing to 64% at end of June, up one percentage point from 63% at the end of March.
• Cash on hand is $21.6 million. The Company is well funded to continue to grow the revenue base and expand our product offering to customers.

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Quarterly Normalised Operational Cashflow (A$M)

0.40

Operational and Product Overview

The Company continues to invest in people, skills and culture, and has expanded and retained a solid and motivated team across all functions. The focus is on investing in its customer facing and product and engineering teams over the quarter. During this time, the Company:

• Onboarded 38 new direct and 233 indirect transacting partners
• Total direct transacting partners of 453 and total indirect transacting partners of over 2,200
• Added 78K paid users to take our total user count to 808k, up 11% on the prior quarter and up 56% on PCP
• Delivered low annual partner revenue churn2 of sub~3%
• Participated in various partner tradeshows and events in North America and Europe
• Rolled out new partner portal with enhanced overall experience including integrations and payment optionality
• Several updates and feature enhancements to our core email and productivity backup and archiving products
• Won the number 1 spot in Infotech's software reviews for Email backup for the 3rd consecutive year

As per prior quarter, the company continued to add further storage and compute capacity across all data centres to manage the increases in storage resulting from new user growth and higher ARPU products mix. With continued data storage cost efficiencies via various initiatives, the company saw a 100 basis points improvement in Gross Margin to 64% at the end of quarter.

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Management Update

During the period, Dropsuite has strengthened its senior management team with the appointment of Jamie Deveaux as Head of Channel Sales ANZ. Jamie has almost 20 years of sales experience. His last role was at N‐able (NYSE‐NABL), a well‐established technology firm catering to Managed Service Providers globally, where Jamie started as a sales representative and left as the Director of Sales for APAC.

Corporate

The Company has reported expenditure of $150k for salaries and director fees to related parties.

Outlook

Dropsuite is well positioned to continue to deliver strong annual recurring revenue growth driven by our significant existing partner base and a growing pipeline of new partners. The strong market tailwinds from data security and regulation are expected to remain with a growing pool of Microsoft 365 and Google Workspace users, expected to exceed 570 million by 2026, providing a significant growth opportunity.

Over the remainder of 2022 the company will focus on:

• Continuing to deliver ARR growth via existing partner ecosystem and strong sales pipeline.
• Achieving continued operating profitability and positive cash flow in 2022.
• Driving product innovation to maintain our leading position as a backup vendor of choice.
• Continuing to invest in talent bench‐strength as well as sales and marketing expansion.
• On track to introduce new data protection service by calendar Q4 2022
• Exploring high conviction M&A opportunities which leverage existing internal growth and take advantage of strong market tailwinds around data protection.

Quarterly Investor Webinar

The Company will provide an investor webinar to discuss the quarterly results. To register please follow the link below.

Date: Wednesday 20th July 2022

Time: 3:00pm AEST

Registration Link:https://us02web.zoom.us/webinar/register/WN_IGhxn79uRNKfgJALxV‐ayQ

The announcement was approved by the Board of Directors.

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About Dropsuite

Dropsuite is a cloud software platform enabling businesses to easily backup, recover and protect their important business information. Dropsuite's commitment to advanced, secure and scalable cloud technologies keeps us in the forefront of the industry and makes us the choice of leading IT Service Providers globally. For more information please visit: www.dropsuite.com