XPON Technologies : Quarterly Activity Report and Appendix 4C

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ASX Announcement

22 July 2022

XPON Q4 FY22 activity report and Appendix 4C1

XPON Technologies Group Ltd (ASX:XPN) (XPON or the Company), a marketing technology and cloud business providing mission-critical software and solutions to corporate and mid-tier enterprises in Australia, New Zealand, the United Kingdom and Europe, is pleased to release its quarterly activity report and Appendix 4C quarterly cash flow statement for the three-month period ended 30 June 2022.

Highlights

• ARR of $16.4m as at June 2022, up 78% YoY2 from June 2021
• Revenue retention up 50 ppts on Q4 FY21 to 160% assisted by a 99.5% Average Customer Retention rate and 34 existing customers expanding their use of our products and services during the year
• Gross margin continued to expand to 66% over Q4 FY22, up 8 ppts compared to Q4 FY21 (up 10 ppts on a like-for-like basis)
• Record quarterly revenue of $3.7m, up 63% YoY (up 49% on a like-for-like basis),
• Recurring revenue of 98% for Q4 FY22, up 8 ppts from Q3 FY22
• Record quarterly gross profit of $2.5m, an increase of 85% YoY (up 77% on a like-for-like basis)
• 8 new customers landed and 11 existing customers expanded during the quarter
• Cash balance of $8.2m, providing continued balance sheet strength for ongoing investment in growth
• Wondaris extends its reach by joining a group of 3rd party integrators approved by Google to upload Customer Match Segments within the Google Ads platform

• Unaudited

• Internetrix was acquired on 5th June 2021.

XPON Technologies Group Ltd. ACN 635 810 258. Level 2, 33 Longland Street, Newstead, QLD 4006

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Key Financial Metrics - Q4 FY22 vs Q4 FY21

	Q4 FY22	Q4 FY21	Q4 FY21
	(actual)	(actual)	(like-for-like)
ARR	$16.4m	+78%	+78%
Revenue	$3.7m	+63%	+49%
Gross profit	$2.5m	+85%	+77%
Gross margin	66%	+8 ppts	+10 ppts

Founder, Managing Director and Group CEO Matt Forman noted, "it is very encouraging to finish FY22 with a strong Q4 FY22. During the quarter, XPON generated record revenue and gross profit, or $3.7m and $2.5m, respectively. In addition, ARR growth of $1.9m represented a $0.5m improvement on Q3 FY22. Across the FY22 year, ARR grew by 78%."

"The 20 ppts increase in the Company's Revenue Retention Rate to 160% and a Net Promoter Score of 88 is a testament to the XPON's 'best in class' offerings and the dedication of our team in supporting our valued customers."

"As previously announced during the quarter, we were also pleased to announce the expansion of our relationship with our valued partner Google. Wondaris now joins a group of 3rd party integrators approved by Google to upload Customer Match Segments within the Google Ads platform, thus extending the reach of Wondaris and driving awareness of the platform to millions of Google Ads customers."

"With our unit economics continuing to demonstrate very healthy underlying customer profitability, and a strong balance sheet, we believe we remain well positioned to meet our growth objectives over FY23 and beyond."

XPON Technologies Group Ltd. ACN 635 810 258. Level 2, 33 Longland Street, Newstead, QLD 4006

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Key Annual Financial Metrics - FY22 vs FY213

	FY22	FY21	FY21
	(actual)	(actual)	(like-for-like)
Revenue	$13.3m	+145%	+67%
Gross profit	$8.6m	+169%	+106%
Gross margin	65%	+6 ppts	+12 ppts

• Revenue increased by 145% (up 67% like-for-like) to $13.3m, assisted by the benefit of 32 landed customers and 34 expanded customers over the year.
• Gross profit grew by 169% (up 106% like-for-like) to $8.6m and gross margin expanded by 6ppts (up 12 ppts like-for-like), assisted by the integration of the Internetrix acquisition and scale benefits.

ARR Growth

XPON added $1.9m in ARR during the quarter to finish June 2022 at $16.4m. ARR growth was 78% YoY. Over the year ARR grew by $7.2m.

During the quarter, XPON won 8 new customers and expanded 11 existing customers, taking new customer wins to 32 and expanded customers to 344 for the year.

• Unaudited

• Some customers expanded on multiple occasions during FY22. 26 unique customers expanded over the same period.

XPON Technologies Group Ltd. ACN 635 810 258. Level 2, 33 Longland Street, Newstead, QLD 4006

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Unit Economics

XPON continues to exhibit compelling unit economics with exceptional customer and revenue retention underpinned by the successful 'land and expand' strategy.

Unit economic highlights include:

• Average Monthly Customer Retention Rate was consistent at 99.5% during the quarter.
• Revenue Retention Rate increased 20 ppts to 160% from 140% in Q3 FY22 as 11 existing customers expanded the number of products and services they use across the Company's full Marketing and CX stack.
• The calculated metric of Lifetime Value Per Customer increased 2% to $667k, and Total Lifetime Value increased 5% to $136m, benefiting from the increased Revenue Retention Rate and improved gross profit margin.
• Customer Acquisition Costs (CAC) increased to $43k, up from $36k in Q3 FY22. This was planned as the company invests in growth, with 3 BDMs added towards the end of Q3 FY22 and an increased investment in marketing in Q4 FY22. The Company continues to expect attractive payback on this investment in future periods, especially with the customer retention and revenue retention metrics outlined above.
• LTV / CAC Ratio was 16x, down from 18x in Q3 FY22 and the CAC Payback also declined by 1 month to 8 months, due to the increased CAC over the quarter.

XPON Technologies Group Ltd. ACN 635 810 258. Level 2, 33 Longland Street, Newstead, QLD 4006

For personal use only

Q4 FY22 Execution Milestones

In Q4 FY22, the team achieved a number of key milestones:

• Wondaris joined a group of 3rd party integrators approved by Google to upload Customer Match Segments within the Google Ads platform, building on XPON's existing relationship with the world's number 1 digital advertising platform.
• A record Revenue Retention Rate of 160%, achieved by successfully delivering on our stated strategy of expanding product adoption to existing customers.
• Exited the year with a global headcount of 1355, while achieving a 97% employee engagement survey score, resulting in achieving "Great Place to Work" certifications in Australia, the United Kingdom and Vietnam.
• Achieved a Net Promoter Score (NPS) of 88 from clients surveyed during the quarter, up from 84% in Q3.

Cash Flow

Receipts from customers was $2.9m for the Q4 FY22, up 34% on Q4 FY21. For the year ending 30 June 2022, receipts totalled $12.3m, up 54% on the previous corresponding period.

Net cash flows from operating activities for Q4 was ($2.6m). Product manufacturing and operating costs increased to $1.4m (Q3 $1.1m), driving revenue growth. Research and development costs (R&D) were itemised for the first time in the Appendix 4C, comprising $379k for the quarter ($1.2m for the 12 months to 30 June) and represented 9% of FY22 revenue. Staff costs (excluding R&D) increased to $2.5m (Q3 $2.3m) as XPON expanded its sales and product teams.

Administration and corporate costs declined by $0.5m from Q3 to $0.9m, due to the exclusion of the one-off cost of $0.7m for Prospectus Liability Insurance in Q3.

Net cash flows from investing activities for Q4 FY22 was ($0.3m), mostly related to the final deferred cash consideration payment for the acquisition of Internetrix.

The Company's cash balance at the end of Q4 FY22 was $8.2m, a decline of $2.9m from Q3 FY22. XPON remains confident that its current cash position enables it to meet its organic growth initiatives and achieve its target of cashflow break-even in FY24.

As detailed in Item 6.1 of the Appendix 4C, Payments to related parties and their associates during the quarter totalled $38k comprising Directors fees, people and culture consulting, and motor vehicle costs.

• Includes 15 on-demand contractors.

XPON Technologies Group Ltd. ACN 635 810 258. Level 2, 33 Longland Street, Newstead, QLD 4006