Dropsuite : March 2022 Quarterly Activities Report and Appendix 4C

ARR at $17m, up 71% on PCP

20 April 2022: Global cloud backup and archiving software provider Dropsuite Limited (ASX: DSE) ("Dropsuite" or the "Company") is pleased to provide an overview of the Q1 results and Appendix 4C for the period ending 31 March 2022.

Highlights

• > Annual Recurring Revenue (ARR1) of $17m, a 15%

  increase on the prior quarter and a 71% increase on previous corresponding period (pcp) on a constant currency basis

  ARR ($M)

  Constant Currency

  17.0

  14.7

• > Q1 FY22 normalised outflow of ($0.25m) due to one-off payments including annual bonuses and insurance premiums. This excludes ($0.27m) of due diligence payments. Reaffirm positive cashflow outlook for FY22

  13.0

  11.4

  9.9

• > Users increased 81k to 730k up 13% quarter on quarter and 55% on pcp

  8.6

• > Monthly ARPU of A$1.95 up 2% quarter on quarter on a constant currency basis

• > Product gross margin of 63%

• > Expanded management team with appointment of CTO, Global Head of HR and Global Support Manager to complement DSE existing highly engaged team

• > DSE ended the quarter with $21.1m cash and remains well funded to progress on acquisitions and internal product development initiatives

4QFY20 1QFY21 2QFY21 3QFY21 4QFY21 1QFY22

CEO Charif El Ansari stated: "It is pleasing to see the momentum we delivered during 2021 continue in the first quarter of the 2022. We have again delivered a record quarterly ARR, and importantly have expanded our user base and further improved our ARPU. As our business continues to expand, we want to ensure that we have the foundations, systems and people to drive sustainable growth. During the period we significantly bolstered our senior management team. With a highly experienced and motivated team, strong industry tailwinds and a well capitalised balance sheet, we are well positioned to drive further growth over the course of 2022 and beyond."

1.

Annualised Recurring Revenue (ARR) is defined as the value of the contracted recurring revenue multiplied by 12 months

Financial Overview

• • Actual (non-normalised) cash receipts from customers were $3.72 million, up 9% on Q4 2021 ($3.42 million) and up 63% on pcp ($2.29 million).

• • Normalised net cash outflow from operations of ($0.25) million, reversing the trend of previous positive cashflow quarters. However, the March quarter contains a number of one-off cash payments such as annual bonuses, insurance renewals and other subscription services. The Company reaffirms its guidance for positive cashflow in 2022.

• • During the quarter, the company implemented cost saving initiatives in storage which resulted in gross margin increasing from 62% from 63%. We expect further improvements throughout 2022

• • Cash on hand is $21.1 million. The Company is well funded to continue to grow the revenue base and expand our product offering to customers.

Cash receipts Normalised cash receipts

Net cash used in operations Normalised net cash used in operationsCash at hand

Mar 20223.723.72(0.52)

Dec 2021 3.42 3.42

Mar 2021 2.29 2.16

QoQPCP

9% 63%

9% 72%

• 0.23 (0.04)

(323%)n/a

(0.25)21.07

0.23 21.60

(0.17)

• (206%) (48%)

  2.44

• (2%) 762%

Quarterly Operational Cashflow (A$M)

0.23

0.09

(0.02)

(0.17)

(0.20)

(0.26)

(0.25)

Sep 2020

Dec 2020

Mar 2021

Jun 2021

Sep 2021

Dec 2021

Mar 2022

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 12 new direct and 197 indirect transacting partners

• • Added 81K paid users. Total user count is 730k, up 13% versus the prior quarter and up 55% PCP

• • Delivered low annual partner revenue churn2 of sub~3%

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.

The Company continues to work through opportunities to improve the backup and archive experience for DSE's partners, to reduce their resource costs and streamline their support processes for end clients.

The Company has made significant inroads to expand its services offering to cover Google Workspace, enhance the backup and archiving offering for Microsoft 365 and Microsoft Teams, introduce a new partner portal experience, and invest in additional features that differentiate Dropsuite's offerings in the marketplace.

Management Update

During the period, Dropsuite has extended its senior management team to provide the personnel and structures to continue to drive revenue growth, strong culture and impeccable customer service. Key appointments include:

• • Manoj Kalyanaraman, Chief Technology Officer (CTO): Manoj has over 20 years of experience in engineering, strategic innovation, and global leadership. Prior to joining Dropsuite, Manoj worked at BitTitan as the VP of Product and Engineering, where he contributed to the transformation of the mail migration platform into a full-service Microsoft 365 and Google Workspaces assessment and migration platform.

• • Frederique van de Poll, Global Head of HR: Frederique joins Dropsuite with a wealth of global HR leadership experience. Frederique worked as the HR manager for the Hollandse School Limited Singapore, before taking on the head of HR role to help scale Gravity Supply Chain Solutions, a SaaS company. Frederique has a master's degree in Work and Organisational Psychology.

• • Ricky Frey, Global Support Manager: Based in Seattle, USA, Ricky will be joining the Dropsuite team with over a decade of experience in SaaS systems and support. He previously led Americas Support, Customer Success at BitTitan.

Corporate

The Company has reported expenditure of $256k for salaries and director fees to related parties.

2.

Partner Churn is defined as lost revenue in current year divided by revenue in previous corresponding period

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 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.

• • Advancing 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: Thursday 21st April 2022 Time: 11:30am AEST

Registration Link:https://us02web.zoom.us/webinar/register/WN_E7PvfMDBQRKp4GCOtOFdAA

The announcement was approved by the Board of Directors.

-END

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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

Rule 4.7B

Appendix 4C

Quarterly cash flow report for entities subject to Listing Rule 4.7B

Name of entityABN

Quarter ended ("current quarter")

• 1. Cash flows from operating activities

• 1.1 Receipts from customers

• 1.2 Payments for

  • (a) research and development

  • (b) product manufacturing and operating costs

  • (c) advertising and marketing

  • (d) leased assets

  • (e) staff costs

  • (f) administration and corporate costs

• 1.3 Dividends received (see note 3)

• 1.4 Interest received

• 1.5 Interest and other costs of finance paid

• 1.6 Income taxes paid

• 1.7 Government grants and tax incentives

• 1.8 Other (Due Diligence expenses)

• 1.9 Net cash from / (used in) operating activities

3,720

3,720

(1,595)

(1,595)

(194)

(194)

(1,745)

(1,745)

(434)

(434)

1

1

(273) (273)

(518) (518)

2.

Cash flows from investing activities

2.1

Payments to acquire or for:

(a) entities

• (b) businesses

• (c) property, plant and equipment

• (d) investments

• (e) intellectual property

• (f) other non-current assets

(13)

(13)

ASX Listing Rules Appendix 4C (17/07/20)

+ See chapter 19 of the ASX Listing Rules for defined terms.

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