Pivotal : Q4 2021 Quarterly Activities Report and Appendix 4C

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ASX / Media Release

Pivotal Systems Corporation December 2021 Quarterly Activities Report

Fremont, California and Sydney, Australia; 31 January 2022 - Pivotal Systems Corporation ("Pivotal" or the "Company") (ASX: PVS), a leading provider of innovative gas flow control (GFC) solutions to the semiconductor industry, is pleased to release a Quarterly update and Appendix 4C Report for the quarter ending 31 December 2021 ("Q4 2021").1

Key Highlights

• Successful completion and US$200k payment from Non-Recurring Engineering (NRE) agreement with leading Japanese Original Equipment Manufacturer (OEM) for next generation Atomic Layer Deposition (ALD) product based on the delivery of that device in December 2021.
• Successfully integrated and installed GFCs on a tool at South 8 Technologies, Inc., in the reported period, following the Memorandum of Understanding (MOU) signed in Q3 2021
• Achieved record unaudited full year new orders of US$33.4 million vs US$21.2 million for FY2020, representing 57% new order growth year over year
• Achieved record unaudited full year revenue of US$29.2 million, 34.4% increase on the prior period (FY2020: US$21.8 million) driven by strong demand from existing OEM and Integrated Device Manufacturer (IDM) customers
• Pivotal has now shown 7 quarters of consecutive revenue growth2.
• Full year FY2021 unaudited gross margins expanded significantly to 31.3%, up from 1.6% in the prior corresponding period (pcp)
• Unaudited Q4 2021 revenue of US$7.9 million was up 6% sequentially on the last quarter (Q3 2021: US$7.4 million) and up 38% on the prior period (Q4 2020: US$5.7 million)
• Unaudited strong Q4 2021 gross margins of 32.7% up from gross margins of 12.0% in the pcp and up from 24.3% in Q3 2021
• Backlog (confirmed orders not yet shipped) at 31 December 2021 was US$3.9 million versus US$2.6 million at 30 September 2021, driven by strong quarterly bookings
• Cash at 31 December 2021 was US$4.0 million
• Appointment of Non-Executive Director Jason Korman to the Board of Directors
• Overall Wafer Fabrication Equipment (WFE) market expected to have grown 44% to a new industry record of US$88 billion in 2021, with continued market growth of 12.4% expected in 2022 to approximately US$99 billion3
• Pivotal expects FY2022 revenues in the range of US$34 to US$40 million.

1. All numbers unless otherwise indicated are reported using U.S. Generally Accepted Accounting Principles ("U.S. GAAP"), consistent with ASX announcement dated 23 December.
2. Based on International Financial Reporting Standards ("IFRS"). The Company is moving from IFRS to US GAAP reporting from FY2021
3. Source:SEMI

Pivotal Systems Corporation

ARBN 626 346 325

48389 Fremont Blvd. Suite 100, Fremont, CA, 94538

Phone [phone], Fax [phone]

Web /https://www.pivotalsys.com

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Quarter Cash Flow Summary

The Company's cash position at 31 December 2021 was US$4.0 million, with higher accounts receivable of US$9.0 million reflecting the timing effect of cash collection from shipments made late in the quarter to customers.

Cash receipts from customers for the period were US$7.1 million, a 24.0% increase from US$5.7 million in Q3 2021. Cash payments for Product Manufacturing were US$5.2 million, down 13% from US$6.0 million in Q3

2021. Pivotal continued to invest in product development with US$1.2 million in costs incurred during the quarter, up 10% from US$1.1 million in Q3 2021. The increase in cash payments for product manufacturing reflect the increased investment into inventory to meet expected product demand in future periods.

During the quarter, the Company made salary and payments of US$0.24 million to related parties and their associates including executive director's salary payments, non-executive director fees, and fees for consulting services provided by a director-related entity.

As previously announced, the Company is moving from IFRS to US GAAP reporting from FY2021. The impact of this GAAP conversion was a reclassification of US$2.1 million cash outflows, from investing activities to operating activities as development costs are not capitalized under US GAAP. The current Appendix 4C reflects this change in item 1.2 (a) being US$2.1 million year-to-date amount as of 30 September 2021, and US$0.7 million per the quarter ended 31 December 2021.

Product Update

In December, Pivotal successfully completed the Non-Recurring Engineering (NRE) Agreement with Japan's largest Original Equipment Manufacturer (OEM) and collected a US$200k payment for final delivery of results. The PVS new ALD product met or exceeded all original requirements in the joint agreement as well as timely shipment of the unit to the OEM.

In total, Pivotal has received US$1.0 million in upfront and milestone payments from this strategically important NRE Agreement signed in August 2020. Pivotal has fulfilled all the OEM's requirements by having exclusively developed a next generation gas flow control product for incorporation into their semiconductor production equipment in ALD. The market for ALD tools is expected to grow at a compound annual growth rate (CAGR) of 29% to US$8 billion by 2024.4

This was the second NRE Agreement with this large Japanese OEM, which has leveraged Pivotal's world class engineering team and leading-edge capability to develop sophisticated, highly differentiated and innovative new product lines to meet their future flow control solutions in a cost-effective and timely manner. Pivotal's next generation GFCs deliver exquisite control in gas flow, thereby increasing the efficiency of ALD manufacturing processes with associated improvements in yield and lower overall input costs over time.

The Remote Electronics GFCs continued to increase its adoption. In this regard, the Company also shipped advanced GFCs for operation at temperatures up to 70C that do not require remote electronics. These new GFCs, which will find immediate use in challenging high temperature gas applications, contain new electronics and advanced high temperature piezoelectric actuators designed to operate at these elevated temperatures. This demonstrates both unique and industry leading capabilities. Over time, we expect both

4 Source: Marketwatch, Kenneth Research Data

Pivotal Systems Corporation

ARBN 626 346 325

48389 Fremont Blvd. Suite 100, Fremont, CA, 94538

Phone [phone], Fax [phone]

Web /https://www.pivotalsys.com

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IDMs and OEMs to move from Remote Electronic GFC's to Integrated High Temperature GFC's to reduce footprint and reduce costs.

Operations Update

Fourth quarter full-time headcount was 46 employees, compared with 45 employees at Q3 2021.

The Company's China and Korea based Contract Manufacturers (CMs) continue to operate at a capacity of 4,000 units per month based on a 5-day, 2 shift production. This flexible manufacturing model enables Pivotal the ability to effectively react to supply chain disruptions.

Gross Margin performance for Q4 2021 of 32.7% was favorably impacted by US$400K revenue from a Japanese OEM for successful delivery of the next generation ALD flow controller. Also, during the reported period, Pivotal received US$520K in volume-based discounts from Compart China versus US$461K Q3 2021.

Supply Chain

During Q4 2021, the Company continued to experience supply shortages, particularly attributable to semiconductor chips utilized in the manufacture of printed circuit boards used in Pivotal GFCs. The supply bottleneck is global in nature and has impacted several different industries, including the WFE market.

However, Pivotal's team successfully navigated these constraints to deliver another quarter of revenue growth.

The Company expresses some caution on its ability to meet all anticipated demand and the timing of shipments to customers in early 2022. Importantly, based on numerous supplier discussions, the supply of chips is anticipated to improve in the second half of FY2022 while near term visibility is still cloudy. These chips shortages have been effectively managed in the past and Pivotal will continue to monitor and manage to the best of its ability going forward.

As Pivotal has previously commented, the underlying drivers of growth for WFE remain unchanged, and demand is expected to show significant growth into 2022, despite a strong 2021. Additional government spending initiatives in the US, South Korea, Japan and the EU to support domestic semiconductor manufacturing and invest in-leading edge chip development remain as additional long terms drivers of industry growth.

Industry Update

The worldwide WFE market continues to experience very strong growth, driven by the global semiconductor industry's capacity expansion to meet strong demand.

On 14 December 2021, SEMI provided an update on expectations for the overall WFE market, which have grown 44% to a new industry record of US$88 billion, followed by an anticipated 12.4% increase in 2022 to approximately US$99 billion, with SEMI commenting that investments in the digital infrastructure buildout and secular trends across multiple end markets will continue to fuel the healthy growth in 2022.

The foundry and logic segments, accounting for more than half of total wafer fab equipment sales, has surged 50% year-over-year to reach approximately US$49 billion in 2021, driven by demand for both leading-edge

Pivotal Systems Corporation

ARBN 626 346 325

48389 Fremont Blvd. Suite 100, Fremont, CA, 94538

Phone [phone], Fax [phone]

Web /https://www.pivotalsys.com

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and mature nodes. This demand growth is expected to continue into 2022 with spending increasing a further 17%. In addition, enterprise and consumer demand for memory and storage is contributing to strength in DRAM and NAND equipment spending. The DRAM equipment segment had the leading the expansion in 2021 surging 52% to approximately US$15 billion and is anticipating to grow another 1% in 2022. The NAND equipment market is projected to have to jumped 24% in 2021 to approximately US$19 billion and is anticipated to grow another 8% in 2022.

Outlook

Pivotal expects that it will continue to gain market share in its target market segments during 2022. We expect the WFE market will continue to grow as outlined by SEMI. We are carefully monitoring global supply chain uncertainties in conjunction with our customers and our suppliers.

Currently, we expect 2022 revenues in the range of US$34 to US$40 million.

Pivotal will pursue financing alternatives to support the investment needed to achieve this level of growth.

THIS RELEASE DATED 31 JANUARY 2022 HAS BEEN AUTHORISED FOR LODGEMENT TO ASX BY THE BOARD OF DIRECTORS OF PIVOTAL SYSTEMS.

- ENDS -
For further information, interview and photos:
Investor Relations & Media (Australia):	Investor Contact (US):
Dr Thomas Duthy	Leanne Sievers
Nemean Group	Shelton Group
[e-mail]	[e-mail]
[phone]	[phone]
ASX Representative:
Danny Davies
Company Matters Pty Ltd
[e-mail]

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Safe Harbor Statement

This press release and the accompanying Appendix 4C contains forward-looking statements, which address a variety of subjects including, for example, our statements regarding expected growth rates, expected product offerings, product development, marketing position and technical advances. Statements that are not historical facts, including statements about our beliefs, plans and expectations, are forward-looking statements. Such statements are based on our current expectations and information currently available to management and are subject to a number of factors and uncertainties, which could cause actual results to differ materially from those described in the forward-looking statements. The Company's management believes that these forward-looking statements are reasonable as and when made. However, you should not place undue reliance on any such forward-looking statements because such statements speak only as of the

Pivotal Systems Corporation

ARBN 626 346 325

48389 Fremont Blvd. Suite 100, Fremont, CA, 94538

Phone [phone], Fax [phone]

Web /https://www.pivotalsys.com

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date when made. We do not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law or the ASX Listing Rules. In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual results, events and developments to differ materially from our historical experience and our present expectations or projections.

About Pivotal Systems Corporation (ASX: PVS)

Pivotal Systems Corporation (ARBN 626 346 325), is a company incorporated in Delaware, USA, whose stockholders have limited liability. Pivotal Systems provides the best-in-class gas flow monitoring and control technology platform for the global semiconductor industry. The Company's proprietary hardware and software utilizes advanced machine learning to enable preventative diagnostic capability resulting in an order of magnitude increase in fab productivity and capital efficiency for existing and future technology nodes. For more information on Pivotal Systems Corporation, visit https://www.pivotalsys.com/.

Notice to U.S. persons: restriction on purchasing CDIs

Pivotal Systems is incorporated in the State of Delaware and its securities have not been registered under the U.S. Securities Act of 1933 or the laws of any state or other jurisdiction in the United States. Trading of Pivotal Systems' CHESS Depositary Interests ("CDIs") on the Australian Securities Exchange is not subject to the registration requirements of the U.S. Securities Act in reliance on Regulation S under the U.S. Securities Act and a related 'no action' letter issued by the U.S. Securities and Exchange Commission to the ASX in 2000. As a result, the CDIs are "restricted securities" (as defined in Rule 144 under the U.S. Securities Act) and may not be sold or otherwise transferred except in transactions exempt from, or not subject to, the registration requirements of the U.S. Securities Act. For instance, U.S. persons who are qualified institutional buyers ("QIBs", as defined in Rule 144A under the U.S. Securities Act) may purchase CDIs in reliance on the exemption from registration provided by Rule 144A. To enforce the transfer restrictions, the CDIs bear a FOR Financial Product designation on the ASX. This designation restricts CDIs from being purchased by U.S. persons except those who are QIBs. In addition, hedging transactions with regard to the CDIs may only be conducted in compliance with the U.S. Securities Act.

Pivotal Systems Corporation

ARBN 626 346 325

48389 Fremont Blvd. Suite 100, Fremont, CA, 94538

Phone [phone], Fax [phone]

Web /https://www.pivotalsys.com

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