24 Nov

Corporate Presentation Rapid Insights Investor Conference

Corporate Presentation Etherstack plc (ASX:ESK) 25 th November 2021 Authorised for release by David Deacon, CEO and David Carter, CFO Company Overview 3 Etherstack enables push - to - talk (PTT) communications for essential services, within and across advanced digital land mobile radio (LMR), cellular and satellite networks Globally diversified client base across various industries Over 20+ years of complex IP underpinning software Cellular revenues similar to SaaS - like high gross margin revenues A leading licensor of innovative wireless technology for mission - critical communications High margin core network products Samsung global teaming arrangement to deliver accelerated growth Solutions typically include long term support contracts 4 Key Developments Timeline Land mobile radio networks Cellular networks Recurring / Potential for recurring revenue (i.e Network has 10 year+ life) Government client 11 February EOS Defence Systems subcontract (A$500,000) 18 February Samsung integration activities license US$1.2 million 14 May WA Iron Ore Resources Network follow on order (~A$600,000) 26 May Australian Government contract win (A$515,000) 27 May UK Ministry of Defence win (GBP 220,000) 24 January Ergon Energy Network Expansion Order (A$520,000) 11 February North American Equipment Sale to Codan (US$1.35 million) 29 May Contract with CSE Crosscom for WA resources project (Initial value A$400,000) 30 June Global Teaming Agreement with Samsung announced for 4G/5G Public safety 20 October Licensing agreement with TPL Systèmes (Min royalties of EUR 440,000) 28 October Royal Canadian Mounted Police network delivered 7 December Australian Department of Defence licensing contract (A$4.1 million) 18 December A$5.0 million Institutional Placement to accelerate growth, invest in R&D and strengthen working capital 22 July First contract under Samsung Teaming Arrangement (US$8.5 million, including US$1.2 previously announced) January – June 2020 July – December 2020 January – June 2021 July – November 2021 20 September First AT&T contract awarded (US$420,000) 5 Leveraging innovative technology and IP that is adaptable across key platforms and customers Digital Land M obile R adio (LMR) networks Mission Critical Push to Talk (MCPTX) over cellular networks (4G & 5G) Satellite Push to Talk (PTT) networks • Falling satellite tariff costs the catalyst for change in the communications sector • Satellite enables extended radio coverage outside urban areas • Developing secure software for satellite communications over past 3 years • Opportunity to incorporate Etherstack technology into satellite communication suppliers • Government regulatory tailwinds the catalyst for transforming public safety communications • Solution enables LMR users expanded coverage from cellular networks – hybrid networks • Cellular networks to drive innovation in the sector due to greater transference of data including voice and images • First contract under Samsung Global Teaming Arrangement • Other opportunities advancing rapidly • Wireless communication software • U sed by public safety, utilities, transportation and resources sectors • Increasing number of network deployments • Core network elements with SaaS - like high margins • Long term support contracts driving recurring revenues Continued growth in LMR networks. Cellular networks adding material value now and into the future. Satellite networks likely to deliver subsequent and future value PTT Technology Digital Land Mobile Radio (LMR) Networks 7 Notes: 1. Management Estimates A significant US$3.0b market opportunity exists for growth in target contracts Developed a full suite of LMR core technologies for voice communications Digital LMR Networks Less than 10 major network vendors globally extraordinarily high technical and commercial barriers to entry, with market dominated by a handful of very large players Scores of target sized contracts available for competition 150 – 250 in target regions annually 1 Etherstack target network contract size US$0.5 – 20m Upfront fees per contract Etherstack target addressable market US$3.0b addressable network deployments annually 1 Limited market participants and high - barriers to entry Recurring revenue growth 31% Support revenue CAGR over the past 5 years Recurring support revenues 15 – 20% of upfront deployment fees annually 1 8 ? Networks are mission critical infrastructure - used within essential services and high hazard environments ? Delivers flexible, feature - rich, and future - proof LMR networks ? Supports any combination of analogue and digital communication standards ? Contracts with global names and Government - backed entities ? Referenceable customers are key ? Support contracts often ~ 10 - 15 years Digital LMR Networks ~15 – 20% p.a. of upfront fees in support revenues Follow - on orders and other ad - hoc revenues Contracts are commonly government backed 10 – 15 years typical lifespan of networks US$0.5 – 20m generated in upfront licensing fees Extensive experience delivering software based digital LMR networks Enables rapid and reliable communication across networks including public safety, utilities, resources and transportation industries A globally diversified base of high quality customers across various industries 9 Su stained growth via key customer wins Currently targeting network contracts valued between US$0.5 – 20.0m in upfront revenues January – June 2020 July – December 2020 January – June 2021 July – December 2021 January – June 2022F Likely growth from ‘captured’ customers. Add significantly to upfront license fee and long - term support revenues Expected mid - lifecycle refresh and ad - hoc revenue from existing customer. Additional revenues beyond upfront license fee and long - term support revenues Potential to increase % win on tendered networks via strategic acquisition of other network element suppliers Captured customers Mid - lifecycle refresh and ad - hoc revenue Growth through acquisition Digital LMR Networks 2021 2022 2023 2024 2025 Continued growth from internal global sales team. A dd significantly to upfront license fee and long - term support revenues Organic growth Etherstack has historically won 1 - 2 customer networks per year Cellular Networks (4G & 5G ) (Mission Critical Push to Talk (MCPTX) over LTE) 11 Notes: 1. Management estimates A large and growing US$250 – 750m market opportunity Contracts available for competition 60 - 90 In OECD countries over ~5 years 1 Upfront licensing fee potential US$2 – 8m per contract Long term recurring revenue stream High Margins comparable to enterprise SaaS peers Etherstack target addressable market Key market participants Samsung, Nokia Siemens Networks, Ericsson, Huawei & NEC with national 5G deployment network rollout capabilities Non - OECD contracts for competition 100 – 200 over next 5 – 10 years 1 US$250 – 750m Upfront licensing fees in OECD and other near target countries 1 Cellular networks (4G & 5G) Leveraging existing technologies to exploit significant opportunity in the immediate to medium - term 12 Evolving public safety communications – hybrid networks Etherstack’s software enables interoperability between traditional digital radio networks and new 4G & 5G networks for public safety communications 12 New wireless technologies ( wifi , 4G & 5G) is transforming public safety communications Traditional digital radio networks used by police, firefighters, ambulance and industry will remain essential Hybrid networks will be deployed rapidly over the near to medium - term - interoperability software is the key Etherstack technology enables interoperability between traditional digital radio networks and new (4G & 5G) networks for public safety communications Etherstack entered into a Global Teaming Agreement with Samsung in June 2020 to deliver this solution to its customers globally Cellular networks (4G & 5G) TODAY Terrestrial Digital Radio Network Hybrid, telco carrier based public safety broadband 5G MIGRATION 13 A Global Teaming Agreement with Samsung delivers Etherstack’s technology to customers globally To supply software solutions and ongoing support services to Samsung’s global telco carrier clients as part of Samsung’s 5G n etw ork roll - out Notes: 1. In cludes US$1.2 million revenue previously announced on 18th February 2021 Cellular networks (4G & 5G) Partnered with Samsung to deliver next generation MCPTX over LTE solutions on the rollout of new 4G & 5G networks globally Government regulatory demand for MCPTX over LTE solutions is underpinning demand on 5G carriers and is expected to deploy rapidly over the next 36 – 48 months Each contract likely consist of an initial roll - out, during which Samsung will pay a software licencing fee Samsung Global Teaming Agreement Global regulatory tailwinds Upfront license fees Subsequent to the network becoming operational, support services will be provided to Samsung under contract to maintain its software within the 5G carrier network Ongoing support fees High probability the support services arrangement remains in place for the lifetime of the network Long support fee tails 14 5G expected to drive demand for MCPTX over LTE technology Global rollout of 5G networks is expected to drive demand for Etherstack MCPTX over LTE technology in coming years 14 National carriers are expected to provide guaranteed public safety communication capacity to public safety agencies in each country 5th generation mobile network (5G) delivers higher peak data speeds, ultra low latency, and more reliability 5G is used across three main types of services: enhanced mobile broadband, mission - critical communications, and the Internet of Things 5G network coverage expected to grow from ~15% of global population in 2020 to ~60% in 2026 As a result, demand for Etherstack’s MCPTX over LTE technology, is expected to rise significantly over next 36 – 48 months Cellular networks (4G & 5G) 2% 15% 25% 32% 39% 46% 53% 60% 5% 10% 18% 30% 43% 56% 66% 74% 79% 83% 86% 88% 90% 92% 94% 95% 87% 89% 90% 91% 92% 93% 93% 94% 94% 95% 95% 95% 95% 95% 96% 96% 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021F 2022F 2023F 2024F 2025F 2026F 5G LTE All 3GPP cellular technologies MCPTX over LTE potential rollout Mobile Population Coverage (%) by Technology 1 Source: 1. Ericsson Mobility Visualizer 2. Management estimates 15 2 to 4 New contracts 4 to 6 New contracts 6+ New contract 6+ New contracts 1 to 2 New contracts Samsung’s clients will be the first carriers to roll out a 5G network incorporating Etherstack’s MCPTX technologies Each network provides upfront licensing and deployment revenues, as well as long term support revenue tails Etherstack and Samsung are actively involved in multiple carrier pursuits globally First mover advantage Upfront & recurring revenues Strong pipeline Samsung global teaming agreement drives additional growth Targeting more than 25 contract wins over the medium term 2021 2022 2023 2024 2025 Cellular networks (4G & 5G) Satellite Networks 17 Well positioned to capitalise on low cost satellite technology opportunities Etherstack is ready to capitalise on emerging wireless communications opportunities made available by new low cost satellite technology 17 Falling satellite tariff costs the catalyst for change in the communications sector Emergency services currently operate in radio voids when in remote areas. Satellite networks enable extended radio coverage Development of secure push to talk (PTT) over Satellite solutions for the past 3 years and trialing them with pilot public safety customers in Australia, the US and Canada Recently delivered a PTT over Satellite solution for a Canadian federal policing and security agency Discussions with well known satellite communications suppliers to incorporate Etherstack’s technology into their networks Source: 1. Ericsson Mobility Visualizer 2. Management estimates Satellite Networks 9.2% CAGR Global satellite communications market CAGR from 2019 – 2027 1 US$56.0b Value of global satellite communications market in 2019 1 Financials 19 $1.7m $2.4m $4.3m $3.1m $2.3m $4.1m - $4.3m $4.8m $4.7m 2019 2020 2021F 1H 2H Financial Highlights Etherstack Revenue ? 2021 full year EBITDA US$2.5 million ? 2021 full year profit after tax USD $1.3m ? Operating cash positive for last 3 years Profitable and operating cash positive ? 77% - 83% forecast revenue growth FY 2020 to FY 2021 ? USD $8.4 - USD $8.6 million forecast revenue ? Multiple growth drivers ? First MCTPX contract with Samsung is producing revenue in H2 Revenue is growing $8.4m - $8.6m guidance 20 Recurring revenues Other revenues Notes: 1. Pro Forma adjustment of US$0.8m recurring revenue in FY20 for the purposes of illustrating Samsung contract impact to revenue composition. 1 1 Samsung contract impact 0.6 1.2 1.5 1.7 1.9 2.3 2.3 0.8 1.5 4.8 2.6 3.6 2.9 2.4 2.4 2.1 5.9 4.1 5.3 4.8 4.7 5.5 2015 2016 2017 2018 2019 2020 2020PF REVENUE (US$M) 29% 19% 36% 31% 39% 50% 42% 15% 71% 81% 64% 69% 61% 50% 43% 2015 2016 2017 2018 2019 2020 2020PF Sustained momentum in recurring revenue growth Recurring revenue has been steadily growing year on year with an increase in support contracts – high gross margin SaaS - like rev enues REVENUE COMPOSITION 21 Estimated Average Remaining Life of Networks 6 7 9 11 11 13 14 Up to 2015 2016 2017 2018 2019 2020 2021 YTD NUMBER OF SUPPORT CONTRACTS Current customer retention rate 100% Lifetime duration of support contracts which are typically agreed at initial network rollout ~10 – 15 years ~10 years Recurring revenues predominantly driven by support contracts in addition to royalty revenues Increasing support contracts drives recurring revenue growth New support contracts from Samsung business will add significantly to support contracts & values Leverage Samsung 22 EBITDA positive operations supported by steadily growing recurring revenues US$'000 2017 2018 2019 2020 Revenue from Contract with Customers 4,142 5,264 4,792 4,699 Recurring Revenue 1,508 1,682 1,838 2,331 Project and Product Revenues 2,634 3,582 2,954 2,368 % Recurring Revenue to Total Revenue 36% 32% 38% 50% Cost of Sales (1,857) (1,668) (1,507) (2,032) Gross Profit 2,285 3,596 3,285 2,667 Gross Margin 55% 68% 69% 57% Other Income; R&D & Government Incentives 97 102 100 125 Other Overheads (2,290) (1,835) (2,292) (1,712) EBITDA 92 1,863 1,093 1,080 Etherstack gross profit margins vary depending on the mix of Etherstack product (relatively high margin) vs third party product (relatively low margin) Gross profit margin lower in 2020 due to changes in the revenue mix, which may vary year to year depending on substantial contracts delivered in the period Income Statement 23 Strong balance sheet position a foundation to invest in growth US$'000 31 - Dec - 19 31 - Dec - 20 Cash and cash equivalents 931 4,180 Trade and other receivables 1,870 1,410 Other current assets 247 446 Intangibles 3,295 3,516 Other non - current assets 119 552 Total assets 6,462 10,104 Trade and other payables 2,467 2,760 Deferred revenue 1,332 1,744 Borrowings 1,262 572 Convertible notes 1,417 233 Other liabilities 604 699 Total liabilities 7,082 6,008 Net assets (620) 4,096 Balance Sheet Cash Flow Statement US$'000 2019 2020 Net cash generated from operating activities 1,364 1,733 Net cash flow (used in) investing activities (1,223) (1,470) Net cash flow (used in) financing activities 739 2,901 Net increase/(decrease) in cash 880 3,164 Effect of foreign exchange rate changes - 85 Cash and cash equivalents at start of period 51 931 Cash at end of period 931 4,180 Balance Sheet & Cash Flow Statement Remaining outstanding convertible notes were converted in March 2021 into equity Operating cash flows consistently positive even throughout COVID - 19 pandemic Continued investment into intellectual property builds on Etherstack’s competitive advantage External debt borrowings fully repaid during 2021 Future Milestones 25 Strong outlook driven by focus on key strategic initiatives Expect to announce a second telco carrier win via Samsung in the first half of 2022 Cellular Networks Expansion of existing Australian & International public safety networks LMR Networks License and supply of defence communications solution to other nations Defence Commencement of upgrades to virtualised switching solutions across installed base Upgrades Procure initial contracts with satellite network terminal providers to incorporate Etherstack technology into their network solutions Satellite network Further Australian Defence projects expected within the next 6 months Further carrier pursuits are underway between Samsung and Etherstack Appendix 27 Customer case studies January – June 2022F The Royal Canadian Mounted Police (RCMP) are the federal and national police service of Canada, providing law enforcement at the federal level November 2019 – Contracted for delivery, commissioning and on - going support of a secure encrypted digital radio network spanning 26 sites Key details - Initial order value CAD$1.7 million - RCMP network will be Etherstack’s second largest network in Canada (after 82 - site ATCO Electric network in Alberta) - Recurring SaaS - like support revenues expected at 15 – 20% pa Additional tranches - Additional sites expected in 2021 & 2022 - Long term support revenues to commence in Q3 2021 and believe will likely continue for a further 15 years Large resources projects require “government grade” communication systems for operations and safety in hazardous environments May 2020 – Contracted to provide software to deliver the first stage of a multi - stage P25 digital LMR network project Key details - Initial order value A$400,000 - End user is a major mining company - Recurring SaaS - like support revenues expected at 15 – 20% pa Additional tranches - Follow - on order expected to generate A$600,000 - A third expansion order is expected late 2021, or early 2022 - Potential to rollout to 50+ other mining sites globally over the next 10 years as existing networks renewed Western Australia Iron Ore Network Royal Canadian Mounted Police 28 Samsung Contract ? Etherstack has signed a long term supply contract with Samsung Electronics Co. Ltd, to provide Etherstack software solutions and ongoing support services to Samsung for a telecommunications carrier client of theirs as part of it’s 5G network roll - out ? The 5G network being rolled out by Samsung incorporates next generation Mission Critical Push To Talk (MCPTX) technologies ut ili sing core Etherstack network software elements ? By embedding Etherstack’s MCPTX related network components within Samsung’s advanced 5G network solutions, the Etherstack technology enables interoperability between existing digital narrowband public safety network infrastructure used by public safety agencies globally, and the new 5G network ? Today, and in the future, national telecommunications carriers are expected to provide high availability public safety commun ica tion capacity to public safety agencies in each country. There are many regulatory & government driven initiatives around the world in thi s s ector creating demand on 5G carriers for these services ? Typical users of MCPTX networks and services will be blue light agencies (police, ambulance, fire service etc), utility worke rs and transportation authorities Key Terms of the Samsung Contract ? The contract consists of an initial roll - out, during which Samsung will pay a software licencing fee to Etherstack. Subsequent to the network becoming operational, Etherstack will provide support services to Samsung under contract to maintain its software within the 5G carrier network ? The initial support services contract term for the carrier is for three years post deployment, with an option to extend the a rra ngement with Etherstack ? With the useful life of the network estimated by Etherstack to be 15 – 20 years, Etherstack expects there is a high probability the support services arrangement remains in place for the lifetime of the network, as is typical with major infrastructure projects First Global Teaming Agreement Carrier Contract 29 Key Terms of the Samsung Contract (cont..) ? Total revenues for Etherstack comprising licence fees, project deployment revenues and support revenues are US$8.5 million, w hic h includes US$1.2 million revenue previously announced on 18th February 2021 ? The term of the contract is 5 years, with the majority of the licence revenues expected to be recognised across the Company’s 20 21, 2022 and 2023 financial years (31 Dec year end). Initial support revenues included in the deal are expected to commence in 2022 a nd be earned over 3 years from the date of delivery of the solution to Samsung’s customer ? Management expects further long term annual support revenues, while not yet currently contracted, to renew in FY25, with a ty pic al minimum lifespan of 10 – 15 years for public safety infrastructure projects Potential future impact ? Etherstack has partnered with Samsung to deliver next generation MCPTX over LTE solutions on the rollout of new 4G & 5G netwo rks globally ? Government awareness, planning and demand for MCPTX over LTE solutions has been steadily growing and is expected to rise rapi dly over the next 36 – 48 months ? As previously advised, Etherstack and Samsung have a number of telecommunications carrier pursuits in progress ? Etherstack estimates that over the next 3 – 5 years, telecommunications providers in OECD countries alone will roll out between 60 to 90 5G networks incorporating next generation MCPTX over LTE capabilities. Many more network deployments of this type will occur in non - OECD countries as well First Global Teaming Agreement Carrier Contract ( cont …) 30 LTE – Long - Term Evolution A standard for wireless broadband communication for mobile devices and data terminals, increasing the capacity and speed usin g a different radio interface together with core network improvements MCPTX - Mission Critical Push to Talk A push - to - talk product functionality that meets the requirements for public safety mission - critical voice communication PTT - Push to talk A method of having conversations or talking on half - duplex communication lines, including two - way radio, using a momentary butto n to switch from voice reception mode to transmit mode Glossary Questions Etherstack plc 93A Shepherd Street, Chippendale NSW 2008 Phone +61 2 8399 7500 David Deacon, CEO david.deacon@etherstack.com David Carter, CFO david.carter@etherstack.com Martin Duff , Corporate & Legal martin.duff@etherstack.com

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