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1 25 October 2017 Melbourne IT Ltd (ASX: MLB) Melbourne IT Ltd ABN ACN Level 4, 1-3 Smail Street Ultimo NSW 2007 Australia Emerging Leaders Conference Presentation Attached is a copy of the presentation to be delivered by Melbourne IT s CEO & Managing Director, Martin Mercer, at the Bell Potter Emerging Leaders Conference in Sydney today. Drew Robinson Company Secretary E: drew.robinson@melbourneit.com.au T: ENDS About Melbourne IT Melbourne IT Group is a publicly listed company with offices in Melbourne, Sydney, and Brisbane. Our purpose is to fuel our customers success through the smart use of technology. We aspire to be Australia s most impactful digital technology partner. By 2020 we aim to have fuelled the success of over one million businesses. Our customers will love us, our people will be our most passionate advocates, and our investors will be rewarded. Melbourne IT operates two businesses marketed under 7 brands. The SMB of Melbourne IT provides Australian small and medium businesses with online marketing solutions. It has over 450,000 direct customers, provides services to over 700,000 Australian businesses, and generates revenue over $90M. The SMB business operates under five brands: Melbourne IT, WebCentral, Netregistry, and TPP brands and Domainz. The Enterprise Services Business (ES) of Melbourne IT is the leading end-to-end provider of digital solutions for the corporate and government market with revenues over $70M. ES have expertise in customer-focused design, software engineering, data analysis and management of flexible digital solutions across foundational technologies: Mobile, Data and Analytics, Cloud and Security. ES is based in Sydney, Melbourne and Brisbane and has a blue chip customer base. It operates under three brands, Melbourne IT, Infoready and Outware. Visit:

2 Transforming Melbourne IT Bell Potter Emerging Leaders Conference 25 October 2017

3 Track record: consistently strong growth Reported EBITDA ($m) YR (H1) CAGR 43% Underlying EBITDA ($m) YR (H1) CAGR 46% Underlying NPAT ($m) Underlying EPS (cents) YR (H1) CAGR 20% 4YR (H1) CAGR 10% Underlying financial information presented excludes one-off and non-recurring expenses/ income, and includes the pro forma impacts of acquisitions/divestments made in the financial period as if that acquisition/divestment had applied for the entire financial period H2 H1 2

4 Four major growth drivers 1 Enhancing crosssell 2 (ES) Growing market share (ES) 3 Increasing solutions 4 ARPU (SMB) Growing market share (SMB) Consistent Execution Against a Clearly Defined Strategy Will Drive Strong Growth 3

5 Four major growth drivers: scorecard Strong growth in customers taking 2 or more services 1 ; 2 services - +22% 2 or more - +43% 3 services - +80% Cross sell contributed ~10% of revenue growth 1 2 ES Strong growth in solutions ARPU in SMB; increased from $1,680pa to $5,400pa SMB ES SMB Growing share of enterprise digital solutions market 1 ; ES digital solutions revenue grew 51% over the past year growing at ~ 5 x the rate of the market Growing share of SMB digital solutions market 1 ; SMB digital solutions revenue grew 57% over the past year growing at ~ 6 x the rate of the market 1. twelve months to 30 June 2017 (NB this is solutions revenue not total revenue, for ES solutions revenue as at 30/06/2017 was 51% higher than it was at 30/06/2016, the growth for SMB solutions revenue over the same period was 57%) 2. the acquisition of WME had a material impact on SMB ARPU - $5,400 is at May (when the acquisition of WME was announced), $1,680 is the 3 month weighted average ARPU as at 30 June

6 FY 2017 Outlook: guidance affirmed Measure Range % 1 Comment Underlying EBITDA $37.5M - $41.5M 39% Underlying EPS $ $ % Dividend 55% - 75% Guidance was revised up (original guidance range was $31M - $34M) following the acquisition of WME Group in May. There has been no change since then. Guidance was revised up (original guidance range was $ $0.17) following the acquisition of WME Group in May. There has been no change since then. Dividends in FY 2017 will be determined by reference to a payout ratio in the range of 55% to 75% of reported NPAT. Strong Growth to Continue 1. Change on last year calculated from the mid-point of the guidance range and last year s actual result NB. Figures throughout this document may not be exact due to rounding and include non-ifrs financial information that is relevant for users understanding the underlying performance. 5

7 ES: strategy and execution 6

8 ES: facts and figures 1 2 Successful reinvention. A provider of complete digital solutions with for large companies and government agencies with more than 400 employees across Melbourne, Sydney, and Brisbane. Strong Growth, underlying EBITDA growing at +20%pa 3 Expertise: Outware founders retained; InfoReady founders retained; AWS Foundation partner in Australia, with multiple AWS accreditations. 4 Culture of Innovation and Customer Excellence 5 Enterprise Grade. Blue Chip customer base 40% of the ASX top 30 are customers. Significant recurring revenues and repeatable project revenue. Governance and balance sheet suitable for Enterprise & Government customer partnering. 7

9 ES Solutions Opportunity: $1.4b in Australia growing at 11.2% Source: IBM 2017 Note: Data in charts represents ANZ. Australia is 88% of the total. 8

10 Execution: cross-sell contributed ~10% of revenue growth Mobile (Outware Mobile) Data & Analytics (Infoready) June 2016 Cloud & Managed Services June

11 ES Customers: marquee brands

12 SMB: strategy and execution 11

13 SMB: facts and figures 1 More than 400 employees with offices in Melbourne, Sydney, Brisbane and Auckland 2 Largest Australian domain name and web hosting provider, with more than 40% market share. 3 Rapidly growing digital solutions business the key to revenue growth and value creation. A market leader following the acquisition of WME. 4 We have helped fuel the success of more than 600,000 Australian SMB customers 5 A portfolio of SME brands: 12

14 SMB: growth from solutions SOLUTIONS MARKET Customers prepared to pay for solutions that meet a need or solve a problem 90 % SMB Growth from Solutions Highly fragmented market with no major competitor in Australia Market growing at 10%+ per annum Average revenue per user (ARPU) $100-$1,000pm COMPONENTS MARKET Domains, web hosting, and are key components for SMBs MIT No. 1 in the Australian market but highly competitive with large competitors driving commoditisation 10 % TOTAL SMB DIGITAL SOLUTIONS MARKET SIZE = $2.2B* SOLUTIONS $2B 90% COMPONENTS $200M 10% Market growing at low single digits Average revenue per user (ARPU) of $5-$50pm * Revised market size following independent study from Growth Solutions Group, Commissioned by Melbourne IT. 13

15 WME Group: facts and figures Founded in 2008 WME Group is one of Australia s leading providers of search engine optimisation & digital marketing services for small to medium enterprises: Leading skills and competencies in the rapidly growing/lucrative digital advertising industry, Extensive expertise in search engine optimisation (SEO), search engine marketing (SEM), social media advertising & web design & development, a full service digital agency, Has experienced exceptional growth due to world-leading innovation. Highly systemized operation that has resulted in superior customer acquisition, outstanding client results and employee retention, Ongoing revenue, low customer churn, track record of successfully expanding customer base, 150 employees with offices in Melbourne and Auckland. Voted Top 100 Coolest Places to work in Australia. Impressive history of strong growth, EBITDA growing at >50% p.a. over recent years. Numerous awards for growth and innovation. 14

16 WME & MLB: a powerful combination MLB 1 WME Group Combined Customer Metrics Customers ~3,500 2 ~1,900 2 ~5,400 ARPU ~$1,800pa ~$12,000pa ~$5,400pa Capabilities Web Design SEO PPC Social The acquisition of WME Group accelerates the transformation of MLB s SMB division to a leading provider of managed marketing solutions Account Management 1. Solutions customers only, MLB has another ~500K legacy domains and hosting customers ( Components customers) who could in the future become solutions customers. 2. Active customers. 15

17 Transformation: WME accelerates the transition of SMB to a solutions business MLB SMB Direct 15% FY15 MLB SMB Direct 20% MLB SMB Direct with WME Group 1 85% FY16 33% REVENUE SPLIT BY SEGMENT SOLUTIONS COMPONENTS 1. Proforma revenue for FY16 80% FY16 67% 16

18 $m Execution: revenue growth Direct Revenue Components vs Solutions (HY) Acquisition of Netregistry Acquisition of Uber Global Acquisition of WME 2 REVENUE SPLIT BY SEGMENT SOLUTIONS COMPONENTS 10% H H H H H H H H % 15% H Solutions 1 Components 85% Rapidly Growing Solutions Revenue Driving Growth Notes: 1. Solutions revenue for prior periods has been restated to ensure consistency with revenue classification for WME results in a decrease in reported solutions revenue for prior periods and a corresponding increase in components revenue. No impact on overall revenue. 2. H result includes one month of WME revenue. 17

19 Summary 1. Strong H result reinforces growing momentum; revenue up 11% underlying EBITDA up 58% underlying EPS up 48% 2. Continuation of strong growth expected over remainder of 2017; underlying EBITDA of $37.5m - $41.5M, up 39% YoY underlying EPS of 17c 19c, up 27% YoY 3. Solutions strategy is driving real growth; Strong growth (pcp) in solutions revenue; 48% in ES and 66% in SMB Translating to strong growth in EBITDA; 22% in ES and 39% in SMB Growth in Solutions to Drive Strong Growth in Both ES and SMB 18

20 H Result: highlights Strong organic growth in Enterprise Services (ES); revenue up 43% on pcp (28% after normalising for Infoready acquisition) acquired businesses continue to grow strongly under MLB ownership Substantial improvement in profitability of Small to Medium Business (SMB); EBITDA up 39% on pcp first material period-on-period growth since EBITDA margin at 19.4% (cf 12.9% pcp) Solutions strategy is driving strong growth; solutions revenue up 48% in ES and 66% in SMB Interim dividend increases by 75% to 3.5c Full year FY17 guidance re-affirmed. Consistent Execution Against a Clearly Defined Strategy Continues to Drive Strong Growth 1. after normalising for the impact of acquisitions 19

21 H Result: snapshot Half Year Ended H H % 30 June 2017 Revenue $91.7m $82.8m [2] 11% Reported EBITDA $15.3m $11.2m 37% Underlying EBITDA [1] $16.8m $10.6m 58% Underlying EPS [1] 6.8c 4.6c 48% 1. Underlying EBITDA and EPS excludes one-off and non-recurring expenses/ income, and includes the pro forma impacts of acquisitions/divestments made in the financial period as if that acquisition/divestment had applied for the entire financial period. 2. In the prior year half year financial statements and investor presentation, ES segment revenue was presented on a provisional basis in line with pre-acquisition revenue recognition policies, as the alignment to MIT Group policy was not yet finalised. The prior year comparative presented above has been aligned with MIT Group policy, resulting in a reduction in both gross revenue and cost of goods sold of $2.2m. This has no net impact on gross margin or EBITDA. Growing Strongly and Meeting Our Commitments NB. Figures throughout this document may not be exact due to rounding and include non-ifrs financial information that is relevant for users understanding the underlying performance. 20